BEARGUARD FUNDS, INC.
[LOGO]
INSTITUTIONAL CLASS
INVESTOR CLASS
ANNUAL REPORT
OCTOBER 31, 2000
<PAGE>
BEARGUARD FUNDS, INC.
Dear Shareholder:
On December 28, 2000, the Board of Directors made the difficult
decision to liquidate and dissolve the Bearguard Fund (the "Fund"), subject to
approval by the shareholders. After reviewing several options with management,
the Board of Directors has concluded that the growth in assets of the Fund was
not sufficient to continue to offer competitive performance and high quality
service to shareholders over the long term.
In 2001 you will be receiving a notice of a Special Meeting of
Shareholders of the Bearguard Fund, along with a proxy statement and proxy card.
You will be asked to consider and approve a Plan of Liquidation and Dissolution
which would result in the proceeds from your shares of the Fund being
distributed to you. The adviser, Skye Investment Advisors, will pay all the
costs associated with the Fund's liquidation.
In light of the proposed liquidation and dissolution of the Fund, no
additional investments will be accepted after January 5, 2001, with certain very
limited exceptions. A supplement, dated January 4, 2001, to the Fund's
Prospectus, dated October 28, 1999, is enclosed.
Thank you for the confidence you have demonstrated in the Bearguard
Fund. All of us at Skye Investment Advisors wish to thank you for being fellow
shareholders in the Fund. It has been both our pleasure and our privilege to
have you as clients.
Sincerely,
Paul L. McEntire
<PAGE>
BEARGUARD FUNDS, INC.
Bearguard Fund - Institutional Class Value of $10,000 Investment
[PLOT POINTS CHART]
Bearguard Institutional Class S&P 500 Index NASDAQ 100 Index
10/29/99 $ 10,000.00 $ 10,000.00 $ 10,000.00
Nov-99 $ 9,850.00 $ 10,204.46 $ 11,248.45
Dec-99 $ 8,910.31 $ 10,804.21 $ 14,058.45
Jan-00 $ 9,140.20 $ 10,261.38 $ 13,536.05
Feb-00 $ 8,710.61 $ 10,067.12 $ 16,178.35
Mar-00 $ 8,720.19 $ 11,052.00 $ 16,674.67
Apr-00 $ 9,440.48 $ 10,719.50 $ 14,306.24
May-00 $ 10,210.82 $ 10,499.56 $ 12,603.45
Jun-00 $ 8,810.92 $ 10,758.39 $ 14,270.64
Jul-00 $ 9,160.71 $ 10,590.19 $ 13,685.07
Aug-00 $ 8,390.29 $ 11,247.98 $ 15,460.43
Sep-00 $ 9,270.44 $ 10,654.15 $ 13,538.19
Oct-00 $ 9,850.76 $ 10,609.11 $ 12,445.05
Bearguard Fund - Investor Class Value of $10,000 Investment
[PLOT POINTS CHART]
Bearguard Investor Class S&P 500 Index NASDAQ 100 Index
10/29/99 $ 10,000.00 $ 10,000.00 $ 10,000.00
Nov-99 $ 9,850.00 $ 10,204.46 $ 11,248.45
Dec-99 $ 8,900.46 $ 10,804.21 $ 14,058.45
Jan-00 $ 9,130.09 $ 10,261.38 $ 13,536.05
Feb-00 $ 8,700.06 $ 10,067.12 $ 16,178.35
Mar-00 $ 8,709.63 $ 11,052.00 $ 16,674.67
Apr-00 $ 9,429.92 $ 10,719.50 $ 14,306.24
May-00 $ 10,200.35 $ 10,499.56 $ 12,603.45
Jun-00 $ 8,790.66 $ 10,758.39 $ 14,270.64
Jul-00 $ 9,151.08 $ 10,590.19 $ 13,685.07
Aug-00 $ 8,371.40 $ 11,247.98 $ 15,460.43
Sep-00 $ 9,251.24 $ 10,654.15 $ 13,538.19
Oct-00 $ 9,831.29 $ 10,609.11 $ 12,445.05
Average Annual Returns
November 1, 1999(1) through October 31, 2000 One Year Since Inception
Bearguard Fund - Institutional Class -1.50% -1.50%
Bearguard Fund - Investor Class -1.70% -1.70%
S&P 500 Index 6.09% 6.09%
NASDAQ 100 Index 24.45% 24.45%
(1) Commencement of operations.
Past performance is not predictive of future performance.
<PAGE>
BEARGUARD FUNDS, INC.
