Dear Shareholders:
Investment Results - Annual Fiscal Period Ended June 30, 1999.
The Industry Leaders Fund(R) (the "Fund") ended its first fiscal year with a
total return of 7.70% for both "I" and "D" classes of Fund shares. The Fund's
performance compared to the Industry Leaders Strategy Model(TM) ("Strategy
Model") was slightly better than would be expected by the hypothetical
performance methodology of the Strategy Model described in the Prospectus dated
March 12, 1999. When hypothetical results were presented in our Prospectus,
hypothetical performance included 2% of Fund assets held in cash. We attempted
to be fully invested and benefited from this position, yet for conservative
historical purposes continue to use the 2% cash position for our hypothetical
analysis.
During the period of time from inception on March 17, 1999 to the close of the
first fiscal year on June 30, 1999, both classes lagged the benchmark large
value S&P BARRA Value Index by 0.96% and The Russell 1000 Value Index by 0.91%.
We are pleased with our management of the Fund relative to the Strategy Model,
and will continue to remain as fully invested as reasonably possible.
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
The Industry The Industry
Comparative Investment Leaders Fund Leaders Fund S&P BARRA Value Russell 1000 Industry Leaders
Returns (a)(b) Class "I" Class "D" Index Value Index Strategy Model(d)
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Last Quarter (c) 10.01% 10.01% 10.76% 11.28% 10.07%
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
Inception to 6/30/99 7.70% 7.70% 8.66% 8.61% 7.71%
- ------------------------- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
(a) Past performance is not indicative of future performance
(b) Both Classes of The Industry Leaders Fund(R) are net of all expenses,
versus the gross market benchmarks (The S&P BARRA Value Index and the
Russell 1000 Value Index). Investors are reminded that when trying to
achieve benchmark returns, investment management fees and transaction costs
will be incurred.
(c) Last Quarter 4/1/99 to 6/29/99.
(d) Results of Industry Leaders Strategy Model(TM) without expenses and 2% in
cash as calculated in Prospectus.
<PAGE>
Outlook
Our long-term outlook for financial assets remains cautiously optimistic as we
continue to traverse through a period of interest rate uncertainty and seemingly
uninterruptible economic growth. The upcoming 18 months will be quite eventful
as Y2K passes and the national election cycle enters the home stretch. We do
stress the importance of proper asset allocation between stocks, bonds and cash
and believe all investors should consider the risk to equity investing and
balance that risk with proper asset allocation..
We look forward to our first full fiscal year and thank you for your confidence
in The Industry Leaders Fund(R), and as always, we welcome your questions and
comments.
Sincerely,
Gerald P. Sullivan
President and Chief Investment Officer
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999
<TABLE>
<S> <C> <C>
Common Stocks - 99.5% Shares Value
AEROSPACE & DEFENSE - 1.3%
Aerospace & Defense - 1.3%
Boeing Co. 820 $ 36,234
----------
BASIC INDUSTRIES - 7.8%
Chemicals - 1.5%
duPont (EI) de NeMours 320 21,860
Praxair, Inc. 380 18,596
----------
40,456
----------
Iron & Steel - 0.2%
USX-U.S. Steel Group 200 5,400
----------
Manufacturers - Diversified - 3.2%
Illinois Tool Works, Inc. 100 8,200
