THE BRAMWELL GROWTH FUND
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QUARTERLY REPORT - SEPTEMBER 1998
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745 Fifth Avenue
New York, New York 10151
Dear Fellow Shareholders:
Investment Results - Quarter Ended September 30, 1998
THE BRAMWELL GROWTH FUND appreciated 9.6% to $20.75 net asset value per share
for the calendar year to date surpassing the 6.0% gain for the S&P 500 Stock
Index. For the quarter, the Fund matched the S&P 500 Index with a (10.0)%
return while outperforming the Lipper Mid-Cap and Growth Funds Indices which
declined (18.0)% and (11.4)%, respectively. The Fund's three-year compound
average annual return as of September 30, was 17.9%, and since inception, August
1, 1994, through September 30, 1998, the cumulative return was 124.8% resulting
in a compound average annual rate of return since inception of 21.5%.
Investment results compared to those of other indices were as follows:
<TABLE>
<CAPTION>
Sept. Q Calendar One Three Since
Comparative Investment Returns (9/30/98) 1998 Year-to-Date Year Years (a) Inception (b)
----------------------------------------- -------- ------------ ------ ---------- --------------
<C> <C> <C> <C> <C>
THE BRAMWELL GROWTH FUND (C) (10.0)% 9.6% 10.7% 17.9% 21.5%
Lipper Mid-Cap Funds Index (d) (18.0) (7.9) (12.3) 8.6 14.6
Lipper Growth Funds Index (d) (11.4) 2.4 3.1 16.4 19.0
S&P 500 Stock Index (e) (10.0) 6.0 9.1 22.6 23.7
</TABLE>
(a) Compound average annual return. (b) Compound average annual return since
inception 8/1/94. (c) Returns shown include the reinvestment of all dividends
and are net of expenses. The annual expense ratio is capped at 1.75%. Past
performance is not predictive of future results. Investment returns and
principal value will fluctuate, so that shares, when redeemed, may be worth more
or less than their original cost. (d) The Lipper Mid-Cap Funds Index is
comprised of the 30 largest funds which by prospectus or portfolio practice,
invest primarily in companies with market capitalizations less than $5 billion
at the time of purchase. The Lipper Growth Funds Index is comprised of the 30
largest funds which by prospectus or portfolio practice, normally invest in
companies with long-term earnings expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indices. Funds
in the Lipper Mid-Cap and Growth Funds Indices are equal weighted and returns
include the reinvestment of all dividends and are net of expenses. (e) The S&P
500 Stock Index is an unmanaged index of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. The Index is adjusted for
dividends, weighted towards stocks with large market capitalizations and
represents approximately two-thirds of the total market value of all domestic
common stocks.
Commentary
The investment environment was difficult in the September quarter. Equity
markets hit new highs in mid-July as capital flowed into equities and then
deteriorated over concerns about declining economies in Asia and Russia and
decelerating profit growth. Disappointment in the Federal Reserve's modest 25-
basis point (0.25%) rate cut in late September also contributed to the quarter's
market decline.
Sectors that contributed positively to performance during the September quarter
were information processing, drug stores, pharmaceuticals and telephone
services. Financial service stocks suffered from contraction of P/E multiples
to reflect higher credit risk and slower earnings growth. Anticipation of
decelerating economic growth had a negative impact on stocks of employee
staffing companies which performed strongly in the June quarter (and which we
still like) as well as on economically sensitive companies. Oil service stocks
continued to languish in an environment of depressed oil prices. Individual
stocks that contributed significant value to the portfolio were Dell Computer,
EMC, Eli Lilly, Walgreen, Cardinal Health, IBM, Paychex, CVS, U.S. West and
Molex.
Outlook
We expect the Federal Reserve to focus increasingly on global financial
stability and to continue reducing interest rates beyond the announced
additional 25-basis point rate cuts in the discount and Fed funds rates on
October 15th. Lower interest rates and greater credit availability would be
especially helpful to emerging countries and companies as well as to the housing
market and equity valuations.
We anticipate that economic growth will slow to 1%-2% going forward given the
impact of economic contraction in Asia and Eastern Europe on U.S. exports and
previously hoped for business opportunities. Inflation should be minimal given
cheaper imports, lower oil and other commodity prices, underutilized global
capacity, and technology-driven productivity gains. Lower interest rates should
continue to drive housing sales and release income for other purposes. Greater
affordability of many products, a strong housing market and continued moderate
economic gains in Europe are expected to help offset the impact of economic
weakness in Asia and emerging markets worldwide.
