The Marketocracy Medical Speicalist Fund
Annual Report
June 30, 2000
PERFORMANCE SUMMARY
THE MARKETOCRACY MEDICAL SPECIALIST FUND
3 Months 6 Months AAR 2 Cumulative
Ended Ended since since
6/30/00 6/30/00 1 Inception Inception
---------- ---------- ----------- -------------
MSF 8.73% 18.70% 24.31% 74.50%
Market Indices
DJIA 3 -3.97% -8.45% 12.91% 36.49%
S&P 500 4 -2.66% -0.45% 18.71% 55.19%
NASDAQ 5 -13.23% -2.46% 43.02% 150.09%
Russell 1000
Healthcare 6 20.59% 22.06% 19.80% 58.86%
Russell 2000
Healthcare 7 15.73% 36.09% 24.85% 76.57%
Russell 3000
Healthcare 8 20.18% 22.84% 19.07% 56.39%
1 Fiscal Year Ending 6/30/00.
2 Average Annual Returns. MSF inception date is 12/10/97.
3 Dow Jones Industrial Average is a price-weighted average of 30 blue-chip
stocks.
4 Standard & Poors 500 Index is comprised of 500 selected common stocks most of
which are listed on the NYSE
5 NASDAQ Composite Index is a broad-based capitalization-weighted index of all
NASDAQ (National Market & Small-Cap stocks.
6 The Russell 1000 Index is comprised of 66 healthcare stocks in the Russell
1000 (large-cap) Index.
7 The Russell 2000 Index is comprised of 168 healthcare stocks in the Russell
2000 (small-cap) Index.
8 The Russell 3000 Index is comprised of 234 healthcare stocks in the Russell
3000 (large & small cap) Index.
The above indices are unmanaged indices
Returns assume reinvestment of dividends and distributions. Past performance is
not a guarantee of future results. Investment returns will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund concentrates its investments in the medical industry. The Fund is
subject to a greater risk because of its concentration of investments in a
single industry and within certain segments of the industry. In addition, the
Fund may, from time to time, invest a substantial portion of its assets in the
securities of smaller-capitalization companies. The securities of smaller
companies often involve higher risks and may be subject to wider price
fluctuations than securities of larger companies. There are certain risks
associated with investments in the medical industry, such as the risk that the
products and services of companies in those industries are subject to rapid
obsolescence caused by scientific developments and technological advances.
Please read the prospectus carefully before investing. To obtain a prospectus,
call us at 888.884.8482.
PERFORMANCE & PORTFOLIO DISCUSSION
Healthcare stocks outperformed the broad market indices during Q2. The Russell
3000 Healthcare Index, the broadest measure for healthcare stocks, grew 20.18%
in Q2 outperforming the three broad market indices (the Dow Jones Industrial
Average, the S&P 500, and the NASDAQ Composite) by wide margins.
Within the healthcare sector, large cap stocks did somewhat better than their
small cap cousins for a change. During Q2, the Russell 1000 Healthcare Index
(large caps) delivered a solid 20.59% return versus 15.73% for the Russell 2000
Healthcare Index (small caps).
The Medical Specialists Fund (MSF) returned 8.73% in Q2 and 18.70% Year-to-Date.
For both the Quarter and Year-to-Date, MSF has outperformed the broad market
indices but underperformed the healthcare indices. We believe these results
justify our continued focus on investing in companies with strong fundamentals
even when overall market sentiment is negative.
Relative Performance:
MSF vs. Market Indices
<TABLE>
<CAPTION>
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PLOTPOINTS 12/10/97 12/31/97 12/31/98 12/31/99 06/30/00
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The Medical Specialists Fund 10,000 10,120 9,663 14,700 17,449
Dow Jones Industrial Average 10,000 9,924 11,723 14,909 13,649
Standard & Poor's 500 Stock Index 10,000 10,016 12,878 15,588 15,519
NASDAQ 10,000 9,839 13,795 25,640 25,009
Russell 1000 Healthcare 10,000 10,068 14,372 13,015 15,886
Russell 2000 Healthcare 10,000 10,011 10,336 12,974 17,657
Russell 3000 Healthcare 10,000 10,064 13,826 12,731 15,639
================================================================================================================================
</TABLE>
THE MARKETOCRACY MEDICAL SPECIALIST FUND
Fund Holdings by Sector*
Net Cash 6.2%
Biotechnology 54.8%
Cardiac Medical Devices 19.4%
Drugs/Medical Supplies 18.2%
Health Services 1.4%
*Based on a percentage of net assets as of June 30, 2000 (cash number net of
payables and receivables)
Q: What are your favorite biotechnology stock these days and why?
