WWW INTERNET FUND
SEMI - ANNUAL REPORT
DECEMBER 31, 1997
(UNAUDITED)
INVESTING IN THE FASTEST
GROWING SEGMENT OF
TECHNOLOGY
WWW.INTERNETFUND.COM
1-(888)-263-2204
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Letter to Shareholders Page 1
Financial Statements Page 3
Notes to Financial Statements Page 8
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WWW INTERNET FUND UPDATE
FELLOW SHAREHOLDERS,
The Internet and World Wide Web are creating the opportunity for global
communications and commerce. Internet technologies are powering an unprecedented
shift toward real time, anytime products and services. The good news is that we
are witnessing the birth of a new industry --the beginning of a potentially
explosive, long term investment opportunity! Investors who see this trend
unfolding and are early to invest have the best chance to reap the highest
rewards.
As Chairman, Lead Manager and a Shareholder of the WWW Internet fund, I
recognize the investment opportunity of the Internet as well as the challenges
and risks in attempting to capture the potential profits. We are striving to
deliver consistent, above-average growth by investing in companies that are
growing at 20 percent or better. Yet we are attempting to mitigate our risks by
diversifying among a large number of companies and balancing off small company
risk by deploying a Net Nichetm investment strategy: that is, a methodology that
utilizes a sectored, dominant market share approach by investing in a 3 tier mix
of Mature, Mid-Life and Adolescent company stocks. Moreover, we closely monitor
the performance of our holdings so we can take corrective action when we believe
it is necessary. This includes taking profits in stocks whose valuations become
excessively high given the company's market fundamentals and near term
prospects.
Recently we just weathered a broad market sell-off of Internet and Technology
company shares precipitated by the Asian crisis which became headline news this
past November. As a result, our 1997 results were positive, but well below our
annual performance expectations. We are confident that the environment for
stocks in general, and Internet stocks in particular, continues to be good
because historically low inflationary, low interest rate periods have always
pushed stocks to new highs.
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This environment, combined with the pervasive move by corporations to boost
productivity and competitiveness, should continue to reward stocks of company's
with above average earnings growth. Should this economic environment change, it
should exacerbate the push for greater efficiencies and result in wider
acceptance and adaptation of Internet technologies for eCommerce, Data Mining,
Data Warehousing, Security, Networking, Agent Software and Information Services.
These themes remain key sectors of our portfolio and indeed the key focus of our
on-going research effort.
As we begin the new year we have reduced our cash position from approximately
7.5% to less than 3% using the cash to invest in several excellent market
opportunities that have presented themselves. We continue to closely monitor
market valuations and have shifted our portfolio toward high quality small and
midcap (Mid Life and Adolescent) company shares because they now offer more
attractive market valuations and long term growth prospects. The bottom line is
that we want to own shares of companies that are growing and building dominant
market share at a reasonable price. We refuse to invest in momentum plays
without regard for investment fundamentals and adhere to our discipline of
calculating target buy and sell prices based on valuation models for high growth
companies. Overtime we expect to be rewarded by sticking to these basics. The
measure of our success will be our results and your continued support.
