------The------
Westwood
-----Funds-----
WESTWOOD EQUITY FUND
WESTWOOD INTERMEDIATE BOND FUND
WESTWOOD BALANCED FUND
Annual Report
- --------------------------------------------------------------------------------
September 30, 1995
- --------------------------------------------------------------------------------
<PAGE>
The Westwood Funds
==================
WESTWOOD EQUITY FUND
WESTWOOD INTERMEDIATE BOND FUND
WESTWOOD BALANCED FUND
Annual Report
Dear Fellow Shareholder:
We are pleased to provide the September 30, 1995, Annual Report for The
Westwood Funds, including the Westwood Balanced Fund, Westwood Equity Fund, and
Westwood Intermediate Bond Fund.
The Federal Reserve's vigilant attention to low inflation has supported
rising equity and bond valuations. We have seen the continued unfolding of a
"soft landing" scenario, evidenced by slow economic growth and modest inflation.
Interest rates have fallen dramatically, reflecting the market's belief that the
threat of an inflationary environment has subsided. Stock market strength has
continued to be fueled by the unprecedented rally in technology stocks as well
as strong earnings momentum and exceptionally high levels of equity investment
by individuals and institutions. We have seen renewed strength of the dollar
against the yen and the Deutsche mark, and have witnessed intervention by
Central Banks and the Bank of Japan, bailing out two failing credit unions.
Westwood Balanced Fund
For the fiscal year ended September 30, 1995, Westwood Balanced Fund Retail
Class had a total return of 22.0% and the Service Class returned 21.7% which
compares to the blended 60% S&P 500/40% Lehman Brothers Government - Corporate
Bond Index return of 23.6%. According to Lipper Analytical Services, the average
return for all 235 balanced mutual funds was 19.0% during the same period. For
the six month period ended September 30, 1995, the Westwood Balanced Fund Retail
and Service Class both posted returns of 15.7%. Year-to-date, the Westwood
Balanced Fund Retail and Service Class posted returns of 22.4% and 22.2%,
respectively. The Fund has invested an average of 60% in equities and 36% in
bonds with the balance in short-term investments.
The average annual returns of Balanced Fund Service Class shares for the
one year period and since inception through September 30, 1995, including the
effect of the Fund's 4% front-end sales charge, were 16.7% and 11.4%,
respectively.
Balanced Fund Retail and Service Class shares achieved total returns since
their respective inception dates on October 1, 1991, and April 6, 1993, through
September 30, 1995, of 62.1% and 36.3%, respectively, which equate to average
annual returns of 12.8% and 13.3%, respectively.
The Westwood Balanced Fund was ranked #1 among 121 balanced funds tracked
by Morningstar for the three-year period ended 10/31/95 and has received
Morningstar's 5-Star (*****) rating(1) among 2,310 similar funds for the 3-year
period ended 10/31/95. Based upon one year returns as of 10/31/95, the Fund was
#15 out of 245 balanced funds tracked. In addition, Stolper and Company, which
- ------------
(1) Morningstar propriety rating reflects historical risk adjusted performance
as of 9/30/95 and is subject to change every month. The ratings are clculated
from the Fund's 3-year average annual return in excess of 90 day T-bill returns
with appropriate fee adjustments and a risk factor that reflects fund
performance below 90 day T-bill returns. 2,243 equity, fixed income and hybrid
funds were rated for the period. 10% of the funds in a category receive five
stars.
<PAGE>
publishes Mutual Fund Monthly, recently added the Westwood Balanced Fund to its
"Sanctuary Portfolio", which is recommended for conservative investors who are
intolerant of volatility but who value the capital appreciation potential stocks
provide. Strategies for the equity and fixed income funds which are discussed
below also apply to their respective components in the Balanced Funds.
Westwood Equity Fund
For the fiscal year ended September 30, 1995, the Westwood Equity Fund Retail
Class posted a return of 25.9% and the Service Class returned 25.5% versus the
25.2% average return for the 175 capital appreciation funds tracked by Lipper
Analytical Services. The unmanaged S&P 500 Index had a return of 29.8% for the
same period. During the past twelve months, overweightings in the Technology,
Capital Goods, Basic Materials and Consumer Cyclical sectors enhanced
performance. For the previous six months (March 31, 1995 - September 30, 1995),
the Westwood Equity Fund Retail Class returned 18.3% while the Service Class
returned 18.2%. Year-to-date, the Equity Fund Retail and Service Class returned
26.5% and 26.3%, respectively. The top performing market sectors included
Technology, Finance, Healthcare, Consumer Staples and Capital Goods. The Fund
maintained an underweighting in Consumer Staples which ultimately detracted from
performance. Although the market has favored this sector, we maintain that, on a
secular basis, the consumer has and will continue to alter his spending habits,
choosing to invest rather than spend, and thus we view this sector as overvalued
relative to other sectors in the market. Top performing stocks for the year
included Dell Computer Corp. (DELL - $85.00 - NASDAQ), Nautica Enterprises, Inc.
(NAUT - $34.25 - NASDAQ), Boeing Company (BA - $68.25 - NYSE), Sterling
Software, Inc. (SSW - $45.50 - NYSE) and Computer Associates International, Inc.
(CA - $42.25 - NYSE).
Equity Fund Retail and Service Class shares achieved total returns since
their respective inception dates on January 2, 1987, and January 28, 1994,
through September 30, 1995, of 181.7% and 24.4%, respectively, which equate to
average annual returns of 12.6% and 13.9%, respectively. Equity Fund Retail
Class shares returned an average 15.5% annually for the five-year period ended
September 30, 1995. The average annual returns of Equity Fund Service Class
shares for the one year period and since inception through September 30, 1995,
including the effect of the Fund's 4% front-end sales charge, were 19.6% and
11.0%, respectively.
All sectors have benefited from continued economic expansion and strong
corporate profits which have directly translated into higher stock prices.
Several stocks in the Fund continue to appreciate in value, based on their own
merits and restructuring, ultimately allowing them to be the low cost producers
of products and services in our global economy. At the writing of our last
annual letter, the Fund had invested approximately 20% of its assets in the
Technology sector which has been a large contributor to Fund performance over
the last year. Although the Technology sector continues to show strength, the
portfolio has taken profits and decreased its exposure to 12%. Portions of the
proceeds have been reinvested in REITS (real estate investment trusts). We view
REITS as an undervalued asset class, poised to benefit from secular trends
favoring defensive investments and real assets. We also view REITS as offering
an opportunity to meet investors' needs for income in a low rate environment.
Westwood Intermediate Bond Fund
The fiscal year ended September 30, 1995, was a strong period for the bond
market, which recovered more than three times the exceptional losses of the
prior year. The bond market rallied explosively in May, as weak second quarter
economic reports engendered fears of a "hard landing." Expectations for the
2
<PAGE>
Federal Reserve to reverse course and lower short term interest rates were met
on July 6. Subsequently, inflation measures have continued to moderate and
economic data has proved to be mixed, consistent with a "soft landing" scenario
- - i.e., moderate economic growth accompanied by low inflation. Declining rates
favored the performance of the longer maturities and higher yielding sectors
such as corporate and asset-backed securities. Westwood Intermediate Bond Fund
maintained overweighted positions in both sectors. The top-performing issues in
the Fund over the last six months were longer maturity Treasuries and
intermediate maturity corporate issues from International Business Machines,
Boise Cascade and American Home Products.
For the fiscal year ended September 30, 1995, the Intermediate Bond Fund
had a total return of 11.1%, versus the 14.3% return of the Lehman Brothers
Government Corporate Bond Index. According to Lipper Analytical Services, the
average taxable bond fund earned 10.9% for the same period. During the six
months ended September 30, 1995, the Intermediate Bond Fund returned 7.1%.
The Intermediate Bond Fund's total return since inception on October 1,
1991, through September 30, 1995, was 29.6%, which equates to a 6.7% average
annual return.
Capital Market Outlook
We expect to see continued slow growth and moderate inflation during the
next twelve months. Furthermore, we have reacted to data which point to secular
lows for hard assets versus financial assets. Our response has been to initiate
positions in the REIT sector in order to benefit from its undervalued status.
Our thesis for the nineties, which includes the themes of an industrial
renaissance and global communications revolution, continues to be reflected in
the Funds by overweightings in the basic materials, capital goods and technology
sectors. Our broad and long-term secular analysis suggests that consumers will
increasingly place emphasis on investing rather than spending. Therefore, we
maintain underweightings in the consumer staples sector.
Over the past year, the Westwood Funds have been featured in several
publications including Barron's, Fortune and Money Magazine as well as having
been the subject of interviews on both the Nightly Business Report and CNBC.
Please let us know if you would like copies of any of these articles. A
transcript of the August 18th interview on Nightly Business Report can be found
on America Online on the NBR (Nightly Business Report) home page.
