LCM INTERNET GROWTH FUND
EXCHANGE TRADED
223 W. LAKE STREET
CHICAGO,
ILLINOIS 60606
312.705.3028
WWW.LCMFUNDS.COM
SYMBOL: FND
EXCHANGE: AMEX
CUSIP: 501816102
PROSPECTUS: Firstar Fund Services
877-LCM-7528
THE INTERNET IS THE "FASTEST GROWING TECHNOLOGY IN HISTORY".
- Harris Interactive
LCM INTERNET GROWTH FUND
The Fund's investment objective is to seek capital appreciation by investing in
a portfolio consisting primarily of equity securities issued by companies that
the Fund's investment adviser believes will benefit from growth of the Internet.
Current dividend income is not an investment consideration. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the equity
securities of companies that engage in Internet and Internet-related
activities.*<F1> There can be no assurance that the Fund's investment objective
will be achieved.
WHAT IS THE DIFFERENCE BETWEEN CLOSED-END AND OPEN-END FUNDS?
Both types of investment companies are authorized by the Investment Company Act
of 1940, and both are commonly called mutual funds. However, there are important
differences between the two. Open-end funds continually issue and redeem their
own securities at net asset value, whereas closed-end funds offer their
securities through an initial public offering and the shares are thereafter
traded on an exchange at a price determined by market conditions, and which may
not necessarily correlate with the fund's net asset value. Open-end funds are
subject to unpredictable capital inflows and outflows, but also have the
opportunity to grow at a rapid rate by adding additional investors and/or in-
vestment capital. Closed-end funds managers have greater certainty as to the
assets under management, but growth of a closed-end fund comes almost entirely
from the appreciation of its assets.
Every day, the Fund posts its Net Asset Value (NAV, value of the fund's
holdings) on its website, www.lcmfunds.com. The availability of the daily NAV
allows investors to measure not only the performance of the Fund's managers, but
also to judge whether the stock is trading at a discount or a premium.
When trading at a discount investors can, in effect, buy shares in leading
Internet companies at less than the market price of the shares!
FACTS AND FIGURES
The Yankee Group speculates that the market for residential high-speed Internet
services will balloon to 16.6 million house-holds by 2004 from 3.3 million in
1999. They also predict that 41% of all U.S. homes will have a DSL access option
by year-end.
Wireless portals will gain subscribers at an explosive rate according to the
Strategis Group. Traditional Internet portals, such as Yahoo! will compete with
newcomers to act as the entry point to the Internet for the emerging wireless
customer base. Growth is projected to grow from 300,000 subscribers in early
2000 to almost 25 million in 2006.
According to the Yankee Group, U.S. Business to Business e-commerce will
approach $3 trillion by 2004, rising from $490 billion in 1999.
Boston Consulting Group reports that Asia and the Pacific Rim are stepping
forward in the area of e-commerce. Though still significantly behind the U.S.
and Europe, online retail sales are expected to grow 150% this year alone.
*<F1> From time to time the Fund may have less than 65% of its assets invested
in such equity securities for temporary market defensive purposes.
WIRELESS SUBSCRIBER FORECAST
(MILLIONS)
2000 300,000
2001 2,300,000
2002 5,700,000
2003 9,800,000
2004 14,500,000
2005 19,700,000
2006 24,800,000
U.S. B2B FORECAST
(BILLIONS)
1999 $145
2000 $403
2001 $953
2002 $2,180
2003 $3,950
2004 $7,290
LCM INTERNET GROWTH FUND, INC.
A MARYLAND CORPORATION
ANNUAL REPORT
MARCH 31, 2000
223 W. LAKE STREET
CHICAGO, ILLINOIS 60606
312-705-3028
AS OF MARCH 31, 2000 THE ISSUER HAD OUTSTANDING
2,640,583 SHARES OF COMMON STOCK ($0.01 PAR VALUE)
LCM INTERNET GROWTH FUND, INC.
TABLE OF CONTENTS
Page
----
I. Letter to Shareholders 4-5
II. Abbreviated Table of Investment Results 6
III. Fund Description 7
IV. Investment Objective and Strategy 7-8
V. Risk Factors and Website 8
VI. Schedule of Investments 9-13
VII. Statement of Assets and Liabilities 14
VIII. Statement of Operations 15
IX. Statement of Changes in Net Assets 16
X. Financial Highlights 17
XI. Notes to Financial Statements 18-20
XII. Report of Independent Accountants 21
XIII. Top Forty Equity Positions (with prior quarter rank) 22
XIV. Portfolio Allocation Graphs 23-24
XV. Dividend Reinvestment Plan 25
XVI. Frequently Asked Questions 26
XVII. Board and Officers 27
LCM INTERNET GROWTH FUND, INC.
LETTER TO SHAREHOLDERS
Since your Fund's debut in late October 1999, volatility increasingly ruled the
Internet stocks. Dramatic changes in investor perceptions fueled the
stratospheric highs of early March and the correction shortly thereafter.
Investors in individual Internet stocks were exposed to even greater risks with
these unpredictable swings in perception.
Certain sectors within the Internet, such as B2B e-commerce or ASPs, have in
recent times benefited from the media spotlight. Second or third-tier companies
in such sectors may rally alongside the leaders while that sector enjoys its
period of popularity, but such companies also tend to lead the way down when the
sector loses favor with investors. Moreover, they generally are less able to
recover from a downturn than the sector leaders. This increased volatility
lends credibility to your Fund's focus on investing in established and emerging
leaders across the spectrum of Internet sub-sectors.
While a market sell-off will paint all the Internet-related companies with the
same brush stroke, not all the companies have the same long-term prospects.
Many will not recover from the latest sell-off, but we believe that some of the
leading companies will not only rebound, but achieve new highs. With a choppy
market like the one we are in, the Fund manager's ability to differentiate
between companies that have strong long-term business models and those that do
not will eventually separate the performance of funds like ours from the average
investor picking a few Internet investments. It is our belief that the Fund's
portfolio management philosophy should reward long-term investors, particularly
in the recent, more volatile markets.
Despite the continuing volatility in Internet stocks, the growth of the Internet
is still in its infancy. Currently, only a small portion of true business-to-
business commerce is done through the Internet. However, some estimates predict
a fifty-fold increase over the next four years (GartnerGroup, $7.29 trillion in
worldwide e-commerce by 2004). We believe the real growth of the Internet will
be driven by businesses trying to increase profitability through improved
efficiency. To make business more efficient, there needs to be growth in:
INFRASTRUCTURE to increase the speed and create new methods by which voice,
data, and various media are integrated; CONTENT aggregated to provide fast and
useful information to improve the decision making process; and E-COMMERCE
seamlessly integrated with traditional business applications such as inventory
management, accounting, marketing, and purchasing.
