Sector
Rotation
Fund
Semi-Annual Report
April 30, 2000
T.O. Richardson
COMPANY
T.O. Richardson Sector Rotation Fund
May 24, 2000
Dear Fellow Shareholder:
The T.O. RICHARDSON SECTOR ROTATION FUND completed the first six months of
fiscal 2000 on April 30th. Twelve-month performance ending April 30th was
57.32% compared with the S&P 500 Stock Index return of 10.13%.
The Fund participated fully in the strong technology driven gains of 1999
which continued through February of 2000. In March and April technology sectors
gave back some of the spectacular gains of last year. As the range of positive
sectors and stocks within those sectors declined, the Fund invested in short-
term cash positions to pursue our secondary objective of protection against down
markets. As of April 30th, 2000, we were in a 100% cash equivalent position
while searching for industry sectors offering investment opportunities greater
than short-term cash returns.
The market decline was led by the technology laden NASDAQ Composite which
fell 23% from its high of 5039.35 on March 10th to 3860.66 on April 30, 2000.
The blame was laid on "irrational exuberance" which drove the NASDAQ to a gain
of 85.6% in 1999. The Federal Reserve Board continues to ratchet up interest
rates to forestall inflation, yet the U.S. economy is as strong as ever, and the
corporate profits for the first quarter came in above market expectations.
The Fund's top gains for the past six months were entirely from technology
sectors. Here is a list of the ten best performing stocks for the past six
months and their percentage contribution to the Fund's total gains of $17
million:
COMPANY SECTOR % OF TOTAL FUND GAIN
------- ------ --------------------
JDS Uniphase Developing Communications 12.0%
Verisign Internet Software 9.9%
Exodus Communication Internet Software 9.6%
Broadcom Developing Communications 9.2%
Internet Capital Internet Finance 7.3%
Veritas Software Internet Software 5.0%
Nortel Networks Developing Communications 4.9%
Immunex Bio-Technology 4.6%
Applied Micro Circuit Developing Communications 4.3%
Oracle Computer Software 4.1%
The U.S. stock market is going through a period of realignment and we do not
yet have any indications of which economic sectors will emerge to lead the
market forward. The objective of our unique investment approach is to provide
protection of prior gains and achieve above average performance over the long-
term.
Thank you for your confidence in T.O. Richardson Company.
Sincerely,
/s/ Samuel Bailey
Samuel Bailey, Jr.
President
Date Sector Rotation Fund S&P 500 Stock Index
---- -------------------- -------------------
12/31/98*<F1> 10,000 10,000
3/31/99 10,620 10,498
6/30/99 11,740 11,238
9/30/99 11,940 10,536
12/31/99 16,580 12,104
3/31/2000 18,517 12,382
*<F1> inception date
This chart assumes an initial investment of $10,000, made on 12/31/98
(inception). Performance reflects fee waivers and does not reflect a non-
recurring early withdrawal fee of 1%. In the absence of fee waivers and the
addition of the non-recurring fee, the total return would be reduced. Returns
shown include the reinvestment of all dividend and other distributions. Past
performance is not predictive of future performance. Investment return and
principal value will fluctuate so that your shares, when redeemed, may be worth
more or less than their original cost. Unlike the S&P 500, the fund is focused
on a few stocks in a small number of sectors and investors are exposed to the
risk that a specific sector will fall rapidly in value. The S&P Stock Index is
an unmanaged stock index with no fees, therefore, there are differences in
performance, risk and expenses between the fund and the index.
RATE OF RETURN(%)
FOR THE PERIOD ENDED MARCH 31, 2000
TWELVE MONTHS ANNUALIZED
ENDED SINCE INCEPTION
3/31/00 12/31/98
------------- ---------------
T.O. Richardson Sector Rotation Fund 74.36% 63.57%
Standard & Poor's 500 Stock Index 17.94% 18.61%
SCHEDULE OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
PRINCIPAL
AMOUNT VALUE
------ -----
SHORT-TERM INVESTMENTS - 99.9%
U.S. GOVERNMENT AGENCY OBLIGATIONS - 94.0%
Fannie Mae:
$33,987,000 5.82%, 05/04/2000 $33,970,508
12,100,000 5.77%, 05/16/2000 12,070,910
Federal Home Loan Bank:
10,816,000 5.70%, 05/16/2000 10,790,312
2,909,000 5.75%, 05/17/2000 2,901,566
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 59,733,296
-----------
VARIABLE RATE DEMAND NOTES#<F2> - 5.9%
211,415 American Family Financial Services Inc., 5.7604% 211,415
2,517,496 Firstar Bank, 5.9138% 2,517,496
40,518 General Mills, Inc., 5.7688% 40,518
205,100 Sara Lee Corporation, 5.7638% 205,100
294,069 Warner-Lambert Co., 5.7600% 294,069
427,993 Wisconsin Corporate Central Credit Union, 5.8338% 427,993
81,591 Wisconsin Electric Power Company, 5.7603% 81,591
-----------
TOTAL VARIABLE RATE DEMAND NOTES 3,778,182
-----------
TOTAL SHORT TERM INVESTMENTS (COST $63,511,478) 63,511,478
-----------
TOTAL INVESTMENTS - (COST OF $63,511,478) - 99.9% 63,511,478
LIABILITIES, LESS OTHER ASSETS - 0.1% 68,590
-----------
TOTAL NET ASSETS - 100.0% $63,580,068
-----------
-----------
#<F2> Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified dates.