We welcome your comments and encourage you to write directly to us at our
offices, or on the Internet at [email protected]. We will continue to work hard to
meet your investment objectives.
Sincerely,
/S/ SUSAN M. BYRNE
Susan M. Byrne
President and Chief Investment Officer
November 1, 1995
3
<PAGE>
THE WESTWOOD FUNDS (Retail Class)
Index Comparisons
The investment performance of the Equity, Intermediate and Balanced Funds
are compared to the S&P 500 Index, Lehman Brothers Government/Corporate Bond
Index and 60% S&P 500 Index/40% Lehman Brothers Government Corporate Bond Index,
respectively, from January 2, 1987 for the Equity Fund, October 1, 1991, for the
Intermediate Bond and Balanced Fund (Retail Class) and January 28, 1994 for the
Service Class of the Equity Fund, January 31, 1994 for the Intermediate Bond
Fund, and April 6, 1993 for the Balanced Fund (commencement of operations for
each of the Funds) through September 30, 1994. Effective October 6, 1994, the
Equity, Intermediate Bond and Balanced Fund's Institutional Class became
no-load. The Institutional Class graphs reflect the current no-load status. The
graph assumes all dividends and distributions from the Fund are reinvested at
net asset value.
Equity Fund
A $10,000 investment in the Equity Fund Institutional Class made on the
inception date would have grown to $28,170 (as of September 30, 1995). The graph
shows how this compares to our benchmark over the same period. Total return for
the life of the Fund was 181.69%.
[The following table was represented by a chart in the printed material]
Westwood Equity Fund
(Retail Class) S&P 500 Index
1/87 10000 10000
9/87 13165 13599
9/88 11779 11893
9/89 15322 15785
9/90 13699 14305
9/91 16396 18766
9/92 17078 20841
9/93 20508 23553
9/94 22383 24421
9/95 28170 31684
Average Annual Total Return
- ---------------------------------------
One Year 5 Year Life of Fund
- ---------------------------------------
25.85% 15.50% 12.57%
Intermediate Bond Fund
A $10,000 investment in the Intermediate Bond Fund Institutional Class made
on the inception date would have grown to $12,960 (as of September 30, 1995).
The graph shows how this compares to our benchmark over the same period. Total
return for the life of the Fund was 29.56%.
[The following table was represented by a chart in the printed material]
Westwood Intermediate Bond Fund Lehman Bros. Gov't.
(Retail Class) Corp. Bond Index
10/91 10000 10000
9/92 11186 11323
9/93 12331 12620
9/94 11658 12098
9/95 12960 13834
Average Annual Total Return
- ------------------------------
One Year Life of Fund
- ------------------------------
11.13% 6.69%
Balanced Fund
A $10,000 investment in the Balanced Fund Institutional Class made on the
inception date would have grown to $16,210 (as of September 30, 1995). The graph
shows how this compares to our benchmark over the same period. Total return for
the life of the Fund was 62.13%.
[The following table was represented by a chart in the printed material]
Westwood Balanced Fund 60% S&P 500/40% Lehman
(Retail Class) Bros. Gov't. Corp. Bond
10/91 10000 10000
9/92 10797 11207
9/93 12621 12603
9/94 13291 12670
9/95 16210 15658
Average Annual Total Return
- -------------------------------
One Year Life of Fund
- -------------------------------
21.98% 12.84%
Past performance is not predictive of future performance.
4
<PAGE>
THE WESTWOOD FUNDS (Service Class)
Equity Fund
A $10,000 investment in the Equity Fund Service Class with a maximum sales
load of 4.00% would have grown to $11,920 (as of September 30, 1995). The graph
shows how this compares to our benchmark over the same period. Total return for
the life of the Fund was 24.41%, without adjusting for the sales charge.
[The following table was represented by a chart in the printed material]
Westwood Equity Fund (Service Class) S&P 500 Index
1/94 9600 10000
9/94 9514 9896
9/95 11920 12839
Average Annual Total Return
- ---------------------------------
One Year Life of Fund
- ---------------------------------
19.6% 11.0%
Intermediate Bond Fund
A $10,000 investment in the Intermediate Bond Fund Service Class with a
maximum sales load of 4.00% would have decreased to $8,859 (as of November 8,
1994. On that date, all shares were redeemed and there have been no further
shares issued). The graph shows how this compares to our benchmark over the same
period. Total return for the life of the Fund was -7.70%, without adjusting for
the sales charge.
[The following table was represented by a chart in the printed material]
Westwood Intermediate Bond Fund Lehman Bros. Gov't.
(Service Class) Corp. Bond Index
1/94 9600 10000
9/94 8944 9471
11/8/94 8859 9551
Total Return
- -------------
Life of Fund
- -------------
-11.4%
Balanced Fund
A $10,000 investment in the Balanced Fund Service Class with a maximum
sales load of 4.00% made on the inception date would have grown to $13,080 (as
of September 30, 1995). The graph shows how this compares to our benchmark over
the same period. Total return for the life of the Fund was 36.31%, without
adjusting for the sales charge.
[The following table was represented by a chart in the printed material]
Westwood Balanced Fund 60% S&P Index/40% Lehman Bros.
(Service Class) Gov't. Corp. Bond Index
4/93 9600 10000
9/93 9809 10443
9/94 10751 10499
9/95 13080 12975
Average Annual Total Return
- -----------------------------
One Year Life of Fund
- -----------------------------
16.7% 11.4%
Past performance is not predictive of future performance.
5
<PAGE>
Westwood Equity Fund
Portfolio of Investments -- September 30, 1995
================================================================================
Market
Value
Shares Cost (Note 2a)
------ ---------- ----------
COMMON STOCKS -- 88.0%
APPAREL -- 1.6%
7,000 Nautica Enterprises, Inc.* ............ $ 120,438 $ 239,750
---------- ----------
AUTO RELATED -- 5.1%
3,500 Chrysler Corporation .................. 162,590 185,500
3,900 Daimler Benz Aktiengesellschaft+ ...... 187,136 193,538
7,200 Eaton Corp. ........................... 364,248 381,600
---------- ----------
713,974 760,638
---------- ----------
BANKING -- 1.4%
2,100 First Interstate Bancorp. ............. 160,020 211,575
---------- ----------
BROADCASTING -- 2.2%
6,500 Viacom Inc. Cl. B* .................... 236,748 323,375
---------- ----------
CAPITAL GOODS -- 8.8%
7,300 Avnet, Inc. ........................... 278,969 376,863
3,800 Fluke Corp. ........................... 103,198 144,400
6,400 Fluor Corporation ..................... 283,762 358,400
6,494 Lockheed Martin Corp. ................. 375,458 435,910
---------- ----------
1,041,387 1,315,573
---------- ----------
COMPUTER EQUIPMENT -- 1.3%
2,300 Dell Computer Corp.* .................. 117,589 195,500
---------- ----------
CONSUMER GOODS -- 2.5%
7,300 Premark International, Inc. ........... 311,903 371,387
---------- ----------
ENERGY -- 7.0%
6,300 Amoco Corporation ..................... 381,957 403,987
6,400 Murphy Oil Corporation ................ 243,812 256,000
6,100 Texaco Inc. ........................... 391,798 394,212
---------- ----------
1,017,567 1,054,199
---------- ----------
HEALTH CARE -- 5.5%
8,000 Emcare Holdings Corp.* ................ 88,000 177,000
5,500 Johnson & Johnson ..................... 308,415 407,687
13,500 Tenet Healthcare Corp.* ............... 204,428 234,562
---------- ----------
600,843 819,249
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 2.8%
11,300 Marriott International Inc. ........... 389,546 422,337
---------- ----------
INSURANCE -- 1.5%
2,100 CIGNA Corp. ........................... 209,978 218,662
---------- ----------
MACHINERY -- 3.4%
4,300 Deere & Company ....................... 333,575 349,912
5,400 Greenfield Industries, Inc. ........... 106,038 166,050
---------- ----------
439,613 515,962
---------- ----------
MANUFACTURING -- 2.7%
6,700 Eastman Kodak Company ................. 368,853 396,975
---------- ----------
PHARMACEUTICALS -- 2.4%
6,000 Biogen, Inc.* ......................... 280,048 360,000
---------- ----------
RAW MATERIALS -- 3.9%
6,700 Aluminum Company of America ........... 260,572 354,262
3,300 E.I. du Pont de Nemours & Company ..... 225,096 226,875
---------- ----------
485,668 581,137
---------- ----------
REAL ESTATE INVESTMENT TRUSTS -- 7.7%
9,600 Crescent Real Estate Equities, Inc. ... 293,832 295,200
6,900 Duke Realty Investments ............... 199,121 214,763
8,100 Highwoods Properties .................. 198,508 213,638
4,000 Meditrust ............................. 138,396 138,500
5,600 Patriot American Hospitality, Inc.* ... 134,400 143,500
7,600 Security Capital Pacific Trust ........ 135,951 144,400
---------- ----------
1,100,208 1,150,001
---------- ----------
RETAIL - SPECIALTY LINE -- 6.7%
5,000 American Home Products Corp. .......... 381,868 424,375
13,700 Federated Department Stores ........... 302,398 388,738
4,700 Tiffany & Co. ......................... 154,590 196,813
---------- ----------
838,856 1,009,926
---------- ----------
SHELTER -- 2.7%
8,800 PPG Industries, Inc. .................. 331,646 409,200
---------- ----------
TECHNOLOGY -- 7.9%
5,500 Boeing Co. 243,973 375,375
9,750 Computer Associates International,
Inc. ................................ 311,084 411,938
2,200 International Business Machines
Corporation ......................... 199,653 207,625
4,200 Sterling Software, Inc.* .............. 133,130 191,100
---------- ----------
887,840 1,186,038
---------- ----------
TELECOMMUNICATIONS -- 2.9%
6,700 AT&T Corp. ............................ 338,329 440,525
---------- ----------
TRANSPORTATION -- 2.6%
4,600 CSX Corporation ....................... 346,538 386,975
---------- ----------
UTILITIES -- 5.4%
10,300 GTE Corporation ....................... 330,004 404,275
9,100 Houston Industries Incorporated ....... 350,858 401,537
---------- ----------
680,862 805,812
---------- ----------
TOTAL COMMON STOCKS ................... 11,018,454 13,174,796
---------- ----------
U.S. TREASURY OBLIGATIONS -- 11.9%
1,775,000 Bills, 5.41%, 10/05/1995 .............. 1,773,940 1,773,940
---------- ----------
TOTAL U.S. TREASURY OBLIGATIONS ....... 1,773,940 1,773,940
---------- ----------
TOTAL INVESTMENTS -- 99.9% ............ $12,792,394** $14,948,736
===========
Other assets less liabilities -- 0.1% . 22,344
----------
NET ASSETS -- 100.0% .................. $14,971,080
-----------
- ----------
* Non-Income producing security.
