The_____
Westport
___Funds
[LOGO]
Semi-Annual Report
June 30, 1999
(Unaudited)
-----------
WESTPORT
INVESTMENTS
-----------
<PAGE>
Letter to Shareholders July 19, 1999
================================================================================
Dear Fellow Shareholder:
First half 1999 was a period of superior performance for The Westport Funds. The
total return of the Westport Fund surpassed the S&P 400 Mid Cap Index by more
than 13 percentage points. The Westport Fund's 1998 underperformance has been
erased with an annualized return of 22.1% since inception for the Fund versus
17.5% for the S&P 400 Mid Cap Index. The total return for the Westport Small Cap
Fund exceeded the Russell 2000 Index in first half 1999 by more than 15
percentage points. Based on this first half 1999 performance and second half
1998 results, Morningstar ranked the Westport Small Cap Fund first, based on
total return, among 238 small cap value funds for the year ended June 30, 1999.
Table of Results
THE WESTPORT FUNDS
Total Returns - June 30, 1999
- --------------------------------------------------------------------------------
Since Inception*
Six Months One Year to 6/30/99
Fund or Index Ended 6/30/99 Ended 6/30/99 Annualized
- --------------------------------------------------------------------------------
Westport Fund - Class R 20.1% 20.6% 22.1%
S&P 400 Mid Cap Index 6.9% 17.2% 17.5%
Westport Small Cap Fund - Class R** 24.4% 28.4% 27.4%
Russell 2000 Index 9.3% 1.5% 4.3%
- --------------------------------------------------------------------------------
The world economy has benefited in 1999 from the stimulus of monetary easings by
central banks worldwide that began late in third quarter 1998 and continued
through second quarter 1999. The cumulative total of monetary easings during
this period totalled more than 150, including three by the U.S. Federal Reserve.
These injections of liquidity, combined with loans by the IMF, halted the spread
of the financial crisis that began in Asia and moved to Russia midway through
1998 and to Latin America during early 1999. These actions averted a global
financial panic, limited the severity of the liquidity-induced economic
contractions that followed in a number of highly leveraged Asian economies, and
supported domestic financial markets which moved up strongly in fourth quarter
1998.
Some of the factors that normally help U.S. small cap and mid cap stocks
outperform large cap stocks are: low relative valuations, a strong dollar,
accommodative domestic monetary policy and good earnings growth. The last three
factors are generally associated with a strong domestic economy with low
inflation. All four factors were present in fourth quarter 1998 and first
quarter 1999, but small and mid cap stocks did not produce superior returns in
this period. Part of the explanation was liquidations by holders of small and
mid cap mutual funds, in an environment of slowing in-flows to mutual funds,
placing downward pressure on the stock prices of smaller companies with much of
the monies from liquidation moving to S&P 500 Index funds. Beginning in second
quarter 1999, performance leadership changed in favor of smaller companies. The
shift coincided with investor recognition that the aggregate influence of the
numerous monetary easings was beginning to impact more than just financial and
currency markets. Asian economies were improving and Latin American economies
had bottomed out, making current estimates of global growth too low. Investors
seemed to require evidence of a broadening of economic growth beyond the U.S. to
ensure a continuation of longer term earnings growth for smaller companies as a
prerequisite for investing in them.
In the last two years as much as one-third of domestic economic growth may have
been generated by the development and deployment of new technology, much of it
e-commerce and communications related. The broad-based acceptance of this
technology has had a dramatic positive impact on the earnings and stock prices
of companies supplying related products and services. Communications,
networking, computing and building blocks such as semiconductors have been
significant beneficiaries. Semiconductor suppliers held by The Westport Funds
are participating in this shift to a more information-based economy.
Another industry that saw a dramatic improvement in its fortunes in first half
1999 was oil and gas exploration and production. Oil and gas companies offered
attractive valuations at year end 1998 as noted in our 1998 Annual Report.
Improving Asian economies are increasing oil demand beyond initial 1999
expectations and both OPEC members and non-members such as Mexico are
demonstrating a higher level of cooperation than in recent years. The domestic
natural gas industry is benefiting from increased use of natural gas as the
preferred fuel for incremental electricity generation. These factors combined to
increase oil and gas prices since the beginning of 1999.
