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THE o BJURMAN o FUNDS
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[LOGO]
BJURMAN MICRO-CAP
GROWTH FUND
----------------------
SEMI-ANNUAL REPORT
September 30, 2000
(Unaudited)
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THE BJURMAN FUNDS
10100 Santa Monica Blvd., Suite 1200
Los Angeles, California 90067
BOARD OF TRUSTEES
G. Andrew Bjurman
O. Thomas Barry, III
Donald W. Hudson, Jr.
Joseph E. Maiolo
William Wallace
INVESTMENT ADVISER
George D. Bjurman & Associates
10100 Santa Monica Blvd, Suite 1200
Los Angeles, California 90067
UNDERWRITER
IFS Fund Distributors, Inc.
221 East Fourth Street, Suite 300
Cincinnati, Ohio 45202
TRANSFER AGENT
Integrated Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street, 6th Floor
Cincinnati, Ohio 45202
LEGAL COUNSEL
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
INDEPENDENT AUDITOR
Deloitte & Touche LLP
350 South Grand Avenue
Los Angeles, California 90071
TABLE OF CONTENTS
================================================================================
Letter to Shareholders .................................................... 1
Statement of Assets and Liabilities ....................................... 2
Statement of Operations ................................................... 3
Statements of Changes in Net Assets ....................................... 4
Financial Highlights ...................................................... 5
Portfolio of Investments .................................................. 6
Notes to Financial Statements ............................................. 9
================================================================================
For Additional Information and a free
prospectus about Bjurman Micro-Cap
Growth Fund call:
(800) 227-7264
or visit The Bjurman Funds' website on the
Internet at www.bjurmanfunds.com
This report is submitted for general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective Prospectus which includes details
regarding the Fund's objective, policies, expenses and other information.
--------------------------------------------------------------------------------
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
LETTER TO SHAREHOLDERS
================================================================================
To Our Shareholders:
The last nine months have been one of the most volatile and least rewarding time
periods for the financial markets. As of September 30, the small capitalization
market, as measured by the Russell 2000 Growth Index, was down 2.8%. Larger
capitalization stocks, as measured by the S&P 500 Index, were down 1.4%. During
this same time period, the Bjurman Micro-Cap Growth Fund had a positive return
of 58.4%.
During January, February and March, the Fund maintained high exposure to
technology stocks, reaching 70% of the Fund's total assets at one point. This
exposure was reduced significantly as the technology sector become temporarily
overvalued according to our quantitative models. We sold portions of some tech
stocks and full positions of others and invested the proceeds in energy and
other non-technology issues. This change in the diversification of the Fund's
portfolio cushioned the downside during March, April and May. After the dramatic
correction (particularly in the technology sector of the market), we began
purchasing several tech stocks again. Similar changes were made in the portfolio
during the summer rally.
As of September 30, the Fund's relatively low exposure to technology stocks
(28%) has once again cushioned the decline during the first part of October. The
recent decline in the markets has created another opportunity to purchase stocks
of rapidly growing companies at very reasonable prices. Many of the stocks in
the technology sector look particularly attractive at current levels.
We believe that the October decline in the stock market is similar to the
decline that took place in the spring of this year. The economic fundamentals
and current valuation levels suggest that the latest decline is providing
another buying opportunity.
Sincerely,
/s/ G. Andrew Bjurman /s/ O. Thomas Barry, III
G. Andrew Bjurman, CFA, CIC O. Thomas Barry, III, CFA, CIC
Co-President and Portfolio Manager Co-President and Portfolio Manager
2
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
ASSETS
Investment securities:
At acquisition cost ......................................... $ 68,197,599
============
At value (Note 2) ........................................... $ 82,790,806
Cash .......................................................... 133,231
Dividends receivable .......................................... 40,622
Receivable for securities sold ................................ 4,359,845
Receivable for capital shares sold ............................ 2,262,814
Organization costs, net (Note 2) .............................. 26,966
Other assets .................................................. 37,651
------------
TOTAL ASSETS ................................................ 89,651,935
------------
LIABILITIES
Payable for securities purchased .............................. 2,166,596
Payable for capital shares redeemed ........................... 130,942
Payable to Adviser (Note 4) ................................... 150,577
Payable to affiliates (Note 4) ................................ 6,500
Accrued distribution expense (Note 4) ......................... 26,378
Other accrued expenses and liabilities ........................ 41,675
------------
TOTAL LIABILITIES ........................................... 2,522,668
------------
NET ASSETS .................................................... $ 87,129,267
============
NET ASSETS CONSIST OF
Paid-in capital ............................................... $ 66,859,072
Accumulated net investment loss ............................... (287,107)
Accumulated net realized gains from security transactions ..... 5,964,095
Net unrealized appreciation on investments .................... 14,593,207
------------
NET ASSETS .................................................. $ 87,129,267
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) .................. 1,813,869
============
Net asset value, offering price and redemption price
per share (Note 2) .......................................... $ 48.04
============
See accompanying notes to financial statements.