** The cost of securities for Federal income tax purposes is $12,796,318.
+ ADR -- American Depository Receipts.
See accompanying notes to financial statements.
6
<PAGE>
Westwood Intermediate Bond Fund
Portfolio of Investments -- September 30, 1995
================================================================================
Market
Value
Principal Cost (Note 2a)
- --------- ---------- ----------
ASSET BACKED SECURITIES-- 8.3%
$ 92,078 EQCC Home Equity 93-3a, 5.15%,
9/15/2008 ............................ $ 91,978 $ 86,784
100,000 Ford Credit Auto Loan Master Trust,
6.50%, 8/15/2002 .................... 99,609 100,500
155,409 GMAC Grantor Trust, 7.15%, 3/15/2000 .. 155,361 157,546
50,000 Premier Auto Trust 1994-4, 6.45%,
5/02/1998 ........................... 48,883 50,210
---------- ----------
Total Asset Backed Securities ......... 395,831 395,040
---------- ----------
CORPORATE OBLIGATIONS -- 30.0%
CAPITAL GOODS -- 0.5%
25,000 Lockheed Martin Corp.,
5.875%, 3/15/1998 ................... 25,094 24,795
---------- ----------
ENTERTAINMENT -- 2.2%
100,000 Time Warner Inc., 7.45%,
2/01/1998 ........................... 98,687 101,750
---------- ----------
FINANCIAL SERVICES -- 8.0%
120,000 Ford Motor Credit Corp., 9.75%,
5/06/1996 ........................... 122,522 122,640
---------- ----------
250,000 General Motors Acceptance Corp.,
7.125%, 6/01/1999 ................... 248,913 254,688
---------- ----------
371,435 377,328
---------- ----------
FOREST PRODUCTS & PAPER -- 2.5%
100,000 Boise Cascade Corp., 9.45%,
11/01/2009 .......................... 107,298 117,375
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 2.1%
100,000 Marriott International Inc.,
7.125%, 4/15/2005 ................... 99,086 100,875
---------- ----------
INDUSTRIAL GOODS -- 8.2%
200,000 American Home Products Corp.,
7.90%, 2/15/2005 .................... 199,610 216,500
50,000 Eaton Corporation, 8.90%,
8/15/2006 ........................... 57,098 58,125
100,000 News American Holdings
Inc., 12.00%, 12/15/2001 ............ 112,759 111,875
---------- ----------
369,467 386,500
---------- ----------
RETAIL STORES -- 2.3%
100,000 Federated Department Stores,
Inc., 10.00%, 2/15/2001 ............. 108,811 108,800
---------- ----------
TECHNOLOGY -- 4.2%
200,000 International Business Machines
Corporation, 6.375%, 6/15/2000 ...... 202,462 200,000
---------- ----------
Total Corporate Obligations ........... 1,382,340 1,417,423
---------- ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.9%
125,000 Federal National Mortgage
Association, 7.20%, 7/25/2025 ....... 126,650 126,950
105,000 Tennessee Valley Authority --
Global Bond, 6.375%, 6/15/2005 ...... 104,322 104,606
---------- ----------
Total U.S. Government
Agency Obligations .................. 230,972 231,556
---------- ----------
U.S. TREASURY OBLIGATIONS -- 52.5%
35,000 Bonds, 8.75%, 5/15/2017 ............... 36,814 43,386
55,000 Bonds, 8.125%, 8/15/2019 .............. 54,225 64,524
220,000 Bonds, 7.625%, 2/15/2025 .............. 247,015 248,916
100,000 Notes, 8.50%, 11/15/1995 .............. 100,255 100,325
125,000 Notes, 7.875%, 2/15/1996 .............. 125,616 125,994
155,000 Notes, 7.375%, 5/15/1996 .............. 156,478 156,562
315,000 Notes, 6.125%, 5/31/1997 .............. 316,446 316,272
190,000 Notes, 7.25%, 2/15/1998 ............... 192,000 195,618
335,000 Notes, 5.875%, 8/15/1998 .............. 334,061 334,752
125,000 Notes, 7.75%, 11/30/1999 .............. 127,597 132,855
50,000 Notes, 7.75%, 2/15/2001 ............... 49,891 53,858
125,000 Notes, 7.875%, 8/15/2001 .............. 125,525 135,909
140,000 Notes, 6.25%, 2/15/2003 ............... 133,222 140,801
85,000 Notes, 7.25%, 5/15/2004 ............... 84,101 90,712
150,000 Notes, 7.50%, 2/15/2005 ............... 149,672 163,368
75,000 Notes, 6.50%, 5/15/2005 ............... 77,592 76,666
100,000 Notes, 6.50%, 8/15/2005 ............... 102,524 102,414
---------- ----------
Total U.S. Treasury Obligations ....... 2,413,034 2,482,932
---------- ----------
Total Investments -- 95.7% ............ $4,422,177* $4,526,951
---------- ----------
Other assets less liabilities -- 4.3% . 202,336
----------
Net Assets -- 100.0% .................. $4,729,287
----------
*The cost of securities for Federal income tax purposes is $4,428,404.
See accompanying notes to financial statements.
