<PAGE> 1
1
May 1, 2000
DEAR FELLOW SHAREHOLDERS:
In the Annual Report last fall we were pleased to write that "for fiscal 1999
the Fund returned almost 100%."(1) Little did we know that the best quarter in
1999 was yet to come. For the calendar year the Fund returned 139%. Good
performance continued into the first quarter of 2000 with a 37% return. We
believe it's a stock-picker's market -- the kind in which we excel -- but we
also believe that you should read our footnote. Among other things, it says:
"Investors should not expect that such returns can be consistently achieved."
Indeed, after the solid run in February and March, April did bring us a
correction.
These pullbacks are normal and healthy. The emotions of a correction are always
painful, but you must expect them and look beyond them, to the longer-term
potential of the market. To keep your perspective (and your sanity), you should
not use the most recent highs as the benchmark against which everything is
measured. Instead, look at where you were at year-end, where you were a year
ago, or where you were when you bought your shares. Taking a longer-term view is
the way in which wealth is created -- not by panicking at every correction.
MARKET VOLATILITY
The movements in the markets have become more dramatic and more rapid than most
investors could ever have imagined. Perhaps the increased number of investors
and the increased levels of cash are part of the reason, but certainly the
increased amount of news flow is a major factor. We are experiencing a market
that is more volatile than anytime in the past -- and it is likely to remain so.
The NASDAQ's intraday swing of 328 points on March 30th set a record -- but that
record did not stand for long. On April 4th, the NASDAQ traded as high as 4250
and as low as 3649, closing down "just" 74 points for the day. Thus, in one day,
the NASDAQ recorded one of its largest one-day declines and one of its largest
one-day advances.
As we said recently, volatility breeds opportunity. The Fund closed to most new
investors on February 8, 2000, when assets topped $1 billion. By March 10th,
assets approached $1.4 billion; yet by April 14th, assets were close to $800
million. Concerned about the effect of volatility on our shareholders and on the
Fund's portfolio, we re-opened the Fund on May 1st, and we will keep it open
until we maintain at least
- ----------------------------------------------------
(1) The Fund's fiscal year ends September 30. Kopp Emerging Growth Fund Class A
Average Annual Total Return:
Since Inception (10/1/97 -- 3/31/00): 49.74%
1 year as of quarter end (3/31/99 -- 3/31/00): 220.99%
Figures include reinvested dividends and are not annualized. Performance
results reflect a maximum sales charge of 3.5%. Performance results also
reflect expense subsidies and waivers, without which the results would have
been less favorable. Past performance is not predictive of future performance.
Investment return will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
The Fund's returns in 1999 were primarily achieved as a result of its
investment in technology companies during a period favorable for these
stocks. Investors should not expect that such returns can be consistently
achieved. Small-cap investing carries more risk than investing in larger, more
well-established companies because small companies have a higher risk of
failure, experience greater price volatility, have more limited financial
resources, and trade in lower volumes.
For an update on the Fund's performance, in view of the recent volatility,
please call us at 1-888-533-KOPP.
<PAGE> 2
2
$1 billion in assets for 90 days. We will give you plenty of notice before we
close again.
THE STRONG GET STRONGER
During corrections, we are reminded of the importance of buying good, solid
companies. A rising tide tends to lift all boats, and the rising tide that we
witnessed recently in technology certainly did that. When the pullbacks take
place, however, the weaker players generally fall by the wayside as investors
realize their high valuations may not have been justified. On the other hand,
those companies with strong managements, strong capital positions, and strong
industry positioning have the potential to emerge even stronger. We feel very
good about the companies in which we have invested and feel confident that our
in-depth, hands-on, kick-the-tires investment style will continue to reward
longer term.
NEW ECONOMY VS. OLD ECONOMY
Now that Y2K has come and gone, the new buzz words that investors are likely to
hear (and probably tire of) are "Old Economy" and "New Economy." In the very
simplest sense, most people use the phrase Old Economy to refer to traditional
cyclical and industrial stocks such as those represented by the Dow Jones
Industrial Average. The New Economy refers to technology stocks that make up
much of the NASDAQ.
For a number of years, our economy has been shifting from an industrial or
manufacturing focus to a technology and service focus. This hasn't happened
overnight, but the broader usage of the Internet in recent years has accelerated
the transition. We believe that we are still in the early stages of this
technological expansion which could last for several years. There doesn't appear
to be anything on the horizon to indicate that the growth in technology will
slow or stop. Will consumers stop using the Internet? We doubt it. Will
companies stop purchasing and implementing new technologies that help to lower
costs and make their businesses more profitable? We doubt that too. In fact,
many Old Economy companies will find that they need to embrace technological
changes to be competitive within their own industries. This is particularly true
in an environment of rising interest rates and slowing economic growth. The
improved productivity brought on by technological change helps to keep inflation
under control and increase corporate profitability. Keep in mind too that the
growth in technology and communications is not just taking place here in the
United States, but it is spreading around the world. Europe and Asia in
particular may be poised for dramatic growth.
