AMERINDO
TECHNOLOGY FUND
Semi-Annual Report
June 30, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
SHAREHOLDER LETTER ..................................................... 1
SCHEDULE OF INVESTMENTS ................................................ 5
STATEMENT OF ASSETS AND LIABILITIES .................................... 6
STATEMENT OF OPERATIONS ................................................ 7
STATEMENT OF CHANGES IN NET ASSETS ..................................... 8
NOTES TO FINANCIAL STATEMENTS .......................................... 9
FINANCIAL HIGHLIGHTS ................................................... 12
<PAGE>
July, 31, 1997
Dear Shareholder:
The roaring bull market of the late 1990s continues to be narrowly focused
on a newly ordained set of "nifty-fifty" stocks, namely the very large
capitalization multinationals, which has had the effect of driving the Dow Jones
Average and the Standard & Poor's (S&P) 500 Index higher and higher -
principally because they are large cap weighted. Small caps, emerging technology
stocks in particular, have for now lagged. But as we discuss below, the recent
relative underperformance of small caps has already begun to change dramatically
for the better, which we think will continue for some time. The key question for
all investors right now, however, is: Does the economic backdrop get any better
than this? The bulls who argue that we have entered into a new secular
"paradigm" point to consistent low inflation in the face of a sharp pick-up in
growth attributed to technology's huge productivity dividend; healthy corporate
profits; shrinking government and a muted Federal Reserve cycle. Admittedly,
these factors have collectively provided an ideal environment for the capital
markets over the past few years. Additionally, the huge flow of funds from the
pre-retirement age "baby-boomer" savers has equally contributed to the
heightened valuation of big cap stocks by going into the same large
capitalization weighted index funds. Despite the good economic times, sides are
nevertheless being sharply drawn between the believers in the new lower-secular
inflation paradigm, which now appears to carry the day, and which we frankly
think has a lot of merit, and those who are sticking with the more
classical-cyclical belief that higher economic growth expected later this year
will clearly bring a pickup in inflation and subsequent Fed tightening. Under
either school of thought, we continue to think that the real driving force
creating the new muted business cycle is clearly the productivity dividend
brought on by new breakthrough technologies, whose share prices unfortunately
have yet to reflect these extraordinary and dented advancements.
Yet, even from a purely cyclical view, the first half of the year distorted
what actually happened. The truly awesome growth came from federal non-defense
spending and imports. Non-defense spending is mostly transfer payments, so it
shows up as personal income. Real non-defense spending rose at a 10.1% annual
rate in the first quarter. Real imports increased at a 21.9% annual rate in the
first quarter, which helped to lower inflation and drive up inventories.
What was significant about the second quarter for technology share prices
was not performance per se, but the fact that the severe decline that started in
May of 1996, came to an end nearly a year later by displaying all the typical
signs of a major selling-climax bottom. This had been no ordinary correction. In
fact, it was the most severe of the last six sector corrections since the
infamous Crash of 1987. Prior corrections, measured by the Hambrecht & Quist
(H&Q) Growth Index, had averaged 30-35% and lasted about six months. This
correction was 41% peak to trough, and was virtually twice as long.
The most striking feature of this latest correction was its performance
divergence from the broad market. This was so dramatic that we show it in the
attached chart. During the 12 month interval between May 1996 and April 1997,
the divergence between large and small cap technology amounted to an
unprecedented 73%. An investment over this period in the S&P/Dow would have been
up roughly 32%, against a decline of 41% for emerging technology (i.e., the H&Q
Growth Index).
A decline of this magnitude immediately raises two key questions: What
caused the decline, and what has been the record of recoveries from such
declines? We believe a number of "soft" or extenuating factors contributed to
the decline, as we discuss below in no particular order of importance. The
technology sector had done extremely well in 1995. It was thus not unreasonable
to expect the group to consolidate 1995's huge gains as momentum players rotated
to more seemingly undervalued areas. Secondly, many internetworking and data
telecommunications companies were undergoing transitional quarters as they
rolled out major new products that could impact short term profitability. While
investors are typically apprehensive of quarterly earnings misses, this concern
is typically carried to extremes in high growth emerging technology companies.
