41st Annual Report
September 30, 1999
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.
<PAGE>
Dear Fellow Shareholder:
We are pleased to provide you with the annual report for the fiscal year
ending September 30, 1999. This period incorporated major changes in the
investment style and management of our Fund.
On April 1, 1999, the Board of Directors appointed Westcap Investors as the
investment manager of the Fund. As a result, the portfolio is being managed in a
large company growth style as opposed to the value style used by the former
manager. This style prompted major changes in the holdings of the portfolio
which now emphasizes investment in the largest and most successful growth
companies in the United States. It is anticipated that the portfolio turnover
rate will decline which will result in lower transaction expenses for Fund
shareholders.
While the Fund's performance was less than the S&P 500 Index for the year,
we are pleased to report that returns in the second half of the fiscal year
outperformed the S&P 500 Index. For the year, the total return of the Fund was
15.46% as compared with a 27.79% increase of the S&P 500 Index. For the first 6
month period (from Oct. 1, 1998 - March 31, 1999) the total return was 12.07% as
compared with a 27.32% increase for the S&P 500 Index. For the second half of
the fiscal year (from April 1, 1999 to September 30, 1999), the Fund's total
return was 3.02% as compared with a 0.37% increase for the S&P 500 Index.
Realization of portfolio losses due to the portfolio turnover resulting
from the change of investment managers offset the capital gains for the year.
Therefore, the Board of Directors did not declare a distribution at the end of
the year. Although no distributions were made, the value of your Fund shares
rose. We look forward to reporting distributions in the future, as capital gains
are realized in the ordinary course of managing the portfolio.
Turning from investment performance to administration of the Fund, the
board of directors has also made major changes. A new group of Fund officers was
elected by the Board, with Glenn C. Weirick, President of Westcap Investors,
succeeding Hugh J. Haferkamp as President of the Fund. The other principal Fund
officers are also officers of Westcap Investors, and the Fund's headquarters
will be relocated to Los Angeles, California. The Fund's administration is being
provided by the Investment Company Administration, L.L.C. located in Glendora,
California. The Board also approved the retention of Ernst & Young, LLP as
auditors for the Fund for the fiscal year beginning October 1, 1999. Once these
administrative changes have been completed, we anticipate that Fund expenses
will decline.
With respect to the future investment environment, we continue to be
optimistic towards the longer-term outlook. Federal Government spending policies
continue to be restrained and we anticipate new tax policies which will
encourage added savings and investments. Demographics continue to support
further investment in the stock and bond markets. And, U.S. companies continue
to enjoy worldwide market dominance in most of the future growth industries.
The major short-term influence on the stock market will be higher interest
rates. The U.S. economy continues to grow rapidly and is showing no signs of
slowing despite higher interest rates. As a result, the Federal Reserve Board
members are concerned and they have signaled that they will take steps to slow
the economy to a level that will prolong the current low inflationary business
cycle. Therefore, we expect that interest rates will rise in the coming months
to a point where the economy will cool down from its current pace. The degree to
which rates must increase to accomplish this is the big question. Clearly, a
slowdown in consumer spending is necessary. Given the high level of consumer
confidence and record results in the stock market, the needed increase in
interest rates may be uncomfortably high.
So far, the stock market has ignored rising interest rates in general,
although the market has now bifurcated. The "new economy" stocks in the high
technology, communications and the dot.com industries are commanding valuations
that are extremely high. Price increases of these stocks have been supported by
widespread evidence of intense speculation. On the other hand, the majority of
stocks are reasonably priced, relative to their anticipated growth rates. Our
valuation work fully supports this dichotomy. Several factors in the coming year
should help to level the playing field. Westcap forecasts that interest rates
will continue to rise 1/4% - 1/2% for the next 3-6 months in order to cool
economic activity. During this period, we would anticipate lower stock prices -
2
<PAGE>
with most of the decline centered in the richly valued part of the market. If
our forecast of modestly higher interest rates cools the economy enough to allow
lower rates in the second half of the year - then stocks should recover, and we
believe equity returns will be positive for the year.
We look forward to a new and exciting future for our Fund. The goals are to
provide long term growth of shareholder value and to manage the Fund in a most
efficient manner. As an expression of my deep confidence in the future of the
Fund, in November and December I personally purchased 218,000 shares.
We look forward to hearing from you, and please direct any portfolio
inquiries to me at (310) 996-3256.