3
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends ................................................... $ 96,739
------------
EXPENSES
Investment advisory fees (Note 4) ........................... 213,248
Distribution expense (Note 4) ............................... 52,312
Administration fees (Note 4) ................................ 29,131
Registration fees ........................................... 23,433
Custodian fees .............................................. 18,620
Accounting services fees (Note 4) ........................... 15,000
Transfer agent fees (Note 4) ................................ 12,000
Professional fees ........................................... 10,430
Trustees' fees and expenses ................................. 9,745
Organization expense (Note 2) ............................... 9,360
Postage and supplies ........................................ 5,923
Shareholder reports ......................................... 3,770
Underwriting fees (Note 4) .................................. 3,000
Other expenses .............................................. 1,265
------------
TOTAL EXPENSES ............................................ 407,237
Fees waived by the Adviser (Note 4) ......................... (23,391)
------------
NET EXPENSES .............................................. 383,846
------------
NET INVESTMENT LOSS ........................................... (287,107)
------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized losses from security transactions .............. (236,851)
Net change in unrealized appreciation/depreciation
on investments ............................................ 9,250,850
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS .............. 9,013,999
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .................... $ 8,726,892
============
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
BJURMAN MICRO-CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
==================================================================================================================
SIX MONTHS
ENDED YEAR
SEPTEMBER 30, ENDED
2000 MARCH 31,
(UNAUDITED) 2000
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss .............................................................. $ (287,107) $ (232,229)
Net realized gains (losses) from security transactions ........................... (236,851) 7,858,289
Net change in unrealized appreciation/depreciation on investments ................ 9,250,850 3,772,014
------------ ------------
Net increase in net assets from operations ......................................... 8,726,892 11,398,074
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains .......................................................... -- (188,329)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................................................ 85,789,754 11,376,371
Net asset value of shares issued in reinvestment of distributions to shareholders. -- 184,457
Payments for shares redeemed ..................................................... (30,442,341) (9,079,715)
------------ ------------
Net increase in net assets from capital share transactions ......................... 55,347,413 2,481,113
------------ ------------
TOTAL INCREASE IN NET ASSETS ....................................................... 64,074,305 13,690,858
NET ASSETS
Beginning of period .............................................................. 23,054,962 9,364,104
------------ ------------
End of period .................................................................... $ 87,129,267 $ 23,054,962
============ ============
CAPITAL SHARE ACTIVITY
Shares sold ...................................................................... 1,943,037 322,767
Shares reinvested ................................................................ -- 6,343
Shares redeemed .................................................................. (695,192) (273,213)
------------ ------------
Net increase in shares outstanding ............................................... 1,247,845 55,897
Shares outstanding, beginning of period .......................................... 566,024 510,127
------------ ------------
Shares outstanding, end of period ................................................ 1,813,869 566,024
============ ============
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
BJURMAN MICRO-CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
=====================================================================================================================
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
---------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR
SEPTEMBER 30, ENDED ENDED ENDED
2000 MARCH 31, MARCH 31, MARCH 31,
(UNAUDITED) 2000 1999 1998
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period ..................... $ 40.73 $ 18.36 $ 20.42 $ 12.00
-------- -------- -------- --------
Income (loss) from investment operations:
Net investment loss ...................................... (0.16) (0.41) (0.26) (0.10)
Net realized and unrealized gains (losses) on investments .. 7.47 23.15 (1.80) 8.52
-------- -------- -------- --------
Total from investment operations ........................... 7.31 22.74 (2.06) 8.42
-------- -------- -------- --------
Less distributions:
Distributions from net realized gains .................... -- (0.37) -- --
-------- -------- -------- --------
Net asset value at end of period ........................... $ 48.04 $ 40.73 $ 18.36 $ 20.42
======== ======== ======== ========
Total return ............................................... 17.95%(C) 124.64% (10.09%) 70.17%
======== ======== ======== ========
Net assets at end of period (000's) ........................ $ 87,129 $ 23,055 $ 9,364 $ 6,507
======== ======== ======== ========
Ratio of net expenses to average net assets ................ 1.79%(B) 1.80% 1.80% 1.80%
Ratio of total expenses to average net assets(A) ........... 1.89%(B) 2.74% 4.40% 13.35%
Ratio of net investment loss to average net assets ......... (1.34%)(B) (1.65%) (1.58%) (1.41%)
Portfolio turnover rate .................................... 235%(B) 337% 234% 110%
</TABLE>
(A) Represents the ratio of expenses to average net assets absent fee waivers
and expense reimbursements by the Adviser (Note 4).
