<PAGE> 1
February 15, 1999
Dear Fellow Social Responsibility Shareholder,
The December quarter was outstanding--up 25.9%--by far our best quarter since
inception. It was our second best quarter relative to the S&P 500 Index. As Wall
Street became less concerned that the U.S. would follow other parts of the world
into recession, the S&P 500 market benchmark rose 21.4%, more than recovering
from the 10% decline of the previous quarter. Our Portfolio performance beat
Lipper's Growth and Income Funds average by 7.7% percent in the quarter, ranking
20th of 743 funds, according to Morningstar. For the calendar year we also had a
very strong 37.8% return, making significant headway toward our goal of
surpassing the S&P 500 on a cumulative basis. For the full year we ranked 20th
of 700 growth and income funds, according to Morningstar. In addition, as of the
year end, our Portfolio has received the top, five-star rating by Morningstar.
Performance Summary
The following table presents SEC standardized performance for the December
quarter, one year, and life-to-date. The graph below presents our cumulative
quarterly performance versus the same benchmarks.
<TABLE>
<CAPTION>
Dec. Qtr. 1 Year Life-to-Date
10/1/98 1/1/98 7/1/94 to
To 12/31/98 to 12/31/98 12/31/97**
----------- ----------- ----------
<S> <C> <C> <C>
Social Responsibility Portfolio 25.9% 37.8% 25.3%
S&P 500 Index (large stocks)* 21.4% 28.7% 27.9%
Lipper Growth and Income Funds* 18.2% 17.0% 21.1%
</TABLE>
* The S&P 500 is an unmanaged index of large stocks, with dividends
reinvested. The Lipper Growth and Income Funds reflect the aggregate
record of domestic growth and income mutual funds as reported by Lipper
Analytical Services, Inc. Past performance does not guarantee future
returns.
** Life-to-date returns are annualized; quarterly returns are not
annualized.
SOCIAL RESPONSIBILITY GRAPH INFORMATION:
Title: Growth of $10,000 Invested in various Funds and Indexes from 8/5/94 to
12/31/98
Shows the growth of $10,000 in the Bridgeway Social Responsibility Portfolio,
the Lipper Growth and Income Funds, and the S&P 500 Index.
As of 12/31/98 the $10,000 had grown to $26,998 in the Bridgeway Social
Responsibility Portfolio, $29,528 in the S&P 500 Index and $23,208 in the
Lipper Growth and Income Funds.
<PAGE> 2
Explanation of Financial Performance
Translation: In addition to the overall stock market appreciation, our excellent
quarterly performance is due to the outstanding recovery of our retail stocks,
the performance of one newly added software stock, and the takeover of a
healthcare firm. As described in our last quarterly shareholder report, we added
four new small companies around the end of the September quarter, in order to
take advantage of the many small stocks which had been decimated in the August
downturn. This addition increased our exposure to small stocks from 7% to 16.5%
of net assets, near the high side of our targeted range of 5% to 20%. This
proved premature for small stocks as a group, since small stocks (as represented
by the Russell 2000 Index) returned 16% relative to the large stocks' 21%.
However, one of the four small stocks skyrocketed, catching the Internet stock
explosion and tripling in price from the beginning to the end of the quarter.
This company, Unify Corporation, develops and deploys business applications for
enterprise networks and the Internet. While the company represented slightly
more than 2% of net assets upon purchase, it added 4.5% to our quarterly return.
Four of the other top five performing stocks were from the retail sector. The
Gap, Inc., led the way by adding 2.8% to our quarterly performance. This apparel
retailer rose 60%. The other three retailers were Home Depot, Safeway, and
Dayton Hudson.
The third positive factor was the takeover of Sofamore Danek by Medtronic.
Sofamore Danek is a spinal implant manufacturer, which was our second largest
holding at the beginning of the quarter. The stock rose 26% on the news, adding
1.5% to our quarterly performance.
Top Ten Holdings
The following are our top ten holdings as of December 31:
<TABLE>
<CAPTION>
% of Net
Rank Description Assets Industry
---- ----------- ------ --------
<S> <C> <C> <C>
1 The Gap 5.5% Retail Stores
2 Unify Corp. 5.3% Data Processing Software
3 Home Depot 5.2% Retail Stores
4 Microsoft Corp 4.7% Data Processing Software
5 International Business Machines 4.4% Data Processing Hardware
6 Safeway Stores 4.4% Retail Stores
7 Schering Plough Corporation 4.2% Drugs-Generic and OTC
8 Intel 4.0% Electronics/Electric
9 Pfizer, Inc. 3.9% Drugs-Generic and OTC
10 Fannie Mae 3.5% Finance
----
Total 45.1%
</TABLE>
Our largest Portfolio industry concentration continues to be retail stores (22%)
followed by health related companies (14%) and software companies (13%). The
enclosed semi-annual financial statement contains a complete listing of
Portfolio securities by industry.
