AMERICAN EAGLE FUNDS, INC.
AMERICAN EAGLE CAPITAL APPRECIATION FUND
AMERICAN EAGLE TWENTY FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
<PAGE>
LETTER TO SHAREHOLDERS JUNE 30, 2000
DEAR SHAREHOLDER,
The markets are catching their collective breath after taking a volatile ride
during the first half of calendar year 2000. The markets reacted not only to
rising oil prices and the Federal Reserve Board's continued concerns over the
perils of an overheated economy, but also to the tremendous strength,
flexibility and innovation of many U.S. companies. These competing forces were
reflected in the NASDAQ as it first surged 22% to reach an all-time high in
mid-March, then dropped over 37% by the end of May. The NASDAQ experienced
several smaller moves through June and closed the first half of 2000 down 4%.
The Dow Jones Industrial Average experienced a similar, albeit less dramatic,
ride. The Dow swelled 3% in January to reach an all-time high, and then steadily
deflated more than 16% through March. Although the Dow recovered marginally
during June, it closed the first half of 2000 down more than 8%. These volatile
moves sharply contrasted the steady climb during the first three quarters of
1999 and the sharp rise during the fourth quarter last year. The unparalleled
optimism of 1999 was quickly replaced by caution and concern.
Throughout the first half of this year, the Funds recognized the underlying
volatility and worked hard to smooth the ride for investors. In the days leading
up to the first three Federal Reserve meetings of the year, the Funds moderately
hedged their portfolios anticipating that the Fed would raise the discount rate
in an attempt to cool the economy. The Fed, in fact, took active steps at each
of these three meetings and increased the discount rate from 5.5% to 6.5% where
it currently stands. After the Fed's May meeting, economic indicators suggested
that the economy showed signs of a moderate slowdown. Accordingly, the Funds
removed their hedges on the belief that the Fed would not raise rates at its
June meeting. When the Fed refused to push rates higher and companies began to
hint at strong second quarter earnings, the Funds were in a position to fully
participate in the early-summer rally. Notwithstanding the strong June returns,
the Funds' overall positioning throughout the first half of the year insulated
the portfolios from the large swings in the markets while producing steady
returns for investors.
AMERICAN EAGLE CAPITAL APPRECIATION FUND
The American Eagle Capital Appreciation Fund seeks long-term capital
appreciation by utilizing an aggressive yet flexible investment program. The
Fund maintains a core portfolio of 30 to 50 stocks of primarily American growth
companies of all sizes. The Fund may employ leverage, sell securities short, and
buy and sell futures and options contracts to protect assets against adverse
market price changes and to generate additional investment returns.
Companies in the computer hardware and software, telecommunications, medical
devices/drugs and Internet technology sectors were significant positions in the
Fund's portfolio during the period.
The returns for the six-month period ended June 30, 2000 for the American Eagle
Capital Appreciation Fund and the Fund's comparable benchmarks are stated below:
Year-
To-Date
-------
AMERICAN EAGLE CAPITAL APPRECIATION FUND 76.30%
Lipper Capital Appreciation Fund Index -1.54
Standard & Poor's 500 Index -0.42
AMERICAN EAGLE TWENTY FUND
The American Eagle Twenty Fund's investment objective is long-term capital
appreciation. The Fund seeks to achieve this objective by investing in a more
concentrated portfolio of approximately, but not less
1
<PAGE>
than, 20 stocks composed primarily of American growth companies of all sizes.
The Fund may employ leverage, sell securities short, and buy and sell futures
and options contracts to protect assets against adverse market price changes and
to generate additional investment returns.
The Fund's main investment concentrations have been in telecommunications,
medical devices/drugs, computer software and Internet technology stocks.
The returns for the six-month period ended June 30, 2000 for the American Eagle
Twenty Fund and the Fund's comparable benchmarks are stated below:
Year-
To-Date
-------
AMERICAN EAGLE TWENTY FUND 59.70%
Lipper Capital Appreciation Fund Index -1.54
Standard & Poor's 500 Index -0.42
The strong performance of both of the American Eagle Funds is largely a result
of each Fund's relatively small asset size. Each Fund has invested in initial
public offerings (IPO's) that can have a greater impact on each Fund's
performance while the Funds are small in size. Each Fund's small size helps
enable it to move more quickly into and out of certain investments. This
liquidity, combined with a volatile equity market, can afford each Fund with the
potential for investment gains. There is no assurance that the Funds' future
investments will result in the same level of performance. As each Fund grows in
size such investments will likely have a smaller impact on performance, making
it unlikely that each Fund will replicate its historical investment returns.
