SEMIANNUAL REPORT
FASCIANO FUND, INC.
(FASCIANO FUND, INC. LOGO)
December 31, 1998
February 20, 1999
Dear Fellow Shareholder:
For 1998, we ended up with a gain of 7.2%. When you consider the results of
recent years, a single-digit rate of return for a small-cap fund may appear
benign. However, the stock market in the second half of 1998 was anything but
calm. The Secretary of the U.S. Treasury characterized the highly publicized
global economic turmoil, which rattled markets worldwide, as the worst financial
crisis in 50 years. 1998 was a volatile year, especially for small-cap stocks,
but Fasciano Fund performed relatively well.
Our performance results for various periods ended December 31, 1998 are
summarized below.
<TABLE>
Average Annual Total Return
------------------------------
Six months One year Three year Five year Ten year
---------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Fasciano Fund (6.9)% 7.2% 18.1% 17.5% 15.6%
Small Company Funds Average*<F1> (8.4)% (0.2)% 12.8% 12.6% 14.3%
S&P SmallCap 600**<F2> (7.0)% (1.3)% 14.6% 13.2% 13.2%
Russell 2000**<F2> (7.1)% (2.6)% 11.6% 11.9% 12.9%
</TABLE>
In 1998, after more than ten years of operating in virtual obscurity,
Fasciano Fund was discovered. Our Fund started showing up on the radar screens
of more investors in July when assets crossed the $100 million mark. Then, we
attracted greater attention after the third quarter when Fasciano Fund once
again outperformed in a market downturn. Lastly, Leah Modigliani, a strategist
at Morgan Stanley Dean Witter, analyzed the risk-adjusted performances of small-
cap funds for the ten years ended October 31, 1998; Fasciano Fund ranked as the
top performer.+<F3> The results of her study were published in the November 6,
1998 edition of The Wall Street Journal.
Those events led to a flurry of publicity. Fasciano Fund's assets swelled to
more than $200 million by year-end, half of which were in interest-bearing cash
equivalents waiting for a more permanent home. Our plan is to be fully invested
in equities, but I want you to know we are not rushing to get there. Rather than
chase what is popular and trendy with our buying power, we are relishing the
challenge and opportunity to ferret out new investments for long-term capital
appreciation. Our approach to investing has been and will continue to be
methodical and patient. We are buying based on value and reason, after carefully
weighing risks and rewards, according to our disciplined investment philosophy.
We believe small-cap equities present good value. In recent years, investors
have neglected small-caps and have favored large-caps partly because they are
easier to buy and sell quickly. In the long run, we think emotional trading will
fail and economic value will prevail. Today's values in the small-cap sector
will be recognized, but we do not try to predict when that will happen. We are
busy turning over many stones searching for businesses we want to own that are
reasonably priced. These are the companies we will grow with in the years ahead.
We target businesses that we believe have the potential to double in size
within three to five years. But growth alone is not enough for us. We also seek
small-cap companies with lower risk profiles. So in addition to growth, we focus
on companies that are financially strong and that have proven earnings and cash
flow. And because we prefer business managers who think like owners, we look for
companies that are heavily owned by insiders. We continue to avoid technology
issues, which we find too speculative.
Thank you for the confidence you have placed in Fasciano Fund. I invite you
to visit our updated web site: WWW.FASCIANOFUNDS.COM or e-mail us at
[email protected]. As always, I am totally committed to delivering the
long-term performance and service you expect.
Sincerely,
/s/ Michael F. Fasciano
Michael F. Fasciano, CFA
President
*<F1> Source: Morningstar, Inc. See Performance Distribution Summary.
**<F2> The S&P SmallCap 600 Index is a capitalization weighted index that
measures the performance of selected U.S. stocks with small market
capitalizations. The Russell 2000 Index is formed by taking the 3,000
largest U.S. companies and then eliminating the largest 1,000. The
performance data shown represents past performance and is no guarantee
of future results. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
+<F3> Ms. Modigliani studied the volatility of 82 small-cap funds that have
been in existence for ten years or more, using a risk measure she
developed with her grandfather, Nobel Laureate Franco Modigliani,
called the "M-squared" measure. Using this measure, each fund's risk
was adjusted to the Russell 2000 Index of small-cap stocks. On a
risk-adjusted basis, Ms. Modigliani found that Fasciano Fund produced
an average return of 17.6% per year over the last ten years, compared
with 11.2% for the Russell 2000 Index.