Respectfully,
/s/ Glenn C. Weirick
Glenn C. Weirick
President of Westcap Investors
3
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PERFORMANCE HIGHLIGHTS
As of September 30, 1999
INVESTORS RESEARCH FUND, INC.
Value of $10,000 vs S&P 500
Total Return
Period Ended September 30, 1999
Since Inception (4/1/99)* (.84%)
FUND S&P
---- ---
3/31/99 - 10,000 3/31/99 - 10,000
4/30/99 - 9,916 4/30/99 - 10,387
5/31/99 - 9,784 5/31/99 - 10,142
6/30/99 - 10,550 6/30/99 - 10,706
7/31/99 - 10,286 7/31/99 - 10,370
8/31/99 - 10,233 8/31/99 - 10,319
9/30/99 - 9,916 9/30/99 - 10,037
- ----------
* Previous periods during which the Fund was advised by another advisor are not
shown.
Past performance is not predictive of future performance.
The S&P 500 Index contains 500 industrial, transportation, utility and financial
companies regarded as generally representative of the U.S. stock market.
4
<PAGE>
INVESTMENT CHANGES
Supplementary Information
For the Six Months ended September 30, 1999
PURCHASES
6,450 AES Corp 6,020 IBM
5,000 Air Products & Chems 11,320 Interpublic Group
6,000 Akzo Nobel NV ADR 15,000 Kerr-McGee
5,830 ALAZ Corp. 9,400 Lucent Technologies Inc.
2,540 Allergan, Inc. 8,380 MCI Worldcomm
6,563 American Intl. Group Inc. 8,320 Mediaone Group Inc.
4,600 Apache Corp. 4,890 Medtronic Inc.
9,280 Bank of America Corp. 8,500 Merck & Co. Inc.
8,540 Bell Atlantic Corp. 7,010 Microsoft Corp.
10,220 Bristol Myers Squibb Co. 10,760 Nation Wide Financial
6,920 Cardinal Health, Inc. 11,880 Newell Rubbermaid Inc.
8,450 CBS Corp. 6,380 PE Biosystems Group
1,595 Celera Genomics Group 18,810 Pfizer Inc.
6,800 Chevron Corp. 10,000 Phillips Petroleum
9,680 Cisco Sys. Inc. 3,450 Pitney Bowes Inc.
5,985 Citigroup Inc. 5,200 Procter & Gamble Co.
3,300 Computer Associates 11,950 Schering Plough Corp.
7,930 Computer Sciences Corp. 11,410 SCI Systems Inc.
6,300 Costco Wholesale Corp. 16,760 Sysco Corp.
11,500 Dana Corp. 17,000 Tenet Healthcare Corp.
3,500 DuPont El deNemours 10,000 Texas Instruments Inc.
8,000 Emerson Electric 11,000 Thomas & Betts
11,680 Enron Corp. 7,410 Time Warner
8,100 Exxon Corp. 3,000 TRW
6,310 Federal Natl Mtg. Corp. 5,240 Tyco International
8,710 Frontier Corp. 11,490 UnumProvident Corp.
5,810 General Electric Co. 9,300 WalMart
7,670 Gillette Co. 11,250 Williams Cos., Inc.
10,000 Halliburton Co. 3,850 Xerox Corp.
7,020 Home Depot, Inc.
5
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SALES
10,000 3Com Corp. 10,000 Halliburton Co.
15,000 Air Products & Chemicals 10,000 Hartford Financial Svcs Group
6,000 Akzo Nobel N.V. 10,000 Ingersoll-Rand
9,450 Albertson's, Inc. 8,960 Intel Corp.
10,000 Alcoa, Inc. 20,000 Kennametal, Inc.
5,830 ALZA Corp. 26,300 Kerr-McGee
10,000 American Stores 10,000 Key Corp.
23,700 Amgen 13,700 Kimberly-Clark
18,000 AMP, Inc. 20,000 KLA-Tencor
15,000 Applied Materials 1,900 Lucent Technologies Inc.
20,000 Baker Highes 4,890 Medtronic Inc.
2,000 Bell Atlantic Corp. 6,500 Mobil Corp.
1,700 Bristol Meyers Squibb Co. 11,880 Newell Rubbermaid Inc.
250 Citigroup, Inc. 20,000 Parker-Hannifin
5,200 Citigroup, Inc. 10,000 Penney, J.C. Co., Inc.
10,000 CNF Transportation 1,500 Pfizer, Inc.
