<PAGE>
[GRAPHIC APPEARS HERE]
Semi-Annual Report . June 30, 1999
The
Kaufmann
Fund, Inc.
140 East 45th Street
New York, New York 10017
Investing in growth companies for the long term
- --------------------------------------------------------------------------------
For questions regarding your account call:
(800)261-0555
- --------------------------------------------------------------------------------
<PAGE>
Dear Shareholder:
We would like to emphasize how extraordinary the investment opportunities are
for small and mid-cap growth stocks. By almost any meaningful measure, these
stocks are trading at the lowest levels in years in relation to earnings and
growth prospects. In our opinion, the valuations are nearly as depressed, and
therefore as attractive, as they were in 1987, 1974 and 1966. Those years
provided terrific buying opportunities as small and mid-caps proceeded to
substantially outperform large-caps for several years.
To be sure, almost anything can happen in the short term -- especially in
today's environment -- when investors are being overloaded with short-term
information and are in the thrall of the instantaneous success of internet
stocks. The Kaufmann Fund could not possibly keep up with the various popular
indexes over the past few years because we have not invested in internet
companies with uncertain fundamentals, or in cyclical companies that have only
mediocre growth prospects.
As portfolio managers we must have the courage to stick to what we know is in
the best interests of our shareholders. Our research shows that over the longer
term, it is the companies with the strongest fundamentals, in particular the
leading small and mid-cap growth stocks, that do best and reward shareholders
the most.
We believe that what sets us apart is the rigor and thoroughness of the research
that we do to identify these companies -- ones with unique products and services
in expanding markets, the most innovative management, and the most profitable
and sustainable business models. The Kaufmann Fund's portfolio consists of these
companies and, especially today, represents a truly outstanding investment
value.
We agree that the internet is an area of exhilarating growth and possibilities,
and we are determined to distinguish sensible ways to invest in it. However, we
will never become mindless momentum investors, and we feel confident that
Kaufmann shareholders will be rewarded for our combination of focus, prudence
and steadfastness.
The Kaufmann Fund is our only business and the only fund we manage. With over 70
years of Wall Street experience, we can honestly say that we have never worked
harder or been more optimistic about the investment environment.
Thank you for your steady support and encouragement. We look forward to serving
you for may years to come.
Yours very truly,
/s/ Hans P. Utsch /s/ Lawrence Auriana
Hans P. Utsch Lawrence Auriana
Portfolio Co-Manager Portfolio Co-Manager
Important Note! The Kaufmann Fund offers Automatic Investment and Payroll
Deduction Plans. These plans are convenient methods of investing fixed dollar
amounts on a monthly basis. This enables you to take advantage of "dollar-cost
averaging" (when prices are lower, your monthly investment buys more shares).
The Fund also offers a selection of retirement plans including 403(b), 401(k),
SEP IRAs, SIMPLE IRAs, ROTH and Education IRAs. For more information or
assistance in completing an application, please call (800) 261-0555.
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Data For A Share Outstanding Throughout Each Period
- -----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Six Months Ended Year Ended December 31,
------------------ -------------------------------------------------------------
June 30, 1999 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $5.68 $6.37 $5.84 $5.05 $3.76 $3.45
Income from Investment Operations:
Net Investment Income (Loss) (0.007) (0.040) (0.060) (0.030) (0.060) (0.060)
Net Realized and Unrealized Gain
(Loss) on Investments (0.023) 0.017 0.795 1.083 1.445 0.370
--------------------------------------------------------------------------
Total Income from Investment Operations (0.030) (0.023) 0.735 1.053 1.385 0.310
Less Distributions:
From Net Investment Income- -- -- -- -- -- --
From Net Realized Gains -- 0.667 0.205 0.263 0.095 --
--------------------------------------------------------------------------
Total Distributions -- 0.667 0.205 0.263 0.095 --
Net Asset Value, End of Period $5.65 $5.68 $6.37 $5.84 $5.05 $3.76
Total Return (a) (0.53)% 0.72% 12.59% 20.91% 36.89% 8.99%
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $3,415,715 $4,621,018 $6,008,161 $5,341,311 $3,163,310 $1,592,551
Ratio of Expenses (after expense reimbursement)
to Average Net Assets (%) 1.96 %* 1.96 % 1.89 % 1.93 % 2.17 % 2.29 %
Ratio of Interest Expense to Average Net Assets (%) 0.01 %* 0.01 % 0.01 % 0.01 % 0.01 % 0.02 %
--------------------------------------------------------------------------
Ratio of Expenses (after expense reimbursement
less interest expense) to Average Net Assets (%) 1.95 %* 1.95 % 1.88 % 1.92 % 2.16 % 2.27 %
Ratio of Net Investment Income (Loss) to
Average Net Assets (%) (1.03)%* (0.66)% (1.00)% (0.82)% (1.24)% (1.58)%
Portfolio Turnover Rate (%) 44% 59% 65% 72% 60% 47%
- -----------------------------------------------------------------------------------------------------------------------------------
Borrowings
- -----------------------------------------------------------------------------------------------------------------------------------
Debt Outstanding at End of Period -- -- -- -- -- --
Average Debt Outstanding During the Period
(in thousands) -- -- -- -- -- $ 3,776
Average Number of Shares Outstanding
During the Period (in thousands) -- -- -- -- -- 333,175
Average Debt per Share During the Period -- -- -- -- -- $0.01
</TABLE>
(a) The total returns would have been lower if certain expenses had not been
reduced. (See Note 3 of Notes to Financial Statements.)
