VanWagoner Funds
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Annual Report
December 31, 1998
(LOGO)
Van Wagoner Funds ANNUAL REPORT
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Dear fellow shareholders: december 31, 1998
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1998 ended on a high note: the Van Wagoner Funds returned to top-ranking
performance, with four of our five Funds finishing the year in the top quartile
of their peer groups.<F1> The fourth quarter saw the Funds outpacing indices
like the Russell 2000, S&P 500/R and Nasdaq Industrial.<F2>
This was the year that tried but ultimately rewarded our patience . . . a true
exercise in market dynamics. The shift away from growth stocks early in the year
only intensified as the depths of the Asian economic crisis became clearer. A
huge liquidity squeeze took hold, sending prices tumbling without regard for
fundamentals. By the third quarter, there were no safe havens; almost all stocks
declined, regardless of company size or sector.
While we made some adjustments in light of economic trends, the Van Wagoner
Funds remained true to their discipline. We made sure we owned what we consider
classic growth stocks with innovative products, sound strategy and good
management teams. We kept our portfolios positioned for the upturn we expected.
And in the fourth quarter, this discipline paid off.
The Federal Reserve cut interest rates, investors grew more comfortable
branching out in their equity portfolios, and dollars began moving into smaller
companies with solid fundamentals. We believe this is the beginning of a true
small-cap cycle that will reward investors in the growth stock sector.
While the Funds stayed true to our investment style, the stocks in our
portfolios changed over the course of the year. In the first six months we held
more energy and retail stocks. As the Asian crisis deepened, we reduced our
exposure in the energy sector. And, after making a healthy profit over the
summer, we cut back on retail stocks, based on expectations for slower spending
later in the year.
Meanwhile, two of the areas we had been monitoring grew more appealing in July.
When Internet stocks took a hit, we saw the opportunity to increase our
holdings. And with small-cap valuations reaching what we considered rock bottom,
we also grew aggressive in semiconductors and other technology sectors. Finally,
we completed the diversification we had begun earlier in the year, eliminating
many large portfolio positions _ a strategy that affected performance
positively.
Here is a sector-by-sector look at where we stood at the end of 1998:
- -THE INTERNET is a powerful resource that is dramatically changing the way
people do business and communicate. We believe we have to be involved, but it
is essential that we choose investments carefully _ following the same first-
hand, fundamental research approach we take in other sectors. Two areas stand
out:
Computer network service continues to be an area of emphasis, with Internet
traffic growing even faster than expected and large corporations upgrading
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Van Wagoner Funds ANNUAL REPORT
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their networks. In this area we like Exodus Communications,<F3> a high-end
host for large corporate Web sites.
Companies that provide useful, original content (as opposed to portal
companies like Yahoo!<F3>) we believe will be in greater demand as people grow
more comfortable using the Internet. To take advantage of this trend, we are
investing in companies like OnHealth Network,<F3> a leading online destination
for health and wellness information.
- -ENERGY companies are suffering from weak demand and oversupply. We have sold
our stocks in this sector.
- -HEALTH CARE is still an area we like, though we trimmed holdings in December
as companies reached what we considered their full valuation. Over the year we
took advantage of large moves in stocks like Medical Manager Corporation,<F3>
which makes software that doctors and medical clinics can use to manage their
practices.
- -SEMICONDUCTORS appear to be on the way to recovery, and we have increased our
holdings accordingly. We like QLogic,<F3> a leading supplier of fiber channel
interfaces to connect computers and data storage products, and RF Micro
Devices,<F3> which provides battery management semiconductors for cellular
phones, laptop computers and other products.
- -CONSUMER GOODS did well for us in the first half of the year, with stocks like
Abercrombie & Fitch,<F3> a fashion-oriented casual apparel company for men and
women. While we cut back in the third quarter, we are considering buying
again, based on domestic economic strength and the depressed prices of many
retail stocks.
- -SOFTWARE stocks are not all alike. We favor those that help companies with
numerous locations manage their organization . . . such as Citrix,<F3> which
allows rapid deployment of enterprise software applications, and Veritas,<F3>
whose storage management software enables businesses to back up and recover
data for Unix and Windows NT tape and disk drives.
- -TELECOMMUNICATIONS companies that appeal to us include those that increase
network speed and capacity - like Com21,<F3> whose cable modems enable cable
networks to distribute data faster, and Metromedia Fiber,<F3> whose high
bandwidth fiber optic infrastructure is used by the government and
corporations to dramatically lower data, voice and video transmission costs.
From one quarter to the next, we were especially pleased with the results of our
analysts' research. Over the year, nearly 95% of the companies we held met or
exceeded their earnings estimates - a phenomenal record in a year where many
companies missed their marks. External factors kept the prices of high
performing companies down - but it was like holding a beach ball under water.
When conditions turned favorable, these stocks exploded.
Now small-cap valuations remain cheap, interest rates are still low and
investors are looking for companies with strong domestic growth. Those are the
makings of a strong small-cap cycle . . . and we be-lieve we have positioned
the Funds to take full advantage. I want to thank you, our shareholders,
for holding firm throughout a turbulent 1998. Like you, everyone on the Van
Wagoner Funds investment team is a shareholder. We are pleased with the
results of our efforts in 1998 and look forward to the year ahead.
Sincerely,
/s/Garrett R. Van Wagoner
Garrett R. Van Wagoner
<F1> Rankings are based on total returns for the one-year and three-year periods
ended 12/31/98 as compiled and published by Lipper Analytical Services,
Inc. For the one year ended 12/31/98, the Emerging Growth Fund was 117th of
638 Funds in the SmallCap Funds category; the Micro-Cap Fund was 8th of 45
Funds in the MicroCap Funds category; the Mid-Cap Fund was 117th of 327
Funds in the MidCap Funds category; the Post-Venture Fund was 12th of 638
Funds in the SmallCap Funds category; and the Technology Fund was 4th of 73
Funds in the Science & Technology Funds category. For the three years ended
12/31/98, the Emerging Growth Fund was 350th of 368 Funds in the SmallCap
Funds category; the Micro-Cap Fund was 22nd of 23 Funds in the MicroCap
Funds category; and the Mid-Cap Fund was 176th of 182 Funds in the MidCap
Funds category.
<F2> Please see pages 4 - 6 for the total returns of the Funds and their
respective benchmarks, including the Russell 2000 Index and Nasdaq
Industrial Index. The S&P 500/R Index's total return for the quarter and
one year ended 12/31/98 and average annual total return since inception
(12/31/95) as of 12/31/98 were as follows: 21.30%, 28.58% and 28.23%,
respectively. The S&P 500/R Index is an unmanaged index of 500 selected
common stocks, most of which are listed on the New York Stock Exchange. The
index is heavily weighted toward stocks with large market capitalizations
and represents approximately two-thirds of the total market value of all
domestic common stocks. It is not possible to directly invest in an
unmanaged index.
<F2> Each of the five Van Wagoner Funds seeks capital appreciation. Although all
of the Funds are aggressive growth funds, they differ based on the market
capitalization of the stocks, and the sectors in which they invest. This
will affect their relative performance. For example during 1998 the
Technology Fund's performance benefited from its policy to invest primarily
in the technology sectors. The Post-Venture, Micro-Cap and Mid-Cap Funds
outperformed the Emerging Growth Fund because they completed portfolio
diversification earlier in the year. The Post-Venture Fund also benefited
because it did not invest in stocks in the energy sector.
<F3> Holdings may change due to ongoing management. References to specific
investments should not be construed as a recommendation of the Funds or
their Adviser.
http://WWW.VANWAGONER.COM
Van Wagoner Funds Annual Report
Van Wagoner Funds PERFORMANCE
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EMERGING GROWTH FUND
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- --------------------------------------------
TOTAL RETURN For the periods ended 12/31/98
- --------------------------------------------
ONE YEAR 7.98%
AVERAGE ANNUAL SINCE INCEPTION 3.10%
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This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Inception date). Returns shown here and in the table are
based on net change in NAV. Per for mance 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 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, 1998, this index included 2,866 companies,
including agricultural, mining, construction, manufacturing (electronic
components), services and public administration enterprises.
The Lipper SmallCap 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 $1 billion at the time of purchase.
EMERGING Nasdaq Lipper
GROWTH FUND Industrial SmallCap
------------ ------------ ------------
12/31/95 10,000 10,000 10,000
12/31/96 12,690 11,557 11,436
12/31/97 10,150 12,772 13,153
12/31/98 10,960 13,694 13,041
MICRO-CAP FUND
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TOTAL RETURN For the periods ended 12/31/98
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ONE YEAR 13.11%
AVERAGE ANNUAL SINCE INCEPTION 4.16%
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This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Inception date). Returns shown here and in the table are
based on net change in NAV. Perform ance 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 smal lest 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.
MICRO-CAP Russell Lipper
FUND 2000 MicroCap
------------ ------------ ------------
12/31/95 10,000 10,000 10,000
12/31/96 12,450 11,649 12,111
12/31/97 9,990 14,254 14,427
12/31/98 11,300 13,891 14,158
Call toll-free 1-800-228-2121
MID-CAP FUND
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TOTAL RETURN For the periods ended 12/31/98
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ONE YEAR 16.49%
AVERAGE ANNUAL SINCE INCEPTION 7.52%
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This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/95 (Inception date). 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 $700 million.
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.