VERY TRULY,
LAWRENCE YORK
CHAIRMAN
2
<PAGE>
FINANCIAL STATEMENTS
WWW INTERNET FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1997
(UNAUDITED)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK - 92.13%
BROADCAST & INFORMATION RESOURCES - 4.46%
ACTV Inc.** ................................. 30,000 $ 48,750
Alliance Comm B** ........................... 4,000 51,000
--------
99,750
--------
COMMUNICATION & TELECOM SERVICES - 11.11%
Cincinnati Bell, Inc. ....................... 1,000 31,000
GTE Corp .................................... 700 36,575
Glenayre Technologies** ..................... 2,000 19,750
Qualcomm, Inc.** ............................ 2,000 101,000
Worldcom, Inc.** ............................ 2,000 60,500
--------
248,825
--------
COMPUTERS & ENTERPRISE HARDWARE - 11.28%
Apple Computer Inc.** ....................... 3,000 39,375
Compaq Computer Corp. ....................... 1,500 84,656
International Business Machines Corp. ....... 800 83,650
Seagate Technology Inc.** ................... 1,500 28,875
Sun Microsystems, Inc.** .................... 400 15,950
--------
252,506
--------
COMPUTER SOFTWARE & INTERNET TOOLS - 9.56%
Edify Corp.** ............................... 2,000 37,500
Hummingbird Comm.** ......................... 1,000 31,563
Intuit, Inc.** .............................. 1,000 41,250
New Era Of Networks Inc.** .................. 3,000 33,750
Oracle Corp.** .............................. 750 16,734
RealNetworks Inc.** ......................... 1,000 13,875
Spyglass Inc.** ............................. 8,000 39,500
--------
214,172
--------
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STATEMENT OF NET ASSETS (CONTINUED)
NUMBER MARKET
OF SHARES VALUE
DATA COMMUNICATION & NETWORKING
EQUIPMENT - 20.16%
3Com Corp Com.** ............................ 2,500 $ 87,344
Andrew Corp.** .............................. 4,000 96,000
Ascend Communication, Inc.** ................ 3,200 78,400
Cisco Systems, Inc.** ....................... 3,000 167,250
Novell Inc.** ............................... 3,000 22,500
--------
451,494
--------
DATA PROCESSING SERVICES - 4.34%
First Data Corp. ............................ 800 23,400
Reynolds & Reynolds, Class A ................ 4,000 73,750
--------
97,150
--------
ELECTRONIC COMMERCE - 12.36%
American Express Company .................... 500 44,625
Checkfree Corp.** ........................... 4,000 108,000
Data Broadcasting Corp.** ................... 5,000 28,125
Electronic Data System Corp. ................ 500 21,969
Harbinger Corp.** ........................... 1,350 37,969
National Data Corp. ......................... 1,000 36,125
--------
276,813
--------
FIREWALL & INTERNET SECURITY - 3.62%
Checkpoint Software** ....................... 800 32,600
Raptor Systems, Inc.** ...................... 1,500 19,875
Security Dynamics Technologies, Inc.** ...... 800 28,600
--------
81,075
--------
ON-LINE RETAILING - 4.11%
E-Trade** ................................... 2,000 46,000
TicketMaster Group** ........................ 2,000 46,000
--------
92,000
--------
SEMICONDUCTORS & EQUIPMENT MAKERS - 11.13%
C-Cube Microsystems** ....................... 1,500 24,469
Intel Corp. ................................. 1,000 70,250
Motorola, Inc. .............................. 1,200 68,475
National Semiconductor Inc. ** .............. 1,000 25,937
S3, Inc.** .................................. 3,000 15,000
Texas Instruments Inc. ...................... 1,000 45,000
--------
249,131
--------
TOTAL COMMON STOCK (COST $2,237,517) ........ 2,062,916
MUTUAL FUNDS - 7.49%
STAR BANK TREASURY FUND (COST $167,695) .... 167,695
---------
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TOTAL MARKET VALUE OF SECURITIES
OWNED - 99.62% (NOTE 6) (COST $2,405,212) .... 2,230,611
RECEIVABLES AND OTHER ASSETS NET
OF LIABILITIES - (0.38%) (NOTE 3) ............ 8,410
--------
NET ASSETS - 100.00% (NOTE 5)
($9.57 PER SHARE, BASED ON 234,055 SHARES
OUTSTANDING) ................................. $ 2,239,021
===========
** NON-INCOME PRODUCING SECURITY
- --------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1997:
Paid in capital (Note 5) ............................ $ 2,437,597
Accumulated undistributed income:
Net investment income/(loss) ................... (19,836)
Net realized gain/(loss) from
security transactions ..................... (4,139)
Net unrealized appreciation/(depreciation)
of investments ............................ (174,601)
-----------
TOTAL NET ASSETS .................................... $ 2,239,021
===========
See accompanying notes
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WWW INTERNET FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
INVESTMENT INCOME:
Dividends ....................... $ 3,194
Interest ........................ 5,346
TOTAL INVESTMENT INCOME ...................... $ 8,540
OPERATING EXPENSES:
Administrative fees (Note 3 ..... 13,520
Investment advisory fees (Note 3) 10,145