Minnesota Mining & Manufacturing Co. 230 19,996
Tenneco, Inc. 250 5,969
Tyco International, Inc. 537 50,881
----------
85,046
----------
Metals & Mining - 1.2%
Alcoa, Inc. 325 20,109
Barrick Gold 430 8,331
Nucor Corp. 110 5,218
----------
33,658
----------
Packaging & Containers - 0.3%
Crown Cork & Seal, Inc. 260 7,410
----------
Paper & Forest Products - 1.4%
International Paper, Inc. 765 38,632
----------
TOTAL BASIC INDUSTRIES 210,602
----------
CONSTRUCTION & REAL ESTATE - 0.7%
Building Materials - 0.4%
LaFarge Corp. 130 4,607
Masco Corp. 250 7,219
----------
11,826
----------
Construction - 0.3%
Centex Corp. 140 5,259
Clayton Homes, Inc. 200 2,287
----------
7,546
----------
TOTAL CONSTRUCTION & REAL ESTATE 19,372
DURABLES - 3.3%
Autos & Auto Parts - 2.2%
Ford Motor Co. 740 41,764
Goodyear Tire & Rubber Co. 100 5,881
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999 - continued
Common Stocks - continued Shares Value
DURABLES - continued
Autos & Auto Parts - continued
Magna International - Class A 180 $ 10,215
----------
57,860
----------
Consumer Durables - 0.3%
Whirlpool Corp. 100 7,400
----------
Home Furnishings - 0.2%
Leggett & Platt, Inc. 180 5,006
----------
Textiles & Apparel - 0.6%
Nike, Inc. - Class B 100 6,331
Springs Industries, Inc. - Class A 100 4,363
V.F. Corp. 150 6,413
----------
17,107
----------
TOTAL DURABLES 87,373
----------
ENERGY - 7.1%
Energy Services - 1.2%
Schlumberger Ltd. 500 31,844
----------
Oil & Gas - 5.9%
Burlington Resources, Inc. 190 8,218
Exxon Corp. 810 62,471
Mobil Corp. 280 27,720
Royal Dutch Petroleum ADR 1,020 61,455
----------
159,864
----------
TOTAL ENERGY 191,708
----------
FINANCE - 26.2%
Banks - 11.4%
Bank of America Corp. 840 61,582
Bank One Corp. 1,040 61,945
Chase Manhattan, Inc. 750 64,969
Citigroup, Inc. 1,260 59,850
Wells Fargo, Inc. 1,360 58,140
----------
306,486
----------
Diversified - 1.2%
Equitable Cos., Inc. 500 33,500
----------
Federal Sponsored Credit - 1.8%
Fannie Mae 710 48,546
----------
Insurance - 9.6%
Aetna, Inc. 500 44,719
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999 - continued
Common Stocks - continued Shares Value
FINANCE - continued
Insurance - continued
Allstate Corp. 1,630 $ 58,476
American International Group 480 56,190
Berkshire Hathaway, Inc. - Class B (a) 26 58,240
CNA Financial, Inc. (a) 110 4,434
Loews Corp. 470 37,189
----------
259,248
----------
REITs - 0.6%
Equity Residential Properties Trust 360 16,222
----------
Securities Industry - 1.6%
Morgan Stanley, Dean Witter & Co. 410 42,025
----------
TOTAL FINANCE 706,027
----------
HEALTH - 4.7%
Diversified - 2.3%
American Home Products, Inc. 260 14,950
Johnson & Johnson, Inc. 470 46,060
----------
61,010
----------
Drugs & Pharmaceuticals - 2.4%
Merck & Co., Inc. 875 64,750
----------
TOTAL HEALTH 125,760
----------
INDUSTRIAL MACHINERY & EQUIPMENT - 3.9%
Electrical Equipment - 2.4%
Applied Materials, Inc. (a) 100 7,387
General Electric, Inc. 500 56,500
----------
63,887
----------
Industrial Machinery & Equipment - 1.2%
Caterpillar, Inc. 540 32,400
----------
Pollution Control - 0.3%
Waste Management 170 9,138
----------
TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 105,425
----------
MEDIA & LEISURE - 4.6%
Entertainment - 2.2%
Disney (Walt) Co. 1,930 59,468
----------
Lodging & Gaming - 1.1%
Carnival Corp. 360 17,460
Park Place Entertainment Corp. (a) 1,250 12,109
----------
29,569
----------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999 - continued