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Schedule of Investments
October 31, 2000
Principal
Amount U.S. TREASURY BILLS - 101.2%* Value
$ 91,000 5.14%, Maturing 11/09/2000 ** $ 90,883
77,000 5.38%, Maturing 11/16/2000 ** 76,815
1,195,000 5.65%, Maturing 11/24/2000 ** 1,190,495
----------
TOTAL INVESTMENTS (Cost $1,358,193) $1,358,193
==========
* Calculated as a percentage of net assets
** All or a portion of the securities have been committed as collateral for
open short positions.
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
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Schedule of Securities Sold Short
October 31, 2000
Shares Security Description Value
1,100 Amazon.com, Inc. $ 40,287
250 Amgen Inc. 14,484
200 Applied Micro Circuits Corporation 15,287
400 Art Technology Group, Inc. 25,100
700 Autodesk, Inc. 15,444
1,800 Bergen Brunswig Corporation - Class A 16,312
50 Broadcom Corporation - Class A 11,119
650 BroadVision, Inc. 19,337
100 Brocade Communications Systems, Inc. 22,737
100 CIENA Corporation 10,512
550 Cintas Corporation 25,506
400 Clear Channel Communications, Inc. 24,025
750 Compaq Computer Corporation 22,807
8,500 CopyTele, Inc. 8,766
5,500 Drugstore.com, Inc. 14,437
2,600 EarthWeb Inc. 32,825
200 eBay Inc. 10,300
500 Edison Schools Inc. 13,719
50 Emulex Corporation 7,344
4,600 eToys Inc. 17,250
700 Exodus Communications, Inc. 23,494
1,100 GSI Lumonics Inc. 13,887
246 Gemstar - TV Guide International, Inc. 16,852
390 Glaxo Wellcome plc - ADR 22,693
100 The Goldman Sachs Group, Inc. 9,981
450 The Home Depot, Inc. 19,350
550 IDT Corporation 19,663
1,950 IMC Global, Inc. 25,228
475 Infinity Broadcasting Corporation - Class A 15,794
1,065 InfoSpace, Inc. 21,433
390 International Speedway Corporation - Class A 12,529
150 Internet Security Systems, Inc. 13,238
3,200 iVillage, Inc. 7,600
700 Kana Communications, Inc. 16,450
400 Kohl's Corporation 21,675
500 Lamar Advertising Company 24,000
1,100 Manor Care, Inc. 18,356
250 Microvision, Inc. 8,516
450 MicroStrategy Incorporated 10,772
50 Micromuse Inc. 8,484
200 Morgan Stanley Dean Witter & Co. 16,063
400 Mylan Laboratories Inc. 11,200
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
--------------------------------------------------------------------------------
Schedule of Securities Sold Short
October 31, 2000
Shares Security Description Value
50 Net.B@nk, Inc. $ 434
1,000 Net2Phone, Inc. 18,563
2,050 Netcentives Inc. 14,606
400 Nextel Communications, Inc. - Class A 15,375
700 Pacific Sunwear of California, Inc. 14,350
1,150 Peregrine Systems, Inc. 27,600
1,050 Power Integrations, Inc. 14,109
2,800 Priceline.com Incorporated 16,100
1,000 Quintiles Transnational Corp. 13,938
300 Rambus Inc. 13,481
4,500 Razorfish, Inc. - Class A 20,250
1,550 Red Hat, Inc. 19,375
100 Redback Networks Inc. 10,644
50 SDL, Inc. 12,963
400 Sapient Corporation 14,225
500 Sotheby's Holdings, Inc. 13,594
2,000 SportsLine.com, Inc. 17,125
3,000 StarMedia Network, Inc. 18,375
200 Sycamore Networks, Inc. 12,650
3,200 Tenneco Automotive Inc. 13,800
300 TIBCO Software Inc. 18,900
300 TriQuint Semiconductor, Inc. 11,494
450 US Airways Group, Inc. 16,988
100 VeriSign, Inc. 13,200
900 VerticalNet, Inc. 25,102
450 Vignette Corporation 13,416
700 VISX, Incorporated 15,006
300 Vodafone Group PLC - ADR 12,769
850 Waste Management, Inc. 17,000
---------
TOTAL SECURITIES SOLD SHORT (Proceeds $1,152,588) $ 1,170,288
===========
ADR - American Depository Receipt
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
October 31, 2000
ASSETS:
Investments, at value (cost $1,358,193) $ 1,358,193
Receivable from broker for proceeds on securities sold short 1,152,613
Interest receivable 24,701
Receivable from Adviser 15,813
Other assets 17,201
------
Total assets 2,568,521
=========
LIABILITIES:
Bank overdraft 14,389
Securities sold short, at value (proceeds of $1,152,588) 1,170,288
Dividends payable on short positions 25
Accrued expenses and other liabilities 42,271
------
Total liabilities 1,226,973
---------
NET ASSETS $ 1,341,548
===========
NET ASSETS CONSIST OF:
Capital stock $ 1,328,081
Accumulated undistributed net
investment income 68,923
Accumulated net realized loss
on investments sold (37,756)
Net unrealized depreciation
on short positions (17,700)
-------
NET ASSETS $ 1,341,548
===========
INSTITUTIONAL CLASS
Net Assets $ 869,917
Shares outstanding
(50,000,000 shares of $0.01 par value authorized) 88,341