Amortization of organization
expenses (Note 2) ........... 6,654
Distribution fees (Note 4) ...... 5,675
Audit fees ...................... 4,033
Directors fees .................. 4,033
Custodian fees .................. 3,176
Website fees .................... 2,934
Registration fees ............... 2,555
Printing fees ................... 1,405
Legal fees ...................... 1,260
Transfer agent fee .............. 1,200
E & O Insurance ................. 573
Miscellaneous ................... 370
-------
Total expenses .................. 57,533
Reimbursed expenses (Note 3) .... (29,157)
-------
NET EXPENSES ................................. 28,376
--------
NET INVESTMENT LOSS .......................... (19,836)
--------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 2):
Net realized gain from investment transactions 63,655
Net unrealized depreciation of investments ... (42,536)
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .................... 21,119
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................... $ 1,283
========
See accompanying notes
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WWW INTERNET FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE PERIOD
MONTHS ENDED 8/1/96
12/31/97 (COMMENCEMENT
(UNAUDITED) OF OPERATIONS)
TO 6/30/97
OPERATIONS:
Net investment loss ............................ $ (19,836) $ (21,827)
Net realized gain from investment transactions . 63,655 289,508
Net unrealized depreciation of investments ..... (42,536) (132,065)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... 1,283 135,616
----------- -----------
DISTRIBUTION TO SHAREHOLDERS:
Net realized gain .............................. (306,421) (29,054)
----------- -----------
FUND SHARE TRANSACTIONS:
Shares sold .................................... 569,893 1,770,779
Shares issued in reinvestment of dividends ..... 303,629 7,433
Shares redeemed ................................ (260,725) (53,412)
----------- -----------
NET CAPITAL SHARE TRANSACTIONS (Note 5) ....... 612,797 1,724,800
----------- -----------
NET INCREASE IN NET ASSETS ..................... 307,659 1,831,362
NET ASSETS:
Beginning of period ............................ 1,931,362 100,000
----------- -----------
End of period .................................. $ 2,239,021 $ 1,931,362
=========== ===========
See accompanying notes
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WWW INTERNET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
NOTE 1. ORGANIZATION
The WWW Internet Fund (the "Fund") was organized as an Ohio business trust (the
"Trust"), on April 23, 1996, and commenced operations on August 1, 1996. The
Trust is registered under the Investment Company Act of 1940, as amended, as a
diversified, open end management investment company. The Trust is authorized to
issue an indefinite number of shares of beneficial interest, par value $.001 per
share. The Trust was formed to achieve the investment objective of long term
growth through capital appreciation by investing primarily in equity securities
of companies that are designing, developing or manufacturing hardware or
software products or services for the Internet and / or World Wide Web.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements:
SECURITIES VALUATIONS- Portfolio securities, including covered call options if
written by the Fund, are valued at the last sale price on the securities
exchange or national securities market on which such securities primarily are
traded. Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices, except in the case of open short positions
where the asked is used for valuation purposes. Bid price is used when no asked
price is available. Short-term investments are carried at amortized cost, which
approximates value. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined in
good faith by the Trust's Board of Trustees. Expenses and fees, including the
management fee and distribution and service fees, are accrued daily and taken
into account for the purpose of determining the net asset value of the Fund's
shares.
FEDERAL INCOME TAXES- The Fund intends to qualify each year as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, the Fund will not be subject to federal income taxes to the extent
that it distributes substantially all of its net investment income and any
realized capital gains.
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.
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ORGANIZATION EXPENSES- During its organization and initial registration with the
Securities and Exchange Commission (the "SEC"), the Fund incurred organization
expenses of $65,993. The fund has elected to defer these expenses and amortize
them on a straight-line basis over a 60 month period beginning with the Fund's
commencement of operations. During the period ended December 31, 1997, $6,654
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 accrual
basis.