A: I particularly like Immunex (IMNX) and Sepracor (SEPR) now.
Immunex lost 20% of its value in large part because the press has given many
people the impression that they are going to issue 70 million new shares. In
fact, only 20 million are new shares. The other 50 million are being sold by
American Home Products and are already outstanding. Immunex is raising capital
to increase manufacturing capacity for its first blockbuster drug, Enbrel. This
drug is very profitable, so I think it's a good idea for them to make and sell
as much as they can.
Sepracor declined almost 30% as a result of an adverse patent ruling against Eli
Lilly. Lilly's patents on Prozac will now expire in 2001 instead of 2003. This
means that Lilly will have to launch Sepracor's improved version of Prozac after
generic versions of Lilly's existing drug have already been launched. Wall
Street seems to think that generic competition will reduce the market's
acceptance of Sepracor's improved version.
History shows that the best way for the big pharmaceutical companies to maintain
their markets in the face of expiring patents is to continually introduce
products which are either more effective or have few side effects. Sepracor's
new version of Prozac seems to be a winner on both counts. Lilly's patent
setback may ultimately benefit Sepracor if Lilly puts their full resources
behind the new version of Prozac ASAP instead of waiting until 2003 (which I
think was Lilly's original plan).
Q: I bought Boston Scientific a few months ago, in part, because of your
comments. Now after its recent drop, what's your opinion on it for the next six
months?
A: Boston Scientific's sales have stopped growing because their latest
generation of products have been delayed at the FDA. This has enabled their
competitors, primarily J&J, to take back some market share in the cardiac stent
business. Once the FDA approves Boston Scientific's next generation products,
they are likely to regain market share and sales growth will resume.
However, I would NOT invest in this company if my time horizon was just 6
months. While I am confident that Boston Scientific will be a winner over the
next 2 years, its valuation over the next 6 months is going to be driven more by
market sentiment than by company fundamentals. I have never been good at
analyzing market sentiment, so I focus on the longer-term investments where
company fundamentals are strong enough to overwhelm the short-term effects of
changing market sentiment.
Fund Holdings by Market Cap*
Net Cash 6.2%
Large Cap 44.3%
Micro Cap 5.7%
Small Cap 8.4%
Mid Cap 35.4%
Large Cap >$9B Small Cap $300M -$2.1B
Mid Cap $2.2B -$8.9B Micro Cap <$300M
*Based on a percentage of net assets as of June 30,2000 (cash number net of
payables and receivables)
Q: I am looking to both increase my foreign equity exposure and my healthcare
exposure and I have an extremely long time horizon. Any suggestions?
A: The U.S. is the world's leader when it comes to medical research. Keep in
mind that the markets for medical devices and drugs are truly global. So, even
though you may be investing in a company that is incorporated in the U.S., you
will benefit from a worldwide market for their products.
In general, I would not be concerned about where a company is headquartered as
long as I can get good information to do my homework on it. I am much more
concerned with the quality of their clinical trial results because I think this
is the real key to finding value in companies that may not have any sales yet.
If you are interested in foreign equity exposure, I suggest you look in sectors
where other countries are the world's leaders.
Q: What is your vision for the Marketocracy Mutual Fund Group over the next 5
years? That is, how many funds (and in what sectors) do you anticipate opening
over the next 5 years? Do you have an asset level goal for your firm.
A: We plan to start funds around the people with the best 3 year Marketocracy
track records. I don't know how many, what investment styles, or what sectors,
are going to create the best track records over the next years, so I can't be
more specific at this time. As the track records develop over the next three
years, the answers to these questions will come into focus.
As for the anticipated asset goals for the firm, we think that a fund family in
which every fund is managed by the 5 people with the best three year track
records for their sector or style will be very attractive to the 80% of mutual
fund investors whose funds don't beat the passive S&P 500 Index every year.
Collectively, there is more than $4 trillion invested in equity mutual funds in
the U.S. We think that a fund family that is run as a meritocracy (letting the
best investors in the world run the funds) will attract a significant share of
these assets.
As always, if you have personal experience with a new medical product that is
dramatically better than existing products, please let me know by sending an
email message to [email protected].
