ANNUAL REPORT
(LOGO)
VAN WAGONER
FUNDS
DECEMBER 31, 1997
December 31, 1997
DEAR SHAREHOLDER:
This has been an especially difficult year for Van Wagoner Capital Management.
Some of the forces behind our performance are exactly those that make growth
stocks volatile. Others have led us to make changes that should improve our
results. Let me briefly discuss the issues we face and the actions we're taking.
1. GROWTH STOCK INVESTING IS CURRENTLY OUT OF FAVOR WITH THE MARKET. Early in
1997, concerns about the U.S. economy fueled a shift from small, lesser-known
companies to larger companies offering more liquidity. Small-cap technology
stocks took a beating. Still, the fundamentals of our holdings stayed positive.
This, plus good economic news, led to dramatic rebounds from May to mid-October.
It looked like we'd have another strong year - until the economic crisis in
Southeast Asia hit. Wall Street's reaction to the turmoil was swift: any company
with Asian exposure saw stock prices fall sharply.
WHAT WE'RE DOING: We did reduce or sell our positions in companies whose results
will suffer due to Asia's economic problems. But we'll continue to hold
companies with only limited exposure to Asia that show strong prospects and
whose stocks we believe are undervalued.
For example, take Advanced Fibre Communications,* based in Petaluma, California.
Their advanced systems enable telephone companies to add capacity and bring
phone service to new locations.
Advanced Fibre has a contract with mainland China, representing about 12% of its
revenues, that will help the government bring basic telephone service to
thousands of customers. The contract is part of the plan to "modernize" China,
giving it political significance, and is a relatively small expenditure. Though
the contract seems immune to cutbacks, and China has felt little of the current
Asian crisis, Advanced Fibre's stock fell 50%, from a high in October of 45 to
about 23 at year-end.
Or look at CHS Electronics,** an international distributor of computers and
peripherals. Management has done an excellent job growing the business, and the
outlook is strong: the demand for PCs and related products is growing more
rapidly outside the U.S. About 60% of CHS's business is in Western Europe, 25%
in Eastern Europe, 12% in Latin America and 2% in Asia. Despite this limited
Asian exposure, the market has taken CHS stock from a high in October down 50%
at year-end.
We'll continue to buy companies like these, staying true to our investment
style. Though it's tempting to play safe with electric utilities or S&P 500
stocks, we won't let ourselves drift away from growth-oriented companies. When
the market again favors growth stocks we believe we will be positioned to
capture the potential rewards.
2. THE SMALL-CAP MARKET ENTERED A NEW PHASE IN 1997. This year various forces
affected small-cap prices as never before. There are more retail investors and
more traders ready to hedge quickly. Broad industry fundamentals, technical
chart patterns, and the rumor mill became more important in determining stock
prices. In this environment, our strong fundamental research wasn't enough.
WHAT WE'RE DOING: We will continue with our fundamental approach. I'm convinced
that fully understanding the companies in which we invest will ultimately pay
off. In fact, as of the December pre-reporting period, a number of high-profile
companies missed their stated earnings goals - but only one of the companies we
held missed its fundamental targets.
While remaining dedicated to our style of investment, we are not going to just
wait for the markets to change for performance to improve. We are increasing and
incorporating a greater awareness of who else owns the stocks we hold, or are
interested in, and their investment style. We believe this will enhance our
trading strategies and should improve results.
I want to thank you, our shareholders, for holding firm during a frustrating
year. I know that can be difficult when markets are not performing well, even
when you understand the long-term potential. We look forward to a new year where
we believe our fundamental approach and the dedication of our research staff
will reward your patience.
Sincerely,
/s/Garrett R. Van Wagoner
Garrett R. Van Wagoner
The Funds' portfolio compositions are subject to change at any time.
* As of 12/31/97, Advanced Fibre Communications represented 4.5% of the
Emerging Growth Fund, 3.6% of the Mid-Cap Fund and 2.1% of the Post-Venture
Fund.
** As of 12/31/97, CHS Electronics represented 4.3% of the Emerging Growth Fund,
3.3% of the Micro-Cap Fund, 3.0% of the Mid-Cap Fund and 3.8% of the Post-
Venture Fund.
EMERGING GROWTH FUND
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Commencement). Returns shown here and in the table are
based on net change in NAV. Performance figures reflect fee waivers in effect
and represent past performance which is no guarantee of future results. The
investment return and principal value of an investment in Van Wagoner Funds will
fluctuate so that an investor's shares in the Funds, when redeemed, may be worth
more or less than their original cost.
The Nasdaq Composite Index is a market value-weighted index that measures all
Nasdaq domestic and non-U.S.- based common stocks listed on The Nasdaq Stock
Market.
The Lipper Small Company Growth Funds Index includes the largest 30 funds in the
group that, by prospectus or portfolio practice, limit their investments to
companies on the basis of the size of the company.
The Nasdaq Industrial Index tracks the performance of domestic common stocks
traded on the regular Nasdaq market and which are classified as industrial
companies. As of December 31, 1997, this index included 3,245 companies,
including agricultural, mining, construction, manufacturing (electronic
components), services and public administration enterprises.
TOTAL RETURN
For the period ended 12/31/97
ONE YEAR (20.02)%
AVERAGE ANNUAL
SINCE COMMENCEMENT 0.75%
12/31/95 12/31/96 12/31/97
EMERGING GROWTH FUND $10,000 $12,690 $10,150
Nasdaq Composite $10,000 $12,303 $15,028
Lipper Small Company $10,000 $11,436 $13,157
Nasdaq Industrial $10,000 $11,557 $12,772
MICRO-CAP FUND
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Commencement). Returns shown here and in the table are
based on net change in NAV. Performance figures reflect fee waivers in effect
and represent past performance which is no guarantee of future results. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in Van Wagoner Funds will fluctuate so that an
investor's shares in the Funds, when redeemed, may be worth more or less than
their original cost.
The Russell 2000 is an index of the smallest 2000 companies in the Russell 3000
Index, as ranked by total market capitalization. The Russell 2000 Index is
widely regarded in the industry to accurately capture the universe of small cap
stocks.
The Lipper MicroCap Funds Index includes the largest ten funds in the group
which, by prospectus or portfolio practice, invest primarily in companies with
market capitalizations less than $300 million at the time of purchase.
TOTAL RETURN
For the period ended 12/31/97
ONE YEAR (19.76)%
AVERAGE ANNUAL
SINCE COMMENCEMENT (0.05)%
12/31/95 12/31/96 12/31/97
MICRO-CAP FUND $10,000 $12,450 $9,990
Russell 2000 $10,000 $11,649 $14,254
Lipper MicroCap $10,000 $12,020 $14,370
MID-CAP FUND
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Commencement). Returns shown here and in the table are
based on net change in NAV. Performance figures reflect fee waivers in effect
and represent past performance which is no guarantee of future results. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in Van Wagoner Funds will fluctuate so that an
investor's shares in the Funds, when redeemed, may be worth more or less than
their original cost.