Thank you for investing with us in the American Eagle Funds.
Sincerely,
James R. Jundt
Chairman
2
<PAGE>
FINANCIAL STATEMENTS JUNE 30, 2000
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN EAGLE AMERICAN EAGLE
CAPITAL APPRECIATION TWENTY
FUND FUND
----------------------------------------------------------------------------------------------------------------------
ASSETS
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment in securities, at market value (note 2)
(identified cost: $11,535,994 and $9,122,397
respectively) $ 12,600,754 $ 9,815,375
Receivable for securities sold 873,661 149,370
Dividends receivable 1,824 1,704
Cash -- 582
Prepaid expenses and other assets 17,097 16,547
-----------------------------------------
Total Assets 13,493,336 9,983,578
-----------------------------------------
LIABILITIES
----------------------------------------------------------------------------------------------------------------------
Loans payable 677,000 428,000
Payable for securities purchased 299,500 60,500
Payable to custodian 18,231 --
Payable to Adviser 12,384 9,302
Interest payable (note 5) 267 179
Accrued expenses and other liabilities 17,609 18,965
-----------------------------------------
Total Liabilities 1,024,991 516,946
-----------------------------------------
Net assets applicable to outstanding capital stock $ 12,468,345 $ 9,466,632
=========================================
NET ASSETS CONSIST OF
----------------------------------------------------------------------------------------------------------------------
Capital stock (note 1)
(par value $.01 per share - authorized 10 billion shares;
outstanding; 707,258 and 592,621 shares, respectively) 7,353,700 6,155,362
Accumulated net investment loss (78,174) (74,492)
Accumulated net realized gain on investments 4,128,059 2,692,784
Unrealized appreciation on investments 1,064,760 692,978
-----------------------------------------
Total, representing net assets applicable
to outstanding capital stock $ 12,468,345 $ 9,466,632
=========================================
Net Asset Value Per Share $ 17.63 $ 15.97
=========================================
</TABLE>
3
<PAGE>
FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2000
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN EAGLE AMERICAN EAGLE
CAPITAL APPRECIATION TWENTY
FOR THE SIX MONTHS ENDED 6/30/00 FUND FUND
-----------------------------------------------------------------------------------------------------------
INCOME
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest $ 38,161 $ 29,550
Dividends (net of foreign taxes withheld of
$165 and $297, respectively) 5,525 6,633
---------------------------------------
43,686 36,183
---------------------------------------
EXPENSES
----------------------------------------------------------------------------------------------------------
Investment adviser fee 56,005 46,770
Registration fee 10,574 10,074
Administrative fee 10,298 10,684
Fund accounting fee 11,332 10,040
Audit fees 8,948 8,948
Legal fees 7,022 7,184
Transfer agent fee 4,914 4,914
Transfer agent expense 3,618 3,928
Custodian fee 6,650 5,722
Reports to shareholders 1,456 1,456
Directors' fees 728 728
Other 48 48
---------------------------------------
Total expenses before interest expense 121,593 110,496
Interest Expense 267 179
---------------------------------------
Total expenses after interest expense 121,860 110,675
---------------------------------------
Net investment loss $ (78,174) $ (74,492)
---------------------------------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
----------------------------------------------------------------------------------------------------------
Net realized gain on investments and futures
transactions 4,196,730 2,746,141
Net realized loss on short sales transactions (68,671) (53,357)
---------------------------------------
Net realized gain on investments, futures
transactions and short sale transactions 4,128,059 2,692,784
---------------------------------------
Net change in unrealized appreciation on investments 1,064,760 692,978
---------------------------------------
Net gain on investments 5,192,819 3,385,762
---------------------------------------
Net increase in net assets resulting from operations $ 5,114,645 $ 3,311,270
=======================================
</TABLE>
4
<PAGE>
FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2000
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN EAGLE CAPITAL APPRECIATION FUND
----------------------------------------------
FOR THE SIX MONTHS ENDED
6/30/00 FOR THE PERIOD
(UNAUDITED) 12/30/99*-12/31/99
--------------------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (78,174) $ (14)