Since last summer, there has been a clear divergence between Old Economy and New
Economy stocks. Through April 30th, the Dow was down 0.5% for the trailing
twelve months while the NASDAQ was up 51%. Will this disparity continue forever?
Probably not. At some point, the valuations of the non-technology stocks will
draw investors. In fact, we are seeing some of that right now, along with normal
profit taking. Longer term, however, we do not believe that the potential
earnings for the Old Economy stocks will be able to match the potential earnings
for many of the technology companies. And since it is ultimately earnings that
drive stocks longer term, we believe investors will be well served by having
some exposure to the technology sector.
Technology and health care stocks remain our primary holdings, so we are excited
about the future. As always, if you have any questions about your account,
please call us at 1-888-533-KOPP or visit our website at www.koppfunds.com.
Thank you for investing with us.
Sincerely,
/s/ L.C. Kopp
LEE KOPP
President
<PAGE> 3
3
TOP ten HOLDINGS
- ------------------------------------------------------
<TABLE>
<C> <S>
1. SDL, INC. (SDLI)
2. DIGITAL MICROWAVE CORPORATION (DMIC)
3. RATIONAL SOFTWARE CORPORATION (RATL)
4. MACROVISION CORPORATION (MVSN)
5. ADC TELECOMMUNICATIONS, INC. (ADCT)
6. PMC-SIERRA, INC. (PMCS)
7. CYLINK CORPORATION (CYLK)
8. ANADIGICS, INC. (ANAD)
9. PROJECT SOFTWARE & DEVELOPMENT, INC.
(PSDI)
10. ZYGO CORPORATION (ZIGO)
</TABLE>
TOP ten INDUSTRIES
- ------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
LASER- WIRELESS INFORMATION SEMICONDUCTOR TELECOMMUNICATION APPLICATION
BASED -------- SECURITY ------------- EQUIPMENT DEVELOPMENT
COMPONENTS ----------- ----------------- TOOLS
& ----------
SUBSYSTEMS
----------
<S> <C> <C> <C> <C> <C>
Top ten Industries 14.50% 11.70% 9.70% 9.70% 9.20% 7.80%
<CAPTION>
RESEARCH SOFTWARE MACHINE NETWORKING OTHER CASH &
REAGENTS/INSTRUMENTATION APPLICATIONS VISION/INSPECTION ---------- COMMON EQUIVALENTS
------------------------ ------------ ----------------- STOCKS -----------
------
<S> <C> <C> <C> <C> <C> <C>
Top ten Industries 6.30% 6.00% 3.30% 3.20% 17.40% 1.20%
</TABLE>
Percentages represent market value as a percentage of total investments.
- --------------------------------------------------------------------------------
It should not be assumed that our stock selections or investment
philosophy will be profitable or will equal past performance.
Small-cap stocks involve greater risks and volatility than those
of larger, more established companies. Potential for profit
involves possibility of loss. The President's letter is for
general information only and is not intended to provide specific
advice or stock recommendations to any individual. Future
investment decisions and commentary may be made under different
economic, market, and industry conditions from those existing at
the time these comments were prepared.
This report and the financial statements contained herein are
submitted for the general information of the shareholders of the
fund. This report is not authorized for distribution to
prospective investors in the fund unless preceded or accompanied
by a prospectus. For more information on the Kopp Emerging Growth
Fund, including charges and expenses, call 1-888-533-KOPP for a
free prospectus. Read it carefully before you invest or send
money.
<PAGE> 4
4
KOPP EMERGING GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
- -------------------------------------------------------
ASSETS
Investments in securities, at value:
Investments in securities of
unaffiliated issuers (cost
$358,669,383) $1,051,454,271
Investments in securities of
affiliated issuers (cost
$86,343,560) 110,493,750
- -------------------------------------------------------
Total investments in securities
(cost $445,012,943) 1,161,948,021
Cash 2,494,983
Receivable from securities sold 925,592
Receivable from capital shares sold 944,491
Interest receivable 77,668
Deferred organization expenses, net
of accumulated amortization 48,463
Prepaid expenses 67,498
- -------------------------------------------------------
Total Assets 1,166,506,716
- -------------------------------------------------------
LIABILITIES
Payable for capital shares redeemed 8,168,334
Payable to Investment Advisor 1,406,189
Payable for service fees 492,536
Payable for distribution fees 228,579
Payable to Affiliated Distributor 110,386
Accrued other expenses 418,172
- -------------------------------------------------------
Total Liabilities 10,824,196
- -------------------------------------------------------
NET ASSETS $1,155,682,520
- -------------------------------------------------------
- -------------------------------------------------------
NET ASSETS CONSIST OF
Capital stock $ 405,876
Paid-in-capital in excess of par 364,935,299
Accumulated undistributed net
investment loss (6,319,356)
Accumulated undistributed net
realized gain on securities 79,725,623
Unrealized net appreciation on
securities 716,935,078
- -------------------------------------------------------
Total Net Assets $1,155,682,520
- -------------------------------------------------------
CLASS A
Net Assets $ 989,927,623
Shares authorized ($0.01 par value) 3,000,000,000
Shares issued and outstanding 34,811,271
Net asset value and redemption price
per share $ 28.44
- -------------------------------------------------------
Maximum offering price per share $ 29.47
- -------------------------------------------------------
CLASS C
Net Assets $ 17,614,568
Shares authorized ($0.01 par value) 3,000,000,000
Shares issued and outstanding 623,149
Net asset value, redemption price and
offering price per share $ 28.27
- -------------------------------------------------------
CLASS I
Net Assets $ 148,140,329
Shares authorized ($0.01 par value) 3,000,000,000
Shares issued and outstanding 5,153,220
Net asset value, redemption price and
offering price per share $ 28.75
- -------------------------------------------------------
</TABLE>
See Notes to the Financial Statements.
