AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07585
---------
WWW FUNDS
(Exact name of registrant as specified in charter)
131 PROSPEROUS PLACE, SUITE 17, LEXINGTON, KY 40509
---------------------------------------------------
(Address of principal offices) (Zip code)
Lawrence S. York
131 PROSPEROUS PLACE, SUITE 17, LEXINGTON, KY 40509
(Name and address of agent for service)
Registrant's telephone number, including area code: 859-263-2204
Date of fiscal year end: JUNE 30, 2003
---------------------
Date of reporting period: JUNE 30, 2003
-------------------------
ITEM 1. REPORT TO STOCKHOLDERS.
[LOGO OMITTED]
THE WWW FUNDS
ANNUAL REPORT
JUNE 30, 2003
HOW TO CONTACT THE WWW FUNDS
- --------------------------------------------------------------------------------
By mail:
The WWW Funds
P.O. Box 25910
Lexington, KY 40524-5910
By phone:
1-888-999-8331
By email:
advisor@thewwwfunds.com
Website:
www.thewwwfunds.com
This report is intended for the Funds' shareholders. It may not be distributed
to prospective investors unless preceded or accompanied by the current
prospectus.
CONTENTS
Letter to the Shareholders ................................................ 1
Financial Statements ...................................................... 4
Financial Highlights ...................................................... 8
WWW Internet Fund Schedule of Investments ................................. 12
Growth Flex Fund Schedule of Investments .................................. 15
Market Opportunities Fund Schedule of Investments ......................... 20
Notes to Financial Statements ............................................. 22
Independent Accountants' Report ........................................... 29
Trustees and Officers ..................................................... 30
LETTER TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Fellow Shareholders:
Since we reported one year ago, the major market indices have rebounded from
their lows. Yet, as of our current fiscal year ending June 30, 2003, these
indices still had not posted positive returns in more than three years. By
contrast, the Internet indices moved up sharply during our fiscal year on better
business prospects and, undoubtedly, due to being oversold. While the first
three quarters of our fiscal year (June 2002 to March 2003) had the markets
preoccupied with the war in Iraq, unemployment, and a slowing US economy, the
fourth quarter gave rise to optimism that an economic recovery may now be
inevitable. As many economists point out, US productivity levels have risen
while the lower dollar has positioned American goods and services with a price
advantage. Moreover, the Bush tax reduction package that cut taxes on corporate
dividends is said to be expected to infuse extra cash into the economy and
provide additional stimulus. Now, midway into the third quarter 2003, the stock
market seems poised for further gains.
Looking at the last fiscal year (June 28, 2002 to June 30, 2003) and
year-to-date numbers through the second quarter 2003, the indices compare as
follows:
YEAR 6/28/02 TO 6/30/03 YEAR-TO-DATE 6/30/03
Dow Jones Index - 2.8% + 7.7%
S&P500 Index - 1.6% +10.8%
NASDAQ Composite - 6.1% + 8.5%
IIX Internet Index(1) +36.1% +34.5%
DOT Internet Index(2) +26.9% +42.3%
WWIFX CLASS Y +25.8% +41.8%
Source: Bloomberg. Class Y shares of The WWW Internet Fund are sold with no
sales charge. (1)The IIX Internet Index is a 45-stock index consisting of
Internet technology companies concentrated towards large-cap issues in its top
six holdings with diverse holdings in medium and small companies. (2)The DOT or
Street.com Internet Index is a 20-stock Internet technology index that is fairly
equally weighed.
The WWW Internet Fund performed similarly to the Street.com Internet Index for
the full fiscal year, but it lagged behind the IIX Internet Index during the
first half, thanks largely to the IIX's greater large-cap stock weightings.
Year-to-date as of June 30, 2003, both the WWW Internet Fund and the Street.com
Internet Index outperformed the IIX as well as the broad stock market indices.
The WWW Internet Fund's performance was initially held back by the lack of
market participation by adolescent and midlife companies (small- and mid-cap
holdings) in the first six months. In the second half of the fiscal year, the
opposite was true, and the WWW Internet Fund's performance was significantly
boosted by a market cap rotation within the Internet and technology sectors.
Stocks that made the largest contribution to our performance were Amazon,
Charter Communications, Finisar, Interactive Corp (formerly USA Networks),
SafeNet, and Yahoo. Stocks that underperformed were mature companies such as
Applied Materials, Microsoft, Liberty Media, Peoplesoft, and Charles Schwab. The
strong second-half improvement in our results was largely due to investors
returning to leading Internet stocks that had become oversold. Also contributing
was a generally more bullish market sentiment following the end of major
conflict in Iraq and the implementation of the Bush Administration's pro-growth
stimulus policies.
1
LETTER TO THE SHAREHOLDERS - CONTINUED
- --------------------------------------------------------------------------------
During the past year, we have strategically evaluated our business and taken
decisive steps intended to grow into a family of funds while creating a new,
identifiable brand. Our first step was to make two new funds available to
shareholders. We thought it was important to provide shareholders with
additional investment options for their money. So we added the Growth Flex Fund
to seek long-term growth while generating income. Growth Flex emphasizes a
"total return" style of investing and uses asset allocation to move money into
stocks, bonds, or cash depending on business and economic conditions. The other
fund added is our Market Opportunities Fund. It seeks to provide shareholders
with capital appreciation over the long term while striving to protect capital
against loss. Market Opportunities utilizes long and short positions as well as
leveraging and hedging techniques while looking for profit opportunities
wherever they may exist.
Our second step was to begin the "rebranding" process of our fund family. Thus,
concurrent with our next report, The WWW Funds will become "IPC Funds,"
effective with our prospectus filing in October. WWW Advisors will continue to
manage the funds, but its name will change as well. Going forward, we hope to
build and grow the IPC Funds brand and add additional fund choices.
