Item #1.  Reports to Stockholders.

EUROPEAN EQUITY FUND

Semi-Annual Report to Shareholders

A series of The World Funds, Inc.
A “Series” Investment Company

For the Six Months Ended
June 30, 2013 (unaudited)

For the six months ended June 30, 2013, the Fund delivered positive absolute returns but underperformed its benchmark. The Fund returned 1.81%, while the MSCI Europe Index returned 2.18%.

Market News
The first half of 2013 has seen turbulence in the markets. We think this turbulence has been driven by changes in outlook for the world’s largest economies, and where they stand in the economic cycle. This fluctuating outlook combined with the specter of higher developed market interest rates has led to volatility across the fixed income and equity markets, as well as sharp falls in a number of emerging market currencies. We see the current positioning as:

Separately, we have seen a number of emerging and frontier markets facing large public demonstrations. The demonstrations appear conceptually split between those protesting for policy change and those for change in government. There may be dissatisfaction with policy in Brazil, China and South Africa, but there appears to be broader discontent with the government itself in countries such as Russia, Turkey, Egypt and Venezuela. Brazilian President Dilma Rousseff’s comment, "My government is listening to democratic voices. We must learn to hear the voices of the street,” stands in sharp contrast to some of the harsh comments from Turkish Prime Minister Recep Tayyip Erdogan towards Turkish protesters.

The Chairman of the U.S. central bank, the Federal Reserve, explained that Fed officials are seeing economic recovery gaining momentum in the U.S. As a result, the Fed plans to pull back its bond buying program to allow interest rates to return towards market equilibrium, although initially it plans to calibrate any rate increases with economic strength. A broad based recovery in the U.S. residential housing market appears to be an important catalyst behind the Fed’s view. The S&P/Case Shiller 20 city home price index rose 12% in April 2013 year-over-year. It was the 11 ^th straight monthly rise, and all 20 cities showed higher prices. The large U.S. banks reported solid first quarter numbers with falling legal costs, lower credit card losses, and growth in commercial loans more than offsetting lower income from residential mortgage refinancing.

The prize for most dramatic government action goes to Japan. The start of an aggressive quantitative easing program led to a spectacular rise and then fall in the Japanese stock market, accompanied by a falling yen against all the major

currencies. Shinzo Abe’s LDP government announced three sets of initiatives, or arrows as they marketed it, that they will use to spur the economy into growth: First, monetary to egg inflation up towards 2% and the central bank has started buying government bonds aggressively. Second, fiscal spending to support investment across the economy. Third, intention to make structural economic changes to allow companies a greater opportunity to grow and improve the efficiency of the economy through increased flexibility – widely hoped to refer to areas such as labor costs and breaking open certain protected markets. The market sold off on the speech focused on the third arrow that came in offering little that was new. The government may take a second go at the third arrow post the July upper house elections – so we wait patiently to see.

Markets around the world began to adjust to the idea of rates rising in the U.S. at the same time the Chinese are slowing their investment-led growth. Countries such as South Korea, Thailand, and Brazil, which have benefited from both strong demand for their exports to China and foreign portfolio investment, have seen their markets and currencies sell off sharply. While the markets have reacted strongly, we have not seen significant negative changes at the economic level across the major economies beyond expectations. The governments of many of these affected countries have been sensible in their funding. The vast majority of their outstanding debt has reasonable maturities and is denominated in local currencies.

Europe still appears stuck in a rut without a clear solution to the internal imbalances created by a single currency without a federal tax. Demand from Europe remains subdued, and we do not anticipate a quick return to growth for a number of years while it restructures to adjust income levels of its workers to close the gap with some of its newer members and low priced external competition. We have seen little sign of improvement across the Eurozone that has made us feel any more comfortable with the regulation risks of its struggling economies.

