THE WESTWOOD FUNDS
==================
Westwood Balanced Fund o Westwood Equity Fund o Westwood Intermediate Bond Fund
Semi-Annual Report
March 31, 1997
Dear Fellow Shareholder:
We are pleased to provide the March 31, 1997 semi-annual report for the
Westwood Funds, including the Westwood Equity Fund, Westwood Balanced Fund and
Westwood Intermediate Bond Fund.
Economic Commentary
Despite Alan Greenspan's concerns over the excessively priced markets, the
stock market continued to make history by setting new highs during the last 3
months of 1996. Although our domestic markets seemed to ignore Mr. Greenspan's
comments, the international markets responded by losing an average of 5% the
following day. It was not until Mr. Greenspan reiterated his concerns during his
February Humphrey Hawkins testimony that our stock and bond markets began to
show signs of volatility. After a series of strong economic reports,
particularly from the housing sector, the Federal Reserve responded by
increasing short-term interest rates by 25 basis points. As a result of the
stronger economic data and the concern from the Fed, the market erased its new
highs and trading sessions became increasingly volatile. At the end of March,
major stock and bond indices had only slight year-to-date gains or even losses
to report.
At Westwood, our philosophy is to manage investments with a strict
discipline and to remain vigilant to the adverse consequences associated with a
volatile marketplace. As you might recall from our annual shareholder letter, we
began to increase the defensive structure in all our mutual funds in
anticipation of these volatile periods. As you continue to read, we will share
with you the adjustments made to the funds over the past 6 months.
Westwood Equity Fund
For the six months ended March 31, 1997, the ***** - rated Westwood Equity
Fund Retail Class(1) posted a return of 10.9% and the Service Class returned
10.8%. For the most recent quarter, the Retail Class and Service Class shares
both earned 2.6%, versus an average return of -4.5% for 232 capital appreciation
funds tracked by Lipper Analytical Services, Inc. The S&P 500 Index earned 2.7%
for the same period.
- --------------------------------------------------------------------------------
(1) Past performance does not guarantee future results. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of March 31, 1997. The
ratings are subject to change every month. Morningstar ratings are calculated
from the Funds' 3, 5 and 10-year average annual returns 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. The top 10% of the funds in an
investment category receive 5 stars and the next 22.5% receive 4 stars. As of
March 31, 1997, the Westwood Equity Fund Retail Class received an overall rating
of 5 stars (*****) from Morningstar. The Fund was rated 5 stars for the 3, 5 and
10-year periods ended March 31, 1997 among 1,919, 1,076 and 601 equity funds,
respectively. As of March 31, 1997, the Westwood Balanced Fund Retail Class
received an overall rating of 5 stars (*****) from Morningstar. The Fund was
rated 5 stars for the 5-year period and 4 stars for the 3 year period ended
March 31, 1997 among 1,076 and 1,919 balanced funds, respectively. The Westwood
Equity Fund received a 5-star rating for the one-year period and the Westwood
Balanced Fund received a 4-star rating for the one-year period. The one year
rating is calculated in the same method but is not a component of the overall
rating.
<PAGE>
For the five and ten years ended March 31, 1997, the Equity Fund Retail
Class had total returns of 126.9% and 230.0%, which equate to average annual
returns of 17.8% and 12.7%, respectively. The Equity Fund Retail Class and
Service Class achieved total returns since their respective inceptions on
January 2, 1987 and January 28, 1994, through March 31, 1997, of 296.3% and
74.1%, which equate to average annual returns of 14.4% and 19.1%, respectively.
Although the Fund remained approximately 90% invested in stocks,
adjustments were made by divesting of holdings in Computer Associates
International, Inc. (CA), Fluor Corporation (FLR), IMC Global Inc. (IGL), and
Boeing Co. (BA). Proceeds were reinvested in Bell Atlantic Corporation (BEL),
Campbell Soup Company (CPB), CVS Corp. (CVS), Pennzoil Company (PZL), Ahmanson
(H.F.) & Co. (AHM), American General Hospitality Corp. (AGT), and Lucent
Technologies (LU). The objective in our trading decisions was to first sell
securities that had reached their price objectives and/or were becoming too
risky to be held in the Fund. We purchased securities that were undervalued but
were also able to decrease the overall volatility in the Fund. We continued to
increase our commitment to the higher yielding REIT sector and as such,
purchased shares of Prentiss Properties and Security Capital Atlantic.
An overweighting in four of the five top performing market sectors -
consumer staples, finance, health care and energy - contributed positively to
the performance of the Fund during the last six months. For the most recent
quarter, top performing stocks included Dell Computer Corp., Campbell Soup,
American General Hospitality, Conseco, Inc., Tenet Healthcare Corp. and, from
the REIT sector, Patriot American Hospitality.
The Equity Fund continued to receive favorable press during the previous
six months, and was featured in several financial publications including
Barrons, Money, The Wall Street Journal and Louis Rukeyser's Mutual Fund
Newsletter. The Equity Fund has enjoyed asset growth resulting not only from
investor interest associated with these publications but also from the Fund's
availability through Schwab's OneSource and newly offered Fund of Funds program.
Westwood Balanced Fund
For the six months ended March 31, 1997, the ***** - rated Westwood
Balanced Fund Retail Class1 posted a return of 7.7% and the Service Class
returned 7.6%. For the most recent quarter, the Retail Class earned 1.4% and the
Service Class earned 1.3%, versus an average return of 0.44% for the 335
balanced funds tracked by Lipper Analytical Services, Inc. The blended return of
60% S&P 500 and 40% Lehman Brothers Government Return for the same period was
1.3%.
For the three and five years ended March 31, 1997, the Balanced Fund Retail
Class had total returns of 60.1% and 94.4%, which equate to average annual
returns of 17.0% and 14.2%, respectively. For the three years ended March 31,
1997, the Balanced Fund Service Class had a total return of 58.9%, which equates
to an average annual return of 16.7%. The Balanced Fund Retail Class and Service
Class achieved total returns since their respective inceptions on October 1,
1991 and April 6, 1993, through March 31, 1997, of 107.8% and 74.4%, which
equate to average annual returns of 14.2% and 15.0%, respectively.
Strategies for the equity and fixed income funds which are discussed in
this letter also apply to their respective components in the Balanced Fund. Over
the last six months we have shifted the allocation among stocks, bonds and cash
by decreasing our exposure in equities from approximately 60% to 57%. Proceeds
from the sales were re-deployed into fixed income securities and cash.
2
<PAGE>
Westwood Intermediate Bond Fund
For the six months ended March 31, 1997, the Westwood Intermediate Bond
Fund Retail Class earned 3.8% versus 2.2% for the Lehman Brothers Government
Corporate Bond Index (LBG/C). For the most recent quarter ended March 31, 1997,
the Fund earned 0.3%, versus a -0.9% return for the LBG/C Index.
For the three and five years ended March 31, 1997, the Intermediate Bond
Fund Retail Class had total returns of 18.6% and 36.2%, which equate to average
annual returns of 5.8% and 6.4%, respectively. Since its inception on October 1,
1991 through March 31, 1997, the Fund's total return was 40.5%, which equates to
an average annual return of 6.4%. The Lehman Brothers Government Corporate Bond
Index had an average annual return of 7.4% over the same period.
The bond market's strength in the fourth quarter was driven by signs of a
slowing economy. The market's strength was short lived due to strength in the
housing sector and a strong Christmas season for retailers. Performance in the
Fund was enhanced by an overweighting in lower-rated corporate bonds and a
continued commitment to the top performing asset-backed sector. A decision to
decrease the average maturity in the Fund during the first three months of 1997
also contributed to performance. Top performing bonds during the most recent
quarter included corporate bonds issued by Jacor Communications Co., Tenet
Healthcare and Lockheed Martin, as well as asset-backed securities
collateralized by auto and home equity loans.
