SEMI-ANNUAL REPORT
JUNE 30, 1999
[LOGO]
The REvest
Value Fund
A No-Load Mutual Fund
Managed in Maine
A Value-Oriented
Investment In Small and
Medium-Sized Company Equities
A Series of The Winter Harbor Fund
<PAGE>
PROFILE OF THE FUND
================================================================================
The REvest Value Fund ("REvest" or the "Fund") is a no-load series of The Winter
Harbor Fund, an open-end, diversified management investment company. Jennifer E.
Goff, President of Ebright Investments, Inc. ("EII" or the "Adviser"), a
registered investment adviser, is responsible for the management of the Fund's
portfolio, subject to the authority of the Fund's Board of Trustees.
REvest primarily seeks long-term growth and secondarily current income by
investing in a broadly diversified portfolio of common stocks and convertible
securities. Prospective portfolio investments are selected on a value basis and
are primarily limited to small and medium-sized companies viewed by the Fund's
investment adviser as having attractive financial characteristics and/or
"vitality factors." Vitality factors are those factors (e.g., an active
acquisition program, stock buy-back program and/or cost reduction program) that
should, in the investment adviser's judgment, allow a company to build future,
incremental value for shareholders. By combining the prospect of vitality with a
value-oriented selection process, we believe we are able to buy Great Companies
at Great Prices. These tenets are elaborated upon in the following outline:
SMALL AND MID-CAP We believe these securities have more potential for capital
STOCKS appreciation because they have historically generated higher
returns for investors, and because they are generally less
well-known, making them more likely to be improperly priced
by the marketplace. The Fund will normally invest at least
90% of its assets in common stocks, convertible preferred
stocks and convertible bonds. At least 80% of these
"allowable securities" will be income-producing, and at
least 80% will be issued by companies with market
capitalizations between $200 million and $2 billion at the
time of investment.
VALUE-ORIENTATION, We look for companies with "value discrepancies," or market
PLUS VITALITY prices below our assessment of their "real" business worth.
From that group, we select companies with vitality or
ongoing programs that should allow them to increase their
long-term value. We believe profits can come from both the
continued success and growth of each portfolio company, as
well as the eventual elimination of any value discrepancy we
believe was present at the time of purchase.
CONSISTENT We will automatically close the Fund to new investors
PORTFOLIO beginning on March 31 after the end of any calendar year
CHARACTER during which its assets reach $350 million. Since we
specialize in small and medium-size companies, we believe a
larger asset base could limit our flexibility in buying and
selling for the Fund, or force us to invest in more
companies than we can closely follow. By placing practical
limits on our size, we believe we can make it possible for
the Fund's investment adviser to actively manage the
portfolio, and enable the Fund to maintain a constant
character over its lifetime.
Please keep in mind, however, that this is a "fixed" style of money management.
REvest does not change from year-to-year, or attempt in any way to anticipate
market trends. Because of this, the Fund is often out-of-sync with the general
equity markets, and short-term performance may be better or worse than either
the "market" or other less specialized funds. Management follows this very
disciplined and consistent path because it believes that in the long run, this
"fixed" characteristic can lead to premium long-term returns.
<PAGE>
Manager's Letter [LOGO]
================================================================================
[PHOTO]
Dear Friends and Fellow Shareholders:
I do not want to get anyone excited, but the winds of change may have started to
finally blow. For the most part, market conditions during the first quarter of
1999 were a continuation of what we experienced in 1998. Concerns about slowing
economic growth and the possibility of a recession caused new money to flow to
the same handful of overvalued stocks that dominated last year, the
"all-weather" vehicles that investors assume will deliver strong earnings growth
even in a weak economy. In this environment, the S&P 500 Index trumped the
Russell 2000 Index, ending the first quarter up 5.0% versus down 5.4%.
But, as the second quarter progressed, a different picture started to emerge.
Industry reports suggested that manufacturing activity was ahead of expectations
and that the Pacific Rim was on the verge of a turnaround, leading economists to
revise their estimates for economic growth upward. Suddenly, it became apparent
that the prospects for growth were not going to be limited to the select few.