7
<PAGE>
Westwood Balanced Fund
Portfolio of Investments -- September 30, 1995
================================================================================
Market
Principal/ Value
Shares Cost (Note 2a)
- ---------- ---------- ----------
ASSET BACKED SECURITIES-- 3.5%
$ 30,693 EQCC Home Equity 93-3a,5.15%,
9/15/2008 ........................... $ 30,659 $ 28,928
130,000 Ford Credit Auto Loan Master
Trust, 6.50%, 8/15/2002 ............. 129,492 130,650
233,113 GMAC Grantor Trust, 7.15%,
3/15/2000 ........................... 233,041 236,319
100,000 Premier Auto Trust 1994-4,
6.45%, 5/02/1998 .................... 97,768 100,420
---------- ----------
Total Asset Backed Securities ......... 490,960 496,317
---------- ----------
COMMON STOCKS -- 60.2%
APPAREL -- 0.8%
3,450 Nautica Enterprises, Inc.* ............ 60,050 118,163
---------- ----------
AUTO RELATED -- 3.4%
2,300 Chysler Corporation ................... 105,660 121,900
2,200 Daimler Benz Aktiengesellschaft+ ...... 101,432 109,175
4,600 Eaton Corp. ........................... 232,003 243,800
---------- ----------
439,095 474,875
---------- ----------
BANKING -- 1.0%
1,400 First Interstate Bancorp .............. 104,974 141,050
---------- ----------
BROADCASTING -- 1.7%
4,700 Viacom Inc. Cl B* ..................... 177,762 233,825
---------- ----------
CAPITAL GOODS -- 6.2%
4,700 Avnet, Inc. ........................... 169,489 242,638
2,800 Fluke Corp. ........................... 74,671 106,400
4,500 Fluor Corporation ..................... 199,787 252,000
4,127 Lockheed Martin Corp. ................. 162,540 277,025
---------- ----------
606,487 878,063
---------- ----------
COMPUTER EQUIPMENT -- 0.9%
1,500 Dell Computer Corp.* .................. 78,619 127,500
---------- ----------
CONSUMER GOODS -- 1.8%
5,100 Premark International, Inc. ........... 214,865 259,463
---------- ----------
ENERGY -- 5.1%
4,200 Amoco Corporation ..................... 252,860 269,325
4,900 Murphy Oil Corporation ................ 200,597 196,000
4,000 Texaco Inc. ........................... 255,384 258,500
---------- ----------
708,841 723,825
---------- ----------
HEALTH CARE -- 3.1%
3,600 Johnson & Johnson ..................... 197,345 266,850
9,700 Tenet Healthcare Corp.* ............... 144,965 168,537
---------- ----------
342,310 435,387
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 2.0%
7,500 Marriott International Inc. ........... 256,340 280,312
---------- ----------
INSURANCE -- 1.0%
1,400 CIGNA Corp. ........................... 139,899 145,775
---------- ----------
MACHINERY -- 2.4%
2,700 Deere & Company ....................... 209,964 219,713
3,800 Greenfield Industries, Inc. ........... 77,075 116,850
---------- ----------
287,039 336,563
---------- ----------
MANUFACTURING -- 1.8%
4,300 Eastman Kodak Company ................. 232,101 254,775
---------- ----------
PHARMACEUTICALS -- 1.7%
4,000 Biogen, Inc.* ......................... 186,331 240,000
---------- ----------
RAW MATERIALS -- 2.8%
4,400 Aluminum Company of America ........... 163,495 232,650
2,300 E.I. du Pont de Nemours & Company ..... 156,888 158,125
---------- ----------
320,383 390,775
---------- ----------
REAL ESTATE INVESTMENT TRUSTS -- 4.6%
6,300 Crescent Real Estate Equities, Inc. ... 195,732 193,725
4,700 Duke Realty Investments ............... 137,485 146,287
5,300 Highwoods Properties .................. 130,148 139,788
2,600 Meditrust ............................. 89,934 90,025
4,500 Security Capital Pacific Trust ........ 81,580 85,500
---------- ----------
634,879 655,325
---------- ----------
RETAIL/SPECIALTY LINE -- 4.6%
3,300 American Home Products ................ 252,740 280,087
8,800 Federated Department Stores ........... 193,352 249,700
3,000 Tiffany & Co. ......................... 97,137 125,625
---------- ----------
543,229 655,412
---------- ----------
SHELTER -- 1.9%
5,700 PPG Industries, Inc. .................. 216,612 265,050
---------- ----------
TECHNOLOGY -- 5.7%
3,900 Boeing Co. ............................ 172,430 266,175
6,450 Computer Associates International,
Inc. ................................ 194,106 272,512
1,400 International Business Machines
Corporation ......................... 127,966 132,125
2,800 Sterling Software, Inc.* .............. 79,679 127,400
---------- ----------
574,181 798,212
---------- ----------
TELECOMMUNICATIONS -- 2.1%
4,400 AT&T Corp. ............................ 220,901 289,300
---------- ----------
TRANSPORTATION -- 1.8%
3,000 CSX Corporation ....................... 227,156 252,375
---------- ----------
UTILITIES -- 3.8%
7,100 GTE Corporation ....................... 228,231 278,675
6,000 Houston Industries Incorporated ....... 227,856 264,750
---------- ----------
456,087 543,425
---------- ----------
Total Common Stocks ................... 7,028,141 8,499,450
---------- ----------
See accompanying notes to financial statements.
8
<PAGE>
Westwood Balanced Fund
Portfolio of Investments -- September 30, 1995 (Continued)
================================================================================
Market
Value
Principal Cost (Note 2a)
- ---------- ---------- ----------
CORPORATE OBLIGATIONS -- 11.9%
CAPITAL GOODS -- 0.9%
125,000 Lockheed Martin Corp.,
5.875%, 3/15/1998 ................... $ 123,039 $ 123,975
---------- ----------
ENTERTAINMENT -- 1.3%
175,000 Time Warner Inc., 7.45%, 2/01/1998 .... 172,701 178,063
---------- ----------
FINANCIAL SERVICES -- 1.6%
225,000 General Motors Acceptance Corp.,
7.125%, 6/01/1999 ................... 224,021 229,219
---------- ----------
FOREST PRODUCTS & PAPERS -- 0.8%
100,000 Boise Cascade Corp., 9.45%,
11/01/2009 .......................... 107,298 117,375
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 0.5%
75,000 Marriott International Inc.,
7.125%, 6/01/2007 ................... 74,315 75,656
---------- ----------
INDUSTRIAL GOODS -- 3.0%
175,000 American Home Products,
7.90%, 2/15/2005 .................... 174,659 189,437
50,000 Eaton Corporation, 8.90%,
8/15/2006 ........................... 57,098 58,125
64,000 General Motors Corporation,
9.75%, 5/15/1999 .................... 65,478 65,440
100,000 Texaco Capital Corp., 9.00%,
11/15/1997 .......................... 105,124 105,625
---------- ----------
402,359 418,627
---------- ----------
RETAIL STORES -- 0.8%
100,000 Federated Department Stores,
Inc., 10.00%, 2/15/2001 ............. 108,811 108,800
---------- ----------
TECHNOLOGY -- 1.6%
225,000 International Business Machines
Corporation, 6.375%, 6/15/2000 ...... 225,235 225,000
---------- ----------
TEXTILES -- 1.4%
200,000 VF Corp., 6.625%, 3/15/2003 ........... 184,878 196,250
---------- ----------
Total Corporate Obligations ........... 1,622,657 1,672,965
---------- ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 1.6%
130,000 Federal National Mortgage
Association, 7.20%, 7/25/2025 ....... 131,716 132,028
100,000 Tennessee Valley Authority --
Global Bond, 6.375%, 6/15/2005 ...... 99,354 99,625
---------- ----------
Total U.S. Government
Agency Obligations .................. 231,070 231,653
---------- ----------
U.S. TREASURY OBLIGATIONS -- 18.7%
125,000 Bonds, 8.75%, 5/15/2017 ............... 131,479 154,950
220,000 Bonds, 7.625%, 2/15/2025 .............. 246,857 248,928
85,000 Notes, 8.50%, 11/15/1995 .............. 85,216 85,276
125,000 Notes, 7.875%, 2/15/1996 .............. 125,616 125,994
95,000 Notes, 7.375%, 5/15/1996 .............. 95,963 95,957
125,000 Notes, 6.875%, 2/28/1997 .............. 125,242 126,779
405,000 Notes, 6.125%, 5/31/1997 .............. 406,911 406,636
175,000 Notes, 7.25%, 2/15/1998 ............... 178,665 180,175
345,000 Notes, 5.875%, 8/15/1998 .............. 343,907 344,745
200,000 Notes, 7.125%, 2/29/2000 .............. 209,343 208,306
200,000 Notes, 6.125%, 7/31/2000 .............. 198,063 200,724
25,000 Notes, 6.25%, 2/15/2003 ............... 23,784 25,143
125,000 Notes, 7.25%, 5/15/2004 ............... 122,979 133,400
185,000 Notes, 7.50%, 2/15/2005 ............... 191,782 201,487
100,000 Notes, 6.50%, 8/15/2005 ............... 102,526 102,414
---------- ----------
Total U.S. Treasury Obligations ....... 2,588,333 2,640,914
---------- ----------
Total Investments -- 95.9%*** ......... 11,961,161** 13,541,299
---------- ----------
Other assets less liabilities -- 4.1% . 583,131
----------
Net Assets -- 100.0% .................. $14,124,430
===========
* Non-Income producing security.
** The cost of securities for Federal income tax purposes is $11,997,842.
+ ADR -- American Depository Receipts.
See accompanying notes to financial statements.