(B) Annualized.
(C) Not annualized.
See accompanying notes to financial statements.
6
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
SHARES COMMON STOCKS -- 93.7% VALUE
--------------------------------------------------------------------------------
BASIC MATERIALS** -- 1.3%
78,600 Ameripath, Inc.* ............................... $ 1,139,700
------------
ENERGY** -- 15.4%
86,500 Carrizo Oil & Gas, Inc. ........................ 1,211,000
30,600 Clayton Williams Energy, Inc.* ................. 1,239,300
101,800 Comstock Resources, Inc.* ...................... 1,157,975
59,800 Howell Corp. ................................... 725,075
10,000 Hydril Co. ..................................... 207,500
39,400 Key Production Co., Inc.* ...................... 869,263
87,100 Magnum Hunter Resources* ....................... 794,788
138,600 Meridian Resource Corp.* ....................... 952,875
75,000 Nordic American Tanker Shipping Ltd. ........... 1,621,875
86,900 Plains Resources, Inc.* ........................ 1,640,238
78,900 Quicksilver Resources, Inc.* ................... 769,275
168,000 Range Resources Corp. .......................... 808,500
67,000 Remington Oil & Gas Corp.* ..................... 699,313
101,200 Texoil, Inc.* .................................. 740,025
------------
13,437,002
------------
INDUSTRIAL** -- 12.6%
35,600 BEI Technologies, Inc.* ........................ 1,486,300
154,100 Digital Power Corp.* ........................... 1,020,913
66,500 Engineered Support Systems, Inc. ............... 1,271,813
43,000 Foilmark, Inc.* ................................ 244,563
60,300 Genesee & Wyoming, Inc. - Class A* ............. 1,462,275
69,900 Ladish Co., Inc.* .............................. 917,438
52,500 Lifschultz Industries, Inc.* ................... 994,219
29,700 Measurement Specialties, Inc.* ................. 1,433,025
183,300 OMI Corp.* ..................................... 1,535,138
100 Porton Energy Systems, Inc. .................... 2,863
50,500 White Electronic Designs Corp.* ................ 606,000
------------
10,974,547
------------
CONSUMER, CYCLICAL**-- 7.7%
30,000 Bright Horizon Family Solutions* ............... 766,875
42,300 Christopher & Banks Corp.* ..................... 1,644,413
151,100 Circuit City Stores - Carmax Group* ............ 689,394
26,800 Coldwater Creek, Inc.* ......................... 723,600
31,200 Fred's, Inc. ................................... 700,050
20,000 Isle Of Capri Casinos, Inc.* ................... 310,000
85,000 MTR Gaming Group, Inc.* ........................ 690,625
46,500 McNaughton Apparel Group, Inc.* ................ 761,438
23,400 Shuffle Master, Inc.* .......................... 454,838
------------
6,741,233
------------
7
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 93.7% VALUE
--------------------------------------------------------------------------------
CONSUMER, NON-CYCLICAL** -- 9.5%
36,000 1-800 Contacts, Inc.* .......................... 1,728,000
12,000 Biosite Diagnostics, Inc.* ..................... $ 478,500
200 Durect Corp. ................................... 2,881
49,500 Interwest Home Medical, Inc.* .................. 176,344
102,100 Inverness Medical Technology* .................. 1,965,425
53,000 Panera Bread Company - Class A ................. 1,106,375
40,000 Rehabcare Group, Inc. .......................... 1,700,000
17,200 Surmodics, Inc.* ............................... 941,700
13,000 Young Innovations, Inc.* ....................... 203,125
------------
8,302,350
------------
TECHNOLOGY** -- 29.0%
55,000 3D Systems Corp.* .............................. 1,031,249