-2-
<PAGE> 3
New Stocks
During the quarter we added two large technology companies to our holdings.
These were International Business Machines and Intel. Both of these companies
rank in the top fifth of our social rankings, with IBM placing in the twelfth
percentile.
IBM excels in the areas of workplace issues, family benefits, community
involvement and the environment. In fact, in 1998, the Council on Economic
Priorities honored IBM as one of the Top Performers in the area of corporate
environmental reporting and product stewardship. I remember thinking five years
ago that IBM might be left in the dust among computer makers. Now I'm staring at
an IBM monitor and carrying an IBM Thinkpad laptop. I have to believe that IBM's
strengths in environmental awareness and in our other social screen areas helped
its financial comeback this decade.
Disclaimer
The following is a reminder from the friendly folks at your fund who worry about
liability. The views expressed here are exclusively those of Fund management.
They are not meant as investment advice. Any favorable (or unfavorable)
description of a holding applies only as of the quarter end, December 31, 1998;
security positions can and do change thereafter.
Myth and Fact
Translation: Recent market performance demonstrates the risk of trying to "time
the market." At Bridgeway, we subscribe to the philosophy that time in the
market is better than timing the market. (I don't know who first said this; if
you know, please write me a card.)
By now you are undoubtedly familiar with Bridgeway's "buy and hold" philosophy
of owning stocks for the long term and with our disdain of trying to time the
market. The following quote (I'll call it "the myth") nearly turned my stomach
when I read it in an advertisement for one of the most popular financial
Internet sites:
With the market's recent schizophrenia -- swooning one month, soaring
the next -- it's become more crucial for investors to be able to stay on
top of events and use the fluctuations to their advantage.
Presumably by using this service you could bail out before the market fell, and
invest again at the bottom.
Fact: While there were more than seven times the number of purchases as sales of
Portfolio shares in 1998, almost half of the sales came in the two months
following the low point of the year, October 8. Those who bailed out missed some
of the best performing weeks at the end of the year. Academic and industry
research indicate that this is not an isolated phenomenon. A significant
majority of people who time the market end up with inferior returns. In a
taxable account, the additional taxes really eat into returns. This isn't an
isolated phenomenon. Wilshire Associates studied the gap between portfolio
returns and shareholder returns from January 1984 through August 1994 and found
that investors' returns were 1.1% less than the average 11.0% return of their
funds. I believe a significant part of this underperformance is due to
investors' fear and reaction to short-term news stories.
The Year 2000 Computer Problem
Translation: Some computers and software (especially older versions) will not
function properly next year because of problems in reading years beginning with
"2000." At Bridgeway, we believe that our systems have very limited exposure and
are operationally ready. However, we have taken action to
-3-
<PAGE> 4
safeguard our operations. In addition, we do not plan to sell portfolio
companies as we try to anticipate their readiness for the year 2000.
As January 1 of 2000 approaches, you will hear more and more stories of the
"Y2K" or year two thousand problem. Many companies are spending tremendous
amounts to correct software which reads only two digits for date fields ("99"
instead of "1999"); this can cause serious problems and software failure. Some
shareholders have asked what Bridgeway is doing about it.
We believe our own computers and software are year 2000 "compliant." There are
some advantages in being a smaller and somewhat younger firm. The network of
personal computers we rely on use major brand name components that are also
compliant. We have no mainframes or older hardware, which are more difficult to
convert to year 2000 capability. We have completed testing of our primary
software, all of which is compliant, and we will conduct final tests in March.
The Securities and Exchange Commission requires regulated investment advisors to
have a Y2K plan. An SEC representative conducted an on-site interview in October
to assess our readiness. (They don't give you a grade or make any representation
about readiness, however.) Bridgeway also has a contingency plan. We had the
opportunity in 1998 to (successfully) price our portfolio off-site on an
"emergency" basis. We have contacted all of our vendors and brokers concerning
their compliance, and I am impressed with the efforts made by these companies.
After studying their plans, I am only concerned about one vendor that supplies
the closing prices of our securities. However, we have several alternative
sources, so I am not worried.
