BRUNDAGE, BRUNDAGE,
STORY AND ROSE STORY AND ROSE
INVESTMENT TRUST INVESTMENT TRUST
312 Walnut Street, 21st Floor Semi-Annual Report
Cincinnati, Ohio 45202-4094 May 31, 2000
(Unaudited)
BOARD OF TRUSTEES
Short/Intermediate Term
Francis S. Branin, Jr. Fixed-Income Fund
Malcolm D. Clarke, Jr. Equity Fund
John M. Kingsley, Jr.
Jerome B. Lieber
William M.R. Mapel
James G. Pepper
Crosby R. Smith
INVESTMENT ADVISER
Brundage, Story and Rose, LLC
One Broadway
New York, New York 10004
UNDERWRITER
IFS Fund Distributors, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202-4094
TRANSFER AGENT
Integrated Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
SHAREHOLDER SERVICES
Nationwide: (Toll Free) 800-320-2212
[LOGO] BRUNDAGE,
STORY AND ROSE
Investment Counsel Since 1932
<PAGE>
LETTER TO SHAREHOLDERS July 20, 2000
================================================================================
ECONOMIC AND FINANCIAL MARKETS UPDATE - MID-YEAR 2000
Now that some of the speculative excess, especially in the ".com" segment of the
technology sector, appears to have been wrung from the market, it is worth
stepping back and remembering what really dictates the outlook for stocks:
Fundamentals.
Despite all of the hype about the Information Age and the transforming nature of
the Internet, the investment potential of common stocks rests today, as always,
upon the interplay of economic growth with profit potential, interest rates with
inflation, and upon valuations. Since all of the above factors change,
absolutely and relative to each other, successful investing has always rested
upon flexibility. Indeed, the last year has offered some especially telling, and
sobering, lessons in this regard. Some of the world's long-time investment
luminaries have spectacularly disappointed investors of late, or simply left the
industry, their once-sparkling records tarnished. Whether it was an inability on
the part of some "Old Timers" to rationalize so swift and radical a change, or a
lack of perspective in which to place that change -- never a problem for the
breathless technophiles -- that brought about their downfall, successful
investing is still in the end all about the fundamentals. So, taking a step back
from the cacophony and confusion that surrounds the moment-to-moment workings of
the financial markets, what is today's fundamental backdrop?
THE ECONOMY AND CORPORATE PROFITS
In the logic of capital markets, a company, or the market as a whole, is valued
at a multiple of its earnings potential, with the multiple affected by the real
(inflation adjusted) rate of growth of those earnings, and earnings in turn
affected by the overall rate of growth in the economy and the specific
opportunities available in a given sector or company. Under this admittedly
oversimplified view of an efficient capital market, both faster growth and lower
inflation result in an increase in the multiple an investor should be willing to
pay for a given level of earnings.
The first step in assembling today's fundamental backdrop is assessing the
health of and the outlook for earnings for the economy in general. On the
earnings front, operating earnings for the S&P 500 have accelerated dramatically
off the Asian crisis-induced decline of 1998, showing a remarkable 20.7%
year-over-year rate of improvement in the first quarter of 2000. While it is
true that the consensus of Wall Street strategists is that corporate earnings
growth will begin to slow as we anniversary the strong improvement in the second
half of 1999, the outlook for earnings remains excellent for the rest of the
year. Furthermore, looking into 2001, these same strategists are predicting a
reacceleration of earnings growth as the year progresses. While we are never
very comfortable being closely aligned with consensus expectations, our own
forecasts are not dissimilar, although we would not be surprised if an
inherently unpredictable event were to upset the neat linear progression of
these projections.
The news on the macro-economic front is, if anything, even better: Expectations
are that economic growth will continue to slow from the unsustainably high rate
in late 1999, but then stabilize around 3-31/2%. This rate of growth in the
U.S., along with the expansion now firmly in place in most of the rest of the
world, should be not only robust enough to provide a good operating environment
of U.S. companies, but also not so fast as to risk an overheating of the economy
that would impel higher inflation and accordingly higher interest rates.
2
<PAGE>
INTEREST RATES AND INFLATION
If the outlook for the economy and earnings remains strong, is inflation enough
of a problem to make the real, inflation adjusted, earnings picture less rosy?
Or, worse, has the recent acceleration of inflation been just the beginning of
growing inflationary pressures, and will the Federal Reserve Bank respond to
this trend with still more interest rate increases in order to prevent the
inflationary expectations from imbedding themselves in the real economy? In the
first case, if the recent acceleration of inflation is more than just an oil
price induced spike, then the doubling of the rate of increase of the Consumer
Price Index (CPI) over the last year and a half will certainly pressure
valuations. Conversely, should the latter concern be on the mark, the
expectations for slowing, but still robust, earnings and economic growth would
turn out to be too optimistic, as an increase in interest rates to levels
meaningfully higher than today's would likely transform the current gentle
deceleration in economic growth into a jarring stop.
As it so often turns out, we believe that we will continue to chart a middle
course: Not a rate of inflation extreme enough to corrupt the quality of
earnings, but high enough to include a reactionary monetary policy that results
in a slowdown in both the real and nominal rates of earnings growth. As support
for this rather sanguine view on the outlook for inflation and interest rates,
we look to two things: The evident vigilance of the Federal Reserve in the face
of what was widely agreed to be an overheating economy in late 1999 and the
difference between the core and reported inflation rates.