<PAGE> 5
5
KOPP EMERGING GROWTH FUND
STATEMENT OF OPERATIONS
For the six months ended March 31, 2000 (Unaudited)
<TABLE>
<S> <C>
- -------------------------------------------------------
INVESTMENT INCOME
Interest $ 302,527
Dividends 32,000
- -------------------------------------------------------
Total investment income 334,527
- -------------------------------------------------------
EXPENSES
Investment advisory fee 4,220,924
Service fees -- Class A 903,806
Service fees -- Class C 10,683
12b-1 fees -- Class A 361,523
12b-1 fees -- Class C 32,048
Transfer agent fees and expenses 298,481
Fund administration fees 197,252
Custody fees 83,868
Fund accounting fees 43,937
Federal and state registration fees 25,436
Professional fees 20,059
Reports to shareholders 16,258
Directors' fees and expenses 15,006
Amortization of deferred organization
expenses 9,716
Other expenses 19,364
- -------------------------------------------------------
Total expenses before recovery 6,258,361
Plus: Advisor fee waiver recovery 400,768
- -------------------------------------------------------
Net expenses 6,659,129
- -------------------------------------------------------
NET INVESTMENT LOSS (6,324,602)
- -------------------------------------------------------
REALIZED AND UNREALIZED GAIN
Net realized gain on investment
transactions:
Net realized gain on investment
transactions of unaffiliated
issuers 79,654,025
Net realized gain on investment
transactions of affiliated issuers 176,602
Change in unrealized appreciation on
investments 599,747,218
- -------------------------------------------------------
Net gain on investments 679,577,845
- -------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $673,253,243
- -------------------------------------------------------
</TABLE>
KOPP EMERGING GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
March 31, 2000 Year Ended
(Unaudited) September 30, 1999
<S> <C> <C>
- ---------------------------------------------------------------
OPERATIONS
Net investment loss $ (6,324,602) $ (5,130,171)
Net realized gain on
investments 79,830,627 11,715,286
Change in unrealized
appreciation on
investments 599,747,218 244,501,309
- ---------------------------------------------------------------
Net increase in net
assets resulting
from operations 673,253,243 251,086,424
- ---------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Class A:
Proceeds from
shares sold 145,188,001 102,526,599
Cost of shares
redeemed (136,376,646) (134,797,837)
Class C:
Proceeds from
shares sold 10,325,299 1,633,971
Cost of shares
redeemed (464,934) (5,713)
Class I:
Proceeds from
shares sold 7,048,348 6,747,721
Cost of shares
redeemed (14,464,695) (127,518)
- ---------------------------------------------------------------
Net increase
(decrease)
resulting from
capital share
transactions 11,255,373 (24,022,777)
- ---------------------------------------------------------------
TOTAL INCREASE IN NET
ASSETS 684,508,616 227,063,647
- ---------------------------------------------------------------
NET ASSETS
Beginning of period 471,173,904 244,110,257
- ---------------------------------------------------------------
End of period $1,155,682,520 $471,173,904
- ---------------------------------------------------------------
</TABLE>
See Notes to the Financial Statements.