The S&P MidCap 400 Index is a capitalization weighted index that measures the
performance of the mid-range sector of the U.S. stock market where the median
market capitalization is approximately $1.8 billion.
The Lipper MidCap Funds Index includes the largest 30 funds in the group which,
by prospectus or portfolio practice, invest primarily in companies with market
capitalizations less than $5 billion at the time of purchase.
TOTAL RETURN
For the period ended 12/31/97
ONE YEAR (13.88)%
AVERAGE ANNUAL
SINCE COMMENCEMENT 3.30%
12/31/95 12/31/96 12/31/97
MID-CAP FUND $10,000 $12,390 $10,670
S&P 400 $10,000 $11,920 $15,765
Lipper MidCap $10,000 $11,630 $13,671
POST-VENTURE FUND
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/96 (Commencement). Returns shown here and in the table are
based on net change in NAV. Performance figures reflect fee waivers in effect
and represent past performance which is no guarantee of future results. In the
absence of fee waivers, total return would be reduced. The investment return and
principal value of an investment in Van Wagoner Funds will fluctuate so that an
investor's shares in the Funds, when redeemed, may be worth more or less than
their original cost.
The Nasdaq Industrial Index tracks the performance of domestic common stocks
traded on the regular Nasdaq market and which are classified as industrial
companies. As of December 31, 1997, this index included 3,245 companies,
including agricultural, mining, construction, manufacturing (electronic
components), services and public administration enterprises.
The Lipper Growth Funds Index includes the largest 30 funds in the group which,
by prospectus or portfolio practice, normally invest in companies whose long-
term earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indices.
TOTAL RETURN
For the period ended 12/31/97
ONE YEAR (12.20)%
12/31/96 12/31/97
POST-VENTURE FUND $10,000 $8,780
Nasdaq Industrial $10,000 $11,051
Lipper Growth $10,000 $12,808
VAN WAGONER EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS
December 31, 1997
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
COMMON STOCKS 102.10%
CHEMICALS - SPECIALTY 0.04%
12,300 NuCo2 Inc.* $ 135,300
--------------
COMMERCIAL SERVICES - SECURITY/SAFETY 0.85%
65,000 Check Point Software Technologies Ltd.* 2,648,750
--------------
COMPUTERS - LOCAL NETWORKS 5.29%
69,500 Cisco Systems, Inc.* 3,874,625
130,000 Citrix Systems, Inc.* 9,880,000
574,713 Com21*++ 2,500,002
20,000 Xylan Corp.* 302,500
--------------
16,557,127
--------------
COMPUTERS - MEMORY DEVICES 2.40%
60,500 Legato Systems, Inc.* 2,662,000
95,000 VERITAS Software Corp.* 4,845,000
--------------
7,507,000
--------------
COMPUTERS - RETAIL/WHOLESALE 4.30%
786,450 CHS Electronics, Inc.* 13,467,956
--------------
COMPUTERS - SOFTWARE 16.44%
187,200 Ariba Technologies *++ 2,340,000
1,193,268 Avant! Corp.* 19,987,239
70,000 Corsair Communications, Inc.* 1,137,500
167,250 J.D. Edwards & Co.* 4,933,875
90,100 Manugistics Group, Inc.* 4,020,713
157,143 NetDynamics Inc.*++ 1,100,001
85,000 Rogue Wave Software, Inc..* 940,312
191,000 Saville Systems Ireland plc ADR* 7,926,500
351,200 Sybase, Inc.* 4,675,350
416,800 Technology Modeling Associates, Inc.*+ 4,428,500
--------------
51,489,990
--------------
DIVERSIFIED OPERATIONS 1.30%
140,700 Galileo Technology Ltd.* 4,062,712
--------------
ELECTRICAL CONNECTORS 1.46%
161,800 Level One Communications, Inc.* 4,570,850
--------------
ELECTRONICS - MISCELLANEOUS COMPONENTS 2.66%
82,700 Alpha Industries, Inc.* 1,333,537
197,500 RF Micro Devices, Inc..* 2,431,719
VAN WAGONER EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- ---------------------------------------------------------------------------
ELECTRONICS - MISCELLANEOUS COMPONENTS 2.66% (CONT'D.)
173,700 Sawtek Inc.* $ 4,581,338
8,346,594
--------------
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 5.17%
44,000 Ade Corp.* 770,000
70,000 DuPont Photomasks, Inc.* 2,441,250
135,150 Etec Systems, Inc.* 6,284,475
105,000 Flextronics International Ltd.* 3,622,500
126,500 Phototronics, Inc.* 3,067,625
--------------
16,185,850
--------------
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 9.07%
185,000 ANADIGICS, Inc.* 5,573,125
301,550 SIPEX Corp.* 9,121,888
269,000 Vitesse Semiconductor Corp.* 10,154,750
150,000 VLSI Technology, Inc.* 3,543,750
--------------
28,393,513
--------------
ENERGY - COMMERCIAL SERVICES 1.39%
273,000 Simulation Sciences Inc.*+ 4,368,000
--------------
ENERGY - SERVICES 5.47%
185,000 ENSCO International Inc. 6,197,500
105,000 EVI, Inc.* 5,433,750
265,000 Marine Drilling Cos., Inc.* 5,498,750
--------------
17,130,000
--------------
MEDICAL - INFORMATION SERVICES 1.84%
120,000 HBO & Co. 5,760,000
--------------
MEDICAL - OUTPATIENT/HOME 1.15%
100,000 Renal Treatment Centers, Inc.* 3,612,500
--------------
MULTI INDUSTRY 1.26%
100,000 Veritas DGC Inc.* 3,950,000
--------------
OIL & GAS - DRILLING 11.54%
34,500 Bayard Drilling Technologies, Inc.* 560,625
100,000 Diamond Offshore Drilling, Inc.* 4,812,500
105,750 Falcon Drilling Co., Inc.* 3,707,859
280,000 Global Marine Inc.* 6,860,000
136,250 Noble Drilling Corp.* 4,172,656
15,550 Patterson Energy, Inc.* 601,591
VAN WAGONER EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS - DRILLING 11.54% (CONT'D.)