Common Stocks - continued Shares Value
MEDIA & LEISURE - continued
Publishing - 0.7%
Gannett Co., Inc. 180 $ 12,847
McGraw-Hill Companies 100 5,394
----------
18,241
----------
Restaurants - 0.6%
McDonald's Corp. 390 16,112
----------
TOTAL MEDIA & LEISURE 123,390
----------
NON-DURABLES - 4.8%
Beverages - 1.2%
Coca-Cola Co. 280 17,500
Seagram Co. Ltd. 300 15,112
----------
32,612
----------
Foods - 1.7%
Unilever N.V. (New) 658 45,896
----------
Household Products - 1.2%
Gillette Co. 100 4,100
Procter & Gamble, Inc. 300 26,775
----------
30,875
----------
Tobacco - 0.7%
Philip Morris Cos. 500 20,094
----------
TOTAL NON-DURABLES 129,477
----------
RETAIL & WHOLESALE - 5.7%
Department Stores - 0.2%
Penney (J.C.) 100 4,856
----------
Drug Stores - 0.4%
Walgreen Co. 350 10,281
----------
General Merchandise Stores - 2.4%
Wal-Mart Stores, Inc. 1,360 65,620
----------
Grocery Stores - 0.6%
Safeway, Inc. (a) 310 15,345
----------
Specialty - 2.1%
AutoNation, Inc. (a) 1,000 17,813
Home Depot, Inc. 150 9,666
Sysco Corp. 140 4,174
Toys R Us, Inc. (a) 1,225 25,342
----------
56,995
----------
TOTAL RETAIL & WHOLESALE 153,097
----------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999 - continued
Common Stocks - continued Shares Value
SERVICES - 0.7%
Advertising - 0.3%
Interpublic Group 100 $ 8,662
----------
Educational Services - 0.1%
Sylvan Learning Systems, Inc. (a) 100 2,719
----------
Leasing & Rental - 0.3%
Hertz Corp. - Class A 130 8,060
----------
TOTAL SERVICES 19,441
----------
TECHNOLOGY - 11.1%
Communications Equipment - 1.5%
Harris Corp. 320 12,540
Lucent Technologies, Inc. 400 26,975
----------
39,515
----------
Computer Services & Software - 3.0%
America Online, Inc. (a) 100 11,050
IMS Health, Inc. 100 3,125
Microsoft, Inc. (a) 740 66,739
----------
80,914
----------
Computers & Office Equipment - 3.5%
Hewlett-Packard Co. 280 28,140
International Business Machines, Inc. 520 67,210
----------
95,350
----------
Electronics - 2.3%
Intel Corp. 1,020 60,690
----------
Photography & Imaging - 0.8%
Eastman Kodak, Inc. 120 8,130
Xerox Corp. 240 14,175
----------
22,305
----------
TOTAL TECHNOLOGY 298,774
----------
TRANSPORTATION - 2.2%
Air Transportation - 0.9%
AMR Corp. (a) 340 23,205
----------
Railroads - 1.2%
Burlington Northern Santa Fe, Inc. 1,065 33,015
----------
Shipping - 0.1%
Overseas Shipholding Group 100 1,288
----------
TOTAL TRANSPORTATION 57,508
----------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Schedule of Investments - June 30, 1999 - continued
Common Stocks - continued Shares Value
UTILITIES - 15.4%
Electric Utility - 6.1%
AES Corp. (a) 100 $ 5,813
Duke Energy, Inc. 300 16,313
PG&E Corp. 840 27,300
Southern Co. 2,155 57,107
Texas Utilities, Inc. 1,385 57,131
----------
163,664
----------
Natural Gas - 1.7%
Enron Corp. 420 34,335
KeySpan Corp. 470 12,396
----------
46,731
----------
Telephone Services - 7.5%
AT&T Corp. 1,025 57,208
Bell Atlantic Corp. 225 14,709
BellSouth Corp. 1,345 63,047
MCI WorldCom (a) 620 53,359
SBC Communications, Inc. 240 13,920
----------
202,243
----------
Water - 0.1%
American Water Works, Inc. 100 3,075
----------
TOTAL UTILITIES 415,713
----------
TOTAL COMMON STOCKS (Cost $2,535,787) 2,679,901
Principal
Amount Value
Money Market Securities - 0.4%
Fiduciary Money Market Fund, 3.76% (b)
(Cost $12,575) $ 12,575 12,575
----------
TOTAL INVESTMENTS - 99.9% (Cost $2,548,362) 2,692,476
----------
Other assets less liabilities - 0.1% 1,471
----------
