- --------------------------------------------------------------------------------
UC INVESTMENT TRUST
UC INVESTMENT FUND
SEMI-ANNUAL REPORT
November 30, 1998
(Unaudited)
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
UNITED INVESTMENT CORPORATION COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 1280 P.O. Box 5354
1005 Glenway Avenue Cincinnati, Ohio 45201-5354
Bristol, Virginia 24203-1280 1.877.823.8637
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<PAGE>
[LOGO]
LETTER TO SHAREHOLDERS - THE UC INVESTMENT FUND
A TOUR D'HORIZON - AN OVERVIEW OF THE PAST YEAR
The UC Investment Fund was launched in the midst of a very paradoxical and
rather turbulent year for investors. The Dow Jones Industrial Average hit a
record high in mid-summer but there were counter currents in both global
economies and financial markets that created increasing uncertainty after eight
years of steady expansion. The U.S. economy was remarkably resilient through
1998 with the timely and effective response of the Federal Reserve's rate
reductions in the latter half of the year providing assurance that monetary ease
and credit conditions would continue to be stable. The underlying strength of
the U.S. economy was apparent in the performance of the following key indicators
over the year:
o Economic growth was about 3.5%, which is above the long-term annual
average
o Unemployment at 4.4% was at the lowest peacetime level for 40 years
o Price stability reflected a virtually inflation free environment
o Interest rates were moving steadily downward with long-term rates reaching
levels below 5%
As the year drew to a close, investor confidence had returned in a rather
substantial way to both domestic and global markets and the Dow Jones Industrial
Average returned to the levels of its mid-summer record high.
The UC Investment Fund, launched on June 29, 1998, has grown to a market
valuation of $26.6 million with 174 shareholders and a net asset value per share
of $9.91 on November 30. We are very gratified by your confidence as evidenced
by the volume of Fund shares purchased. This report covers the period from the
inception of the Fund to November 30. However, it may be interesting to note
that at December 31, the Fund had grown to $28.5 million with 198 shareholders
and a net asset value per share of $10.51.
THE INVESTMENT APPROACH AND PHILOSOPHY OF THE UC INVESTMENT FUND MANAGEMENT
We believe that domestic equity investments still provide the greatest potential
for substantial and superior returns over the long term. Our fundamental
approach, which might be termed "value investing," is to give very careful
attention to the analysis and selection of companies which must meet a set of
highly selective criteria. We do not, as a matter of policy, engage in
short-term trading but rather seek to retain investment positions in companies
which possess the qualities necessary to grow earnings, profitability and cash
flow over the business cycle and, especially, over the long term. We constantly
review the changing forces in the national and international economic scene as
well as developments in a given industry or sector of the economy in order to
anticipate the possible impact on our holdings.
United Management Company, LLC
1005 Glenway Avenue o P.O. Box 1280 o Bristol, Virginia 24203-1280
Phone (540) 466-3322 Fax: (540) 645-1426
<PAGE>
LETTER TO SHAREHOLDERS - THE UC INVESTMENT FUND PAGE 2
Stock selection is the critical element in successful investment return and the
approach of the UC Investment Fund professionals involves the following key
elements:
o Finding companies, which may be out of favor, but have above average
turnaround prospects.
o Identifying companies with promising new products, processes or services.
o Targeting companies with a strong franchise, producing dominant market
share and pricing power.
o Adding selectively to the holdings in the equity portfolio on a
stock-by-stock basis.
The companies selected may aggregate into certain sectors, which may also be
identified as dynamic in terms of overall growth potential. We seek to use a top
down investment analysis to identify trends which may develop into longer-term
themes providing new investment opportunities.
ECONOMIC AND FINANCIAL OUTLOOK AND THE RESPONSE OF THE UC INVESTMENT FUND
The rather satisfactory economic conditions that currently prevail in the U.S.
economy are expected to continue well into the coming year. However, these do
not translate automatically into a continuing boom in the U.S. financial
markets. Investors may come to appreciate increased profits, yields and growth
in the single digit column rather than the somewhat excessive expectations that
have been reflected in the U.S. equity markets. It is not at all certain that
earnings will continue to grow overall at the rates which current market levels
seem to imply. This could mean lowered expectations and much more careful
selection of equity investments. Equities will have to demonstrate their
comparative advantage as investors shift their objectives from rapid increments
of "total return" to preservation of wealth and the maintenance of value in the
face of continuing uncertainty. Although there are some reasons for caution in
the short run, there is no reason to abandon equities as the investment of
choice over the longer term. In summary, the management of the UC Investment
Fund is convinced that the best still lies ahead for prudent and patient
investors.