Numerous companies and industries would benefit from an expanding economy, and
in many cases, their securities were much more reasonably priced than those of
the companies that have led the charge thus far. The result was one of the most
dramatic shifts in investor sentiment ever witnessed, with some of the biggest
gains coming from once lagging industry sectors such as industrial cyclicals.
Not surprising then, the Russell 2000 was the index to beat in the second
quarter, gaining 15.6% as compared to 7.0% for the S&P 500.
As for REvest, our higher yielding portfolio continued to serve us well. In the
difficult first quarter, we were supported on the downside, losing 4.6% versus
the Russell 2000's loss of 5.4%, but we also met resistance on the upside in the
second quarter, gaining 11.7% as compared to the Russell 2000's 15.6%. Overall,
the large-cap stocks still had the advantage, with the S&P 500 up 12.4% in the
first half of the year. At the same juncture, the Russell 2000 was up 9.3% and
REvest was up 6.5%.
A major contributor to our higher yielding portfolio has been our convertible
bonds. With the recent acquisition of one of the underlying companies and the
surge in the small-cap market in the second quarter, I have been reviewing the
merits of owning these securities. Since their primary purpose is to reduce
downside risk, one must determine whether it is more likely that the market will
go up than down in the near term.
On the plus side, small-caps continue to be extremely undervalued relative to
large-cap stocks. In addition, we are seeing encouraging signs, such as
increased takeover activity (four from our portfolio so far this year), earnings
disappointments from some of the aforementioned all-weather vehicles, orderly
deflation of the Internet bubble, and a bottoming of outflows from small company
mutual funds, all of which suggest our time might be coming. On the minus side,
concerns over inflation and wage pressures have the Federal Reserve standing by,
ready to increase interest rates should the need arise, and new international
tensions have been surfacing. This convergence of factors makes the market's
future direction difficult to discern. My response is to "wait and see." If the
positive trends that have developed since early April continue to play out, then
you can expect that I will alter the portfolio accordingly by year-end.
In the meantime, we will not become complacent. We will continue our company
visitation program as part of our ongoing efforts to improve the quality of the
portfolio, and we will continue to develop and implement marketing initiatives
in order to better position the Fund in the event that this changing of the
guard is real.
By the time you receive this report, the Fund will have attained a five-year
operating history (August 1, 1994 is the Fund's inception date). Historical
returns are reported in 1-, 5- and 10-year increments, so psychologically, we
have passed another important milestone. We have only you to thank for giving us
this opportunity. Your continued support of our work through the ownership of
your shares is much appreciated.
Sincerely,
/s/ Jennifer Ebright Goff
Jennifer Ebright Goff
Portfolio Manager
President, Ebright Investments, Inc.
July 29, 1999
1
<PAGE>
PORTFOLIO SUMMARY
================================================================================
The following (unaudited) information provides a "bird's eye" view of the REvest
portfolio as of June 30, 1999. For a more complete picture, the Portfolio of
Investments and accompanying financial statements should be read in their
entirety.
