JUNDT GROWTH FUND
JUNDT U.S. EMERGING GROWTH FUND
JUNDT OPPORTUNITY FUND
JUNDT TWENTY-FIVE FUND
JUNDT MID-CAP GROWTH FUND
JUNDT SCIENCE & TECHNOLOGY FUND
1550 UTICA AVENUE SOUTH, SUITE 950
MINNEAPOLIS, MINNESOTA 55416
1-800-370-0612
STATEMENT OF ADDITIONAL INFORMATION
DATED JULY 1, 2000
(SUPPLEMENTED ON NOVEMBER 1, 2000)
The Jundt Growth Fund, Inc. ("Growth Fund"), Jundt U.S. Emerging Growth
Fund ("U.S. Emerging Growth Fund"), Jundt Opportunity Fund ("Opportunity Fund"),
Jundt Twenty-Five Fund ("Twenty-Five Fund"), Jundt Mid-Cap Growth Fund ("Mid-Cap
Growth Fund") and Jundt Science & Technology Fund ("Science & Technology Fund")
(collectively, the "Funds") are professionally managed mutual funds. Investors
in each Fund become Fund shareholders. Each Fund offers its shares in four
classes (Classes A, B, C and I), each subject to different selling and other
expenses. U.S. Emerging Growth Fund, Opportunity Fund, Twenty-Five Fund, Mid-Cap
Growth Fund and Science & Technology Fund are separately managed series of Jundt
Funds, Inc.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Funds' applicable Prospectus, dated July 1, 2000
(supplemented on November 1, 2000) (the "Prospectus"), which has been filed with
the Securities and Exchange Commission (the "SEC"). To obtain a copy of the
Prospectus, please call the Funds at 1-800-370-0612 or your investment
executive.
The Schedules of Investments, Notes to Schedules of Investments, Financial
Statements, Notes to Financial Statements and Independent Auditors' Report
contained in the Annual Report of The Jundt Growth Fund, Inc. and Jundt Funds,
Inc. dated December 31, 1999 (File Nos. 811-06317 and 811-09128, respectively)
are incorporated herein by reference. You may obtain a copy of the Annual
Report without charge by calling the Funds at 1-800-370-0612.
TABLE OF CONTENTS
PAGE
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Investment Policies ....................................................... B-2
Investment Restrictions ................................................... B-9
Taxes ..................................................................... B-11
Advisory, Administrative and Distribution Agreements ...................... B-11
Special Purchase Plans .................................................... B-16
Monthly Cash Withdrawal Plan .............................................. B-18
Compensation to Firms Selling Fund Shares ................................. B-18
Determination of Net Asset Value .......................................... B-19
Calculation of Performance Data ........................................... B-22
Directors and Officers .................................................... B-27
Counsel and Auditors ...................................................... B-30
General Information ....................................................... B-30
Financial and Other Information ........................................... B-35
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS STATEMENT OF ADDITIONAL
INFORMATION OR IN THE PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE JUNDT
GROWTH FUND, INC., JUNDT FUNDS, INC. OR THE FUNDS' INVESTMENT ADVISER OR
DISTRIBUTOR. NEITHER THIS STATEMENT OF ADDITIONAL INFORMATION NOR THE PROSPECTUS
CONSTITUTES AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, SHARES OF
ANY FUND IN ANY STATE OR JURISDICTION IN WHICH SUCH OFFERING OR SOLICITATION MAY
NOT LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS STATEMENT OF ADDITIONAL
INFORMATION NOR ANY SALE MADE HEREUNDER (OR UNDER THE PROSPECTUS) SHALL CREATE
ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
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INVESTMENT POLICIES
Growth Fund is an open-end diversified management investment company. U.S.
Emerging Growth Fund is a "diversified" series, and each of Opportunity Fund,
Twenty-Five Fund, Mid-Cap Growth Fund and Science & Technology Fund is a
"non-diversified" series, of Jundt Funds, Inc., also an open-end management
investment company. Each Fund's investment objective and principal investment
policies and strategies are set forth in the Prospectus. The following
information is intended to supplement the Prospectus disclosures.
OPTIONS
Each Fund may purchase and sell put and call options on its portfolio
securities to protect against changes in market prices when the Fund's
investment adviser believes that market conditions make it advisable to do so.
In addition, Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth Fund and Science
& Technology Fund may purchase and sell options on an opportunistic basis to
generate additional investment returns. There is no assurance that the use of
put and call options will achieve these desired objectives and could result in
losses.
CALL OPTIONS. Each Fund may sell covered call options on its securities and
securities indices to realize a greater current return, through the receipt of
premiums, than it would realize on its securities alone. A call option gives the
holder the right to purchase, and obligates the seller to sell, a security at
the exercise price at any time before the expiration date. A call option is
"covered" if the seller, at all times while obligated as a seller, either owns
the underlying securities (or comparable securities satisfying the cover
requirements of the securities exchanges), or has the right to immediately
acquire such securities. In addition to covered call options, Opportunity Fund,
Twenty-Five Fund, Mid-Cap Growth Fund and Science & Technology Fund may sell
uncovered (or "naked") call options; however, SEC rules require that such Funds
segregate assets on their books and records with a value equal to the value of
the securities or the index that the holder of the option is entitled to call.
In return for the premiums received when it sells a covered call option, a
Fund gives up some or all of the opportunity to profit from an increase in the
market price of the securities covering the call option during the life of the
option. The Fund retains the risk of loss should the price of such securities
decline. If the option expires unexercised, the Fund realizes a gain equal to
the premium, which may be offset by a decline in price of the underlying
security. If the option is exercised, the Fund realizes a gain or loss equal to
the difference between the Fund's cost for the underlying security and the
proceeds of sale (exercise price minus commission) plus the amount of the
premium.
A Fund may terminate a call option that it has sold before it expires by
entering into a closing purchase transaction. The Fund may enter into closing
transactions in order to free itself to sell the underlying security or to sell
another call option on the security, realize a profit on a previously written
call option, or protect a security from being called in an unexpected market
rise. Any profits from a closing purchase transaction may be offset by a decline
in the value of the underlying security. Conversely, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.
PUT OPTIONS. Each Fund may sell covered put options in order to enhance its
current return. A put option gives the holder the right to sell, and obligates
the seller to buy, a security, or the notional value of an index, at the
exercise price at any time before the expiration date. A put option is "covered"
if the seller segregates permissible collateral equal to the price to be paid if
the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, a Fund also receives
interest on the cash and debt securities maintained to cover the exercise price
of the option. By writing a put option, the Fund assumes the risk that it may be
required to purchase the underlying security for an exercise price higher than
its then current market value, resulting in a potential capital loss unless the
security later appreciates in value.
A Fund may terminate a put option that it has written before it expires by
a closing purchase transaction. Any loss from this transaction may be partially
or entirely offset by the premium received on the terminated option.
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PURCHASING PUT AND CALL OPTIONS. Each Fund may also purchase put options to
protect portfolio holdings against a decline in market value. This practice is
often referred to as "hedging." This protection lasts for the life of the put
option because the Fund, as a holder of the option, may sell the underlying
security or index at the exercise price regardless of any decline in its market
price. In order for a put option to be profitable, the market price of the
underlying security or index must decline sufficiently below the exercise price
to cover the premium and transaction costs that the Fund must pay. These costs
will reduce any profit the Fund might have realized had it sold the underlying
security instead of buying the put option.
Each Fund may purchase call options to hedge against an increase in the
price of securities that the Fund ultimately wants to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security (or an index representative
of the underlying security) at the exercise price regardless of any increase in
the underlying security's or index's market price. In order for a call option to
be profitable, the market price of the underlying security or index must rise
sufficiently above the exercise price to cover the premium and transaction
costs. These costs will reduce any profit the Fund might have realized had it
bought the underlying security at the time it purchased the call option.
Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth Fund and Science &
Technology Fund may also purchase put and call options to enhance their current
returns.
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve certain
risks, including the risks that Jundt Associates, Inc., each Fund's investment
adviser (the "Investment Adviser"), will not forecast market movements
correctly, that a Fund may be unable at times to close out such positions, or
that hedging transactions may not accomplish their purpose because of imperfect
market correlations.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, a Fund may be forced to continue to hold, or to
purchase at a fixed price, a security on which it has sold an option at a time
when the Investment Adviser believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other unforeseen
events might cause The Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict the Funds' use of
options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Funds and other clients
of the Investment Adviser may be considered such a group. These position limits
may restrict a Fund's ability to purchase or sell options on particular
securities.
Options which are not traded on national securities exchanges may be closed
out only with the other party to the option transaction. For that reason, it may
be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
SPECIAL EXPIRATION PRICE OPTIONS. Each Fund may purchase over-the-counter
("OTC") put and call options with respect to specified securities ("special
expiration price options") pursuant to which the Fund in effect may create a
custom index relating to a particular industry or sector that the Investment
Adviser believes will increase or decrease in value generally as a group. In
exchange for a premium, the counterparty, whose performance is guaranteed by a
broker-dealer, agrees to purchase (or sell) a specified number of shares of a
particular stock at a specified price and further agrees to cancel the option at
a specified price that decreases straight line over the term of the option.
Thus, the value of the special expiration price option is comprised of the
market value of the applicable underlying security relative to the option
exercise price and the value of the remaining premium. However, if the value of
the underlying security increases (or decreases) by a pre-negotiated amount, the
special expiration price option is canceled and becomes worthless. A portion of
the dividends during the term of the option are applied to reduce the exercise
price if the option is exercised. Brokerage commissions and other
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transaction costs will reduce a Fund's profits if a special expiration price
option is exercised. A Fund will not purchase special expiration price options
with respect to more than 25% of the value of its net assets.
FUTURES CONTRACTS
INDEX FUTURES CONTRACTS AND OPTIONS. Each Fund may buy and sell index
futures contracts and related options to protect against changes in market
prices when the Fund's investment adviser believes that market conditions make
it advisable to do so. In addition, Opportunity Fund, Twenty-Five Fund, Mid-Cap
Growth Fund and Science & Technology Fund may purchase and sell such securities
on an opportunistic basis to attempt to increase investment return. A stock
index futures contract is a contract to buy or sell units of a stock index at a
specified future date at a price agreed upon when the contract is made. A unit
is the current value of the stock index.
The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index (the "S&P 100
Index") is composed of 100 selected common stocks, most of which are listed on
the New York Stock Exchange. The S&P 100 Index assigns relative weightings to
the common stocks included in the Index, and the Index fluctuates with changes
in the market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units x $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if a Fund enters into a futures contract to buy 100
units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units x gain of $4). If a Fund enters into a futures contract to sell
100 units of the stock index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $182 on that future date, the Fund will lose
$200 (100 units x loss of $2).
Positions in index futures contracts may be closed out only on an exchange
or board of trade which provides a secondary market for such futures contracts.
In order to hedge its investments successfully using futures contracts and
related options, a Fund must invest in futures contracts with respect to indexes
or sub-indexes the movements of which will, in the Investment Adviser's
judgment, have a significant correlation with movements in the prices of the
Fund's securities.
Options on index futures contracts give the purchaser the right, in return
for the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who fail
to exercise their options prior to the exercise date suffer a loss of the
premium paid.
As an alternative to purchasing and selling call and put options on index
futures contracts, each Fund may purchase and sell call and put options on the
underlying indexes themselves to the extent that such options are traded on
national securities exchanges. Index options are similar to options on
individual securities in that the purchaser of an index option acquires the
right to buy (in the case of a call) or sell (in the case of a put), and the
seller undertakes the obligation to sell or buy (as the case may be), units of
an index at a stated exercise price during the term of the option. Instead of
giving the right to take or make actual delivery of securities, the holder of an
index option has the right to receive a cash "exercise settlement amount." This
amount is equal to the amount by which the fixed exercise price of the option
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the date of the exercise, multiplied by
a fixed "index multiplier."
A Fund may purchase or sell options on stock indices in order to close out
outstanding positions in options on stock indices which it has purchased or may
allow such options to expire unexercised.
