================================================================================
PROFIT FUNDS INVESTMENT TRUST
-----------------------------
PROFIT VALUE FUND
-----------------
SEMI-ANNUAL REPORT
March 31, 2000
(Unaudited)
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
INVESTOR RESOURCES GROUP, LLC INTEGRATED FUND SERVICES, INC.
8720 Georgia Avenue, Suite 808 P.O. Box 5354
Silver Spring, Maryland 20910 Cincinnati, Ohio 45201-5354
1.888.744.2337
================================================================================
<PAGE>
PROFIT FUNDS PROFIT VALUE FUND
[LOGO] -----------------
INVESTMENT TRUST
LETTER TO SHAREHOLDERS PROFIT VALUE FUND
May 19, 2000
Dear Profit Value Fund Shareholder:
We are pleased to inform you that the performance of the Profit Value Fund
during the past three years, including the six months covered by this report,
ranked as the top performing large capitalization value fund of the 278 covered
by Lipper Analytical Services, Inc. Asset growth continues to be impressive in
an environment where many equity funds are losing assets and the fund continues
to receive positive press coverage. The most exciting news is that the Fund's
strong performance in 1998 and 1999 continues this year with the Fund's 5.67%
increase outperforming the S&P 500 Index's 0.79% decline and the Lipper Large
Value Index's 0.90% increase year to date May 15, 2000. We are excited about the
Fund's performance and how it is helping to generate substantial interest in the
Profit Value Fund.
For the semi-annual period ending March 31, 2000, the Profit Value Fund
closed at a net asset value of $21.92 per share. The Fund's total return over
the trailing 6 months of 27.83% reflects its outperformance compared to its S&P
500 Index benchmark's total return of 17.51%.
During the new millennium the stock market to date can be summed up in one
word, volatile. Aside from a few swift corrections, the first two months of the
year 2000 the market looked to continue the explosive growth in technology
shares of the 4th quarter 1999. However, since a NASDAQ peak on March 10, 2000,
the landscape has changed dramatically. The average stock on the NYSE and NASDAQ
has fallen by 40% from its respective 52 week high. 59% of the NYSE and 83% of
the NASDAQ are at least 20% below former recent highs, the classic definition of
a bear market. In a period of rising interest rates, Treasury Bonds are
outperforming stock returns to date in 2000. What happened?
We believe that the general market is engaging in a normal overreaction.
The portfolio rebalancing by institutions is causing a divergence in performance
between the former high flying technology shares, the former out of favor old
economy industrial type shares, and a rally in Treasury securities. Institutions
locking in performance from technology shares and rotating assets to more
industrial issues and treasuries has resulted over the short-term in energy,
financials and transports posting positive returns, while the technology laden
NASDAQ falls. The volatility in the market is being caused by the nimble and the
timid rushing in and out of the technology sector. During the past several years
the largest returns have been obtained in technology. Many investors are seeking
to avoid being left behind during the next upside phase of the sector, while
avoiding the carnage of collapsing valuations, by shifting back and forth
between technology shares and industrial shares. The market has broadened and
the declines are removing some of the market excess, which is a positive
occurrence.
During these periods of market distress we continue to focus on earnings,
the apparently invisible inflation and swelling cash reserves. Oil, gold and
lumber prices indicate falling inflation and a potential cap to interest rate
increases. Money market funds are swelling providing ample resources to a
continuation of multiple expansion in select stocks when the landscape is
clearer to more market participants. We continue to manage the portfolio
according to the market climate by buying shares that are inexpensive relative
to their peers and historical
--------------------------------------------------------------------------------
P.O. Box 5354 o Cincinnati, Ohio 45202 o 888.744.2337
<PAGE>
valuation standards. Growth oriented names in mostly value industries that are
currently out of favor provide attractive opportunities. We see opportunity in a
number of areas along with the ones that the market has been selling off the
past four weeks. Health care issues and insurance are very cheap and we are
buyers. Oil drillers are trading as if oil were still at $15 a barrel and we are
buyers.
As always, quality firms will rise to the top following this correction;
some of the more speculative stocks might take much longer if ever to recover.
Those who are overwhelmed by the emotion of the moment and sell with the herd
will be the true losers. Refocusing on the fundamentals and ignoring consensus
thinking and the noise from the media will be key elements of performance
success. We are patient and still bullish.
