INVESTMENT CHANGES
SUPPLEMENTARY INFORMATION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1998
PURCHASES
10,000 3COM Corp.
10,000 Air Products & Chemical
5,000 ALCOA
1,200 Allegheny Teledyne
8,100 American Home Products
5,400 American Stores
15,000 Amgen Inc.
10,5000 AMP Inc.
15,000 Applied Materials
1,100 Armstrong World Indus.
6,000 Atlantic Richfield
20,000 Baker Hughes Inc.
2,700 Bard (C.R.)
3,600 Baxter International
8,600 BetzDearborn
7,000 Block (H & R)
5,500 Boise Cascade
2,900 rown-Forman Cl 'B'
2,500 Citicorp
10,000 CNF Transportation
5,000 Columbia Energy Group
12,000 Computer Associates Intl.
1,900 Cooper Tire & Rubber
4,000 Crestar Financial
13,100 Crown Cork & Seal
12,500 CSX Corp.
18,000 Dana Corp
11,900 Dean Foods
12,000 duPont (El) deNemours
6,400 Electronic Data Systems
10,000 Everest Reinsurance Hldgs.
10,000 First Union Corp.
10,500 Flowers Indus.
2,100 Fortune Brands
9,100 Frontier Corp.
7,800 General Mills
1,100 General Signal
15,700 Genuine Parts
10,000 Goodyear Tire & Rubber
7,200 Harris Corp
7,000 Hartford Finl. Svcs. Group
8,400 Heinz (H.J.)
14,000 Hercules, Inc.
15,000 Hewlett-Packard
30,000 Hong Kong Telecom ADR
4,900 Hubbell Inc. Cl 'A'
10,000 Ingersoll-Rand
12,000 Intel Corp.
20,000 Kennametal, Inc.
10,000 KeyCorp
20,000 KLA-Tencor Corp.
2,100 May Dept. Stores
2,200 Mercantile Stores
3,400 Mitchell Energy/Dev. 'A'
1,400 Mobil Corp.
10,900 Morton Internationsl
5,400 Natl. Service Indus.
3,500 Olin Corp.
6,100 PacifiCorp
20,000 Parker-Hannifin
10,000 Penney (J.C.)
1,700 Philip Morris Cos.
10,000 Raychem Corp.
5,500 Raytheon Co. Cl 'A'
5,000 Rohm & Haas
15,000 SBC Communications
2,300 Stanley Works
9,900 Sysco Corp.
5,600 Thomas & Betts
10,000 Tidewater Inc.
12,000 Toys R Us
5,900 Transamerica Corp.
10,000 TRW Inc.
15,000 U S West Communic. Grp.
12,000 Union Planters
12,500 Universal Foods
6,600 Unocal Corp.
2,700 Wallace Computer Service
800 Wells Fargo
900 Willamette Indus.
SALES
15,800 AGL Resources
20,800 Alleghany Teledyne
10,000 ALLTEL Corp.
9,900 American Home Products
4,500 Aamerican Stores
5,200 Armstrong World Indus.
2,253 Assoc. 1st Capital
6,000 Atlantic Richfield
14,400 Bard (C.R.)
7,900 Bausch & Lomb
12,200 Baxter International
8,600 BetzDearborn
11,200 Block (H & R)
15,100 Boise Cascade
2,900 Brown-Forman Cl 'B'
9,700 Brunswick Corp.
6,100 Caterpillar Inc.
9,900 Cooper Industries
15,900 Cooper Tire & Rubber
4,000 Crestar Financial
1,900 Crown Cork & Seal
19,500 Cypress Amax Minerals
11,900 Dean Foods
11,300 Deluxe Corp.
7,700 Developers Diversified Rlty.
5,200 Eastman Chemical
6,400 Electronic Data Systems
17,900 Englehard Corp.
6,800 Equitable Resources
6,000 Equity Residential Prop. Tr.
17,100 Federal Signal
9,700 FelCor Suite Hotels
10,500 Flowers Indus.
14,200 Flowserve Corp.
8,600 Ford Motor
2,100 Fortune Brands
13,800 Foster Wheeler
3,000 General Mills
8,000 General Public Utilities
17,000 General Signal
16,600 Giant Foods Cl 'A'
9,700 Goodrich (B.F.)