/s/ Kendrick W. Kam
Kendrick W. Kam
Portfolio Manager
[GRAPH OMMITED]
Portfolio of Investments
Statements of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Report of Independent Certified Public Accountants
THE MARKETOCRACY MEDICAL SPECIALIST FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - JUNE 30, 2000
--------------------------------------------------------------------------------
NON-INCOME PRODUCING SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS - 93.8% $43,974,840
(Cost $39,310,872)
BIOTECHNOLOGY 54.8% 25,684,795
----------
Affymetrix, Inc.* 15,000 2,476,875
Amgen, Inc.* 36,800 2,585,200
Biogen, Inc.* 34,700 2,238,150
Celera Genomics* 20,000 1,870,000
IGEN International, Inc.* 66,597 1,103,013
Immunex Corp.* 79,509 3,930,726
Incyte Genomics, Inc.* 23,020 1,891,956
MedImmune, Inc.* 42,000 3,108,000
Millennium Pharmaceuticals, Inc.* 39,600 4,430,250
Sepracor, Inc.* 17,000 2,050,625
CARDIAC MEDICAL DEVICES 19.4% 9,107,208
---------
Boston Scientific Corp.* 105,700 2,318,794
Cambridge Heart, Inc.* 216,950 705,087
Cardima, Inc.* 169,924 201,785
Guidant Corp.* 35,466 1,755,567
Medtronic, Inc. 15,600 777,075
Novoste Corp.* 54,900 3,348,900
DRUGS/MEDICAL SUPPLIES 18.2% 8,509,962
---------
ALZA Corp.* 37,500 2,217,188
C. R. Bard, Inc. 44,000 2,117,500
Johnson & Johnson 4,029 410,454
Merck & Co. 20,000 1,532,500
MiniMed, Inc.* 14,000 1,652,000
PathoGenesis Corp.* 22,320 580,320
HEALTH SERVICES 1.4% 672,875
-------
Eclipsys Corp.* 7,200 54,000
QuadraMed Corp.* 247,550 618,875
CASH EQUIVALENTS 6.3% 2,938,155
---------
(Cost $2,938,155)
Firstar Stellar Treasury Fund 2,938,155 2,938,155
TOTAL INVESTMENT SECURITIES 100.1% 46,912,995
(cost $42,249,027)
Liabilities in excess of other assets (0.1)% (28,008)
--------
NET ASSETS 100.0% $46,884,987
===== ===========
*Non-income producing
See accompanying notes to the financial statements.
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
June 30, 2000
ASSETS
Investment securities:
At acquisition cost $ 42,249,027
============
At market value (Note 1) $ 46,912,995
Cash 50
Interest and dividends receivable 10,363
Receivable for capital shares sold 52,500
------
TOTAL ASSETS 46,975,908
----------
LIABILITIES
Payable for capital shares redeemed 9,087
Accrued expenses and other liabilities 81,834
------
TOTAL LIABILITIES 90,921
------
NET ASSETS $ 46,884,987
============
NET ASSETS CONSIST OF:
Paid in capital $ 42,302,399
Accumulated net realized loss from security transactions (81,380)
Net unrealized appreciation of investments 4,663,968
---------
NET ASSETS $ 46,884,987
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING (UNLIMITED
NUMBER OF SHARES AUTHORIZED, NO PAR VALUE) 2,787,407
=========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE (NOTE 1) $ 16.82
=======
See accompanying notes to the financial statements.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2000
INVESTMENT INCOME
Interest $ 89,278
Dividends 44,613
------
TOTAL INVESTMENT INCOME 133,891
-------
EXPENSES
Investment advisory fees (Note 4) 317,194
Administrative fees (Note 4) 95,158
-------
TOTAL EXPENSES 412,352
-------
NET INVESTMENT LOSS (278,461)
--------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions 219,939
Net change in unrealized appreciation of investments 1,879,921
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,099,860
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,821,399
===========
See accompanying notes to the financial statements.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Six Months Ended June 30, 2000 and the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
6/30/00 12/31/99
------------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (278,461) $ (68,736)
Net realized gains from security transactions 219,939 888,866
Net change in unrealized appreciation of investments 1,879,921 2,400,960
--------- ---------
Net increase in net assets resulting from operations 1,821,399 3,221,090
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
From realized gains - (444,569)
--------- --------
Decrease in net assets from distributions to shareholders - (444,569)
--------- --------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 55,026,841 18,496,753
Net asset value of shares issued to shareholders
in reinvestment of distributions - 433,294
Payments of shares redeemed (26,521,020) (9,638,719)
----------- ----------
Net increase in net assets from capital share transactions 28,505,821 9,291,328
---------- ---------
TOTAL INCREASE IN NET ASSETS 30,327,220 12,067,849
NET ASSETS:
Beginning of period 16,557,767 4,489,918
---------- ---------
End of period $ 46,884,987 $ 16,557,767
============ ============
CAPITAL SHARE ACTIVITY
Shares sold 3,234,086 1,525,063
Shares issued in reinvestment of distributions to shareholders - 33,715
