Technology Value Fund
June 30, 1997
Semi-Annual Report
<PAGE>
Second Quarter Results
The Technology Value Fund performed extremely well in the second quarter,
gaining 31.5%. In fact, Q2 was the best quarter in the Fund's history. Relative
comparisons for the quarter were strong - the fund easily outpaced the broad
market indices as well as all other Science and Technology Funds.
For the quarter, TVF ranked number two among all U.S. mutual funds tracked
by Lipper Analytical. This makes three out of the last eight quarters in which
the Fund has placed either first or second among all funds.
Performance was lead by the Electronic Design Automation and Semiconductor
sectors. Medical, Networking and Peripherals stocks also performed well. All
sectors made money during the quarter.
More importantly, we are pleased that the Fund's first half and twelve month
performance figures compare favorably with the indices as well as with other
Science and Technology Funds. Although it is gratifying to post a great quarter,
we are well aware that long term investors are best rewarded by consistently
strong results.
Long Term Performance
The chart below shows the monthly performance of the Technology Value Fund
(since inception) versus the three most commonly referenced market indices: The
Dow Jones Industrial Average, the Standard & Poor's 500 index, and the NASDAQ
composite index. (Note: Each of these indices represent an unmanaged,
broad-based basket of stocks. They are typically used as a proxy for overall
market performance.)
Performance
(returns as of 06/30/97)
===============================================================================
Avg. Ann.
1 05/20/94-
Q2 '97 YTD Year 06/30/97
- -------------------------------------------------------------------------------
TVF 31.50% 19.40% 38.41% 54.42%
- -------------------------------------------------------------------------------
DJIA 17.06% 20.12% 38.59% 28.75%
- -------------------------------------------------------------------------------
S&P 500 17.46% 20.61% 34.70% 26.70%
- -------------------------------------------------------------------------------
NASDAQ 18.23% 11.94% 22.08% 25.07%
- -------------------------------------------------------------------------------
Relative Performance: Technology Value Fund vs. Market Indices
TVF PERFORMANCE AS OF JUNE 30, 1997
One-Year Return +38.4%
Average Annual Return Since Inception* +54.4%
Average Annual Return Since Effectiveness** +59.7%
* TVF inception on 05/20/94 ** TVF effectiveness: 12/15/94 (per SEC)
===============================================================================
<TABLE>
MOUNTAIN CHART
<CAPTION>
TVF DJIA NASDAQ S&P 500
--- ---- ------ -------
<S> <C> <C> <C> <C>
5/20/94 $10,000 $10,000 $10,000 $10,000
5/31/94 $10,040 $10,004 $10,108 $10,013
6/30/94 $9,190 $9,666 $9,706 $9,768
7/31/94 $9,430 $10,045 $9,929 $10,088
8/31/94 $10,510 $10,489 $10,527 $10,502
9/30/94 $11,200 $10,320 $10,510 $10,246
10/31/94 $12,170 $10,504 $10,690 $10,475
11/30/94 $11,830 $10,094 $10,316 $10,094
12/31/94 $12,530 $10,372 $10,339 $10,244
1/31/95 $12,412 $10,407 $10,386 $10,509
2/28/95 $13,215 $10,905 $10,926 $10,919
3/31/95 $13,333 $11,325 $11,260 $11,241
4/30/95 $14,436 $11,778 $11,634 $11,572
5/31/95 $14,543 $12,217 $11,930 $12,034
6/30/95 $15,742 $12,487 $12,890 $12,314
7/31/95 $17,980 $12,913 $13,832 $12,722
8/31/95 $19,212 $12,691 $14,103 $12,754
9/30/95 $20,679 $13,206 $14,435 $13,293
10/31/95 $20,047 $13,122 $14,335 $13,245
11/30/95 $20,294 $14,053 $14,663 $13,827
12/31/95 $20,194 $14,194 $14,577 $14,093
1/31/96 $20,063 $14,976 $14,687 $14,573
2/29/96 $21,454 $15,274 $15,255 $14,708
3/31/96 $21,585 $15,581 $15,273 $14,849
4/30/96 $26,984 $15,539 $16,513 $15,068
5/31/96 $30,751 $15,801 $17,251 $15,457
6/30/96 $27,970 $15,855 $16,444 $15,516
7/31/96 $26,316 $15,519 $14,997 $14,830
8/31/96 $27,400 $15,817 $15,845 $15,143
9/30/96 $30,291 $16,594 $17,035 $15,996
10/31/96 $29,251 $17,023 $16,962 $16,437
11/30/96 $32,786 $18,470 $17,952 $17,679
12/31/96 $32,422 $18,293 $17,934 $17,329
1/31/97 $34,915 $19,337 $19,170 $18,411
2/28/97 $31,886 $19,579 $18,189 $18,556
3/31/97 $29,438 $18,771 $16,980 $17,793
4/30/97 $31,039 $19,998 $17,532 $18,856
5/31/97 $38,053 $20,972 $19,484 $20,004
6/30/97 $38,714 $21,974 $20,075 $20,900
</TABLE>
NOTE:The Fund's performance information assumes reinvestment of all dividends
and includes all fund expenses. Past performance does not guarantee future
results. Both the return from and the principal value of an investment in
the Fund will fluctuate so that any investor's shares, when redeemed, may
be worth more or less than their original cost.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
Portfolio Discussion
Assets under management more than doubled during the quarter - from $50.6M
to $108.7M. Most of the new cash was employed in the medical, semiconductor and
networking sectors. Sector performance varied from a slight gain in the
semiconductor equipment stocks to very strong returns by the EDA group. All
sectors posted positive performance.