TOTAL NET ASSETS - 100.0% $ 2,693,947
============
</TABLE>
(a) Non-income producing
(b) Variable rate security; the coupon rate shown represents the rate at
June 30, 1999
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R) June 30, 1999
Statement of Assets & Liabilities
Assets
Investment in securities (cost $2,548,362) $ 2,692,476
Cash 100
Receivable for fund shares sold 60,000
Dividends receivable 3,010
Interest receivable 43
-----------
Total assets 2,755,629
Liabilities
Accrued investment advisory fee payable $ 1,456
Accrued distribution fee payable 226
-----------
Total liabilities 1,682
-----------
Net Assets $ 2,753,947
===========
Net Assets consist of:
Paid in capital $ 2,580,900
Accumulated undistributed net investment income 7,878
Accumulated undistributed net realized gain on investments 21,055
Net unrealized appreciation on investments 144,114
----------
Net Assets $ 2,753,947
==========
Class D:
Net Asset Value, offering price and redemption
price per share ($1,130,407 / 105,000 shares) $ 10.77
==========
Class I:
Net Asset Value, offering price and redemption
price per share ($1,623,540 / 150,769 shares) $ 10.77
==========
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Statement of Operations for the period March 17, 1999
(Commencement of Operations) to June 30, 1999
Investment Income
Dividend income $ 13,243
Interest income 268
----------
Total Income 13,511
Expenses
Investment advisory fee $ 4,842
Distribution fees - Class D 791
--------------
Total operating expenses 5,633
-----------
Net Investment Income 7,878
-----------
Realized & Unrealized Gain (Loss)
Net realized gain on investment securities 21,055
Change in net unrealized appreciation (depreciation)
on investment securities 144,114
--------------
Net gain on investment securities 165,169
-----------
Net increase in net assets resulting from operations $ 173,047
===========
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Statement of Changes in Net Assets for the period March 17, 1999
(Commencement of Operations) to June 30, 1999
Increase (Decrease) in Net Assets
Operations
Net investment income $ 7,878
Net realized gain (loss) on investment securities 21,055
Change in net unrealized appreciation (depreciation) 144,114
-----------
Net increase in net assets resulting from operations 173,047
-----------
Share Transactions - net increase
Class D 1,050,000
Class I 1,530,900
-----------
Net increase in net assets resulting
from share transactions 2,580,900
-----------
Total increase in net assets 2,753,947
Net Assets
Beginning of period -
-----------
End of period [including accumulated undistributed net
investment income of $7,878] $ 2,753,947
===========
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Class D
Financial Highlights for the period March 17, 1999
(Commencement of Operations) to June 30, 1999
Selected Per Share Data
Net asset value, beginning of period $ 10.00
--------------
Income from investment operations
Net investment income 0.03
Net realized and unrealized gain 0.74
--------------
Total from investment operations 0.77
--------------
Net asset value, end of period $ 10.77
==============
Total Return (b) 7.70%
Ratios and Supplemental Data
Net assets, end of period (000) $1,130
Ratio of expenses to average net assets 0.95% (a)
Ratio of net investment income to
average net assets 0.84% (a)
Portfolio turnover rate 64.93% (a)
(a) Annualized
(b) For periods of less than a full year, total returns are not annualized.