* Annualized
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 3
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stocks 96.0%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000s)
------ ------
<S> <C> <C>
Consumer 2.9%
CONSUMER - DURABLES 0.1%
Ducati Motor Holding SpA (ITL) 1,500,000 $ 3,928
---------
3,928
---------
CONSUMER - NONDURABLES 2.8%
Blyth Industries, Inc. 500,000 17,188
Del Monte Foods Company 2,000,000 33,500
Jones Apparel Group, Inc. 1,000,000 34,312
Skechers U.S.A., Inc. 750,000 7,875
---------
92,875
---------
Total Consumer 96,803
=========
Financial 3.5%
FINANCIAL - DOMESTIC 2.6%
Federal Agricultural Mortgage Corporation 173,000 11,872
GreenPoint Financial Corp. 1,216,000 39,900
Philadelphia Consolidated Holding Corp. 1,286,300 31,514
Wit Capital Group, Inc. 135,000 4,590
---------
87,876
---------
FINANCIAL - FOREIGN 0.9%
Provident Financial plc (GBP) 531,000 7,299
Royal Bank of Scotland Group plc (GBP) 400,000 8,197
Shohkoh Fund & Co., Ltd. (JPY) 20,000 14,350
Thai Farmers Bank PCL (THB) 200,000 618
---------
30,464
---------
Total Financial 118,340
=========
Medical 19.1%
MEDICAL EQUIPMENT & SUPPLIES 3.6%
Amira Medical Series A Preferred 250,000 1,375
Amira Medical Series D Preferred 1,000,000 5,500
Anika Therapeutics, Inc. 277,400 2,358
Bionx Implants, Inc. 750,000 4,125
Boston Scientific Corporation 50,000 2,196
Combact Diagnostics Sys. Ltd. Series B - Pfd. (ILS) 22,502 1,000
Combact Diagnostics Sys. Ltd. Series C - Pfd. (ILS) 3,522 0
Combact Diagnostics Sys. Ltd. - Ordinary Shares (ILS) 666 0
Cytyc Corporation 400,000 7,800
Diagnostic Products Corporation 400,000 11,050
ENDOcare, Inc. 2,000,000 12,000
ENDOcare, Inc. 499,300 2,996
Hanger Orthopedic Group, Inc. 923,900 13,108
NeoPath, Inc. 1,821,000 6,351
Orthofix International N.V. 1,000,000 14,875
SonoSite, Inc. 50,000 850
ThermoGenesis Corp.-Series A - Conv. Pfd. 576,000 3,600
ThermoGenesis Corp. 800,000 1,200
ThermoGenesis Corp. - Warrants 80,000 0
Thoratec Laboratories Corporation 260,800 2,771
Trex Medical Corporation 22,000 237
Xomed Surgical Products, Inc. 300,000 14,606
Zoll Medical Corporation 980,600 11,767
---------
119,765
---------
MEDICAL SERVICES 11.8%
AmeriPath, Inc. 30,000 259
CareInsite, Inc. 120,000 5,670
Coast Dental Services, Inc. 246,400 1,155
CompDent Corporation 248,612 124
CompDent Corporation - Pfd. 2,851 2,876
Eclipsys Corporation 227,500 5,446
Express Scripts, Inc. 435,000 26,182
Healthcare Recoveries, Inc. 1,396,000 6,631
Laser Vision Centers, Inc. 25,000 1,575
Latin Healthcare Fund, L.P. 1 5,080
Lincare Holdings, Inc. 5,102,300 127,557
MedPartners, Inc. 2,500,000 18,906
Orthodontic Centers of America, Inc. 475,000 6,709
Pacific Health Laboratories, Inc. 140,000 525
Peachtree Medichem Partners, LLC 30,078 1,463
PhyCor, Inc. 500,000 3,703
PSS World Medical, Inc. 4,601,000 51,474
Quintiles Transnational Corp. 400,000 16,800
RTW, Inc. 1,349,500 7,928
Sterile Recoveries, Inc. 450,000 5,203
Surmodics Inc. 5,000 82
United Payors & United Providers, Inc. 1,134,400 26,304
Universal Standard Healthcare, Inc. 666,000 0
US Oncology, Inc. 5,968,174 71,618
---------
393,270
---------
PHARMACEUTICAL & BIOTECH 3.7%
Aastrom Biosciences, Inc. 1,500,000 1,875
Aastrom Biosciences, Inc. - Pfd. 135,062 0
Alexion Pharmaceuticals, Inc. 837,300 7,431
Aradigm Corporation 377,500 3,350
Aradigm Corporation 666,667 5,325
ArQule, Inc. 2,129,200 10,380
</TABLE>
- --------------------------------------------------------------------------------