As clearly evidenced in the historical pattern of the FED Funds target rate, the
Federal Reserve has been highly responsive both to signs of accelerating
inflation and to signs of unsustainably high economic growth. Over the last
year, the FED Funds target rate has been raised on five separate occasions
totaling a 1.75 percentage point increase. While it is too soon to say
definitively that the elusive economic soft landing has been achieved, the FED
is now clearly ahead of the curve in terms of responding to signs of economic
overheating.
At the same time, we believe that the CPI, with its volatile commodity
components of food and energy, can be a misleading indicator of underlying
inflationary trends. This has been especially true over the last few years, as
sharp swings in the price of crude oil have resulted in considerable volatility
in the reported CPI numbers, but little meaningful change in the actual rate of
inflation in the economy. Obviously a sustained increase in energy prices can
push inflation upward over time, but we do not see convincing evidence, either
in wage pressures or in a broad measure of prices, that current inflationary
trends are out of control, or require a more aggressive FED posture. Core
consumer prices have actually been remarkably stable.
THE $64 QUESTION
In our opinion then, the fundamental backdrop for the financial markets is
actually quite good. The economy is slowing, but remains very healthy, and the
outlook for profit growth in most sectors is positive. In addition, the strains
placed on the economy by too rapid growth, fueled in part by the "wealth effect"
of stock market riches, have eased. The key to the outlook for the market then
becomes one of whether or not it is appropriately valued. In addressing this
crucial issue, we looked back at twenty years of stock market statistics in an
attempt to find a common denominator to which we could relate periods of higher
and lower stock market valuations. What we discovered is that there has been a
remarkable correlation between the valuation of the stock market as a whole and
any given level of long
3
<PAGE>
term (10 year U.S. Treasuries) interest rates. In other words, at a given level
of interest rates, the PE on the stock market can be expected to "regress" to a
certain average level from temporary periods -- which will always occur -- of
under or over-valuation.
Using this historical relationship and the current 6% yield on 10-year U.S.
Treasuries, and disregarding all other variables, one could expect with a 90%
degree of confidence that the market (as represented by the S&P 500) would be
considered fairly valued at between 20x and 24x earnings. While this is
certainly below the current trailing PE on the S&P 500 of 27.8x, it is in line
with the market's valuation on earnings estimates for 2001 of 23.6x Also,
overvaluation by historical standards is today entirely a product of
breathtakingly high PEs in the technology sector; the rest of the market is
valued at the low end of historical expectations. Furthermore, given the
exciting changes wrought by technology, and that earnings growth this year and
next is likely to be well above the 6.1% annual average of the last twenty
years, we would argue that the current environment is actually much better than
it has been over most of the last two decades.
BRUNDAGE, STORY AND ROSE EQUITY FUND
The first half of fiscal 2000 was another period of strong investment
performance in the Equity Fund. Specifically, for the six months ended May 31,
2000, returns on the Fund were 6.5% compared to 2.8% for the S&P 500. For the
twelve months ended May 31, 2000, returns on the Equity Fund were 12.27% versus
10.5% in the Standard and Poor's 500.
Of course, the story of the last six months was not their totality, but the
marked contrast in the month-by-month returns in the market during the period.
In fact, while December and March were good months for stocks, January,
February, April and May were all periods during which broad measures of the
stock market showed negative returns. Furthermore, within the broad stock
market, there were individual companies and sectors, specifically the previously
high-flying technology sector, which saw violent gyrations.
We were able to position the Fund to participate in the market's upward moves
over the last six months while dampening downward volatility in the Portfolio.
To a great extent, this was a result of how we had structured the Fund over the
last year, with an emphasis on growth but with a strong valuation overlay. In
particular, we were able to dampen somewhat the volatility experienced in the
technology and telecommunications sectors through underweighted positions while
enhancing returns through good stock selections. We also profited from an
emphasis on undervalued energy companies.
Looking forward, we have now rebuilt positions in fast growing and dynamic
information technology companies while also positioning the Fund to benefit from
ongoing consolidation in communications services, with a particular emphasis on
wireless. We are also positive on "medical technology" including
pharmaceuticals, medical devices companies and enabling instrumentation
companies.
BRUNDAGE, STORY AND ROSE SHORT/INTERMEDIATE TERM FUND
Interest rates rose for most maturities in the U.S. Treasury market for the six
months through May 31, 2000, particularly in the short and intermediate portion
of the curve. The six-month Treasury bill rate rose 78 basis points (0.78%), the
two-year note 66 basis points and the five-year note 41 basis points. With the
Federal Reserve actively raising short-term rates, the Treasury yield curve
moved to an inverted shape during the period. Ten-year Treasury rates were
nearly unchanged and long maturities were lower by 25 basis points. We are now
in an unusual situation where two-year notes out-yield 30 year bonds by about 50
basis
4
<PAGE>
points. The U.S. Treasury has been actively buying back long-term Treasury
bonds; this, along with the Fed raising short-term rates 100 basis points, has
caused the curve to invert. Nominal returns for the period ranged from about
1.5% for 3-5 year Treasuries to 5.5% for longer maturity issues.
Other sectors of the bond market have exhibited poor returns relative to
Treasuries. Volatility in the equity markets, uncertainty about the economic
outlook, Federal Reserve activity and the heavy supply of new debt have all
contributed to poor liquidity and a difficult market for non-Treasury issues.
The U.S. Agency market, which had been -- like Treasuries -- a safe haven,
suffered severely after high ranking Treasury officials commented that the
quasi-government guarantees on U.S. Agency debt may be taken away. We are
uncertain of the ultimate status of the Agencies and would be cautious at this
time considering the size of issuance that emanates from the sector.
