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UC INVESTMENT TRUST
UC INVESTMENT FUND
SEMI-ANNUAL REPORT
November 30, 1999
(Unaudited)
INVESTMENT ADVISER ADMINISTRATOR
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UNITED MANAGEMENT COMPANY, LLC 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>
January 13, 2000
Dear Shareholder:
As we stand on the edge of a new calendar era with the possibility of a new era
in terms of economic performance, some reflection can certainly be appropriate
even if we are not impressed with all the hoopla of the new millennium. In this
past century our economy underwent incredible change as economic growth
proceeded to compound in real terms so that incomes and standards of living have
grown far beyond expectations or visions at the beginning of this century.
What are some of the key changes in the American economy over the past decade?
1. VIRTUALLY CONTINUOUS GROWTH HAS BEEN THE HALLMARK OF THIS DECADE as GDP
grew from $2.8 trillion in 1990 to nearly $9.0 trillion now, the longest
peacetime expansion in our history.
2. UNEMPLOYMENT HAS FALLEN STEADILY. The rate of unemployment now stands at
4.1%, the lowest since 1970. There has been a surge of new jobs making
labor markets increasingly tight.
3. INFLATION HAS RETREATED TO A RATE BELOW 2% PER ANNUM. The rate is holding
constant.
THE ROLE OF THE FED AND MONETARY POLICY
The conditions set in place by the Federal Reserve for low inflation have borne
fruit and enabled the economy to grow faster without increasing price levels.
The question now remains, "How will this decade of boom and expansion end?" Some
observers argue that there is a new structure or new paradigm for the U.S.
economy, that the business cycle is vanquished, and the path to continued growth
and prosperity will continue without interruption. We believe there are some
real significant changes in the American economy, but we also affirm there are
still factors to consider as a caution against excessive overconfidence.
FINANCIAL MARKETS
The equity markets of the U.S. have had an unprecedented Bull Run. The Dow Jones
Industrial Average came within a whisper of 11,500 and closed up 318% over the
decade. The Internet boom was the primary force behind the sensational increase
of 85.6% this past year in the Nasdaq index which became the best performance
ever of a major stock index. Indeed, for the decade, the Nasdaq index rose 795%
... more than twice that of the Dow. This momentum seemed to entice investors to
accept the notion that the only direction equities could go was up and up and
up. Even the venerable S&P 500 added 20% over the year, but this average hid a
great disparity in returns since a small group of Internet equities was the
dominant influence.
The Federal Reserve moved to increase interest rates during the year. In short,
the Fed and the markets were clearly signaling a restraint on credit. Higher
rates were back as both long- and short-term rates moved upward.
WHAT CAN WE EXPECT?
The economic outlook is basically good with the best set of statistics
imaginable. The consensus is for a slowdown in growth and slight increases in
inflationary pressures along with some increase in the rate of unemployment.
There is general agreement that interest rates will rise some in the first half
and then moderate downward toward the last quarter. It seems that the level of
demand must slow down over the year ahead. Although there are significant
strains in our economy, it does not mean that there cannot be a "soft landing."
As to the financial markets, there is a growing realization that equity markets
are unlikely to sustain the kind of growth and returns that have characterized
the decade and this past year. There is certain to be greater volatility in all
markets. The prudent investor will continue to make careful selections based on
thorough and independent analysis, with a minimum of attention to the whims and
fashions of a very fickle market.
<PAGE>
Letter to Shareholders January 13, 2000 Page 2
SECTOR ALLOCATION AND KEY HOLDINGS
Based on market value at the end of the quarter, the following are the leading
sectors for the UC Investment Fund portfolio:
1. Technology 25.7%
2. Financial Services, particularly Banking 22.7%
3. Healthcare 16.0%
Our judgement about the relative prospects for these sectors remains unchanged.
We did reduce some issues in the healthcare holdings, which we believe will
enhance the Fund's future performance.
The top five holdings in the UC Investment Fund portfolio at year-end 1999, in
terms of relative weight, were:
1. King Pharmaceuticals, Inc. 7.5%
2. Cisco Systems, Inc. 6.3%
3. Oracle Corp. 4.9%
4. MCI WorldCom, Inc. 4.8%
5. Lucent Technologies 4.7%
The asset allocation of the Fund remains heavily weighted in technology, which
has been among the leading sectors in the rise in the overall market. However,
stock selectivity remains the critical factor in the Fund's relative
performance.
FUND PERFORMANCE (PERIODS ENDING 12/31/99)
It has been a year-and-a-half since the inception of the UC Investment Fund.
This longer term gives a better perspective on total performance.
UCIFX Multi-Cap Value S&P 500
------------------------------------------
Fourth Quarter 19.22% 7.58% 14.88%
Year-to-Date 20.69% 7.78% 21.04%
Since Inception 27.55% 4.87% 20.08%
The comparison of the performance of the UC Investment Fund with the benchmarks
of an overall market average such as the S&P 500 or against other funds in a
similar category is a gratifying indication of the continuing merit of careful
stock selection, even in a market that is generally rising overall.