The investment strategy employed by The Westport Funds is to identify
undervalued companies relative to their stock market valuations and a catalyst
to close the valuation gap. If the strategy is successfully implemented, The
Westport Funds would expect a number of portfolio companies to be acquired by
other companies operating in the same industry. In first half 1999, four
portfolio holdings in each of The Westport Funds received acquisition or merger
proposals. The largest gain on a first half acquisition was the cash purchase of
Platinum Technology International by Computer Associates International for
$29.25 per share, producing realized gains of 90% and 122% for the Westport Fund
and Westport Small Cap Fund, respectively.
Westport Fund
The largest industry commitment for the Westport Fund is computer software and
related services, constituting approximately 20% of the portfolio. All the
industry companies were purchased at depressed prices reflecting a problem or
concern by investors. All are currently benefiting from the rush by domestic
companies to build e-commerce capability. The second largest portfolio
commitment is specialty electronics component manufacturers. The best performers
among these companies in first half 1999 were Anadigics and Unitrode, both
suppliers of specialty wireless telephony, computing and communications
semiconductors. Healthcare and banking commitments continued to disappoint and
all shares of Rural/Metro, a leading supplier of ambulance services, were sold
from the portfolio.
Westport Small Cap Fund
The largest industry commitment of the Westport Small Cap Fund, specialty
semiconductors, also had the best first half 1999 performance. The worldwide
boom in wireless telephony and the demand for greater bandwidth and speed in
communications were the drivers for the excellent results. Conexant Systems, the
largest portfolio holding at June 30, 1999, also had the best performance at
247% for the half. Computer related products and services is also an important
industry commitment for the Small Cap Fund, and it performed well in the period.
As noted above, the acquisition of Platinum Technology International produced a
sizeable gain for the Fund, but other holdings such as Unigraphics Solutions, a
provider of design software, majority owned by EDS, also recorded excellent
returns.
The oil and gas industry segment provided excellent first half performance as
well, with PennzEnergy agreeing to merge with Devon Energy for an unrealized
gain of 39% during the period.
Summary
The current economic expansion in the United States entered its one hundredth
month in July 1999. Despite the Federal Reserve's recent 0.25% increase in the
Fed Funds rate, the domestic economy should continue to grow at a 2.5% to 3.0%
rate unless the Federal Reserve tightens monetary policy further. Such an action
seems unlikely if domestic inflation remains at current subdued levels and
employment data do not suggest a pick-up in unit labor costs.
If economic growth outside the U.S. continues to improve as well, smaller
companies are likely to continue the recent trend of providing higher returns
than large cap companies. The key to good investment performance will remain the
identification of undervalued investments. This remains our goal and challenge.
We would like to thank our fellow shareholders for their continuing confidence.
Sincerely,
/s/ Edmund H. Nicklin, Jr. /s/ Andrew J. Knuth
Edmund H. Nicklin, Jr. Andrew J. Knuth
Portfolio Manager Portfolio Manager
* Commencement of operations was January 2, 1998.
** For total return and other information relating to Class I shares of the
Westport Small Cap Fund, see the Financial Highlights on page 8.
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999 (Unaudited)
==============================================================================================
Westport
Westport Small Cap
Fund Fund
- ----------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At acquisition cost .................................... $ 6,689,775 $ 127,607,557
============= =============
At market value (Note 2) ............................... $ 8,097,657 $ 156,406,435
Dividends receivable ...................................... 4,602 76,849
Receivable for capital shares sold ........................ 150 459,881
Receivable for securities sold ............................ 36,559 348,955
Organization expenses, net (Note 2) ....................... 15,226 15,226
Other assets .............................................. 22,876 27,418
------------- -------------
TOTAL ASSETS ........................................ 8,177,070 157,334,764
------------- -------------
LIABILITIES
Payable for capital shares redeemed ....................... 180 64,659
Payable for securities purchased .......................... 69,200 29,750
Payable to affiliates (Note 4) ............................ 4,126 157,306
Other accrued expenses and liabilities .................... 8,780 32,607
------------- -------------
TOTAL LIABILITIES ................................... 82,286 284,322
------------- -------------
NET ASSETS ................................................ $ 8,094,784 $ 157,050,442
============= =============
Net assets consist of:
Paid-in capital ........................................... $ 6,469,017 $ 126,977,097