The corporate sector also performed poorly during the last six months. The
financial sector was particularly hard-hit. Also, credit specific risk has
risen. The ratio of quality upgrades to downgrades by the rating agencies has
moved into negative territory. Some companies have experienced severe
dislocations in the value of their debt. Interestingly, this period has been as
bad for quality credits as for lower-rated issues. Thus, returns for AA-rated
and BB-rated corporates have been similar. The return for 3-5 year corporates
was about 0.60% for the 6-month period, underperforming Treasuries by nearly 100
basis points (1.00%).
Although the net returns of the Fund were modest, 0.42% for the 6-month period
and 1.54% for the 12 months through May 31st, we are cautiously optimistic
looking ahead, particularly on the non-Treasury sectors of the bond market. The
yield advantage from quality corporate bonds is significant so we anticipate
adding to this sector, focusing in short maturities. Given the volatility of
corporate spreads, we feel trading opportunities will arise from time to time in
longer maturities. In the mortgage sector, we may also add some weighting, given
current yield levels. Most importantly, we continue to focus on security
selection as the primary method of adding value to the fund.
SUMMARY
In summary, we believe the balance between fundamentals and equity valuations is
favorable. Yes, the market is richly valued and likely to mark time as investors
digest the gains of the last few years. And yes, there are still pockets of
extreme speculation -- again, mostly in the technology area -- to be avoided.
Nonetheless, investors can, we believe, be comfortable with the long-term
outlook. Selectivity, flexibility and discipline remain the watchwords of this
market. The fixed income outlook seems better after a period of low and
disappointing returns. We would expect that investment performance in the coming
year should at least equal the current coupon yields available from good quality
bonds, perhaps falling in the 6-8% range.
Sincerely yours,
/s/ Malcolm D. Clarke, Jr.
Malcolm D. Clarke, Jr.
President
5
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 2000 (UNAUDITED)
===========================================================================================
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
-------------------------------------------------------------------------------------------
ASSETS
Investment securities:
<S> <C> <C>
At amortized cost (original cost $38,701,028
and $41,986,716, respectively) ..................... $ 38,654,565 $ 41,986,716
============ ============
At market value (Note 2) .............................. $ 37,325,991 $ 54,740,648
Investments in repurchase agreements (Note 2) ............ 134,855 1,261,272
Interest and principal paydowns receivable ............... 560,992 207
Dividends receivable ..................................... -- 43,951
Receivable for securities sold ........................... 603 482,831
Receivable for capital shares sold ....................... 5,839 3,850
Other assets ............................................. 14,451 17,325
------------ ------------
TOTAL ASSETS .......................................... 38,042,731 56,550,084
------------ ------------
LIABILITIES
Dividends payable ........................................ 19,012 --
Payable for capital shares redeemed ...................... 49,427 6,225
Payable for securities purchased ......................... 1,506,094 341,879
Payable to affiliates (Note 4) ........................... 10,300 45,275
Other accrued expenses and liabilities ................... 13,566 28,272
------------ ------------
TOTAL LIABILITIES ..................................... 1,598,399 421,651
------------ ------------
NET ASSETS ............................................... $ 36,444,332 $ 56,128,433
============ ============
Net assets consist of:
Paid-in capital .......................................... $ 38,436,078 $ 34,554,924
Undistributed net investment income ...................... 729 1,604
Accumulated net realized gains (losses)
from security transactions ............................ (798,756) 7,556,701
Net unrealized appreciation (depreciation)
on investments ......................................... (1,193,719) 14,015,204
------------ ------------
Net assets ............................................... $ 36,444,332 $ 56,128,433
============ ============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) (Note 5) ... 3,594,975 2,515,024
============ ============
Net asset value, offering price and redemption
price per share (Note 2) .............................. $ 10.14 $ 22.32
============ ============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 2000 (UNAUDITED)
==========================================================================================
SHORT/
INTERMEDIATE
TERM
FIXED-INCOME EQUITY
FUND FUND
------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C>
Interest ............................................. $ 1,239,990 $ 78,098
Dividends ............................................ -- 265,879
------------ ------------
TOTAL INVESTMENT INCOME ........................... 1,239,990 343,977
------------ ------------
EXPENSES
Investment advisory fees (Note 4) .................... 94,751 179,338
Administrative services fees (Note 4) ................ 37,813 54,878
Accounting services fees (Note 4) .................... 18,000 19,700
Professional fees .................................... 10,166 10,166
Transfer agent and shareholder service fees (Note 4) . 7,200 7,200
Registration fees .................................... 7,276 4,835
Trustees' fees and expenses .......................... 9,711 9,711
Insurance expense .................................... 5,565 6,886
Postage and supplies ................................. 6,312 6,720
Reports to shareholders .............................. 3,141 4,841
Pricing expense ...................................... 3,773 612
Custodian fees ....................................... 3,492 3,055
Distribution expenses (Note 4) ....................... 387 771
Other expenses ....................................... 4,007 8,578
------------ ------------
TOTAL EXPENSES .................................... 211,594 317,291
Fees waived by the Adviser (Note 4) .................. (88,418) --
------------ ------------
NET EXPENSES ...................................... 123,176 317,291
------------ ------------
NET INVESTMENT INCOME ................................... 1,116,814 26,686
------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from