9
<PAGE>
THE WESTWOOD FUNDS
Statement of Assets and Liabilities
September 30, 1995
================================================================================
<TABLE>
<CAPTION>
Equity Intermediate Balanced
Fund Bond Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities at value (cost $12,792,394, $4,422,177 and
$11,961,161, respectively) ................................................... $14,948,736 $ 4,526,951 $13,541,299
Cash ........................................................................... 93,789 108,071 468,716
Receivable for investments sold ................................................ 125,061 -- 69,788
Dividends and interest receivable .............................................. 19,208 65,567 80,830
Unamortized organization expenses (Note 2f) .................................... -- 7,657 8,158
Receivable for fund shares sold ................................................ -- -- 16,646
Prepaid Expenses ............................................................... 286 192 286
Receivable from Advisor (Note 3) ............................................... -- 33,495 --
----------- ----------- -----------
Total Assets ............................................................... 15,187,080 4,741,933 14,185,723
----------- ----------- -----------
LIABILITIES
Payable for fund shares redeemed ............................................... -- -- 1,500
Payable for securities purchased ............................................... 134,400 -- --
Advisory fee payable (Note 3) .................................................. 36,169 -- 19,878
Distribution expense payable (Note 3) .......................................... 3,210 1,020 7,500
Other accrued expenses ......................................................... 42,221 11,626 32,415
----------- ----------- -----------
Total Liabilities .......................................................... 216,000 12,646 61,293
----------- ----------- -----------
NET ASSETS ..................................................................... $14,971,080 $ 4,729,287 $14,124,430
=========== =========== ===========
Net Assets Consist of:
Capital Stock .................................................................. $ 2,270 $ 474 $ 1,670
Additional paid-in capital ..................................................... 11,517,560 5,311,717 12,456,124
Accumulated undistributed (overdistributed) net investment income .............. 90,652 466 645
Accumulated undistributed realized gain (loss) on investments .................. 1,204,256 (688,144) 85,852
Unrealized appreciation on investments ......................................... 2,156,342 104,774 1,580,139
----------- ----------- -----------
Net Assets ..................................................................... $14,971,080 $ 4,729,287 $14,124,430
=========== =========== ===========
SHARES OF BENEFICIAL INTEREST
Retail Class:
Shares of beneficial interest outstanding ...................................... 2,259,700 473,667 816,040
=========== =========== ===========
Net Asset Value and redemption price per share ................................. $ 6.59 $ 9.98 $ 8.47
=========== =========== ===========
Service Class:
Shares of beneficial interest outstanding ...................................... 10,434 853,827
=========== ===========
Net Asset Value and redemption price per share ................................. $ 6.57 $ 8.45
=========== ===========
Maximum offering price per share ($6.57/.96, $0,
and $8.45/.96, respectively) ................................................. $ 6.84 $ 8.80
=========== ===========
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
THE WESTWOOD FUNDS
Statement of Operations
For the year ended September 30, 1995
================================================================================
<TABLE>
<CAPTION>
Equity Intermediate Balanced
Fund Bond Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Iterest .......................................... $ 63,359 $ 308,753 $ 331,737
Dividends ........................................ 218,475 -- 168,153
----------- ----------- -----------
281,834 308,753 499,890
----------- ----------- -----------
Expenses:
Advisory (Note 3) ................................ 118,524 28,016 97,048
Audit & Tax ...................................... 33,061 10,652 30,486
Shareholder services ............................. 9,026 4,782 9,148
Legal ............................................ 29,652 10,647 23,910
Custody .......................................... 13,522 7,464 15,024
Reports to shareholders .......................... 2,380 1,032 4,563
Registration ..................................... 20,688 24,699 20,140
Insurance ........................................ 1,338 1,302 1,994
Trustee .......................................... 4,744 4,246 4,810
Distribution -- Retail class (Note 3) ............ 28,920 11,474 11,200
Distribution -- Service class (Note 3) ........... 870 18 41,708
Amortization of organizational expenses .......... -- 8,205 8,205
Miscellaneous .................................... 9,364 2,947 4,867
----------- ----------- -----------
Total expenses before waivers .................. 272,089 115,484 273,103
Less expenses waived/reimbursed by Adviser ..... (80,907) (60,783) (75,402)
----------- ----------- -----------
Net expenses ................................... 191,182 54,701 197,701
----------- ----------- -----------
Net investment income .............................. 90,652 254,052 302,189
----------- ----------- -----------
Realized gain (loss) on investments ................ 1,225,125 (136,574) 765,282
Change in unrealized appreciation of investments ... 1,610,313 347,515 1,452,907
----------- ----------- -----------
Net realized and unrealized gain on investments .... 2,835,438 210,941 2,218,189
----------- ----------- -----------
Net increase in net assets resulting from operations $ 2,926,090 $ 464,993 $ 2,520,378
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
THE WESTWOOD FUNDS
Westwood Equity Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
September 30, September 30,
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 90,652 $ 116,142
Net realized gain on investments ........................................ 1,225,125 519,064
Change in unrealized appreciation (depreciation) of investments ......... 1,610,313 (107,269)
------------ ------------
Net increase in net assets resulting from operations .......................... 2,926,090 527,937
------------ ------------
Dividends to shareholders from net investment income:
Retail Class ............................................................ (110,241) (32,465)
Service Class ........................................................... (1,473) --
------------ ------------
(111,714) (32,465)
------------ ------------
Distributions to shareholders from realized gain on investments:
Retail Class ............................................................ (364,338) (2,412,598)
Service Class ........................................................... (6,782) --
------------ ------------
(371,120) (2,412,598)
------------ ------------
Decrease in net assets resulting from distributions to shareholders ..... (482,834) (2,445,063)
------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class ............................................................ 4,912,943 4,320,365
Service Class ........................................................... 56,081 269,787
------------ ------------
4,969,024 4,590,152
------------ ------------
Net asset value of shares issued to shareholders upon reinvestment
of dividends and distributions:
Retail Class ............................................................ 464,553 2,438,705
Service Class ........................................................... 8,255 --
------------ ------------
472,808 2,438,705
------------ ------------
Net asset value of shares redeemed:
Retail Class ............................................................ (1,534,515) (1,375,837)
Service Class ........................................................... (270,255) (17,401)
------------ ------------
(1,804,770) (1,393,238)
------------ ------------
Net increase in net assets from capital share transactions .............. 3,637,062 5,635,619
------------ ------------
Total increase in net assets .................................................. 6,080,318 3,718,493
Net Assets:
Beginning of period ..................................................... 8,890,762 5,172,269
------------ ------------
End of period (including undistributed net investment
income of $90,652 and $111,714 respectively) ......................... $ 14,971,080 $ 8,890,762
============ ============
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
THE WESTWOOD FUNDS
Westwood Intermediate Bond Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
September 30, September 30,
1995 1994
----------- -----------
<S> <C> <C>
Operations:
Net investment income ................................................... $ 254,052 $ 356,644
Net realized (loss) on investments ...................................... (136,574) (532,374)
Change in unrealized appreciation (depreciation) of investments ......... 347,515 (332,892)
----------- -----------
Net increase (decrease) in net assets resulting from operations ............... 464,993 (508,622)
----------- -----------
Dividends to shareholders from net investment income:
Retail Class ............................................................ (253,798) (349,029)
Service Class ........................................................... (254) (7,615)
----------- -----------
(254,052) (356,644)
----------- -----------
Distributions to shareholders from realized gain on investments:
Retail Class ............................................................ -- (163,537)
Service Class ........................................................... -- --
----------- -----------
-- (163,537)
----------- -----------
Decrease in net assets resulting from distributions to shareholders ..... (254,052) (520,181)
----------- -----------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class ............................................................ 1,686,246 7,971,868
Service Class ........................................................... 77 729,043
----------- -----------
1,686,323 8,700,911
----------- -----------
Net asset value of shares issued to shareholders upon reinvestment
of dividends and distributions:
Retail Class ............................................................ 213,072 487,747
Service Class ........................................................... 254 7,403
----------- -----------
213,326 495,150
----------- -----------
Net asset value of shares redeemed:
Retail Class ............................................................ (4,720,785) (2,982,953)
Service Class ........................................................... (75,949) (618,108)
----------- -----------
(4,796,734) (3,601,061)
----------- -----------
Net increase (decrease) in net assets from capital share transactions ... (2,897,085) 5,595,000
----------- -----------
Total increase (decrease) in net assets ....................................... (2,686,144) 4,566,197
Net Assets:
Beginning of period ..................................................... 7,415,431 2,849,234
----------- -----------
End of period (including undistributed net investment
income of $0 and $0, respectively) ................................... $ 4,729,287 $ 7,415,431
=========== ===========
</TABLE>
See accompanying notes to financial statements
13
<PAGE>
THE WESTWOOD FUNDS
Westwood Balanced Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
September 30, September 30,
1995 1994
------------ ------------
<S> <C> <C>
Operations:
Net investment income ................................................. $ 302,189 $ 275,297
Net realized gain (loss) on investments ............................... 765,282 (643,681)
Change in unrealized appreciation (depreciation) of investments ....... 1,452,907 13,458
------------ ------------
Net increase (decrease) in net assets resulting from operations ............. 2,520,378 (354,926)
------------ ------------
Dividends to shareholders from net investment income:
Retail Class .......................................................... (127,208) (48,360)
Service Class ......................................................... (174,988) (235,016)
------------ ------------
(302,196) (283,376)
------------ ------------
Distributions to shareholders from realized gain on investments:
Retail Class .......................................................... -- (524,957)
Service Class ......................................................... -- (41,570)
------------ ------------
-- (566,527)
------------ ------------
Decrease in net assets resulting from distributions to shareholders ... (302,196) (849,903)
------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class .......................................................... 3,974,656 4,658,518
Service Class ......................................................... 382,695 20,169,013
------------ ------------
4,357,351 24,827,531
------------ ------------
Net asset value of shares issued to shareholders in reinvestment
of dividends and distributions:
Retail Class .......................................................... 117,015 543,496
Service Class ......................................................... 157,008 217,908
------------ ------------
274,023 761,404
------------ ------------
Net asset value of shares redeemed:
Retail Class .......................................................... (1,156,706) (3,245,272)
Service Class ......................................................... (5,459,031) (8,945,043)
------------ ------------
(6,615,737) (12,190,315)
------------ ------------
Net increase (decrease) in net assets from capital share transactions ...... (1,984,363) 13,398,620
------------ ------------
Total increase in net assets ................................................ 233,819 12,193,791
Net Assets:
Beginning of period ................................................... 13,890,611 1,696,820
------------ ------------
End of period (including undistributed net investment
income of $645 and $0, respectively) ............................... $ 14,124,430 $ 13,890,611
============ ============
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements
================================================================================
Note 1 -- Description. The Westwood Funds (the "Trust") is registered under
the Investment Company Act of 1940, as amended, as an open-end diversified
management investment company and currently consists of four separate investment
portfolios: Westwood Equity Fund, Westwood Intermediate Bond Fund, Westwood
Balanced Fund (collectively, the "Funds") and Westwood Cash Management Fund,
each with two (2) classes of shares known as the Service Class and the Retail
Class (formerly the "Institutional Class"). Westwood Cash Management Fund has
not commenced operations as of September 30, 1995. Each class of shares
outstanding bears the same voting, dividend, liquidation and other rights and
conditions, except that the expenses incurred in the distribution and marketing
of such shares are different for each class with the exception of the Cash
Management Fund. Effective November 8, 1994, all shares in the Service Class of
Intermediate Bond Fund were redeemed. No such shares were outstanding at
September 30, 1995, although such shares are available for sale.
