(INTERNET INDEX FUND LOGO)
TRACKING THE DOW JONES INTERNET INDEXSM
ANNUAL REPORT
JUNE 30, 2000
Investment Manager
(IGAM INTEGRITY GLOBAL ASSET MANAGEMENT LOGO)
July 12, 2000
Dear Shareholder:
We are pleased to present the annual report for the Internet Index Fund for the
eight-month period from the inception date, November 4, 1999 to June 30, 2000.
The Fund rose 12.90% for the eight months ended June 30, 2000, vs. a gain of
10.99% in the Dow Jones Internet IndexSM and an increase of 6.75% in the S&P 500
Index. As a result, the Fund was able to outperform the Internet sector
benchmark index as well as a general U.S. market index during this period.
In retrospect, the Internet sector along with the overall U.S. stock market
suffered from a market correction which took place during last March through
last May. The Fund gained more than 100% since its inception at the market peak
in March and since then lost 45% of its asset value. Such a severe market
correction was partially caused by a concern about the valuation of the
technology sector and several decisions by the Fed Reserve Board to raise
interest rate levels. Despite the correction, the Fund has received relatively
few redemption requests, which we believe indicates continued investor
confidence over the long term.
As we pointed out in the last semi annual report, the Internet sector has been
and will remain volatile. The reason is that the Internet industry is so new
and rapidly changing that there is no consensus on the true value of Internet
companies in the market. However, we are bullish on the future outlook on the
Internet sector since we believe that the Internet is not a fad, but a true
technology revolution. We think that this market correction will turn out to be
a blip when we look back to it in the future.
The Fund has undergone some structural changes. Specifically, the advisor has
agreed to further subsidize the Fund costs so that the overall expense ratio
decreases from the current 1.40% to 0.99%. Also, a sales charge of 5% will be
imposed on new shareholders. In addition, IGAM Group Funds and its advisor are
excited about plans to launch new products and will keep shareholders informed
of new developments.
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.
Best regards,
/s/ Eugene Y.W. Lee
Eugene Y.W. Lee, Ph.D., CFA
President
Date Internet Index Fund Dow Jones Internet Index
11/4/99 $10,000 $10,000
12/31/99 $15,560 $15,475
3/31/00 $15,380 $14,810
6/30/00 $11,290 $11,099
This chart assumes an initial investment of $10,000. Performance reflects fee
waivers in effect. In the absence of fee waivers, total return would be reduced.
Past performance 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.
As of the fiscal period ended June 30, 2000 the Fund has chosen to use the Dow
Jones Internet Index as it's comparison benchmark.
RATE OF RETURN(%)
SINCE INCEPTION*<F1> TO
JUNE 30, 2000
-----------------------
Internet Index Fund 12.90%
Dow Jones Internet Index**<F2> 10.99%
*<F1> November 4, 1999
**<F2> The Dow Jones Internet Index (DJII), a 40-stock benchmark to measure
performance of U.S. Internet stocks. The index seeks to represent 80%
of the market capitalization of Internet stocks. The actual number of
components may fluctuate as the sector continues to mature.
STATEMENT OF ASSETS & LIABILITIES
June 30, 2000
ASSETS:
Investments, at value (cost $4,467,937) $3,417,443
Receivable from Adviser 106,483
Other assets 16,209
----------
Total assets 3,540,135
----------
LIABILITIES:
Accrued expenses and other liabilities 54,397
Payable to Custodian 296,550
----------
Total Liabilities 350,947
----------
NET ASSETS $3,189,188
----------
----------
NET ASSETS CONSIST OF:
Capital stock $4,174,130
Undistributed net investment income 30,969
Undistributed net realized gains on investment 34,583
Net unrealized depreciation on investments (1,050,494)
----------
Total Net Assets $3,189,188
----------
----------
Shares outstanding (no par, unlimited shares authorized) 282,435
Net Asset Value, Redemption Price and Offering Price Per Share $ 11.29
----------
----------
See Notes to the Financial Statements.