312,500 Precision Drilling Corp.* $ 7,617,188
112,000 Reading & Bates Corp.* 4,690,000
120,700 UTI Energy Corp.* 3,123,113
--------------
36,145,532
--------------
OIL & GAS - EXPLORATION & PRODUCTION 2.48%
649,800 Comstock Resources, Inc.* 7,756,988
--------------
OIL & GAS - FIELD SERVICES 4.10%
50,000 BJ Services Co.* 3,596,875
86,100 Friede Goldman International, Inc.* 2,572,237
167,800 Global Industries Ltd.* 2,852,600
50,000 Tidewater, Inc. 2,756,250
75,000 TransCoastal Marine Services, Inc.* 1,068,750
--------------
12,846,712
--------------
OIL & GAS - MACHINERY & EQUIPMENT 9.05%
75,000 Camco International, Inc. 4,776,563
75,000 Cooper Cameron Corp.* 4,575,000
136,850 Dril-Quip, Inc.* 4,806,856
68,300 Gulf Island Fabrication, Inc.* 1,366,000
85,000 National-Oilwell, Inc.* 2,905,937
75,000 Smith International, Inc.* 4,603,125
247,500 Varco International, Inc.* 5,305,781
--------------
28,339,262
--------------
POLLUTION CONTROL - SERVICES 0.42%
70,600 Waste Industries, Inc.* 1,314,925
--------------
RESTAURANTS 1.34%
100,000 CKE Restaurants, Inc. 4,212,500
--------------
RETAIL - MAIL ORDER/DIRECT 0.42%
85,000 DM Management Co.* 1,328,125
--------------
TELECOMMUNICATIONS - EQUIPMENT 12.06%
485,100 Advanced Fibre Communications, Inc.* 14,128,538
80,000 CIENA Corp.* 4,890,000
91,000 Galileo Corp.* 955,500
35,200 Innova Corp.* 536,800
538,571 Netro Corp.*++ 3,769,997
184,000 Powerwave Technologies, Inc.* 3,093,500
204,100 REMEC, Inc.* 4,592,250
110,000 Tellabs, Inc.* 5,816,250
--------------
37,782,835
--------------
VAN WAGONER EMERGING GROWTH FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS - SERVICES 0.23%
30,000 World Access, Inc.* $ 716,250
--------------
TRANSPORTATION 0.37%
39,700 Trico Marine Services, Inc.* 1,166,187
--------------
Total Common Stocks
(cost $331,753,846) 319,795,458
--------------
NUMBER
OF CONTRACTS
- ----------------------
OPTIONS PURCHASED 2.42%
449 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @950 1,549,050
687 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @980 2,962,687
1,380 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @415 2,208,000
451 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @425 856,900
--------------
Total Options Purchased
(cost $11,115,665) 7,576,637
--------------
PRINCIPAL
AMOUNT
- ----------------------
SHORT-TERM INVESTMENTS 0.00%
$563 UMB Bank, n.a., Money Market Fiduciary 563
--------------
Total Short-Term Investments
(cost $563) 563
--------------
Total Investments 104.52%
(cost $342,870,074) 327,372,658
Other Liabilities
less Assets (4.52)% (14,155,966)
--------------
NET ASSETS 100.00% $313,216,692
============
* Non-income producing
+ Affiliated company - see Note 6
++ Restricted Security. Purchased in a private placement transaction; resale to
the public may require registration or sale only to qualified institutional
buyers.
See notes to financial statements.
VAN WAGONER MICRO-CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 1997
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 90.35%
CHEMICALS - SPECIALTY 0.23%
15,200 NuCo2 Inc.* $ 167,200
--------------
COMMERCIAL SERVICES - MISCELLANEOUS 6.57%
25,000 Abacus Direct Corp.* 1,025,000
2,300 Boron, LePore & Associates, Inc.* 63,250
55,000 INSpire Insurance Solutions, Inc.* 1,148,125
45,000 MedQuist, Inc.* 1,563,750
115,000 NovaCare Employee Services, Inc.* 920,000
--------------
4,720,125
--------------
COMPUTERS - INTEGRATED SYSTEMS 2.69%
150,000 Peerless Systems Corp.* 1,931,250
--------------
COMPUTERS - LOCAL NETWORKS 0.70%
114,942 Com21*++ 499,998
--------------
COMPUTERS - RETAIL/WHOLESALE 3.28%
137,500 CHS Electronics Inc.* 2,354,687
--------------
COMPUTERS - SOFTWARE 12.16%
40,800 Ariba Technologies*++ 510,000
228,700 Avant! Corp.* 3,830,725
13,100 Corsair Communications, Inc.* 212,875
35,714 NetDynamics Inc.*++ 249,998
30,000 NS Group, Inc.* 513,750
125,000 Omega Research, Inc.* 671,875
150,000 Rogue Wave Software, Inc.* 1,659,375
102,500 Technology Modeling Associates, Inc.* 1,089,063
--------------
8,737,661
--------------
DIVERSIFIED OPERATIONS 1.43%
35,500 Galileo Technology Ltd.* 1,025,063
--------------
ELECTRONICS - MISCELLANEOUS COMPONENTS 4.00%
86,500 Alpha Industries, Inc.* 1,394,813
120,100 RF Micro Devices, Inc.* 1,478,731
--------------
2,873,544
--------------
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 4.85%
52,000 Ade Corp.* 910,000
500 DuPont Photomasks, Inc.* 17,437
VAN WAGONER MICRO-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTOR
EQUIPMENT 4.85% (CONT'D.)
30,000 Etec Systems, Inc.* $1,395,000
48,000 Phototronics, Inc.* 1,164,000
--------------
3,486,437
--------------
ELECTRONICS - SEMICONDUCTOR
MANUFACTURING 9.89%
42,000 ANADIGICS, Inc.* 1,265,250
157,000 SEEQ Technology, Inc.* 436,648
110,000 SIPEX Corp.* 3,327,500
55,000 Vitesse Semiconductor Corp.* 2,076,250
--------------
7,105,648
--------------
ENERGY - COMMERCIAL SERVICES 2.60%
117,000 Simulation Sciences Inc.* 1,872,000
--------------
MEDICAL - INSTRUMENTS 1.49%
140,000 IRIDEX Corp.* 1,067,500
--------------
MEDICAL - PRODUCTS 0.38%
11,000 Cytyc Corp.* 273,625
--------------
MEDICAL - WHOLESALE/DRUG 0.69%
33,000 Priority Healthcare Corp.* 499,125
--------------
MULTI INDUSTRY 2.35%
42,800 Veritas DGC Inc.* 1,690,600
--------------
OIL & GAS - DRILLING 8.89%
55,000 Bayard Drilling Technologies, Inc.* 893,750
115,000 Dawson Production Services, Inc.* 1,998,125
50,000 Key Energy Group, Inc.* 1,084,375
10,000 Patterson Energy, Inc.* 386,875
30,000 Precision Drilling Corp.* 731,250
50,000 UTI Energy Corp.* 1,293,750
--------------
6,388,125
--------------
OIL & GAS - EXPLORATION & PRODUCTION 2.49%
150,000 Comstock Resources, Inc.* 1,790,625
--------------
OIL & GAS - FIELD SERVICES 5.47%
40,000 Dawson Geophysical Co.* 655,000
29,900 Friede Goldman International, Inc.* 893,263
100,000 OMNI Energy Services Corp.* 1,175,000
VAN WAGONER MICRO-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS - FIELD SERVICES 5.47% (CONT'D.)