Competition heated up in some of the more traditional, cisco
1
<PAGE>
markets, as the latter sought to solidify and increase its market share.
Thirdly, technology also undoubtedly got wrongly tagged with being the same as
domestic small caps, which were penalized for their perceived inability to fully
participate in the new global business opportunities being afforded the
multinationals through NAFTA, China, etc. This charge could not have been
further from the truth. Most technology companies quickly move to a 50/50 split
in their business between the US and overseas, with the overseas segment
typically growing faster. Lastly, and perhaps having the most severe impact of
all, the huge flow of funds into mutual funds by the baby-boomers went
overwhelmingly into the large cap biased index funds. Large cap stocks are
perceived to enjoy a favorable liquidity bias for two reasons. In good economic
times, their profit growth is sufficiently respectable so investors do not have
to trade down in liquidity to smaller, but generally faster growing companies;
secondly, late in a cycle that is still showing above average growth, they offer
a less risky liquidity exit medium, should the market turn down.
THE LARGE CAP MARKET COMPARED TO EMERGING TECH STOCKS
DOW JONES INDUSTRIAL AVERAGE VS. HAMBRECHT & QUIST GROWTH INDEX
MAY 22, 1996 TO JUNE 30, 1997
DOW JONES HEMBRECHT
INDUSTRIAL & QUIST
AVERAGE GROWTH INDEX
- ------- ------------
100.00 100.00
99.73 99.49
99.74 98.91
99.74 98.91
98.82 96.78
98.20 95.15
98.54 96.29
97.67 96.64
97.35 96.00
98.06 96.55
98.61 96.69
98.08 94.91
98.60 94.08
98.44 94.66
98.11 94.33
98.10 94.41
97.92 92.94
97.78 91.17
97.83 90.23
97.40 85.99
97.76 85.48
97.95 84.02
98.74 84.55
98.96 85.49
98.98 84.36
98.35 81.53
98.09 83.50
97.86 86.45
99.17 87.76
99.00 87.42
98.70 85.70
98.70 85.70
96.71 83.37
96.07 81.99
96.61 82.02
96.98 80.10
95.54 76.31
95.37 75.51
92.58 70.23
92.74 69.68
93.06 74.32
94.57 77.13
93.92 75.33
93.30 72.93
92.53 69.25
92.67 69.06
93.84 71.11
94.72 72.56
94.06 71.19
94.88 71.32
95.69 71.97
96.83 73.70
98.30 76.84
98.20 76.60
98.58 77.14
98.97 78.08
98.88 78.18
98.33 77.64
98.74 77.40
97.74 76.24
98.08 76.62
98.06 76.50
98.47 76.15
98.64 75.48
99.02 74.64
98.47 74.72
99.23 76.85
99.04 77.41
98.54 77.27
98.85 78.56
98.86 79.20
97.74 78.24
97.20 77.88
97.20 77.88
97.76 77.45
97.90 77.48
97.04 75.89
97.96 76.75
99.24 77.29
99.12 77.86
99.60 78.17
99.90 78.93
101.05 80.95
101.92 81.48
101.92 82.10
101.72 81.82
101.55 82.63
101.91 83.23
102.02 82.91
101.66 83.58
101.72 84.98
101.57 85.75
101.64 86.29
101.80 86.40
102.20 85.11
102.70 85.92
102.68 85.83
103.72 86.82
103.49 87.04
103.27 86.16
102.64 85.33
102.49 85.46
103.31 85.21
104.02 86.22
103.92 86.62
104.20 86.23
104.87 85.34
105.47 85.02
105.41 83.83
104.91 81.68
104.47 82.19
103.71 82.32
103.96 81.83
103.37 80.40
103.96 78.77
103.72 78.92
104.35 80.11
104.22 79.57
104.56 78.76
105.25 78.96
106.92 80.23
107.41 80.99
107.65 81.15
108.27 80.88
108.46 80.88
108.59 80.28