See accompanying notes which are an integral part of the financial statements
<PAGE>
Industry Leaders Fund(R)
Class I
Financial Highlights for the period March 17, 1999
(Commencement of Operations) to June 30, 1999
Selected Per Share Data
Net asset value, beginning of period $ 10.00
--------------
Income from investment operations
Net investment income 0.04
Net realized and unrealized gain 0.73
--------------
Total from investment operations 0.77
--------------
Net asset value, end of period $ 10.77
==============
Total Return (b) 7.70%
Ratios and Supplemental Data
Net assets, end of period (000) $1,624
Ratio of expenses to average net assets 0.70% (a)
Ratio of net investment income to
average net assets 1.39% (a)
Portfolio turnover rate 64.93% (a)
(a) Annualized
(b) For periods of less than a full year, total returns are not annualized.
<PAGE>
Industry Leaders Fund(R)
Notes to Financial Statements
June 30, 1999
NOTE 1. ORGANIZATION
Industry Leaders Fund(R) (the "Fund") was organized as a series of Industry
Leaders Fund(R), a Delaware business trust (the "Trust), on December 13, 1995
and commenced operations on March 17, 1999. The Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a diversified
open-end management investment company. The Fund's investment objective is to
provide long-term capital appreciation. The Declaration of Trust permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value.
The Fund currently consists of two classes of shares, Class D and Class I,
each of which has equal rights as to assets and voting privileges except that
each class has different distribution expenses. Each class has exclusive voting
rights with respect to its distribution plans.
NOTE 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 Valuations - Stocks are valued at the closing prices reported on
recognized securities exchanges or if no sale was reported, and for unlisted
securities, at the mean between the last-reported bid and asked prices. Although
the Fund does not anticipate holding securities for which market quotations are
not readily available, such securities will be valued at fair value as
determined in good faith by or under the direction of the Board of Trustees (the
"Board").
Short-term cash management securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data processing
techniques based on yield spreads relating to securities with similar
characteristics to determine prices for normal institutional-size trading units
of debt securities without regard to sale or bid prices. When prices are not
readily available from a pricing service, securities are valued at fair value as
determined in good faith by the Adviser, subject to review of the Board.
Short-term investments in fixed-income securities with maturities of less than
60 days when acquired, or which subsequently are within 60 days of maturity, are
valued by using the amortized cost method of valuation, which the Board has
determined will represent fair value.
<PAGE>
Industry Leaders Fund(R)
Notes to Financial Statements
June 30, 1999 - continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued
The Fund subtracts the non-class specific liabilities of the Fund from the
Fund's assets to determine its total assets. The fund then determines each
class's proportionate interest in the Fund's net assets. The liabilities
attributable to that class, including its Fund management and Distribution Plan
fees, are then deducted and the resulting amount is divided by the number of
shares of that class outstanding to produce its net asset value per share.
Federal Income Taxes - The Fund intends to qualify each year as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, the Fund will not be subject to federal income taxes to the extent
that it distributes substantially all of its net investment income and any
realized capital gains.
Dividends and Distributions - The Fund intends to distribute substantially all
of its net investment income as dividends to its shareholders on an annual
basis. The Fund intends to distribute its net long-term capital gains and its
net short-term capital gains at least once a year.
Redemption Fees - Class D shares held in the fund less than six months are
subject to a redemption fee equal to 0.75% of an amount equal to the lesser of
the net asset value at time of purchase of Class D shares being redeemed or the
net asset value of such Class D shares at time of redemption. The fee, which is
retained by the Fund, is accounted for as an addition to paid in capital.
Other - The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Claremont Investment Partners(R) L.L.C. (the "Adviser") to
manage the Fund's investments. The Adviser is organized as a Delaware limited
liability company and its Chief Executive Officer is Barry F. Sullivan. Barry F.
