BARRETT
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GROWTH FUND
LETTER TO SHAREHOLDERS JANUARY 31, 2000
Dear Fellow Shareholders:
We are happy to report that the Barrett Growth Fund had a very successful first
year. The Fund appreciated by 33.53% in 1999, significantly better than the
21.04% return of the S&P 500. Our strategy of buying strong companies with
rising sales and earnings was well rewarded. The results for the fourth quarter
and year are shown below:
TOTAL RETURN SINCE INCEPTION
FOURTH QUARTER FULL YEAR 12/29/98
BARRETT GROWTH FUND +27.55% +33.53% 33.80%
S&P 500 Index +14.88% +21.04% 19.25%
THE YEAR IN REVIEW
Last year was a terrific one for growth investors. All the major stock indexes
closed the year at new highs. The economy has produced the longest economic
expansion in modern history. Corporate earnings are robust yet inflation is low.
Investors continue to enjoy the greatest bull market in history.
While the performance of the stock averages was strong, the averages themselves
do not tell the whole story. The median stock in the S&P 500 was up less than 1%
in 1999--so one had to be in the right stocks. The best performing groups were
Technology and Telecommunications. We have been overweighted in these areas
because of our focus on companies with solid growth prospects.
The Internet became the rage in 1999. Much of the excitement came from newly
minted companies with no earnings. We see a revolution taking place but, based
on our disciplines, have decided to own only established companies with earnings
such as Cisco, Oracle, Network Appliance and AOL, that should benefit from rapid
growth in this area. Another major trend in the stock market last year was the
massive number of corporate mergers and acquisitions. This activity tends to
push up stock prices. Global mergers and acquisitions will continue as companies
strive to increase market share and cut costs.
THE YEAR AHEAD
As we enter the new Millennium, the economy continues to grow at a rapid rate.
Our main worry is that the Federal Reserve will be compelled to raise interest
rates several more times. This could have a negative effect on the stock market.
Rising interest rates could cause price/earnings multiples to contract despite
the strength in corporate earnings. But as long as productivity and low
inflation continue, we think that the bull market is intact, though we could get
stock price corrections at any time. Our focus is on the long-term and how to
best take advantage of periodic opportunities in our favored companies.
THE PORTFOLIO
The Barrett Growth Fund is a diversified stock fund with investments in a number
of growing sectors. Our objective is to own companies that are growing 50%
faster than those in the S&P 500. Here is a breakdown of the sector weightings:
PIE CHART:
AS OF 12/31/99, FIGURES AS A PERCENT OF EQUITIES
Financial Services 16%
Software & Electronics 22%
Health Care 12%
Consumer Products & Services 12%
Telecom Services & Equipment 14%
Information Services 11%
Energy 5%
Basic Industry 8%
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BARRETT
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GROWTH FUND
The SOFTWARE AND ELECTRONIC, INFORMATION SERVICES and TELECOM SERVICES AND
EQUIPMENT sectors hold enormous promise for high returns over the next five
years. HEALTHCARE underperformed in 1999 but we see a strong rebound in 2000 as
earnings growth progresses. FINANCIAL SERVICES will get going once interest
rates peak. CONSUMER PRODUCTS AND SERVICES will move ahead even if there is an
economic slowdown. Though we have not made a large commitment to BASIC INDUSTRY,
this area helped in 1999 and should benefit from stronger commodity prices in
2000.
The largest holdings in the Fund as of 12/31/99 are:
LARGEST EQUITY POSITIONS AS PERCENT OF NET ASSETS
Oracle Corporation 5.2% Computer Associates International, Inc. 3.8%
Cisco Systems, Inc. 4.9% Microsoft Corporation 3.6%
Computer Sciences Corp. 4.7% MCI WorldCom, Inc. 3.0%
Intel Corporation 4.4% American International Group, Inc. 2.9%
Network Appliance, Inc. 3.8% Honeywell International, Inc. 2.9%
We added a number of new investments to the Fund in the last quarter. FIRST DATA
is a fast growing computer services firm. It is the largest processor of credit
card transactions in the U.S. It also owns Western Union, the best-known money
transfer business. We expect First Data to grow its earnings by 13% to 15% per
year. The stock sells at only 20x estimated 2001 earnings per share. This is a
first-class e-commerce company that has a strong future.