190 South LaSalle Street, Suite 2800, Chicago, Illinios 60603 o 800-848-6050
<TABLE>
PERFORMANCE AND DISTRIBUTION SUMMARY
FASCIANO FUND
--------------------------------------------------------------
Distributions
--------------- Annual S&P Small U.S.
Calendar Beginning Capital Ending Total SmallCap Russell Company Treasury
Year NAV Income Gains NAV Return 600 2000 Funds*<F4> Bills
-------- ---------- ------ ------ ------- -------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 $ 9.55 $0.03 $0.00 $11.45 20.2% 19.5% 24.9% 20.4% 6.4%
1989 $11.45 $0.24 $0.59 $13.16 22.5% 13.9% 16.2% 23.6% 8.1%
1990 $13.16 $0.12 $0.38 $12.50 (1.2)% (23.7)% (19.5)% (9.5)% 7.5%
1991 $12.50 $0.02 $0.36 $16.40 35.1% 48.5% 46.1% 50.3% 5.4%
1992 $16.40 $0.00 $0.46 $17.29 7.7% 21.0% 18.4% 13.7% 3.5%
1993 $17.29 $0.00 $1.00 $17.68 8.1% 18.8% 18.9% 17.1% 3.0%
1994 $17.68 $0.00 $1.14 $17.18 3.7% (4.8)% (1.8)% (0.7)% 4.3%
1995 $17.18 $0.00 $1.34 $21.18 31.1% 30.0% 28.4% 31.3% 5.5%
1996 $21.18 $0.00 $0.59 $26.20 26.5% 21.3% 16.5% 20.1% 5.0%
1997 $26.20 $0.00 $1.49 $30.31 21.5% 25.6% 22.4% 21.4% 4.9%
1998 $30.31 $0.03 $1.25 $31.19 7.2% (1.3)% (2.6)% (0.2)% 4.6%
*<F4> The Morningstar Small Company Funds Index consists of funds that seek capital appreciation by investing primarily in stocks
of companies with market capitalizations of less than $1 billion.
</TABLE>
EQUITY PORTFOLIO BY MARKET CAPITALIZATION
AVERAGE MARKET CAPITALIZATION
$1,050 million
MEDIAN MARKET CAPITALIZATION
$592 million
MARKET CAPITALIZATION RANGES
Micro-cap: <$300 million
Small-cap: $300 million - $1.5 billion
Mid-cap: >$1.5 billion
39 small caps 59.0%
27 micro-caps 14.0%
14 mid-caps 27.0%
<TABLE>
% OF TOTAL % OF COMMON
TOP TEN NET ASSETS AS INDUSTRY SUMMARY NET STOCK OWNED BY
HOLDINGS OF 12/31/98 GROUPING DESCRIPTION SALES*<F5> INCOME*<F5> MANAGEMENT
- -------- ------------ --------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Concord 2.3% Business Provides electronic $375.7 $63.8 6.7%
EFS Inc. Services transaction authorization
and processing.
Pulitzer 2.2% Communications Newspapers, television, $369.5 $25.8 68.8%
Publishing Co. & Media radio broadcasting.
International 2.1% Entertainment Promotes automobile $149.6 $26.1 49.8%
Speedway Corp. & Leisure races and owns auto
racing tracks.
Central 2.0% Communications Media and information $752.7 $89.4 70.1%
Newspapers Inc. & Media company involved
primarily in newspaper
publishing.
HA-LO 1.9% Business Markets and distributes $589.7 $30.7 28.3%
Industries Inc. Services promotional products
in the U.S., Canada,
and Europe.
Central 1.8% Consumer Operates parking facili- $383.2 $26.6 38.6%
Parking Corp. Products ties in 35 states as well
& Services as internationally.
Zebra 1.7% Commercial Worldwide provider of $309.7 $54.4 20.0%
Technologies Corp. Products & bar code solutions to
Services manufacturing and
service entities.
Dentsply 1.4% Health Care Develops, manufactures $795.1 $80.2 3.8%
International Inc. Products and markets a broad
& Services range of products for
the dental market.
Interim 1.3% Business Worldwide provider of $1,890.1 $58.6 2.0%
Services Inc. Services staffing and human
resource consulting
solutions.
Emmis 1.3% Communications Radio broadcasting, $172.4 $12.3 32.4%
Communications & Media television, and
Corporation magazines.