Over time, the Internet will produce a more efficient commerce engine. As we
look forward, we intend to evaluate new opportunities with traditional
businesses that have taken a 'first mover position' by integrating business
functions with Internet strategy. We believe the opportunities to improve
profit and competitive position within specific industry groups will be
tremendous.
Your Fund managers attempt to adjust to rapid changes in technology, new
companies and shifts in leadership position by continually monitoring and
rebalancing the portfolio. As you can see in the section of this Annual Report
devoted to the Fund's top forty holdings, only two of the Fund's top 10 holdings
on 3/31/00 were among the top 10 holdings at the end of the previous quarter.
Such dramatic shifts are indicative of the active portfolio management style of
your Fund's managers.
The Fund was launched with the idea that growth can best be achieved by
investing in the leading companies in several dozen identified sub-sectors. The
Fund's net asset value ("NAV") grew from $9.35 at inception to $14.81 on March
31 (a total return of 58.4%). The IPO price of $10 grew to $12.44 at the close
on March 31 (a total return of 24.4%).
A total of $967,970, or 6.7%, of the Fund's net gains resulted from investment
in initial public offerings ("IPOs") from inception through March 31, 2000.
There can be no assurance that the Fund will continue to have access to IPOs or
that any such investments in the future will be profitable for the Fund.
At the initial meeting of the Board of Directors of the Fund, the Board
authorized the Fund's managers to repurchase shares of the Fund at such times as
the Fund is trading at a substantial discount to NAV (greater than 10%). The
Board agreed that such periodic share repurchases could benefit shareholders.
As of March 31, 2000, the Fund had not repurchased any shares of its own stock,
as the Fund was required to give 180 days advance notice. This notification to
shareholders was contained in the Fund's Prospectus. We anticipate that any
share repurchases will commence from June 1, 2000 onward. There can be no
assurance that the Fund's manager will decide to purchase shares or whether any
such purchases will be completed during this period.
Additionally, the Board of Directors of the Fund approved a special distribution
of short-term capital gains of $.50 per share to shareholders of record as of
the close of business on April 6, 2000, payable April 13, 2000.
We are optimistic about the long-term growth of the Internet and the ability of
your Fund's managers to capitalize on its growth. Thank you for your support of
the Fund. We look forward to a long and prosperous relationship. Shareholder
inquiries are welcome.
Michael R. Grady
Chairman of the Board of Directors
LCM INTERNET GROWTH FUND, INC.
ABBREVIATED TABLE OF INVESTMENT RESULTS
FOR PERIOD ENDED MARCH 31, 2000
LCM INTERNET GROWTH FUND - NAV 1<F2>
TOTAL
RETURN
NAV 1 3 6 CALENDAR 12 FROM
RETURNS MONTH MONTH MONTH YTD MONTH INCEPTION 1,2,4
<F2>,<F3>,<F5>
----------------------------------------------------------------------------
-10.19% 9.38% n/a 9.38% n/a 58.40%
LCM INTERNET GROWTH FUND - MARKET VALUE 1<F2>
TOTAL
RETURN
MARKET 1 3 6 CALENDAR 12 FROM
RETURNS MONTH MONTH MONTH YTD MONTH INCEPTION 1,3
<F2>,<F4>
----------------------------------------------------------------------------
-6.13% -4.33% n/a -4.33% n/a 24.38%
PER SHARE DATA
March 31, 2000 December 31, 1999 Inception Date
-------------- ----------------- --------------
Market Price $12.44 $13.00 $10.00 3<F4>
Net Asset Value $14.81 $13.54 $9.35 4<F5>
1<F2> Returns for periods of less than one year are not annualized
2<F3> Includes net gains of $967,970 from investments in IPOs. There can be
no assurance that the Fund will continue to have access to IPOs or that
any such investments in the future will be profitable for the Fund.
3<F4> The Inception Date is October 26, 1999, the day the Fund first traded on
AMEX
4<F5> The Inception Date is October 29, 1999, the day the Fund's initial
public offering closed
Investors should be aware that the information contained in this page is
historical data and that past performance is not indicative of future investment
results. Shares, when sold, may be worth more or less than their original cost.
LCM INTERNET GROWTH FUND, INC.
FUND DESCRIPTION
The Fund was organized on August 24, 1998 as a corporation under the laws of the
State of Maryland. The Fund is a non-diversified, closed-end management
investment company registered under the Investment Company Act of 1940. LCM
Capital Management, Inc. ("LCMCM"), a registered investment advisor, is the
Fund's Investment Advisor. As of March 31, 2000, there were 2,640,583 shares of
the Fund's common stock issued and outstanding.
INVESTMENT OBJECTIVE AND STRATEGY
The Fund's investment objective is capital appreciation through investment in a
portfolio consisting primarily of equity securities issued by companies that
LCMCM believes will benefit from growth of the Internet. Equity securities are
defined to include common stocks, securities convertible into common stocks,
such as convertible preferred stocks, bonds, notes and debentures, and American
Depository Receipts ("ADRs"). Current income is not an investment consideration.
The Fund's investment objective is a fundamental policy that may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in the equity securities of companies that engage in Internet and
Internet-related activities. Under favorable market conditions, the Fund
typically is substantially fully invested in such securities. The Fund may hold
a small portion of its assets (generally not more than 10%) in U.S. government
securities, money market securities and cash to meet ordinary daily cash needs.
Under unusual circumstances, as a defensive technique, the Fund may retain a
larger portion of the cash and/or invest more assets in U.S. government
securities and/or money market securities deemed by LCMCM to be consistent with
a temporary defensive posture. For example, in April and May of 2000 the Fund
increased its cash position beyond 35% of assets due to adverse market
conditions. To the extent the Fund engages in temporary investment strategies,
the Fund may not achieve its investment objective.
In order to assess Internet-related opportunities for the Fund, LCMCM has
divided those companies that participate in the Internet into three major areas
consisting of sectors and further broken down to sub-sectors. The three major
areas are: infrastructure, content and e-commerce. Infrastructure refers to the
basic connections, networks and computer and server hardware necessary to convey
information from point A to point B. Content includes those sites, services,
software and applications necessary to facilitate user access to information
and/or services on the web. E-commerce is the structure necessary to conduct
business-to-business, consumer-to-business and government-to-business
transactions.
Because the Internet is so dynamic, LCMCM continues to closely monitor the
Internet industry for emerging and obsolete sectors and sub-sectors. For each
identified sub-sector, LCMCM evaluates the companies, both public and private,
that are vying for leadership positions. Generally, such leaders are added to
the Fund's holdings. However, like the sectors and sub-sectors themselves,
these leaders will not remain static. The evaluation of changes among the
leaders will be a continual process.