Another recent change was to add various share classes (Classes A, B, C, and Y)
to make our funds available to fee-based advisors and registered representatives
of NASD broker dealers. We believe that we will gain greater distribution of
shares by making them available in this "dealer" channel. We expect this will
benefit shareholders by increasing our assets and lowering fund expenses.
Finally, we took the additional step to make the First American Money Market
Fund available to shareholders who may seek a "defensive place" for their money
during future periods of great uncertainty. During the approximately two-month
period of this fiscal year for which these new funds were operative, the Class Y
shares of the Growth Flex Fund rose + 4.2 % while the Class Y shares of the
Market Opportunities Fund rose + 4.5 %. The financial information contained
inside this annual report details the performance of all share classes during
the last year.
In summary, we have worked hard to manage through what has been an unprecedented
decline in the financial markets. We believe our funds are performing well
compared to the markets and our benchmarks. Having said that, we are growth
managers and we expect to perform best in a growing economy. The financial
markets appear to anticipate a return to growth. Should growth occur, we believe
that the Internet and technology sectors should outperform most other sectors
and that small- and mid-cap companies should do better than their large company
competitors. We have taken important steps to position The WWW Funds for the
future. The new funds we have added, together with the new First American Money
Market account option, are demonstrative of our ongoing and responsive
commitment to you, our shareholders.
If you have any questions about your current investments or any of The WWW Funds
that have been added, please contact us at 1-888-263-2204 or visit our Website
at www.thewwwfunds.com.
Thank you for your confidence, trust, and perseverance. We look forward to
helping you reach your investment objectives in an economy that we expect to
improve.
Sincerely,
/S/ LAWRENCE YORK
- ------------------
Lawrence York
Chairman & CIO
2
WWW INTERNET FUND CLASS Y SHARES PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
FROM AUGUST 1, 1996 (*INCEPTION) TO JUNE 30, 2003
[graph omitted]
AVERAGE ANNUAL TOTAL RETURN
---------------------------
1 YEAR 5 YEAR *SINCE INCEPTION
25.60% -10.14% - 3.87%
S & P 500 $16,911
NASDAQ $15,380
WWIFX $ 7,610
It is not possible to invest directly in an index. All indices represented are
unmanaged. All indices include reinvestment of dividends and interest income
unless otherwise noted. The S&P 500 Index is a market capitalization-weighted
index of 500 common stocks chosen for market size, liquidity, and industry group
representation to represent U.S. equity performance. The NASDAQ Composite Index
is a market capitalization-weighted index that is designed to represent the
performance of the National Market System which includes stocks traded only
over-the-counter and not on an exchange.
Past performance is no guarantee of future results.
The line graph of the WWW Internet Fund represents the performance of the Class
Y shares of the WWW Internet Fund. The performance of Class C shares of the WWW
Internet Fund will be greater than or less than the line graph based on the
differences in loads and fees paid by shareholders investing in the different
classes. The sales charges and distribution fees applicable to each class of
shares are described in the Notes to Financial Statements. The Fund's line graph
and table do not reflect the deduction of taxes that a shareholder would pay on
Fund distributions or the redemption of Fund shares. The Fund's line graph and
average annual total returns reflect applicable sales loads and the reinvestment
of dividends and distributions. During certain of the periods shown, the Advisor
reimbursed certain Fund expenses. If the Advisor had not made these
reimbursements, Fund performance would have been lower.
No performance information for the Growth Flex Fund or the Market Opportunities
Fund is provided because these Funds commenced operations on or after May 5,
2003.
3
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
As of June 30, 2003
- --------------------------------------------------------------------------------------------------
MARKET
WWW GROWTH FLEX OPPORTUNITIES
INTERNET FUND FUND FUND
- --------------------------------------------------------------------------------------------------
ASSETS
Investments in securities of unaffiliated
issuers, at value (cost $8,814,546, $1,115,623
and $613,733, respectively) $ 9,554,471 $ 1,148,118 $ 611,018
Investments in securities of affiliated
issuers, at value (cost $338,750) 350,000 -- --
- --------------------------------------------------------------------------------------------------
Total Investments in securities 9,904,471 1,148,118 611,018
- --------------------------------------------------------------------------------------------------
Deposits with brokers for securities sold short -- -- 154,034
Receivable from dividends and interest 377 2,866 13
Receivable from securities sold 259,842 48,192 --
Receivable from fund shares sold 916 1,865 --
Receivable from affiliated fund 8,377 -- --
Receivable from adviser -- 1,823 2,344
Other assets 6,154 -- --
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS 10,180,137 1,202,864 767,409
- --------------------------------------------------------------------------------------------------
LIABILITIES
Securities sold short, at fair value
(proceeds $41,304) -- -- 45,010
Payable for securities purchased 186,761 44,537 4,750
Payable for fund shares redeemed 5,039 -- --
Payable for other accrued expenses 66,132 1,714 2,391
Payable for investment advisory fees 12,713 1,678 750
Payable for distribution fees 4,239 851 384
Payable for administration fees 6,758 -- --
Payable to affiliated fund -- 5,938 2,562