Our portfolio focus continues to be on companies that generate strong top-line
growth despite macroeconomic conditions. For those companies that can deliver
superior growth, we anticipate above-average and possibly even rising P/E
valuations. Growth from new products, which intrinsically provide pricing
flexibility, should be valued highly in a slowing global economy. Advances in
communications, computing and medicine, the explosive growth of the Internet and
electronic commerce, and technology upgrades for the Year 2000 are driving
change and creating investment opportunities. Themes that we continue to like
are outsourcing, home-related products, effective use of technology, and
consolidation to achieve critical mass and economies of scale.
We continue to estimate that the 1999 earnings growth rate for our portfolio
approximates 20%, some 4-5 times that projected for the S&P 500 Index, for which
we are paying about the same multiple of 20 times. Over time, stock prices
move with earnings growth and, in an environment of lower inflation and interest
rates, price/earnings ratios have the potential to expand, especially for
companies selling at discounts to valuations paid for the S&P, thereby
increasing investment returns. Also, relative to current 3-month Treasury bill
yields of approximately 3.5% and longer term 10-year Treasury note yields below
5%, even 10% consistent annual earnings growth is comparatively more attractive
assuming that P/E ratios at least hold even in an environment of declining
interest rates. The 20% long-term capital gains tax rate also favors equity
investment.
The recent sell-off in itself has reduced market risk. The decline in interest
rates has made cash and other fixed income instruments less appealing investment
alternatives to equities, and market dips are creating attractive buying
opportunities to bolster long-term investment returns.
Fund Investment
The minimum initial investment for a Regular account is $1,000 and for an IRA or
Gift to Minors account $500. Subsequent investment minimums are $100 for
Regular and IRA accounts and $50 for a Gift to Minor account. Equity markets
are inherently volatile and investors are encouraged to invest over time to
smooth the effects of volatility. An Automatic Investment Plan, with initial
and subsequent investment minimums of $50 per month, is available upon request
to facilitate regular investment.
The Fund's net asset value is available each evening after 6:00 p.m. (EST) by
calling 1-800-BRAMCAP (1-800-272-6227). Please also call this number if you
need assistance or additional information.
Sincerely,
/s/Elizabeth R. Bramwell
Elizabeth R. Bramwell, CFA
President and Chief Investment Officer
October 20, 1998
The outlook and opinions expressed above represent the views of the investment
adviser as of October 20, 1998 and are subject to change as market and economic
events unfold.
THE BRAMWELL GROWTH FUND
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1998 (UNAUDITED)
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SHARES VALUE
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COMMON STOCKS - 93.73%
APPAREL - 0.60%
Cutter & Buck, Inc.<F1> 50,000 $ 1,150,000
AUTOMOTIVE & HEAVY
EQUIPMENT - 1.10%
Hayes Lemmerz International, Inc.<F1> 28,700 785,663
Lear Corporation<F1> 30,000 1,312,500
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2,098,163
CHEMICALS - 1.61%
Minerals Technologies, Inc. 38,000 1,674,375
OM Group, Inc. 50,000 1,409,375
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3,083,750
COMMUNICATIONS - 7.57%
BellSouth Corporation 30,000 2,257,500
Cisco Systems, Inc.<F1> 33,000 2,039,812
EarthLink Network, Inc.<F1> 8,000 330,000
Lucent Technologies, Inc. 50,000 3,453,125
MCI WorldCom, Inc.<F1> 50,000 2,443,750
Northern Telecom Ltd. 10,000 320,000
Teleglobe, Inc. 38,000 985,625
U.S. West, Inc. 50,000 2,621,875
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14,451,687
EMPLOYEE STAFFING - 5.91%
Interim Services, Inc.<F1> 100,000 2,056,250
Labor Ready, Inc.<F1> 70,000 1,023,750
On Assignment, Inc.<F1> 99,000 3,663,000
Robert Half International, Inc.<F1> 105,000 4,534,687
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11,277,687
ENERGY - 2.42%
Diamond Offshore Drilling, Inc. 40,000 1,040,000
R&B Falcon Corporation<F1> 20,000 240,000
Schlumberger Ltd. 66,300 3,335,719
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4,615,719
ENTERTAINMENT &
LEISURE TIME - 1.09%
Cinar Films, Inc., Class B<F1> 60,000 1,076,250
Imax Corporation<F1> 50,000 1,000,000
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2,076,250
FINANCIAL SERVICES - 9.53%
Charles Schwab Corporation (The) 35,000 1,378,125
Federated Investors, Inc.<F1> 50,000 718,750
LaSalle Partners, Inc.<F1> 25,600 836,800
Mellon Bank Corporation 20,000 1,101,250
Merrill Lynch & Co., Inc. 45,000 2,131,875
North Fork Bancorporation, Inc. 50,000 1,000,000
Northern Trust Company 45,000 3,071,250
Star Banc Corporation 25,000 1,653,125
TCF Financial Corporation 60,000 1,192,500
Washington Mutual, Inc. 115,000 3,881,250
Zions Bancorporation 30,000 1,224,375
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18,189,300
FOOD & BEVERAGE - 2.17%
Bestfoods 50,000 2,421,875
Hershey Foods Corporation 25,000 1,710,938
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4,132,813
SHARES VALUE
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COMMON STOCKS - 93.73% (CONT'D.)
