BERWYN FUND SEMI-ANNUAL REPORT
August 2, 1999 Net Asset Value Per Share: $17.55
Dear Berwyn Fund Shareholder:
The Berwyn Fund (TBF) advanced 2.24 percent for the first six
months of 1999. This modest gain masked a major turnaround in
the Fund's performance between the first and second quarters.
TBF fell 15.7 percent in value in the first quarter of 1999, but
rose 21.3 percent in the second quarter. The sharp contrast
between the Fund's first and second quarters results, in our
opinion, marked the end of a bear market for the broad market,
particularly small-cap stocks, which began in November, 1997.
The turnaround in our performance versus the senior stock market
indices is presented in Table 1.
1st Quarter 2nd Quarter First Half
TBF (15.68)% 21.26% 2.24%
DJIA (7.03) 12.54 20.45
S&P 500 4.98 7.05 12.38
S&P 600 (9.00) 15.42 5.03
Table 1 - Total Returns
Also shown in Table 1 is the performance of the S&P 600, an index
comprised of 600 small capitalization stocks. The strong
performance of the S&P 600 in the second quarter underscores the
change in investors' attitudes during this period.
There are several reasons to believe that the improved
performance of TBF will be sustained on both an absolute and
relative basis in future quarters. First, there has never been a
greater disparity in valuations between the now popular large-cap
universe and the small-cap and value sectors of the market.
While the popular indices such as the DJIA and S&P 500 are
selling at historically high multiples of trailing 12 month
earnings (25.0 and 34.6 times earnings, respectively), many of
our stock holdings are selling below ten times trailing 12 month
earnings.
The second reason to expect a leadership change to smaller stocks
is the rebound in the global economy, particularly in Asia. A
recent weakening of the dollar with respect to the Euro and Asian
currencies has raised commodity prices in the agricultural,
energy and other natural resources sectors, benefiting many
smaller-cap stocks. In addition, a weaker dollar eases the
world-wide competitive pressures on many domestic manufacturing
companies.
Still another reason to expect superior performance from the
small-cap value sector of the market is the very fact that this
sector has experienced an especially difficult bear market which
has left these stocks in "strong hands". Present shareholders of
value stocks are long-term investors who understand the
exceptional potential in this type of investment.
As we move forward in 1999, we believe that corporate share
repurchases, takeover activity and a growing awareness of the
risks associated with momentum investing will support the
improving trend for the undervalued stocks in TBF. The
accompanying Statement of Investments lists the industry sectors
and individual securities held by your Fund at mid-year. The six
major industry sectors represented in the Fund's holdings are:
metals and mining, 10.5 percent; oil refining, 7.2 percent; oil
and gas exploration, 7.0 percent; computer and peripherals, 6.4
percent; machinery manufacturing, 4.6 percent; and, electronic
products, 5.3 percent. The Fund held 61 common stock and two
convertible bond positions at mid-year, thus maintaining a
diversified asset base.
For the first half of 1999, the portfolio's annualized turnover
rate was a low 9.1 percent, which is below our historical rate of
about 23 percent. The expense ratio remained at a modest 1.38
percent, up slightly from last year's level of 1.12 percent.
Assets totaled $49.5 million as compared to $44.7 million at the
end of the March quarter and $62.9 million at year's end.
As we continue to recover from the 1998/99 bear market, it is
important to remember that long-term studies comparing the
performance of value and growth investing conclude value
investing to be the winner. When large-cap and small-cap value
investing are compared, small-cap value emerges as the asset
sector with the best performance. Consequently, we will continue
to refine our value-oriented investment techniques, confident
that hard work and logic will prevail in the months and years
ahead.
Very truly yours,
Robert E. Killen
President
Note: Returns for the Berwyn Fund are net of all expenses,
advisory fees and commission charges and include the reinvestment
of dividends and interest (total return). All index returns
listed herein also include the reinvestment of dividends and
interest (total return). The investment return and the principal
value of an investment in TBF will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than
their original cost.
<TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(Unaudited)
<S> <C>
Assets:
Investments in Securities, at Market Value $50,059,230
(Cost $45,328,613) (Note 2)
Receivables:
Dividends 14,395
Interest 3,074
Investment Securities Sold 11,412
Total Assets 50,088,111
Liabilities:
Payable to Custodian 474,037
Accrued Expenses 21,947
Investment Advisory Fee Payable 40,330
Total Liabilities 536,314
Net Assets: (1)
Applicable to 2,856,859 Outstanding Shares of
Common Stock, $1.00 Par Value
(Authorized 20,000,000 Shares) $49,551,797
Net Asset Value and Offering Price Per Share
($49,551,797 / 2,856,859 Outstanding Shares)$ 17.34
Minimum Redemption Price Per Share (Note 1) $ 17.17
(1) On June 30, 1999 Net Assets consisted of
the following:
Common Stock, Par Value $1.00 2,856,859
Paid-in Capital 38,371,200
Accumulated Net Investment Loss (128,582)
Accumulated Net Realized Capital Gains 3,721,703
Net Unrealized Appreciation of Investment
Securities 4,730,617
$49,551,797
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
(Unaudited)
<S> <S>
Investment Income:
Dividends $202,183
Interest 26,758
Total Investment Income $ 228,941
Expenses:
Investment Advisory Fee (Note 3) 255,596
Transfer Agent Fees 23,837
Custodian Fees 19,087
Professional Fees 12,847
Registration Fees 14,368
Directors' Fees 1,600
Printing Costs 10,209
Office Expenses 11,476
Insurance 4,657
Taxes (Other than Income Taxes) 3,846
Total Expenses 357,523
Net Investment Loss (128,582)
Realized and Unrealized Gain on Investments:
Net Realized Gain from Sales of Investment
Securities 3,612,311
Net Change in Unrealized Depreciation on
Investment Securities (3,270,774)
Net Realized and Unrealized Gain on
Investments 341,537
Net Increase in Net Assets Resulting from
Operations $ 212,955
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six Months Six Months
Ended Ended
06/30/99 06/30/98
<S> <C> <C>
Increase in Net Assets from Investment
Activities:
Net Investment Income (Loss) $ (128,582) $ (212,305)
Net Realized Gain from Sales of
Investment Securities 3,612,311 4,238,887
Change in Net Unrealized
Appreciation/Depreciation
on Investment Securities (3,270,774) (2,078,636)
Net Increase in Net Assets Resulting
from Operations 212,955 1,947,946
Capital Share Transactions (1):
Net Proceeds from Sales of Shares 1,994,782 8,048,217
Cost of Shares Redeemed (15,530,472) 19,090,964)
Net Increase in Net Assets from
Capital Share Transactions (13,535,690) (11,042,747)
Total Increase in Net Assets (13,322,735) (9,094,801)
Net Assets:
Beginning of Period 62,874,532 100,405,940
End of Period (Including Undistributed Net
Investment Loss of ($134,135) and
($213,055) at June 30, 1999 and 1998,
respectively) $49,551,797 $91,311,139
(1) Capital Shares Issued and Redeemed:
Shares Sold 126,236 354,495
Shares Redeemed (976,884) (837,781)
(850,648) (483,286)
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(Unaudited)
SIX MONTHS
ENDED YEAR ENDED
6/30/99 12/31/98 12/31/97 12/31/96 12/31/95 12/30/94
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $16.96 $22.01 $19.69 $19.43 $17.55 $17.67
Income from Investment
Operations:
Net Investment Income
(Loss) (0.04) (0.09) 0.00 (0.02) 0.00 0.02
Net Realized and Unrealized
Gains on Securities .42 (4.11) 5.06 2.78 3.34 0.65
Total from Investment
Operations .38 (4.20) 5.06 2.76 3.34 0.67
Less Distributions:
Dividends from Net
Investment Income 0.00 0.00 0.00 0.00 (0.01) (0.01)
Distributions from Net
Realized Gains 0.00 (0.85) (2.74) (2.50) (1.45) (0.78)
Total Distributions 0.00 (0.85) (2.74) (1.46) (0.79) (0.58)
Net Asset Value, End of
Year $17.34 $16.96 $22.01 $19.69 $19.43 $17.55
Total Return 2.24% (18.90%) 26.05% 14.35% 19.18% 3.90%
Ratios/Supplemental Data:
Net Assets, End of
Period (000) $49,552 $62,862 $100,406 $94,056 $97,234 $63,522
Ratio of Expenses to
Average Net Assets 1.38%* 1.20% 1.20% 1.21% 1.23% 1.33%
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.50%)* (0.45%) (0.02%) (0.10%) 0.04% 0.11%
Portfolio Turnover Rate 9.12%* 19% 26% 32% 32% 24%
*Annualized
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
STATEMENT OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
Number of
Shares COMMON STOCKS - 100.2% Value*
<S> <S> <C>
AEROSPACE / DEFENSE - 1.9%