4 The accompanying notes are an integral part of these financial statements.
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000s)
------ ------
<S> <C> <C>
PHARMACEUTICAL & BIOTECH (Continued)
Aurora Biosciences Corporation + * 1,900,400 $ 13,778
Aviron * 250,000 7,187
AXYS Pharmaceuticals, Inc. * 465,500 1,571
Cephalon, Inc. * 500,000 8,688
Cephalon, Inc. - Class A-Warrants # * 480,000 0
Cephalon, Inc. - Class B-Warrants # * 160,000 0
Dura Pharmaceuticals, Inc. * 600,000 7,163
ENZON, Inc. * 404,000 8,358
EPIX Medical, Inc. * 450,000 2,475
Genomica Corporation Series B - Pfd. # * 9,722,222 7,000
IntraBiotics Pharmaceuticals, Inc. Series G - Pfd. # * 1,500,000 4,502
LJL Biosystems, Inc. # * 857,143 3,279
Protein Design Labs, Inc. * 500,000 11,093
QLT PhotoTherapeutics Inc. (CAD) /\ * 317,100 17,227
QLT PhotoTherapeutics Inc. * 59,000 3,245
Xenometrix, Inc. # * 6,619 2
---------
123,929
---------
Total Medical 636,964
=========
Retail 13.5%
MAIL ORDER COMMERCIAL/INDUSTRIAL 1.4%
Micro Warehouse, Inc. * 1,000,000 17,875
Systemax Inc. + * 2,186,100 27,053
---------
44,928
---------
RESTAURANTS 2.4%
J.D. Wetherspoon plc (GBP) /\+ 17,426,432 81,032
---------
81,032
---------
RETAIL STORES 9.7%
Circuit City Stores - Circuit City Group 700,000 65,100
Consolidated Stores Corporation * 381,200 10,292
Finish Line, Inc., The * 400,000 4,500
General Nutrition Companies, Inc. * 676,200 15,764
Office Depot, Inc. * 5,350,000 118,035
PETsMART, Inc. + * 5,863,800 60,104
ShopKo Stores, Inc. * 800,000 29,000
Staples, Inc. * 700,000 21,656
Western Growth Capital Partners I, L.L.L.P # * 52,500 130
---------
324,581
---------
Total Retail 450,541
=========
Technology 32.8%
COMMUNICATIONS EQUIPMENT 2.1%
AudioCodes Ltd. * 300,000 8,100
JDS Fitel Inc. (CAD) /\ * 300,000 25,161
P-Com, Inc. # * 2,516,990 10,000
Powerwave Technologies, Inc. * 357,500 11,529
Tellabs, Inc. * 200,000 13,513
--------
68,303
--------
COMPUTER HARDWARE & ACCESSORIES 1.0%
Apex PC Solultions, Inc. * 200,000 4,100
Hutchinson Technology Incorporated + * 800,000 22,200
PixTech, Inc. * 678,169 865
PixTech, Inc. # * 1,000,000 1,500
PixTech, Inc. - Conv. Pfd. # * 266,297 5,400
--------
34,065
--------
COMPUTER SERVICES 10.7%
Affiliated Computer Services, Inc. * 1,600,000 81,000
Concord EFS, Inc. * 2,485,000 105,147
CSG Systems International, Inc. * 850,000 22,259
Galileo International, Inc. 2,000,000 106,875
INSpire Insurance Solutions, Inc. + * 1,152,100 16,705
International Telecommunication Data Systems, Inc. + * 1,489,400 23,830
--------
355,816
--------
COMPUTER SOFTWARE 8.0 %
Amdocs Limited * 4,500,000 102,375
Ariba, Inc. * 30,000 2,918
BMC Software Inc. * 100,000 5,400
Check Point Software Technologies Ltd. * 500,000 26,813
Citrix Systems, Inc. * 500,000 28,250
Compuware Corporation * 200,000 6,363
GreenField Technology Ventures Fund I # * 1 75
Inso Corporation * 50,000 269
MAPICS, Inc. + * 1,275,000 13,467
Project Software & Development, Inc. * 32,500 1,016
Puma Technology, Inc. * 91,900 482
SensAble Technologies, Inc. * 1,333,334 2,064
Siebel System, Inc. # * 500,000 33,187
Sterling Software, Inc. * 96,900 2,586
Synopsys, Inc. * 501,000 4,715
Visio Corporation * 200,000 7,612
--------
265,241
--------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 5
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000s)
------ --------
<S> <C> <C> <C>
ELECTRONIC COMPONENTS 0.3%
Aavid Thermal Technologies, Inc. * 311,000 $ 7,036
Sensormatic Electronics Corporation * 200,000 2,788
---------
9,824
---------
SEMICONDUCTOR & EQUIPMENT 6.0%
Alpha Industries, Inc. + * 1,100,000 52,388
Altera Corporation * 1,000,000 36,813
Atmel Corporation * 157,300 4,119
Cypress Semiconductor * 300,000 5,138
DSP Communications, Inc. * 205,900 5,945
LSI Logic Corporation * 850,000 39,206
Vitesse Semiconductor Corporation * 800,000 53,950
---------
197,559
---------
TELECOMMUNICATION SERVICES 4.7%
American Tower Corporation Class A * 890,700 21,376
Billing Concepts Corp. + * 2,423,300 27,111
Crown Castle International Corp. * 40,000 833
Illuminet Holdings, Inc. # * 20,100 358
Intermedia Communications Inc. * 200,000 6,000
ITC /\ DeltaCom, Inc. * 312,500 8,750
Orckit Communications Ltd. * 400,000 9,900
SBA Communications Corporation * 225,000 2,179
TALK.com, Inc. * 1,000,000 11,250
Time Warner Telecom Inc. * 325,000 9,425
Transaction Network Services, Inc. + * 1,500,000 43,875
United Pan-Europe Communications NV 250,000 13,813
---------
154,870
---------
Total Technology 1,085,678
---------
Other 24.2%
DISTRIBUTION 0.2%
Keystone Automotive Industries, Inc. * 200,000 3,475
Nuco2 Inc. + * 250,000 2,188
---------
5,663
---------
ENTERTAINMENT 1.5%
Championship Auto Racing Teams, Inc. * 512,800 15,352
Cinar Corporation - Class B + * 1,250,000 30,625
Penske Motorsports, Inc. * 31,300 1,553
Realm Production and Entertainment, Inc. # * 172,000 301
Speedway Motorsports, Inc. * 37,500 1,474
---------
49,305
---------
INDUSTRIAL 1.4%
Asia Pulp & Paper Company Ltd. * 1,950,000 18,769
Asia Pulp & Paper Company Ltd. - Warrants * 90,000 236
Eastern Water Resources Dev. and Mgmt. PCL * 660,000 814
JLM Industries, Inc. + * 400,000 2,100
Phoenix Pulp & Paper Pcl (THB) /\ * 201,100 0
Simpson Manufacturing Co., Inc. * 250,000 11,875
Synetic, Inc. * 200,000 13,750
--------
47,544
--------
MEDIA & INFORMATION SERVICES 7.2%
AdForce, Inc. * 133,700 3,142
Citadel Communications Corporation * 225,000 8,141
Clear Channel Communications, Inc. * 1,000,000 68,938
Cunningham Graphics International, Inc. + * 246,000 4,090
Flycast Communications Corporation * 35,000 669
Getty Images, Inc. * 500,000 9,438
GoTo.com, Inc. * 25,000 700
HA-LO Industries, Inc. * 359,400 3,549
Homeseekers.com, Incorporated * 286,000 1,359
Infinity Broadcasting Corp.- Class A * 1,600,000 47,600
internet.com LLC * 40,000 503
Lamar Advertising Company * 600,000 24,563
Mail.com, Inc. * 550,000 10,347
Outdoor Systems, Inc. * 800,000 29,200
Panavision Inc. # * 46,363 0
Radio One, Inc. * 35,000 1,628
TMP Worldwide Inc. * 300,000 19,050
topjobs.net plc * 180,000 1,001
Ziff-Davis Inc. -ZDNet * 249,200 6,479
--------
240,397
--------
OIL & GAS 1.8%
Apache Corporation 400,000 15,600
EEX Corporation * 300,000 2,081
Enron Oil & Gas Company 100,000 2,025
Forest Oil Corporation * 678,700 8,526
Oceaneering International, Inc. * 163,900 2,643