LCMCM expects that approximately 85% of the Fund's Internet-related equity
investments will be divided among the leaders of the identified sub-sectors. As
the leaders of the identified sub-sectors change, the Fund's investments are
rebalanced so as to replicate as nearly as possible the current status of the
sub-sector leaders. Such rebalancing increases the Fund's transactional
expenses and portfolio turnover. The weighting of the investment in each sub-
sector is partly determined by a proprietary quantitative program overlapping
the portfolio. The Fund expects to invest up to the remaining 15% of its equity
investments in special situations which will generally be in companies that do
not have the historical basis necessary for the Fund's model or involve emerging
technology.
RISK FACTORS
An investment in shares of the Fund involves a number of risks. As a result,
there can be no assurance that the Fund will achieve its investment objective.
Due to the risks inherent in the securities in which the Fund invests, the Fund
should not be considered a complete investment program. You should consider the
following risk factors in evaluating an investment in shares of the Fund.
Volatility of Investments The market prices of the securities in which the Fund
-------------------------
invests are likely to be highly volatile and are subject to wide fluctuations,
which may result in similar fluctuations in the net asset value of the Fund's
stock.
Concentration on the Information Technology Industry The net asset value of the
----------------------------------------------------
Fund's shares is especially influenced by factors specific to the information
technology industry and may fluctuate more than the value of shares in a
portfolio investing in a broader range of industries.
Investments in Smaller Companies and/or Illiquid Securities Because the
-----------------------------------------------------------
Internet is a relatively new development, many of the companies in which the
Fund invests are small with little prior operating history, and certain of these
companies have securities for which no readily available markets exists, which
are restricted as to resale or are otherwise highly illiquid.
Discount from Net Asset Value Shares of closed-end management investment
-----------------------------
companies frequently trade at a discount to their net asset value.
Initial Public Offerings From time to time, the Fund invests in companies at
------------------------
the initial public offering stage. The Fund has no assurance that it will
continue to have access to such investments, or that any such investments will
be profitable for the Fund.
For a more complete discussion of the Fund's risk factors, please see the Fund's
initial public offering prospectus.
www.lcmfunds.com
Shareholders can get updates on the Fund's net asset value and stock price at
the Fund's website, www.lcmfunds.com. Investors will also find links to the
----------------
Fund's quarterly and annual reports, as well as press releases issued by the
Fund. Your feedback on the site is welcome at [email protected], or by
---------------------
calling our customer service department at 877-LCM-7528.
LCM INTERNET GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
MARCH 31, 2000
SHARES MARKET VALUE
------ ------------
COMMON STOCKS - 64.1%**<F7>
BROADCAST AND MEDIA - 0.3%**<F7>
7,130 Charter Communications, Inc. Class A *<F6> $ 102,160
-----------
BUSINESS SERVICES - 1.4%**<F7>
2,000 AGENCY.COM Inc.*<F6> 53,375
40,000 e4L, Inc. *<F6> 85,000
3,500 Organic, Inc. *<F6> 75,688
200 The Management Network Group, Inc. *<F6> 5,387
4,046 TMP Worldwide Inc. *<F6> 314,577
-----------
534,027
-----------
CLOSED END INVESTMENT COMPANY - 0.8%**<F7>
15,000 meVC Draper Fisher Jurvetson Fund I r<F10> v<F11>
(Acquired 03/28/00, Cost $300,000) 300,000
-----------
COMPUTERS AND ELECTRONICS - 3.7%**<F7>
3,793 Dell Computer Corporation *<F6> 204,585
7,000 M -Systems Flash Disk Pioneers Ltd. *<F6> f<F9> 371,000
3,518 Sun Microsystems, Inc. *<F6> 329,648
6,000 Methode Electronics, Inc. Class A 303,000
15,000 Robinson Nugent, Inc.*<F6> 234,375
-----------
1,442,608
-----------
E-COMMERCE - 3.2%**<F7>
4,710 Amazon.com, Inc. *<F6> 315,570
1,195 eBay, Inc. *<F6> 210,320
600 FreeMarkets, Inc. *<F6> 72,600
2,380 Internet Capital Group, Inc. *<F6> 214,944
6,000 Onvia.com, Inc. *<F6> 126,750
4,100 Priceline.com, Incorporated *<F6> 328,000
-----------
1,268,184
-----------
FIBER OPTICS - 3.7%**<F7>
2,081 CIENA Corporation *<F6> 262,466
500 Finisar Corporation *<F6> 73,258
2,000 Harmonic, Inc. *<F6> 166,500
3,120 JDS Uniphase Corporation *<F6> 376,155
3,321 Metromedia Fiber Network, Inc. Class A*<F6> 321,307
2,000 Sycamore Networks, Inc. *<F6> 258,000
-----------
1,457,686
-----------