The chart below details the Fund's holdings by sector as of 06/30/97. Our
weighting in semiconductors declined from 37.4% to 30.3%. Our best performers
were PMC-Sierra, Dallas Semiconductor, Triquint, Level One and Quality
Semiconductor. AMD and Texas Instruments declined in value. We established a new
position in Texas Instruments, re-established a position in Vitesse, and closed
our position in C-Cube Microsystems.
Our investment in semiconductor capital equipment declined from 1.3% to
.76%. We established a new position in KLA-Tencor and closed out our position in
Novellus.
The Fund's weighting in Electronic Design Automation (EDA) stocks fell from
11.2% to 7.7%. We added to our position in Avant!, established a new position in
Technology Modeling Associates, and sold our Synopsys shares.
Our weighting in the medical sector expanded from 19.6% to 24.8%. We
established new positions in Cardiothoracic Systems, Chiron, Endocardial
Solutions, HCIA and Mariner Health Care. We closed our positions in Occu Systems
and Regeneron.
Our weighting in networking declined slightly, from 20.4% to 20.1%. Our best
performers were US Robotics and Cisco Systems. We added significantly to our
positions in Cisco and Cascade. US Robotics was acquired by 3Com.
===============================================================================
Top 5 Stocks by $ Gain in Q2 1997
- -------------------------------------------------------------------------------
Stock Symbol $ Gain % Gain
- -------------------------------------------------------------------------------
PMC-Sierra PMCS 3,314,375 60.49
Arterial Vascular AVEI 3,008,528 96.13
Avant! AVNT 1,476,285 41.38
3Com/USRobot. COMS/USRX 1,355,000 29.77
Level One LEVL 1,177,533 43.05
===============================================================================
===============================================================================
Bottom 5 Stocks by $ Loss in Q2 1997
- -------------------------------------------------------------------------------
Stock Symbol $ Loss % Loss
- -------------------------------------------------------------------------------
Cascade Comm. CSCC 837,588 15.14
Advanced Micro AMD 225,000 13.55
Ascend ASND 82,500 3.37
Novellus NVLS 57,500 27.78
Texas Instruments TXN 26,825 0.77
- -------------------------------------------------------------------------------
Fund Holdings by Sector as of 06/30/97
Pie Chart:
EDA 7.6%
Semiconductors 30.3%
Semi Equip 0.8%
Networking 20.1%
Peripherals 3.4%
Cash 13.0%
Medical 24.8%
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
Portfolio Snapshot
Technology Value Fund 06/30/97
- -------------------------------------------------------------------------------
Security Shares Price Market Value
- -------------------------------------------------------------------------------
3 Com 131,250 45 $5,906,250
Advanced Micro 40,000 36 $1,440,000
Affymetrix 40,000 34 3/4 $1,390,000
Amgen 10,000 58 1/8 $581,250
Applied Materials 5,000 70 13/16 $354,063
Arterial Vascular1 90,700 32 3/16 $6,138,156
Ascend 60,000 39 3/8 $2,362,500
Avanti 156,100 32 5/16 $5,043,981
Cabletron Systems 25,000 28 5/16 $707,813
Cardiometrics 281,700 7 11/16 $2,165,569
Cardiothoracic Sys 199,800 14 $2,797,200
Cascade Comm. 170,000 27 5/8 $4,696,250
Centocor 35,000 31 1/16 $1,087,187
Chiron 25,000 20 7/8 $521,875
Cisco Systems 130,000 67 1/8 $8,726,250
Dallas Semi 50,200 39 1/4 $1,970,350
Endocardial Solutions 120,000 9 7/8 $1,185,000
Endosonics 340,000 10 7/8 $3,697,500
Everest Medical 35,000 3 1/8 $109,375
HCIA, Inc. 15,900 33 1/2 $532,650
HMT Technology 60,000 12 15/16 $776,250
IKOS 150,000 21 3/8 $3,206,250
Intel 20,000 141 13/16 $2,836,250
Iomega 150,000 19 7/8 $2,981,250
KLA-Tencor Corp. 10,000 48 3/4 $487,500
Lattice Semi 110,000 56 1/2 $6,215,000
Level One 101,800 38 7/16 $3,912,938
Mariner Health Care 269,000 15 7/16 $4,152,687
MedCath 17,100 14 7/8 $254,362
Medtronic 40,000 81 $3,240,000
Medwave 21,300 13 1/4 $282,225
Mini-Med 32,400 26 5/8 $862,650
PMC-Sierra 370,000 26 1/4 $9,712,500
Quality Semi 237,800 10 5/8 $2,526,625
Silicon Valley Re. 110,000 1 $110,000
Technology Modeling 17,500 13 5/8 $238,437
Texas Instruments 40,000 84 1/16 $3,362,500
Triquint 79,500 34 3/8 $2,732,813
Vitesse 35,000 32 11/16 $1,144,063
Cash- 14,455,888 1 $14,455,888
===============================================================================
Total Investments $114,903,407
===============================================================================
Portfolio snapshots are available through the Fund's e-mail auto-responder.