5,000 Columbia Energy Group 10,000 Phillips Petroleum
15,300 Computer Associates Intl. 10,000 Raychem
20,600 ConAgra, Inc. 5,500 Raytheon "A"
20,000 Crown Cork & Seal 15,000 Rohm & Hoss
12,500 CSX Corp. 15,000 SBC Communications
29,500 Dana Corp. 4,200 Sysco Corp.
15,500 DuPont El deNemours 17,000 Tenet Healthcare
8,000 Emerson Electric Co. 2,800 Texas Instruments, Inc.
10,000 Everest Reinsurance Hldgs. 16,600 Thomas & Betts
6,310 Federal Natl. Mtg. Assoc. 10,000 Tidewater
10,000 First Union Corp. 19,000 TRW, Inc.
17,810 Frontier Corp. 15,000 U S West
7,800 General Mills 12,000 Union Planters
15,700 Genuine Parts 12,500 Universal Foods
7,670 Gillette Co. 1,950 Williams Cos., Inc.
10,000 Goodyear Tire & Rubber
6
<PAGE>
SHAREHOLDER DIVIDEND INFORMATION
Shareholders Dividend Reference Table
Amount per share - Ordinary Income $ .029
Amount per share - Capital Gain Income $ .056
Shareholder Record Date Dec. 29, 1998
Payment Date Dec. 31, 1998
Reporting Year 1998
Price per new share if reinvested $ 3.80
7
<PAGE>
SECURITIES IN THE FUND
September 30, 1999
NUMBER OF
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
ADVERTISING (2.32%)
11,320 Interpublic Group $ 465,535
BANKING (2.57%)
9,280 Bank of America 516,780
COMPUTER/PERIPHERAL (17.75%)
9,680 Cisco Systems Inc * 663,685
7,930 Computer Sciences Corp * 557,578
4,720 IBM 572,890
7,380 Intel Corp 548,426
7,010 Microsoft Corp 634,843
7,200 Texas Instruments 592,200
CONGLOMERATES (6.12%)
5,810 General Electric Co 688,848
5,240 Tyco International 541,030
DRUGS (14.87%)
2,540 Allergan Inc 279,400
8,520 Bristol Myers Squibb Co 575,100
6,920 Cardinal Health Inc 377,140
8,500 Merck & Co Inc 550,906
1,595 P E Celera Genomics Group * 64,199
17,310 Pfizer Inc 622,087
11,950 Schering Plough Corp 521,319
ELECTRONICS (2.52%)
11,410 Sci Sys Inc * 507,032
ENERGY/OIL (7.05%)
4,600 Apache Corp 198,662
6,800 Chevron Corp 603,500
8,100 Exxon Mobil Corp 615,098
ENTERTAINMENT (7.01%)
8,450 CBS Corp * 390,813
8,320 MediaOne Group Inc * 568,360
7,410 Time Warner Inc 450,158
FOOD (2.19%)
12,560 Sysco Corp 440,385
HOUSEHOLD PRODUCTS (2.42%)
5,200 Proctor & Gamble Co 487,500
INSURANCE (8.55%)
6,562 American International Group 570,487
9,785 Citigroup Inc 430,540
10,760 Nationwide Financial 380,635
11,490 Unum Provident Corp 338 237
OFFICE EQUIPMENT (1.85%)
3,450 Pitney Bowes Inc 210,234
3,850 Xerox Corp 161,459
8
<PAGE>
NUMBER OF
SHARES OR QUOTED
PRINCIPAL MARKET
AMOUNT COMMON STOCKS VALUE
- --------------------------------------------------------------------------------
RETAIL (6.85%)
6,300 Costco Wholesale Group * 453,600
7,020 Home Depot Inc 481,747
9,300 WalMart 442,331
TECHNOLOGY (2.29%)
6,380 P E Biosystems Group 460,955
TELECOMMUNICATIONS (7.60%)
6,540 Bell Atlantic Corp 440,224
8,380 MCI WorldCom * 602,313
7,500 Lucent Technologies 486,563
UTILITIES (6.02%)
6,450 AES Corp * 380,550
11,680 Enron Corp 481,800
9,300 Williams Cos Inc 348,173
-----------
Total Common Stock (97.98%)
(cost $19,414,895) $19,703,322
-----------
Add: Excess of cash and other assets
over payables (2.02%) 406,453
-----------
NET ASSETS (100.00%) $20,109,775
===========
* Non-income producing.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1999
ASSETS
Investments in securities, at market ............................. $19,703,322
(cost $19,414,895) (Note 1)
Cash ............................................................. 457,256
Receivables
Dividends from common stocks ................................ 10,774
Interest .................................................... 1,094
Funds shares sold ........................................... 32
Other assets ..................................................... 21,794
-----------
$20,194,272
LIABILITIES
Accrued expenses (Note 3) ........................................ $ 84,497
-----------
Net assets at September 30, 1999 ........................... $20,109,775
-----------
Net asset value per share on 5,358,625