MID-CAP Lipper
FUND S&P 400 MidCap
--------------- ------------ ------------
12/31/95 10,000 10,000 10,000
12/31/96 12,390 11,920 11,630
12/31/97 10,670 15,765 13,662
12/31/98 12,430 18,778 15,563
POST-VENTURE FUND
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- -------------------------------------------
TOTAL RETURN For the periods ended 12/31/98
- -------------------------------------------
ONE YEAR 37.59%
AVERAGE ANNUAL SINCE INCEPTION 9.91%
- -------------------------------------------
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/96 (Inception date). 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, 1998, this index included 2,866 companies,
including agricultural, mining, construction, manufacturing (electronic
components), services and public administration enterprises.
The Lipper SmallCap 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 $1 billion at the time of purchase.
POST-VENTURE Nasdaq Lipper
FUND Industrial SmallCap
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12/31/96 10,000 10,000 10,000
12/31/97 8,780 11,051 11,502
12/31/98 12,080 11,849 11,403
http://WWW.VANWAGONER.COM
Van Wagoner Funds PERFORMANCE
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TECHNOLOGY FUND
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- -------------------------------------------
TOTAL RETURN For the periods ended 12/31/98
- -------------------------------------------
ONE YEAR AND
AVERAGE ANNUAL SINCE INCEPTION 85.10%
- -------------------------------------------
This chart assumes an initial investment of $10,000 made after the close of
business on 12/31/97 (Inception date). 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 Morgan Stanley High-Technology 35 Index is a broad-market technology
indicator dedicated exclusively to the electronics-based technology sector. The
35 stocks in the index include the most highly capitalized American companies
drawn from nine technology subsectors: computer services/design software, server
software, PC software and new media, networking and telecom equipment, server
hardware, PC hardware and peripherals, specialized systems and semiconductors.
Capitalization ranges from $1 billion to $54 billion.
The S&P 500/R Composite Stock Index is an unmanaged index of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
The Lipper Science & Technology Funds Index includes the largest ten funds in
the group which, by prospectus or portfolio practice, invest 65% of their equity
portfolios in science and technology stocks.
TECHNOLOGY Morgan Stanle Lipper Science
FUND High-Tech and Tech S&P 500
------------ ------------ ------------ ------------
12/31/96 10,000 10,000 10,000 10,000
12/31/98 18,510 19,569 14,694 12,858
Call toll-free 1-800-228-2121
Van Wagoner Funds SCHEDULE OF INVESTMENTS
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EMERGING GROWTH FUND december 31, 1998
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NUMBER
OF SHARES VALUE
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COMMON AND PREFERRED STOCKS 88.91%
BANKS - WEST/SOUTHWEST 0.19%
33,500 Colorado Business Bankshares, Inc.<F4> $ 364,313
---------
CHEMICALS - SPECIALTY 0.28%
25,000 ChiRex, Inc. <F4> 534,375
---------
COMMERCIAL SERVICES -
Business 0.83%
130,900 Dental Care Alliance, Inc. <F4> 1,570,800
---------
Commercial Services -
Miscellaneous 3.08%
7,500 CMGI, Inc. <F4> 798,750
20,500 International Network
Services<F4> 1,363,250
37,500 MedQuist Inc. <F4> 1,481,250
35,000 The Metzler Group, Inc. <F4> 1,704,062
39,000 Realty Information Group, Inc. <F4> 492,375
---------
5,839,687
---------
Commercial Services -
Schools 0.98%
50,000 Apollo Group, Inc. <F4> 1,693,750
38,000 Caliber Learning Network, Inc. <F4> 161,500
---------
1,855,250
---------
Computers - Graphics 1.94%
138,000 Micromuse Inc. <F4> 2,691,000
15,000 Xilinx, Inc. <F4> 976,875
---------
3,667,875
---------
Computers - Integrated
Systems 1.54%
101,000 Apex PC Solutions, Inc. <F4> 2,916,375
---------
Computers - Local
Networks 3.28%
30,000 Citrix Systems, Inc. <F4> 2,911,875
92,903 Copper Mountain Networks, Inc. <F4><F6> 719,998
100,000 FORE Systems, Inc. <F4> 1,831,250
42,000 Xylan Corp. <F4> 740,251
---------
6,203,374
---------
Number
of Shares Value
- --------- -----
Computers - Memory
Devices 5.55%
15,000 ARM Holdings plc <F4> $ 903,750
46,650 EMC Corp. <F4> 3,965,250
30,000 Legato Systems, Inc. <F4> 1,978,125
40,000 Network Appliances, Inc. <F4> 1,800,000
31,000 VERITAS Software Corp. <F4> 1,858,062
---------
10,505,187
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Computers - Mini/Micro 1.22%
75,000 Rational Software Corp. <F4> 1,987,500
3,813 Sun Microsystems, Inc. <F4><F7> 326,488
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2,313,988
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Computers -
RETAIL/Wholesale 1.31%
62,250 Emulex Corp. <F4> 2,490,000
---------
Computers - Services 1.78%
11,000 America Online, Inc. <F4> 1,760,000
61,000 USWeb Corp. <F4> 1,608,875
---------
3,368,875
---------
Computers - Software 5.90%
187,200 Ariba Technologies<F4><F6> 2,340,000
65,000 Avant! Corp. <F4><F5> 985,000
15,000 EarthLink Network, Inc. <F4> 855,000
30,000 GeoTel Communications Corp. <F4> 1,117,500
10,000 Great Plains Software, Inc. <F4> 478,281
15,000 Lycos, Inc. <F4> 833,438
30,000 Mercury Interactive Corp. <F4> 1,897,500
237,671 Unwired Planet<F4><F6> 762,924
8,000 Yahoo! Inc. <F4> 1,895,500
---------
11,165,143
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Computer Software -
Enterprise 5.96%
170,800 Best Software, Inc. <F4> 4,056,500
117,000 New Era of Networks, Inc. <F4> 5,148,000
102,500 Segue Software, Inc. <F4> 2,075,625
---------
11,280,125
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http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Emerging Growth Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Computer Software -
Internet 5.67%
12,500 At Home Corp. <F4> $ 928,125
15,000 Digital River, Inc. <F4> 532,500
77,850 Exodus Communications, Inc. <F4> 5,001,862
1,175,438 iVillage, Inc. <F4><F6> 3,349,998
15,000 MindSpring Enterprises, Inc. <F4> 915,937
----------
10,728,422
----------
Computer Software -
Medical 3.49%
49,000 Medical Manager Corp. <F4> 1,537,375
1,019,900 OnHealth Network Co. <F4><F5> 5,067,998
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6,605,373
----------
Computer Software -
Security 0.52%
7,000 ISS Group, Inc. <F4> 385,000
10,000 VeriSign, Inc. <F4> 591,250
----------
976,250
----------
Electrical Connectors 0.56%
30,000 Level One Communications, Inc. <F4> 1,065,000
----------
Electronics - Miscellaneous
Components 2.30%
64,000 RF Micro Devices, Inc. <F4> 2,968,000
15,000 Solectron Corp. <F4> 1,394,062
----------
4,362,062
----------
Electronics - Semiconductor
Equipment 6.21%
46,000 ASM Lithography Holding N.V. <F4> 1,403,000
74,000 ATMI, Inc. <F4> 1,868,500
15,000 Etec Systems, Inc. <F4> 600,000
22,750 Flextronics International Ltd. <F4> 1,947,969
20,000 KLA-Tencor Corp. <F4> 867,500
15,000 Novellus Systems, Inc. <F4> 742,500
10,000 Rambus, Inc. <F4> 962,500
25,000 Teradyne, Inc. <F4> 1,059,375
18,000 Uniphase Corp. <F4> 1,248,750
20,000 Veeco Instruments, Inc. <F4> 1,062,500
----------
11,762,594
----------
Number
of Shares Value
- --------- -----
Electronics - Semiconductor
Manufacturing 12.02%
105,000 Actel Corp. <F4> $ 2,100,000
15,000 Altera Corp. <F4> 913,125
30,000 Applied Micro Circuits Corp. <F4> 1,019,061
105,000 Conexant Systems, Inc. <F4> 1,758,750
30,000 Jabil Circuit, Inc. <F4> 2,238,750
15,000 Linear Technology Corp. 1,343,437
15,000 Maxim Integrated Products, Inc. <F4> 655,313
15,000 PMC-Sierra, Inc. <F4> 946,875
9,000 QLogic Corp. <F4> 1,177,875
45,000 SDL, Inc. <F4> 1,783,125
30,000 Semtech Corp. <F4> 1,076,250
500,000 Transmeta Corp. <F4><F6> 3,000,000
75,300 TranSwitch Corp. <F4> 2,931,994
40,000 Vitesse Semiconductor Corp. <F4> 1,825,000
----------
22,769,555
----------
Energy - Alternative
Sources 0.34%
30,000 KTI, Inc. <F4> 648,750
----------
Finance - Savings & Loans 2.13%
118,700 TeleBanc Financial Corp. <F4> 4,041,249
----------
Leisure - Services 1.28%
79,500 Travel Services International, Inc. <F4> 2,424,750
----------
Medical - Ethical Drugs 0.35%
25,000 Anesta Corp. <F4> 665,625
----------
Medical - Information
Services 0.29%
52,500 MECON, Inc. <F4> 550,764
----------
Medical - Products 1.79%
60,000 Pharmaceutical Product
Development, Inc. <F4> 1,803,750
35,000 ResMed, Inc. <F4> 1,588,125
----------
3,391,875
----------
Pollution Control -
Services 0.33%
23,400 Tetra Tech, Inc. <F4> 633,263
----------
Call toll-free 1-800-228-2121
Emerging Growth Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Restaurants 0.70%
381,600 Famous Dave's of America, Inc. <F4> $ 1,073,250
6,000 P.F. Chang's China Bistro, Inc. <F4> 136,500
6,000 PJ America Inc. <F4> 108,750
----------
1,318,500
----------
Retail - Apparel/Shoes 1.65%
30,000 Abercrombie & Fitch Co. <F4> 2,122,500
33,000 The Wet Seal, Inc. <F4> 996,188
----------
3,118,688
----------
Retail - Mail Order/Direct 1.40%
5,000 Amazon.com, Inc. <F4> 1,606,250
278,291 Garden Escape<F4><F6> 1,046,374
----------
2,652,624
----------
Telecommunications -
Equipment 8.50%
192,500 Allegiance Telecom, Inc. <F4> 2,334,062
60,000 Carrier Access Corp. <F4> 2,066,250
12,000 E-Tek Dynamics, Inc. <F4> 321,000
112,500 Metromedia Fiber Network, Inc. <F4> 3,768,750
538,571 Netro Corp. <F4><F6> 3,769,997
25,000 Nokia Corp. ADR 2,998,945
30,000 Powerwave Technologies, Inc. <F4> 558,750
15,000 REMEC, Inc. <F4> 270,000
----------
16,087,754
----------
Telecommunications -
Services 5.54%
11,700 COLT Telecom Group plc<F4> 700,537
261,500 Com21, Inc. <F4> 5,491,500
52,300 MetroNet Communications Corp. <F4> 1,752,050
51,000 Qwest Communications
International Inc. <F4> 2,550,000
----------
10,494,087
----------
Total Common and
Preferred Stocks
(cost $121,034,169) 168,372,552
-----------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS 1.21%
$2,286,000 UMB Bank, n.a., repurchase agreement,
4.35%, dated 12/31/98, repurchase
price $2,287,090, maturing 1/4/99
(collateralized by FNMA discount
notes maturing 3/11/99) $ 2,286,000
566 UMB Bank, n.a., Money Market
Fiduciary 566
----------
Total Short-Term Investments
(cost $2,286,566) 2,286,566
----------
Total Investments 90.12%
(cost $123,320,735) 170,659,118
Other Assets less Liabilities 9.88% 18,712,567
----------
NET ASSETS 100.00% $189,371,685
============
<F4> Non-income producing
<F5> Affiliated company - see Note 7
<F6> Preferred stock purchased in a private placement transaction; resale to the
public may require registration or sale only to qualified institutional
buyers. Security is valued under procedures established by the Board of
Directors.
