WWW INTERNET FUND UPDATE
------------------------
FELLOW SHAREHOLDERS:
I am pleased to report that 1999 was a year that WWW Internet Fund achieved
several important milestones. First, we surpassed $100 million in assets.
Second, we gained entry into several important fund "supermarket" distribution
channels including Fidelity and MSDW Online. Third, we received a coveted 5 Star
rating from Morningstar, Inc. for our overall performance for three years.
Fourth, we adapted our 3 tier mix benchmarks to modestly increase our Midlife
and Adolescent Company weighting from 25% to 33% while decreasing the Mature
weighting from 50% to 33%. And fifth, we posted a 166.8% net return for 1999 and
closed at a new NAV high of $41.97.
I place the rise in the Fund's assets as our first milestone because increased
assets will enable us to operate at a lower expense ratio for shareholders. This
occurs because Fund expenses, while not fixed, will decline as a percentage of
total assets. But reaching this milestone is also important because it is
opening doors for us to receive greater share allocations of Internet IPOs. We
are grateful that we have crossed this significant threshold and that
shareholders will reap the potential benefits.
Looking forward into the year 2000, we believe that the Internet sector will
continue to outperform most other market sectors. The Internet is still in its
embryonic stage of development and adaptation. It truly offers an enormous
advantage to businesses as a communication, information and distribution system.
We have added one new research analyst to follow Adolescent Company stocks
(IPO's and small cap issues). This tier has offered extraordinary opportunity
for return, although it carries the highest risk in our portfolio. Our
management discipline is working and we continue to manage the portfolio for
both risk and return. Last year this discipline caused us to take profits in a
few stocks that sharply exceeded most all reasonable valuation levels. We closed
the year with a little over ten percent in cash. This positioned us favorably
for the January sell off that developed as anticipated given the concerns over a
hike in US interest rates.
Thank you for your confidence in the management of your hard-earned money. We
will continue to work toward increasing shareholder value in the new century.
Sincerely,
/S/ LAWRENCE YORK
- -----------------
Lawrence York
Chairman and President
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WWW TRUST
WWW INTERNET FUND
STATEMENT OF ASSESTS AND LIABILITIES
December 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value $ 101,219,338
Cash at custodian bank 500,000
Receivable for fund shares sold 2,417,526
Dividends and interest receivable 32,929
Prepaid expenses and other assets 28,073
-------------
Total assets 104,197,866
LIABILITIES
Payable for securities purchased 1,614,760
Investment advisory fees payable 312,034
Distribution fees payable 119,546
Payable for fund shares redeemed 52,837
Other accrued expenses 51,628
-------------
Total Liabilities 2,150,805
-------------
NET ASSETS $ 102,047,061
=============
NET ASSETS CONSIST OF
Capital shares $ 60,722,115
Accumulated net investment loss (719,635)
Accumulated net realized gain from investment transactions 13,405,791
Net unrealized appreciation on investments 28,638,790
-------------
NET ASSETS $ 102,047,061
=============
Net asset value, offering price and redemption price per share $ 41.97
=============
Fund shares outstanding 2,431,672
=============
</TABLE>
See notes to financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WWW TRUST
WWW INTERNET FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
December 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 89.14%
SHARES VALUE
------ -----
BROADCAST & INFORMATION RESOURCES 5.53%
ACTV Inc** 30,000 $ 1,370,625
AT&T Corp.-Liberty Media Group Cl A** 15,000 851,250