Total in Top -----
Ten Holdings 18.0%
*<F5> Trailing 12 months, in $ millions. Net income figures exclude non-recurring charges and extraordinary items.
</TABLE>
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998 (Unaudited)
<TABLE>
Principal
Amount or Market
Shares Description Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 49.4%
BUSINESS SERVICES - 9.7%
130,000 Concord EFS, Inc. *<F6>
Engaged in electronic transaction authorization, processing,
settlement and funds transfer services in selected markets $ 5,508,750
120,000 HA-LO Industries, Inc. *<F6>
Provides integrated marketing and promotions solutions to
corporate clients primarily in the United States, Canada and Europe 4,515,000
130,000 Interim Services, Inc. *<F6>
National provider of a range of customized staffing solutions
to business, professional and service organizations, and government agencies 3,038,750
50,000 G & K Services, Inc. - Class A
Manufactures uniform garments and is a full service uniform rental provider 2,662,500
100,000 Wallace Computer Services, Inc.
Manufactures and markets business forms, computer labels, machine ribbons,
computer hardware and software, accessories and other office products 2,637,500
30,000 Lason Holdings, Inc. *<F6>
Provides integrated outsourcing services for records management,
document management and business communications 1,745,625
75,000 ABR Information Services, Inc. *<F6>
Provides comprehensive benefits administration, payroll,
and human resource services to employers seeking to outsource
these functions, through its subsidiaries 1,471,875
20,000 ADVO, Inc. *<F6>
Direct marketing firm engaged in soliciting and processing printed advertising from retailers,
manufacturers and service companies for targeted distribution 527,500
35,000 Execustay Corporation *<F6>
Provides interim housing for corporate clients and professionals,
furnishing high-quality apartments for stays over 30 days 455,000
10,000 Metro Networks, Inc. *<F6>
Provides traffic reporting services, news, sports, weather, video news and other information reporting
services to the television and radio broadcast industries in exchange for commercial airtime 426,250
------------
22,988,750
------------
COMMUNICATIONS & MEDIA - 8.3%
60,000 Pulitzer Publishing Co.
Engaged in newspaper publishing, television and radio broadcasting . 5,197,500
65,000 Central Newspapers, Inc.
Engaged in the publication and distribution of newspapers in
the Indianapolis and Phoenix metropolitan areas 4,643,438
70,000 Emmis Communications Corporation *<F6>
A diversified media company with television and radio broadcasting and publishing operations 3,036,250
60,000 Meredith Corporation
Diversified media company involved in magazine and
book publishing and television broadcasting 2,272,500
60,000 McClatchy Newspapers - Class A
Engaged primarily in the publication of newspapers located in
California, Alaska, Washington,the Carolinas, and Minnesota 2,122,500
60,000 Lee Enterprises, Inc. *<F6>
In the business of newspaper publishing and television broadcasting 1,890,000
27,000 Journal Register Company *<F6>
Publishes small metropolitan, suburban daily and suburban and community non-daily
newspapers serving markets in New York, Connecticut, Ohio, Pennsylvania, Missouri and
central New England. 405,000
------------
19,567,188
------------
HEALTH CARE PRODUCTS & SERVICES - 6.0%
130,000 Dentsply International, Inc.
Designs, develops, manufactures, and markets dental consumable and
laboratory products, and dental equipment 3,347,500
70,000 Landauer, Inc.
Offers a service for measuring the dosage of x-ray, gamma
radiation and other penetrating ionizing radiations 2,266,250
60,000 Hooper Holmes, Inc.
Provides medical and paramedical examinations and related
services to life and health insurance companies 1,740,000
45,000 Serologicals Corporation *<F6>
Provider of specialty human antibody based products and services to
healthcare companies. Services include donor recruitment and clinical testing services 1,350,000
20,000 Express Scripts, Inc. *<F6>
As an independent pharmacy benefit manager and managed care company, Express Scripts
provides a broad range of pharmacy benefit and medical information
management services, as well as managed vision care programs 1,342,500
100,000 Young Innovations, Inc. *<F6>
Designs, manufactures and markets single-use supplies, autoclavable
instruments and other products used by dental professionals 1,312,500
50,000 Brookdale Living Communities, Inc. *<F6>
Provides senior and assisted living services to the elderly through its
facilities located in urban and suburban areas of major metropolitan markets 975,000
30,000 Kendle International, Inc. *<F6>
Contract research organization providing integrated clinical research services
on a contract basis to the pharmaceutical and biotechnology industries 701,250
50,000 Sterile Recoveries, Inc. *<F6>
Provides hospitals and surgery centers with a comprehensive surgical procedure-
based delivery and retrieval service for reusable gowns, towels, etc.
