The IPO Plus
Aftermarket Fund
................................................................................
ANNUAL REPORT
September 30, 1998
Dear Shareholders:
After producing solid returns through March 1998, we encountered the worst bear
market in IPOs in over ten years. IPO issuance came to a halt in mid-August and
there was only one IPO in September. The 23% appreciation that the IPO Plus
Aftermarket Fund (the "IPO Fund") had built through March 31, 1998 was erased by
last summer's market plunge. As of September 30, 1998 the IPO Fund was down
- -10%.
The cascading financial crises in Asia, South America and Russia have had a
negative effect on liquidity and the availability of credit worldwide. Stock
prices fell significantly because sellers panicked and no one wanted to buy. All
but companies with the highest credit ratings found it difficult to borrow.
Prospective IPOs were postponed because no one wanted to buy at the prices at
which the companies wanted to sell.
One of the reasons why the IPO Fund and other small capitalization or aggressive
growth funds lost so much value in the recent market turbulence was that
institutional investors indiscriminately sold what they perceived as risky
stocks and fled to well-known, large capitalization equities and U.S. government
securities. In the process, they drove stocks to low prices that did not reflect
the positive fundamentals of many of these smaller capitalization, less well
known companies.
This leads us to two questions. First, is the IPO market going to recover? And
second, what is the IPO Fund's strategy?
We are already seeing signs that the IPO market is recovering. While many
prospective deals have been justifiably postponed, the IPOs that are coming
forward are the most compelling investments. For example, oil giant Conoco, a
spin off from the well known chemical company DuPont, went public in October,
the U.S.'s largest IPO ever. Fox Entertainment, the fourth largest television
network, debuted in early November. The IPO Fund invested in each of these
companies.
With low interest rates and a growing U.S. economy, we see many compelling IPOs
queued up to go public in the months ahead. History shows that the best time to
buy IPOs is when sentiment is at its worst.
During the summer, the IPO Fund raised cash, selling stocks that we believed
would suffer the most in the global turmoil. With many stocks selling at bargain
basement prices, we added new securities such as American Tower, a leading
provider of towers to wireless communication companies. We also increased our
investments in stocks that sold off, such as Aurora Foods, a June IPO. As the
IPO market has become active again, we have been deploying our cash in IPOs.
We wish to express our thanks to our investors during these difficult times.
Careful stock selection enabled the IPO Fund to achieve superior +23% returns
through the March 1998 quarter, compared to the Russell 200, which was up only
+10%. The same good stock selection cushioned the IPO Fund from the worst of the
bear market turmoil, resulting in the IPO Fund being down -10% through the
September quarter, compared to a larger -17% decline in the Russell 2000 over
the same period.
We are pleased to report that during the month of October the IPO Fund rebounded
5% compared to a 4% rise in the Russell 2000. We remain committed to pursuing
the investment strategy you expect of us purchasing IPOs on the offering and in
the aftermarket using Renaissance Capital's proprietary research.
Sincerely,
Renaissance Capital
November 16, 1998
Portfolio of Investments
................................................................................
As of
September 30, 1998
Common Stock (86.1%) Shares Value
------------ -----------
Business Services (13.7%)
Convergys Corp.* 15,000 $224,062
Neff Corp.* 37,900 379,000
Provant, Inc.* 2,000 29,750
School Specialty, Inc.* 15,100 232,163
Young & Rubicam, Inc.* 4,700 133,362
-----------
998,337
-----------
Capital Goods & Services (5.0%)
CompX International, Inc.* 21,100 363,975
-----------
Computer/Internet (15.8%)
BindView Development Corp.* 8,000 161,000
Equant NV-NY* 12,000 552,000
GeoCities* 8,000 186,000
NeoMagic Corp.* 22,100 254,150
-----------
1,153,150
-----------
Consumer Cyclical (4.1%)
Columbia Sportswear Co.* 8,500 139,188
Gerber Childrenswear, Inc.* 20,000 158,750
-----------
297,938
-----------
Consumer Staples (9.3%)
Aurora Foods Inc/DE* 15,000 206,250
Keebler Foods Co.* 18,000 468,000
------------
674,250
------------
Energy (2.2%)
Santa Fe International Corp. 10,400 159,900
------------
See Notes to Financial Statements
Portfolio of Investments
................................................................................
