The
Westport
Funds
[LOGO]
Semi-Annual Report
June 30, 1998
(Unaudited)
WESTPORT
INVESTMENTS
<PAGE>
Letter to Shareholders August 3, 1998
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
This semi-annual report for The Westport Funds initiates regular communications
with shareholders about strategy, portfolio highlights and results. The latter
was favorable with both Westport Funds exceeding their benchmarks during the
first half of 1998.
Table of Results
THE WESTPORT FUNDS
First Half 1998 Total Returns
- --------------------------------------------------------------------------------
Comparative
Fund Return Index Return
- --------------------------------------------------------------------------------
Westport Fund - Class R 11.70% S&P 400 Mid Cap 8.01%
- --------------------------------------------------------------------------------
Westport Small Cap Fund - Class R* 11.80% Russell 2000 4.93%
- --------------------------------------------------------------------------------
Domestic monetary and fiscal policy have been satisfactory and stable in recent
years. The dominant economic factor influencing the first half of 1998 was the
widening and deepening financial disaster in Asia. Domestically, inflation has
stayed low because the Asian turmoil caused currency shifts that increased
competition for domestic manufacturers and decreased demand for commodity raw
materials such as oil and non-ferrous metals. This positive inflation impact and
concern that higher U.S. short-term interest rates would further depress
affected Asian currencies have caused the Federal Reserve Board to hold interest
rates constant even though wage and price pressure in domestic service
industries is increasing. The full economic import of the Asian financial crisis
has not been seen as more Asian countries shift their focus to increasing
exports to the U.S. and Europe. In addition, the financial crisis likely has
further to run and, correspondingly, the economic impact. The high level of bad
loans at Japanese banks is causing them to retreat from lending in their
traditional markets in other Asian countries transforming severe currency
problems into a credit crunch and solvency crisis. Unchecked, this can decimate
the impacted countries with economic activity falling dramatically under the
weight of corporate bankruptcies. Clearly, a concerted international effort is
required to forestall insolvency, and improvement in Japan's economy is
essential to braking the downward spiral.
The Asian crisis has also produced "flight capital" that has positively impacted
U.S. stock and bond markets. As expected, this capital movement to the best
known U.S. companies contributed strongly to the positive correlation between
first half equity performance and stratified market capitalization. In the first
half of 1998, the S&P 500 Index (reinvested) provided a total return which
exceeded the S&P 400 Mid Cap Index which, in turn, exceeded the Russell 2000
Index. It is interesting to note that the 50 largest companies in the S&P 500
provided a total return that exceeded all quintiles in that index with the
lowest quintile (the 100 smallest companies in the S&P 500) providing a negative
return.
<PAGE>
PORTFOLIO HIGHLIGHTS
The investment strategy followed by The Westport Funds is to identify
undervalued securities, and the factors or events likely to remove the
undervaluation, creating an attractive expected portfolio rate of return. This
variant of value investing imposes a discipline on the investment process that
attempts to avoid highly risky situations, leaving opportunistic ones.
Investor focus on the largest capitalization companies has created a valuation
problem for the S&P 500. The June 1998 issue of the Federal Reserve Bank of St.
Louis Monetary Trends states that the P/E for the S&P 500 in April 1998 was the
highest in more than 100 years and was unprecedented because previous highs were
recorded as the domestic economy exited a recession. Even adjusting for current
low inflation and interest rates does not alter the conclusion of extended
valuation.
WESTPORT FUND
Not surprisingly, more attractive valuation opportunities for the Westport Fund
were found among smaller capitalization companies. In the current investment
environment the valuation focus of our investment strategy has led to a higher
than normal proportion of smaller company stocks in the Fund as appreciation in
this segment of the equity market has failed to keep pace with indices composed
of larger companies for the reasons noted above. At the end of first half 1998,
the Fund's portfolio was composed of 30 small and mid capitalization companies
in attractive businesses with a median price/earnings ratio based on estimated
1998 earnings of 18 versus 25 for the S&P 500. The Westport Fund provided a
total return that exceeded that from the S&P 400 Mid Cap Index benchmark by more
than 3 percentage points despite the small company bias.
