Khan Growth Fund
A Series of Khan Funds
Semi Annual Report
June 30, 2000
714 FM 1960 West #201
Houston, Texas 77090
(888) 311-5426
www.khanfunds.com
Investment Advisor:
Khan Investment, Inc.
714 FM 1960 West #201
Houston Texas 77090
Custodian Bank:
Firstar Bank Corp
425 Walnut St. M.L. 6118
Cincinnati, Ohio 45202
Transfer Agent and Fund Accounting:
American Data Services
P.O. Box 5536
Hauppauge, New York 11788-0123
Auditors:
Tait, Weller & Baker
8 Penn Center Plaza #800
Philadelphia, Pennsylvania 19103
Dear Fellow Shareholders:
As always, it gives us here at Khan Funds great pleasure to provide
you with our Semi-Annual Report of the Khan Growth Fund (the
"Fund"). For the six months ending June 30, 2000 the Fund had a return
of -3.4 %, which compares with the benchmark Standard & Poor's 500
index return of -.43 %.
The Fund's performance over the first six months of 2000 was
gratifying, particularly when we consider the market volatility
over this time span. We will continue to work hard to search for
market leading companies that will provide the accelerated growth
needed to create value for our shareholders. Confidence in our
holdings and the investment strategy allows us to take advantage of
short-term market declines. Discounted prices with essentially no
change in the underlying fundamentals of a business provides us an
opportunity to pick up some holdings that we feel were overvalued
in past.
We will continue to be steadfast in our efforts to maintain the
high standard of growth associated with Khan Growth Fund holdings.
Our belief in the long-term feasibility of companies like Cisco
Systems, General Electric, Enron, Intel, Citigroup and Sun
Microsystems has allowed us to look beyond short term stock price
volatility and focus on new product innovation, increased market
share and other relevant non-market factors.
Although we are pleased with our Fund's performance we did have our
share of disappointments in the tumultuous first half of 2000. The
telecommunications industry, a long time consumer staple with a
history of strong returns brought considerable weakness after the
turn of the millennium. Long time market favorites such as AT&T
and Worldcom lost significant value based on rising competition
following deregulation and expansion of other forms of
communications services. The question still remains whether the
stalwarts of modern communication can transform in accordance with
the rapidly changing information technology market. Other
companies that are at the forefront of technological change saw
downward volatility based more on concerns over market valuations
rather than changes in consumer behavior and technology. Business
to business internet companies and biotechnology companies are
examples of industries which fell prey to this market volatility.
America Online, a company that sought to accelerate its foothold in
online services into other media outlets by merging with Time
Warner, was seen as an unfavorable move by the market and saw
considerable weakness. The market also adversely affected another
consumer staple in Wal-mart, viewing its core business as not
aggressive enough to maintain its substantial cost relative to
earnings.
In a more positive note, there was a resurgence in some industries
that were out of favor in the market in 1999. We saw considerable
strength in the financial sector with companies like Marsh and
McLennan, American General, Associated First Capital and Citigroup
posting strong gains. After the first quarter there was a
revitalization of many of the weakened healthcare holdings such as
Merck, Johnson and Johnson and Pfizer as well. By maintaining our
diversity in the Khan Growth Fund and continuing to focus on market
leaders, we have thereby limited the extreme volatility plaguing
the markets. Though we are not thrilled about the specific return
over the first six months of the year, again we are pleased with
our results relative to the market. What this has created is an
opportunity, which we feel we took untold advantage to progress
future returns for Khan Growth Fund shareholders.
PORTFOLIO COMPOSITION
As of June 30th of 2000, the Fund had 2.77 % of its net assets in
short term investments, the remaining in diversified common stocks,
with an emphasis on the technology, financial, healthcare,
telecommunication services and retail sectors. Though our primary
focus leans towards an investment in equities, a small percentage
of assets are kept liquid in order to take advantage of possible
market inefficiencies or opportunities.