Healtheon Corp** 33,000 1,237,500
Time Warner Inc 15,000 1,086,563
USA Networks Inc** 19,000 1,049,750
-----------
5,595,688
COMMUNICATION & TELECOMMUNICATION SERVICES 12.93%
Airnet Communications Corp** 100,000 3,637,500
Charter Communications Inc** 25,000 546,875
Deltathree.com Inc** 10,000 257,500
KPNQuest NV** 25,000 1,593,750
Phone.com. Inc** 17,100 1,982,531
Qwest Communications International Inc** 35,000 1,505,000
SBC Communications Inc 30,000 1,462,500
USA Talks.com Inc**(1) 320,000 24,000
Vocaltec Communications Ltd** 55,000 921,250
Winstar Communications Inc** 15,500 1,160,562
-----------
13,091,468
COMPUTERS & COMPUTER PERIPHERALS 2.75%
Creative Technology Ltd 22,000 382,250
Delphi Automotive Systems Corportation 100,000 1,575,000
Intel Corp 10,000 823,125
-----------
2,780,375
COMPUTER SOFTWARE & INTERNET TOOLS 17.61%
BroadVision Inc** 20,000 3,401,250
Circle.Com** 100,000 1,231,250
Compuware Corp** 20,000 745,000
Crossroads Systems Inc** 30,000 2,535,000
Intuit Inc** 50,000 2,996,875
Microsoft Corp** 10,000 1,167,500
Optio Software Inc** 50,000 1,175,000
Phoenix Technologies Ltd** 31,500 498,094
Scient Corp** 9,400 812,512
Vignette Corp** 20,000 3,260,000
-----------
17,822,481
See notes to financial statements.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES - (Continued)
SHARES VALUE
------ -----
DATA COMMUNICATION & NETWORKING EQUIPMENT 11.99%
CIENA Corp** 15,000 $ 862,500
Data Critical Corp** 25,000 371,875
Extreme Networks Inc** 20,000 1,670,000
Finisar Corp** 35,000 3,145,625
Rainmaker Systems Inc** 50,000 1,012,500
Redback Networks Inc** 10,500 1,863,750
Tellabs Inc** 50,000 3,209,375
-----------
12,135,625
eCOMMERCE 4.19%
NCR Corp** 25,000 946,875
Ntown Inc**(1) 275,000 525,000
Official Payments Corp** 50,000 2,600,000
ProxyMed Inc** 17,500 170,625
-----------
4,242,500
ELECTRONIC MEASURING SOFTWARE & EQUIPMENT 3.59%
Agilent Technologies Inc** 30,000 2,319,375
Applied Digital Solutions Inc** 175,000 1,312,500
-----------
3,631,875
ENTERPRISE SOFTWARE 1.70%
Peoplesoft Inc** 25,000 532,813
Sybase Inc** 70,000 1,190,000
-----------
1,722,813
e-TAILING 5.89%
4 Kids Entertainment Inc** 50,000 1,400,000
Consolidated Stores Corp** 50,000 812,500
Garden.com Inc** 73,000 634,187
Sharper Image Corp** 55,000 697,813
Wal-Mart Stores Inc 35,000 2,419,375
-----------
5,963,875
FINANCIAL SERVICES 9.62%
E*Trade Group Inc** 20,000 522,500
Internet Capital Group Inc** 10,000 1,700,000
London Pacific Group Ltd, ADR** 23,000 828,000
Merrill Lynch & Co. Inc 20,000 1,670,000
Quotesmith.com Inc** 24,500 278,688
S1 Corporation** 50,000 3,906,250
TD Waterhouse Group Inc** 30,000 493,125
Wit Capital Group Inc** 20,000 340,000
-----------
9,738,563
See notes to financial statements.
4
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES - (Continued)
SHARES/FACE
AMOUNT VALUE
------ -----
Firewall & Internet Security 5.30%
Check Point Software Technologies Ltd** 15,000 $ 2,981,250
Entrust Technologies Inc** 22,000 1,318,625
ISS Group Inc** 15,000 1,066,875
-----------
5,366,750
Internet Content 2.34%
Harris Interactive Inc** 35,200 459,800
Mapquest.com Inc** 25,000 564,062
Townpagesnet.com PLC** 66,600 341,325
iHigh.com Inc**(1) 3,280 1,000,400
-----------
2,365,587
ISP/Hosting Service 4.67%
America Online Inc** 20,000 1,508,750
Exodus Communications Inc** 32,850 2,917,491
Mindspring Enterprises Inc** 11,400 301,031
-----------
4,727,272
Training & Certification 1.03%
Prosoft Training.com** 100,880 1,046,630
-----------
Total Common Stock (Cost $62,141,149) 90,231,502
CONVERTIBLE NOTE 0.64%
Poso Convertible Note, 13.00%, 11/30/2003 $100,000 648,437
(Cost $ 100,000)
MUTUAL FUNDS 10.22%
Firstar Bank Treasury Fund $10,339,399 10,339,399
-----------
(Cost $10,339,399)
TOTAL INVESTMENTS IN SECURITIES 100.00% $101,219,338
============
(Cost $72,580,548)
<FN>
**Non-dividend paying securities.
(1) Restricted / illiquid securities.