Net realized gain on investments and futures
transactions 4,196,730 --
Net realized loss on short sale transactions (68,671) --
---------------- ----------------
Net realized gain on investments, futures
transactions and short sale transactions 4,128,059 --
Net change in unrealized appreciation
on investments 1,064,760 --
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations 5,114,645 (14)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------------------------------
Net proceeds from shares sold 7,286,126 --
Cost of shares redeemed (6,912) --
---------------- ----------------
Net increase in net assets resulting
from capital share transactions 7,279,214 --
---------------- ----------------
NET ASSETS
--------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 12,393,859 $ (14)
Net assets at beginning of period 74,486 74,500
---------------- ----------------
Net assets at end of period $ 12,468,345 $ 74,486
================ ================
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------------------------------
Shares sold 700,300 7,450
Shares redeemed (492) --
---------------- ----------------
Net increase in shares outstanding 699,808 7,450
================ ================
</TABLE>
* Commencement of operations
5
<PAGE>
FINANCIAL STATEMENTS (CONCLUDED) JUNE 30, 2000
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
AMERICAN EAGLE TWENTY FUND
------------------------------------------------
FOR THE SIX MONTHS ENDED
6/30/00 FOR THE PERIOD
(UNAUDITED) 12/30/99*-12/31/99
--------------------------------------------------------------------------------------------------------
OPERATIONS
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment loss $ (74,492) $ (14)
Net realized gain on investments and futures
transactions 2,746,141 --
Net realized loss on short sale transactions (53,357) --
---------------- ----------------
Net realized gain on investments, futures
transactions and short sale transactions 2,692,784 --
Net change in unrealized appreciation
on investments 692,978 --
---------------- ----------------
Net increase (decrease) in net assets resulting
from operations 3,311,270 (14)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------------------------------
Net proceeds from shares sold 6,117,410 --
Cost of shares redeemed (36,534) --
---------------- ----------------
Net increase in net assets resulting
from capital share transactions 6,080,876 --
---------------- ----------------
NET ASSETS
--------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets $ 9,392,146 $ (14)
Net assets at beginning of period 74,486 74,500
---------------- ----------------
Net assets at end of period $ 9,466,632 $ 74,486
================ ================
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------------------------------
Shares sold 588,171 7,450
Shares redeemed (3,000) --
---------------- ----------------
Net increase in shares outstanding 585,171 7,450
================ ================
</TABLE>
* Commencement of operations
6
<PAGE>
AMERICAN EAGLE CAPITAL APPRECIATION FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER MARKET
INDUSTRY DESCRIPTION AND ISSUE OF SHARES COST VALUE (a)
------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE (4.4%)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pixelworks Inc. (b) 6,000 $ 126,000 $ 136,500
Texas Instruments 6,000 363,360 412,125
------------------------------------
489,360 548,625
------------------------------------
COMPUTER SERVICES/SOFTWARE (19.7%)
------------------------------------------------------------------------------------------------------------
HNC Software (b) 8,000 461,250 494,000
Immersion Corporation (b) 18,700 670,678 561,000
Macrovision Corporation (b) 2,000 68,250 127,844
Microsoft Corporation (b) 7,500 631,894 600,000
Siebel Systems Inc. (b) 4,100 445,030 670,606
------------------------------------
2,277,102 2,453,450
------------------------------------
HEALTHCARE SERVICES (2.2%)
------------------------------------------------------------------------------------------------------------
Schering Plough Corporation 5,500 189,451 277,750
------------------------------------
INTERACTIVE MEDIA (0.9%)
------------------------------------------------------------------------------------------------------------
Echostar Communications - Class A (b) 3,200 135,868 105,950
------------------------------------
INTERNET SERVICES (3.7%)
------------------------------------------------------------------------------------------------------------
Apropos Technology (b) 12,200 188,400 242,475
Korea Thrunet Co. Ltd. - Class A (b) 15,500 496,686 217,000
------------------------------------
685,086 459,475
------------------------------------