The slowing German economy has tracked that of China, albeit at a lower level. In June, the Bundesbank, Germany’s central bank, lowered its 2013 growth forecast to 0.3% despite the benefits of low interest rates on residential construction and commercial investment. France, the second largest Eurozone economy, is also hovering around zero growth in real terms and the government’s 2013 growth forecast currently stands at 0.1%. However, unlike his German neighbors, Francois Hollande, the French president, faces a difficult political task in restructuring the future liabilities of his country’s pensions in line with what the country will want to afford. According to The 2012 Ageing Report , published by the European Commission, French public pension expense stood at 14.6% of GDP in 2010 – the second highest within the EU and well above the EU27 average of 11.3%.

The UK’s economy is plodding along in the right direction despite some stiff political challenges the government’s been wallowing in that include trying to get Royal Bank of Scotland and Lloyds off its books, in or out of the EU and how to keep or let go of Scotland. But some positive signs are showing: confidence is basically what seems to be driving it as the savings ratio has fallen to 4.2%, the lowest since 2009, while at the same time inflation is biting into household income that is not rising in real terms. The adjusted first quarter figures showed rising net trade, household spending and private sector investment into housing led to 0.3% GDP growth.

Greece was lowered by MSCI from developed to emerging market status – the first time MSCI has relegated a developed market country.

In China, authorities seem to have started implementing a path towards a lower and more sustainable growth rate, as they had previously announced their 12th five-year plan back in 2011 when it set a base line GDP growth target of 7%. While we still do not understand why the country needs 7% growth specifically, we feel the growth does need to slow as the capital investment growth bridge between export and consumer led growth is capital intensive and has led to a sharp increase in debt to GDP. We read the recent tugging on the money supply purse strings, which had led to a spike in overnight rates, as a heads up to bankers that a tighter environment lies ahead. Ratings agency Fitch downgraded China during the second quarter, partly over concerns of the country’s credit ratio.

Outlook
Despite market turbulence, we do not believe there have been any significant changes that would negatively affect the quality growth companies we hold at the operating level. One of the core drivers of the market turbulence has been the strength of the U.S. market.

New Members
On July 1 ^st , the EU took on its 28 ^th member: Croatia. The last to join were Bulgaria and Romania that joined, some may argue a tad prematurely, in 2007. Croatia started negotiations on joining the EU in 2005, along with Turkey. Croatia has not generated positive GDP growth since 2008 and the country’s unemployment rate is around the 20% mark. Its joining is a good reminder that the EU is a political union first and foremost. When the EU started life as the European Coal and Steel Community in 1951 with just six members, its central reason for its existence was to support European stability and reintegration post the Second World War.

In many ways, the EU – with its foundations rooted in security, mutual respect for democracy and cultural differences – has been a dramatic success. The single currency, however, is not so forgiving.

For us, the challenging question of the Eurozone’s economic future, especially for the peripheral economies, is not so much when the “crisis” will pass, but what the post-crisis will look like for the people who live there. We find it hard to imagine many of these well educated and ambitious people will want to work and save for the future in an economy with poor prospects and few well paid jobs. We do not see how these economies can industrialize overnight to provide the value add needed to share a currency with the industrial might of countries such as Germany and France. At the same time, we do not see willingness from the rich industrialized nations to be part of a fiscal union that will allow a flow of wealth to be transferred from the richer to poorer states (countries), as already happens within individual countries (e.g., Italian transfers from north to south, Spanish north to Andalucia, etc.). At this point, we do not see a bounce in European growth, but rather a slow rebalancing. However, there are many high quality European companies with strong franchises and long established global operations.

In the near term, valuations of companies with substantial exposure to weakening emerging market currencies should see income translation diluting reported earnings that will likely result in lower share prices. However, when the opportunities are seen in a five-to-ten-year context, the near term sell-off has produced a number of investment opportunities, in our view. As the markets sell off, we sense more high quality investment opportunities are being created rather than destroyed.

We feel the currency falls against the U.S. dollar and Euro are healthy rebalances following several years of strong portfolio inflows across the emerging markets that had led to a number of governments struggling to control their currency and seeing their domestic industry suffering either as exporters or facing strong price competition in their domestic markets from imports.

We think that powerful long term secular drivers from growing consumption in emerging markets will continue to support a number of growth opportunities for European companies across the globe, particularly in consumer staples (Nestle, Unilever, SABMiller) and health related demand such as eyewear (Essilor International, Luxottica Group).