------
Net asset value, offering and
redemption price per share $ 9.85
======
INVESTOR CLASS
Net Assets $ 471,631
Shares outstanding
(50,000,000 shares of $0.01 par value authorized) 47,984
------
Net asset value, offering and
redemption price per share $ 9.83
======
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
--------------------------------------------------------------------------------
Statement of Operations
November 1, 1999 (1) to October 31, 2000
INVESTMENT INCOME:
Interest income $ 102,146
-------
Total investment income 102,146
-------
EXPENSES:
Investment advisory fee 14,665
Administration fee 55,682
Shareholder servicing and accounting costs 75,468
Custody fees 3,425
Federal and state registration 35,610
Professional fees 27,557
Reports to shareholders 2,255
Directors' fees and expenses 3,038
Other 17,488
Distribution expense - Investor Class shares 200
---
Total operating expenses before expense reimbursement
and dividends on short positions 235,388
Less: Fee waivers from Firstar Mutual Fund Services, LLC (37,415)
Less: Expense reimbursement from Adviser (168,387)
Dividends on short positions
(net of foreign taxes withheld of $56) 3,755
-----
Total expenses 33,341
------
NET INVESTMENT INCOME 68,805
------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized loss on:
Long transactions (564)
Short transactions (37,192)
-------
Net realized loss (37,756)
Change in unrealized appreciation
(depreciation) on short positions (17,700)
-------
Net realized and unrealized loss on investments (55,456)
-------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 13,349
========
(1) Commencement of operations.
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
November 1, 1999 (1)
through
October 31, 2000
----------------
OPERATIONS:
Net investment income $ 68,805
Net realized loss on:
Long transactions (564)
Short transactions (37,192)
Change in unrealized appreciation
(depreciation) on short positions (17,700)
------
Net increase in net assets resulting from operations 13,349
======
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 3,695,287
Cost of shares redeemed (2,467,088)
---------
Net increase in net assets resulting from
capital share transactions 1,228,199
---------
TOTAL INCREASE IN NET ASSETS 1,241,548
NET ASSETS:
Beginning of period 100,000
-------
End of period
(including undistributed net investment
income of $68,923) $ 1,341,548
===========
(1) Commencement of operations.
See notes to the financial statements
<PAGE>
BEARGUARD FUNDS, INC.
--------------------------------------------------------------------------------
Financial Highlights
Institutional Class Investor Class
November 1, 1999 (1) November 1, 1999 (1)
through through
October 31, 2000 October 31, 2000
Per Share Data:
Net asset value, beginning of period $ 10.00 $ 10.00
Income from investment operations:
Net investment income (2) 0.54 (3) 0.52 (3)
Net realized and unrealized
(losses) on investments (0.69) (0.69)
----- -----
Total from investment operations (0.15) (0.17)
----- -----
Net asset value, end of period $ 9.85 $ 9.83
====== ======
Total return -1.50% -1.70%
Supplemental data and ratios:
Net assets, end of period $ 869,917 $ 471,631
Ratio of operating expenses
to average net assets (4) (5) 2.50% 2.57%
Ratio of dividends on short positions
to average net assets 0.32% 0.32%
Ratio of net investment income
to average net assets (5) 5.88% 5.81%
Potfolio turnover rate (6) 0% 0%
(1) Commencement of operations.
(2) Net investment income before dividends on short positions for the
Institutional and Investor Class shares for the period ended October 31,
2000 was $0.57 and $0.55, respectively.
(3) Net investment income per share represents net investment income divided
by the average shares outstanding throughout the period.
(4) The operating expense ratio excludes dividends on short positions. The
ratio including dividends on short positions for the period ended October
31, 2000 was 2.82% for the Institutional Class and 2.89% for the Investor
Class.
(5) Without expense waivers and reimbursements for the period ended October 31
, 2000, of $153,710 for the Institutional Class and $52,092 for the
Investor Class, the ratio of operating expense to average net assets
would have been 20.05% for the Institutional Class and 20.12% for the
Investor Class and the ratio of net investment income to average net
assets would have been (11.67%) and (11.74%), respectively.