(Continued)
Financial (17.2%)
CB Richard Ellis Services, Inc.* 10,400 208,650
Heller Financial Inc. Class A* 10,000 240,000
E*TRADE Group, Inc.* 19,800 370,012
Waddell & Reed Financial, Inc. Class A 23,000 437,000
------------
1,255,662
------------
Health Care (4.9%)
Ocular Sciences, Inc.* 17,000 357,000
------------
Retail (6.2%)
Cost Plus, Inc.* 12,500 332,813
dELiA*s Inc.* 18,000 119,250
------------
452,063
------------
Telecom Services (7.7%)
American Tower Corp. Class A* 10,000 255,000
Hyperion Telecommunications Corp. Class A* 30,000 176,250
RELTEC Corp.* 9,000 132,750
------------
564,000
------------
Total Common Stocks (Cost
$8,682,157) 6,276,275
------------
US Government Securities (8.4%)
US Treasury Bills due 10/22/98 to 12/17/98
Face amount of $617,000 (Cost $611,780) 612,137
-----------
Total Government Securities 612,137
-----------
Total Investments (94.5%) (Cost $9,293,937) (a) 6,888,412
Other Assets and Liabilities (Net) (5.5%) 399,302
===========
Net Assets (100%) $7,287,714
===========
* Non-income producing
(a) The cost for federal income tax purposes was $9,293,937. At September 30,
1998, net unrealized depreciation for all securities based on tax costs was
$2,405,525. This consisted of aggregate gross unrealized appreciation for
all securities of $178,787 and aggregate gross unrealized Depreciation for
all securities of $2,584,312.
See Notes to Financial Statements
Financial Highlights
................................................................................
................................................................................
For a Share Outstanding Throughout the Period
From December 19, l997 (commencement of operations) to
September 30, l998
Net Asset Value, Beginning of Period $12.50
-----------
Income From Investment Operations
Net Investment (Loss) (0.08)
Net Realized and Unrealized (Loss) (1.23)
-----------
Total from Investment Operations (1.31)
-----------
Net Asset Value, End of Period $11.19
===========
Total Return (10.48)% **
Ratios and Supplemental Data
Net Assets, End of Period (Thousands) $7,288
Ratio of Expenses to Average Net Assets 2.50% *
Ratio of Net Investment Loss to Average Net Assets (0.96)% *
Ratio of Expenses to Average Net
Assets *
(excluding waivers) 4.45%
Ratio of Net Investment Loss to Average Net Assets
(excluding waivers) (2.99)% *
Portfolio Turnover Rate 71.26%
* Annualized
** Not Annualized
See Notes to Financial Statements
................................................................................
Statement of Assets and Liabilities
.
September 30, l998
Assets
Investment Securities, at Value, (cost $9,293,937) $6,888,412
Receivable for Investments Sold 456,811
Organizational Costs--Note A 97,442
Receivable from Investment Adviser--Note B 21,353
Dividends and Interest Receivable 338
Other Assets 5,604
--------------
Total Assets 7,469,960
--------------
Liabilities
Payable to Custodian Bank 85,594
Payable for Investments Purchased 25,250
Payable for Administrative Fee--Note C 17,533
Payable for Portfolio Shares Redeemed 5,486
Payable for Distribution Fees--Note D 1,554
Payable for Shareholder Services Fees--Note D 1,554
Accrued Expenses 45,275
--------------
Total Liabilities 182,246
--------------
Net Assets $7,287,714
==============
Net Assets Consist of:
Paid in Capital $9,849,559
Accumulated Net Realized Loss on Investments (156,320)
Net Unrealized Depreciation on Investments (2,405,525)
==============
Net Assets $7,287,714
==============
Net Asset Value, Offering and Redemption Price per Share
($7,287,714 / 651,301 shares of
Beneficial interest, without par value, unlimited
Number of shares authorized) $11.19
==============
See Notes to Financial Statements
...............................................................................