STATEMENT OF OPERATIONS
For the period November 4, 1999(1)<F3> thru June 30, 2000
INVESTMENT INCOME:
Interest income $ 1,116
-----------
Total Investment Income 1,116
-----------
EXPENSES:
Investment management fee 10,578
Shareholder servicing and accounting fees 50,971
Organization charges 50,322
Administration fee 25,329
Legal fees 19,889
Directors fees 19,038
Federal and state registration 13,169
Reports to shareholders 7,889
Audit fees 7,151
Custody fees 4,337
Distribution fees 4,068
Other 14,932
-----------
Total expenses before reimbursement 227,673
Less: Reimbursement from Investment Manager (204,890)
-----------
Net Expenses 22,783
-----------
NET INVESTMENT LOSS (21,667)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gains on investments 34,583
Change in unrealized appreciation/(depreciation)
on investments (1,050,494)
-----------
Net realized and unrealized gain on investments (1,015,911)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,037,578)
-----------
-----------
(1)<F3> Commencement of Operations.
See Notes to the Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
NOVEMBER 4, 1999(1)<F4>
THRU
JUNE 30, 2000
-----------------------
OPERATIONS:
Net investment loss $ (21,667)
Net realized gains on investment 34,583
Change in unrealized appreciation/(depreciation)
on investments (1,050,494)
-----------
Net decrease in net assets from operations (1,037,578)
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,689,976
Cost of shares redeemed (463,210)
-----------
Net increase in net assets from
capital share transactions 4,226,766
-----------
TOTAL INCREASE IN NET ASSETS 3,189,188
NET ASSETS:
Beginning of period --
----------
End of period $3,189,188
----------
----------
CHANGES IN SHARES OUTSTANDING:
Shares sold 320,299
Shares redeemed (37,864)
----------
Net increase 282,435
----------
----------
(1)<F4> Commencement of Operations.
See Notes to the Financial Statements.
SCHEDULE OF INVESTMENTS
June 30, 2000
NUMBER OF MARKET
SHARES VALUE
------ -----
COMMON STOCKS -- 107.2%
CONSUMER CYCLICAL - 0.3%
1,329 Etoys, Inc.*<F5> $ 8,431
----------
CONSUMER NON-DURABLE - 0.9%
783 Priceline.Com, Inc.*<F5> 29,742
----------
FINANCIAL SERVICES - 2.7%
3,093 E*Trade Group, Inc.*<F5> 51,035
2,900 Ameritrade Holding Corp.*<F5> 33,713
----------
84,748
----------
CONSUMER - 3.8%
2,670 CMG Information Services*<F5> 122,319
----------
E-COMMERCE - 1.4%
900 MP3.Com, Inc.*<F5> 12,206
800 Ticketmaster Online City
Search, Inc.*<F5> 12,750
2,700 Webvan Group, Inc.*<F5> 19,659
----------
44,615
----------
MANUFACTURING - 4.6%
1,240 Inktomi Corp.*<F5> 146,630
----------
MEDICAL INFORMATION
SYSTEMS - 0.5%
1,100 Healtheon/WebMD Corp. 16,294
----------
ELECTRONIC - 4.9%
1,162 Amazon.Com, Inc.*<F5> 42,195
2,200 Vingnette Corp.*<F5> 114,434
----------
156,629
----------
SOFTWARE - 37.2%
1,100 Akamai Technologies, Inc.*<F5> 130,608
2,160 Ariba, Inc.*<F5> 211,781
3,500 Bea Systems, Inc.*<F5> 173,031
2,739 Broadvision, Inc.*<F5> 139,175
1,240 Commerce One, Inc.*<F5> 56,265
1,725 Covad Communications
Group, Inc.*<F5> 27,816
400 Digital Island*<F5> 19,450
1,323 Earthlink, Inc.*<F5> 20,424
714 Lycos, Inc.*<F5> 38,556
1,600 PSInet, Inc.*<F5> 40,200
1,463 Realnetwork, Inc.*<F5> 73,973
1,900 Tibco Software, Inc.*<F5> 203,745
950 Verio, Inc.*<F5> 52,710
----------
1,187,734
----------
MECHANICS & SOFTWARE - 20.1%
5,020 America Online, Inc.*<F5> 264,805
3,332 At Home Corporation - Ser A*<F5> 69,139
1,732 Verisign, Inc.*<F5> 305,698
----------
639,642
----------
SERVICE - 10.2%
680 Checkfree Holdings Corp.*<F5> 35,063
250 Go2Net, Inc.*<F5> 12,578
1,830 I2 Technologies, Inc.*<F5> 190,806
900 Verticalnet, Inc.*<F5> 33,244
422 Yahoo!, Inc.*<F5> 52,275
----------
323,966
----------
COMPUTER DATA SECURITY - 4.7%
714 Check Point Software
Technologies Ltd.*<F5> 151,190
----------
TELECOMMUNICATION - 9.6%
979 CNET, Inc.*<F5> 24,047
3,968 Exodus Communications, Inc.*<F5> 182,776
2,650 Internet Capital Group, Inc.*<F5> 98,091
----------
304,914
----------
MISCELLANEOUS - 6.3%
1,342 Doubleclick, Inc.*<F5> 51,164
676 Ebay, Inc.*<F5> 36,715
2,040 Infospace.Com*<F5> 112,710
----------
200,589
----------
Total common stocks
(cost $4,467,937) $3,417,443
----------
----------
Total investments - 107.2%
(cost $4,467,937) 3,417,443
Other assets in excess of
liabilities - (7.2%) (228,255)
----------
TOTAL NET ASSETS - 100.0% $3,189,188
----------
----------
*<F5> Non-income producing security.