PITNEY BOWES is a name you might recognize. It is the largest manufacturer of
mailing systems in the world. It has over two million customers in 118 countries
and an under-appreciated e-commerce strategy. A less well-known name is SANMINA.
This company is an electronics-manufacturing firm that makes products for other
marketers. Many large technology companies like Nokia have become "virtual"
manufacturing companies, outsourcing many components to companies such as
Sanmina. A major portion of its production goes to the telecommunications
industry. We expect Sanmina to grow its earning per share by 30% per year for
the foreseeable future.
We also added a beginning position in CHARLES SCHWAB. This company is a leader
in financial services and has successfully reinvented itself several times.
Schwab is a powerful gatherer of investment assets and will continue to benefit
from the flow of money out of banks and into brokers. We expect the company to
grow its earnings by 20% per annum for the next few years.
Thank you for choosing the Barrett Growth Fund. Please visit us at our web site,
www.barrettassociates.com. If you have any questions, please call toll-free
(877) 363-6333.
Sincerely,
/s/ Robert E. Harvey, CFA
Robert E. Harvey, CFA
President
/s/ Robert J. Voccola, CFA /s/ Peter H. Shriver, CFA /s/ Larry W. Seibert, CFA
Robert J. Voccola, CFA Peter H. Shriver, CFA Larry W. Seibert, CFA
Lead Portfolio Manager Portfolio Manager Portfolio Manager
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BARRETT
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GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
MARKET
SHARES VALUE
- --------- --------
COMMON STOCKS - 98.44%
BUSINESS SERVICES - 6.05%
6,500 Automatic Data
Processing, Inc. $ 350,187
4,000 Equifax, Inc. 94,250
7,000 First Data Corporation 345,188
-----------
789,625
-----------
COMPUTER SERVICES &
OUTSOURCING - 4.71%
6,500 Computer Sciences
Corporation * 615,062
-----------
CONSUMER PRODUCTS - 2.49%
5,000 Colgate-Palmolive Company 325,000
-----------
ELECTRONICS - 8.23%
7,000 Intel Corporation 576,188
6,000 Network Appliance, Inc. * 498,375
-----------
1,074,563
-----------
ENERGY - 4.93%
6,000 Anadarko Petroleum
Corporation 204,750
4,000 BP Amoco Plc ADR 237,250
5,000 Halliburton Company 201,250
-----------
643,250
-----------
FINANCIAL SERVICES - 14.31%
3,500 American International
Group, Inc. 378,437
6,000 The Charles Schwab
Corporation 230,250
2,500 Fannie Mae 156,094
3,200 Franklin Resources, Inc. 102,600
MARKET
SHARES VALUE
- --------- --------
FINANCIAL SERVICES (CONTINUED)
3,000 The Goldman Sachs
Group, Inc. $ 282,563
3,000 Providian Financial
Corporation 273,187
3,500 State Street Corporation 255,718
3,200 Zions Bancorporation 189,400
-----------
1,868,249
-----------
INDUSTRIAL - 7.57%
2,000 General Electric Company 309,500
6,500 Honeywell International, Inc. 374,969
2,000 Pitney Bowes, Inc. 96,625
3,000 United Parcel Service, Inc. -
Class B 207,000
-----------
988,094
-----------
MEDICAL DEVICES &
SERVICES - 4.31%
10,000 IMS Health Incorporated 271,875
8,000 Medtronic, Inc. 291,500
-----------
563,375
-----------
MEDIA & ENTERTAINMENT - 4.61%
4,500 America Online, Inc. * 339,469
5,500 Carnival Corporation 262,969
-----------
602,438
-----------
PHARMACEUTICALS - 7.26%
6,000 Amgen, Inc. * 360,375
3,000 Eli Lilly and Company 199,500
8,000 Pfizer, Inc. 259,500
3,000 Schering-Plough Corporation 126,562
-----------
945,937
-----------
See accompanying Notes to the Financial Statements
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BARRETT
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GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
MARKET
SHARES VALUE
- --------- --------
REAL ESTATE - 1.96%
6,000 Equity Residential
Properties Trust $ 256,125
-----------
RETAILING - 4.44%
4,500 Dayton Hudson Corporation * 330,469
12,000 Staples, Inc. * 249,000
-----------
579,469
-----------
SOFTWARE - 13.60%
7,000 Computer Associates
International, Inc. 489,563
100 FreeMarkets, Inc. * 34,131
4,000 Microsoft Corporation * 467,000
6,000 Oracle Corporation * 672,375
4,000 Transaction Systems
Architects, Inc. - Class A * 112,000