security transactions ............................. (644,761) 7,689,455
Net change in unrealized appreciation/
depreciation on investments ....................... (316,145) (4,358,101)
------------ ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (960,906) 3,331,354
------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS .............. $ 155,908 $ 3,358,040
============ ============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
=========================================================================================================================
SHORT/INTERMEDIATE TERM
FIXED-INCOME FUND EQUITY FUND
----------------------------- -----------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
MAY 31, ENDED MAY 31, ENDED
1999 NOVEMBER 30, 1999 NOVEMBER 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
-------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income ............................. $ 1,116,814 $ 2,110,297 $ 26,686 $ 4,872
Net realized gains (losses) from
security transactions .......................... (644,761) (148,056) 7,689,455 4,258,788
Net change in unrealized appreciation/
depreciation on investments .................... (316,145) (1,685,649) (4,358,101) 6,063,505
------------ ------------ ------------ ------------
Net increase in net assets from operations ........... 155,908 276,592 3,358,040 10,327,165
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ........................ (1,119,620) (2,106,762) (25,082) (21,064)
From net realized gains from
security transactions .......................... -- (245,416) (4,278,312) (2,622,479)
------------ ------------ ------------ ------------
Decrease in net assets from
distributions to shareholders ..................... (1,119,620) (2,352,178) (4,303,394) (2,643,543)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (Note 5):
Proceeds from shares sold ......................... 1,919,642 4,395,836 4,132,447 3,793,019
Net asset value of shares issued in reinvestment
of distributions to shareholders ............... 988,303 2,036,777 4,211,416 2,624,110
Payments for shares redeemed ...................... (4,067,042) (5,025,647) (2,509,108) (3,548,244)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from capital share transactions ................... (159,097) 1,406,966 5,834,755 2,868,885
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ................ 2,122,809 (668,620) 4,889,401 10,552,507
NET ASSETS:
Beginning of period ............................... 38,567,141 39,235,761 51,239,032 40,686,525
------------ ------------ ------------ ------------
End of period ..................................... $ 36,444,332 $ 38,567,141 $ 56,128,433 $ 51,239,032
============ ============ ============ ============
UNDISTRIBUTED NET INVESTMENT INCOME .................. $ 729 $ 3,535 $ 1,604 $ --
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
MAY 31, YEARS ENDED NOVEMBER 30,
2000 ------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 10.40 $ 10.96 $ 10.69 $ 10.69 $ 10.73 $ 9.94
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................... 0.30 0.58 0.60 0.62 0.62 0.64
Net realized and unrealized
gains (losses) on investments ................ (0.26) (0.49) 0.27 -- (0.04) 0.79
-------- -------- -------- -------- -------- --------
Total from investment operations ................ 0.04 0.09 0.87 0.62 0.58 1.43
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ............ (0.30) (0.58) (0.60) (0.62) (0.62) (0.64)
Distributions from net realized gains ........... -- (0.07) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions ................................ (0.30) (0.65) (0.60) (0.62) (0.62) (0.64)
-------- -------- -------- -------- -------- --------
Net asset value at end of period ................... $ 10.14 $ 10.40 $ 10.96 $ 10.69 $ 10.69 $ 10.73
======== ======== ======== ======== ======== ========
Total return ....................................... 0.42%(C) 0.80% 8.39% 6.03% 5.65% 14.84%
======== ======== ======== ======== ======== ========
Net assets at end of period (000's) ................ $ 36,444 $ 38,567 $ 39,236 $ 36,653 $ 33,377 $ 35,272
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets(A) ..... 0.65%(B) 0.65% 0.65% 0.65% 0.65% 0.60%
Ratio of net investment income to average net assets 5.90%(B) 5.43% 5.58% 5.88% 5.90% 6.21%
Portfolio turnover rate ............................ 186%(B) 53% 90% 46% 40% 39%
</TABLE>
(A) Absent fee waivers and/or expense reimbursements by the Adviser, the ratios
of expenses to average net assets would have been 1.12%(B), 1.05%, 1.04%,
1.07%, 1.09% and 1.09% for the periods ended May 31 2000, November 30,
1999, 1998, 1997, 1996 and 1995 respectively (Note 4).
(B) Annualized.
(C) Not Annualized.
See accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
EQUITY FUND
FINANCIAL HIGHLIGHTS
===================================================================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
-----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED
MAY 31, YEARS ENDED NOVEMBER 30,
2000 ------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at beginning of period ............. $ 22.81 $ 19.47 $ 19.40 $ 17.18 $ 14.91 $ 12.43
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........................... 0.01 0.00 0.04 0.06 0.06 0.07
Net realized and unrealized gains on investments 1.42 4.61 2.01 3.65 2.97 3.02
-------- -------- -------- -------- -------- --------
Total from investment operations ................... 1.43 4.61 2.05 3.71 3.03 3.09
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income ............ (0.01) (0.01) (0.04) (0.06) (0.07) (0.06)
Distributions from net realized gains ........... (1.91) (1.26) (1.94) (1.43) (0.69) (0.55)
-------- -------- -------- -------- -------- --------
Total distributions ................................ (1.92) (1.27) (1.98) (1.49) (0.76) (0.61)
-------- -------- -------- -------- -------- --------
Net asset value at end of period ................... $ 22.32 $ 22.81 $ 19.47 $ 19.40 $ 17.18 $ 14.91
======== ======== ======== ======== ======== ========
Total return ....................................... 6.51%(A) 25.43% 11.96% 23.98% 21.27% 26.08%
======== ======== ======== ======== ======== ========
Net assets at end of period (000's) ................ $ 56,128 $ 51,239 $ 40,687 $ 35,343 $ 27,540 $ 24,191
======== ======== ======== ======== ======== ========
Ratio of net expenses to average net assets ........ 1.15%(B) 1.15% 1.15% 1.19% 1.30% 1.45%
Ratio of net investment income to average net assets 0.10%(B) 0.01% 0.24% 0.34% 0.42% 0.52%
Portfolio turnover rate ............................ 68%(B) 37% 50% 49% 44% 42%
</TABLE>
(A) Not Annualized.
