Semi-Annual Report
March 31, 1999
Investment Changes
Supplementary Information
For the Six Months Ended March 31, 1999
Holdings under Fox Asset Management
Purchases
5,000 Air Products & Chems 10,000 Halliburton Company
6,000 AKZO Nobel NV ADR 15,000 Kerr-McGee
3,300 Computer Associates 10,000 Phillips petroleum
11,500 Dana Corporation 17,000 Tenet healthcare Corp
3,500 DuPont EI deNemours 11,000 Thomas & Betts
8,000 Emerson Electric 3,000 TRW
Sales
10,000 American Stores 6,500 Hercules Inc
23,700 Amgen 2,000 Hong Kong Tele Spnd ADR
15,701 AMP Inc. 2,000 Intel
15,000 Applied Materials 3,100 Kennametal Inc
20,000 Baker Hughes 11,300 Kerr-McGee
250 Citigroup Inc 20,000 KLA-Tencor
2,000 Computer Associates Intl 6,500 Mobil Corp
6,000 Crown Cork & Seal 4,000 Penney J.C. Co Inc
4,000 CSX 10,000 Raychem
5,000 Dana Corporation 5,600 Thomas & Betts
2,000 DuPont EI deNemours 10,000 Tidewater
4,500 First Union Corp 1,000 U S West
9,100 Frontier Corp
Supplemental Information
For April 6, 1999
Transactions by Westcap
Purchases
5,250 American Intl Group Inc 4,890 Medtronic Inc
8,540 Bell Atlantic Corp8, 500 Merck & Co Inc
10,220 Bristol Myers Squibb Co 7,010 Microsoft Corp
4,840 Cisco Sys Inc 10,760 Nation Wide Financial
3,990 Citigroup Inc 7,030 Newell Rubbermaid Inc
7,930 Computer Sciences Corp 4,670 Pfizer Inc
6,310 Federal Natl. Mtg. Assoc. 11,950 Schering Plough Corp
8,710 Frontier Corporation 11,410 SCI Sys Inc
5,810 General Electric Co 16,760 Sysco Corp
3,010 I B M 5,000 Texas Instruments Inc
5,660 Interpublic Group Cos 7,410 Time Warner Inc
9,400 Lucent Technologies Inc 11,490 Unum Corp
8,320 Mediaone Group Inc 4,650 Wal Mart Stores, Inc.
Sales
10,000 3 Com Corp 10,000 Goodyear Tire & Rubber Co
15,000 Air Prods & Chems 10,000 Hartford Financial Services
6,000 Akzo Nobel NV ADR 20,100 Hercules Inc
10,000 Alcoa Inc. 15,000 Hewlett Packard Co
5,000 Columbia Gas System 28,000 Hong Kong Telecomm
13,300 Computer Associates Int l16,900 Kennametal Inc
20,600 ConAgra Inc 10,000 KeyCorp New
14,000 Crown Cork & Seal Inc 20,000 Parker Hannifin Corp
8,500 CSX Corp 6,000 Penney, JC Inc
24,500 Dana Corporation 15,000 Rohm & Haas
8,000 Emerson Electric Co 17,000 Tenet Healthcare Corp
10,000 Everest Reins Hdlg. Inc 11,000 Thomas & Betts Corp
5,500 First Union Corp 19,000 TRW Inc
7,800 General Mills Inc 12,000 Union Planters Corp
15,700 Genuine Parts Co 12,500 Universal Foods Corp
Dear Fellow Shareholder:
Sadly, we report the passing of the Fund's Secretary-Treasurer and
long-time Director, James (Jim) Corradi. After a brief illness, Jim passed
away peacefully at his home on Easter morning surrounded by his wife,
Marianne, and their children. Jim has been a dedicated, major contributor to
the administrative operations of the Fund during the past several years. To
say that he will be sorely missed does not do justice to Jim's very
significant contributions. All of us at Investors Research Fund extend our
deepest sympathy to his family at this time of loss.
A further important news item relates to the change that has taken place
in the portfolio management of the Fund. Effective April 1, 1999, we engaged
a new portfolio manager: Westcap Investors, LLC, of Los Angeles California.
Your Board of Directors had not been satisfied with Fox Asset Management's
investment performance during its management tenure. Operating differences
at Fox during late 1998 had culminated in a substantial reorganization. The
result was that Fox had become a different organization from the Fox that we
had engaged in mid-1998. In late February and early March, 1999, the Board
undertook a thorough review of Fox's portfolio management history relative to
our Fund and determined that it was desirable for our shareholders to have
the benefit of a new portfolio manager at the earliest date possible. After
termination notice was given to Fox Asset Management, an agreement was made
among Westcap Investors, Fox Asset Management and Investors Research Fund
whereby on April 1, 1999 Westcap took over full management of the Fund's
portfolio.