-----------
1,775,069
-----------
TELECOMMUNICATION & DATA
NETWORK EQUIPMENT - 8.08%
6,000 Cisco Systems, Inc. * 642,750
3,500 Lucent Technologies, Inc. 261,844
1,500 Sanmina Corporation * 149,812
-----------
1,054,406
-----------
TELECOMMUNICATION
SERVICES - 5.89%
7,500 MCI WorldCom, Inc. * 397,969
7,500 Vodafone AirTouch Plc ADR 371,250
-----------
769,219
-----------
Total common stocks
(Cost $9,684,492) 12,849,881
===========
PRINCIPAL MARKET
AMOUNT VALUE
- --------- --------
U.S. TREASURY
OBLIGATIONS - 0.19%
$ 5,000 U.S. Treasury Note, 5.250%,
due 01/31/2001 $ 4,959
20,000 U.S. Treasury Note, 5.375%,
due 02/15/2001 19,844
----------
Total U.S. Treasury
Obligations (Cost $25,879) 24,803
----------
VARIABLE RATE
DEMAND NOTES # - 1.62%
$ 211,345 Firstar Bank, 6.240% $ 211,345
----------
Total variable rate demand
notes (Cost $211,345) 211,345
----------
Total investments - 100.25%
(Cost $9,921,716) 13,086,029
----------
Liabilities in excess of
other assets - (0.25%) (33,233)
----------
TOTAL NET ASSETS - 100.00% $13,052,796
===========
* Non-income producing security.
# Variable rate demand notes are considered short-term obligations and are
payable on demand at the market value. The interest rates change
periodically at specified dates. The rates shown are as of December 31,
1999.
See accompanying Notes to the Financial Statements
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BARRETT
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GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(UNAUDITED)
ASSETS:
Investments in securities,
at market value
(cost: $9,921,716) $13,086,029
Accrued dividends and interest 6,733
Receivable from Adviser 13,659
Prepaid assets 12,673
-----------
Total assets 13,119,094
-----------
LIABILITIES:
Accrued expenses 66,298
-----------
Total liabilities 66,298
-----------
Net assets applicable to
outstanding capital stock $13,052,796
===========
NET ASSETS CONSIST OF:
Capital stock $ 8,724,789
Accumulated undistributed
net investment loss (18,184)
Accumulated undistributed
net realized gain
on investments 1,181,878
Unrealized appreciation
on investments 3,164,313
-----------
Total Net Assets $13,052,796
===========
Shares outstanding (unlimited
shares of $0.001 par value
authorized) 975,368
-----------
Net asset value, offering and
redemption price per share $ 13.38
===========
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
INVESTMENT INCOME:
Dividend income (net of
withholding tax of $355) $ 36,330
Interest income 12,459
-----------
Total investment income 48,789
-----------
EXPENSES:
Investment advisory fee 53,134
Federal and state registration 18,443
Professional fees 17,848
Shareholder servicing fees
and expenses 17,480
Administration fees 16,008
Distribution expenses 13,284
Fund accounting fees 12,880
Reports to shareholders 9,568
Custody fees 7,360
Other expenses 5,704
Trustees fees and expenses 1,656
-----------
Total expenses before
Adviser reimbursement 173,365
Less fees and expenses
reimbursed and waived
by Adviser (106,392)
-----------
Net expenses 66,973
-----------
Net investment loss (18,184)
-----------
NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain (loss)
on investments (20,519)
Net change in unrealized
appreciation on investments 2,397,092
-----------
Net realized and unrealized
gains on investments 2,376,573
-----------
Net increase in net assets
resulting from operations $ 2,358,389
===========
See accompanying Notes to Financial Statements
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BARRETT
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GROWTH FUND
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
SIX MONTHS ENDED DECEMBER 29, 1998*
DECEMBER 31, 1999 THROUGH
(UNAUDITED) JUNE 30, 1999
----------------- ------------------
OPERATIONS:
<S> <C> <C>
Net investment loss $ (18,184) $ (9,428)
Net realized gain (loss) on investments (20,519) 1,202,397
Net change in unrealized appreciation on investments 2,397,092 767,221
------------ ------------
Net increase in assets resulting from operations 2,358,389 1,960,190
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,308,642 7,729,359
Cost of shares redeemed (365,979) (37,805)