NOTE 3. INVESTMENT ADVISORY & ADMINISTRATION AGREEMENT
The Board of Trustees provides broad supervision over the affairs of the Fund.
Pursuant to a Management Agreement between the Fund and WWW Advisors, Inc. (the
"Manager") and subject to the authority of the Board of Trustees, the Manager
manages the investments of the Fund and is responsible for the overall
management of the business affairs of the Fund.
Under the terms of the Management Agreement, the Fund has agreed to pay the
manager a base monthly management fee at the annual rate of 1.00% of the Fund's
average daily net assets (the "Base Fee") which will be adjusted monthly (the
"Monthly Performance Adjustment") depending on the extent by which the
investment performance of the Fund, after expenses, exceeded or was exceeded by
the percentage change of the S&P 500 Index. Under terms of the Management
Agreement, the monthly performance adjustment may increase or decrease the total
management fee payable to the manager (the "Total Management Fee") by up to .50%
per year of the value of the Fund's average daily net assets.
All expenses incurred in the operation of the Fund will be borne by the Fund,
except to the extent specifically assumed by the manager. The expenses to be
borne by the Fund will include: organizational costs, taxes, interest, brokerage
fees and commissions, fees of board members who are not officers, directors or
employees of the Manager or its affiliates, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory, administrative and fund
accounting fees, charges of custodians, transfer and dividend disbursing agents'
fees, insurance premiums, industry association fees, outside auditing and legal
expenses, costs attributable to investor services (including, without
limitation, telephone and personnel expenses ),
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. INVESTMENT ADVISORY & ADMINISTRATION AGREEMENT (CONTINUED)
cost of shareholders' reports and meetings, costs of preparing and printing
prospectuses and statements of additional information, amounts payable under the
Fund's Distribution and Shareholder Servicing Plan (the "Plan") and any
extraordinary expenses.
The Manager has undertaken, until such time as it gives investors 60 days'
notice to the contrary, to waive its Management Fee in the amount, if any, by
which the total expenses of the Fund for any fiscal year, including amortization
of organizational expenses and amounts paid by the Fund under the Plan, exceed
2.50% of average annual net assets of the Fund, except that the amount of such
fee waiver shall not normally exceed the amount of fees received by the Manager
under the Management Agreement for such fiscal year. During the six months ended
December 31, 1997, the manager has reimbursed all expenses in excess of 2.50%.
The fee waiver, if any, will be on a monthly basis, subject to year-end
adjustment. Interest expenses, taxes, brokerage fees and commissions, and
extraordinary expenses are not included as expenses for these purposes.
The Fund will reimburse the Manager for organizational costs incurred on behalf
of the Fund only if and when net assets of the Fund exceed $3,000,000.
The Fund has a Fund Accounting and Administrative Agreement with American Data
Services, Inc. ("ADS"). ADS receives a fee, computed daily and payable monthly,
at an annual rate of .08% of average daily net assets, subject to a monthly
minimum.
NOTE 4. DISTRIBUTION AGREEMENT
Under a plan adopted by the Fund's Board of Trustees pursuant to Rule 12b-1
under the 1940 Act (the "Plan"), the Fund pays the Manager a shareholder
servicing and distribution fee at the annual rate of .50% of the average daily
net assets of the Fund. Such fee will be used in it's entirety by the Manager to
make payments for administration, shareholder services and distribution
assistance, including, but not limiting to (i) compensation to securities
dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Fund, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to Fund shareholders, and (iii) otherwise
promoting the sale of shares of the Fund, including paying for the preparation
of advertising and sales literature and the printing and distribution of such
promotional materials to prospective investors.
10
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The fees paid to the Manager under the Plan are in addition to the fees payable
under the Management Agreement and are payable without regard to actual expenses
incurred. For the six months ended December 31, 1997, the amount paid or accrued
for such expenses was $5,675. The Fund understands that third parties also may
charge fees to their clients who are beneficial owners of Fund shares in
connection with their client accounts. These fees would be in addition to any
amounts which may be received by them from the Manager under the Plan.