I believe that the two areas of greatest exposure to the Y2K problem are the
phone company and the electric company. Obviously, we are too small to have an
impact on their readiness, but we don't feel it would be a catastrophe even if
Bridgeway were without these utilities for a couple of weeks. We are considering
obtaining a backup source of electricity. Quite frankly, if there are problems
at Bridgeway, it is likely that you will have more important and immediate
problems in other parts of your life. I don't anticipate major problems in early
January 2000, but I am taking the issue very seriously.
The other side of the equation is the companies we own. Should we anticipate a
major market correction? For reasons similar to our disdain of timing the
market, we will not try to time the market impact of the Y2K problem. We plan to
"ride it out," whether it is large or small. It would be too easy to sell now
and miss a great 1999, or sell after prices already reflect the problem.
Conclusion
As always, I appreciate your feedback. We keep a bulletin board of
shareholder comments and suggestions which we review at our weekly staff
meeting. We take them very seriously. As a result of shareholder feedback, we
have slowed our voluntary transfer of direct accounts to E*TRADE until their
service and response time returns to better levels. Please keep your ideas
coming.
Sincerely,
/s/ JOHN MONTGOMERY
John Montgomery
-4-
<PAGE> 5
BRIDGEWAY FUND, INC.
SOCIAL RESPONSIBILITY PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS (unaudited)
Showing percentage of total net assets
December 31, 1998
<TABLE>
<CAPTION>
Industry Company Shares Value
-------- ------- ------ -----
<S> <C> <C>
Common Stock - 87.2%
Air Transport - 0.9%
AMR Corp. * 300 $ 17,813
Aluminum & Products - 1.1%
Invision Technologies, Inc. 3,400 21,038
Banking - 2.3%
Bank Boston Corp. 90 3,504
MBNA Corp. 1,687 42,070
----------
45,574
Chemicals - 0.1%
Solutia Inc. 100 2,238
Data Processing - Hardware - 4.4%
International Business
Machines Corp. 470 86,833
Data Processing - Software & Services - 11.1%
International Management &
Research Corp. * 3,800 22,325
Microsoft Corp * 660 91,534
Unify Corp. * 12,000 103,500
----------
217,359
Drugs-Generic and OTC - 12.2%
Eli Lilly and Company 590 52,436
Merck & Company, Inc. 195 28,811
Pfizer, Inc. 610 76,517
Schering-Plough Corp. 1,476 81,549
----------
239,313
Electronics/Electric - 7.4%
Intel, Corp. 670 79,437
Xerox Corp. * 550 64,900
----------
144,337
Finance - 8.5%
American Express Company 590 60,328
Fannie Mae 940 69,560
Student Loan SLM
Holding Corp. 770 36,960
----------
166,848
Food - 2.4%
Ben & Jerry's Homemade, Inc. 2,150 48,106
Leather & Shoes - 3.4%
Timberland Co. * 1,450 66,066
Leisure-Amusement - 1.9%
Time Warner Inc. * 600 37,238
Medical equipment/Supplies - 4.9%
Arterial Vascular Engineering 500 26,250
Johnson & Johnson, Inc. 640 53,680
WRP Corp * 3,000 17,063
----------
96,993
Retail Stores - 19.1%
Whole Foods Market, Inc. * 400 19,350
Dayton Hudson Corp. 1,100 59,675
Gap, Inc. 1,913 107,578
Home Depot, Inc. 1,670 102,183
Safeway, Inc. * 1,424 $ 86,775
----------
375,561
Services - 2.4%
The AES Corp. * 1,000 47,375
Telecommunications - 3.4%
Airtouch Communications * 930 67,541
Transportation - 1.7%
Railamerica Inc * 3,900 33,150
----------
Total Common Stock
(Identified Cost $1,150,599) $1,713,383
Warrants - 0.0%
Services - 0.0%
AES Corp Warrants * 6 390
----------
Total Warrants (Identified Cost $266) $ 390
Options - 0.1%
S&P 100 Index - 0.1%
January, 1999 Calls @ 615 * 2 1,038
----------
Total Options (Identified Cost $1,752) $ 1,038
Short-term Investments - 10.6%
Money Market Funds - 10.6%
Expedition Money Market Fund 35,386 35,386
Federated Money Market Prime
Obligations Fund 33,304 33,304
Federated Money Market
Trust Fund 33,304 33,304
Federated Prime Obligations
Fund 35,386 35,386
SEI Daily Income Trust Money
Market Fund 35,386 35,386
SEI Daily Income Trust Prime
Obligations Fund 35,386 35,386
----------
208,152
Total Short-term Investments
(Identified Cost $208,152) $ 208,152
----------
Total Investments - 97.9%
(Cost $1,360,769) $1,922,963
Other Assets and Liabilities, net - 2.1% 40,872
----------
Total Net Assets - 100.0% $1,963,835
==========
</TABLE>
* Non-income producing security as no dividends were paid during the period
from July 1, 1998 to December 31, 1998.