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Compared to the purchase or sale of futures contracts, the purchase of call
or put options on an index involves less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
MARGIN PAYMENTS. When a Fund purchases or sells a futures contract, it is
required to deposit with its custodian an amount of cash, U.S. Treasury bills,
or other permissible collateral equal to a small percentage of the amount of the
futures contract. This amount is known as "initial margin." The nature of the
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market." These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when a Fund sells a futures contract and the price of the
underlying index rises above the delivery price, the Fund's position declines in
value. The Fund then pays the broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the value of
the index underlying the futures contract. Conversely, if the price of the
underlying index falls below the delivery price of the contract, the Fund's
future position increases in value. The broker then must make a variation margin
payment equal to the difference between the delivery price of the futures
contract and the value of the index underlying the futures contract.
When a Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
Consistent with the rules and regulations of the Commodity Futures Trading
Commission exempting each Fund from regulation as a "commodity pool," each Fund
will not purchase or sell futures contracts or related options if, as a result,
the sum of the initial margin deposit on the Fund's existing futures and related
options positions and premiums paid for options on futures contracts entered
into for other than bona fide hedging purposes would exceed 5% of the Fund's
assets. (For options that are "in-the-money" at the time of purchase, the amount
by which the option is "in-the-money" is excluded from this calculation.)
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market for such futures
contracts. Although each Fund intends to purchase or sell futures contracts only
on exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular futures contract or at any
particular time. If there is not a liquid secondary market at a particular time,
it may not be possible to close a futures contract position at such time and, in
the event of adverse price movements, a Fund would continue to be required to
make daily variation margin payments. However, in the event financial futures
contracts are used to hedge portfolio securities, such securities will not
generally be sold until the financial futures contracts can be terminated. In
such circumstances, an increase in the price of the portfolio securities, if
any, may partially or completely offset losses on the financial futures
contracts.
The ability to establish and close out positions in options on futures
contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
each Fund generally will purchase only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option or at any particular
time. In the event no such market exists for particular options, it might not be
possible to effect closing transaction in such options, with the result that a
Fund would have to exercise the options in order to realize any profit.
HEDGING RISK. There are several risks in connection with the use by a Fund
of futures contracts and related options as a hedging device. One risk arises
because of the imperfect correlation between
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movements in the prices of the futures contracts and options and movements in
the underlying securities or index or movements in the prices of the Fund's
securities which are the subject of the hedge. The Investment Adviser will
attempt to reduce the risk by purchasing and selling, to the extent possible,
futures contracts and related options on securities and indexes the movements of
which will, in its judgment, correlate closely with movements in the prices of
the underlying securities or index and the Fund's portfolio securities sought to
be hedged.
Successful use of futures contracts and options by a Fund for hedging
purposes is also subject to the Investment Adviser's ability to predict
correctly movements in the direction of the market. It is possible that, where a
Fund has purchased puts on futures contracts to hedge its portfolio against a
decline in the market, the securities or index on which the puts are purchased
may increase in value and the value of securities held in the portfolio may
decline. If this occurred, the Fund would lose money on the puts and also
experience a decline in value in its portfolio securities. In addition, the
prices of futures contracts, for a number of reasons, may not correlate
perfectly with movements in the underlying securities or index due to certain
market distortions. All participants in the futures market are subject to margin
deposit requirements. Such requirements may cause investors to close futures
contracts through offsetting transactions which could distort the normal
relationship between the underlying security or index and futures contracts
markets. Further, the margin requirements in the futures contracts markets are
less onerous than margin requirements in the securities markets in general, and
as a result the futures contracts markets may attract more speculators than the
securities markets do. Increased participation by speculators in the futures
contracts markets may also cause temporary price distortions. Due to the
possibility of price distortion, even a correct forecast of general market
trends by the Investment Adviser may not result in a successful hedging
transaction over a short time period.
Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth Fund and Science &
Technology Fund may use futures contracts and related options to enhance
investment returns in addition to hedging against market risk. Such use of
futures contracts involves risk similar to the use of leverage. Within
applicable regulatory limits (which require that each Fund segregate securities
and other assets on its books and records with a value equal to the value of all
long futures contracts positions, less margin deposits), Opportunity Fund,
Twenty-Five Fund, Mid-Cap Growth Fund and Science & Technology Fund can be
subject to the same degree of market risk as if approximately twice their net
assets were fully invested in securities. This may result in substantial
additional gains in rising markets, but likewise may result in substantial
additional losses in falling markets.
OTHER RISKS. Each Fund will incur brokerage fees in connection with its
futures contracts and options transactions. In addition, while futures contracts
and options on futures contracts will be purchased and sold to reduce certain
risks, those transactions themselves entail certain other risks. Thus, while a
Fund may benefit from the use of futures contracts and related options,
unanticipated changes in market movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures contract position and the portfolio position which is
intended to be protected, the desired protection may not be obtained and a Fund
may be exposed to risk of loss.
FOREIGN SECURITIES
Each Fund may invest up to 25% of its total assets in securities of foreign
issuers. Each Fund may only purchase foreign securities that are represented by
American Depository Receipts listed on a domestic securities exchange or
included in the NASDAQ National Market System, or foreign securities listed
directly on a domestic securities exchange or included in the NASDAQ National
Market System. Interest or dividend payments on such securities may be subject
to foreign withholding taxes. The Funds' investments in foreign securities
involve considerations and risks not typically associated with investments in
securities of domestic companies, including unfavorable changes in currency
exchange rates, reduced and less reliable information about issuers and markets,
different accounting standards, illiquidity of securities and markets, local
economic or political instability and greater market risk in general.
INITIAL PUBLIC OFFERINGS
Each fund may invest in the securities of companies making initial public
offerings of their stock. Many of the companies making initial public offerings
have limited operating histories, making prospects
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for future profitability uncertain. Prices of initial public offerings may also
be unstable due to the absence of a prior public market and the small number of
shares available for trading.
DEBT SECURITIES
In normal market conditions, each Fund may invest up to 35% of its total
assets in "investment grade" debt securities. However, when the Investment
Adviser believes that a defensive investment posture is warranted, each Fund may
invest without limitation in investment grade debt securities. Debt securities
are "investment grade" if they are rated Baa or higher by Moody's Investors
Service, Inc. ("Moody's") or BBB or higher by Standard & Poor's Corporation
("S&P") or, if they are unrated, if the Investment Adviser believes that they
are comparable in quality. Securities rated Baa or BBB (and similar unrated
securities) lack outstanding investment characteristics, have speculative
characteristics, and are subject to greater credit and market risks than
higher-rated securities. A Fund will not necessarily dispose of an investment
if, after its purchase, its rating slips below investment grade. However, the
Investment Adviser will monitor such investments closely and will sell such
investments if the Investment Adviser at any time believes that it is in the
Fund's best interests. Each Fund may also invest in non-investment grade
"convertible" debt securities. See "Convertible Securities."
CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities. A convertible security (a
bond or preferred stock) may be converted at a stated price within a specified
period of time into a certain number of common shares of the same or a different
issuer. Convertible securities are senior to common stock in an issuer's capital
structure, but are usually subordinate to similar non-convertible securities.
While providing a fixed income stream (generally higher in yield than the income
from common stocks but lower than that afforded by a similar non-convertible
security), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation of
the issuer's common stock. Each Fund may invest in non-investment grade
convertible debt securities. Such securities (sometimes referred to as "junk
bonds") are considered speculative and may be in poor credit standing or even in
default as to payments of principal or interest. Moreover, such securities
generally are less liquid than investment grade debt securities.
INDEXED SECURITIES
Each Fund may purchase securities whose prices are indexed to the prices of
other securities, securities indices or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. The performance of indexed securities depends to a
great extent on the performance of the security or other instrument to which
they are indexed. At the same time, indexed securities are subject to the credit
risks associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations and certain U.S. Government
agencies.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. A repurchase agreement is a
contract under which a Fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). Each Fund presently intends to
enter into repurchase agreements only with member banks of the Federal Reserve
System and securities dealers meeting certain criteria as to creditworthiness
and financial condition established by the Board of Directors and only with
respect to obligations of the U.S. Government or its agencies or
instrumentalities or other high-quality, short-term debt obligations. Repurchase
agreements may also be viewed as loans made by a Fund which are collateralized
by the securities subject to repurchase. The Investment Adviser will monitor
such transactions to ensure that the value of the underlying securities will be
at least equal at all times to the total amount of the repurchase obligation,
including the interest factor. If the seller defaults, a Fund could realize a
loss on the sale of the underlying security to the extent that the proceeds of
sale are less than the resale price provided in the agreement including
interest. In addition, if the
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seller should be involved in bankruptcy or insolvency proceedings, a Fund may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's estate.
LEVERAGE
Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth Fund and Science &
Technology Fund may borrow money on an opportunistic basis to purchase
additional portfolio securities. Growth Fund and U.S. Emerging Growth Fund may
not borrow money for such purposes.
Leveraging a Fund creates an opportunity for increased net income but, at
the same time, creates special risk considerations. For example, leveraging may
exaggerate changes in the net asset value of a Fund's shares and in the yield on
the Fund's portfolio. Although the principal of such borrowings will be fixed,
the Fund's assets may change in value during the time the borrowing is
outstanding. Since any decline in value of the Fund's investments will be borne
entirely by the Fund's shareholders (and not by those persons providing the
leverage to the Fund), the effect of leverage in a declining market would be a
greater decrease in net asset value than if the Fund were not so leveraged.
Leveraging will create an interest expense for the Fund, which can exceed the
investment return (if any) from the borrowed funds. To the extent the investment
return derived from securities purchased with borrowed funds exceeds the
interest the Fund will have to pay, the Fund's investment return will be greater
than if leveraging were not used. Conversely, if the investment return from the
assets retained with borrowed funds is not sufficient to cover the cost of
leveraging, the investment return of the Fund will be less than if leveraging
were not used.
REVERSE REPURCHASE AGREEMENTS
In connection with its leveraging activities, Opportunity Fund, Twenty-Five
Fund, Mid-Cap Growth Fund and Science & Technology Fund may enter into reverse
repurchase agreements on an opportunistic basis. In reverse repurchase
agreements a Fund sells securities and agrees to repurchase them at a mutually
agreed date and time. A reverse repurchase agreement may be viewed as a
borrowing by the Fund, secured by the security which is the subject of the
agreement. In addition to the general risks involved in leveraging, reverse
repurchase agreements involve the risk that, in the event of the bankruptcy or
insolvency of the Fund's counterparty, the Fund would be unable to recover the
security which is the subject of the agreement, that the amount of cash or other
property transferred by the counterparty to the Fund under the agreement prior
to such insolvency or bankruptcy is less than the value of the security subject
to the agreement, or that the Fund may be delayed or prevented, due to such
insolvency or bankruptcy, from using such cash or property or may be required to
return it to the counterparty or its trustee or receiver.
SECURITIES LENDING
Each Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities,
cash or cash equivalents adjusted daily to have a market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities of the Fund loaned will not at any time exceed
one-third (or such other limit as the Board of Directors may establish) of the
total assets of the Fund. In addition, it is anticipated that the Fund may share
with the borrower some of the income received on the collateral for the loan or
that it will be paid a premium for the loan.
Before a Fund enters into a loan, the Investment Adviser considers all
relevant facts and circumstances, including the creditworthiness of the
borrower. The risks in lending portfolio securities, as with other extensions of
credit, consist of possible delay in recovery of the securities or possible loss
of rights in the collateral should the borrower fail financially. Although
voting rights or rights to consent with respect to the loaned securities pass to
the borrower, a Fund retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by the Fund if holders of such securities are asked to vote upon or consent to
matters materially affecting the investment. The Funds will not lend portfolio
securities to borrowers affiliated with the Funds.