</FN>
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
WWW TRUST
WWW INTERNET FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C>
Dividends $ 29,482
Interest 74,765
------------
Total Investment Income 104,247
EXPENSES
Investment advisory fees 362,037
Distribution fees 119,546
Professional services fees 76,121
Registration fees 19,156
Reports to shareholders 9,456
Other expenses 4,759
------------
Total expenses 591,075
------------
NET INVESTMENT LOSS (486,828)
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gain from investment transactions 14,122,625
Net change in unrealized appreciation of investments 22,638,549
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 36,761,174
------------
NET INCREASE IN ASSETS FROM OPERATIONS $ 36,274,346
============
</TABLE>
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
WWW TRUST
WWW INTERNET FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
DECEMBER 31, 1999 YEAR ENDED
(UNAUDITED) JUNE 30, 1999
----------- -------------
FROM OPERATIONS
<S> <C> <C>
Net investment loss $ (486,828) $ (232,807)
Net realized gain from investment transactions 14,122,625 29,950
Net change in unrealized appreciation of investments 22,638,549 5,941,215
------------- -------------
Net increase in net assets resulting from operations 36,274,346 5,738,358
DISTRIBUTIONS TO SHAREHOLDERS
From net capital gains on investments (745,301) (112,653)
CAPITAL SHARE TRANSACTIONS
Net increase from capital share transactions 33,199,729 25,064,257
------------- -------------
NET INCREASE IN NET ASSETS 68,728,774 30,689,962
NET ASSETS
Beginning of period 33,318,287 2,628,325
------------- -------------
End of period $ 102,047,061 $ 33,318,287
============= =============
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
WWW TRUST
WWW INTERNET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AS FOLLOWS:
FOR THE PERIOD
FOR THE SIX AUGUST 1, 1996
MONTHS ENDED FOR THE YEAR FOR THE YEAR (COMMENCEMENT OF
DEC. 31, 1999 ENDED ENDED OPERATIONS) THROUGH
(UNAUDITED) JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.64 $ 10.95 $ 10.99 $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment loss (0.29) (0.37) (0.21) (0.16)
Net realized and unrealized gain on investments 20.02 12.39 1.70 1.36
Total from investment operations 19.73 12.02 1.49 1.20
LESS DISTRIBUTIONS FROM REALIZED GAINS FROM
SECURITY TRANSACTIONS (0.40) (0.33) (1.53) (0.21)
NET ASSET VALUE, END OF PERIOD $ 41.97 $ 22.64 $ 10.95 $ 10.99
TOTAL RETURN** 87.65% 112.01% 15.96% 13.08%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's) $102,047 $ 33,318 $ 2,628 $ 1,472
Ratio of expenses to average net assets before
expense reimbursement 2.43% * 3.65% 5.10% 7.23% *
Ratio of expenses to average net assets after
expense reimbursement 2.43% * 2.50% 2.50% 2.50% *
Ratio of net investment (loss) to average net assets (2.00%)* (3.07%) (4.47%) (1.62%)*
Ratio of net investment (loss) to average net assets
net of reimbursement (2.00%)* (1.90%) (1.89%) (0.62%)*
PORTFOLIO TURNOVER RATE 106.15% 48.03% 70.52% 109.52%
<FN>
* Annualized
** Based on net asset value per share
</FN>
</TABLE>
See notes to financial statements.
8
<PAGE>
WWW TRUST
WWW INTERNET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
The WWW Trust (comprising the WWW Internet Fund) (the "Fund") was organized as
an Ohio business 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.
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.
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 Funds'
commencement of operations. Amortization expense amounted to $3,406 for the six
months ended December 31, 1999.
INVESTMENTS- 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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
2. INVESTMENT ADVISORY 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 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), costs 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 the 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. 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.
3. 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 (1) 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, (2) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to Fund shareholders, and (3) 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. 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. 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. For the six months ended December 31, 1999, the amount
paid or accrued for such expenses was $119,546.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
As of December 31, 1999 there was an unlimited number of $.001 par value capital
shares authorized for the Fund.
