KENILWORTH FUND, INC.
One First National Plaza
Suite 2594
Chicago, IL 60603
SEMI-ANNUAL REPORT
June 30, 1997
(Unaudited)
Advisor's Perspective
July 1, 1997
DJIA: 7,672.79
S&P 500: 885.14
The parabolic rise of 20.12% in the DJIA and 20.62% in the S&P
500 during the last six months came as a stunning surprise to us
all, coming as it did on the heels of a 70% rise during the
previous two years. An analyst points out that from late 1994
lows the major market averages rose at a 55 degree angle of
ascent; the up-trend accelerated to 65 degrees from the July 1996
lows, and now from the April 1997 lows the averages have risen at
an astonishing 85 degree angle of ascent. (The maximum
possibility is a 90 degree vertical advance). This was
facilitated by a perception that the economy is in a Goldilocks
scenario of low inflation, steady growth, rising employment and
surging corporate profits.
This Advisor has lived through the previous parabolic rises in
the markets such as oil and gold in early 1980 when per unit
prices increased tenfold in a few years only to collapse by over
80%, the Japanese Nikkei Index in 1989 from around 39,000 to
less than 15,000 over the next six years, a similar decline in
the bio-technology stocks in 1992, and the more recent declines
of 60% to 80% after late 1993 and early 1994 in emerging markets
all over the world. Thus, these rises always end in sharp, rude
and disastrous declines.
We have been cautiously optimistic as you know from our
Perspective in January 1997. The long-term U.S. Treasury rates
went from 6.75% to 7.1% in April, and began their slow descent to
6.78% on June 30th. With the strong dollar and low inflation,
interest rates may even approach 6.25% in the near future. We
expected the volatility to increase, as it indeed has, (over 100
to 200 Dow points intraday). We expected a 10% decline that came
in March-April before this parabolic rise of over 1,200 Dow
points! We expect another 10% decline before long, even though
the momentum of this market rise may soon carry the DJIA over the
8,000 mark.
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KENILWORTH FUND, INC.
January 1, 1997 to June 30, 1997
NAV: $15.43........$17.72
We are happy to report that your Fund NAV grew from $15.43 to
$17.72 a rise of 14.84% during the six months. The average
growth fund rose a lesser 14.28% during the same span, even
though the major market averages of the S&P 500 rose 20.62%. For
the longer period of a year, ending June 30, 1997 at +35.52% we
were ahead of both the S&P 500 (+34.71%) and significantly above
the average growth fund (+23.96%).
Our performance lagged in June after Intel announced that they
were experiencing a 10-15% shortfall in their 2nd quarter revenue
as European and Japanese demand was sluggish, while at the
same time they could not meet the demand for their new MMX chips.
This also is traditionally the slow season for the computer
companies. Believing that this is a transitional problem we
actually added to our already large Intel holdings, even though
in the short-term derby we may fall behind.
Many of our holdings continue to do well. Applied Materials
(+97%), Telecommunications Brasil (+81.2%), Bristol-Myers Squibb
(+48.6%), General Electric (+31%), Compania De Chile (+30.4%),
Merck (+28.49%), Federal Home Loan (+26.8%) and Exxon (+25%),
and we believe the laggards such as Adaptec (-13.13%), Boeing
(-0.4%) etc., will more than catch up in the second half.
Finally, it is most gratifying to see that a young couple from
California who invested $80,000 in the last few months at an
average cost of $15.38, redeemed part of their original holdings
at $18.07 to buy their first house. It is fulfilling to see
that those of our shareholders who bought during the last
quarter of 1994 have already more than doubled their original
investment in the Kenilworth Fund. I strongly believe that a
large number of our shareholders can soon make that claim for
themselves.
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KENILWORTH FUND, INC.
