A No - Load Fund
MUHLENKAMP FUND
PO Box 598, Wexford PA 15090-0598 * (412)935-5520 or
(800)860-3863
e-mail:[email protected]
Semi - Annual Report
June 30, 1996
Dear Shareholder:
The Trustees and Management of the Muhlenkamp Fund are
pleased to present this semi - annual report of your fund.
As of June 30, 1996, the Net Asset Value (NAV) of your fund
was $23.16, up 8.94% year to date. For the same period the
S&P 500 was up 8.9%.
Year Ending Total Return (%)
12/31 Muhlenkamp Fund S&P 500
1991 45.4 30.5
1992 15.8 7.7
1993 18.1 9.9
1994 (7.3) 1.3
1995 32.9 37.1
6/30/96 8.9 8.9
Chart goes here. This is a line chart comparing the
performance of the Muhlenkamp Fund with the S&P 500 since
December 31, 1990. On December 31, 1990 the Fund and the
S&P are each assigned an index value of 100. At the end of
each subsequent year (and six month period ending June 30,
1996) this value is recalculated using the performance
figures from the above table. The results shown below are
then plotted on a line chart.
X-Axis = Date Y-Axis = Index Value
Muhlenkamp Fund S&P 500
12/31/90 100 100
12/31/91 145 131
12/31/92 168 141
12/31/93 198 155
12/31/94 184 157
12/31/95 245 215
6/30/96 267 234
At year-end, we wrote, Stock and bond prices are fair, the
long and intermediate trends are positive, and the short-
term trends are neutral. The price actions of various
markets since then have diverged widely.
Since year-end, stock prices moved up 8-10%, giving us an
equivalent of twelve months of returns in five months. In
this same time period, bonds prices moved down 10%. Our
judgment in late June was that the stock-bond spread was as
wide as it was likely to get. (Some dividend discount
models, which showed stocks fairly priced relative to bonds
at year-end, showed stocks overpriced relative to bonds by
30% in late June.) This made stock prices vulnerable to any
continued weakness or any accident in the bond market.
Our readers know that we believe prices in any market can
swing plus or minus 10% at any time for any reason. Moves
within a 10% range are psychological noise. We believe
the recent decline in bond prices has been mostly noise,
abetted by fears of increased inflation. These fears are
aided by some economists who are predicting higher inflation
and higher interest rates. Specifically, the chief
economist of Morgan Stanley is predicting treasury rates as
high as 8% by year-end 1997. While we dont (yet) believe
this prediction, we must respect the possibility (and the
author). The real point today is that with bond prices
already down 10%, any bond market accident could trigger
another 10% decline
whether the fundamentals justify it or not. In 1994, the
Orange County bankruptcy was such an accident. While we
think such an accident is less likely to happen today
(largely because a big one happened just two years ago), the
nature of accidents is such that they are hard to predict.
To sum the above in one sentence the price moves of the
stock and bond markets since year-end have made stocks more
vulnerable to any further decline in bond prices. The 2%
price declines in the bond and stock markets, in response to
the strong employment numbers released on July 5,
demonstrated this thought process and the resulting
vulnerability.
Meanwhile, on a short-term basis, stock prices were widely
dispersed around the 8-10% gain in the averages. Recent
focus on small capitalization and technology stocks have
highlighted a speculative bent in the marketplace. This was
reinforced by the recent tendency to consider a move of a
few weeks duration as a trend and a counter move of a few
days as a correction. Our judgment was that a correction
which dampened these speculative juices would be the best
thing that could happen. And, since early June, we have
been witnessing such a correction. The problem is that such
corrections seldom confine themselves to the areas of
concern they often spread to the rest of the market. If
we are about to get a broader based correction, the current
weakness in the high-tech stocks, aided by weakness in the
bond market such as occurred on July 5, should trigger it.
The above was written in the first week of July. Since then
the correction in the high tech stocks spread to the broader
market and appears to have climaxed on July 16 . We believe
the correction in high tech stocks was necessary and a
positive development. In fact, we judge the price actions
of the past as nearly ideal (to be truly ideal would require
that our stocks go up while others go down).
We still judge the long-term and intermediate-term trends to
be positive. But prices are full enough; and short-term
trends are dicey enough, that we became more nervous than
we have been for some time. Consequently, we culled out
some holdings and accumulated some cash. Since July 17,
weve been buying selectively. However, we want to see a
few more weeks of market response before we are willing to
say the correction is over.