To obtain a snapshot, send any e-mail message to: [email protected]. The
month-end snapshot will be posted near the end of the following month.
The Doctors' Choice
New surgical instruments and techniques will change the way most coronary
bypass operations are performed. Minimally invasive cardiac surgery (MICS) makes
it possible for surgeons to perform open-heart surgery without a sternotomy
(cracking open the patient's chest). Access to the heart is achieved through
relatively small incisions made between the ribs.
Although angioplasty is less invasive than MICS, its beneficial effects are
short-lived in about 40% of the cases. Normal coronary bypass operations have a
much higher success rate, but are also much more traumatic for the patient. If
the success rate for MICS equals that of standard open procedures, MICS could
become the procedure of choice, offering the best trade-off between trauma and
effectiveness.
Two companies are currently leading this revolution. Cupertino-based
Cardiothoracic Systems, Inc. (CTSI) currently leads in the number of procedures
performed, and the number of surgical teams trained. Redwood City based,
Heartport, Inc. (HPRT) is ahead in sales and market value.
Doctors Wall Street
Choice Choice
(CTSI) (HPRT)
CLINICAL COMPARISON
Q2 Bypass Procedures 1,700 660
Total Bypass Procedures 3,100 1,200
Surgical Teams Trained 260 128
FINANCIAL COMPARISON ($ MILLIONS)
Q2 Revenues $2.8 $4.7
Q2 Losses $4.8 $14.6
Market Cap. $175 $493
Although both companies are growing their procedure volumes at a healthy
rate, CTSI has a significant lead in training surgeons. The number of trained
surgical teams which prefer one procedure over the other is probably the best
predictor of each company's relative share of the patients who could be treated
equally well by either system.
As things are now developing, the future "average" patient, about 50% of the
cases, would be treated with a combination of CTSI's system, balloon
angioplasty, and/or stents. The more "difficult" cases will more likely be
performed on a stopped heart using Heartport's system. The "less" difficult
cases will continue to be candidates for balloon angioplasty alone.
Between the two companies, we believe CTSI is currently the better
investment. CTSI is closer to breaking into profitability, is getting more
procedures done, and has trained more surgical teams than HPRT. And, CTSI's
market cap is less than 50% of HPRT's. Whenever Wall Street and the physician
community disagree on the value of a medical technology, I will always be on the
physicians' side because I think the doctors have better medical judgement than
Wall Street. TVF has accumulated a position in CTSI at prices ranging from $12
to $14. We think CTSI could be trading between $28 and $30 within 2 years.
Heartport may also be a good investment. Although at its current valuation, we
want to see more clinical data to justify its higher price.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
Calculated Risk Pays Off
In our 1996 annual report, we reported that Cardiometrics (CFLO) had
announced an agreement to be acquired by Endosonics (ESON) for a package of
securities and cash valued at a minimum of $9 per share. With CFLO's stock then
trading at 7 1/2, we calculated that if it took 3 months to close the deal an
investment in CFLO stock could give you an annualized return of about 107%. We
liked this risk/reward profile, so the fund started buying.
By the time we issued our Q197 report to shareholders, CFLO had fallen to
around $6 and the value of the package of securities Endosonics had agreed to
pay for each CFLO share had fallen to $7.46 (valued at 5/16/97). Our Q197 report
outlined our reasons for adding to our positions in both Endosonics (then at
$9.50) and Cardiometrics.
On July 24, 1997, Endosonics completed the acquisition of Cardiometrics.
CFLO stockholders received 0.35 of a newly issued share of ESON common stock,
0.1364 of a share of CardioVascular Dynamics Inc. (CCVD) common stock and $3 in
cash, in exchange for each CFLO share.
Between February 3, 1997 and June 3, 1997 the fund purchased a total of
281,700 shares at an average price of $7.43. As of July 30, 1997, the cash and
securities exchanged for each CFLO share was worth a total of $9.10. The fund's
internal rate of return on its CFLO investment was 56%. Endosonics is currently
trading at 13 7/8, an increase of 46% since our Q197 report.
Three Trends You Can Count On
BROADBAND ACCESS TO THE HOME: Cable TV and On-line information services have
clearly demonstrated two things: One, that people love greater access to
information, and two, that they are unwilling to pay a premium for it.
Furthermore, consumer behavior is evolving as people learn how to make fuller
use of their new capabilities. The combination of increasing user sophistication
and ever richer content should lead to years of growing consumer demand for
bandwidth.
There are a number of competing technologies aimed at providing more
information to the home. These include cable modems, Direct Broadcast Satellite,
and the various flavors of Digital Subscriber Line techniques (xDSL).