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<PAGE>
SHORT SALES
Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth Fund and Science &
Technology Fund may seek to hedge investments through short sales when the
Fund's investment adviser believes that market conditions make it advisable to
do so. In addition, these Funds may sell securities short on an opportunistic
basis to generate additional investment returns. Short sales are transactions in
which a Fund sells a security it does not own, in anticipation of a decline in
the market value of that security. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated to
replace the security borrowed by purchasing it at the market price at or prior
to the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to repay the lender any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund also
may be required to pay a premium, which would increase the cost of the security
sold. The net proceeds of the short sale will be retained by the broker (or by
the Fund's custodian in a special custody account), to the extent necessary to
meet margin requirements, until the short position is closed out. A Fund also
will incur transaction costs in effecting short sales.
In addition, each Fund (including Growth Fund and U.S. Emerging Growth
Fund) may invest in short sales "against the box" to hedge investments in
portfolio securities. A short sale is "against the box" if a Fund owns, or has
the right to obtain at no added cost, securities identical to those sold short.
A Fund will incur a loss as a result of a short sale if the price of the
security increases between the date of the short sale and the date on which the
Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of the premium,
dividends, interest or expenses the Fund may be required to pay in connection
with the short sale. An increase in the value of the security sold short by the
Fund over the price at which it was sold short will result in a loss to the
Fund, and there can be no assurance that the Fund will be able to close out the
position at any particular time or at an acceptable price. Except in the case of
short sales "against the box," a Fund's market risk is unlimited in that the
increase in market price of the security sold short is unlimited.
ZERO-COUPON DEBT SECURITIES
Zero-coupon securities in which each Fund may invest are debt obligations
which are generally issued at a discount and payable in full at maturity, and
which do not provide for current payments of interest prior to maturity.
Zero-coupon securities usually trade at a deep discount from their face or par
value and are subject to greater market value fluctuations from changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest. As a result, the net asset value of shares of a
mutual fund investing in zero-coupon securities may fluctuate over a greater
range than shares of other mutual funds investing in securities making current
distributions of interest and having similar maturities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
is sold at a deep discount because the buyer receives only the right to receive
a future fixed payment on the security and does not receive any rights to
periodic cash interest payments. Once stripped or separated, the principal and
coupons may be sold separately. Typically, the coupons are sold separately or
grouped with other coupons with like maturity dates and sold in such bundled
form. Purchasers of stripped obligations acquire, in effect, discount
obligations that are economically identical to the zero-coupon securities issued
directly by the obligor.
Zero-coupon securities allow an issuer to avoid the need to generate cash
to meet current interest payments. Even though zero-coupon securities do not pay
current interest in cash, a Fund is nonetheless required to accrue interest
income on them and to distribute the amount of that interest at least annually
to shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its distribution requirements.
INVESTMENT RESTRICTIONS
Each Fund has adopted certain FUNDAMENTAL INVESTMENT RESTRICTIONS that may
not be changed except by a vote of shareholders owning a "majority of the
outstanding voting securities" of the Fund, as defined in the Investment Company
Act of 1940, as amended (the "Investment Company Act"). Under the Investment
Company Act, a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of: (a) more than 50% of the outstanding shares
of the Fund; or (b) 67% or more of the shares present at a meeting if more than
50% of the outstanding shares are represented
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<PAGE>
at the meeting in person or by proxy. In addition, each Fund has adopted certain
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS that may be changed by the Fund's Board
of Directors without the approval of the Fund's shareholders.
FUNDAMENTAL INVESTMENT RESTRICTIONS
None of the Funds may:
1. Borrow money in excess of limitations imposed by the Investment
Company Act of 1940;
2. Issue senior securities in excess of limitations imposed by the
Investment Company Act of 1940;
3. Concentrate its investments in a particular industry, as determined
in accordance with the Investment Company Act. Securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
shall not be considered to represent an "industry" within the meaning of
this limitation. However, a Fund may concentrate its investments in one or
more market sectors which may be made up of companies in a number of
related industries;
4. Acquire or sell real estate unless acquired as a result of
ownership of securities or another permissible instrument. This limitation
shall not prohibit the Fund from acquiring or selling investments that may
be backed or secured by real estate or interests in real estate or
investments in companies that deal in or own real estate or interests in
real estate;
5. Acquire or sell commodities or contracts relating to physical
commodities unless acquired as a result of the Fund's ownership of another
permissible instrument. This limitation shall not prohibit the Fund from
acquiring or selling investment that may be backed or secured by physical
commodities or investments in companies that deal in or own physical
commodities;
6. Make loans in excess of limitations imposed by the Investment
Company Act of 1940; or
7. Underwrite securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in selling
certain of its portfolio securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
None of the Funds may:
1. Make purchases on margin, although it may obtain short-term credit
necessary for the clearance of purchases and sales of its portfolio
securities, and except as required in connection with otherwise permissible
options, futures contracts, short selling and leverage activities (as
described elsewhere in the Funds' Prospectus and in this Statement of
Additional Information);
2. Mortgage, hypothecate, or pledge any of its assets as security for
any of its obligations, except as required to secure otherwise permissible
borrowings (including reverse repurchase agreements), short sales,
financial options and other hedging activities;
3. Invest in securities issued by other investment companies in excess
of limitations imposed by applicable law;
4. Make investments for the purpose of exercising control or
management;
5. Invest more than 15% of its net assets in illiquid securities; or
6. Purchase equity securities in private placements.
In addition, as a non-fundamental restriction, neither Growth Fund nor
U.S. Emerging Growth Fund may acquire additional portfolio securities while
borrowings of such Fund exceed 15% of its total assets.
* * *
With respect to each of the foregoing fundamental and non-fundamental
investment restrictions involving a percentage of a Fund's assets, if a
percentage restriction or limitation is adhered to at the time of an investment
or sale (other than a maturity) of a security, a later increase or decrease in
such percentage resulting from a change of values or net assets will not be
considered a violation thereof.
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<PAGE>
TAXES
Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). To
so qualify, each Fund must, among other things: (a) derive in each taxable year
at least 90% of its gross income from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies; and (b) satisfy
certain diversification requirements at the close of each quarter of the Fund's
taxable year.
As a regulated investment company, each Fund will not be liable for federal
income taxes on the part of its taxable net investment income and net capital
gains, if any, that it distributes to shareholders, provided it distributes at
least 90% of its "investment company taxable income" (as that term is defined in
the Code) to Fund shareholders in each taxable year. However, if for any taxable
year a Fund does not satisfy the requirements of Subchapter M of the Code, all
of its taxable income will be subject to tax at regular corporate rates without
any deduction for distributions to shareholders, and such distributions will be
taxable to shareholders as ordinary income to the extent of the Fund's current
or accumulated earnings and profits.
Each Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year each Fund must
distribute: (a) at least 98% of its taxable ordinary income (not taking into
account any capital gains or losses) for the calendar year; (b) at least 98% of
its capital gain net income for the twelve month period ending on October 31 (or
December 31, if the Fund so elects); and (c) any portion (not taxed to the Fund)
of the respective balances from the prior year. To the extent possible, each
Fund intends to make sufficient distributions to avoid this 4% excise tax.
Each Fund, or the shareholder's broker with respect to the Fund, is
required to withhold federal income tax at a rate of 31% of dividends, capital
gains distributions and proceeds of redemptions if a shareholder fails to
furnish the Fund with a correct taxpayer identification number ("TIN") or to
certify that he or she is exempt from such withholding, or if the Internal
Revenue Service notifies the Fund or broker that the shareholder has provided
the Fund with an incorrect TIN or failed to properly report dividend or interest
income for federal income tax purposes. Any such withheld amount will be fully
creditable on the shareholder's federal income tax return. An individual's TIN
is his or her social security number.
Each Fund may write, purchase or sell options or futures contracts.
Generally, options and futures contracts that are "Section 1256 contracts" will
be "marked to market" for federal income tax purposes at the end of each taxable
year, i.e., each option or futures contract will be treated as sold for its fair
market value on the last day of the taxable year. Gain or loss from transactions
in options and futures contracts that are subject to the "marked to market" rule
will be 60% long-term and 40% short-term capital gain or loss. However, a Fund
may be eligible to make a special election under which certain "Section 1256
contracts" would not be subject to the "marked to market" rule.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of each Fund's transactions in options and futures contracts. Under
Section 1092, a Fund may be required to postpone recognition for tax purposes of
losses incurred in certain closing transactions in options and futures
contracts.
ADVISORY, ADMINISTRATIVE AND DISTRIBUTION AGREEMENTS
INVESTMENT ADVISORY AGREEMENT
Jundt Associates, Inc. (the "Investment Adviser"), 1550 Utica Avenue
South, Suite 950, Minneapolis, Minnesota 55416, serves as each Fund's
investment adviser. James R. Jundt serves as Chairman of the Board and Chief
Executive Officer of the Investment Adviser and Marcus E. Jundt serves as the
Vice Chairman of the Investment Adviser. Marcus E. Jundt owns 95% of the
Investment Adviser's stock. A
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<PAGE>
trust benefiting James R. Jundt's children and grandchildren owns the remaining
5% of the Investment Adviser's stock. The Investment Adviser was incorporated in
December 1982.
The Investment Adviser has been retained as each Fund's investment adviser
pursuant to investment advisory agreements between the Investment Adviser and
each Fund (the "Investment Advisory Agreements"). Under the terms of the
Investment Advisory Agreements, the Investment Adviser furnishes continuing
investment supervision to each Fund and is responsible for the management of
each Fund's portfolio. The responsibility for making decisions to buy, sell or
hold a particular security rests with the Investment Adviser, subject to review
by the Board of Directors.
The Investment Adviser furnishes office space, equipment and personnel to
each Fund in connection with the performance of its investment management
responsibilities. In addition, the Investment Adviser pays the salaries and fees
of all officers and directors of each Fund who are affiliated persons of the
Investment Adviser.
Each Fund pays all other expenses incurred in its operation including, but
not limited to, brokerage and commission expenses; interest charges; fees and
expenses of legal counsel and independent auditors; the Fund's organizational
and offering expenses, whether or not advanced by the Investment Adviser; taxes
and governmental fees; expenses (including clerical expenses) of issuance, sale
or repurchase of the Fund's shares; membership fees in trade associations;
expenses of registering and qualifying shares of the Fund for sale under federal
and state securities laws; expenses of printing and distributing reports,
notices and proxy materials to existing shareholders; expenses of regular and
special shareholders meetings; expenses of filing reports and other documents
with governmental agencies; charges and expenses of the Fund's administrator,
custodian and registrar, transfer agent and dividend disbursing agent; expenses
of disbursing dividends and distributions; compensation of officers, directors
and employees who are not affiliated with the Investment Adviser; travel
expenses of directors for attendance at meetings of the Board of Directors;
insurance expenses; indemnification and other expenses not expressly provided
for in the Investment Advisory Agreement; and any extraordinary expenses of a
non-recurring nature.
For its services, the Investment Adviser receives from each of Growth Fund
and U.S. Emerging Growth Fund a monthly fee at an annual rate of 1.0% of the
Fund's average daily net assets and from each of Opportunity Fund, Twenty-Five
Fund, Mid-Cap Growth Fund and Science & Technology Fund a monthly fee at an
annual rate of 1.3% of the Fund's average daily net assets. During the fiscal
years ended December 31, 1997, 1998 and 1999, Growth Fund paid the Investment
Adviser fees of $906,945, $824,938 and $971,085, respectively; during the fiscal
years ended December 31, 1997, 1998 and 1999, U.S. Emerging Growth Fund paid the
Investment Adviser fees of $163,666, $214,784 and $498,766, respectively; during
the fiscal years ended December 31, 1997, 1998 and 1999, Opportunity Fund paid
the Investment Adviser fees of $61,941, $236,669 and $856,971, respectively; and
during the fiscal years ended December 31, 1998 and 1999, Twenty-Five Fund paid
the Investment Adviser fees of $42,951 and $452,191.