Note 2 -- Significant Accounting Policies. The following is a summary of
the significant accounting policies followed by the Funds.
(a) Portfolio Valuation. Investments in securities (including options and
financial futures) are valued at the last sale price on the securities
exchange on which such securities are primarily traded or, if there are no
trades, at the current bid price as of 4:15 p.m. eastern time.
Over-the-counter securities, or securities for which there were no
transactions, are valued at the bid price. Bonds and other fixed income
securities are valued by using market quotations, and may be valued on the
basis of prices provided by a pricing service. Securities for which market
quotations are not readily available are valued at fair value as determined
in good faith by or at the direction of the Board of Trustees. Short-term
securities which mature in 60 days or less are valued at amortized cost, if
their terms to maturity at purchase were 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their original term to
maturity at purchase exceeded 60 days.
(b) Securities transactions and investment income. Securities transactions
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income,
including, where applicable, amortization of premium and accretion of
discount on investments, is accrued daily.
(c) Distributions to shareholders. Dividends from net investment income are
declared and paid annually for the Equity Fund and quarterly for the
Balanced Fund. The Intermediate Bond Fund declares dividends of such income
daily and pays those dividends monthly. Distributions of net realized gains
are normally declared and paid at least annually by each Fund.
Distributions are recorded on the ex-dividend date. The amount of dividends
and distributions from net investment income and net realized capital gains
are determined in accordance with federal income tax regulations which may
differ with generally accepted accounting principles. These "book/tax"
differences are either temporary or permanent in nature. To the extent
these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their tax-basis treatment; temporary
differences do not require a reclassification.
(d) Federal income taxes. It is the policy of each of the Funds to qualify
as a "regulated investment company" under Subchapter M of the Internal
Revenue Code of 1986, as amended. By so qualifying, the Funds will not be
subject to Federal income taxes to the extent that they distribute all of
their taxable income for the fiscal year.
(e) Organizational expenses. Costs incurred in connection with the
organization and initial registration of the Funds have been deferred and
are being amortized on a straight line basis over sixty months beginning
with each Fund's commencement of operations. In the event any of the
initial shares of any of the Funds, which were purchased by Furman Selz,
are redeemed, the appropriate Fund will be reimbursed for any unamortized
organizational expenses in the same proportion as the number of shares
redeemed bears to the number of initial shares held at the time of
redemption.
15
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements (Continued)
================================================================================
(f) Determination of net asset value and calculation of expenses. Expenses
directly attributable to a Fund are charged to that Fund. Other expenses
are allocated proportionately among each Fund within the Trust in relation
to the net assets of each Fund or on another reasonable basis. In
calculating net asset value per share of each class, investment income,
realized and unrealized gains and losses and expenses other than class
specific expenses, are allocated daily to each class of shares based upon
the proportion of net assets of each class at the beginning of each day.
Distribution expenses are solely borne by the Class incurring the expense.
Note 3 -- Investment Advisory, Administrative and Other Transactions with
Affiliates. Pursuant to an agreement with Westwood Management Corp.
("Westwood"), the adviser to the Funds from their inception through October 6,
1994, Westwood and Gabelli Funds, Inc. ("Gabelli") have formed a new limited
liability company, Teton Advisers LLC (the "Adviser") which has entered into a
new advisory agreement with the Trust and a sub-advisory agreement with Westwood
and the Trust whereby Westwood (the "Sub-Adviser") serves as sub-adviser to the
Funds. The Investment Advisory Agreement was approved by the Fund's shareholders
on September 30, 1994 and was effective October 6, 1994. The Adviser oversees
the administration of each Fund's business affairs and in this connection is
responsible for maintaining certain of the Funds' books and records and
providing other administrative services.
As compensation for its services and related expenses, the Trust pays the
Adviser a fee computed daily and payable monthly in an amount equal on an
annualized basis to 1.0% for the Equity Fund, .60% for the Intermediate Bond
Fund and .75% for the Balanced Fund of each Fund's daily average net asset
value. For the year ended September 30, 1995, the adviser was entitled to fees
of $117,075, $27,288, $95,280, for the Equity, Intermediate Bond and Balanced
Funds, respectively. For the year ended September 30, 1995, the adviser waived
fees of $80,907, $27,288, $75,402, respectively. Additionally, the Adviser has
voluntarily agreed to reimburse the Funds in the event the Funds' expenses
exceed certain prescribed limits. The Adviser will reimburse the Funds in the
amount of $0, $33,495 and $0, for the Equity, Intermediate Bond and Balanced
Funds, respectively. For the period October 1 through October 6, 1994 Westwood
Management Corp. was entitled to advisory fees of $1,448, $728 and $1,768 for
the Westwood Equity, Intermediate Bond and Balanced Fund respectively.
Gabelli & Company, an indirect subsidiary of Gabelli Funds, Inc. serves as
distributor of the Funds. On September 30, 1994 the Funds' shareholders approved
a Plan of Distribution (the "Plan") for the Retail Class of shares pursuant to
Rule 12b-1. The Plan authorizes payment by the Funds in connection with the
distribution of its Retail Class shares at an annual rate of up to .25% of the
average daily net assets. For the year ended September 30, 1995, the Fund
incurred distribution expenses in the amounts of $28,920, $11,474, $11,200 for
the Retail Class of the Equity, Intermediate Bond and Balanced Funds,
respectively. Under the Distribution Plan and Agreement (the "Plan") for the
Service Class, each Fund may reimburse Gabelli & Company on a monthly basis for
cost and expenses in connection with the distribution and marketing of Service
Class shares. This distribution expense is subject to a maximum limit of 0.35%
per annum of the average daily net assets of the Service Class of the
Intermediate Bond Fund and 0.50% per annum of the Service Class of the Equity
and Balanced Funds. The Funds, with respect to the Service Class, incurred
distribution costs and expenses of $870 in the Equity Fund, $18 in the
Intermediate Bond Fund and $41,708 in the Balanced Fund, for the year ended
September 30, 1995. Subject to Board of Trustees approval, distribution expenses
incurred by Gabelli & Company, Inc., totalling $17,502 for the Equity Fund,
$19,108 for the Intermediate Bond Fund and $178,675 for the Balanced Fund, which
are in excess of the Retail Class .25% limitation may be recovered from the
Funds in future periods.
16
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements (Continued)
================================================================================
Note 4 -- Securities Transactions.