FINANCIAL SERVICES - 1.8%**<F7>
2,354 American Express Company 350,599
5,174 E*TRADE Group, Inc. *<F6> 155,867
4,110 Knight/Trimark Group, Inc. Class A *<F6> 209,610
-----------
716,076
-----------
INTERNET CONTENT - 4.8%**<F7>
556 America Online, Inc. *<F6> 37,391
4,176 CMGI Inc. *<F6> 473,193
2,276 DoubleClick Inc. *<F6> 213,090
2,856 InfoSpace.com, Inc. *<F6> 415,369
3,520 Lycos, Inc. *<F6> 247,280
3,100 net.Genesis Corp. *<F6> 138,725
1,930 Yahoo!, Inc. *<F6> 330,754
-----------
1,855,802
-----------
INTERNET SOFTWARE - 6.7%**
1,934 Ariba, Inc. *<F6> 405,415
5,386 Be Free, Inc. *<F6> 118,492
1,880 BroadVision, Inc. *<F6> 84,365
975 Clarent Corporation *<F6> 87,933
8,182 CyberCash, Inc. *<F6> 110,457
12,650 Harbinger Corporation *<F6> 368,431
6,500 Information Architects Corp. *<F6> 112,937
1,620 Inktomi Corporation *<F6> 315,900
1,000 Interwoven, Inc. *<F6> 109,750
931 Phone.com, Inc. *<F6> 151,869
3,130 Retek Inc. *<F6> 128,917
2,500 TIBCO Software Inc. *<F6> 203,750
1,000 webMethods, Inc. *<F6> 241,375
6,495 WorldGate Communications, Inc. *<F6> 195,256
-----------
2,634,847
-----------
NETWORKING PRODUCTS - 6.1%**<F7>
2,760 Brocade Communications Systems, Inc. *<F6> 494,902
3,714 Cisco Systems, Inc. *<F6> 287,139
2,000 Emulex Corporation *<F6> 218,250
3,100 Extreme Networks, Inc. *<F6> 244,900
3,486 Juniper Networks, Inc. *<F6> 918,779
7,300 Paradyne Networks, Inc. *<F6> 226,300
200 Universal Access, Inc. *<F6> 6,700
-----------
2,396,970
-----------
NETWORK SECURITY - 3.4%**<F7>
2,096 Check Point Software Technologies Ltd. *<F6> f<F9> 358,547
3,330 Entrust Technologies Inc. *<F6> 283,310
5,000 Identix, Incorporated *<F6> 139,375
1,500 ISS Group, Inc. *<F6> 174,750
4,753 RSA Security Inc. *<F6> 246,265
21,500 V-ONE Corporation *<F6> 116,234
-----------
1,318,481
-----------
SEMICONDUCTORS - 8.4%**<F7>
4,322 Applied Micro Circuits Corporation *<F6> 648,570
2,108 Broadcom Corporation Class A*<F6> 511,980
2,509 Intel Corporation 331,031
6,500 Intersil Holding Corporation *<F6> 335,969
2,508 PMC-Sierra, Inc. *<F6> 510,848
1,500 RF Micro Devices, Inc. *<F6> 201,563
1,847 Texas Instruments Incorporated 295,520
4,557 Vitesse Semiconductor Corporation *<F6> 438,611
-----------
3,274,092
-----------
SOFTWARE - 6.3%**<F7>
4,000 Aspect Development, Inc. *<F6> 257,500
2,000 BEA Systems, Inc. *<F6> 146,750
5,000 Datastream Systems, Inc. *<F6> 145,000
2,500 i2 Technologies, Inc. *<F6> 305,312
546 Microsoft Corporation *<F6> 58,012
7,022 Oracle Corporation *<F6> 548,155
1,532 Siebel Systems, Inc. *<F6> 182,978
10,000 StarBase Corporation *<F6> 93,750
4,500 VERITAS Software Corporation *<F6> 589,500
3,938 Wind River Systems, Inc. *<F6> 142,753
-----------
2,469,710
-----------
TELECOMMUNICATION EQUIPMENT - 4.2%**<F7>
7,000 Able Telcom Holding Corp. *<F6> 31,500
6,842 ADC Telecommunications, Inc. *<F6> 368,613
7,252 Advanced Fibre Communications, Inc. *<F6> 454,610
1,498 Efficient Networks, Inc. *<F6> 233,313
1,000 Next Level Communications, Inc. *<F6> 108,750
352 Nortel Networks Corporation f<F9> 44,352
2,057 Terayon Communication Systems, Inc. *<F6> 421,685
-----------
1,662,823
-----------
TELECOMMUNICATION SERVICES - 7.3%**<F7>
10,000 Carrier 1 International S.A. ADR *<F6> 193,750
5,235 Concentric Network Corporation *<F6> 287,925
2,568 Covad Communications Group, Inc. *<F6> 186,180
1,297 Digex, Inc. *<F6> 143,886
2,766 Exodus Communications, Inc. *<F6> 388,623
4,000 Global Crossing Ltd. *<F6> f<F9> 163,750
30,000 IBS Interactive, Inc. *<F6> r<F10> v<F11>
(Acquired 03/15/00, Cost $292,200) 168,750
6,323 ICG Communications, Inc. *<F6> 228,418
2,572 Level 3 Communications, Inc. *<F6> 271,989
2,250 MCI WorldCom, Inc. *<F6> 101,953
4,020 Net2Phone, Inc. *<F6> 237,683
6,347 Qwest Communications International Inc. *<F6> 307,830
4,271 Rhythms NetConnections Inc. *<F6> 157,226
-----------
2,837,963
-----------
WIRELESS EQUIPMENT - 2.0%**<F7>
1,500 Aether Systems, Inc. *<F6> 272,250
10,000 BroadBand Wireless International Corporation *<F6> 46,250
2,000 Netro Corporation *<F6> 130,031
2,900 Proxim, Inc. *<F6> 347,094
-----------
795,625
-----------
TOTAL COMMON STOCKS (Cost $17,669,285) 25,067,054
-----------
CONTRACTS
(100 SHARES
PER CONTRACT)
------------
PUT OPTIONS PURCHASED - 0.6%**<F7>
15 Broadcom Corporation
Expiration April 2000
Exercise Price $230.00 18,000
25 Brocade Communications Systems, Inc.
Expiration May 2000
Exercise Price $165.00 42,188
30 JDS Uniphase Corporation
Expiration May 2000
Exercise Price $115.00 45,000
30 Juniper Networks, Inc.
Expiration April 2000
Exercise Price $250.00 49,125
40 VERITAS Software Corporation
Expiration May 2000
Exercise Price $135.00 92,000
-----------
TOTAL PUT OPTIONS PURCHASED
(Cost $277,027) 246,313
-----------
Shares
------
WARRANTS - 0.0%**<F7>
7,500 IBS Interactive, Inc. r v (Acquired 03/15/00)