(B) Annualized.
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000 (UNAUDITED)
===========================================================================================
PAR MARKET
VALUE INVESTMENT SECURITIES -- 102.4% RATE MATURITY VALUE
-------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 43.0%
<S> <C> <C> <C> <C>
$ 1,200,000 U.S. Treasury Bills ................. 1/16/00 $ 1,166,232
200,000 U.S. Treasury Notes ................. 6.625 7/31/01 199,688
1,225,000 U.S. Treasury Notes ................. 6.125 12/31/01 1,213,133
800,000 U.S. Treasury Notes ................. 6.625 3/31/02 798,250
1,500,000 U.S. Treasury Notes ................. 6.625 4/30/02 1,496,250
1,200,000 U.S. Treasury Notes ................. 6.000 7/31/02 1,182,376
1,000,000 U.S. Treasury Notes ................. 5.500 5/31/03 968,750
1,000,000 U.S. Treasury Notes ................. 5.750 8/15/03 973,750
550,000 U.S. Treasury Notes ................. 7.500 2/15/05 569,250
900,000 U.S. Treasury Notes ................. 5.875 11/15/05 871,875
3,400,000 U.S. Treasury Notes ................. 7.000 7/15/06 3,471,189
1,900,000 U.S. Treasury Notes ................. 6.125 8/15/07 1,859,032
875,000 U.S. Treasury Notes ................. 6.500 2/15/10 887,852
------------ ------------
$ 15,750,000 TOTAL U.S. TREASURY OBLIGATIONS
------------ (Amortized Cost $16,038,890) ........ $ 15,657,627
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 13.3%
$ 1,500,000 FNMA ................................ 8.500 6/15/00 $ 1,515,000
1,000,000 FHLMC ............................... 5.750 7/15/03 954,280
1,500,000 FNMA ................................ 5.625 5/15/04 1,409,276
1,000,000 FNMA ................................ 7.250 1/15/10 983,096
------------ ------------
$ 5,000,000 TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
------------ (Amortized Cost $5,040,005) ......... $ 4,861,652
------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES -- 6.7%
$ 11,057 FHLMC GOLD#G-50274 .................. 7.500 6/1/00 $ 11,040
2,737 FHLMC GNOME #200068 ................. 8.000 3/1/02 2,756
9,952 FNMA DWARF #51935 ................... 8.000 4/1/02 9,960
34,122 FHLMC GOLD #140094 .................. 7.500 5/1/05 33,492
400,000 FNMA ................................ 5.750 6/15/05 372,775
378,585 FHLMC REMIC #1404-D ................. 6.800 1/15/06 377,343
25,618 FNMA DWARF #50480 ................... 8.000 9/1/06 25,743
331,287 FNMA REMIC #92-24H .................. 7.500 11/25/06 331,559
53,167 FHLMC REMIC #1523-PE ................ 6.000 10/15/15 53,034
139,796 FHLMC REMIC #1522-C ................. 6.000 8/15/16 139,371
352,310 FNMA REMIC #94-29PE ................. 6.000 5/25/18 349,816
6,260 GNMA #285639 ........................ 9.000 2/15/20 6,463
409,455 FHLMC REMIC #1699-C ................. 6.200 2/15/24 407,019
337,890 FNMA REMIC #250322 .................. 7.500 8/1/25 329,570
------------ ------------
$ 2,492,236 TOTAL U.S. GOVERNMENT AGENCY
------------ MORTGAGE-BACKED SECURITIES
(Amortized Cost $2,442,932) ......... $ 2,449,941
------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
===========================================================================================
PAR MARKET
VALUE INVESTMENT SECURITIES -- 102.4% RATE MATURITY VALUE
(CONTINUED)
-------------------------------------------------------------------------------------------
OTHER MORTGAGE-BACKED SECURITIES -- 0.9%
<S> <C> <C> <C> <C>
$ 161,866 Advanta Home Equity Loan Trust #92-1A 7.875 9/25/08 $ 161,133
158,442 CMC Securities Corp. III #94-B ...... 6.000 2/25/09 157,678
------------ ------------
$ 320,308 TOTAL OTHER MORTGAGE-BACKED SECURITIES
------------ (Amortized Cost $321,045) $ 318,811
------------
ASSET-BACKED SECURITIES -- 0.3%
$ 107,034 J.C. Penney Credit Card Trust #B-A
------------ (Amortized Cost $108,470) ........... 8.950 10/15/01 $ 106,747
-----------
CORPORATE BONDS -- 38.2%
$ 1,000,000 Alco Standard ....................... 8.875 4/15/01 1,013,338
1,000,000 Conseco, Inc. ....................... 6.400 6/15/01 750,000
1,175,000 EOP Operating LP .................... 6.376 2/15/02 1,143,467
888,000 Rep Ny Corp. ........................ 7.250 7/15/02 876,919
1,000,000 Asian Development Bank .............. 5.750 5/19/03 954,098
350,000 Simon Debart LP ..................... 6.625 6/15/03 329,985
1,000,000 Salomon Smith Barney Holdings, Inc. . 6.625 11/15/03 964,335
1,300,000 Household Finance Corp. ............. 5.875 9/25/04 1,194,921
750,000 Lehman Brothers Holdings ............ 7.750 1/15/05 729,460
1,100,000 Emerson Electric .................... 7.875 6/1/05 1,113,930
1,000,000 Chilgener S.A ....................... 6.500 1/15/06 877,714
1,000,000 Worldcom, Inc. ...................... 8.000 5/15/06 1,000,484
252,000 National Rural Utilities ............ 5.750 11/1/08 219,930
1,000,000 Goldman Sachs ....................... 7.800 1/28/10 961,382
725,000 Sempra Energy ....................... 7.950 3/1/10 708,395
400,000 MONY Group, Inc. .................... 8.350 3/15/10 391,567
800,000 Penney (J.C.) Co. ................... 7.400 4/1/37 701,288
------------ ------------
$ 14,740,000 TOTAL CORPORATE BONDS
------------ (Amortized Cost $14,568,368) ........ $ 13,931,213
------------
$ 38,409,578 TOTAL INVESTMENT SECURITIES
============ (Amortized Cost $38,519,710) ........ $ 37,325,991
============
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SHORT/INTERMEDIATE TERM FIXED-INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
===========================================================================================
FACE MARKET
AMOUNT REPURCHASE AGREEMENTS(A) -- 0.4% VALUE
-------------------------------------------------------------------------------------------
<S> <C> <C>
$ 134,855 Fifth Third Bank, 5.90%, dated 5/31/00,
============ due 6/01/00, repurchase proceeds $134,877 $ 134,855
------------
TOTAL INVESTMENT SECURITIES AND
REPURCHASE AGREEMENTS -- 102.8% ..... $ 37,460,846
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.8%) (1,016,514)
------------
NET ASSETS -- 100.0% ................ $ 36,444,332
============
</TABLE>
(A) Repurchase agreements are fully collateralized by U.S. Government
obligations
FHLMC - Federal Home Loan Mortgage Corporation.