VALUE % OF NET ASSETS
----- ---------------
PORTFOLIO Common Stocks:
COMPOSITION Micro-Caps (under $200M) .... $ 2,462,813 ..... 11.1%
Small-Caps ($200M - $1B) .... 13,424,169 ..... 60.1%
Mid-Caps ($1B - $2B) ........ 4,070,156 ..... 18.2%
Convertible Bonds ............. 1,454,500 ..... 6.5%
Non-Convertible Bond .......... 402,000 ..... 1.8%
Net Cash ...................... 513,332 ..... 2.3%
----------- ------
Net Assets .................... $22,326,970 ..... 100.0%
=========== ======
% OF NET ASSETS
---------------
INDUSTRY Industrial Cyclicals ........................ 16.2%
CONCENTRATION Energy ...................................... 11.5%
Consumer Products ........................... 11.4%
Technology .................................. 11.1%
Health ...................................... 10.8%
Services .................................... 10.2%
Retail ...................................... 9.7%
Financial ................................... 9.6%
Real Estate ................................. 7.2%
Net Cash .................................... 2.3%
AVERAGE FINANCIAL Market Capitalization ....................... $584.9M
CHARACTERISTICS P/E Ratio ................................... 18.8x
OF PORTFOLIO P/B Ratio ................................... 2.1x
COMPANIES Return on Assets ............................ 7.4%
Return on Equity ............................ 12.8%
Compound 5-Year EPS Growth Rate ............. 15.4%
Gross Portfolio Yield ....................... 2.5%
VALUE % OF NET ASSETS
----- ---------------
TOP TEN EQUITY 1. Teleflex, Inc. ............. $ 651,562 ..... 2.9%
POSITIONS 2. The Standard Register Company 615,000 ..... 2.8%
3. In Focus Systems, Inc. ..... 600,000 ..... 2.7%
4. Helix Technology Corporation 598,438 ..... 2.7%
5. Cousins Properties, Inc. ... 591,719 ..... 2.7%
6. The Toro Company ........... 590,625 ..... 2.7%
7. Barrett Resources Corporation 575,625 ..... 2.6%
8. CLARCOR, Inc. .............. 575,625 ..... 2.6%
9. Peoples Heritage Financial
Group, Inc. .............. 564,375 ..... 2.6%
10. Berry Petroleum Company,
Class A .................. 557,500 ..... 2.5%
2
<PAGE>
PERFORMANCE DISCUSSION [LOGO]
================================================================================
The first half of 1999 was very interesting for two reasons. First, the
performance divergence between different size companies was very pronounced. At
the end of the first quarter, large-cap stocks, as represented by the S&P 500,
were up 5.0%, while small-cap stocks, as represented by the Russell 2000, were
down 5.4%. But, by the end of June, that situation had reversed. Small-cap
stocks made considerable advances in the second quarter with the Russell 2000
ending the quarter up 15.6%, as compared to 7.0% for the S&P 500. Unfortunately,
this surge was not enough to fully offset the damage of the first quarter,
leaving small-caps lagging large-caps at the half.
Secondly, much of the Russell 2000's second quarter outperformance can be
attributed to style preference. At the half, the Russell 2000 Growth Index was
up 12.8%, while the Russell 2000 Value Index was up 5.3%. This situation is
consistent with the broadening of the market scenario painted in the Manager's
Letter. As the economic forecasts were revised upward, investors looking for
growth felt more comfortable travelling down the capitalization ladder to the
relatively cheaper issues. While value companies benefited from this trend, they
did so to a lesser degree than their growth counterparts.
REvest, with its value-orientation, ended the first half of 1999 up 6.5%. Our
performance was enhanced by our participation in the technology, energy, retail
and industrial cyclicals sectors, while the financial sector acted as more of a
drag. This year's performance renewed our commitment to maintaining relatively
equal weightings across industry sectors. It reminded us that while we can
determine value exists, we can never time the realization of that value. Being
broadly diversified helps ensure that we participate whenever a shift finally
occurs.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INITIAL INVESTMENT
ON AUGUST 1, 1994* IN THE REVEST VALUE FUND, S&P 500 AND RUSSELL 2000
- --------------------------------------------------------------------------------
[GRAPH]
2Q99
-------
REvest Value Fund $17,044
S&P 500 Index $33,107
Russell 2000 Index $20,134
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
SIX MONTHS YEAR ENDED TOTAL RETURN
ENDED 6/30/99 6/30/99 SINCE INCEPTION*
------------- ------- ----------------
REvest Value Fund 6.5% -1.2% 11.5%
S&P 500 Index 12.4% 22.8% 27.6%
Russell 2000 Index 9.3% 1.5% 15.3%
The above table and preceding narrative depict the historical returns of REvest,
the S&P 500, an unmanaged index representative of large-company stocks, and the
Russell 2000, an unmanaged index representative of small-company stocks. The
Fund's present investment philosophy was followed in each of the periods
identified. All results presented in this Report are on a "total return" basis,
which assumes that all dividends and distributions were reinvested.