The bigger question is one of economic theory. Most of the
people who are now chief economist in various places
(including Morgan Stanley) studied economics 30-40 years
ago. Most of them were taught that growth causes inflation;
and consquently fear that good growth in the current economy
will cause higher inflation and higher interest rates. We
believe the U.S. experience of the past 30 years has proved
that growth does not cause inflation. The chief economist
at Donaldson Lufkin and Jenrette, based partly on a similar
belief, is predicting long-term treasury rates of 4% by
year-end 1997. This is opposite of the prediction of Morgan
Stanley. Strange as it may seem, both economists could be
right. Financial markets are people, and eighteen months is
ample time to reflect first the fears of higher inflation
rates and then the (possible) reality of lower inflation
rates. It is these conflicting prospects that make the
current markets so "interesting".
Meanwhile, of course, other concerns that we have been
monitoring remain active. So far, our troops in Bosnia
remain unwounded; but the bombing in Saudia Arabia marks
this vulnerability. The election results in Russia indicate
continuing progress towards a freer people and freer markets
in that country, albeit often in fits and starts.
Current politics in this country remain more theater than
policy, and soap opera theater at that. Two of the more
interesting presidential election results in recent history
were Carter over Ford in 1976 and Clinton over Bush in 1992.
In each of these elections, I believe, the American people
chose an unknown promise over a known, dull quantity.
Clintons problem in 1996 is that he is now a known promise,
facing a known, dull Dole. The only argument I have heard
for re-electing Clinton is that things are pretty good, why
change them. I would respond that things are pretty good
largely because Clinton failed in his agenda. The only
thing Bill Clinton has accomplished so far it to make
Richard Nixon look honest by comparison.
Ronald H. Muhlenkamp
President
August, 1996
Investment Custodian Auditors
Advisor
Muhlenkamp & Star Bank Schneider, Downs &
Co., Inc. Co., Inc., CPAs
12300 Perry 425 Walnut 1133 Penn Avenue
Highway Street
Wexford, PA Cincinnati, OH Pittsburgh, PA 15222
15090 45201-1118
(412)935-5520 (513)632-4603 (412)261-3644
Transfer Agent
American Data
Services
24 West Carver
Street
Huntington, NY
11743
(516)385-9580
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
ASSETS
INVESTMENTS, AT VALUE (Identified Cost $29,453
$21,685,453) ,728
PREPAID EXPENSES $44,657
RECEIVABLES
Dividends $37,770
Interest $13,727
Subscriptions $35,243
Overpayment of Advisor Fees (Note 3) $
-
Total Receivables $86,740
OTHER ASSETS $33,472
Total Assets $29,618
,597
LIABILITIES
ACCOUNTS PAYABLE
Fund Services $690
Advisor Fee Payable $4,030
Redemptions $1,360
Total Liabilities $6,080
Total Net Assets $29,612
,517
NET ASSETS
CAPITAL PAID IN ON SHARES OF BENEFICIAL INTEREST $21,669,
(Shares Authorized - unlimited) (Note 4) 988
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME 113,153
ACCUMULATED UNDISTRIBUTED GAIN ON INVESTMENTS 61,101
NET UNREALIZED APPRECIATION OF INVESTMENTS AS OF 7,768,27
JUNE 30, 1996 5
Total Net Assets $29,612,
517
NUMBER OF SHARES OF BENEFICIAL INTEREST 1,278,38
OUTSTANDING (Note 4) 7.461
NET ASSET VALUE PER SHARE (Net assets divided by $23.16
shares outstanding)
See notes to financial statements.