85,000 TransCoastal Marine Services, Inc.* $ 1,211,250
--------------
3,934,513
--------------
OIL & GAS - MACHINERY & EQUIPMENT 3.32%
40,000 Dril-Quip, Inc.* 1,405,000
49,000 Gulf Island Fabrication, Inc.* 980,000
--------------
2,385,000
--------------
POLLUTION CONTROL - SERVICES 2.93%
113,200 Waste Industries, Inc.* 2,108,350
--------------
RETAIL - MAIL ORDER/DIRECT 2.75%
126,500 DM Management Co.* 1,976,562
--------------
TELECOMMUNICATIONS - EQUIPMENT 9.58%
176,500 Galileo Corp.* 1,853,250
71,000 Innova Corp.* 1,082,750
132,857 Netro Corp.*++ 929,999
49,000 Powerwave Technologies, Inc.* 823,812
97,500 REMEC, Inc.* 2,193,750
--------------
6,883,561
--------------
WASTE DISPOSAL 1.61%
40,000 Superior Services, Inc.* 1,155,000
--------------
Total Common Stocks
(cost $68,904,341) 64,926,199
--------------
VAN WAGONER MICRO-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF CONTRACTS VALUE
- --------------------------------------------------------------------------------
OPTIONS PURCHASED 1.84%
45 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @950 $ 155,250
115 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @980 495,938
325 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @415 520,000
80 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @425 152,000
--------------
Total Options Purchased
(cost $1,990,952) 1,323,188
--------------
PRINCIPAL
AMOUNT
- ----------------------
REPURCHASE AGREEMENTS 13.58%
$9,762,000 UMB Bank, n.a., 5.80%, dated 12/31/97,
repurchase price $9,765,102, maturing
1/2/98 (collateralized by U.S.
Treasury Notes, 8.25%, 7/15/98) 9,762,000
--------------
Total Repurchase Agreements
(cost $9,762,000) 9,762,000
--------------
SHORT-TERM INVESTMENTS 0.00%
379 UMB Bank, n.a., Money Market Fiduciary 379
--------------
Total Short-Term Investments
(cost $379) 379
--------------
Total Investments 105.77%
(cost $80,657,672) 76,011,766
Other Liabilities
less Assets (5.77)% (4,144,578)
-----------
NET ASSETS 100.00% $71,867,188
===========
* Non-income producing
++ Restricted Security. Purchased in a private placement transaction; resale to
the public may require registration or sale only to qualified institutional
buyers.
See notes to financial statements.
VAN WAGONER MID-CAP FUND
SCHEDULE OF INVESTMENTS
December 31, 1997
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 92.44%
COMMERCIAL SERVICES - SECURITY/SAFETY 2.21%
40,000 Check Point Software Technologies Ltd.* $1,630,000
--------------
COMPUTERS - GRAPHICS 1.86%
50,000 ENCAD, Inc.* 1,375,000
--------------
COMPUTERS - INTEGRATED SYSTEMS 1.88%
35,000 Wind River Systems, Inc.* 1,389,062
--------------
COMPUTERS - LOCAL NETWORKS 3.09%
30,000 Citrix Systems, Inc.* 2,280,000
--------------
COMPUTERS - MEMORY DEVICES 3.12%
17,500 Legato Systems, Inc.* 770,000
30,000 VERITAS Software Corp.* 1,530,000
--------------
2,300,000
--------------
COMPUTERS - RETAIL/WHOLESALE 2.96%
127,500 CHS Electronics, Inc.* 2,183,438
--------------
COMPUTERS - SOFTWARE 10.86%
200,000 Avant! Corp.* 3,350,000
25,000 J.D. Edwards & Co.* 737,500
30,000 Manugistics Group, Inc.* 1,338,750
30,000 NS Group, Inc.* 513,750
50,000 Saville Systems Ireland plc ADR* 2,075,000
--------------
8,015,000
--------------
ELECTRICAL CONNECTORS 1.15%
30,000 Level One Communications, Inc.* 847,500
--------------
ELECTRONICS - MISCELLANEOUS COMPONENTS 1.61%
45,000 Sawtek Inc.* 1,186,875
--------------
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 5.02%
25,000 DuPont Photomasks, Inc.* 871,875
10,000 Etec Systems, Inc.* 465,000
35,000 Flextronics International Ltd.* 1,207,500
48,000 Phototronics, Inc.* 1,164,000
--------------
3,708,375
--------------
VAN WAGONER MID-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 6.51%
48,000 ANADIGICS, Inc.* $1,446,000
23,000 SIPEX Corp.* 695,750
55,000 Vitesse Semiconductor Corp.* 2,076,250
25,000 VLSI Technology, Inc.* 590,625
--------------
4,808,625
--------------
ENERGY - SERVICES 6.09%
65,000 ENSCO International Inc. 2,177,500
75,000 Marine Drilling Cos., Inc.* 1,556,250
25,000 Rowan Cos., Inc.* 762,500
--------------
4,496,250
--------------
MEDICAL - INFORMATION SERVICES 2.60%
40,000 HBO & Co. 1,920,000
--------------
Medical - Outpatient/Home 3.58%
60,000 Renal Care Group, Inc.* 1,920,000
20,000 Renal Treatment Centers, Inc.* 722,500
--------------
2,642,500
--------------
OIL & GAS - DRILLING 11.28%
25,000 Diamond Offshore Drilling, Inc.* 1,203,125
25,000 Falcon Drilling Co., Inc.* 876,563
45,000 Global Marine Inc. 1,102,500
35,000 Noble Drilling Corp.* 1,071,875
92,500 Precision Drilling Corp.* 2,254,688
25,000 Reading & Bates Corp.* 1,046,875
30,000 UTI Energy Corp.* 776,250
--------------
8,331,876
--------------
OIL & GAS - FIELD SERVICES 1.08%
14,500 Tidewater, Inc. 799,312
--------------
OIL & GAS - MACHINERY & EQUIPMENT 6.32%
10,000 Camco International, Inc. 636,875
20,000 Cooper Cameron Corp.* 1,220,000
15,000 National-Oilwell, Inc.* 512,812
20,000 Smith International, Inc.* 1,227,500
50,000 Varco International, Inc.* 1,071,875
--------------
4,669,062
--------------
VAN WAGONER MID-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
POLLUTION CONTROL - EQUIPMENT 0.81%
20,000 U.S. Filter Corp.* $ 598,750
--------------
RESTAURANTS 1.71%
30,000 CKE Restaurants, Inc. 1,263,750
--------------
RETAIL - APPAREL/SHOES 2.74%
15,000 Ross Stores, Inc.* 545,625
50,000 The Wet Seal, Inc.* 1,475,000
--------------
2,020,625
--------------
RETAIL - DISCOUNT/VARIETY 2.12%
30,000 Family Dollar Stores, Inc. 879,375
20,000 TJX Companies, Inc. 687,500
--------------
1,566,875
--------------
TELECOMMUNICATIONS - EQUIPMENT 10.16%
90,000 Advanced Fibre Communications, Inc.* 2,621,250
27,500 CIENA Corp.* 1,680,938
49,000 Powerwave Technologies, Inc.* 823,812
45,000 Tellabs, Inc.* 2,379,375
--------------
7,505,375
--------------
TELECOMMUNICATIONS - SERVICES 1.49%
50,000 RSL Communications, Ltd. Class A* 1,100,000
--------------
TRANSPORTATION 2.19%
55,000 Trico Marine Services, Inc.* 1,615,625
--------------
Total Common Stocks
(cost $69,638,718) 68,253,875
--------------
NUMBER
OF CONTRACTS
- ----------------------
OPTIONS PURCHASED 1.79%
45 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @950 155,250
115 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @980 495,937
325 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @415 520,000
80 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @425 152,000
--------------
Total Options Purchased
(cost $1,990,952) 1,323,187
--------------
VAN WAGONER MID-CAP FUND
SCHEDULE OF INVESTMENTS (cont'd.)