The rates listed are as of April 30, 2000.
See notes to the financial statements.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
ASSETS:
Investments, at value (cost $63,511,478) $63,511,478
Dividends and interest receivable 24,476
Capital shares sold 152,500
Other assets 23,150
-----------
Total Assets 63,711,604
-----------
LIABILITIES:
Payable to Advisor 81,250
Capital shares redeemed 1,000
Accrued expenses and other liabilities 49,286
-----------
Total Liabilities 131,536
-----------
NET ASSETS $63,580,068
-----------
-----------
NET ASSETS CONSIST OF:
Capital stock $46,552,787
Accumulated undistributed net investment income 16,949
Accumulated undistributed net realized gain on
investments sold 17,010,332
-----------
TOTAL NET ASSETS $63,580,068
-----------
-----------
SHARES OUTSTANDING 3,840,891
(No par value, unlimited shares authorized)
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $ 16.55
-----------
-----------
See notes to the financial statements.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
INVESTMENT INCOME:
Interest income $ 505,784
Dividend income (net of foreign withholding taxes of $2,046) 23,954
-----------
Total investment income 529,738
-----------
EXPENSES:
Investment advisory fee 394,337
Federal and state registration 14,831
Administration fee 17,472
Shareholder servicing and accounting costs 29,516
Professional fees 16,575
Reports to shareholders 3,022
Custody fees 12,430
Trustees' fees and expenses 8,259
Other 10,266
-----------
Total operating expenses before expense waiver recovery 506,708
Advisor expense waiver recovery (Note 5) 5,930
-----------
Net expenses 512,638
-----------
NET INVESTMENT INCOME 17,100
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions 17,010,593
Change in unrealized appreciation/depreciation
on investments (865,814)
-----------
Net realized and unrealized gain on investments 16,144,779
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $16,161,879
-----------
-----------
See notes to the financial statements.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE PERIOD
SIX MONTHS ENDED DECEMBER 31, 1998(1)<F3>
APRIL 30, 2000 TO OCTOBER 31, 1999
---------------- -------------------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,100 $ 67,216
Net realized gain on investment transactions 17,010,593 2,814,367
Change in unrealized appreciation/depreciation
on investments (865,814) 865,814
----------- -----------
Net increase in net assets resulting from operations 16,161,879 3,747,397
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (67,367) --
Net realized gains (2,814,629) --
----------- -----------
Total distributions (2,881,996) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 16,695,710 33,607,204
Shares issued to holders as reinvestment of dividends 2,863,516 --
Cost of shares redeemed (3,039,278) (3,574,364)
----------- -----------
Net increase in net assets resulting from capital
share transactions 16,519,948 30,032,840
----------- -----------
TOTAL INCREASE IN NET ASSETS 29,799,831 33,780,237
NET ASSETS:
Beginning of period 33,780,237 --
----------- -----------
End of period $63,580,068 $33,780,237
----------- -----------
----------- -----------
</TABLE>
(1)<F3> Commencement of operations.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS
Selected per share data is based on a share of beneficial interest outstanding
throughout the period.
<TABLE>
FOR THE PERIOD
SIX MONTHS ENDED DECEMBER 31, 1998(1)<F4>
APRIL 30, 2000 TO OCTOBER 31, 1999
----------------- ------------------------
(UNAUDITED)
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $12.13 $10.00
------ ------
Income from investment operations:
Net investment income 0.00 0.02
Net realized and unrealized gain on investments 5.39 2.11
------ ------
Total from investment operations 5.39 2.13
------ ------
Less distributions:
Dividends from net investment income (0.02) --
Distributions from net realized gains (0.95) --
------ ------
Total distributions (0.97) --
------ ------
Net asset value, end of period $16.55 $12.13
------ ------
------ ------
Total return(2)<F5> 46.04% 21.30%
Supplemental data and ratios:
Net assets, end of period $63,580,068 $33,780,237
Ratio of operating expenses to average net assets(3)<F6> 1.95%(4)<F7> 1.95%(5)<F8>
Ratio of net investment income to average net assets(3)<F6> 0.07%(4)<F7> 0.36%(5)<F8>
Portfolio turnover rate(2)<F5> 424.06% 946.15%
</TABLE>
(1)<F4> Commencement of operations.
