(Muhlenkamp Fund Logo)
SEMI-ANNUAL REPORT
June 30, 1999
Phone: 1-800-860-3863
E-mail: [email protected]
Web Site: www.muhlenkamp.com
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a currently effective prospectus of the Muhlenkamp
Fund. Please call 1-800-860-3863 for a free prospectus. Read it carefully before
you invest.
THE MUHLKENKAMP FUND
(A Portfolio of the Wexford Trust)
Dear Fellow Shareholders:
The Trustees and Management of the Muhlenkamp Fund are pleased to present this
semi-annual report of your Fund.
As of June 30, 1999, the Net Asset Value (NAV) of your Fund was $43.72. The
year-to-date return for your Fund as of June 30, 1999 was 16.12%.
Total Return % Cumulative Return %
----------------------- -----------------------
Muhlenkamp S&P Muhlenkamp S&P
Period Ending Fund 500 Fund 500
------------- ---- --- ---- ---
12/31/91 45.4 30.5 45.4 30.5
12/31/92 15.8 7.7 68.4 40.6
12/31/93 18.1 9.9 98.8 54.5
12/31/94 (7.2) 1.3 84.5 56.5
12/31/95 33.0 37.1 145.4 114.5
12/31/96 30.0 22.9 219.1 163.7
12/31/97 33.3 33.4 325.3 251.7
12/31/98 3.2 28.1 339.0 350.6
6/30/99 16.1 12.4 409.0 407.0
<TABLE>
Muhlenkamp S&P
Date Fund 500
<S> <C> <C>
12/31/90 100 100
12/31/91 145 131
12/31/92 168 141
12/31/93 199 154
12/31/94 184 157
12/31/95 245 215
12/31/96 318 264
12/31/97 424 352
12/31/98 438 451
6/30/99 509 506
</TABLE>
It's working, folks. The things we wrote about in April are happening.
Inflation remains modest and economic growth remains strong. The U.S.
worker/consumer remains in good shape. Anyone who wants a job can get a
job. Anyone willing to learn can upgrade to a better job. Even some
economists are starting to understand this.
The Asian economies are also improving. Fundamental changes in Japan are slow
but positive. Other parts of Southeast Asia are improving. Those countries which
have moved toward free markets, primarily South Korea and Thailand, are doing
better than their neighbors. This is helping large international companies in
businesses like oil, paper, chemicals, etc.
Business and investor confidence in this economy has also improved, which
allowed the stocks of large international cyclical companies to bounce in April
and May. So far, most of the strength is still in the well-known names like
Royal Dutch, International Paper, Alcoa, and Dow Chemical.
Meanwhile the bloom has come off the Internet stocks and the "security blanket"
stocks that were bid to high premiums after the scare in the 3rd quarter of
1998. Many of these stocks are off their recent highs by as much as 30-40%.
The change in market focus dates to mid-April, and is still in its early stages.
Our portfolio holdings have participated nicely in this change.
As continued good economic and inflation numbers are reported, we expect the
market's strength to continue to spread to those companies with attractive
values and good earnings. We believe the stocks we hold represent such
companies, and we continue to seek additions to our list.
Year 2000 Update
As we have been saying for over a year, our belief is that Y2K will have a
minimal effect on the lives of most Americans. Yes, there will be some
disruptions, but none beyond the normal disruptions caused by a winter storm.
The Muhlenkamp Fund's service partners tell us their systems are Y2K compliant
and ready to handle the upcoming non-event without interruption.
Ron Muhlenkamp
President
August 1999
STATEMENT OF ASSETS & LIABILITIES
June 30, 1999(Unaudited)
ASSETS
INVESTMENTS, AT VALUE (Identified cost $145,345,288) $ 210,193,337
CASH 19,110
RECEIVABLES:
Dividends 142,814
Interest 8,623
Subscriptions 29,800
------
Total receivables 181,237
PREPAID EXPENSES 724
---
Total assets 210,394,408
LIABILITIES
COVERED PUT AND CALL OPTIONS WRITTEN, AT VALUE 1,832,500
(Premiums received $474,009)
INVESTMENTS PURCHASED 213,750
ADVSOR FEE 161,837
ACCRUED EXPENSES 126,533
-------
Total liabilities 2,334,620
---------
NET ASSETS $ 208,059,788
============
NET ASSETS
CAPITAL PAID IN ON SHARES OF BENEFICIAL INTEREST $ 146,059,921
UNDISTRIBUTED NET INVESTMENT LOSS (206,798)
ACCUMULATED NET REALIZED LOSS ON INVESTMENTS (1,282,893)
NET UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investments 64,848,049
Written options (1,358,491)
----------
NET ASSETS $ 208,059,788
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(unlimited number of shares authorized, $.001 par value) 4,758,727
NET ASSET VALUE PER SHARE $ 43.72
=======
See notes to financial statements.