The results presented in this Report represent past performance and should not
be considered representative of the "total return" from an investment in the
Fund today. They are provided only to give an historical perspective of the
Fund. The investment return and principal value of the Fund's shares will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
*Commencement of Operations - August 1, 1994
3
<PAGE>
PORTFOLIO OF INVESTMENTS
================================================================================
June 30, 1999 (Unaudited)
COMMON STOCKS - 89.4%
SHARES COST VALUE
------ ---- -----
CONSUMER 25,000 * Helen of Troy Ltd. ........... $ 363,659 $ 448,438
PRODUCTS - 40,000 * In Focus Systems, Inc. ....... 367,500 600,000
11.4% 20,000 Russ Berrie and Company, Inc.. 322,025 495,000
15,000 The Toro Company ............. 390,900 590,625
30,000 Wolverine World Wide, Inc. ... 388,363 420,000
---------- -----------
1,832,447 2,554,063
---------- -----------
ENERGY - 15,000 * Barrett Resources Corporation 394,878 575,625
11.5% 40,000 Berry Petroleum Company, Class A 432,755 557,500
20,000 Helmerich & Payne, Inc. ...... 396,284 476,250
25,000 Penn Virginia Corporation .... 451,645 493,750
22,500 St. Mary Land & Exploration
Company .................... 421,641 462,656
---------- -----------
2,097,203 2,565,781
---------- -----------
FINANCIAL - 13,900 Banknorth Group, Inc. ........ 417,763 458,700
9.6% 10,000 Community Banks, Inc. ........ 116,057 213,750
40,000 Donegal Group, Inc. .......... 412,401 455,000
30,000 Peoples Heritage Financial
Group, Inc. ................ 209,263 564,375
25,000 Susquehanna Bancshares, Inc. . 287,536 442,188
---------- -----------
1,443,020 2,134,013
---------- -----------
HEALTH - 15,000 Analogic Corporation ......... 461,445 466,406
10.8% 20,000 Arrow International, Inc. .... 385,312 517,500
15,000 Diagnostic Products Corporation 420,713 414,375
20,000 * IDEXX Laboratories, Inc. ..... 260,847 466,250
20,000 Invacare Corporation ......... 387,383 535,000
---------- -----------
1,915,700 2,399,531
---------- -----------
INDUSTRIAL 30,000 CLARCOR, Inc. ................ 401,725 575,625
CYCLICALS - 10,000 Greif Bros. Corporation,
14.4% Class A .................... 216,950 255,000
15,000 Kaydon Corporation ........... 468,619 504,375
5,000 LSI Industries, Inc. ......... 100,000 120,625
12,500 M.A. Hanna Company ........... 188,250 205,468
12,500 Oil-Dri Corporation of America 192,688 200,000
20,000 Regal-Beloit Corporation ..... 420,968 472,500
15,000 Teleflex, Inc. ............... 298,187 651,562
12,500 Wausau-Mosinee Paper Corporation 213,531 225,000
---------- -----------
2,500,918 3,210,155
---------- -----------
REAL ESTATE - 35,000 Cavalier Homes, Inc. ......... 375,362 286,563
5.5% 17,500 Cousins Properties, Inc. ..... 380,749 591,719
20,000 New Plan Excel Realty Trust .. 398,313 360,000
---------- -----------
1,154,424 1,238,282
---------- -----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued) [LOGO]
================================================================================
June 30, 1999 (Unaudited)
COMMON STOCKS - 89.4% (Continued)
SHARES COST VALUE
------ ---- -----
RETAIL - 17,500 Applebee's International, Inc. $ 398,940 $ 527,187
9.7% 20,000 CBRL Group, Inc. ............. 387,500 346,250
50,000 * The Gymboree Corporation ..... 397,648 525,000
35,000 * Stein Mart, Inc. ............. 402,500 328,125
30,000 * West Marine, Inc. ............ 362,812 436,875
---------- -----------
1,949,400 2,163,437
---------- -----------
SERVICES - 17,500 Banta Corporation ............ 412,300 367,500
10.2% 12,500 Chemed Corporation ........... 405,870 415,625
25,000 * Computer Horizons Corporation 400,000 345,313
35,000 * Right Management Consultants,
Inc. ....................... 457,000 542,500
20,000 The Standard Register Company 419,174 615,000
---------- -----------
2,094,344 2,285,938
---------- -----------
TECHNOLOGY - 25,000 Helix Technology Corporation . 385,329 598,438
6.3% 20,000 * Kulicke & Soffa Industries, Inc. 392,766 536,250
35,000 * Planar Systems, Inc. ......... 385,000 271,250
---------- -----------
1,163,095 1,405,938
---------- -----------
TOTAL COMMON STOCKS ................... $16,150,551 $19,957,138
----------- -----------
CORPORATE BONDS - 8.3%
<TABLE>
<CAPTION>
PAR COST VALUE
--- ---- -----
<S> <C> <C>
$ 400,000 MSC.Software Corporation 7.875% Conv. Sub. Deb. due 8/18/04 ...... $ 386,207 $ 338,500