FNMA - Federal National Mortgage Association.
GNMA - Government National Mortgage Association.
DWARF - A 15-year mortgage pool issued by FNMA.
GNOME - A 15-year mortgage pool issued by FHLMC.
REMIC - Real Estate Mortgage Investment Conduit.
GOLD - A 30-year mortgage pool issued by FHLMC with a shorter coupon payment
delay period.
See accompanying notes to financial statements.
13
<PAGE>
EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 2000 (UNAUDITED)
================================================================================
MARKET
COMMON STOCKS -- 97.5% SHARES VALUE
--------------------------------------------------------------------------------
TECHNOLOGY-- 23.7%
3Com Corp. * ..................................... 21,500 $ 898,969
Applied Materials, Inc. * ........................ 6,000 501,000
At Home Corp. * .................................. 39,500 730,750
Compaq Computer Corp. ............................ 41,000 1,076,250
Dell Computer Corp. * ............................ 10,500 452,813
EMC Corp. * ...................................... 9,186 1,068,447
Hewlett-Packard Co. .............................. 12,600 1,513,575
Honeywell International, Inc. .................... 15,200 831,250
Intel Corp. ...................................... 9,600 1,196,400
Microsoft Corp. * ................................ 16,000 1,001,000
Motorola, Inc. ................................... 13,000 1,218,750
Nortel Networks Corp. ............................ 20,000 1,086,250
QUALCOMM, Inc. * ................................. 4,500 298,688
Siebel Systems, Inc. * ........................... 136 15,912
Vodafone Airtouch PLC ............................ 32,000 1,466,000
------------
13,356,054
------------
HEALTH CARE-- 13.8%
Abbott Laboratories .............................. 35,700 1,452,544
Becton, Dickinson & Co. .......................... 47,500 1,386,406
Bristol-Myers Squibb Co. ......................... 15,500 853,469
Guidant Corp. * .................................. 28,000 1,417,500
Lilly (Eli) & Co. ................................ 17,500 1,332,188
Schering-Plough Corp. ............................ 27,000 1,306,125
------------
7,748,232
------------
FINANCIAL SERVICES-- 12.0%
American Express Co. ............................. 18,000 968,625
American International Group, Inc. ............... 9,608 1,081,500
Chubb Corp. ...................................... 15,500 1,085,000
Citigroup, Inc. .................................. 13,500 839,531
Fannie Mae ....................................... 26,700 1,605,338
FleetBoston Financial Corp. ...................... 30,688 1,160,390
------------
6,740,384
------------
CAPITAL GOODS-- 10.2%
Avery Dennison Corp. ............................. 21,000 1,286,250
Danaher Corp. .................................... 21,500 1,036,031
Illinois Tool Works, Inc. ........................ 9,000 522,563
Molex, Inc. - Class A ............................ 32,132 1,184,886
Thermo Electron Corp. * .......................... 89,750 1,665,984
------------
5,695,714
------------
COMMUNICATION SERVICES-- 9.8%
America Online, Inc. * ........................... 11,000 583,000
AT&T Corp. ....................................... 30,500 1,057,969
Leap Wireless International, Inc. * .............. 1,750 77,000
Lucent Technologies, Inc. ........................ 20,000 1,147,500
Qwest Communications International, Inc. * ....... 17,000 719,312
SBC Communications, Inc. ......................... 12,000 524,250
14
<PAGE>
EQUITY FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
MARKET
COMMON STOCKS -- 97.5% (CONTINUED) SHARES VALUE
--------------------------------------------------------------------------------
COMMUNICATION SERVICES-- 9.8% (Continued)
US WEST, Inc. .................................... 7,000 $ 504,000
WorldCom, Inc. * ................................. 23,000 865,375
------------
5,478,406
------------
CONSUMER STAPLES-- 9.5%
Bestfoods ........................................ 20,000 1,290,000
Gillette Co. ..................................... 17,500 584,062
McDonald's Corp. ................................. 25,000 895,312
PepsiCo, Inc. .................................... 27,800 1,131,112
Sysco Corp. ...................................... 33,500 1,404,906
------------
5,305,392
------------
ENERGY-- 8.4%
Apache Corp. ..................................... 11,000 669,625
Conoco, Inc. - Class B ........................... 51,468 1,466,838
Exxon Mobil Corp. ................................ 19,201 1,599,683
Schlumberger Ltd. ................................ 13,500 993,094
------------
4,729,240
------------
BASIC MATERIALS-- 4.0%
Du Pont (E.I.) de Nemours and Co. ................ 14,587 714,763
Ecolab, Inc. ..................................... 39,300 1,503,225
------------
2,217,988
------------
CONSUMER CYCLICALS-- 3.5%
H&R Block, Inc. .................................. 33,000 1,018,875
Nike, Inc. - Class B ............................. 22,500 964,688
------------
1,983,563
------------
TRANSPORTATION-- 2.6%
Landstar System, Inc. * .......................... 27,900 1,485,675
------------
TOTAL COMMON STOCKS (Cost $40,725,444) ........... $ 54,740,648
------------
================================================================================
FACE MARKET
REPURCHASE AGREEMENTS(A) -- 2.3% AMOUNT VALUE
--------------------------------------------------------------------------------
Fifth Third Bank, 5.90%, dated 5/31/00, due
6/01/00, repurchase proceeds $1,261,479 .......... $ 1,261,272 $ 1,261,272
============ ------------
TOTAL COMMON STOCKS AND REPURCHASE AGREEMENTS -- 99.8% $ 56,001,920
OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% .... 126,513
------------
NET ASSETS -- 100.0% ............................. $ 56,128,433
============
* Non-income producing security.