FINANCIAL HIGHLIGHTS
(Unaudited)
Six Months Ended Year Ended
June 30, December 31,
1997 1996
Selected Per-Share Data
Net Asset Value, beginning of period. . . .$15.43 $11.93
Income from Investment Operations
Net Investment Income (Loss) . . . . .(0.01) 0.01
Net Realized and Unrealized
Gain on Investments . . . . . . . .2.30 3.51
Total. . . . . . . . . . . . . . .2.29 3.52
Less Distributions
From Net Investment Income . . . . . . .0.00 0.01
From Net Realized Gains. . . . . . . . .0.00 0.01
Total. . .. 0.00 0.02
Net Asset Value, end of period. . . . . . .$17.72 $15.43
Total Return . . . . . . . . . . . . . . . .14.84% 29.48%
Ratios and Supplemental Data
Net Assets, end of period (in thousands). .$8,849 $7,222
Ratio of Net Expenses to Average Net Assets 0.79% 1.51%
Ratio of Net Investment Income to
Average Net Assets. . .(0.04%) 0.06%
Portfolio Turnover Rate . . . . . . . . . .36.50% 73.93%
Average Commission Rate Paid . . . . . . .0.0693 0.0590
The accompanying notes are an integral part of these financial
statements.
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KENILWORTH FUND, INC.
STATEMENT OF NET ASSETS
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Market
COMMON STOCKS 97.76%a Shares Value Percent
<S> <C> <C> <C> <C>
Aircraft 3.00%
Boeing Corp. 5,000 $265,300 3.00
Autos 4.69%
Ford Motor 4,000 152,000
1.72
Chrysler Corp. 8,000 263,000 2.97
Banks 1.91%
Norwest Corp. 3,000 168,750 1.91
Construction 1.27%
Empresas ICA Sociedad 7,000 112,420 1.27
Chemicals 1.74%
W.R. Grace Corp. 2,800 154,350 1.74
Computer-Semiconductor 14.81%
Intel Corp. 7,000 992,670 11.22
Applied Materials, Inc.* 3,000 212,430 2.40
Cypress Semiconductor* 3,000 43,500 0.49
Xircom, Inc.* 5,000 62,200 0.70
Computers 2.25%
Compaq Computer Corp. 2,000 199,000 2.25
Computer Software 8.97%
Adaptec, Inc.* 18,500 642,875 7.26
Oracle Systems, Inc.* 3,000 151,125 1.71
Computer Systems 8.51%
Hewlett-Packard 12,000 672,000 7.59
Quantum Corp.* 4,000 81,240 0.92
Drugs 6.46%
Merck & Co. 4,000 409,240 4.63
Bristol-Myers Squibb 2,000 162,000 1.83
Electrical Equipment4.41%
General Electric 6,000 390,000 4.41
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KENILWORTH FUND, INC.
STATEMENT OF NET ASSETS
June 30, 1997
(Unaudited)
Market
COMMON STOCKS Shares Value Percent
Finance 17.18%
Federal National Mortgage 14,000 610,750 6.90
Federal Home Loan Mortgage 26,000 910,000 10.28
Insurance 3.13%
Loews Corp. 2,400 240,300 2.71
Conseco, Inc. 1,000 37,000 0.42
Media 1.72%
Grupo Televisa 5,000 151,875 1.72
Oil & Gas 2.91%
Exxon Corp. 2,500 153,125 1.73
Amoco Corp. 1,200 104,328 1.18
Retail 0.99%
Claire's Stores 5,000 87,500 0.99
Telecommunications 9.52%
ADC Telecommunication* 9,000 300,375 3.39
General Motors Cl. H 1,500 86,438 0.98
Telecommun. Brasilerias Telebras 3,000 455,625 5.15
Utilities-Telephone 4.29%
Comp. De Telecommunications De Chile11,500 379,500 4.29
Total Investments 8,650,915
(Cost $5,573,046)
CASH AND RECEIVABLES
NET OF LIABILITIES 2.24% 198,152
TOTAL NET ASSETS 100.00% $8,849,067
NET ASSET VALUE PER SHARE $17.72
(based on 499,510 shares of capital stock outstanding)
a Percentages for various classifications relate to total
net assets.
*Non-income producing security.
</TABLE>
The accompanying notes are an integral part of these financial
statements.