77,366 Ducommun Inc. + $ 923,557
AIRLINES - 0.2%
11,000 Midway Airlines + 112,750
ALCOHOLIC BEVERAGE - 2.1%
126,141 Todhunter International Corp. + 1,056,431
AUTOMOTIVE AND TRUCK PARTS - 2.4%
249,334 National Standard Co. + 1,215,503
BANKING - 3.7%
51,320 BSB Bancorp Inc. 1,366,395
9,000 First Essex Bancorp, Inc. 142,312
34,500 Lawrence Savings Bank 323,438
1,832,145
CHEMICALS - 1.0%
13,000 Carbide/Graphite + 185,250
17,000 IMC Global, Inc. 299,625
484,875
COMMERCIAL PRINTING - 3.8%
81,767 Courier Corp. 1,860,199
COMPUTER & PERIPHERALS - 6.4%
264,855 Data I/O Corp. + 339,359
59,150 Inacom Corp. + 746,769
191,000 Plaintree Systems + 11,938
149,002 Printronix, Inc. + 2,086,028
3,184,094
DIVERSIFIED MANUFACTURING - 3.0%
83,404 Lindberg Corp. 907,018
14,708 Robbins & Myers, Inc. 328,172
33,500 Synalloy Corp. 249,156
1,484,346
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
STATEMENT OF INVESTMENTS (Continued)
Number of
Shares COMMON STOCKS (Continued) Value*
<S> <S> <C>
ELECTRONIC PRODUCTS - 5.3%
373,417 Scan-Optics $1,633,699
67,700 Trans-Lux Corp. 558,525
121,275 Wells-Gardner Electronics 424,463
2,616,687
FOREST & PAPER PRODUCTS - 3.7%
39,100 Greif Brothers Corp. 997,050
12,906 MAXXAM Inc. 832,437
1,829,487
FURNITURE MANUFACTURING - 3.4%
80,698 Ladd Furniture + 1,694,658
HEALTH CARE - 0.1%
3,000 Rehabcare Group + 55,313
INDUSTRIAL EQUIPMENT - 1.1%
43,000 Airgas Inc. 526,750
133,500 Dura Products International 28,035
554,785
INSURANCE - 2.8%
6,000 Chicago Title Corp. 214,125
67,063 First American Financial Corp. 1,198,751
1,412,876
MACHINERY MANUFACTURING - 5.6%
39,750 Hardinge, Inc. 695,625
68,744 Terex Corp. + 2,092,396
2,788,021
MANUFACTURED HOUSING - 4.8%
85,700 Drew Ind. + 1,055,181
77,000 Kevco Inc. + 587,125
47,000 Patrick Industries 737,312
2,379,618
MARITIME INDUSTRY - 4.8%
130,311 Anangel-American Shipholders ADR 692,277
271,405 B & H Ocean Carriers 644,587
51,087 BT Shipping Ltd. ADR+ 89,402
61,600 Stolt-Nielsen S.A. ADR 939,400
2,365,666
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
STATEMENT OF INVESTMENTS (Continued)
Number of
Shares COMMON STOCKS (Continued) Value*
<S> <S> <C>
MEDICAL PRODUCTS & SERVICES - 2.2%
348,676 Quidel Corp.+ $1,067,820
METALS & MINING - 10.5%
500,139 Campbell Resources, Inc. + 156,293
19,450 Cleveland Cliffs, Inc. 629,694
3,000 Freeport McMoran Class B 53,813
49,200 Impala Platnium-UNSPON ADR 1,237,680
149,600 Kaiser Aluminum + 1,327,700
310,110 Nord Pacific Limited ADR+ 184,143
500,350 Westmoreland Coal Co. +** 1,626,137
5,215,460
OIL & GAS EXPLORATION & PRODUCTION - 7.0%
24,300 Berry Petroleum Co. 338,681
96,600 Callon Petroleum + 996,187
166,700 COHO Energy + 83,350
38,496 Louis Dreyfus Natural Gas Corp. + 830,070
213,864 Ranger Oil Ltd. 1,055,954
12,000 World Fuel Services 177,000
3,481,242
OIL REFINING - 7.2%
335,744 Frontier Oil Corp. 2,287,256
48,000 Giant Industries 477,000
26,800 Sunoco, Inc. 809,025
3,573,281
PRECISION INSTRUMENTS - 3.6%
123,170 Esterline Technology Corp. + 1,770,569
RETAIL INDUSTRY - 1.8%
33,100 Blair Corporation 891,631
STEEL & STEEL PRODUCTS - 3.1%
45,802 AK Steel Holding Corp. 1,030,545
76,828 Keystone Consolidated Inc. + 508,986
1,539,531
TELECOMMUNICATIONS - 3.3%
40,066 Commonwealth Telephone Enterprise + 1,617,665
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
BERWYN FUND
STATEMENT OF INVESTMENTS (Continued)
Number of
Shares COMMON STOCKS (Continued) Value*
<S> <S> <C>
TEXTILES - 5.4%
97,540 Culp, Inc. 1,024,170
193,649 Dixie Group, Inc. + 1,639,975
2,664,145
TOTAL COMMON STOCKS (Cost $44,828,613) 49,672,355
Face
Amount CORPORATE BONDS - 0.8%
$250,000 Campbell Resources 7.5% CV 07/20/04 146,875
250,000 TransLux 7.5% CV 12/01/06 240,000
386,875
TOTAL CORPORATE BONDS (Cost $500,000) 386,875
TOTAL INVESTMENTS (Cost $45,328,613) - 101.0% 50,059,230
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.0%) (507,433)
NET ASSETS - 100% $49,551,797
______________________________________
* See Note 2 to the Financial Statements
** Considered to be an affiliate under the Investment Company
Act of 1940
+ Non-Income Producing Security
ADR American Depositary Receipt
CV Convertible Security
The accompanying notes are an integral part of these financial
statements.