<F7> Shares held in escrow; can trade freely beginning in
August 1999.
See notes to financial statements.
http://WWW.VANWAGONER.COM
Van Wagoner Funds SCHEDULE OF INVESTMENTS
VAN WAGONER MICRO-CAP FUND december 31, 1998
NUMBER
OF SHARES VALUE
- --------- -----
COMMON AND PREFERRED STOCKS 85.81%
Commercial Services -
Business 1.60%
61,300 Dental Care Alliance, Inc.<F4> $ 735,600
----------
Commercial Services -
Miscellaneous 5.42%
15,500 MedQuist Inc. <F8> 612,250
14,250 The Metzler Group, Inc. <F8> 693,797
7,500 Pediatrix Medical Group, Inc. <F8> 449,531
30,000 Realty Information Group, Inc. <F8> 378,750
8,400 Superior Consultant Holdings Corp. <F8> 365,400
----------
2,499,728
----------
Commercial Services -
Schools 0.99%
59,000 Caliber Learning Network, Inc. <F8> 250,750
8,800 Education Management Corp. <F8> 207,900
----------
458,650
----------
Commercial Services -
Staffing 1.78%
10,000 On Assignment Inc. <F8> 345,000
18,000 RCM Technologies, Inc. <F8> 477,000
----------
822,000
----------
Computers - Graphics 1.69%
40,000 Micromuse Inc. <F8> 780,000
----------
Computers - Integrated
Systems 6.23%
40,500 Apex PC Solutions, Inc. <F8> 1,169,437
35,000 Computer Network
Technology Corp. <F8> 437,500
15,000 Concentric Network Corp. <F8> 498,750
11,200 Mercury Computer Systems, Inc. <F8> 315,000
20,000 Mylex Corp. <F8> 240,000
25,000 Peerless Systems Corp. <F8> 212,500
----------
2,873,187
----------
Computers - Local
Networks 0.39%
23,225 Copper Mountain Networks, Inc. <F8><F10> 179,994
----------
Number
of Shares Value
- --------- -----
Computers - Memory
Devices 0.87%
25,000 Advanced Digital Information Corp. <F8> $ 400,000
----------
Computers - Mini/Micro 0.16%
867 Sun Microsystems, Inc. <F8><F10> 74,237
----------
Computers -
Retail/Wholesale 3.06%
15,000 Emulex Corp. <F8> 600,000
36,000 Pomeroy Computer Resources, Inc. <F8> 810,000
----------
1,410,000
----------
Computers - Software 6.57%
40,800 Ariba Technologies<F8><F9> 510,000
2,500 EarthLink Network, Inc. <F8> 142,500
25,000 Great Plains Software, Inc. <F8> 1,206,250
10,000 IONA Technologies PLC ADR<F8> 380,000
17,000 MAPICS, Inc. <F8> 280,500
5,000 Mercury Interactive Corp. <F8> 316,250
60,200 Unwired Planet<F8><F9> 193,242
----------
3,028,742
----------
Computer Software -
Enterprise 4.58%
32,500 Best Software, Inc. <F8> 771,875
19,000 New Era of Networks, Inc. <F8> 836,000
25,000 Segue Software, Inc. <F8> 506,250
----------
2,114,125
----------
Computer Software -
Internet 7.13%
16,000 Digital River, Inc. <F8> 568,000
25,000 Exodus Communications, Inc. <F8> 1,606,250
298,246 iVillage, Inc. <F8><F9> 850,001
2,500 MindSpring Enterprises, Inc. <F8> 152,656
2,000 Ticketmaster Online-
CitySearch, Inc. <F8> 112,000
----------
3,288,907
----------
Computer Software -
Medical 3.52%
33,000 Medical Manager Corp. <F8> 1,035,375
117,700 OnHealth Network Co. <F8> 588,500
----------
1,623,875
----------
Call toll-free 1-800-228-2121
Van Wagoner Micro-Cap Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Electronics -
Laser Systems/Components 0.48%
10,000 Laser Vision Centers, Inc. <F8> $ 221,562
----------
Electronics - Miscellaneous
Components 2.09%
20,750 RF Micro Devices, Inc. <F8> 962,281
----------
Electronics - Semiconductor
Equipment 0.52%
5,000 Cree Research, Inc. <F8> 239,375
----------
Electronics - Semiconductor
Manufacturing 10.19%
34,000 Actel Corp. <F8> 680,000
10,500 Cybex Computer Products Corp. <F8> 308,438
30,000 DSP Communications, Inc. <F8> 459,375
1,000 PMC-Sierra, Inc. <F8> 63,125
2,500 QLogic Corp. <F8> 327,187
17,500 SDL, Inc. <F8> 693,437
30,000 Semtech Corp. <F8> 1,076,250
115,000 Transmeta Corp. <F8><F9> 690,000
8,000 TranSwitch Corp. <F8> 311,500
2,000 Vitesse Semiconductor Corp. <F8> 91,250
----------
4,700,562
----------
Energy - Alternative
Sources 0.47%
10,000 KTI, Inc. <F8> 216,250
----------
Finance - Savings & Loans 2.95%
40,000 TeleBanc Financial Corp. <F8> 1,360,000
----------
Information Services 0.95%
15,000 Data Processing Resources Corp. <F8> 438,750
----------
Medical/Dental Services 1.20%
16,500 ICON plc ADR<F8> 552,750
----------
Medical - Ethical Drugs 0.58%
10,000 Anesta Corp. <F8> 266,250
----------
Medical - Hospitals 1.17%
15,000 Province Healthcare Co. <F8> 538,125
----------
Number
of Shares Value
- --------- -----
Medical - Information
Services 1.63%
71,600 MECON, Inc. <F8> $ 751,800
----------
Medical - Products 2.67%
15,000 Molecular Devices Corp. <F8> 326,250
----------
15,000 Pharmaceutical Product
Development, Inc. <F8> 450,938
10,000 ResMed, Inc. <F8> 453,750
----------
1,230,938
----------
Pollution Control -
Services 2.54%
13,200 Casella Waste Systems, Inc. <F8> 490,050
15,000 Tetra Tech, Inc. <F8> 405,938
15,000 Waste Connections, Inc. <F8> 275,625
----------
1,171,613
----------
Restaurants 0.91%
85,000 Famous Dave's of America, Inc. <F8> 239,063
10,000 PJ America Inc. <F8> 181,250
----------
420,313
----------
Retail - Apparel/Shoes 1.42%
8,400 The Buckle, Inc. <F8> 201,600
15,000 The Wet Seal, Inc. <F8> 452,813
----------
654,413
----------
Retail - Consumer
Electronics 1.00%
16,000 Tweeter Home Entertainment
Group, Inc. <F8> 460,000
----------
Retail - Mail Order/Direct 2.57%
50,000 DM Management Co. <F8> 950,000
62,533 Garden Escape<F8><F9> 235,124
----------
1,185,124
----------
Telecommunications -
Equipment 6.02%
57,500 Allegiance Telecom, Inc. <F8> 697,187
17,000 Harmonic Lightwaves, Inc. <F8> 318,750
14,000 Metromedia Fiber Network, Inc. <F8> 469,000
132,857 Netro Corp. <F8><F9> 929,999
20,000 REMEC, Inc. <F8> 360,000
----------
2,774,936
----------
http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Van Wagoner Micro-Cap Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Telecommunications -
Services 2.46%
50,000 Com21, Inc. <F8> $ 1,050,000
1,700 Qwest Communications
International Inc. <F8> 85,000
----------
1,135,000
----------
Total Common and
Preferred Stocks
(cost $29,455,484) 39,569,087
----------
Principal
Amount
- ------
SHORT-TERM INVESTMENTS 7.13%
$3,290,000 UMB Bank, n.a., repurchase agreement,
4.35%, dated 12/31/98, repurchase
price $3,291,568, maturing 1/4/99
(collateralized by FNMA discount
notes maturing 3/11/99) 3,290,000
524 UMB Bank, n.a., Money Market
Fiduciary 524
----------
Total Short-Term Investments
(cost $3,290,524) 3,290,524
----------
Total Investments 92.94%
(cost $32,746,008) 42,859,611
Other Assets less Liabilities 7.06% 3,253,886
----------
NET ASSETS 100.00% $46,113,497
===========
<F8> Non-income producing
<F9> Preferred stock purchased in a private placement transaction; resale to the
public may require registration or sale only to qualified institutional
buyers. Security is valued under procedures established by the Board of
Directors.