(6) The portfolio turnover ratio excludes purchases and sales of short
positions as the Adviser does not intend to hold the short positions for
more than one year.
<PAGE>
BEARGUARD FUNDS, INC.
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Notes to Financial Statements
October 31, 2000
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Bearguard Funds, Inc. (the "Corporation") was incorporated on April 8, 1999
, as a Maryland Corporation and is registered as an open-end management
investment company under the Investment Company Act of 1940 ("1940 Act").
The Corporation currently consists of one diversified series: the Bearguard Fund
(the "Fund").
The investment objective of the Fund is to seek capital appreciation. The Fund
attempts to achieve its goal by engaging in short sales of securities that the
Adviser believes will decrease in value. The Fund will primarily engage in short
sales of mid- to large-cap domestic common stocks. The Fund also invests in U.S.
government and investment grade corporate notes, bonds and other investment
grade money market instruments to collateralize its short positions.
The Fund has issued two classes of shares: Institutional Class and Investor
Class. The Institutional Class is not subject to a distribution and service
(12b-1) fee, while the Investor Class is subject to a distribution and service
(12b-1) fee up to 0.25%.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) Investment Valuation - Common stocks and securities sold short that are
listed on a security exchange or quoted on the NASDAQ are valued at the
last quoted sales price on the day the valuation is made. Price
information on listed stocks is taken from the exchange where the
security is primarily traded. If such securities were not traded on the
valuation date they are valued at the average of the current bid and asked
price. Unlisted equity securities for which market quotations are
readily available are valued at the latest quoted bid price. Debt
securities are valued at the latest bid price. Investments in
open-end mutual funds are valued at the net asset value on the day the
valuation is made. Short-term instruments(those with remaining
maturities of 60 days or less) are valued at amortized cost, which
approximates market value. Other assets and securities for which no
quotations are readily available are valued at fair value as determined
in good faith by management in accordance with procedures approved by the
Board of Directors.
b) Short Positions - For financial statement purposes, an amount equal to the
settlement amount is included in the Statement of Assets and Liabilities as
an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the short
position. Subsequent fluctuations in the market prices of securities sold,
but not yet purchased, may require purchasing the securities at prices
which may differ from the market value reflected on the Statement of Assets
and Liabilities. The Fund is liable for any dividends payable on securities
while those securities are in a short position.
c) Collateral on Short Sales - As collateral for short positions, the Fund is
required under the 1940 Act to maintain assets consisting of cash or liquid
securities. For short positions, this collateral must equal the market
value of the securities sold short. All collateral is required to be
adjusted daily. U.S. Treasury Bills in the amount of $1,358,193 have been
committed as collateral for securities sold short as of October 31, 2000.
<PAGE>
BEARGUARD FUNDS, INC.
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Notes to Financial Statements
October 31, 2000
d) 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.
e) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund has complied to date with the provisions of the Internal
Revenue Code applicable to regulated investment companies and intends to
continue to so comply in future years and to distribute investment company
net taxable income and net capital gains to shareholders. Additionally, the
Fund intends to make all required distributions to avoid being liable for
federal excise taxes.
f) 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.
g) 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.
h) Other - Investment and shareholder transactions are recorded on 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. 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. Investment income includes $38,191 of interest earned
on receivables from brokers for proceeds on securities sold short.
Generally accepted accounting principles require that permanent financial
reporting and tax differences be reclassified in the capital accounts.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
Period Ended
October 31, 2000
----------------
Institutional Class $ Shares
Shares sold $ 1,472,360 156,419
Shares redeemed (656,357) (73,078)
-------- -------
Net Increase $ 816,003 83,341
Shares Outstanding:
Beginning of period 5,000
-------
End of period 88,341
======
Period Ended
October 31, 2000
----------------
Institutional Class $ Shares
Shares sold $ 2,222,927 240,847
Shares redeemed (1,810,731) (197,863)
-------- -------
Net Increase $ 412,196 42,984
============
Shares Outstanding:
Beginning of period 5,000
-------
End of period 47,984
======
<PAGE>
BEARGUARD FUNDS, INC.
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Notes to Financial Statements
October 31, 2000
3. INVESTMENT TRANSACTIONS
The Fund did not make any purchases or sales of investments, other than
short-term investments and short positions, for the period ended October 31,
2000.
At October 31, 2000, gross unrealized appreciation and depreciation of
investments for tax purposes was as follows:
Appreciation $ -
(Depreciation) (23)
----
Net unrealized depreciation on investments $ (23)
====
At October 31, 2000, the cost of investments, excluding short positions, for
federal income tax purposes was $1,358,216.