HEALTHCARE: PRODUCTS - 7.54%
Alkermes, Inc.<F1> 15,000 $ 218,437
BioChem Pharmaceuticals, Inc. - ADR<F1> 15,000 275,625
Closure Medical Corporation<F1> 10,000 210,000
Elan Corporation, PLC<F1> 20,000 1,441,250
Eli Lilly & Company 40,000 3,132,500
Focal, Inc.<F1> 25,000 256,250
Johnson & Johnson 15,000 1,173,750
Medtronic, Inc. 37,000 2,141,375
Merck & Company, Inc. 10,000 1,295,625
Pfizer, Inc. 40,000 4,237,500
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14,382,312
HEALTHCARE: SERVICES - 3.90%
Cardinal Health, Inc. 50,000 5,162,500
PAREXEL International Corporation<F1> 25,000 975,000
Quintiles Transnational Corporation<F1> 30,000 1,312,500
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7,450,000
HOME & OFFICE FURNITURE - 3.39%
Ethan Allen Interiors, Inc. 25,000 906,250
Furniture Brands International, Inc.<F1> 40,000 780,000
Herman Miller, Inc. 50,000 987,500
HON Industries, Inc. 40,000 945,000
Knoll, Inc.<F1> 35,200 770,000
Leggett & Platt, Inc. 100,000 2,075,000
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6,463,750
HOUSEHOLD & PERSONAL CARE
PRODUCTS - 1.44%
Colgate-Palmolive Company 40,000 2,740,000
INDUSTRIAL PRODUCTS - 6.57%
Emerson Electric Company 50,800 3,162,300
General Electric Company 45,000 3,580,313
Illinois Tool Works, Inc. 70,000 3,815,000
Molex Inc., Class A 66,385 1,800,693
ThermoQuest Corporation<F1> 20,000 195,000
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12,553,306
INFORMATION PROCESSING:
OFFICE EQUIPMENT - 9.35%
Dell Computer Corporation<F1> 110,000 7,232,500
EMC Corporation<F1> 85,000 4,860,938
International Business Machines
Corporation 35,000 4,480,000
Xerox Corporation 15,000 1,271,250
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17,844,688
INFORMATION PROCESSING:
SERVICES - 9.66%
Automatic Data Processing, Inc. 58,500 4,372,875
Computer Sciences Corporation<F1> 140,058 7,633,161
DST Systems, Inc.<F1> 50,000 2,637,500
Paychex, Inc. 30,000 1,546,875
Sterling Commerce, Inc.<F1> 65,000 2,250,625
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18,441,036
INFORMATION PROCESSING:
SOFTWARE - 1.96%
Microsoft Corporation<F1> 34,000 3,742,125
THE BRAMWELL GROWTH FUND
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PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1998 (UNAUDITED) (CONTINUED)
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SHARES VALUE
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COMMON STOCKS - 93.73% (CONT'D.)