Faithfully yours,
/s/ Lois A. Clarke
Lois A. Clarke
President
<PAGE>
UC INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998 (UNAUDITED)
================================================================================
ASSETS
Investment securities:
At acquisition cost $ 26,098,577
=============
At market value (Note 1) $ 26,353,083
Dividends receivable 39,417
Receivable for capital shares sold 160,628
Organization costs, net (Note 1) 75,211
Other assets 15,929
-------------
TOTAL ASSETS 26,644,268
-------------
LIABILITIES
Payable to affiliates (Note 3) 28,422
Other accrued expenses and liabilities 13,268
-------------
TOTAL LIABILITIES 41,690
-------------
NET ASSETS $ 26,602,578
=============
Net assets consist of:
Paid-in capital $ 26,262,285
Undistributed net investment income 62,550
Accumulated net realized gains from security transactions 23,237
Net unrealized appreciation on investments 254,506
-------------
Net assets $ 26,602,578
=============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 2,684,150
=============
Net asset value, offering price and
redemption price per share (Note 1) $ 9.91
=============
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED NOVEMBER 30, 1998 (a) (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends $ 235,017
----------
EXPENSES
Investment advisory fees (Note 3) 86,234
Administration fees (Note 3) 12,998
Registration fees 10,856
Accounting services fees (Note 3) 10,000
Distribution expense (Note 3) 10,144
Trustees' fees and expenses 8,761
Insurance expense 8,100
Transfer agent fees (Note 3) 7,500
Amortization of organization costs (Note 1) 6,837
Professional fees 5,200
Custodian fees 3,576
Other expenses 2,261
----------
TOTAL EXPENSES 172,467
----------
NET INVESTMENT INCOME 62,550
----------
REALIZED AND UNREALIZED GAINS ON
INVESTMENTS
Net realized gains from security transactions 23,237
Net change in unrealized appreciation/
depreciation on investments 254,506
----------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS 277,743
----------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 340,293
==========
(a) Represents the period from the initial public offering of shares (June 29,
1998) through November 30, 1998.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED NOVEMBER 30, 1998 (a) (UNAUDITED)
================================================================================
FROM OPERATIONS:
Net investment income $ 62,550
Net realized gains from security transactions 23,237
Net change in unrealized appreciation/depreciation
on investments 254,506
-------------
Net increase in net assets from operations 340,293
-------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 26,262,298
Payments for shares redeemed (100,013)
-------------
Net increase in net assets from capital share transactions 26,162,285
-------------
TOTAL INCREASE IN NET ASSETS 26,502,578
NET ASSETS:
Beginning of period (Note 1) 100,000
-------------
End of period $ 26,602,578
=============
UNDISTRIBUTED NET INVESTMENT INCOME $ 62,550
=============
CAPITAL SHARE ACTIVITY:
Shares sold 2,684,825
Shares redeemed (10,675)
-------------
Net increase in shares outstanding 2,674,150
Shares outstanding, beginning of period (Note 1) 10,000
-------------
Shares outstanding, end of period 2,684,150
=============
(a) Represents the period from the initial public offering of shares (June 29,
1998) through November 30, 1998.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED NOVEMBER 30, 1998 (a) (UNAUDITED)
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period $ 10.00
----------
Income (loss) from investment operations:
Net investment income 0.02
Net realized and unrealized losses on investments (0.11)
----------
Total from investment operations (0.09)
----------
Net asset value at end of period $ 9.91
==========
RATIOS AND SUPPLEMENTAL DATA:
Total return (0.90%)(b)
==========
Net assets at end of period (000's) $ 26,603
==========
Ratio of net expenses to average net assets 2.00%(c)
Ratio of net investment income to average net assets 0.72%(c)
Portfolio turnover rate 25%(c)
(a) Represents the period from the initial public offering of shares (June 29,
1998) through November 30, 1998.
(b) Unannualized.
(c) Annualized.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998 (UNAUDITED)
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MARKET
COMMON STOCKS - 80.7% SHARES VALUE
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CONSUMER PRODUCTS - 12.5%
DaimlerChrysler AG* 3,118 $ 285,836
Clayton Homes, Inc. 45,000 697,500
General Electric Co. 2,000 181,000
General Motors Corp. 10,000 700,000
PepsiCo, Inc. 20,000 773,750
Philip Morris Companies Inc. 10,000 559,375
Philips Electronics N.V. - ADR 2,000 126,625
------------
3,324,086
------------
ELECTRIC UTILITIES - 1.1%
Entergy Corp. 10,000 293,125
------------
FINANCIAL & INSURANCE - 28.6%
BankAmerica Corp. 5,000 325,938
Citigroup Inc. 14,000 702,625
Compass Bancshares, Inc. 10,000 372,500
Crestar Financial Corp. 8,000 531,000
Equitable Companies Inc. 15,000 828,750
First American Corp. 10,000 433,125
First Union Corp. 10,000 607,500
Fleet Financial Group, Inc. 14,000 583,625
Hibernia Corp. 30,000 506,250
Mercantile Bankshares Corp. 15,000 526,875
Morgan Keegan, Inc. 20,000 400,000
North Fork Bancorporation, Inc. 25,000 526,562
One Valley Bancorp, Inc. 13,000 428,187
PNC Bank Corp. 7,000 360,938
Union Planters Corp. 10,000 476,250
------------
7,610,125
------------
HEALTHCARE - 8.1%
Bristol-Myers Squibb Co. 6,000 735,375
King Pharmaceuticals, Inc.* 54,000 810,000
Merck & Co., Inc. 4,000 619,500
------------
2,164,875
------------
OIL/ENERGY - 11.9%
Cabot Oil & Gas Corp. 34,000 524,875
Consolidated Natural Gas Co. 12,000 651,750
Exxon Corp. 7,000 525,438
Noble Drilling Corp.* 21,000 242,812
Questar Corp. 35,000 671,562
Sempra Energy 22,000 551,375
------------
3,167,812
------------
RETAIL STORES - 1.7%
Albertson's, Inc. 8,000 456,500
------------
<PAGE>
UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998 (UNAUDITED)
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MARKET