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
Muhlenkamp
Fund
Principal Value
Amount
or Shares
COMMON STOCK - 96.1%
Aerospace - 4.7%
* BE Aerospace, Inc. 17,000 $221,000
Lockheed Martin 14,000 1,176,00
0
Airlines - 2.1%
Air Express International Corp. 21,562 609,126
Autos - 3.6%
Ford Motor Company 22,000 712,250
Superior Industries 13,180 349,271
Building - 1.3%
Armstrong World 3,000 172,875
* Griffon Corp. 18,400 149,500
* Strober Organization 16,000 66,500
Banks - 7.6%
Chase Manhattan Corp. 12,000 847,500
Citicorp 10,000 826,250
Mellon 10,000 570,000
Brokerage - 6.9%
A. G. Edwards 12,500 339,063
Merrill Lynch 16,000 1,042,00
0
Morgan Stanley, Inc. 4,000 196,500
Salomon, Inc. 5,000 220,000
Southwest Securities, Inc. 20,000 232,500
Capital Goods - 10.3%
Commercial Intertech 10,000 257,500
General Electric 9,000 778,500
Graco Inc. 17,550 355,388
* Idex Corp. 7,500 285,000
Kysor Industrial 24,000 582,000
Trinova 24,000 801,000
Conglomerate - 2.0%
GATX Corp. 6,000 289,500
Scotsman Industries, Inc. 15,000 301,875
Chemicals - 4.5%
Eastman Chemical 8,000 487,000
Union Carbide Corp. 15,000 596,250
Atlantic Richfield Exchangeable 10,000 243,750
Note
Electronics - 1.0%
Intel Corp. 4,000 293,750
Finance - 6.8%
Fidelity National Financial 12,009 181,636
Green Tree Acceptance Corp. 38,800 1,212,50
0
National City Corp 16,852 591,927
Investment Company - 11.8%
Star Treasury Fund 3,482,209 3,482,20
9
Furniture - 2.1%
Roberds Inc. 5,000 53,125
Stanley Furniture, Inc. 25,000 268,750
* Winsloew Furniture 49,600 285,200
Sub-Total $19,077,
195
* Non - Income Producing
See Notes to Financial Statements
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996
(Continued)
Muhlenkamp Fund
Principal Value
Amount
or Shares
BALANCE BROUGHT FORWARD $19,077
,195
Insurance - 17.6%
American Bankers Insurance Group 8,000 349,000
Bankers Life Holding 20,000 442,500
Conseco, Inc. 24,000 960,000
Frontier Insurance 29,426 1,015,2
00
Integon Corp. 15,000 301,875
Penn Treaty American Corp. 5,000 107,500
Sun America 22,500 1,271,2
50
Vesta 22,500 750,937
Metals - 2.3.%
J&L Specialty Steel 30,000 446,250
Matthews International Corp. 8,000 220,000
Paper & Forest Products - 2.1%
Champion International 15,000 626,250
Rails - 0.8%
Burlington Northern Sante Fe 3,000 242,625
Corp.
Savings and Loan - 2.8%
Federal National Mortgage Corp. 24,400 817,400
Technology - 1.4%
Applied Materials 10,000 305,000
* PLC Systems 5,000 111,875
Tobacco - 4.5%
Philip Morris 12,860 1,337,4
40
Total Common Stocks (Cost $28,382
$21,141,384) ,297
BONDS & NOTES - 2.7%
General Motors Acceptance 2,300,000 556,600
Corporation -0%, deferred
debentures, due 2015
U.S. Treasury, stripped interest 800,000 248,831
- - 0%, due 2013
Total Bonds and Notes (Cost $805,43
$544,013) 1
PREFERRED STOCK - .8%
Pioneer Financial Services Inc. 16,000 266,000
Total Preferred Stock (Cost $266,00
$276,854) 0
Total Security Investments $29,453
(Cost $21,685,397) ,728
* Non - Income Producing
See notes to financial statements.
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
INVESTMENT INCOME
Interest $35,530
Dividends 239,379
Total Investment Income 274,909
EXPENSES
Investment advisor (Note 3) $135,0
18
Fund Services 4,262
Registrations and filing 2,416
Custodian 10,638
Printing and Postage Expenses 6,984
Legal 267
Misc. 26
Auditor's Fees 746
Total Expenses 160,357
Commission Credits (Note 6) (0)
Net Expenses 160,357
Net Investment Income 114,552
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS
Net realized gain on investments 57,050
Change in unrealized appreciation
in value of investments for the period 2,065,590
Net Gain on Investments 2,122,640
Net Increase in Net Assets $2,237,192
Resulting from Operations
See notes to financial statements.
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
STATEMENT OF CHANGES IN NET ASSETS
FOR YEAR ENDED DECEMBER 31, 1995
AND SIX MONTH PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
Six
month
period
ended
June 1995
30,
1996
(Unaudi
ted)
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net Investment Income $114,55 $222,99
2 4
Net realized gain on investments 57,050 133,077
Unrealized (depreciation) 2,065,5 5,376,4
appreciation in value of investments 90 66
Net Increase (Decrease) in Net
Assets Resulting From $2,237, 5,732,5
Operations 192 37
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income - (231,70
6)
Net realized gain from investments - (129,02
6)
- (360,37
2)
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of 210,183
shares in 1996 and 201,856 4,725,4 3,679,8
shares in 1995 (Note 4) 84 49
Net asset value of 0 shares in 1996
and 21,392 shares in 1995 issued to - 349,551
shareholders on reinvestment of dividends
(Note 5)
Cost of 40,570 shares in 1996 and
132,886 shares in 1995 redeemed (Note (921,49 (2,440,
4) 0) 624)
Net Increase in Net Assets
Resulting from Capital 3,803,9 1,588,7
Share Transactions 94 76
Total Increase in Net Assets 6,041,1 6,960,5
86 81
NET ASSETS
Beginning of year 23,571, 16,610,
331 750
End of period (including
undistributed investment gain of
$61,101 and accumulated undistributed net
investment income of $113,153 in 1995, $29,612 $23,571
and undistributed net investment income ,517 ,331
of $7,313 in 1994)
See notes to financial statements.