For additional information and a more complete discussion, we are
enclosing herewith a copy of our "sticker" to the new Investors Research Fund
Prospectus. As you know, a "sticker" is a document prepared after a
prospectus has become effective in order to update the Fund's prospectus
without having to reprint all of the information in the basic prospectus. If
anyone wishes a copy of the Fund's current prospectus, please call our
Shareholder Service Department at ND Resources, Inc. ND's toll-free
telephone number is: 1-800-292-6775.
On September 30, 1998, the net asset value of our shares was $3.32. On
March 31, 1999, marking the end of the six-month semi-annual period, the net
asset value was $3.64. That is an increase of $.32 per share for the
six-month period.
On its face, that number represents a 13% increase in share value during
the six-month period. However, when Fox took over portfolio management
responsibilities on June 22, 1998, Investors Research Fund shares had a net
asset value of $3.70. On April 1, when Fox turned over management
responsibilities to Westcap, the net asset value was $3.65. That was
essentially a flat performance. The board of directors expected more from
Fox under the contemporary market conditions.
The basic reason for the flat performance of Fund shares during the
current reporting period is that Fox has managed the portfolio on a value
style basis. Value stocks (that is, stocks believed by a manager to have
been undervalued by the market) have not been in favor in the current
market. Our change to Westcap Investors will put the Fund into the current
flow of the market, which has favored the growth style of investment
management. The growth style focuses primarily on companies that have
established a history of steadily increasing earnings. However, Westcap
maintains the flexibility and technique to take advantage of current shifts
in market sentiment to benefit our shareholders.
For your information, I am enclosing an itemization of the portfolio
changes that had been made by Westcap as of April 6, 1999. The "sales"
represent dispositions and the "purchases" represent new issues acquired by
the Fund under Westcap portfolio management. I think that you will be
gratified to know that we have moved into the "movers and shakers" area of
the current securities markets.
There have been a number of interesting and somewhat unusual facts about
the performance of the securities markets during recent months. For example,
the Dow Jones Industrial Average has gained approximately 23% in the last six
months. However, about 80% of that gain has been the result of gains in only
8 of the 30 stocks in the index. Thus, about 25% of the Dow stocks chalked
up 80% of the overall index gain.
With respect to the S & P 500, only 7 of the stocks in that index have
accounted for 40% of the gain in that index of 500 stocks. Here again, the
apparently substantial gain in 500 stocks was created by an upsurge in the
price of a handful of stocks.
We believe that Westcap is on the right track in its handling of the
Fund's portfolio. Its management style is that of "core growth," meaning,
according to Glenn Weirick, president and co-founder of Westcap Investors,
that they select growth stocks on the basis of "growth at a reasonable
price." They can also utilize value stocks when the market is embracing that
type of security. The officers and directors of your Fund favor that
approach in the current market and, based upon the responses from those of
you who attended the annual shareholders' meeting on March 30, 1999, you like
it, also.
Mr. Weirick has indicated that he would welcome the opportunity to speak
with any Investors Research Fund shareholder who would like to discuss with
him the Fund's portfolio, anything relating thereto, and future investment
prospects. Westcap's telephone number is: (310) 996-3200.
At the present time, our expectations are that the long running bull
market will continue for the reasonably indefinite future. However, as we
have indicated previously, the upward trend will not continue without some
intervals of profit taking correction on a short term basis, generating some
continuing volatility. Thus far, inflation has remained at a very low
level. Interest rates appear reasonably stable. Consumer confidence seems
to be optimistic. We expect economic growth to continue. For those of us
who are interested in equity investing, we think that an essentially fully
invested equity position is to be maintained.
As you can ascertain, we are optimistic concerning future market
performance. We believe that the blossoming of the internet carries with it
promise of favorable conditions for consumers as well as for those companies
that can take advantage of the changing conditions. Those favorable factors
carry good prospects for investors. Please be assured that Investors
Research Fund's directors and management will remain committed to providing
you, our shareholders, with the best service providers we can obtain.