Statement of Operations
From December 19, 1997 (commencement of operations) to
September 30, l998
Investment Income
Dividends $7,963
Interest 75,520
---------------
Total Investment Income 83,483
---------------
Expenses
Investment Adviser--Note B
Basic Fees $81,155
Less: Fees Waived (81,155) -
------------
Administrative Fees--Note C 29,387
Distributions Fee--Note D 13,521
Shareholder Services Fees--Note D 13,521
Trustees' Fees--Note E
Basic Fees 6,500
Less: Fees Waived (6,500) -
------------
Federal and State Registration 32,746
Legal 25,000
Shareholder Reports 13,141
Auditing 7,500
Amortization of Organizational Costs--Note A 18,118
Other Expenses 4,671
---------------
Total Expenses 157,605
Fees Assumed by the Investment Adviser--Note B (22,451)
---------------
Net Expenses 135,154
---------------
Net Investment Loss (51,671)
---------------
Realized and Unrealized Loss on Investments
Net Realized Loss on Investments (156,320)
Net Unrealized Appreciation/Depreciation
during the Period on Investments (2,405,525)
---------------
Net Loss on Investments (2,561,845)
---------------
Net Decrease in Net Assets Resulting from Operations $(2,613,516)
===============
See Notes to Financial Statements
...............................................................................
Statement of Changes in Net Assets
From December 19, l997 (commencement of operations) to
September 30, l998
Increase in Net Assets from Operations
Net Investment $(51,671)
Loss
Net Realized Loss from Investments (156,320)
Net Unrealized Appreciation/Depreciation on Investments (2,405,525)
-------------
Net Decrease in Net Assets Resulting from Operations (2,613,516)
-------------
Fund Share Transactions
Proceeds from Shares Sold 12,817,811
Cost of Shares Redeemed (3,018,581)
-------------
Net Increase from Fund Share Transactions 9,799,230
-------------
Total Increase in Net Assets 7,825,813
Net Assets
Beginning of Period
102,000
-------------
End of Period $7,287,714
=============
Increase (Decrease) in Fund Shares Issued
Number of Shares Sold 868,305
Number of Shares Redeemed (217,004)
-------------
Net Increase in Fund Shares
651,301
=============
See Notes to Financial Statements
...............................................................................
Notes to Financial Statements
September 30, l998
The IPO Plus Aftermarket Fund ("IPO Fund") is a series of Renaissance Capital
Greenwich Funds ("Renaissance Capital Funds"), a Delaware Trust, operating as a
registered, diversified, open-end investment company. Renaissance Capital Funds,
organized on February 3, 1997, may issue an unlimited number of shares and
classes of the IPO Fund.
The investment objective of the IPO Fund is to seek capital appreciation by
investing in the common stocks of Initial Public Offerings on the offering and
in the aftermarket.
A. SIGNIFICANT ACCOUNTING POLICIES: The following significant accounting
policies are in conformity with generally accepted accounting principles. Such
policies are followed by the IPO Fund in the preparation of its financial
statements. Generally accepted accounting principles may require management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results may differ from those estimates.
1. SECURITY VALUATION: Portfolio securities 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 not transactions, are
valued at the average of the most recent bid and asked prices. 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 IPO Fund's
Board of Trustees.
Restricted securities, as well as securities or other assets for which market
quotations are not readily available, or are not valued by a pricing service
approved by the Board of Trustees, are valued at fair value as determined in
good faith by the Board of Trustees.
2. FEDERAL INCOME TAXES: It is the IPO Fund's intention to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code and
to distribute all of its taxable income. Accordingly, no provision for Federal
income taxes is required in the financial statements.
3. DISTRIBUTIONS TO SHAREHOLDERS: The IPO Fund will normally distribute
substantially all of its net investment income in December. Any realized net
capital gains will be distributed annually. All distributions are recorded on
the ex-dividend date. The amount and character of income and capital gain
distributions to be paid are determined in accordance with Federal income tax
regulations, which may differ from generally accepted accounting principles.
4. REPURCHASE AGREEMENTS: The IPO Fund may enter into repurchase agreements.
Under the terms of a repurchase agreement, the IPO Fund acquires securities from
financial institutions or registered broker-dealers, subject to the seller's
agreement to repurchase such securities at a mutually agreed upon date and
price. The seller is required to maintain the value of collateral held pursuant
to the agreement at not less than the repurchase price (including
...............................................................................
