UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21292
-----------------
Ned Davis Research Funds
---------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center,
Rye, New York 10580-1422
---------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center,
Rye, New York 10580-1422
---------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
--------------------------
Date of fiscal year end: December 31, 2003
-------------------------
Date of reporting period: June 30, 2003
---------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
NED DAVIS RESEARCH ASSET ALLOCATION FUND
SEMI-ANNUAL REPORT
JUNE 30, 2003
TO OUR SHAREHOLDERS,
We are changing the way we provide portfolio managers' commentary to
shareholders of our Funds. Our shareholder reports have typically contained
commentary on each portfolio manager's assessment of the stock market,
individual stocks and how economic events affect their thinking in managing a
specific Fund. We have always provided details about performance and presented
returns, both good and bad, hopefully in a clear and concise fashion. These
comments have been included as part of each Fund's quarterly, semi-annual, and
annual financial statements.
The Sarbanes-Oxley Act's new corporate governance regulations now require
a Fund's principal executive and financial officers to certify the entire
contents of shareholder reports in a filing with the Securities and Exchange
Commission on form N-CSR. This certification covers the portfolio manager's
commentary and subjective opinions if they are attached to or a part of the
financial statements.
Rather than ask our portfolio managers to eliminate their opinions and/or
restrict their commentary to historical facts only, we are removing their
commentary from the financial statements and sending it to you separately. As a
result, this commentary will no longer be considered part of a Fund's financial
report and therefore will not be subject to the officers' certifications.
We trust that you understand that our approach is an unintended
consequence of the ever-increasing regulatory requirements affecting public
companies generally. We hope the specific certification requirements of these
new regulations will be modified as they relate to mutual funds, since
investment companies have different corporate structures and objectives than
other public companies.
Sincerely yours,
/S/ BRUCE N. ALPERT
Bruce N. Alpert
Chief Operating Officer
August 8, 2003 Gabelli Funds, LLC
NED DAVIS RESEARCH ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 85.6%
BUILDING AND CONSTRUCTION -- 7.0%
100 Beazer Homes USA
Inc.+ ..............$ 9,415 $ 8,350
900 Centex Corp. ......... 65,594 70,011
2,200 D.R. Horton Inc. ..... 56,955 61,820
500 Hovnanian Enterprises Inc.,
Cl. A+ ............. 29,941 29,475
1,000 KB HOME .............. 55,334 61,980
500 Lennar Corp., Cl. A .. 38,729 35,750
500 MDC Holdings Inc. .... 24,378 24,140
100 NVR Inc.+ ............ 43,950 41,100
1,000 Pulte Homes Inc. ..... 62,018 61,660
700 Ryland Group Inc. .... 42,227 48,580
1,800 Standard Pacific Corp. 60,932 59,688
900 Toll Brothers Inc.+ .. 24,774 25,479
---------- ----------
514,247 528,033
---------- ----------
COMPUTER HARDWARE -- 2.3%
1,900 Electronics for
Imaging Inc.+ ...... 38,165 38,551
1,700 Intel Corp. .......... 34,300 35,333
500 International Business
Machines Corp. ..... 42,491 41,250
500 Lexmark International
Inc.+ .............. 36,515 35,385
800 Maxtor Corp.+ ........ 5,359 6,008