(2)<F5> Not annualized.
(3)<F6> Annualized.
(4)<F7> Ratio includes Advisor expense waiver recovery of 0.02%.
(5)<F8> Without expense reimbursements of $105,174 for the period December 31,
1998 to October 31, 1999 the ratio of operating expenses and net
investment income to average net assets would have been 2.51% and
(0.20)% respectively.
See notes to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION
The T.O. Richardson Sector Rotation Fund (the "Fund") is a series of the
T.O. Richardson Trust (the "Trust"), a voluntary business association organized
on June 2, 1998 in the Commonwealth of Massachusetts, and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
diversified management investment company. The Fund is currently the only
series of the Trust. The principal investment objective of the Fund is to seek
capital appreciation with some protection against down markets. The Fund
commenced operations on December 31, 1998.
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.
(a) Investment Valuation
Common stocks and other equity-type securities are valued at the last
sales price on the securities exchange on which they are usually traded.
Under other circumstances, securities are valued at the average of the most
recent bid and asked prices. Fixed income securities are valued by pricing
services that use electronic data processing techniques to determine values.
Under other circumstances, actual sale or bid prices are used. 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 Fund's
Trustees. The Board of Trustees may approve the use of pricing services to
assist the Fund in determining NAV.
(b) Federal Income and Excise Taxes
The Fund intends to comply with the requirements of the Internal
Revenue Code necessary to qualify as a regulated investment company and to
make the requisite distributions of income and capital gains to its
shareholders sufficient to relieve it from all or substantially all Federal
income and excise taxes.
(c) Distributions to Shareholders
Dividends from net investment income are declared and paid annually.
Distributions of net realized capital gains, if any, will be declared and
paid at least annually.
(d) Security Transactions and Investment Income
Investment transactions are recorded on the trade date for financial
statement purposes. The Fund determines the gain or loss realized from the
investment transactions by comparing the original cost of the security lot
sold with the net sale proceeds. Dividend income is recognized on the ex-
dividend date and interest income is recognized on an accrual basis.
Acquisition and market discount are amortized over the life of the security.
Generally accepted accounting principles require that permanent financial
reporting and tax differences be reclassified to capital stock.
(e) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and use
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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
SIX MONTHS ENDED
APRIL 30, 2000
------------------------
$ SHARES
----------- ---------
Shares sold $16,695,710 1,045,099
Shares issued to
holders in
reinvestment
of dividends 2,863,516 206,602
Shares redeemed (3,039,278) (194,692)
----------- ---------
Net increase $16,519,948 1,057,009
-----------
-----------
Shares Outstanding:
Beginning of period 2,783,882
---------
End of period 3,840,891
---------
---------
DECEMBER 31, 1998*<F9>
THROUGH OCTOBER 31, 1999
------------------------
$ SHARES
----------- ---------
Shares sold $33,607,204 3,101,071
Shares issued to
holders in
reinvestment
of dividends -- --
Shares redeemed (3,574,364) (317,189)
----------- ---------
Net increase $30,032,840 2,783,882
-----------
-----------
Shares Outstanding:
Beginning of period --
---------
End of period 2,783,882
---------
---------
*<F9> Commencement of operations.
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments for the Fund, for the six months ended April 30, 2000 were
$122,453,612 and $143,727,519, respectively. There were no purchases or sales
of long-term U.S. government securities. At April 30, 2000, there was no gross
unrealized appreciation or depreciation of investments. At April 30, 2000, the
cost of investments for federal income tax purposes was $63,511,478.
5. INVESTMENT ADVISORY AGREEMENT
The Trust has an Investment Advisory Agreement (the "Agreement") with the
Advisor, with whom certain Officers and Trustees of the Trust are affiliated, to
furnish investment advisory services to the Fund. Under the terms of the
Agreement, the Trust, on behalf of the Fund, compensates the Advisor for its
management services at the annual rate of 1.50% of the Fund's average daily net
assets.
The Advisor agreed to waive its investment advisory fee and/or reimburse
the Fund's operating expenses (exclusive of brokerage, taxes and extraordinary
expenses) to the extent necessary to ensure that the Fund's total operating
expenses did not exceed 1.95% of its average daily net assets. The Advisor may
recover from the Fund the expenses paid in excess of the cap on expenses for the
three previous years, as long as the recovery does not cause the Fund to exceed
such cap on expenses. For the fiscal period ending October 31, 1999, the Advisor
waived investment advisory fees totaling $105,174. During the six months ended
April 30, 2000, the Advisor recovered $5,930.
T.O. Richardson Company, Inc.
Two Bridgewater Road
Farmington, CT 06032-2256
1-800-235-1022
For more information about the
T.O. Richardson Sector Rotation Fund,
call 1-800-643-7477
Shares distributed through
T.O. Richardson Securities, Inc.,
member of the NASD.