109.26 80.27
109.87 80.45
109.85 79.66
110.72 78.39
111.28 77.85
111.08 77.53
112.01 76.77
113.32 77.52
112.99 78.24
112.48 78.20
112.48 78.34
112.87 78.34
112.87 78.96
111.50 80.41
111.16 81.40
111.41 81.26
110.45 81.23
111.87 80.58
112.03 82.73
110.81 82.34
109.10 81.67
109.12 81.07
108.49 81.07
109.18 79.79
109.84 77.63
112.04 77.71
112.23 79.00
112.31 79.59
112.89 78.77
112.89 77.95
111.75 78.25
113.55 78.25
113.35 78.78
111.60 78.82
111.60 79.19
111.50 80.08
113.26 79.19
113.66 80.63
114.24 81.33
113.35 82.45
114.67 81.45
116.02 81.95
116.12 82.14
117.04 81.61
116.42 81.95
117.09 82.05
118.26 82.73
118.45 83.82
119.14 85.11
118.55 86.03
116.92 85.47
115.90 83.95
115.28 82.66
115.20 83.24
116.66 83.28
118.10 84.01
117.91 84.23
117.79 83.93
118.27 83.67
116.77 82.33
117.22 82.05
118.65 82.33
117.80 80.65
118.69 79.89
120.49 80.88
121.54 82.26
120.96 82.14
120.96 82.14
122.32 81.94
121.50 81.94
119.89 81.39
119.97 79.95
121.29 78.81
121.81 78.91
120.86 79.14
119.85 77.87
119.03 75.66
119.75 75.15
118.60 75.22
118.60 75.45
120.21 75.91
120.19 75.25
121.16 75.56
122.52 75.09
122.62 74.53
121.83 73.35
119.05 71.71
120.03 71.87
120.38 70.18
119.36 68.87
119.03 67.16
118.04 68.22
117.77 68.79
119.51 67.03
119.01 67.22
119.08 67.89
116.66 66.84
116.66 66.84
118.61 64.62
114.42 63.48
112.79 62.27
112.10 62.71
112.95 65.06
113.46 66.21
114.38 66.16
113.60 65.87
113.19 64.98
110.62 63.29
111.66 63.53
114.00 62.99
115.61 61.97
115.24 61.44
116.02 60.88
115.27 58.61
118.27 58.67
117.91 59.44
117.55 59.52
116.63 58.22
117.39 58.46
120.49 59.82
121.30 61.09
120.74 62.25
122.38 65.27
124.86 68.84
125.05 68.39
122.63 68.05
123.51 68.29
124.08 68.36
126.22 69.33
125.89 69.05
126.10 69.06
126.92 69.89
124.52 69.28
125.11 69.27
126.40 70.18
126.18 70.86
125.62 70.69
127.14 71.74
127.14 71.74
127.78 73.04
127.33 73.59
126.86 73.68
126.88 73.96
126.16 74.60
126.55 74.08
125.82 73.87
126.43 74.52
128.69 75.19
129.43 75.00
130.48 74.06
131.12 73.75
133.46 73.89
134.68 73.87
134.51 74.08
134.32 74.50
133.59 74.15
134.60 74.80
134.93 74.60
131.61 73.79
134.27 74.86
133.09 74.02
132.47 73.67
133.05 74.09
132.79 75.46
The tables have now clearly turned around for technology performance. In
past downturns like the recent one, emerging technology has recovered about 21/2
times the amount of the decline over the ensuing three-to-five quarters. This
would set the group up for a move exceeding 120%, which we believe is quite
possible. Of considerable importance is that the three basic reasons we offered
for the extended appreciation in our sector at the start of our major bull
market call in late 1990 are still intact. They are: historically low absolute
and relative valuations; the fact that technology is the principal beneficiary
of the dominant trend in the global economy, which is rightsizing/downsizing for
productivity enhancement; and lastly, the explosion in four new technologies
which are changing the landscape of consumer, business and government markets.