Shares redeemed (1,615,444) (855,017)
---------- --------
Net increase in shares outstanding 1,618,642 703,761
Shares outstanding, beginning of period 1,168,765 465,004
--------- -------
Shares outstanding, end of period 2,787,407 1,168,765
========= =========
</TABLE>
See accompanying notes to the financial statements.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected Per Share Data and Ratios for a Share Outstanding Throughout
Each Period
<TABLE>
<CAPTION>
Six Months Year Year Peirod
Ended Ended Ended Ended
6/30/2000 (d) 12/31/99 12/31/98 12/31/97(a)
--------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE AT BEGINNING OF PERIOD $14.17 $9.66 $10.12 $10.00
------ ----- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.10) (0.06) (0.10) 0.01
Net realized and unrealized gain (loss) on investments 2.75 5.05 (0.36) 0.11
Total from investment operations 2.65 4.99 (0.46) 0.12
LESS DISTRIBUTIONS FROM:
Realized gains - (0.48) - -
---- ------ ----- ----
Total distributions - (0.48) - -
---- ------ ----- ----
NET ASSET VALUE AT END OF PERIOD $16.82 $14.17 $9.66 $10.12
------ ------ ----- ------
TOTAL RETURN 18.70%(B) 52.13% (4.55%) 1.20%(b)
----- ----- ----- ----
Net assets at end of period (millions) $46.9 $16.6 $4.5 $2.4
----- ----- ---- ----
Ratio of expenses to average net assets: 1.95% (c) 1.77% 1.95% 1.81%(c)
Ratio of net investment income (loss) to
average net assets: (1.32%) (c) (0.91%) (1.33%) 1.75%(c)
Portfolio turnover rate 19%(b) 71% 160% 0%
(a) Represents the period from the commencement of operations (December 10,
1997) through December 31, 1997
(b) Not annualized
(c) Annualized
(d) Effective March 15, 2000 the Fund's fiscal year end was changed to June 30
rom December 31.
</TABLE>
See accompanying notes to the financial statements.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Marketocracy Medical Specialists Fund (the "Fund") was organized as a
Delaware business trust on December 14, 1999 as a non-diversified series of
Marketocracy Funds (the "Trust") and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company. The Fund, formerly a series of the Firsthand Funds, commenced
operations on December 10, 1997. The Fund's investment objective is long-term
capital appreciation. The Fund seeks to achieve its objective by investing
primarily in securities of companies in the health and biotechnology fields
which the Adviser considers to have a strong earnings growth outlook and
potential for capital appreciation. Effective March 15, 2000 the Fund's fiscal
year end was changed to June 30 from December 31.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies employed by the
Fund in preparing its financial statements:
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.
INVESTMENT VALUATION
Common stocks and other equity-type securities that are listed on a securities
exchange 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. Securities which are listed on an exchange but
which are not traded on the valuation date are valued at the average of the most
recent bid price. Unlisted securities for which market quotations are readily
available are valued at the latest quoted bid price. Other assets and securities
for which no quotations are readily available are valued at fair value as
determined in good faith under the supervision of the Board of Trustees of the
Trust.
SHARE VALUATION
The net asset value per share is calculated daily by dividing the total value of
the Fund's assets, less liabilities, by the number of shares outstanding,
rounded to the nearest cent. The offering and redemption price per share is
equal to the net asset value per share.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income and distributions of net realized capital
gains, if any, will be declared and paid at least annually. Dividends from net
investment income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from generally accepted accounting
principles.
FEDERAL INCOME TAXES
The Fund has elected to be taxed as a "regulated investment company" and intends
to distribute substantially all taxable income to its shareholders and otherwise
comply with the provisions of the Internal Revenue Code applicable to regulated
investment companies. Therefore, a provision for federal income taxes or excise
taxes has not been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
OTHER
Investment and shareholder transactions are recorded on the trade date. 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 sales
proceeds. Dividend income is recognized on the ex-dividend date and interest
income is recognized on an accrual basis. Reclassifications are made within the
net asset accounts for amounts related to permanent differences in the character
of certain income and expense items for income tax and financial reporting
purposes.