<F10>Shares held in escrow; can trade freely beginning in
August 1999.
See notes to financial statements.
Call toll-free 1-800-228-2121
Van Wagoner Mid-Cap Fund december 31, 1998
Number
of Shares Value
- --------- -----
COMMON STOCKS 88.41%
Banks - Money Center 0.66%
5,000 First Union Corp. $ 304,062
----------
Banks - Super Regional 5.33%
7,500 Comerica Inc. 511,406
7,500 Mellon Bank Corp. 515,625
10,000 SunTrust Banks, Inc. 765,000
7,500 Wachovia Corp. 655,781
----------
2,447,812
----------
Commercial Services -
Miscellaneous 2.07%
7,500 International Network Services<F11> 498,750
7,500 Pediatrix Medical Group, Inc. <F11> 449,531
----------
948,281
----------
Commercial Services -
Schools 1.11%
15,000 Apollo Group, Inc. <F11> 508,125
----------
Computers - Integrated
Systems 0.28%
2,500 Policy Management Systems Corp. 126,250
----------
Computers - Local
Networks 6.48%
12,500 Ascend Communications, Inc. <F11> 821,875
7,500 Cisco Systems, Inc. <F11> 696,094
15,000 Citrix Systems, Inc. <F11> 1,455,937
----------
2,973,906
----------
Computers - Memory
Devices 7.37%
10,000 EMC Corp. <F11> 850,000
10,000 Legato Systems, Inc. <F11> 659,375
17,000 Network Appliances, Inc. <F11> 765,000
10,000 Quantum Corp. <F11> 212,500
15,000 VERITAS Software Corp. <F11> 899,062
----------
3,385,937
----------
Computers - Mini/Micro 1.15%
20,000 Rational Software Corp. <F11> 530,000
----------
Number
of Shares Value
- --------- -----
Computers - Services 8.15%
15,000 America Online, Inc. <F11> $2,400,000
10,000 DST Systems, Inc. <F11> 570,625
15,000 Fiserv, Inc. <F11> 771,562
----------
3,742,187
----------
Computers - Software 5.94%
10,000 Compuware Corp. <F11> 781,250
7,500 EarthLink Network, Inc. <F11> 427,500
5,000 Saville Systems Ireland PLC ADR<F11> 95,000
6,000 Yahoo! Inc. <F11> 1,421,625
----------
2,725,375
----------
Computer Software -
Education 1.83%
15,000 Electronic Arts Inc. <F11> 841,875
----------
Computer Software -
Enterprise 0.73%
7,500 BMC Software, Inc. <F11> 334,219
----------
Computer Software -
Internet 7.85%
12,500 At Home Corp. <F11> 928,125
10,000 Exodus Communications, Inc. <F11> 642,500
15,000 MindSpring Enterprises, Inc. <F11> 915,937
20,000 Ticketmaster Online-
CitySearch, Inc. <F11> 1,120,000
----------
3,606,562
----------
Electronics - Semiconductor
Equipment 2.13%
7,500 Teradyne, Inc. <F11> 317,813
9,500 Uniphase Corp. <F11> 659,062
----------
976,875
----------
Electronics - Semiconductor
Manufacturing 2.90%
2,500 Maxim Integrated Products, Inc. <F11> 109,219
10,000 Micron Technology, Inc. <F11> 505,625
11,500 Sanmina Corp. <F11> 718,750
----------
1,333,594
----------
http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Van Wagoner Mid-Cap Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Finance - Investment
Banking 1.50%
18,500 A. G. Edwards, Inc. <F11> $ 689,125
----------
Finance - Investment
Management 6.41%
30,000 Kansas City Southern
Industries, Inc. <F11> 1,475,625
11,000 Morgan Stanley Dean Witter & Co. 781,000
20,000 T. Rowe Price Associates, Inc. 685,000
----------
2,941,625
----------
Insurance - Property/
Casualty/Title 0.98%
7,500 Ambac Financial Group, Inc. 451,406
----------
Media 1.34%
12,500 Heftel Broadcasting Corp. <F11> 615,625
----------
Medical - Outpatient/
Home 1.60%
5,000 Renal Care Group, Inc. <F11> 144,063
20,000 Total Renal Care Holdings, Inc. <F11> 591,250
----------
735,313
----------
Medical - Products 3.00%
12,500 Guidant Corp. 1,378,125
----------
Medical - Wholesale/Drug 0.97%
10,000 Schein (Henry), Inc. <F11> 447,500
----------
Radio Stations 1.49%
25,000 Infinity Broadcasting Corp. 684,375
----------
Retail - Apparel/Shoes 4.57%
17,500 Abercrombie & Fitch Co. <F11> 1,238,125
5,000 The Buckle, Inc. <F11> 120,000
15,000 Ross Stores, Inc. <F11> 590,625
5,000 The Wet Seal, Inc. <F11> 150,938
----------
2,099,688
----------
Retail - Discount/Variety 1.18%
7,500 Costco Companies, Inc. <F11> 541,406
----------
Number
of Shares Value
- --------- -----
Retail - Mail Order/Direct 2.80%
4,000 Amazon.com, Inc. <F11> $ 1,285,000
----------
Supermarkets 2.32%
7,500 Kroger Co. <F11> 453,750
10,000 Safeway Inc. <F11> 609,375
----------
1,063,125
----------
Telecommunications -
Services 2.71%
45,000 Com21, Inc. <F11> 945,000
10,200 RSL Communications, Ltd.
Class A<F11> 300,900
----------
1,245,900
----------
Television 3.56%
30,000 Clear Channel Communications, Inc. <F11> 1,635,000
----------
Total Common Stocks
(cost $26,246,385) 40,598,273
----------
Principal
Amount
- ------
SHORT-TERM INVESTMENTS 1.59%
$731,000 UMB Bank, n.a., repurchase agreement,
4.35%, dated 12/31/98, repurchase
price $731,348, maturing 1/4/99
(collateralized by U.S. Treasury
Notes, 5.875%, 2/28/99) 731,000
934 UMB Bank, n.a., Money Market
Fiduciary 934
----------
Total Short-Term Investments
(cost $731,934) 731,934
----------
Call toll-free 1-800-228-2121
Van Wagoner Mid-Cap Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Total Investments 90.00%
(cost $26,978,319) $41,330,207
Other Assets less Liabilities 10.00% 4,594,316
----------
NET ASSETS 100.00% $45,924,523
===========
SECURITIES SOLD SHORT
5,000 i2 Technologies, Inc. $151,875
----------
Total Securities Sold Short
(proceeds $125,933) $151,875
========
*Non-income producing
See notes to financial statements.
http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Van Wagoner Post-Venture Fund december 31, 1998
Number
of Shares Value
- --------- -----
COMMON AND PREFERRED STOCKS 69.39%
Banks - West/Southwest 0.38%
6,700 Colorado Business Bankshares, Inc.<F12> $ 72,863
---------
Chemicals - Specialty 0.22%
2,000 ChiRex, Inc. <F12> 42,750
---------
Commercial Services -
Business 0.42%
6,700 Dental Care Alliance, Inc. <F12> 80,400
---------
Commercial Services -
Miscellaneous 2.76%
750 CMGI, Inc. <F12> 79,875
2,500 International Network Services<F12> 166,250
4,000 MedQuist Inc. <F12> 155,125
10,000 Realty Information Group, Inc. <F12> 126,250
---------
527,500
---------
Commercial Services -
Schools 0.87%
4,000 Apollo Group, Inc. <F12> 135,500
7,250 Caliber Learning Network, Inc. <F12> 30,813
---------
166,313
---------
Computers - Graphics 1.86%
11,500 Micromuse Inc. <F12> 224,250
2,000 Xilinx, Inc. <F12> 130,250
---------
354,500
---------
Computers - Integrated
Systems 1.44%
9,550 Apex PC Solutions, Inc. <F12> 275,756
---------
Computers - Local
Networks 1.84%
3,000 Citrix Systems, Inc. <F12> 291,187
7,743 Copper Mountain Networks, Inc. <F12><F13> 60,008
---------
351,195
---------
Computers - Memory
Devices 3.40%
2,000 ARM Holdings plc<F12> 120,500
3,000 Legato Systems, Inc. <F12> 197,812
Number
of Shares Value
- --------- -----
Computers - Memory
Devices 3.40% (cont'd.)