New Mutual Fund Offerings at Westwood
Two new funds have joined Westwood's family of funds. The Westwood Realty
Fund (a fund consisting of publicly traded equity REIT's) and the Westwood
SmallCap Equity Fund (a fund consisting of stocks with market capitalizations
between $100 million and $1 billion). Both Funds are managed by experienced
portfolio managers. I am leading the investment team for the Realty Fund and
Lynda Calkin, CFA, is leading our team for the SmallCap Fund. Both funds are
no-load with a $1,000 minimum investment. Prospectuses and applications are
available by calling 1-800-WESTWOOD.
Capital Market Outlook
Over the past few years, we have been fortunate to find ourselves investing
in an extraordinary environment. We expect that, going forward, the major stock
indices will begin to earn more normal returns (single digit increases) or
perhaps show slight declines. As we work our way through 1997, we will continue
to apply our investment discipline which incorporates risk management control
measures at all levels. We will continue to look for undervalued securities, yet
we are mindful that it is better to let some opportunities pass by than to risk
losing shareholder capital.
We welcome your comments and encourage you to write us directly at our
offices or on the internet at [email protected].
Sincerely,
/s/ Susan M. Byrne
Susan M. Byrne
President and Chief Investment Officer
May 1, 1997
3
<PAGE>
The Westwood Funds
==================
WESTWOOD EQUITY FUND
WESTWOOD INTERMEDIATE BOND FUND
WESTWOOD BALANCED FUND
(unaudited)
Westwood Funds -- Retail Class Shares
-------------------------------------
Average Annual Returns -- March 31, 1997(a)
Calendar
--------
1Q 1 yr 5 yr Life of Fund Inception Date
-- ---- ---- ------------ --------------
Equity............... 2.6% 19.1% 17.8% 14.4% 1/02/87
Intermediate Bond.... 0.3 6.7 6.4 6.4 10/01/91
Balanced............. 1.4 13.8 14.2 14.2 10/01/91
Westwood Funds -- Service Class Shares
--------------------------------------
Average Annual Returns -- March 31, 1997(a)(b)
1 yr Life of Fund Inception Date
---- ------------ --------------
Equity.......................... 14.0% 17.6% 1/28/94
Balanced........................ 9.1 13.8 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 they may be worth more
or less than their original cost.
(b) Adjusted for the maximum 4.0% sales charge.
4
<PAGE>
Westwood Equity Fund
Portfolio of Investments -- March 31, 1997 (unaudited)
================================================================================
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 89.7%
AUTO RELATED -- 4.6%
27,600 Chrysler Corporation .................... $ 847,581 $ 828,000
22,800 Eaton Corp .............................. 1,383,617 1,615,950
14,400 Lear Corp * ............................. 517,850 480,600
---------- ----------
2,749,048 2,924,550
---------- ----------
CAPITAL GOODS -- 2.8%
20,794 Lockheed Martin Corp. ................... 1,645,099 1,746,695
---------- ----------
CONSUMER PRODUCTS -- 2.6%
38,600 Anheuser-Busch Cos. ..................... 1,526,999 1,626,025
---------- ----------
COMPUTER EQUIPMENT -- 2.6%
24,600 Dell Computer Corp.* .................... 1,517,702 1,663,575
---------- ----------
COMPUTER SOFTWARE -- 3.0%
40,677 Sterling Commerce, Inc.* ................ 1,179,633 1,179,633
25,500 Sterling Software, Inc.* ................ 761,540 704,438
---------- ----------
1,941,173 1,884,071
---------- ----------
ELECTRICAL EQUIPMENT -- 3.4%
27,900 Berg Electronics Corp.* ................. 748,300 795,150
89,300 Scientific-Atlanta, Inc. ................ 1,454,427 1,361,825
---------- ----------
2,202,727 2,156,975
---------- ----------
ENERGY -- 10.8%
43,200 Baker Hughes, Inc ....................... 1,446,242 1,657,800
12,600 Mobil Corporation ....................... 1,505,284 1,645,875
33,100 Pennzoil Company ........................ 1,976,194 1,712,925
16,400 Texaco, Inc ............................. 1,467,618 1,795,800
---------- ----------
6,395,338 6,812,400
---------- ----------
FINANCIAL SERVICES -- 1.3%
22,900 Ahmanson (H.F.) & Co. ................... 916,827 835,850
---------- ----------
FOOD PROCESSING -- 2.5%
33,800 Campbell Soup Company ................... 1,372,340 1,567,475
---------- ----------
FOREST PRODUCTS & PAPER -- 1.7%
35,100 Boise Cascade Corp. ..................... 1,215,028 1,070,550
---------- ----------
HEALTH CARE -- 4.4%
26,200 American Home Products, Inc. ............ 1,436,002 1,572,000
50,700 Tenet Healthcare Corp.* ................. 1,049,252 1,248,488
---------- ----------
2,485,254 2,820,488
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 3.8%
24,700 American General Hospitality Corp. ...... 468,149 673,075
34,200 Marriott International, Inc. ............ 1,623,816 1,701,450
---------- ----------
2,091,965 2,374,525
---------- ----------
INDUSTRIAL GOODS -- 2.0%
23,400 PPG Industries, Inc. .................... 1,089,640 1,263,600
---------- ----------
INSURANCE -- 5.0%
10,400 CIGNA Corp .............................. 1,250,731 1,519,700
46,600 Conseco, Inc ............................ 1,357,367 1,660,125
---------- ----------
2,608,098 3,179,825
---------- ----------
MACHINERY -- 2 7%
39,300 Deere & Company ......................... 1,553,875 1,709,550
--------- ---------
PHARMACEUTICALS -- 2.6%
35,600 Genzyme Corp * .......................... 854,685 801,000
11,900 SmithKline Beecham plc-ADR .............. 721,907 833,000
---------- ----------
1,576,592 1,634,000
---------- ----------
Principal/
Shares Cost Value
------ ---- -----
RAW MATERIALS -- 5.2%
24,500 Aluminum Company of America ............. $1,518,554 $1,666,000
15,400 E. I. du Pont de Nemours and Company .... 1,342,099 1,632,400
---------- ----------
2,860,653 3,298,400
---------- ----------
REAL ESTATE INVESTMENT TRUSTS (REITS) -- 9.5%
28,900 Crescent Real Estate Equities, Inc. ..... 669,051 773,075
18,500 Duke Realty Investments, Inc. ........... 609,037 751,562
31,000 Excel Realty Trust Inc. ................. 775,000 829,250
23,300 Highwoods Properties, Inc. .............. 682,750 780,550
36,400 Patriot American Hospitality, Inc. ...... 623,807 882,700
32,500 Prentiss Properties Trust ............... 740,586 824,688
15,000 Security Capital Industrial Trust ....... 282,353 313,125
35,200 Security Capital Pacific Trust .......... 684,952 858,000
---------- ----------
5,067,536 6,012,950
---------- ----------
RETAIL -- 2.6%
7,000 Circuit City Stores, Inc ................ 144,335 105,000
34,100 CVS Corp ................................ 1,345,104 1,572,863
---------- ----------
1,489,439 1,677,863
---------- ----------
TECHNOLOGY -- 2.8%
12,800 International Business
Machines Corporation .................. 1,598,048 1,758,400
---------- ----------
TELECOMMUNICATIONS -- 8.4%
28,700 Bell Atlantic Corporation ............... 1,852,203 1,747,112
34,100 Lucent Technologies, Inc. ............... 1,826,358 1,798,775
33,400 SBC Communications, Inc. ................ 1,714,656 1,757,675
---------- ----------
5,393,217 5,303,562
---------- ----------
UTILITIES -- 5.4%
37,600 GTE Corporation ......................... 1,594,541 1,753,100
81,200 Houston Industries Incorporated ......... 1,796,927 1,695,050
---------- ----------
3,391,468 3,448,150
---------- ----------
TOTAL COMMON STOCKS ..................... 52,688,066 56,769,479
---------- ----------
U.S. TREASURY OBLIGATIONS -- 9.9%
$ 440,000 Notes, 6.25%, 6/30/1998 ............... 441,501 440,303
800,000 Notes, 5.875%, 1/31/1999 .............. 798,837 792,616
750,000 Notes, 5.875%, 11/15/1999 ............. 746,662 737,730
500,000 Notes, 5.875%, 2/15/2000 .............. 496,896 490,605
2,435,000 Notes, 6.25%, 1/31/2002 ............... 2,427,559 2,383,646
500,000 Notes, 6.25%, 2/28/2002 ............... 496,525 489,135
450,000 Notes, 6.875%, 5/15/2006 .............. 449,453 447,709
250,000 Notes, 7.00%, 7/15/2006 ............... 250,442 250,653
250,000 Notes, 6.25%, 2/15/2007 ............... 241,452 238,145
---------- ----------
TOTAL U.S. TREASURY
OBLIGATIONS ........................... 6,349,327 6,270,542
---------- ----------
TOTAL INVESTMENTS** --
99.6% ................................. $59,037,393 63,040,021
===========
Other Assets in excess of
liabilities-- 0.4% .................... 277,508
-----------
NET ASSETS-- 100.0% ..................... $63,317,529
===========
* Non-Income producing.