INSURANCE - 4.13%
Allstate Corporation 70,000 $ 2,918,125
American International Group, Inc. 17,500 1,347,500
Chubb Corporation (The) 35,000 2,205,000
Horace Mann Educators Corporation 25,000 750,000
Mercury General Corporation 17,500 656,250
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7,876,875
RETAILING - 12.78%
Amazon.com, Inc.<F1> 12,000 1,339,500
CVS Corporation 60,000 2,628,750
Home Depot, Inc. (The) 111,000 4,384,500
Kohl's Corporation<F1> 90,000 3,510,000
Lowe's Companies, Inc. 30,000 954,375
Saks, Inc.<F1> 40,000 897,500
Tiffany & Company 35,800 1,123,225
Wal-Mart Stores, Inc. 50,000 2,731,250
Walgreen Company 155,000 6,829,687
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24,398,787
TRANSPORTATION - 1.01%
Kansas City Southern Industries, Inc. 55,000 1,925,000
TOTAL COMMON STOCKS
(Cost $122,077,304) 178,893,248
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PRINCIPAL
AMOUNT VALUE
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VARIABLE RATE
DEMAND NOTES - 6.54%
Firstar Corporation $2,176,000 $ 2,176,000
General Mills, Inc. 4,238,000 4,238,000
Pitney Bowes Credit Corporation 859,000 859,000
Sara Lee Corporation 2,203,000 2,203,000
Warner-Lambert Company 3,007,000 3,007,000
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TOTAL VARIABLE RATE DEMAND NOTES
(Cost $12,483,000) 12,483,000
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TOTAL INVESTMENTS - 100.27%
(Cost $134,560,304) 191,376,248
LIABILITIES LESS CASH
AND OTHER ASSETS - (0.27)% (506,292)
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NET ASSETS - 100.00%
(9,197,026 shares outstanding) $190,869,956
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NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $20.75
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<F1> Non-income producing security
THE BRAMWELL GROWTH FUND
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QUARTERLY REPORT - SEPTEMBER 30, 1998
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TOP TEN INDUSTRY SECTORS
SEPTEMBER 30, 1998
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Information Processing 21.0% Industrial Products 6.6%
Retailing 12.8 Employee Staffing 5.9
Healthcare 11.4 Insurance 4.1
Financial Services 9.5 Home & Office Furniture 3.4
Communications 7.6 Energy 2.4
TOP TEN EQUITY HOLDINGS
SEPTEMBER 30, 1998
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Computer Sciences 4.0% Robert Half 2.4%
Dell Computer 3.8 International Business Machines 2.3
Walgreen 3.6 Home Depot 2.3
Cardinal Health 2.7 Automatic Data Processing 2.3
EMC 2.5 Pfizer 2.2
THE BRAMWELL GROWTH FUND
745 Fifth Avenue
New York, New York 10151
1-800-BRAMCAP
(1-800-272-6227)
www.bramwell.com
BOARD OF DIRECTORS
-----------------------------------------
ELIZABETH R. BRAMWELL, CFA
President, Chief Investment
and Financial Officer
The Bramwell Funds, Inc.
J. SINCLAIR ARMSTRONG
Director, Secretary and Treasurer
The Reed Foundation, Inc.
Retired Partner
Whitman, Breed, Abbott & Morgan
Former Commissioner and Chairman
Securities and Exchange Commission
ISABEL H. BENHAM
Trustee Emeritus and former President, Board of Trustees
John W. Barringer III National Railroad Library
GEORGE F. KEANE
Chairman
Trigen Energy Corp.
President Emeritus
The Common Fund, Inc.
JAMES C. SARGENT
Counsel
Opton, Handler, Gottlieb, Feiler & Katz
Former Commissioner
Securities and Exchange Commission
MARTHA R. SEGER, PH.D.
Chairman
Martha Seger & Associates
Former Governor
Federal Reserve Board
OFFICERS
-----------------------------------------------
ELIZABETH R. BRAMWELL, CFA
President, Chief Investment and Financial Officer
MARY F. MCCOLLUM
Secretary and Treasurer
MARGARET A. BANCROFT
Assistant Secretary
INVESTMENT ADVISER
Bramwell Capital Management, Inc.
ADMINISTRATOR
Sunstone Financial Group, Inc.
COUNSEL
Dechert Price & Rhoads
INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP
CUSTODIAN
Firstar Bank Milwaukee
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Firstar Mutual Fund Services, LLC
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This financial statement is submitted for the general information of the
shareholders of The Bramwell Growth Fund. It is not authorized for distribution
to prospective investors unless preceded or accompanied by an effective
prospectus.
BR-412-1098