In addition,provides disposable products necessary for surgery 587,500
10,000 Henry Schein, Inc. *<F6>
Distributor of healthcare products and services to office-based
healthcare practitioners in North America and Europe. The Company's primary
customers are dental practices and dental laboratories 447,500
------------
14,070,000
------------
COMMERCIAL PRODUCTS AND SERVICES - 5.1%
140,000 Zebra Technologies Corp. - Class A *<F6>
Provides bar code solutions to manufacturing and service entities worldwide,
for use in automatic identification and data collection systems 4,025,000
130,000 Superior Services, Inc. *<F6>
Solid waste services company providing solid waste collection, transfer,
recycling and disposal services to residential, commercial and industrial customers 2,608,125
40,000 Modine Manufacturing Co.
Develops, manufactures, and markets heat exchangers and systems for use
in various original equipment manufacturer applications and for sale to
the automotive aftermarket and to a wide array of building markets 1,450,000
50,000 IDEX Corp.
Manufactures industrial pumps and related controls for use in process
applications, and proprietary equipment that may combine pumps or other
devices into products for industrial, commercial and safety applications 1,225,000
50,000 Juno Lighting, Inc.
Specializes in the design, manufacture and marketing of
lighting fixtures for commercial and residential use 1,168,750
30,000 Wilmar Industries, Inc. *<F6>
A national marketer and direct distributor of repair and maintenance
products, principally to the apartment housing market 609,375
20,000 Andrew Corporation *<F6>
A multinational supplier of communication products and systems to
worldwide commercial, industrial, governmental, and military customers 330,000
20,000 Inacom Corp. *<F6>
Provides information technology products and technology
management services to the end-user business clients 297,500
20,000 Communications Systems, Inc.
Engaged in the manufacture and sale of modular connecting
and wiring devices for voice and data communications 236,250
10,500 Supreme Industries, Inc. *<F6>
Manufactures truck bodies that are mounted on new truck
chassis produced by others. Also manufactures shuttle buses and trailers 101,063
------------
12,051,063
------------
CONSUMER PRODUCTS AND SERVICES - 4.2%
130,000 Central Parking Corp.
Operates parking facilities in 34 states, the
District of Columbia, and several international locations 4,216,875
60,000 Blyth Industries, Inc. *<F6>
Designs, manufactures, markets and distributes a line of candles
and home fragrance products, and markets a range of related candle
accessories and gift bags. Also produces portable heating fuel products 1,875,000
41,700 Tootsie Roll Industries, Inc.
Engaged in the manufacture and sale of candy for over 100 years. Products include Tootsie Roll,
Charms, Blow Pops, Junior Mints, Sugar Babies, Charleston Chews, Sugar Daddys and others 1,631,512
20,000 Action Performance Companies, Inc. *<F6>
Designer and seller of licensed motorsports collectible and
consumer products in the United States 707,500
40,000 Day Runner, Inc. *<F6>
Develops, manufactures and markets paper-based organizers for retail markets. Day Runner
products are carried by approximately 20,000 retail stores across the U.S. 580,000
15,000 Garan, Inc.
Designs, manufactures and sells apparel for children, men and women.
Products are sold under the trademarks Garan, Garanimals, Everlast and other names 421,875
10,000 Snap-on Incorporated
Manufactures and distributes hand tools, power tools, tool storage products,
diagnostic equipment,shop equipment, and diagnostic software and other services 348,125
15,000 LaCrosse Footwear, Inc.
