Ensign Investors, Inc.
Ensign Investors Value Fund
December 31, 1999
Dear Investors:
I am pleased to announce that Ensign Investors Value Fund had a total return
of 10.3 percent for the year ended December 31, 1999. The Standard and Poor's
500 Index had a total return of 21.0 percent for the same period. The
difference in performance was directly attributable to the S&P 500 having a
larger proportion of high technology stocks than what was held by the Fund for
most of the year. Technology stocks were the stellar performers during 1999,
but we feel many have moved to extreme valuations.
Management remains committed to finding and investing in well managed
companies that have the potential to produce solid revenue and earnings growth
over a period of many years and to buy those companies when their stock prices
represent reasonable value.
However, because of continued significant scientific advances and discoveries
in the high technology and telecommunications sectors and the very real
probability of continuing above average growth in these sectors we have made a
determination to include more companies from these sectors in the Fund.
Accordingly, during the last quarter of 1999 we made several changes in the
Fund's composition. These changes can be viewed on pages 2 and 3 of the
attached audited financial statements.
Companies in these sectors tend to trade at higher multiples of earnings than
companies in other industries, but many of the high tech companies have had
significant and stable growth over several years. We are staying away from
the most richly priced of these companies and from the new public stock
offerings which tend to be more volatile.
By increasing the proportion of the Fund's assets invested in high technology
and telecommunications companies and by selecting leaders in these fields we
believe we can improve the performance of the Fund without significantly
increasing overall risk in the portfolio. We believe that scientific and
technological advances will continue to redefine the economy and the way
people live and we are excited to invest a larger proportion of the Fund's
assets in these areas.
Thank you for investing with Ensign Investors, we appreciate the opportunity
to help you build your wealth.
Sincerely,
/s/Stanley M. Wells
Stanley M. Wells
ENSIGN INVESTORS, INC.
Financial Statements
December 31, 1999 and 1998
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Ensign Investors, Inc.
We have audited the accompanying statement of assets and liabilities of Ensign
Investors, Inc., including the schedule of investments in securities as of
December 31, 1999 and 1998, and the related statements of income, changes in
net assets, and the supplementary schedule of selected per share data and
ratios for the years then ended. These financial statements and per share
data and ratios are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
supplementary schedule based on our audits.
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 per
share data and ratios are free of material misstatement. Our procedures
included confirmation of securities owned at December 31, 1999 and 1998 by
corresponding with the custodian. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. 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 audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary schedule referred
to above present fairly, in all material respects, the financial position of
Ensign Investors Inc. at December 31, 1999 and 1998, the results of its
operations for the years then ended, the changes in its net assets and the
selected per share data and ratios for the years then ended, in conformity
with generally accepted accounting principles.
/s/Tanner+Co.
TANNER+CO.
<TABLE>
Salt Lake City, Utah
February 22, 2000
<CAPTION>
Statement of Assets and Liabilities
December 31,
1999 1998
Assets ____________________
<S> <C> <C>
Investment in securities, at value (cost
$503,606 and $372,716, respectively) $572,597 $402,539
Interest and dividends receivable 305 310
___________________
Total assets 572,902 402,849
___________________
Liabilities
Current liabilities - accounts payable 604 110
___________________
Net assets applicable to outstanding
capital shares - authorized 500,000,000
shares of $.10 par value; outstanding 481,962
shares and 373,619 shares, respectively $572,298 $402,739
____________________
Net asset value per share $ 1.19 $ 1.08
____________________
See accompanying notes to financial statements.