8,900 GTE Corp.
13,600 Harris Corp.
11,600 Harsco Corp.
8,400 Heinz (H.J.)
11,900 Hubbell Inc Cl 'A'
6,800 Intl. Flavors/Fragrance
2,800 Johnson Controls
16,500 Louisiana Pacific
9,400 Mallinckrodt Inc.
6,100 May Dept. Stores
2,200 Mercantile Stores
9,500 Mitchell Energy/Dev. 'A'
12,200 Mitchell Energy/Dev. 'B'
1,700 Mobil Corp.
21,400 Moore Corp. Ltd.
10,900 Morton International
7,500 Murphy Oil
7,000 Natl. Fuel. Gas
5,400 Natl. Service Indus.
11,700 NICOR Inc.
14,300 OGE Energy
3,500 Olin Corp.
16,800 Oregon Steel Mills
6,100 PacifiCorp
28,400 Pall Corp.
13,300 Peoples Energy
13,500 Pharmacia & Upjohn
12,800 Philip Morris Cos.
12,400 Potomac Electric Power
9,700 PG Industries
7,000 Rayonier Inc.
7,500 Reynolds Metals
18,900 RPM, Inc.
19,800 Rubbermaid, Inc.
11,700 Seagram Co. Ltd.
11,000 Sonat, Inc.
2,300 Stanley Works
9,900 Sysco Corp.
6,700 Tecumseh Products Cl 'A'
5,900 Temple-Inland
8,000 Tenneco Inc.
12,200 TIG Holdings
12,000 Toys R Us
5,900 Transamerica Corp.
13,100 Tupperware Corp.
9,600 Ultramar Diamond Shamrock
8,600 Unifi, Inc.
6,600 Unocal Corp.
11,100 Wallace Computer Service
2,350 Wells Fargo
2,200 Whirlpool Corp.
9,800 Willamette Indus.
19,400 Worthington Industries
INVESTORS RESEARCH FUND, INC.
3757 STATE STREET, SUITE 204
(800) IRFUND 1
(805) 569-3253
DISTRIBUTOR/UNDERWRITER
ND CAPITAL, INC.
1 NORTH MAIN
MINOT, NORTH DAKOTA 58793
SHAREHOLDER/DEALER SERVICE
1 (877) 473-8631 * (701) 852-5292
TRANSFER, SHAREHOLDER RECORDS AND
DIVIDEND DISBURSING AGENT
ND Resources, Inc.
P.O. Box 759
Minot, North Dakota 58702-0759
(800) 292-6775
(701) 857-0230
FAX (701) 852-2548
CUSTODIAN
UMB BANK
928 Grand Avenue
Kansas City, Missouri 64141
LEGAL COUNSEL
Hugh J. Haferkamp, Esquire
3757 State Street, Suite 204
Santa Barbara, California 93105
AUDITORS
Timpson Garcia
1610 Harrison Street
Oakland, California 94612
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, sales commissions, and other information.
40th ANNUAL REPORT
SEPTEMBER 30, 1998
INVESTORS
RESEARCH
FUND
INCORPORATED
[Investors Research Fund, Inc. Logo] Investors Research Fund, Inc.
3757 State Street, Suite 204
Santa Barbara, CA 93105
(805) 569-3253
FAX (805) 569-0373
November 27, 1998
Dear Fellow Shareholder:
Your Fund's fiscal year '97-'98 was one of positive changes intended to
position the Fund for the 21st Century. We have a powerful new adviser in
place, Fox Asset Management, Inc., having come aboard effective June 22, 1998.
We have also engaged a new transfer agent and an accounting services provider,
ND Resources, Inc., which is located in Minot, ND and whose engagement becomes
effective on December 12, 1998. The Dakotas are one of the new and growing high
tech areas of the United States, and ND Resources is right up to date in terms
of equipment and knowledgeable personnel. Also, we have employed a new
distributor: ND Capital, Inc., which is an associate in the ND Holdings
complex. Its work began December 1, 1998. Effective December 12, 1998, we will
also be changing custodians for our retirement plans, to United Missouri Bank,
Kansas City, MO. Thus, we believe your Fund is well positioned for 1999 and the
21st Century.