These are discussed below.
While it is difficult to ascertain with any degree of precision when either
the investment flows into index funds or the rate of gain in profits for
Corporate America will moderate, and in the process divert investor interest
away from large caps back to more rapidly growing small caps, the extraordinary
historic attractiveness of small caps versus large caps is nevertheless truly
compelling today. Even assuming a generous growth in profits for Corporate
America (i.e., S&P 500) next year of 10%, which is presently above consensus
expectations, investors are paying a record premium for such growth versus small
caps. The divergence is virtually unprecedented. At almost 18-19 times next
year's
2
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earnings, large cap stocks are commanding top dollar for that growth. This makes
the all important ratio of p-e to growth stand at an astounding 180% for large
caps. Technology is closer to a 50% discount! In effect, this says that one can
buy growth of earnings in technology, measured by next year's p-e, for roughly
less than one-third for what is being demanded in large capitalization stocks.
Other factors also support the attractiveness of small caps. This includes a
likely cut this year in the capital gains rate; the prospect of higher p-e's in
general that comes with sustainably low inflation; a downturn in the liquidity
premium investors would normally be willing to pay for hedging fears of Fed
tightening and the need to sell stocks in size, and perhaps most important of
all, sharply rising relative earnings (for small caps) in the face of a slowdown
in the rate of earnings growth in 1998 for Corporate America.
Forbes featured a cover story on how and where the next trillion dollars in
wealth would be created by technology. ("Steel versus Silicon: Who reaps the
next trillion dollars?" - July 7, 1997). We were intrigued by several aspects of
the story, which has been discussed any number of times in our quarterly
letters. We were always a bit frustrated at not being able to pinpoint the
portion of the economy that constituted technology. Forbes infers that the
amount is close to what we have long been thinking, perhaps 12%. This would also
imply that technology is the largest (macro) sector of the economy with the
fastest growth rate. We think it is entirely possible for technology to increase
by another trillion dollars in value in the next five years or less. Clearly no
other macro sector of the economy is poised for such growth, especially
considering that the economy is in its seventh year of the present cycle. We
mention briefly below a number of major trends and likely new sectors that will
be spawned from this spectacular growth potential over the next few years. Our
views, of course, differ from the Forbes article here, as could be expected.
INTERNETWORKING: The demand forces that have fueled an unprecedented
buildout of the data communications infrastructure over the past few years will
probably support a torrid pace of new computer network deployment and upgrades.
Computer networks appear poised to continue to grow at 30-50% per annum. The
network has become a strategic asset and a competitive business weapon for the
multinational global enterprise. The growth of the Internet and Intranets has
fueled the demand for even more data networking products and technologies. We
continue to think switching and remote access concentration represent two of the
most attractive growth areas in the networking marketplace.
INTERNET: The Internet is the most significant technological development of
the decade (and perhaps of the next decade) and will have a tremendous impact on
economic change, similar to that of the microprocessor and the pc. The number of
Internet users continues to grow at an exponential rate now approaching 50
million people worldwide. Users are becoming involved in a wider spectrum of
activities and spending an increasing amount of time on the Net. The number of
websites continues to grow and content is becoming richer and more interesting
as it takes on a multimedia orientation with increased usage of voice and video.
All of these factors will create the need for additional infrastructure and
increased bandwidth.
Today, Net economics are driven by subscription, advertising and
transactions more or less in order of importance. But this is changing fast.
Worldwide advertising on the Net exceeded $300 million in 1996 (ten times the
previous year's number), with one company, Netscape, having more advertising
than the entire Web had in 1995. Bigger yet are business transactions. Buying
and selling over the Internet will become so attractive that one will use retail
stores chiefly to browse and then return home to transact in cyberspace what was
seen in real space. All signs point toward the Internet becoming the next wave
in retail distribution. Within several years consumers will be able to find
virtually any product from a variety of merchants at any time of the day using
their personal computer or interactive access device. The groundwork is rapidly
being laid for interactive shopping and electronic commerce to gain popularity.