Balancing our two assumptions: the need for a "wider information pipe", and
the price sensitivity of the typical consumer, we observe that the
easier-and-cheaper-to-deploy mousetrap could easily win-out over the better
mousetrap. We are therefore investing in companies that can provide and apply
practical technology to this opportunity.
EXPANSION OF THE COMMUNICATIONS BACKBONE: If we believe that "broadband to
the home" is inevitable because people want it, then it stands to reason that
once it's in place, people will use it aggressively. As surely as having more
cars jams surface streets and freeways alike, upgrading the edges of a network
puts amazing pressure on the central backbone.
This pressure will come not only from the home, but from the workplace as
well. Companies are upgrading their Local Area Networks as fast as they can. The
combination of faster upgraded LAN's, along with new deployments, will place
greater demands on the corresponding Wide Area Networks which, in turn, will
stress the backbone like never before.
That the backbone will have to expand is not in dispute. It is the magnitude
of the coming change that goes unappreciated. Most people understand, for
example, that a 56K modem can download information almost four times as fast as
a 14.4K modem, or that a 1% growth in phone lines translates into an increase of
at least 1% in phone traffic, but we fail to note the gradual, often subtle
changes in how we use technology. More often than not, it is the secondary
changes that prove to be most profound.
A good example of a behavioral change is the fax machine, which
fundamentally altered the basic demand each of us places on the telephone
network. But most do not appreciate that many more such fundamental shifts lie
ahead. Most of us are still so busy learning how to best utilize simple-text
e-mail, that we don't stop to ponder the ramifications of having the ability to
e-mail a photograph, then an entire photo album and even a home video to a
distant relative.
Although we can't say exactly how people's behavior will change, it's a safe
bet that it will. Whatever form these changes take, they are sure to create
problems and bottlenecks in the communications infrastructure - and we'll be
looking to invest in the companies that can best take advantage of those
opportunities.
BETTER-FASTER-CHEAPER-SMALLER: The chip industry pushes the rest of
high-tech along by constantly shrinking current products onto future designs
which are either more feature-rich, less expensive, or both. In order to
continue down this path, the semiconductor industry will need help from both
Electronic Design Automation (EDA) and Process Technology companies.
Within the EDA realm, chip companies will face severe challenges at either
end of the design process. At the transistor level, designers will find that the
basic assumptions of device modeling will need to be revisited at the "deep
sub-micron" level. Basic transistor behavior will need to be re-examined (and
"re-modeled") as second-order effects become nontrivial.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
At the other end of the design process, the task of verifying designs of
ever-increasing complexity is becoming untenable. New techniques will soon be an
absolute requirement for any chip company wishing to hit its market windows on
time. The challenge for us is to invest in those EDA companies which provide the
right solutions to tomorrow's challenges.
But all of this is moot if you can't physically build the chip. In order to
pack more transistors into a given area, chip companies are thinking in all
three dimensions - adding more layers of interconnect, for instance, as well as
shrinking line geometries.
Building more layers on a chip sounds like an easy way to increase the
density of a device, but there are considerable complications involved. Each
process step, whether it's an etch, a deposition, an oxide growth or even an
implant, assumes a flat surface, but leaves an uneven one. Past a certain point,
the loss of planarity makes further process steps impractical.
Hence the need for Chemical/Mechanical Planarization (CMP). By precisely
applying a fine mixture of chemical abrasives, CMP equipment can re-planarize a
wafer in mid-process. This effectively enables the manufacture of higher
density, and therefore lower cost, devices. We believe that we are witnessing
the early stages of industry-wide adoption of this process, and are looking to
invest heavily in the emerging leaders.
Automatic Investing in TVF Now Available
Once you establish a direct account with Interactive Investments, you may
now automatically add a minimum of $50 per month. Investing fixed sums at
regular intervals brings the power of dollar cost averaging to your TVF account.
Call our Shareholder Services Office at the toll-free number listed below for
details.
Money Market Fund Also Available
For our clients with direct accounts, a money market account is now
available. Call our Shareholder Services Office at the toll-free number listed
below and request a prospectus for details.
Staying Current on the Technology Value Fund
===============================================================================
Newspaper Listing TECH VALUE
- - - - - - - - -
Web Site WWW.TECHFUNDS.COM
- - - - - - - - -
Ticker Symbol TVFQX
- - - - - - - - -
Getting Info Via Email Send any email message to:
General Info and Portfolio Holdings [email protected]
Application and Prospectus [email protected]
- - - - - - - - -
Getting Info Via U.S. Mail 1-888-TVF-FUND
- - - - - - - - -
Direct Account Shareholder Services 1-888-884-2675
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
Outlook
Given that the first quarter's 9.2% decline was our worst ever, and that the
second quarter's 31.5% gain was our best ever, we feel it's safe to say that
1997 is already shaping up to be a year of sharp contrasts and interesting
lessons. Although active traders had ample opportunity to make and lose money,
patient investors enjoyed a very respectable 19.4% gain over the first six
months, demonstrating that often, the best way to react to volatility is to
ignore it.
Looking forward, we are excited about the potential of the medical and
electronic industries, as they continue to offer unique new possibilities to the
world through the creative application of technology. Our portfolio represents
the collection of companies which we feel have the greatest potential to benefit
from this on-going renaissance.