On the market side, this has been something less than a stellar year for
the stock market and your Fund. In addition, as far as Investors Research Fund
is concerned, the end of the fiscal year came at a very misleading time because
the market was in a temporary trough in August and September, the closing
months of our fiscal year. We will look at the more recent results in a moment,
but, as of September 30, 1998 we had incurred a total return of a minus 9.6%.
That figure does not take into consideration any sales loads. That figure,
however, does take into consideration the $1.08 distributions made to the
shareholders during the fiscal year. On September 30, 1998 our net asset value
was $3.32, a date which occurred during the market trough.
On a more cheerful note, there are some interesting calculations for the
last quarter of the fiscal year, July, August, and September. During that
quarter, your Fund was off 10.7%, as reported in the Wall Street Journal.
During the same quarter, the S & P 500 was off 10.11% (which includes
dividends paid during that quarter), and the DOW Jones Industrial Average was
off 11.98%. All in all, we had a performance that was very close to equaling
the S & P 500 and substantially better than the DOW's performance during the
quarter.
During the month of October, again according to figures from the Wall Street
Journal, your Fund was up 9.3% while the S & P 500 was up 8.12%.
As the above figures indicate, since our new advisers came on board on June
22, 1998, our performance has essentially equalled the performance of the S & P
500. As of November 16, 1998, the net asset value has increased to $3.74 per
share, which is well over 10% higher than the September 30 valuation.
It is interesting to compare our Fund's performance with some of the other
market results during the July to September quarter. According to our adviser,
such stalwarts as Disney, Coke and Gillette declined from 30% to 40% during the
quarter. Some of the major financial stocks such as American Express, Citicorp,
Merrill Lynch, etc. lost more than 30% of their value. The average diversified
U.S. stock fund investor had his investment reduced by more than 15% during
that same quarter. "In August alone more than $2.3 trillion of wealth was
erased by the plunge in equity values, although September saw a partial
recovery," a quotation from our adviser's summary of the July-September
statistics.
We believe that the future looks good for the stock market. We believe the
bull market remains in place at this time. The various economic factors that,
in the past, have led to bear markets all appear quite favorable at the present
time. Another factor is that 1999 is a pre-election year and there never has
been a losing year in 15 pre-election year markets in the past six decades. All
in all, we believe that the future looks good for Investors Research Fund
shareholders.
We have now completed the reprogramming of our home office computer system
to become Y2K compliant. The cost was approximately $5,000. We do not
anticipate any problems from our computer at the turn of the century. Our new
transfer agent and accounting services provider has assured us that it is
already Y2K compliant. Our distributor has also assured us that it is Y2K
compliant at this time. Our other significant vendors have verified that they
are in the process of updating their computer resources and will be Y2K
compliant well in advance of January 1, 2000. Under the circumstances, we
believe that Investors Research Fund is well prepared for the change to the new
century.
We experienced remarkably few redemptions during the recent market
turbulence. We appreciate our loyal shareholders and we believe that they will
be well-rewarded between now and the turn of the century for their confidence
in Investors Research Fund.
/Hugh J. Haferkamp/
HUGH J. HAFERKAMP
President
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 IN INVESTORS RESEARCH FUND
1. WITH CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS REINVESTED
The chart below covers the period from March 3, 1959, to September 30, 1998.
While this period, on the whole, was one of generally rising common stock
prices, it also included some interim periods of substantial market decline.
The results shown should not be considered as a representation of the
dividend income or profit or loss which may be realized from an investment
made in the Fund today. No adjustment has been made for any income taxes
payable by shareholders on capital gains income distributions accepted in
shares and ordinary income dividends reinvested.
Initial net asset value is the amount received by the Fund after deducting
from the cost of the investment the maximum sales commission of 3 3/4%
TOTAL RETURN
The average annual compound rate of Total Return for the 1, 5 and 10 year
periods ended Sept. 30, 1998 was -13.03%, +6.58%, and +8.78% respectively.
In accordance with requirements of the Securities and Exchange Commission,
these total return quotations reflect the deduction of the maximum initial
sales charge, deduction of proportional shares of Fund expenses, and assume
that all dividends and distributions are reinvested when paid.