shares outstanding (Note 4) ............................. $ 3.75
-----------
Maximum offering price per share
(100/96.25 of $3.75) .................................... $ 3.90
-----------
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
Year Ended September 30, 1999
INVESTMENT INCOME:
Dividends ...................................... $ 354,051
Interest ....................................... 18,073
----------
Total investment income ..................... $ 372,124
EXPENSES:
Investment advisory fee (Note 2) ............... $ 113,704
Legal, accounting and auditing ................. 129,441
Transfer agent fee and out-of-pocket costs ..... 58,076
12b-1:
Service fees .................................. $ 43,869
Distribution fees ............................. 7,500 51,369
----------
Custodian fee .................................. 12,076
Salaries - officer ............................. 24,000
Salaries - other ............................... 18,465
Directors' fees ................................ 39,212
Office ......................................... 21,767
Rent ........................................... 8,783
Insurance ...................................... 16,411
Taxes .......................................... 13,688
Registration and filing fees ................... 15,565
Notices to investors ........................... 11,781
Miscellaneous .................................. 2,734
-----------
Total expenses .............................. 537,072
-----------
Net investment (loss) ....................... $ (164,948)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain ........................... $ 132,667
Change in unrealized appreciation of
investments during the year ................ 3,648,270
----------
Net gain on investments .................... 3,780,937
-----------
Net increase in net assets resulting
from operations .......................... $ 3,615,989
-----------
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended September, 1999 and 1998
1999 1998
------------ ------------
INCREASE (DECREASE) IN NET ASSSETS:
Operations:
Net investment income (loss) ................. $ (164,948) $ 272,327
Net realized gain on investments ............. 132,667 1,928,784
Net change in unrealized appreciation
(depreciation) of investments ............. 3,648,270 (4,740,347)
----------- -----------
Net increase (decrease) in net assets
resulting from operations .............. $ 3,615,989 $(2,539,236)
----------- -----------
Distributions paid to shareholders:
From net investment income ................... $ (185,349) $ (525,264)
From net realized gain on investments ........ (357,012) (6,713,944)
----------- -----------
Total distributions to shareholders ....... $ (542,361) $(7,239,208)
----------- -----------
Fund share transactions:
Proceeds from sale of Fund shares ............ $ 407,390 $ 334,851
Proceeds from reinvestment of distributions
from net investment income and net
realized gain on investments .............. 481,670 6,434,548
Cost of shares redeemed from
shareholders .............................. (7,655,904) (6,559,652)
----------- -----------
Net increase (decrease) in net assets
due to fund share transactions ......... $(6,766,844) $ 209,747
----------- -----------
Total (decrease) in net assets ............ $(3,693,216) $(9,568,697)
NET ASSETS:
Beginning of year ............................... 23,802,991 33,371,688
----------- -----------
End of year ..................................... $20,109,775 $23,802,991
----------- -----------
NET ASSETS CONSIST OF:
Fund shares ..................................... $19,875,854 $26,642,698
Undistributed net investment income ............. 169,334 519,631
Undistributed net realized gain (loss)
on sale of investment securities ............. (223,840) 505
Unrealized appreciation (depreciation)
of investment securities ..................... 288,427 (3,359,843)
----------- -----------
$20,109,775 $23,802,991
=========== ===========
See Notes to Financial Statements.