** The cost of securities for Federal income tax purposes is $59,049,422.
ADR - American Depository Receipts.
See accompanying notes to financial statements.
5
<PAGE>
Westwood Intermediate Bond Fund
Portfolio of Investments -- March 31, 1997 (unaudited)
================================================================================
Principal Cost Value
--------- ---- -----
ASSET BACKED SECURITIES -- 13.1%
$275,000 Contimortgage Home 96-3,
7.83%, 2/15/2016 ...................... $ 280,946 $ 278,438
100,000 Ford Credit Auto Loan
Master Trust 6.50%,
8/15/2002 .............................. 99,684 98,875
59,361 GMAC Grantor Trust 7.15%,
3/15/2000 .............................. 59,349 59,806
125,000 Green Tree Financial Trust
6.45%, 7/15/2026 ....................... 125,000 124,403
55,876 Old Stone Credit Corp.
5.15%, 9/15/2008 ....................... 55,825 53,121
24,041 Premier Auto Trust 1994-4,
6.45%, 5/02/1998 ....................... 23,796 24,090
75,000 Spieker Properties LP
7.125%, 12/01/2006 ..................... 74,904 71,812
---------- ----------
TOTAL ASSET BACKED
SECURITIES ............................. 719,504 710,545
---------- ----------
PREFERRED STOCK -- 2.3%
5,000 NB Capital Trust 7.84% ................... 123,125 121,250
---------- ----------
CORPORATE OBLIGATIONS -- 37.1%
CAPITAL GOODS -- 7.2%
125,000 Boeing Co. 8.75%,
9/15/2031 .............................. 147,812 140,781
50,000 Lockheed Martin Corp.
6.625%, 6/15/1998 ...................... 49,996 50,127
200,000 Lockheed Martin Corp.
6.85%, 5/15/2001 ....................... 199,862 198,250
---------- ----------
397,670 389,158
---------- ----------
FINANCIAL SERVICES -- 3.6%
100,000 Chase Capital II 6.0625%,
2/01/2027 .............................. 98,833 97,500
100,000 Societe Generale (NY)
7.40%, 6/01/2006 ....................... 99,781 98,500
---------- ----------
198,614 196,000
---------- ----------
HEALTH CARE -- 4.7%
140,000 Health Care Property Investors,
Inc. 6.50%, 2/15/2006 .................. 139,018 129,416
125,000 Tenet Healthcare Corp.
8.625%, 1/15/2007 ...................... 124,869 124,531
---------- ----------
263,887 253,947
---------- ----------
INDUSTRIAL GOODS -- 12.6%
100,000 Crown Paper Co. 11.00%,
9/01/2005 .............................. 94,916 92,500
250,000 Globalstar LP/Capital
11.375%, 2/15/2004 ..................... 250,000 243,750
150,000 ITT Corporation 6.25%,
11/15/2000 ............................. 149,613 145,313
200,000 WMX Technologies, Inc.
7.125%, 6/15/2001 ...................... 199,748 199,500
---------- ----------
694,277 681,063
---------- ----------
RAW MATERIALS -- 1.0%
50,000 E.I. du Pont de Nemours and
Company 9.15%, 4/15/2000 ............... 53,057 53,125
---------- ----------
REAL ESTATE/DEVELOPMENT -- 3.4%
185,000 Post Apartments Homes LP
7.25%, 10/01/2003 ...................... 184,375 182,095
---------- ----------
TELECOMMUNICATIONS -- 4.6%
100,000 Jacor Communications Inc.
9.75%, 12/15/2006 ...................... 100,000 102,500
150,000 Lucent Technologies, Inc.
7.25%, 7/15/2006 ....................... 149,676 148,688
---------- ----------
249,676 251,188
---------- ----------
TOTAL CORPORATE
OBLIGATIONS ............................ 2,041,556 2,006,576
---------- ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.3%
125,000 Federal National Mortgage
Association 7.20%,
7/25/2025 .............................. 126,632 125,312
---------- ----------
U.S. TREASURY OBLIGATIONS -- 27.0%
100,000 Bonds, 8.75%, 5/15/2017 .................. 114,377 116,147
625,000 Bonds, 6.625%, 8/15/2026 ................. 633,953 592,550
140,000 Notes, 5.125%, 4/30/1998 ................. 138,896 138,541
200,000 Notes, 7.00%, 4/15/1999 .................. 203,771 202,060
125,000 Notes, 7.75%, 11/30/1999 ................. 126,782 128,503
300,000 Notes, 6.625%, 2/15/2027 ................. 292,914 282,552
---------- ----------
TOTAL U.S. TREASURY
OBLIGATIONS ............................ 1,510,693 1,460,353
---------- ----------
TOTAL INVESTMENTS*
-- 81.8% ............................... $4,521,510 4,424,036
==========
Other assets in excess of
liabilities -- 18.2% ................... 984,462
----------
NET ASSETS -- 100.0% ..................... $5,408,498
==========
* The cost of securities for Federal income tax purposes is substantially the
same.
See accompanying notes to financial statements.