For a share which had been outstanding during the entire period from October 1,
1997, to September 30, 1998, the negative return for that period would have
been reduced by 3.75% to -9.28%. The Fund's Directors deemed that performance
unsatisfactory and replaced the portfolio managers effective June 22, 1998.
Legend
Value of Shares with Capital Gains and Dividends Reinvested
Value of Shares with Capital Gains Reinvested
Value of Shares Initially Acquired
RECORD OF PRINCIPAL
RECORD OF INCOME
YEAR TO YEAR CHANGES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1959-65 1966-70 1971-75 1976-80 Dec-81 Dec-82 Dec-83 Dec-84 Dec-85 Dec-86 Dec-87
VALUE OF SHARES
Initially Acquired
through investment of
$10,000 dollars $14,167 11,874 12,528 24,115 13,535 19,067 20,519 18,008 19,734 20,283 19,381
VALUE OF SHARES Accepted
as Capital Gain Income $5,233 12,606 18,828 60,454 59,344 83,597 113,420 108,921 130,003 178,382 202,221
VALUE OF SHARES with
Capital Gains
Reinvested $19,400 24,480 31,356 84,569 72,879 102,664 133,939 126,929 149,737 198,665 221,602
Value of Ordinary
Income Reinvested $1,080 2,243 5,336 17,398 11,433 21,787 23,445 27,058 33,313 35,294 36,663
Value of Shares with
Capital Gains and
Dividends Reinvested $20,480 26,723 36,692 101,967 84,312 124,451 157,384 153,987 183,050 233,959 258,265
Investors Research
Fund * 91.9% 30.5% 22.8% 73.9% -17.3% 47.6% 26.5% -2.2% 18.9% 27.8% 10.4%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Sept-98
VALUE OF SHARES
Initially Acquired
through investment of
$10,000 dollars $18,478 22,127 18,400 25,658 18,871 18,282 14,673 15,614 15,301 14,320 13,025
VALUE OF SHARES Accepted
As Capital Gain Income $192,806 230,876 224,679 317,378 300,304 324,458 285,193 303,494 300,772 282,754 257,190
VALUE OF SHARES with
Capital Gains
Reinvested $211,284 253,003 243,079 343,036 319,175 342,740 299,866 319,108 316,073 297,074 270,215
Value of Ordinary
Income Reinvested $43,860 57,382 61,735 90,652 71,553 73,829 102,279 149,726 229,070 363,883 330,984
Value of Shares with
Capital Gains and
Dividends Reinvested $255,144 310,385 304,814 433,688 390,728 416,569 402,145 468,834 545,143 660,957 601,199
Investors Research
Fund * -1.2% 21.7% -1.8% 42.3% -9.9% 6.6% -3.5% 16.6% 16.3% 21.2% -9.0%
</TABLE>
*Figures reflect change in net asset value per share, adjusted for capital gain
income distribution, annual dividends, and stock splits.