<CAPTION>
Schedule of Investments in Securities
December 31,
1999 1998
______________________________________________________
Principal Principal
Amount or Market Amount or Market
Shares Value Percent Shares Value Percent
______________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Common stock, 79% and 90%,
respectively:
High-Tech 22% 8%
Intel Corp 400 32,925 200 23,750
BMC Software, Inc. 100 7,994 - -
Cisco Systems, Inc. 100 10,713 - -
Dell Computer Corp. 500 25,500 - -
Linear Technology Corp. 100 7,156 - -
LSI Logic Corp. 100 6,750 - -
Microsoft 200 23,350 - -
Texas Instruments, Inc. 100 9,663 - -
Hewlett-Packard Co. - - 100 6,875
Telecommunication: 12% 11%
Andrew Corporation - - 800 12,850
L.M. Ericsson Telephone 600 39,413 600 14,213
Motorola, Inc. - - 300 18,300
Lucent Technologies, Inc. 100 7,500 - -
MCI Worldcom, Inc. 450 23,878 - -
Medical/Dental Supplies: 8% 11%
Ballard Medical Products - - 1,000 24,250
Stryker Corp 400 27,850 400 21,725
BioTechnology General Corp 300 4,575 - -
Meditronic, Inc. 200 7,288 - -
St. Jude Medical, Inc. 200 6,138 - -
Consumer Products: 7% 14%
Newell Company 800 23,200 400 16,425
Gillette Co. 300 12,356 300 14,531
Diebold, Inc. - - 500 17,563
Legett & Platt 300 6,431 300 6,488
Pharmaceutical: 5% 3%
Bristol Meyers Squibb 200 12,838 100 13,225
Pfizer, Inc. 300 9,731 - -
Schering-Plough Corp 200 8,475 - -
Retail: 4% 7%
Albertsons, Inc. 500 16,125 200 12,700
Autozone, Inc. - - 500 16,469
Claire's Stores, Inc. 200 4,475 - -
Building and Construction: 4% 5%
Clayton Homes, Inc. 2,300 21,131 1,400 18,900
Business Information
Services: 3% 2%
Reuters Group - - 120 7,605
Robert Half International 500 14,281 - -
Diversified Operations: 3% 9%
Federal Signal - - 700 19,075
Johnson Controls 200 11,375 200 11,750
Dover Corp. - - 100 3,631
Baldor Electric Co. 400 7,250 - -
Regional Banks: 3% 3%
State Street Corp - - 100 7,160
Zions Bancorporation 300 17,756 100 6,106
Financial Services: 2% -
Charles Schwab Corp. 100 3,823 - -
Knight/Trimark Group 100 4,600 - -
Computer Services: 2% 2%
Automatic Data Processing 200 10,775 100 7,938
Scientific and Technical
Instr.: 4% 2%
American Power Conversion 500 13,188 - -
Emerson Electric Co. 200 11,475 100 6,213
Transportation: - 3%
Air Express International - - 600 13,350
Chemicals: - 4%
RPM, Inc. - - 1,100 17,394
Oil & Gas Operations: - 6%
Questar - - 200 3,850
Nabors Industries, Inc. - - 600 7,950
Schlumberger LTD - - 300 14,044
Total common stock,
(cost $379,613 and $334,044,
respectively) 449,978 364,330
________ ________
Real estate trust 2% and 5%,
respectively:
Real Estate Operations: 2% 5%
Equity Residential
Properties Trust - - 200 8,075
Washington Real
Estate Trust 800 12,000 600 11,250
________ ________
Total real estate trust
(cost $13,374 and $19,788,
respectively) 12,000 19,325
________ ________
Temporary investments, 19%
and 5%, respectively:
Cash Funds: 19% 5%
Temporary Reserve
Central Bank 104,152 5,801
Waterhouse Securities 6,467 13,083
________ ________
Total temporary investments
(cost $110,619 and $18,884,
respectively) 110,619 18,884
________ ________
Total investments, 100%
(cost $503,606 and $372,716,
respectively) $ 572,597 $ 402,539
________ ________
See accompanying notes to financial statements.
<CAPTION>
Statement of Income
Years Ended December 31,
1999 1998
Investment income: ____________________
<S> <C> <C>
Income:
Dividends $6,905 $11,544
Interest 333 1,478
_____________________
7,238 13,022
_____________________
Expenses:
Investment advisory fee 4,976 2,304
Custodian fee 1,470 1,225
Other 36 1,302
_____________________
6,482 4,831
_____________________
Net investment income 756 8,191
Realized and unrealized gain (loss) on investments:
Realized gain from securities transactions:
Proceeds from sale 240,112 25,163
Cost of securities sold (237,513) (31,643)
_____________________
Net realized gain (loss) on investments 2,599 (6,480)
_____________________
Change in net unrealized appreciation
of investments:
Beginning of year 29,823 1,862
End of year 68,991 29,823
_____________________
Increase in net unrealized appreciation
of investments 39,168 27,961
_____________________
Net gain on investments 41,767 21,481
_____________________
Net increase in net assets
resulting from operations $42,523 $29,672
_____________________
See accompanying notes to financial statements.