St. Mary Land & Exploration Company 400,000 8,225
Sante Fe Snyder Corporation * 2,408,750 18,367
Virginia Gas Company + 593,000 2,594
--------
60,061
--------
REAL ESTATE 0.1%
IRSA Inversiones y Representaciones S.A. 101,781 3,142
--------
3,142
--------
SERVICE 11.5%
Ambassadors International, Inc. + * 915,000 13,611
Cendant Corporation * 15,800,000 323,900
</TABLE>
- --------------------------------------------------------------------------------
6 The accompanying notes are an integral part of these financial statements.
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (000s)
------ ------
<S> <C> <C> <C>
SERVICE (Continued)
Charles River Associates Incorporated * 200,000 $5,013
Coinstar, Inc. * 40,000 1,147
Corporate Executive Board Company, The * 475,000 16,892
Electricity Generating
Authority of Thailand (THB) /\ * 10,000 14
ITT Educational Services, Inc. * 291,900 7,608
Kroll-O'Gara Company, The * 300,000 6,619
Realty Information Group, Inc. * 200,000 8,700
-------
383,504
-------
TRANSPORTATION 0.5%
Carey International, Inc. + * 520,000 12,805
Dispatch Management Services Corp. + * 1,319,700 3,670
-------
16,475
-------
Total Other 806,091
-------
- ------------------------------------------------------------------------------------
Total Stocks(Cost $2,128,479) $3,194,417
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Convertible Bonds 3.8%
- ------------------------------------------------------------------------------------
Face Value
Amount (000s)
------ ------
APP Finance (VII) Mauritius Limited $29,000,000 $ 21,460
3.50% 04/30/2003
Cephalon, Inc. # 10,000,000 10,000
11.00% 01/31/2002
Hutchinson Technology Incorporated 24,000,000 27,960
6.00% 03/15/2005
PETsMART, Inc. 51,000,000 65,790
6.75% 11/01/2004
Universal Standard Healthcare, Inc. 5,000,000 0
8.25% 02/01/2006 ------
- ------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $116,037) $ 125,210
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Short-Term Obligations 0.0%
- ------------------------------------------------------------------------------------
Par Value
Value (000s)
------ ------
Repurchase Agreements 0.0%
State Street Bank and Trust Company,
6.85%, dated 06/30/1999, due 07/01/1999
(collateralized by Federal Agency Securities) $171,000 $ 171
------
- ------------------------------------------------------------------------------------
Total Short-Term Obligations (Cost $171) $ 171
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Contracts 0.2%
- ------------------------------------------------------------------------------------
Value
Contracts (000s)
--------- ------
PURCHASED OPTIONS
Currency options, strike price, expiration:
GBP, call @1.5675, 09/03/1999 64,000,000 $ 931
Equity options, strike price, expiration:
Cendant Corporation, call @ 15, 01/20/2001 5,000 4,250
Cendant Corporation, call @ 20, 01/20/2001 7,000 4,375
SOLD OPTION
Currency options, strike price, expiration:
GBP, call @ 1.627, 09/03/1999 (64,000,000) (295)
-----
- ------------------------------------------------------------------------------------
Total Contracts (Cost $4,542) $ 9,261
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Total Investments 100% $ 3,329,059
(Cost $2,249,229) =========
- ------------------------------------------------------------------------------------
Legend
% Represents percentage of total portfolio investments
/\ Foreign Denominated Security:
CAD - Canadian Dollar
GBP - British Pound
ILS - Israeli Shekel
ITL- Italian Lira
JPY- Japanese Yen
THB - Thai Baht
+ Affiliated Company (See Note 7 of Notes to Financial Statements)
# Restricted security - not registered under the Securities Act of 1933
(See Note 8 of Notes to Financial Statements)
* Non - income producing during the period
- ------------------------------------------------------------------------------------
Schedule of Securities Sold Short
- ------------------------------------------------------------------------------------
Value
Shares (000s)
------ ------
STOCKS
Books-A-Million, Inc. 30,000 $ 226
CIENA Corporation 110,000 3,321
Pre-Paid Legal Services, Inc. 20,000 544
Restoration Hardware, Inc. 11,800 158
SAP AG 100,000 3,462
SONUS Pharmaceuticals, Inc. 20,000 104
Sunrise Technologies International, Inc. 30,000 367
------
$ 8,182
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 7
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in thousands
(except per share amount)
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------------
Investments in securities at value (including repurchase agreements of $171) (cost $2,249,229)
(See accompanying schedule) $3,329,059
Cash and cash equivalents 61,524
Deposit with custodian bank for securities sold short 8,130
Receivable from brokers for securities sold short 8,119
Receivable for investments sold 42,865
Receivable for Fund shares sold 737
Receivable from Investment Advisor 2,187
Dividends and interest receivable 1,915
Other receivables 108
Shares of Investment Fund, at amortized cost, held as collateral for securities loaned 762,989
- -----------------------------------------------------------------------------------------------------------------------------
Total Assets $4,217,633
- -----------------------------------------------------------------------------------------------------------------------------
Liabilities
Securities sold short, at value (proceeds $7,454) (See accompanying schedule) $ 8,182
Payable for investments purchased 17,593
Payable for Fund shares redeemed 11,743
Other payables and accrued expenses 1,411
Collateral on securities loaned, at value 762,989
Total Liabilities $801,918
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets $3,415,715
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets Consist Of:
Paid in capital $2,002,102
Accumulated net investment loss (211,099)
Accumulated undistributed net realized gain on investments and foreign currency transactions 545,610
Net unrealized appreciation on investments and assets and liabilities in foreign currencies 1,079,102
---------
Net Assets, for 604,099 Shares Outstanding $3,415,715
=========
Net Asset Value per Share
(based on 604,099 shares outstanding, 2,000,000 shares authorized with $.10 per share par value) $5.65
====
</TABLE>
- --------------------------------------------------------------------------------