The Investment Advisory Agreements continue in effect from year to year, if
specifically approved at least annually by a majority of the Board of Directors,
including a majority of the directors who are not "interested persons" (as
defined in the Investment Company Act) of The Jundt Growth Fund, Inc., Jundt
Funds, Inc. or the Investment Adviser ("Independent Directors") at a meeting in
person. Each Investment Advisory Agreement may be terminated by either party, by
the Independent Directors or by a vote of the holders of a majority of the
outstanding securities of the Fund that is a party thereto, at any time, without
penalty, upon 60 days' written notice, and automatically terminates in the event
of its "assignment" (as defined in the Investment Company Act).
PORTFOLIO TRANSACTIONS, BROKERAGE COMMISSIONS AND PORTFOLIO TURNOVER RATE
The Investment Adviser is responsible for investment decisions and for
executing each Fund's portfolio transactions. The Funds have no obligation to
execute transactions with any particular broker-dealer. The Investment Adviser
seeks to obtain the best combination of price and execution for each Fund's
transactions. However, the Funds do not necessarily pay the lowest commission.
During the years ended December 31, 1997, 1998 and 1999, Growth Fund paid
commissions to brokers and futures commission merchants of $121,872, $134,262
and $152,337, respectively; during the
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<PAGE>
years ended December 31, 1997, 1998 and 1999, U.S. Emerging Growth Fund paid
commissions to brokers and futures commission merchants of $27,740, $89,565 and
$31,103, respectively; during the years ended December 31, 1997, 1998 and 1999,
Opportunity Fund paid commissions to brokers and futures commission merchants of
$21,502, $27,376 and $153,749, respectively; and, during the years ended
December 31, 1998 and 1999, Twenty-Five Fund paid commissions to brokers and
futures commission merchants of $9,175 and $49,142.
Other clients of the Investment Adviser have investment objectives similar
to those of the Funds. The Investment Adviser, therefore, may combine the
purchase or sale of investments for the Funds and its other clients. Such
simultaneous transactions may increase the demand for the investments being
purchased or the supply of the investments being sold, which may have an adverse
effect on price or quantity. The Investment Adviser's policy is to allocate
investment opportunities fairly among the clients involved, including the Funds.
When two or more clients are purchasing or selling the same security on a given
day from or through the same broker-dealer, such transactions are averaged as to
price.
Where best price and execution may be obtained from more than one
broker-dealer, the Investment Adviser may purchase and sell securities through
broker-dealers that provide research and other valuable information to the
Investment Adviser. Such information may be useful to the Investment Adviser in
providing services to clients other than the Funds.
Consistent with the rules and regulations of the National Association of
Securities Dealers, Inc., the Investment Adviser may, from time to time,
consider the distribution of Fund shares, and referrals of investors to
investment partnerships and other investment companies managed by the Investment
Adviser, when allocating transactions among broker-dealers that otherwise offer
best price and execution. The Investment Adviser may also agree from time to
time to direct a portion of a client's brokerage transactions to a particular
broker-dealer if such broker-dealer is among those that offer best price and
execution. Because the Investment Adviser frequently aggregates multiple
contemporaneous client purchase or sell orders into a block order for execution,
such considerations and directions may influence the Investment Adviser's
allocation of brokerage transactions for all client accounts. Pursuant to such
arrangements, during the year ended December 31, 1999, Growth Fund paid
commissions to brokers and futures commission merchants of $86,781, U.S.
Emerging Growth Fund paid commissions to brokers and futures commission
merchants of $6,762, Opportunity Fund paid commissions to brokers and futures
commission merchants of $115,351 and, Twenty-Five Fund paid commissions to
brokers and futures commission merchants of $28,404.
ADMINISTRATION AGREEMENT
Firstar Mutual Fund Services, LLC (the "Administrator"), 615 East Michigan
Street, 3rd Floor, Milwaukee, WI 53202-5207, an affiliate of the Funds'
custodian, performs various administrative and accounting services for the
Funds.
Each Fund has entered into an Administration Agreement with the
Administrator. The Administration Agreements will remain in effect unless and
until terminated in accordance with their terms. They may be terminated at any
time, without the payment of any penalty, by The Jundt Growth Fund, Inc. or
Jundt Funds, Inc. on 90 days' written notice to the Administrator and by the
Administrator on 90 days' written notice to The Jundt Growth Fund, Inc. or Jundt
Funds, Inc. The Administration Agreements terminate automatically in the event
of their assignment.
Under the terms of the administration agreement between the Administrator
and each Fund (the "Administration Agreements"), the Administrator performs or
arranges for the performance of the following administrative services to each
Fund: (a) maintenance and keeping of certain books and records of the Fund; (b)
preparation or review and filing of certain reports and other documents required
by federal, state and other applicable U.S. laws and regulations to maintain the
Funds' registrations as open-end investment companies; (c) coordination of tax
related matters; (d) responses to inquiries from Fund shareholders; (e)
calculati on and dissemination for publication of the net asset value of the
Fund's shares; (f) oversight and, as the Board of Directors may request,
preparation of reports and recommendations to the Board of Directors on the
performance of administrative and professional services rendered to the Fund by
others, including the Fund's custodian and any subcustodian, registrar, transfer
agency, and dividend disbursing agent, as well as accounting, auditing and other
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<PAGE>
services; (g) provision of competent personnel and administrative offices
necessary to perform its services under the Administration Agreement; (h)
arrangement for the payment of Fund expenses; (i) consultations with Fund
officers and various service providers in establishing the accounting policies
of the Fund; (j) preparation of such financial information and reports as may be
required by any banks from which the Fund borrows funds; and (k) provision of
such assistance to the Investment Adviser, the custodian and any subcustodian,
and the Fund's counsel and auditors as generally may be required to carry on
properly the business and operations of the Fund.
The Administrator is obligated, at its expense, to provide office space,
facilities, equipment and necessary personnel in connection with its provision
of services under the Administration Agreements; however, each Fund (in addition
to the fees payable to the Administrator under the Administration Agreement, as
described below) has agreed to pay reasonable travel expenses of persons who
perform administrative, clerical and bookkeeping functions on behalf of the
Fund. Additionally, the expenses of legal counsel and accounting experts
retained by the Administrator, after consulting with the Fund's counsel and
independent auditors, as may be necessary or appropriate in connection with the
Administrator's provision of services to the Fund, are deemed expenses of, and
shall be paid by, the Fund.
For the services rendered to each Fund and the facilities furnished, each
Fund is obliged to pay the Administrator, subject to an annual minimum fee of
$45,000 per Fund, a monthly fee at an annual rate of .11% of the first $200
million of the Fund's average daily net assets, .09% of the next $500 million of
the Fund's average daily net assets, and .07% on the Fund's average daily net
assets in excess of $700 million.
Prior to March 1, 2000, Princeton Administrators, L.P. served as the
administrator of the Funds. During the years ended December 31, 1997, 1998 and
1999, Growth Fund paid Princeton Administrators, L.P. fees of $181,389, $164,897
and $194,217, respectively; during the years ended December 31, 1997, 1998 and
1999, U.S. Emerging Growth Fund paid Princeton Administrators, L.P. fees of
$32,733, $42,957 and $99,253, respectively; during the years ended December 31,
1997, 1998 and 1999, Opportunity Fund paid Princeton Administrators, L.P. fees
of $9,529, $40,000 and $126,804, respectively; and, during the year ended
December 31, 1998 and 1999, Twenty-Five Fund paid the Administrator fees of
$40,000 and $83,900, respectively.
DISTRIBUTOR
Pursuant to Distribution Agreements by and between U.S. Growth Investments,
Inc. (the "Distributor") and each of the Funds (the "Distribution Agreements"),
the Distributor serves as the principal underwriter of each Fund's shares. Each
Fund's shares are offered continuously by and through the Distributor. As agent
of each Fund, the Distributor accepts orders for the purchase and redemption of
Fund shares. The Distributor may enter into selling agreements with other
dealers and financial institutions, pursuant to which such dealers and/or
financial institutions also may sell Fund shares.
12b-1 DISTRIBUTION PLANS
Rule 12b-1 under the Investment Company Act provides that any payments made
by a Fund (or any Class thereof) in connection with the distribution of its
shares must be pursuant to a written plan describing all material aspects of the
proposed financing of distribution and that any agreements entered into in
furtherance of the plan must likewise be in writing. In accordance with Rule
12b-1, each Fund adopted a separate 12b-1 Distribution Plan for each of its
Class A, Class B and Class C shares. There is no 12b-1 Distribution Plan for any
Fund's Class I shares.
Rule 12b-1 requires that the Distribution Plans (the "Plans") and the
Distribution Agreements be approved initially, and thereafter at least annually,
by a vote of the Board of Directors, including a majority of the directors who
are not interested persons of the Funds and who have no direct or indirect
interest in the operation of the Plans or in any agreement relating to the
Plans, cast in person at a meeting called for the purpose of voting on the plan
or agreement. Rule 12b-1 requires that each Distribution Agreement and each Plan
provide, in substance:
(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in the preceding paragraph;
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<PAGE>
(b) that any person authorized to direct the disposition of moneys
paid or payable by the Fund pursuant to the Plan or any related agreement
shall provide to the Board of Directors, and the directors shall review, at
least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made; and
(c) in the case of a Plan, that it may be terminated at any time by a
vote of a majority of the members of the Board of Directors who are not
interested persons of the Funds and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements
related to the Plan or by a vote of a majority of the outstanding voting
shares of each affected Class or Classes of the Fund's shares.
Rule 12b-1 further requires that none of the Plans may be amended to
increase materially the amount to be spent for distribution without approval by
the shareholders of the affected Class or Classes and that all material
amendments of the Plan must be approved in the manner described in the paragraph
preceding clause (a) above.
Rule 12b-1 provides that a Fund may rely upon Rule 12b-1 only if the
selection and nomination of the disinterested directors are committed to the
discretion of such disinterested directors. Rule 12b-1 provides that a Fund may
implement or continue the Plans only if the directors who vote to approve such
implementation or continuation conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law, and under
Sections 36(a) and (b) of the Investment Company Act, that there is a reasonable
likelihood that each Plan will benefit the Fund and its shareholders. The Board
of Directors has concluded that there is a reasonable likelihood that the
Distribution Plans will benefit the Funds and their shareholders.
Under its Distribution Plan, each of Class A, Class B and Class C of each
Fund pays the Distributor a service fee equal on an annual basis to .25% of the
average daily net assets attributable to each such Class. This fee is designed
to compensate the Distributor and certain broker-dealers and financial
institutions with which the Distributor has entered into selling arrangements
for the provision of certain services to the holders of Fund shares, including,
but not limited to, answering shareholder questions, providing shareholders with
reports and other information and providing various other services relating to
the maintenance of shareholder accounts.
The Distribution Plans of Class B and Class C of each Fund provide for the
additional payment of a distribution fee to the Distributor, equal on an annual
basis to .75% of the average daily net assets attributable to such Class. This
fee is designed to compensate the Distributor for advertising, marketing, and
distributing the Class B and Class C shares, including the provision of initial
and ongoing sales compensation to the Distributor's sales representatives and to
other broker-dealers and financial institutions with which the Distributor has
entered into selling arrangements.
The Funds compensate the Distributor as described above regardless of the
amount of the Distributor's expenses.
James R. Jundt is the sole owner of the Distributor and therefore has a
financial interest in the Plans.