We would like to take this opportunity to once again thank our shareholders,
both new and old, for their patience and confidence in us.
/s/KEVIN LANDIS /s/KEN KAM
KEVIN LANDIS KEN KAM
Portfolio Manager, Electronic Technology Portfolio Manager, Medical Technology
Technology Value Fund Technology Value Fund
Important Legal Disclosures
This report is provided for the general information of TVF shareholders and
is not authorized for distribution to prospective investors in the Fund unless
preceded or accompanied by a current prospectus. Past performance is not a
guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Investing in high technology and medical technology
stocks entails certain risks, including increased volatility of share value.
Investors are encouraged to read the prospectus carefully. Copies of the most
recent prospectus are available on the Fund's web site, or by calling 1 (888)
TVF-FUND. You may also request the most recent prospectus from the following
brokers: Charles Schwab's OneSource, Fidelity Investments, Jack White & Co., and
National Investors Service Corporation.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
<S> <C>
ASSETS
Investments in securities, at value (cost $85,127,710) (Note 1) $ 100,447,519
Investments in repurchase agreements (Note 1) 14,455,000
Cash 888
Receivable for capital shares sold 2,178,471
Dividends and interest receivable 6,286
Other assets 11,578
----------------
TOTAL ASSETS $ 117,099,742
----------------
LIABILITIES
Payable to affiliates (Note 3) 149,255
Payable for capital shares redeemed 67,800
Payable for securities purchased 8,136,375
----------------
TOTAL LIABILITIES $ 8,353,430
----------------
NET ASSETS $ 108,746,312
================
Net assets consist of:
Paid-in capital (Note 1) $ 94,180,157
Accumulated net investment loss (432,532)
Accumulated net realized losses from security transactions (321,122)
Net unrealized appreciation on investments 15,319,809
----------------
Net assets $ 108,746,312
================
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) 3,432,876
================
Net asset value, offering price and redemption price per share (Note 1) $ 31.68
================
</TABLE>
See accompanying notes to financial statements.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (unaudited)
===============================================================================
INVESTMENT INCOME
<S> <C>
Interest income $ 134,711
Dividend income 12,344
--------------
TOTAL INVESTMENT INCOME 147,055
--------------
EXPENSES
Investment management fees (Note 3) 304,127
Administration fees (Note 3) 275,460
--------------
TOTAL EXPENSES 579,587
--------------
NET INVESTMENT LOSS (432,532)
--------------
REALIZED AND UNREALIZED GAINS/
(LOSSES) ON INVESTMENTS
Net realized losses from security transactions (257,726)
Net increase in unrealized appreciation on investments 13,094,571
--------------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS 12,836,845
--------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 12,404,313
==============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Periods Ended June 30, 1997 and December 31, 1996
=====================================================================================================
Six Months
Ended Year
06/30/97 Ended
(unaudited) 12/31/96
---------------- ---------------
FROM OPERATIONS
<S> <C> <C>
Net investment loss $ (432,532) $ (103,853)
Net realized gains/(losses) from security transactions (257,726) 2,546,140
Net change in unrealized appreciation on investments 13,094,571 1,675,722
---------------- ---------------
Net increase in net assets from operations 12,404,313 4,118,009
---------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net realized gains (238,678) (2,244,807)
---------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS (A)
Proceeds from shares sold 98,197,767 35,670,929
Net asset value of shares issued in
reinvestment of distributions to shareholders 164,773 1,153,485
Payments for shares redeemed (36,885,965) (6,274,508)
---------------- ---------------
Net increase in net assets from capital share transactions 61,476,575 30,549,906
---------------- ---------------
TOTAL INCREASE IN NET ASSETS 73,642,210 32,423,108
NET ASSETS
Beginning of period 35,104,102 2,680,994
---------------- ---------------
End of period $ 108,746,312 $ 35,104,102
================ ===============
(a) CAPITAL SHARE ACTIVITY:
Shares sold 3,432,255 1,435,204
Shares issued in reinvestment of distributions
to shareholders 6,840 43,942
Shares redeemed (1,322,851) (307,953)
---------------- ---------------
Net increase in shares outstanding 2,116,244 1,171,193
Shares outstanding, beginning of period 1,316,632 145,439
---------------- ---------------
Shares outstanding, end of period 3,432,876 1,316,632
================ ===============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding Throughout Each Period
===============================================================================================================================
Six Months
Ended Year Year Period From
06/30/97 Ended Ended 05/20/94 (a)
(unaudited) 12/31/97 12/31/95 to 12/31/94
----------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 26.66 $ 18.44 $ 11.70 $ 10.00
----------- ---------- --------- ---------
Income from investment operations:
Net investment loss (0.07) (0.08) (0.14) (0.03)
Net realized and unrealized gains on investments 5.21 11.20 7.28 2.56
----------- ---------- --------- ---------
Total from investment operations 5.14 11.12 7.14 2.53
----------- ---------- --------- ---------
Less distributions:
Distributions from net realized gains (0.12) (2.90) (0.40) (0.83)
----------- ---------- --------- ---------
Net asset value at end of period $ 31.68 $ 26.66 $ 18.44 $ 11.70
=========== ========== ========= =========
Ratios and supplemental data:
Total return 39.1% (c) 60.5% 61.2% 25.3% (b)
=========== ========== ========= =========
Net assets at end of period (millions) $ 108.7 $ 35.1 $ 2.7 $ 0.2
=========== ========== ========= =========
Ratio of expenses to average net assets 1.89% (c) 1.81% 1.98% 1.96% (c)
Ratio of net investment loss to average net assets (1.41%) (c) (0.55%) (1.45%) (1.29%) (c)
Portfolio turnover rate 41% (c) 43% 45% 56%
Average commission rate per share $ 0.0380 $0.0426 N/A N/A
<FN>
(a) Commencement of operations.