Expiration March 14, 2003
Exercise Price $13.75 7,200
-----------
TOTAL WARRANTS (Cost $18,000) 7,200
-----------
PRINCIPAL
AMOUNT/SHARES
-------------
SHORT-TERM INVESTMENTS - 11.3%**<F7>
U.S. TREASURY BILL - 7.6%**<F7>
$3,000,000 5.84%, Maturing 05/04/2000 s<F8> 2,983,935
-----------
INVESTMENT COMPANY - 3.7%**<F7>
1,428,890 Star Treasury Fund, 5.07% 1,428,890
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $4,412,825) 4,412,825
-----------
TOTAL INVESTMENTS (Cost $22,377,137) $29,733,392
-----------
-----------
CONTRACTS
(100 SHARES
PER CONTRACT) MARKET VALUE
------------ ------------
CALL OPTIONS WRITTEN - (0.3%)**<F7>
20 BEA Systems, Inc.
Expiration April 2000
Exercise Price $95.00 $ 4,625
15 Broadcom Corporation
Expiration April 2000
Exercise Price $250.00 24,000
25 Brocade Communications Systems, Inc.
Expiration May 2000
Exercise Price $175.00 55,625
30 Juniper Networks, Inc.
Expiration April 2000
Exercise Price $290.00 49,875
-----------
TOTAL CALL OPTIONS WRITTEN
(Premiums received $227,604) $ 134,125
-----------
-----------
*<F6> Non-income producing security
**<F7> Computed as a percentage of net assets
ADR American Depository Receipt
s<F8> Security pledged as collateral for written options
f<F9> Foreign security
r<F10> Restricted security
v<F11> Fair valued security
See Notes to Financial Statements
LCM INTERNET GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
ASSETS:
Investments, at market value (cost $22,377,137) $29,733,392
Cash 560,214
Receivable for investments sold 10,635,544
Dividends and interest receivable 23,574
Other assets 1,448
-----------
Total assets 40,954,172
-----------
LIABILITIES:
Payable for investments purchased 1,629,099
Options written, at value (premiums received $227,604) 134,125
Payable to Advisor 35,904
Accrued expenses and other liabilities 50,256
-----------
Total liabilities 1,849,384
-----------
NET ASSETS $39,104,788
-----------
-----------
NET ASSETS CONSIST OF:
Common stock, at par ($0.01), 500 million shares authorized $ 26,406
Additional paid-in capital 24,677,104
Accumulated undistributed net realized gains 6,951,544
Net unrealized appreciation on:
Investments 7,356,255
Written options 93,479
-----------
Net assets $39,104,788
-----------
-----------
Net assets, per share of Common Stock
(based on 2,640,583 shares outstanding) $ 14.81
-----------
-----------
Market value, per share of Common Stock $ 12.4375
-----------
-----------
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 29, 1999 THROUGH MARCH 31, 2000
INVESTMENT INCOME:
Interest income $ 121,679
Dividend income (net of foreign taxes withheld of $192) 3,370
-----------
Total investment income 125,049
-----------
EXPENSES:
Investment advisory fee 148,051
Administration fee 17,595
Shareholder servicing and accounting costs 26,403
Custody fees 11,325
Registration 7,021
Professional fees 19,079
Reports to shareholders 6,591
Directors' fees and expenses 17,200
Other 11,100
-----------
Total expenses 264,365
-----------
Net investment loss (139,316)
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Realized gain on:
Long transactions 7,022,071
Short sale transactions 11,684
Written options expired or closed 57,105
Change in unrealized appreciation (depreciation) on:
Investments 7,356,255
Written options 93,479
-----------
Net realized and unrealized gain on investments 14,540,594
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,401,278
-----------
-----------
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FROM OCTOBER 29, 1999 THROUGH MARCH 31, 2000
OPERATIONS:
Net investment loss $ (139,316)
Net realized gain on:
Long transactions 7,022,071
Short transactions 11,684
Options contracts expired or closed 57,105
Change in unrealized appreciation (depreciation) on:
Investments 7,356,255
Written options 93,479
-----------
Net increase in net assets resulting from operations 14,401,278
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold (2,640,583 shares) 24,703,510
-----------
Net increase in net assets resulting
from capital share transactions 24,703,510
-----------
TOTAL INCREASE IN NET ASSETS 39,104,788
-----------
NET ASSETS
Beginning of period -
-----------
End of year $39,104,788
-----------
-----------
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
Period Ended
March 31, 2000*<F12>
--------------------
Net asset value, beginning of period $ 9.35
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.05)
Net realized and unrealized gain on investments 5.51
-------
Net increase in net asset value from operations 5.46
-------
Net asset value, end of period $ 14.81
-------
-------
TOTAL RETURN
Market value 24.38%**<F13>
Net asset value. 58.40%**<F13>
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted $39,105
Ratio of expenses to average net assets 1.78%***<F14>
Rato of net investment loss to average net assets (0.94)***<F14>
Portfolio turnover rate 168.62%
*<F12> From commencement of operations on October 29, 1999
**<F13> Not annualized
***<F14> Annualized
See Notes to Financial Statements.
LCM INTERNET GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
LCM Internet Growth Fund, Inc. (the "Fund") was incorporated under the laws of
the State of Maryland on August 24, 1998 and is registered under the Investment
Company Act of 1940 as a non-diversified, closed-end management investment
company. The Fund commenced operations on October 29, 1999. The investment
objective of the Fund is to seek capital appreciation by investing in a
portfolio consisting primarily of equity securities issued by companies that the
Fund's investment advisor believes will benefit from growth of the Internet.
Current dividend income is not an investment consideration. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the equity
securities of companies that engage in Internet and Internet-related activities.
The following is a summary of significant accounting policies followed by the
Fund.
a) Investment Valuation - Common stocks and securities sold short that are
listed on a securities exchange or quoted on NASDAQ are valued at the last
quoted sales price on the day the valuation is made. Price information on
listed stocks is taken from the exchange where the security is primarily traded.
If such securities are not traded on the valuation date, they are valued at the
average of the current bid and asked price. Unlisted equity securities for
which market quotations are readily available are valued at the latest quoted
bid price. Debt securities are valued at the latest bid price. Investments in
open-end mutual funds are valued at the net asset value on the day the valuation
is made. Short-term instruments (those with remaining maturities of 60 days or
less) are valued at amortized cost, which approximates market value. Other
assets and securities for which no quotations are readily available are valued
at fair value as determined in good faith by management in accordance with
procedures approved by the Board of Directors. At March 31, 2000, such
securities represent 1.2% of the Fund's net assets.
b) Written Option Accounting - The Fund writes (sells) call options for trading
purposes and writes put options for hedging purposes. When the Fund writes
(sells) an option, an amount equal to the premium received by the Fund is
included in the Statement of Assets and Liabilities as an asset and an
equivalent liability. The amount of the liability is subsequently marked-to-
market to reflect the current value of the option written. By writing an
option, the Fund may become obligated during the term of the option to deliver
or purchase the securities underlying the option at the exercise price if the
option is exercised. Option contracts are valued at the average of the current
bid and asked price reported on the day of valuation. When an option expires on
its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain or loss if the cost of the closing
purchase transaction differs from the premium received when the option was sold
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is eliminated. When an option is
exercised, the premium originally received decreases the cost basis of the
underlying security (or increases the proceeds on securities sold short) and the
Fund realizes a gain or loss from the sale of the security (or closing of the
short sale). All written options must be fully collateralized. The Fund
maintains segregated collateral, as appropriate, consisting of cash, U.S.
Government securities or other liquid assets in the amount at least equal to the
market value of the purchase obligation of put options or the market value of
the instrument underlying the contract for call options. See Note 3 for options
written by the Fund for the period ended March 31, 2000.
c) Purchased Option Accounting - Premiums paid for option contracts purchased
are included in the Statement of Assets and Liabilities as an asset. Option
contracts are valued at the average of the current bid and asked price reported
on the day of valuation. When option contracts expire or are closed, realized
gains or losses are recognized without regard to any unrealized gains or losses
on the underlying securities. Put and call option contracts are held by the
Fund for trading and hedging purposes.
d) Short Sales - The Fund may engage in short sale transactions. For financial
statement purposes, an amount equal to the short sale proceeds is included in
the Statement of Assets and Liabilities as an asset and an equivalent liability.
