(INTERNET INDEX FUND LOGO)
TRACKING THE DOW JONES INTERNET INDEX
SEMI-ANNUAL REPORT
DECEMBER 31, 1999
Investment Manager
(IGAM INTEGRITY GLOBAL ASSET MANAGEMENT LOGO)
February 9, 2000
Dear Internet Index Fund Shareholder:
We are pleased to present our semiannual report for the Internet Index Fund for
the period ended December 31, 1999. The Internet Index Fund turned out to be a
great success. In less than two months of operation, the Fund experienced
impressive performance. The Fund's total return from its launch on November 4,
1999 through December 31, 1999 was 55.60%. During the same period, the Dow Jones
Internet IndexTM, the benchmark index for the fund, and S&P 500 Index returned
54.75% and 7.82%, respectively.
In retrospect, the Internet sector continued its rapid growth in 1999 and this
coupled with investors' enthusiasm turned into outstanding capital gains for
Internet stocks. Specifically, the Dow Jones Internet IndexTM made a return of
168% in 1999. We remain bullish on the outlook for Internet companies and
believe that the Internet sector will outperform other sectors for several years
to come. We would like to emphasize, however, that Internet stocks will remain
volatile and, thus, investors could suffer significant capital losses in a short
run. Therefore, I encourage you to consider the Internet Index fund as a vehicle
for long term investment.
If you want to obtain the most recent information about the Fund's performance,
please visit the Fund's web site at www.internetindexfund.net. The Fund's web
site has an e-mail system you can use to communicate with us.
Thank you for your support and participation. We appreciate the confidence you
have placed in us, and we look forward to continuing to serve you.
Sincerely yours,
/s/ Eugene Y. W. Lee
Eugene Y.W. Lee, Ph.D., CFA
President
STATEMENT OF ASSETS & LIABILITIES
December 31, 1999 (Unaudited)
ASSETS:
Investments, at value (cost $836,614) $1,045,229
Interest receivable 121
Other assets 30,614
----------
Total assets 1,075,964
----------
LIABILITIES:
Accrued expenses and other liabilities 28,891
Payable to Investment Manager 766
----------
Total Liabilities 29,657
----------
NET ASSETS $1,046,307
----------
----------
NET ASSETS CONSIST OF:
Capital stock $ 838,640
Undistributed net investment loss (948)
Net unrealized appreciation (depreciation) on investments 208,615
----------
Total Net Assets $1,046,307
----------
----------
Shares outstanding 67,229
Net Asset Value, Redemption Price and Offering Price Per Share $ 15.56
----------
----------
See Notes to the Financial Statements.
STATEMENT OF OPERATIONS
For the two months ending December 31, 1999 (Unaudited)
INVESTMENT INCOME:
Interest income $ 149
--------
Total Investment Income 149
--------
EXPENSES:
Organization costs 50,322
Shareholder servicing and accounting fees 8,378
Federal and state registration 6,018
Administration fee 5,664
Directors fees 5,192
Professional fees 5,074
Reports to shareholders 2,419
Custody fees 1,947
Investment management fee 509
Distribution fees 196
Other 2,950
--------
Total expenses before reimbursement 88,669
Less: Reimbursement from Investment Manager (87,572)
--------
Net Expenses 1,097
--------
NET INVESTMENT LOSS (948)
--------
UNREALIZED GAIN ON INVESTMENTS:
Change in unrealized appreciation (depreciation) on investments 208,615
--------
Net unrealized gain on investments 208,615
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $207,667
--------
--------
See Notes to the Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
TWO MONTHS ENDED
DECEMBER 31, 1999
(UNAUDITED)
-----------------
OPERATIONS:
Net investment (loss) $ (948)
Change in unrealized appreciation
(depreciation) on investments 208,615
-----------
Net increase in net assets from operations 207,667
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 900,220
Cost of shares redeemed (61,580)
-----------
Net increase in net assets from capital share transactions 838,640
-----------
TOTAL INCREASE IN NET ASSETS 1,046,307
NET ASSETS:
Beginning of period --
-----------
End of period $1,046,307
-----------
-----------
CHANGES IN SHARES OUTSTANDING:
Shares sold 71,186
Shares redeemed (3,957)
-----------
Net increase 67,229
-----------
-----------
See Notes to the Financial Statements.