Notes to Financial Statements
(continued)
accrued interest). If the seller were to default on its repurchase obligation or
become insolvent, the IPO Fund would suffer a loss to the extent that the
proceeds from a sale of the underlying portfolio securities were less than the
repurchase price, or to the extent that the disposition of such securities by
the IPO Fund was delayed pending court action.
5. ORGANIZATIONAL COSTS: Costs incurred by the IPO Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight line basis over a five-year period.
Renaissance Capital Corporation "Renaissance Capital" agreed to advance the
organization expenses incurred by the IPO Fund and was reimbursed for such
expenses after commencement of the IPO Fund's operations. The organization
expenses will be amortized over a period of five years commencing after the
effective date of the IPO Fund's Registration Statement.
6. OTHER: Security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
B. INVESTMENT ADVISER: Under the terms of an Investment Advisory Agreement with
Renaissance Capital, a registered investment adviser, the IPO Fund agrees to pay
Renaissance Capital an annual fee equal to 1.50% of the average daily net assets
of the IPO Fund and payable monthly. Additionally, Renaissance Capital has
voluntarily agreed to defer or waive fees or absorb some or all of the expenses
of the IPO Fund in order to limit Total Fund Operating Expenses to 2.5%. During
period ended September 30,1998 Renaissance Capital deferred fees of $81,155 and
reimbursed expenses of $22,451. These deferrals and reimbursements are subject
to later recapture by Renaissance Capital for a period of three years.
C. FUND ADMINISTRATION: Under an Administration and Fund Accounting Agreement
(the "Administration Agreement"), Chase Global Funds Services Company (the
"Administrator"), generally supervises certain operations of the IPO Fund,
subject to the over-all authority of the Board of Trustees. For its services,
the Administrator receives a maximum annual fee of .17%, computed daily and
payable monthly as a percent of assets under management.
D. SHAREHOLDER SERVICES: The IPO Fund has adopted a Distribution and Shareholder
Services Plan ("the Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan
authorizes the IPO Fund, as determined from time to time by the Board of
Trustees, to pay up to .50% of the IPO Fund's average daily net assets for
distribution and shareholder servicing.
Total annual fee for distribution of the IPO Fund's shares which is payable
monthly, will not exceed .25% of the average daily net asset value of shares
invested in the IPO Fund by customers of the broker-dealers or distributors.
Each shareholder servicing agent receives an annual fee which is payable monthly
up to .25% of the average daily net assets of shares of the IPO Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship.
E. TRUSTEES' FEES: For the period ended September 30, 1998, the Trustees have
agreed to waive their fees.
F. PURCHASES AND SALES: For the period ended September 30, 1998, the IPO Fund
made purchases of approximately $12,966,579 and sales of approximately
$4,127,818 of investment securities other than long-term U.S. Government and
short-term securities.
G. OTHER: Investing in Initial Public Offerings entails special risks, including
limited operating history of the companies, unseasoned trading, high portfolio
turnover and limited liquidity.
REPORT OF INDEPENDENT ACCOUNTANTS
......................................
To the Shareholders
and Board of Directors
of Renaissance Capital Greenwich Funds
We have audited the accompanying statement of assets and liabilities of
The IPO Plus Aftermarket Fund, a series of shares of Renaissance Capital
Greenwich Funds, including the portfolio of investments, as of September
30, 1998 and the related statement of operations for the year then ended,
the statement of changes in net assets, and the financial highlights in
the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on the financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 1998 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of The IPO Plus Aftermarket Fund as of September 30, 1998, the
results of their operations for the year then ended, the changes in net
assets and the financial highlights in the period then ended, in
conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
November 6, 1998
Have You Visited
the IPO Fund Website?
Our website has the most current information available on the Renaissance
IPO Plus Aftermarket Fund, including information on the IPO Fund's current
NAV, historical performance, top five investment holdings, press releases,
and shareholder applications. In addition, our website keeps you informed
about the IPO market with: IPO News, Weekly Commentary, Guide to IPO
Investing, and IPO Glossary. Use the website to stay current on IPO Fund
activites and on the IPO market.
IPO Fund Website
Top Holdings
NAV and Performance
Fund News/Press Releases
Meet the Managers
Prospectus
Applications
www.ipo-fund.com
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