INTERNET TECHNOLOGY (16.5%)
------------------------------------------------------------------------------------------------------------
America Online Inc. (b) 11,600 684,464 611,900
Marvell Technology Group (b) 18,600 692,889 1,060,200
Starmedia Network Inc. (b) 13,700 307,601 258,588
Tele 1 Europe Holdings ADR (b) 3,300 53,608 39,806
Travelocity.com Inc. (b) 5,400 168,522 88,425
------------------------------------
1,907,084 2,058,919
------------------------------------
MEDICAL DEVICES/DRUGS (14.7%)
-----------------------------------------------------------------------------------------------------------
Amgen (b) 2,900 172,770 203,725
Intuitive Surgical Inc. (b) 25,000 250,000 235,938
Pharmacia Corporation 15,200 561,726 785,650
Sepracor Inc. (b) 5,000 429,042 603,125
------------------------------------
1,413,538 1,828,438
------------------------------------
MISCELLANEOUS (1.9%)
------------------------------------------------------------------------------------------------------------
Edison Schools Incorporated 10,000 222,500 231,875
------------------------------------
</TABLE>
7
<PAGE>
AMERICAN EAGLE CAPITAL APPRECIATION FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS (CONCLUDED)
NUMBER MARKET
INDUSTRY DESCRIPTION AND ISSUE OF SHARES COST VALUE (a)
------------------------------------------------------------------------------------------------------------
RESTAURANTS (2.5%)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Starbucks Corporation (b) 8,300 $ 234,302 $ 316,956
--------------------------------------
TELECOMMUNICATIONS INFRASTRUCTURE (10.2%)
------------------------------------------------------------------------------------------------------------
At Home Corporation (b) 15,400 416,350 319,550
Cisco Systems Inc. (b) 5,000 265,173 317,812
Corning Corporation 700 111,342 188,912
GT Group Telecom Inc. (b) 14,100 193,539 222,956
Level 3 Communications Inc. (b) 2,500 215,300 220,000
--------------------------------------
1,201,704 1,269,230
--------------------------------------
WIRELESS/TELECOMMUNICATION SERVICES (24.4%)
------------------------------------------------------------------------------------------------------------
Gemstar International Group (b) 9,300 499,341 571,514
NDS Group PLC (b) 8,000 463,000 488,000
Nextel Communications Inc. - Class A (b) 6,000 309,607 367,125
Nokia Corporation - ADR A 5,600 255,234 279,650
Viatel Inc. (b) 17,400 502,337 496,987
Voicestream Wireless Corporation (b) 3,000 366,937 348,891
XM Satellite Radio Holdings (b) 13,300 383,543 497,919
--------------------------------------
2,779,999 3,050,086
--------------------------------------
TOTAL COMMON STOCKS (101.1%) 11,535,994(c) 12,600,754
======================================
Liabilities in excess of other assets (-1.1%) (132,409)
----------------
NET ASSETS (100.0%) $ 12,468,345
================
Notes to Schedule of Investments:
Percentage of investments as shown is the ratio of the total market
value to total net assets.
(a) Securities are valued by procedures described in note 2 to the
financial statements.
(b) Presently non-income producing.
(c) Cost for federal income tax purposes at June 30, 2000, was
$11,573,593. The aggregate gross unrealized appreciation and
depreciation of investments in securities based on this cost were:
--------------------------------------------------------------------------
Gross unrealized appreciation $ 2,042,265
Gross unrealized depreciation (1,015,104)
----------------
Net unrealized appreciation $ 1,027,161
--------------------------------------------------------------------------
</TABLE>
ADR - American Depositary Receipt
8
<PAGE>
AMERICAN EAGLE TWENTY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER MARKET
INDUSTRY DESCRIPTION AND ISSUE OF SHARES COST VALUE (a)
------------------------------------------------------------------------------------------------------------
COMPUTER SERVICES/SOFTWARE (15.7%)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Immersion Corporation (b) 18,400 $ 454,150 $ 552,000
Microsoft Corporation (b) 5,500 490,297 440,000
Siebel Systems Inc. (b) 3,000 325,631 490,688
-------------------------------------
1,270,078 1,482,688
-------------------------------------
HEALTHCARE SERVICES (3.6%)
------------------------------------------------------------------------------------------------------------
Immunex Inc. (b) 6,900 235,275 341,119
-------------------------------------
INTERACTIVE MEDIA (1.0%)
------------------------------------------------------------------------------------------------------------
Echostar Communications - Class A (b) 3,000 127,377 99,328
-------------------------------------
INTERNET SERVICES (6.7%)
