|
|
|
|
|
|
|
|
|
|
Previous: WORLD FUNDS INC, N-30D, 1997-02-28 |
Next: WORLD FUNDS INC, N-30D, 1997-02-28 |
ANNUAL REPORT
TO SHAREHOLDERS
SAND HILL
PORTFOLIO MANAGER
FUND
A SERIES of
The World Funds, Inc.
a "Series" Investment Company
FOR THE YEAR ENDED
DECEMBER 31, 1996
<PAGE>
[GRAPH GOES HERE]
Sand Hill S&P 500
01/01/95 $10,000.00 $10,000.00
12/31/95 $11,160.09 $13,758.00
12/31/96 $13,344.01 $16,918.21
<PAGE>
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ----------
<S> <C>
COMMON STOCK: 73.16%
BASIC INDUSTRY: 1.97%
7,100 Material Sciences $ 127,800
----------
CAPITAL GOODS: 4.47%
2,000 Dover Corp. 100,500
3,000 Osmonics 66,000
300 Sumitomo Electric ADR 41,871
1,000 W.W. Grainger 80,250
----------
288,621
----------
CONGLOMERATE: 2.74%
6,900 Cheung Kong Holdings ADR 61,328
2,431 Desc, S.A. De C.V. ADR 53,482
15,800 Sime Darby BHD ADR 62,249
----------
177,059
----------
CONSUMER DURABLES: 4.87%
1,000 Johnson Controls 82,875
3,000 Leggett & Platt Inc. 103,875
300 Matsushita Electric ADR 48,975
1,200 Sony Corp ADR 78,750
----------
314,475
----------
CONSUMER NON-DURABLES: 7.39%
3,000 Avery Dennison 106,125
700 Colgate Palmolive 64,575
800 Panamerican Beverage 37,500
700 Procter & Gamble 75,338
3,100 Sara Lee Corp 115,475
1,400 Sherwin Williams 78,400
----------
477,413
----------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ----------
<S> <C>
CONSUMER SERVICES: 4.01%
1,200 Carlton Communications ADR 53,400
3,100 Choice Hotels International 54,637
1,800 Walgreen 72,000
3,500 Whole Foods Markets 78,750
----------
258,787
----------
ENERGY: 8.30%
700 Atlantic Richfield 92,837
500 British Petroleum ADR 70,687
1,200 Mobil 146,700
6,200 Nabors Industries 119,350
1,500 Western Atlas Inc 106,312
----------
535,886
----------
FINANCE: 10.14%
2,900 AXA ADR 91,350
1,100 Banco de Santander ADR 69,850
1,000 Develop Bk of Singapore ADR 54,045
5,000 Hang Seng Bank Ltd ADR 60,763
1,700 MBIA Inc. 172,125
3,500 PXRE Corp. 87,938
2,300 Regions Financial Corp 118,881
----------
654,952
----------
HEALTH CARE: 8.75%
2,200 Astra AB ADR 107,800
2,000 Becton Dickinson & Co. 86,750
3,100 Manor Care 84,088
600 Roche Holdings ADR 46,540
2,100 Schering Plough Corp 135,975
2,300 United Healthcare 103,788
----------
564,941
----------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF MARKET
SHARES SECURITY VALUE
- -------- -------- ---------
<S> <C>
TECHNOLOGY: 10.06%
600 3Com 44,025
2,800 Adaptec 112,000
1,000 Adobe Systems Inc 37,375
2,000 E M C Corp 66,250
2,430 Ericsson ADR 73,356
700 Intel 91,656
1,400 Hewlett Packard 70,350
3,000 Sabre Group Holding A 83,625
1,800 Sungard Data Systems 71,100
----------
649,737
----------
R E I T: 3.94%
4,000 Apartment Investment & Management Co 112,500
5,500 J P Realty 142,313
----------
254,813
----------
UTILITIES: 6.52%
1,800 Ameritech Corp 109,125
4,100 Frontier Corp. 92,762
15,000 Hong Kong Electric ADR 49,837
3,100 Hong Kong Telecom 50,375
3,000 Nipsco Industies 118,875
----------
420,974
----------
TOTAL COMMON STOCKS:
(Cost: $3,704,865) 4,725,458
----------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------
<S> <C>
U.S. GOVT. SECURITIES: 20.22%
$100,000 U.S. Treasury Note
maturity date 10/31/99; 7.50% 103,750
200,000 U.S. Treasury Note
maturity date 02/28/01; 5.625% 196,125
200,000 U.S. Treasury Note
maturity date 02/15/03; 6.25% 199,876
200,000 U.S. Treasury Note
maturity date 02/15/04; 5.875% 194,813
300,000 U.S. Treasury Note
maturity date 05/15/05; 6.5% 302,250
300,000 U.S. Treasury Note
maturity date 05/15/06; 6.875% 309,375
----------
TOTAL U.S. GOVERNMENT SECURITIES:
(Cost: $1,294,657) 1,306,189
----------
TOTAL INVESTMENTS:
(Cost: $4,999,522)* 93.38% 6,031,647
Other assets, net 6.62% 427,778
-------- ----------
NET ASSETS 100.00% $6,459,425
-------- ----------
-------- ----------
</TABLE>
*Cost for Federal income tax purpose is $4,999,522 and net unrealized
appreciation consists of:
<TABLE>
<S> <C>
Gross unrealized appreciation $1,090,678
Gross unrealized depreciation (58,553)
----------
Net unrealized appreciation $1,032,125
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________
DECEMBER 31, 1996
--------------------------------
<S> <C>
ASSETS
Investments at value (Identified cost of $4,999,522)
(Notes 1 & 3) $ 6,031,647
Cash 366,379
Receivables:
Dividend and interest 25,467
Receivable from manager 8,799
-----------
34,266
Deferred organization costs 23,305
Prepaid expenses 3,828
-----------------
TOTAL ASSETS 6,459,425
-----------------
NET ASSETS $ 6,459,425
-----------------
-----------------
NET ASSET VALUE OFFERING AND