The best performing portfolio companies were those with a domestic consumer
focus. Duane Reade, Inc. (metropolitan New York drug retailer), Fingerhut
(catalog retailer) and May & Speh, Inc. (information management for direct
marketers) all appreciated more than 45% in the first half. May & Speh agreed to
be acquired by Acxiom Corp. becoming the Fund's first takeover. Impacted
negatively by changes in Medicare reimbursement, Rural Metro Corp. (ambulance
service) was the poorest performer in the first half.
WESTPORT SMALL CAP FUND
As indicated in the above table, during the first half of 1998, the Westport
Small Cap Fund outperformed the benchmark Russell 2000 Index by approximately 7
percentage points. The challenge to successful investing this year has been to
minimize the impact of negative earnings surprises on share prices. We have
succeeded in this task by utilizing a two-faceted approach - (1) buying good
companies whose share prices have been severely impacted by short-term problems,
and (2) focusing on other issues where we felt below market valuations were the
result of misunderstanding or misperception of business trends.
Because our philosophy favors the management of relatively concentrated
portfolios, the Fund ended the first half with holdings in 37 issues.
Particularly strong performance was turned in by Bindley Western Industries (a
drug wholesaler) and Duane Reade, Inc. Loss of a large contract caused a sharp
decline in the price of Owens & Minor, Inc. (a medical supplies distributor),
whose price has recovered more than 25% in the first three weeks of July.
2
<PAGE>
SUMMARY
We feel the Funds are off to a good start and that the value based strategy we
have utilized for a combined total of more than fifty years will continue to be
effective for The Westport Funds. The underperformance and attractive valuation
of small and mid capitalization companies provide a significant opportunity for
appreciation relative to large capitalization companies. The timing of this
valuation adjustment is unknowable, but both Funds are positioned to exploit the
opportunity.
We would like to thank our fellow shareholders for their confidence and
participation in the launch of The Westport Funds.
Sincerely,
/s/ Edmund H. Nicklin, Jr. /s/ Andrew J. Knuth
Edmund H. Nicklin, Jr. Andrew J. Knuth
Portfolio Manager Portfolio Manager
* For total return and other information relating to Class I shares of the
Westport Small Cap Fund, see the Financial Highlights on page 7.
3
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
==========================================================================================
Westport
Westport Small Cap
Fund Fund
- ------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At acquisition cost .................................... $ 4,190,693 $ 28,730,188
============ ============
At market value (Note 2) ............................... $ 4,423,778 $ 28,836,470
Receivable for capital shares sold ........................ 5,150 533,100
Receivable for securities sold ............................ 104,559 658,468
Dividends receivable ...................................... 2,061 36,608
Organization expenses, net (Note 2) ....................... 19,576 19,576
Other assets .............................................. 19,908 20,014
------------ ------------
TOTAL ASSETS ........................................... 4,575,032 30,104,236
------------ ------------
LIABILITIES
Payable for capital shares redeemed ....................... 140 110
Payable for securities purchased .......................... 102,605 1,706,055
Payable to affiliates (Note 4) ............................ 66,028 92,691
Other accrued expenses and liabilities .................... 395 698
------------ ------------
TOTAL LIABILITIES ...................................... 169,168 1,799,554
------------ ------------
NET ASSETS ................................................ $ 4,405,864 $ 28,304,682
============ ============
Net assets consist of:
Paid-in capital ........................................... $ 4,138,870 $ 28,496,269
Undistributed net investment income (loss) ................ (8,841) 8,701
Accumulated net realized gains (losses)
from security transactions ............................. 42,750 (306,570)
Net unrealized appreciation on investments ................ 233,085 106,282
------------ ------------
Net assets ................................................ $ 4,405,864 $ 28,304,682
============ ============
PRICING OF CLASS R SHARES
Net assets attributable to Class R shares ................. $ 4,405,864 $ 7,031,061
============ ============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5) ........... 394,502 628,776
============ ============
Net asset value, offering price and redemption
price per share (Note 2) ............................... $ 11.17 $ 11.18
============ ============
PRICING OF CLASS I SHARES
Net assets attributable to Class I shares ................. $ -- $ 21,273,621
============ ============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5) ........... -- 1,901,776
============ ============
Net asset value, offering price and redemption
price per share (Note 2) ............................... $ -- $ 11.19
============ ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF OPERATIONS
For the Period Ended June 30, 1998(A) (Unaudited)
=====================================================================================
Westport
Westport Small Cap
Fund Fund
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Dividends ............................................... $ 14,599 $ 103,482
--------- ---------