<PAGE> 6
6
KOPP EMERGING GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
Mar. 31, 2000 Sept. 30, 1999
------------- --------------
Class A
(Unaudited) Class A
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of
period $11.89 $5.81
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(2) (0.16) (0.14)
Net realized and unrealized gain
(loss) on investments 16.71 6.22
- -----------------------------------------------------------------------------------------------
Total from investment operations 16.55 6.08
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $28.44 $11.89
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000's) $989,928 $404,630
Ratio of expenses to average net
assets: 1.62%(3),(5),(8) 1.50%(3)
Ratio of net investment loss to
average net assets: (1.54)%(5),(6),(8) (1.44)%(6)
Portfolio turnover rate(9) 16.6% 41.3%
Total return(10) 139.19%(11) 104.65%
- -----------------------------------------------------------------------------------------------
<CAPTION>
Six Months
Year Ended Ended
Sept. 30, 1998 Mar. 31, 2000
-------------- -------------
Class C
Class A (Unaudited)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of
period $10.00 $11.85
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(2) (0.09) (0.25)
Net realized and unrealized gain
(loss) on investments (4.10) 16.67
- -----------------------------------------------------------------------------------------------
Total from investment operations (4.19) 16.42
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $5.81 $28.27
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000's) $216,533 $17,615
Ratio of expenses to average net
assets: 1.50%(3) 2.27%(5),(8)
Ratio of net investment loss to
average net assets: (1.30)%(6) (2.19)%(5),(8)
Portfolio turnover rate(9) 19.7% 16.6%
Total return(10) (41.90)% 138.57%(11)
- -----------------------------------------------------------------------------------------------
<CAPTION>
Feb. 19,
1999(1) Six Months
through Ended
Sept. 30, 1999 Mar. 31, 2000
-------------- -------------
Class I
Class C (Unaudited)
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of
period $8.09 $12.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(2) (0.07) (0.15)
Net realized and unrealized gain
(loss) on investments 3.83 16.90
- -----------------------------------------------------------------------------------------------
Total from investment operations 3.76 16.75
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $11.85 $28.75
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000's) $1,891 $148,140
Ratio of expenses to average net
assets: 2.15%(4),(5) 1.27%(3),(5),(8)
Ratio of net investment loss to
average net assets: (2.09)%(5),(7) (1.19)%(5),(6),(8)
Portfolio turnover rate(9) 41.3% 16.6%
Total return(10) 46.48%(11) 139.58%(11)
- -----------------------------------------------------------------------------------------------
<CAPTION>
Year Ended Year Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Class I Class I
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of
period $5.84 $10.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss(2) (0.09) (0.06)
Net realized and unrealized gain
(loss) on investments 6.25 (4.10)
- -----------------------------------------------------------------------------------------------
Total from investment operations 6.16 (4.16)
- -----------------------------------------------------------------------------------------------
Net asset value, end of period $12.00 $5.84
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (000's) $64,653 $27,577
Ratio of expenses to average net
assets: 1.15%(3) 1.15%(3)
Ratio of net investment loss to
average net assets: (1.09)%(6) (0.95)%(6)
Portfolio turnover rate(9) 41.3% 19.7%
Total return(10) 105.48% (41.60)%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Commencement of operations for Class C.
(2) Net investment loss per share is calculated using the ending balance of
undistributed net investment loss prior to consideration of adjustments for
permanent book and tax differences.
(3) Absent voluntary fee waivers for the six months ended March 31, 2000 and
the years ended September 30, 1999 and 1998, respectively, the ratio of
expenses to average net assets would have been 1.65%, 1.79% and 1.96% for
Class A and 1.30%, 1.40%, and 1.65% for Class I. Included in these fee
waivers, for the six months ended March 31, 2000 and the years ended
September 30, 1999 and 1998, respectively, were 12b-1 waivers of 0.03%,
0.09% and 0.15% for Class A and 0.03%, 0.05% and 0.19% for Class I.
(4) Absent voluntary fee waivers for the period February 19, 1999 through
September 30, 1999, the ratio of expenses to average net assets would have
been 2.31% for Class C. No 12b-1 fee waivers are included in these fee
waivers since Class C had already incurred its maximum 12b-1 and
shareholder servicing fees.
(5) Annualized.
(6) Absent voluntary fee waivers for the six months ended March 31, 2000 and
the years ended September 30, 1999 and 1998, respectively, the ratio of net
investment loss to average net assets would have been (1.57)%, (1.73)% and
(1.76)% for Class A and (1.22)%, (1.34)% and (1.45)% for Class I.
(7) Absent voluntary fee waivers for the period February 19, 1999 through
September 30, 1999, the ratio of net investment loss to average net assets
would have been (2.25)% for Class C.
(8) For the six months ended March 31, 2000, the ratio includes Advisor fee
waiver recovery of 0.10% for Class A, Class C and Class I.
(9) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(10) Total return excludes sales charges.
(11) Not annualized.
See Notes to the Financial Statements.