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<PAGE>
For the year ended December 31, 1999, the Distributor earned the following
Rule 12b-1 distribution and service fees:
DISTRIBUTION SERVICE AGGREGATE
FEES FEES 12b-1 FEES
------------ -------- ----------
GROWTH FUND
Class A ................. N/A $ 5,438 $ 5,438
Class B ................. $ 14,242 4,747 18,989
Class C ................. 5,684 1,895 7,579
-------- -------- --------
$ 19,926 $ 12,080 $ 32,006
======== ======== ========
U.S. EMERGING GROWTH FUND
Class A ................. N/A $ 42,527 $ 42,527
Class B ................. $108,038 36,013 144,051
Class C ................. 69,979 23,326 93,305
-------- -------- --------
$178,017 $101,866 $279,883
======== ======== ========
OPPORTUNITY FUND
Class A ................. N/A $ 48,495 $ 48,495
Class B ................. $120,107 40,036 160,143
Class C ................. 81,046 27,015 108,061
-------- -------- --------
$201,153 $115,546 $316,699
======== ======== ========
TWENTY-FIVE FUND
Class A ................. N/A $ 28,656 $ 28,656
Class B ................. $ 66,347 22,116 88,463
Class C ................. 45,889 15,297 61,186
-------- -------- --------
$112,236 $ 66,069 $178,305
======== ======== ========
SPECIAL PURCHASE PLANS
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN; SUBACCOUNTING AGENTS
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, 3rd Floor,
Milwaukee, WI 53202-5207, serves as the Funds' transfer agent and dividend
disbursing agent. Firstar Bank, N.A., 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, serves as the Funds' custodian. In addition, the Funds
compensate certain broker-dealers that sell Fund shares for performing various
accounting and administrative services with respect to large street-name
accounts maintained by such broker-dealers.
AUTOMATIC INVESTMENT PLAN. As a convenience to investors, shares may be
purchased through an automatic investment plan. Under such a plan, the investor
authorizes a Fund to withdraw a specific amount (minimum dollars $50 per
withdrawal) from the investor's bank account and to invest such amount in shares
of the Fund. Such purchases are normally made on the 5th day of each month, or
the next business day thereafter. Further information is available from the
Distributor.
COMBINED PURCHASE PRIVILEGE. The following persons (or groups of persons)
may qualify for reductions from the front-end sales charge ("FESC") schedule for
Class A shares (and Growth Fund Class I shares, if eligible to purchase such
shares) set forth in the Prospectus by combining purchases of any Class of
shares of the Funds, if the combined purchase of all such shares totals at least
$25,000:
(i) an individual or a "company" as defined in Section 2(a)(8) of the
Investment Company Act;
(ii) an individual, his or her spouse and their children under
twenty-one, purchasing for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust
estate or single fiduciary account (including a pension, profit-sharing or
other employee benefit trust) created pursuant to a plan qualified under
Section 401 of the Code;
(iv) tax-exempt organizations enumerated in Section 501(c)(3) of the
Code;
(v) employee benefit plans of a single employer or of affiliated
employers;
B-16
<PAGE>
(vi) any organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company, and provided that
the purchase is made through a central administration, or through a single
dealer, or by other means which result in economy of sales effort or
expense. An organized group does not include a group of individuals whose
sole organizational connection is participation as credit cardholders of a
company, policyholders of an insurance company, customers of either a bank
or broker-dealer, or clients of an investment adviser.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A purchase of Class A
shares of a Fund (or Growth Fund Class I shares) may qualify for a Cumulative
Quantity Discount. The applicable FESC will then be based on the total of:
(i) the investor's current purchase; and
(ii) the net asset value (at the close of business on the previous
day) of shares of the Funds held by the investor; and
(iii) the net asset value of shares of any Class of shares of the
Funds owned by another shareholder eligible to participate with the
investor in a "Combined Purchase Privilege" (see above).
For example, if an investor owned shares worth $15,000 at the then current
net asset value and purchased an additional $10,000 of shares, the sales charge
for the $10,000 purchase would be at the rate applicable to a single $25,000
purchase.
To qualify for the Combined Purchase Privilege or to obtain the Cumulative
Quantity Discount on a purchase through a dealer, when each purchase is made the
investor or dealer must provide the Fund whose shares are being purchased with
sufficient information to verify that the purchase qualifies for the privilege
or discount.
LETTER OF INTENTION. Investors wishing to purchase Class A shares of a Fund
(or Growth Fund Class I Shares, if eligible to purchase such shares) may also
obtain the reduced FESC shown in the Prospectus by means of a written Letter of
Intention, which expresses the investor's intention to invest not less than
$25,000 (including certain "credits," as described below) within a period of 13
months in any Class of shares of the Funds. Each purchase of shares under a
Letter of Intention will be made at the public offering price applicable at the
time of such purchase to a single transaction of the dollar amount indicated in
the Letter of Intention. A Letter of Intention may include purchases of shares
made not more than 90 days prior to the date that an investor signs a Letter of
Intention; however, the 13-month period during which the Letter of Intention is
in effect will begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described above may
purchase shares under a single Letter of Intention.
For example, assume that an investor signs a Letter of Intention to invest
at least $25,000 as set forth above and that the investor and the investor's
spouse and children under twenty-one have previously invested $10,000 in shares
which are still held by such persons. It will only be necessary to invest a
total of $15,000 during the 13 months following the first date of purchase of
such shares in order to qualify for the sales charges applicable to investments
of $25,000.
The Letter of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intention is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased, the escrow will be
released. To the extent that an investor purchases more than the dollar amount
indicated on the Letter of Intention and qualifies for further reduced sales
charges, the sales charges will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in sales charges will be used to
purchase additional shares at the then current offering price applicable to the
actual amount of the aggregate purchases. Absent an instruction to the contrary,
such additional purchases shall be in shares of each Fund in proportion to the
respective number of shares held by such investor in each Fund at the time of
such additional purchases.
B-17
<PAGE>
Investors electing to take advantage of the Letter of Intention should
carefully review the appropriate provisions on the application form attached to
the Prospectus.
MONTHLY CASH WITHDRAWAL PLAN
Any investor who owns or buys shares of the Funds valued at $10,000 or more
at the current offering prices may open a Withdrawal Plan and have a designated
sum of money paid monthly to the investor or another person. Shares are
deposited in a Withdrawal Plan account and all distributions are reinvested at
net asset value in additional shares of the Fund to which such distributions
relate. Shares in a Withdrawal Plan account are then redeemed at net asset value
to make each withdrawal payment. Deferred sales charges may apply to monthly
redemptions of shares. Redemptions for the purpose of withdrawal are made on the
20th day of the month (or on the preceding business day if the 20th day falls on
a weekend or is a holiday) at that day's closing net asset value, and checks are
mailed on the next business day. Payments will be made to the registered
shareholder or to another party if preauthorized by the registered shareholder.
As withdrawal payments may include a return on principal, they cannot be
considered a guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with a Withdrawal Plan may result in a gain
or loss for tax purposes. Continued withdrawals in excess of income will reduce
and possibly exhaust invested principal, especially in the event of a market
decline. The maintenance of a Withdrawal Plan concurrently with purchases of
additional shares of a Class which imposes an FESC would normally be
disadvantageous to the investor because of the FESC payable on such purchases.
For this reason, an investor may not maintain an Automatic Investment Plan for
the accumulation of shares of a Class which imposes an FESC (other than through
reinvestment of distributions) and a Withdrawal Plan at the same time. Each Fund
or the Distributor may terminate or change the terms of the Withdrawal Plan at
any time. The Withdrawal Plan is fully voluntary and may be terminated by the
shareholder at any time without the imposition of any penalty.
Since the Withdrawal Plan may involve invasion of capital, investors should
consider carefully with their own financial advisers whether the Withdrawal Plan
and the specified amounts to be withdrawn are appropriate in their
circumstances. The Funds make no recommendations or representations in this
regard.
COMPENSATION TO FIRMS SELLING FUND SHARES
The Distributor receives all front-end sales charges ("FESCs"), contingent
deferred sales charges ("CDSCs") and 12b-1 distribution and service fees. These
charges are described in detail in the Prospectus. The Distributor pays portions
of the FESCs and 12b-1 fees to firms authorized to sell Fund shares ("Authorized
Firms"). Authorized Firms may be paid different amounts and types of
compensation depending upon which Class of shares is sold.
REALLOWANCE OF FESCs IN CONNECTION WITH SALES OF CLASS A AND GROWTH FUND'S
CLASS I SHARES SUBJECT TO A FESC. Sales of Class A shares, and certain sales of
Growth Fund Class I shares, are subject to a FESC. These charges are described
in detail in the Prospectus. The following table sets forth the FESC amount
received by the Authorized Firm with whom your investment executive is
associated (as a percentage of the offering price of the Class A or Class I
shares subject to a FESC):
FESC PAID TO
AMOUNT OF INVESTMENT AUTHORIZED FIRM
-------------------- ---------------
Less than $25,000 ......................... 4.50%
$25,000 but less than $50,000 ............. 4.25%
$50,000 but less than $100,000 ............ 3.50%
$100,000 but less than $250,000 ........... 2.50%
$250,000 but less than $1,000,000 ......... 1.75%
$1,000,000 and greater .................... *
------------------
*For investments of $1 million and greater, the Authorized Firm receives a
commission of 1% of the investment amount up to $2.5 million, .50% of the
amount between $2.5 million and $5 million and .25% of the amount over $5
million.
INITIAL COMPENSATION PAID TO AUTHORIZED FIRMS IN CONNECTION WITH SALES OF
CLASS B AND CLASS C SHARES. Although Fund shareholders do not pay a FESC in
connection with investments in Class B and Class C
B-18
<PAGE>
shares, the Distributor pays Authorized Firms initial compensation of 4% of the
amount invested in connection with purchases of Class B shares and initial
compensation of 1% of the amount invested in connection with purchases of Class
C shares.
REALLOWANCE OF 12b-1 SERVICE AND DISTRIBUTION FEES. In addition to initial
compensation paid to Authorized Firms in connection with sales of Fund shares,
as described above, the Distributor pays Authorized Firms an annual fee of .25%
of each Fund investment (beginning one year after the purchase date) for Class A
and Class B shares and an annual fee of 1% of each Fund investment (beginning
one year after the purchase date) for Class C shares.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is calculated separately for each Class of
shares of each Fund. The assets and liabilities attributable to each Class of
shares is determined in accordance with generally accepted accounting principles
and applicable SEC rules and regulations.