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999(Unaudited)
INVESTMENT INCOME:
Dividends $ 895,804
Interest 164,050
-------
Total investment income 1,059,854
EXPENSES:
Investment advisory fees 949,033
Transfer agent fees & expenses 130,625
Printing & mailing 66,603
Federal & state registration 27,963
Custody fees 22,473
Fund accounting fees 20,798
Administration fees 22,139
Audit fees 23,326
Legal fees 3,050
Insurance 1,567
Miscellaneous 14,237
------
Total expenses 1,281,814
Fees paid indirectly (15,700)
-------
Net expenses 1,266,114
---------
NET INVESTMENT LOSS (206,260)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (1,050,914)
Change in unrealized appreciation or depreciation
in value of :
Investments 30,671,332
Written options (752,598)
--------
Net realized and unrealized gain on investments 28,867,820
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 28,661,560
============
See notes to financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ (206,260) $ 387,575
Net realized loss on investments (1,050,914) (104,365)
Change in unrealized appreciation or
depreciation in value of investments
and written options 29,918,734 (1,155,525)
---------- ----------
Net increase(decrease) in net assets
resulting from operations 28,661,560 (872,315)
---------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (392,344)
-------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 24,067,586 120,046,067
Proceeds from shares issued to holders
in reinvestment of dividends -- 381,937
Cost of shares redeemed (39,630,958) (49,662,383)
----------- -----------
Net increase (decrease) in net assets
resulting from capital share transactions (15,563,372) 70,765,621
----------- ----------
Total increase in net assets 13,098,188 69,500,962
NET ASSETS:
Beginning of year 194,961,600 125,460,638
----------- -----------
End of year (including undistributed net
investment income of $0 and distributions
in excess of undistributed net investment
income of ($538), respectively) $208,059,788 $194,961,600
============ ============
See notes to financial statements.
FINANCIAL HIGHLIGHTS
Six Months Ended Year Ended December 31,
-------------------------
June 30, 1999 1998 1997 1996 1995 1994
------------- ---- ---- ---- ---- ----
Unaudited)
NET ASSET VALUE,
BEGINNING OF YEAR $37.65 $36.55 $27.52 $21.26 $16.23 $17.86
INCOME FROM
INVESTMENT OPERATIONS
Net investment income (1) (0.04) 0.08 0.18 0.14 0.21 0.11
Net gains (losses)
on securities 6.11 1.10 8.98 6.23 5.14 (1.39)
---- ---- ---- ---- ---- -----
Total from investment
operations 6.07 1.18 9.16 6.37 5.35 (1.28)
LESS DISTRIBUTIONS:
From net investment income 0.00 (0.08) (0.13) (0.11) (0.21) (0.10)
From net realized gains 0.00 0.00 0.00 0.00 (0.11) (0.25)
---- ---- ---- ---- ----- -----
Total distributions 0.00 (0.08) (0.13) (0.11) (0.32) (0.35)
------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF YEAR $43.72 $37.65 $36.55 $27.52 $21.26 $16.23
======= ======= ====== ====== ====== ======
TOTAL RETURN 16.12% 3.22% 33.28% 29.96% 32.90% (7.20%)
NET ASSETS, END OF PERIOD
(in thousands) $208,060 $194,962 $125,461 $42,039 $23,571 $16,611
RATIO OF TOTAL EXPENSES TO
AVERAGE NET ASSETS 1.35% 1.36% 1.44% 1.56% 1.40% 1.57%
RATIO OF NET EXPENSES TO
AVERAGE NET ASSETS 1.33% 1.32% 1.33% 1.54% 1.35% 1.52%
RATIO OF NET INVESTMENT
INCOME (LOSS) TO AVERAGE
NET ASSETS (0.22%) 0.21% 0.53% 0.58% 1.10% 0.70%
PORTFOLIO TURNOVER RATE 7.78% 27.03% 13.89% 16.90% 22.70% 25.60%
(1)Computed on weighted average number of shares outstanding for the years ended
December 31, 1994 - 1998.