(A) Repurchase agreements are fully collateralized by U.S. Government
obligations.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
15
<PAGE>
BRUNDAGE, STORY AND ROSE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000 (UNAUDITED)
================================================================================
1. ORGANIZATION
Brundage, Story and Rose Investment Trust (the Trust) was organized as an Ohio
business trust on October 1, 1990. The Trust offers two series of shares to
investors: the Brundage, Story and Rose Short/Intermediate Term Fixed-Income
Fund and the Brundage, Story and Rose Equity Fund (collectively, the Funds). The
Trust commenced operations on December 3, 1990, when Brundage, Story and Rose,
LLC (the Adviser) purchased the initial 5,000 shares of each Fund at $10 per
share. The public offering of shares commenced on January 2, 1991.
The Brundage, Story and Rose Short/Intermediate Term Fixed-Income Fund (the Bond
Fund) seeks to provide a higher and more stable level of income than a money
market fund but with more volatility and with more principal stability than a
mutual fund investing in intermediate and long-term fixed-income securities but
at a lower level of income. The Bond Fund invests primarily in short and
intermediate-term fixed-income securities.
The Brundage, Story and Rose Equity Fund (the Equity Fund) seeks to provide
protection and enhancement of capital, current income and growth of income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Funds' significant accounting policies:
Securities valuation -- The Funds' portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange (normally
4:00 p.m., Eastern time). Securities which are traded on stock exchanges or are
quoted by NASDAQ are valued at the last reported sale price or, if not traded on
a particular day, at the closing bid price. Securities traded in the
overthe-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price, if available, otherwise, at the last quoted bid price. U.S.
Government and agency obligations, asset-backed securities and corporate bonds
are valued at their most recent bid price as obtained from one or more of the
major market makers for such securities or are valued on the basis of prices
provided by an independent pricing service giving consideration to such factors
as maturity, coupon, issuer and type of security. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith in accordance with consistently applied procedures established by and
under the general supervision of the Board of Trustees.
Repurchase agreements -- Repurchase agreements, which are collateralized by U.S.
Government obligations, are valued at cost which, together with accrued
interest, approximates market. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Funds' custodian at the Federal
Reserve Bank. At the time each Fund enters into a repurchase agreement, the
seller agrees that the value of the underlying securities, including accrued
interest, will be equal to or exceed the face amount of the repurchase
agreement. Each Fund enters into repurchase agreements only with institutions
deemed to be creditworthy by the Adviser, including the Funds' custodian, banks
having assets in excess of $10 billion and primary U.S. Government securities
dealers.
Share valuation -- The net asset value of each Fund is calculated daily by
dividing the total value of that Fund's assets, less liabilities, by the number
of shares outstanding. The offering and redemption price per share of each Fund
are equal to the net asset value per share.
Investment income -- Interest income is accrued as earned. Dividend income is
recorded on the ex-dividend date. Discounts and premiums on securities purchased
are amortized in accordance with income tax regulations.
Distributions to shareholders -- Dividends arising from net investment income
for the Bond Fund are declared daily and paid monthly. Dividends arising from
net investment income for the Equity Fund are declared and paid quarterly. With
respect to each Fund, net realized short-term capital gains, if any, may be
distributed throughout the year and net realized long-term capital gains, if
any, are distributed at least once each year. Income distributions and capital
gain distributions are determined in accordance with income tax regulations.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are accounted for on a specific identification basis.
16
<PAGE>
Securities traded on a to-be-announced basis -- The Bond Fund periodically
trades portfolio securities on a "to-be-announced" (TBA) basis. In a TBA
transaction, the Fund has committed to purchase securities for which all
specific information is not yet known at the time of the trade, particularly the
face amount and maturity date in mortgage-backed and asset-backed securities
transactions. Securities purchased on a TBA basis are recorded on the trade
date, however, they are not settled until they are delivered to the Fund,
normally 15 to 45 days later. These transactions are subject to market
fluctuations and their current value is determined in the same manner as for
other portfolio securities. When effecting such transactions, assets of a dollar
amount sufficient to make payment for the portfolio securities to be purchased
are placed in a segregated account on the trade date.