Accumulated net investment loss ........................... (28,094) (205,245)
Accumulated net realized gains from security transactions . 245,979 1,479,712
Net unrealized appreciation on investments ................ 1,407,882 28,798,878
------------- -------------
Net assets ................................................ $ 8,094,784 $ 157,050,442
============= =============
PRICING OF CLASS R SHARES
Net assets attributable to Class R shares ................. $ 8,094,784 $ 51,238,280
============= =============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) .... 601,158 3,568,921
============= =============
Net asset value, offering price and
redemption price per share (Note 2) .................... $ 13.47 $ 14.36
============= =============
PRICING OF CLASS I SHARES
Net assets attributable to Class I shares ................. $ -- $ 105,812,162
============= =============
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 5) ...... -- 7,363,044
============= =============
Net asset value, offering price and
redemption price per share (Note 2) .................... $ -- $ 14.37
============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1999 (Unaudited)
==================================================================================================
Westport
Westport Small Cap
Fund Fund
- --------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Dividends .................................................... $ 18,133 $ 460,967
------------ ------------
EXPENSES
Investment advisory fees (Note 4) ............................ 27,756 477,631
Administration fees (Note 4) ................................. 6,000 55,987
Professional fees ............................................ 27,415 27,415
Accounting services fees (Note 4) ............................ 12,000 19,500
Registration fees, Common .................................... 2,552 21,247
Registration fees, Class R ................................... 3,296 5,905
Registration fees, Class I ................................... 3,704 3,519
Transfer agent fees, Class R (Note 4) ........................ 7,200 15,687
Transfer agent fees, Class I (Note 4) ........................ -- 6,000
Shareholder servicing fees, Class R (Note 4) ................. -- 14,481
Custodian fees ............................................... 2,567 11,470
Shareholder reporting costs .................................. 2,337 3,464
Amortization of organization expenses (Note 2) ............... 2,175 2,175
Trustees' fees and expenses .................................. 1,463 1,463
Other expenses ............................................... 5,012 268
------------ ------------
TOTAL EXPENSES ............................................ 103,477 666,212
Fees waived and/or expenses reimbursed by the Adviser (Note 4) (57,250) --
------------ ------------
NET EXPENSES .............................................. 46,227 666,212
------------ ------------
NET INVESTMENT LOSS ............................................. (28,094) (205,245)
------------ ------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ................ 275,196 1,545,534
Net change in unrealized appreciation/
depreciation on investments ............................... 1,000,451 25,030,078
------------ ------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................ 1,275,647 26,575,612
------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ...................... $ 1,247,553 $ 26,370,367
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended June 30, 1999 and December 31, 1998
=================================================================================================================================
Westport Fund Westport Small Cap Fund
------------------------------- -------------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, 1999 December 31, June 30, 1999 December 31,
(Unaudited) 1998 (Unaudited) 1998
- ---------------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment loss ................................... $ (28,094) $ (27,293) $ (205,245) $ (91,013)
Net realized gains (losses) from security transactions 275,196 (29,217) 1,545,534 (65,822)
Net change in unrealized appreciation/depreciation
on investments ..................................... 1,000,451 407,431 25,030,078 3,768,800
------------- ------------- ------------- -------------
Net increase in net assets from operations ............... 1,247,553 350,921 26,370,367 3,611,965
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
CLASS R
Proceeds from shares sold ............................. 2,035,761 7,691,385 30,954,584 20,616,984
Payments for shares redeemed .......................... (1,287,430) (1,993,406) (8,848,059) (1,845,989)
------------- ------------- ------------- -------------
Net increase in net assets from Class R share transactions 748,331 5,697,979 22,106,525 18,770,995
------------- ------------- ------------- -------------
CLASS I
Proceeds from shares sold ............................. -- -- 55,615,183 32,884,086
Payments for shares redeemed .......................... -- -- (908,548) (1,450,131)
------------- ------------- ------------- -------------
Net increase in net assets from Class I share transactions -- -- 54,706,635 31,433,955
------------- ------------- ------------- -------------