8 The accompanying notes are an integral part of these financial statements.
<PAGE>
The Kaufman Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
Amounts in thousands
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
Interest (including income on securities loaned of $1,017) $ 11,994
Dividends, net of $38 of foreign taxes withheld
(including $1,128 received from affiliated issuers) 2,747
Other (Note 3) 2,357
-------
- --------------------------------------------------------------------------------
Total Income $ 17,098
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment advisory fee (Note 3) $ 27,618
Distribution fee (Note 3) 6,073
Service fees (Note 4) 2,360
Shareholder servicing fees 982
Dividends on securities sold short 561
Custodian fees and expenses 238
Audit fees 198
Printing fees 159
Loan commitment fee (Note 9) 150
Legal fees 99
Non-interested directors' fees and expenses 96
Registration fees 83
Miscellaneous expenses 524
-------
Total expenses before reimbursement 39,141
Expense reimbursement by Investment Advisor (Note 3) (3,053)
-------
- --------------------------------------------------------------------------------
Net Expenses $ 36,088
- --------------------------------------------------------------------------------
Net Investment Loss $ (18,990)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain on:
Investment securities (including net realized loss
of $32,318 on sales of investments in affiliated issuers) $ 186,710
Foreign currency transactions 268
-------
186,978
-------
Changes in net unrealized (depreciation) on:
Investment securities (260,565)
Assets and liabilities (1)
-------
(260,566)
-------
Net loss (73,588)
-------
Net decrease in net assets resulting from operations $ (92,578)
=======
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. 9
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in thousands
--------------------------
(Unaudited) Year
Six months ended
ended December 31,
June 30, 1999 1998
------------- ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment loss $ (18,990) $ (35,087)
Net realized gain 186,978 614,899
Change in net unrealized appreciation (260,566) (574,200)
----------- -----------
Net increase (decrease) in net assets resulting from operations (92,578) 5,612
----------- -----------
Distributions to shareholders
From net investment income -- --
From net realized gain -- (499,865)
----------- -----------
Total distributions -- (499,865)
----------- -----------
Share transactions
Net proceeds from sales of shares 155,580 728,424
Reinvestment of distributions -- 483,873
Cost of shares redeemed (1,268,305) (2,105,187)
----------- -----------
Net decrease in net assets resulting from share transactions (1,112,725) (892,890)
----------- -----------
Total decrease in net assets (1,205,303) (1,387,143)
Net Assets
Beginning of period 4,621,018 6,008,161
----------- -----------
End of period $ 3,415,715 $ 4,621,018
=========== ===========
Other Information
Shares:
Sold 29,269 116,161
Issued in reinvestment of distributions -- 93,955
Redeemed (238,369) (339,616)
----------- -----------
Net decrease (209,100) (129,500)
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
10 The accompanying notes are an integral part of these financial statements.
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 Significant Accounting Policies
The Kaufmann Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940, as amended (the 1940 Act), as an open-end management
investment company. The Fund is incorporated in Maryland. The financial
statements have been prepared in conformity with generally accepted
accounting principles which permit management to make certain estimates
and assumptions. The following summarizes the significant accounting
policies of the Fund:
Security Valuation
Securities for which exchange quotations are readily available are valued
at the last sale price, or if none, at the closing bid price. Securities,
including restricted securities, for which exchange quotations are not
readily available, are valued primarily using dealer-supplied valuations
or at fair value, as determined in good faith under consistently applied
procedures established by the Board of Directors. Short-term securities
with remaining maturities of sixty days or less, for which quotations are
not readily available, are valued at amortized cost or original cost plus
interest, which approximate current value.
Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing
exchange rates at period end. Income and expenses are translated into U.S.
dollars at the prevailing exchange rate on the dates of the respective
transactions. Purchases and sales of securities are translated into U.S.
dollars at the contractual currency exchange rates established at the time
of each trade.
Net realized gains and losses on foreign currency transactions represent
net gains and losses from sales and maturities of forward currency
contracts, dispositions of foreign currencies, and the difference between
the amount of accrued net investment income and the U.S. dollar amount
actually received. The effects of changes in foreign currency exchange
rates on investments in securities are included in net realized and
unrealized gain or loss on investment securities.