= The Funds fiscal year ends on September 30
2. WITH CAPITAL GAINS INCOME
DISTRIBUTIONS AND DIVIDENDS
RECEIVED IN CASH
If capital gains income distributions & dividends had not been reinvested, the
results would have been as follows:
Initial Investment $ 10,000
Total Dividends Received from Investment Income $ 20,654
Total Distributions from Capital Gains Income $ 47,525
Asset Value of 4,076
Shares at Sept. 30, 1998 $ 13,532
SHAREHODERS DIVIDEND REFERENCE TABLE
Ordinary Capital Gain
Income Income
Amount per share $1.066 $0.009
Shareholder
Record Date Dec. 29, 1997
Payment Date Dec. 31, 1997
Shareholder Tax
Reporting
Year 1997
Price per new
share if reinvested $3.638
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
Investment income:
Dividends $ 720,775
Interest 102,194
Other 770
-------
Total investment income $ 823,739
Expenses:
Investment advisory fee (Note 2) $ 147,957
Legal, accounting and auditing 78,225
Transfer agent fee 48,099
12b-1:
Service fees $ 54,557
Distribution fees 1,000 55,557
-------
Custodian fee 14,903
Consulting fees 20,363
Salaries - officer 21,600
Salaries - other 31,415
Directors' fees 25,750
Office 25,218
Insurance 24,607
Taxes 16,283
Registration fees 14,830
Notices to investors 12,004
Board meeting 7,312
Edgar filing 5,189
Miscellaneous 2,100
Total expenses 551,412
--------
Net investment income $ 272,327
Realized and unrealized gain on investments:
Net realized gain $ 1,928,784
Change in unrealized (depreciation) of
Investments during the year (4,740,347)
-----------
Net (loss) on investments (2,811,563)
----------
Net decrease in net assets resulting from operations $ (2,539,236)
===========
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
A S S E T S
Investments in securities, at market
(cost $26,957,568) (Note 1) $ 23,597,725
Cash 240,210
Receivables - dividends from common stocks 22,713
- interest 2,451
Other assets 22,102
----------
$ 23,885,201
L I A B I L I T I E S
Accrued expenses (Note 2) 82,210
----------
Net assets at September 30, 1998 $ 23,802,991
==========
Net assets value per share on 7,166,640
shares outstanding (Note 3) $3.321
==========
Maximum offering price per share
(100/96.25 of $3.321) $3.450
==========
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Investors Research Fund is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The Fund
is incorporated in the State of Delaware.
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets,
liabilities, revenues and expenses.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
Security valuations:
A security listed or traded on an exchange is valued at its last sales price
on the exchange where the security is principally traded. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date. Short-term obligations (U.S. Treasury Bills)
are valued at amortized cost which approximates market value.
Security transactions and related investment income:
Security transactions are accounted for on the date the securities are
purchased or sold (trade date). Realized gains or losses on security
transactions are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the ex-
dividend date.
Distributions to shareholders:
Dividends to shareholders are recorded on the ex-dividend date. Net
investment income and net realized gains from security transactions are
generally distributed at December 31 of each calendar year. See Note 5.
Income taxes:
The Fund's policy is to comply with the requirements of the Internal Revenue
Code that are applicable to regulated investment companies and to distribute
all its taxable income to its shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.
NOTE 2. AFFILIATED PARTY TRANSACTIONS
INVESTMENT ADIVSORY FEE:
LAKEVIEW SECURITIES CORPORATION AND ITS SUB-ADVISER, MERRIMAC ADVISORS COMPANY
The Fund had entered into an investment advisory agreement with Lakeview
Securities Corporation (Adviser). Under the terms of the investment advisory
agreement, the Fund pays an advisory fee to the Adviser at the annual rate of
one-half of one percent (0.5%) of the Fund's average daily net assets,
payable quarterly. This agreement requires the Adviser to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations there-
under of any state in which the Fund's shares are qualified for sale. There
were no excess expenses absorbed by the Adviser during the year.
Mr. Robert P. Moseson was a director of the Fund and Mr. Fredric J. French is
a director of the Fund. Mr. Moseson is President and a Director of Lakeview
Securities Corporation. Mr. French was President of the Arms Companies
Division of Lakeview Securities Corporation until March 25, 1997 when, due to
a reorganization, Mr. French resigned from the Arms Companies and was
employed by Merrimac Advisors Company (a New Mexico corporation) of which he
is the sole shareholder. Merrimac Advisors Company provided investment
advisory services to the Fund under a Sub-Advisory Agreement with Lakeview
Securities Corporation dated January 20, 1997, and ratified by the Fund's
shareholders on March 25, 1997. The Fund did not directly compensate
Merrimac Advisors Company.
The Fund did not directly compensate directors affiliated with the Adviser
(Lakeview Securities Corporation) or the Sub-Adviser (Merrimac Advisors
Company).
The Fund terminated the advisory agreement with Lakeview Securities
Corporation and its sub-adviser, Merrimac Advisors Company effective June 21,
1998. Mr. Robert P. Moseson did not run for re-election to the Board of
Directors.