Net increase in net assets from capital share transactions 748,331 5,697,979 76,813,160 50,204,950
------------- ------------- ------------- -------------
TOTAL INCREASE IN NET ASSETS ............................. 1,995,884 6,048,900 103,183,527 53,816,915
NET ASSETS:
Beginning of period (Note 1) .......................... 6,098,900 50,000 53,866,915 50,000
------------- ------------- ------------- -------------
End of period ......................................... $ 8,094,784 $ 6,098,900 $ 157,050,442 $ 53,866,915
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE WESTPORT FUNDS
WESTPORT FUND
FINANCIAL HIGHLIGHTS
================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- --------------------------------------------------------------------------------
Class R
-----------------------
Six Months Year
Ended Ended
June 30, 1999 December 31,
(Unaudited) 1998
- --------------------------------------------------------------------------------
Net asset value at beginning of period ............ $ 11.22 $ 10.00
-------- --------
Income from investment operations:
Net investment loss ............................ (0.05) (0.05)
Net realized and unrealized gains on investments 2.30 1.27
-------- --------
Total from investment operations .................. 2.25 1.22
-------- --------
Net asset value at end of period .................. $ 13.47 $ 11.22
======== ========
Total return ...................................... 20.05% 12.20%
======== ========
Net assets at end of period (000's) ............... $ 8,095 $ 6,099
======== ========
Ratio of net expenses to average net assets ....... 1.50%(B) 1.50%
Ratio of gross expenses to average net assets(A) .. 3.23%(B) 3.60%
Ratio of net investment loss to average net assets (0.91%)(B) (0.71%)
Portfolio turnover rate ........................... 62%(B) 63%
(A) Represents the ratio of expenses to average net assets absent fee waivers
and/or expense reimbursements by the Adviser (Note 4).
(B) Annualized.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE WESTPORT FUNDS
WESTPORT SMALL CAP FUND
FINANCIAL HIGHLIGHTS
=======================================================================================================================
Per Share Data for a Share Outstanding Throughout Each Period
- -----------------------------------------------------------------------------------------------------------------------
Class R Class I
----------------------------- -----------------------------
Six Months Year Six Months Period
Ended Ended Ended Ended
June 30, 1999 December 31, June 30, 1999 December 31,
(Unaudited) 1998 (Unaudited) 1998(A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ............ $ 11.54 $ 10.00 $ 11.55 $ 10.92
---------- ---------- ---------- ----------
Income from investment operations:
Net investment loss ............................ (0.02) (0.02) (0.02) (0.02)
Net realized and unrealized gains on investments 2.84 1.56 2.84 0.65
---------- ---------- ---------- ----------
Total from investment operations .................. 2.82 1.54 2.82 0.63
---------- ---------- ---------- ----------
Net asset value at end of period .................. $ 14.36 $ 11.54 $ 14.37 $ 11.55
========== ========== ========== ==========
Total return ...................................... 24.44% 15.40% 24.42% 5.77%
========== ========== ========== ==========
Net assets at end of period (000's) ............... $ 51,238 $ 20,637 $ 105,812 $ 33,230
========== ========== ========== ==========
Ratio of net expenses to average net assets ....... 1.48%(C) 1.50% 1.33%(C) 1.50%(C)
Ratio of gross expenses to average net assets(B) .. 1.48%(C) 1.79% 1.33%(C) 1.64%(C)
Ratio of net investment loss to average net assets (0.54%)(C) (0.39%) (0.37%)(C) (0.36%)(C)
Portfolio turnover rate ........................... 22%(C) 19% 22%(C) 19%
</TABLE>
(A) Represents the period from the initial public offering of shares (February
16, 1998) through December 31, 1998.
(B) Represents the ratio of expenses to average net assets absent fee waivers
and/or expense reimbursements by the Adviser.
(C) Annualized.
See accompanying notes to financial statements.
<PAGE>
THE WESTPORT FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (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 a 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 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 primarily capital appreciation and
secondarily current income by investing the majority of its assets in
undervalued equity securities of attractive mid capitalization companies. A mid
capitalization company has a market capitalization between $1 billion and $5
billion.
The Westport Small Cap Fund seeks long-term capital appreciation by investing at
least 65% of its total assets in the equity securities of small capitalization
companies. A small capitalization company has a market capitalization of $1
billion or less at the time of the Fund's investment.
Each of the Funds is authorized to 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 assets 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 of each
Fund (Note 4), and (ii) certain other class specific expenses are borne solely
by the class to which such expenses are attributable. As of June 30, 1999, the
public offering of Class I shares of the Westport Fund had not commenced.