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 and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax -- It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies
and distributes at least 90% of its taxable net income, the Fund (but not the
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as dividends
in each calendar year at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains (earned during the
fiscal year ended November 30) plus undistributed amounts from prior years.
The following information is based upon federal income tax cost of portfolio
investments (excluding repurchase agreements) as of May 31, 2000:
--------------------------------------------------------------------------------
BOND EQUITY
FUND FUND
--------------------------------------------------------------------------------
Gross unrealized appreciation ................ $ 82,283 $ 16,681,220
Gross unrealized depreciation ................ (1,280,012) (2,791,395)
------------ ------------
Net unrealized appreciation (depreciation) ... $ (1,197,729) $ 13,889,825
============ ============
Federal income tax cost ...................... $ 38,658,575 $ 42,112,095
============ ============
--------------------------------------------------------------------------------
The difference between the financial statement cost and the federal income tax
cost of portfolio investments is due to certain timing differences in the
recognition of capital losses under generally accepted accounting principles and
income tax regulations.
As of May 31, 2000, the Bond Fund had capital loss carryforwards for federal
income tax purposes of $153,995 which expire on November 30, 2007. These capital
loss carryforwards may be utilized in the current and future years to offset net
realized gains prior to distributing any such gains to shareholders.
3. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales and maturities of investment
securities, other than short-term investments, amounted to $33,581,942 and
$34,917,321, respectively, for the Bond Fund, and $19,533,276 and $17,987,240,
respectively, for the Equity Fund during the six months ended May 31, 2000.
4. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are principals of the Adviser.
Certain officers of the Trust are officers of Integrated Fund Services, Inc.
(IFS), the administrative services agent, shareholder servicing and transfer
agent, and accounting services agent for the Trust, or of IFS Fund Distributors,
Inc., the exclusive underwriter of the Funds' shares.
As of May 31, 2000, the Adviser, principals of the Adviser and certain employee
benefit plans of the Adviser were, collectively, a significant shareholder of
record of each Fund.
ADVISORY AGREEMENT
Each Fund's investments are managed by the Adviser pursuant to the terms of an
Advisory Agreement. Under the Advisory Agreement, the Bond Fund and the Equity
Fund each pay the Adviser a fee, computed and accrued daily and paid monthly, at
an annual rate of 0.50% and 0.65%, respectively, of average daily net assets.
17
<PAGE>
In order to reduce the operating expenses of the Bond Fund, the Adviser
voluntarily waived $88,418 of its investment advisory fees during the six months
ended May 31, 2000.
ADMINISTRATIVE SERVICES AGREEMENT
Under the terms of an Administrative Services Agreement with the Trust, IFS
supplies non-investment related statistical and research data, internal
regulatory compliance services and executive and administrative services for the
Funds. IFS supervises the preparation of tax returns, reports to shareholders of
the Funds, reports to and filings with the Securities and Exchange Commission
and state securities commissions and materials for meetings of the Board of
Trustees. For these services, IFS receives a monthly fee from each Fund at an
annual rate of 0.20% on each Fund's respective average daily net assets up to
$50 million; 0.175% on such net assets between $50 and $100 million; and 0.15%
on such net assets in excess of $100 million, subject to a $1,000 minimum
monthly fee from each Fund.
TRANSFER AGENT AND SHAREHOLDER SERVICE AGREEMENT
Under the terms of the Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement with the Trust, IFS maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of each Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, IFS receives a monthly fee at an annual
rate of $19.50 per shareholder account from the Bond Fund and $15.00 per
shareholder account from the Equity Fund, subject to a $1,200 minimum monthly
fee from each Fund. In addition, each Fund pays IFS out-of-pocket expenses
including, but not limited to, postage and supplies.
ACCOUNTING SERVICES AGREEMENT
Under the terms of the Accounting Services Agreement with the Trust, IFS
calculates the daily net asset value per share and maintains the financial books
and records of each Fund. For these services, IFS receives a monthly fee, based
on current asset levels, of $3,000 from the Bond Fund and $2,700 from the Equity
Fund. In addition, each Fund pays certain out-of-pocket expenses incurred by IFS
in obtaining valuations of such Fund's portfolio securities.
PLAN OF DISTRIBUTION
The Trust has adopted a plan of distribution (the Plan) under which each Fund
may directly incur or reimburse the Adviser for expenses related to the
distribution and promotion of Fund shares. The annual limitation for payment of
such expenses under the Plan is 0.25% of the average daily net assets of each
Fund.
5. CAPITAL SHARE TRANSACTIONS
Proceeds and payments on capital shares sold and redeemed as shown in the
Statements of Changes in Net Assets are the result of the following capital
share transactions for the periods shown:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
BOND FUND EQUITY FUND
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
MAY 31, ENDED MAY 31, ENDED
2000 NOVEMBER 30, 2000 NOVEMBER 30,
(UNAUDITED) 1999 (UNAUDITED) 1999
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................. 187,338 412,442 186,843 183,550
Shares issued in reinvestment
of distributions to shareholders ......... 96,615 191,704 194,269 145,475
Shares redeemed ............................. (398,370) (473,265) (112,219) (173,018)
---------- ---------- ---------- ----------
Net increase (decrease) in shares outstanding (114,417) 130,881 268,893 156,007
Shares outstanding, beginning of year ....... 3,709,392 3,578,511 2,246,131 2,090,124
---------- ---------- ---------- ----------
Shares outstanding, end of year ............. 3,594,975 3,709,392 2,515,024 2,246,131
========== ========== ========== ==========
--------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
19
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
20