The portfolio securities in which each Fund invests fluctuate in value, and
hence each Fund's net asset value per share also fluctuates. On December 31,
1999, the net asset value and the maximum public offering price of each Class of
each of the following Fund's shares was calculated as follows:
GROWTH FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class A ($2,880,071)
Net Asset Value Per Share ($17.68) = ---------------------------------------------------
Class A Shares outstanding (162,931)
Net Asset Value Per Share ($17.68)
Maximum Public Offering Price Per Share ($18.66) = ------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class B ($3,650,156)
Net Asset Value Per Share ($17.07) = ---------------------------------------------------
Class B Shares outstanding (213,784)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C ($1,187,580)
Net Asset Value Per Share ($17.13) = ---------------------------------------------------
Class C Shares outstanding (69,341)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class I ($93,521,329)
Net Asset Value Per Share ($17.89) = ----------------------------------------------------
Class I Shares outstanding (5,228,627)
Net Asset Value Per Share ($17.89)
Maximum Public Offering Price Per Share ($18.88) = ------------------------------------
1 - Maximum FESC (5.25%)
</TABLE>
B-19
<PAGE>
U.S. EMERGING GROWTH FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class A ($34,530,859)
Net Asset Value Per Share ($21.85) = ----------------------------------------------------
Class A Shares outstanding (1,580,265)
Maximum Public Offering Price Per Share ($23.06) = Net Asset Value Per Share ($21.85)
------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class B ($28,105,756)
Net Asset Value Per Share ($21.25) = ----------------------------------------------------
Class B Shares outstanding (1,322,463)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C $(18,449,798)
Net Asset Value Per Share ($21.24) = ----------------------------------------------------
Class C Shares outstanding (868,593)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class I ($12,454,598)
Net Asset Value Per Share ($22.29) = ----------------------------------------------------
Class I Shares outstanding (558,864)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
</TABLE>
OPPORTUNITY FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class A ($23,976,742)
Net Asset Value Per Share ($21.42) = ----------------------------------------------------
Class A Shares outstanding (1,119,515)
Maximum Public Offering Price Per Share ($22.61) = Net Asset Value Per Share ($21.42)
------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class B ($24,604,449)
Net Asset Value Per Share ($21.00) = ----------------------------------------------------
Class B Shares outstanding (1,171,631)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C ($18,170,686)
Net Asset Value Per Share ($20.93) = ----------------------------------------------------
Class C Shares outstanding (868,226)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class C ($25,741,846)
Net Asset Value Per Share ($21.58) = ----------------------------------------------------
Class I Shares outstanding (1,180,543)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
</TABLE>
B-20
<PAGE>
TWENTY-FIVE FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class C ($18,019,966)
Net Asset Value Per Share ($22.74) = ----------------------------------------------------
Class A Shares outstanding (792,578)
Net Asset Value Per Share ($22.74)
Maximum Public Offering Price Per Share ($24.00) = ------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class C ($17,734,132)
Net Asset Value Per Share ($22.34) = ----------------------------------------------------
Class B Shares outstanding (793,676)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C ($14,092,895)
Net Asset Value Per Share ($22.48) = ----------------------------------------------------
Class C Shares outstanding (627,034)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class I ($10,001,165)
Net Asset Value Per Share ($22.82) = ----------------------------------------------------
Class I Shares outstanding (438,178)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
</TABLE>
MID-CAP GROWTH FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class A Shares outstanding (1)
Net Asset Value Per Share ($10.00)
Maximum Public Offering Price Per Share ($10.55) = ------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class B Shares outstanding (1)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class C Shares outstanding (1)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class I ($100,000)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class I Shares outstanding (10,000)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
</TABLE>
B-21
<PAGE>
SCIENCE & TECHNOLOGY FUND
<TABLE>
<S> <C>
CLASS A SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class A Shares outstanding (1)
Net Asset Value Per Share ($10.00)
Maximum Public Offering Price Per Share ($10.55) = ------------------------------------
1 - Maximum FESC (5.25%)
CLASS B SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class B Shares outstanding (1)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS C SHARES
Net Assets Attributable to Class C ($10)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class C Shares outstanding (1)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
CLASS I SHARES
Net Assets Attributable to Class I ($100,000)
Net Asset Value Per Share ($10.00) = ----------------------------------------------------
Class I Shares outstanding (10,000)
(MAXIMUM PUBLIC OFFERING PRICE PER SHARE IS THE SAME AS THE NET ASSET VALUE PER SHARE)
</TABLE>
CALCULATION OF PERFORMANCE DATA
For purposes of quoting and comparing the performance of each Class of each
Fund's shares to that of other mutual funds and to other relevant market indices
in advertisements or in reports to shareholders, performance may be stated in
terms of "average annual total return" or "cumulative total return." These total
return quotations are and will be computed separately for each Class of shares.
Under the rules of the SEC, funds advertising performance must include average
annual total return quotations calculated according to the following formula:
P(1-T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
This calculation assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = ( ERV - P ) - 100
---------
P
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period; and
P = initial payment of $1,000.
B-22
<PAGE>
This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
Under each of the above formulas, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertisement for publication.
The average annual total return and cumulative total return figures
calculated in accordance with the foregoing formulas assume in the case of Class
A shares the maximum FESC has been deducted from the hypothetical initial
investment at the time of purchase, or in the case of Class B or Class C shares
the maximum applicable CDSC has been paid upon the hypothetical redemption of
the shares at the end of the period.
Past performance is not predictive of future performance. All
advertisements containing performance data of any kind will include a legend
disclosing that such performance data represents past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Set forth below is selected performance information and comparative index
information for each Fund.
GROWTH FUND
<TABLE>
<CAPTION>
CUMULATIVE
TOTAL RETURN
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED
(FOR PERIODS ENDED DECEMBER 31, 1999) DECEMBER 31, 1999)
--------------------------------------------- ---------------------------
SINCE SINCE SINCE SINCE
INCEPTION INCEPTION INCEPTION INCEPTION
1 YEAR 5 YEAR (9/3/91)(a) (12/29/95)(a) (9/3/91)(a) (12/29/95)(a)
------ ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A SHARES
Without sales charge ................ 19.71% n/a n/a 21.86% n/a 120.86%
With sales charge deducted (b) ...... 13.42 n/a n/a 20.23 n/a 109.26
CLASS B
Without sales charge ................ 18.72 n/a n/a 20.99 n/a 114.60
With sales charge deducted (c) ...... 14.72 n/a n/a 20.70 n/a 112.60
CLASS C
Without sales charge ................ 18.82 n/a n/a 21.05 n/a 115.07
With sales charge deducted (d) ...... 17.82 n/a n/a 21.05 n/a 115.07
CLASS I
Without sales charge ................ 19.97 20.92% 14.19% n/a 202.17% n/a
With sales charge deducted (b) ...... 13.67 19.63 13.46 n/a 186.56 n/a
RUSSELL 1000 INDEX (e) ............... 20.91 28.03 19.77 25.66 346.35 149.85
LIPPER GROWTH FUND INDEX (f) ......... 27.96 26.27 18.50 24.73 311.34 142.01
</TABLE>
------------------
(a) Total returns prior to December 29, 1995 reflects Growth Fund's performance
as a closed-end fund. Since December 29, 1995, the Fund has offered its
shares in the current four class structure.
(b) Maximum initial front-end sales charge of 5.25%.
(c) A contingent deferred sales charge of up to 4% will be imposed if shares
are redeemed within 6 years of purchase.
(d) A contingent deferred sales charge of 1% will be imposed if shares are
redeemed within 1 year of purchase.
(e) Composite performance of the 1,000 largest U.S. companies based on total
market capitalization. THIS INDEX DOES NOT REFLECT THE DEDUCTION OF SALES
CHARGES AND EXPENSES THAT ARE BORNE BY MUTUAL FUND INVESTORS. Inception
date for index data is August 31, 1991.
(f) Composite performance of the 30 largest "growth" mutual funds, as
categorized by Lipper Analytical Services, Inc. Performance is presented
net of the funds' fees and expenses and assumes
B-23
<PAGE>
reinvestment of all dividends and distributions. HOWEVER, APPLICABLE SALES
CHARGES ARE NOT TAKEN INTO CONSIDERATION. Inception date for index data is
August 31, 1991.
****
Morningstar Overall Rating
Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar ratings
are calculated from a fund's three and, if applicable, five and 10 year average
annual returns in excess of 90 day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects fund performance below 90 day
Treasury bill returns. Growth Fund received four stars (****) for the three-year
period ended December 31, 1999 for each class of the Fund's shares. The top 10%
of the Funds in an investment universe receive five stars, the next 22.5%
receive four stars and the next 35% receive three stars. Growth Fund was rated
among 3,411 and 2,161 total "domestic equity" funds for the three and five year
periods, respectively, ended December 31, 1999.
U.S. EMERGING GROWTH FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURNS CUMULATIVE
(FOR PERIODS ENDED TOTAL RETURN
DECEMBER 31, 1999) (FOR PERIOD ENDED
---------------------------- DECEMBER 31, 1999)
SINCE INCEPTION SINCE INCEPTION
ONE YEAR (1/2/96) (1/2/96)
-------- --------------- ------------------
<S> <C> <C> <C>
CLASS A
Without sales charge ......................... 49.04% 41.08% 295.75%
With sales charge deducted (a) ............... 41.22 39.19 275.05
CLASS B
Without sales charge ......................... 47.96 40.18 285.76
With sales charge deducted (b) ............... 43.96 39.90 282.76
CLASS C
Without sales charge ......................... 47.88 40.17 285.65
With sales charge deducted (c) ............... 46.88 40.17 285.65
CLASS I
Without sales charge ......................... 49.51 41.60 301.69
RUSSELL 2000 GROWTH INDEX (d) ................. 43.09 16.12 82.03
LIPPER SMALL CAP GROWTH FUND INDEX (e) ........ 41.54 16.56 85.13
</TABLE>
------------------
(a) Maximum initial front-end sales charge of 5.25%.
(b) A contingent deferred sales charge of up to 4% will be imposed if shares
are redeemed within 6 years of purchase.
(c) A contingent deferred sales charge of 1% will be imposed if shares are
redeemed within 1 year of purchase.
(d) Composite performance of companies within the Russell 2000 Index (the 2000
smallest of the 3000 largest U.S. companies based on total market
capitalization) with relatively higher price-to-book ratios and forecasted
growth values. THIS INDEX DOES NOT REFLECT THE DEDUCTION OF SALES CHARGES
AND EXPENSES THAT ARE BORNE BY MUTUAL FUND INVESTORS. Inception date for
index data is December 31, 1995.
(e) Composite performance of the 30 largest "small company growth" mutual
funds, as categorized by Lipper Analytical Services, Inc. Performance is
presented net of the funds' fees and expenses and assumes reinvestment of
all dividends and distributions. HOWEVER, APPLICABLE SALES CHARGES ARE NOT
TAKEN INTO CONSIDERATION. Inception date for index data is December 31,
1995.
*****
Morningstar Overall Rating
Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar ratings
are calculated from a fund's three and, if applicable, five and
B-24
<PAGE>
10 year average annual returns in excess of 90 day Treasury bill returns with
appropriate fee adjustments, and a risk factor that reflects fund performance
below 90 day Treasury bill returns. U.S. Emerging Growth Fund received the
highest rating of five stars (*****) for the three-year period ended December
31, 1999 for each class of the Fund's shares. The top 10% of the Funds in an
investment universe receive five stars. U.S. Emerging Growth Fund was rated
among 3,411 total "domestic equity" funds for the three year period ended
December 31, 1999.
OPPORTUNITY FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURNS CUMULATIVE
(FOR PERIODS ENDED TOTAL RETURN
DECEMBER 31, 1999) (FOR PERIOD ENDED
---------------------------- DECEMBER 31, 1999)
SINCE INCEPTION SINCE INCEPTION
ONE YEAR (12/26/96) (12/26/96)
-------- --------------- ------------------
<S> <C> <C> <C>
CLASS A
Without sales charge ............................ 36.11% 44.77% 204.98%
With sales charge deducted (a) .................. 28.97 42.21 188.98
CLASS B
Without sales charge ............................ 35.10 43.74 198.48
With sales charge deducted (b) .................. 31.10 43.26 195.48
CLASS C
Without sales charge ............................ 35.13 43.69 198.15
With sales charge deducted (c) .................. 34.13 43.69 198.15
CLASS I
Without sales charge ............................ 36.55 45.17 207.50
RUSSELL 1000 GROWTH INDEX (d) .................... 33.16 33.23 137.41
LIPPER CAPITAL APPRECIATION FUND INDEX (e) ....... 39.17 25.97 100.39
</TABLE>
------------------
(a) Maximum initial front-end sales charge of 5.25%.
(b) A contingent deferred sales charge of up to 4% will be imposed if shares
are redeemed within 6 years of purchase.
(c) A contingent deferred sales charge of 1% will be imposed if shares are
redeemed within 1 year of purchase.
(d) Composite performance of the companies within the Russell 1000 Index with
relatively higher price-to-book ratios and forecasted growth values. THIS
INDEX DOES NOT REFLECT THE DEDUCTION OF SALES CHARGES AND EXPENSES THAT ARE
BORNE BY MUTUAL FUND INVESTORS. Inception date for index data is December
31, 1996.
(e) Composite performance of the 30 largest "capital appreciation" mutual
funds, as categorized by Lipper Analytical Services, Inc. Performance is
presented net of the funds' fees and expenses and assumes reinvestment of
all dividends and distributions. HOWEVER, APPLICABLE SALES CHARGES ARE NOT
TAKEN INTO CONSIDERATION. Inception date for index data is December 31,
1996.
*****
Morningstar Overall Rating
Morningstar proprietary ratings reflect historical risk-adjusted
performance. The ratings are subject to change every month. Morningstar ratings
are calculated from a fund's three and, if applicable, five and 10 year average
annual returns in excess of 90 day Treasury bill returns with appropriate fee
adjustments, and a risk factor that reflects fund performance below 90 day
Treasury bill returns. Opportunity Fund received the highest rating of five
stars (*****) for the three-year period ended December 31, 1999 for each class
of the Fund's shares. The top 10% of the Funds in an investment universe receive
five stars. U.S. Emerging Growth Fund was rated among 3,411 total "domestic
equity" funds for the three year period ended December 31, 1999.