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
(normally 4:00 p.m., Eastern time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued at the last reported sale price on the
principal exchange where the security is traded or, if not traded on a
particular day, at the closing bid price. Securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price, if available, otherwise, at the last quoted 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.
<PAGE>
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.
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 determined 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, 1999:
- --------------------------------------------------------------------------------
Westport Westport
Fund Small Cap Fund
- --------------------------------------------------------------------------------
Gross unrealized appreciation ........ $ 1,690,311 $ 32,191,234
Gross unrealized depreciation ........ (300,438) (3,454,495)
------------- -------------
Net unrealized appreciation .......... $ 1,389,873 $ 28,736,739
============= =============
Federal income tax cost .............. $ 6,707,784 $ 127,669,696
============= =============
- --------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio investments and
the acquisition cost is due to certain timing differences in the recognition of
capital losses under income tax regulations and generally accepted accounting
principles.
As of December 31, 1998, the Westport Fund and the Westport Small Cap Fund had
capital loss carryforwards for federal income tax purposes of $11,208 and
$3,683, respectively, which expire on December 31, 2006. These capital loss
carryforwards may be utilized in the current and future years to offset net
realized capital gains prior to distributing such gains to shareholders.
3. INVESTMENT TRANSACTIONS
For the six months ended June 30, 1999, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$1,969,851 and $1,854,537, respectively, for the Westport Fund, and $69,351,440
and $9,729,417, respectively, 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.
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
average daily net assets for the Westport Fund, and at an annual rate of 1.00%
of average daily net assets for the Westport Small Cap Fund.
In order to voluntarily reduce operating expenses of the Westport Fund during
the six months ended June 30, 1999, the Adviser waived investment advisory fees
of $27,756 and reimbursed the Fund for $15,294 of common expenses, $10,496 of
Class R expenses and $3,704 of Class I expenses.
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 from each Fund based on the number of
shareholder accounts in each class, subject to a minimum monthly fee for each
class of shares. In addition, each Fund pays CFS 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 CFS certain out-of-pocket expenses incurred by CFS in
obtaining valuations of such Fund's portfolio securities.
<PAGE>
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 six months ended
June 30, 1999, shareholder servicing fees of $14,481 were paid by Class R shares
of the Westport Small Cap Fund.
DISTRIBUTION AGREEMENT
The Trust has entered into a Distribution Agreement on behalf of the Funds with
CW Fund Distributors, Inc. (the Distributor). Pursuant to the Distribution
Agreement, the Distributor acts as distributor of each Fund's shares. The
Distributor receives no compensation for its services and is an affiliate of
CFS.
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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Westport Westport
Fund Small Cap Fund
------------------------- -------------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
June 30, 1999 December 31, June 30, 1999 December 31,
(Unaudited) 1998 (Unaudited) 1998
- --------------------------------------------------------------------------------------------------
CLASS R
<S> <C> <C> <C> <C>
Shares sold ........................... 171,935 722,348 2,478,310 1,956,945
Shares redeemed ....................... (114,576) (183,549) (696,945) (174,389)
---------- ---------- ---------- ----------
Net increase in shares outstanding .... 57,359 538,799 1,781,365 1,782,556
Shares outstanding, beginning of period 543,799 5,000 1,787,556 5,000
---------- ---------- ---------- ----------
Shares outstanding, end of period ..... 601,158 543,799 3,568,921 1,787,556
========== ========== ========== ==========
CLASS I
Shares sold ........................... -- -- 4,556,536 3,016,287
Shares redeemed ....................... -- -- (70,805) (138,974)
---------- ---------- ---------- ----------