------------------------------------------------------------------------------------------------------------
Apropos Technology (b) 16,900 229,226 335,887
Internet Initiative Japan ADR (b) 3,000 194,250 177,750
Korea Thrunet Co. Ltd. - Class A (b) 8,300 452,297 116,200
-------------------------------------
875,773 629,837
-------------------------------------
INTERNET TECHNOLOGY (22.2%)
------------------------------------------------------------------------------------------------------------
America Online Inc. (b) 8,800 521,416 464,200
Intuit Inc. (b) 6,300 213,500 260,662
Liberate Technologies (b) 5,000 156,875 146,563
Marvell Technology Group (b) 13,900 518,836 792,300
Tele 1 Europe Holdings ADR (b) 5,400 87,722 65,138
Websense Inc. (b) 15,000 408,750 376,875
-------------------------------------
1,907,099 2,105,738
-------------------------------------
MEDICAL DEVICES/DRUGS (22.3%)
-----------------------------------------------------------------------------------------------------------
Heartport Inc. (b) 145,500 664,712 418,312
Medtronic Inc. 8,100 384,541 403,481
Pharmacia Corporation 14,200 524,147 733,963
Sepracor Inc. (b) 4,600 397,808 554,875
-------------------------------------
1,971,208 2,110,631
-------------------------------------
RESTAURANTS (3.2%)
------------------------------------------------------------------------------------------------------------
Starbucks Corporation (b) 7,900 216,185 301,681
-------------------------------------
</TABLE>
9
<PAGE>
AMERICAN EAGLE TWENTY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) JUNE 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS (CONCLUDED)
NUMBER MARKET
INDUSTRY DESCRIPTION AND ISSUE OF SHARES COST VALUE (a)
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS INFRASTRUCTURE (5.1%)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At Home Corporation (b) 11,700 $ 343,513 $ 242,775
Corning Corporation 700 91,225 188,912
First World Communications (b) 5,000 85,000 52,500
-------------------------------------
519,738 484,187
-------------------------------------
WIRELESS/TELECOMMUNICATION SERVICES (23.9%)
------------------------------------------------------------------------------------------------------------
Charter Communications (b) 25,000 363,775 410,937
Gemstar International Group (b) 9,200 406,310 565,369
L.M. Ericsson Tel ADR 15,200 244,919 304,000
Nokia Corporation - ADR A 5,600 255,234 279,650
Viatel Inc. (b) 12,300 362,488 351,319
Voicestream Wireless Corporation (b) 3,000 366,938 348,891
-------------------------------------
1,999,664 2,260,166
-------------------------------------
TOTAL COMMON STOCKS (103.7%) 9,122,397(c) 9,815,375
=====================================
Liabilities in excess of other assets (-3.7%) (348,743)
----------------
NET ASSETS (100.0%) $ 9,466,632
================
Notes to Schedule of Investments:
Percentage of investments as shown is the ratio of the total market
value to total net assets.
(a) Securities are valued by procedures described in note 2 to the
financial statements.
(b) Presently non-income producing.
(c) Cost for federal income tax purposes at June 30, 2000, was
$9,187,241. The aggregate gross unrealized appreciation and
depreciation of investments in securities based on this cost were:
---------------------------------------------------------------------------
Gross unrealized appreciation $ 1,725,844
Gross unrealized depreciation (1,097,710)
---------------
Net unrealized appreciation $ 628,134
---------------------------------------------------------------------------
</TABLE>
ADR - American Depositary Receipt
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2000
1. ORGANIZATION
American Eagle Capital Appreciation Fund ("Capital Appreciation Fund") and
American Eagle Twenty Fund ("Twenty Fund") (each, a "Fund" or collectively, the
"Funds") are separate non-diversified investment portfolios and series of
capital stock of American Eagle Funds, Inc. (the "Company"), which is registered
under the Investment Company Act of 1940, as amended (the "Act") as an open-end
management investment company. The Funds commenced operations on December 30,
1999. Jundt Associates, Inc. serves as the investment adviser (the "Adviser")
and is responsible for managing the Funds' portfolio of securities.
The investment objectives of the Funds are as follows:
* Capital Appreciation Fund's objective is capital appreciation. The
Fund will maintain a core portfolio of long positions in 30 to 50 of
primarily American growth companies without regard to their size. The
Fund may employ leverage, sell securities short and buy and sell
futures and options contracts to protect against adverse market price
changes and to generate additional investment returns.