ECONOMIC OUTLOOK
In the past several months, nerves on Wall Street were tested, more
specifically in the technology-laden Nasdaq. The year 2000 picked
up where 1999 left off and technology was in the forefront of the
market in the early part of the year. Volatility then began to
plague the markets. Consumer cyclicals, which had been out of
favor since mid-1998 began to emerge as a market divergence took
place, with funds shifting from "new economy" stocks to "old
economy" stocks. The rapid decline began with the decision against
Microsoft and then snowballed until the Nasdaq had fallen over 30%
from its highest level. The divergence then shifted to an overall
decline in the entire marketplace, with very few companies
escaping. Inflation numbers based on the CPI (Consumer Price
Index) came out rising 4%, though it was higher than expected, the
Fed continued to raise interest rates to stifle current healthy
inflation levels as a pre-emptive strike against future increasing
inflation. Even with the unemployment rate at 4%, a thirty year
low, productivity for the second quarter increased 5.3% so the wage
cost inflationary implications are not as bad as the unemployment
numbers may seem alone. Earnings reports have generally come in
very strong for the 1st half of 2000 and should continue going into
the third quarter. Even with positive earnings on the
technology issues, future concerns over the ability to maintain
such high profit margins and future competition led to further
declines in stock prices.
Though the stock market may not reflect it, the U.S.
economy is still in the midst of one of the greatest economic
expansions in the post-war era. GDP growth is climbing and may top
5% for the first time since post-recession 1984.Corporate profits
in all industries have and will continue to beat expectations on
all fronts. As reiterated by the Fed, the growth in information
technology is benefiting all forms of commerce and business in the
U.S. This will allow U.S. multi-national conglomerates to hold a
distinct advantage in the global economy as well as increase
internal efficiency. The technology industry has expanded
beyond anyone's belief and this is reflected in the stock
market. A majority of the downturn, especially in the technology
industry should be over, but gains of this magnitude are
unsustainable by common market measures and should not be expected
in the future. Aside from stock gains based on price earnings
multiple expansion, more should come from true earnings growth.
With that being said, the market should rebound effectively this
year and post strong gains on both the corporate level and the
stock market level for the year 2000. Future weakness in the
consumer cyclicals should be seen as a buying opportunity based on
valuation and strong growth outlook. Some of the more favorable
industries include the financial industry, pharmaceuticals and the
retail sector. In the technology front, maintaining an investment
in the industry leaders should prove to be profitable and limit
potential losses in an ever-changing industry. Though valuations
are high in the entire industry some areas to focus on would be
semi-conductors and the wireless industry. These industries should
mature together and have produced solid earnings in the past. In
the internet front, industry leaders are the key. This volatile
sector is still in a very young phase, and choosing leaders at this
time is extremely premature. The market is beginning to narrow and
should continue until a few companies leading the way. We remain
bullish on the market for years to come and feel that this weakness
has created opportunities. The FED seems to be near the end of its
interest rate hikes and they may even come down in 2001 spurring
future growth. The Presidential election in November should also
add increase investor optimism and we see the market as once again
proving its resilience in the year 2000 and beyond.
INVESTMENT STRATEGY
The holdings of the Fund are concentrated in the common stock of
companies with a market capitalization over a billion dollars,
which we believe provide value based on consistent growth in
earnings. We will continue to conduct extensive analysis of the
underlying fundamentals of the company, while using technical
analysis to take advantage of market inefficiencies. Finally,
variable factors such as management innovation, consumer trends,
industry and sector dominance, and projection models are used to
establish the continued investment worthiness of Khan Growth Fund
holdings.
Here at Khan Funds, our most important asset is you, our
shareholders. Through our mutual trust and dependence, we strive
for conviction from both ourselves and from you in our investment
philosophy. We look forward to what lies ahead in our financial
futures and together strive for excellence. The management of the
Khan Growth Fund will continue to invest in the Fund to understand
and live with the emotions caused by fluctuation in the market. We
believe that our investment strategy limits market speculation and
sensitivity. Furthermore, consistency is a goal we strive for as we
navigate into the millennium and beyond.