Designs, develops, markets and manufactures protective footwear and
rainwear for sporting, occupational and recreational markets 138,750
11,025 Monro Muffler Brake, Inc. *
Operates a chain of 350 automotive undercar repair shops. Shops provide a full range of services for
mufflers, exhaust systems, brakes, steering, suspension, and wheel alignment 79,931
------------
9,999,568
------------
ENTERTAINMENT & LEISURE - 2.8%
122,500 International Speedway Corp. - Class A
A leading promoter of motorsports activities in the U.S. The company owns and/or operates 5
motorsports facilities: Daytona, Talladega, Phoenix, Darlington, and Watkins Glen International 4,961,250
50,000 Carmike Cinemas, Inc. - Class A *<F6>
Engaged in the motion picture exhibition business. As of 12/98, Carmike operated 488 theatres
with an aggregate of 2,752 screens in 36 states 1,015,625
12,500 Penske Motorsports, Inc. *<F6>
Promoter and marketer of professional motorsports in the United States which, through its
subsidiaries, owns and operates a number of speedways 332,812
10,000 Speedway Motorsports, Inc. *<F6>
Owns and operates the Charlotte Motor Speedway, Bristol Motor Speedway, Atlanta Motor
Speedway, Sears Point Raceway and Texas Motor Speedway. The company also promotes and
sponsors motorsports activities 285,000
------------
6,594,687
------------
INSURANCE AND INVESTMENT MANAGEMENT - 2.8%
60,000 Chicago Title Corporation *<F6>
Provider of title insurance and other related services for residential
and commercial real estate transactions 2,816,250
154,700 HCC Insurance Holdings, Inc.
Principally engaged in providing aviation, marine, offshore energy, property,
accident and health,and lenders single interest insurance and reinsurance on a worldwide basis 2,726,588
50,000 Waddell & Reed Financial, Inc.
Underwrites and distributes 36 mutual fund portfolios. Also distributes underwritten
variable annuities and life insurance products of Torchmark Corporation 1,184,375
------------
6,727,213
------------
TRANSPORTATION - 2.5%
80,000 Midwest Express Holdings, Inc. *<F6>
Operates single-class, premium service passenger jet airline that caters to business travelers and
serves selected major business destinations throughout the U.S. and Toronto from operations based
in Milwaukee and Omaha 2,105,000
100,000 Wisconsin Central Transportation Corporation *<F6>
A holding company that operates approximately 2,925 route miles of railway
serving Wisconsin,Illinois, Minnesota, Michigan, and Ontario 1,718,750
40,000 C.H. Robinson Worldwide, Inc.
Global provider of multimodal transportation services and logistics
solutions through a network of 115 offices in 38 states and internationally 1,037,500
40,000 Eagle USA Airfreight, Inc. *<F6>
Provider of air freight forwarding and other transportation and logistics services 980,000
10,000 Arnold Industries, Inc.
Engaged in the trucking and warehousing business through its subsidiaries,
New Motor Penn Express and Arnold Transportation Services 161,250
------------
6,002,500
------------
BANK & BANK HOLDING - 2.5%
40,000 CNB Bancshares, Inc.
Engages in banking, data processing and information services, underwriting
credit life and disability insurance, and selling property and casualty insurance 1,865,000
30,000 First Midwest Bancorp, Inc.
A multi-bank holding company for First Midwest Bank,
National Association and McHenry State Bank 1,141,875
50,000 Doral Financial Corporation
Bank holding company that operates in the mortgage banking,
commercial banking and broker-dealer businesses 1,106,250
30,000 Community First Bankshares, Inc.
A multi-bank holding company that operates banks and bank branches in 109 communities
in nine states 631,875
15,000 Cass Commercial Corporation
Bank holding company for Cass Bank and Trust Company, and provides information services
through its Cass Information Systems subsidiary 373,125
20,000 Corus Bankshares, Inc.
Bank holding company for CORUS Bank, which provides financial services through 11 bank
branches in the Chicago metropolitan area 645,000
13,000 Bank of Commerce
State-chartered commercial bank, providing a variety of commercial bank
services, including lending and deposit services, and construction lending 217,750
------------
5,980,875
------------
DISTRIBUTOR - 1.7%
30,000 CDW Computer Centers, Inc. *<F6>
Sells MS-DOS/Microsoft Windows and Apple/Macintosh based microcomputer hardware and
peripherals including: desktop computers, notebooks and laptops, printing devices, video monitors,
networking products, software and accessories 2,878,125
30,000 MSC Industrial Direct Company, Inc. *<F6>
A direct marketer of a full line of industrial products intended to satisfy its
customers' maintenance,repair and operations supplies requirements 678,750
10,000 TESSCO Technologies, Inc. *<F6>
Distributor of products to the wireless communications industry, serves customers in the cellular
telephone, personal communication system (PCS), paging and mobile radio-dispatched markets 227,500
20,000 Valley National Gases Corporation *<F6>
A packager and distributor of industrial, medical and specialty gases, welding equipment and
supplies, propane and fire protection equipment in 10 states in the mid-Atlantic and midwestern
regions of the U.S. 112,500
------------
3,896,875
------------
SAVINGS & LOAN - 1.3%
75,000 ITLA Capital Corporation *<F6>
Primarily engages in the origination of loans secured by income producing real estate 1,134,375
50,000 Home Federal Bancorp
Unitary savings and loan holding company for Home Federal Savings Bank 1,112,500
30,000 Alliance Bancorp., Inc.
