INVESTORS RESEARCH FUND, INC.
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ANNUAL REPORT
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Year Ended
September 30, 2000
<PAGE>
INVESTORS RESEARCH FUND, INC.
Dear Fellow Shareholder:
We are pleased to report the results of our first full year under our
management. This annual report for the year ended September 30, 2000 celebrates
over 41 years since the founding of the Investors Research Fund on March 3,
1959. As I have had the privilege of meeting and talking with many of you over
the past year and one-half, I have become aware that some of you have invested
in the fund years ago - a few within just months after the Fund began. I know
you join me in being proud of this long history, and we are particularly pleased
to return to the original philosophy of the founders - investing in high quality
growth companies.
For the fiscal year ended September 30, 2000, your Fund's total return, gross
and net of expenses, were 15.09% and 12.27%, respectively, as compared with the
S&P 500 return for the same twelve month period of 13.28%. The Fund's total
return for the fiscal year after expenses and the maximum sales charge was
8.06%. As we have previously discussed with you, the Fund has undergone
extensive changes in the operations and management, which are providing
substantial benefits. The costs of such changes were temporarily high; however,
the Board is dedicated to substantially reducing these costs in the year ahead.
During this productive year, we have taken some capital gains. The Board has
estimated that .07(cent)/share will be paid on December 15, 2000 to shareholders
of record at the close of business on December 14, 2000. We anticipate that
yearly distributions will continue.
The Fund's fiscal year encompassed a very volatile period in the stock market,
and was dominated by substantial gains in the shares of technology companies and
newly emerging dot com companies in the December quarter. The prices of these
stocks formed a market "bubble" about which your management was quite concerned.
At the same time, interest rates were increasing due to our overheated economy.
As a result, we grew increasingly cautious with our portfolio until the stock
market had corrected and interest rate increases had peaked. While stocks of
many untested technology companies went through major corrections - particularly
in the June quarter, the stocks of high quality companies corrected in September
and October as investors' fears of higher interest rates quickly changed to
major concerns over the outlook for earnings.
Westcap believes that the market correction, which has brought prices and
valuations down to very attractive levels, is overdone. As negative seasonal
market influences wane, we anticipate that investors will begin to believe that
we have a slower, but steady economic growth period ahead. As this "soft
landing" occurs, we look for the market to provide positive returns over the
next 12 - 18 months. We hope that you will take this opportunity to add to your
holdings, if appropriate.
We have scheduled the Annual Meeting of Shareholders for Tuesday, March 27,
2001, which will be held in Los Angeles. Details will be forthcoming, and we
look forward to seeing you then.
In the meantime, we look forward to hearing from you with any questions you may
have, and please direct any portfolio inquiries to me at (310) 996-3256.
Respectfully,
Glenn C. Weirick
President
<PAGE>
Investors Research Fund, Inc.
Value of $10,000 vs. S&P 500 Index
Investor's Research
Month Fund, Inc. S&P500
----- ---------- ------
3/31/99** 10,000.00 $10,000
4/30/99 9,915.87 $10,387
5/31/99 9,783.65 $10,142
6/30/99 10,550.48 $10,706
7/31/99 10,286.06 $10,371
8/31/99 10,233.17 $10,320
9/30/99 9,915.87 $10,037
10/31/99 10,338.94 $10,672
11/30/99 10,629.81 $10,891
12/31/99 11,370.19 $11,531
1/31/00 11,132.21 $10,952
2/29/00 10,656.25 $10,745
3/31/00 11,872.60 $11,796
4/30/00 11,634.62 $11,440
5/31/00 11,555.29 $11,206
6/30/00 11,740.38 $11,483
7/31/00 11,449.52 $11,304
8/31/00 12,163.46 $12,006
9/30/00 11,132.21 $11,372
Average Annual Total Return*
Periods Ended September 30, 2000
One Year Since April 1, 1999**
-------- ---------------------
8.06% 7.39%
Past performance is not predictive of future performance.
The Standard & Poor's 500 Composite Index is an asset weighted, broad based
measurement of changes in stock market conditions based on the coverage
performance of 500 widely held common stocks. This index is unmanaged and does
not reflect sales charges, commissions or expenses.
* For each of the periods, the Fund's performance figures are net of the
maximum applicable sales charge of 3.75%.
** Westcap Investors, LLC was appointed investment manager on April 1, 1999.
Previous periods during which the Fund was advised by another advisor are
not shown.
2
<PAGE>
INVESTORS RESEARCH FUND, INC.
