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Sector
Rotation
Fund
Semi-Annual Report
April 30, 1999
T.O. Richardson Company, Inc.
Two Bridgewater Road
Farmington, CT 06032-2256
1-800-235-1022
For more information about the T.O. ----------------
Richardson Sector Rotation Fund, call T.O.Richardson
1-800-643-7477 COMPANY
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T.O. Richardson Sector Rotation Fund
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June, 1999
Dear Fellow Shareholder:
We are pleased to report the results for the T.O. Richardson Sector Rotation
Fund's first four months of operation. From December 31, 1998 through April 30,
1999 our fund was up 12.6% versus the S&P 500 Stock Index of 9.0%.
During the first four months of 1999 the broad market began the year with vigor,
continuing its strong pace from last October. The market moved sideways in
February followed by renewed strength in March and April. Market leadership was
narrowly focused on High Technology, Financial Services, Internet Related
Businesses and Teleccomunications. During February and March there was a noted
change in sector leadership. Cyclical Industries such as Chemicals, Paper and
Wood Products and Basic Industries moved into leadership positions and our
sector trend strategies directed us away from weakening Technology, Internet and
Financial Services sectors and into cyclical sectors. By the end of April, we
had completed most of the move with 9% of the portfolio in cash.
In our view, rising interest rates and concerns about inflation driven by a
booming national economy will temper the flow of new money into the stock
market. Our focus on industry sectors should enable us to identify opportunities
for gain in a market with very narrow leadership.
Thank you for making the T.O. Richardson Sector Rotation Fund part of your
investment portfolio. We appreciate your continued business.
Sincerely,
/s/ Samuel Bailey, Jr.
Samuel Bailey, Jr.
President
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T.O. Richardson Sector Rotation Fund
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[THE FOLLOWING TABLE IS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
TOR SECTOR
DATE ROTATION FUND S&P 500
---- ------------- -------
31-Dec-98 10000 10000
29-Jan-99 11210 10418
26-Feb-99 10240 10094
31-Mar-99 10620 10498
30-Apr-99 11260 10905
This chart assumes an initial investment of $10,000, made on 12/31/98
(inception). Performance reflects fee waivers in effect. In the absence of fee
waivers, total return would be reduced. Returns shown include the reinvestment
of all dividend and other distributions. Past performance is not predictive of
future performance. Investment return and principal value will fluctuate, so
that your shares, when redeemed, may be worth more or less than their original
cost.
RATE OF RETURN(%)
FOR THE PERIOD ENDED APRIL 30, 1999
- --------------------------------------------------------------------------------
Cumulative
since inception
12/31/98
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T.O. Richardson Sector Rotation Fund ............................12.60%
Standard & Poor's 500 Stock Index ............................... 9.05%
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2
<PAGE>
T.O. RICHARDSON SECTOR ROTATION FUND
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Schedule of Investments - April 30, 1999
- --------------------------------------------------------------------------------
(Unaudited)
Shares Value
------ -----
COMMON STOCKS - 90.96%
Automotive - 2.47%
5,700 Eaton Corporation $ 522,619
-----------
Brokerage Services - 16.01%
9,400 Charles Schwab Corporation (The) 1,031,650
11,500 Donaldson Lufkin & Jenrette, Inc. 804,281
13,500 E*TRADE Group, Inc. * 1,559,250
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3,395,181
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Computers - 3.77%
7,341 EMC Corporation * 799,710
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Developmental Communications - 11.39%
8,600 Cisco Systems, Inc. * 980,937
3,400 QUALCOMM, Inc. * 680,000
17,800 Sprint Corporation (PCS Group) * 754,275
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2,415,212
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Energy Services - 14.56%
57,000 Global Marine, Inc. * 847,875
10,500 Halliburton Company 447,562
22,500 Nabors Industries, Inc. * 462,656
52,500 Rowan Companies, Inc. * 840,000
14,400 Weatherford International, Inc. * 487,800
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3,085,893
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Financial Services - 6.34%
5,100 American Express Company 666,506
9,000 Citigroup, Inc. 677,250
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1,343,756
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See notes to financial statements.
3
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T.O. RICHARDSON SECTOR ROTATION FUND
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Schedule of Investments - April 30, 1999
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(Unaudited)
Shares Value
------ -----
COMMON STOCKS (continued)
Industrial Equipment - 4.83%
14,600 Case Corporation $ 505,525
7,500 Ingersoll-Rand Company 518,906
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1,024,431
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Paper & Forest Products - 14.60%
18,800 Boise Cascade Corporation 756,700
15,000 Champion International Corporation 820,313
13,500 International Paper Company 719,719
19,100 Mead Corporation (The) 798,619
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3,095,351
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Software - 5.84%
7,100 Adobe Systems, Inc. 449,963
19,400 Oracle Corporation * 525,013
20,200 Parametric Technology Corporation * 263,863
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1,238,839
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Technology - 5.05%
7,500 America Online, Inc. * 1,070,625
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Telecommunications - 3.73%
9,617 MCI WorldCom, Inc. * 790,397
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Transportation - 2.37%
9,400 Cummins Engine Company, Inc. 502,900
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Total Common Stocks
(Cost $17,076,240) 19,284,914
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See notes to financial statements.