Registered savings and loan holding company engaged in the business of providing
financial service products through its wholly-owned subsidiary, Liberty Federal Bank 586,875
20,000 Haven Bancorp, Inc.
Holding company for Columbia Federal Saving Bank, a federally chartered stock savings bank 300,000
------------
3,133,750
------------
MACHINERY - INDUSTRIAL - 1.1%
60,000 Regal-Beloit Corporation
Manufactures a line of mechanical products to control motion and torque and electrical products
such as motors and generators 1,380,000
16,100 The Manitowoc Company, Inc.
Designs and manufactures commercial ice machines and refrigeration products, and cranes and
related products. Manitowoc also engages in marine vessel repair 714,438
25,000 Robbins & Myers, Inc.
Designs, manufactures and markets fluid handling products and systems for the process industry 553,125
------------
2,647,563
------------
SPECIALTY FINANCE - 0.8%
90,000 American Capital Strategies, Ltd.
Specialty finance company that has been principally engaged
in arranging commercial loans to small and medium sized business 1,552,500
30,000 Rock Financial Corporation
Specialty finance company marketing debt consolidation and home financing
products, secured by 1st or 2nd mortgages, to conventional and subprime borrowers 390,000
------------
1,942,500
------------
ELECTRONICS - 0.6%
60,000 Methode Electronics, Inc. - Class A
Manufactures electronic components that connect, convey and control electrical energy, signal
and pulse, including connectors, automotive components, interconnect devices,
printed circuits, and current carrying distribution systems 937,500
50,000 Richey Electronics, Inc. *<F6>
Specialty distributor of interconnect, electromechanical and
passive electronic components, and a provider of value-added assembly services 515,625
------------
1,453,125
------------
TOTAL COMMON STOCKS (cost $95,413,393) 117,055,657
------------
SHORT-TERM INVESTMENTS - 49.1%
VARIABLE RATE DEMAND NOTES**<F7> - 25.4%
$ 11,043,277 Firstar Bank, 5.38% 11,043,278
9,413,082 Wisconsin Electric Power Co., 5.17% 9,413,082
8,306,401 Sara Lee, 5.23% 8,306,401
8,289,291 Warner Lambert, 5.18% 8,289,291
7,842,131 American Family Financial Services, Inc., 5.17% 7,842,131
7,365,563 General Mills, 5.23% 7,365,563
7,246,152 Pitney Bowes, 5.23% 7,246,152
576,562 Wisconsin Central Credit Union Corporation, 5.30% 576,562
------------
60,082,460
COMMERCIAL PAPER - 23.7%
General Electric Capital Corporation
3,500,000 5.14%, 1/12/99 3,500,000
6,000,000 5.31%, 1/15/99 6,000,000
Prudential Funding Corporation
3,000,000 5.33%, 1/13/99 3,000,000
6,000,000 5.30%, 1/20/99 6,000,000
CIT Group Holdings,Inc.
6,899,000 5.15%, 1/19/99 6,899,000
General Motors Acceptance Corp.
6,686,000 5.34%, 1/07/99 6,686,000
American Express Credit
6,000,000 4.80%, 2/04/99 6,000,000
Associates Corporation
6,000,000 5.30%, 1/04/99 6,000,000
Ford Motor Credit Corporation
6,000,000 5.17%, 1/22/99 6,000,000
Norwest Corporation
5,941,000 5.17%, 1/07/99 5,941,000
------------
56,026,000
TOTAL SHORT-TERM INVESTMENTS (cost $116,108,460) 116,108,460
------------
TOTAL INVESTMENTS - 98.5% (cost $211,521,853) 233,164,117
------------
OTHER ASSETS, LESS LIABILITIES - 1.5% 3,570,827
------------
TOTAL NET ASSETS - 100.0% $236,734,944
------------
------------
*<F6> non-income producing
**<F7> Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change
periodically on specified dates. The rates listed are as of December 31, 1998.