NOTE 5. CAPITAL SHARE TRANSACTIONS
As of December 31, 1997 there was an unlimited number of $.001 par value shares
of capital stock authorized for the Fund. Transactions in capital stock were as
follows:
For the Six Month Period Ended December 31, 1997
Shares Amount
Shares sold 46,811 $ 569,893
Shares issued in reinvestment
of dividends 32,578 303,629
Shares redeemed (21,140) (260,725)
-------- -----------
Net increase 58,249 612,797
Beginning balance 175,806 1,824,800
-------- -----------
Total paid in capital 234,055 $ 2,437,597
======== ===========
NOTE 6. INVESTMENTS
For the six months ended December 31, 1997, purchases and sales of investment
securities, other than short-term investments, aggregated $1,191,762 and
$761,140 respectively. The gross unrealized appreciation for all securities
totaled $185,752 and the gross unrealized depreciation for all securities
totaled $360,353 for a net unrealized depreciation of $174,601. The aggregate
cost of securities for federal income tax purposes at December 31, 1997 was
$2,405,212.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. RELATED PARTY TRANSACTIONS
Certain owners of WWW Advisors, Inc., are also Owners and /or Directors of WWW
Internet Fund. These individuals may receive benefits from any Management fee
paid to the Advisor.
NOTE 8. DISTRIBUTIONS
During the Six Months Ended December 31, 1997, Distributions of $1.53
aggregating $306,421 were made from Short Term Capital Gains.
NOTE 9. FINANCIAL HIGHLIGHTS
For a fund share outstanding throughout the period.
FOR THE SIX FOR THE PERIOD
MONTHS ENDED 8/1/96
12/31/97 (COMMENCEMENT
(UNAUDITED) OF OPERATIONS)
TO 6/30/97
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.99 $ 10.00
------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.11) (0.16)
Net realized and unrealized gains from
security transactions 0.22 1.36
------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.11 1.20
------ ------
LESS DISTRIBUTIONS FROM REALIZED GAINS
FROM SECURITY TRANSACTIONS: (1.53) (0.21)
------ ------
NET ASSET VALUE, END OF PERIOD $ 9.57 $ 10.99
====== ======
TOTAL RETURN** 2.68%* 13.08%*
* ANNUALIZED
** BASED ON NET ASSET VALUE PER SHARE
12
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RATIOS / SUPPLEMENTAL DATA
FOR THE SIX FOR THE PERIOD
MONTHS ENDED 8/1/96
12/31/97 (COMMENCEMENT
(UNAUDITED) OF OPERATIONS)
TO 6/30/97
Net assets end of period (in 000's) 2,239 1,472
Ratio of expenses to average net assets,
before reimbursement 5.07%* 7.23%*
Ratio of expenses to average net assets,
after reimbursement 2.50%* 2.50%*
Ratio of net investment income (loss) to
average net assets (4.31%)* (1.62%)*
Ratio of net investment income (loss) to
average net assets, net of reimbursement (1.75%)* (.62%)*
Portfolio turnover rate 75.46%* 109.52%*
Average commission rate paid $0.0304 $ 0.0676
* ANNUALIZED
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WWW
INTERNET
FUND
INVESTMENT MANAGER & FUND
DISTRIBUTOR
WWW Advisors, Inc.
Lexington, KY
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING AND TRANSFER AGENT
American Data Services, Inc.
Hauppauge, NY
PORTFOLIO SECURITIES CUSTODIAN
Star Bank, N.A.
Cincinnati, OH
GENERAL COUNSEL
Benesch, Friedlander, Coplan & Aronoff, P.L.L.
Cleveland, OH
SHAREHOLDER SERVICES
(888) 999-8331
SECURITIES DEALERS AND
FINANCIAL INSTITUTIONS ONLY
(888) 263-2204