At Profit Funds, we are committed to helping you pursue your financial
goals. Our investment philosophy is that, over the long term, the most promising
investment opportunities can be found among large financially sound companies,
which at the time of investment show an attractive valuation discount relative
to their peers.
Profit Value Fund seeks long-term total return by investmenting primarily
in established, larger capitalization companies (i.e. companies having a market
capitalization exceeding $1 billion) that are attractive relative to their
peers.
The U.S. market has been rising at triple its historical annual rate over
the past 4 years. Although we caution investors to temper expectations of future
market return we believe the Fund is well positioned to weather any changes in
the market environment. We believe that although the Federal Reserve may change
interest rate policy in the short-term we believe that interest rates will
remain near the current level over the longer term. We remain convinced that
within the market strength of the past three years the significant sector and
individual security corrections should cause one to not be overly concerned
about a sustained market downturn.
Regardless of the direction the markets take in the coming years, we
believe that the Profit Value Fund will continue to offer an attractive
investment opportunity for individual and institutional investors. We continue
to evaluate companies in a prudent and cautious manner, seeking companies that
represent good valuations relative to their industry and competitors that are
not dependent upon an excessive upward market trend.
We urge shareholders to take a similar approach. That is, invest for the
long-run, avoid the temptation to "time" your investment based on market
predictions and diversify among stocks, bonds and mutual funds based on your
individual needs and time horizons. Finally, invest on a consistent basis,
regardless of whether the markets are up or down.
We would like to take this opportunity to express our sincere appreciation
to our valued and growing family of shareholders, for your continued support of
and confidence in the Profit Value Fund. We look forward to serving your
investment needs for many years to come.
Sincerely,
/s/ Eugene A. Profit
Eugene A. Profit
President
<PAGE>
PROFIT VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000 (UNAUDITED)
================================================================================
ASSETS
Investments in securities:
At acquisition cost $ 4,211,783
===========
At value (Note 1) $ 6,194,786
Receivable for securities sold 72,673
Receivable for capital shares sold 11,612
Dividends receivable 6,771
Receivable from Adviser (Note 3) 46,432
Organization costs, net (Note 1) 37,623
Other assets 7,778
-----------
TOTAL ASSETS 6,377,675
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LIABILITIES
Payable to Administrator (Note 3) 4,000
Payable for securities purchased 136,560
Other accrued expenses and liabilities 15,886
-----------
TOTAL LIABILITIES 156,446
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NET ASSETS $ 6,221,229
===========
NET ASSETS CONSIST OF:
Paid-in capital $ 4,126,592
Accumulated net investment loss (17,738)
Accumulated net realized gains from security transactions 129,372
Net unrealized appreciation on investments 1,983,003
-----------
NET ASSETS $ 6,221,229
===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 283,802
===========
Net asset value and redemption price per share (Note 1) $ 21.92
===========
Maximum offering price per share (Note 1) $ 22.83
===========
See accompanying notes to financial statements.