Sincerely,
S. D. Khan, M.D. Faisal D. Khan
Portfolio Manager Portfolio Manager
The outlook and opinion expressed above represent the view of the
investment advisor as of August 2, 2000, and are subject to change
as market and economic events unfold.
KHAN GROWTH FUND vs. BENCHMARK INDEX
The chart below compares your Fund to a benchmark index. It is
intended to give you a general idea how your Fund performed
compared to the stock market during the six months ended 6/30/2000.
It is important to understand the difference between your Fund
and an index. Your Fund's total return includes Fund expenses and
management fees. An index reflects the investment of income
dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of
investing.
Comparative Investment Returns June 30, 2000
* Initial investment $10,000.
* Past performance is no guarantee of future results.
(GRAPH )
Period Return
2000 (1/1 - 6/30) -3.40 %
1999 26.06 %
1998 33.21 %
1997 (7/9 - 12/31) 3.60 %
The Standard & Poor's 500 Stock Index is a capitalization-weighed
index of 500 stocks that attempts to measure the performance of the
broad domestic economy through changes in the aggregate market
value of 500 stocks representing major industries.
Top Sectors Holdings
Computer & Related 17.54%
Telecommunications Equipment 16.67%
Internet Software 14.31%
Electronics Components 9.97%
Retail 7.84%
Healthcare 7.37%
Financial 5.06%
Fiber Optics 3.92%
Capital Goods 3.81%
Banks 3.27%
Top Company Holdings
Cisco Systems, Inc. 6.62%
Nokia Class A 5.87%
Sun Microsystems, Inc. 5.70%
EMC Corp./Mass 4.52%
Intel Corp. 3.93%
General Electric Co. 3.81%
Corning, Inc. 3.70%
Wal-Mart Stores, Inc. 3.61%
JDS Uniphase Corp. 3.29%
Citigroup, Inc. 3.27%
KHAN GROWTH FUND
SCHEDULE OF INVESTMENTS
June 30, 2000 (Unaudited)
Market
Shares Value
COMMON STOCKS (99.95%)
Auto Related (.52%)
600 Ford Motor Co. $ 25,800
78 * Visteon Corp. 953
========
26,753
Banks (3.27%)
2,775 Citigroup, Inc. 167,194
Capital Goods (3.81%)
3,675 General Electric Co. 194,775
Cellular Telecommunications (1.13%)
600 * Nextel Communications, Inc. 36,712
500 Vodafone AirTouch PLC 20,719
=======
57,431
Communication Services (2.12%)
1,400 * Exodus Communications, Inc. 64,487
500 * Level 3 Communications 44,000
=======
108,487
Computer & Related (17.54%)
1,100 * Dell Computer Corp. 54,244
3,000 * EMC Corp./Mass 230,812
400 * Gateway, Inc. 22,700
1,500 Intel Corp. 200,531
500 * Microsoft Corp. 40,000
3,200 * Sun Microsystems, Inc. 291,000
500 * VERITAS Software, Inc. 56,508
========
895,795
Electronics Components (9.97%)
152 * Agilent Technologies, Inc. 11,210
700 * Applied Materials, Inc. 24,688
250 * Applied Micro Circuits Corp. 63,438
300 * Broadcom Corporation 65,681
300 * Conexant Systems, Inc. 14,587
1,600 Linear Technology Corp. 102,300
850 * Maxim Integrated Products, Inc. 57,747
450 * PMC-Sierra, Inc. 79,959
1,300 Texas Instruments, Inc. 89,294
========
508,904
Fiber Optics (3.92%)
1,400 * JDS Uniphase Corp. $ 167,825
400 * Metromedia Fiber Network, Inc. 15,875
500 * Williams Communications Group 16,594
========
200,294
Financial (5.06%)
2,000 Associates First Capital Corp. 44,625
1,500 MBNA Corp. 40,687
500 Merrill Lynch & Co. Inc. 57,500
700 Morgan Stanley Dean Witter & Co 58,275
300 The Chase Manhattan Corp. 13,819
1,500 Washington Mutual, Inc. 43,312
========
258,218
Healthcare (7.37%)
600 American General Corp. 36,600
500 * Biogen, Inc. 32,250
900 Bristol Myers Squibb 52,425
1,100 Merck & Co., Inc. 84,287
2,500 Pfizer, Inc. 120,000
1,000 Schering Plough Corp. 50,500
=======
376,062
