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[LIGHT REVOLUTION FUND LOGO APPEARS HERE]
LIGHT REVOLUTION FUND
ANNUAL REPORT
OCTOBER 31, 1999
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LIGHT REVOLUTION FUND
Dear Shareholder:
As of October 31, 1999, the net asset value per share of the Light Revolution
Fund stood at $11.39, which indicates a 13.9% gain (8.48% load adjusted return)
since inception in June of this year. The market continues to reward the holders
of shares of the large cap technology companies that are leaders in the
continuing worldwide effort to build the information highway. During the period
June 30, 1999 to October 31, 1999, the S&P 500, by comparison, was down by
- -0.31%.
Although the performance of large cap technology shares was good during the
period, the results for Internet start-ups and dot-com IPOs continues to astound
even their most jubilant promoters. It is impossible to say how much longer the
market will continue to reward companies that have yet to learn how to make
money. We continue to believe that the best place for prudent investors to hold
money for the long run is in the leading companies that are building the nuts
and bolts of the information highway upon which the dot-com companies depend.
A Website is a fine thing to have, but it is no more than a grain of sand on a
wide beach. The proprietor still has to get everyone to come over and look at
it. This phenomenon is benefiting one traditional business - the advertising
agencies and broadcasters - who are happy to take money from the venture capital
community and put it to work entertaining consumers with creative
advertisements. We urge our investor not to risk more than they care to lose in
the high-flying Internet sector and keep their core position in the type of
companies that we hold in the Light Revolution Fund.
We reiterate our belief that the information revolution is still in its early
stages with barely 200 million people worldwide hooked up to the Internet, out
of a population of 6 billion. It is, therefore, still only 3 percent of the way
to completion. This is where the telephone was in terms of market penetration at
the turn of the last century in America. Though nearly half of these users are
located in North America, the rest of the world is catching up. Over one million
cell phone users are signing up in China alone each month. This is good news for
companies like Nokia, Motorola and Ericsson, as well as the standard setting
Qualcomm whose shares have risen more than 10-fold so far this year.
We continue to believe that this favorable trend will be in place for many years
to come and that the best way to participate in it is to own shares of the Light
Revolution Fund. We thank you for your faith in us.
Sincerely,
/s/ Henry Hewitt
Henry Hewitt
President
1
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LIGHT REVOLUTION FUND
CUMULATIVE RATE OF RETURN (%)
FOR THE PERIOD JUNE 29, 1999<F1>1 TO OCTOBER 31, 1999
LIGHT REVOLUTION FUND (NO-LOAD)................................. 13.90%
LIGHT REVOLUTION FUND (LOAD ADJUSTED)........................... 8.48%
Lipper Science & Technology Index............................... 18.16%
S&P 500 Stock Index............................................. -0.31%
<F1>1 Commencement of operations.
6/30/99 10/31/99
Light Revolution Fund (No-Load) 10,290 11,390
Light Revolution Fund (Load Adjusted) 9,801 10,849
Lipper Science & Technology Index 10,000 11,816
S&P 500 Stock Index 10,000 9,969
This chart assumes an initial investment of $10,000 made on 6/29/99
(commencement of operations). Total return is based on the net change in N.A.V.
and assuming reinvestment of all dividends and other distributions. Performance
figures represent past performance which is not predictive of future
performance. Investment return and principal value will fluctuate so that your
shares, when redeemed, may be worth more or less than their original cost.
The Lipper Science & Technology Index is composed of 10 mutual funds. Each
mutual fund making up the Index invests at least 65% of its equity portfolio in
science and technology stocks.
The S&P 500 Stock Index is an index of an unmanaged group of 500 selected common
stocks, most of which are listed on the New York Stock Exchange. The Index is
heavily weighted toward stocks with large market capitalizations and represents
approximately two-thirds of the total market value of all domestic common
stocks.
2
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LIGHT REVOLUTION FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS:
Investments, at value
(cost of $1,316,565) $ 1,471,248
Dividends and interest receivable 1,298
Receivable from Adviser 18,001
Other assets 2,357
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Total assets 1,492,904
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LIABILITIES:
Payable to Distributor 807
Accrued expenses and other liabilities 43,658
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Total liabilities 44,465
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=================
NET ASSETS $ 1,448,439
=================
NET ASSETS CONSIST OF:
Paid in capital $ 1,293,756
Net unrealized appreciation of investments 154,683
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Net assets $ 1,448,439
=================
Shares issued and outstanding (Five hundred
million shares of $0.0001 par value authorized) 127,148
NET ASSET VALUE ON REDEMPTION:
Price per share $ 11.39
=================
Maximum offering price per share $ 11.96
=================
See notes to the financial statements.