<PAGE>
PROFIT VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends $ 30,470
-----------
EXPENSES
Investment advisory fees (Note 3) 31,029
Professional fees 15,672
Accounting services fees (Note 3) 12,000
Organization expense (Note 1) 11,830
Postage and supplies 8,558
Insurance expense 6,976
Distribution expense (Note 3) 6,266
Administration fees (Note 3) 6,000
Transfer agent fees (Note 3) 6,000
Trustees' fees and expenses 6,000
Custodian fees 5,856
Registration fees 4,804
Reports to shareholders 660
Other expenses 633
-----------
TOTAL EXPENSES 122,284
Fees waived and expenses reimbursed (Note 3) (74,076)
-----------
NET EXPENSES 48,208
-----------
NET INVESTMENT LOSS (17,738)
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 129,372
Net change in unrealized appreciation/
depreciation on investments 1,095,153
-----------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS 1,224,525
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,206,787
===========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PROFIT VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
===================================================================================================
Six Months Year
Ended Ended
March 31, September 30,
2000 1999
(Unaudited)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss $ (17,738) $ (26,255)
Net realized gains from security transactions 129,372 241,006
Net change in unrealized appreciation/depreciation
on investments 1,095,153 620,078
------------ ------------
Net increase in net assets from operations 1,206,787 834,829
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gains (214,751) (3,407)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,771,079 1,512,964
Net asset value of shares issued in
reinvestment of distributions to shareholders 214,736 3,397
Payments for shares redeemed (667,309) (453,228)
------------ ------------
Net increase in net assets from capital share transactions 1,318,506 1,063,133
------------ ------------
TOTAL INCREASE IN NET ASSETS 2,310,542 1,894,555
NET ASSETS
Beginning of period 3,910,687 2,016,132
------------ ------------
End of period $ 6,221,229 $ 3,910,687
============ ============
CAPITAL SHARE ACTIVITY
Shares sold 89,454 85,572
Shares issued in reinvestment of distributions to shareholders 11,046 206
Shares redeemed (33,770) (27,917)
------------ ------------
Net increase in shares outstanding 66,730 57,861
Shares outstanding, beginning of period 217,072 159,211
------------ ------------
Shares outstanding, end of period 283,802 217,072
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
PROFIT VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-------------------------------------------------------------------------------------------------------------------------
Six Months Year Year Period
Ended Ended Ended Ended
March 31, September 30, September 30, September 30,
2000 1999 1998 1997 (a)
(Unaudited)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 18.02 $ 12.66 $ 12.88 $ 10.00
---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss) (0.06) (0.12) (0.02) 0.07
Net realized and unrealized gains (losses) on investments 4.95 5.50 (0.06) 2.81
---------- ---------- ---------- ----------
Total from investment operations 4.89 5.38 (0.08) 2.88
---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income -- -- (0.09) --
Distributions from net realized gains (0.99) (0.02) (0.05) --
---------- ---------- ---------- ----------
Total distributions (0.99) (0.02) (0.14) --
---------- ---------- ---------- ----------
Net asset value at end of period $ 21.92 $ 18.02 $ 12.66 $ 12.88
========== ========== ========== ==========
Total return (b) 27.83% (d) 42.52% (0.57%) 28.80% (d)
========== ========== ========== ==========
Net assets at end of period (000's) $ 6,221 $ 3,911 $ 2,016 $ 2,010
========== ========== ========== ==========
Ratio of net expenses to average net assets (c) 1.95% (e) 1.95% 1.95% 1.95% (e)
Ratio of net investment income (loss) to average net assets (0.72%)(e) (0.82%) (0.18%) 1.19% (e)
Portfolio turnover rate 21% (e) 23% 101% 10% (e)
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</TABLE>
(a) Represents the period from the initial public offering of shares (November
15, 1996) through September 30, 1997.
(b) Total returns shown exclude the effect of applicable sales loads.
(c) Absent fee waivers and expense reimbursements, the ratios of expenses to
average net assets would have been 4.94% (e), 6.87%, 8.36% and 18.57% (e)
for the periods ended March 31, 2000, September 30, 1999, 1998 and 1997,
respectively (Note 3).
(d) Not annualized.
(e) Annualized.
See accompanying notes to financial statements.