Net increase in shares outstanding .... -- -- 4,485,731 2,877,313
Shares outstanding, beginning of period -- -- 2,877,313 --
---------- ---------- ---------- ----------
Shares outstanding, end of period ..... -- -- 7,363,044 2,877,313
========== ========== ========== ==========
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
WESTPORT FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
================================================================================
Market
COMMON STOCKS - 88.1% Shares Value
- --------------------------------------------------------------------------------
BROADCASTING/CABLE TV - 9.1%
Cox Radio, Inc. - Class A(a) ..................... 6,700 $ 363,475
MediaOne Group, Inc.(a) .......................... 5,000 371,875
------------
735,350
------------
BUSINESS PRODUCTS & SERVICES - 22.9%
Acxiom Corporation(a) ............................ 6,000 149,625
Parametric Technology Corporation(a) ............. 15,000 208,125
Policy Management Systems Corporation(a) ......... 10,000 300,000
Rational Software Corporation(a) ................. 14,500 477,594
Reynolds & Reynolds Company (The) - Class A ...... 14,000 326,375
Shared Medical Systems Corporation ............... 6,000 391,500
------------
1,853,219
------------
CONSUMER PRODUCTS & SERVICES - 10.1%
Consolidated Stores Corporation(a) ............... 7,500 202,500
Duane Reade, Inc.(a) ............................. 7,000 214,375
Harcourt General, Inc. ........................... 4,000 206,250
Whitehall Jewellers, Inc.(a) ..................... 7,400 197,487
------------
820,612
------------
FINANCE - 0.8%
Freedom Securities Corporation ................... 4,000 68,500
------------
HEALTH CARE - 9.8%
Lincare Holdings, Inc.(a) ........................ 8,000 200,000
Quorum Health Group, Inc.(a) ..................... 30,000 376,875
Universal Health Services, Inc. - Class B(a) ..... 4,500 214,875
------------
791,750
------------
INDUSTRIAL SPECIALTY PRODUCTS - 17.5%
Anadigics, Inc.(a) ............................... 8,000 296,000
C&D Technologies, Inc. ........................... 11,000 336,875
JLG Industries, Inc. ............................. 8,000 163,000
Strattec Security Corporation(a) ................. 6,500 219,375
Unitrode Corporation(a) .......................... 14,000 401,625
------------
1,416,875
------------
OIL & GAS PRODUCERS - 4.8%
Pogo Producing Company ........................... 14,500 270,062
Southwestern Energy Company ...................... 11,000 116,188
------------
386,250
------------
OIL & GAS SERVICES - 1.9%
Transocean Offshore, Inc. ........................ 6,000 157,500
------------
REGIONAL BANKS & THRIFTS - 3.5%
Republic Banking Corporation of Florida .......... 7,500 144,375
Sterling Financial Corporation(a) ................ 10,000 138,125
------------
282,500
------------
SECURITY PRODUCTS & SERVICES - 2.5%
Pittston Brink's Group ........................... 7,500 200,625
------------
<PAGE>
WESTPORT FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1999 (Unaudited)
================================================================================
Market
COMMON STOCKS - 88.1% (Continued) Shares Value
- --------------------------------------------------------------------------------
TRANSPORTATION - 2.4%
Airborne Freight Corporation ..................... 7,000 $ 193,812
------------
UTILITIES - 2.8%
El Paso Electric Company(a) ...................... 25,000 223,438
------------
TOTAL COMMON STOCKS (Cost $5,722,549) ............ $ 7,130,431
------------
MONEY MARKETS - 11.9%
Firstar Stellar Treasury Fund (Cost $967,226) .... 967,226 $ 967,226
------------
TOTAL INVESTMENT SECURITIES - 100.0% (Cost $6,689,775) $ 8,097,657
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.0)% ... (2,873)
------------
NET ASSETS - 100.0% .............................. $ 8,094,784
============
(a) Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
WESTPORT SMALL CAP FUND
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
================================================================================
Market
COMMON STOCKS - 87.7% Shares Value
- --------------------------------------------------------------------------------
AIRCRAFT MAINTENANCE & SERVICES - 1.2%
AAR Corporation .................................. 81,250 $ 1,843,359
------------
BROADCASTING/CABLE TV - 3.2%
Cox Radio, Inc. - Class A(a) ..................... 19,700 1,068,725
Emmis Communications Corporation(a) .............. 80,700 3,984,563
------------
5,053,288
------------
BUSINESS PRODUCTS & SERVICES - 17.2%
Aspen Technology, Inc.(a) ........................ 225,000 2,643,750