4,000 Network Appliances, Inc. <F12> $180,000
2,500 VERITAS Software Corp. <12> 149,844
---------
648,156
---------
Computers - Mini/Micro 0.49%
3,000 Rational Software Corp. <F12> 79,500
173 Sun Microsystems, Inc. <F12><F14> 14,813
---------
94,313
---------
Computers -
Retail/Wholesale 1.26%
6,000 Emulex Corp. <F12> 240,000
---------
Computers - Services 1.53%
500 America Online, Inc. <F12> 80,000
8,000 USWeb Corp. <F12> 211,000
---------
291,000
---------
Computers - Software 4.53%
12,000 Ariba Technologies<F12><F13> 150,000
2,500 Avant! Corp. <F12> 36,563
1,350 EarthLink Network, Inc. <F12> 76,950
2,500 GeoTel Communications Corp. <F12> 93,125
2,000 Great Plains Software, Inc. <F12> 96,500
1,500 Lycos, Inc. <F12> 83,344
2,500 Mercury Interactive Corp. <F12> 158,125
15,840 Unwired Planet<F12><F13> 50,846
500 Yahoo! Inc. <F12> 118,469
---------
863,922
---------
Computer Software -
Enterprise 4.88%
9,500 Best Software, Inc. <F12> 225,625
11,500 New Era of Networks, Inc. <F12> 506,000
10,000 Segue Software, Inc.<F12> 198,750
---------
930,375
---------
Computer Software -
Internet 4.42%
1,000 At Home Corp. <F12> 74,250
2,000 Digital River, Inc. <F12> 71,000
4,000 Exodus Communications, Inc. <F12> 257,000
Call toll-free 1-800-228-2121
Van Wagoner Post-Venture Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Computer Software -
Internet 4.42% (cont'd.)
122,807 iVillage, Inc. <F12><F13> $350,000
1,500 MindSpring Enterprises, Inc. <F12> 91,594
---------
843,844
---------
Computer Software -
Medical 3.35%
4,000 Medical Manager Corp. <F12> <F12> 125,500
105,000 OnHealth Network Co. <F12> 513,846
---------
639,346
---------
Computer Software -
Security 0.19%
600 VeriSign, Inc. <F12> 35,475
---------
Electrical Connectors 0.74%
4,000 Level One Communications, Inc. <F12> 142,000
---------
Electronics - Miscellaneous
Components 1.55%
5,000 RF Micro Devices, Inc. <F12> 231,875
3,600 Sawtek Inc. <F12> 63,000
---------
294,875
---------
Electronics - Semiconductor
Equipment 4.70%
5,000 ASM Lithography Holding N.V. <F12> 152,500
8,000 ATMI, Inc. <F12> 202,000
2,000 Etec Systems, Inc. <F12> 80,000
1,000 Flextronics International Ltd. <F12> 85,625
1,000 Rambus, Inc. <F12> 96,250
2,500 Uniphase Corp. <F12> 173,438
2,000 Veeco Instruments, Inc. <F12> 106,250
---------
896,063
---------
Electronics - Semiconductor
Manufacturing 9.75%
11,000 Actel Corp. <F12> 220,000
4,000 Applied Micro Circuits Corp. <F12> 135,875
10,000 Conexant Systems, Inc.<F12> 167,500
2,500 Jabil Circuit, Inc. <F12> 186,562
1,500 PMC-Sierra, Inc. <F12> 94,687
1,000 QLogic Corp. <F12> 130,875
Number
of Shares Value
- --------- -----
Electronics - Semiconductor
Manufacturing 9.75% (cont'd.)
4,500 SDL, Inc. <F12> $ 178,312
4,000 Semtech Corp. <F12> 143,500
40,000 Transmeta Corp. <F12><F13> 240,000
7,000 TranSwitch Corp. <F12> 272,562
2,000 Vitesse Semiconductor Corp. <F12> 91,250
---------
1,861,123
---------
Energy - Alternative
Sources 0.11%
1,000 KTI, Inc. <F12> 21,625
---------
Finance - Savings & Loans 1.87%
10,500 TeleBanc Financial Corp. <F12> 357,478
---------
Leisure - Services 1.12%
7,000 Travel Services International, Inc. <F12> 213,500
---------
Medical - Information
Services 0.55%
10,000 MECON, Inc. <F12> 105,000
---------
Medical - Products 1.91%
6,000 Pharmaceutical Product
Development, Inc. <F12> 180,375
4,000 ResMed, Inc. <F12> 183,625
---------
364,000
---------
Restaurants 0.72%
6,000 P.F. Chang's China Bistro, Inc. <F12> 136,500
---------
Retail - Apparel/Shoes 0.47%
3,000 The Wet Seal, Inc. <F12> 90,563
---------
Retail - Mail Order/Direct 1.23%
500 Amazon.com, Inc. <F12> 160,625
19,747 Garden Escape <F12><F13> 74,249
---------
234,874
---------
Telecommunications -
Equipment 5.06%
12,500 Allegiance Telecom, Inc. <F12> 151,562
4,000 Carrier Access Corp. <F12> 137,750
9,000 Metromedia Fiber Network, Inc. <F12> 301,500
http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Van Wagoner Post-Venture Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Telecommunications -
Equipment 5.06% (cont'd.)
42,857 Netro Corp. <F12><F13> $ 299,999
4,000 Powerwave Technologies, Inc. <F12> 74,500
---------
965,311
---------
Telecommunications -
Services 5.77%
2,500 COLT Telecom Group plc<F12> 149,687
21,000 Com21, Inc. <F12> 441,000
7,000 MetroNet Communications Corp. <F12> 234,500
5,500 Qwest Communications
International Inc. <F12> 275,000
---------
1,100,187
---------
Total Common and
Preferred Stocks
(cost $9,183,584) 13,240,807
---------
Principal
Amount
- -------
U.S. Treasury NoteS 10.50%
$2,000,000 12/31/00, 4.625% 2,003,118
---------
Total U.S. Treasury Notes
(cost $2,004,057) 2,003,118
---------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS 8.16%
$1,557,000 UMB Bank, n.a., repurchase agreement,
4.35%, dated 12/31/98, repurchase
price $1,557,742, maturing
1/4/99 (collateralized by FNMA
discount notes maturing 3/11/99) $ 1,557,000
120 UMB Bank, n.a., Money Market
Fiduciary 120
---------
Total Short-Term Investments
(cost $1,557,120) 1,557,120
---------
Total Investments 88.05%
(cost $12,744,761) 16,801,045
Other Assets less Liabilities 11.95% 2,279,962
---------
NET ASSETS 100.00% $19,081,007
===========
<F12> Non-income producing
<F13> Preferred stock purchased in a private placement transaction; resale to
the public may require registration or sale only to qualified
institutional buyers. Security is valued under procedures established by
the Board of Directors.
<F14> Shares held in escrow; can trade freely beginning in
August 1999.
See notes to financial statements.
Call toll-free 1-800-228-2121
Van Wagoner Technology Fund december 31, 1998
Number
of Shares Value
- --------- -----
COMMON AND PREFERRED STOCKS 88.80%
Chemicals - Specialty 0.26%
1,000 ChiRex, Inc.<F15> $ 21,375
---------
Commercial Services -
Miscellaneous 1.13%
500 CMGI, Inc. <F15> 53,250
1,000 MedQuist Inc. <F15> 39,500
---------
92,750
---------
Commercial Services -
Schools 0.83%
2,000 Apollo Group, Inc. <F15> 67,750
---------
Computers - Graphics 1.47%
4,500 Micromuse Inc. <F15> 87,750
500 Xilinx, Inc. <F15> 32,563
---------
120,313
---------
Computers - Integrated
Systems 3.48%
4,500 Apex PC Solutions, Inc. <F15> 129,937
5,000 Computer Network
Technology Corp. <F15> 62,500
2,000 Mercury Computer Systems, Inc. <F15> 56,250
3,000 Mylex Corp. <F15> 36,000
---------
284,687
---------
Computers - Local
Networks 3.73%
1,500 3Com Corp. <F15> 67,219
1,000 Citrix Systems, Inc. <F15> 97,062
5,161 Copper Mountain Networks, Inc. <F15><F16> 39,998
5,000 FORE Systems, Inc. <F15> 91,562
500 Xylan Corp. <F15> 8,781
---------
304,622
---------
Computers - Memory
Devices 5.91%
2,500 Advanced Digital Information Corp. <F15> 40,000
500 ARM Holdings plc<F15> 30,125
1,400 EMC Corp. <F15> 119,000
Number
of Shares Value
- --------- -----
Computers - Memory
Devices 5.91% (cont'd.)