<PAGE> 7
7
KOPP EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Number of Market
Shares Value
<C> <S> <C>
- ----------------------------------------------------------------
COMMON STOCK -- 99.5%
- ----------------------------------------------------------------
APPLICATION DEVELOPMENT TOOLS -- 7.9%
1,190,000 Rational Software Corporation $ 91,035,000
- ----------------------------------------------------------------
CARDIOVASCULAR -- 0.1%
215,000 Eclipse Surgical Technologies,
Inc. 1,599,062
- ----------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.9%
400,000 Inter-Tel, Inc.* 10,950,000
- ----------------------------------------------------------------
COMPUTERS/PERIPHERAL EQUIPMENT -- 0.3%
160,000 S3, Inc. 3,360,000
- ----------------------------------------------------------------
DATA WAREHOUSING -- 0.5%
100,000 Cognos, Inc.(f) 6,256,250
- ----------------------------------------------------------------
DIAGNOSTICS -- 1.2%
420,000 Biosite Diagnostics, Inc. 10,237,500
400,000 Cholestech Corporation 3,387,500
- ----------------------------------------------------------------
13,625,000
- ----------------------------------------------------------------
E-COMMERCE -- 0.7%
200,000 ValueVision International, Inc. 8,275,000
- ----------------------------------------------------------------
ELECTRONIC COMPONENTS -- 0.7%
400,000 Artesyn Technologies, Inc. 7,575,000
- ----------------------------------------------------------------
ELECTRONIC DESIGN AUTOMATION -- 1.8%
300,000 ANSYS, Inc. 3,225,000
460,000 Applied Microsystems
Corporation(#) 7,187,500
300,000 Artisan Components, Inc. 5,887,500
100,000 Synopsys, Inc. 4,875,000
- ----------------------------------------------------------------
21,175,000
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
<C> <S> <C>
- ----------------------------------------------------------------
GENOMICS -- 1.3%
350,000 Gene Logic, Inc. 14,721,875
- ----------------------------------------------------------------
INDUSTRIAL AUTOMATION -- 0.7%
640,000 Adept Technology, Inc.(#) 7,680,000
- ----------------------------------------------------------------
INFORMATION SECURITY -- 9.8%
2,590,000 Cylink Corporation(#) 37,555,000
880,000 Macrovision Corporation 75,790,000
- ----------------------------------------------------------------
113,345,000
- ----------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 2.0%
270,000 eLoyalty Corporation 6,446,250
540,000 Lightbridge, Inc. 12,622,500
190,000 Norstan, Inc. 1,235,000
280,000 Technology Solutions Company 2,555,000
- ----------------------------------------------------------------
22,858,750
- ----------------------------------------------------------------
LASER-BASED COMPONENTS & SUBSYSTEMS -- 14.6%
790,000 SDL, Inc. 168,171,250
- ----------------------------------------------------------------
MACHINE VISION/INSPECTION -- 3.3%
180,000 CyberOptics Corporation 7,638,750
640,000 Zygo Corporation(#) 30,880,000
- ----------------------------------------------------------------
38,518,750
- ----------------------------------------------------------------
MEDICAL PRODUCTS -- 0.5%
107,500 Zoll Medical Corporation 5,509,375
</TABLE>
See Notes to the Financial Statements.
<PAGE> 8
KOPP EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 2000 (Unaudited)
8
<TABLE>
<CAPTION>
Number of Market
Shares Value
<C> <S> <C>
- ----------------------------------------------------------------
NETWORKING -- 3.2%
100,000 Cisco Systems, Inc. 7,731,250
1,000,000 Computer Network Technology
Corporation 17,500,000
400,000 Ezenia!, Inc. 4,200,000
600,000 Larscom Incorporated 3,937,500
100,000 MMC Networks, Inc. 3,300,000
- ----------------------------------------------------------------
36,668,750
- ----------------------------------------------------------------
ONCOLOGY -- 1.0%
150,000 ImClone Systems Incorporated 11,531,250
- ----------------------------------------------------------------
ORTHOPEDICS -- 0.1%
200,000 Interpore International, Inc. 1,675,000
- ----------------------------------------------------------------
RESEARCH REAGENTS/INSTRUMENTATION -- 6.3%
400,000 Molecular Devices Corporation 30,700,000
400,000 Techne Corporation 27,600,000
340,000 Ventana Medical Systems, Inc. 14,683,750
- ----------------------------------------------------------------
72,983,750
- ----------------------------------------------------------------
SEMICAP EQUIPMENT -- 1.4%
235,000 Applied Science and Technology,
Inc. 7,108,750
140,000 Brooks Automation, Inc. 8,750,000
- ----------------------------------------------------------------
15,858,750
- ----------------------------------------------------------------
SEMICONDUCTOR -- 9.8%
547,500 ANADIGICS, Inc. 36,135,000
80,000 Conexant Systems, Inc. 5,680,000
100,000 EMCORE Corporation 11,506,250
200,000 PMC-Sierra, Inc.(f) 40,737,500
200,000 Vitesse Semiconductor Corporation 19,250,000
- ----------------------------------------------------------------
113,308,750
</TABLE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
<C> <S> <C>
- ----------------------------------------------------------------
SOFTWARE APPLICATIONS -- 6.0%
100,000 Documentum, Inc. 7,800,000
450,000 Epicor Software Corporation 3,825,000
80,000 HNC Software, Inc. 5,765,000
170,000 Hyperion Software Corporation 5,525,000
90,000 Infinium Software, Inc. 464,062
180,000 Inso Corporation 2,430,000
244,500 National Computer Systems, Inc.
(*) 12,408,375
560,000 Project Software & Development,
Inc. 31,640,000
- ----------------------------------------------------------------
69,857,437
- ----------------------------------------------------------------
SPECIALTY PHARMACEUTICALS -- 0.2%
175,000 Warner Chilcott Laboratories -- SP
ADR(f) 2,821,875
- ----------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 9.3%
1,200,000 ADC Telecommunications, Inc. 64,650,000
330,000 Advanced Fibre Communications,
Inc. 20,686,875
320,000 Tekelec 11,880,000
100,000 Tellabs, Inc. 6,298,438
67,500 Tut Systems, Inc. 4,020,469
- ----------------------------------------------------------------
107,535,782
- ----------------------------------------------------------------
TEST AND MEASUREMENT -- 1.0%
730,000 LeCroy Corporation(#) 11,497,500
- ----------------------------------------------------------------
THERAPEUTICS -- 0.8%
300,000 Neose Technologies, Inc. 9,656,250
- ----------------------------------------------------------------
VOICE PROCESSING -- 2.3%
800,000 AVT Corporation 9,450,000
205,000 Centigram Communications
Corporation 3,895,000
475,000 Davox Corporation 12,706,250
- ----------------------------------------------------------------
26,051,250
</TABLE>
See Notes to the Financial Statements.