6
<PAGE>
Westwood Balanced Fund
Portfolio of Investments -- March 31, 1997 (unaudited)
================================================================================
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 59.4%
AUTO RELATED -- 3.2%
15,800 Chrysler Corporation ..................... $ 480,003 $ 474,000
13,300 Eaton Corp ............................... 771,873 942,638
9,400 Lear Corp.* .............................. 328,550 313,725
---------- ----------
1,580,426 1,730,363
---------- ----------
CAPITAL GOODS -- 1.8%
11,627 Lockheed Martin Corp ..................... 803,424 976,667
---------- ----------
CONSUMER PRODUCTS -- 1.7%
21,900 Anheuser-Busch Cos ....................... 839,832 922,537
---------- ----------
COMPUTER EQUIPMENT -- 1.8%
14,000 Dell Computer Corp.* ..................... 860,474 946,750
---------- ----------
COMPUTER SOFTWARE -- 1.9%
24,118 Sterling Commerce, Inc.* ................. 586,640 699,422
12,300 Sterling Software, Inc ................... 349,857 339,788
---------- ----------
936,497 1,039,210
---------- ----------
ELECTRICAL EQUIPMENT -- 2.3%
15,900 Berg Electronics Corp.* .................. 410,889 453,150
50,600 Scientific-Atlanta, Inc .................. 802,387 771,650
---------- ----------
1,213,276 1,224,800
---------- ----------
ENERGY -- 7.2%
24,800 Baker Hughes, Inc ........................ 817,035 951,700
7,200 Mobil Corporation ........................ 836,750 940,500
18,800 Pennzoil Company ......................... 1,126,075 972,900
9,400 Texaco, Inc .............................. 779,516 1,029,300
---------- ----------
3,559,376 3,894,400
---------- ----------
FINANCIAL SERVICES -- 0.8%
12,400 Ahmanson (H.F.) & Co ..................... 496,460 452,600
---------- ----------
FOOD PROCESSING -- 1.7%
20,200 Campbell Soup Company .................... 818,589 936,775
---------- ----------
FOREST PRODUCTS & PAPER -- 1.2%
20,200 Boise Cascade Corp ....................... 695,228 616,100
---------- ----------
HEALTH CARE -- 3.1%
14,600 American Home Products, Inc .............. 760,838 876,000
31,600 Tenet Healthcare Corp.* .................. 641,500 778,150
---------- ----------
1,402,338 1,654,150
---------- ----------
HOTEL/RESTAURANT MANAGEMENT -- 2.6%
16,500 American General Hospitality
Corp ................................... 301,093 449,625
19,500 Marriott International, Inc .............. 895,689 970,125
---------- ----------
1,196,782 1,419,750
---------- ----------
INDUSTRIAL GOODS -- 1.5%
15,000 PPG Industries, Inc ...................... 690,740 810,000
---------- ----------
INSURANCE -- 3.3%
6,100 CIGNA Corp ............................... 699,962 891,362
25,500 Conseco, Inc ............................. 732,519 908,438
---------- ----------
1,432,481 1,799,800
---------- ----------
MACHINERY -- 1.8%
22,400 Deere & Company .......................... 844,108 974,400
---------- ----------
Principal/
Shares Cost Value
------ ---- -----
PHARMACEUTICALS -- 1.7%
20,200 Genzyme Corp.* ........................... $ 472,972 $ 454,500
6,600 SmithKline Beecham plc-ADR ............... 378,128 462,000
---------- ----------
851,100 916,500
---------- ----------
RAW MATERIALS -- 3.5%
14,000 Aluminum Company of
America ................................ 817,942 952,000
8,800 E.I. du Pont de Nemours
and Company ............................ 710,949 932,800
---------- ----------
1,528,891 1,884,800
---------- ----------
REAL ESTATE INVESTMENT TRUSTS (REITS)-- 5.6%
16,400 Crescent Real Estate Equities, Inc ....... 340,934 438,700
11,100 Duke Realty Investments, Inc ............. 345,942 450,938
13,800 Highwoods Properties, Inc ................ 378,287 462,300
21,200 Patriot American Hospitality, Inc ........ 333,757 514,100
18,400 Prentiss Properties Trust ................ 399,613 466,900
10,000 Security Capital Industrial Trust ........ 172,500 208,750
20,100 Security Capital Pacific Trust ........... 372,713 489,937
---------- ----------
2,343,746 3,031,625
---------- ----------
RETAIL -- 1.7%
20,200 CVS Corp ................................. 786,673 931,725
---------- ----------
TECHNOLOGY -- 1.9%
7,400 International Business Machines
Corporation ............................ 873,747 1,016,575
---------- ----------
TELECOMMUNICATIONS -- 5.5%
16,300 Bell Atlantic Corporation ................ 1,043,205 992,263
19,100 Lucent Technologies, Inc ................. 1,018,605 1,007,525
18,800 SBC Communications, Inc .................. 948,842 989,350
---------- ----------
3,010,652 2,989,138
---------- ----------
UTILITIES -- 3.6%
21,500 GTE Corporation .......................... 890,860 1,002,438
46,000 Houston Industries
Incorporated ........................... 1,008,641 960,250
---------- ----------
1,899,501 1,962,688
---------- ----------
TOTAL COMMON STOCKS ...................... 28,664,341 32,131,353
---------- ----------
ASSET BACKED SECURITIES -- 3.1%
$550,000 Contimortgage Home Equity 96-3,
7.83%, 2/15/2016 ....................... 561,892 556,875
169,000 EQCC Home Equity 93-2a,
5.15%, 9/15/2008 ....................... 164,405 166,127
230,000 Ford Credit Auto Loan Master
Trust, 6.50%, 8/15/2002 ................ 227,951 227,413
89,041 GMAC Grantor Trust 7.15%,
3/15/2000 .............................. 89,013 89,709
375,000 Green Tree Financial Trust
6.45%, 7/15/2026 ....................... 375,000 373,208
18,625 Old Stone Credit Corp.
5.15%, 9/15/2008 ....................... 18,605 17,707
72,122 Premier Auto Trust 1994-4,
6.45%, 5/02/1998 ....................... 71,744 72,269
200,000 Spieker Properties LP
7.125%, 12/01/2006 ..................... 199,740 191,500
---------- ----------
TOTAL ASSET BACKED
SECURITIES ............................. 1,708,350 1,694,808
---------- ----------
See accompanying notes to financial statements.
7
<PAGE>
Westwood Balanced Fund
Portfolio of Investments -- March 31, 1997 (unaudited) (continued)
================================================================================
Principal Cost Value
--------- ---- -----
CORPORATE OBLIGATIONS -- 8.1%
CAPITAL GOODS -- 1.1%
$ 250,000 Boeing Co. 8.75%, 9/15/2031 .............. $ 295,623 $ 281,563
150,000 Lockheed Martin Corp. 6.625%,
6/15/1998 .............................. 149,981 150,380
175,000 Lockheed Martin Corp. 6.85%,
5/15/2001 .............................. 174,858 173,468
---------- ----------
620,462 605,411
---------- ----------
COMPUTER SOFTWARE -- 0.5%
300,000 Oracle Corporation 6.72%,
2/15/2004 .............................. 300,000 288,375
---------- ----------
ENERGY -- 0.2%
100,000 Texaco Capital 9.00%,
11/15/1997 ............................. 101,578 101,607
---------- ----------
ENTERTAINMENT -- 0.6%
325,000 Viacom, Inc. 8.75%, 5/15/2001 ............ 334,524 333,125
---------- ----------
FINANCIAL SERVICES -- 2.5%
600,000 Chase Capital II 6.0625%,
2/01/2027 .............................. 592,967 585,000
186,477 Olympic Financial Auto Loan
6.30%, 1/15/2000 ....................... 186,395 186,626
325,000 Simon Debartolo Group, Inc.
6.875%, 11/15/2006 ..................... 323,902 307,125
250,000 Societe Generale (NY)
7.40%, 6/01/2006 ....................... 249,463 246,250
---------- ----------
1,352,727 1,325,001
---------- ----------
HEALTH CARE -- 0.4%
240,000 Health Care Property Investors, Inc.
6.50%, 2/15/2006 ...................... 235,935 221,856
---------- ----------
INDUSTRIAL GOODS -- 1.2%
370,000 ITT Corporation 6.25%,
11/15/2000 ............................. 363,513 358,438
275,000 WMX Technologies, Inc.