Instruments - Scientific (.52%)
400 PE Corp. - PE Biosystems Group 26,350
Insurance (1.87%)
1 * Berkshire Hathaway 53,800
400 Marsh & McLennan Cos., Inc. 41,775
========
95,575
Internet Software (14.31%)
2,600 * America Online, Inc. 137,150
400 * Ariba, Inc. 39,219
5,320 * Cisco Systems, Inc. 338,153
600 * Juniper Networks, Inc. 87,338
200 * Portal Software, Inc. 12,775
200 * VeriSign, Inc. 35,300
600 * Vignette Corp. 31,209
400 * Yahoo! Inc. 49,550
========
730,694
Multimedia & Entertainment (.53%)
500 The News Corp., Ltd. $ 27,250
Personal Care (1.60%)
800 Johnson & Johnson 81,500
Pipelines (1.90%)
1,500 Enron Corp. 96,750
Retail (7.84%)
1,000 * Best Buy Co., Inc. 63,250
500 Home Depot, Inc. 24,969
2,300 * Kohl's Corp. 127,938
3,200 Wal-Mart Stores, Inc. 184,400
========
400,557
Telecommunication Equipment (16.67%)
300 * CIENA Corp. 50,006
700 Corning, Inc. 188,912
1,950 Motorola, Inc. 56,672
6,000 * Nokia Class A 299,625
1,500 Nortel Networks Corporation 102,375
600 * QUALCOMM, Inc. 36,000
1,600 * Vitesse Semiconductor Corp. 117,700
========
851,290
==========
Total Common Stocks (Cost $4,006,425) 5,103,879
Short-Term Investments (2.77%)
141,146 Star Treasury Fund (Cost $141,146) 141,146
Total Investments Securities (Cost $4,147,571)
102.72% 5,245,025
Less Liabilities in Excess of Other Assets
(2.72)% (138,826)
Net Assets 100.00% $ 5,106,199
+ Cost is the same for federal income tax purposes.
Net unrealized appreciation consist of:
Aggregate unrealized appreciation of investment securities $1,340,027
Aggregate unrealized depreciation of investment securities (242,573)
Net unrealized appreciation of investment securities $1,097,454
* Denotes non-income producing securities
See accompanying notes to financial statements.
KHAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
ASSETS
Investment, at market value
(cost $4,147,571) $ 5,245,025
Receivable for fund shares sold 994
Dividends and interest receivable 1,128
Organization costs, net 14,904
Due from advisor 26,441
Total assets 5,288,492
LIABILITIES
Payable for investment securities purchased $129,937
Accrued expenses 52,356
Total liabilities 182,293
Net assets applicable to shares outstanding $5,106,199
Shares outstanding 615,621
Net assets value, offering and redemption price per share
$8.29
NET ASSETS
At June 30, 2000, net assets consists of:
Paid-in capital
$ 3,850,188
Accumulated net investment loss
(36,389)
Accumulated net realized gain on investments
194,946
Accumulated net unrealized appreciation of investments
1,097,454
$ 5,106,199
See accompanying notes to financial statements.
KHAN GROWTH FUND
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2000 (Unaudited)
Investment income
Dividends $ 7,337
Interest 2,767
Total investment income 10,104
Expenses
Investment advisory fee (Note 2)17,435
Administration fee (Note 2) 5,811
Fund accounting expense 9,890
Transfer agent fees 7,431
Registration fee 2,493
Custodial fee 2,992
Prospectus and shareholders' reports
499
Professional fees 7,979
Directors fees and expenses 599
Amortization of organization costs
3,669
Insurance fee 499
Miscellaneous 4,775
=======
Total expenses 64,072
Less: reimbursed and waived expenses (17,579)
Net expenses 46,493
Net investment loss (36,389)
Realized and unrealized gain (loss) on investments:
Net realized gain on sales of investments
198,945
Net change in unrealized appreciation of investments
(305,454)
Net realized and unrealized loss on investments
(106,509)
Net decrease in net assets resulting from operations
$ (142,898)
See accompanying notes to financial statements.
KHAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
Six
Months Ended Year Ended
June 30, 2000 December 31,
(Unaudited) 1999
Operations
Net investment loss
$(36,389) $(36,089)
Net realized gain on investments
198,945 96,767
Net change in unrealized appreciation on investments
(305,454) 830,095
Net increase (decrease) in net assets resulting from operations
(142,898) 890,773
Dividends paid to shareholders from:
Capital gain ($.00 and $.07 per share, respectively)
- (34,016)
Net capital share transactions (Note 5)
788,690 1,010,839
Total increase in net assets
645,792 1,867,596
Net assets
Beginning of period
4,460,407 2,592,811
End of period $5,106,199 $4,460,407
See accompanying notes to financial statements.
KHAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Khan Funds, (the "Trust") is a business trust under the laws of
Delaware registered under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end management investment
company. The Declaration of Trust provides for the issuance of
multiple series of shares, each representing a diversified
portfolio of investments with different investment objectives,
policies and restrictions. As of June 30, 2000, the only
series issued by the Trust is the Khan Growth Fund.
The Fund seeks long-term capital growth, consistent with the
preservation of capital, by investing primarily in the common
stock of large capitalization U.S. companies. Income is a
secondary objective of the Fund. Khan Investment, Inc. serves
as the Fund's investment advisor.
The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial
statements. 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
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuations - A security listed or traded on an
exchange is valued at the last sales price on the exchange
where the security is principally traded. Investments with
maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -
Securities transactions are accounted for on a trade date
basis. Realized gains or losses are computed on the basis of
specific identification of the securities sold. Interest
income is recorded as earned from settlement date and is
recorded on an accrual basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend
date.
C. Federal Income Taxes - The Fund intends to comply
with the requirements of the Internal Revenue Code necessary to
qualify as a regulated investment company and, as such, will not be
subject to federal income taxes on otherwise taxable income
(including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Deferred Organization Costs - The Fund has
incurred expenses of $36,818 in connection with the organization.
These costs have been deferred and are being amortized on a
straight line basis over a period of sixty months from the date
the Fund commenced operations.
E. Use of Estimates - The preparation of
financial statements inconformity 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,
as well as the reported amounts of income and expenses
during the reported period. Actual results could differ
from those estimates.
KHAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
(2) ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Khan
Investment, Inc. (the "Advisor"). Under the terms of the
investment advisory agreement, the Advisor has responsibility
for supervising all aspects of the operations of the Fund
subject to the Trust's Board of Trustees (the "Trustees"). The
Advisor has agreed to ensure that assets of the Fund are
invested in accordance with the investment objectives and
policies. For its services, the Advisor receives an annual
management fee, payable monthly, and computed on the value of
the net assets of the Fund as of the close of business each
business day, at the annual rate of 0.75% of such net assets of
the Fund. During the six months ended June 30, 2000, the
Advisor was paid $17,435 for such services. The Advisor has
voluntarily agreed to waive all of their fees and reimburse fund
expense in order to limit operating expenses to an annual rate
of 2% of the net assets of the Fund. Fee waivers and expense
reimbursements are voluntary and may be terminated at anytime.
The Fund has an administrative services agreement (the
"Agreement") with the Advisor. Under the terms of the
Agreement, the Advisor provides all administrative services
necessary for the Fund's operations and is responsible for the
supervision of the Fund's other service providers. The Advisor
also assumes all ordinary, recurring expenses necessary in
carrying out the duties for the Fund, such as office space and
facilities, and equipment and clerical personnel. The Advisor
shall also pay all compensation of all Trustees, officers and
employees of the Trust who are affiliated persons of the
Advisor. For these services, the Advisor receives an annual
fee, payable monthly, computed on the value of the net assets of
the Fund as of the close of business each business day at an
annual rate of 0.25% of 1% of such assets of the Fund. During
the six months ended June 30, 2000, the Advisor was paid $5,811
for such services.