** The aggregate identified cost on a tax basis is $1,360,769. Gross unrealized
appreciation and depreciation were $597,942 and $35,748, respectively, or net
unrealized appreciation of $562,194.
See accompanying notes to financial statements.
-5-
<PAGE> 6
BRIDGEWAY FUND, INC. - SOCIAL RESPONSIBILITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
As of December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at value (cost - $1,360,769) $1,922,963
Cash $107,879
Receivable for interest 291
Receivable from adviser 102
Prepaid expenses 10,082
Deferred organization costs 2,374
----------
Total assets 2,043,691
----------
LIABILITIES:
Payable for shares redeemed 83
Payable for investments purchased 78,246
Payable for management fee 350
Accrued expenses 1,177
----------
Total liabilities 79,856
----------
NET ASSETS ( 69,692 SHARES OUTSTANDING) $1,963,835
==========
Net asset value, offering and redemption price per share ($1,963,835 / 82,641) $23.76
==========
NET ASSETS REPRESENT:
Paid-in capital $1,380,304
Undistributed net realized gain 21,337
Net unrealized appreciation of investments 562,194
----------
NET ASSETS $1,963,835
==========
</TABLE>
BRIDGEWAY FUND, INC. - SOCIAL RESPONSIBILITY PORTFOLIO
STATEMENT OF OPERATIONS (Unaudited)
For the six months ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 3,107
Interest 3,936
--------
Total income 7,043
EXPENSES:
Management fees 1,554
Accounting fees 9,156
Audit fees 2,622
Custody 1,377
Amortization of organization costs 2,324
Insurance 88
Legal 260
Registration fees 1,540
Directors' fees 617
--------
Total expenses 19,538
Less fees waived (7,901)
--------
Net expenses 11,637
--------
NET INVESTMENT LOSS (4,594)
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 25,268
Net realized loss on options (109)
Net change in unrealized appreciation 198,451
--------
Net realized and unrealized gain 223,610
--------
NET INCREASE IN ASSETS RESULTING FROM OPERATIONS $219,016
========
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE> 7
BRIDGEWAY FUND, INC. - SOCIAL RESPONSIBILITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
Six months ended Year ended
INCREASE (DECREASE) IN NET ASSETS: December 31, 1998 June 30, 1998
----------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income(loss) $ (4,594) $ 215
Net realized gain on investments 25,268 43,383
Net realized loss on options (109) 0
Net change in unrealized appreciation 198,451 246,810
----------- -----------
Net increase resulting from operations 219,016 290,408
----------- -----------
Distributions to shareholders:
From net investment income 0 (547)
From realized gains on investments (12,170) (30,868)
----------- -----------
Total distributions to shareholders (12,170) (31,415)
FUND SHARE TRANSACTIONS:
Proceeds from sale of shares 476,906 671,280
Reinvestment of dividends 11,534 28,882
Cost of shares redeemed (204,674) (123,861)
----------- -----------
Net increase from Fund share transactions 283,766 576,301
----------- -----------
Net increase in net assets 490,612 835,294
NET ASSETS:
Beginning of period 1,473,223 637,929
----------- -----------
End of period $ 1,963,835 $ 1,473,223
=========== ===========
Number of Fund shares:
Sold 22,498 34,827
Issued on dividends reinvested 592 1,681
Redeemed (10,141) (6,179)
----------- -----------
Net increase 12,949 30,329
Outstanding at beginning of period 69,692 39,363
----------- -----------
Outstanding at end of period 82,641 69,692
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-7-
<PAGE> 8
BRIDGEWAY FUND, INC. - SOCIAL RESPONSIBILITY PORTFOLIO
FINANCIAL HIGHLIGHTS (Unaudited)
(for a share outstanding throughout the period)
<TABLE>
<CAPTION>
Six months ended Year ended Year ended Year ended 8/5/94* to
December 31, 1998 June 30, 1998 June 30, 1997 June 30, 1996 June 30, 1995
----------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period $21.14 $16.21 $14.68 $11.61 $9.85
---------- ---------- -------- -------- -------
Income (loss) from investment operations:
Net investment income (loss) (0.06) 0.00 0.03 (0.02) 0.07
Net realized and unrealized gain 2.85 5.57 2.31 3.11 1.70
---------- ---------- -------- -------- -------
Total from investment operations 2.79 5.57 2.34 3.09 1.77
---------- ---------- -------- -------- -------
Less distributions to shareholders:
Net investment income (loss) 0.00 (0.01) 0.00 (0.02) (0.01)