7.125%, 6/15/2001 ...................... 274,656 274,312
---------- ----------
638,169 632,750
---------- ----------
RAW MATERIALS -- 0.2%
100,000 E.I. du Pont de Nemours and
Company 9.15%, 4/15/2000 ............... 106,115 106,250
---------- ----------
REAL ESTATE/DEVELOPMENT -- 0.9%
500,000 Post Apartment Homes LP
7.25%, 10/01/2003 ...................... 498,210 492,150
---------- ----------
TELECOMMUNICATIONS -- 0.5%
270,000 Lucent Technologies, Inc.
7.25%, 7/15/2006 ....................... 269,425 267,638
---------- ----------
TOTAL CORPORATE
OBLIGATIONS ............................ 4,457,145 4,374,163
---------- ----------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 0.2%
130,000 Federal National Mortgage
Association 7.20%,
7/25/2025 .............................. 131,698 130,325
---------- ----------
U.S. TREASURY OBLIGATIONS -- 29.1%
160,000 Bonds, 8.75%, 5/15/2017 .................. 173,241 185,835
105,000 Bonds, 7.125%, 2/15/2023 ................. 107,146 103,759
155,000 Bonds, 6.875%, 8/15/2025 ................. 170,026 149,006
900,000 Notes, 5.875%, 7/31/1997 ................. 901,879 900,756
455,000 Notes, 5.125%, 4/30/1998 ................. 451,409 450,259
1,475,000 Notes, 6.25%, 6/30/1998 .................. 1,480,034 1,476,017
500,000 Notes, 5.875%, 1/31/1999 ................. 500,796 495,385
500,000 Notes, 7.00%, 4/15/1999 .................. 510,264 505,150
1,000,000 Notes, 5.875%, 11/15/1999 ................ 998,242 983,640
1,500,000 Notes, 5.875%, 2/15/2000 ................. 1,489,033 1,471,815
230,000 Notes, 7.125%, 2/29/2000 ................. 241,567 233,068
4,715,000 Notes, 6.25%, 1/31/2002 .................. 4,728,434 4,615,561
500,000 Notes, 6.25%, 2/28/2002 .................. 496,484 489,135
200,000 Notes, 7.50%, 2/15/2005 .................. 222,827 206,920
275,000 Notes, 6.50%, 8/15/2005 .................. 286,071 267,377
90,000 Notes, 5.875%, 11/15/2005 ................ 88,713 83,847
695,000 Notes, 6.875%, 5/15/2006 ................. 697,841 691,462
1,110,000 Notes, 7.00%, 7/15/2006 .................. 1,155,225 1,112,897
500,000 Notes, 6.25%, 2/15/2007 .................. 483,762 476,290
500,000 Notes, 6.50%, 11/15/2026 ................. 475,000 460,415
400,000 Notes, 6.625%, 2/15/2027 ................. 383,688 376,736
---------- ----------
TOTAL U.S. TREASURY
OBLIGATIONS ........................... 16,041,682 15,735,330
---------- ----------
TOTAL INVESTMENTS** --
99.9% ................................ $51,003,216 54,065,979
===========
Other assets in excess of
liabilities -- 0.1% .................. 48,363
-----------
NET ASSETS -- 100.0% ................... $54,114,342
===========
* Non-Income producing.
** The cost of securities for Federal income tax purposes is $51,030,988.
ADR- American Depository Receipts.
See accompanying notes to financial statements.
8
<PAGE>
THE WESTWOOD FUNDS
Statement of Assets and Liabilities
March 31, 1997 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Equity Intermediate Balanced
Fund Bond Fund Fund
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Investments in securities at value
(cost $59,037,393, $4,521,510 and
$51,003,216, respectively) .................. $63,040,021 $ 4,424,036 $54,065,979
Cash .......................................... 758,784 436,769 --
Receivable for fund shares sold ............... 272,470 5,000 103,456
Dividends and interest receivable ............. 175,457 67,664 373,781
Receivable for investments sold ............... 109,927 495,500 91,905
Prepaid expenses .............................. 2,226 476 720
----------- ----------- -----------
Total Assets .............................. 64,358,885 5,429,445 54,635,841
----------- ----------- -----------
LIABILITIES
Payable for investments purchased ............. 799,844 -- 326,001
Payable for fund shares redeemed .............. 27,693 -- --
Payable to custodian .......................... -- -- 41,828
Advisory fee payable (Note 3) ................. 131,099 -- 71,609
Distribution expense payable (Note 3) ......... 23,883 2,288 25,922
Other accrued expenses ........................ 58,837 18,659 56,139
----------- ----------- -----------
Total Liabilities ......................... 1,041,356 20,947 521,499
----------- ----------- -----------
NET ASSETS .................................... $63,317,529 $ 5,408,498 $54,114,342
=========== =========== ===========
Net Assets Consist of:
Capital Stock ................................. $ 8,331 $ 543 $ 5,547
Additional paid-in capital .................... 57,695,840 6,001,756 49,874,817
Accumulated undistributed net investment income 154,705 466 55,113
Accumulated undistributed realized gain (loss)
on investments .............................. 1,456,025 (496,793) 1,116,102
Unrealized appreciation (depreciation) on
investments ................................. 4,002,628 (97,474) 3,062,763
----------- ----------- -----------
Net Assets .................................... $63,317,529 $ 5,408,498 $54,114,342
=========== =========== ===========
SHARES OF BENEFICIAL INTEREST
Retail Class:
Shares of beneficial interest outstanding ..... 8,043,375 543,286 4,325,809
=========== =========== ===========
Net asset value, offering and redemption price
per share ................................... $ 7.60 $ 9.96 $ 9.76
=========== =========== ===========
Service Class:
Shares of beneficial interest outstanding ..... 287,743 1,221,289
=========== ===========
Net asset value and redemption price per share. $ 7.61 $ 9.74
=========== ===========
Maximum offering price per share ($7.61/.96
and $9.74/.96, respectively) ................ $ 7.93 $ 10.15
=========== ===========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE WESTWOOD FUNDS
Statement of Operations
For the six months ended March 31, 1997 (unaudited)
================================================================================
<TABLE>
<CAPTION>
Equity Intermediate Balanced
Fund Bond Fund Fund
----------- --------- -----------
<S> <C> <C> <C>
Investment Income:
Interest ...................................... $ 143,882 $ 175,805 $ 568,185
Dividends ..................................... 467,618 13,185 317,641
----------- --------- -----------
611,500 188,990 885,826
----------- --------- -----------
Expenses:
Advisory (Note 3) ............................. 222,353 16,214 165,837
Distribution-- Retail Class (Note 3) .......... 53,512 6,756 40,293
Distribution-- Service Class (Note 3) ......... 4,069 -- 28,703
Audit & Tax ................................... 20,905 1,831 21,176
Registration .................................. 19,381 6,213 14,217
Shareholder services .......................... 16,922 4,645 25,558
Custody ....................................... 10,736 4,181 11,946
Reports to shareholders ....................... 7,463 1,309 9,616
Legal ......................................... 6,407 849 8,265
Trustee ....................................... 2,537 2,074 2,562
Miscellaneous ................................. 6,294 3,813 12,692
----------- --------- -----------
Total expenses before waivers ............... 370,579 47,885 340,865
Less expenses waived/reimbursed by Adviser .. (24,133) (18,661) (39,047)
----------- --------- -----------
Net expenses ................................ 346,446 29,224 301,818
----------- --------- -----------
Net investment income ........................... 265,054 159,766 584,008
----------- --------- -----------
Net realized gain on investments ................ 1,530,191 99,196 1,281,375
Change in unrealized appreciation (depreciation)
of investments ................................ 1,114,034 (58,902) 721,287
----------- --------- -----------
Net realized and unrealized gain on investments.. 2,644,225 40,294 2,002,662
----------- --------- -----------
Net increase in net assets resulting from
operations .................................... $ 2,909,279 $ 200,060 $ 2,586,670
=========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
THE WESTWOOD FUNDS
Westwood Equity Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Six Months ended Year ended
March 31, 1997 September 30,
(unaudited) 1996
--------------- --------------
<S> <C> <C>
Operations:
Net investment income .................................... $ 265,054 $ 245,203
Net realized gain on investments ......................... 1,530,191 3,776,460
Change in unrealized appreciation of investments ......... 1,114,034 732,252
------------ ------------
Net increase in net assets resulting from operations ..... 2,909,279 4,753,915
------------ ------------
Dividends to shareholders from net investment income:
Retail Class ............................................. (298,531) (136,789)
Service Class ............................................ (10,884) --
------------ ------------
(309,415) (136,789)