FOX ASSET MANAGEMENT, INC.:
The Fund entered into an investment advisory agreement with Fox Asset
Management, Inc. (Fox) in February 1998, with an effective date of June 22,
1998. Under the terms of the agreement, in consideration of the advisory
services to be rendered by Fox, the Fund will pay Fox a quarterly fee equal
to 0.125% of the net assets of the Fund calculated as an average of the net
assets of the Fund as of the close of each month of the Fund's fiscal year;
said fee not to exceed 0.5% annually of the average net assets of the Fund
calculated as at the close of each month of the Fund?s fiscal year.
Mr. Van Whisnand, representing Fox Asset Management was elected to the Board
of Directors at the annual shareholders meeting of April 22, 1998. The fund
does not directly compensate directors affiliated with the investment
advisers. Effective September 15, 1998, Mr. Whisnand resigned as a director
of the Fund due to his termination of employment with Fox Asset Management.
LEGAL FEES:
Mr. Hugh J. Haferkamp is a member of the Board of Directors and President of
the Fund. Mr. Haferkamp is legal counsel to the Fund and has been paid legal
fees in addition to drawing a salary as the Fund's President and receiving
director's fees for attending Board meetings.
COMPUTER CONSULTING FEES:
Mr. Mark Sills is a member of the Board of Directors of the Fund. Mr. Sills
is the Fund's computer consultant and has received compensation for computer
consulting and for director's fees for attending Board meetings.
<TABLE>
<CAPTION>
RECAP OF FEES:
Payable at
Total September 30
Expense 1998
-------- ---------
<S> <C> <C>
Lakeview Securities - investment advisory fees $ 113,452 $ 0
Fox Asset Management, Inc. - investment advisory fees 34,505 31,222
Mr. Hugh J. Haferkamp - legal fees 14,408 2,000
Mr. Mark Sills - consulting fees and computer 8,600 0
</TABLE>
NOTE 3. CAPITAL STOCK (FUND SHARES)
At September 30, 1998, there were 20,000,000 shares of $1.00 par value capital
stock authorized. Transactions in Fund shares for the years ended September
30, 1998 and 1997 were as follows:
1998 1997
---- ----
Shares sold 86,333 95,506
Shares issued to shareholders in reinvestment
of net investment income and net realized gains 1,768,705 1,111,42
Shares redeemed (1,701,669) (1,226,107)
--------- ---------
Net increase (decrease) 153,369 (19,180)
Balance:
Beginning of year 7,013,271 7,032,451
--------- ---------
End of year 7,166,640 7,013,271
========= =========
NOTE 4. APPRECIATION (DEPRECIATION) OF INVESTMENTS
At September 30, 1998, the net unrealized (depreciation) for stocks was as
follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost $ 872,058
Aggregate gross unrealized (depreciation)
for all investments in which there is an
excess of tax cost over value (4,231,901)
-----------
Net unrealized (depreciation) - stocks $(3,359,843)
===========
The cost basis used above is the same as that used for financial statement
purposes.
NOTE 5. DISTRIBUTION OF INCOME
The Fund's Board of Directors declared dividends on November 6, 1997. The
exact amount of the distributions were determined on December 30, 1997 and
consisted of the following per share: $0.078 aggregating $525,264 from net
investment income, $0.988 aggregating $6,653,337 from short-term investment
transactions, and $0.009 aggregating $60,607 from long-term investment
transactions were declared.
The distributions were paid on December 31, 1997 to shareholders of record on
December 29, 1997. These distributions represent net investment income and
net realized short-term gains for the calendar year ended December 31, 1997
and net realized long-term gains for the year November 1, 1996 through October
31, 1997.
NOTE 6. PRIMARY DIFFERENCE BETWEEN NET INVESTMENT INCOME AND REALIZED GAINS
The primary difference between net investment income and realized gains per
financial statements and actual distributions to shareholders is due to the
fact that the financial statements are reported on the October 1 through
September 30 fiscal year and the distributions are based on the calendar year
for net investment income and short term net realized gain on investments
(ordinary income) and on the November 1 through October 31 fiscal year for
long-term net realized gain on investments (capital gains). The distribution
periods follow income tax laws and regulations.
NOTE 7. LEASE COMMITMENTS
Under a lease expiring April 14, 2000, the Fund is committed to pay minimum
lease payments of $678 per month for the rent for its present office space.