------------ ------------
Net increase in net assets from capital share transactions 942,663 7,691,554
------------ ------------
TOTAL INCREASE IN NET ASSETS 3,301,052 9,651,744
------------ ------------
NET ASSETS:
Beginning of period $ 9,751,744 $ 100,000
------------ ------------
End of period $ 13,052,796 $ 9,751,744
============ ============
* Commencement of operations
See accompanying Notes to Financial Statements
</TABLE>
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BARRETT
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GROWTH FUND
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Per share data for a share of capital stock SIX MONTHS ENDED DECEMBER 29, 1998*
outstanding for the entire period and selected DECEMBER 31, 1999 THROUGH
information for the period are as follows: (UNAUDITED) JUNE 30, 1999
----------------- -------------
<S> <C> <C>
NET ASSET VALUE
Beginning of period $ 10.94 $ 10.00
--------- ---------
OPERATIONS
Net investment loss (0.01) 1 (0.01) 1
Net realized and unrealized gains
on investments 2.45 0.95
--------- ---------
Total from operations 2.44 0.94
--------- ---------
NET ASSET VALUE
End of period $ 13.38 $ 10.94
========= =========
Total return 22.30% 9.40%
Net assets at end of period (000s omitted) $ 13,053 $ 9,752
RATIO OF EXPENSES TO
AVERAGE NET ASSETS
Before expense reimbursement 3.25% 2 5.22% 2
After expense reimbursement 1.25% 2 1.44% 2
RATIO OF NET INVESTMENT LOSS
TO AVERAGE NET ASSETS
Before expense reimbursement (2.34)% 2 (4.02)% 2
After expense reimbursement (0.34)% 2 (0.24)% 2
Portfolio turnover rate 25% 30%
* Commencement of operations.
1 Net investment income (loss) per share is calculated using the ending
balance of undistributed net investment income prior to consideration of
adjustments for permanent book to tax differences.
2 Annualized.
See accompanying Notes to Financial Statements
</TABLE>
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BARRETT
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GROWTH FUND
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
1. ORGANIZATION
The Barrett Growth Fund (the "Fund") is a series of The Barrett Funds (the
"Trust"), a business trust organized on September 29, 1998 in the state of
Delaware and is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end diversified management investment company. The
Barrett Growth Fund is currently the only series of the Trust. The Fund
commenced operations on December 29, 1998. Barrett Associates Inc., serves as
the investment adviser (the "Adviser") for the Fund and is responsible for
managing the Fund's portfolio of securities.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Organization and Prepaid Initial Registration Expenses Expenses incurred by
the Trust in connection with the organization and the initial public offering of
shares were expensed as incurred. These expenses were advanced by the Adviser,
and the Adviser has agreed to voluntarily reimburse the Fund for these expenses,
subject to potential recovery (see Note 3). Prepaid initial registration
expenses are deferred and amortized over the period of benefit.
b) Investment Valuation
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. The value of a
foreign security is determined as of the close of trading on the foreign
exchange on which it is traded or as of the scheduled close of trading on the
NYSE, if that is earlier. Corporate bonds, U.S. government securities and money
market instruments are valued at the close of the NYSE. The value of these
securities used in computing the NAV of each class is determined as of such
time. Variable rate demand notes are valued at amortized cost, which
approximates market value.
c) Federal Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and to make the requisite
distributions of income and capital gains to its shareholders sufficient to
relieve it from all or substantially all Federal income taxes. Therefore, no
federal income tax provision is required. Generally accepted accounting
principles require that permanent differences between financial reporting and
tax reporting be reclassified between various components of net assets.