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
SELECTED PER SHARE DATA AND RATIOS
FOR THE YEARS ENDED DECEMBER 31,1991 THROUGH 1995
AND SIX MONTH PERIOD ENDED JUNE 30, 1996 (UNAUDITED)
Six
month
period
ended
June 1995 1994 1993 1992 1991
30,
1996
(Unaudi
ted)
NET ASSET VALUE, BEGINNING $21.26 $16.23 $17.86 $15.20 $13.25 $9.21
OF PERIOD
Income from Investment
Operations
Net Investment Income .09 .21 0.11 0.12 0.20 0.13
(1)
Net gains or (losses) 1.81 5.14 (1.39) 2.63 1.89 4.05
on securities
Total from 1.90 5.35 (1.28) 2.75 2.09 4.18
Investment
Operations
Less Distributions:
Dividends (from - (0.21) (0.10) (0.08) (0.14) (0.11)
investment income)
Distributions (from - (0.11) (0.25) - - -
capital gains)
Return of capital - - - (0.01) - (0.03)
Total - (0.32) (0.35) (0.09) (0.14) (0.14)
Distributions
NET ASSET VALUE, END OF $23.16 $21.26 $16.23 $17.86 $15.20 $13.25
PERIOD
Total Return 8.9% 32.9% (7.20)% 18.10% 15.80% 45.40%
Net Assets, End of Period $29,612 $23,571 $16,610 $12,057 $4,716 $1,926
,517 ,331 ,750 ,605 ,214 ,529
Ratio of Total Expenses to 1.18% 1.40% 1.57% 1.30% 1.41% 1.71%
Average Net Assets (3)
Ratio of Net Income to .84% 1.10% 0.70% 0.70% 1.44% 1.17%
Average Net Assets
Portfolio Turnover Rate 5.77% 22.70% 25.60% 14.10% 20.10% 52.50%
Average Commission Rate .0410 .0442 .0471 .0586 .0704 .1304
Paid (dollar per share)
(1) Computed on weighted average number of shares
outstanding during the year.
(2) During the years ended December 31, 1992 through 1995,
and the 6 month period ending June 30, 1996, the Fund
utilized commission credits of $4,420, $5,590, $8830,
$11,000, and $0.00 respectively, to pay certain expenses of
the Fund. The total returns for the Fund would have been
15.6%, 18.0% , (7.2)%, 16.67%, and 32.9% for the years ended
December 31, 1992 through 1995, and the 6 month period
ending June 30, 1996, respectively, without the credits.
(3) Beginning with the period ended June, 30, 1996, the
ratio of Total Expenses to Average Net Assets was computed
using the Total Expenses for the Fund before Commission
Credits.
See notes to financial statements.
THE WEXFORD TRUST
(COMPRISED OF THE MUHLENKAMP FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - ORGANIZATION
The Wexford Trust (the Trust) was organized as a
Massachusetts Business Trust on September 21, 1987 and
operations commenced on November 1, 1988. The Trust is
registered under the Investment Company Act of 1940, as
amended, as a diversified open-end mutual fund. The
Muhlenkamp Fund (the Fund) is a series of the Wexford Trust
and is currently the only fund in the Trust.
The Fund operates as a diversified open-end mutual fund that
continuously offers its shares for sale to the public. The
Fund will manage its assets to seek a maximum total return
to its shareholders, primarily through a combination of
interest and dividends and capital appreciation by holding a
diversified list of publicly traded stocks. The Fund may
acquire and hold fixed-income or debt investments as market
conditions warrant and when, in the opinion of its advisor,
it is deemed desirable or necessary in order to attempt to
achieve its investment objective.
The primary focus of the Fund is long-term and the
investment options diverse. This allows for greater
flexibility in the daily management of fund assets.
However, with flexibility also comes the risk that assets
will be invested in various classes of securities at the
wrong time and price.
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 liablilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results
could differ from those estimates.
The Fund is exposed to credit risk on the amount invested in
marketable securities. The maximum amount of loss the Fund
would incur is limited to the amount recorded in the 1994
financial statements. The Fund does not hold any type of
collateral on the marketable securities. This exposure to
credit risk is customary for all entities which have
invested in financial instruments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied by
management in the preparation of the accompanying financial
statements follows.