1,500 Western Digital Corp.+ 16,601 15,450
---------- ----------
173,431 171,977
---------- ----------
COMPUTER SOFTWARE AND SERVICES -- 9.3%
400 Adobe Systems Inc. ... 14,004 12,828
1,000 BMC Software Inc.+ ... 16,620 16,330
500 Borland Software Corp.+ 5,690 4,885
7,000 Cisco Systems Inc.+ .. 117,855 116,830
3,200 Computer Associates
International Inc. . 69,479 71,296
4,600 EMC Corp.+ ........... 46,568 48,162
1,200 Legato Systems Inc.+ . 9,179 10,068
1,000 McDATA Corp.+ ........ 13,214 14,670
8,600 Microsoft Corp. ...... 216,175 220,246
1,700 Netscreen Technologies
Inc.+ .............. 37,807 38,335
2,500 Oracle Corp.+ ........ 32,149 30,050
4,800 Red Hat Inc.+ ........ 35,439 36,336
1,100 Storage Technology
Corp.+ ............. 29,168 28,314
1,700 Yahoo! Inc.+ ......... 49,979 55,692
---------- ----------
693,326 704,042
---------- ----------
CONSUMER PRODUCTS -- 0.2%
200 Procter & Gamble Co. . 17,820 17,836
---------- ----------
DIVERSIFIED INDUSTRIAL -- 1.9%
5,100 General Electric Co. . 149,037 146,268
---------- ----------
ENERGY AND UTILITIES -- 9.4%
1,500 AGL Resources Inc. ... 39,394 38,160
600 Brown (Tom) Inc.+ .... 16,890 16,674
MARKET
SHARES COST VALUE
------ ---- ------
1,400 Burlington Resources
Inc. ...............$ 73,549 $ 75,698
100 Consolidated Edison
Inc. ............... 4,313 4,328
200 Devon Energy Corp. ... 10,761 10,680
1,500 Edison International+ 24,792 24,645
600 Equitable Resources
Inc. ............... 24,724 24,444
3,100 Exxon Mobil Corp. .... 112,087 111,321
2,400 FMC Technologies Inc.+ 52,333 50,520
600 Halliburton Co. ...... 13,919 13,800
300 Houston Exploration
Co.+ ............... 9,537 10,410
100 Kinder Morgan Inc. ... 5,560 5,465
1,500 National Fuel Gas Co. 40,037 39,075
800 New Jersey Resources
Corp. .............. 28,934 28,400
300 NSTAR ................ 14,133 13,665
600 ONEOK Inc. ........... 12,392 11,778
1,975 Patina Oil & Gas Corp. 62,927 63,496
400 Peoples Energy Corp. . 17,879 17,156
200 Pride International
Inc.+ .............. 3,733 3,764
2,600 Superior Energy
Services Inc.+ ..... 29,389 24,648
1,200 UGI Corp. ............ 40,705 38,040
1,100 Westport Resources
Corp.+ ............. 25,152 25,025
1,000 Wisconsin Energy Corp. 27,994 29,000
1,600 XTO Energy Inc. ...... 33,781 32,176
---------- ----------
724,915 712,368
---------- ----------
ENVIRONMENTAL SERVICES -- 0.4%
100 Stericycle Inc.+ ..... 3,993 3,848
1,700 Tetra Tech Inc.+ ..... 29,073 29,121
---------- ----------
33,066 32,969
---------- ----------
EQUIPMENT AND SUPPLIES -- 2.7%
1,200 Avocent Corp.+ ....... 34,654 35,916
800 CANON Inc., ADR ...... 34,044 36,520
100 DENTSPLY International
Inc. ............... 3,783 4,090
500 Hillenbrand Industries,
Inc. ............... 25,709 25,225
600 PACCAR Inc. .......... 42,265 40,536
4,700 Xerox Corp.+ ......... 51,076 49,773
200 Zebra Technologies Corp.,
Cl. A+ ............. 13,955 15,038
---------- ----------
205,486 207,098
---------- ----------
FINANCIAL SERVICES -- 16.5%
600 Ambac Financial
Group Inc. ......... 42,045 39,750
2,000 American Express Co. . 81,877 83,620
700 American International
Group Inc. ......... 39,907 38,626
400 Associated Banc-Corp. 15,091 14,752
200 Bank of America Corp. 14,889 15,806
500 Bear Stearns
Companies Inc. ..... 41,182 36,210
700 Capital One
Financial Corp. .... 35,323 34,426
2,000 Charter Municipal Mortgage
Acceptance Co. ..... 38,929 38,020
3,700 Citigroup Inc. ....... 154,518 158,360
See accompanying notes to financial statements.