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 2000
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SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS: 99.8%
BANKING/FINANCIAL SERVICES: 4.6%
13,406 Citigroup, Inc. $ 724,762
4,780 Stilwell Financial, Inc. 207,930
------------
932,692
------------
COMPUTER/PERIPHERAL: 22.3%
22,620 ADC Telecommunications, Inc.* 608,265
10,360 Cisco Systems, Inc.* 572,390
6,730 Compaq Computer Corp. 185,613
6,270 Computer Sciences Corp.* 465,548
2,440 EMC Corp.* 241,865
8,260 First Data Corp. 322,656
4,680 IBM 526,500
7,010 Microsoft Corp.* 422,353
13,890 Motorola, Inc. 392,392
2,660 Oracle Corp.* 209,475
12,830 SCI Systems, Inc. 526,030
------------
4,473,087
------------
CONGLOMERATES: 6.9%
13,530 General Electric Co. 780,512
11,730 Tyco International, Ltd. 608,494
------------
1,389,006
------------
DRUGS: 14.8%
8,460 Allergan, Inc. 714,341
11,260 ALZA Corp.* 973,990
17,310 Pfizer, Inc. 777,868
10,940 Schering-Plough Corp. 508,710
------------
2,974,909
------------
ELECTRICAL PRODUCTS: 2.7%
12,990 Molex, Inc. - Class A 538,273
------------
ENERGY/OIL: 11.3%
7,340 Apache Corp. 433,978
20,120 Baker Hughes, Inc. 746,955
7,450 El Paso Energy Corp. 459,106
10,680 Transocean Sedco Forex, Inc. 626,115
------------
2,266,154
------------
ENTERTAINMENT: 9.0%
28,880 AT&T Corp. - Liberty Media Group* 519,840
5,060 Time Warner, Inc. 395,945
11,770 UnitedGlobalCom, Inc.* 353,100
9,168 Viacom, Inc.* 536,328
------------
1,805,213
------------
FOOD: 1.8%
7,800 Sysco Corp. 361,237
------------
3
<PAGE>
INVESTORS RESEARCH FUND, INC.
SCHEDULE OF INVESTMENTS AT SEPTEMBER 30, 2000 - (CONTINUED)
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SHARES VALUE
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INSURANCE: 3.6%
7,500 American International Group, Inc. $ 717,656
------------
RETAIL: 5.7%
8,520 Costco Wholesale Corp.* 297,668
7,370 Home Depot, Inc. 391,071
9,300 Wal-Mart Stores, Inc. 447,562
------------
1,136,301
------------
SEMICONDUCTORS: 3.4%
9,270 Intel Corp. 385,864
6,480 Texas Instruments, Inc. 305,775
------------
691,639
------------
TELECOMMUNICATIONS: 8.6%
4,900 Cox Communications, Inc.* 187,425
3,980 Nextel Communications, Inc.* 186,065
20,450 WorldCom, Inc.* 621,169
6,780 Sprint Corp. (PCS Group)* 237,724
10,000 Verizon Communications 484,375
------------
1,716,758
------------
UTILITIES: 5.1%
9,310 AES Corp.* 637,735
9,280 Williams Cos, Inc. 392,080
------------
1,029,815
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TOTAL COMMON STOCKS
(cost $17,585,614) 20,032,740
------------
PRINCIPAL
AMOUNT
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SHORT TERM INVESTMENTS: 0.6%
$ 113,875 UMB Money Market Fiduciary (cost $113,875) 113,875
------------
TOTAL INVESTMENTS IN SECURITIES
(cost $17,699,489+): 100.4% 20,146,615
Liabilities in excess of Other Assets: (0.4%) (73,193)
------------
NET ASSETS: 100.0% $ 20,073,422
============
* Non-income producing security.
+ At September 30, 2000, the basis of investments for federal income tax
purposes was the same as their cost for financial reporting purposes.
Unrealized appreciation and depreciation were as follows:
Gross unrealized appreciation $ 4,416,719
Gross unrealized depreciation (1,969,593)
------------
Net unrealized appreciation $ 2,447,126
============
See accompanying Notes to Financial Statements.
4
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES AT SEPTEMBER 30, 2000
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ASSETS
Investments in securities, at value (cost $17,699,489) $20,146,615
Receivables:
Dividends and interest 3,238
Prepaid expenses 17,778
Other Assets 914
-----------
Total Assets 20,168,545
-----------
LIABILITIES
Payables:
Due to advisor 26,864
Taxes 5,482
Accrued expenses 62,777
-----------
Total Liabilities 95,123
-----------
NET ASSETS $20,073,422
===========
NET ASSET VALUE PER SHARE
($20,073,422/4,768,456 shares outstanding;
20,000,000 of shares authorized, $1.00 par value) $ 4.21
===========
Maximum offering price per share (100/96.25 of $4.21) $ 4.37
===========
COMPONENTS OF NET ASSETS
Paid-in capital $17,338,749
Accumulated net investment income 169,334
Accumulated net realized gain on investments 118,213
Net unrealized appreciation of investments 2,447,126
-----------
Net Assets $20,073,422
===========
See accompanying Notes to Financial Statements.