3
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LIGHT REVOLUTION FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 29, 1999<F2>1 TO OCTOBER 31, 1999
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $45) $ 905
Interest 2,789
-----------------
Total investment income 3,694
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EXPENSES:
Accounting and transfer agent fees and expenses 19,625
Administrative fees 15,500
Registration and filing fees 15,125
Professional fees 13,250
Insurance expense 8,125
Investment advisory fees 4,142
Shareholder reports 4,125
Custody fees and expenses 2,500
Directors' fees and expenses 2,500
Distribution fees (12b-1) 1,036
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Total expenses before waiver and
reimbursement from Adviser 85,928
Expense waiver and reimbursement from Adviser (77,643)
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Net expenses 8,285
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NET INVESTMENT LOSS (4,591)
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UNREALIZED GAIN ON INVESTMENTS:
Net change in unrealized appreciation of investments 154,683
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NET GAIN ON INVESTMENTS 154,683
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 150,092
=================
<F2>1 Commencement of operations
See notes to the financial statements.
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LIGHT REVOLUTION FUND
STATEMENT OF CHANGES IN NET ASSETS
June 29, 1999<F3>1
to
October 31, 1999
OPERATIONS:
Net investment loss $ (4,591)
Net change in unrealized appreciation of investments 154,683
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Net increase in net assets resulting from operations 150,092
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 1,198,472
Cost of shares redeemed (125)
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Net increase in net assets from capital share transactions 1,198,347
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TOTAL INCREASE IN NET ASSETS 1,348,439
NET ASSETS:
Beginning of period 100,000
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End of period $ 1,448,439
===================
CHANGES IN SHARES OUTSTANDING:
Shares sold 117,160
Shares redeemed (12)
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NET INCREASE IN SHARES OUTSTANDING 117,148
===================
<F3>1 Commencement of operations
See notes to the financial statements.
5
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LIGHT REVOLUTION FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING
THROUGHOUT THE PERIOD
June 29, 1999<F4>1
to
October 31, 1999
NET ASSET VALUE - BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (0.04)
Net realized gain and unrealized appreciation 1.43
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Total from investment operations 1.39
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NET ASSET VALUE - END OF PERIOD $11.39
===================
TOTAL RETURN<F5>2,<F6>3 13.90%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (thousands) $1,448
Ratio of expenses to average net assets:
Before expense reimbursement<F7>4 20.74%
After expense reimbursement<F7>4 2.00%
Ratio of net investment loss to
average net assets:
Before expense reimbursement<F7>4 -19.85%
After expense reimbursement<F7>4 -1.11%
Portfolio turnover rate 0.00%
<F4>1 Commencement of operations
<F5>2 Not annualized
<F6>3 The total return calculation does not reflect the maximum sales charge of
4.75%.
<F7>4 Annualized
See notes to the financial statements.
6
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LIGHT REVOLUTION FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999
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COMMON STOCKS - 84.3% Shares Value
- ------------------------------------------------------------------------------
COMPUTER HARDWARE & ELECTRONICS - 11.1%
Apple Computer, Inc.<F8>* 339 $ 27,162
Compaq Computer Corporation 331 6,289
Dell Computer Corporation<F8>* 379 15,207
Hewlett-Packard Company 203 15,035
International Business Machines Corporation 150 14,756
Koninklijke (Royal) Philips Electronics N.V. 204 21,203
Lexmark International Group, Inc. - Class A<F8>* 276 21,545
Sony Corporation ADR 193 30,832
Toshiba Corporation<F9>** 1,438 9,039
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161,068
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ENTERTAINMENT & MEDIA - 6.5%
The Walt Disney Company 462 12,185
The News Corporation Limited ADR 525 15,553
Nintendo Company Ltd. ADR 1,143 22,672
Reuters Group PLC ADR 218 12,058
Time Warner Inc. 223 15,540
Viacom Inc.<F8>* 375 16,781
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94,789
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IMAGING & GRAPHICS - 7.4%
Adobe Systems Incorporated 594 41,543
Canon, Inc. ADR 665 18,911
Eastman Kodak Company 193 13,305
Electronics for Imaging, Inc.<F8>* 347 13,989
Fuji Photo Film ADR 379 12,081
Xerox Corporation 235 6,580
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106,409
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INTEGRATED CIRCUITS & SEMICONDUCTORS - 16.1%
Analog Devices, Inc.<F8>* 443 23,534
Applied Materials, Inc.<F8>* 326 29,279
Broadcom Corporation - Class A<F8>* 230 29,397
Intel Corporation 234 18,120
KLA-Tencor Corporation<F8>* 320 25,340
Maxim Integrated Products, Inc.<F8>* 318 25,102
Micron Technology, Inc. 275 19,611
Texas Instruments Incorporated 324 29,079
Xilinx, Inc.<F8>* 427 33,573
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233,035
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7