The amount of the liability is subsequently marked-to-market to reflect the
current value of the short position. Subsequent fluctuations in the market
prices of securities sold, but not yet purchased, may require the Fund to
purchase the securities at prices that may differ from the market value
reflected in the Statement of Assets and Liabilities. The Fund is liable for any
dividends payable on securities while those securities are in a short position.
As collateral for its short positions, the Fund is required under the 1940 Act
to maintain segregated assets consisting of cash, cash equivalents or liquid
securities. These segregated assets are required to be adjusted daily to
reflect changes in the value of the securities sold short. At March 31, 2000,
the Fund did not hold any short positions.
e) 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 those of securities of comparable U.S. companies and the U.S. government.
f) Restricted Securities - The Fund owns investment securities that are
unregistered and thus restricted as to resale. These securities are valued by
the Fund after giving due consideration to pertinent factors including recent
private sales, market conditions and the issuer's financial performance. Where
future disposition of these securities requires registration under the
Securities Act of 1933, the Fund has the right to include these securities in
such registration, generally without cost to the Fund. The Fund has no right to
require registration of unregistered securities. At March 31, 2000, the Fund
had restricted securities with an aggregate market value of $475,950,
representing 1.2% of the Fund's net assets.
g) Federal Income Taxes - It is the Fund's policy to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute, at least annually, substantially all of its net investment income
and net realized capital gains to shareholders. Therefore, no provision for
federal income or excise taxes is required.
h) Investment Income and Investment Transactions - Investment transactions are
recorded on trade date. The Fund determines the gain or loss realized from
investment transactions by comparing the original cost of the security lot sold
with the net sales proceeds. Dividend income (or expense on securities sold
short) is recognized on the ex-dividend date or as soon as information is
available to the Fund, and interest income is recognized on an accrual basis.
i) Distributions to Shareholders - Dividends and distributions to shareholders
are recorded on the ex-dividend date. Income and capital gains distributions are
determined in accordance with federal tax regulations and may differ from those
determined in accordance with generally accepted accounting principles. To the
extent these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences require no such reclassification.
On March 23, 2000, the Fund's Board of Directors declared a $0.50 per share
short-term capital gain distribution. The ex-date of the distribution was April
6, 2000, and the distribution was payable on April 13, 2000.
j) 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 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.
2. INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments,
options and short positions) aggregated $51,698,056 and $41,030,658
respectively, for the period ended March 31, 2000.
At March 31, 2000, gross unrealized appreciation and depreciation of investments
for tax purposes were as follows:
Appreciation $8,950,135
Depreciation (1,669,101)
----------
Net appreciation on investments $7,281,034
----------
----------
At March 31, 2000, the cost of investments for federal income tax purposes was
$22,452,358.
3. OPTION CONTRACTS WRITTEN
The premium amount and the number of option contracts written during the period
ended March 31, 2000 were as follows:
PREMIUM AMOUNT NUMBER OF CONTRACTS
Options written $433,297 260
Options closed (158,764) (75)
Options exercised (20,260) (35)
Options expired (26,669) (60)
-------- ---
Options outstanding at
March 31, 2000 $227,604 90
-------- ---
-------- ---
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS
The Fund has an investment advisory agreement with LCM Capital Management, Inc.
("LCMCM"). Pursuant to this agreement, LCMCM is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 1% as applied to the
Fund's daily net assets.
Firstar Mutual Fund Services, LLC serves as administrator and accounting
services agent for the Fund, and Firstar Bank, N.A. serves as transfer agent,
dividend paying agent, registrar, and custodian.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of LCM Internet Growth 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 LCM Internet Growth Fund, Inc. (the
"Fund") at March 31, 2000, and the results of its operations, the changes in its
net assets and the financial highlights for the period October 29, 1999
(commencement of operations) through March 31, 2000, in conformity with
accounting principles generally accepted in the United States. 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 auditing
standards generally accepted in the United States, 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 March
31, 2000 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
May 10, 2000
LCM INTERNET GROWTH FUND, INC.
TOP FORTY EQUITY POSITIONS
<TABLE>
RANK RANK PERCENTAGE OF
3/31/2000 12/31/1999 SECURITY VALUE NET ASSETS
<S> <C> <C> <C> <C>
1 10 Juniper Networks, Inc. $918,779 2.35%
2 39 Applied Micro Circuits Corporation 648,570 1.66%
3 41 VERITAS Software Corporation 589,500 1.51%
4 33 Oracle Corporation 548,155 1.40%
5 30 Broadcom Corporation Class A 511,980 1.31%
6 34 PMC-Sierra, Inc. 510,848 1.31%
7 62 Brocade Communications Systems, Inc. 494,902 1.27%
8 1 CMGI, Inc. 473,193 1.21%
9 22 Advanced Fibre Communications, Inc. 454,610 1.16%
10 98 Vitesse Semiconductor Corporation 438,611 1.12%
11 90 Terayon Communication Systems, Inc. 421,685 1.08%
12 8 InfoSpace.com, Inc. 415,369 1.06%
13 14 Ariba, Inc. 405,415 1.04%
14 16 Exodus Communications, Inc. 388,623 0.99%
15 20 JDS Uniphase Corporation 376,155 0.96%
16 - M -Systems Flash Disk Pioneers Ltd. 371,000 0.95%
17 58 ADC Telecommunications, Inc. 368,613 0.94%
18 28 Harbinger Corporation 368,431 0.94%
19 64 Check Point Software Technologies Ltd. 358,547 0.92%
20 100 American Express Company 350,599 0.90%
21 - Proxim, Inc. 347,094 0.89%
22 - Intersil Holding Corporation 335,969 0.86%
23 89 Intel Corporation 331,031 0.85%
24 6 Yahoo!, Inc. 330,754 0.85%
25 40 Sun Microsystems, Inc. 329,648 0.84%
26 - Priceline.com, Incorporated 328,000 0.84%
27 87 Metromedia Fiber Network, Inc. Class A 321,307 0.82%
28 23 Inktomi Corporation 315,900 0.81%
29 107 Amazon.com, Inc. 315,570 0.81%
30 29 TMP Worldwide, Inc. 314,577 0.80%
31 19 Qwest Communications Intl., Inc. 307,830 0.79%
32 - i2 Technologies, Inc. 305,312 0.78%
33 - Methode Electronics, Inc. Class A 303,000 0.77%
34 - meVC Draper Fisher Jurvetson Fund I 300,000 0.77%
35 102 Texas Instruments, Incorporated 295,520 0.76%
36 106 Concentric Network Corporation 287,925 0.74%
37 53 Cisco Systems, Inc. 287,139 0.73%
38 94 Entrust Technologies, Inc. 283,310 0.72%
39 - Aether Systems, Inc. 272,250 0.70%
40 85 Level 3 Communications, Inc. 271,989 0.70%
</TABLE>
FUND POSITION BREAKDOWN - MARCH 31, 2000
Business Services 1.2%
Broadcast and Media 0.3%
Closed-End Investment Company 0.8%
Computers and Electronics 3.7%
Computer Security 3.1%
E-Commerce 2.7%
Fiber Optics 3.7%
Financial Services 1.8%
Internet Content 5.2%
Internet Software 9.9%
Networking Products 6.4%
Semiconductors 7.9%
Software 6.7%
Telecommunication Equipment 4.2%
Telecommunication Services 3.9%
Wireless Equipment 2.6%
Short Term Investments & Net Due on Open Trades 35.6%
All Options
COMPOSITION OF NET ASSETS.