42,300 Alpha Technologies Group, Inc.* ................ 634,500
9,700 Anaren Microwave, Inc. ......................... 1,315,563
35,000 Applied Innovation, Inc.* ...................... 542,500
63,800 Bell Microproducts, Inc.* ...................... 1,993,750
50,000 Boston Communications Group, Inc.* ............. 962,500
45,300 Cryolife, Inc.* ................................ 1,571,344
4,900 Datum, Inc.* ................................... 127,400
32,800 Dianon Systems, Inc.* .......................... 1,307,900
30,500 Information Resource Engineering, Inc.* ........ 922,625
35,000 Innovative Solutions & Support* ................ 599,375
79,900 Jaco Electronics, Inc.* ........................ 1,198,500
22,500 Keithley Instruments, Inc. ..................... 1,575,000
24,000 Mapinfo Corp.* ................................. 751,500
30,450 Merix Corp.* ................................... 1,973,541
51,200 Nam Tai Electronics, Inc. ...................... 1,056,000
83,000 Nortech Systems, Inc.* ......................... 1,037,500
20,100 Pentastar Communications, Inc.* ................ 484,913
34,600 Pericom Semiconductor Corp.* ................... 1,280,200
61,300 RMH Teleservices, Inc. ......................... 984,631
23,950 Reptron Electronics, Inc.* ..................... 389,187
24,500 Scansource, Inc.* .............................. 1,307,687
56,900 Spectrum Control, Inc.* ........................ 913,955
61,100 Standard Microsystems Corp.* ................... 1,332,743
------------
25,294,063
------------
8
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 93.7% VALUE
--------------------------------------------------------------------------------
FINANCIAL SERVICES** -- 14.0%
45,600 Actrade Financial Technologies, Ltd.* .......... $ 1,370,850
77,500 Boston Private Financial Holdings, Inc. ........ 1,278,750
68,500 CNBT Bancshares, Inc. .......................... 1,215,874
70,000 First Sentinel Bancorp, Inc. ................... 667,187
56,000 Haven Bancorp, Inc. ............................ 1,645,000
62,600 Mutualfirst Financial, Inc. .................... 837,274
65,800 Oceanfirst Financial Corp. ..................... 1,365,350
40,000 PFF Bancorp, Inc. .............................. 870,000
60,000 Port Financial Corp.* .......................... 1,065,000
43,100 Security Financial Bancorp ..................... 684,212
31,800 UCBH Holdings, Inc. ............................ 1,138,837
------------
12,138,334
------------
CONGLOMERATES** -- 4.2%
100,400 ASI Solutions, Inc.* ........................... 1,869,949
30,200 Corinthian Colleges, Inc.* ..................... 1,781,800
------------
3,651,749
------------
TOTAL COMMON STOCKS (Cost $67,085,771) ......... $ 81,678,978
------------
MONEY MARKETS -- 1.3%
1,111,828 Firstar Stellar Treasury Fund (Cost $1,111,828) $ 1,111,828
------------
TOTAL INVESTMENT SECURITIES-- 95.0%
(Cost $68,197,599) ........................... $ 82,790,806
OTHER ASSETS IN EXCESS OF LIABILITIES-- 5.0% ... 4,338,461
------------
NET ASSETS -- 100%.............................. $ 87,129,267
============
* Non-income producing security.
** Securities are grouped by sector.
9
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
1. ORGANIZATION
The Bjurman Funds (the "Trust") is organized as a Delaware business trust
pursuant to a Trust Agreement dated September 26, 1996. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Trust is organized to offer separate series of shares
and is currently offering a single series of shares called Bjurman Micro-Cap
Growth Fund (the "Fund"). The Fund commenced operations on March 31, 1997 when
8,333 capital shares were purchased at $12 per share.