<CAPTION>
Statement of Changes in Net Assets
Year Ended December 31,
1999 1998
________________________
<S> <C> <C>
Increase in net assets from operations:
Net investment income $756 $8,191
Net realized gain (loss) from investments 2,599 (6,480)
Change in net unrealized appreciation
of investments 39,168 27,961
______________________
Net increase in net assets
resulting from operations 42,523 29,672
______________________
Distributions to shareholders - net
investment income (960) (8,000)
______________________
From capital share transactions:
Payments for redemption of 81 shares
in 1999 (95) -
Sale of 108,343 shares and 102,595
shares, respectively, to investors 128,091 106,950
______________________
Increase in net assets from
capital share transactions 127,996 106,950
______________________
Increase in net assets 169,559 128,622
Net assets, beginning of year 402,739 274,117
______________________
Net assets, end of year (including
undistributed net investment income
of $218 and $422, respectively) $572,298 $402,739
______________________
See accompanying notes to financial statements.
</TABLE>
Ensign Investors, Inc.
Notes to Financial Statements
December 31, 1999 and 1998
1. Summary of Significant Accounting Policies
Organization
The Company was incorporated on August 29, 1996 under the laws of the State of
Utah and on December 2, 1998 was registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management company. The
following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
Securities Valuation
The value of securities traded on any national exchange has been determined at
their last sales price on the year end date. Investments are stated at value
based on latest quoted market prices or at fair value as determined by the
Board of Directors.
Federal Income Taxes
The Company's intention is to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders it pays no income tax.
Cash and Cash Equivalents
The Company considers all nongovernment debt instruments of nine months or
less to be cash or cash equivalents.
Other
As is common in the industry, security transactions are accounted for on the
date the securities are purchased or sold. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. Discounts and premiums
on securities purchased are amortized over the life of the respective security.
Concentration of Credit
The Company is a diversified open-end management company (Mutual Fund)
investing in common stocks, preferred stock, and securities convertible into
common stocks. The fund's value is subject to fluctuations based on market
conditions, interest rates, and other economic, business, and political news.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results may differ from those estimates.
2. Management and Advisory Fees with Related Parties
The Company has contracts with Wells Investment Services, Inc. wherein Wells
Investment Services, Inc. acts as an investment advisor to the Company.
Under the Advisory and Service Contract, the Company pays the advisor a
monthly fee computed on the average daily net assets of the Fund at the annual
rate of 1.0% of the average daily net assets of the Fund up to $50 million,
plus 0.75% of the next $450 million, and 0.5% of the excess over $500 million.
The fee will be calculated daily and paid at the end of each month after
services have been rendered. The advisor has voluntarily agreed to limit
total expenses to 1.5 percent of the Company's average net assets computed on
a daily basis. The Company paid approximately $4,975 and $2,300 in 1999 and
1998, respectively, to Wells Investment Services, Inc.
The president of Wells Investment Services, Inc. is also president of the
Company. Eighty-one percent of the outstanding capital stock of Wells
Investment Services, Inc. is owned by such officer.
3. Accumulated Undistributed Investment Income
Net investment income had been distributed as follows:
<TABLE>
<CAPTION>
December 31.
1999 1998
______________________
<S> <C> <C>
Accumulated net investment
income distributed:
December 31, 1999 and 1998 $ 960 $ 8,000
Accumulated realized gains
distributed:
December 31, 1999 and 1998 - -
_____________________
Total net investment income and
realized gain distributed $ 960 $ 8,000
_____________________
Net unrealized appreciation in
value of investments as of
December 31, 1999 and 1998 $68,991 $ 29,823
_____________________
</TABLE>
As of December 31, 1999 and 1998, net investment income of $(204) and $191,
respectively, had not been distributed to the Company's shareholders.
4. Distributions to Shareholders
On December 21, 1999 and December 16, 1998, cash distributions of $.002 and
$.02 per share, respectively, aggregating to $960 and $8,000 were declared and
paid from net investment income.
5. Financial Instruments
None of the Company's financial instruments are held for trading purposes.
The Company estimates that the fair value of all financial instruments at
December 31, 1999 and 1998, does not differ materially from the aggregate
carrying values of its financial instruments recorded in the accompanying
balance sheet. The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. Considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value, and, accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
ENSIGN INVESTORS, INC.