Payable to custodian bank 7,000 -- --
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 288,642 54,718 55,847
- --------------------------------------------------------------------------------------------------
NET ASSETS $ 9,891,495 $ 1,148,146 $ 711,562
==================================================================================================
NET ASSETS CONSIST OF
Capital shares $ 64,847,205 $ 1,102,133 $ 698,439
Net investment loss -- (4,916) (3,675)
Accumulated net realized gain (loss) from
investment transactions (55,706,885) 18,434 23,219
Net unrealized appreciation (depreciation ) 751,175 32,495 (6,421)
- --------------------------------------------------------------------------------------------------
NET ASSETS $ 9,891,495 $ 1,148,146 $ 711,562
==================================================================================================
NET ASSET VALUE PER SHARE:
Each Class of each Fund is authorized to
issue an indefinite number of shares of
beneficial interest, par value $0.001 per
share CLASS A - based on net assets of
$0, $191,713 and $158,731, and shares
outstanding of 0, 18,382 and 15,196,
respectively $ -- $ 10.43 $ 10.45
==================================================================================================
CLASS A - public offering price $0, $10.43 and
$10.45 divided by .9425, .9425 and .94,
respectively $ -- $ 11.07 $ 11.12
==================================================================================================
CLASS C - based on net assets of $2,134, $15,944
and $21,470, and shares outstanding of
405, 1,530 and 2,056, respectively $ 5.27 $ 10.42 $ 10.44
==================================================================================================
CLASS Y - based on net assets of $9,889,361,
$940,489 and $531,361, and shares outstanding
of 1,882,518, 90,182 and 50,865, respectively $ 5.25 $ 10.43 $ 10.45
==================================================================================================
See notes to financial statements
4
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------------------
MARKET
WWW GROWTH FLEX OPPORTUNITIES
INTERNET FUND FUND FUND
FOR THE YEAR FROM INCEPTION FROM INCEPTION
ENDED (MAY 5, 2003) (MAY 6, 2003)
JUNE 30, TO TO
2003 JUNE 30, 2003 JUNE 30, 2003
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 22,861 $ 2,167 $ 219
Interest 4,859 1,301 64
Other income 1,136 32 10
- -------------------------------------------------------------------------------------------
Total investment income 28,856 3,500 293
- -------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 55,627 1,678 751
Distribution fees-Class A -- 135 95
Distribution fees-Class C 1 24 18
Distribution fees-Class Y 39,854 692 271
Administration fees 213,969 4,242 1,801
Custody fees 8,688 1,538 2,193
Auditor fees 33,849 776 447
Legal fees 27,554 412 183
Trustees fees 22,502 396 175
Other expenses 40,541 346 378
- -------------------------------------------------------------------------------------------
Total gross expenses 442,585 10,239 6,312
Less expense reimbursement -- (1,823) (2,344)
- -------------------------------------------------------------------------------------------
Total net expenses 442,585 8,416 3,968
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (413,729) (4,916) (3,675)
- -------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gain (loss) from investment
securities of unaffiliated issuers (4,019,514) 18,434 43,189
Net realized gain (loss) from investment
securities of affiliated issuers 7,500 -- --
Net realized gain (loss) from closed short
positions in securities -- -- (19,970)
Net change in unrealized appreciation
(depreciation) on investments 6,376,054 32,495 (6,421)
- -------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 2,356,540 50,929 16,798
- -------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 1,950,311 $ 46,013 $ 13,123
===========================================================================================
See notes to financial statements
5
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
GROWTH FLEX OPPORTUNITIES
WWW INTERNET FUND FUND FUND
FOR THE YEAR FROM INCEPTION FROM INCEPTION
ENDED FOR THE (MAY 5, 2003) (MAY 6, 2003)
JUNE 30, YEAR ENDED TO TO
2003 JUNE 30, 2002 JUNE 30, 2003 JUNE 30, 2003
------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (413,729) $ (521,214) $ (4,916) $ (3,675)
Net realized gain (loss) from investment transactions (4,012,014) (14,661,988) 18,434 23,219
Net change in unrealized appreciation (depreciation) 6,376,054 1,144,664 32,495 (6,421)
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations 1,950,311 (14,038,538) 46,013 13,123
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) from
capital share transactions (789,911) (2,714,345) 1,102,133 698,439
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,160,400 (16,752,883) 1,148,146 711,562
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 8,731,095 25,483,978 -- --
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 9,891,495 $ 8,731,095 $ 1,148,146 $ 711,562
==========================================================================================================================
See notes to financial statements
6
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- ------------------------------------------------------------------------------------------------------------------------------------
WWW INTERNET FUND CLASS C CLASS Y
FROM INCEPTION
(JUNE 9, 2003) FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
THROUGH ENDED ENDED ENDED ENDED ENDED
JUNE 30, 2003 JUNE 30, 2003 JUNE 30, 2002 JUNE 30, 2001 JUNE 30, 2000 JUNE 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING
OF PERIOD $ 5.18 $ 4.18 $ 10.21 $ 36.63 $ 22.64 $ 10.95
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment gain (loss) (0.02) (0.22) (0.25) (0.49) (0.52) (0.37)
Net realized and unrealized
gain (loss) on investments 0.11 1.29 (5.78) (22.98) 14.91 12.39