400,000 Richardson Electronics, Ltd. 8.25% Conv. Sub. Deb. due 6/15/06 ... 346,000 334,000
400,000 Sequa Corporation 9.375% Sr. Sub. Notes due 12/15/03 ............. 397,826 402,000
400,000 Sizeler Property Investors, Inc. 8.00% Conv. Sub. Deb. due 7/15/03 371,066 376,000
400,000 VLSI Technology, Inc. 8.25% Conv Sub. Notes due 10/01/05 ......... 387,000 406,000
----------- -----------
TOTAL CORPORATE BONDS ............................................ $ 1,888,099 $ 1,856,500
----------- -----------
TOTAL INVESTMENTS - 97.7% $18,038,650 $21,813,638
----------- -----------
REPURCHASE AGREEMENT - 1.4%
Firstar Bank, N.A., 3.30%, dated 6/30/99, due 7/01/99, repurchase
proceeds $318,029 (collaterized by Government National Mortgage
Association, 7.75% due 4/15/39 valued at $325,174) ............. $ 318,000 $ 318,000
----------- -----------
TOTAL INVESTMENTS AND REPURCHASE
AGREEMENTS - 99.1% ............................................. $18,356,650 $22,131,638
===========
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.9% 195,332
-----------
NET ASSETS - 100.0% ................................................ $22,326,970
===========
</TABLE>
* Non-income producing.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
==================================================================================================
June 30, 1999 (Unaudited)
<S> <C>
ASSETS: Investments, at value (acquisition cost: $18,038,650) (Note 2) .. $21,813,638
Investments in repurchase agreements (Note 2) ................... 318,000
Cash ............................................................ 754
Receivable for capital shares sold .............................. 2,100
Receivable for investment securities sold ....................... 249,992
Interest receivable ............................................. 35,443
Dividends receivable ............................................ 20,272
Other assets .................................................... 3,507
-----------
Total assets .................................................. 22,443,706
-----------
LIABILITIES: Dividends payable ............................................... 6,459
Payable to affiliates (Note 5) .................................. 16,375
Payable for investment securities purchased ..................... 89,724
Other accrued expenses and liabilities .......................... 4,178
-----------
Total liabilities ............................................. 116,736
-----------
Net assets .................................................... $22,326,970
===========
NET ASSETS: Paid-in capital ................................................. $17,056,577
Undistributed net investment income ............................. 6,536
Accumulated net realized gains from security transactions ....... 1,488,869
Net unrealized appreciation on investments ...................... 3,774,988
-----------
Net assets .................................................... $22,326,970
===========
PRICE PER Net asset value, offering and redemption price per share (Note 2)
SHARE: ($22,326,970 / 1,939,598 shares outstanding $0.001 par value) ... $ 11.51
===========
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
==================================================================================================================
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
(Unaudited) DECEMBER 31, 1998
----------- -----------------
<S> <C> <C>
INVESTMENT Net investment income ...................................... $ 145,386 $ 378,008
OPERATIONS: Net realized gains from security transactions .............. 1,482,164 3,193,187
Net change in unrealized appreciation/depreciation
on investments ........................................... (272,605) (5,641,998)
------------ ------------
Net increase (decrease) in net assets from operations .... 1,354,945 (2,070,803)
------------ ------------
DISTRIBUTIONS TO From net investment income ................................. (151,671) (371,064)
SHAREHOLDERS: Net realized gains on investments .......................... -- (2,560,610)
------------ ------------
Decrease in net assets from distributions to shareholders (151,671) (2,931,674)
------------ ------------
CAPITAL SHARE Proceeds from shares sold .................................. 363,105 2,095,317
TRANSACTIONS Reinvestment of distributions in shares .................... 134,282 2,687,414