5
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME
Income
Dividends $ 132,869
Interest 26,032
Other 1,806
-----------
Total income 160,707
-----------
Expenses
Advisory fees 107,938
Legal fees 90,610
Distribution fees 45,489
Administration fees 45,065
Transfer agent fees 42,095
Fund accounting fees 31,643
Director fees 28,128
Reports to shareholders 23,760
Salaries 23,335
Insurance expense 18,261
Audit fees 16,880
Custody fees 14,343
Registration expense 14,101
Rent expense 8,674
Tax expense 6,261
Miscellaneous 12,290
-----------
Total expenses 528,873
-----------
NET INVESTMENT LOSS (368,166)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 710,219
Net unrealized appreciation on investments 2,158,699
-----------
Net realized and unrealized gain on investments 2,868,918
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,500,752
===========
See accompanying Notes to Financial Statements.
6
<PAGE>
INVESTORS RESEARCH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment loss $ (368,166) $ (164,948)
Net realized gain on investments 710,219 132,667
Net unrealized appreciation on investments 2,158,699 3,648,270
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,500,752 3,615,989
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment loss -- (185,349)
From net realized loss -- (357,012)
------------ ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS -- (542,361)
------------ ------------
CAPITAL SHARE TRANSACTIONS
Net decrease in net assets derived from net change
in outstanding shares (a) (2,537,105) (6,766,844)
------------ ------------
TOTAL DECREASE IN NET ASSETS (36,353) (3,693,216)
NET ASSETS
Beginning of year 20,109,775 23,802,991
------------ ------------
END OF YEAR $ 20,073,422 $ 20,109,775
============ ============
</TABLE>
(a) A summary of capital share transactions is as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
-------------------------- --------------------------
Shares Value Shares Value
----------- ----------- ----------- -----------
Shares sold 428,615 $ 1,782,728 111,321 $ 407,390
Shares issued in
reinvestment of
of distributions -- -- 125,316 481,670
Shares redeemed (1,018,784) (4,319,833) (2,044,652) (7,655,904)
----------- ----------- ----------- -----------
Net decrease (590,169) $(2,537,105) (1,808,015) $(6,766,844)
=========== =========== =========== ===========
See accompanying Notes to Financial Statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS FOR A CAPITAL SHARE OUTSTANDING THROUGHOUT THE YEAR
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------
2000 1999 1998 1997 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 3.75 $ 3.32 $ 4.76 $ 4.33 $ 4.10
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.00+ (0.02) 0.04 0.09 0.26
Net realized and unrealized gain
(loss) on investments 0.46 0.53 (0.40) 1.11 0.33
------- ------- ------- ------- -------
Total from investment operations 0.46 0.51 (0.36) 1.20 0.59
LESS DISTRIBUTIONS:
From net investment income -- (0.03) (0.08) (0.28) (0.07)
From net realized gain -- (0.05) (1.00) (0.49) (0.29)
------- ------- ------- ------- -------
Total distributions -- (0.08) (1.08) (0.77) (0.36)
Net asset value, end of year $ 4.21 $ 3.75 $ 3.32 $ 4.76 $ 4.33
======= ======= ======= ======= =======
Total return 12.27% 15.46% (9.55%) 30.42% 14.66%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (millions) $ 20 $ 20 $ 24 $ 33 $ 30
Ratio of expenses to average net assets 2.45% 2.39% 1.85% 1.77% 1.76%
Ratio of net investment income (loss) to
average net assets (1.71%) (0.73%) 0.91% 1.94% 6.67%
Portfolio turnover rate 48.39% 114.35% 260.95% 294.81% 669.79%
</TABLE>
+ Amount represents less than $0.01 per share.
See accompanying Notes to Financial Statements.
8
<PAGE>
INVESTOR RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
Investors Research Fund, Inc. ("The 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. The Fund began operations on March 1, 1959. The investment objective
of the Fund is to seek growth of capital over the long term. The Fund seeks to
achieve its objective by primarily investing in common stocks of large
capitalization domestic companies that combine growth potential with superior
financial strength.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund. These policies are in conformity with generally accepted
accounting principles.
A. SECURITIES VALUATION. Securities traded on a national securities
exchange or Nasdaq are valued at the last reported sale price at the
close of regular trading on each day that the exchanges are open for
trading; securities traded on an exchange or Nasdaq for which there
have been no sales, and other over-the-counter securities, are valued
at the last reported bid price. Securities for which quotations are
not readily available are valued at their respective fair values as
determined in good faith by the Board of Directors. Short-term
obligations are stated at cost, which when combined with accrued
interest, approximates market value.
B. FEDERAL INCOME TAXES. The Fund's policy is to comply with the
requirements of the Internal Revenue Code 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.