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 13.61%
$10,048,000 UMB Bank, n.a., 5.80%, dated
12/31/97, repurchase
price $10,051,193, maturing 1/2/98
(collateralized by U.S. Treasury
Notes, 8.875%, 11/15/98) $10,048,000
--------------
Total Repurchase Agreements
(cost $10,048,000) 10,048,000
--------------
SHORT-TERM INVESTMENTS 0.00%
153 UMB Bank, n.a., Money Market Fiduciary 153
--------------
Total Short-Term Investments
(cost $153) 153
--------------
Total Investments 107.84%
(cost $81,677,823) 79,625,215
Other Liabilities
less Assets (7.84)% (5,787,796)
--------------
NET ASSETS 100.00% $73,837,419
===========
* Non-income producing
See notes to financial statements.
VAN WAGONER POST-VENTURE FUND
SCHEDULE OF INVESTMENTS
December 31, 1997
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 91.86%
CHEMICALS - SPECIALTY 1.07%
20,000 NuCo2 Inc.* $220,000
--------------
COMMERCIAL SERVICES - MISCELLANEOUS 4.88%
10,000 Abacus Direct Corp.* 410,000
7,500 MedQuist, Inc.* 260,625
41,000 NovaCare Employee Services, Inc.* 328,000
--------------
998,625
--------------
COMMERCIAL SERVICES - SECURITY/SAFETY 1.99%
10,000 Check Point Software Technologies Ltd.* 407,500
--------------
COMPUTERS - INTEGRATED SYSTEMS 0.94%
15,000 Peerless Systems Corp.* 193,125
--------------
COMPUTERS - LOCAL NETWORKS 3.40%
7,500 Citrix Systems, Inc.* 570,000
28,736 Com21*++ 125,002
--------------
695,002
--------------
COMPUTERS - MEMORY DEVICES 2.57%
5,000 Legato Systems, Inc.* 220,000
6,000 VERITAS Software Corp.* 306,000
--------------
526,000
--------------
COMPUTERS - PERIPHERALS 1.66%
20,000 MMC Networks, Inc.* 340,000
--------------
COMPUTERS - RETAIL/WHOLESALE 3.77%
45,000 CHS Electronics, Inc.* 770,625
--------------
COMPUTERS - SOFTWARE 13.79%
12,000 Ariba Technologies*++ 150,000
40,000 Avant! Corp.* 670,000
20,000 Concord Communications, Inc.* 415,000
17,500 Corsair Communications, Inc.* 284,375
7,143 NetDynamics Inc.*++ 50,001
40,500 Omega Research, Inc.* 217,687
19,500 RealNetworks, Inc.* 270,563
VAN WAGONER POST-VENTURE FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMPUTERS - SOFTWARE 13.79% (CONT'D.)
10,000 Saville Systems Ireland plc ADR* $ 415,000
33,000 Technology Modeling Associates, Inc.* 350,625
--------------
2,823,251
--------------
DIVERSIFIED OPERATIONS 2.30%
16,300 Galileo Technology Ltd.* 470,663
--------------
ELECTRICAL CONNECTORS 1.59%
11,500 Level One Communications, Inc.* 324,875
--------------
ELECTRONICS - MISCELLANEOUS COMPONENTS 4.04%
35,000 RF Micro Devices, Inc.* 430,937
15,000 Sawtek Inc.* 395,625
--------------
826,562
--------------
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 3.93%
15,000 Ade Corp.* 262,500
7,500 Etec Systems, Inc.* 348,750
8,000 Phototronics, Inc.* 194,000
--------------
805,250
--------------
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 7.19%
10,000 ANADIGICS, Inc.* 301,250
20,000 SIPEX Corp.* 605,000
15,000 Vitesse Semiconductor Corp.* 566,250
--------------
1,472,500
--------------
ENERGY - COMMERCIAL SERVICES 1.95%
25,000 Simulation Sciences Inc.* 400,000
--------------
MEDICAL - BIOMEDICAL/GENETICS 1.65%
15,000 COR Therapeutics, Inc.* 337,500
--------------
MEDICAL - WHOLESALE/DRUG 1.48%
20,000 Priority Healthcare Corp.* 302,500
--------------
MINING 1.84%
20,000 OYO Geospace Corp.* 377,500
--------------
VAN WAGONER POST-VENTURE FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS - DRILLING 3.05%
15,000 Precision Drilling Corp.* $ 365,625
10,000 UTI Energy Corp.* 258,750
--------------
624,375
--------------
OIL & GAS - EXPLORATION & PRODUCTION 2.33%
40,000 Comstock Resources, Inc.* 477,500
--------------
OIL & GAS - FIELD SERVICES 4.91%
9,500 Friede Goldman International, Inc.* 283,812
25,000 OMNI Energy Services Corp.* 293,750
30,000 TransCoastal Marine Services, Inc.* 427,500
--------------
1,005,062
--------------
OIL & GAS - MACHINERY & EQUIPMENT 4.66%
15,000 Dril-Quip, Inc.* 526,875
21,300 Gulf Island Fabrication, Inc.* 426,000
--------------
952,875
--------------
POLLUTION CONTROL - SERVICES 1.82%
20,000 Waste Industries, Inc.* 372,500
--------------
REAL ESTATE 1.76%
14,000 Trammell Crow Co.* 360,500
--------------
RETAIL - MAIL ORDER/DIRECT 1.91%
25,000 DM Management Co.* 390,625
--------------
TELECOMMUNICATIONS - EQUIPMENT 10.21%
15,000 Advanced Fibre Communications, Inc.* 436,875
5,500 CIENA Corp.* 336,188
25,000 Innova Corp.* 381,250
2,000 Metromedia Fiber Network, Inc.* 33,250
42,857 Netro Corp.*++ 299,999
14,400 Powerwave Technologies, Inc.* 242,100
16,000 REMEC, Inc.* 360,000
--------------
2,089,662
--------------
TELECOMMUNICATIONS - SERVICES 1.17%
10,000 World Access, Inc.* 238,750
--------------
Total Common Stocks
(cost $18,969,253) 18,803,327
--------------
VAN WAGONER POST-VENTURE FUND
SCHEDULE OF INVESTMENTS (cont'd.)