Net realized gains (0.17) (0.63) (0.81) 0.00 0.00
---------- ---------- -------- -------- -------
Total distributions (0.17) (0.64) (0.81) (0.02) (0.01)
---------- ---------- -------- -------- -------
Net asset value, end of period $23.76 $21.14 $16.21 $14.68 $11.61
========== ========== ======== ======== =======
TOTAL RETURN [1] 13.4% 35.3% 16.9% 26.6% 18.9%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period $1,963,835 $1,473,223 $637,929 $360,960 $64,421
Ratios to average net assets: [2]
Expenses after waivers and reimbursements 1.50% 1.50% 1.50% 1.48% 1.46%
Expenses before waivers and reimbursements 2.51% 3.81% 5.81% 16.80% 72.83%
Net investment income (loss) after waivers
and reimbursements(0.59%) 0.02% 0.24% (0.17%) 0.90%
Portfolio turnover rate [2] 65.1% 37.8% 35.5% 83.8% 71.7%
</TABLE>
[1] Not annualized for periods less than a year.
[2] Annualized for periods less than a year.
* August 5, 1994 was commencement of operations.
See accompanying notes to financial statements.
-8-
<PAGE> 9
BRIDGEWAY FUND, INC.
SOCIAL RESPONSIBILITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Organization:
Bridgeway Fund, Inc. (the "Fund") was organized as a Maryland
corporation on October 19, 1993, and is registered under the Investment
Company Act of 1940, as amended, as a no-load, diversified, open-end
management investment company.
The Fund is organized as a series fund and has six portfolios. The Fund
commenced operations as a regulated investment company on August 5,
1994 with the Ultra-Small Company Portfolio, the Aggressive Growth
Portfolio and the Social Responsibility Portfolio. On July 20, 1997,
the Fund added two portfolios: the Ultra-Small Index Portfolio and the
Ultra-Large 35 Index Portfolio. On June 5, 1998, the Fund added the
Micro-Cap Limited Portfolio. The Fund is authorized to issue
1,000,000,000 shares.
Bridgeway Capital Management, Inc. is Adviser to the Fund.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements.
Securities Valuation
Securities are valued at the closing price for securities traded on a
principal U.S. securities exchange and on NASDAQ. Listed securities for
which no sales are reported are valued at the latest bid price in
accordance with the pricing policy established by the Fund's Board of
Directors. When current bid prices are not available, the most recently
available quoted closing or bid price is used and adjusted for changes
in the index on the exchange on which that security trades, also in
accordance with the pricing policy established by the Fund's Board of
Directors.
Federal Income Taxes
It is the Fund's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code applicable to regulated investment
companies, including the timely distribution of all its taxable income
to its shareholders. Therefore, no federal income tax provision has
been recorded.
Deferred Organization Costs
Deferred organization costs are amortized on a straight-line basis over
five years. The initial shareholders, prior to the prospectus being
declared effective on June 30, 1994, have agreed that if any of the
initial shares of each portfolio are redeemed during such amortization
period by any holder thereof, the redemption proceeds will be reduced
by the amount of the then unamortized organization expenses in the same
ratio as the number of shares redeemed bears to the number of total
outstanding shares at the time of redemption.
Distributions to Shareholders
Distributions to shareholders are recorded when declared. The amount
and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles.
Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements, as well as the reported amounts of income and
expenses during the reporting period. Actual results could differ from
those estimates.
-9-
<PAGE> 10
BRIDGEWAY FUND, INC.
SOCIAL RESPONSIBILITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
2. Significant Accounting Policies, Continued
Risks and Uncertainties
The Fund invests in stocks. Such investments are exposed to various
risks, such as interest rate, market and credit. Due to the level of
risk associated with certain investments and the level of uncertainty
related to changes in the value of investments, it is at least
reasonably possible that changes in risks in the near term would
materially affect shareholders' account values and the amounts reported
in the financial statements and financial highlights.