The Fund has a shareholder service plan whereby the Trust pays
securities broker-dealers, retirement plan sponsors and
administrators, and other securities professionals and/or
beneficial owners of shares of the Fund, for expenses incurred
in connection with non-distribution shareholder services
provided by them to shareholders, provided that such shareholder
servicing is not duplicative of the servicing otherwise provided
on behalf of the Fund. These expenses are limited to an annual
rate of not more than 0.25% of the net assets of the Fund as of
the close of business each business day. As of June 30, 2000,
the Fund has not made any payments.
(3) DIRECTORS' FEES AND EXPENSES
Directors' fees represent remuneration paid or accrued to each
director who is not an "interested person" of Khan Investment,
Inc.
(4) INVESTMENT SECURITIES
Purchases of securities and proceeds from sales of securities
(other than short-term securities) during the six months ended
June 30, 2000 were $4,371,081 and $3,426,586, respectively.
KHAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
(5) CAPITAL STOCK
Changes in the Fund's capital stock outstanding for the periods
ended June 30, 2000 and December 31, 1999, were as follows:
Six Months Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
Shares Amount Shares Amount
Shares sold
96,755 $798,225 166,170 $1,187,594
Shares issued in reinvestment of dividends
- - 4,015 33,439
Shares redeemed
(1,125) (9,535) (28,313) (210,194)
Net increase
95,630 $788,690 141,872 $1,010,839
As of June 30, 2000, S. D. Khan, Faisal Khan and their family
owned an aggregate of 47.38% of the outstanding shares of this
Fund which may be deemed to control the Fund.
KHAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS - (Continued)
June 30, 2000 (Unaudited)
(6) FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding
throughout each period.
Six
Months Ended Year Ended Year Ended To July 8, 1997**
June 30, 2000 December 31, December 31, December 31,
(Unaudited) 1999 1998 1997
Net asset value, beginning of the period
$ 8.58 $ 6.86 $ 5.18 $ 5.00 -
Income from investment operations:
Net investment loss
(.06) (0.07) (0.02) (0.01)
(a)
Net realized and unrealized gain on investment
(.23) 1.86 1.73 0.19
Total from investment operations
(.29) 1.79 1.71 0.18
Less distributions from realized gains
- (0.07) (0.03) -
Net asset value, end of period
$ 8.29 $ 8.58 $ 6.86 $ 5.18
Total return
(6.58)% 26.06% 33.21% 3.60%
Net assets, end of period (000's omitted)
$5,106 $4,460 $2,593 $1,150
Ratio of expenses to average net assets:
After fee waivers and reimbursements
2.00% * 2.00% 2.00% 2.00% *
Before fee waivers and reimbursements
2.75% * 3.12% 5.38% 6.30%
Ratio of net investment loss to average
net assets:
After fee waivers and reimbursements
(1.56)% * (1.06)% (0.62)% (0.25)% *
Before fee waivers and reimbursements
(2.32)% * (2.18)% (4.00)% (8.89)% *
Portfolio turnover rate
74.85% 44.48% 31.21% 18.81%
Financial Foot Notes:
(a) Calculated using averaged shares outstanding.
* Annualized
** Commencement of operations
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
Khan Funds
Houston, Texas
We have audited the accompanying statement of assets and
liabilities of the Khan Growth Fund, a series of shares of the Khan
Funds including the portfolio of investments, as of June 30, 2000,
and the related statement of operations for the year then ended and
the statement of changes in net assets and the financial highlights
for the two years in the period then ended. These financial
statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The
financial statements and financial highlights presented for the
period ended December 31, 1997 were audited by other auditors whose
report dated January 24, 1998, expressed an unqualified opinion on
those statements.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of June 30, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Khan Growth Fund as of June 30, 2000, the
results of its operation for the year then ended and, the changes
in its net assets and the financial highlights for the two years in
the period then ended in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
August 28, 2000