(a) Purchase and sale transactions. The aggregate amount of purchases and
sales of investment securities, other than short-term securities, for the year
ended September 30, 1995 were as follows:
<TABLE>
<CAPTION>
Common Stocks & Bonds U.S. Government Obligations
----------------------------- ----------------------------
Purchases Sales Purchases Sales
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Equity Fund ................................ $12,844,966 $10,110,527 $ 473,292 $ 1,477,462
Intermediate Bond Fund ..................... 1,672,791 3,373,021 5,060,455 6,465,353
Balanced Fund .............................. 10,316,311 14,077,198 5,981,954 5,642,511
</TABLE>
(b) Federal income tax basis. Gross unrealized appreciation and
depreciation on investment securities at September 30, 1995 based on cost for
Federal income tax purposes, is as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation
------------ ------------ ------------
<S> <C> <C> <C>
Equity Fund ................................ $2,152,418 $ 0 $2,152,418
Intermediate Bond Fund ..................... 108,607 (10,060) 98,547
Balanced Fund .............................. 1,553,505 (10,048) 1,543,457
</TABLE>
Note 5 -- Capital Share Transactions. The Trust is authorized to issue an
unlimited number of shares of beneficial interest with a par value of $0.001
each. Transactions in shares of the Funds are as follows:
<TABLE>
<CAPTION>
Year Ended September 30, 1995 Year Ended September 30, 1994
-------------------------------------- --------------------------------------
Equity Intermediate Balanced Equity Intermediate Balanced
Fund Bond Fund Fund Fund Bond Fund Fund
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Retail Class
Shares sold ................................... 858,260 175,874 521,381 777,702 753,551 594,288
Shares issued in reinvestment of net investment
income and capital gain distributions ....... 89,682 22,119 15,004 457,543 48,494 75,519
Shares redeemed ............................... (257,845) (498,753) (152,905) (187,357) (293,176) (382,633)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in shares ............. 690,097 (300,760) 383,480 1,047,888 508,869 287,174
========== ========== ========== ========== ========== ==========
Service Class
Shares sold ................................... 10,462 8 52,541 49,454 69,637 2,742,593
Shares issued in reinvestment of net investment
income and capital gain distributions ....... 1,596 27 20,705 0 747 30,908
Shares redeemed ............................... (47,926) (8,102) (742,089) (3,153) (62,317) (1,261,255)
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in shares ............. (35,868) (8,067) (668,843) 46,301 8,067 1,512,246
========== ========== ========== ========== ========== ==========
</TABLE>
Note 6 -- Federal Income Tax Carryforwards. Capital losses incurred after
October 31, 1994 within the year ended September 30, 1995 are deemed to arise on
the first business day of the following fiscal year. The Westwood Intermediate
Bond Fund incurred and will elect to defer post October capital losses of
approximately $60,000.
At September 30, 1995, Westwood Intermediate Bond Fund had capital loss
carryovers of approximately $621,000, which will be available through September
2003 to offset future capital gains as provided by the Federal Income Tax
regulations. To the extent that these carryover losses are used to offset future
capital gains, the gains so offset would not be distributed to shareholders.
17
<PAGE>
THE WESTWOOD FUNDS
Selected Per Share Data and Ratios
For a share outstanding throughout each period(a)
================================================================================
<TABLE>
<CAPTION>
Equity Fund
---------------------------------------------------------------------------------------
Year Ended Year Ended
September 30, 1995 September 30, 1994 Year Ended September 30,
------------------ ------------------ ------------------------------------------
1993 1992 1991 1990
Retail Service Retail Service ------ ------- ------ -------
Class Class Class Class* Retail Class
------- ------ ------ ------ ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...... $ 5.50 $ 5.48 $ 9.91 $ 5.53 $14.19 $ 14.23 $ 12.62 $ 15.11
------- ------ ------ ------ ------ ------- ------- -------
Income from Investment Operations:
Net investment income ................... 0.04 0.04 0.10 0.06 0.05 0.27 0.46 0.53
Net realized and unrealized gain (loss)
on investments ........................ 1.31 1.29 0.64 (0.11) 2.12 0.34 1.92 (2.04)
------- ------ ------ ------ ------ ------- ------- -------
Total from Investment Operations ........ 1.35 1.33 0.74 (0.05) 2.17 0.61 2.38 (1.51)
------- ------ ------ ------ ------ ------- ------- -------
Less Distributions:
Dividends from net investment income .... (0.06) (0.04) (0.07) -- (0.55) (0.51) (0.61) (0.56)
Distributions from net realized
capital gains ......................... (0.20) (0.20) (5.08) -- (5.90) (0.14) (0.16) (0.42)
------- ------ ------ ------ ------ ------- ------- -------
Total Distributions ..................... (0.26) (0.24) (5.15) -- (6.45) (0.65) (0.77) (0.98)
------- ------ ------ ------ ------ ------- ------- -------
Net Asset Value, End of Period ............ $ 6.59 $ 6.57 $ 5.50 $ 5.48 $ 9.91 $ 14.19 $ 14.23 $ 12.62
======= ====== ====== ====== ====== ======= ======= =======
Total Return (not reflecting sales load) .. 25.85% 25.54% 9.14% (0.90)% 20.16% 4.16% 19.61% 10.59%
Net Assets End of Period (in thousands) ... $14,903 $ 68 $8,637 $ 254 $5,172 $13,161 $52,884 $51,754
Ratios to average net assets of:
Net Investment Income ................... 0.77% 0.64% 1.63% 1.64%** 0.40% 1.85% 3.06% 3.74%
Expenses net of waivers/reimbursements+ . 1.61% 1.85% 0.71% 1.04%** 1.95% 1.40% 1.29% 1.26%
Expenses before waivers/reimbursements+ . 2.29% 2.63% 1.94% 2.29%** 2.32% 1.54% 1.29% 1.26%
Portfolio Turnover Rate ................. 107% 107% 137% 137% 102% 75% 143% 127%
</TABLE>
<TABLE>
<CAPTION>
Intermediate Bond Fund
-----------------------------------------------------------------------------
Year Ended September 30, Year Ended September 30, Year Ended September 30,
------------------------ ------------------------ ------------------------
1995 1994 1993 1992
------------------ ------------------- ------ ------
Retail Service Retail Service
Class Class(b) Class Class* Retail Class
----- -------- ------ ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $9.48 $9.48 $10.73 $10.51 $10.65 $10.00
----- ----- ------ ------ ------ ------
Income from Investment Operations:
Net investment income ....................... 0.52 0.05 0.48 0.41 0.39 0.51
Net realized and unrealized gain
(loss) on investments ..................... 0.50 (0.14) (1.04) (1.03) 0.62 0.65
----- ----- ------ ------ ------ ------
Total from Investment Operations ............ 1.02 (0.09) (0.56) (0.62) 1.01 1.16
----- ----- ------ ------ ------ ------
Less Distributions:
Dividends from net investment income ........ (0.52) (0.05) (0.48) (0.41) (0.39) (0.51)
Distributions from net realized
capital gains ............................ -- -- (0.21) -- (0.54) --
----- ----- ------ ------ ------ ------
Total Distributions ......................... (0.52) (0.05) (0.69) (0.41) (0.93) (0.51)
----- ----- ------ ------ ------ ------
Net Asset Value, End of Period ................ $9.98 $9.34 $ 9.48 $ 9.48 $10.73 $10.65
===== ===== ====== ====== ====== ======
Total Return (not reflecting sales load) ...... 11.13% (0.95)% (5.46)% (6.81)% 10.24% 11.87%
Net Assets End of Period (in thousands) ....... $4,729 $0 $7,339 $76 $2,849 $3,153
Ratios to Average Net Assets of:
Net Investment Income ....................... 5.38% 4.85% 4.86% 6.05%** 3.74% 5.25%
Expenses net of waivers/reimbursements+ ..... 1.17% 1.45% 0.92% 1.34%** 2.40% 1.94%
Expenses before waivers/reimbursements+ ..... 2.47% 4.07% 1.75% 2.37%** 3.46% 3.40%
Portfolio Turnover Rate ..................... 165% 70% 203% 203% 222% 198%
</TABLE>
- -----------
(a) Per share based on the average number of shares outstanding during the
period.
(b) On November 8, 1994, all shares of the Service Class were redeemed and
there have been no further shares issued in this class since that date.
Accordingly, the NAV per share of $9.34 represents the net asset value on
November 8, 1994.
* Prior to January 31, 1994, no shares of the Service Class were issued.
** Annualized.
+ See footnote on page 19.