(b) Not annualized.
(c) Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (unaudited)
===============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Technology Value Fund (the Fund) is a non-diversified series of
Interactive Investments Trust (the Trust), an open-end management
investment company registered under the Investment Company Act of 1940.
The Trust was organized as an Delaware business trust on November 8, 1993.
The Fund commenced operations on May 20, 1994. The public offering of
shares of the Fund commenced on January 3, 1995.
The primary investment objective of the Fund is long-term growth of
capital. Receipt of income is a secondary objective, as some investments
may yield dividends, interest or other income. The Fund will invest
primarily in securities of companies in the high technology and medical
fields which are believed to be undervalued and have potential for capital
appreciation. The Fund may also invest portions of its total assets in
securities that entail special risks, such as foreign securities and
securities of unseasoned issuers.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of
the close of business of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time). Securities which are
traded on a national stock exchange or are quoted by NASDAQ are valued
based upon the last reported sale price as of the close of the regular
session of trading on the New York Stock Exchange, or, if not traded, at
the most recent bid price. Securities which are traded over-the-counter,
and which are not quoted by NASDAQ, are valued based on the most recent
bid price as obtained from one or more of the major market makers for such
securities.
Repurchase agreements -- Repurchase agreements, which are collateralized
by U.S. Government obligations, are valued at cost which, together with
accrued interest, approximates market. At the time the Fund enters into a
repurchase agreement, the seller agrees that the value of the underlying
securities, including accrued interest, will at all times be equal to or
exceed the face amount of the repurchase agreement.
Share valuation -- The net asset value per share of the Fund is calculated
daily by dividing the total value of the Fund's assets, less liabilities,
by the number of shares outstanding, rounded to the nearest cent. The
offering and redemption price per share of the Fund is equal to the net
asset value per share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders -- Distributions to shareholders arising
from net investment income and net realized capital gains, if any, are
distributed at least once each year. Dividends from net investment income
and capital gain distributions are determined in accordance with income
tax regulations, which may differ from generally accepted accounting
principles.
Security transactions -- Security transactions are accounted for on the
trade date. Securities sold are valued on a specific identification basis.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Federal income tax -- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the
Fund so qualifies and distributes at least 90% of its taxable net income,
the Fund (but not the shareholders) will be relieved of federal income tax
on the income distributed. Accordingly, no provision for income taxes has
been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital
gains (earned during the twelve months ended October 31) plus
undistributed amounts from prior years.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
As of June 30, 1997, net unrealized appreciation on investments was
$15,319,809 for federal income tax purposes, of which $19,985,183 related
to appreciated securities and $4,665,374 related to depreciated securities
based on a federal income tax cost basis of $85,127,710.
2. INVESTMENT TRANSACTIONS
During the six months ended June 30, 1997, purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted
to $66,155,604 and $12,043,457, respectively.
3. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of
Interactive Research Advisers, Inc. (the Adviser) or of Countrywide Fund
Services, Inc. (CFS), the administrative services agent, shareholder
servicing and transfer agent, and accounting services agent for the Trust.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of
an Investment Advisory Agreement (the Advisory Agreement). Under the
Advisory Agreement, the Adviser furnishes advice and recommendations with
respect to the Fund's portfolio of securities and investments and provides
persons satisfactory to the Trust's Board of Trustees to act as officers
and employees of the Trust responsible for the overall management and
administration of the Trust, subject to the supervision of the Trust's
Board of Trustees. The Adviser is responsible for (i) the compensation of
any of the Trust's trustees, officers and employees who are directors,
officers, employees or shareholders of the Adviser, (ii) compensation of
the Adviser's personnel and payment of other expenses in connection with
the provision of portfolio management services under the Advisory
Agreement, and (iii) expenses of printing and distributing the Fund's
Prospectus and sales and advertising materials to prospective clients.
For the services provided by the Adviser under the Advisory Agreement, the
Adviser receives from the Fund a management fee, computed and accrued
daily and paid monthly, equal to 1% per annum of the Fund's average daily
net assets.
ADMINISTRATION AGREEMENT
The Trust has entered into a separate contract with the Adviser wherein
the Adviser is responsible for providing administrative and supervisory
services to the Fund (the Administration Agreement). Under the
Administration Agreement, the Adviser oversees the maintenance of all
books and records with respect to the Fund's securities transactions and
the Fund's book of accounts in accordance with all applicable federal and
state laws and regulations. The Adviser also arranges for the preservation
of journals, ledgers, corporate documents, brokerage account records and
other records which are required to be maintained pursuant to the 1940
Act.