C. SECURITY TRANSACTIONS, INVESTMENT INCOME AND DISTRIBUTIONS. Security
transactions are accounted for on the trade date. The cost of
securities sold is determined on an identified cost basis. Dividend
income and distributions to shareholders are recorded on the
ex-dividend date.
D. 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 at the date of the financial
statements. Actual results could differ from those estimates.
E. RECLASSIFICATION OF CAPITAL ACCOUNTS. The Fund accounts and reports
for distributions to shareholders in accordance with the American
Institute of Certified Public Accountants Statement of Position 93-2:
DETERMINATION, DISCLOSURE, AND FINANCIAL STATEMENT PRESENTATION OF
INCOME, CAPITAL AND RETURN OF CAPITAL DISTRIBUTIONS BY INVESTMENT
COMPANIES. For the year ended September 30, 2000, the Fund decreased
net realized gain on investments by $368,166 due to the Fund
experiencing a net investment loss during the year. Net assets were
not affected by this change.
9
<PAGE>
INVESTOR RESEARCH FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------
NOTE 3 - COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
Effective April 1, 1999, the Fund entered into an Investment Advisory
Agreement (the "Agreement") with Westcap Investors, LLC (the "Advisor"). Under
the terms of the Agreement, the Advisor furnishes all investment advice needed
by the Fund. As compensation for its services, the Advisor receives a quarterly
fee at the annual rate of 0.50% of the Fund's average daily net assets. For the
year ended September 30, 2000, the Fund incurred $107,938 in advisory fees.
The Agreement calls for the Fund to pay, in addition to the 0.50% advisory
fee, other expenses and charges incident to the operation of the Fund,
including, but not limited to, clerical, accounting and other office costs of
the Fund and the cost of personnel providing services of the Fund. For the year
ended September 30, 2000, rent and salaries expenses totaled $32,009.
Investment Company Administration, L.L.C. (the "Administrator") acts as the
Fund's administrator under an Administration Agreement. The Administrator
prepares various federal and state regulatory filings, reports and returns for
the Fund; prepares reports and materials to be supplied to the directors;
monitors the activities of the Fund's custodian, transfer agent and accountants;
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a fee, payable
monthly on the value of the total average net assets of the Fund at an annual
rate of 0.10% of the first $200 million of such net assets, 0.05% of the next
$300 million, and 0.03% thereafter, subject to a minimum fee of $40,000. For the
year ended September 30, 2000, the Fund incurred $45,065 in administration fees.
First Fund Distributors, Inc. (the "Distributor") acts as the Fund's
principal underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliate of the Administrator.
Certain officers of the Fund are also officers and/or directors of the
Administrator and Distributor.
NOTE 4 - DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Plan allows the Fund to pay
distribution fees for the sale and distribution of its shares and for services
provided to its shareholders at an annual rate of up to 0.50% of the Fund's
average daily net assets. For the year ended September 30, 2000, the Fund
incurred $45,489 in distribution fees.
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The cost of purchases and the proceeds from sales of securities for the
year ended September 30, 2000, excluding short-term investments, were
$10,084,336 and $12,631,304, respectively.
10
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors of
Investors Research Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Investors Research Fund, Inc. (the Fund) as of
September 30, 2000, and the related statements of operations and changes in net
assets and the financial highlights for the year 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 audit. The statement of changes
in net assets for the year ended September 30, 1999 and the financial highlights
for each of the four years in the period ended September 30, 1999 were audited
by other auditors whose report dated November 19, 1999 expressed an unqualified
opinion on those financial statements and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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. Our procedures included confirmation of securities
owned as of September 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 audit provides a reasonable basis for our
opinion.
In our opinion, the 2000 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, 2000, the results of its
operations, changes in its net assets and the financial highlights for the year
then ended, in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Los Angeles, California
November 24, 2000
11
<PAGE>
================================================================================
Advisor
WESTCAP INVESTORS, L.L.C.
11111 Santa Monica Blvd., Suite 820
Los Angeles, CA 90025
(310) 996-3256
(Mutual Fund Direct Line)
www.westcapinvestors.com
Distributor
FIRST FUND DISTRIBUTORS, INC.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
UMB BANK
928 Grand Avenue, 10th Floor
Kansas City, MO 64141
Transfer Agent
ND RESOURCES, INC.
#1 North Main Street
Minot, ND 58703
Auditors
ERNST & YOUNG LLP
725 South Figueroa
Los Angeles, CA 90017
Legal Counsel
PAUL, HASTINGS, JANOFSKY & WALKER, LLP
555 South Flower Street, 23rd Floor
Los Angeles, CA 90071
================================================================================
This report is intended for the shareholders of the Fund and may not be used as
sales literature unless preceded or accompanied by a current prospectus.
Past performance results shown in this report should not be considered a
representation of future performance. Share price and returns will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are dated and subject to change.