(NOTE 4): Payments for shares redeemed ............................... (4,103,814) (13,935,671)
------------ ------------
Net decrease in net assets from capital share transactions (3,606,427) (9,152,940)
------------ ------------
Net decrease in net assets ............................... (2,403,153) (14,155,417)
NET ASSETS: Beginning of period ........................................ 24,730,123 38,885,540
End of period .............................................. $ 22,326,970 $ 24,730,123
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 6,536 $ 12,821
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS [LOGO]
================================================================================
For the six months ended June 30, 1999 (Unaudited)
INVESTMENT Interest ...................................... $ 98,373
INCOME: Dividends ..................................... 191,935
----------
Total investment income ..................... 290,308
----------
EXPENSES: Investment advisory fees (Note 5) ............. 111,478
Accounting services fees (Note 5) ............. 12,000
Administrative services fees (Note 5) ......... 12,000
Transfer agent fees (Note 5) .................. 7,500
Custodian fees ................................ 6,357
Trustees' fees and expenses ................... 4,755
Postage and supplies .......................... 3,962
Printing of shareholder reports ............... 3,472
Insurance expense ............................. 1,818
Professional fees ............................. 1,250
Registration fees ............................. 937
Pricing costs ................................. 825
----------
Total expenses ............................. 166,354
Fees waived by the Adviser (Note 5) ........... (21,432)
----------
Net expenses ............................... 144,922
----------
NET INVESTMENT INCOME ........................................... 145,386
----------
REALIZED AND Net realized gains from security transactions . 1,482,164
UNREALIZED Net change in unrealized appreciation/
GAIN (LOSS) ON depreciation on investments ................. (272,605)
INVESTMENTS: ----------
Net realized and unrealized gain on investments 1,209,559
----------
NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS $1,354,945
==========
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
=================================================================================================================================
Per share data for a share outstanding through each period.
SIX MONTHS
ENDED PERIODS ENDED DECEMBER 31, DEC. 31, PERIOD
6/30/99 -------------------------------------- ENDED
Unaudited 1998 1997 1996 1995 1994 1
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT Net asset value, beginning of period .............. $ 10.88 $ 13.00 $ 12.21 $ 10.73 $ 9.66 $ 10.00
OPERATIONS: -------- -------- -------- -------- -------- --------
Net investment income ............................. 0.07 0.15 0.21 0.21 0.18 0.04
Net realized and unrealized gain (loss)
on investments .................................. 0.64 (1.02) 2.64 2.16 1.38 (0.33)
-------- -------- -------- -------- -------- --------
Total from investment operations .................. 0.71 (0.87) 2.85 2.37 1.56 (0.29)
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO Dividends from net investment income .............. (0.08) (0.15) (0.19) (0.21) (0.17) (0.05)
SHAREHOLDERS: Distributions from net realized gain on investments -- (1.10) (1.87) (0.68) (0.32) --
-------- -------- -------- -------- -------- --------
Total from distributions to shareholders ........ (0.08) (1.25) (2.06) (0.89) (0.49) (0.05)
-------- -------- -------- -------- -------- --------
Net asset value, end of period .................... $ 11.51 $ 10.88 $ 13.00 $ 12.21 $ 10.73 $ 9.66
======== ======== ======== ======== ======== ========
RATIOS AND Total return ...................................... 6.5% (6.1%) 23.5% 22.3% 16.2% (2.9%)
SUPPLEMENTAL Ratio of expenses to average net assets2 .......... 1.30%3 1.30% 1.26% 1.29% 1.30% 1.42%3
DATA: Ratio of net investment income to
average net assets .............................. 1.30%3 1.20% 1.60% 1.78% 1.73% 1.45%3
Net assets, end of period (000's) ................. $ 22,327 $ 24,730 $ 38,886 $ 42,099 $ 35,804 $ 21,676
Portfolio turnover rate ........................... 41%3 35% 54% 64% 53% 5%
</TABLE>
1 Represents the period from the commencement of operations (August 1, 1994)
through December 31, 1994.