Under the Administration Agreement, the Adviser is responsible for the
equipment, staff, office space and facilities necessary to perform its
obligations. The Adviser has also assumed responsibility for payment of
all of the Fund's operating expenses except for brokerage and commission
expenses and any extraordinary and non-recurring expenses.
For the services rendered by the Adviser under the Administration
Agreement, the Adviser receives a fee at the annual rate of .95% of the
Fund's average daily net assets.
The Adviser has retained Countrywide Fund Services, Inc. (the Transfer
Agent) to serve as the Fund's transfer agent, dividend paying agent and
shareholder service agent, to provide accounting and pricing services to
the Fund, and to assist the Adviser in providing executive, administrative
and regulatory services to the Fund. The Transfer Agent is an indirect
wholly owned subsidiary of Countrywide Credit Industries, Inc., a New York
Stock Exchange-listed company principally engaged in the business of
residential mortgage lending. The Adviser (not the Fund) pays the Transfer
Agent's fees for these services.
4. SPECIAL MEETING OF SHAREHOLDERS
On July 21, 1997, a special meeting of shareholders of the Fund was held
at which a new investment advisory agreement with the Adviser (the New
Advisory Agreement) was approved. The New Advisory Agreement increases the
investment management fees payable by the Fund to the Adviser from an
annual rate of 1% of the Fund's average daily net assets to an annual rate
of 1.50%. However, due to a corresponding decrease in the administration
fees payable by the Fund to the Adviser, the Fund's total operating
expenses will not increase as a result of the New Advisory Agreement.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
June 30, 1997 (unaudited)
% of Unrealized
COMMON STOCKS SHARES TOTAL COST MARKET VALUE GAIN/(LOSS)
------------- ------- ----- ------------ ------------ -------------
<S> <C> <C> <C> <C>
ELECTRONIC DESIGN AUTOMATION
IKOS Systems, Inc. * 150,000 $ 2,902,150 $ 3,206,250 $ 304,100
Avant! Corp. * 156,100 3,755,583 5,043,981 1,288,398
Silicon Valley Research * 110,000 514,556 110,000 (404,556)
Technology Modeling Associates. Inc. * 17,500 241,563 238,437 (3,126)
---------- ------- -------
TOTAL ELECTRONIC DESIGN AUTOMATION 7.9% 7,413,852 8,598,668 1,184,816
--------- --------- ---------
MEDICAL
HCIA, Inc. * 15,900 367,136 532,650 165,514
Affymetrix, Inc. * 40,000 1,119,513 1,390,000 270,487
Amgen, Inc. * 10,000 499,790 581,250 81,460
Arterial Vascular Engineering, Inc. * 190,700 3,208,433 6,138,156 2,929,723
Cardiometrics, Inc. * 281,700 2,093,544 2,165,569 72,025
Cardiothoracic Systems, Inc. * 199,800 2,716,776 2,797,200 80,424
Centocor, Inc. * 35,000 1,091,585 1,087,187 (4,398)
Chiron Corp. * 25,000 461,937 521,875 59,938
Endocardial Solutions, Inc. * 120,000 1,144,800 1,185,000 40,200
Endosonics Corp. * 340,000 3,742,390 3,697,500 (44,890)
Everest Medical Corp. 35,000 135,513 109,375 (26,138)
Mariner Health Group, Inc. * 269,000 3,087,802 4,152,687 1,064,885
Medcath, Inc. * 17,100 309,058 254,362 (54,696)
Medtronic, Inc. 40,000 2,646,930 3,240,000 593,070
Medwave, Inc. * 21,300 240,902 282,225 41,323
Minimed, Inc. * 32,400 880,346 862,650 (17,696)
------- ------- --------
TOTAL MEDICAL 26.7% 23,746,455 28,997,686 5,251,231
----------- ---------- ---------
NETWORKING
3 Com Corp. * 131,250 4,994,326 5,906,250 911,924
Ascend Communications, Inc. * 60,000 4,302,550 2,362,500 (1,940,050)
Cabletron Systems, Inc. * 25,000 971,600 707,813 (263,787)
Cascade Communications Corp. * 170,000 5,754,390 4,696,250 (1,058,140)
Cisco Systems, Inc. * 130,000 8,241,383 8,726,250 484,867
---------- ----------- -------------
TOTAL NETWORKING 20.6% 24,264,249 22,399,063 (1,865,186)
---------- ---------- -----------
PERIPHERAL
HMT Technology Corp. * 60,000 741,564 776,250 34,686
Iomega Corp. * 150,000 2,826,775 2,981,250 154,475
--------- ----------- ---------
TOTAL PERIPHERAL 3.4% 3,568,339 3,757,500 189,161
--------- ----------- ---------
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
<CAPTION>
PORTFOLIO OF INVESTMENTS, continued
June 30, 1997 (unaudited)
% of Unrealized
COMMON STOCKS SHARES TOTAL COST MARKET VALUE GAIN/(LOSS)
------------- ------- ----- ------------ ------------ -------------