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.09 1.07 (6.03) (23.47) 14.39 12.02
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions -- -- -- (2.95) (0.40) (0.33)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $ 5.27 $ 5.25 $ 4.18 $ 10.21 $ 36.63 $ 22.64
===================================================================================================================================
TOTAL RETURN (2,3,4) 1.74% 25.60% (59.06%) (67.19%) 63.56% 112.01%
===================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in thousands) $ 2 $ 9,889 $ 8,731 $ 25,484 $ 102,226 $ 33,318
Ratio of expenses to average
net assets before expenses
reimbursement(1) 6.35% 5.55% 3.75% 2.42% 2.51% 3.65%
Ratio of expenses to average
net assets after expenses
reimbursement(1) N/A N/A 3.47% 2.42% 2.49% 2.50%
Ratio of net investment loss
to average net assets1 (5.99%) (5.19%) (3.63%) (2.25%) (2.13%) (3.07%)
Ratio of net investment loss
to average net assets net
of reimbursement(1) N/A N/A (3.34%) (2.25%) (2.11%) (1.90%)
Portfolio turnover rate 242.29% 242.29% 268.13% 501.71% 229.28% 48.03%
<FN>
(1) Annualized for periods less than one year
(2) Not annualized for periods less than one year
(3) Based on net asset value per share
(4) Total return excludes the effect of sales charges
See notes to financial statements
</FN>
8
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- --------------------------------------------------------------------------------------------------------------
GROWTH FLEX FUND CLASS A CLASS C CLASS Y
FROM INCEPTION FROM INCEPTION FROM INCEPTION
(MAY 5, 2003) (MAY 5, 2003) (MAY 5, 2003)
THROUGH THROUGH THROUGH
JUNE 30, 2003 JUNE 30, 2003 JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) (0.04) (0.05) (0.04)
Net realized and unrealized
gain (loss) on investments 0.47 0.47 0.47
- --------------------------------------------------------------------------------------------------------------
Total from investment operations 0.43 0.42 0.43
- --------------------------------------------------------------------------------------------------------------
Less distributions -- -- --
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.43 $ 10.42 $ 10.43
==============================================================================================================
TOTAL RETURN (2,3,4) 4.30% 4.20% 4.30%
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 192 $ 16 $ 940
Ratio of expenses to average net assets
before expenses reimbursement(1) 6.10% 6.60% 6.10%
Ratio of expenses to average net assets
after expenses reimbursement(1) 5.01% 5.51% 5.01%
Ratio of net investment loss
to average net assets(1) (4.01%) (4.51%) (4.01%)
Ratio of net investment loss to average
net assets net of reimbursement(1) (2.92%) (3.42%) (2.92%)
Portfolio turnover rate 23.49% 23.49% 23.49%
<FN>
1 Annualized for periods less than one year
2 Not annualized for periods less than one year
3 Based on net asset value per share
4 Total return excludes the effect of sales charges
See notes to financial statements
</FN>
9
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- --------------------------------------------------------------------------------------------------------
MARKET OPPORTUNITIES FUND CLASS A CLASS C CLASS Y
FROM INCEPTION FROM INCEPTION FROM INCEPTION
(MAY 6, 2003) (MAY 13, 2003) (MAY 6, 2003)
THROUGH THROUGH THROUGH
JUNE 30, 2003 JUNE 30, 2003 JUNE 30, 2003
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 9.98 $ 10.00
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) (0.06) (0.05) (0.06)
Net realized and unrealized
gain (loss) on investments 0.51 0.51 0.51
- --------------------------------------------------------------------------------------------------------
Total from investment operations 0.45 0.46 0.45
- --------------------------------------------------------------------------------------------------------
Less distributions -- -- --
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.45 $ 10.44 $ 10.45
========================================================================================================
TOTAL RETURN 2 3 4 4.50% 4.61% 4.50%
========================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 159 $ 21 $ 531
Ratio of expenses to average net assets
before expenses reimbursement1 8.36% 8.86% 8.36%
Ratio of expenses to average net assets
after expenses reimbursement1 5.25% 5.75% 5.25%
Ratio of net investment loss
to average net assets1 (7.98%) (8.48%) (7.98%)
Ratio of net investment loss to average
net assets net of reimbursement1 (4.87%) (5.37%) (4.87%)
Portfolio turnover rate 497.88% 497.88% 497.88%
<FN>
1 Annualized for periods less than one year
2 Not annualized for periods less than one year
3 Based on net asset value per share
4 Total return excludes the effect of sales charges
See notes to financial statements
</FN>
10
WWW INTERNET FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 99.06%
B2B/E-COMMERCE 1.95%
Agile Software Corp /De ** 20,000 192,800
COLLECTION AGENCY 2.53%
Collection Express Services Inc (1,2) ** 5,000 250,000
COMPUTERS-INTEGRATED SYS 3.54%
Dell Inc ** 11,000 350,240
COMPUTERS-MEMORY DEVICES 1.40%
StorageNetworks Inc ** 100,000 138,000
COMPUTERS-PERIPHER EQUIP 2.86%
Lexmark International Inc ** 4,000 283,080
E-COMMERCE/PRODUCTS 10.90%
1-800-FLOWERS.COM Inc-Cl A ** 15,000 125,850
Amazon.Com Inc ** 9,000 326,880
Drugstore.Com Inc ** 40,000 233,600
iHigh.Inc 1** 3,280 200,080
Stamps.com Inc ** 40,000 192,000
----------
1,078,410
E-COMMERCE/SERVICES 15.40%
Homestore Inc ** 250,000 430,000
InterActiveCorp ** 13,000 511,290
Priceline.com Inc ** 4,175 93,186
WebMD Corp ** 45,000 489,150
----------
1,523,626
E-MARKETING/INFO 4.68%
DoubleClick Inc ** 50,000 462,500
FINANCE-INVEST BNKR/BRKR 7.40%
Ameritrade Holding Corp ** 30,000 222,000
E*TRADE Group Inc ** 60,000 510,000
----------
732,000
See notes to financial statements
11
WWW INTERNET FUND--Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
INTERNET CONTENT-INFO/NE 13.13%