<PAGE>
PROFIT VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED)
================================================================================
MARKET
COMMON STOCKS -- 95.9% SHARES VALUE
================================================================================
($)
AEROSPACE -- 2.0%
General Dynamics Corp. 2,500 124,375
------------
AUTOMOBILES -- 3.4%
DaimlerChrysler AG 1,000 65,438
Ford Motor Co. 3,200 147,000
------------
212,438
------------
BASIC & SPECIALTY CHEMICALS -- 2.7%
Dow Chemical Co. 720 82,080
E.I. du Pont de Nemours & Co. 1,584 83,754
------------
165,834
------------
BEVERAGES -- 1.1%
PepsiCo, Inc. 2,000 69,125
------------
COMMERCIAL SERVICES -- 0.9%
Cendant Corp. * 3,000 55,500
------------
CONGLOMERATE -- 3.7%
Berkshire Hathaway, Inc. - Class A * 4 228,800
------------
CONSUMER STAPLES -- 0.9%
Eastman Kodak Co. 1,000 54,312
------------
ELECTRIC UTILITIES -- 0.9%
Southern Co. 2,460 53,505
------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.5%
Agilent Technologies, Inc. * 1,500 156,000
------------
ENERGY & RESOURCES -- 4.0%
Conoco, Inc. - Class B 1,227 31,442
El Paso Energy Corp. 2,500 100,938
Exxon Mobil Corp. 1,460 113,606
------------
245,986
------------
<PAGE>
PROFIT VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED)
================================================================================
MARKET
COMMON STOCKS --- 95.9% SHARES VALUE
================================================================================
($)
FINANCIAL & INSURANCE -- 12.0%
American General Corp. 1,375 77,172
Chase Manhattan Corp. 1,300 113,344
Citigroup, Inc. 1,500 88,969
Fannie Mae 2,000 112,875
Legg Mason, Inc. 2,000 86,500
Marsh & McLennan Co's., Inc. 750 82,734
Merrill Lynch & Co., Inc. 1,000 105,000
T. Rowe Price Associates, Inc. 2,000 79,000
------------
745,594
------------
HEALTHCARE -- 8.8%
Amgen, Inc. * 2,800 171,850
Cardinal Health, Inc. 1,000 45,875
Elan Corp. plc * 4,000 190,000
Merck & Co., Inc. 1,400 86,975
Pfizer, Inc. 1,500 54,844
------------
549,544
------------
HOTELS -- 1.4%
Host Marriott Corp. 10,000 88,750
------------
MEDICAL PRODUCTS -- 2.1%
Medtronic, Inc. 2,000 102,875
VISX, Inc. * 1,500 27,375
130,250
------------
MULTI-MEDIA -- 2.3%
Walt Disney Co. 3,500 144,812
------------
OIL AND GAS DRILLING -- 1.6%
Global Marine, Inc. * 4,000 101,500
------------
RETAIL -- 8.3%
Home Depot, Inc. 1,000 64,500
Intimate Brands, Inc. 3,000 123,000
Limited, Inc. 1,500 63,188
NIKE, Inc. - Class B 1,000 39,625
Tricon Global Restaurants, Inc. * 2,000 62,125
Wal-Mart Stores, Inc. 3,000 166,500
------------
518,938
------------
<PAGE>
PROFIT VALUE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 2000
(UNAUDITED)
================================================================================
MARKET
COMMON STOCKS --- 95.9% SHARES VALUE
================================================================================
($)
TECHNOLOGY --- 27.2%
America Online, Inc. * 4,800 322,800
Cisco Systems, Inc. * 4,110 317,754
EMC Corp. * 3,000 375,000
Inktomi Corp. * 600 111,673
Intel Corp. 2,000 263,875
Sun Microsystems, Inc. * 2,000 187,406
Western Digital Corp. * 15,000 111,562
------------
1,690,070
TELECOMMUNICATIONS --- 9.1%
AT&T Corp. 2,912 163,800
Bell Atlantic Corp. 1,500 91,688
Covad Communications Group * 1,500 108,750
MCI WorldCom, Inc. * 4,436 201,006
------------
565,244
TRANSPORT SERVICES --- 1.0%
United Parcel Service, Inc. - Class B 1,000 63,000
------------
TOTAL COMMON STOCKS --- (COST $3,980,574) 5,963,577
------------
================================================================================
MARKET
MONEY MARKETS --- 3.7% SHARES VALUE
================================================================================
($)
Fidelity Institutional Cash Portfolio - Government 149,177 149,177
Fidelity Institutional Cash Portfolio - Class I 82,032 82,032
------------
TOTAL MONEY MARKETS --- (COST $231,209) 231,209
------------
TOTAL INVESTMENTS AT VALUE --- 99.6% (COST $4,211,783) 6,194,786
------------
OTHER ASSETS IN EXCESS OF LIABILITIES --- 0.4% 26,443
------------
NET ASSETS --- 100.0% 6,221,229
============
* Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
PROFIT VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Profit Value Fund (the Fund) is a diversified series of Profit Funds
Investment Trust (the Trust), an open-end management investment company
registered under the Investment Company Act of 1940. The Trust was organized as
a Massachusetts business trust on June 14, 1996. The public offering of shares
of the Fund commenced on November 15, 1996. The Fund had no operations prior to
the public offering of shares except for the initial issuance of shares.