Capital share transactions were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS For the Year
ENDED DECEMBER 31, 1999 ended
(UNAUDITED) JUNE 30, 1999
----------- -------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,512,254 $ 50,114,282 1,920,436 $ 38,668,211
Shares issued by reinvestment
of dividends/distributions 21,573 709,537 7,579 98,532
Shares redeemed
(net of redemption fees) (573,685) (17,624,090) (696,500) (13,702,486)
--------- ------------ --------- ------------
Net increase 960,142 $ 33,199,729 1,231,515 $ 25,064,257
========= ============ ========= ============
</TABLE>
5. INVESTMENTS
For the six months ended December 31, 1999, purchases and sales of investment
securities, other than short-term investments, aggregated $72,487,359 and
$49,392,307 respectively. The gross unrealized appreciation for all securities
totaled $30,962,692 and the gross unrealized depreciation for all securities
totaled $2,323,902 for a net unrealized appreciation of $28,638,790. The
aggregate cost of securities for federal income tax purposes at December 31,
1999 was $72,727,553.
6. RELATED PARTY TRANSACTIONS
Certain owners of WWW Advisors, Inc., are also Owners and/or Trustees of the
Fund. These individuals may receive benefits from any Management fee paid to the
Advisor.
7. DISTRIBUTIONS
For the six months ended December 31, 1999, distributions of $0.16 aggregating
$299,451 and $0.24 aggregating $445,850 were made from Short Term Capital Gains
and Long Term Capital Gains, respectively.
8. RESTRICTED AND OTHER ILLIQUID SECURITIES
Investments in restricted securities and investments where market quotations are
not available, are valued at fair value as determined in good faith by the Board
of Trustees, or a committee composed of members of the Board of Trustees of the
Fund.
The Fund may acquire portfolio securities called restricted securities, which
can be sold only pursuant to an effective registration statement under the
Securities Act of 1933 or an exemption from such registration. In addition,
other securities held by the Fund may be illiquid which means they cannot be
sold or disposed of in the ordinary course of business at approximately the
quoted market value of such securities, or in the absence of such quoted market
value, the price at which the Fund has valued such securities. The Fund will not
invest in restricted and other illiquid securities if, as a result of such
investment, the value of the Fund's illiquid assets would exceed 15% of the
value of the Fund's net assets.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
8. RESTRICTED AND OTHER ILLIQUID SECURITIES - CONTINUED
Restricted securities eligible for resale under Rule 144A under the Securities
Act of 1933 that have been determined to be liquid by the Fund's Board of
Trustees based upon trading markets for the securities and any other restricted
securities that become registered under the Securities Act of 1933 or that may
be otherwise freely sold without registration thereunder are not subject to the
foregoing limitation, unless they are otherwise illiquid.
The Fund normally will be able to purchase restricted securities at a
substantial discount from the market value of similar unrestricted securities,
but there are certain risks which the Fund will necessarily assume in acquiring
restricted securities. The principal risk is that the Fund may have difficulty
in disposing of such securities without registration under the Securities Act of
1933, and the Fund will have to bear the risk of market conditions prior to such
registration. In the absence of an agreement obtained at the time of purchase of
such securities, there can be no assurance that the issuer will register the
restricted securities. Furthermore, if the Fund disposes of restricted
securities without registration, it may be necessary to sell such shares at a
discount similar to or greater than that at which the Fund purchased the shares.
12
<PAGE>
WWW TRUST
WWW INTERNET FUND
INVESTMENT ADVISOR
WWW Advisors, Inc.
131 Prosperous Place, Suite 17
Lexington, KY 40509
(888) 263-2204
FUND ACCOUNTANT AND TRANSFER AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
(888) 999-8331
CUSTODIAN FirStar
Bank, N.A.
Cincinnati, OH
LITERATURE REQUESTS, NEW ACCOUNTS
SECURITIES DEALERS AND FINANCIAL INSTITUTIONS
(888) 263-2204
EXISTING ACCOUNTS AND REDEMPTIONS ONLY
(888) 999-8331
Member - Investment Company Institute
WWW.INTERNETFUND.COM