Sullivan is the father of the Portfolio Manager, Gerald P. Sullivan who is
primarily responsible for the day-to-day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees and
pays all
<PAGE>
Industry Leaders Fund(R)
Notes to Financial Statements
June 30, 1999 - continued
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued
of the expenses of the Fund. As compensation for its management services and
agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a
fee of 0.70% of the average daily net assets of the Fund. It should be noted
that most investment companies pay their own operating expenses directly, while
the Fund's expenses are paid by the Adviser. For the period from March 17, 1999
(commencement of operations) through June 30, 1999, the Adviser received a fee
of $4,842 from the Fund. Certain officers and trustees of the Fund are also
officers of the Advisor and shareholders of the Fund.
On behalf of the Class D shares, the fund has adopted a distribution fee
(the "Distribution Plan") under Rule 12b-1 of the 1940 Act. Under the
Distribution Plan, the Fund is authorized to pay a fee in an amount not to
exceed on an annual basis 0.25% of the average daily net asset value of the
Class D Shares. For the period from March 17, 1999 (commencement of operations)
through June 30, 1999, the Adviser received distribution fees of $791 from the
Fund for expenses related to the sale of Fund shares.
NOTE 4. SHARE TRANSACTIONS
As of June 30, 1999, there was an unlimited number of authorized shares for
the Fund. Paid in capital at June 30, 1999 was $2,580,900.
Transactions in shares were as follows:
For the period March 17, 1999 (Commencement
of Operations) to June 30, 1999
Shares Dollars
Class D:
Shares sold 105,000 $1,050,000
======= ==========
Class I
Shares sold 150,769 $1,530,900
======= ==========
<PAGE>
Industry Leaders Fund(R)
Notes to Financial Statements
June 30, 1999 - continued
NOTE 5. INVESTMENTS
For the period from March 17, 1999 (commencement of operations) through
June 30, 1999, purchases and sales of investment securities, other than
short-term investments, aggregated $2,874,596 and $359,864, respectively. As of
June 30, 1999, the gross unrealized appreciation for all securities totaled
$193,388 and the gross unrealized depreciation for all securities totaled
$49,274 for a net unrealized appreciation of $144,114. The aggregate cost of
securities for federal income tax purposes at June 30, 1999 was $2,548,362.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does
not receive commissions on trades made on behalf of the Fund. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund, under Section
2(a)(9) of the Investment Company Act of 1940. As of June 30, 1999, Barry F.
Sullivan, Chief Executive Officer of Claremont Investment Partners, L.L.C. (the
Adviser), and entities which the Adviser could be deemed to control or have
investment discretion over, beneficially owned in aggregate more than 25% of the
Fund.
NOTE 8. YEAR 2000 ISSUE
Like other mutual funds, financial and business organizations and
individuals around the world, the fund could be adversely affected if the
computer systems used by the Adviser, Administrator or other service providers
do not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Issue." The
Adviser and Administrator have taken steps that they believe are reasonably
designed to address the Year 2000 Issue with respect to computer systems that
are used and to obtain reasonable assurances that comparable steps are being
taken by each of the Fund's major service providers. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund. In addition, the Adviser cannot make any assurances
that the Year 2000 Issue will not affect the companies in which the Fund invests
or worldwide markets and economies.
<PAGE>
Industry Leaders Fund(R)
Notes to Financial Statements
June 30, 1999 - continued
NOTE 9. SHAREHOLDER MEETING
At a Special Meeting of Shareholders held on July 29, 1999, shareholders of
the Fund approved an increase in the Fund's fundamental restriction on the
maximum percentage of assets which it may invest in any one issuer from 2.25% to
2.75%.
The fundamental investment restriction change was approved by 100% of the
outstanding Class D Shares and 92.25% of outstanding Class I Shares. Of the
7.75% Class I Shares not voting in favor of the fundamental investment
restriction change, none were present at the Special Meeting in person or by
proxy. No Class I or Class D Shares voted against the proposal. No abstentions
or broker non-votes were submitted.