12b-1 Plan
The Fund acts as distributor of its shares pursuant to a 12b-1 plan
adopted by shareholders on October 15, 1996. The cost of distributing
shares of the Fund is borne by the Adviser at no cost to the Fund;
thus, there is no "12b-1 fee."
Other
Security transactions are accounted for as of the trade date, the date
the order to buy or sell is executed. Realized gains and losses are
computed on the identified cost basis. Dividend income is recorded on
the ex-dividend date, and interest income is recorded on the accrual
basis.
Assets in the Social Responsibility Portfolio are very low, and may
remain so in the immediate future. Because commission cost per trade is
unacceptably high as a percentage of assets, the Adviser reimburses
this Portfolio for any commissions above one cent/share. The Adviser
expects to continue this practice until portfolio net assets reach at
least $2 million.
3. Use of Derivative Instruments:
The Social Responsibility Portfolio may use options and futures on
stock indexes in seeking to achieve the investment objective of roughly
matching market risk over longer time periods. (See the Prospectus
sections "Risk Factors" and "Investment Objectives and Policies" for
additional information.) Buying calls increases a Portfolio's exposure
to the underlying security. Buying puts on a stock market index tends
to limit a Portfolio's exposure to a stock market decline. All options
purchased by the Fund were listed on exchanges and considered liquid
positions with readily available market quotes. A summary of
transactions in options by the Social Responsibility Portfolio follows:
<TABLE>
<CAPTION>
Call Options Put Options
------------------ -------------------
Number Cost Number Cost
------ -------- ------ -------
<S> <C> <C> <C> <C>
Outstanding June 30, 1998 0 $ -- 0 $ --
Purchased 15 22,003 7 8,603
Expired 0 -- (7) (8,603)
Exercised 0 -- 0
Closed -13 (20,251) 0 --
------ -------- ----- -------
Outstanding December 31, 1998 2 $ 1,752 0 $ --
====== ======== ===== =======
Market value December 31, 1998 $ 1,038 $ --
======== =======
</TABLE>
-10-
<PAGE> 11
BRIDGEWAY FUND, INC.
SOCIAL RESPONSIBILITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited), Continued
4. Management Contract:
The Fund has entered into a management contract with Bridgeway Capital
Management, Inc. (the Adviser"), a shareholder of the Fund. As
compensation for the advisory services rendered, facilities furnished,
and expenses borne by Bridgeway Capital Management, Inc., the Portfolio
pays Bridgeway Capital Management, Inc. a fee, computed and paid
monthly based on the average daily net assets of the portfolio for the
month. Such fee is based on the following annual rates: 0.90% of the
first $250 million of each portfolio's average daily net assets, 0.875%
of the next $250 million and 0.85% of any excess over $500 million.
The fee is adjusted quarterly based upon performance. The performance
adjustment rate varies with the Fund's performance as compared to the
performance of the Standard & Poor's 500 Composite Stock Price Index
with dividends reinvested (hereinafter "Index" ) and ranges from -.7%
to +.7%. The performance rate adjustment is calculated at 4.67% of the
difference between the performance of the Fund and that of the Index
over the trailing five year period, except that there is no performance
adjustment if the difference between the Fund performance and the Index
performance is less than or equal to 2%.
5. Related Party Transactions:
One director of the Fund, John Montgomery, is an owner and director of
the Adviser. Under the Investment Company Act of 1940 definitions, he
is considered to be "affiliated" and "interested." Compensation of Mr.
Montgomery is borne by the Adviser rather than the Fund. The other
officers of the fund are employees of the Adviser and the portion of
their compensation attributable to fund accounting, shareholder
accounting and state registration services is paid by the Fund and is
included in the Accounting fees expense category of the financial
statements. All amounts paid for shareholder accounting are paid to the
Adviser.
The Adviser has been voluntarily reimbursing the Social Responsibility
Portfolio for any operating expenses above 1.5% and expects to continue
this voluntary level of reimbursement for the foreseeable future. To
achieve this expense level the Adviser has waived the management fees
and $6,347 of the accounting fees for the six months ended December 31,
1998.
6. Custodial Agreement:
The Fund has entered into a Custodial Agreement with Compass Bank. As
compensation for services rendered by the custodian, each portfolio
pays a fee, computed and paid quarterly based on the average month end
total assets of each portfolio for the quarter plus a fee per
transaction.
7. Cost, Purchases and Sales of Investment Securities:
Investments have the same cost for tax and financial statement
purposes. Aggregate purchases and sales of investment securities, other
than cash equivalents were $814,295 and $431,017, respectively for the
six months ended December 31, 1998.
-11-