<PAGE> 9
KOPP EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
March 31, 2000 (Unaudited)
9
<TABLE>
<CAPTION>
Number of Market
Shares Value
<C> <S> <C>
- ----------------------------------------------------------------
WIRELESS -- 11.8%
3,000,000 Digital Microwave Corporation 101,625,000
190,000 EMS Technologies, Inc. 3,800,000
540,000 Itron, Inc. 3,746,250
80,000 Proxim, Inc. 9,575,000
100,000 RF Monolithics, Inc. 1,500,000
697,500 Spectrian Corporation(#) 15,693,750
- ----------------------------------------------------------------
135,940,000
- ----------------------------------------------------------------
Total Common Stock (cost $433,106,578) $1,150,041,656
<CAPTION>
Principal Market
Amount Value
<C> <S> <C>
- ----------------------------------------------------------------
SHORT-TERM INVESTMENT -- 1.0%
- ----------------------------------------------------------------
INVESTMENT COMPANY -- 1.0%
$11,906,365 Firstar Institutional Money Market
Fund (*) $ 11,906,365
- ----------------------------------------------------------------
Total Short-Term Investment (cost $11,906,365) 11,906,365
- ----------------------------------------------------------------
Total Investments -- 100.5% (cost $445,012,943) 1,161,948,021
- ----------------------------------------------------------------
Liabilities, less Other Assets -- (0.5)% (6,265,501)
- ----------------------------------------------------------------
NET ASSETS -- 100.0% $1,155,682,520
- ----------------------------------------------------------------
</TABLE>
* Income producing security.
f Foreign security.
# Affiliated company; the Fund owns 5% or more of the outstanding voting
securities of the issuer.
See Notes to the Financial Statements.
<PAGE> 10
10
KOPP EMERGING GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
March 31, 2000 (Unaudited)
1. ORGANIZATION
Kopp Funds, Inc. (the "Company") was incorporated on June 12, 1997, as a
Minnesota corporation, and is registered as an open-end, investment management
company under the Investment Company Act of 1940 (the "1940 Act"). The Kopp
Emerging Growth Fund (the "Fund") is a non-diversified series of the Company.
The Fund's investment objective is to seek long-term capital appreciation by
investing primarily in common stocks of companies that Kopp Investment Advisors,
Inc. (the "Advisor") believes to have the potential for superior growth. The
Company's registration statement was declared effective on September 16, 1997.
The Fund commenced operations on October 1, 1997.
The costs incurred in connection with the organization, initial registration and
public offering of shares aggregated $96,935. The Fund is amortizing these costs
over the period of benefit, but not to exceed sixty months from the Fund's
commencement of operations. The proceeds of any redemption of the initial shares
by the original shareholder or any transferee will be reduced by a pro rata
portion of any then unamortized organizational expenses in the same proportion
as the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of such redemption.
The Fund has issued three classes of shares: Class A, Class C, and Class I. Each
class of shares has identical rights and privileges except that each class bears
its own expenses and exclusive voting rights on matters pertaining to the
distribution plan for that class.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATION
Common stocks and other equity-type securities are valued at the last sales
price on the national securities exchange or NASDAQ on which such securities are
primarily traded; however, securities traded on a national securities exchange
or NASDAQ for which there were no transactions on a given day, and securities
not listed on a national securities exchange or NASDAQ, are valued at the
average of the most recent bid and asked prices. Any securities or other assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by the Board of Directors of the Company or its
delegate. The Board of Directors has approved the use of pricing services to
assist the Fund in the determination of net asset value. Instruments with a
remaining maturity of 60 days or less are valued on an amortized cost basis.
FEDERAL INCOME TAXES
The Fund intends to qualify for treatment as a "Regulated Investment Company"
under Subchapter M of the Internal Revenue Code, and the Fund intends to
distribute investment company net taxable income and net capital gains to
shareholders. Therefore, no federal tax provision is required.
INCOME AND EXPENSES
Net investment income (loss), other than class specific expenses, and realized
and unrealized gains and losses are allocated daily to each class of shares
based upon the relative net asset value of outstanding shares of each class of
shares at the beginning of the day (after adjusting for the current day's
capital share activity of the respective class).
<PAGE> 11
11
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income and distributions of net realized gains, if
any, will be declared and paid at least annually.
USE OF 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 and disclosure of
contingent 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.
FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in U.S.
companies and the U.S. government. These risks include revaluation of currencies
and future adverse political and economic developments. Moreover, securities of
many foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of comparable
U.S. companies and the U.S. government.