Income Taxes
As a qualified regulated investment company under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year. Accordingly, no provision for Federal income taxes is
required.
Investment Income
Dividend income is recorded on ex-dividend date. Non-cash dividends, if
any, are recorded at the fair market value of the securities received.
Interest income is accrued as earned. Investment income is recorded net of
foreign taxes withheld when recovery of such taxes is uncertain.
- --------------------------------------------------------------------------------
11
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Security Transactions
Security transactions are recorded on trade date, the date the order to
buy or sell is executed. Gains and losses on securities sold are
determined on the basis of identified cost.
Distributions to Shareholders
Distributions are recorded on ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations, which may differ from generally accepted
accounting principles.
Permanent book and tax differences relating to shareholder distributions
may result in reclassifications to paid-in capital and may affect the
per-share allocation between net investment income and realized and
unrealized gain/loss. Undistributed net investment income and accumulated
undistributed net realized gain/loss on investments and foreign currency
transactions may include temporary book and tax differences which reverse
in subsequent periods. Any taxable income or gain remaining at fiscal year
end is distributed the following year.
2 Operating Policies
Foreign Currency Contracts
The Fund utilizes foreign currency contracts to facilitate transactions in
foreign securities. Losses may arise from changes in the value of the
foreign currency, or from counter parties not performing under the
contract terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at the
time of each trade. The cost of the foreign currency contracts is included
in the cost basis of the associated investment.
Repurchase Agreements
The Fund, through its custodian, takes possession through the Federal
Reserve Book Entry System, of the collateral pledged for investments in
repurchase agreements. The underlying U.S. Treasury or Federal Agency
Securities are valued daily on a mark-to-market basis to ensure that the
value, including accrued interest, is at least equal to the repurchase
price. In the event of default of the obligation to repurchase,
liquidation and/or retention of the collateral may be subject to legal
proceedings.
Short Sales
Short sales are transactions in which the Fund sells a security it does
not own, in anticipation of a decline in the market value of that
security. To complete such a transaction, the Fund must borrow the
security to deliver to the buyer upon the short sale; the Fund is then
obligated to replace the security borrowed by purchasing it in the open
market at some later date. The Fund will incur a loss if the market price
of the security increases between the date of the short sale and the date
on which the borrowed security is replaced. The Fund will realize a gain
if the security declines in value between those dates. All short sales
must be fully collateralized. The Fund maintains the collateral in a
segregated account with its
- --------------------------------------------------------------------------------
12
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
custodian. At June 30, 1999, the cost of securities purchased to cover
short sales and the proceeds from securities sold short were $102,265,750
and $332,777,279, respectively. Securities sold short at June 30, 1999 and
their related values are described in the Schedule of Securities Sold
Short.
3 Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee
Edgemont Asset Management Corporation (Edgemont) is the investment advisor
of the Fund. Certain officers and directors of the Fund are affiliated
with Edgemont. Edgemont's investment advisory fee is calculated on an
annual basis at 1.50% of the Fund's average net assets. For the six months
ended June 30, 1999, the Fund incurred investment advisory fees of
$27,618,214. Edgemont has voluntarily agreed to reimburse the Fund for
expenses, to the extent of the investment advisory fee, if the Fund's
annual expenses (other than brokerage commissions, capital items,
interest, taxes, extraordinary items and other excludable items) are in
excess of $650,000. A reimbursement of $3,053,381 was made for the six
months ended June 30, 1999. Edgemont has voluntarily agreed to continue to
provide this reimbursement in the future.
Distribution Fee
The Fund has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act
whereby the Fund or Edgemont may finance activities which are primarily
intended to result in the sale of the Fund's shares, including, but not
limited to: advertising, printing of prospectuses and reports for
prospective shareholders, preparation and distribution of advertising
materials and sales literature, and payments to dealers and shareholder
servicing agents who enter into agreements with the Fund or Edgemont. The
Fund or Edgemont may incur such distribution expenses at the rate of 0.75%
per annum on the Fund's average net assets. For the six months ended June
30, 1999, distribution expenses of $6,073,189 were incurred by the Fund,
equivalent to 0.33% per annum of the Fund's average net assets.
Redemption Fee
The Fund imposes a redemption fee of 0.20% on the redemption price of the
Fund's capital stock shares redeemed, if such shares were purchased after
February 1, 1985. The redemption fee is applied to the Fund's expenses
allocable to providing redemption services, including, but not limited to:
transfer agent fees, postage, printing, telephone and related employment
costs. Any excess fee proceeds are added to the Fund's assets. For the six
months ended June 30, 1999, redemption fees of $2,482,312 were charged by
the Fund of which $1,052,030 were allocated to cover the cost of
redemptions. Excess fee proceeds of $1,112,265 were added to the Fund's
assets.
Brokerage Commissions
The Fund is permitted to place a portion of its portfolio transactions
with Bowling Green Securities, Inc. (Bowling Green). For the six months
ended June 30, 1999, no portfolio transactions were executed with Bowling
Green and therefore no brokerage commissions were paid. Certain officers
and directors of the Fund are affiliated with Bowling Green.
- --------------------------------------------------------------------------------
13
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4 Service Fees
The Fund has an Authorization Agreement for the payment of a service fee,
not to exceed 0.25% per annum of the Fund's average net assets, to
broker-dealers that provide liaison services to investors, such as
responding to client inquiries and providing information on investments.
For the six months ended June 30, 1999, service fees of $982,000 were
incurred by the Fund. Effective May 1999, Edgemont has agreed to pay for
these services via the distribution fee.