Harris Interactive Inc ** 30,000 193,800
iVillage Inc ** 300,000 444,000
Marketwatch.com Inc ** 20,000 166,000
TheStreet.com Inc ** 105,000 494,550
----------
1,298,350
INTERNET SECURITY 2.09%
Verisign Inc ** 15,000 206,850
MEDIA 7.84%
AOL Time Warner Inc** 25,000 402,250
Charter Communications Inc-Cl A ** 100,000 373,000
----------
775,250
SEMICONDUCTORS 1.89%
Intel Corp 9,000 187,290
SOFTWARE 7.43%
BEA Systems Inc ** 10,000 108,900
Microsoft Corp 10,000 256,400
Oracle Corp ** 15,000 180,150
Siebel Systems Inc ** 20,000 189,660
----------
735,110
TELECOM EQ FIBER OPTICS 4.14%
Ciena Corp ** 20,000 103,400
Finisar Corp ** 200,000 306,000
----------
409,400
TELECOMMUNICATION EQUIP 3.87%
AudioCodes Ltd ** 50,000 233,000
Comverse Technology Inc ** 10,000 150,100
----------
383,100
WEB PORTALS/ISP 5.82%
hongkong.com Corp ** 250,000 20,000
Yahoo! Inc ** 17,000 555,900
----------
575,900
See notes to financial statements
12
WWW INTERNET FUND--Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT 2.19%
Qualcomm Inc 6,000 216,180
----------
TOTAL COMMON STOCKS
(Cost $8,697,261) 99.06% 9,798,086
- --------------------------------------------------------------------------------
CALL OPTIONS PURCHASED 0.06%
COMMON STOCK EXPIRE DATE STRIKE PRICE
AOL Time Warner Inc 1/17/04 $30.00 20,000 500
Schwab (Charles) Corp 1/17/04 $15.00 20,000 4,500
Sprint Corp PCS Group 1/17/04 $25.00 20,000 500
Sun Microsystems Inc 1/17/04 $12.50 20,000 500
----------
(Cost $366,900) 6,000
- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANIES 1.01%
E-COMMERCE/SERVICES
Owens Direct LLC(1,2) ** (Cost $88,750) 888 100,000
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS 0.00%
First American Treasury Obiligation
Fund Cl S (Cost $385) 385 385
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 100.13%
(COST $9,153,296) 9,904,471
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.13%) (12,976)
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $9,891,495
================================================================================
**Non-income producing securities
1 Illiquid securities
2 Affiliated issuer
See notes to financial statements
13
GROWTH FLEX FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 73.70%
AEROSPACE/DEFENSE 1.14%
Raytheon Co 400 13,136
AGRICULTURE 0.56%
Monsanto Co 300 6,492
AUTO PARTS&EQUIPMENT 0.42%
American Axle & Mfg Holdings Inc** 200 4,780
BANKS 4.34%
BB&T Corporation 300 10,290
Keycorp 500 12,635
PNC Financial Services Group 300 14,643
US Bancorp 500 12,250
----------
49,818
BIOTECHNOLOGY 4.05%
Amgen Inc ** 400 26,376
Cell Genesys Inc ** 500 4,405
Millennium Pharmaceuticals Inc ** 1,000 15,730
----------
46,511
BUILDING MATERIALS 0.32%
Vulcan Materials Co 100 3,707
CELLULAR TELECOM 0.72%
A T & T Wireless Services Inc ** 1,000 8,210
CHEMICALS 1.67%
Dow Chemical Co/The 400 12,384
Lyondell Chemical Co 500 6,765
----------
19,149
COMPUTERS-INTEGRATED SYS 4.63%
Dell Inc ** 1,000 31,840
Hewlett-Packard Co 1,000 21,300
----------
53,140
See notes to financial statements
14
GROWTH FLEX FUND--CONTINUED
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES 0.91%
EMC Corp/Massachusetts ** 1,000 10,470
COMPUTERS-PERIPHER EQUIP 1.85%
Lexmark International Inc ** 300 21,231
E-COMMERCE/PRODUCTS 1.58%
Amazon.Com Inc ** 500 18,160
E-COMMERCE/SERVICES 4.37%
InterActiveCorp ** 1,000 39,330
WebMD Corp ** 1,000 10,870
----------
50,200
ELECTRIC 1.00%
Centerpoint Energy Inc 500 4,075
Cinergy Corp 200 7,358
----------
11,433
ENTERTAINMENT 0.73%
Nevada Gold & Casinos Inc ** 1,000 8,330
FINANCE-INVEST BNKR/BRKR 4.67%
Ameritrade Holding Corp ** 1,000 7,400
E*TRADE Group Inc ** 1,500 12,750
Goldman Sachs Group Inc 400 33,500
----------
53,650
FOOD 0.85%
Kraft Foods Inc-A 200 6,510
Wild Oats Markets Inc ** 300 3,300
----------
9,810
FOREST PRODUCTS&PAPER 1.09%
International Paper Co 200 7,146
Weyerhaeuser Co 100 5,400
----------
12,546
See notes to financial statements
15
GROWTH FLEX FUND--CONTINUED
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
GAS 0.34%
Oneok Inc 200 3,926
HEALTHCARE-PRODUCTS 0.66%
Intuitive Surgical Inc ** 1,000 7,590
INSURANCE 1.14%
Chubb Corp 100 6,000
Lincoln National Corp 200 7,126
----------
13,126
INTERNET CONTENT-INFO/NE 1.23%
TheStreet.com Inc ** 3,000 14,130
MEDIA 5.23%
AOL Time Warner Inc ** 1,000 16,090
Charter Communications Inc-Cl A ** 4,000 14,920
Comcast Corp-Special Cl A ** 1,000 28,990
----------
60,000
METAL FABRICATE/HARDWARE 0.30%
Timken Co 200 3,502
MISCELLANEOUS MANUFACTURE 1.85%
Honeywell International Inc 500 13,425
Textron Inc 200 7,804
----------
21,229
OIL&GAS 5.27%
Anadarko Petroleum Corp 200 8,894
Devon Energy Corporation 200 10,680
EOG Resources Inc 200 8,368
Exxon Mobil Corp 300 10,773
Kerr-Mcgee Corp 200 8,960
Pengrowth Energy Trust 1,000 12,830
----------
60,505
OIL&GAS SERVICES 1.65%
BJ Services Co ** 200 7,472
Halliburton Co 500 11,500
----------
18,972
See notes to financial statements
16
GROWTH FLEX FUND--CONTINUED
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS 8.13%
Abbott Laboratories 200 8,752
Abgenix Inc ** 500 5,225
Astrazeneca Plc-Spons Adr 200 8,154
Celgene Corp ** 200 6,068
Gilead Sciences Inc ** 450 24,998
Merck & Co Inc 100 6,055
Pfizer Inc 1,000 34,150
----------
93,402
PIPELINES 0.70%
El Paso Corp 500 4,040
Williams Cos Inc 500 3,950
----------
7,990
RETAIL-APPAREL/SHOE 0.55%
Chico's FAS Inc ** 300 6,315
RETAIL-DISCOUNT 1.13%
Target Corp 200 7,568
Wal-Mart Stores Inc 100 5,367
----------
12,935
RETAIL-MAJOR DEPT STORE 0.58%
May Department Stores Co/The 300 6,678
RETAIL-RESTAURANTS 1.12%
Dave & Buster's Inc ** 500 5,450
Starbucks Corp ** 300 7,365
----------
12,815
SEMICONDUCTORS 0.91%
Intel Corp 500 10,405
SOFTWARE 1.79%
Microsoft Corp 800 20,512
TELECOM EQ FIBER OPTICS 0.27%
Finisar Corporation ** 2,000 3,060
See notes to financial statements
17
GROWTH FLEX FUND--CONTINUED
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION EQUIP 0.57%
Tellabs Inc ** 1,000 6,560
TELEPHONE-INTEGRATED 1.85%