2
NED DAVIS RESEARCH ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
1,000 Countrywide Financial
Corp. ..............$ 74,820 $ 69,570
1,000 Doral Financial Corp. 43,540 44,650
1,600 Fannie Mae ........... 116,828 107,904
1,500 First Tennessee
National Corp. ..... 68,317 65,865
300 Freddie Mac .......... 15,554 15,231
400 Golden West
Financial Corp. .... 31,126 32,004
2,100 JP Morgan Chase & Co. 70,182 71,778
100 Legg Mason Inc. ...... 6,616 6,495
400 Lehman Brothers
Holdings Inc. ...... 26,984 26,592
2,900 MBNA Corp. ........... 60,157 60,436
200 Merrill Lynch
& Co. Inc. ......... 8,319 9,336
1,300 Metris Companies Inc. 7,297 7,215
1,200 Moody's Corp. ........ 64,149 63,252
1,700 Principal Financial
Group Inc. ......... 52,387 54,825
5,500 Providian
Financial Corp. .... 52,249 50,930
1,500 SLM Corp ............. 60,746 58,755
400 Sovereign Bancorp Inc. 6,276 6,260
1,100 T. Rowe Price
Group Inc. ......... 42,318 41,525
---------- ----------
1,271,626 1,252,193
---------- ----------
FOOD AND BEVERAGE -- 0.2%
400 Coca-Cola Co. ........ 17,370 18,564
---------- ----------
HEALTH CARE: GENERAL -- 17.6%
1,200 Aetna Inc. ........... 67,017 72,240
1,900 Amgen Inc.+ .......... 120,193 126,236
1,000 Anthem Inc.+ ......... 74,047 77,150
800 Bausch & Lomb Inc. ... 31,121 30,000
600 Becton, Dickinson
and Co. ............ 22,819 23,310
100 Biogen Inc.+ ......... 4,314 3,800
700 Boston Scientific
Corp.+ ............. 36,650 42,770
1,000 Caremark Rx Inc.+ .... 24,962 25,680
700 Chiron Corp.+ ........ 32,305 30,604
400 CIGNA Corp. .......... 20,476 18,776
700 Cobalt Corp.+ ........ 13,111 14,385
300 Coventry Health
Care Inc.+ ......... 13,614 13,848
2,500 First Health
Group Corp.+ ....... 65,496 69,000
800 Genzyme Corp.+ ....... 37,195 33,440
100 Gilead Sciences Inc.+ 5,598 5,558
1,300 Guidant Corp. ........ 54,334 57,707
2,100 Health Net Inc.+ ..... 63,680 69,195
2,000 Humana Inc.+ ......... 27,587 30,200
200 IDEXX Laboratories
Inc.+ .............. 7,355 6,708
900 Johnson & Johnson .... 48,248 46,530
300 Medtronic Inc. ....... 14,441 14,391
1,400 Mentor Corp. ......... 29,991 27,132
700 Mid Atlantic Medical
Services Inc.+ ..... 34,923 36,610
1,100 Oxford Health
Plans Inc.+ ........ 42,375 46,233
300 PacifiCare Health
Systems Inc.+ ...... 12,157 14,799
200 St. Jude Medical Inc.+ 11,316 11,500
MARKET
SHARES COST VALUE
------ ---- ------
1,100 Stryker Corp. ........$ 73,229 $ 76,307
1,800 UnitedHealth
Group Inc. ......... 86,018 90,450
700 Varian Medical
Systems Inc.+ ...... 38,788 40,299
800 VISX Inc.+ ........... 13,555 13,880
900 WellPoint Health
Networks Inc.+ ..... 73,852 75,870
900 Wright Medical
Group Inc.+ ........ 18,606 17,100
1,600 Zimmer Holdings Inc.+ 71,089 72,080
---------- ----------
1,290,462 1,333,788
---------- ----------
HEALTH CARE: PHARMACEUTICALS -- 9.7%
1,000 Allergan Inc. ........ 74,200 77,100
1,500 Alpharma Inc., Cl. A . 32,210 32,400
400 Barr Laboratories
Inc.+ .............. 22,247 26,200
1,200 Endo Pharmaceuticals
Holdings Inc.+ 21,138 20,304
1,500 Forest Laboratories
Inc.+ .............. 76,423 82,125
3,300 ICN Pharmaceuticals
Inc. ............... 45,966 55,308
800 Medicis Pharmaceutical Corp.,
Cl. A .............. 45,942 45,360
500 Merck & Co. Inc. ..... 27,658 30,275
1,900 Mylan Laboratories
Inc. ............... 57,645 66,063
3,800 Perrigo Co. .......... 58,071 59,432
3,700 Pfizer Inc. .......... 118,772 126,355
600 Pharmaceutical
Resources Inc.+ .... 26,206 29,196
700 SICOR Inc.+ .......... 15,364 14,238
1,700 Watson Pharmaceuticals
Inc.+ .............. 64,376 68,629
---------- ----------
686,218 732,985
---------- ----------
REAL ESTATE -- 2.1%