See Notes to the Financial Statements.
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
NOVEMBER 4, 1999(1)<F6>
THRU
JUNE 30, 2000
-----------------------
PER SHARE DATA:
Net asset value, beginning of period $10.00
------
Income from investment operations:
Net investment income 0.12
Net realized and unrealized gains on investments 1.17
------
Total from investment operations 1.29
------
Net asset value, end of period $11.29
------
------
TOTAL RETURN 12.90%(2)<F7>
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period $3,189,188
Ratios of expenses to average net assets:
Before expense reimbursement 13.60%(3)<F8>
After expense reimbursement 1.40%(3)<F8>
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement (13.53)%(3)<F8>
After expense reimbursement (1.33)%(3)<F8>
Portfolio turnover rate 46.88%(2)<F7>
(1)<F6> Commencement of Operation.
(2)<F7> Not annualized.
(3)<F8> Annualized.
See Notes to the Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2000
1. ORGANIZATION
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 4, 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.
2. SIGNIFICANT ACCOUNTING POLICIES
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 Trust. 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. The amount of dividends and distributions
from net investment income and net realized capital gains are determined
in accordance with Federal income tax regulations, which may differ from
generally accepted accounting principles. To the extent these book and
tax differences are permanent in nature, such amounts are reclassified
among paid-in-capital in excess of par value, undistributed net
investment income and undistributed net realized gain (loss) on
investments. Accordingly at June 30, 2000 reclassifications were
recorded to increase undistributed net investment income by $52,636, and
decrease capital stock by $52,636, to account for differences between
the book and tax treatment of organization and registration costs.
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.
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, by the Fund for the period November 4, 1999 (inception date) to
June 30, 2000, were as follows:
Purchases Sales
--------- -----
U.S. Government $ -- $ --
Other $5,704,319 $1,270,966
At June 30, 2000, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation $ 350,934
(Depreciation) (1,471,399)
-----------
Net depreciation on investments $(1,120,465)
-----------
-----------
At June 30, 2000, the cost of investments for federal income tax purposes
was $4,537,908.
4. AGREEMENTS
The Fund has entered into an Investment Advisory Agreement with Integrity
Global Asset Management, (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 4, 1999 to June 30, 2000, the
Investment Adviser waived advisory fees and will reimburse the Fund for
other expenses in the amount of $204,890. 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 Trust. 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 Trust has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which
authorizes the Trust 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 eight
months ended June 30, 2000, the Fund incurred expenses of $4,068 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.
5. SUBSEQUENT EVENTS
The Fund has a temporary overdraft arrangement in place with its custodian
bank, which beginning September 1, 2000, will charge interest at the current
prime rate. The amount outstanding as of June 30, 2000 is $296,550.
On August 29, 2000, the Adviser entered into an agreement with an outside
investment group. In connection with this agreement the Fund will be fully
reimbursed by the Adviser for the receivable due from the Adviser.
Subsequent to June 30, 2000 that Fund has undergone some structural changes.
Specifically, the Adviser has agreed to further subsidize the Fund costs so
that the overall expense ratio decreases from the current 1.40% to 0.99%.
Also a sales charge of 5% will be imposed on new shareholders.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Board of Trustees
of the Internet Index Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedule of investments, of the Internet Index Fund for the period November
4, 1999 to June 30, 2000, and the related statement of operations, the statement
of changes in net assets and the financial highlights for the period presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 2000, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Internet Index Fund as ofJune 30, 2000, the results of its operations, changes
in its net assets and its financial highlights for the period then ended, in
conformity with accounting principles generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 29, 2000
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, N.A.
Cincinnati, Ohio
DISTRIBUTOR
T.O. Richardson Securities, Inc.
Farmington, Connecticut