Level 3 Communications Inc ** 2,000 13,320
Verizon Communications Inc 200 7,890
----------
21,210
WEB PORTALS/ISP 2.85%
Yahoo! Inc ** 1,000 32,700
----------
TOTAL COMMON STOCKS
(Cost $809,371) 73.02% 838,335
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS 5.28%
Anworth Mortgage Asset Corp 2,000 30,840
Duke Realty Corp 200 5,510
Plum Creek Timber Co Inc 300 7,785
Simon Property Group Inc 200 7,806
United Dominion Realty Trust Inc 500 8,610
----------
(Cost $51,831) 60,551
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 13.99%
U.S. Treasury 2% notes due 5/15/06 40,000 40,447
U.S. Treasury 2.625% notes due 5/15/08 40,000 40,384
U.S. Treasury 3.625% notes due 5/15/13 40,000 40,338
U.S. Treasury 5.375% bonds due 2/15/31 35,000 39,457
----------
(Cost $162,921) 160,626
- --------------------------------------------------------------------------------
SHORT-TERM NOTES 3.22%
U.S. Treasury bills, 2.625% due 11/20/03
(Cost $39,894) 40,000 37,000
- --------------------------------------------------------------------------------
UNSECURED NOTE 4.35%
LIMITED LIABILITY COMPANIES
Owens Direct LLC, 10% due 5/31/05(1)
(Cost $50,000) 50,000 50,000
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS 0.14%
First American Treasury Obiligation
Fund Cl S (Cost $1,606) 1,606 1,606
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 100.00%
(COST $1,115,623) 1,148,118
- --------------------------------------------------------------------------------
OTHER ASSETS IN EXCESS OF LIABILITIES 0.00% 28
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $1,148,146
================================================================================
** Non-income producing securities
(1) Illiquid securities
See notes to financial statements
18
MARKET OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 82.45%
COMPUTERS-MEMORY DEVICES 3.88%
StorageNetworks Inc ** 20,000 $ 27,600
E-COMMERCE/PRODUCTS 10.62%
1-800-FLOWERS.COM Inc-Cl A ** 1,000 8,390
Amazon.Com Inc ** 1,000 36,320
Drugstore.Com Inc ** 2,000 11,680
Stamps.com Inc ** 4,000 19,200
----------
75,590
E-COMMERCE/SERVICES 19.61%
Homestore Inc ** 20,000 34,400
InterActiveCorp ** 1,000 39,330
Priceline.com Inc ** 1,000 22,320
WebMD Corp ** 4,000 43,480
----------
139,530
ENTERTAINMENT 2.34%
Nevada Gold & Casinos Inc ** 2,000 16,660
FINANCE-INVEST BNKR/BRKR 4.47%
Ameritrade Holding Corp ** 2,000 14,800
E*TRADE Group Inc ** 2,000 17,000
----------
31,800
INTERNET CONTENT-INFO/NE 15.84%
Harris Interactive Inc ** 3,000 19,380
iVillage Inc ** 20,000 29,600
Marketwatch.com Inc ** 2,000 16,600
TheStreet.com Inc ** 10,000 47,100
----------
112,680
INTERNET SECURITY 0.68%
SonicWALL Inc ** 1,000 4,850
See notes to financial statements
19
MARKET OPPORTUNITIES FUND--CONTINUED
SCHEDULE OF INVESTMENTS IN SECURITIES
As of June 30, 2003
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
INTERNET TELEPHONY 3.67%
ITXC Corp ** 10,000 26,100
MEDIA 5.57%
AOL Time Warner Inc ** 2,000 32,180
Charter Communications Inc-Cl A ** 2,000 7,460
----------
39,640
OIL&GAS 0.58%
Daugherty Resources Inc ** 1,000 4,150
TELECOM EQ FIBER OPTICS 6.48%
Ciena Corp ** 3,000 15,510
Finisar Corp ** 20,000 30,600
----------
46,110
TELEPHONE-INTEGRATED 1.87%
Level 3 Communications Inc ** 2,000 13,320
WEB PORTALS/ISP 6.84%
Earthlink Inc ** 2,000 15,960
Yahoo! Inc ** 1,000 32,700
----------
48,660
TOTAL COMMON STOCKS
(Cost $589,405) 82.45% 586,690
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS 3.42%
First American Treasury Obiligation
Fund Cl S (Cost $24,328) 24,328 24,328
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(COST $613,733) 85.87% 611,018
- --------------------------------------------------------------------------------
OTHER ASSETS IN EXCESS OF LIABILITIES 14.13% 100,544
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $711,562
================================================================================
**Non-income producing securities
See notes to financial statements
20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
The WWW Funds (the "Trust") comprising the WWW Internet Fund, the Growth Flex
Fund and the Market Opportunities Fund (the "Funds") was organized as an Ohio
business trust, on April 23, 1996. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The WWW Internet Fund and the Growth Flex Fund are diversified funds. The Market
Opportunities Fund is a non-diversified fund. Each Fund is authorized to issue
an indefinite number of shares of beneficial interest, par value $0.001 per
share. The WWW Internet Fund was formed to achieve the investment objective of
long-term growth through capital appreciation. The Growth Flex Fund was formed
to achieve the investment objective of long-term growth while generating current
income. The Market Opportunities Fund was formed to achieve the investment
objective of capital appreciation over the long-term while seeking to protect
capital against loss. The WWW Internet Fund commenced operations on August 1,
1996 and seeks to achieve its goal by investing primarily, under normal
conditions, at least 80% of its assets in common stock of domestic companies
that are designing, developing or manufacturing hardware or software products or
services related to the Internet. The Growth Flex Fund commenced operations on
May 5, 2003 and seeks to achieve its goal by investing primarily, under normal
conditions, in three main asset classes: stocks, bonds, and cash and cash
equivalents. The Market Opportunities Fund commenced operations on May 6, 2003
and seeks to achieve its goal by investing in long and short positions of equity
and debt securities of companies that are publicly traded or listed on a US
exchange or the OTC market. The Market Opportunities Fund may borrow to hedge
and/or create leverage in an attempt to increase the Fund's risk-adjusted
performance. The WWW Global Internet Fund ceased offering its shares to the
public effective December 30, 2002 and was fully liquidated as of June 30, 2003.