* Twenty Fund's objective is capital appreciation. The Fund will
maintain a more concentrated portfolio of long positions in
approximately, but not less than, 20 stocks of primarily American
growth companies without regard to their size. The Fund may employ
leverage, sell securities short and buy and sell futures and options
contracts to protect against adverse market price changes and to
generate additional investment returns.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Funds are as follows:
ORGANIZATION AND PREPAID INITIAL REGISTRATION EXPENSES
Expenses incurred by the Company in connection with the organization and the
initial public offering of shares of the Funds were expensed as incurred. These
expenses were advanced by the Adviser and were subsequently reimbursed by the
Funds. Prepaid initial registration expenses are deferred and amortized over the
period of benefit.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) JUNE 30, 2000
INITIAL PUBLIC OFFERINGS
The Funds may invest in initial public offerings (IPOs). IPOs and other
investment techniques may have a magnified performance impact on a fund with a
small asset base. The Funds may not experience similar performance as their
assets grow.
INVESTMENT IN SECURITIES
Investment in securities traded on U.S. securities exchanges or included in a
national market system and open short sales transactions are valued at the last
quoted sales price as of the close of business on the date of valuation or,
lacking any sales, at the mean between the most recently quoted bid and asked
prices. Securities traded in the over-the-counter market are valued at the mean
between the most recently quoted bid and asked prices. Options and futures
contracts are valued at market value or fair value if no market exists, except
that open futures contracts sales are valued using the closing settlement price
or, in the absence of such a price, the most recently quoted asked price. Other
securities for which market quotations are not readily available are valued at
fair value in good faith by or under the direction of the Board of Directors.
Short-term securities with maturities of fewer than 60 days when acquired, are
valued at amortized cost, which approximates market value.
FEDERAL TAXES
The Funds intend to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and also intend to distribute all
of their investment company taxable income to shareholders. Therefore, no income
tax provision is required. In addition, on a calendar year basis, the Funds will
make sufficient distributions of their net investment and realized gains, if
any, to avoid the payment of any federal excise taxes.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to wash sales and net
operating losses. The character of distributions made during the period from net
investment income or net realized gains, if any, may differ from its ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the period in which amounts are distributed may differ
from the year the income or realized gains (losses) were recorded by the Funds.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) JUNE 30, 2000
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements with member banks of the Federal
Reserve System or primary dealers in U.S. Government securities. Under such
agreements, the bank or primary dealer agrees to repurchase the security (U.S.
Government securities) at a mutually agreed upon time and price. The Funds take
possession of the underlying securities, mark to market such securities daily
and, if necessary, receive additional securities to ensure that the contract is
adequately collateralized.
DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER INVESTMENT STRATEGIES
The Funds may engage in various portfolio strategies to hedge against changes in
net asset value or to attempt to realize a greater current return.
OPTIONS TRANSACTIONS
For hedging purposes, the Funds may purchase and sell put and call options on
its portfolio securities to protect against changes in market prices and to
generate additional investment returns.
The risk associated with purchasing an option is that the Funds pay a premium
whether or not the option is exercised. Additionally, the Funds bear the risk of
loss of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by the premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Funds write an option, the premium received by the Funds is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options that expire unexercised
are recorded by the Funds on the expiration date as realized gains from option
transactions. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether the Funds have realized a gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security
purchased by the Funds. In writing an option, the Funds bear the market risk of
an unfavorable change in the price of the security underlying the written
option. Exercise of an option written
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) JUNE 30, 2000
by the Funds could result in the Funds selling or buying a security at a price
different from the current market price.
FINANCIAL FUTURES CONTRACTS
The Funds may buy and sell index futures contracts and related options for
hedging purposes and to attempt to increase investment return. A stock index
futures contract is a contract to buy or sell units of a stock index at a
specified future date at a price agreed upon when the contract is made. The
stock index futures contract specifies that no delivery of the actual stocks
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at the
expiration of the contract.
Options on index futures contracts give the purchaser the right, in return for
the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who fail
to exercise their options prior to the exercise date suffer a loss of the
premium paid.
SHORT SALE TRANSACTIONS
The Funds may seek to hedge investments or realize additional gains through
short sales. Short selling obligates the Fund to replace the security borrowed
by purchasing the security at current market value. The Fund will incur a loss
if the price of the security increases between the date of the short sale and
the date on which the Fund replaces the borrowed security. The Fund realizes a
gain if the price of the security declines between those dates. Until the Fund
replaces the borrowed security, it will maintain daily, a segregated account
with a broker and /or custodian, of cash and/or other liquid securities
sufficient to cover its short position.
DISTRIBUTION TO SHAREHOLDERS
Distributions are recorded as of the close of business on the ex-dividend date.