300 CBL & Associates
Properties Inc. .... 13,076 12,900
300 Chelsea Property
Group Inc. ......... 12,703 12,093
1,000 Developers Diversified
Realty Corp. ....... 28,639 28,440
1,900 iStar Financial Inc. . 66,678 69,350
200 Liberty Property Trust 6,721 6,920
700 Macerich Co. ......... 24,524 24,591
200 Weingarten Realty
Investors .......... 8,228 8,380
---------- ----------
160,569 162,674
---------- ----------
RETAIL -- 3.3%
300 Amazon.com Inc.+ ..... 10,126 10,947
300 AutoZone Inc.+ ....... 25,226 22,791
1,600 Bed Bath & Beyond
Inc.+ .............. 65,074 62,096
1,000 Claire's Stores Inc. . 29,106 25,360
300 Cost Plus Inc.+ ...... 10,601 10,698
800 Staples Inc.+ ........ 15,525 14,680
1,900 Wal-Mart Stores Inc. . 103,331 101,973
100 Williams-Sonoma Inc.+ 2,810 2,920
---------- ----------
261,799 251,465
---------- ----------
SATELLITE -- 0.1%
300 PanAmSat Corp.+ ...... 5,815 5,529
---------- ----------
See accompanying notes to financial statements.
3
NED DAVIS RESEARCH ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- 2.0%
300 ADTRAN Inc.+ .........$ 16,162 $ 15,387
2,100 Avaya Inc.+ .......... 15,040 13,566
100 BellSouth Corp. ...... 2,691 2,663
1,500 CenturyTel Inc. ...... 51,273 52,275
1,600 Citizens Communications
Co.+ ............... 20,169 20,624
600 Corning Inc.+ ........ 4,739 4,434
800 Deutsche Telekom
AG, ADR+ ........... 11,961 12,160
600 Plantronics Inc.+ .... 13,262 13,002
100 Telefonica SA, ADR+ .. 3,448 3,457
300 Verizon Communications
Inc. ............... 11,139 11,835
---------- ----------
149,884 149,403
---------- ----------
WIRELESS COMMUNICATIONS -- 0.9%
4,100 AT&T Wireless
Services Inc.+ ..... 30,889 33,661
1,200 Crown Castle International
Corp.+ ............. 9,720 9,324
1,000 Nextel Communications Inc.,
Cl. A+ ............. 16,476 18,080
300 Vodafone Group
plc, ADR ........... 6,263 5,895
---------- ----------
63,348 66,960
---------- ----------
TOTAL COMMON STOCKS .. 6,418,419 6,494,152
---------- ----------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 11.8%
U.S. TREASURY BONDS -- 11.8%
$143,000 7.250%, 05/15/16 ..... 188,137 190,224
193,000 8.125%, 08/15/19 ..... 275,624 279,194
344,000 6.250%, 08/15/23 ..... 414,655 421,481
---------- ----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS ........ 878,416 890,899
---------- ----------
TOTAL INVESTMENTS --
97.4% ..............$7,296,835 7,385,051
==========
OTHER ASSETS AND
LIABILITIES (NET) -- 2.6% ....... 197,384
----------
NET ASSETS -- 100.0% ..............$7,582,435
==========
NUMBER OF EXPIRATION UNREALIZED
CONTRACTS DATE DEPRECIATION
--------- ---------- ------------
FUTURES CONTRACTS -- LONG POSITION
1 U.S. Bond Future .......9/19/03 $ (906)
==========
FUTURE CONTRACTS -- SHORT POSITION
2 S&P 500 Emini Future ...9/19/03 $ (5)
==========
- -----------------
For Federal tax purposes:
Aggregate cost ....................$7,296,835
==========
Gross unrealized appreciation .....$ 198,453
Gross unrealized depreciation ..... (110,237)
----------
Net unrealized appreciation .......$ 88,216
==========
- -----------------
+ Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
4
NED DAVIS RESEARCH ASSET ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $7,296,835) .... $7,385,051
Cash ....................................... 107,293
Dividends and interest receivable .......... 20,879
Receivable for Fund shares sold ............ 78,791
Receivable from advisor .................... 65,703
Deferred organizational expense ............ 82,651
Variation margin ........................... 725
----------
Total Assets ............................... 7,741,093
----------
LIABILITIES:
Payable for investment advisory fees ....... 10,157
Payable for distribution fees .............. 3,043
Payable for organizational expenses ........ 110,000
Other accrued expenses and liabilities ..... 34,751
----------
TOTAL LIABILITIES .......................... 157,951
----------
NET ASSETS applicable to 684,129
shares outstanding ..................... $7,583,142
==========
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value $ 684
Additional paid-in capital ................. 7,289,414
Net investment loss ........................ (8,875)
Accumulated net realized gain on investments
and futures contracts .................... 214,596
Net unrealized appreciation on investments
and futures contracts .................... 87,323
----------
TOTAL NET ASSETS ........................... $7,583,142
==========
SHARES OF CAPITAL STOCK:
CLASS AAA:
Shares of capital stock outstanding
($0.001 par value) ....................... 203,118
=======
Net Asset Value, offering and
redemption price per share ............... $11.09
======
CLASS A:
Shares of capital stock
outstanding ($0.001 par value) ........... 149,279
=======
Net Asset Value and redemption
price per share .......................... $11.09
======
Maximum sales charge ....................... 5.75%
======
Maximum offering price per share (NAV (DIVIDE)
0.9425, based on maximum sales charge of 5.75%
of the offering price at June 30, 2003) .. $11.77
======
CLASS B:
Shares of capital stock outstanding
($0.001 par value) ....................... 17,793
======
Net Asset Value, offering and redemption
price per share .......................... $11.07(a)
======
CLASS C:
Shares of capital stock outstanding
($0.001 par value) ....................... 242,129
=======
Net Asset Value, offering and redemption
price per share .......................... $11.07(a)
======
CLASS I:
Shares of capital stock outstanding
($0.001 par value) ....................... 71,810
======
Net Asset Value, offering and
redemption price per share ............... $11.10
======
- -------------------
(a) Redemption price varies based on the length of time held.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $10) .......... $ 8,234
Interest ......................................... 5,856
--------
TOTAL INVESTMENT INCOME .......................... 14,090
--------
EXPENSES:
Organizational expenses .......................... 27,349
Shareholder services fees ........................ 11,334
Investment advisory fees ......................... 10,157
Shareholder communications expenses .............. 8,602
Legal and audit fees ............................. 7,745
Registration fees ................................ 7,036
Trustees' fees ................................... 5,957
Distribution fees ................................ 5,223
Custodian fees ................................... 3,409
Miscellaneous expenses ........................... 1,856
--------
TOTAL EXPENSES ................................... 88,668
Less: Expense reimbursements ..................... (65,703)
--------
TOTAL NET EXPENSES ............................... 22,965
--------
NET INVESTMENT LOSS .............................. (8,875)
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain on investments ................. 95,455
Net realized gain on futures contracts ........... 119,141
Net change in unrealized appreciation/depreciation
on investments and futures contracts ........... 87,323
--------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FUTURES CONTRACTS .......................... 301,919
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $293,044
========
See accompanying notes to financial statements.