Each Fund offers three classes of shares (Class A, Class C and Class Y). A
maximum sales charge (load) of 5.75% is imposed on the purchases of Class A
shares for the WWW Internet Fund and the Growth Flex Fund. A maximum sales
charge (load) of 6% is imposed on the purchases of Class A shares for the Market
Opportunities Fund. Each class of shares has equal rights as to earnings and
assets except that each class bears different distribution and shareholder
service expenses. Each class has exclusive voting rights with respect to matters
that effect just that class. Income, expenses (other than expenses attributable
to a specific class), and realized and unrealized gains and losses on
investments are allocated to each class of shares based on its relative net
assets.
When WWW Advisors, Inc., the Funds' Manager, determines that adverse market
conditions exist, a Fund may adopt a temporary defensive posture and invest all
or part of its assets in short-term obligations, such as U.S. government
obligations, high-quality money market instruments and repurchase agreements
with maturities of 13 months or less. The taking of such a temporary defensive
position may adversely affect the ability of a Fund to achieve its investment
goal. There is the additional risk that any long position taken by the Funds'
Manager may be ill-timed, causing the NAV of a Fund to be adversely affected.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements.
ESTIMATES- The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 income and expenses during the reporting period. Actual results could
differ from these estimates.
21
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - CONTINUED
SECURITIES VALUATIONS- Portfolio securities, including covered call options if
written by the Funds, are valued at the last sale price on the exchange or
national securities market (U.S. or foreign) on which such securities primarily
are traded. Securities not listed on an exchange or national securities market,
or securities in which there were no transactions, are valued at the average of
the most recent bid and asked prices, except in the case of open short positions
where the asked is used for valuation purposes. Bid price is used when no asked
price is available. Short-term investments are carried at amortized cost, which
approximates market value. Any securities or other assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Funds' Manager in conformity with guidelines adopted by and
subject to the review of the Board of Trustees.
The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held at the date of the
financial statements. Net unrealized appreciation or depreciation on investments
and foreign currency translation arise from changes in the value of assets and
liabilities, including investments in securities held at the date of the
financial statements, resulting from changes in the exchange rates and changes
in market prices of securities held.
SHARE VALUATION- The net asset value of each Fund's class of shares is
calculated daily by dividing the total value of the Fund's assets attributable
to each class, less the Fund's liabilities attributable to each class, by the
Fund's number of shares of each class outstanding. Expenses and fees, including
the management fee and distribution and service fees, are accrued daily and
taken into account for the purpose of determining each class of each Fund's net
asset value. Trust level expenses are allocated to each Fund based on its
relative net assets.
SHORT SALES- The Funds may sell securities they do not own in anticipation of a
decline in the fair value of that security. When a Fund sells a security short,
it must borrow the security sold short and deliver it to the broker-dealer
through which it made the short sale. A gain, limited to the price at which the
Fund sold the security short, or a loss, unlimited in size, will be recognized
upon the termination of a short sale.
As of June 30, 2003, the Market Opportunities Fund had a liability of $45,010
(fair value) resulting from the short sale of 700 common stock shares of
Cardinal Health Inc (proceeds $41,304).
BORROWING MONEY- The Board of Trustees has authorized each Fund to establish a
secured line of credit agreement with its custodian, US Bank. For the WWW
Internet Fund the aggregate principal amount is not to exceed the lesser of
$2,350,000 or 33 1/3% of the Fund's Net Assets. For the Growth Flex Fund the
aggregate principal amount is not to exceed the lesser of $300,000 or 33 1/3% of
the Fund's Net Assets. For the Market Opportunities Fund the aggregate principal
amount is not to exceed the lesser of $250,000 or 33 1/3% of the Fund's Net
Assets. Interest is charged on the outstanding principal balance at a rate per
annum equal to Prime (4.25% at June 30, 2003), payable monthly. For the year
ended June 30, 2003, the WWW Internet Fund paid interest expense of $739, on an
average borrowed amount of $46,379 at an average rate of 4.51%. During the year
ended June 30, 2003, neither the Growth Flex Fund nor the Market Opportunities
Fund participated in borrowing transactions.
22
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - CONTINUED
DISTRIBUTIONS TO SHAREHOLDERS- The Funds intend to distribute substantially all
of their net investment income as dividends to its shareholders on an annual
basis. The Funds intend to distribute their net long-term capital gains and
their net short-term capital gains at least once a year.
FEDERAL INCOME TAXES- The Funds intend to qualify each year as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, the Funds will not be subject to federal income taxes to the extent
that they distribute substantially all of their net investment income and any
realized capital gains. As of June 30, 2003, for U.S. federal income tax
purposes, the WWW Internet Fund has capital loss carry-forwards of approximately
$36,400,000, expiring in 2009; approximately $14,600,000, expiring in 2010; and
approximately $4,000,000, expiring in 2011.