See notes to financial statements.
PORTFOLIO OF INVESTMENTS
June 30, 1999 (Unaudited)
Number of Shares
Name of Issuer or Title of Issue or Principal Amount Value
COMMON STOCK - 98.0%+
Aerospace - 3.7%+
*BE Aerospace, Inc. 357,000 $6,671,437
Lockheed Martin 28,000 1,043,000
---------
7,714,437
---------
Airlines - 6.5%+
AMR Corp. 100,000 6,825,000
Air Express International Corp. 32,343 820,704
*Alaska Air Group 140,000 5,845,000
---------
13,490,704
----------
Autos - 7.5%+
Dana Corp. 15,000 690,937
Ford Motor Company 112,000 6,321,000
*Monaco Coach Corp. 30,000 1,269,375
*National RV Holdings 204,500 4,959,125
Superior Industries 53,180 1,452,480
Winnebago Industries, Inc. 40,000 900,000
---------
15,592,917
----------
Banks - 7.5%+
Chase Manhattan 24,000 2,079,000
Citigroup Inc. 180,000 8,550,000
Mellon Bank Corp. 140,000 5,092,500
---------
15,721,500
----------
Brokerage - 11.1%+
A.G. Edwards 18,750 604,688
*Donaldson, Lufkin & Jenrette, Inc. 300 8,850
*Friedman Billings Ramsey 5,000 59,375
Merrill Lynch 102,000 8,153,625
Southwest Securities, Inc. 199,635 14,323,811
----------
23,150,349
----------
Building Products - 4.8%+
*Griffon Corp. 121,000 945,313
Owens Corning 100,000 3,437,500
Southdown Inc. 60,000 3,855,000
Texas Industries Inc. 47,400 1,836,750
---------
10,074,563
----------
Capital Goods - 3.6%+
Commercial Intertech 183,400 $2,922,937
Graco, Inc. 105,825 3,108,609
IDEX Corp. 41,250 1,356,094
---------
7,387,640
---------
Diversified Operations - 0.4%+
Loews Corp. 10,000 791,250
-------
Electronics - 6.7%+
*ATMI, Inc. 100,000 2,975,000
Computer Associates
International,Inc. 105,000 5,775,000
Intel Corp. 88,000 5,236,000
---------
13,986,000
----------
Finance - 8.0%+
Federal National Mortgage Assoc. 74,400 5,087,100
# *Long Beach Financial Corp. 136,000 1,997,500
Morgan Stanley Dean Witter & Co. 81,500 8,353,750
National City Corp. 16,852 1,103,806
---------
16,542,156
----------
Furniture - 5.1%+
*Stanley Furniture, Inc. 305,500 6,873,750
*Winsloew Furniture 109,600 3,685,300
---------
10,559,050
----------
Homebuilding - 5.6%+
American Woodmark Corp. 92,200 3,250,050
*Beazer Homes USA, Inc. 20,000 463,750
*Crossman Communities Inc. 180,000 5,231,250
*NVR, Inc. 52,000 2,713,750
---------
11,658,800
----------
Industrial Equipment - 1.3%+
JLG Industries, Inc. 128,100 2,610,038
------- ---------
Insurance - 8.8%+
Conseco, Inc. 344,608 10,489,006
Fidelity National Financial 238,881 5,016,501
Frontier Insurance 64,737 995,331
Reliance Group Holdings Inc. 232,500 1,729,219
---------
18,230,057
----------
Medical - 0.9%+
*D & K Healthcare Resources, Inc. 17,500 417,812
Inc.