5 Investments
Purchases and Sales of Investments
Purchases and sales of securities (excluding short-term investments and
securities sold short) aggregated $1,538,858,631 and $2,068,058,195,
respectively.
Portfolio Turnover Rate
Portfolio turnover rate, which is calculated on the lesser of the costs of
investments purchased or the proceeds from investments sold (excluding
short-term investments and securities sold short) measured as a percentage
of the Fund's average monthly portfolio, was 44% for the six months ended
June 30, 1999.
Tax Basis of Investments
As of June 30, 1999, the aggregate cost, for Federal income tax purposes,
of investment securities and proceeds of securities sold short was
$2,249,057,864 and $7,453,582, respectively. Accumulated net unrealized
appreciation aggregated $1,079,101,700 of which $1,222,345,912 related to
appreciated investment securities and $143,244,212 related to depreciated
investment securities.
6 Securities Lending
The Fund lends securities to certain brokers who pay the Fund negotiated
lenders' fees. These fees, less costs to administer the program, are
included in interest income and amounted to $1,071,247 for the six months
ended June 30, 1999. The Fund receives U.S. Treasury obligations and/or
cash as collateral against the loaned securities in an amount at least
equal to 102% of the market value of the loaned securities at the
inception of each loan. This collateral must be maintained at not less
than 100% of the market value of the loaned securities during the period
of the loan. At June 30, 1999, the value of the securities loaned and the
value of collateral was $743,395,985 and $762,988,551, respectively.
- --------------------------------------------------------------------------------
14
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
7 Transactions with Affiliated Companies
An affiliated company is a company in which the Fund has ownership of at
least 5% of the voting shares. Transactions with companies which are or
were affiliates are as follows:
<TABLE>
<CAPTION>
Amounts in thousands
----------------------------------------------------------
Purchases Sales Dividend
Affiliates Cost Cost Income Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aastrom Biosciences, Inc. * $ -- $ 741 $ -- $ 1,875
Aastrom Biosciences, Inc. Pfd. (restricted) * -- -- -- --
Alexion Pharmaceuticals, Inc. * -- -- -- 7,431
Alpha Industries, Inc. * 17,952 255 -- 52,388
Ambassadors International, Inc. * -- 342 -- 13,611
ArQule, Inc. * -- 1,231 -- 10,380
Aurora Biosciences Corporation * -- 8,585 -- 13,778
Barnett, Inc. * -- 9,702 -- --
Billing Concepts Corp. * -- -- -- 27,111
Bionx Implants, Inc. * -- 1,389 -- 4,125
Boran LePore & Assocs Inc. * 10,799 7,908 -- --
Carey International, Inc. * -- 640 -- 12,805
Central Garden & Pet Company * -- 19,785 -- --
Cinar Corporation - Class B * 5,000 -- -- 30,625
Coast Dental Services, Inc. * -- 3,576 -- 1,155
CompDent Corporation * -- 14,375 -- --
CompDent Corporation * -- -- -- 124
CompDent Corporation Pfd. (restricted) * -- -- -- 2,876
Cunningham Graphics International, Inc. * -- 1,669 -- 4,090
Diagnostic Products Corporation -- 8,483 164 11,050
Dispatch Management Services Corp. * 451 -- -- 3,670
Hanger Orthopedic Group, Inc. * 9,490 -- -- 13,108
Hastings Entertainment, Inc. * -- 7,640 -- --
Headlands Mortgage Company * -- 21,487 -- --
Health Management Systems, Inc. * -- 5,937 -- --
Healthcare Recoveries, Inc. * -- 2,520 -- 6,631
Hutchinson Technology Incorporated * -- 13,675 -- 22,200
INSpire Insurance Solutions, Inc. * 9,281 614 -- 16,705
International Telecommunication Data Sys. Inc. * 5,118 -- -- 23,830
J.D. Wetherspoon plc -- -- 235 81,032
JLM Industries, Inc. * -- -- -- 2,100
Lincare Holdings, Inc. * 3,289 6,940 -- 127,557
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in thousands
------------------------------------------------------------
Purchases Sales Dividend
Affiliates Cost Cost Income Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAPICS, Inc. * $ 2,493 $ -- $ -- $ 13,467
Marquee Group Inc., The * -- 14,337 -- --
Medstone International, Inc. * -- 3,786 -- --
Nuco2 Inc. * -- 1,460 -- 2,188
Orthofix International N.V. * -- -- -- 14,875
Peak Trends Trust -- 5,618 708 --
PETsMART, Inc. * -- -- -- 60,104
Philadelphia Consolidated Holding Corp. * 4,261 -- -- 31,514
PSS World Medical, Inc. * 3,018 8,697 -- 51,474
RTW, Inc. * 256 -- -- 7,928
Sheridan Healthcare, Inc. * -- 8,322 -- --
Skechers U.S.A., Inc. * 8,250 -- -- 7,875
Sterile Recoveries, Inc. * -- 1,993 -- 5,203
STERIS Corporation * -- 126,192 -- --
Systemax Inc. * -- 3,736 -- 27,053
Transaction Network Services, Inc. * 152 3,098 -- 43,875
United Payors & United Providers, Inc. * 21,320 -- -- 26,304
Universal Standard Healthcare, Inc.* -- 70 -- --
U S Oncology, Inc. * 19,671 31 -- 71,618
Virginia Gas Company 560 -- 21 2,594
ViroPharma Incorporated * -- 6,084 -- --
Wilmar Industries, Inc. * -- 16,185 -- --
Zoll Medical Corporation * -- -- -- 11,767
-------- -------- -------- --------
$121,361 $337,103 $ 1,128 $868,096
======== ======== ======== ========
</TABLE>
* Non-income producing during the period.