The Fund seeks long-term total return, consistent with the preservation of
capital and maintenance of liquidity, by investing primarily in the common stock
of established, larger capitalization companies (i.e. companies having a market
capitalization exceeding $1 billion). Dividend income is only an incidental
consideration to the Fund's investment objective.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of business of the regular session of trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time). Securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the closing sales price
or, if not traded on a particular day, at the closing bid price. Securities
traded in the over-the-counter market, and which are not quoted by NASDAQ, are
valued at the last sales price, if available, otherwise, at the last quoted bid
price. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith in accordance with procedures
established by and under the general supervision of the Board of Trustees.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The maximum offering
price per share of the Fund is equal to the net asset value per share plus a
sales load equal to 4.17% of the net asset value (or 4% of the offering price).
The redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Distributions to shareholders arising from net
investment income and net realized capital gains, if any, are distributed at
least once each year. Dividends from net investment income and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles.
Security transactions -- Security transactions are accounted for on the trade
date. Securities sold are determined on a specific identification basis.
Organization costs -- Costs incurred by the Fund in connection with its
organization and registration of shares, net of certain expenses, have been
capitalized and are being amortized on a straight-line basis over a five year
period beginning with the commencement of operations. In the event any of the
initial shares of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro rata portion of any unamortized
organization costs in the same proportion as the number of initial shares being
redeemed bears to the number of initial shares of the Fund outstanding at the
time of redemption. As of March 31, 2000, unamortized organization costs of
$37,623 are scheduled to be amortized over a remaining 19 months.
<PAGE>
PROFIT VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED)
================================================================================
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
As of March 31, 2000, net unrealized appreciation on investments was $1,983,003
for federal income tax purposes, of which $2,228,539 related to appreciated
securities and $245,536 related to depreciated securities based on a federal
income tax cost basis of $4,211,783.
2. INVESTMENT TRANSACTIONS
During the six months ended March 31, 2000, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$1,609,335 and $495,480, respectively.
3. TRANSACTIONS WITH AFFILIATES
The President of the Trust is also the President of Investor Resources Group,
LLC (the Adviser). Certain other Trustees and officers of the Trust are also
officers of the Adviser, or of Integrated Fund Services, Inc. (IFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of IFS Fund Distributors, Inc. (the
Underwriter), the principal underwriter for the Fund and exclusive agent for the
distribution of shares of the Fund.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Advisory Agreement. The Fund pays the Adviser an investment advisory
fee, computed and accrued daily and paid monthly, at an annual rate of 1.25% of
average daily net assets of the Fund.
During the six months ended March 31, 2000, the Adviser voluntarily waived its
investment advisory fees of $31,029 and reimbursed the Fund for $43,047 of other
operating expenses in order to limit total operating expenses of the Fund to
1.95% of the Fund's average daily net assets.
<PAGE>
PROFIT VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 (UNAUDITED)
================================================================================
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, IFS supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Fund. IFS supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the Securities and Exchange Commission and state securities
commissions and materials for meetings of the Board of Trustees. For these
services, IFS receives a monthly fee at an annual rate of 0.15% of the Fund's
average daily net assets up to $25 million; 0.125% of such net assets between
$25 million and $50 million; and 0.10% of such net assets in excess of $50
million, subject to a minimum monthly fee of $1,000.
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, IFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, IFS receives a fee, based on current asset levels, of
$2,000 per month from the Fund. In addition, the Fund reimburses IFS for
out-of-pocket expenses related to the pricing of the Fund's portfolio
securities.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, IFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, IFS receives a monthly fee at an annual rate of $17 per shareholder
account from the Fund, subject to a $1,000 minimum monthly fee. In addition, the
Fund reimburses IFS for out-of-pocket expenses including, but not limited to,
postage and supplies.
UNDERWRITING AGREEMENT
Under the terms of an Underwriting Agreement between the Trust and the
Underwriter, the Underwriter earned $22,704 from underwriting and brokerage
commissions on the sale of shares of the Fund during the six months ended March
31, 2000.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the Plan) under which the Fund may
directly incur or reimburse the Adviser for expenses related to the distribution
and promotion of Fund shares. The annual limitation for payment of such expenses
under the Plan is 0.25% of the Fund's average daily net assets. The Fund
incurred distribution expenses of $6,266 under the Plan during the six months
ended March 31, 2000.