2 Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.49%3 for the six months ended June 30, 1999, 1.37%
for the year ended December 31, 1998 and 1.78%3 for the period ended December
31, 1994 (Note 5).
3 Annualized.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. ORGANIZATION. The REvest Value Fund (the "Fund") is a no-load series of The
Winter Harbor Fund (the "Trust"), a diversified open-end investment management
company organized as a Delaware business trust. The Fund primarily seeks
long-term growth and secondarily current income by investing in a broadly
diversified portfolio of common stocks and convertible securities.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the Trust's
significant accounting policies:
Security Valuation. The Fund's 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 based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. U.S. Government obligations are valued
at their most recent bid prices as obtained from one or more of the major market
makers for such securities. Securities for which market quotations are not
readily available are valued at their fair value under procedures established
and supervised by 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. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
Investment Income and Distributions to Shareholders. Dividends arising from net
investment income are declared and paid quarterly and distributions from net
realized gains, if any, are paid annually in December. These dividends and
distributions are recorded on the ex-date and are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Securities Transactions. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Realized gains and losses from security
transactions and unrealized appreciation and depreciation on investments are
determined on the basis of identified cost for book and tax purposes.
Repurchase Agreements. The Fund enters into repurchase agreements with respect
to its portfolio securities solely with Firstar Bank, N.A. ("Firstar"), the
custodian of its assets. The Fund restricts repurchase agreements to maturities
of no more than seven days. Securities pledged as collateral for repurchase
agreements are held by Firstar until maturity of the repurchase agreements.
Repurchase agreements could involve certain risks in the event of default or
insolvency of Firstar, including possible delays or restrictions upon the
ability of the Fund to dispose of the underlying securities.
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 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.
Based upon the federal income tax cost of portfolio investments of $18,030,082
as of June 30, 1999, the Fund had net unrealized appreciation of $3,783,556,
consisting of gross unrealized appreciation of $4,377,622 and gross unrealized
depreciation of $594,066.
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 $4,427,234 and $8,313,275, respectively.
4. CAPITAL SHARES. The Board of Trustees has authority to issue an unlimited
number of shares of beneficial interest of the Fund, with a par value of $.001.
Share transactions were as follows:
SIX MONTHS YEAR
ENDED ENDED
6/30/99 12/31/98
--------- ---------
Sold ......................................... 34,028 175,492
Reinvest ..................................... 12,487 256,185
Redeemed ..................................... (379,820) (1,150,578)
--------- ---------
Net decrease in shares outstanding ........... (333,305) (718,901)
Shares outstanding, beginning
of period ................................. 2,272,903 2,991,804
--------- ---------
Shares outstanding, end of period ............ 1,939,598 2,272,903
========= =========
Shares redeemed within one year of opening a shareholder account are subject to
a 1.0% redemption fee.
5. TRANSACTIONS WITH AFFILIATES. Certain Trustees and officers of the Trust are
also officers of Ebright Investments, Inc. (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 Fund's investments are managed by the Adviser
pursuant to the terms of an Advisory Agreement. The Fund pays the Adviser an
investment advisory fee, computed and accrued daily and paid monthly, at an
annual rate of 1.00% of its average daily net assets. In order to voluntarily
reduce operating expenses of the Fund during the six months ended June 30, 1999,
the Adviser waived $21,432 of its investment advisory fees.
Sub-Advisory Agreement. The Adviser has retained Gouws Capital Management, Inc.
("GCMI") to provide investment sub-advisory and marketing support services to
the Fund. The Adviser (not the Fund) pays GCMI a fee, computed daily and payable
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) [LOGO]
================================================================================
monthly, at an annual rate equal to 50% of the investment advisory fee received
by the Adviser, less associated costs and expenses incurred by the Adviser.