12
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------------------------
PER SHARE DATA 1999 1998 1997 1996 1995
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(for one share outstanding throughout
each year) (2) (1)
Net asset value, beginning of year $ 3.32 $ 4.76 $ 4.33 $ 4.10 $ 4.62
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) $ (0.02) $ 0.04 $ 0.09 $ 0.26 $ 0.07
Net realized and unrealized gains
(losses) on securities 0.53 (0.40) 1.11 0.33 0.25
------- ------- ------- ------- -------
Total from investment operations $ 0.51 $ (0.36) $ 1.20 $ 0.59 $ 0.32
------- ------- ------- ------- -------
Less distribution to shareholders:
Dividends from net investment income $ (0.03) $ (0.08) $ (0.28) $ (0.07) $ (0.50)
Distributions from capital gains (0.05) (1.00) (0.49) (0.29) (0.34)
------- ------- ------- ------- -------
Total distributions $ (0.08) $ (1.08) $ (0.77) $ (0.36) $ (0.84)
------- ------- ------- ------- -------
Net asset value, end of year $ 3.75 $ 3.32 $ 4.76 $ 4.33 $ 4.10
======= ======= ======= ======= =======
TOTAL RETURN (3) 15.46% (9.55)% 30.42% 14.66% 7.74%
------- ------- ------- ------- -------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of year (in millions) $ 20 $ 24 $ 33 $ 30 $ 32
Ratios to average net assets:
Expenses 2.39% 1.85% 1.77% 1.76% 1.60%
Net investment income (loss) (0.73)% 0.91% 1.94% 6.67% 1.52%
Portfolio turnover rate 114.35% 260.95% 294.81% 669.79% 248.44%
Average commission paid per share
for portfolio transactions $0.0571 $0.0538 $0.0582 $0.0339 (4)
</TABLE>
- ----------
(1) Fund changed investment advisers on June 22, 1998.
(2) Fund changed investment advisers on April 1, 1999.
(3) Sales loads are not reflected in total return.
(4) Information not available.
13
<PAGE>
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 6.
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. INVESTMENT ADVISER:
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.
The Fund terminated the advisory agreement with Fox Asset Management effective
April 1, 1999.
WESTCAP INVESTORS, LLC:
Effective April 1, 1999, the Fund entered into an investment advisory agreement
with Westcap Investors, LLC (Westcap). Under the terms of the agreement, in
consideration of the advisory services to be rendered by Westcap, the Fund will
pay Westcap a quarterly fee equal to 0.125% of the net assets of the Fund
14
<PAGE>
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.
NOTE 3. AFFILIATED PARTY TRANSACTIONS
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. For the year ended September 30, 1999 legal
fees amounted to $53,285 for services provided by Mr. Haferkamp. At September
30, 1999 accrued expenses included $5,383 owed by the Fund to Mr. Haferkamp.
NOTE 4. CAPITAL STOCK (FUND SHARES)
At September 30, 1999, there were 20,000,000 shares of $1.00 par value capital
stock authorized. Transactions in Fund shares for the years ended September 30,
1999 and 1998 were as follows:
1999 1998
---------- ----------
Shares sold ........................................ 111,321 86,333
Shares issued to shareholders in reinvestment of
net investment income and net realized gains ..... 125,316 1,768,705
Shares redeemed .................................... (2,044,652) (1,701,669)
---------- ----------
Net increase (decrease) ............................ (1,808,015) 153,369
Balance:
Beginning of year ................................. 7,166,640 7,013,271
---------- ----------
End of year ....................................... 5,358,625 7,166,640
---------- ----------
NOTE 5. APPRECIATION (DEPRECIATION) OF INVESTMENTS
At September 30, 1999, the net unrealized appreciation for stocks was as
follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 1,815,505
Aggregate gross unrealized (depreciation) for all investments
in which there is an excess of tax cost over value (1,527,078)
-----------
Net unrealized appreciation - stocks $ 288,427
===========
The cost basis used above is the same as that used for financial statement
purposes.
NOTE 6. DISTRIBUTION OF INCOME
The Fund's Board of Directors declared dividends on December 8, 1998. The exact
amount of the distributions were determined on December 29, 1998 and consisted
of the following per share: $0.029 aggregating $185,349 from net investment
income, and $0.056 aggregating $357,012 from short-term investment transactions
were declared.
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 short-term gains for the calendar year ended December 31, 1998.
15
<PAGE>
NOTE 7. PRIMARY DIFFERENCE BETWEEN NET INVESTMENT INCOME AND REALIZED GAINS PER
FINANCIAL STATEMENTS AND ACTUAL DISTRIBUTIONS TO SHAREHOLDERS
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 Fund's fiscal year and the
distributions are based on the calendar year, or periods, as required by income
tax laws and regulations.
NOTE 8. 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 for the remaining term of this lease is
$4,407. Rental expense for the year ended September 30, 1999 was $8,783.
NOTE 9. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities from unaffiliated issuers aggregated
$26,153,995 and $33,797,119, respectively.
16
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
of 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, 1999, 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, 1999, 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, 1999, 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
November 19, 1999
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