REDEMPTION PRICE PER SHARE
($6,459,425/504,705 shares outstanding) $ 12.79
-----------------
-----------------
At December 31, 1996 there were 50,000,000 shares of $.01 par
value stock authorized and components of net assets are:
Paid in capital $ 5,354,034
Undistributed net realized gain on investments 73,266
Net unrealized appreciation of investments 1,032,125
Net Assets $ 6,459,425
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________
YEAR ENDED
DECEMBER 31, 1996
---------------------
<S> <C>
INVESTMENT INCOME
Income:
Interest $81,560
Dividend 94,169
-------
Total income $ 175,729
Expenses:
Investment management fees (Note 2) 53,649
Transfer agent fees (Note 2) 24,190
Custodian and accounting fees (Note 3) 51,123
Legal & audit fees 5,195
Registration fees 2,250
Recordkeeping and administrative services (Note 2) 16,294
Shareholder servicing and reports (Note 2) 6,779
Organization expense amortization 4,140
Other 4,564
-------
168,184
Custodian fee credits (27,040)
Reimbursement by manager (34,049)
----------
Total expenses 107,095
----------
Net investment income 68,634
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 230,479
Net increase in unrealized appreciation on investments 740,807
----------
Net gain on investments 971,286
----------
Net increase in net assets resulting from operations $1,039,920
----------
----------
</TABLE>
*Commencement of operations
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
___________________________________________________________________________________
JANUARY 2, 1995
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C>
OPERATIONS
Net investment income $ 68,634 $ 14,079
Net realized gain on investments 230,479 3,594
Change in unrealized appreciation of investments 740,807 291,318
----------------- -----------------
Net increase in net assets resulting from operations 1,039,920 308,991
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income ($.15 and $.05 per share) (72,905) (17,898)
Capital gains ($.33 per share) (155,461)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets resulting from capital share
transactions* 1,622,851 3,733,927
----------------- -----------------
Net increase in net assets 2,434,405 $ 4,025,020
Net asset at beginning of period 4,025,020 0
----------------- -----------------
NET ASSETS at the end of the period (including
undistributed net investment income of $0 and $4,270) $ 6,459,425 $ 4,025,020
----------------- -----------------
----------------- -----------------
</TABLE>
*A summary of capital share transactions follows:
<TABLE>
<CAPTION>
JANUARY 2, 1995*
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
SHARES VALUE SHARES VALUE
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Shares sold 199,556 $2,332,804 384,304 $3,964,257
Shares reinvested from dividend 17,744 225,708 1,554 17,229
Shares redeemed (75,044) (935,661) (23,410) (247,559)
------- ---------- ------- ----------
Net increase 142,256 $1,622,851 362,448 $3,733,927
------- ---------- ------- ----------
------- ---------- ------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
______________________________________________________________________________________
JANUARY 2, 1995*
YEAR ENDED TO
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
<S> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 11.11 $ 10.00
----------------- -----------------
Income from investment operations-
Net investment income 0.14 0.06
Net realized and unrealized gain on investments 2.02 1.10
----------------- -----------------
Total from investment operations 2.16 1.16
----------------- -----------------
Less distributions-
Distributions from net investment income (0.15) (0.05)
Distributions from capital gains (0.33)
----------------- -----------------
Total distributions (0.48) (0.05)
----------------- -----------------
Net asset value, end of period (000's) $ 12.79 $ 11.11
----------------- -----------------
----------------- -----------------
Total Return 19.57% 11.60%
Ratios/Supplemental Data
Net assets, end of period(000's) $ 6,459 $ 4,025
Ratio to average net assets-(A)
Expenses (B) 2.50% 3.03%**
Expense ratio-net (C) 2.00% 1.90%**
Net investment income 1.29% 0.52%**
Portfolio turnover rate 32.97% 40.96%
Average brokerage commission per share $0.0581 --
</TABLE>
*Commencement of operations
**Annualized
(A) Management fee waivers reduced the expense ratios and increased the net
investment income ratio by .64% in 1996 and 1.00% in 1995.
(B) Expense ratio has been increased to include custodian fees which were offset
by custodian credits.