Internet sales could capture 10% of total retail sales within the next decade
and exceed $100 billion in revenue.
THE NEW PUBLIC DATA NETWORK IN TELECOMMUNICATIONS: Significant changes in
public policy, highlighted by the passage of The Telecommunications Act of 1996,
are changing the industry landscape and increasing competition among service
providers. In addition to global deregulation and rapid growth in developing
countries, new technology
3
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is stimulating demand. ATM deployment is gaining momentum along with the
increased use of fiber optic technology. Wave division multiplexing and the
SONET cross-connect market are both experiencing high rates of growth. The
largest opportunity may be in the upgrade of the local loop, which will provide
increased bandwidth to homes and businesses required for the efficient use of
the Internet. Competing technologies include ISDN, xDSL and cable modems. All
these factors point to an extended cycle for telecommunications equipment.
ENTERPRISE SOFTWARE: For several decades, the primary role of the computer
has been number crunching; now communications is becoming an additional
essential feature. Global Network Computing requires new updated software.
Modern software is being developed with an object oriented framework
incorporating languages such as C++ and Java. It is component based with
reusable modules and is also Web enabled.
The Year 2000 problem (Y2K) is receiving an increased amount of attention.
Organizations which have software that was written decades ago in COBOL have a
potential problem. If this snag is not corrected, erroneous results will be
generated and some mission critical applications could grind to a halt. After
evaluation, many IT managers will choose to purchase integrated packaged
software that is Y2K compliant and customize their own applications around them.
Customer Interaction Software is a relatively new area that is in the
embryonic growth phase and offers immense investment potential. Integrated
packages are available which focus on the helpdesk, customer support and field
service. Sales Force Automation software is on a dynamic growth curve. These
customized packages can be carried by sale professionals on their notebook
computers and interact with the corporate database. In addition to providing
better service for the customer, this software increases sales productivity and
enhances revenue generation for the company.
HEALTHCARE: Over the past few decades, the pharmaceutical industry has
evolved from drug discovery based on a basic understanding of cellular and whole
animal physiology, to a discovery and development process based upon detailed
knowledge of molecular structures and intracellular pathways. Using the enabling
tools of this molecular revolution, biopharmaceutical companies are addressing
many more therapeutic categories. Successful results from recently completed
clinical trials suggest several significant drugs are likely to be launched over
the next couple of years in major therapeutic categories. Breakthroughs will
likely be seen in tissue healing; in the treatment of serious burns and
deep-seated ulcers using artificial skin products; non-union fractures may be
healed by the application of a bone growth factor; diabetic foot ulcers, the
leading cause of amputation, by a recombinant growth factor; a frog-derived
novel anti-infective peptide for use in infectious diseases, and the use of
vaccines for influenza, papilloma virus and even cancer.
In summary, we believe technology has survived yet another periodic
correction and stands poised to recover lost ground vis-a-vis the broad market
fairly quickly.