The minimum monthly rent is subject to consumer price index adjustments each
April 1 for the duration of the lease. In addition to the minimum monthly
payments, the lease requires monthly payments of increases in building
operating expenses effective January 1, 1998. Building operating expenses are
adjusted annually each January 1 by the lessor.
Future minimum annual lease commitments are as follows:
Years ending September 30:
1999 $ 8,136
2000 4,407
-------
Total $ 12,453
=======
From October 1, 1997 to June 21, 1998 the rent was indirectly paid by the
Fund's investment adviser (Lakeview Securities Corporation) by decreasing the
amount due to the investment adviser. Effective June 22, 1998, the Fund has
recorded the payment as an expense. Rental expense of $2,218 is included in
office expenses.
NOTE 8. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (other than United States Government
Obligations) from unaffiliated issuers aggregated $67,655,056 and $74,018,431,
respectively. Purchases and sales, including redemptions, of U.S. Treasury
Bills totaled $7,405,264 and $7,405,264, respectively.
SECURITIES IN THE FUND
SEPTEMBER 30, 1998
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
- ------ ------------- -----
AUTO & AUTO PARTS ( 4.81%)
18,000 Dana Corp. $ 671,625
15,700 Genuine Parts Co. 471,981
BANKING (6.88%)
2,500 Citicorp 232,500
10,000 First Union Corp. 511,875
10,000 Keycorp 288,750
12,000 Union Planters Corp 603,000
CHEMICAL (9.20%)
10,000 Air Prod & Chemical 297,500
12,000 Du Pont 675,000
26,600 Hercules Inc 799,663
15,000 Rohm & Haas Co. 417,187
COMPUTER/PERIPHERAL (14.47%)
10,000 3COM * 300,625
15,000 Applied Materials * 378,750
12,000 Computer Associates 444,000
15,000 Hewlett Packard 794,062
12,000 Intel Corp. 1,029,000
20,000 KLA-Tencor * 497,500
DRUGS (4.76%)
15,000 Amgen * 1,133,437
ELECTRONICS (8.80%)
18,000 AMP Inc. 643,500
10,000 Raychem Corp. 243,750
5,500 Raytheon Co Cl A 284,969
16,000 TRW 710,000
5,600 Thomas & Betts Corp. 213,150
ENERGY/OIL (4.23%)
11,300 Kerr McGee Corp. $ 514,150
6,500 Mobil Corp. 493,594
ENERGY/NON-OIL (1.23%)
5,000 Columbia Energy Group 293,125
ENERGY/OILFIELD SERVICES (2.64%)
20,000 Baker Hughes Inc. 420,000
10,000 Tidewater Inc. 207,500
FOOD (5.72%)
20,600 ConAgra 554,913
7,800 General Mills 546,000
12,500 Universal Foods Corp. 260,938
FOOD WHOLESALERS/RETAILERS (3.38%)
25,000 American Stores 804,688
HOUSEHOLD PRODUCTS (2.33%)
13,700 Kimberly-Clark 554,850
INDUSTRIAL PRODUCTS (6.35%)
10,000 Ingersoll-Rand 379,375
20,000 Kennametal 538,750
20,000 Parker-Hannifin 593,750
Number of
Shares or Quoted
Principal Market
Amount Common Stocks Value
- ------ ------------- -----
INSURANCE (3.56%)
10,000 Everest Reinsurance 372,500
10,000 Hartford Fin Grp. 474,375
METALS (1.49%)
5,000 ALCOA 355,000
PAPER-PACKAGING/CONTAINERS (2.25%)
20,000 Crown Cork & Seal 535,000
RETAIL (1.89%)
10,000 J C Penney 449,375
RUBBER PRODUCTS/TIRES (2.16%)
10,000 Goodyear $ 515,000
TELECOMMUNICATIONS (9.56%)
9,100 Frontier Corp 249,112
30,000 Hong Kong Tele ADR 573,750
15,000 SBC Communications 665,625
15,000 U S West Communic Grp 787,500
TRANSPORTATION (3.43%)
10,000 CNF Transportation 291,250
12,500 CSX 525,781
----------
Total common stock (99.14%)
(cost $26,957,568) $ 23,597,725
Add: Excess of cash and other assets
Over payables (0.86%) 205,266
-----------
Net assets (100.0%) $ 23,802,991
===========
* Non-income producing.