------------ ------------
Distributions to shareholders from net realized gain
on investments:
Retail Class ............................................. (3,698,222) (1,203,822)
Service Class ............................................ (148,100) (4,738)
------------ ------------
(3,846,322) (1,208,560)
------------ ------------
Decrease in net assets resulting from distributions
to shareholders ........................................ (4,155,737) (1,345,349)
------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class ........................................... 35,093,170 13,671,023
Service Class .......................................... 952,223 1,193,888
------------ ------------
36,045,393 14,864,911
------------ ------------
Net asset value of shares issued to shareholders upon
reinvestment of dividends and distributions:
Retail Class ......................................... 3,960,522 1,328,732
Service Class ........................................ 158,980 4,738
------------ ------------
4,119,502 1,333,470
------------ ------------
Net asset value of shares redeemed:
Retail Class ......................................... (6,048,809) (3,924,009)
Service Class ........................................ (115,052) (91,065)
------------ ------------
(6,163,861) (4,015,074)
------------ ------------
Net increase in net assets from capital share transactions 34,001,034 12,183,307
------------ ------------
Total increase in net assets .................................. 32,754,576 15,591,873
Net Assets:
Beginning of period ...................................... 30,562,953 14,971,080
------------ ------------
End of period (including undistributed net investment
income of $154,705 and $199,066, respectively) ......... $ 63,317,529 $ 30,562,953
============ ============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
THE WESTWOOD FUNDS
Westwood Intermediate Bond Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Six Months ended Year ended
March 31, 1997 September 30,
(unaudited) 1996
--------------- --------------
<S> <C> <C>
Operations:
Net investment income ............................... $ 159,766 $ 281,492
Net realized gain on investments .................... 99,196 92,155
Change in unrealized depreciation of investments .... (58,902) (143,346)
----------- -----------
Net increase in net assets resulting from operations 200,060 230,301
----------- -----------
Dividends to shareholders from net investment income:
Retail Class ........................................ (159,766) (281,492)
----------- -----------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class ................................... 783,501 1,825,411
----------- -----------
Net asset value of shares issued to shareholders upon
reinvestment of dividends and distributions:
Retail Class ................................... 108,334 184,446
----------- -----------
Net asset value of shares redeemed:
Retail Class ................................... (1,019,324) (1,192,260)
----------- -----------
Net increase (decrease) in net assets from capital
share transactions ................................ (127,489) 817,597
----------- -----------
Total increase (decrease) in net assets .................. (87,195) 766,406
Net Assets:
Beginning of period ................................. 5,495,693 4,729,287
----------- -----------
End of period (Including undistributed net
investment income of $466 and $466, respectively) . $ 5,408,498 $ 5,495,693
=========== ===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
THE WESTWOOD FUNDS
Westwood Balanced Fund
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
For the For the
Six Months ended Year ended
March 31, 1997 September 30,
(unaudited) 1996
----------- ------------
<S> <C> <C>
Operations:
Net investment income ......................................... $ 584,008 $ 596,382
Net realized gain on investments .............................. 1,281,375 2,402,768
Change in unrealized appreciation of investments .............. 721,287 761,337
------------ ------------
Net increase in net assets resulting from operations .......... 2,586,670 3,760,487
------------ ------------
Dividends to shareholders from net investment income:
Retail Class .................................................. (405,014) (388,690)
Service Class ................................................. (124,353) (207,865)
------------ ------------
(529,367) (596,555)
------------ ------------
Distributions to shareholders from net realized gain on investments:
Retail Class .................................................. (1,720,932) (136,634)
Service Class ................................................. (687,890) (108,437)
------------ ------------
(2,408,822) (245,071)
------------ ------------
Decrease in net assets resulting from distributions
to shareholders ............................................. (2,938,189) (841,626)
------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Retail Class ............................................. 20,668,644 16,778,536
Service Class ............................................ 1,384,947 4,707,239
------------ ------------
22,053,591 21,485,775
------------ ------------
Net asset value of shares issued to shareholders upon
reinvestment of dividends and distributions:
Retail Class ............................................. 2,017,153 501,337
Service Class ............................................ 730,501 276,240
------------ ------------
2,747,654 777,577
------------ ------------
Net asset value of shares redeemed:
Retail Class ............................................. (3,214,735) (2,761,202)
Service Class ............................................ (1,494,428) (2,171,662)
------------ ------------
(4,709,163) (4,932,864)
------------ ------------
Net increase in net assets from capital share
transactions ................................................ 20,092,082 17,330,488
------------ ------------
Total increase in net assets ....................................... 19,740,563 20,249,349
Net Assets:
Beginning of period ........................................... 34,373,779 14,124,430
------------ ------------
End of period (including undistributed net investment
income of $55,113 and $472, respectively) ................... $ 54,114,342 $ 34,373,779
============ ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements (unaudited)
================================================================================
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 six separate investment
portfolios: Westwood Equity Fund, Westwood Intermediate Bond Fund, Westwood
Balanced Fund (collectively, the "Funds"), Westwood Cash Management Fund,
Westwood SmallCap Equity Fund and Westwood Realty Fund, each with two (2)
classes of shares known as the Service Class and the Retail Class (formerly the
"Institutional Class"). Westwood SmallCap Equity Fund Retail Class commenced
operations on April 15, 1997. Westwood Cash Management Fund and Westwood Realty
Fund have not commenced operations. 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. Effective November 8, 1994, all shares in the Service
Class of Westwood Intermediate Bond Fund were redeemed. No such shares were
outstanding at March 31, 1997, 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) 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
14
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements (unaudited)(continued)
================================================================================
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.
(f) Use of Estimates. Estimates and assumptions are required to be made
regarding assets, liabilities, and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ from these amounts.
Note 3 -- Investment Advisory, Administrative and Other Transactions with
Affiliates. Teton Advisers LLC (the "Adviser") has entered into an Investment
Advisory Agreement with the Trust and a Sub-Advisory Agreement with Westwood
Management Corporation (the "Sub-Adviser") and the Trust whereby Westwood
Management Corporation serves as Sub-Adviser to the Trust. The Adviser oversees
the administration of each Fund's business and affairs. In this connection the
Adviser is responsible for maintaining certain of the Funds' books and records
and performing 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 1.00% 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 six months ended March 31,
1997, the Adviser waived fees of $24,133, $16,214 and $39,047, respectively.
Additionally, the Adviser has voluntarily agreed to reimburse the Funds in the
event the Funds' annual expenses exceed certain prescribed limits. As of March
31, 1997, the Adviser reimbursed the Intermediate Bond Fund in the amount of
$2,447.