</TABLE>
The accompanying notes to financial statements are an integral part of this
schedule.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (unaudited)
ASSETS
Common stocks, at market value (cost: $95,413,393) $117,055,657
Variable rate demand notes and commercial paper,
at amortized cost, which approximates market
value (cost: $116,108,460) 116,108,460
Capital shares sold 3,805,030
Receivables
Dividends 127,260
Interest 418,214
Prepaid expenses and other assets 40,980
------------
Total assets $237,555,601
------------
------------
LIABILITIES AND NET ASSETS
Capital shares redeemed $ 221,367
Payables and accrued expenses
Payable for securities purchased 367,257
Accrued expenses and other liabilities 56,007
Due to adviser 176,026
------------
Total liabilities 820,657
------------
Net assets
Common stock, $.01 par value; 10,000,000 shares
authorized,7,590,335 shares issued and
outstanding, and paid-in capital 216,875,209
Accumulated undistributed net investment income 621,247
Accumulated undistributed net realized
gain (loss) on investments (2,403,776)
Net unrealized appreciation on investments 21,642,264
------------
Total net assets 236,734,944
------------
Total liabilities and net assets $237,555,601
------------
------------
Net asset value per share $ 31.19
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
For the six months ended December 31, 1998 (unaudited)
INCOME
Interest $ 1,449,295
Dividends 468,749
Other income 14,806
------------
1,932,850
------------
EXPENSES
Management fee 679,240
Transfer and disbursing agent fees 54,615
Administration fee 43,511
Registration fees 29,322
Custodian fees 20,397
Accounting fee 18,098
Legal fees 11,170
Printing and mailing fees 9,204
Audit fees 7,341
Other operating expenses 3,549
------------
Total expenses 876,447
------------
Net investment income 1,056,403
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS
Net realized gain (loss) on investments (2,474,009)
Net change in unrealized appreciation on investments 996,364
------------
Net gain (loss) on investments (1,477,645)
------------
Net increase (decrease) in net assets
resulting from operations $ (421,242)
------------
------------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 1998 (unaudited) and the year ended June
30, 1998
<TABLE>
December 31, June 30,
1998 1998
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,056,403 $ 145,596
Net realized gain (loss) on investments (2,474,009) 8,783,209
Net change in unrealized appreciation 996,364 7,971,431
----------- ----------
Net increase (decrease) in net assets resulting
from operations (421,242) 16,900,236
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income (208,185) --
Distributions from net capital gains (8,674,266) (2,597,640)
----------- ----------
Total distributions (8,882,451) (2,597,640)
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (5,190,248 and
1,315,647 shares, respectively) 161,159,798 42,757,189
Increase in shares issued for reinvested distributions
(282,573 and 84,945 shares, respectively) 8,683,470 2,512,667
Cost of shares redeemed (602,337 and 210,578 shares,
respectively) (18,761,831) (6,735,975)
----------- ----------
Net increase in net assets derived from
capital share transactions 151,081,437 38,533,881
----------- ----------
Net increase in net assets 141,777,744 52,836,477
----------- ----------
NET ASSETS AT BEGINNING OF PERIOD 94,957,200 42,120,723
----------- ----------
NET ASSETS AT END OF PERIOD (including accumulated
undistributed net investment gain (loss) of $621,247 and
($226,970), respectively) $236,734,944 $94,957,200
----------- ----------
----------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
Condensed financial information per share of capital stock outstanding
throughout the period is presented below:
<TABLE>
(unaudited)
Six Months
ended
December 31, Year ended June 30,
----------------------------------------------
1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 34.91 $27.53 $24.33 $20.17 $17.34 $17.74
Income from investment operations:
Net investment income (loss) 0.20 0.16 (0.03) (0.05) (0.24) (0.05)
Net realized and unrealized
gain (loss) on investments (2.64) 8.71 3.82 5.55 4.21 0.65
-------- ------- ------- ------- ------- -------
Total from investment operations (2.44) 8.87 3.79 5.50 3.97 0.60
Less distribution:
Dividends from net investment income (0.03) 0.00 0.00 0.00 0.00 0.00
Distributions from net capital gains (1.25) (1.49) (0.59) (1.34) (1.14) (1.00)
-------- ------- ------- ------- ------- -------
Total distributions (1.28) (1.49) (0.59) (1.34) (1.14) (1.00)
-------- ------- ------- ------- ------- -------
Net asset value at end of period $ 31.19 $ 34.91 $ 27.53 $ 24.33 $ 20.17 $ 17.34
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
Total return (6.9)%(1)<F8> 33.2% 15.8% 28.3% 24.1% 3.3%
Ratios/Supplemental Data:
Net assets at end of period (in thousands) $236,735 $94,957 $42,121 $28,981 $20,868 $16,582
Ratio of expenses to average net assets 1.3%(2)<F9> 1.3% 1.4% 1.5% 1.7% 1.7%
Ratio of net investment income (loss)
to average net assets 1.5%(2)<F9> 0.2% (0.4)% (0.3)% (0.6)% (0.3)%
Portfolio turnover rate 11.7%(1)<F8> 49.8% 41.0% 45.6% 37.9% 99.0%
(1)<F8> Not annualized
(2)<F9> Annualized
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
Fasciano Fund, Inc. (the "Fund"), a Maryland corporation, commenced
operations on August 1, 1987 as a private investment company. On June 30, 1988,
the Fund registered with the Securities and Exchange Commission as a diversified
open-end management investment company under the Investment Company Act of 1940
and began offering its shares to the public on November 10, 1988. The primary
objective of the Fund is long-term capital growth.