*Eclipse Surgical Technologies,
Inc. 20,000 216,250
*Orthodontic Centers of America,
Inc. 60,000 847,500
*Scios, Inc. 140,000 455,000
-------
1,936,562
---------
Metal - 1.7%+
Allegheny Teledyne Inc. 40,000 905,000
*RTI International Metals 179,200 2,632,000
---------
3,537,000
---------
Oils, Natural Gas and Energy Related - 5.0%+
*Calpine Corp. 180,000 9,720,000
*OMNI Energy Services 198,000 693,000
-------
10,413,000
----------
Retail Jewelry - 0.1%+
*Piercing Pagoda, Inc. 10,000 126,250
-------
Technology - 5.3%+
# *Applied Materials 150,000 11,081,250
----------
Telecommunication - 0.0%+
*Korea Telecom Corp. 1,000 40,000
--------
Tobacco - 1.6%+
Phillip Morris 85,280 3,427,190
---------
Transportation - 2.8%+
*Arkansas Best Corp. 146,000 1,450,875
# *Coach USA 105,500 4,424,406
---------
5,875,281
---------
Total Common Stocks (cost $140,101,751) 203,945,994
-----------
BONDS AND NOTES - 2.2%+
General Motors Acceptance Corp.
-0-%, due 2015 $5,000,000 1,566,275
U.S. Treasury Strip
-0-%, due 2013 800,000 341,351
U.S. Treasury Strip
-0-%, due 2024 12,880,000 2,735,957
---------
Total Bonds and Notes (cost $3,639,777) 4,643,583
---------
REGISTERED INVESTMENT COMPANY - 0.8%+
Star Trust for U.S. Treasury $1,603,760 $1,603,760
----------
Total Registered Investment Companies
(cost $1,603,760) 1,603,760
----------
TOTAL INVESTMENTS
(identified and tax cost of $145,345,288) $210,193,337
============
* Non income producing security.
+ Investments are shown as a percentage of net assets at June 30, 1999.
# At June 30, 1999, the Fund's open covered put and call option contracts
which are accounted for as a liability on the Statement of Assets and
Liabilities were as follows:
Underlying Security/Expiration Date Number of
/Exercise Price Contracts Written Value
Applied Materials/January 2000/$40 500 $1,825,000
Coach USA/September 1999/$30 250 6,250
Long Beach Financial Corp./December 1999/$12.50 200 1,250
---------
Total covered put and call options written
(premiums received $474,009) $1,832,500
=========
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 1999 (Unaudited)
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. The Muhlenkamp Fund (the "Fund") is a portfolio of the 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies applied by management in the
preparation of the accompanying financial statements follows.
a. Investment Valuations - Stocks and Bonds are valued at the latest sales
price on the last business day of the fiscal period as reported by the
securities exchange on which the issue is traded. If no sale is reported,
the security is valued at the last quoted bid price.
b. Investment Transactions and Related Investment Income - Investment
transactions are accounted for on the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded daily on
the yield to maturity basis. Discounts and premiums on securities are
amortized over the life of the respective securities. The Fund uses the
specific identification method in computing gain or loss on the sale of
investment securities.
c. Federal 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 tax provision is required.
d. Dividends and Distributions to Shareholders of Beneficial Interest
Dividends and distributions are recorded by the Fund on the record date.
<PAGE>
e. Use of Estimates - 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 revenues and
expenses during the reported period. Actual results could differ from
those estimates.
f. Options Transactions - The Fund may write put and call options only if
such options are considered to be covered. A written call option is
considered to be covered when the writer of the call option owns
throughout the option period the security on which the option is written.
A written put option is considered covered when the writer of the put has
deposited and maintained amount equal to or greater than the exercise
price of the put option.
When the Fund writes a covered call or put option, an amount equal to the
premium received is included in the statement of assets and liabilities
as a liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. If an
option expires on its stipulated expiration date or if the Fund enters
into a closing purchase transaction, a gain or loss is realized. If a
written call option is exercised, a gain or loss is realized for the sale
of the underlying security and the proceeds from the sales are increased
by the premium originally received. If a written put option is exercised,
the cost of the security acquired is decreased by the premium originally
received. As writer of an option, the Fund has no control over whether
the underlying securities are subsequently sold (call) or purchased (put)
and, as a result, bears the market risk of an unfavorable change in the
price of the security underlying the written option.