NUMBER
OF CONTRACTS VALUE
- --------------------------------------------------------------------------------
OPTIONS PURCHASED 2.63%
25 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @950 $ 86,250
50 Put option on Nasdaq 100 Stock Index,
expiring 3/21/98 @980 215,625
100 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @415 160,000
40 Put option on Morgan Stanley High
Technology Index,
expiring 3/21/98 @425 76,000
--------------
Total Options Purchased
(cost $780,292) 537,875
--------------
PRINCIPAL
AMOUNT
- ----------------------
SHORT-TERM INVESTMENTS 3.35%
$685,612 UMB Bank, n.a., Money Market Fiduciary 685,612
--------------
Total Short-Term Investments
(cost $685,612) 685,612
--------------
Total Investments 97.84%
(cost $20,435,157) 20,026,814
Other Assets
less Liabilities 2.16% 441,613
--------------
NET ASSETS 100.00% $20,468,427
===========
* Non-income producing
++ Restricted Security. Purchased in a private placement transaction; resale to
the public may require registration or sale only to qualified institutional
buyers.
See notes to financial statements.
<TABLE>
VAN WAGONER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
<CAPTION>
EMERGING MICRO-CAP MID-CAP POST-VENTURE
GROWTH FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value:
Nonaffiliated issuers (cost $334,193,096,
$70,895,672, $71,629,823 and $20,435,157,
respectively) $318,576,158 $ 66,249,766 $ 69,577,215 $20,026,814
Affiliated issuers (cost $8,676,978, $0,
$0 and $0, respectively) 8,796,500 - - -
Repurchase agreements, at value (cost $0,
$9,762,000, $10,048,000 and $0, respectively) - 9,762,000 10,048,000 -
Receivable for investments sold 8,462,626 1,324,377 1,397,374 1,711,981
Interest and dividends receivable 8,359 3,336 9,189 83
Receivable from investment adviser - - - 10,905
Organizational expenses, net of accumulated
amortization 22,016 22,016 22,016 -
Prepaid expenses and other assets 51,629 19,494 17,767 10,831
----------- ----------- ----------- -----------
Total Assets 335,917,288 77,380,989 81,071,561 21,760,614
----------- ----------- ----------- -----------
LIABILITIES:
Payable for investments purchased 18,985,754 5,253,651 7,030,319 1,094,940
Payable to custodian 2,847,033 1,356 3,206 106,709
Accrued investment advisory fee 357,753 122,708 65,475 28,797
Accrued distribution fee 262,819 61,593 59,427 29,263
Payable for shares redeemed 14,581 - 2,165 -
Accrued expenses and other liabilities 232,656 74,493 73,550 32,478
----------- ----------- ----------- -----------
Total Liabilities 22,700,596 5,513,801 7,234,142 1,292,187
----------- ----------- ----------- -----------
NET ASSETS $313,216,692 $ 71,867,188 $ 73,837,419 $20,468,427
=========== =========== =========== ===========
NET ASSETS CONSIST OF:
Capital stock $ 3,086 $ 719 $ 692 $ 233
Paid-in-capital 483,276,164 100,018,890 94,508,209 23,873,598
Accumulated net realized loss on investments (154,565,142) (23,506,515) (18,618,874) (2,997,061)
Net unrealized depreciation on investments (15,497,416) (4,645,906) (2,052,608) (408,343)
----------- ----------- ----------- -----------
Net Assets $313,216,692 $ 71,867,188 $ 73,837,419 $20,468,427
=========== =========== =========== ===========
CAPITAL STOCK, $0.0001 PAR VALUE
Authorized 200,000,000 100,000,000 100,000,000 100,000,000
Issued and outstanding 30,858,636 7,194,046 6,922,234 2,331,241
NET ASSET VALUE, REDEMPTION PRICE,
AND OFFERING PRICE PER SHARE
(NET ASSETS/SHARES OUTSTANDING) $10.15 $9.99 $10.67 $8.78
====== ====== ====== ======
See notes to financial statements.
</TABLE>
<TABLE>
VAN WAGONER FUNDS
STATEMENTS OF OPERATIONS
Year Ended December 31, 1997
<CAPTION>
EMERGING MICRO-CAP MID-CAP POST-VENTURE
GROWTH FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 674,360 $ 226,346 $ 318,552 $ 144,337
Dividends 264,907 18,447 84,882 929
----------- ----------- ----------- -----------
Total Investment Income 939,267 244,793 403,434 145,266
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees 5,815,171 1,628,215 1,068,243 387,026
Transfer agent fees and expenses 1,314,935 386,051 382,007 93,259
Distribution fees 838,278 199,858 188,803 64,504
Fund accounting and administration fees 289,564 147,075 146,137 61,667
Custody fees 269,270 45,678 32,008 12,212
Printing and postage expenses 126,171 32,914 32,979 6,890
State registration fees 59,242 39,576 39,852 41,218
Professional fees 20,509 16,816 16,816 20,463
Amortization of organization costs 7,344 7,344 7,344 -
Directors' fees and expenses 4,123 4,123 4,123 3,589
Miscellaneous 16,816 6,451 5,908 3,001
----------- ----------- ----------- -----------
Total expenses before waiver 8,761,423 2,514,101 1,924,220 693,829
Less: Waiver of expenses - (397,422) - (190,694)
----------- ----------- ----------- -----------
Net Expenses 8,761,423 2,116,679 1,924,220 503,135
----------- ----------- ----------- -----------
NET INVESTMENT LOSS (7,822,156) (1,871,886) (1,520,786) (357,869)
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on investments (35,738,255) (3,711,351) (3,910,862) (3,246,420)
Net realized gain on short positions - 496,589 - 249,359
Net change in unrealized
appreciation and depreciation on investments (53,549,197) (17,420,883) (9,456,465) (408,343)
----------- ----------- ----------- -----------
Net Loss on Investments (89,287,452) (20,635,645) (13,367,327) (3,405,404)
----------- ----------- ----------- -----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(97,109,608) $(22,507,531) $(14,888,113) $(3,763,273)
=========== =========== =========== ===========
See notes to financial statements.