March 31, 2000
COMMON STOCKS 64.1%
OPTIONS 0.3%
SHORT-TERM INVESTMENTS, NET DUE ON
OPEN TRADES & OTHER ASSETS, NET 35.6%
LCM INTERNET GROWTH FUND, INC.
DIVIDEND REINVESTMENT PLAN
Under the Fund's Distribution Reinvestment Plan (the "Plan"), shareholders may
elect to receive distributions in cash paid by check, and shareholders not
making such election will have all such amounts automatically reinvested in
whole or fractional shares of the Fund's common stock. Firstar Bank acts as the
agent for the participants in the Plan (the "Plan Agent").
If the directors of the Fund declare a distribution, non-participants in the
Plan will receive cash and participants in the Plan will receive the equivalent
in shares determined as follows:
O Whenever the market price per share of FND on the valuation date is equal
to or exceeds the NAV per share on that date, the Fund will issue new
shares to participants at net asset value
O If NAV is less than 95% of the market price per share of FND on the
valuation date, the Fund will issue new shares to participants at 95% of
the market price
O If NAV exceeds the market price per share of FND on the valuation date, the
Plan Agent will purchase shares of FND on the open market for the accounts
of the participants in the Plan. Such purchases will be made on or shortly
after the payment date. If, before such open market purchases can be
completed, the market price of FND becomes greater than NAV, the open
market purchases will cease and the Fund will issue the remaining shares at
a price equal to the higher of NAV or 95% of the then market price of FND.
Note: The valuation date is the distribution payment date, and if that date is
not an AMEX trading day, the next preceding trading day.
The Plan Agent maintains all shareholder accounts for Plan participants and
furnishes written confirmations of all transactions in such accounts, including
information needed by shareholders for personal and tax records. Shares in the
account of each Plan participant are held by the Plan Agent in non-certificated
form in the name of the participant.
There is no charge to participants for reinvesting distributions. The Plan
Agent's fees for handling the reinvestment of distributions are paid by the
Fund. There are no brokerage charges with respect to shares issued directly by
the Fund upon declaration of a distribution as described above. However, each
participant will pay a pro-rata share of brokerage commissions incurred with
respect to the above-referenced open market purchases in connection with the
reinvestment of distributions. Brokerage charges for purchasing small amounts
of stock for individual accounts through the Plan are expected to be less than
the usual brokerage charges for such transactions, as blocks of shares for all
participants are purchased by the Plan Agent, and prorating the lower commission
thus attainable. The Plan Agent may use its affiliates and/or affiliates of LCM
Capital Management, Inc. for all trading activity relative to the Plan. Any
such affiliate would receive a commission in connection with such trading
transactions.
If a shareholder desires to discontinue his or her participation in the Plan,
the shareholder will receive a certificate for the appropriate number of full
shares in the account, along with a check in payment for any fractional shares.
Distributions are subject to taxation, whether received in cash or in shares.
The Fund reserves the right to amend the Plan, provided that participants are
given written notice at least 30 days prior to the effective date thereof. The
Fund may also terminate the Plan as applied to any distribution paid subsequent
to written notice of the termination sent to participants at least 30 days
before the record date for such distribution. For more information about the
Plan, please call Firstar Bank at (877) 526-7528.
LCM INTERNET GROWTH FUND, INC.
FREQUENTLY ASKED QUESTIONS
HOW DOES ONE INVEST IN LCM INTERNET GROWTH FUND?
Unlike its more common open-end mutual fund kin, the Fund is a closed-end
investment company, which means that its shares of common stock are bought and
sold in the same manner as other publicly listed companies. Shares of the Fund
trade on the American Stock Exchange under the symbol "FND". Shares of FND may
be bought or sold through any registered investment securities dealer, including
online trading firms.
WHAT IS THE DIFFERENCE BETWEEN CLOSED-END AND OPEN-END FUNDS?
Both types of investment companies are authorized by the Investment Company Act
of 1940, and both are commonly called mutual funds. However, there are
important differences between the two. Open-end funds continually issue and
redeem their own securities at net asset value, whereas closed-end funds offer
their securities through an initial public offering and the shares are
thereafter traded on an exchange at a price determined by market conditions, and
which may not necessarily correlate with the fund's net asset value. Open-end
funds are subject to unpredictable capital inflows and outflows, but also have
the opportunity to grow at a rapid rate by adding additional investors and/or
investment capital. Closed-end funds managers have greater certainty as to the
assets under management, but growth of a closed-end fund comes almost entirely
from the appreciation of its assets. For more information on closed end funds,
including articles by industry analysts, see www.cefa.com/research.
---------------------
THE FUND INVESTS IN INTERNET COMPANIES. WHAT CONSTITUTES AN INTERNET COMPANY?
These days, it seems like every company wants to be an "Internet company" or at
least be treated like one. However, an established company announcing a "new
Internet strategy" does not necessarily make that company a true Internet
player. On the other hand, the Internet is a pervasive industry that
encompasses a great number of companies beyond the obvious dotcoms like AOL,
Amazon and Yahoo! The Fund's manager generally looks for companies whose main
business falls within one or more of the following categories in the Internet
industry: Infrastructure, Content and E-Commerce.
HOW CAN ONE FIND INFORMATION ABOUT THE FUND'S STOCK PRICE, NET ASSET VALUE AND
TRADING ACTIVITY?
The Fund's end-of-day stock price and net asset value (NAV) are generally posted
on the Fund's website, www.lcmfunds.com on a daily basis. Trading information
----------------
for FND can be obtained from any source that lists information for stocks listed
on AMEX, such as major newspapers and online quotation websites.