Supplementary Schedule Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
Per Share Data ________________________
______________
<S> <C> <C>
Investment income $ 0.02 $ 0.03
Expenses (0.01) (0.01)
________________________
Net investment income 0.01 0.02
Dividends from net investment income - (0.02)
Net realized and unrealized gain
on securities 0.09 0.06
Capital share transactions 0.01 0.01
________________________
Net increase in net asset value 0.11 0.07
Net asset value at beginning of year 1.08 1.01
________________________
Net asset value at end of year $1.19 $1.08
________________________
Ratios
______
Expenses to average net assets % 1.50 1.36
________________________
Net investment income to average
net assets % 0.17 2.61
________________________
Portfolio turnover ratio 0.55 0.08
________________________
Number of shares outstanding at
end of year 481,962 373,619
________________________
</TABLE>
Letter of Release
We hereby give our permission for release of our audit report on the
financial statements of Ensign Investors, Inc. for the year ended December 31,
1999 and our Report on Internal Control Structure Required by Rule 17a-5 of
the Securities and Exchange Commission for the year ended December 31, 1999.
/s/Tanner+Co.
TANNER+CO.
ENSIGN INVESTORS, INC.
Report on Internal Control Structure
Required by Rule 17a-5 of the
Securities and Exchange Commission
To the Board of Directors of
Ensign Investors, Inc.
In planning and performing our audit of the financial statements and
supplemental schedules of Ensign Investors, Inc. for the year ended December
31, 1999 we considered its internal control, including control activities for
safeguarding securities, in order to determine our auditing procedures for the
purpose of expressing our opinion on the financial statements and not to
provide assurance on internal control.
Also, as required by rule 17a-5(g)(1) of the Securities Exchange Commission
(SEC), we have made a study of the practices and procedures followed by the
Company including tests of such practices and procedures that we considered
relevant to the objectives stated in rule 17a-5(g) in making the periodic
computations of aggregate indebtedness (or aggregate debits) and net capital
under rule 17a-3(a)(11) and for determining compliance with the exemptive
provisions of rule 15c3-3. Because the Company does not carry securities
accounts for customers or perform custodial function as relating to customer
securities, we did not review the practices and procedures followed by the
Company in any of the following:
1. Making quarterly securities examinations, counts, verifications, and
comparisons
2. Recordation of differences required by rule 17a-13
3. Complying with the requirements for prompt payment for securities under
Section 8 of Federal Reserve Regulation T of the Board of Governors of
the Federal Reserve System
The management of the Company is responsible for establishing and maintaining
internal control and the practices and procedures referred to in the preceding
paragraph. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls and of the practices and procedures referred to in the preceding
paragraph and to assess whether those practices and procedures can be expected
to achieve the SEC's above-mentioned objectives. Two of the objectives
of internal control and the practices and procedures are to provide management
with reasonable but not absolute assurance that assets for which the Company
has responsibility are safeguarded against loss from unauthorized use or
disposition and that transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. Rule
17a-5(g) lists additional objectives of the practices and procedures listed in
the preceding paragraph.
Because of inherent limitations in internal control or the practices and
procedures referred to above, error or fraud may occur and not be detected.
Also, projection of any evaluation of them to future periods is subject to the
risk that they may become inadequate because of changes in conditions or that
the effectiveness of their design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of the
specific internal control components does not reduce to a relatively low level
the risk that error or fraud in amounts that would be material in relation to
the financial statements being audited may occur and not be detected within
a timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving internal control, including
control activities for safeguarding securities, that we consider to be
material weaknesses as defined above.
We understand that practices and procedures that accomplish the objectives
referred to in the second paragraph of this report are considered by the SEC
to be adequate for its purposes in accordance with the Securities Exchange
Act of 1934 and related regulations, and that practices and procedures that do
not accomplish such objectives in all material respects indicate a material
inadequacy for such purposes. Based on this understanding and on our study,
we believe that the Company's practices and procedures were adequate at
December 31, 1999 to meet the SEC's objectives.
This report is intended solely for the use of the Board of Directors,
management, the SEC, (Designated self-regulatory organization), and other
regulatory agencies that rely on rule 17a-5(g) under the Securities Exchange
Act of 1934 in their regulation of registered brokers and dealers, and should
not be used for any other purpose.
/s/Tanner+Co.
TANNER+CO.
Salt Lake City, Utah
February 22, 2000