Sincerely,
HUGH J. HAFERKAMP, President
Securities in the Fund
March 31, 1999
Quoted
Number of Market
Shares Common Stocks Value
- -------- ----------------------- --------
Auto Related (6.3%)
24,500 Dana $ 931,000
15,700 Genuine Parts 452,356
BANKS (6.9%)
6,000 Citigroup 383,250
5,500 First Union 293,906
10,000 Keycorp 303,125
12,000 Union Planters 527,250
CHEMICAL (11.6%)
15,000 Air Products & Chemical 513,750
6,000 Akzo Nobel NV ADR 222,000
13,500 Du Pont 783,844
20,100 Hercules 507,525
15,000 Rohm & Haas Co. 503,438
COMPUTER (13.4%)
10,000 3COM 233,125
13,300 Computer Associates 472,981
15,000 Hewlett-Packard 1,017,188
10,000 Intel 1,191,250
ELECTRONICS (9.3%)
8,000 Emerson Electric Co 423,500
5,500 Raytheon Cl A 322,438
1,900 TRW 864,500
1,100 Thomas & Betts 413,188
ENERGY/OIL (4.4%)
15,000 Kerr-McGee 492,188
10,000 Phillips Petroleum 472,500
ENERGY/NON OIL (1.2%)
5,000 Columbia Energy Group 261,250
ENERGY/OILFIELD SVC (1.8%)
10,000 Halliburton 385,000
FOOD (6.3%)
20,600 ConAgra 526,588
7,800 General Mills 589,388
12,500 Universal Foods 257,813
FOOD WHOLE/RETAIL (2.3%)
15,000 American Stores 495,000
HOUSEHOLD PRODS (3.0%)
13,700 Kimberly-Clark 656,744
INDUSTRIAL PRODUCTS (6.8%)
10,000 Ingersoll-Rand 496,250
16,900 Kennametal 295,750
20,000 Parker-Hannifin 685,000
INSURANCE (4.0%)
10,000 Everest Reinsurance 311,875
10,000 Hartford Fin'l Services 568,125
MEDICAL SERVICES/SUPPLIES (1.5%)
17,000 Tenent Healthcare 321,938
METALS (1.9%)
10,000 ALCOA 411,875
PACKAGING-CONTAINERS (1.8%)
14,000 Crown Cork & Seal 399,875
RETAILING (1.1%)
6,000 J. C. Penney 243,000
RUBBER PRODUCTS & TIRES (2.3%)
10,000 Goodyear 498,125
TELECOMMUNICATIONS (9.3%)
28,000 Hong Kong Tele. ADR 547,750
15,000 SBC Communications 706,875
14,000 US West 770,875
TRANSPORTATION (3.2%)
10,000 CNF Transportation 378,125
8,500 CSX 330,965
------------
*TOTAL COMMON STOCK $ 21,462,488
Add Excess of cash and other assets
Over payables (1.6%) 351,751
-------------
TOTAL NET ASSETS (100%) $ 21,814,239
=============
Equivalent to $ 3.64 per share on 5,995,288 shares outstanding
Based on market quotations computed at the last reported sale price on
March 31, 1999
Statement of Operations
For the Six Months Ended March 31, 1999
(Unaudited Interim Report)
Investment Income:
Dividends $ 255,964
Interest 11,560
-------------
Total investment income $ 267,524
-------------
Expenses:
Investment Advisory fee $ 61,841
Legal, Accounting and auditing 36,338
Transfer agent's fee 21,155
12b-1 distribution fees 23,058
Custodian fee 7,885
Salaries 22,199
Insurance 11,995
Taxes 5,013
Office 22,116
Notice to Investors 2,500
Consulting Fees 250
Directors' Fees 23,950
Registration fees 4,950
Miscellaneous 6,799
--------------
Total Expenses $ 250,049
--------------
NET INVESTMENT INCOME $ 17,475
--------------
Realized and unrealized gain on investments:
Net realized gain $ 702,079
Change in unrealized apreciation of
investments during the year 2,161,985
--------------
NET GAIN ON INVESTMENTS 2,864,064
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,881,539
==============
The accompanying notes are an integral part of these financial statements.
Investors Research Fund announces its newly elected officers:
President: Mr. Hugh J. Haferkamp
Vice President Mr. Harry Gelles
Secretary/Treasurer Dr. Dan Secord
Statement of Assets and Liabilities
March 31, 1999
(Unaudited Interim Report)
Assets
Investment in securities at market $ 21,462,488
(cost $22,660,346)
Cash 378,836
Dividends receivable from common stocks 25,724
Other assets 16,296
--------------
TOTAL ASSETS $ 21,883,344
--------------
Liabilities
Investment advisory fees $ 30,451
Other expenses 38,654
--------------
Total Liabilities $ 69,105
--------------
NET ASSETS at March 31, 1999 $ 21,814,239
==============
Net assets value per share on
5,995,288 shares outstanding $ 3.639
==============
Maximum offering price per share
(100/96.25 of $3.639) $ 3.780
==============
The accompanying notes are an integral part of these financial statements.