Such distributions are payable in cash or reinvested in additional shares of
each Fund.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) JUNE 30, 2000
EXPENSES
Expenses directly attributable to each Fund are charged to that Fund's
operations; expenses that are applicable to both Funds are allocated between the
Funds on a pro rata basis.
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 in the financial statements. Actual results could
differ from those estimates.
3. INVESTMENT SECURITY TRANSACTIONS
For the six months ended June 30, 2000, for Capital Appreciation Fund and Twenty
Fund, the cost of purchases and proceeds from sales of securities, other than
temporary investments in short-term securities, were as follows:
Cost of Proceeds
Purchases from Sales
--------------------------------------------------------------------------------
Capital Appreciation Fund
Long-term investment transactions $ 31,683,513 $ 23,733,531
Short sale transactions $ 2,715,950 $ 2,647,279
Twenty Fund
Long-term investment transactions $ 16,609,072 $ 9,843,091
Short sale transactions $ 1,025,200 $ 971,842
--------------------------------------------------------------------------------
4. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
Jundt Associates, Inc. is the investment adviser for the Funds. The Adviser is
responsible for the management of each Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of each Fund. For its services, the investment adviser
receives from each Fund a monthly fee at an annual rate of 1.3% of each Fund's
average daily net assets.
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.
The Funds have entered into distribution agreements with U.S. Growth
Investments, Inc. (the "Distributor"), an affiliate of the Adviser. The
Distributor serves as the principal
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONCLUDED) JUNE 30, 2000
underwriter of each Fund's shares.
In addition to the investment management fee and the administrative fee, each
Fund is responsible for paying most other operating expenses, including
directors' fees and expenses; custodian fees; registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal, auditing and
accounting services; insurance; and other miscellaneous expenses.
For the six months ended June 30, 2000, legal fees of $7,022 for Capital
Appreciation Fund and $7,184 for Twenty Fund were incurred with a law firm of
which the secretary of the Funds is a partner.
Certain officers and/or directors of each Fund are officers and/or directors of
the Adviser and/or the Distributor.
Each of the directors of American Eagle Funds, Inc. is also a director of other
fund companies managed by the Investment Adviser. American Eagle Funds, Inc. and
other fund companies managed by the Investment Adviser have agreed to pay their
pro rata share (based on the relative net assets of each fund company) of the
fees payable to each director who is not an "interested person" of any fund
company managed by the Investment Adviser. In the aggregate, American Eagle
Funds, Inc. and other fund companies managed by the Investment Adviser have
agreed to pay each such director a fee of $15,000 per year plus $1,500 for each
meeting attended and to reimburse each such director for the expenses of
attendance at such meetings. No compensation is paid to officers or directors
who are "interested persons" of American Eagle Funds, Inc. and other fund
companies managed by the Investment Adviser.
5. BANK BORROWING
The Capital Appreciation Fund and Twenty Fund entered into a joint Line of
Credit Agreement with Firstar Bank, N.A., for an amount not to exceed jointly
the lesser of $2,000,000 or 30% of the Fund's assets. For the six months ended
June 30, 2000, the Capital Appreciation Fund's average daily balance of loans
outstanding was $3,720 at a weighted average interest rate of 9.35%. The maximum
amount of loans outstanding at any time during the period was $677,000 or 5.02%
of total assets. The loans were collateralized by certain Capital Appreciation
Fund investments. The Twenty Fund's average daily balance of loans outstanding
was $2,352 at a weighted average interest rate of 9.44%. The maximum amount of
loans outstanding at any time during the period was $428,000 or 4.29% of total
assets. The loans were collateralized by certain Twenty Fund investments.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2000
6. FINANCIAL HIGHLIGHTS (UNAUDITED)
Per share data for a share of capital stock outstanding throughout each period
and selected supplemental and ratio information for each period indicated,
calculated based on average shares outstanding, are as follows:
<TABLE>
<CAPTION>
AMERICAN EAGLE CAPITAL APPRECIATION FUND
-------------------------------------------------
FOR THE SIX MONTHS ENDED
6/30/00 FOR THE PERIOD
(UNAUDITED) 12/30/99*-12/31/99
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning of period $ 10.00 $ 10.00
---------------- ----------------
OPERATIONS
-------------------------------------------------------------------------------------------------------------
Net investment loss (0.11) --
Net realized and unrealized gains on investments 7.74 --
---------------- ----------------
Total from operations 7.63 --
---------------- ----------------
NET ASSET VALUE
-------------------------------------------------------------------------------------------------------------
End of period $ 17.63 $ 10.00
================ ================
Total return(1) 76.30% 0.00%
Net assets at end of period $ 12,468,345 $ 74,486
RATIO OF EXPENSES TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------------------------
Net Expenses(2)(5) 2.82% 6.96%
Gross Expenses(3)(5) 2.82% 168.87%
Gross Expenses Including Interest Expense(4)(5) 2.83% N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------------------------
Excluding interest expense, net of reimbursement(5) (1.81%) (6.96%)
Excluding interest expense, before reimbursement(5) (1.81%) (168.87%)
Including interest expense, before reimbursement(5) (1.81%) N/A
Portfolio turnover rate 344.31% 0.00%
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period, and assumes reinvestment of distributions. Total investment
returns for periods less than one full year are not annualized.