EXPENSES
Investment advisory fees (Note 4) ....................... 14,064 63,187
Registration fees, Common ............................... 3,494 3,494
Registration fees, Class R .............................. 5,474 6,000
Registration fees, Class I .............................. 5,858 5,358
Accounting services fees (Note 4) ....................... 10,000 12,500
Transfer agent fees, Class R (Note 4) ................... 6,000 5,000
Transfer agent fees, Class I (Note 4) ................... -- 5,000
Administration fees (Note 4) ............................ 5,000 8,523
Insurance expense ....................................... 4,031 4,031
Postage and supplies .................................... 2,520 3,064
Custodian fees .......................................... 1,792 3,071
Amortization of organization expenses (Note 2) .......... 2,175 2,175
Other expenses .......................................... 568 606
--------- ---------
TOTAL EXPENSES ....................................... 60,976 122,009
Fees waived and/or expenses reimbursed
by the Adviser (Note 4) .............................. (37,536) (27,228)
--------- ---------
NET EXPENSES ......................................... 23,440 94,781
--------- ---------
NET INVESTMENT INCOME (LOSS) ............................... (8,841) 8,701
--------- ---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from security transactions .. 42,750 (306,570)
Net change in unrealized appreciation/depreciation
on investments ....................................... 233,085 106,282
--------- ---------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS .. 275,835 (200,288)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ...... $ 266,994 $(191,587)
========= =========
</TABLE>
(A) Represents the period from the commencement of operations (January 2, 1998)
through June 30, 1998.
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended June 30, 1998(A) (Unaudited)
===========================================================================================
Westport
Westport Small Cap
Fund Fund
- -------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss) ............................ $ (8,841) $ 8,701
Net realized gains (losses) from security transactions .. 42,750 (306,570)
Net change in unrealized appreciation/depreciation
on investments ....................................... 233,085 106,282
------------ ------------
Net increase (decrease) in net assets from operations ...... 266,994 (191,587)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
CLASS R
Proceeds from shares sold ............................... 4,190,286 6,872,034
Payments for shares redeemed ............................ (101,416) (103,103)
------------ ------------
Net increase in net assets from Class R share transactions . 4,088,870 6,768,931
------------ ------------
CLASS I
Proceeds from shares sold ............................... -- 21,748,063
Payments for shares redeemed ............................ -- (70,725)
------------ ------------
Net increase in net assets from Class I share transactions . -- 21,677,338
------------ ------------
Net increase in net assets from capital share transactions . 4,088,870 28,446,269
------------ ------------
TOTAL INCREASE IN NET ASSETS ............................... 4,355,864 28,254,682
NET ASSETS:
Beginning of period ..................................... 50,000 50,000
------------ ------------
End of period ........................................... $ 4,405,864 $ 28,304,682
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) ................. $ (8,841) $ 8,701
============ ============
</TABLE>
(A) Represents the period from the commencement of operations (January 2, 1998)
through June 30, 1998.
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
FINANCIAL HIGHLIGHTS
======================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period Ended June 30, 1998(A) (Unaudited)
- ------------------------------------------------------------------------------------------------------
Westport
Westport Small Cap
Fund Fund
---------------------------------------------
Class R Class R Class I
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value at beginning of period ............... $ 10.00 $ 10.00 $ 10.92
---------- ---------- ----------
Income from investment operations:
Net investment income (loss) ...................... (0.02) 0.00 0.00
Net realized and unrealized gains on investments .. 1.19 1.18 0.27
---------- ---------- ----------
Total from investment operations ..................... 1.17 1.18 0.27
---------- ---------- ----------
Net asset value at end of period ..................... $ 11.17 $ 11.18 $ 11.19
========== ========== ==========
Total return ......................................... 11.70% 11.80% 2.47%
========== ========== ==========
Net assets at end of period (000's) .................. $ 4,406 $ 7,031 $ 21,274
========== ========== ==========
Ratio of net expenses to average net assets .......... 1.50%(C) 1.50%(C) 1.50%(C)
Ratio of gross expenses to average net assets (B) .... 3.50%(C) 2.13%(C) 1.83%(C)
Ratio of net investment income (loss)
to average net assets ............................. (0.56)%(C) 0.14%(C) 0.13%(C)
Portfolio turnover rate .............................. 39% 18% 18%
Average commission rate per share .................... $ 0.0481 $ 0.0479 $ 0.0479
</TABLE>
(A) Represents the period from the commencement of operations (January 2, 1998)
through June 30, 1998, except for Class I shares of the Westport Small Cap
Fund which represents the period from its commencement of operations
(February 16, 1998) through June 30, 1998.