B-25
<PAGE>
TWENTY-FIVE FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL
RETURNS CUMULATIVE
(FOR PERIODS ENDED TOTAL RETURN
DECEMBER 31, 1999) (FOR PERIOD ENDED
---------------------------- DECEMBER 31, 1999)
SINCE INCEPTION SINCE INCEPTION
ONE YEAR (12/31/97) (12/31/97)
-------- --------------- -------------------
<S> <C> <C> <C>
CLASS A
Without sales charge ............................ 41.59% 57.51% 148.09%
With sales charge deducted (a) .................. 34.16 53.32 135.07
CLASS B
Without sales charge ............................ 40.59 56.12 143.74
With sales charge deducted (b) .................. 36.59 54.83 139.74
CLASS C
Without sales charge ............................ 40.85 56.41 144.64
With sales charge deducted (c) .................. 39.85 56.41 144.64
CLASS I
Without sales charge ............................ 42.00 57.84 149.12
RUSSELL 1000 GROWTH INDEX (d) .................... 33.16 35.91 84.70
LIPPER CAPITAL APPRECIATION FUND INDEX (e) ....... 39.17 29.22 66.98
</TABLE>
------------------
(a) Maximum initial front-end sales charge of 5.25%.
(b) A contingent deferred sales charge of up to 4% will be imposed if shares
are redeemed within 6 years of purchase.
(c) A contingent deferred sales charge of 1% will be imposed if shares are
redeemed within 1 year of purchase.
(d) Composite performance of the companies within the Russell 1000 Index with
relatively higher price-to-book ratios and forecasted growth values. THIS
INDEX DOES NOT REFLECT THE DEDUCTION OF SALES CHARGES AND EXPENSES THAT ARE
BORNE BY MUTUAL FUND INVESTORS.
(e) Composite performance of the 30 largest "capital appreciation" mutual
funds, as categorized by Lipper Analytical Services, Inc. Performance is
presented net of the funds' fees and expenses and assumes reinvestment of
all dividends and distributions. HOWEVER, APPLICABLE SALES CHARGES ARE NOT
TAKEN INTO CONSIDERATION.
Advertisements and communications may compare the performance of Fund
shares with that of other mutual funds, as reported by Lipper Analytical
Services, Inc. or similar independent services or financial publications, and
may also contrast a Fund's investment policies and portfolio flexibility with
other mutual funds. From time to time, advertisements and other Fund materials
and communications may cite statistics to reflect the performance over time of
Fund shares, utilizing generally accepted indices or analyses, including, but
not limited to, those published by Lipper Analytical Services, Inc., Standard &
Poor's Corporation, The Frank Russell Company, Dow Jones & Company, Inc., CDA
Investment Technologies, Inc., Morningstar, Inc. and Investment Company Data
Incorporated. Performance ratings reported periodically in national financial
publications also may be used. In addition, advertising materials may include
the Investment Adviser's analysis of, or outlook for, the economy or financial
markets, compare the Investment Adviser's analysis or outlook with the views of
others in the financial community and refer to the expertise of the Investment
Adviser's personnel and their reputation in the financial community.
B-26
<PAGE>
DIRECTORS AND OFFICERS
The Board of Directors of The Jundt Growth Fund, Inc. is responsible for
the overall management and operation of Growth Fund. The Board of Directors of
Jundt Funds, Inc. is responsible for the overall management and operation of
each of the other Funds. The officers of The Growth Fund, Inc. and Jundt Funds,
Inc. are responsible for the day-to-day operations of the respective Funds
under the applicable Board's supervision. Directors and officers of The Jundt
Growth Fund, Inc. and The Jundt Funds, Inc., together with information as to
their principal occupations during the past five years, are set forth below.
All positions held are with both The Jundt Growth Fund, Inc. and Jundt Funds,
Inc.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND ADDRESS POSITIONS HELD PAST 5 YEARS AND OTHER AFFILIATIONS
-------------------------- ------------------------ -----------------------------------------
<S> <C> <C>
James R. Jundt(1)(2) Chairman of the Board Chairman of the Board, Chief Executive
Age: 58 Officer, Secretary and portfolio manager
1550 Utica Avenue South of the Investment Adviser since its
Suite 950 inception in 1982. Chairman of the
Minneapolis, MN 55416 Board and a portfolio manager of The
Jundt Growth Fund, Inc. since 1991,
Jundt Funds, Inc. since 1995 and, since
1999, one other investment company
managed by the Investment Adviser.
President of The Jundt Growth Fund,
Inc. from 1991 to 1999 and Jundt Funds,
Inc. from 1995 to 1999. Chairman of the
Board of the Distributor since 1995.
Also a trustee of Gonzaga University
and a director of three private
companies.
Marcus E. Jundt(1)(3) President and Director Vice Chairman of the Investment Adviser
Age: 34 since 1992. Research Analyst, Victoria
Suite 950 Investors, New York, New York from
1550 Utica Avenue South 1988 to 1992. Employed by Cargill
Minneapolis, MN 55416 Investor Services, Inc. from 1987 to
1988. Since 1999, President, and since
2000, Director of Jundt Funds, Inc., The
Jundt Growth Fund, Inc. and one other
investment company managed by the
Investment Adviser. Portfolio Manager
of Jundt Funds, Inc. since 1995 and The
Jundt Growth Fund since 1992.
President of U.S. Growth Investments,
Inc. since 1997. Also a director of a
private company.
John E. Clute Director Dean and Professor of Law, Gonzaga
Age: 65 University School of Law, since 1991;
1221 West Riverside previously Senior Vice President Human
Avenue Resources and General Counsel, Boise
Spokane, WA 99201 Cascade Corporation (forest products).
Director of The Jundt Growth Fund,
Inc. since 1991, Jundt Funds, Inc. since
1995 and, since 1999, one other
investment company managed by the
Investment Adviser. Also a director of
Hecla Mining Company (mining) and
two private companies.
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND ADDRESS POSITIONS HELD PAST 5 YEARS AND OTHER AFFILIATIONS
-------------------------- ------------------------ -----------------------------------------
<S> <C> <C>
Floyd Hall Director Chairman, President and Chief Executive
Age: 61 Officer of K-Mart Corporation since
3100 West Big Beaver 1995. Chairman from 1989 to 1998 and
Road Chief Executive Officer from 1989 to
Troy, MI 48084 1995 of The Museum Company and
Alva Replicas. Chairman and Chief
Executive Officer from 1984 to 1989 of
The Grand Union Company. Chairman
and Chief Executive Officer from 1981
to 1984 of Target Stores. President and
Chief Executive Officer from 1974 to
1981 of B. Dalton Bookseller. Director
of The Jundt Growth Fund, Inc. since
1991, Jundt Funds, Inc. since 1995 and,
since 1999, one other investment
company managed by the Investment
Adviser.
Demetre M. Nicoloff Director Cardiac and thoracic surgeon, Cardiac
Age: 66 Surgical Associates, P.A., Minneapolis,
1492 Hunter Drive Minnesota. Director of The Jundt
Wayzata, MN 55391 Growth Fund, Inc. since 1991, Jundt
Funds, Inc. since 1995 and, since 1999,
one other investment company managed
by the Investment Adviser. Also a
director of Optical Sensors Incorporated
(patient monitoring equipment);
Micromedics, Inc. (instrument trays,
ENT specialty products and fibrin glue
applicators); Applied Biometrics, Inc.
(cardiac output measuring devices); and
Sonometrics, Inc. (ultrasound imaging
equipment).
Darrell R. Wells Director Managing Director, Security Management
Age: 57 Company (asset management firm) in
4350 Brownsboro Road, Suite 310 Louisville, Kentucky. Director
Louisville, KY 40207 of The Jundt Growth Fund, Inc. since
1991, Jundt Funds, Inc. since 1995 and,
since 1999, one other investment
company managed by the Investment
Adviser. Also a director of Churchill
Downs Inc. (race track operator) and
Citizens Financial Inc. (insurance
holding company), as well as several
private companies.
</TABLE>
B-28
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING
NAME AND ADDRESS POSITIONS HELD PAST 5 YEARS AND OTHER AFFILIATIONS
-------------------------- ------------------------ -----------------------------------------
<S> <C> <C>
Clark W. Jernigan Director Product Engineering Director, Cirrus
Age: 39 Logic, Inc., Crystal Industrial &
1201 Verdant Way Communications Division, Austin, Texas
Austin, TX 78746 since 1997; Research Associate Analyst,
Alex. Brown & Sons Incorporated, New
York, New York from 1996 to 1997;
Product Development Engineering
Manager, Advanced Micro Devices, Inc.,
Embedded Processor Division, Austin,
Texas from June 1991 to 1996; Director
of The Jundt Growth Fund, Inc., Jundt
Funds, Inc. and, since 1999, one other
investment company managed by the
Investment Adviser.
Jon C. Essen, CPA Treasurer Chief Financial Officer of the Investment
Age: 36 Adviser since 1998. Treasurer of The
1550 Utica Avenue South Suite 950 Jundt Growth Fund, Inc.,
Minneapolis, MN 55416 Jundt Funds, Inc. and, since 1999, one
other investment company managed by
the Investment Adviser. Senior Financial
Analyst, Norwest Investment Services,
Inc., 1997 to 1998. Fund Reporting and
Control Supervisor, Voyageur Funds
Inc., 1994 to 1997.
James E. Nicholson Secretary Partner with the law firm of Faegre &
Age: 48 Benson LLP, Minneapolis, Minnesota,
2200 Norwest Center which has served as general counsel to
Minneapolis, MN 55402 the Investment Adviser, Jundt Growth
Fund, Inc., Jundt Funds, Inc., American
Eagle Funds, Inc., and the Distributor
since their inception. Secretary of The
Jundt Growth Fund, Inc. since 1991,
Jundt Funds, Inc. since 1995 and, since
1999, one other investment company
managed by the Investment Adviser.
</TABLE>
------------------
(1) Director who is an "interested person" of each fund, as defined in the
Investment Company Act.
(2) James R. Jundt owns 100% of the stock of the Distributor and is, therefore,
a "controlling person" of the Distributor, as defined in the Investment
Company Act.
(3) Marcus E. Jundt beneficially owns 95% of the stock of the Investment
Adviser and is, therefore, a "controlling person" of the Investment
Adviser, as defined in the Investment Company Act.
Each of the directors of The Jundt Growth Fund, Inc. and Jundt Funds, Inc.
is also a director of American Eagle Funds, Inc., other fund companies managed
by the Investment Adviser. Jundt Growth Fund, Inc., Jundt Funds, Inc. and
American Eagle Funds, Inc. has agreed to pay its pro rata share (based on the
relative net assets of each fund company) of the fees payable to each director
who is not an "interested person" of any fund company managed by the Investment
Adviser. In the aggregate, the Jundt Growth Fund, Inc., Jundt Funds, Inc. and
American Eagle Funds, Inc. have agreed to pay each such director a fee of
$15,000 per year plus $1,500 for each meeting attended and to reimburse each
such director for the expenses of attendance at such meetings. No compensation
is paid to officers or directors who are "interested persons" of Jundt Growth
Fund, Inc., Jundt Funds, Inc. or American Eagle Funds, Inc.