ARE STOCK CERTIFICATES AVAILABLE?
Yes. While the majority of shareholders hold their shares in book entry form,
all record shareholders are entitled to receive a certificate evidencing their
shares if so desired. To request a stock certificate, or to replace a lost,
damaged or stolen certificate, please contact Firstar Bank, 615 E. Michigan
Street, Milwaukee, Wisconsin 53202, Attention: Transfer Agent for LCM Internet
Growth Fund.
DOES THE FUND PAY REGULAR DIVIDENDS?
As of March 31, 2000 the Board of Directors of the Fund had not approved payment
of a regular dividend to shareholders. However, on March 24, 2000 the Board
declared a special distribution of $.50/share to shareholders. Said
distribution consisted of short-term capital gains, which must be distributed at
least yearly according to the Fund's policies. Should the Board declare a
regular dividend or an additional special distribution, the Fund will make a
prior notification to shareholders through a press release to that effect.
Visit www.lcmfunds.com regularly to keep up to date with announcements by the
----------------
Fund.
LCM INTERNET GROWTH FUND, INC.
BOARD OF DIRECTORS
MICHAEL R. GRADY, Jr. BARRY J. GLASGOW
President Chief Investment Officer
LCM Capital Management, Inc. LCM Capital Management, Inc.
Chicago, Illinois Chicago, Illinois
DAVID A. SCHWERING, Ph.D. MICHAEL RADNOR, Ph.D.
President and Director Professor
American Communication & Computation, Inc. Kellogg Graduate School of
Silver Spring, Maryland Management
Northwestern University
Evanston, Illinois
GEORGE D. KRAFT, Ph.D. LAWRENCE E. HARB
Professor Managing Director of
I.I.T. Stuart Graduate Sales & Marketing
School of Business J.S. Wurzler Underwriting
Chicago, Illinois Managers, LLC
Okemos, Michigan
EXECUTIVE OFFICERS
MICHAEL R. GRADY, Jr. BARRY J. GLASGOW
President and Treasurer Vice President and Secretary
INVESTMENT ADVISOR
LCM CAPITAL MANAGEMENT, INC.
223 W. Lake Street
Chicago, Illinois 60606
312-705-3028
CUSTODIAN, TRANSFER AGENT AND REGISTRAR
FIRSTAR BANK, N.A.
615 East Michigan Street
Milwaukee, Wisconsin 53202
LCM INTERNET GROWTH FUND
DO YOU KNOW... WHERE THE INTERNET IS GOING?
"THE NEW ECONOMY"
o Ecommerce o Entertainment
o Banking & Financial Services o Government
o Real Estate o Research
o Education o Communication
o Retail o And many other areas
o NEARLY 40 PERCENT OF HOME BUYERS USE THE WEB
--------------------------------------------
Nearly four in 10 buyers now use the Internet to shop for their next home,
according to a survey by the National Association of Realtors (NAR).
"The Internet is empowering consumers and making them more knowledgeable," said
NAR President Dennis Cronk. "In these times of low inventories in many local
markets, many buyers are using the Internet to look for their next home quickly
and easily."
O 100% of the schools in Higher Education (universities and colleges) are
connected to the Internet!
O By 2000, 72 million students will be online- FORRESTER RESEARCH, INC.
O GartnerGroup estimates that worldwide Business-to-Business (B2B) e-commerce
revenues will grow from $145 Billion in 1999 to $7.29 TRILLION in 2004. IF
THIS PREDICTION IS ACCURATE, B2B E-COMMERCE WILL ACCOUNT FOR 7% OF ALL SALES
TRANSACTIONS WORLDWIDE.
O A report released by Nortel Networks and IDC predicts that spending on
Internet Infrastructure will quadruple to $1.5 trillion by 2003. THE REPORT
ALSO PREDICTS THAT THE INTERNET ECONOMY WILL BECOME THE THIRD LARGEST IN THE
WORLD BY 2003, FAR SURPASSING THE ECONOMIES OF GERMANY, FRANCE AND BRITAIN.
O Harris Interactive, in announcing the results of a recent poll, made the
prediction that 'GOING ONLINE' WILL BE AS COMMON AS MAKING A PHONE CALL BY
2005.
ONLINE LANGUAGE POPULATIONS
(MARCH, 2000)
English 51.3%
Japanese 7.2%
German 6.7%
Spanish 6.5%
Chinese 5.2%
French 4.4%
Korean 3.6%
Italian 3.3%
Dutch 2.0%
Courtesy Global Reach.com
THE INTERNET IS INTERNATIONAL IN SCOPE
THE INCREASINGLY GLOBAL INTERNET
1998
149M Users
North America 55.5%
Western Europe 23.3%
Asia Pacific 15.5%
Eastern Europe/Russia 2%
Latin America 1.8%
Middle East/Africa 1.9%
2005
716M Users
North America 32.1%
Western Europe 28.2%
Asia Pacific 23.8%
Eastern Europe/Russia 6.1%
Latin America 6.1%
Middle East/Africa 3.7%
WITH WORLDWIDE GROWTH OPPORTUNITIES
LCM INTERNET GROWTH FUND
Internet Taxonomy
Growing with the Internet
LCM Internet Growth Fund, Inc.
Internet World
Infrastructure
Communications
Equipment
DSL
Wireless
Cable
Network Security
VPN's
Virus
Intrusion
Firewalls
PKI's
System Mgmt
Encryption
Biometrics
Network Connections
Servers
Data Storage
Wireless
Routers
Backbones
Internet Service Providers ISP's
Portal
Web Developers
Private Net
ECommerce Providers
Turnkey
Media Technologies
Video Conference
Digital Video
Streaming Video
Multimedia
Content
Information Providers
Family
Health
Educational
Multi-media Entertainment
Financial
Internet Software
Java
Enterprise
Browsers/micro interface
Database
ECommerce
Site Development
Portals & Hubs
Mass Market
Search
Industry Specific
Communities
Transaction
Advertising & Marketing
Ad Mgmt
Consultants
Market Research
Enabling Technologies
Streaming
Cache
IPtelephony
E-Commerce
Retail E-Commerce
Direct Sales
Auctions
Bill/fulfillment
Buy Guides
Business to Business
Vertical Nets
Auctions
Search Procurement
EDI Networks
Outsourcing
Government to Business
Gov/Bus Nets
Document Distribution
Gov/Bus Auctions
Vertical Networks
Contract Search
Outsourcing Management
The Internet is complex and dynamic. The opportunities and the risks for the
long-term growth of the Internet are challenging and we would suggest the LCM
Internet Growth Fund for your aggressive Internet portfolio.