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Skye Investment
Advisors LLC (the "Adviser"). Pursuant to its advisory agreement with the Fund,
the Adviser is entitled to receive a fee, calculated daily and payable monthly,
at the annual rate of 1.25% as applied to the Fund's daily net assets. Certain
officers of the Adviser are also officers of the Fund. For the fiscal period
ending October 31, 2000, the Adviser agreed to waive its investment advisory fee
and/or reimburse the Fund's operating expenses (exclusive of brokerage,
interest, taxes, short dividends and extraordinary expenses) to the extent
necessary to ensure that the Fund's total operating expenses do not exceed 2.50%
of the average net assets of the Institutional Class and 2.75% of the average
net assets of the Investor Class. During the period ended October 31, 2000, the
Adviser reimbursed the Fund $168,387.
Firstar Mutual Fund Services, LLC serves as transfer agent, administrator, and
accounting services agent for the Fund. Firstar Bank, N.A. serves as custodian
for the Fund. The Fund has entered into a Fee Waiver/Reduction Agreement dated
June 1, 2000. Firstar Mutual Fund Services, LLC agreed to waive the standard
minimum fee payable by the Fund under the Transfer Agent Servicing Agreement,
the Fund Accounting Servicing Agreement and the Fund Administration Servicing
Agreement for the period June 1, 2000 to October 31, 2000. During the period
ended October 31, 2000, the total fees waived pursuant to the Fee
Waiver/Reduction Agreement was $37,415. Rafferty Capital Markets, Inc. (the
"Distributor"), is the sole distributor of the Investor Class shares pursuant to
a Distribution Agreement with the Fund.
5. DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
The Fund has adopted a distribution and shareholder service plan (the "Plan")
pursuant to Rule 12b-1 of the Investment Company Act of 1940. The Plan allows
the Fund to reimburse the Distributor for a portion of the costs incurred in
distributing the Fund's Investor Class shares, including amounts paid to brokers
or dealers, at an annual rate not to exceed 0.25% of the average daily net
assets of the Fund's Investor Class shares. The Fund incurred $200 for the
Investor Class shares pursuant to the Plan for the period ended October 31,
2000.
6. SUBSEQUENT EVENT
On January 3, 2001, the Board of Directors made the difficult decision to
liquidate and dissolve the Fund, subject to approval by the shareholders. In
light of the proposed liquidation and dissolution of the Fund, no additional
investments will be accepted after January 5, 2001, with certain very limited
exceptions.
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of the
Bearguard Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments and of securities sold short, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Bearguard Fund (constituting the Bearguard Funds, Inc. and hereafter
referred to as the "Fund") at October 31, 2000, the results of its operations,
the changes in its net assets, and the financial highlights for the period
November 1, 1999 (commencement of operations) through October 31, 2000, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at October 31, 2000 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
As explained in Note 6, on January 3, 2001, the Board of Directors voted to
liquidate and dissolve the Fund, subject to approval by shareholders.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 3, 2001
<PAGE>
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BEARGUARD FUNDS, INC.
BEARGUARD * FUND
P.O. BOX 701
MILWAUKEE, WISCONSIN 53201-0701
1-888-288-2880
WWW.BEARGUARDFUND.COM
--------------------------------------------------------------------------------
BOARD OF DIRECTORS CUSTODIAN
Paul L. McEntire, CHAIRMAN Firstar Bank, N.A.
425 Walnut Street
Robert E. Larson Cincinnati, OH 45202
----------------------------------------
Robert W. Lishman, Jr.
LEGAL COUNSEL
Thomas M. Cover
Godfrey & Kahn, S.C.
Charles D. Feinstein 780 North Water Street
Milwaukee, Wisconsin 53202
David G. Luenberger ----------------------------------------
Edward C. Murphy INDEPENDENT AUDITORS
------------------------------------
PricewaterhouseCoopers LLP
INVESTMENT ADVISER 100 East Wisconsin Avenue, Suite 1500
Milwaukee, Wisconsin 53202
Skye Investment Advisors LLC ----------------------------------------
985 University Avenue, Suite 26
Los Gatos, California 95032 DISTRIBUTOR
------------------------------------
Rafferty Capital Markets, Inc.
ADMINISTRATOR, TRANSFER AGENT 1311 Mamaroneck Avenue
AND DIVIDEND - White Plains, New York 10605
DISBURSING AGENT ----------------------------------------
Firstar Mutual Fund Services, LLC This report has been prepared for P.O. Box 701
shareholders and may be distributed to 615 East Michigan Street others only if
preceded or accompanied Milwaukee, WI 53202 by a current prospectus.