5
NED DAVIS RESEARCH ASSET ALLOCATION FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2003(A)
----------------
OPERATIONS:
Net investment loss ...................................................... $ (8,875)
Net realized gain on investments and futures contracts ................... 214,596
Net change in unrealized appreciation on investments and futures contracts 87,323
----------
Net increase in net assets resulting from operations ..................... 293,044
----------
CAPITAL SHARE TRANSACTIONS:
Class AAA .............................................................. 2,167,033
Class A ................................................................ 1,613,015
Class B ................................................................ 187,928
Class C ................................................................ 2,563,938
Class I ................................................................ 758,184
----------
Net increase in net assets from shares of beneficial interest transactions 7,290,098
----------
NET INCREASE IN NET ASSETS ............................................... 7,583,142
NET ASSETS:
Beginning of period ...................................................... --
----------
End of period ............................................................ $7,583,142
==========
- ------------------------------
(a) Ned Davis Research Asset Allocation Fund commenced operations on March 31,
2003.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION. Ned Davis Research Asset Allocation Fund (the "Fund"), a series
of Ned Davis Research Funds (the "Trust") was organized on January 30, 2003 as a
Delaware business trust. The Fund is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund commenced investment operations on March 31,
2003. The Fund's primary objective is capital appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Trustees so determines, by such other method as the Board of Trustees
shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges. Securities and assets for which market
quotations are not readily available are valued at their fair value as
determined in
6
NED DAVIS RESEARCH ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
good faith under procedures established by and under the general supervision of
the Board of Trustees. Short term debt securities with remaining maturities of
60 days or less are valued at amortized cost, unless the Board of Trustees
determines such does not reflect the securities fair value, in which case these
securities will be valued at their fair value as determined by the Board of
Trustees. Debt instruments having a maturity greater than 60 days for which
market quotations are readily available are valued at the latest average of the
bid and asked prices. If there were no asked prices quoted on such day, the
security is valued using the closing bid price. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such options
have taken place that day, they will be valued at the mean between their closing
bid and asked prices.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the Board
of Trustees. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles in
the United States. These differences are primarily due to differing treatments
of income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund.
PROVISION FOR INCOME TAXES. The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a result, a Federal income tax provision is not required.
7
NED DAVIS RESEARCH ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Trustees of the Fund who are its affiliates. The Adviser has
voluntarily agreed to reimburse expenses of the Fund to the extent necessary to
maintain the annualized total operating expenses of 2.00%, 2.00%, 2.75%, 2.75%
and 1.75%, respectively of average daily net assets. For the period from March
31, 2003 (commencement of operations) through June 30, 2003, the Adviser
reimbursed the Fund $65,703.
The Fund has also entered into a sub-advisory agreement with Ned Davis Research
Inc. (the "Sub-Adviser") whereby the Adviser pays the Sub-Adviser a monthly
sub-advisory fee based on the average daily net assets of the Fund at a rate of
0.30% of the first $500 million of such average daily net assets and 0.35% on
average daily net assets in excess of $500 million. For the period ended June
30, 2003, the Adviser paid to the Sub-Advisor fees of $3,047.
4. DISTRIBUTION PLAN. The Fund's Board of Trustees adopted distribution plans
(the "Plan") pursuant to Rule 12b-1 under the 1940 Act for each of the classes
of shares (other than Class I). For the period ended June 30, 2003, the Fund
incurred distribution costs of $697,535, $217 and $3,774 for Class AAA, Class A,
Class B and Class C, respectively, payable to Gabelli & Company, Inc., an
affiliate of the Adviser.
5. ORGANIZATIONAL EXPENSES. Offering expenses of $110,000 have been paid by
the Adviser and will be amortized over a twelve-month period. Organizational
expenses of $20,000 were borne by the Adviser.
6. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the period ended June 30, 2003, other than short term securities, aggregated
$9,883,678 and $2,681,224, respectively.
7. TRANSACTIONS WITH AFFILIATES. Gabelli & Company has informed the Fund that it
received commissions (sales charges and underwriting fees) from investors on
sales or redemptions of Fund shares in the amount of $1,065.
8. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED JUNE 30, 2003
(UNAUDITED)
------------------------------------------------------------
CLASS AAA CLASS A
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
Shares sold ......... 302,934 $ 3,278,352 334,618 $ 3,651,170
Shares redeemed ..... (99,816) (1,111,319) (185,340) (2,038,155)
-------- ----------- -------- -----------
Net increase ...... 203,118 $ 2,167,033 149,279 $ 1,613,015
======== =========== ======== ===========
CLASS B CLASS C
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
Shares sold ......... 17,793 $ 187,928 287,522 $ 3,047,905
Shares redeemed ..... -- -- (45,393) (483,967)
-------- ----------- -------- -----------
Net increase ...... 17,793 $ 187,928 242,129 $ 2,563,938
======== =========== ======== ===========
CLASS I
--------------------------
SHARES AMOUNT
-------- -----------
Shares sold ......... 71,910 $ 759,249
Shares redeemed ..... (100) (1,065)
-------- -----------
Net increase ...... 71,810 $ 758,184
======== ===========
8
NED DAVIS RESEARCH ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout the period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
---------------------------------------- ------------------------------------
Net In Excess
Net Asset Realized and Total Net of Net Net Asset
Period Value, Net Unrealized from Net Realized Realized Value,
Ended Beginning Investment Gain (Loss) on Investment Investment Gain on Gain on Total End of Total
June 30+ of Period Gain (Loss) Investments Operations Income Investments Investments Distributions Period Return++
- -------- --------- ----------- -------------- ---------- ---------- ----------- ----------- ------------- --------- --------
CLASS AAA
2003 $10.00 $(0.02) $1.11 $1.09 -- -- -- -- $11.09 10.9%
CLASS A
2003 10.00 (0.02) 1.11 1.09 -- -- -- -- 11.09 10.9
CLASS B
2003 10.00 (0.04) 1.11 1.07 -- -- -- -- 11.07 10.7
CLASS C
2003 10.00 (0.04) 1.11 1.07 -- -- -- -- 11.07 10.7
CLASS I
2003 10.00 (0.01) 1.11 1.10 -- -- -- -- 11.10 11.0
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------
Net
Net Assets Investment Expenses Expenses
Period End of Income/(Loss) Net of Before Portfolio
Ended Period to Average Waivers/ Waivers/ Turnover
June 30+ (in 000's) Net Assets(b) Reimbursements(b) Reimbursements(b)(c) Rate
-------- ---------- ------------- ----------------- -------------------- ---------
CLASS AAA
2003 $2,253 (0.62)% 2.00% 8.92% 81%
CLASS A
2003 1,656 (0.59) 2.00 7.52 81
CLASS B
2003 197 (1.41) 2.75 8.89 81
CLASS C
2003 2,680 (1.36) 2.75 8.72 81
CLASS I
2003 797 (0.37) 1.75 10.40 81
- ------------------
+ From commencement of investment operations on March 31, 2003 through June
30, 2003.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for less than one year is
not annualized.
(a) Based on average month-end shares outstanding.
(b) Annualized.
(c) During the period ended June 30, 2003 the Adviser reimbursed certain
expenses. If such expense reimbursement had not occurred, the ratio of
operating expenses to average net assets would have been as shown.
See accompanying notes to financial statements.
9
Ned Davis Research Funds
NED DAVIS RESEARCH
ASSET ALLOCATION FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Henry G. Van der Eb, CFA Robert J. Morrissey
CHAIRMAN ATTORNEY-AT-LAW
MORRISSEY, HAWKINS & LYNCH
Anthony J. Colavita Karl Otto Pohl
ATTORNEY-AT-LAW FORMER PRESIDENT
ANTHONY J. COLAVITA, P.C. DEUTSCHE BUNDESBANK
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN ENERGY CORP.
Mario J. Gabelli, CFA Salvatore J. Zizza
CHAIRMAN AND CHIEF INVESTMENT OFFICER CHAIRMAN
GABELLI ASSET MANAGEMENT INC. HALLMARK ELECTRICAL
SUPPLIES CORP.
OFFICERS
Bruce N. Alpert James McKee
PRESIDENT SECRETARY
Gus Coutsouros
VICE PRESIDENT AND TREASURER
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of Ned
Davis Research Asset Allocation Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB840Q203SR
[LOGO OMITTED]
NED DAVIS
RESEARCH
ASSET
ALLOCATION
FUND
SEMI-ANNUAL REPORT
JUNE 30, 2003
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Ned Davis Research Funds
By (Signature and Title)* /s/ Bruce N. Alpert
-----------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 09/03/03
-----------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-----------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 09/03/03
-----------------------------------------------
By (Signature and Title)* /s/ Gus A. Coutsouros
-----------------------------------------------
Gus A. Coutsouros, Principal Financial Officer
Date 09/03/03
-----------------------------------------------
* Print the name and title of each signing officer under his or her signature.