B-29
<PAGE>
Director fees and expenses aggregated $81,129 for the fiscal year ended
December 31, 1999. The following table sets forth for such period the aggregate
compensation (excluding expense reimbursements) paid by the Fund Complex to the
directors during the year ended December 31, 1999:
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT ESTIMATED FROM FUND AND FUND
COMPENSATION BENEFITS ACCRUED AS ANNUAL BENEFITS COMPLEX (6 FUNDS)
NAME OF PERSON, POSITION FROM FUND* PART OF FUND EXPENSES UPON RETIREMENT PAID TO DIRECTORS*
------------------------ ------------ --------------------- --------------- ------------------
<S> <C> <C> <C> <C>
James R. Jundt, Chairman of
the Board ......................... $ 0 $0 $0 $ 0
John E. Clute, Director ............ $18,200 $0 $0 $18,200
Floyd Hall, Director ............... $18,200 $0 $0 $18,200
Demetre M. Nicoloff, Director ...... $18,200 $0 $0 $18,200
Darrell R. Wells, Director ......... $18,200 $0 $0 $18,200
Clark W. Jernigan, Director ........ $ 0 $0 $0 $ 0
</TABLE>
------------------
*Total Compensation paid to directors is for services on the board of The Jundt
Growth Fund, Inc., Jundt Funds, Inc. and the board of one other investment
company in the Fund Complex managed by the Investment Adviser.
COUNSEL AND AUDITORS
Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402, serves as the Funds' general counsel. KPMG LLP,
4200 Norwest Center, Minneapolis, Minnesota 55402, has been selected as the
Funds' independent auditors for the fiscal year ending December 31, 2000.
GENERAL INFORMATION
Growth Fund and Jundt Funds, Inc. were organized as Minnesota corporations
on May 20, 1991 and October 26, 1995, respectively. Although Growth Fund and
Jundt Funds, Inc. are registered with the Securities and Exchange Commission,
the SEC does not supervise their management or investments.
Shares of each Class of a Fund generally have the same voting, dividend,
liquidation and other rights. However, expenses relating to the distribution of
each Class (Rule 12b-1 fees) are paid solely by such Class. Additionally, shares
of each Fund vote together (with each share being entitled to one vote) on
matters affecting the Fund generally (such as the Fund's investment advisory
agreement, fundamental investment policies and similar matters). However, shares
of each Class of a Fund generally vote alone on matters affecting only such
Class, such as such Class' Rule 12b-1 plan. In addition, shares of all Classes
of U.S. Emerging Growth Fund, Opportunity Fund, Twenty-Five Fund, Mid-Cap Growth
Fund and Science & Technology Fund generally vote together (with each share
being entitled to one vote) with respect to the Board of Directors, independent
auditors and other general matters affecting Jundt Funds, Inc. Each Fund's
shares are freely transferable. The Board of Directors may designate additional
classes of shares of each Fund, each with different sales arrangements and
expenses, but has no current intention of doing so. In addition, the Board of
Directors may designate additional series of Jundt Funds, Inc., each to
represent a new mutual fund.
Under Minnesota law, the Board of Directors has overall responsibility for
managing the Funds. In doing so, the directors must act in good faith, in the
Funds' best interests and with ordinary prudence.
Under Minnesota law, each director of a company, such as Growth Fund or
Jundt Funds, Inc., owes certain fiduciary duties to the company and to its
shareholders. Minnesota law provides that a director "shall discharge the duties
of the position of director in good faith, in a manner the director reasonably
believes to be in the best interest of the corporation, and with the care an
ordinary prudent person in
B-30
<PAGE>
a like position would exercise under similar circumstances." Fiduciary duties of
a director of a Minnesota corporation include, therefore, both a duty of
"loyalty" (to act in good faith and act in a manner reasonably believed to be in
the best interests of the corporation) and a duty of "care" (to act with the
care an ordinarily prudent person in a like position would exercise under
similar circumstances). Minnesota law authorizes a corporation to eliminate or
limit the liability of directors to the corporation or its shareholders for
monetary damages for breaches of fiduciary duty as a director. However, a
corporation cannot eliminate or limit the liability of a director: (a) for any
breach of the director's duty of "loyalty" to the corporation or its
shareholders; (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, for certain illegal
distributions or for violation of certain provisions of Minnesota securities
laws; or (c) for any transaction from which the director derived an improper
personal benefit. The Articles of Incorporation of Growth Fund and Jundt Funds,
Inc. limit the liability of their directors to the fullest extent permitted by
Minnesota statutes, except to the extent that such liability cannot be limited
as provided in the Investment Company Act (which prohibits any provisions which
purport to limit the liability of directors arising from such directors' willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their role as directors).
Minnesota law does not permit a corporation to eliminate the duty of "care"
imposed upon a director. It only authorizes a corporation to eliminate monetary
liability for violations of that duty. Minnesota law, further, does not permit
elimination or limitation of liability of "officers" to the corporation for
breach of their duties as officers (including the liability of directors who
serve as officers for breach of their duties as officers). Minnesota law does
not permit elimination of the availability of equitable relief, such as
injunctive or rescissionary relief. These remedies, however, may be ineffective
in situations where shareholders become aware of such a breach after a
transaction has been consummated and rescission has become impractical. Further,
Minnesota state law does not affect a director's liability under the Securities
Act or the Securities Exchange Act of 1934, as amended, both of which are
federal statutes. It is also uncertain whether and to what extent the
elimination of monetary liability would extend to violations of duties imposed
on directors by the Investment Company Act and the rules and regulations
thereunder.
Neither Growth Fund nor Jundt Funds, Inc. is required under Minnesota law
to hold annual or periodically scheduled regular meetings of shareholders.
Regular and special shareholder meetings are held only at such times and with
such frequency as required by law. Minnesota corporation law provides for the
Board of Directors to convene shareholder meetings when it deems appropriate. In
addition, if a regular meeting of shareholders has not been held during the
immediately preceding 15 months, a shareholder or shareholders holding three
percent or more of the voting shares of a company may demand a regular meeting
of shareholders of the company by written notice of demand given to the chief
executive officer or the chief financial officer of the company. Within 90 days
after receipt of the demand, a regular meeting of shareholders must be held at
the expense of the company. Irrespective of whether a regular meeting of
shareholders has been held during the immediately preceding 15 months, in
accordance with Section 16(c) under the Investment Company Act, the Board of
Directors of Growth Fund or Jundt Funds, Inc. is required to promptly call a
meeting of shareholders for the purpose of voting upon the question of removal
of any director when requested in writing to do so by the record holders of not
less than 10% of the outstanding shares of the company. Additionally, the
Investment Company Act requires shareholder votes for all amendments to
fundamental investment policies and restrictions and for all investment advisory
contracts and amendments thereto.
Upon issuance and sale in accordance with the terms of the Prospectus and
Statement of Additional Information, each Fund share will be fully paid and
non-assessable. Shares have no preemptive, subscription or conversion rights and
are redeemable as set forth under "How To Redeem Fund Shares" in the Prospectus.
The Funds, the Investment Adviser and the Distributor have adopted a Code
of Ethics under Rule 17j-1 of the Investment Company Act. Subject to certain
limitations, the Code of Ethics permits persons subject to the Code to invest in
securities, including securities that may be purchased or held by a Fund.
B-31
<PAGE>
Except as set forth below, no person owned of record or, to the knowledge
of Growth Fund or Jundt Funds, Inc., as applicable, owned of record or
beneficially more than 5% of any Class of a Fund's common shares as of December
31, 1999:
GROWTH FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Merrill Lynch FBO 53,805 Class A R 33.09%
Customer Accounts 57,070 Class B R 26.70%
4800 Deer Lake Drive East, 3rd Floor 35,760 Class C R 52.56%
Jacksonville, Florida 32246
Vacans Corporation 12,367 Class A R 7.61%
Profit Sharing Plan
59 East Horizon Circle
Oro Valley, Arizona 85737
Dain Rauscher Inc. FBO 10,986 Class B R 5.14%
Ruth Cliff
Theresa Cliff Ttees
U/W Cameron Cliff
P.O. box 97
LA Pine, Oregon 97739-0097
James R. Jundt 1,017,656 Class I B 19.50%
1550 Utica Avenue South, Suite 950
Minneapolis, Minnesota 55416
</TABLE>
U.S. EMERGING GROWTH FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Merrill Lynch FBO 268,141 Class A R 16.97%
Customer Accounts 617,832 Class B R 46.72%
4800 Deer Lake Drive East, 3rd Floor 429,481 Class C R 49.45%
Jacksonville, Florida 32246
REM Inc. & Affiliates 221,880 Class A R 14.04%
Employees Retirement Plan
6921 York Avenue South
Edina, Minnesota 55435
Columbus Circle Trust Co. FBO 136,692 Class A R 8.65%
Ironworkers District
Council of New England
1 Station PL
Stamford, CT 06902-6800
Wendel & Co. c/o Bank of New York 48,580 Class I R 8.69%
P.O. Box 1066
Wall Street Station
New York, New York 10268
James R. Jundt 430,795 Class I B 77.10%
1550 Utica Avenue South, Suite 950
Minneapolis, Minnesota 55416
</TABLE>
B-32
<PAGE>
OPPORTUNITY FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Merrill Lynch FBO 149,768 Class A R 13.38%
Customer Accounts 274,518 Class B R 23.43%
4800 Deer Lake Drive East, 3rd Floor 282,220 Class C R 32.51%
Jacksonville, Florida 32246
REM Inc. & Affiliates 162,852 Class A R 14.55%
Employees Retirement Plan
6921 York Avenue South
Edina, Minnesota 55435
Paul W. Bottum and 60,247 Class I R 5.10%
Teri B. Bottum JTWROS
1933 Oriole Avenue North
Stillwater, Minnesota 55082
Prudential Securities, Inc. FBO 63,463 Class C R 7.31%
Mr. Lary Gunning
8275 N 61st PL Paradise
Valley, AZ 85253-8124
James R. Jundt 922,237 Class I B 78.1%
1550 Utica Avenue South, Suite 950
Minneapolis, Minnesota 55416
</TABLE>
TWENTY-FIVE FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Merrill Lynch FBO 202,024 Class A R 25.48%
Customer Accounts 233,870 Class B R 29.47%
4800 Deer Lake Drive East, 3rd Floor 404,750 Class C R 64.54%
Jacksonville, Florida 32246
REM Inc. & Affiliates 94,637 Class A R 11.94%
Employees Retirement Plan
U/A DTD 11/22/74
6921 York Avenue South
Edina, MN 55435-2517
James R. Jundt 400,502 Class I B 91.00%
1550 Utica Avenue South, Suite 950
Minneapolis, Minnesota 55416
</TABLE>
MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
James R. Jundt 1 Class A R 100.00%
1550 Utica Avenue South, Suite 950 1 Class B R 100.00%
Minneapolis, Minnesota 55416 1 Class C R 100.00%
10,000 Class I R 100.00%
</TABLE>
B-33
<PAGE>
SCIENCE & TECHNOLOGY FUND
<TABLE>
<CAPTION>
RECORD (R) OR
NUMBER OF BENEFICIAL (B) PERCENTAGE
NAME AND ADDRESS SHARES OWNED OWNERSHIP OF CLASS
---------------- ---------------- -------------- ----------
<S> <C> <C> <C>
James R. Jundt 1 Class A R 100.00%
1550 Utica Avenue South, Suite 950 1 Class B R 100.00%
Minneapolis, Minnesota 55416 1 Class C R 100.00%
10,000 Class I R 100.00%
</TABLE>
B-34
<PAGE>
FINANCIAL AND OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not contain
all the information included in the Registration Statements of Growth Fund and
Jundt Funds, Inc. filed with the SEC under the Securities Act and the Investment
Company Act (the "Registration Statements") with respect to the securities
offered by the Prospectus and this Statement of Additional Information. Certain
portions of the Registration Statements have been omitted from the Prospectus
and this Statement of Additional Information pursuant to the rules and
regulations of the SEC. The Registration Statements including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
In addition, the Schedules of Investments, Notes to Schedules of
Investments, Financial Statements, Notes to Financial Statements and
Independent Auditors' Report contained in the Annual Report of the Jundt Growth
Fund, Inc. and Jundt Funds, Inc. dated December 31, 1999 (File Nos. 811-06317
and 811-09128, respectively) are incorporated herein by reference.
Statements contained in the Prospectus or in this Statement of Additional
Information as to any contract or other document referred to are not necessarily
complete, and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement of which the
Prospectus and this Statement of Additional Information form a part, each such
statement being qualified in all respects by such reference.
B-35
