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SEMI-ANNUAL REPORT
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India Technology Fund
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June 30, 2000
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VENUS CAPITAL MANAGEMENT, INC.
31 Milk Street, Suite # 315, Boston, MA 02109
Ph: 1(617)423-1901, 1(800)720-6850; Fax:1(617)423-1011
Email: [email protected] URL: www.venuscapital.com
Dear Shareholders:
The India Technology Fund (ITF) is the first fund in US, which gives the small
investor a chance to invest in the high-tech sector in India. The fund is not
just a bet on the high-tech sector in India but is a bet on Indians, as a whole
community. ITF intends to invest 50% of the money in US companies founded by
Indians and the rest half in India.
Similar to our fund is the Amidex35 Index Fund, which invests in Israeli
companies both in Israel and in US. The difference being that ITF is not an
index fund. We essentially aim to beat the benchmarked index by better stock
picking.
The success of Indians in networking space in USA has created a tremendous
opportunity for the ITF. Indians have created tremendous amount of wealth,
generated by the intellectual property (IP) they have patented. The ITF will
invest in companies, which possess tremendous IP value. Juniper, Sycamore, i2,
Tibco, Transwitch, Broacade, Q-logic and Redback are all Indian founded
companies, now enjoying billions in valuation, in the stock market today. The
50% to be invested in US will go in companies such as mentioned above. Out of
this portion there will be some companies (up to 20%), which may be privately
owned (unlisted) and these will tend to be late stage investments in venture
capital/pre-IPO situations.
On the India front, the software sector continues to grow at an average rate of
65% and exports out of India are expected to cross $6 Billion, this year versus
$4.4 Billion last year. ITF strategy is to focus on companies, which are led by
visionaries, who can assess the new areas of growth and enter them early.
Companies that can identify the opportunities, in the international markets,
early are usually the most efficiently managed. We will have a combination of
large caps and mid-caps in this area. The new areas emerging from India are
media and broadcasting, where the use of software in movie production is driving
exceptional rates of growth. Telecom equipment is another emerging area in
India, which we would be actively investing in.
Both in US and India, our theme is Internet infrastructure companies. We may
have a few b2b companies primarily those, which we believe will survive in the
long run. We expect over 80% of the money to go in the Internet infrastructure
based companies.
In May-June, we did no invest much cyclically the period from September-March is
better for the stock market. We expect to get fully invested by the end of
October. Our current portfolio is as follows:
Company Exchange Traded On
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Satyam Infoway Nasdaq
Healtheon Nasdaq
Stratos Lightwaves Nasdaq
Wipro Bombay
Satyam Computers Bombay
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Satyam Infoway is the largest private Internet service provider (ISP) in India
and will benefit from the rise of use of Internet, which stands at a paltry 1.2
million people currently. Healtheon, we believe will be a b2b survivor as they
have over a billion in cash and the backing of Janus funds, Microsoft and News
Corp. Stratos makes components and sub-systems for optical networks. Wipro, is
one of the largest customized software manufacturers in India and has received
the sigma level V certifications on the process methodology. There are only
about 10 companies in the world, who have been able to achieve the same. Satyam
Computers is one of the largest software companies in India and is planning to
lists its shares in US in October.
We are continuing to find attractive opportunities in India as the software
stocks have on average declined 65% from their peaks made in March, this year.
The valuations are reasonable and long-term trend is extremely positive as India
increases its exports from $4.4 Billion to $55 billion by 2005.
The ITF will be available at the Fidelity and Waterhouse network soon and we are
spending conservatively in advertising to enhance the size of the fund. For
brand awareness, we have our internal public relations staff, which continues to
get stories published for us. Besides all the Indian papers, we got some press
coverage in TheStreet.com, Silicon India and Smart Money (a Wall Street Journal
publication). As the awareness increases and some track record builds, our
attempt will be to grow the fund to $50 million in assets in the next 12 months.