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the six months ended June 30, 2000 are summarized
below: There were no purchases or sales of long-term U.S. Government securities.
Purchases ................................................ $33,914,914
Sales ..................................................... $7,291,220
At June 30, 2000, gross unrealized appreciation and depreciation of investments
for tax purposes were as follows:
Unrealized appreciation .................................. $ 11,614,924
Unrealized depreciation .................................. (7,098,132)
Net unrealized appreciation of investments ............... $ 4,516,792
At June 30, 2000, the cost of investments for federal income tax purposes was
$42,396,203. The difference between federal tax cost of portfolio investments
and the financial statement cost is due to certain timing differences in the
recognition of capital losses under income tax regulations and generally
accepted accounting principles.
4. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Advisory Agreement (the "Advisory Agreement"). Under the Advisory
Agreement, the Adviser furnishes advice and recommendations with respect to the
Fund's portfolio of investments and provides persons satisfactory to the Trust's
Board of Trustees to be responsible for the overall management and
administration of the Trust, subject to the supervision of the Trust's Board of
Trustees. The Adviser is responsible for (1) the compensation of any of the
Trust's trustees, officers and employees who are directors, officers, employees
or shareholders of the Adviser, (2) compensation of the Adviser's personnel and
payment of other expenses in connection with the provision of portfolio
management services under the Advisory Agreement, and (3) expenses of printing
and distributing the Fund's Prospectus and sales and advertising materials to
prospective clients.
For the services provided by the Adviser under the Advisory Agreement, the
Adviser received from the Fund a management fee, computed and accrued daily and
paid monthly, equal to 1.50% per annum of the Fund's average daily net assets.
The Advisory Agreement requires the Adviser to waive its management fees and, if
necessary, reimburse expenses of the Fund to the extent necessary to limit the
Fund's total operating expenses to 1.95% of its average net assets up to $200
million, 1.90% of such assets from $200 million to $500 million, 1.85% of such
assets from $500 million to $1 billion, and 1.80% of such assets in excess of $1
billion.
The Trust has entered into a separate contract with the Adviser wherein the
Adviser is responsible for providing administrative and supervisory services to
the Fund (the "Administration Agreement"). Under the Administration Agreement,
the Adviser oversees the maintenance of all books and records with respect to
the Fund's securities transactions and the Fund's book of accounts in accordance
with all applicable federal and state laws and regulations. The Adviser also
arranges for the preservation of journals, ledgers, corporate documents,
brokerage account records and other records, which are to be maintained pursuant
to the 1940 Act.
Under the Administration Agreement, the Adviser is responsible for the
equipment, staff, office space and facilities necessary to perform its
obligations. The Adviser has also assumed responsibility for payment of all of
the Fund's operating expenses except for brokerage and commission expenses and
any extraordinary and non-recurring expenses.
For the services rendered by the Adviser under the Administration Agreement, the
Adviser receives a fee at the annual rate of 0.45% of the Fund's average daily
net assets up to $200 million, 0.40% of such assets from $200 million to $500
million, 0.35% of such assets from $500 million to $1 billion, and 0.30% of such
assets in excess of $1 billion.
The Adviser has retained Firstar Mutual Funds Services, LLC (the "Transfer
Agent") to serve as the Fund's transfer agent, dividend paying agent and
shareholder service agent, to provide accounting and pricing services to the
Fund, and to assist the Adviser in providing executive, administrative and
regulatory services to the Fund. The Adviser (not the Fund) pays the Transfer
Agent's fees for these services.
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
MARKETOCRACY FUNDS
LOS ALTOS, CALIFORNIA
We have audited the accompanying statements of assets and liabilities of The
Marketocracy Medical Specialists Fund, a series of shares of the Marketocracy
Funds, including the portfolio of investments as of June 30, 2000, and the
related statements of operations for the six months then ended, changes in net
assets for the six months then ended and the year ended December 31, 1999 and
financial highlights for the periods indicated thereon. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights 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 financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosure in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 2000, by correspondence with the custodian. 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 financial highlights referred to
above present fairly, in all material respects, the financial position of The
Marketocracy Medical Specialists Fund as of June 30, 2000, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and the year ended December 31, 1999, and the financial
highlights for the periods indicated thereon, in conformity with generally
accepted accounting principles.
Tait, Weller & Baker
PHILADELPHIA, PENNSYLVANIA
JULY 21, 2000