</TABLE>
<TABLE>
VAN WAGONER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
EMERGING GROWTH MICRO-CAP MID-CAP POST-VENTURE
FUND FUND FUND FUND
-------------------------- ------------------------- ------------------------- -----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment loss $ (7,822,156) $ (7,754,290) $ (1,871,886) $ (972,487) $ (1,520,786) $ (971,113) $ (357,869)
Net realized loss on
investments (35,738,255) (118,833,259) (3,711,351) (20,296,388) (3,910,862) (14,710,318) (3,246,420)
Net realized gain on
short positions - - 496,589 - - - 249,359
Net change in unrealized
appreciation and
depreciation
on investments (53,549,197) 38,051,781 (17,420,883) 12,774,977 (9,456,465) 7,403,857 (408,343)
------------- ------------- ------------- ------------ ------------ ------------ ------------
Net decrease in net assets
resulting from operations (97,109,608) (88,535,768) (22,507,531) (8,493,898) (14,888,113) (8,277,574) (3,763,273)
------------- ------------- ------------- ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 226,434,056 1,363,297,233 96,555,054 245,071,240 92,514,890 244,490,946 54,243,643
Redemption of shares (454,267,232) (636,635,323) (142,878,789) (95,912,221) (141,529,840) (98,506,223) (30,011,943)
------------- ------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease)
from share transactions (227,833,176) 726,661,910 (46,323,735) 149,159,019 (49,014,950) 145,984,723 24,231,700
------------- ------------- ------------- ------------ ------------ ------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (324,942,784) 638,126,142 (68,831,266) 140,665,121 (63,903,063) 137,707,149 20,468,427
NET ASSETS:
Beginning of period 638,159,476 33,334 140,698,454 33,333 137,740,482 33,333 -
------------- ------------- ------------- ------------ ------------ ------------ ------------
End of period $313,216,692 $638,159,476 $ 71,867,188 $140,698,454 $ 73,837,419 $137,740,482 $20,468,427
============= ============= ============= ============ ============ ============ ============
TRANSACTIONS IN SHARES:
Shares sold 19,199,101 96,673,050 8,080,869 18,977,746 7,469,170 18,740,673 5,409,119
Shares redeemed (38,615,725) (46,401,123) (12,190,073) (7,677,829) (11,661,886) (7,629,056) (3,077,878)
------------- ------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) (19,416,624) 50,271,927 (4,109,204) 11,299,917 (4,192,716) 11,111,617 2,331,241
============= ============= ============= ============ ============ ============ ============
See notes to financial statements.
</TABLE>
<TABLE>
VAN WAGONER FUNDS
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout the period
<CAPTION>
EMERGING GROWTH MICRO-CAP MID-CAP POST-VENTURE
FUND FUND FUND FUND<F1>
-------------------------- ------------------------- ------------------------- -----------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997 DEC. 31, 1996 DEC. 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.69 $10.00 $12.45 $10.00 $12.39 $10.00 $10.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.25) (0.15) (0.26) (0.09) (0.22) (0.09) (0.15)
Net realized and unrealized gains
(losses) on investments (2.29) 2.84<F2> (2.20) 2.54<F2> (1.50) 2.48<F2> (1.07)
--------- --------- --------- --------- --------- --------- ---------
Total from investment operations (2.54) 2.69 (2.46) 2.45 (1.72) 2.39 (1.22)
--------- --------- --------- --------- --------- --------- ---------
Net Asset Value, End of Period $10.15 $12.69 $ 9.99 $12.45 $10.67 $12.39 $8.78
========= ========= ========= ========= ========= ========= =========
Total Return (20.02)% 26.90% (19.76)% 24.50% (13.88)% 23.90% (12.20)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of
period (000s) $313,217 $638,159 $71,867 $140,698 $73,837 $137,740 $20,468
Ratio of expenses to average
net assets - net of waivers
and reimbursements 1.88% 1.95% 1.95% 1.95% 1.80% 1.95% 1.95%
Ratio of net investment loss
to average net assets - net
of waivers and reimbursements (1.68)% (1.49)% (1.72)% (1.04)% (1.42)% (1.16)% (1.39)%
Ratio of expenses to average
net assets - before waivers
and reimbursements 1.88% 1.98% 2.32% 2.55% 1.80% 2.05% 2.69%
Ratio of net investment loss
to average net assets - before
waivers and reimbursements (1.68)% (1.52)% (2.09)% (1.64)% (1.42)% (1.26)% (2.13)%
Portfolio turnover rate 333% 159% 232% 153% 304% 173% 317%
Average commission rate paid
on portfolio
investment transactions $0.0476 $0.0531 $0.0397 $0.0474 $0.0481 $0.0516 $0.0413
<FN>
<F1> Commenced operations after the close of business on December 31, 1996
<F2> The amount shown may not correlate with the aggregate gains and losses of portfolio securities
due to the timing of sales and redemptions of Fund shares.
See notes to financial statements.
</TABLE>
VAN WAGONER FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1.ORGANIZATION
Van Wagoner Funds, Inc. (the "Company") was organized on October 18, 1995 as
a Maryland corporation and is registered under the Investment Company Act of
1940 (the "1940 Act") as an open-end management investment company. The
Emerging Growth Fund, Micro-Cap Fund, Mid-Cap Fund and Post-Venture Fund
(collectively "the Funds") are separate, diversified investment portfolios of
Van Wagoner Funds, Inc.
2.SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") which permit management to make certain
estimates and assumptions at the date of the financial statements.
(A) INVESTMENT VALUATION - A security traded on a recognized stock exchange
is valued at the last sale price. If no sale is reported, the most
current bid price will be used. All other securities for which over-the-
counter market quotations are readily available are valued at the most
current closing price. Debt securities which will mature in more than 60
days are valued at prices furnished by a pricing service. Securities
which will mature in 60 days or less are valued at amortized cost, which
approximates market value. Any securities for which market quotations
are not readily available are valued at their fair value as determined
in good faith by the Funds' investment adviser under the supervision of
the Board of Directors.
(B) REPURCHASE AGREEMENTS - During the term of a repurchase agreement, the
market value of the underlying collateral, including accrued interest,
is required to equal or exceed the market value of the repurchase
agreement. The underlying collateral for all repurchase agreements is
held by the Funds' custodian.
NOTES TO FINANCIAL STATEMENTS (cont'd.)
(C) ORGANIZATION COSTS - Costs incurred by the Emerging Growth, Micro-Cap
and Mid-Cap Funds in connection with their organization, registration
and the initial public offering of shares have been deferred and will be
amortized over the period of benefit, but not to exceed five years. If
any of the original shares of a Fund are redeemed by any holder thereof
prior to the end of the amortization period, the redemption proceeds
will be reduced by the pro rata share of the unamortized expenses as of
the date of redemption. The pro rata share by which the proceeds are
reduced will be derived by dividing the number of original shares of the
Funds being redeemed by the total number of original shares outstanding
at the time of redemption.
(D) EXPENSES - The Funds are charged for those expenses that are directly
attributable to each portfolio, such as advisory and custodian fees.
Expenses that are not directly attributable to a portfolio are typically
allocated among the portfolios in proportion to their respective net
assets.
(E) FEDERAL INCOME TAXES - Each Fund intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of income to
its shareholders which will be sufficient to relieve it from all or
substantially all federal income taxes.
As of December 31, 1997, the Emerging Growth, Micro-Cap and Mid-Cap
Funds had federal income tax capital loss carryforwards of $121,173,497,
$21,632,657 and $12,145,972, respectively. The entire federal income tax
loss carryforward for each of these Funds expires between 2004 and 2005.
As of December 31, 1997, the Post-Venture Fund had a federal income tax
capital loss carryforward of $1,349,247 which expires in 2005. Net
realized gains and losses may differ for tax and financial statement
purposes primarily as a result of wash sales and differences in the
timing of the recognition of realized gains and losses.