Investment valuations - Each stock and bond is valued at the
latest sales price thereof on the last business day of the
fiscal period as reported by the securities exchange on
which the issued is traded. If no sale is reported, the
security is valued at the last quoted bid price.
Investment transactions and related investment income -
Investment transactions are accounted for on the trade date
(date the order to buy or sell is executed). Dividend
income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis. The Fund uses the
specific identification method in computing gain or loss on
the sale of investment securities.
Federal income taxes - It is the Fund's policy to comply
with the requirements of the Internal Revenue Code that are
applicable to regulated investment companies and to
distribute substantially all of its taxable income to its
shareholders. Therefore, no federal income tax provision is
required.
Dividends and distributions to shareholders of beneficial
interest - Dividends and distributions are recorded by the
Trust on the record date.
NOTE 3 - INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES
Muhlenkamp and Co., Inc., an affiliate of which an officer-
stockholder is a trustee of the Trust, receives a fee for
investment management. The fee is computed and accrued
daily based on the net asset value at the close of business
and is equal to 1% per annum. The fee totaled $135,018 for
sixmonths ended June 30, 1996. The investment advisory
agreement permits the advisor to charge the fund for some or
all of its routine administration costs which totaled
approximately $25,338 for the six months ended June 30,
1996. An expense reimbursement of $25,338 was requested by
the advisor and paid by the fund for the six months ended
June 30, 1996. The reimbursement consists of $22,656 of
administrative expenses, $2,416 of registrations and filing
expenses and $266 of legal fees.
Certain affiliated persons held in the aggregate 24,858.446
shares with a net asset value of $575,711 in the Muhlenkamp
Fund at June 30,1995. In addition, the Muhlenkamp & Co.,
Inc. Pension & Trust Fund held 12,722 shares with a net
asset value of $294,648 at June 30, 1996.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial
interest with a par value of $.001 per share. Transactions
in capital stock were as follows:
June 30 1996 1995
Shares Amount Share Amount
s
Shares outstanding, beginning 1,108,7 17,865, 1,023 16,277,
of period 74 994 ,378 218
Shares sold 210,183 4,679,3 201,8 3,679,8
36 56 49
Shares issued to
shareholders in reinvestment - - 16,42 349,551
of dividend 6
Shares redeemed (40,570 (921,49 (132, (2,440,
) 0) 886) 624)
Shares outstanding, end of 1,278,3 $29,612 1,108 $17,865
period 87 ,517 ,774 ,994
NOTE 5 - DIVIDENDS AND DISTRIBUTIONS
On June 30, 1996 no distributions were declared by the
Trustees.
NOTE 6 - INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding
short-term securities, were $2,693,530 and $1,574,507
respectively in 1996. Purchases and sales of U.S.
Government obligations were $0.00 and $0.00, respectively,
in 1996. The components of the net realized gain on
investments of $57,050 recognized during the six months
ended June 30, 1996 are as follows:
Proceeds from sale of 1,574,507
securities
Cost of Securities Sold 1,517,457
Net Realized Gain 57,050
The components of the net unrealized appreciation in
value of the investments held at June 30, 1996 are as
follows:
Unrealized appreciation of 8,303,431
investments
Unrealized depreciation of 535,156
investments
Net Unrealized 7,768,275
Appreciation of Investments
The unrealized appreciation of securities recognized
during the six months ended June 30, 1996 is $2,065,590.
NOTE 7 - DIRECTED BUSINESS ARRANGEMENT
The Fund has a directed business arrangement with Capital
Institution Services, Inc. (CIS). Upon the purchase and/or
sale of investment securities, the Fund pays a brokerage
commission to CIS. These commission payments generate
nonrefundable cumulative credits which are available to pay
certain expenses of the Fund.
The following is an analysis of commission credits
generated, utilized and available to pay future expenses of
the Fund:
Amount
Balance, January 1, 1996 ($1,834)
Commission Credits $2,568
generated during 1996
Commission Credits -
utilized
Balance, June 30, 1995 $734
The following is an analysis of Fund expenses with and
without Commission Credits.
With Without
Commiss Commiss
ion ion
Credits
Credits
Semi-Annual Fund Operating Expenses
Investment Advisor .57% .57%
Administrative .02 .02
Registration and Filing .01 .01
Custodian .04 .04
Printing and Postage .03 .03
Auditor - -
Total Fund Expenses .67% .67%