Shareholder Information
The Annual Shareholders Meeting held on March 30, 1999 had three matters that
were voted upon.
Item #1 was the election of Directors. The following directors were elected
on votes cast as follow:
# Shares Voted FOR WITHHOLD AUTHORITY
For Mr. Richard Chernick 3,314,867 132,326
For Mr. James A. Corradi 3,314,867 132,326
For Mr. Harry P. Gelles 3,314,867 132,326
For Mr. Hugh J. Haferkamp 3,325,118 132,326
For Mr. Leonard S. Jarrott 3,314,867 132,326
For Mr. Michael A. Marshall 3,314,867 132,326
For Mr. William J. Nasif 3,314,687 132,326
For Mr. Mark Schniepp 3,314,687 132,326
For Dr. Dan B. Secord 3,314,687 132,326
Item #2 was the proposal to ratify the selection of Timpson Garcia, as
independent accountants. The vote was as follows:
FOR AGAINST ABSTAIN
# Shares Voted 3,235,565 34,926 177,839
Item #3 was the proposal to approve the amendment to the corporate by-laws
reducing the authorized number of directors to nine (9).
FOR AGAINST ABSTAIN
# Shares Voted 3,233,306 16,246 198,780
Notes to Financial Statements
March 31, 1999
(Unaudited Interim Report)
Note 1 Significant Accounting Policies
Investors Research Fund is registered under the Investment 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 its 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.
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.
Security Transactions and Related Investment Income: Security
transactions are accounted for on the trade date basis. Realized gains or
losses on sales 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 distributed to shareholders at December 31 of each
calendar year.
Note 2 Affiliated Party Transactions
Investment Advisory Fee: The Fund entered into an investment advisory
agreement with Fox Asset Management, Inc. (Fox). Under the terms of the
agreement the Fund, in consideration of the advisory services to be rendered
by Fox, 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 and
resigned in September, 1998 when he terminated employment with Fox Asset
Management.
The fund does not directly compensate directors affiliated with the
Adviser.
Legal Fees: Mr. Hugh Haferkamp is President of the Fund. Mr. Haferkamp
also provides 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.
Recap of fees for the six months ended March 31, 1999:
Payable At
Total Expenses March 31, 1999
--------------------------------------
Fox Asset Management-investment
advisory fees $ 61,841 $ 30,451
Mr. Hugh Haferkamp-legal fees $ 4,000
Note 3 Capital Stock (Fund Shares)
At March 31, 1998 there were 20,000,000 shares of $1.00 par value capital
stock authorized. Transactions in Fund shares for the six months ending
March 31, 1999 and 1998 were as follows:
March 31, March 31,
1999 1998
----------------------------
Shares sold 75,442 34,581
Shares issued to shareholders in reinvestment
of net investment income and net realized gains 125,316 1,768,705
------------------------------
200,758 1,803,286
Shares redeemed (1,372,110) (541,938)
------------------------------
Net increase (decrease) (1,171,352) 1,261,348
Balance:
Beginning of period 7,166,640 7,013,271
------------------------------
End of period 5,995,288 8,274,619
==============================
Note 4 Appreciation (Depreciation) of Investments
At March 31, 1999, the net unrealized appreciation for securities was
as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $1,664,049
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (2,861,907)
------------
Net unrealized depreciation $(1,197,858)
============
The cost basis above is the same as that used for financial statement
purposes.
Note 5 Distribution of Income
Net investment income and realized gains from investment transactions
distributed during the period to the shareholders' accounts for each
outstanding share were:
Net Investment Income $ 0.056
Net realized gain on investments $ 0.029
The distributions were paid on December 31, 1998, to shareholders of record
on December 29, 1998. These distributions represent net investment income and
net realized gain for the year ended December 31, 1998.
Note 6 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:
1998 $ 8,136
1999 4,407
----------
Total $ 12,543
==========
Note 7 Purchases and Sales of Securities
Purchases and sales of securities (other than United States Government
obligations) from unaffiliated issuers aggregated $3,850,024 and $8,867,637
respectively for the 6 months ended March 31, 1999.
Note 8 Year 2000 Issue
The Fund has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 Issue, and has
been informed by its consultant that they are Year 2000 compliant.
The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Fund is dependent on computer processing in the conduct
of its activities.
The Fund has contracted with third parties to provide transfer and
accounting services. The Fund has been informed by its contracting parties
that they are Year 2000 compliant. From the Fund's investigation, the
potential effect on the Fund that might result from other organizations
experiencing Year 2000 related system failures is not expected to be a
material factor.
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