Barrett Business Services, Inc.(a) ............... 79,100 672,350
Billing Concepts Corporation(a) .................. 250,000 2,796,875
Policy Management Systems Corporation(a) ......... 154,750 4,642,500
Rational Software Corporation(a) ................. 100,000 3,293,750
Reynolds and Reynolds Company (The) - Class A .... 202,600 4,723,113
Unigraphics Solutions, Inc.(a) ................... 298,300 5,611,769
Volt Information Sciences, Inc.(a) ............... 112,912 2,582,862
------------
26,966,969
------------
CONSUMER PRODUCTS & SERVICES - 12.8%
Applebee's International, Inc. ................... 50,000 1,506,250
Consolidated Stores Corporation(a) ............... 105,506 2,848,662
Duane Reade, Inc.(a) ............................. 165,800 5,077,625
Gaylord Entertainment Company .................... 75,000 2,250,000
Houghton Mifflin Company ......................... 100,000 4,706,250
Ruby Tuesday, Inc. ............................... 131,300 2,494,700
Whitehall Jewellers, Inc.(a) ..................... 45,500 1,214,281
------------
20,097,768
------------
HEALTH CARE - 4.3%
Quorum Health Group, Inc.(a) ..................... 256,000 3,216,000
Universal Health Services, Inc. - Class B(a) ..... 73,900 3,528,725
------------
6,744,725
------------
INDUSTRIAL SERVICES - 3.9%
ITT Educational Services, Inc.(a) ................ 158,000 4,117,875
XTRA Corporation ................................. 43,100 1,979,906
------------
6,097,781
------------
INDUSTRIAL SPECIALTY PRODUCTS - 17.0%
Alpha Industries, Inc.(a) ........................ 83,775 3,989,784
Anadigics, Inc.(a) ............................... 66,200 2,449,400
C&D Technologies, Inc. ........................... 134,400 4,116,000
Conexant Systems, Inc.(a) ........................ 135,000 7,838,438
JLG Industries, Inc. ............................. 50,000 1,018,750
Rogers Corporation(a) ............................ 48,500 1,430,750
Unitrode Corporation(a) .......................... 206,500 5,923,969
------------
26,767,091
------------
MEDICAL PRODUCT WHOLESALERS - 3.1%
Bindley Western Industries, Inc. ................. 107,644 2,482,540
Owens & Minor, Inc. .............................. 210,250 2,312,750
------------
4,795,290
------------
<PAGE>
WESTPORT SMALL CAP FUND
PORTFOLIO OF INVESTMENTS (Continued)
June 30, 1999 (Unaudited)
================================================================================
Market
COMMON STOCKS - 87.7% (Continued) Shares Value
- --------------------------------------------------------------------------------
OIL & GAS PRODUCERS - 3.4%
PennzEnergy Company .............................. 320,600 $ 5,350,012
------------
REGIONAL BANKS & THRIFTS - 9.2%
Downey Financial Corporation ..................... 100,000 2,193,750
Harbor Florida Bancshares, Inc. .................. 150,000 1,837,500
PBOC Holdings, Inc.(a) ........................... 102,500 1,025,000
People's Bank .................................... 84,000 2,556,750
Republic Banking Corporation of Florida .......... 50,000 962,500
Seacoast Financial Services Corporation(a) ....... 186,925 2,126,272
Staten Island Bancorp, Inc. ...................... 80,000 1,440,000
Sterling Financial Corporation(a) ................ 102,000 1,408,875
Timberland Bancorp ............................... 70,400 827,200
------------
14,377,847
------------
SECURITY PRODUCTS & SERVICES - 2.0%
Checkpoint Systems, Inc.(a) ...................... 115,800 1,034,963
Sensormatic Electronics Corporation(a) ........... 156,200 2,177,038
------------
3,212,001
------------
TRANSPORTATION - 4.9%
Airborne Freight Corporation ..................... 36,900 1,021,668
Air Express International Corporation ............ 151,100 3,834,162
Circle International Group, Inc. ................. 24,750 541,406
Fritz Companies, Inc.(a) ......................... 164,200 1,765,150
Pittston BAX Group ............................... 48,475 460,512
------------
7,622,898
------------
UTILITIES - 1.0%
El Paso Electric Company(a) ...................... 182,850 1,634,222
------------
OTHER - 4.5% 218,001 7,088,525
------------
TOTAL COMMON STOCKS (Cost $108,852,898) .......... $137,651,776
------------
MONEY MARKETS - 11.9%
Firstar Stellar Treasury Fund (Cost $18,754,659) . 18,754,659 $ 18,754,659
------------
TOTAL INVESTMENT SECURITIES - 99.6% (Cost $127,607,557) $156,406,435
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.4% ..... 644,007
------------
NET ASSETS - 100.0% $157,050,442
============
(a) Non-income producing security.
See accompanying notes to financial statements.
<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.