- --------------------------------------------------------------------------------
16
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8 Restricted Securities
The Fund may not invest more than 10% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At June 30, 1999, the
Fund owned the following restricted securities (constituting 2.7% of net assets)
which may not be publicly sold without registration under the Securities Act of
1933 (the 1933 Act). The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by pricing services or brokers, or if not available, in good
faith by or at the direction of the Board of Directors. Certain of these
securities may be offered and sold to "qualified institutional buyers" under
Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Amounts in thousands
Date of Share/Par --------------------
Description Acquisition Amount Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aastrom Biosciences, Inc. - Preferred 02/17/98 6,457 $ -- $ --
04/15/98 26,316 -- --
10/02/98 102,289 -- --
---------- -------- --------
135,062 -- --
Amira Medical Series D - Preferred 04/12/99 1,000,000 5,500 5,500
Amira Medical Series A - Preferred 04/12/99 250,000 1,375 1,375
Aradigm Corporation 03/10/99 666,667 7,000 5,325
Cephalon, Inc. 11.00% 01/31/2002 03/01/99 10,000,000 10,000 10,000
Cephalon, Inc. Class B Warrants 03/01/99 160,000 -- --
Cephalon, Inc. Class A Warrants 03/01/99 480,000 -- --
Combact Diagnostics Systems Ltd. (ILS) 11/02/95 22,502 1,000 1,000
Combact Diagnostics Systems Ltd. 10/16/98 3,522 -- --
Series C - Preferred (ILS)
Combact Diagnostics Systems Ltd. 10/16/98 666 -- --
Ordinary Shares (ILS)
CompDent Corporation 05/24/95 60,000 36 30
04/21/97 75,000 46 38
04/22/97 65,000 40 33
06/30/99 48,612 -- 23
---------- -------- --------
248,612 122 124
CompDent Corporation - Preferred 05/24/95 855 834 863
04/21/97 1,069 1,060 1,078
04/22/97 927 938 935
---------- -------- --------
2,851 2,832 2,876
- ------------------------------------------------------------------------------------------------------------------------------------
17
</TABLE>
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report -- June 30, 1999 -- Unaudited
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts in thousands
-----------------------
Date of Share/Par
Description Acquisition Amount Cost Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ENDOcare, Inc. 01/24/97 1,000,000 $ 3,500 $ 6,000
04/16/98 750,000 2,625 4,500
04/24/98 250,000 879 1,500
---------- ---------- ----------
2,000,000 7,004 12,000
Genomica Corporation Series B - Preferred 02/17/99 9,722,222 7,000 7,000
GreenField Technology Ventures Fund I 06/15/98 1 75 75
Illuminet Holdings, Inc. 02/04/98 20,100 358 358
IntraBiotics Pharmaceuticals, Inc. Series G - Pfd. 11/23/98 1,500,000 4,502 4,502
LJL Biosystems, Inc. 01/22/99 857,143 3,000 3,279
Latin Healthcare Fund, L.P. 07/15/97 1 2,080 2,080
06/03/99 -- 3,000 3,000
---------- ---------- ----------
1 5,080 5,080
NeoPath, Inc. 02/09/99 1,821,000 9,105 6,351
Pacific Health Laboratories, Inc. 08/09/96 140,000 525 525
P-Com, Inc. 06/22/99 2,516,990 10,000 10,000
Panavision Inc. 06/05/98 46,363 767 --
Peachtree Medichem Partners, LLC 06/07/99 30,078 1,463 1,463
PixTech, Inc. 03/31/98 1,000,000 4,021 1,500
PixTech, Inc. Convertible Preferred 12/24/98 266,297 6,000 5,400
Realm Production and Entertainment, Inc. 03/24/97 172,000 301 301
SensAble Technologies, Inc. 12/23/97 1,333,334 2,064 2,064
ThermoGenesis Corp. 12/31/97 800,000 2,000 1,200
ThermoGenesis Corp. - Warrants 01/27/98 80,000 -- --
ThermoGenesis Corp. Series A - Conv. Pfd. 12/29/98 576,000 3,600 3,600
Trex Medical Corporation 11/15/95 20,000 205 215
06/24/96 2,000 28 22
---------- ---------- ----------
22,000 233 237
Western Growth Capital Partners I, L.L.L.P. 12/31/97 52,500 131 130
Xenometrix, Inc. 07/10/92 6,619 50 2
---------- ----------
$ 95,108 $ 91,267
========== ==========
</TABLE>
- --------------------------------------------------------------------------------
18
<PAGE>
The Kaufmann Fund, Inc. Semi-Annual Report - June 30, 1999 - Unaudited
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9 Line of Credit
The Fund has a $400,000,000 committed secured leverage line of credit. The
Fund is required to pledge assets equivalent to its borrowings under the
line of credit. Borrowings are charged interest at 0.50%, over the current
overnight Federal Funds Rate. The Fund incurs a commitment fee of 0.075%
per annum on the unused portion of the line of credit. There were no
borrowings under the line of credit during the six months ended June 30,
1999.
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Investment Advisor
Edgemont Asset Management Corporation
140 East 45th Street, 43rd Floor
New York, New York 10017
(212) 661-2443
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
- --------------------------------------------------------------------------------
Transfer Agent
Boston Financial Data Services Inc.
P.O. Box 8331
Boston, Massachusetts 02266
(800) 261-0555
- --------------------------------------------------------------------------------
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
- --------------------------------------------------------------------------------
Independent Auditors
Sanville & Company
1514 Old York Road
Abington, Pennsylvania 19001
- --------------------------------------------------------------------------------
This semi-annual report must be accompanied with or preceded by the Fund's
current prospectus.
- --------------------------------------------------------------------------------
The
Kaufmann
Fund,
Inc.
[GRAPHIC APPEARS HERE]
Semi-Annual Report
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1999