SCHEDULE OF INVESTMENTS
December 31, 1999 (Unaudited)
NUMBER OF MARKET
SHARES VALUE
- --------- ------
COMMON STOCKS -- 99.3%
CONSUMER - 7.5%
285 CMG Information Services*<F2> $ 78,909
CONSUMER CYCLICAL - 1.1%
426 Etoys, Inc.*<F2> 11,261
CONSUMER NON-DURABLE - 2.4%
533 Priceline.Com, Inc.*<F2> 25,251
ELECTRONIC - 5.4%
312 Amazon.Com, Inc.*<F2> 23,751
200 Vingnette Corporation*<F2> 32,600
----------
56,351
----------
FINANCIAL SERVICES - 1.0%
393 E*Trade Group, Inc.*<F2> 10,267
MANUFACTURING - 4.0%
470 Inktomi Corporation*<F2> 41,713
MECHANICS & SOFTWARE - 22.0%
770 American Online, Inc.*<F2> 58,087
1,032 At Home Corporation - Ser A*<F2> 44,247
672 Verisign, Inc.*<F2> 128,310
----------
230,644
----------
MISCELLANEOUS - 11.9%
171 Doubleclick, Inc.*<F2> 43,274
218 Ebay, Inc.*<F2> 27,291
250 Infospace.Com*<F2> 53,500
----------
124,065
----------
SERVICE - 14.1%
1,500 Network Solution, Inc. Cl A*<F2> 38,509
500 USWEB Corporation*<F2> 22,219
201 Yahoo!, Inc.*<F2> 86,970
----------
147,698
----------
SOFTWARE - 13.3%
263 Broadvision, Inc.*<F2> 44,726
192 Check Point Software Tech*<F2> 38,160
414 Lycos, Inc.*<F2> 32,939
194 Realnetwork, Inc.*<F2> 23,341
----------
139,166
----------
TELECOMMUNICATION - 16.6%
279 CNET, Inc.*<F2> 15,833
814 Exodus Communications, Inc.*<F2> 72,293
500 Internet Capital Group, Inc.*<F2> 85,000
----------
173,126
----------
Total common stocks
(cost $829,836) $1,038,451
----------
----------
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM
INVESTMENTS -- 0.6%
VARIABLE RATE DEMAND NOTES#<F1> - 0.6%
$4,545 Wisconsin Corp Cent
Credit Union, 5.48% 4,545
2,233 Firstar Bank, 5.56% 2,233
----------
Total variable rate demand notes
(cost $6,778) 6,778
----------
Total investments - 99.9%
(cost $836,614) 1,045,229
Other assets and liabilities - 0.1% 1,078
----------
TOTAL NET ASSETS - 100.0% $1,046,307
----------
----------
#<F1> Variable rate demand notes are considered short-term obligations and are
payable on demand. Interest rates change periodically on specified
dates. The rates listed are as of December 31, 1999.
*<F2> Non income producing.
See Notes to the Financial Statements.
FINANCIAL HIGHLIGHTS
TWO MONTHS ENDED
DECEMBER 31, 1999
(UNAUDITED)
-----------------
PER SHARE DATA:
Net asset value, beginning of period $10.00
------
Income from investment operations:
Net investment (loss) (0.01)
Net unrealized gains on investments 5.57
------
Total from investment operations 5.56
------
Net asset value, end of period $15.56
------
------
TOTAL RETURN(2)<F4> 55.60%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $1,046,307
Ratios of expenses to average net assets:
Before expense reimbursement(3)<F5> 112.66%
After expense reimbursement(3)<F5> 1.40%
Ratio of net investment income/(loss) to average net assets:
Before expense reimbursement(3)<F5> (112.46)%
After expense reimbursement(3)<F5> (1.20)%
Portfolio turnover rate 0.00%
(1)<F3> Operations commenced November 1, 1999
(2)<F4> Not annualized.
(3)<F5> Annualized.
See Notes to the Financial Statements.