1,500 Legato Systems, Inc. <F15> $ 98,906
1,000 Network Appliances, Inc. <F15> 45,000
2,500 VERITAS Software Corp. <F15> 149,844
---------
482,875
---------
Computers - Mini/Micro 5.12%
2,000 Dell Computer Corp. <F15> 146,812
1,500 Intel Corp. 179,281
3,500 Rational Software Corp. <F15> 92,750
---------
418,843
---------
Computers -
Retail/Wholesale 2.37%
4,000 Emulex Corp. <F15> 160,000
1,500 Pomeroy Computer Resources, Inc. <F15> 33,750
---------
193,750
---------
Computers - Services 1.62%
500 America Online, Inc. <F15> 80,000
2,000 USWeb Corp. <F15> 52,750
---------
132,750
---------
Computers - Software 5.51%
2,500 Avant! Corp. <F15> 36,563
750 EarthLink Network, Inc. <F15> 42,750
1,000 GeoTel Communications Corp. <F15> 37,250
500 Lycos, Inc. <F15> 27,781
1,000 Mercury Interactive Corp. <F15> 63,250
1,250 Microsoft Corp. <F15> 173,359
3,160 Unwired Planet<F15><F16> 10,144
250 Yahoo! Inc. <F15> 59,234
---------
450,331
---------
Computer Software -
Enterprise 4.96%
6,000 Best Software, Inc. <F15> 142,500
4,000 New Era of Networks, Inc. <F15> 176,000
4,250 Segue Software, Inc. <F15> 86,062
---------
404,562
---------
http://www.vanwagoner.com
Van Wagoner Funds Schedule of Investments
Van Wagoner Technology Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Computer Software -
Internet 4.84%
500 At Home Corp. <F15> $ 37,125
500 Digital River, Inc. <F15> 17,750
2,500 Exodus Communications, Inc. <F15> 160,625
52,631 iVillage, Inc. <F15><F16> 149,998
500 MindSpring Enterprises, Inc. <F15> 30,531
---------
396,029
---------
Computer Software -
Medical 3.73%
1,750 Medical Manager Corp. <F15> 54,906
50,000 OnHealth Network Co. <F15> 250,000
---------
304,906
---------
Computer Software -
Security 0.40%
550 VeriSign, Inc. <F15> 32,519
---------
Electrical Connectors 0.43%
1,000 Level One Communications, Inc. <F15> 35,500
---------
Electronics - Miscellaneous
Components 2.45%
2,750 RF Micro Devices, Inc. <F15> 127,531
1,500 Sawtek Inc. <F15> 26,250
500 Solectron Corp. <F15> 46,469
---------
200,250
---------
Electronics - Semiconductor
Equipment 6.40%
500 Applied Materials, Inc. <F15> 21,344
2,300 ASM Lithography Holding N.V. <F15> 70,150
2,500 ATMI, Inc. <F15> 63,125
500 Etec Systems, Inc. <F15> 20,000
250 Flextronics International Ltd. <F15> 21,406
1,000 KLA-Tencor Corp. <F15> 43,375
1,000 Novellus Systems, Inc. <F15> 49,500
500 Rambus, Inc. <F15> 48,125
1,500 Teradyne, Inc. <F15> 63,563
1,000 Uniphase Corp. <F15> 69,375
1,000 Veeco Instruments, Inc. <F15> 53,125
---------
523,088
---------
Number
of Shares Value
- --------- -----
Electronics - Semiconductor
Manufacturing 13.38%
4,500 Actel Corp. <F15> $ 90,000
500 Altera Corp. <F15> 30,438
1,000 Applied Micro Circuits Corp. <F15> 33,969
5,000 Conexant Systems, Inc. <F15> 83,750
3,000 DSP Communications, Inc. <F15> 45,938
1,250 Jabil Circuit, Inc. <F15> 93,281
500 Linear Technology Corp. 44,781
500 Maxim Integrated Products, Inc. <F15> 21,844
1,000 Micron Technology, Inc. <F15> 50,562
500 PMC-Sierra, Inc. <F15> 31,563
500 QLogic Corp. <F15> 65,437
2,000 SDL, Inc. <F15> 79,250
1,750 Semtech Corp. <F15> 62,781
1,000 Texas Instruments, Inc. 85,563
11,666 Transmeta Corp. <F15><F16> 69,996
3,500 TranSwitch Corp. <F15> 136,281
1,500 Vitesse Semiconductor Corp. <F15> 68,438
---------
1,093,872
---------
Energy - Alternative
Sources 0.26%
1,000 KTI, Inc. <F15> 21,625
---------
Finance - Savings & Loans 1.66%
4,000 TeleBanc Financial Corp. <F15> 136,000
---------
Medical - Information
Services 0.64%
5,000 MECON, Inc. <F15> 52,500
---------
Medical - Products 2.04%
2,500 Pharmaceutical Product
Development, Inc. <F15> 75,156
2,000 ResMed, Inc. <F15> 90,750
---------
165,906
---------
Pollution Control -
Services 0.41%
1,250 Tetra Tech, Inc. <F15> 33,828
---------
Call toll-free 1-800-228-2121
Van Wagoner Technology Fund (cont'd.) december 31, 1998
Number
of Shares Value
- --------- -----
Retail - Mail Order/Direct 1.22%
250 Amazon.com, Inc. <F15> $ 80,312
5,120 Garden Escape<F15><F16> 19,251
---------
99,563
---------
Telecommunications -
Equipment 8.68%
6,000 Allegiance Telecom, Inc. <F15> 72,750
500 AT&T Corp. 37,625
2,000 Carrier Access Corp. <F15> 68,875
3,000 E-Tek Dynamics, Inc. <F15> 80,250
2,500 Harmonic Lightwaves, Inc. <F15> 46,875
500 Lucent Technologies, Inc. 55,000
5,000 Metromedia Fiber Network, Inc. <F15> 167,500
600 Nokia Corp. ADR 72,262
1,000 Powerwave Technologies, Inc. <F15> 18,625
5,000 REMEC, Inc. <F15> 90,000
---------
709,762
---------
Telecommunications -
Services 5.87%
500 COLT Telcom Group plc<F15> 29,938
10,000 Com21, Inc. <F15> 210,000
500 MCI WorldCom, Inc. 35,875
2,000 MetroNet Communications Corp. <F15> 67,000
2,750 Qwest Communications
International Inc. <F15> 137,500
---------
480,313
---------
Total Common and
Preferred Stocks
(cost $5,080,472) 7,260,269
---------
Principal
Amount Value
- ------ -----
SHORT-TERM INVESTMENTS 3.93%
$321,000 UMB Bank, n.a., repurchase agreement,
4.35%, dated 12/31/98, repurchase
price $321,153, maturing 1/4/99
(collateralized by U.S. Treasury
Notes, 5.875%, 2/28/99) $ 321,000
711 UMB Bank, n.a., Money Market
Fiduciary 711
---------
TOTAL SHORT-TERM INVESTMENTS
(cost $321,711) 321,711
---------
TOTAL INVESTMENTS 92.73%
(cost $5,402,183) 7,581,980
Other Assets less Liabilities 7.27% 594,196
---------
NET ASSETS 100.00% $8,176,176
==========
<F15>Non-income producing
<F16>Preferred stock purchased in a private placement transaction; resale to the
public may require registration or sale only to qualified institutional
buyers. Security is valued under procedures established by the Board of
Directors.
See notes to financial statements.
http://WWW.VANWAGONER.COM
Van Wagoner Funds STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1998
<TABLE>
<CAPTION>
EMERGING MICRO-CAP MID-CAP POST-VENTURE TECHNOLOGY
GROWTH FUND FUND FUND FUND FUND
<C> <C> <C> <C> <C>
ASSETS:
Investments, at value:
Nonaffiliated issuers (cost $117,182,978,
$32,746,008, $26,978,319, $12,744,761
and $5,402,183, respectively) $164,606,120 $42,859,611 $41,330,207 $16,801,045 $ 7,581,980
Affiliated issuers (cost $6,137,757, $0, $0,
$0 and $0, respectively) 6,052,998 - - - -
Cash 546,750 136,693 - - 61,512
Deposit at brokers for short sales 100,000 100,000 295,609 100,000 100,000
Receivable from brokers for proceeds
on securities sold short - - 351,791 - -
Receivable for investments sold 85,005,205 4,370,404 4,825,850 6,919,225 2,361,321
Interest and dividends receivable 1,070 590 8,922 260 268
Receivable from investment adviser - - - - 16,070
Organizational expenses, net of accumulated
amortization 14,672 14,672 14,672 - -
Prepaid expenses and other assets 19,359 10,995 9,666 4,833 7,404
------------- ------------- ------------- ------------- -------------
Total Assets 256,346,174 47,492,965 46,836,717 23,825,363 10,128,555
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Payable for investments purchased 66,377,909 1,222,811 602,577 4,671,573 1,912,280
Payable to custodian 26,796 10,209 13,296 5,967 5,909
Accrued investment advisory fee 304,376 60,048 59,399 27,723 7,505
Accrued distribution fee 16,323 3,804 4,176 1,520 679
Securities sold short, at value
(proceeds of $0, $0, $125,933,
$0 and $0, respectively) - - 151,875 - -
Accrued expenses and other liabilities 249,085 82,596 80,871 37,573 26,006
------------- ------------- ------------- ------------- -------------
Total Liabilities 66,974,489 1,379,468 912,194 4,744,356 1,952,379
------------- ------------- ------------- ------------- -------------
NET ASSETS $189,371,685 $46,113,497 $45,924,523 $19,081,007 $ 8,176,176
============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Capital stock $ 1,728 $ 408 $ 369 $ 158 $ 44
Paid-in-capital 342,592,903 67,613,058 59,450,012 16,971,343 5,735,167
Accumulated net realized gain
(loss) on investments (200,561,329) (31,613,572) (27,851,804) (1,946,778) 261,168
Net unrealized appreciation on investments 47,338,383 10,113,603 14,325,946 4,056,284 2,179,797
------------- ------------- ------------- ------------- -------------
Net Assets $189,371,685 $46,113,497 $45,924,523 $19,081,007 $ 8,176,176
============ ============ ============ ============ ============
CAPITAL STOCK, $0.0001 PAR VALUE
Authorized 200,000,000 100,000,000 100,000,000 100,000,000 100,000,000
Issued and outstanding 17,275,207 4,081,642 3,693,271 1,579,788 441,616
NET ASSET VALUE, REDEMPTION
PRICE, AND OFFERING PRICE PER SHARE
(NET ASSETS/SHARES OUTSTANDING) $10.96 $11.30 $12.43 $12.08 $18.51
============ ============ ============ ============ ============
</TABLE>
Call toll-free 1-800-228-2121
See notes to financial statements.