OUR STRATEGY AND INVESTMENT APPROACH
The U.S. equity market has achieved a remarkable sustained increase in prices
and total returns for virtually a decade. The past two years have seen a
particularly sharp increase in equity values. There is increasing concern about
over-valuation and excessive expectations by investors for ever-increasing share
prices. Our strategy and fundamental philosophy remain unchanged. We continue to
believe that careful analysis of companies, combined with prudent selection,
will produce long-term results above the market averages.
Yours faithfully,
/s/ Lois A. Clarke
Lois A. Clarke
President and Managing Director
<PAGE>
UC INVESTMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1999 (UNAUDITED)
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ASSETS
Investment securities:
At acquisition cost $ 34,150,296
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At market value (Note 1) $ 41,175,050
Dividends receivable 50,029
Receivable for capital shares sold 2,400
Organization costs, net (Note 1) 60,593
Other assets 11,209
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TOTAL ASSETS 41,299,281
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LIABILITIES
Payable to Adviser (Note 3) 33,466
Payable to Administrator (Note 3) 8,265
Other accrued expenses and liabilities 13,929
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TOTAL LIABILITIES 55,660
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NET ASSETS $ 41,243,621
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Net assets consist of:
Paid-in capital $ 33,825,887
Undistributed net investment income 64,102
Accumulated net realized gains from security transactions 328,878
Net unrealized appreciation on investments 7,024,754
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Net assets $ 41,243,621
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Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 3,395,334
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Net asset value, offering price and
redemption price per share (Note 1) $ 12.15
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See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 (UNAUDITED)
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INVESTMENT INCOME
Dividends $ 263,046
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EXPENSES
Investment advisory fees (Note 3) 184,619
Administration fees (Note 3) 26,155
Trustees' fees and expenses 12,541
Accounting services fees (Note 3) 12,000
Transfer agent fees (Note 3) 9,000
Amortization of organization costs (Note 1) 8,455
Custodian fees 7,911
Professional fees 5,159
Registration fees 5,075
Postage and supplies 2,971
Printing of shareholder reports 2,720
Other expenses 322
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TOTAL EXPENSES 276,928
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NET INVESTMENT LOSS (13,882)
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 318,379
Net change in unrealized appreciation/
depreciation on investments 5,070,546
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 5,388,925
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,375,043
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See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
UC INVESTMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
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Six Months
Ended Period
Nov. 30, Ended
1999 May 31,
(Unaudited) 1999 (a)
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FROM OPERATIONS:
<S> <C> <C>
Net investment income (loss) $ (13,882) $ 156,440
Net realized gains from security transactions 318,379 91,119
Net change in unrealized appreciation/depreciation
on investments 5,070,546 1,954,208
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Net increase in net assets from operations 5,375,043 2,201,767
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (78,456)
From net realized gains from security transactions -- (80,620)
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Decrease in net assets from distributions to shareholders -- (159,076)
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FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,378,263 33,333,524
Net asset value of shares issued in reinvestment of
distributions to shareholders -- 152,387
Payments for shares redeemed (1,777,654) (2,360,633)
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Net increase in net assets from capital share transactions 2,600,609 31,125,278
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TOTAL INCREASE IN NET ASSETS 7,975,652 33,167,969
NET ASSETS:
Beginning of period (Note 1) 33,267,969 100,000
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End of period $ 41,243,621 $ 33,267,969
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UNDISTRIBUTED NET INVESTMENT INCOME $ 64,102 $ 77,984
============ ============
CAPITAL SHARE ACTIVITY:
Shares sold 393,954 3,363,134
Shares reinvested -- 14,499
Shares redeemed (159,158) (227,095)
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Net increase in shares outstanding 234,796 3,150,538
Shares outstanding, beginning of period (Note 1) 3,160,538 10,000
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Shares outstanding, end of period 3,395,334 3,160,538
============ ============
</TABLE>
(a) Represents the period from the initial public offering of shares (June 29,
1998) through May 31, 1999.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
UC INVESTMENT FUND
FINANCIAL HIGHLIGHTS
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PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
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SIX MONTHS
ENDED PERIOD
NOV. 30, ENDED
1999 MAY 31,
(UNAUDITED) 1999 (A)
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<S> <C> <C>
Net asset value at beginning of period $ 10.53 $ 10.00
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Income from investment operations:
Net investment income (loss) (0.01) 0.05
Net realized and unrealized gains on investments 1.63 0.54
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Total from investment operations 1.62 0.59
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Less distributions:
Dividends from net investment income -- (0.03)
Distributions from net realized gains -- (0.03)
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Total distributions -- (0.06)
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Net asset value at end of period $ 12.15 $ 10.53
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Total return 15.38% (b) 5.89% (b)
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RATIOS AND SUPPLEMENTAL DATA:
Net assets at end of period (000's) $ 41,244 $ 33,268
========== ==========
Ratio of net expenses to average net assets 1.50% (c) 1.81% (c)
Ratio of net investment income (loss) to average net assets (0.08%)(c) 0.64% (c)
Portfolio turnover rate 48% (c) 67% (c)
</TABLE>
(a) Represents the period from the initial public offering of shares (June 29,
1998) through May 31, 1999.