Administration Agreement. Under the terms of an Administration Agreement, CFS
supplies non-investment related administrative and compliance services for the
Fund. CFS supervises the preparation of 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 the Fund at an annual rate of 0.09% on
the Fund's average daily net assets up to $100 million; 0.075% on the next $100
million; and 0.05% on such net assets in excess of $200 million, subject to a
$2,000 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 Fund's 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, subject to a $1,250 minimum monthly fee. In
addition, the 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 Fund. For these services, CFS receives a
monthly fee, based on current net assets, of $2,000 from the Fund. In addition,
the Fund pays certain out-of-pocket expenses incurred by CFS in obtaining
valuations of the Fund's portfolio securities.
Underwriting Agreement. Under the terms of an Underwriting Agreement, CW Fund
Distributors, Inc. (the "Underwriter") serves as the exclusive agent for the
distribution of the Fund's shares. The Underwriter is an affiliate of CFS by
reason of common ownership.
Shareholder Service Plan. The Trust has adopted a Shareholder Service Plan (the
"Plan"). Under the Plan, the Trust may enter into shareholder service agreements
pursuant to which a shareholder service provider performs certain shareholder
services not otherwise provided by the transfer agent. For these services, the
Adviser pays the shareholder service provider a fee at an annual rate of up to
0.25% of the average daily net assets attributable to shares owned by investors
for which the shareholder service provider maintains a servicing relationship.
The Fund may reimburse the Adviser such payments in an amount not to exceed
0.25% per annum of the average daily net assets of the Fund. For the six months
ended June 30, 1999, no shareholder servicing fees were paid by the Adviser or
reimbursed or accrued by the Fund.
SHAREHOLDER INFORMATION
================================================================================
Y2K Like other mutual funds, financial and other business
organizations and individuals around the world, the Fund could be
adversely affected if the computer systems used by Ebright
Investments, Inc. ("EII") and other service providers to the Fund
do not properly process and calculate date-related information
and data from and after January 1, 2000. Since reporting on the
status of Year 2000 computer compliance in the December 31, 1998
Annual Report, EII and Countrywide Fund Services, Inc. ("CFS")
have completed testing mission critical applications and have
continued to monitor the compliance status of the Fund's other
major third-party service providers. Where applicable,
contingency plans are being developed and assessed.
While EII and CFS are completing steps to address the Year 2000
issues and to obtain reasonable assurances that comparable steps
are being taken by the Fund's other major service providers,
there can be no guarantees that these steps will be sufficient to
avoid adverse impact on the Fund from this problem. It is always
good practice for our shareholders to check account statements
and to keep all records for your account. The issues surrounding
the Year 2000 date change make such record retention especially
important. If you have questions or problems regarding any
information on your statements, please contact Cornelia Morin by
calling EII at (800) 277-5573.
INVESTMENTS Questions concerning the Fund's investments can be directed to
Jennifer Goff, the Fund's portfolio manager, by calling (800)
277-5573. We are one of a small number of funds where the manager
is available to talk directly to investors. If Ms. Goff is
traveling she will return your call when she returns to the
office. We consider our shareholders as true partners with us in
the Fund.
GENERAL Cornelia Morin, EII's Customer Service Officer, is available to
answer questions about the Fund or provide you with the Fund's
current literature. Ms. Morin can also be reached at (800)
277-5573. Ms. Morin maintains a mailing list of shareholders and
other interested parties for Fund mailings such as our financial
reports and special interim shareholder letters. If you are not
on the mailing list and would like to be included, please contact
Ms. Morin.
E-MAIL Our e-mail address has changed. Electronic correspondence for the
Adviser can now be sent to:
[email protected]
9
<PAGE>
This report must be accompanied or preceded by a current Prospectus of the Fund.
Ebright Investments, Inc.
Investment Adviser
511 Congress Street, 9th Floor
Portland, ME 04101
(207) 774-7455 o (800) 277-5573
Fax (207) 772-7370
REvest Logo
P.O. Box 5354
Cincinnati, OH 45201-5354
(877) 473-8378
A Series of The Winter Harbor Fund