</TABLE>
BERWYN FUND
A SERIES OF THE BERWYN FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 - ORGANIZATION
On April 30, 1999, The Berwyn Fund, Inc. (the Fund) merged with
The Berwyn Funds, a Delaware Business Trust. The Berwyn Funds is
registered under the Investment Company Act of 1940, as amended,
as an open-end management company. Berwyn Fund is a portfolio
series of The Berwyn Funds. The Fund's primary investment
objective is long-tern capital appreciation. For redemptions of
capital shares of the Fund held less than one year, the Fund
charges a redemption fee of 1% of the net asset value of the
capital shares being redeemed.
NOTE 2 - ACCOUNTING POLICIES
The following significant accounting policies are in conformity
with generally accepted accounting principles for investment
companies. The preparation of financial statements in accordance
with generally accepted accounting principles requires management
of the Fund to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
Security Valuation: Securities listed on a national securities
exchange are valued at the last quoted sales price. Securities
not traded on the valuation date and securities not listed are
valued at the last quoted bid price. Short-term investments are
valued at amortized cost which approximates market value. The
value of other assets and securities for which no quotations are
readily available is determined in good faith at fair value using
methods determined by the Board of Directors.
Federal Income Taxes: The Fund intends to continue to qualify as
a regulated investment company and distribute all of its taxable
income and otherwise comply with the provisions of the Internal
Revenue Code of 1986, as amended. Accordingly, no provision for
Federal income tax is required in the financial statements.
Securities Transactions and Investment Income: Securities
transactions are accounted for on the date the securities are
purchased or sold. Costs used in determining realized gains and
losses on sales of investment securities are those of specific
securities sold. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest
income is recorded as earned.
Distributions to Shareholders: The Fund distributes annually all
of its net investment income and any net realized capital gains.
The amounts of distributions from net investment income and net
realized capital gains are determined in accordance with Federal
income tax regulations, which may differ from those amounts
determined under generally accepted accounting principles. These
book/tax differences are either temporary or permanent in nature.
To the extent these differences are permanent, they are adjusted
to reflect their tax treatment in the period the differences
arise.
NOTE 3 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY
TRANSACTIONS
Under the terms of the investment advisory agreement, the Fund
has agreed to pay The Killen Group, Inc. (the "Investment
Adviser") an investment advisory fee at an annual rate of 1% of
the Fund's average daily net assets. The Investment Adviser and
the Directors and Officers of the Investment Adviser, together
with their families, owned 354,060 shares of the Fund at June 30,
1999.
During the period ended June 30, 1999, the Fund paid $48,283 in
commissions to Berwyn Financial Services, a brokerage company
affiliated with the Investment Adviser, to execute certain
portfolio transactions.
NOTE 4 - SECURITY TRANSACTIONS
During the period, the Fund made purchases of $2,392,718 and
sales of $15,380,823 of investment securities other than U.S.
Government securities and temporary cash investments.
Cost of securities owned at June 30, 1999 and the net realized
gains or losses on securities sold for the period then ended for
Federal income tax purposes were not materially different from
amounts reported for financial reporting purposes.
At June 30, 1999, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $4,730,617
of which $16,291,970 related to appreciated securities and
$11,561,353 related to depreciated securities.