(2) Excluding interest expense, net of reimbursement.
(3) Excluding interest expense, before reimbursement.
(4) Including interest expense, before reimbursement.
(5) Adjusted to an annual basis.
* Commencement of operations
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) JUNE 30, 2000
6. FINANCIAL HIGHLIGHTS (UNAUDITED)
Per share data for a share of capital stock outstanding throughout each period
and selected supplemental and ratio information for each period indicated,
calculated based on average shares outstanding, are as follows:
<TABLE>
<CAPTION>
AMERICAN EAGLE TWENTY FUND
-------------------------------------------------
FOR THE SIX MONTHS ENDED
6/30/00 FOR THE PERIOD
(UNAUDITED) 12/30/99*-12/31/99
-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Beginning of period $ 10.00 $ 10.00
---------------- ----------------
OPERATIONS
-------------------------------------------------------------------------------------------------------------
Net investment loss (0.13) --
Net realized and unrealized gains on investments 6.10 --
---------------- ----------------
Total from operations 5.97 --
---------------- ----------------
NET ASSET VALUE
-------------------------------------------------------------------------------------------------------------
End of period $ 15.97 $ 10.00
================ ================
Total return(1) 59.70% 0.00%
Net assets at end of period $ 9,466,632 $ 74,486
RATIO OF EXPENSES TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------------------------
Net Expenses(2)(5) 3.07% 6.96%
Gross Expenses(3)(5) 3.07% 168.87%
Gross Expenses Including Interest Expense(4)(5) 3.08% N/A
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------------------------
Excluding interest expense, net of reimbursement(5) (2.07%) (6.96%)
Excluding interest expense, before reimbursement(5) (2.07%) (168.87%)
Including interest expense, before reimbursement(5) (2.07%) N/A
Portfolio turnover rate 175.77% 0.00%
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period, and assumes reinvestment of distributions. Total investment
returns for periods less than one full year are not annualized.
(2) Excluding interest expense, net of reimbursement.
(3) Excluding interest expense, before reimbursement.
(4) Including interest expense, before reimbursement.
(5) Adjusted to an annual basis.
* Commencement of operations
18
<PAGE>
INVESTMENT ADVISER
Jundt Associates, Inc.
1550 Utica Avenue South
Suite 950
Minneapolis, MN 55416
DISTRIBUTOR
U.S. Growth Investments, Inc.
1550 Utica Avenue South
Suite 935
Minneapolis, MN 55416
ADMINISTRATOR
Firstar Mutual Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
TRANSFER AGENT
Firstar Mutual Fund Services, LLC
615 E. Michigan Street, 3rd Floor
Milwaukee, WI 53202
CUSTODIAN
Firstar Bank, N.A.
625 Walnut Street
Cincinnati, OH 45202
INDEPENDENT AUDITORS
KPMG LLP
4200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
LEGAL COUNSEL
Faegre & Benson LLP
2200 Norwest Center
Minneapolis, MN 55402
FOR MORE INFORMATION CONCERNING EACH FUND (INCLUDING FEE, EXPENSES AND RISKS
ASSOCIATED WITH AN INVESTMENT IN EACH FUND), CONTACT THE FUND AT 1-800-335-0333
OR YOUR INVESTMENT PROFESSIONAL FOR THE FUND'S CURRENT PROSPECTUS. PLEASE READ
IT CAREFULLY BEFORE INVESTING. PAST PERFORMANCE SHOWN IN THIS REPORT SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE OF SHARES WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY THE FUND'S CURRENT PROSPECTUS.