We thank all shareholders for their support and confidence and will appreciate
suggestions, which may help us serve better.
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India Technology Fund
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Schedule of Investments
June 30, 2000 (Unaudited)
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Shares/Principal Amount Market Value % of Assets
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COMMON STOCKS
Computer Related Service
1,500 Satyam Infoway Limited- ADR 33,375 2.40%
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Health Care
2,500 Healtheon 37,031 2.67%
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Semiconductors
500 Stratos Lightwave, Inc. 13,938 1.00%
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Total Stocks 84,344 6.08%
Money Market Funds
692,627 Firstar Money Market 692,627 49.89%
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Total Money Market Funds 692,627 49.89%
Total Investments (Cost - 777,767) 776,971 55.96%
Other Assets Less Liabilities 611,400 44.04%
Net Assets 1,388,371 100.00%
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India Technology Fund
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Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
Assets:
Investment Securities at Market Value $ 776,971
(Identified Cost - 777,767)
Cash 618,238
Receivables:
Dividends and Interest 3,662
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Total Assets 1,398,871
Liabilities
Payable for investment securities purchased 10,500
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Total Liabilities 10,500
Net Assets $ 1,388,371
Net Assets Consist of:
Capital Paid In 1,383,325
Accumulated Realized Gain (Loss) on Investments - Net 5,842
Unrealized Depreciation in Value
of Investments Based on Identified Cost - Net (796)
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Net Assets, for 137,570 Shares Outstanding $ 1,388,371
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Net Asset Value and Redemption Price
Per Share ($1,388,371/137,570 shares) 10.09
Offering Price Per Share 10.09
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India Technology Fund
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Statement of Operations
For the period ended June 30, 2000 (Unaudited)
Investment Income:
Dividends -
Interest 5,842
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Total Investment Income 5,842
Expenses
Management Fees (Note 2) -
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Total Expenses -
Net Investment Income 5,842
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments -
Unrealized Appreciation (Depreciation) on Investments (796)
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Net Realized and Unrealized Gain (Loss) on Investments (796)
Net Increase (Decrease) in Net Assets from Operations 5,046
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India Technology Fund
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Statement of Changes in Net Assets
For two months ending June 30, 2000 (Unaudited)
5/01/99 *
to
6/30/00
From Operations:
Net Investment Income 5,842
Net Realized Gain (Loss) on Investments 0
Net Unrealized Appreciation (Depreciation) (796)
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Increase (Decrease) in Net Assets from Operations 5,046
From Distributions to Shareholders
Net Investment Income 0
Net Realized Gain (Loss) from Security Transactions 0
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Net Increase (Decrease) from Distributions 0
From Capital Share Transactions:
Proceeds From Sale of Shares 883,325
Shares Issued on Reinvestment of Dividends 0
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Cost of Shares Redeemed 0
Net Increase from Shareholder Activity 883,325
Net Increase in Net Assets 888,371
Net Assets at Beginning of Period 500,000
Net Assets at End of Period 1,388,371
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Share Transactions:
Issued 87,570
Reinvested -
Redeemed -
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Net increase (decrease) in shares 87,570
Shares outstanding beginning of period 50,000
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Shares outstanding end of period 137,570
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*Commencement of operations
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India Technology Fund
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Financial Highlights (Unaudited)
Selected data for a share outstanding throughout the period:
5/01/99**
to
6/30/00
Net Asset Value -
Beginning of Period 10.00
Net Investment Income 0.10
Net Gains or Losses on Securities
(realized and unrealized) (0.01)
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Total from Investment Operations 0.09
Dividends
(from net investment income) 0.00
Distributions (from capital gains) 0.00
Return of Capital 0.00
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Total Distributions 0.00
Net Asset Value -
End of Period 10.09
Total Return 0.90%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 1,388
Ratio of Expenses to Average Net Assets 0.00% *
Ratio of Net Income to Average Net Assets 3.84% *
Portfolio Turnover Rate 0.00% *
* Annualized
** commencement of operations.
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India Technology Fund
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Notes to Financial Statements
June 30, 2000 (Unaudited)
1.)SIGNIFICANT ACCOUNTING POLICIES
The Fund is an open-end management investment company, organized as a Trust
under the laws of the State of Delaware by a Declaration of Trust in
November 1999. The Fund's investment objective is to obtain long-term
capital appreciation. In seeking its objective, this Fund will invest at
least 70% of its total assets in securities of Indian technology companies.