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 to reimburse Gabelli &
Company in connection with the distribution of its Retail Class shares at an
annual rate of up to .25% of the average daily net assets. 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. There
were no Service Class shares outstanding during the six months ended March 31,
1997 for the Intermediate Bond Fund. Subject to Board of Trustees approval,
distribution expenses related to the Retail Class shares incurred by Gabelli &
Company, totalling $101,500 for the Equity Fund, $13,200 for the Intermediate
Bond Fund and $451,700 for the Balanced Fund, which are in excess of the Retail
Class .25% limitation may be recovered from the Funds in future periods, subject
to such limitation.
15
<PAGE>
THE WESTWOOD FUNDS
Notes to Financial Statements (unaudited)(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 six
months ended Mach 31, 1997 were as follows:
<TABLE>
<CAPTION>
Common Stocks & Bonds U.S. Government Obligations
--------------------- ---------------------------
Purchases Sales Purchases Sales
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Equity Fund..................... $32,205,968 $13,151,024 $10,754,399 $7,409,997
Intermediate Bond Fund.......... 12,161,691 12,209,447 3,396,982 3,385,557
Balanced Fund................... 19,646,177 12,925,032 17,392,741 10,022,504
</TABLE>
(b) Federal income tax basis. Gross unrealized appreciation and
depreciation on investment securities at March 31, 1997 based on cost for
Federal income tax purposes, is as follows:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation Depreciation Appreciation/Depreciation
------------ ------------ -------------------------
<S> <C> <C> <C>
Equity Fund..................... $5,092,424 $(1,101,825) $3,990,599
Intermediate Bond Fund.......... 6,939 (104,413) (97,474)
Balanced Fund................... 3,922,253 (887,262) 3,034,991
</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>
Six Months Ended March 31, 1997 Year Ended September 30, 1996
------------------------------- -----------------------------
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 ................................... 4,458,105 76,287 2,051,398 1,899,542 184,406 1,807,225
Shares issued in reinvestment of net investment
income and capital gain distributions ....... 531,614 11,601 210,516 204,420 18,608 54,134
Shares redeemed ............................... (767,603) (100,947) (321,372) (542,403 (120,336) (292,132)
---------- -------- ---------- ---------- -------- ---------
Net increase (decrease) in shares ............. 4,222,116 (13,059) 1,940,542 1,561,559 82,678 1,569,227
========== ======== ========== ========= ======== =========
Service Class
Shares sold ................................... 121,929 138,716 160,373 509,146
Shares issued in reinvestment of net investment
income and capital gain distributions ....... 21,311 74,397 726 30,203
Shares redeemed ............................... (14,335) (149,487) (12,695) (235,513)
---------- ---------- -------- ---------
Net increase in shares ........................ 128,905 63,626 148,404 303,836
========== ========== ======== =========
</TABLE>
Note 6 -- Federal Income Tax Carryforwards. At September 30, 1996 the
Westwood Intermediate Bond Fund had a capital loss carryforward of $596,040
which will be available through September 2003 to offset future capital gains as
provided by the Federal Income Tax regulations. To the extent that this
carryforward loss is used to offset future capital gains, the gains so offset
would not be distributed to shareholders.
16
<PAGE>
THE WESTWOOD FUNDS
Selected Per Share Data and Ratios
For a share outstanding throughout each period(a)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1997 ---------------------------------------------------------------
(unaudited) 1996 1995 1994
-------------------- ------------------ ----------------- -----------------
Retail Service Retail Service Retail Service Retail Service
Equity Fund Class Class Class Class Class Class Class Class*
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .... $ 7.68 $ 7.69 $ 6.59 $ 6.57 $ 5.50 $ 5.48 $ 9.91 $ 5.53
------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income ................. 0.05 0.04 0.08 0.06 0.04 0.04 0.10 0.06
Net realized and unrealized gain
(loss) on investments ............... 0.77 0.77 1.59 1.58 1.31 1.29 0.64 (0.11)
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ...... 0.82 0.81 1.67 1.64 1.35 1.33 0.74 (0.05)
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income .. (0.07) (0.06) (0.06) -- (0.06) (0.04) (0.07) --
Distributions from net realized
capital gains ....................... (0.83) (0.83) (0.52) (0.52) (0.20) (0.20) (5.08) --
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ................... (0.90) (0.89) (0.58) (0.52) (0.26) (0.24) (5.15) --
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .......... $ 7.60 $ 7.61 $ 7.68 $ 7.69 $ 6.59 $ 6.57 $ 5.50 $ 5.48
======= ======= ======= ======= ======= ======= ======= =======
Total Return (not reflecting sales load) 10.87% 10.78% 26.88% 26.33% 25.85% 25.54% 9.14% (0.90)%
Net Assets End of Period (in thousands) . $61,129 $ 2,189 $29,342 $ 1,221 $14,903 $ 68 $ 8,637 $ 254
Ratios to Average Net Assets of:
Net Investment Income ................. 1.20%** 0.93%** 1.16% 0.92% 0.77% 0.64% 1.63% 1.64%**
Expenses net of waivers/reimbursements+ 1.55%** 1.80%** 1.50% 1.74% 1.61% 1.85% 0.71% 1.04%**
Expenses before waivers/reimbursements+ 1.66%** 1.91%** 1.95% 2.19% 2.29% 2.63% 1.94% 2.29%**
Portfolio Turnover Rate ............... 49% 49% 106% 106% 107% 107% 137% 137%
Average Commission Rate (per share
of security) .......................... $ 0.053 $ 0.053 $ 0.054 $ 0.054 -- -- -- --
</TABLE>
Year Ended September 30,
------------------------
1993 1992
------- -------
Equity Fund Retail Class
------------------
Net Asset Value, Beginning of Period .... $ 14.19 $ 14.23
------- -------
Income from Investment Operations:
Net investment income ................. 0.05 0.27
Net realized and unrealized gain
(loss) on investments ............... 2.12 0.34
------- -------
Total from Investment Operations ...... 2.17 0.61
------- -------
Less Distributions:
Dividends from net investment income .. (0.55) (0.51)
Distributions from net realized
capital gains ....................... (5.90) (0.14)
------- -------
Total Distributions ................... (6.45) (0.65)
------- -------
Net Asset Value, End of Period .......... $ 9.91 $ 14.19
======= =======
Total Return (not reflecting sales load) 20.16% 4.16%
Net Assets End of Period (in thousands) . $ 5,172 $13,161
Ratios to Average Net Assets of:
Net Investment Income ................. 0.40% 1.85%
Expenses net of waivers/reimbursements+ 1.95% 1.40%
Expenses before waivers/reimbursements+ 2.32% 1.54%
Portfolio Turnover Rate ............... 102% 75%
Average Commission Rate (per share
of security) .......................... -- --
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1997 --------------------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------ ------ ----------------- ----------------- ------- -------
Retail Retail Retail Service Retail Service
Intermediate Bond Fund Class Class Class Class(b) Class Class* Retail Class
------ ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 9.88 $ 9.98 $ 9.48 $ 9.48 $10.73 $10.51 $10.65 $10.00
------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income ....................... 0.30 0.51 0.52 0.05 0.48 0.41 0.39 0.51
Net realized and unrealized gain
(loss) on investments ..................... 0.08 (0.10) 0.50 (0.14) (1.04) (1.03) 0.62 0.65
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations ............ 0.38 0.41 1.02 (0.09) (0.56) (0.62) 1.01 1.16
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income ........ (0.30) (0.51) (0.52) (0.05) (0.48) (0.41) (0.39) (0.51)
Distributions from net realized capital gains -- -- -- -- (0.21) -- (0.54) --
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions ......................... (0.30) (0.51) (0.52) (0.05) (0.69) (0.41) (0.93) (0.51)
------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period ................ $ 9.96 $ 9.88 $ 9.98 $ 9.34 $ 9.48 $ 9.48 $10.73 $10.65
====== ====== ====== ====== ====== ====== ====== ======
Total Return (not reflecting sales load) ...... 3.82% 4.50% 11.13% (0.95)% (5.46)% (6.81)% 10.24% 11.87%
Net Assets End of Period (in thousands) ....... $5,408 $5,496 $4,729 $ 0 $7,339 $ 76 $2,849 $3,153
Ratios to Average Net Assets of:
Net Investment Income ....................... 5.91%** 5.43% 5.38% 4.85% 4.86% 6.05%** 3.74% 5.25%
Expenses net of waivers/reimbursements+ ..... 1.08%** 1.09% 1.17% 1.45% 0.92% 1.34%** 2.40% 1.94%
Expenses before waivers/reimbursements+ ..... 1.77%** 2.46% 2.47% 4.07% 1.75% 2.37%** 3.46% 3.40%
Portfolio Turnover Rate ..................... 333% 309% 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 represented the net asset value on
November 8, 1994.