The Fund seeks capital appreciation through investments in the common stocks of
smaller companies with market capitalizations generally between $30 million and
$300 million at the time of investment.
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value.
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. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
Investment income and distributions to shareholders -- Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Dividends arising from net investment income, if any, are declared and paid
annually in December. Net realized short-term capital gains, if any, may be
distributed throughout the year and net realized long-term capital gains, if
any, are distributed at least once each year. Income dividends and capital gain
distributions are determined in accordance with income tax regulations.
Organization expenses -- Expenses of organization have been capitalized and are
being amortized on a straight-line basis over five years.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
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.
10
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which a 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.
Based upon the federal income tax cost of portfolio investments of $68,299,260
as of September 30, 2000, the Fund had net unrealized appreciation of
$14,491,546, consisting of $16,932,680 of gross unrealized appreciation and
$2,441,134 of gross unrealized depreciation. The difference between the federal
income tax cost of portfolio investments and the acquisition cost is due to
certain timing differences in the recognition of capital losses under income tax
regulations and generally accepted accounting principles.
3. INVESTMENT TRANSACTIONS
For the six months ended September 30, 2000, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$99,634,974 and $50,937,992, respectively.
4. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are also officers of George D.
Bjurman & Associates (the "Adviser"), or of Integrated Fund Services, Inc.
("IFS"), the administrative services agent, shareholder servicing and transfer
agent, and accounting services agent, or IFS Fund Distributors, Inc. (the
"Underwriter"), the principal underwriter for the Trust.
INVESTMENT ADVISORY FEE
The Adviser provides the Fund with investment advisory services. For providing
investment advisory services, the Fund pays the Adviser a monthly fee, which is
calculated daily by applying an annual rate of 1.00% to the average daily net
assets of the Fund. The Adviser has voluntarily agreed to waive all or a portion
of its fees and to reimburse certain expenses of the Fund to the extent
necessary to limit total operating expenses to 1.80% of the Fund's average daily
net assets. For the six months ended September 30, 2000, the Adviser waived
$23,391 of its investment advisory fee. Any fees withheld or voluntarily reduced
and any Fund expense absorbed by the Adviser voluntarily or pursuant to an
agreed upon expense cap which are the Fund's obligation are subject
reimbursement by the Fund to the Adviser, if so requested by the Adviser, in
subsequent fiscal years, if the aggregate amount paid by the Fund toward the
operating expenses for such fiscal year (taking into account the reimbursement)
does not exceed the applicable limitation on Fund expenses. The Adviser is
permitted to be reimbursed only for fee reductions and expense payments made in
the previous three fiscal years, except that it is permitted to look back up to
five years and four years, respectively, during the initial six years and
seventh year of the Fund's operations. Any such reimbursement is also contingent
upon the Board of Trustees' review and approval at the time the reimbursement is
made. Such reimbursement may not be paid prior to the Fund's payment of current
ordinary expenses.
11
<PAGE>
BJURMAN MICRO-CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
ADMINISTRATION FEE
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 assets from $25
million to $50 million; and 0.10% of such assets in excess of $50 million,
subject to a monthly minimum fee of $2,000.
TRANSFER AGENT FEE
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 $20 per shareholder
account, subject to a monthly minimum fee of $2,000. In addition, the Fund pays
IFS out-of-pocket expenses including, but not limited to, postage and supplies.
ACCOUNTING SERVICES FEE
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 monthly fee, based on current net
assets, of $2,500 from the Fund. In addition, the Fund pays IFS certain
out-of-pocket expenses incurred by IFS in obtaining valuations of the Fund's
portfolio securities.
UNDERWRITING FEE
Under the terms of an Underwriting Agreement, IFS Fund Distributors, Inc. (the
"Underwriter") serves as principal underwriter for the Fund and, as such, is the
exclusive agent for the distribution of shares of the Fund. For these services,
the Underwriter receives a monthly fee of $500 from the Fund. The Underwriter is
an affiliate of IFS by reason of common ownership.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. As provided in the Plan,
the Fund will reimburse the Adviser, the Underwriter or others for expenses
incurred in distributing and promoting shares of the Fund at a maximum aggregate
annual rate of 0.25% of the Fund's average daily net assets. Under the Plan, the
Fund incurred $52,312 of distribution fees during the six months ended September
30, 2000.