The fiscal year end of the Fund is June 30. The following is a summary of
significant accounting policies followed by the Fund in the preparation of its
financial statements in accordance with generally accepted accounting
principles.
(a) Investment and shareholder transactions are recorded on a trade date
basis.
(b) Each security traded on a national securities exchange or traded over the
counter and quoted on the Nasdaq National Market will be valued at the last sale
price on the day of valuation. Securities for which there was no sale on the
day of valuation will be valued at the current bid prices. Each money market
instrument having a maturity of 60 days or less from the date of purchase is
valued on an amortized cost basis, which approximates market value. Other assets
and securities will be valued at a fair value, as determined in good faith by
the Board of Directors.
(c) Dividends are recognized as income on the ex-dividend date. Interest
income and operating expenses are recorded on the accrual basis.
(d) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
(2) RELATED PARTIES:
Michael F. Fasciano is an officer and director of the Fund and also an
officer, director and sole shareholder of the investment adviser, Fasciano
Company, Inc. Mr. Fasciano held 18,116 shares or 0.2% of the outstanding common
stock of the Fund at December 31, 1998.
The non-affiliated directors receive a fee of $2,000 annually.
The management fee was paid to Fasciano Company, Inc. for its services as
investment adviser. This fee is paid monthly at the rate of 1/12 of 1% (an
annual rate of 1.0%) of the average daily net asset value of the Fund.
Total annual operating expenses of the Fund shall not exceed 2% of average
net assets, and the adviser has agreed to pay any excess operating expenses or
to reimburse the Fund for any sums expended for such expenses in excess of that
amount. For this purpose, brokers' commissions and other charges relative to the
purchase and sale of portfolio securities, interest charges, taxes and
litigation and other extraordinary expense shall not be regarded as operating
expenses.
(3) INVESTMENTS:
During the six months ended December 31, 1998, purchases of securities other
than short-term investments were $51,828,492. Sales of such securities for that
period were $9,698,603.
Cost of investments is the same for financial reporting purposes as for
Federal income tax purposes. At December 31, 1998, on a tax basis, gross
unrealized appreciation of investments was $26,598,016 and gross unrealized
depreciation of investments was $4,955,752.
(4) INCOME TAXES:
No provision for federal income taxes has been made. The Fund has complied
to date with the provisions of the Internal Revenue Code applicable to regulated
investment companies and intends to distribute substantially all of its net
investment income and net realized capital gains in order to avoid payment of
all future federal income taxes.
(5) DISTRIBUTIONS TO SHAREHOLDERS:
On December 29, 1998, the Fund distributed net investment income, short-term
and long-term capital gains of approximately $0.03, $0.18 and $1.07 per share,
respectively.
INVESTMENT ADVISER
Fasciano Company, Inc.
ADDRESS OF FUND & ADVISER
190 South LaSalle Street
Suite 2800
Chicago, Illinois 60603
(312) 444-6050
(800) 848-6050
www.fascianofunds.com
[email protected]
TRANSFER AGENT, DIVIDEND DISBURSING
AGENT AND ADMINISTRATOR
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201
(414) 765-4124
(800) 982-3533
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701
Milwaukee, Wisconsin 53201
(414) 765-4124
(800) 982-3533
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
LEGAL COUNSEL
Bell, Boyd & Lloyd
Chicago, Illinois
This report is submitted for the information
of shareholders of the Fund. It is not
authorized for distribution to prospective
investors unless preceded or accompanied
by an effective prospectus.
Printed on Recycled Paper