The Fund may purchase put and call options. When the Fund purchases a
call or put option, an amount equal to the premium paid is included in
the Fund's statement of assets and liabilities as an investment, and is
subsequently marked-to-market to reflect the current market value of the
option. If an option expires on the stipulated expiration date or if the
Fund enters into a closing sale transaction, a gain or loss is realized.
If the Fund exercises a call, the cost of the security acquired is
increased by the premium paid for the call. If the Fund exercises a put
option, a gain or loss is realized from the sale of the underlying
security, and the proceeds from such a sale are decreased by the premium
originally paid. Written and purchased options are non-income producing
securities.
3. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Muhlenkamp & Co., Inc. (the "Advisor"), an affiliate of which an
officer-stockbroker 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 Advisor is
permitted to charge the Fund for some or all of its routine administration
costs which totaled $82,034 for the six months ended June 30, 1999. The
reimbursement consists of the following:
Federal & State Registration $42,491
Printing & Mailing 28,701
Legal & Audit 578
Insurance 713
Miscellaneous 9,551
-----
Total $82,034
Effective April 1, 1999, Firstar Mutual Funds Services, LLC ("Firstar")
began providing administration services to the Fund. Effective May 1, 1999,
the accounting and transfer agent services previously provided by American
Data Services, Inc. are also provided by Firstar. Firstar Bank Cincinnati,
NA serves as custodian for the Fund.
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 shares of the Fund were as follows:
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
--------------- -----------------
Shares outstanding, beginning of year 5,178,767 3,432,778
Shares sold 603,061 3,066,602
Shares issued to shareholders in
reinvestment of dividends 0 10,376
Shares redeemed (1,023,101) (1,330,989)
----------- -----------
Shares outstanding, end of year 4,758,727 5,178,767
========= =========
5. CAPITAL LOSS CARRYFORWARD
As of December 31, 1998, the Fund had available for federal income tax
purposes a capital loss carryforward of $231,979 which expires as follows:
December 31, 2004 $127,614
December 31, 2006 104,365
6. COVERED PUT AND CALL OPTIONS
The Fund's activity in written options for the six months ended June 30,
1999 was as follows:
Number of Contracts Premiums Received
------------------- -----------------
Options outstanding at
beginning of period 1,300 $551,082
Options written 450 231,767
Options expired (300) (66,598)
Options closed (500) (242,242)
------ ---------
Options outstanding at end of period 950 $474,009
------ ---------
7. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, excluding short-term
securities, for the six months ended June 30, 1999 were as follows:
Purchases Sales
------------------------------- --------------------------------
U.S. Government Other U.S. Government Other
--------------- ----- --------------- -----
$0 $14,900,010 $8,726,427 $24,749,574
The components of the net unrealized appreciation in the value of the
investments held at June 30, 1999 for both financial reporting and tax
purposes are as follows:
Gross unrealized appreciation of investments $74,735,567
Gross unrealized depreciation of investments (9,887,518)
-----------
Net unrealized appreciation of investments $64,848,049
===========
At June 30, 1999, the cost of investments for federal income tax purposes
was $145,345,288.
8. 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, such as performance measurements, pricing
information, custodian and record keeping services, legal, accounting and
other administrative costs. The commission credits redeemed during the year
were utilized by the Fund to pay accounting fees due to the Independent
Auditors, transfer agent fees and fund accounting.
The following is an analysis of commissions credits generated, utilized and
available to pay future expenses of the Fund:
Balance, January 1, 1999 $13,850
Commission credits generated in 1999 35,164
Commission credits utilized:
Auditor fees (15,700)
-------
Balance, June 30, 1999 $33,314
=======
For the six months ended June 30, 1999, total Fund operating expenses, as a
percentage of average net assets were 1.35% without the commission credits.
With the commission credits, net Fund operating expenses as a percentage of
average net assets were 1.33% for the same period.
Investment Advisor
Muhlenkamp & Company, Inc.
12300 Perry Highway
Wexford, PA 15090
Administrator and Transfer Agent
Firstar Mutual Funds Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
Custodian
Firstar Bank Cincinnati, NA
425 Walnut Street
Cincinnati, OH 45201
Auditors
Deloitte & Touche LLP
2500 1 PPG Place
Pittsburgh, PA 15222