AMERINDO TECHNOLOGY FUND
/s/ Alberto W. Vilar /s/ Gary A. Tanaka
Alberto W. Vilar Gary A. Tanaka
<PAGE>
<TABLE>
<CAPTION>
AMERINDO TECHNOLOGY FUND
SCHEDULE OF INVESTMENTS
June 30, 1997
(Unaudited)
COMMON STOCKS - 84.80%
<C> <S> <C>
MARKET
SHARES VALUE
------ -----
47,500 + Ascend Communication Inc. ............ $ 1,864,375
232,500 + Avant Corp.. ......................... 7,498,125
220,300 + Cascade Communications Corp. ......... 6,072,019
112,500 + Cygnus Inc ........................... 1,940,625
105,000 + Fore Systems, Inc. ................... 1,424,062
25,000 + Geltex Pharmaceutical Inc ............ 496,875
195,100 + Netscape Communications Corp ......... 6,243,200
100,001 + Objective Systems Integrators Inc. ... 862,509
35,000 + Peoplesoft Inc. ...................... 1,846,250
90,000 + Red Brick Systems Inc ................ 646,875
47,500 + Remedy Corp .......................... 1,891,094
52,500 + Security Dynamics Technologies, Inc... 1,929,375
55,000 + TCSI Corp. ........................... 281,875
120,000 + Xylan Corp ........................... 2,040,000
------- ---------
TOTAL INVESTMENTS
(Cost $37,230,638) .......... 84.80% 35,037,259
OTHER INVESTMENTS LESS
LIABILITIES ................. 15.20% 6,279,636
----- ---------
TOTAL NET ASSETS ................ 100.00% $ 41,316,895
====== ============
<FN>
(1) Federal Tax Information: At June 30, 1997 the net unrealized depreciation
based on cost for Federal Income tax purposes of $37,230,638 was as follows:"
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over cost ..... $ 2,575,177
Aggregate gross unrealized depreciation for all investments
in which there was an excess of cost over value ...... (4,768,556)
----------
Net unrealized depreciation ............................. $(2,193,379)
===========
+ Non-income producing security
</FN>
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
AMERINDO TECHNOLOGY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
(Unaudited)
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $37,230,638) (Note 1) $35,037,259
Receivable for fund shares sold ............ 273,538
Receivable for securities sold ............. 7,867,708
Deferred organization expenses
(Note 2 ) ......................... 231,205
Other assets ............................... 45,544
----------
Total Assets ...................... 43,455,254
----------
LIABILITIES:
Overdraft at custodian bank ................ 1,896,561
Payables:
Fund shares redeemed .............. $ 17,049
Advisory fees ..................... 161,221
Distribution fees ................. 37,122
Other payables and accrued expenses 26,406 241,798
------ -----------
Total Liabilities ................. 2,138,359
-----------
Net Assets ........................ $41,316,895
===========
NET ASSETS CONSIST OF:
Capital stock, $.001 par value;
unlimited shares authorized;
5,952,925 shares outstanding ....... $ 5,953
Additional paid in capital ......... 53,423,670
Net investment loss ................ (9,919,349)
Unrealized depreciation on
investments ..................... (2,193,379)
------------
Net Assets .................................. $ 41,316,895
============
Net asset value, redemption and offering price
(per share $41,316,895/5,952,925 shares
of capital stock outstanding)
(Note 5 ) ......................... $ 6.94
============
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
AMERINDO TECHNOLOGY FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
(Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Income $ -0-
---------
Expenses:
Investment advisory fees (Note 4) $ 256,106
Directors' fees and expenses ..... 29,753
Professional services ............ 18,844
Administration and accounting fees 32,233
Distributor fees ................. 42,684
Amortization of organization
expenses (Note 2 ) ......... 27,770
Registration fees ................ 29,753
Transfer agent fees .............. 9,918
Printing expense ................. 7,439
Custodian fees ................... 7,934
Miscellaneous .................... 13,636
-------
Total expenses ................... 476,070
Less:
Reimbursed expenses (Note 4) ..... (91,911)
-------
Net expenses ..................... 384,159
---------
Net investment loss .............. (384,159)
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
(Note 2)
Net realized gain (loss) from investment
transactions ........................ (9,440,977)
Net unrealized depreciation of
investments ......................... (2,193,379)
------------
Net realized and unrealized gain (loss)
on investments ...................... (11,634,356)
------------
Net decrease in net assets resulting
from operations ..................... $(12,018,515)
============
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
AMERINDO TECHNOLOGY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
OCTOBER 29, 1996
FOR THE (COMMENCEMENT
SIX MONTHS ENDED OF OPERATIONS)
JUNE 30, 1997 THROUGH
(UNAUDITED) DECEMBER 31, 1996
----------- -----------------
<S> <C> <C>
Net investment loss ................................. $ (384,159) $ (94,213)
Net realized gain/(loss) from investment transactions (9,440,977) -0-
Net change in unrealized depreciation of investments 1,388,867 (3,582,246)
--------- ----------
Net decrease in net assets resulting from operations (8,436,269) (3,676,459)
Net capital share transactions (Note 5 ) ............ 15,898,484 37,431,139
---------- ----------
Net increase in net assets .......................... 7,462,215 33,754,680
NET ASSETS:
Beginning of period ................................. 33,854,680 100,000
---------- ----------
End of period ....................................... $ 41,316,895 $ 33,854,680
============ ============
</TABLE>
See notes to financial statements.