(b) Not annualized.
(c) Annualized.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999 (UNAUDITED)
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MARKET
COMMON STOCKS - 94.4% SHARES VALUE
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AEROSPACE/DEFENSE - 1.1%
Raytheon Co. 15,000 $ 460,313
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BASIC MATERIALS - 1.6%
Birmingham Steel Corp. 90,800 658,300
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CONSUMER PRODUCTS - 10.3%
Clayton Homes, Inc. 57,000 580,687
Coca-Cola Co. 8,000 538,500
Ford Motor Co. 15,000 757,500
General Electric Co. 14,000 1,820,000
PepsiCo, Inc. 16,000 553,000
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4,249,687
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DEPOSITARY RECEIPTS - 2.0%
Energy Select Sector SPDR 9,000 242,859
Standard and Poor's 500 Depositary Receipts 4,000 557,375
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800,234
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ELECTRIC UTILITIES - 1.9%
FirstEnergy Corp. 15,000 349,688
FPL Group, Inc. 10,000 437,500
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787,188
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FINANCIAL & INSURANCE - 22.7%
AXA Financial, Inc. 30,000 1,008,750
AmSouth Bancorp 18,710 422,144
Bank of America Corp. 14,000 819,000
Bank One Corp. 25,000 881,250
Citigroup Inc. 24,000 1,293,000
First Tennessee National Corp. 20,000 657,500
First Union Corp. 25,000 967,187
FleetBoston Financial Corp. 14,000 529,375
Morgan Keegan, Inc. 36,000 600,750
North Fork Bancorporation, Inc. 30,000 603,750
PNC Bank Corp. 10,000 557,500
Wells Fargo Co. 22,000 1,023,000
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9,363,206
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HEALTH CARE - 16.0%
Bristol-Myers Squibb Co. 17,000 1,242,063
Johnson & Johnson 8,000 830,000
King Pharmaceuticals, Inc.* 67,500 3,113,437
Merck & Co., Inc. 18,000 1,413,000
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6,598,500
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OIL/ENERGY - 1.9%
Coastal Corp. 22,000 775,500
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PRIVATE PLACEMENT(A) - 2.4%
Ecampus.Com, Inc.* 256,410 1,000,000
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<PAGE>
UC INVESTMENT FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1999 (UNAUDITED)
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MARKET
COMMON STOCKS - 94.4% SHARES VALUE
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PUBLISHING - NEWSPAPERS - 1.3%
Knight-Ridder, Inc. 10,000 $ 545,625
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TECHNOLOGY - 25.7%
Cisco Systems, Inc.* 29,000 2,586,438
Compaq Computer Corp. 23,000 562,063
Intel Corp. 15,000 1,150,312
International Business Machines Corp. 12,000 1,236,750
Lucent Technologies Inc. 26,500 1,936,156
Microsoft Corp.* 12,000 1,092,563
Oracle Corp.* 30,000 2,034,375
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10,598,657
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TELECOMMUNICATIONS - 7.5%
AT&T Corp. 20,000 1,117,500
MCI WorldCom, Inc.* 24,000 1,984,500
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3,102,000
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TOTAL COMMON STOCKS - 94.4% (Cost $31,914,456) $ 38,939,210
------------
CASH EQUIVALENTS - 5.4%
Fountain Square U.S. Treasury Obligation Fund (Cost $2,235,840) $ 2,235,840
------------
TOTAL COMMON STOCKS AND
CASH EQUIVALENTS - 99.8% (Cost $34,150,296) $ 41,175,050
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.2% 68,571
------------
NET ASSETS - 100.0% $ 41,243,621
============
* Non-income producing security.
SPDR - Standard and Poor's 500 Depositary Receipt.
(A) Valued at fair value as determined in good faith by the Adviser consistent
with procedures approved by the Board of Directors.
See accompanying notes to financial statements.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 (UNAUDITED)
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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 (normally
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.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined 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. In the event any of the
initial shares of the Fund are redeemed during the five year amortization
period, redemption proceeds will be reduced by any unamortized organization
expenses in the same proportion as the number of initial shares redeemed bears
to the number of initial shares outstanding at the time of the redemption.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 (UNAUDITED)
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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 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, 1999, net unrealized appreciation on investments was
$7,024,754 based on a federal income tax cost basis of $34,150,296, of which
$8,778,812 related to appreciated securities and $1,754,058 related to
depreciated securities.
2. INVESTMENT TRANSACTIONS
During the six months ended November 30, 1999, cost of purchases and proceeds
from sales of portfolio securities, other than short-term investments, amounted
to $9,916,159 and $8,387,068, 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 shares of the Fund.
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.
<PAGE>
UC INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999 (UNAUDITED)
================================================================================
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.
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 from the Fund at an annual rate of $20 per
shareholder account, 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 no distribution expenses under the Plan during the six
months ended November 30, 1999.