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LIGHT REVOLUTION FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (CONTINUED)
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COMMON STOCKS (CONTINUED) Shares Value
- ------------------------------------------------------------------------------
INTERNET - 6.1%
America Online, Inc.<F8>* 178 23,084
Cisco Systems, Inc.<F8>* 299 22,126
Sun Microsystems, Inc.<F8>* 324 34,283
3Com Corporation<F8>* 310 8,990
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88,483
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SOFTWARE - 8.8%
Cadence Design Systems, Inc.<F8>* 467 7,093
Intuit Inc.<F8>* 573 16,689
Microsoft Corporation<F8>* 199 18,420
Oracle Corporation<F8>* 483 22,973
Parametric Technology Corporation<F8>* 855 16,299
SAP AG ADR<F8>* 385 14,077
The Charles Schwab Corporation 401 15,614
Wells Fargo Company 347 16,613
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127,778
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TELECOMMUNICATIONS - 12.2%
AT&T Corp. 292 13,651
Bell Atlantic Corporation 257 16,689
Lucent Technologies Inc. 252 16,191
MCI WorldCom, Inc.<F8>* 191 16,390
Nortel Networks Corporation 588 36,419
Qwest Communications International Inc.<F8>* 555 19,980
Sprint Corporation 301 22,368
Symbol Technologies, Inc. 217 8,626
Tellabs, Inc.<F8>* 405 25,616
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175,930
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8
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LIGHT REVOLUTION FUND
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (CONTINUED)
- ------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) Shares Value
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS - 16.1%
General Motors Corporation - Class H 350 25,484
Globalstar Telecommunications Limited<F8>* 690 15,223
Motorola, Inc. 227 22,118
Nokia Corporation ADR 230 26,579
QUALCOMM Incorporated<F8>* 536 119,394
Telefonaktiebolaget LM Ericsson ADR 581 24,838
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233,636
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TOTAL COMMON STOCK
(cost $1,066,445) 1,221,128
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SHORT-TERM INVESTMENTS - 17.3% PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES - 17.3%
American Family Insurance $ 44,311 44,311
Firstar Corporation 50,258 50,258
General Mills, Inc. 48,087 48,087
Pitney Bowes 20,197 20,197
Wisconsin Corporate Central Credit Union 51,633 51,633
Wisconsin Electric Power Company 35,634 35,634
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250,120
TOTAL SHORT-TERM INVESTMENTS
(cost $250,120) 250,120
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TOTAL INVESTMENTS - 101.6%
(cost $1,316,565) 1,471,248
Liabilities in excess of other assets - (1.6)% (22,809)
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Total net assets - 100.0% $1,448,439
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<F8>* Non-income producing
<F9>** Foreign Security
See notes to the financial statements.
9
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LIGHT REVOLUTION FUND
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. ORGANIZATION
The Light Revolution Fund, Inc. (the "Corporation") was organized as a Maryland
corporation on October 21, 1997 and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. The series presently
authorized is the Light Revolution Fund (the "Fund"). Pursuant to the 1940 Act,
the Fund is a "diversified" series of the Corporation and has an investment
objective of capital appreciation. The Fund commenced operations on June 29,
1999. Shares of the Fund are subject to an initial sales charge imposed at the
time of purchase, in accordance with the Fund's prospectus. The maximum sales
charge is 4.75% of the offering price.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies employed by the
Fund in preparing its financial statements:
USE OF ESTIMATES
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVESTMENT VALUATION
- --------------------
Common stocks and other equity-type securities that are listed on a securities
exchange are valued at the last quoted sales price during regular trading on the
day the valuation is made. Price information, on listed stocks, is taken from
the exchange where the security is primarily traded. Securities which are listed
on an exchange but which are not traded on the valuation date are valued at the
average of the most recent bid and asked prices. Unlisted securities for which
market quotations are readily available are valued at the latest quoted bid
price. Debt securities are valued at the latest bid prices furnished by a
pricing service. Other assets and securities for which no quotations are readily
available are valued at fair value as determined in good faith under the
supervision of the Board of Directors of the Corporation. Short-term instruments
(those with remaining maturities of 60 days or less) are valued at amortized
cost, which approximates market.
DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------
Dividends from net investment income and distributions of net realized capital
gains, if any, will be declared and paid at least annually.
10
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LIGHT REVOLUTION FUND
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999 (CONTINUED)
FEDERAL INCOME TAXES
- --------------------
The Fund has elected to be taxed as a "regulated investment company" and intends
to distribute substantially all taxable income to its shareholders and otherwise
comply with the provisions of the Internal Revenue Code applicable to regulated
investment companies.