(B) Represents the ratio of expenses to average net assets absent fee waivers
and/or expense reimbursements by the Adviser (Note 4).
(C) Annualized.
See accompanying notes to financial statements.
7
<PAGE>
THE WESTPORT FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
1. ORGANIZATION
The Westport Funds (the Trust) is registered under the Investment Company Act of
1940 (the 1940 Act), as a diversified, no-load, open-end management investment
company. The Trust was organized as an Delaware business trust under a
Declaration of Trust dated September 17, 1997. The Trust has established two
separate series: the Westport Fund and the Westport Small Cap Fund (the Funds).
The Trust was capitalized on December 16, 1997, when the initial shares of each
Fund were purchased at $10.00 per share. Except for the initial purchase of
shares, the Trust had no operations prior to the commencement of operations on
January 2, 1998.
The Westport Fund seeks a return composed of capital appreciation by investing
in the securities of companies which are undervalued relative to such company's
assets or long-term earnings potential. The Fund invests primarily in equity
securities and current income is a secondary consideration. The median market
capitalization of the companies the Fund invests in is expected to be mid-range
- - between $1 billion and $5 billion.
The Westport Small Cap Fund seeks long-term capital appreciation by investing in
the securities of companies which are undervalued relative to such company's
assets or long-term earnings potential. The Fund invests primarily in equity
securities of companies with market capitalizations less than or equal to $1
billion.
The Funds each offer two classes of shares: Class R shares and Class I shares.
Each Class R and Class I share of a Fund represents identical interests in the
Fund's investment portfolio and has the same rights, except that (i) Class I
shares are expected to have lower operating expenses over time due to a
shareholder services plan adopted with respect to Class R shares (Note 4), and
(ii) certain other class specific expenses will be borne solely by the class to
which such expenses are attributable. As of June 30, 1998, there were no
outstanding Class I shares of the Westport Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Trust's significant accounting policies:
Security valuation - The Funds' portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued at their closing sales price on the
principal exchange where the security is traded or, if not traded on a
particular day, at their closing bid price. Securities for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Share valuation - The net asset value per share of each class of shares of each
Fund is calculated daily by dividing the total value of a Fund's assets
attributable to that class, less liabilities attributable to that class, by the
number of shares of that class outstanding. The offering price and redemption
price per share of both classes of shares of each Fund is equal to the net asset
value per share.
Investment income and distributions to shareholders - Dividend income is
recorded on the ex-dividend date. Interest income is accrued as earned.
Dividends arising from net investment income, if any, are declared and paid
annually. Net capital gains (net long-term capital gains in excess of net
short-term capital losses), if any, are distributed at least annually.
8
<PAGE>
Organization expenses - Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years. In the event any of
the initial shares of a Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro rata portion of any unamortized
organization expenses in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares of the Fund outstanding at
the time of the redemption.
Security transactions - Security transactions are accounted for on the trade
date. Securities sold are valued on a specific identification basis.
Estimates - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
Federal income tax - It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
The following information is based upon the federal income tax cost of portfolio
investments as of June 30, 1998:
- --------------------------------------------------------------------------------
Westport Westport
Fund Small Cap Fund
- --------------------------------------------------------------------------------
Gross unrealized appreciation ........... $ 452,879 $ 1,241,567
Gross unrealized depreciation ........... (219,794) (1,135,285)
-------- ----------
Net unrealized appreciation ............. $ 233,085 $ 106,282
=========== ===========
- --------------------------------------------------------------------------------
The federal income tax cost of portfolio investments is equal to acquisition
cost as shown on the statements of assets and liabilities.
3. INVESTMENT TRANSACTIONS
For the period ended June 30, 1998, purchases and proceeds from sales of
portfolio securities, other than short-term investments, amounted to $4,776,408
and $1,038,110, respectively, for the Westport Fund, and $25,210,601 and
$1,813,546 for the Westport Small Cap Fund.
4. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Westport
Advisers, LLC (the Adviser), or of Countrywide Fund Services, Inc. (CFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of CW Fund Distributors, Inc., the
distributor of each Fund's shares under the terms of a Distribution Agreement.
9
<PAGE>
INVESTMENT ADVISORY AGREEMENT
The Funds' investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Each Fund pays the Adviser an investment management fee,
computed and accrued daily and paid monthly, at an annual rate of 0.90% of its
average daily net assets for the Westport Fund, and 1.00% of its average daily
net assets for the Westport Small Cap Fund.
In order to voluntarily reduce operating expenses during the period ended June
30, 1998, the Adviser waived its entire advisory fees of $14,064 and reimbursed
$6,140 of common expenses, $11,474 of Class R expenses and $5,858 of Class I
expenses for the Westport Fund; and waived $6,384 of its advisory fees and
reimbursed $11,000 of Class R expenses and $9,844 of Class I expenses for the
Westport Small Cap Fund.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related administrative and compliance services for the Funds. CFS supervises the
preparation of tax returns, reports to shareholders, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these services, CFS
receives a monthly fee from each Fund at an annual rate of 0.125% on its average
daily net assets up to $50 million; 0.10% on the next $50 million of such net
assets; and 0.075% on such net assets in excess of $100 million, subject to a
minimum monthly fee.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Funds' shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee based on the number of shareholder accounts
in each class of each Fund, subject to a minimum monthly fee for each class of
shares of a Fund. In addition, each Fund pays out-of-pocket expenses, including
but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Funds. For these services, CFS receives a monthly fee from each Fund. In
addition, each Fund pays certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
SHAREHOLDER SERVICES PLAN
The Trust has adopted a shareholder services plan with respect to Class R shares
of each Fund. Under this plan, the Trust may enter into agreements pursuant to
which a shareholder servicing agent performs certain shareholder services not
otherwise provided by the transfer agent. For these services, each Fund pays the
shareholder servicing agent a fee of up to 0.25% of the average daily net assets
attributable to the Class R shares owned by investors for which the shareholder
servicing agent maintains a servicing relationship. For the period ended June
30, 1998, no shareholder servicing fees were paid or accrued by the Funds.
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares as shown in the Statements of Changes in
Net Assets are the result of the following capital share transactions for the
period ended June 30, 1998:
- --------------------------------------------------------------------------------
Westport Westport
Fund Small Cap Fund
- --------------------------------------------------------------------------------
CLASS R
Shares sold .................................... 398,188 632,268
Shares redeemed ................................ (8,686) (8,492)
------- ---------
Net increase in shares outstanding ............. 389,502 623,776
Shares outstanding, beginning of period ........ 5,000 5,000
------- ---------
Shares outstanding, end of period .............. 394,502 628,776
======= =========
CLASS I
Shares sold .................................... -- 1,908,197
Shares redeemed ................................ -- (6,421)
------- ---------
Net increase in shares outstanding ............. -- 1,901,776
Shares outstanding, beginning of period ........ -- --
------- ---------
Shares outstanding, end of period .............. -- 1,901,776
======= =========
- --------------------------------------------------------------------------------
11
<PAGE>
WESTPORT FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
================================================================================
Market
COMMON STOCKS - 91.1% Shares Value
- --------------------------------------------------------------------------------
AEROSPACE - 1.3%
Sundstrand Corporation .............................. 1,000 $ 57,250
-----------
BROADCASTING - 4.6%
Cox Radio, Inc. - Class A (a) ....................... 4,700 203,275
-----------
BUSINESS PRODUCTS & SERVICES - 13.1%
May & Speh, Inc. (a) ................................ 10,000 198,750