Sector Comments

Consumer Discretionary
Our holdings in the Consumer Discretionary sector made positive contributions to absolute and relative performance during the six months ended June 30, 2013.

Energy
Stock selection within the Energy sector was a leading contributor to the portfolio’s relative performance during the period. Our underweight to the sector was also beneficial.

Health Care
The portfolio’s underweight exposure to the Health Care sector hurt performance during the period, as did our stock selection.

Financials
Our selection of Financials names was a leading detractor from performance during the six-month period.

Stocks that Helped Performance - Absolute
Barratt Developments, Core Laboratories, Rolls Royce Holdings, Persimmon and Luxottica contributed to performance during the period.

Stocks that Helped Performance - Relative
Barratt Developments, Core Laboratories, Persimmon, Rolls Royce Holdings and Luxottica helped performance during the period.

Stocks that Hurt Performance - Absolute
Fresnillo, Standard Chartered, Statoil, Bureau Veritas and SAP AG detracted from performance during the period.

Stocks that Hurt Performance - Relative
Fresnillo, Roche Holding, Standard Chartered, Bureau Veritas and Vodafone Group* hurt performance during the period.

* This company was not held in the portfolio. When a company that comprises a significant portion of the benchmark index makes a significant gain or loss during a quarter, it can affect the relative performance of the portfolio significantly

Performance Disclosure
Past performance is not indicative of future results. Any companies described in this commentary may or may not currently represent a position in our client portfolios. Also, any sector and industry weights described in the commentary may or may not have changed since the writing of this commentary. The information and methodology described in this commentary should not be construed as a recommendation to purchase or sell securities. Please contact a Vontobel representative for more information.

Any projections, forecasts or estimates contained in this commentary are based on a variety of estimates and assumptions. There can be no assurance that the estimates or assumptions made will prove accurate, and actual results may differ materially. The inclusion of projections or forecasts should not be regarded as an indication that Vontobel considers the projections or forecasts to be reliable predictors of future events, and they should not be relied upon as such.

In the event a company described in this commentary is a position in client portfolios, the securities identified and described do not represent all of the securities purchased, sold or recommended. The reader should not assume that an investment in any securities identified was or will be profitable or that investment recommendations or investment decisions we make in the future will be profitable.

For information about how contribution was calculated for any such securities, or to obtain a list showing the contribution of each holding to overall performance, please contact a Vontobel representative.

Vontobel Asset Management

Important Disclosure Statements

The Fund’s prospectus contains important information about the Fund’s investment objectives, potential risks, management fees, charges and expenses, and other information and should be read and considered carefully before investing. The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. You may obtain a current copy of the Fund’s prospectus by calling 1-800-527-9525. Distributed by First Dominion Capital Corp., Richmond, VA.

Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1-800-527-9525. Information provided with respect to the Fund’s Portfolio Holdings, Sector Weightings, Number of Holdings and Expense Ratios are as of June 30, 2013 and are subject to change at any time.

The opinions presented in this document are those of the portfolio manager as of the date of this report and may change at any time. Information contained in this document was obtained from sources deemed to be reliable, but no guarantee is made as to the accuracy of such information. Nothing presented in this document may be construed as an offer to purchase or sell any security.

The MSCI Europe Index is a free-float weighted equity index designed to measure the equity market performance of developed markets in Europe.

The comparative index is not adjusted to reflect deductions for fees, expenses or taxes that the U. S. Securities and Exchange Commission (the “SEC”) requires to be reflected in the fund’s performance.

* Non-income producing (security is considered non-income producing if at least one dividend has not been paid during the first year preceeding the date of the Fund’s related balance sheet.)

ADR- Security represented is held by the custodian bank in the form of American Depository Receipts.

GDR- Security represented is held by the custodian bank in the form of Global Depository Receipts.

⁽¹⁾ - Fair valued pursuant to Valuation Procedures adopted by the Board of Directors. These holdings represent 0.03% of the Fund’s net assets at June 30, 2013.

See Notes to Financial Statements