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BARRETT
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GROWTH FUND
d) 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.
e) Other
Investment and shareholder transactions are recorded on trade date. The Fund
determines the gain or loss realized from the investment transactions by
comparing the cost of the security lot sold with the net sales proceeds.
Dividend income is recognized on the ex-dividend date or as soon as information
is available to the Fund, and interest income is recognized on an accrual basis.
Discounts and premiums on securities purchased are amortized over the life of
the respective security.
3. AGREEMENTS
The Trust has an Investment Advisory Agreement (the "Agreement") with the
Adviser, 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 Adviser for its
management services at the annual rate of 1.00% of the Fund's average daily net
assets.
For the period December 29, 1998 (commencement of operations) through March 31,
1999, the adviser agreed to voluntarily waive its management fee and/or
reimburse the Fund's other expenses, including organizational expenses, to the
extent necessary to ensure that the Fund's total operating expenses do not
exceed 1.70% of average daily net assets.
Effective April 1, 1999, the Adviser has agreed to voluntarily waive its
management fee and/or reimburse the Fund's other expenses to the extent
necessary to ensure that the Fund's total operating expenses do not exceed 1.25%
of its average daily net assets until June 30, 2000. Any such waiver or
reimbursement is subject to later adjustment to allow the Adviser to recoup
amounts waived or reimbursed to the extent actual fees and expenses for a period
are less than the expense limitation caps, provided, however, that the Adviser
shall only be entitled to recoup such amounts for a period of three years from
the date such amount was waived or reimbursed.
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4. DISTRIBUTION PLAN
The Trust, on behalf of the Fund, has adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which provides that the Fund
may reimburse the Fund's distributor or others at an annual rate of up to 0.25%
of the average daily net assets attributable to its shares. Payments under the
12b-1 Plan shall be used to compensate or reimburse the Fund's distributor or
others for services provided and expenses incurred in connection with the sale
of shares and are tied to the amounts of actual expenses incurred.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the six months ended December 31, 1999 were as
follows:
PURCHASES SALES
------------- -------------
U.S. Government $ 0 $ 0
Other $ 3,808,351 $ 2,585,941
At December 31, 1999, gross unrealized appreciation and depreciation of
investments for tax purposes were are follows:
Appreciation $4,118,380
(Depreciation) (133,541)
----------
Net unrealized appreciation on investments $3,984,839
==========
At December 31, 1999, the cost of investments for tax purposes was $9,101,190.
SIX MONTHS DECEMBER 29, 1998
ENDED THROUGH
6. SHARES OF BENEFICIAL INTEREST DECEMBER 31, 1999 JUNE 30, 1999
----------------- --------------
Shares sold 116,513 885,202
Shares reinvested -- --
Shares redeemed (32,689) (3,658)
---------- ----------
Net increase in shares 83,824 881,544
Shares outstanding:
Beginning of period 891,544 10,000
---------- ----------
End of period 975,368 891,544
========== ==========
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BARRETT GROWTH FUND
565 Fifth Avenue
New York, NY 10017
(877) 363-6333
INVESTMENT ADVISER
BARRETT ASSOCIATES, INC.
565 Fifth Avenue
New York, NY 10017
DISTRIBUTOR
T.O. RICHARDSON SECURITIES, INC.
2 Bridgewater Road
Farmington, CT 06032
ADMINISTRATOR, FUND ACCOUNTANT
& TRANSFER AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
FIRSTAR BANK, N.A.
615 East Michigan Street
Milwaukee, WI 53202
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, LLP
2600 One Commerce Square
Philadelphia, PA 19103
AUDITORS
KPMG LLP
303 East Wacker Drive
Chicago, IL 60601
LOGO: BARRETT GROWTH FUND
Semi-Annual Report
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December 31, 1999