Van Wagoner Funds STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended December 31, 1998
<TABLE>
<CAPTION>
EMERGING MICRO-CAP MID-CAP POST-VENTURE TECHNOLOGY
GROWTH FUND FUND FUND FUND FUND
<C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 816,061 $ 315,300 $ 341,331 $ 90,130 $ 42,789
Dividends 49,256 21,206 74,889 629 956
------------- ------------- ------------- ------------- -------------
Total Investment Income 865,317 336,506 416,220 90,759 43,745
------------- ------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees 2,728,083 770,904 517,445 244,996 50,993
Transfer agent fees and expenses 859,426 267,720 262,641 66,718 28,257
Distribution fees 377,956 91,265 89,481 14,936 10,199
Fund accounting and administration fees 207,536 91,441 91,812 61,667 61,667
Printing and postage expenses 141,342 32,863 33,285 10,559 11,787
Custody fees 131,390 31,875 38,194 26,986 22,840
State registration fees 75,417 30,244 30,691 21,161 18,824
Professional fees 17,552 17,551 17,551 17,497 25,493
Amortization of organization costs 7,344 7,344 7,344 - -
Directors' fees and expenses 3,252 3,252 3,252 3,247 3,047
Miscellaneous 24,583 7,951 7,509 5,662 3,385
------------- ------------- ------------- ------------- -------------
Total expenses before waiver 4,573,881 1,352,410 1,099,205 473,429 236,492
------------- ------------- ------------- ------------- -------------
Less: Waiver of expenses (318,072) (350,235) (90,188) (154,934) (156,888)
------------- ------------- ------------- ------------- -------------
Net Expenses 4,255,809 1,002,175 1,009,017 318,495 79,604
------------- ------------- ------------- ------------- -------------
NET INVESTMENT LOSS (3,390,492) (665,669) (592,797) (227,736) (35,859)
------------- ------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments
(See Note 7) (25,908,970) (6,659,483) (7,949,180) 2,119,321 536,736
Net realized loss on short positions (3,263,439) (177,360) (141,333) (47,432) (30,410)
Net realized gain on options written 338,890 35,449 67,488 17,724 -
Net realized loss on options purchased (17,162,668) (1,305,663) (1,209,905) (1,039,330) (211,806)
Net change in unrealized appreciation
and depreciation on investments 62,835,799 14,759,509 16,378,554 4,464,627 2,179,797
------------- ------------- ------------- ------------- -------------
Net Gain on Investments 16,839,612 6,652,452 7,145,624 5,514,910 2,474,317
------------- ------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $13,449,120 $ 5,986,783 $ 6,552,827 $5,287,174 $2,438,458
============ ============ ============ ============ ============
</TABLE>
http://WWW.VANWAGONER.COM
See notes to financial statements.
Van Wagoner Funds STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH FUND MICRO-CAP FUND
------------- -------------- -------------- --------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997
<C> <C> <C> <C>
OPERATIONS:
Net investment loss $ (3,390,492) $(7,822,156) $(665,669) $(1,871,886)
Net realized gain (loss) on
investments (25,908,970) (35,738,255) (6,659,483) (3,711,351)
Net realized gain (loss) on
short positions (3,263,439) - (177,360) 496,589
Net realized gain on
options written 338,890 - 35,449 -
Net realized loss on
options purchased (17,162,668) - (1,305,663) -
Net change in unrealized
appreciation and depreciation
on investments 62,835,799 (53,549,197) 14,759,509 (17,420,883)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations 13,449,120 (97,109,608) 5,986,783 (22,507,531)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 89,133,843 226,434,056 20,946,312 96,555,054
Redemption of shares (226,427,970) (454,267,232) (52,686,786) (142,878,789)
------------- ------------- ------------- -------------
Net increase (decrease) from
share transactions (137,294,127) (227,833,176) (31,740,474) (46,323,735)
------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (123,845,007) (324,942,784) (25,753,691) (68,831,266)
NET ASSETS:
Beginning of period 313,216,692 638,159,476 71,867,188 140,698,454
------------- ------------- ------------- -------------
End of period $189,371,685 $313,216,692 $46,113,497 $ 71,867,188
============= ============= ============= =============
TRANSACTIONS IN SHARES:
Shares sold 9,196,675 19,199,101 2,127,300 8,080,869
Shares redeemed (22,780,104) (38,615,725) (5,239,704) (12,190,073)
------------- ------------- ------------- -------------
Net increase (decrease) (13,583,429) (19,416,624) (3,112,404) (4,109,204)
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MID-CAP FUND POST-VENTURE FUND TECHNOLOGY FUND
------------- ------------- ------------- ------------- -------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1998
<C> <C> <C> <C> <C>
OPERATIONS:
Net investment loss $(592,797) $(1,520,786) $(227,736) $(357,869) $(35,859)
Net realized gain (loss) on
investments (7,949,180) (3,910,862) 2,119,321 (3,246,420) 536,736
Net realized gain (loss) on
short positions (141,333) - (47,432) 249,359 (30,410)
Net realized gain on
options written 67,488 - 17,724 - -
Net realized loss on
options purchased (1,209,905) - (1,039,330) - (211,806)
Net change in unrealized
appreciation and depreciation
on investments 16,378,554 (9,456,465) 4,464,627 (408,343) 2,179,797
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations 6,552,827 (14,888,113) 5,287,174 (3,763,273) 2,438,458
------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 13,148,963 92,514,890 14,473,780 54,243,643 12,482,357
Redemption of shares (47,614,686) (141,529,840) (21,148,374) (30,011,943) (6,744,639)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) from
share transactions (34,465,723) (49,014,950) (6,674,594) 24,231,700 5,737,718
------------- ------------- ------------- ------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (27,912,896) (63,903,063) (1,387,420) 20,468,427 8,176,176
NET ASSETS:
Beginning of period 73,837,419 137,740,482 20,468,427 - -
------------- ------------- ------------- ------------- -------------
End of period $45,924,523 $73,837,419 $19,081,007 $20,468,427 $8,176,176
============= ============= ============= ============= =============
TRANSACTIONS IN SHARES:
Shares sold 1,236,753 7,469,170 1,460,608 5,409,119 944,674
Shares redeemed (4,465,716) (11,661,886) (2,212,061) (3,077,878) (503,058)
------------- ------------- ------------- ------------- -------------
Net increase (decrease) (3,228,963) (4,192,716) (751,453) 2,331,241 441,616
============= ============= ============= ============= =============
</TABLE>
http://WWW.VANWAGONER.COM
See notes to financial statements.
Van Wagoner Funds FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Fund Share Outstanding Throughout the Period Ended December 31
<TABLE>
<CAPTION>
EMERGING GROWTH FUND MICRO-CAP FUND
---- ---- ---- ---- ---- ----
1998 1997 1996 1998 1997 1996
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.15 $12.69 $10.00 $9.99 $12.45 $10.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss (0.20) (0.25) (0.15) (0.16) (0.26) (0.09)
Net realized and unrealized gains
(losses) on investments 1.01 (2.29) 2.84<F2> 1.47 (2.20) 2.54<F2>
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 0.81 (2.54) 2.69 1.31 (2.46) 2.45
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $10.96 $10.15 $12.69 $11.30 $9.99 $12.45
========== ========== ========== ========== ========== ==========
Total Return 7.98% (20.02)% 26.90% 13.11% (19.76)% 24.50%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $189,372 $313,217 $638,159 $46,113 $71,867 $140,698
Ratio of net expenses to average
net assets - net of waivers and
reimbursements 1.95% 1.88% 1.95% 1.95% 1.95% 1.95%%
Ratio of net investment loss to
average net assets - net of waivers
and reimbursements (1.55)% (1.68)% (1.49)% (1.30)% (1.72)% (1.04)%
Ratio of net expenses to average
net assets - before voluntary waivers
and reimbursements 2.00% 1.88% 1.98% 2.00% 2.00% 2.00%
Ratio of net investment loss to
average net assets - before voluntary
waivers and reimbursements (1.60)% (1.68)% (1.52)% (1.35)% (1.77)% (1.09)%
Portfolio turnover rate 668% 333% 159% 367% 232% 153%
</TABLE>
<TABLE>
<CAPTION>
TECHNOLOGY
MID-CAP FUND POST-VENTURE FUND FUND <F1>
---- ---- ---- ---- ---- ----
1998 1997 1996 1998 1997 1998
<C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.67 $12.39 $10.00 $8.78 $10.00 $10.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment loss (0.16) (0.22) (0.09) (0.14) (0.15) (0.08)
Net realized and unrealized gains
(losses) on investments 1.92 (1.50) 2.48<F2> 3.44 (1.07) 8.59
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 1.76 (1.72) 2.39 3.30 (1.22) 8.51
---------- ---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $12.43 $10.67 $12.39 $12.08 $8.78 $18.51
========== ========== ========== ========== ========== ==========
Total Return 16.49% (13.88)% 23.90% 37.59% (12.20)% 85.10%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s) $45,925 $73,837 $137,740 $19,081 $20,468 $8,176
Ratio of net expenses to average
net assets - net of waivers and
reimbursements 1.95% 1.80% 1.95% 1.95% 1.95% 1.95%
Ratio of net investment loss to
average net assets - net of waivers
and reimbursements (1.15)% (1.42)% (1.16)% (1.39)% (1.39)% (0.88)%
Ratio of net expenses to average
net assets - before voluntary waivers
and reimbursements 2.00% 1.80% 2.00% 2.00% 2.00% 2.00%
Ratio of net investment loss to
average net assets - before voluntary
waivers and reimbursements (1.20)% (1.42)% (1.21)% (1.44)% (1.44)% (0.93)%
Portfolio turnover rate 787% 304% 173% 641% 317% 888%
</TABLE>
<F1> Commenced operations after the close of business on December 31, 1997
<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.