NOTES TO THE FINANCIAL HIGHLIGHTS
December 31, 1999 (Unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
IGAM Group Funds (the "Trust") was organized as a Delaware business trust on
July 15, 1999, 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 Internet Index Fund (the "Fund"). The Fund is a "non-
diversified" series of the Trust pursuant to the 1940 Act. The Fund
commenced operations on November 1, 1999. Costs incurred by the Trust in
connection with the organization, registration and the initial public
offering of shares of the Fund were expensed as incurred.
The following is a summary of significant accounting policies consistently
followed by the Fund.
a) INVESTMENT VALUATION - Common stocks and other equity-type securities
that are listed on a securities exchange are valued at the last quoted
sales price at the close of 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 mean 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 independent pricing services. 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 Trustees of the Corporation. Short-term instruments (those with
remaining maturities of 60 days or less) are valued at amortized cost,
which approximates market.
b) FEDERAL INCOME TAXES - A provision, for federal income taxes or excise
taxes, has not been made since 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.
c) INCOME AND EXPENSE - The Fund is charged for those expenses that are
directly attributable to the Fund, such as advisory, administration and
certain shareholder service fees.
d) 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.
e) 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.
f) REPURCHASE AGREEMENTS - The Fund may enter into repurchase agreements
with certain banks or non-bank dealers. The Adviser will monitor, on an
ongoing basis, the value of the underlying securities to ensure that the
value always equals or exceeds the repurchase price plus accrued
interest.
g) 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 or as soon as information is available to the Fund and interest
income is recognized on an accrual basis. Generally accepted accounting
principles require that permanent financial reporting and tax differences
be reclassified to capital stock.
2. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the period November 1, 1999 (inception date) to
December 31, 1999, were as follows:
Purchase Sales
-------- -----
U.S. Government $ -- $ --
Other $829,835 $ --
At December 31, 1999, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation $257,310
(Depreciation) (48,695)
--------
Net appreciation on investments $208,615
--------
--------
At December 31, 1999, the cost of investments for federal income tax purposes
was $836,614.
3. AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Internet
Index Fund, (the "Investment Adviser"). Pursuant to its advisory agreement
with the Fund, the Investment Adviser is entitled to receive a fee,
calculated daily and payable monthly, at the annual rate of 0.65% as applied
to the Fund's average daily net assets.
Until September 30, 2000, the Adviser has agreed to 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 1.40% of the net assets of the Fund, computed on a daily
basis. Accordingly, for the period November 1, 1999 to December 31, 1999, the
Investment Adviser waived advisory fees and reimbursed the Fund for other
expenses in the amount of $87,572. The Adviser may decide to continue the
agreement, or revise the total annual operating expense limitations after
September 30, 2000. 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 1.40%, 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.
T.O. Richardson Securities, 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 Fund's shares are sold on a
no-load basis and, therefore, the Distributor receives no sales commission or
sales load for providing services to the Fund. The Corporation has adopted a
plan pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which
authorizes the Corporation to pay the Distributor a distribution and
shareholder servicing fee of up to 0.25% of the Fund's average daily net
assets (computed on an annual basis). All or a portion of the fee may be
used by the Fund or the Distributor to pay its distribution fee and costs of
printing reports and prospectuses for potential investors and the costs of
other distribution and shareholder servicing expenses. During the two months
ending December 31, 1999, the Fund incurred expenses of $196 pursuant to the
12b-1 Plan.
Firstar Mutual Fund Services, LLC serves as transfer agent, administrator and
accounting services agent for the Fund. Firstar Bank, N.A. serves as
custodian for the Fund.
BOARD OF TRUSTEES
Edward M. Mazze, Ph.D., Chairman
Eugene Y.W. Lee, Ph.D., CFA, President
Andrew C. Laviano, J.D.
Harris N. Rosen
Bruce Whyte
INVESTMENT MANAGER
Integrity Global Asset Management, Inc.
Wakefield, Rhode Island
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
Philadelphia, Pennsylvania
INDEPENDENT AUDITORS
Arthur Andersen LLP
Milwaukee, Wisconsin
TRANSFER AGENT, FUND ACCOUNTING AGENT
AND FUND ADMINISTRATOR
Firstar Mutual Fund Services, LLC
Milwaukee, Wisconsin
CUSTODIAN
Firstar Bank Milwaukee, N.A.
Milwaukee, Wisconsin
DISTRIBUTOR
T. O. Richardson Securities, Inc.
Farmington, Connecticut