(C) Expense ratio-net reflects the effect of the custodian fee credits the fund
received.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1996
_______________________________________________________________________________
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES -- The Sand Hill Portfolio Manager Fund
(the "Fund") is a series of The World Funds, Inc. ("TWF") which is registered
under The Investment Company Act of 1940, as amended, as a diversified open-end
management company. The Fund was established in January 2, 1995, as a series of
TWF which has allocated to the Fund 50,000,000 shares of its 500,000,000 shares
of $.01 par value common stock. The following is a summary of significant
accounting policies consistently followed by the Fund. The policies are in
conformity with generally accepted accounting principles.
The investment objective of the Fund is to maximize total return by investing in
equity securities, debt securities and short term investments.
A. SECURITY VALUATION. Investments in securities traded on a national securities
exchange or included in the NASDAQ National Market System are valued at the last
reported sales price; other securities traded in the over-the-counter market and
listed securities for which no sale is reported on that date are valued at the
last reported bid price. Short-term investments (securities with a remaining
maturity of sixty days or less) are valued at cost which, when combined with
accrued interest, approximates market value.
B. FEDERAL INCOME TAXES. The Fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no federal
income tax provision is required.
C. SECURITY TRANSACTIONS AND DIVIDENDS. As is common in the industry, security
transactions are accounted for on the trade date. Dividend income is recorded on
the ex-dividend date.
D. DEFERRED ORGANIZATIONAL EXPENSES. All of the expenses of TWF incurred in
connection with its organization and the public offering of its shares have been
assumed by the series funds of TWF. The organization expenses allocable to Sand
Hill Portfolio Manager Fund are being amortized over a period of fifty-seven
(57) months.
E. DISTRIBUTIONS TO SHAREHOLDERS. Distributions from net investment income and
realized gains, if any, are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These distribution differences primarily result from different
treatments of equalization and post-October capital losses.
10
<PAGE>
F. ACCOUNTING ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
NOTE 2-INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS -- Pursuant to an
Investment Advisory Agreement, the Advisor, Sand Hill Advisors ("SHA") provides
investment services for an annual fee of 1.0% of the first $100 million of
average daily net assets and .75% on average daily net assets over $100 million.
SHA will reimburse the Fund to the extent of its advisory fee to limit the
Fund's aggregate annual operating expenses (excluding taxes and brokerage
commissions), to the lowest applicable percentage limitation prescribed by any
state in which the Fund's shares are qualified for sale. For the year ended
December 31, 1996, a voluntary reimbursement of $34,043 was made.
As provided in the Administrative Agreement, the Fund reimbursed Commonwealth
Shareholder Services, Inc. ("CSS"), its Administrative Agent, $17,681 for
providing shareholder services, recordkeeping, administrative services and
blue-sky filings. The Fund compensates CSS for blue-sky filings and certain
shareholder servicing on an hourly rate basis. For other administrative
services, CSS receives .20% of average daily net assets, with a minimum fee of
$60,000, of which $43,706 has been waived.
Fund Services, Inc. ("FSI") is the Fund's Transfer and Dividend Disbursing
Agent. FSI received $24,190 for its services for the year ended December 31,
1996.
Certain officers and/or directors of the Fund are also officers and/or directors
of CSS and FSI.
NOTE 3-PURCHASES AND SALES OF SECURITIES -- Purchases and sales of securities
other than short-term notes aggregated $3,129,441 and $1,688,861 respectively.
The Custodian has provided credits in the amount of $24,083 against custodian
and accounting charges based on credits on uninvested cash balances of the Fund.
11
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
The World Funds, Incorporated
Richmond, Virginia
We have audited the accompanying statement of assets and liabilities of the Sand
Hill Portfolio Manager Fund, a series of The World Funds, Inc., including the
schedule of portfolio investments as of December 31, 1996, and the related
statements of operations for the year then ended and the statement of changes in
net assets and the financial highlights for each of the two years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Sand Hill Portfolio Manager Fund as of December 31, 1996, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for each of the two years in the period then ended, in
conformity with generally accepted accounting principles.
TAIT, WELLER AND BAKER
Philadelphia, Pennsylvania
January 17, 1997
12
<PAGE>
INVESTMENT ADVISOR:
Sand Hill Advisors, Inc.
3000 Sand Hill Road
Building Three, Suite 150
Menlo Park, California 94025-7111
DISTRIBUTOR:
First Dominion Capital Corp.
1500 Forest Avenue
Suite 223
Richmond, Virginia 23229
INDEPENDENT AUDITORS:
Tait, Weller and Baker
Two Penn Center, Suite 700
Philadelphia, Pennsylvania 19102-1707
TRANSFER AGENT:
For account information, wire purchase or redemptions, call or write to
Sand Hill's Transfer Agent:
Fund Services, Inc.
Post Office Box 26305
Richmond, Virginia 23260
(800) 628-4077 Toll Free
MORE INFORMATION:
For 24 hour, 7 days a week price information, and for information on any
series of The World Funds, Inc., investment plans, and other shareholder
services, call Commonwealth Shareholder Services at (800) 527-9500 Toll Free
|
|