See accompanying notes to financial statements
18
<PAGE>
THE WESTWOOD FUNDS
Selected Per Share Data and Ratios
For a share outstanding throughout each period(a)
================================================================================
<TABLE>
<CAPTION>
Balanced Fund
----------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1995 1994 1993 1992
------------------ ------------------- ------------------ --------
Retail Service Retail Service Retail Service Retail
Class Class Class Class* Class Class* Class
------ ------- ------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $7.12 $7.10 $10.89 $10.88 $10.45 $10.24 $10.00
----- ----- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income ................... 0.19 0.17 0.12 0.15 0.20 0.19 0.31
Net realized and unrealized gain
on investments 1.35 1.35 0.42 0.36 1.44 0.52 0.49
----- ----- ------ ------ ------ ------ ------
Total from Investment Operations ........ 1.54 1.52 0.54 0.51 1.64 0.71 0.80
----- ----- ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income .... (0.19) (0.17) (0.13) (0.11) (0.24) (0.07) (0.31)
Distributions from net realized
capital gains ......................... -- -- (4.18) (4.18) (0.96) -- (0.04)
----- ----- ------ ------ ------ ------ ------
Total Distributions ..................... (0.19) (0.17) (4.31) (4.29) (1.20) (0.07) (0.35)
----- ----- ------ ------ ------ ------ ------
Net Asset Value, End of Period ................ $8.47 $8.45 $ 7.12 $ 7.10 $10.89 $10.88 $10.45
===== ===== ====== ====== ====== ====== ======
Total Return (not reflecting sales load) ...... 21.98% 21.67% 5.30% 4.67% 17.60% 6.96% 7.32%
Net Assets End of Period (in thousands) ....... $6,912 $7,212 $3,081 $10,810 $1,583 $114 $3,716
Ratios to average net assets of:
Net Investment Income ................... 2.47% 2.26% 1.55% 2.15% 1.90% 1.76%** 3.13%
Expenses net of waivers/reimbursements+.. 1.35% 1.62% 1.68% 1.17% 1.82% 2.07% 1.44%
Expenses before waivers/reimbursements+.. 1.86% 2.24% 2.36% 2.11% 2.97% 3.14%** 2.38%
Portfolio Turnover Rate ................. 133% 133% 168% 168% 192% 192% 178%
</TABLE>
- -----------
(a) Per share based on the average number of shares outstanding during the
period.
* Prior to April 6, 1993, no shares of the Service Class were issued.
** Annualized.
+ Effective 1995, the ratios do not include a reduction of expenses for
custodian fee credits on cash balances maintained with the custodian.
Including such custodian fee credits, the expense ratios would be 1.50% and
1.72% for Equity Retail and Service Class, respectively, net of waivers and
2.16% and 2.38% for Equity Retail and Service Class before waivers. For
Intermediate Bond Fund: 1.00% and 1.41% net of waivers for the Retail and
Service Class, respectively, and 2.18% and 4.23% before waivers for the
Retail and Service Class, respectively. For the Balanced Fund: expenses net
of waivers would be 1.25% and 1.50% for the Retail and Service Class,
respectively, and 1.85% and 2.11% before waivers for the Retail and Service
Class, respectively.
See accompanying notes to financial statements
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Westwood Funds
In our opinion, the accompanying statement of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the selected per share data and ratios present fairly,
in all material respects, the financial position of Westwood Equity Fund,
Westwood Intermediate Bond Fund and Westwood Balanced Fund (constituting The
Westwood Funds, hereafter referred to as the "Fund") at September 30, 1995, the
results of each of their operations for the year then ended, the changes in each
of their net assets for each of the two years in the period then ended and the
selected per share data and ratios for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and selected per share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 1995 by correspondence with the custodian and brokers and the
application of alternative procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 10, 1995
20
<PAGE>
THE WESTWOOD FUNDS
1995 Federal Tax Status of Dividends (unaudited)
This information is presented to you to meet regulatory requirements and no
current action on your part is needed.
Westwood Equity Fund
31.3% of the income distributed qualifies for the Corporate Dividends Received
Deduction. 21.2% of the distributions were derived from United States Treasury
Obligations.
Retail Class
Of the $0.26 in distributions paid to you in cash or reinvested in your
account during the Fund's fiscal year ended September 30, 1995, $0.06 was
derived from net investment income, $0.13 from short-term capital gains and
$0.07 from long-term capital gains.
Service Class
Of the $0.24 in distributions paid to you in cash or reinvested in your
account during the Fund's fiscal year ended September 30, 1995, $0.04 was
derived from net investment income, $0.13 from short-term capital gains and
$0.07 from long-term capital gains.
Westwood Intermediate Bond Fund
58.2% was derived from United States Treasury Obligations. Many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government securities.
The Westwood Intermediate Bond Fund met this requirement for fiscal 1995.
Retail Class
Of the $0.52 per share dividend paid to you in cash or reinvested in your
account for the fiscal year ended September 30, 1995, $0.52 was derived from net
investment income, $0 from short-term capital gains, $0 from long-term capital
gains.
Service Class
Of the $0.05 per share dividend paid to you in cash or reinvested in your
account for the fiscal year ended September 30, 1995, $0.05 was derived from net
investment income, $0 from short-term capital gains, $0 from long-term capital
gains.
Westwood Balanced Fund
54.6% of the income distributed qualifies for the Corporate Dividends Received
Deduction. 36.7% of the distributions were derived from United States Treasury
Obligations.
Retail Class
Of the $0.19 in distributions paid to you in cash or reinvested in your
account during the Fund's fiscal year ended September 30, 1995, $0.19 was
derived from net investment income, $0 from short-term capital gains and $0 from
long-term capital gains.
Service Class
Of the $0.17 in distributions paid to you in cash or reinvested in your
account during the Fund's fiscal year ended September 30, 1995, $0.17 was
derived from net investment income, $0 from short-term capital gains and $0 from
long-term capital gains.
21
<PAGE>
The Westwood Funds
==================
WESTWOOD EQUITY FUND
WESTWOOD INTERMEDIATE BOND FUND
WESTWOOD BALANCED FUND
(unaudited)
Westwood Funds -- Retail Class Shares
-------------------------------------
Average Annual Returns -- September 30, 1995 (a)
Calendar
-------- Life Inception
3Q 1 yr 5 yr of Fund Date
--- ---- ---- ------- ---------
Equity ..................... 8.4% 25.9% 15.5% 12.6% 1/02/87
Intermediate Bond .......... 1.8 11.1 -- 6.7 10/01/91
Balanced ................... 6.6 22.0 -- 12.8 10/01/91
Westwood Funds -- Service Class Shares
--------------------------------------
Average Annual Returns -- September 30, 1995 (a)(b)
1 yr Life of Fund Inception Date
---- ------------ --------------
Equity ............................. 19.6% 11.0% 1/28/94
Intermediate Bond .................. N/A (11.4)(c) 1/31/94
Balanced ........................... 16.7 11.4 4/06/93
(a) Average annual and total returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of
the Fund is reduced on the ex-dividend (payment) date by the amount of the
dividend paid. Of course, the returns represent past performance and do not
guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are redeemed that may be worth more
or less than their original cost.
(b) Adjusted for the maximum 4.0% sales charge.
(c) Service class shares were outstanding only for the period from January 31,
1994 through November 8, 1994 (not annualized).
22
<PAGE>
THE WESTWOOD FUNDS
Board of Trustees
ANTHONY J. COLAVITA DR. WERNER J. ROEDER
Attorney-at-Law Director of Surgery
Anthony J. Colavita, P.C. Lawrence Hospital
JAMES P. CONN SUSAN M. BYRNE
Managing Director and President and
Chief Investment Officer Chief Investment Officer
Financial Security Assurance
- --------------------------------------------------------------------------------
Officers
SUSAN M. BYRNE GORDON M. FORRESTER
President and Assistant Treasurer
Chief Investment Officer
BRUCE N. ALPERT JOAN V. FIORE
Vice President Assistant Secretary
JOHN J. PILEGGI SHERYL HIRSCHFELD
Treasurer Assistant Secretary
JAMES E. McKEE
Secretary
================================================================================
Susan M. Byrne
President & Chief Investment Officer of
The Westwood Funds
will be appearing as a special guest on
"Wall Street Week
with Louis Rukeyser"
Friday, December 8, 1995 on PBS
8:30 p.m. Eastern Time
(check your local listings)
The Westwood Funds are distributed by Gabelli & Company, Inc.
================================================================================
<PAGE>
The Westwood Funds
One Corporate Center
Rye, NY 10580
General and Account Information:
1-(800) GABELLI (422-3554) (all continental states)
Investment Adviser
- ------------------
Teton Advisers LLC
One Corporate Center
Rye, NY 10580
Investment Sub-Advisor
- ----------------------
Westwood Management Corporation
885 Third Avenue
New York, NY 10022
Distributor
- -----------
Gabelli & Company, Inc.
One Corporate Center
Rye, NY 10580
Custodian
- ---------
The Bank of New York
90 Washington Street
New York, NY 10286
Legal Counsel
- -------------
Baker & McKenzie
805 Third Avenue
New York, NY 10022
Independent Accountants
- -----------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
This report is for the information of the shareholders of The Westwood Funds.
Its use in connection with any offering of the Trust's shares is authorized only
in case of a concurrent or prior delivery of the Trust's current prospectus.