OTHER
Investment and shareholder transactions are recorded on the trade date. The Fund
determines the gain or loss realized from investment transactions by comparing
the original cost of the security lot sold with the net sales proceeds (specific
identification). Dividend income is recognized on the ex-dividend date or as
soon as this information is available to the Fund, and interest income is
recognized on an accrual basis. Generally accepted accounting principles require
that permanent financial reporting and tax differences be reclassified to more
closely present capital balances on a tax basis.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
Class A
Six Months Ended
March 31, 2000
----------------
<S> <C>
Shares sold 7,252,111
Shares redeemed (6,460,392)
- ----------------------------------------------------------
Net increase 791,719
</TABLE>
<TABLE>
<CAPTION>
Class C
Six Months Ended
March 31, 2000
----------------
<S> <C>
Shares sold 484,556
Shares redeemed (20,885)
- ----------------------------------------------------------
Net increase 463,671
</TABLE>
<TABLE>
<CAPTION>
Class I
Six Months Ended
March 31, 2000
----------------
<S> <C>
Shares sold 375,517
Shares redeemed (609,037)
- ----------------------------------------------------------
Net decrease (233,520)
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Fund for the six months ended March 31, 2000, were
$139,327,995 and $135,439,357, respectively. There were no purchases or sales of
long-term U.S. Government securities.
At March 31, 2000, gross unrealized appreciation and depreciation of investments
for federal income tax purposes were as follows:
<TABLE>
<S> <C>
Appreciation $757,610,753
Depreciation (40,932,544)
- ----------------------------------------------------------
Net unrealized appreciation on
investments $716,678,209
</TABLE>
At March 31, 2000, the cost of investments for federal income tax purposes was
$445,269,812.
<PAGE> 12
12
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Pursuant to its investment advisory agreement with the Fund, the Advisor is
entitled to receive a fee, calculated daily and payable monthly, at an annual
rate of 1.00% applied to the daily net assets of the Fund.
For the fiscal year ending September 30, 2000, the Advisor has voluntarily
agreed to waive its management fee to the extent necessary to ensure that (i)
the total annual operating expenses for Class A shares would not exceed 1.75%,
(ii) the total annual operating expenses for Class C shares would not exceed
2.40%, and (iii) the total annual operating expenses for Class I shares would
not exceed 1.40%. The Advisor may recover previously waived management fees. As
of March 31, 2000, the Advisor has recovered $400,768 of previously waived
management fees. Cumulative unrecovered management fees waived as of March 31,
2000 totaled $1,194,007.
Firstar Mutual Fund Services, LLC, serves as accounting services agent,
administrator, and transfer agent for the Fund. Firstar Bank, N.A., serves as
custodian for the Fund.
The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan") with respect to each class of shares pursuant to which certain
distribution and shareholder servicing fees may be paid to Centennial Lakes
Capital, Inc. (the "Distributor"). The Distributor is an affiliate of the
Advisor. Under the terms of the Plan, each class of shares may be required to
pay the Distributor (i) a distribution fee for the promotion and distribution of
shares of up to 0.25% of the average daily net assets of the Fund attributable
to Class A and Class I and up to 0.75% of the average daily net assets of the
Fund attributable to Class C (computed on an annual basis) and (ii) a
shareholder servicing fee for personal service provided to shareholders of up to
0.25% of the average daily net assets of the Fund attributable to all three
classes (computed on an annual basis). Payments under the Plan with respect to
Class A shares are currently limited to 0.35%, which represents a 0.10%
distribution fee and a 0.25% shareholder servicing fee. Class C shares are
currently incurring 1.00%, which represents a 0.75% distribution fee and a 0.25%
shareholder servicing fee. The Fund has no intention of paying any Rule 12b-1
fees in connection with the Class I shares. The Distributor is authorized to, in
turn, pay all or a portion of these fees to any registered securities dealer,
financial institution, or other person who renders assistance in distributing or
promoting the sale of Fund shares, or who provides certain shareholder services
to Fund shareholders, pursuant to a written agreement. To the extent such fee is
not paid to such persons, the Distributor may use the fee for its own
distribution expenses incurred in connection with the sale of Fund shares, or
for any of its shareholder servicing expenses. The Plan is a "reimbursement"
plan, which means that the fees paid by the Fund under the Plan are intended to
reimburse the Distributor for services rendered and commission fees borne up to
the maximum allowable distribution and shareholder servicing fees. If the
Distributor is due more money for its services rendered and commission fees
borne than are immediately payable because of the expense limitation under the
Plan, the unpaid amount is carried forward from period to period while the Plan
is in effect until such time as it may be paid. As of March 31, 2000, there were
$874,080 of unreimbursed distribution and shareholder servicing related expenses
to be carried forward to future plan years. Distribution and shareholder
servicing fees incurred by Class A shares for the six months ended March 31,
2000 were $361,523 and $903,806, respectively (net of voluntary waiver). The
distribution and shareholder servicing fees retained by the Distributor, related
to Class A, for the six months ended March 31, 2000 were $51,576 and $128,955,
respectively. The Fund was advised that the Distributor advanced $99,651 of
distribution and shareholder servicing fees related to
<PAGE> 13
13
Class C shares for the six months ended March 31, 2000. The distribution and
shareholder servicing fees retained by the Distributor, related to Class C, for
the six months ended March 31, 2000 were $32,048 and $10,683, respectively.