<S> <C> <C> <C> <C>
SEMICONDUCTOR EQUIPMENT
Applied Materials, Inc. * 5,000 187,508 354,063 166,555
KLA-Tencor Corp. * 10,000 434,500 487,500 53,000
------- ---------- ------------
TOTAL SEMICONDUCTOR EQUIPMENT 0.8% 622,008 841,563 219,555
------- ---------- -----------
SEMICONDUCTORS
Advanced Micro Devices, Inc. * 40,000 831,600 1,440,000 608,400
Dallas Semiconductor Corp. 50,200 1,312,910 1,970,350 657,440
Intel Corp. 20,000 1,574,077 2,836,250 1,262,173
Lattice Semiconductor Corp. * 110,000 4,429,445 6,215,000 1,785,555
Level One Communications, Inc. * 101,800 2,773,498 3,912,938 1,139,440
PMC-Sierra, Inc. * 370,000 5,933,931 9,712,500 3,778,569
Quality Semiconductor, Inc. * 237,800 2,048,394 2,526,625 478,231
Texas Instruments, Inc. 40,000 3,491,825 3,362,500 (129,325)
TriQuint Semiconductor, Inc. * 79,500 1,972,126 2,732,813 760,687
Vitesse Semiconductor, Corp. * 35,000 1,145,001 1,144,063 (938)
---------- ----------- --------------
TOTAL SEMICONDUCTORS 33.0% 25,512,807 35,853,039 10,340,232
---------- ---------- ----------
TOTAL COMMON STOCKS 92.4% 85,127,710 100,447,519 15,319,809
---------- ----------- ----------
FACE AMOUNT
-----------
REPURCHASE AGREEMENTS (1)
The Fifth Third Bank, 5.07%, dated
6/30/97, due 7/01/97, repurchase
proceeds $14,457,036 $ 14,455,000 13.3% 14,455,000 14,455,000
----- ------------ -------------
TOTAL INVESTMENTS AND
REPURCHASE AGREEMENTS 105.7% $ 99,582,710 $ 114,902,519 $ 15,319,809
============= ============
Liabilities in Excess of Other Assets (5.7%) (6,156,207)
------ -------------
TOTAL NET ASSETS 100.0% $ 108,746,312
====== =============
<FN>
* Non-income producing security.
(1) Repurchase agreements are fully collateralized by U.S. Government obligations.
</FN>
</TABLE>
See accompanying notes to financial statements.
===============================================================================
Interactive Investments o 101 Park Center Plaza - Suite 1300 o
San Jose, CA 95113 o 1 (888) 884-2675
<PAGE>
INTERACTIVE INVESTMENTS TRUST
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
BOARD OF TRUSTEES
Ken Kam
Kevin Landis
Michael Lynch
Mark Taguchi
OFFICERS
Kevin Landis, President
Kendrick Kam, Secretary
Yakoub Billawala, Treasurer
INVESTMENT ADVISER
Interactive Research Advisers, Inc.
101 Park Center Plaza, Suite 1300
San Jose, CA 95113
TRANSFER AGENT / FUND ACCOUNTANT / FUND ADMINISTRATOR
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201
This report is authorized for distribution only when it is accompanied or
preceded by a current prospectus of Interactive Investments' Technology Value
Fund.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000917124
<NAME> INTERACTIVE INVESTMENTS - TECHNOLOGY VALUE FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 99,582,710
<INVESTMENTS-AT-VALUE> 114,902,519
<RECEIVABLES> 2,184,757
<ASSETS-OTHER> 11,578
<OTHER-ITEMS-ASSETS> 888
<TOTAL-ASSETS> 117,099,742
<PAYABLE-FOR-SECURITIES> 8,136,375
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 217,055
<TOTAL-LIABILITIES> 8,353,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94,180,157
<SHARES-COMMON-STOCK> 3,432,876
<SHARES-COMMON-PRIOR> 1,316,632
<ACCUMULATED-NII-CURRENT> (432,532)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (321,122)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,319,809
<NET-ASSETS> 108,746,312
<DIVIDEND-INCOME> 12,344
<INTEREST-INCOME> 134,711
<OTHER-INCOME> 0
<EXPENSES-NET> 579,587
<NET-INVESTMENT-INCOME> (432,532)
<REALIZED-GAINS-CURRENT> (257,726)
<APPREC-INCREASE-CURRENT> 13,094,571
<NET-CHANGE-FROM-OPS> 12,404,313
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 238,678
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,432,255
<NUMBER-OF-SHARES-REDEEMED> 1,322,851
<SHARES-REINVESTED> 6,840
<NET-CHANGE-IN-ASSETS> 73,642,210
<ACCUMULATED-NII-PRIOR> (125,410)
<ACCUMULATED-GAINS-PRIOR> 300,692
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 304,127
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 579,587
<AVERAGE-NET-ASSETS> 61,736,356
<PER-SHARE-NAV-BEGIN> 26.66
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 5.21
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.12
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31.68
<EXPENSE-RATIO> 1.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