Significant accounting policies of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a common and preferred stock, convertible
debt and equity instruments. The investments in securities are carried at
market value. The market quotation used for common stocks, including those
listed on the NASDAQ National Market System, is the last sale price on the
date on which the valuation is made or, in the absence of sales, at the
closing bid price. Over-the-counter securities will be valued on the basis
of the bid price at the close of each business day. Short-term investments
are valued at amortized cost, which approximates market. Securities for
which market quotations are not readily available will be valued at fair
value as determined in good faith pursuant to procedures established by the
Board of Directors.
SECURITY TRANSACTION TIMING
Security transactions are recorded on the dates transactions are entered
into. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded as earned. The Fund uses the
identified cost basis in computing gain or loss on sale of investment
securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service. This Internal Revenue Service requirement may
cause an excess of distributions over the book year-end accumulated income.
In addition, it is the Fund's policy to distribute annually, after the end
of the fiscal year, any remaining net investment income and net realized
capital gains.
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.
2.)INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration
agreement with Venus Capital Management, Inc. As compensation for the
Adviser's services to the Fund, the Fund will pay the Advisor a
performance-based management fee ranging from 0.00%- 5.00% of the Fund's
net asset value, calculated monthly by comparing the funds investment
advisory by comparing the Fund's investment performance to a target during
the most recent twelve-month period. The Fund paid investment management
fees of $0 during the two months ending June 30, 2000.
3.)RELATED PARTY TRANSACTIONS
Certain owners of Venus Capital Management, Inc. are also owners and/or
directors of the India Technology Fund. These individuals may receive
benefits from any management fees paid to the Advisor.
As of June 30, 2000, VLS International, SA owned 36.05% of the Fund. This
shareholder is considered a control person as defined under Section 2(1)(9)
of the 1940 Act, by virtue of their ownership of more than 25% of the
voting securities of the Fund.
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4.)CAPITAL STOCK AND DISTRIBUTION
At June 30, 2000 an indefinite number of shares of capital stock were
authorized, and paid-in capital amounted to $1,383,325.
5.)PURCHASES AND SALES OF SECURITIES
During the two months ending June 30, 2000, purchases and sales of
investment securities other than U.S. Government obligations and short-term
investments aggregated $85,140 and $0 respectively. Purchases and sales of
U.S. Government obligations aggregated $0 and $0 respectively.
6.)FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance
sheet risk as of June 30, 2000.
7.)SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at June 30,
2000 was the same as identified cost. At June 30, 2000, the composition of
unrealized appreciation (the excess of value over tax cost) and
depreciation (the excess of tax cost over value) was as follows:
Appreciation (Depreciation) Net Appreciation (Depreciation)
5,273 (6,069) (796)
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Board of Trustees
John Gutjreund
Rajvir Singh
S. Afiq Raza
Vikas Mehrotra
Investment Adviser
Venus Capital Management.
31 Milk St.. Suite 315
Boston, MA 02109
Dividend Paying Agent,
Shareholders' Servicing Agent,
Transfer Agent
Mutual Shareholder Services
1301 E. 9th St., Suite 1005
Cleveland, Ohio 44114
Custodian
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
Counsel
Duval & Stachenfeld LLP,
300 E 42nd St. 3rd floor
New York, NY 10017
Independent Auditors
KPMG LLP
99 High Street
Boston, Massachusetts 02110