The Fund was advised that the Distributor retained front-end sales charges on
Class A shares of $359,911 for the six months ended March 31, 2000.
6. OTHER AFFILIATES*
Investments representing 5% or more of the outstanding voting securities of a
portfolio company result in that company being considered an affiliated company,
as defined in the Investment Company Act of 1940. The aggregate market value of
all securities of affiliated companies as of March 31, 2000 amounted to
$110,493,750 representing 9.56% of net assets. Transactions during the six
months ended March 31, 2000 in which the issuer was an "affiliated person" are
as follows:
<TABLE>
<CAPTION>
Adept Applied Centigram
Technology, Microsystems Communications Cylink LeCroy Spectrian
Inc. Corporation Corporation ** Corporation Corporation Corporation
----------- ------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
September 30, 1999 Balance
Shares 637,000 430,000 335,000 1,238,498 732,000 700,000
Cost $8,535,471 $2,850,837 $4,449,398 $ 8,715,977 $19,430,478 $16,987,632
Gross Additions
Shares 10,000 40,000 -- 1,361,502 -- --
Cost $ 66,875 $ 198,439 $ -- $18,760,698 $ -- $ --
Gross Deductions
Shares 7,000 10,000 130,000 10,000 2,000 2,500
Cost $ 110,687 $ 122,031 $2,280,234 $ 196,563 $ 85,750 $ 135,937
March 31, 2000 Balance
Shares 640,000 460,000 205,000 2,590,000 730,000 697,500
Cost $8,491,659 $2,927,245 $2,169,164 $27,280,112 $19,344,728 $16,851,695
- -----------------------------------------------------------------------------------------------------------------------
Realized gain (loss) $ (68,907) $ 97,962 $ 340,055 $ (59,068) $ (55,001) $ (78,439)
- -----------------------------------------------------------------------------------------------------------------------
Investment income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Zygo
Corporation Total
----------- -----
<S> <C> <C>
September 30, 1999 Balance
Shares 500,000 4,572,498
Cost $ 7,384,932 $68,354,725
Gross Additions
Shares 140,000 1,551,502
Cost $ 4,063,189 $23,089,201
Gross Deductions
Shares -- 161,500
Cost $ -- $ 2,931,202
March 31, 2000 Balance
Shares 640,000 5,962,500
Cost $11,448,121 $88,512,724
- ---------------------------------------------------------
Realized gain (loss) $ 0 $ 176,602
- ---------------------------------------------------------
Investment income $ 0 $ 0
- ---------------------------------------------------------
</TABLE>
* The listing of these companies is not an admission that the "affiliated
persons" are affiliates of the Distributor, Advisor, Fund, Company, or any
other client of the Advisor.
** Security that was affiliated during the six months ended March 31, 2000, but
not at March 31, 2000.
7. BANK BORROWING
The Fund has secured a $10,000,000 line of credit with Firstar Bank, N.A. The
interest rate on any borrowings is the Bank's announced prime rate and
borrowings would be for liquidity purposes. The Fund pays a commitment fee equal
to the amount of the line at a rate of 0.10% per annum. During the six months
ended March 31, 2000, the Fund did not draw upon the line of credit.
<PAGE> 14
14
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<PAGE> 15
15
(This page is intentionally left blank.)
<PAGE> 16
[KOPP LOGO]
DIRECTORS
LeRoy C. Kopp
Robert L. Stehlik
Thomas R. Stuart
OFFICERS
LeRoy C. Kopp, Chief Executive Officer and President
John P. Flakne, Chief Financial Officer and Treasurer
Kathleen S. Tillotson, Executive Vice President and Secretary
Gregory S. Kulka, First Vice President
INVESTMENT ADVISER
KOPP INVESTMENT ADVISORS, INC.
7701 France Avenue South, Suite 500
Edina, MN 55435
EMERGING GROWTH FUND
ADMINISTRATOR AND TRANSFER AGENT SEMI-ANNUAL REPORT 2000
FIRSTAR MUTUAL FUND SERVICES, LLC
<TABLE>
<S> <C>
For Overnight deliveries, For regular mail deliveries,
use: use:
Kopp Funds, Inc. Kopp Funds, Inc.
c/o Firstar Mutual Fund c/o Firstar Mutual Fund
Services, LLC Services, LLC
Third Floor P.O. Box 701
615 E. Michigan Street Milwaukee, WI 53201-0701
Milwaukee, WI 53202
</TABLE>
CUSTODIAN
FIRSTAR BANK, N.A.
777 E. Wisconsin Avenue
Milwaukee, WI 53202
DISTRIBUTOR
CENTENNIAL LAKES CAPITAL, INC.
7701 France Avenue South, Suite 500
Edina, MN 55435
INDEPENDENT AUDITORS
KPMG LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
LEGAL COUNSEL
GODFREY & KAHN, S.C.
780 N. Water Street
Milwaukee, WI 53202
Kopp Funds is distributed by Centennial Lakes Capital, Inc., a member of
the NASD and an affiliate of Kopp Investment Advisors, Inc. and the Fund.
(C)2000 Kopp Investment Advisors, Inc.