8
<PAGE>
AMERINDO TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
JUNE 30, 1997
NOTE 1. ORGANIZATION
The Amerindo Technology Fund (the "Fund") is a series of the Amerindo Funds
Inc., a Maryland Corporation, incorporated on February 6, 1996 and commenced
operations on October 29, 1996. The Fund is an open-end, non-diversified
management investment company under the Investment Company Act of 1940,
authorized to issue an unlimited number of shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets, each with its own investment objectives and
policies.
The Fund offers two classes of shares to investors, Class A and Class
D shares. Class A shares are sold subject to an initial sales load of up to
2.50% with a minimum investment of $25,000. Class D shares are sold without an
initial sales load with a minimum investment of $150,000. As of June 30, 1997,
only Class D shares were being offered for sale by the Fund with a reduced
minimum investment of $25,000.
The Fund is the only current series of the Amerindo Funds Inc.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. These policies are in
conformity with generally accepted accounting principles for investment
companies. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the period. Actual results could differ from these estimates.
Security Valuation- Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its closing bid price on such exchanges, or
at the quoted bid price in the over-the-counter market. Securities for which
market quotations are not readily available are valued in accordance with
procedures established by the Fund's Board of Directors, including use of an
independent pricing service or services which use prices based upon yields or
prices of comparable securities, indications as to values from dealers, and
general market conditions.
Short term investments in fixed income securities with maturities of less
than 60 days when acquired, or which subsequently are within 60 days of
maturity, are valued by using the amortized cost method of valuation, which the
Board has determined will represent fair value.
Federal Income Taxes- The Fund intends to comply with requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
Dividends and Distributions- The Fund intends to distribute substantially all
of its net investment income as dividends to its shareholders on an annual
basis. The Fund intends to distribute its net long term capital gains and its
net short term capital gains at least once a year.
9
<PAGE>
AMERINDO TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) - (UNAUDITED)
JUNE 30, 1997
Organization expenses- During its organization and initial registration with
the Securities and Exchange Commission (the "SEC"), the Fund incurred
organization expenses of $279,807. The Fund has elected to defer these expenses
and amortize them on a straight-line basis over a 60 month period beginning with
the Funds' commencement of operations. During the period ended June 30, 1997,
$27,770 was amortized.
Other- The Fund follows industry practice and records security transactions
on the trade date. The specific identification method is used for determining
gains or losses for financial statements and income tax purposes. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrued basis.
NOTE 3. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities, during the period January 1,
1997 through June 30, 1997, aggregated $112,411,699 and $100,639,867
respectively.
NOTE 4. INVESTMENT ADVISORY AGREEMENT
The Fund has an agreement with Amerindo Investment Advisors Inc. (the
"Advisor"), with whom certain officers and directors of the Fund are affiliated,
to serve as investment advisor and manager. Under the terms of the agreement, a
monthly fee is paid to the investment advisor based on 1/12th of 1.50% (1.50% on
an annual basis) of the average daily net asset value. This advisory agreement
is subject to an annual review by the Directors of the Fund.
The Advisor has agreed to a reduction in the amounts payable to it and to
reimburse the Fund for any expenses (including the advisory fee, but excluding
taxes, interest and brokerage fees and extraordinary expenses incurred in
connection with any matter not in the ordinary course of business of the Fund)
over 2.25% of the average daily net asset value of the Class D shares of the
Fund.
For the period January 1, 1997 through June 30, 1997, the Advisor earned
advisory fees of $256,106 and reimbursed the Fund $91,911 in expenses.