Policy Management Systems Corporation (a) ........... 2,000 78,500
Rational Software Corporation (a) ................... 14,500 221,125
Young and Rubicam, Inc. ............................. 2,500 80,000
-----------
578,375
-----------
CONSUMER PRODUCTS & SERVICES - 10.1%
Duane Reade, Inc. (a) ............................... 5,500 165,000
Fingerhut Companies, Inc. ........................... 1,800 59,400
Marks Bros. Jewelers, Inc. (a) ...................... 7,400 144,300
Rural/Metro Corporation (a) ......................... 6,000 78,000
-----------
446,700
-----------
FINANCE - 2.1%
Freedom Securities Corporation (a) .................. 5,000 90,625
-----------
INDUSTRIAL SPECIALTY PRODUCTS - 18.8%
Anadigics, Inc. (a) ................................. 10,900 148,513
C&D Technologies, Inc. .............................. 4,000 232,000
JLG Industries, Inc. ................................ 8,000 162,000
Strattec Securities Corporation (a) ................. 6,000 180,750
Unitrode Corporation (a) ............................ 9,000 103,500
-----------
826,763
-----------
OIL & GAS SERVICES - 3.3%
Petroleum Helicopters, Inc. ......................... 7,000 144,375
-----------
REGIONAL BANKS AND THRIFTS - 14.0%
Carolina First Corporation .......................... 2,000 50,750
First Virginia Banks, Inc. .......................... 2,500 127,812
Heritage Financial Corporation ...................... 2,500 36,875
Republic Banking Corporation of Florida (a) ......... 10,000 160,000
Sterling Financial Corporation (a) .................. 8,500 193,375
Webster Financial Corporation ....................... 1,500 49,875
-----------
618,687
-----------
SECURITY PRODUCTS & SERVICES - 3.3%
Pittston Brink's Group .............................. 4,000 147,500
-----------
12
<PAGE>
WESTPORT FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1998 (Unaudited)
================================================================================
Market
COMMON STOCKS - 91.1% (Continued) Shares Value
- --------------------------------------------------------------------------------
TRANSPORTATION - 13.9%
Air Express International Corporation ............... 4,200 $ 112,350
Airborne Freight Corporation ........................ 4,000 139,750
Circle International Group, Inc. .................... 7,000 196,000
Expeditors International Wash, Inc. ................. 3,685 162,140
-----------
610,240
-----------
UTILITIES - 4.7%
El Paso Electric Company (a) ........................ 20,000 183,750
Southwestern Energy Company ......................... 2,500 22,969
-----------
206,719
-----------
OTHER - 1.9% 83,625
-----------
TOTAL COMMON STOCKS (COST $3,781,049) $ 4,014,134
-----------
MONEY MARKETS - 9.3%
Star Treasury Fund (Cost $409,644) 409,644 $ 409,644
-----------
TOTAL INVESTMENT SECURITIES - 100.4% (Cost $4,190,693) $ 4,423,778
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.4)% (17,914)
-----------
Net Assets - 100.0% $ 4,405,864
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
13
<PAGE>
WESTPORT SMALL CAP FUND
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
================================================================================
Market
COMMON STOCKS - 82.0% Shares Value
- --------------------------------------------------------------------------------
AIRCRAFT MAINTENANCE & SERVICES - 5.3%
AAR Corporation ..................................... 32,300 $ 954,869
Sifco Industries .................................... 25,400 536,575
-----------
1,491,444
-----------
BROADCASTING - 2.9%
Emmis Communications Corporation (a) ................ 17,000 812,812
-----------
BUSINESS PRODUCTS & SERVICES - 8.6%
Rational Software Corporation (a) ................... 70,000 1,067,500
Volt Information Sciences, Inc. (a) ................. 35,900 973,787
Willis Corroon Group - ADR .......................... 30,000 376,875
-----------
2,418,162
-----------
CONSUMER PRODUCTS & SERVICES - 12.4%
Applebee's International, Inc. ...................... 50,000 1,118,750
Duane Reade, Inc. (a) ............................... 20,000 600,000
Marks Bros. Jewelers, Inc. (a) ...................... 35,100 684,450
Royal Olympic Cruise Lines (a) ...................... 59,100 591,000
Ruby Tuesday, Inc. .................................. 33,200 514,600
-----------
3,508,800
-----------
FINANCE - 1.6%
Freedom Securities Corporation (a) .................. 25,000 453,125
-----------
HEALTHCARE - 3.6%
Vencor, Inc. (a) .................................... 140,000 1,015,000
-----------
INDUSTRIAL SPECIALTY PRODUCTS - 10.8%
Anadigics, Inc. (a) ................................. 56,200 765,725