COMMON STOCKS - 80.7% (CONTINUED) SHARES VALUE
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TECHNOLOGY - 9.4%
Cisco Systems, Inc.* 7,500 $ 565,312
Compaq Computer Corp. 10,000 325,000
International Business Machines Corp. 4,000 660,000
Lucent Technologies Inc. 11,000 946,688
------------
2,497,000
------------
TELECOMMUNICATIONS - 3.4%
Loral Space & Communications Ltd.* 15,000 275,625
MCI WorldCom, Inc.* 10,707 631,713
------------
907,338
------------
TRANSPORTATION - 4.0%
Arkansas Best Corp.* 40,000 235,000
Union Pacific Corp. 9,000 437,625
Wisconsin Central Transportation Corp.* 21,000 380,625
------------
1,053,250
------------
TOTAL COMMON STOCKS (COST $21,219,605) $ 21,474,111
CASH EQUIVALENTS - 18.3%
Fountain Square U.S. Treasury Obligation Fund (Cost $4,878,972) 4,878,972
------------
TOTAL COMMON STOCKS AND
CASH EQUIVALENTS (COST $26,098,577) - 99.0% $ 26,353,083
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.0% 249,495
------------
NET ASSETS - 100.0% $ 26,602,578
============
* Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The UC Investment Fund (the Fund) is a no-load, diversified series of the UC
Investment Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
an Ohio business trust on February 27, 1998. The Fund was capitalized on May 21,
1998 when United Investment Corporation (the Adviser) purchased the initial
10,000 shares of the Fund at $10.00 per share. The initial public offering of
shares of the Fund commenced on June 29, 1998. The Fund had no operations prior
to the public offering of shares except for the initial issuance of shares.
The Fund seeks long-term total return, from a combination of capital growth and
growth of income, by investing primarily in common stocks.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the last reported sale price 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
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 the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The offering and
redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Dividends arising from net investment income,
if any, are declared and paid annually to shareholders of the Fund. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are valued on a specific identification basis.
Organization costs -- Costs incurred by the Fund in connection with its
organization and registration of shares, net of certain expenses, have been
capitalized and are being amortized on a straight-line basis over a five year
period beginning with the commencement of operations.
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.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (UNAUDITED)
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the 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 the 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.
As of November 30, 1998, net unrealized appreciation on investments was $225,202
for federal income tax purposes, of which $1,614,523 related to appreciated
securities and $1,389,321 related to depreciated securities based on a federal
income tax cost basis of $26,127,881. The difference between the federal income
tax cost of portfolio investments and the financial statement cost is due to
certain timing differences in the recognition of capital losses under income tax
regulations and generally accepted accounting principles.
2. INVESTMENT TRANSACTIONS
During the period ended November 30, 1998, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$22,665,757 and $1,469,389, respectively.
3. TRANSACTIONS WITH AFFILIATES
The Chairman of the Trust is also Chairman and Chief Executive Officer of the
Adviser. The President of the Trust is also President and a Director of the
Adviser. The Vice President of the Trust is also an employee of the Adviser.
Certain other officers of the Trust are also officers 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), the principal underwriter for the Fund and
exclusive agent for the distribution of Fund shares.
ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Under the Advisory Agreement, the Fund pays the Adviser a
fee, computed and accrued daily and paid monthly, at an annual rate of 1.00% of
the Fund's average daily net assets.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders of the Fund, 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 at an annual rate of 0.15% on the Fund's
average daily net assets up to $25 million; 0.125% on such net assets between
$25 million and $50 million; and 0.10% on such net assets in excess of $50
million, subject to a $1,000 minimum monthly fee.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (UNAUDITED)
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
Fund. For these services, CFS receives a fee, based on current asset levels, of
$2,000 per month from the Fund. In addition, the Fund reimburses CFS for
out-of-pocket expenses related to the pricing of the Fund's portfolio
securities.
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 Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee at an annual rate of $20 per shareholder
account from the Fund, subject to a $1,500 minimum monthly fee. In addition, the
Fund reimburses CFS for out-of-pocket expenses including, but not limited to,
postage and supplies.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the Plan) under which the Fund may
directly incur or reimburse the Adviser or the Distributor for expenses related
to the distribution and promotion of Fund shares. The annual limitation for
payment of such expenses under the Plan is 0.25% of the Fund's average daily net
assets. The Fund incurred distribution expenses of $10,144 under the Plan during
the period ended November 30, 1998.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001055258
<NAME> UC INVESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 5-MOS
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<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 26,098,577
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<RECEIVABLES> 200,045
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