Therefore, a provision for federal income taxes or excise taxes has not been
made.
FOREIGN SECURITIES
- ------------------
The Fund may invest in foreign securities. Investing in securities of foreign
companies and foreign governments involves special risks and considerations not
typically associated with investing in U.S. companies and the U.S. Government.
These risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices more
volatile than securities of comparable U.S. companies and the U.S. Government.
FOREIGN CURRENCY TRANSLATION
- ----------------------------
Investment securities and other assets and liabilities initially expressed in
foreign currencies are converted to U.S. dollars based upon current exchange
rates. Purchases and sales of foreign investment securities and income are
converted to U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
OTHER
- -----
Investment and shareholder transactions are recorded on the trade date. The Fund
determines the gain or loss realized from the investment transactions by
comparing the original cost of the security lot sold with the net sales
proceeds. Dividend income is recognized on the ex-dividend date and interest
income is recognized on an accrual basis. Reclassifications are made within the
net asset accounts for amounts related to permanent differences in the character
of certain income and expense items for income tax and financial reporting
purposes.
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the period June 29, 1999 to October 31, 1999, were
as follows:
Purchases Sales
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U.S. Government $ -- $ --
Other $1,066,445 $ --
11
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LIGHT REVOLUTION FUND
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999 (CONTINUED)
At October 31, 1999, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation $207,544
(Depreciation) (52,861)
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Net appreciation of investments $154,683
========
At October 31, 1999, the cost of investments is identical for federal income tax
and financial reporting purposes.
4. AGREEMENTS
The Corporation has entered into an Investment Advisory Agreement with Light
Index Investment Company (the "Investment Adviser"). Pursuant to its advisory
agreement with the Corporation, the Investment Adviser is entitled to receive a
fee, calculated daily and payable monthly, at the annual rate of 1.00% as
applied to the Fund's daily net assets.
Until May 31, 2000, the Investment Adviser has agreed to voluntarily waive its
advisory fee and/or reimburse the Fund's other expenses, including organization
expenses, to the extent that total operating expenses (exclusive of interest,
taxes, brokerage commissions and other costs incurred in connection with the
purchase or sale of portfolio securities, and extraordinary items) exceed the
annual rate of 2.00% of the average net assets of the Fund, computed on a daily
basis. Accordingly, for the period June 29, 1999 to October 31, 1999, the
Investment Adviser waived advisory fees and reimbursed other Fund expenses in
the amount of $77,643. In addition, during the period prior to commencement of
Fund operations, the Investment Adviser reimbursed the Fund for organizational
expenses of $95,243. After May 31, 2000, the Investment Adviser may terminate or
revise the total annual operating expense limitations at any time. Any waiver or
reimbursement is subject to later adjustment to allow the Investment Adviser to
recoup amounts waived or reimbursed to the extent actual fees and expenses for a
period are less than the expense limitation cap of 2.00%, provided, however,
that the Investment Adviser shall only be entitled to recoup such amounts for a
period of three years from the date such amount was waived or reimbursed.
First Data Distributors, Inc. (the "Distributor") serves as principal
underwriter of the shares of the Fund pursuant to a Distribution Agreement
between the Distributor and the Corporation. The Corporation, on behalf of the
Fund, has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plan"), which authorizes the Fund to pay the Distributor (and others that have
entered into related agreements under the 12b-1 Plan) a distribution fee at an
annual rate of up to 0.25% of the average daily net assets of the Fund. Payments
under the 12b-1 Plan are used to reimburse the recipient for services provided
and expenses incurred in connection with the sale of the Fund's shares.
12
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LIGHT REVOLUTION FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Light Revolution Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Light Revolution Fund (constituting
the Light Revolution Fund, Inc., and hereafter referred to as the "Fund") at
October 31, 1999, and the results of its operations, the changes in its net
assets and the financial highlights for the period from June 29, 1999
(commencement of operations) through October 31, 1999, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
/s/ PricewaterhouseCoopers LLP
November 15, 1999
Milwaukee, Wisconsin
13
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Shares of the Light Revolution Fund are distributed by an independent third
party, Provident Distributors, Inc. This report has been prepared for the
general information of Light Revolution Fund shareholders. It is not authorized
for distribution to prospective investors unless preceded or accompanied by a
current prospectus. The Fund's prospectus contains more complete information
about the objectives, policies, expenses and risks of the Fund. Please read the
prospectus carefully before investing or sending money.
[LIGHT REVOLUTION FUND LOGO APPEARS HERE]
LIGHT REVOLUTION FUND
704 Court A
Tacoma, Washington 98402
Fund: 1.888.463.3957
Fund Adviser: 1.888.544.4889