C&D Technologies, Inc. .............................. 15,000 870,000
JLG Industries, Inc. ................................ 20,000 405,000
Rogers, Inc. (a) .................................... 12,900 425,700
Unitrode Corporation (a) ............................ 50,000 575,000
-----------
3,041,425
-----------
MEDICAL PRODUCT WHOLESALERS - 5.3%
Bindley Western Industries .......................... 33,333 1,099,989
Owens & Minor, Inc. ................................. 40,000 400,000
-----------
1,499,989
-----------
REGIONAL BANKS AND THRIFTS - 14.3%
Harbor Florida Bancshares ........................... 100,000 1,193,750
PBOC Holdings, Inc. (a) ............................. 57,500 794,219
Republic Banking Corporation of Florida (a) ......... 20,000 320,000
Staten Island Bancorp, Inc. (a) ..................... 29,000 659,750
Sterling Financial Corporation (a) .................. 28,000 637,000
Timberland Bancorp (a) .............................. 27,000 445,500
-----------
4,050,219
-----------
14
<PAGE>
WESTPORT SMALL CAP FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
June 30, 1998 (Unaudited)
================================================================================
Market
COMMON STOCKS - 82.0% (Continued) Shares Value
- --------------------------------------------------------------------------------
SECURITY PRODUCTS & SERVICES - 0.3%
Checkpoint Systems, Inc. (a) ........................ 7,000 $ 98,875
-----------
TRANSPORTATION - 10.9%
Airborne Freight Corporation ........................ 21,200 740,675
Circle International Group, Inc. .................... 21,800 610,400
Expeditors International Wash, Inc. ................. 18,685 822,140
Fritz Companies, Inc. (a) ........................... 29,000 387,875
Pittston Burlington Group ........................... 34,000 529,125
-----------
3,090,215
-----------
UTILITIES - 2.4%
El Paso Electric Company (a) ........................ 73,600 676,200
-----------
Other - 3.6% ........................................ 1,040,500
-----------
Total Common Stocks (Cost $23,090,484) .............. $23,196,766
-----------
MONEY MARKETS - 19.9%
Star Treasury Fund (Cost $5,639,704) ................ 5,639,704 $ 5,639,704
-----------
Total Investment Securities - 101.9% (Cost $28,730,188) $28,836,470
Liabilities in Excess of Other Assets - (1.9)% (531,788)
-----------
Net Assets - 100.0% $28,304,682
===========
(a) Non-income producing security.
See accompanying notes to financial statements.
15
<PAGE>
THE WESTPORT FUNDS
WESTPORT FUND
WESTPORT SMALL CAP FUND
SHAREHOLDER SERVICES
888-593-7878
INVESTMENT ADVISER
Westport Advisers, LLC
253 Riverside Avenue
Westport, Connecticut 06880
203-227-3601
BOARD OF TRUSTEES
Raymond J. Armstrong
Stephen E. Milman
Edmund H. Nicklin, Jr.
Ronald H. Oliver
D. Bruce Smith, II
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
DISTRIBUTOR
CW Fund Distributors, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
This report is authorized for distribution only when it is accompanied or
preceded by a current prospectus of The Westport Funds.
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<NAME> WESTPORT FUND
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<INVESTMENTS-AT-VALUE> 4,423,778
<RECEIVABLES> 111,770
<ASSETS-OTHER> 19,576
<OTHER-ITEMS-ASSETS> 19,908
<TOTAL-ASSETS> 4,575,032
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<NAME> WESTPORT SMALL CAP FUND - RETAIL SHARES
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<OTHER-ITEMS-LIABILITIES> 93,499
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<SHARES-COMMON-STOCK> 628,776
<SHARES-COMMON-PRIOR> 5,000
<ACCUMULATED-NII-CURRENT> 8,701
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106,282
<NET-ASSETS> 7,031,061
<DIVIDEND-INCOME> 103,482
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<EXPENSES-NET> 94,781
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<AVERAGE-NET-ASSETS> 4,170,616
<PER-SHARE-NAV-BEGIN> 10.00
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<NAME> WESTPORT SMALL CAP FUND - INSTITUTIONAL SHARES
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 28,730,188
<INVESTMENTS-AT-VALUE> 28,836,470
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<SHARES-COMMON-STOCK> 1,901,776
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<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 103,482
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<EXPENSES-NET> 94,781
<NET-INVESTMENT-INCOME> 8,701
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 1,908,197
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