The Fund has agreements with American Data Services, Inc. (the
"Administrator") to provide shareholder servicing , fund accounting and
administrative services to the Fund. The services to be provided under the
agreements include day-to-day administration of matters related to the corporate
existence of the Fund (other than rendering investment advice), maintenance of
its records, preparation of reports, supervision of the Fund's arrangement with
its custodian and assistance in the preparation of the Fund's registration
statement under federal and state laws. Costs incurred totaled $42,151 for the
period January 1, 1997 through June 30, 1997.
NOTE 5. DISTRIBUTION FEES
The Board of Directors has adopted a distribution plan applicable to the Fund
under Section 12(b) of the Investment Company Act of 1940 and Rule 12b-1
thereunder. Pursuant to the Plan, registered broker-dealers and qualified
recipients will be reimbursed by the Fund for distribution expenditures up to a
limit of 0.50% of 1% and 0.25% of 1% on Class A Shares and Class D Shares,
respectively.
10
<PAGE>
AMERINDO TECHNOLOGY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) - (UNAUDITED)
JUNE 30, 1997
NOTE 6. FUND SHARE TRANSACTIONS
At June 30, 1997 there were an unlimited number of shares of $0.001 par value
capital stock authorized.:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE OCTOBER 29, 1996
SIX MONTHS ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1997 THROUGH DECEMBER 31, 1996
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares Sold ....................... 2,773,160 $ 19,875,900 3,788,883 $ 37,786,139
Shares issued for reinvestment
dividends and distribution
from realized gains ........... 0 0 0 0
Shares redeemed ................... (579,674) (3,977,416) 0 0
--------- ------------ --------- ------------
Net increase ...................... 2,193,486 $ 15,898,484 3,788,883 $ 37,786,139
========= ============ ========= ============
</TABLE>
11
<PAGE>
AMERINDO TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout each period)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 29, 1996
FOR THE (COMMENCEMENT
SIX MONTHS ENDED OF OPERATIONS)
JUNE 30, 1997 THROUGH
(UNAUDITED) DECEMBER 31, 1996
----------- -----------------
<S> <C> <C>
Net asset value, beginning of period ........... $ 9.00 $ 10.00
---------- ---------
Income (loss) from investment operations
Net investment loss ............................ (0.06) (0.04)
Net realized and unrealized gain (loss) on
investments .................................. (2.00) (0.96)
---------- ---------
Total from investment operations ............... (2.06) (1.00)
---------- ---------
Less distributions
Dividends from net investment income ........... 0.00 0.00
Distribution from realized gains from security
transactions ................................. 0.00 0.00
---------- ---------
Total distributions ............................ 0.00 0.00
---------- ---------
Net asset value, end of period ................. $ 6.94 $ 9.00
========== =========
Total return** ................................. (40.79%)* (45.69%)*
Ratios/supplemental data
Net assets end of period (in 000's) ........... 41,317 33,854
Ratio of expenses to average net assets ........ 2.78%* 3.82%*
Ratio of expenses to average net assts, net of
reimbursement ................................ 2.25%* 2.25%*
Ratio of net investment income (loss) to average
net assets ................................... (2.78%)* (3.82%)*
Ratio of net investment income (loss) to average
net assets, net of reimbursement ............. (2.25%)* (2.25%)*
Portfolio turnover rate ........................ 571.33% 0.00%
Average commission rate paid ................... $ 0.0500 $ 0.0500
<FN>
* Annualized
** Based on net asset value per share
</FN>
</TABLE>
See notes to financial statements
12
<PAGE>
Investment Advisor
- -------------------------------------------
Amerindo Investment Advisors Inc.
San Francisco, California
New York, New York
Administrator and
Transfer and Dividend Agent
- -------------------------------------------
American Data Services, Inc.
Huntington, New York
Custodian
- -------------------------------------------
The Northern Trust Company
Chicago, Illinois
Legal Counsel
- -------------------------------------------
Battle Fowler LLP
New York, New York
Independent Auditors
- -------------------------------------------
Morrison, Brown, Argiz & Company
Miami, Florida
1-888-TECH FUND
www.amerindo.com