(F) RESTRICTED SECURITIES - The Emerging Growth, Micro-Cap and Post-Venture
Funds own securities which are unregistered and thus restricted as to
resale. These securities are valued at their fair value, which at
December 31, 1997 is equal to cost. Where future disposition of these
securities requires registration under the Securities Act of 1933, the
Funds have the right to include these securities in such registration,
generally without cost to the Funds.
NOTES TO FINANCIAL STATEMENTS (cont'd.)
The Funds have no right to require registration of unregistered
securities. The Emerging Growth, Micro-Cap and Post-Venture Funds had
restricted securities with an aggregate market value of $9,710,000,
$2,189,995 and $625,002, respectively, representing 3.1% of the net
assets of each of the Funds.
(G) OPTIONS CONTRACTS - The Funds purchase put options to hedge portfolio
investments. Premiums paid for option contracts purchased are included
in the Statements of Assets and Liabilities as an asset. Option
contracts are valued at the last sales price reported on the date of
valuation. If no sale is reported, the option contract purchased is
valued at the average of the current bid and asked price reported on the
day of valuation. When option contracts expire or are closed, realized
gains or losses are recognized without regard to any unrealized gains or
losses on the underlying securities.
(H) DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income and
net realized capital gains, if any, will be declared and paid at least
annually. Distributions to shareholders are recorded on the ex-dividend
date. The Fund may periodically make reclassifications among certain of
its capital accounts as a result of the timing and characterization of
certain income and capital gains or losses determined in accordance with
federal income tax regulations, which may differ from GAAP. Accordingly,
at December 31, 1997, reclassifications were recorded to increase
undistributed net investment income and decrease paid-in-capital by
$7,822,156, $1,871,886, $1,520,786 and $357,869 for the Emerging Growth,
Micro-Cap, Mid-Cap and Post-Venture Funds, respectively.
(I) OTHER - Investment transactions are accounted for on a trade date basis.
Each Fund determines the gain or loss realized from the investment
transactions by comparing the original cost of the security lot sold
with the net sale proceeds. Dividend income is recognized on the ex-
dividend date and interest income is recognized on an accrual basis.
3. INVESTMENT ADVISORY AGREEMENT
Each Fund has an agreement with Van Wagoner Capital Management, Inc. (the
"Adviser") to furnish investment advisory services to the
NOTES TO FINANCIAL STATEMENTS (cont'd.)
Funds. Under the terms of each agreement, the Adviser is compensated at the
following percentage of average daily net assets for each Fund: 1.25% for
the Emerging Growth Fund, 1.50% for the Micro-Cap Fund, 1.00% for the Mid-
Cap Fund and 1.50% for the Post-Venture Fund. The Adviser has agreed to
voluntarily reduce fees for expenses (exclusive of brokerage, interest,
taxes and extraordinary expenses) that exceed 1.95% for each Fund until
January 1, 1999. Expenses of $397,422 and $190,694 were waived in the
Micro-Cap and Post-Venture Funds, respectively.
4. SERVICE AND DISTRIBUTION PLAN
The Funds have adopted a Service and Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by
the Funds in connection with the distribution of their shares at an annual
rate, as determined from time to time by the Board of Directors, of up to
0.25% of a Fund's average daily net assets.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the year ended December 31, 1997 were as
follows:
EMERGING MICRO-CAP MID-CAP POST-VENTURE
GROWTH FUND FUND FUND FUND
------------- ------------ ----------- ------------
Purchases $1,483,678,761 $237,490,034 $294,880,570 $88,036,149
Sales 1,751,906,101 291,892,883 352,892,105 67,557,294
For the year ended December 31, 1997, there were no purchases or sales of
long-term U.S. government securities.
The cost of securities on a tax basis for the Emerging Growth Fund, Micro-Cap
Fund, Mid-Cap Fund and Post-Venture Fund is $347,512,760, $81,332,166,
$82,857,232 and $20,813,208, respectively. At December 31, 1997, gross
unrealized appreciation and depreciation on investments for federal income
tax purposes were as follows:
NOTES TO FINANCIAL STATEMENTS (cont'd.)
EMERGING MICRO-CAP MID-CAP POST-VENTURE
GROWTH FUND FUND FUND FUND
------------- ------------ ----------- ------------
Unrealized
appreciation $ 26,116,461 $5,503,583 $ 7,394,027 $2,587,053
(Unrealized
depreciation) (46,256,563) (10,823,983) (10,626,044) (3,373,447)
------------ ------------ ------------ -----------
Net unrealized
depreciation
on investments $(20,140,102) $(5,320,400) $(3,232,017) $ (786,394)
============= ============ ============ ===========
6. TRANSACTIONS WITH AFFILIATED COMPANIES
An affiliated company is a company in which a Fund has ownership of at least
5% of the voting securities. Companies which are affiliates of each Fund are
as follows:
<TABLE>
<CAPTION>
AMOUNT OF
AMOUNT OF GAIN (LOSS)
SHARE ACTIVITY DIVIDENDS REALIZED
--------------------------------------------------------------- CREDITED ON SALE
BALANCE PURCHASES/ SALES/ BALANCE TO INCOME OF SHARES
SECURITY NAME 12/31/96 ADDITIONS REDUCTIONS 12/31/97 IN 1997 IN 1997
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EMERGING GROWTH FUND
Cardiovascular
Dynamics, Inc.* - 469,500 469,500 - - $ 229,471
Simulation
Sciences Inc.* - 667,600 394,600 273,000 - 1,500,994
Technology Modeling
Associates, Inc.* 250,000 393,800 227,000 416,800 - 1,204,158
--- -------------
- $2,934,623
=== =============
MICRO-CAP FUND
Cardiovascular
Dynamics, Inc.* 250,000 277,200 527,200 - - $(1,118,072)
=== ============
* Non-income producing
</TABLE>
VAN WAGONER FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF THE VAN WAGONER FUNDS, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Van Wagoner Emerging Growth
Fund, the Van Wagoner Micro-Cap Fund, the Van Wagoner Mid-Cap Fund and the Van
Wagoner Post-Venture Fund, four of the portfolios of the Van Wagoner Funds, Inc.
(the "Funds") at December 31, 1997, the results of each of their operations, the
changes in each of their net assets and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1997 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
Milwaukee, Wisconsin
January 28, 1998
FOR FUND INFORMATION
AND SHAREHOLDER SERVICES
CALL 1-800-228-2121.
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF SHAREHOLDERS OF VAN
WAGONER FUNDS. IT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS
UNLESS ACCOMPANIED OR PRECEDED BY AN EFFECTIVE PROSPECTUS FOR THE FUNDS. THE
PROSPECTUS GIVES DETAILS ABOUT CHARGES, INVESTMENT OBJECTIVES, RISKS AND
OPERATING POLICIES OF THE FUNDS. READ THE PROSPECTUS CAREFULLY.
VAN WAGONER FUNDS
P.O. BOX 1628
MILWAUKEE, WI 53201-1628