4
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T.O. RICHARDSON SECTOR ROTATION FUND
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Schedule of Investments - April 30, 1999
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(Unaudited)
Principal
Amount Value
- --------- -----
VARIABLE RATE DEMAND NOTES - 9.03%
$813,846 General Mills, Inc. $ 813,846
847,331 Pitney Bowes Credit Corporation 847,331
71,539 Sara Lee Corporation 71,539
182,520 Warner-Lambert Company 182,520
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Total Variable Rate Demand Notes
(Cost $1,915,236) 1,915,236
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TOTAL INVESTMENTS - 99.99%
(Cost $18,991,476) 21,200,150
Other Assets
less Liabilities - 0.01% 1,028
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NET ASSETS - 100.00% $21,201,178
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* Non-income producing security.
See notes to financial statements.
5
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T.O. RICHARDSON SECTOR ROTATION FUND
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STATEMENT OF ASSETS AND LIABILITIES
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April 30, 1999
(Unaudited)
ASSETS:
Investments at value (cost $18,991,476) $ 21,200,150
Dividends and interest receivable 22,699
Prepaid expenses 32,981
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Total Assets 21,255,830
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LIABILITIES:
Due to Advisor 15,031
Accrued expenses 39,621
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Total Liabilities 54,652
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NET ASSETS $ 21,201,178
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NET ASSETS CONSIST OF:
Capital stock $ 19,365,407
Accumulated undistributed net investment loss (15,329)
Accumulated undistributed net realized loss on investments (357,574)
Net unrealized appreciation on investments 2,208,674
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NET ASSETS $ 21,201,178
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CAPITAL STOCK, Issued and outstanding 1,882,785
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(No par value, unlimited shares authorized)
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 11.26
============
See notes to financial statements
6
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T.O RICHARDSON SECTOR ROTATION FUND
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STATEMENT OF OPERATIONS
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For the Period December 31, 1998(1) to April 30, 1999
(Unaudited)
INVESTMENT INCOME:
Dividends $11,768
Interest 88,559
----------
Total Investment Income 100,327
----------
EXPENSES:
Investment advisory fees 88,966
Shareholder servicing fees 13,500
Fund administration fees 11,772
Federal and state registration fees 11,065
Fund accounting fees 8,826
Custody fees 7,295
Professional fees 6,378
Reports to shareholders 3,998
Trustees' fees 2,400
Other 7,970
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Total expenses before waiver 162,170
Waiver of expenses by Advisor (46,514)
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Net expenses 115,656
NET INVESTMENT LOSS (15,329)
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REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized loss on investment transactions (357,574)
Change in unrealized appreciation on investments 2,208,674
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Net Gain on Investments 1,851,100
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,835,771
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- ----------
(1) Commencement of operations.
See notes to financial statements
7
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T.O. RICHARDSON SECTOR ROTATION FUND
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STATEMENT OF CHANGES IN NET ASSETS
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For the Period
December 31, 1998(1)
to April 30, 1999
----------------------
(Unaudited)
OPERATIONS:
Net investment loss $ (15,329)
Net realized loss on investments (357,574)
Change in unrealized appreciation on investments 2,208,674
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Net increase in net assets resulting from operations 1,835,771
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 20,853,273
Cost of shares redeemed (1,487,866)
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Net increase in net assets resulting
from capital share transactions 19,365,407
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TOTAL INCREASE IN NET ASSETS 21,201,178
NET ASSETS:
Beginning of period --
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End of period $ 21,201,178
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- ----------
(1)Commencement of operations.
See notes to financial statements
8
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T.O. RICHARDSON SECTOR ROTATION FUND
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FINANCIAL HIGHLIGHTS
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For the Period
December 31, 1998 (1)
to April 30, 1999
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(Unaudited)
SELECTED PER-SHARE DATA:(2)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.01)
Net realized and unrealized gains
on securities 1.27
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TOTAL FROM INVESTMENT OPERATIONS 1.26
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NET ASSET VALUE, END OF PERIOD $ 11.26
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TOTAL RETURN 12.6%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $ 21,201,178
Ratio of expenses to average net assets (4) 1.95%
Ratio of net investment loss to average net assets (4) (0.26)(5)
Portfolio turnover rate 201%
(1) Commencement of operations.
(2) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(3) Not annualized.