http://WWW.VANWAGONER.COM
See notes to financial statements.
Van Wagoner Funds NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1998
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, Post-Venture Fund and
Technology 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.
(C) ORGANIZATIONAL 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 by the
total number of original shares outstanding at the time of redemption
for the Funds being redeemed.
(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.
Call toll-free 1-800-228-2121
(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, 1998, the Emerging Growth, Micro-Cap and Mid-Cap
Funds had federal income tax capital loss carryforwards of $187,146,618,
$30,446,223 and $24,215,117, respectively. The entire federal income tax
loss carryforward for each of these Funds expires between 2004 and 2006.
During 1998, the Post-Venture Fund utilized $403,949 of its capital loss
carryforward against net realized capital gains. As of December 31,
1998, the Post-Venture Fund had a federal income tax capital loss
carryforward of $945,298 which expires in 2005, and the Emerging Growth
Fund had $3,930,411 of post-October 1998 capital losses which are
deferred until 1999 for tax purposes. 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, Post-Venture and
Technology Funds own some securities which are unregistered and thus
restricted as to resale. These securities are valued at their fair
value, which at December 31, 1998 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.
The Funds have no right to require registration of unregistered
securities. The Emerging Growth, Micro-Cap, Post-Venture and Technology
Funds had restricted securities with an aggregate market value of
$14,989,291, $3,588,360, $1,225,102 and $289,387, respectively,
representing 7.9%, 7.8%, 6.4% and 3.5%, respectively, 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.
The Funds may also write (sell) covered call options to hedge portfolio
investments. When a Fund sells an option, an amount equal to the premium
received by the Fund is included in the Statement of Assets and
Liabilities as an asset and an equivalent liability. The amount of the
liability is subse-
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Van Wagoner Funds NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
quently marked-to-market to reflect the current value of the option
written. By writing an option, a Fund may become obligated during the
term of the option to deliver or purchase the securities underlying the
option at the exercise price if the option is exercised. Option
contracts are valued at the last sales price reported on the date of
valuation. If no sale is reported, the option contract written is valued
at the average of the current bid and asked price reported on the day of
valuation. When an option expires on its stipulated expiration date or a
Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss if the cost of the closing purchase transaction differs
from the premium received when the option was sold without regard to any
unrealized gain or loss on the underlying security, and the liability
related to such option is eliminated. When an option is exercised, the
premium originally received decreases the cost basis of the security (or
increases the proceeds on a sale of the security), and the Fund realizes
a gain or loss from the sale of the underlying security.
(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 Funds may periodically make reclassifications among
certain 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, 1998, reclassifications were recorded to
increase undistributed net investment income by $3,390,492, $665,669,
$592,797, $227,736 and $35,859; decrease accumulated net realized gain
(loss) on investments by $0, $0, $0, $0 and $33,352; and decrease paid-
in-capital by $3,390,492, $665,669, $592,797, $227,736 and $2,507 for
the Emerging Growth, Micro-Cap, Mid-Cap, Post-Venture and Technology
Funds, respectively.
(I) OTHER - Investment transactions are ac-counted 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 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, 1.50%
for the Post-Venture Fund and 1.25% for the TechnologyFund. The agreement
also provides that the Adviser will limit expenses to no more than 2.00% of
each
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Fund's average daily net assets. The Adviser has further 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,
2000. Expenses of $318,072, $350,235, $90,188, $154,934 and $156,888 were
waived in the Emerging Growth, Micro-Cap, Mid-Cap, Post-Venture and
Technology 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, 1998 were as
follows:
PURCHASES SALES
--------------------------------------------------------
EMERGING
GROWTH FUND $1,400,487,903 $1,582,076,578
MICRO-CAP FUND 167,417,928 200,033,192
MID-CAP FUND 357,083,582 392,592,314
POST-VENTURE FUND 94,914,737 106,773,108
TECHNOLOGY FUND 33,472,789 28,899,657
For the year ended December 31, 1998, 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, Post-Venture Fund and Technology Fund is $129,105,243,
$33,174,611, $28,790,799, $13,224,470 and $5,561,878, respectively. At
December 31, 1998, gross unrealized appreciation and depreciation on
securities for federal income tax purposes were as follows:
NET
UNREALIZED
APPRECIATION
UNREALIZED (UNREALIZED ON
APPRECIATION DEPRECIATION) INVESTMENTS
---------------------------------------------------------------------
EMERGING
GROWTH
FUND $48,512,912 $(6,959,037) $41,553,875
MICRO-CAP
FUND 11,042,743 (1,357,743) 9,685,000
MID-CAP
FUND 13,002,556 (615,023) 12,387,533
POST-VENTURE
FUND 4,114,962 (538,387) 3,576,575
TECHNOLOGY
FUND 2,112,229 (92,127) 2,020,102
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Van Wagoner Funds NOTES TO FINANCIAL STATEMENTS
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6. OPTIONS CONTRACTS WRITTEN
The premium amount and the number of options contracts written during the
year ended December 31, 1998 were as follows:
PREMIUM NUMBER OF
AMOUNT CONTRACTS
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EMERGING GROWTH FUND
Options outstanding at
December 31, 1997 - -
Options written $ 538,585 4,656
Options closed (163,935) (1,494)
Options exercised (422) (6)
Options expired (374,228) (3,156)
----------- -----------
Options outstanding at
December 31, 1998 $ - -
=========== ===========
MICRO-CAP FUND
Options outstanding at
December 31, 1997 - -
Options written $ 35,449 300
Options closed - -
Options exercised - -
Options expired (35,449) (300)
----------- -----------
Options outstanding at
December 31, 1998 $ - -
=========== ===========
PREMIUM NUMBER OF
AMOUNT CONTRACTS
- -------------------------------------------------------------------------
MID-CAP FUND
Options outstanding at
December 31, 1997 - -
Options written $ 29,912 285
Options closed (10,000) (125)
Options exercised (14,566) (106)
Options expired (5,346) (54)
----------- -----------
Options outstanding at
December 31, 1998 $ - -
=========== ===========
POST-VENTURE FUND
Options outstanding at
December 31, 1997 - -
Options written $ 17,724 150
Options closed - -
Options exercised - -
Options expired (17,724) (150)
----------- -----------
Options outstanding at
December 31, 1998 $ - -
=========== ===========
7. 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 LOSS
SHARE ACTIVITY DIVIDENDS REALIZED
------------------------------------------------------ CREDITED ON SALE
BALANCE PURCHASES/ SALES/ BALANCE TO INCOME OF SHARES
SECURITY NAME 12/31/97 ADDITIONS REDUCTIONS 12/31/98 IN 1998 IN 1998
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
EMERGING GROWTH FUND
Avant! Corp.<F1> 1,193,268 423,840 1,552,108 65,000 - $(9,022,279)
OnHealth Network Co.<F1> - 1,024,900 5,000 1,019,900 - (30,491)
------------ ------------
- $(9,052,770)
============ ============
<F1> Non-income producing
</TABLE>
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Van Wagoner Funds REPORT OF INDEPENDENT ACCOUNTANTS
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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 schedules 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, the Van
Wagoner Post-Venture Fund and the Van Wagoner Technology Fund (five of the
portfolios constituting the Van Wagoner Funds, Inc., hereafter referred to as
the "Funds") at December 31, 1998, and the results of each of their operations,
changes in 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 (hereinafter collectively referred
to as the "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, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 29, 1999
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Notice to Shareholders: Ernst & Young LLP has been retained as the
Funds' independent accountants for the fiscal year ending December 31, 1999.
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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.
(LOGO) VANWAGONER FUNDS
Please mail correspondence to:
VAN WAGONER FUNDS
P.O. BOX 1628
MILWAUKEE, WI 53201-1628
Express mail or overnight deliveries
should be sent to:
VAN WAGONER FUNDS
207 EAST BUFFALO ST., SUITE 315
MILWAUKEE, WI 53202-5712
WWW.VANWAGONER.COM
1-800-228-2121
ADDRESS SERVICE REQUESTED
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