* Prior to January 28, 1994, no shares of the Service Class were issued.
** Annualized.
+ See page 18.
See accompanying notes to financial statements.
17
<PAGE>
THE WESTWOOD FUNDS
Selected Per Share Data and Ratios (continued)
For a share outstanding throughout each period(a)
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1997 ---------------------------------------------------------
(unaudited) 1996 1995 1994
------------------- ----------------- ----------------- -----------------
Retail Service Retail Service Retail Service Retail Service
Balanced Fund Class Class Class Class Class Class Class Class
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 9.71 $ 9.69 $ 8.47 $ 8.45 $ 7.12 7.10 $ 10.89 $ 10.88
------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income ....................... 0.14 0.12 0.22 0.20 0.19 0.17 0.12 0.15
Net realized and unrealized gain
on investments .............................. 0.60 0.62 1.37 1.37 1.35 1.35 0.42 0.36
------- ------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ............ 0.74 0.74 1.59 1.57 1.54 1.52 0.54 0.51
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income ........ (0.11) (0.11) (0.22) (0.20) (0.19) (0.17) (0.13) (0.11)
Distributions from net realized capital gains (0.58) (0.58) (0.13) (0.13) -- -- (4.18) (4.18)
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions ......................... (0.69) (0.69) (0.35) (0.33) (0.19) (0.17) (4.31) (4.29)
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ................ $ 9.76 $ 9.74 $ 9.71 $ 9.69 $ 8.47 $ 8.45 $ 7.12 $ 7.10
======= ======= ======= ======= ======= ======= ======= =======
Total Return (not reflecting sales load) ...... 7.71% 7.63% 19.11% 18.85% 21.98% 21.67% 5.30% 4.67%
Net Assets End of Period (in thousands) ....... $42,222 $11,892 $23,158 $11,216 $ 6,912 $ 7,212 $ 3,081 $10,810
Ratios to Average Net Assets of:
Net Investment Income ....................... 2.71%** 2.45%** 2.62% 2.34% 2.47% 2.26% 1.55% 2.15%
Expenses net of waivers/reimbursements+ ..... 1.30%** 1.55%** 1.32% 1.57% 1.35% 1.62% 1.68% 1.17%
Expenses before waivers/reimbursements+ ..... 1.48%** 1.73%** 1.71% 1.96% 1.86% 2.24% 2.36% 2.11%
Portfolio Turnover Rate ..................... 56% 56% 111% 111% 133% 133% 168% 168%
Average Commission Rate (per share of security) $ 0.055 $ 0.055 $ 0.055 $ 0.055 -- -- -- --
</TABLE>
Year Ended September 30,
----------------------------
1993 1992
----------------- ------
Retail Service Retail
Balanced Fund Class Class* Class
------ ------ ------
Net Asset Value, Beginning of Period .......... $10.45 $10.24 $10.00
------ ------ ------
Income from Investment Operations:
Net investment income ....................... 0.20 0.19 0.31
Net realized and unrealized gain
on investments .............................. 1.44 0.52 0.49
------ ------ ------
Total from Investment Operations ............ 1.64 0.71 0.80
------ ------ ------
Less Distributions:
Dividends from net investment income ........ (0.24) (0.07) (0.31)
Distributions from net realized capital gains (0.96) -- (0.04)
------ ------ ------
Total Distributions ......................... (1.20) (0.07) (0.35)
------ ------ ------
Net Asset Value, End of Period ................ $10.89 $10.88 $10.45
====== ====== ======
Total Return (not reflecting sales load) ...... 17.60% 6.96% 7.32%
Net Assets End of Period (in thousands) ....... $1,583 $ 114 $3,716
Ratios to Average Net Assets of:
Net Investment Income ....................... 1.90% 1.76%** 3.13%
Expenses net of waivers/reimbursements+ ..... 1.82% 2.07%** 1.44%
Expenses before waivers/reimbursements+ ..... 2.97% 3.14%** 2.38%
Portfolio Turnover Rate ..................... 192% 192% 178%
Average Commission Rate (per share of security) -- -- --
- ----------
(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.
+ Beginning in fiscal 1995, the ratios exclude a reduction of expenses for
custodian fee credits on cash balances maintained with the custodian.
Including such custodian fee credits, the expense ratios for six months
ended March 31, 1997 (annualized) and fiscal year ended September 30, 1996
would be:
Equity Fund -- Retail Class -- net of waivers (1.50% and
1.44%, respectively), before waivers (1.61% and 1.88%,
respectively) Service Class -- net of waivers (1.75% and
1.68%, respectively), before waivers (1.86% and 2.13%,
respectively)
Intermediate Bond Fund -- Retail Class -- net of waivers
(1.00% and 1.00%, respectively), before waivers (1.69% and
2.36%, respectively)
Balanced Fund -- Retail Class -- net of waivers (1.25% and
1.24%, respectively), before waivers (1.43% and 1.63%,
respectively) Service Class -- net of waivers (1.50% and
1.49%, respectively), before waivers (1.68% and 1.89%,
respectively)
See accompanying notes to financial statements.
18
<PAGE>
The Westwood Funds
One Corporate Center
Rye, NY 10580
General and Account Information:
1-(800) GABELLI (422-3554) (all continental states)
Board of Trustees
SUSAN M. BYRNE JAMES P. CONN
President and Managing Director and
Chief Investment Officer Chief Investment Officer
Financial Security Assurance
ANTHONY J. COLAVITA DR. WERNER J. ROEDER
Attorney-at-Law Director of Surgery
Anthony J. Colavita, P.C. Lawrence Hospital
Officers
SUSAN M. BYRNE BRUCE N. ALPERT
President and Vice President
Chief Investment Officer and Treasurer
PATRICIA R. FRAZE JAMES E. McKEE
Vice President Secretary
DOUGLAS LEHMAN
Vice President
Investment Adviser
Teton Advisers LLC
Investment Sub-Adviser
Westwood Management Corporation
Distributor
Gabelli & Company, Inc.
Custodian
The Bank of New York
Legal Counsel
Baker & McKenzie
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
The
Westwood
Funds
WESTWOOD EQUITY FUND
WESTWOOD INTERMEDIATE BOND FUND
WESTWOOD BALANCED FUND
Semi-Annual Report
------------------------
March 31, 1997
------------------------