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INVESTORS RESEARCH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September 30, 1998 and 1997
<S> <C> <C>
1998 1997
---- ----
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $ 272,327 $ 612,711
Net realized gain on investments 1,928,784 7,324,197
Net change in unrealized appreciation
(depreciation) of investments (4,740,347) 473,705
---------- ---------
Net increase (decrease) in net assets
resulting from operations $(2,539,236) $8,410,613
---------- ---------
Distributions paid to shareholders:
From net investment income $ (525,264) $(1,994,015)
From net realized gain on investments (6,713,944) (2,914,330)
---------- ----------
Total distributions to shareholders $(7,239,208) $(4,908,345)
---------- ----------
Fund share transactions:
Proceeds from sale of Fund shares $ 334,851 $ 405,679
Proceeds from reinvestment of distributions from net
Investment income and net realized gain on investments 6,434,548 4,383,443
Cost of shares redeemed from shareholders (6,559,652) (5,361,830)
---------- ----------
Net increase (decrease) in net assets due
to fund share transactions $ 209,747 $ (572,708)
---------- ----------
Total increase (decrease) in net assets $(9,568,697) $ 2,929,560
NET ASSETS:
Beginning of year 33,371,688 30,442,128
---------- ----------
End of year $23,802,991 $33,371,688
========== ==========
NET ASSETS CONSIST OF:
Fund shares at par $ 7,166,640 7,013,271
Paid in capital 19,476,058 19,419,681
Undistributed net investment income 519,631 772,567
Undistributed net realized gain
on sale of investment securities 505 4,785,665
Unrealized appreciation (depreciation) of
investment securities (3,359,843) 1,380,504
---------- ---------
$23,802,991 $33,371,688
=========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Years Ended September 30,
<S> <C> <C> <C> <C> <C>
Per Share Data 1998 1997 1996 1995 1994
(for one share outstanding throughout each year) (2) (1)
Net asset value, beginning of year $ 4.76 $ 4.33 $ 4.10 $ 4.62 $ 5.18
----- ----- ----- ----- -----
Income from investment operations:
Net investment income $ 0.04 $ 0.09 $ 0.26 $ 0.07 $ 0.06
Net realized and unrealized gains (losses)
on securities (0.40) 1.11 0.33 0.25 (0.15)
----- ----- ------ ------ ------
Total from investment operations $(0.36) $1.20 $0.59 $0.32 $(0.09)
----- ----- ------ ------ ------
Less distribution to shareholders:
Dividends from net investment income $(0.08) $(0.28) $(0.07) $(0.50) $(0.05)
Distributions from capital gains (1.00) (0.49) (0.29) (0.34) (0.42)
----- ----- ------ ------ ------
Total distributions $(1.08) $(0.77) $(0.36) $0.84) $(0.47)
----- ----- ------ ------ ------
Net asset value, end of year $ 3.32 $ 4.76 $ 4.33 $ 4.10 $ 4.62
===== ===== ====== ====== =====
Total return (3) (9.6)% 30.4% 14.7% 7.7% (1.8)%
===== ===== ====== ====== ======
Ratios and Supplemental Data
Net assets, end of year (in millions) $24 $33 $30 $32 $36
Ratios to average net assets:
Expenses 1.85% 1.77% 1.76% 1.60% 1.47%
Net investment income 0.91% 1.94% 6.67% 1.52% 1.39%
Portfolio turnover rate 260.95% 294.81% 669.79% 248.44% 234.77%
Average commission paid per share for
portfolio transactions $0.0538 $0.0582 $0.0339 (4) (4)
</TABLE>
(1) Fund changed investment advisers on January 1, 1994.
(2) Fund changed investment advisers on June 22, 1998.
(3) Sales loads are not reflected in total return.
(4) Information not available.
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors
Investors Research Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
INVESTORS RESEARCH FUND, INC., including the securities in the Fund, as of
September 30, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. 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 disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 1998, 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
INVESTORS RESEARCH FUND, INC. as of September 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
TIMPSON GARCIA
Oakland, California
October 16, 1998