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KENILWORTH FUND, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Six Months Ended
INVESTMENT INCOME June 30, 1997
INCOME:
Dividends $52,713
Interest 8,112
Total Income 60,825
EXPENSES:
Investment Advisory Fees 40,888
Administrative and Management Fees 15,000
Auditing 2,605
Registration Fees 3,585
Insurance and Other Expenses 2,414
Total Expenses 64,492
NET INVESTMENT LOSS: (3,667)
NET REALIZED GAIN ON INVESTMENTS 317,462
NET INCREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS 810,348
NET REALIZED GAIN AND UNREALIZED APPRECIATION
ON INVESTMENTS 1,127,810
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,124,143
The accompanying notes are an integral part of these financial
statements.
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KENILWORTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
Six Months Ended Year Ended
OPERATIONS: June 30, 1997 December 31, 1996
Net Investment Income (Loss) ($3,667) $3,416
Net Realized Gain on Investments 317,462 4,332
Net Increase in Unrealized Appreciation
on Investments 810,348 1,578,426
Increase in Net Assets
from Operations 1,124,143 1,586,174
DISTRIBUTIONS To SHAREHOLDERS:
Distributions from
Net Investment Income 0 (3,416)
Distributions from
Net Realized Gains on Investments 0 (4,332)
Decrease in Net Assets
resulting from Distributions 0 (7,748)
CAPITAL SHARE TRANSACTIONS:
Proceeds From Shares Issued
(39,169 and 48,376 shares, respectively) 636,775 639,733
Cost of Shares Redeemed
(7,699 and 8,060 shares, respectively) (134,139) (100,933)
Reinvested Dividends
(0 and 369 shares, respectively) 0 5,693
Increase in Net Assets from
Capital Share Transactions 502,636 544,493
Total Increase in Net Assets 1,626,779 2,122,919
NET ASSETS AT BEGINNING OF PERIOD
(468,040 and 427,355 shares
outstanding, respectively) 7,222,288 5,099,369
NET ASSETS AT END OF PERIOD
(499,510 and 468,040 shares
outstanding, respectively) $8,849,067 $7,222,288
The accompanying notes are an integral part of these financial
statements.
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NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
The Kenilworth Fund, Inc., (the "Fund") is registered under the
Investment Company Act of 1940 as a no-load, open-end,
non-diversified management investment company.
1. Summary of Significant Accounting Policies
a. The Fund is registered under the Investment Company Act
of 1940 as a no-load, open-end, non-diversified management
investment company. The Fund's objective is long-term capital
appreciation which it seeks by investing primarily in a
non-diversified portfolio of common stocks, preferred stocks,
warrants to purchase common stocks, convertible bonds and
fixed-income obligations of corporations and the United States
government. Its books and records are maintained on the accrual
basis. Securities are valued at their last sale price as
reported on a securities exchange, or at their last bid price as
applicable. Short term instruments are valued at cost which
approximates market value. Cost amounts, as reported on the
statement of net assets, are the same for federal income tax
purposes. For the six months ended June 30, 1997, purchases and
sales of investment securities were $4,117,944 and $2,988,279
respectively.
b. Security transactions are accounted for on the trade
date and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Realized gains
and losses from security transactions are reported on an
identified cost basis.
c. Provision has not been made for federal income tax since
the Fund has elected to be taxed as a "regulated investment
company" and intends to distribute substantially all its income
to its shareholders and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment
companies.
d. As of June 30, 1997 there were 10,000,000 shares of
capital stock authorized.
e. 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. Investment Adviser and Investment Advisory Agreement and
Transactions with Related Parties
The Fund has signed two agreements with Institutional
Portfolio Services, Ltd., ("IPS"), with whom certain officers of
the Fund are affiliated. Under the terms of the first agreement
(the investment advisory agreement) the Fund will pay IPS a
monthly investment advisory fee at the annual rate of 1.0% of
the daily net assets of the Fund. Under the terms of the second
agreement (the administrative and management services agreement)
the Fund will pay IPS a yearly administrative and management
services fee of $30,000 per year payable on a quarterly basis.
The advisory agreement requires the adviser to reimburse the Fund
in the event that the expenses of the Fund in any fiscal year
exceed 1.7%.
3. Aggregate Net Unrealized Appreciation
Aggregate Net Unrealized Appreciation as of June 30, 1997
consisted of the following:
Aggregate gross unrealized appreciation: $3,104,324
Aggregate gross unrealized depreciation: (26,455)
Net unrealized appreciation: 3,077,869