(4) Net of reimbursements and waivers. Absent reimbursements and waivers of
expenses by the Adviser, the ratios of expenses and net investment loss to
average net assets for the period December 31, 1998 to April 30, 1999, would
have been 2.73% and (1.04)% respectively.
(5) Annualized.
See notes to financial statements
9
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T.O. RICHARDSON SECTOR ROTATION FUND
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Notes to the Financial Statements
April 30, 1999 (Unaudited)
1. Organization
The T.O. Richardson Sector Rotation Fund (the "Fund") is a series of the
T.O. Richardson Trust (the "Trust"), a voluntary business association organized
on June 2, 1998 in the Commonwealth of Massachusetts, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
diversified management investment company. The Fund is currently the only series
of the Trust. The principal investment objective of the Fund is to seek capital
appreciation with some protection against down markets. T.O. Richardson Company,
Inc. (the "Advisor") held 11,000 shares of the Fund's capital stock at $10 per
share on December 18, 1998. The Fund commenced operations on December 31, 1998.
Organization Costs incurred by the Trust in connection with the
organization of the Fund, in the amount of $86,722, were assumed by the Advisor.
The Fund will not be required to reimburse the Advisor for the organization
costs. Prepaid registration expenses incurred by the Trust in connection with
the initial public offering of shares and prepaid insurance costs were advanced
by the Advisor, subject to potential recovery from the Fund (see Note 5).
Prepaid registration expenses and prepaid insurance costs are deferred and
amortized over the period of benefit.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
(a) Investment Valuation - Common stocks and other equity-type securities are
valued at the last sales price on the securities exchange on which they are
usually traded. Under other circumstances, securities are valued at the average
of the most recent bid and asked prices. Fixed income securities are valued by
pricing services that use electronic data processing techniques to determine
values. Under other circumstances, actual sale or bid prices are used. Any
securities or other assets for which market quotations are not readily available
are valued at fair value as determined in good faith by the Fund's Trustees. The
Board of Trustees may approve the use of pricing services to assist the Fund in
determining net asset value.
(b) Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment company
and to make the requisite distributions of income and capital gains to its
shareholders sufficient to relieve it from all or substantially all Federal
income taxes.
(c) Expenses - The Fund is charged for those expenses that are directly
attributable to the portfolio, such as advisory, administration and certain
shareholder service fees.
(d) Distributions to Shareholder - Dividends from net investment income and
distributions of net realized capital gains, if any, will be declared at least
annually.
(e) Security Transactions and Income - Investment and shareholder transactions
are recorded on the trade date. The Fund determines the gain or loss realized
from the investment transactions by comparing the original cost of the security
lot sold with the net sale proceeds. Dividend income is recognized on the
ex-dividend date and interest
10
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T.O. RICHARDSON SECTOR ROTATION FUND
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Notes to the Financial Statements
April 30, 1999 (Unaudited)
(Continued)
income is recognized on an accrual basis. Generally accepted accounting
principles require that permanent financial reporting and tax differences be
reclassified to capital stock.
(f) Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and use assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
3. Capital Share Transactions
Transactions in shares of the Fund for the period ended April 30, 1999,
were as follows:
Shares sold 2,022,172
Shares issued to holders in
reinvestment of dividends --
Shares redeemed (139,387)
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1,882,785
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4. Investment Transactions
The aggregate purchases and sales of securities, excluding short-term
investments for the Fund, for the period ended April 30, 1999 were $44,013,118
and $26,579,381, respectively. There were no purchases or sales of long-term
U.S. government securities.
At April 30, 1999, based on aggregate cost for federal income tax purposes
of $18,991,476 gross unrealized appreciation and depreciation of investments
were as follows:
Appreciation $ 2,647,061
Depreciation (438,387)
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Net appreciation on investments $ 2,208,674
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5. Investment Advisory Agreement
The Trust has an Investment Advisory Agreement (the "Agreement") with the
Advisor, with whom certain officers and Trustees of the Trust are affiliated, to
furnish investment advisory services to the Fund. Under the terms of the
Agreement, the Trust, on behalf of the Fund, compensates the Advisor for its
management services at the annual rate of 1.50% of the Fund's average daily net
assets.
The Advisor has agreed to voluntarily waive its management fee and/or
reimburse the Fund's other expenses to the extent necessary to ensure that the
Fund's operating expenses do not exceed 1.95% of its average daily net assets.
Any such waiver or reimbursement is subject to later adjustment to allow the
Advisor to recoup amounts waived or reimbursed to the extent actual fees and
expenses for a period are less than the expense limitation caps, provided,
however, that the Advisor shall only be entitled to recoup such amounts for a
period of three years from the date such amount was waived or reimbursed. For
the period ended April 30, 1999, the Advisor waived expenses of the Fund in the
amount of $46,514.
11