RECLASSIFICATION OF CAPITAL ACCOUNTS- For the year ended June 30, 2003, the WWW
Internet Fund reclassified net investment losses of $413,729 against capital
shares on the Statements of Assets and Liabilities. This reclassification was
the result of permanent differences between financial statement and income tax
reporting requirements and has no effect on the Funds' net asset value per
share.
INVESTMENTS- The Funds record security transactions on the trade date. The
specific identification method is used for determining gains or losses for
financial statements and income tax purposes. Dividend income is recorded on the
ex-dividend date and interest income is recorded on an accrual basis.
2. ILLIQUID SECURITIES
Securities held by the Funds may be illiquid, which means that a Fund may not be
able to sell or dispose of the securities in the ordinary course of business at
approximately the quoted market value of such securities, or in the absence of
such quoted market value, the price at which the Fund has valued such
securities. Investments for which market quotations are not readily available,
are valued at fair value as determined in good faith by the Funds' Manager in
conformity with guidelines adopted by and subject to the review of the Board of
Trustees. A Fund will not invest in illiquid securities if, as a result of such
investment, the value of the Fund's illiquid assets would exceed 15% of the
value of the Fund's net assets. At June 30, 2003, illiquid securities
represented 5.56% of the WWW Internet Fund's net assets and 4.35% of the Growth
Flex Fund's net assets.
3. INVESTMENT ADVISORY AGREEMENT
The Board of Trustees provides broad supervision over the affairs of the Funds.
Pursuant to a Management Agreement between the Trust and WWW Advisors, Inc. (the
"Manager") and subject to the authority of the Board of Trustees, the Manager
manages the investments of the Funds and is responsible for the overall
management of the business affairs of the Funds.
Under the terms of the Management Agreement, the WWW Internet Fund has agreed to
pay the Manager a base monthly management fee at the annual rate of 1.00% of the
Fund's average daily net assets (the "Base Fee") which will be adjusted monthly
(the "Monthly Performance Adjustment") depending on the extent by which the
investment performance of the Fund, after expenses, exceeded or was exceeded by
the percentage
23
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT - CONTINUED
change of the S&P 500 Index. Under terms of the Management Agreement, the
monthly performance adjustment may increase or decrease the total management fee
payable to the Manager (the "Total Management Fee") by up to 0.50% per year of
the value of the Fund's average daily net assets.
The Growth Flex Fund and Market Opportunities Fund have each agreed to pay the
Manager a fee at the annual rate of 1.00% and 1.50%, respectively of the Fund's
average daily net assets.
All expenses incurred in the operation of the Funds will be borne by the Funds,
except to the extent specifically assumed by the Manager. The expenses to be
borne by the Funds will include: organizational costs, taxes, interest,
brokerage fees and commissions, fees of board members who are not officers,
directors, or employees of the of the Manager or its affiliates, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory,
administrative and Fund accounting fees, charges of custodians, transfer and
dividend disbursing agents' fees, insurance premiums, industry association fees,
outside auditing and legal expenses, costs attributable to investor services
(including, without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing prospectuses
and statements of additional information, amounts payable under the Funds'
Distribution and Shareholder Servicing Plan (the "Plan") and any extraordinary
expenses.
During the year ended June 30, 2003, the Manager voluntarily reimbursed expenses
of the Growth Flex Fund and Market Opportunities Fund in the amounts of $1,823
and $2,344, respectively.
4. UNDERWRITING AGREEMENT
Interactive Planning Corp. (the "Distributor), an affiliated person of the
Funds' Manager, is the principal underwriter of the Funds.
5. DISTRIBUTION AGREEMENT
Each Fund has adopted a Distribution and Shareholder Servicing Plan (the
"Plans") for each class of shares pursuant to Rule 12b-1 under the 1940 Act.
Under the Plans, Class A, Class C and Class Y shares pay a shareholder servicing
and distribution fee at the annual rate of 0.50%, 1.00% and 0.50% of the average
daily net assets attributable to the applicable class. These fees are used to
make payments for administration, shareholder services, and marketing and
distribution assistance, including compensation to the Manager, the Distributor,
securities dealers and other organizations for providing distribution
assistance, administration, accounting and shareholder services, and other
promotion of the sales of the shares of each Fund.
24
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
Each Fund is authorized to issue an unlimited number of shares in an unlimited
number of classes.
Capital share transactions of each Fund were as follows:
- --------------------------------------------------------------------------------
FOR THE YEAR ENDED For the year ended
WWW INTERNET FUND JUNE 30, 2003 June 30, 2002
----------------------- -----------------------
CLASS C SHARES AMOUNT Shares Amount
------ ------ ------ ------
SHARES SOLD 405 $ 2,100 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- -- -- --
------- ----------- --------- -----------
NET INCREASE 405 $ 2,100 -- $ --
======= =========== ========= ===========
CLASS Y SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 232,134 $ 967,300 980,706 $ 6,761,950
SHARES REDEEMED
(NET OF REDEMPTION FEES) (436,587) (1,759,311) (1,388,844) (9,476,295)
-------- ----------- --------- -----------
NET DECREASE (204,453) $ (792,011) (408,138) $(2,714,345)
======== =========== ========= ===========
FROM INCEPTION (MAY 5, 2003) TO
GROWTH FLEX FUND JUNE 30, 2003
--------------------------------
CLASS A SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 22,718 $ 227,753
SHARES REDEEMED
(NET OF REDEMPTION FEES) (4,336) (43,355)
------- ---------
NET INCREASE 18,382 $ 184,398
======= =========
CLASS C SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 1,530 $ 15,300
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- --
------- ---------
NET INCREASE 1,530 $ 15,300
======= =========
CLASS Y SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 90,729 $ 907,967
SHARES REDEEMED
(NET OF REDEMPTION FEES) (547) (5,532)
------- ---------
NET INCREASE 90,182 $ 902,435
======= =========
- --------------------------------------------------------------------------------
25
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS - CONTINUED
FROM INCEPTION (MAY 6, 2003) TO
MARKET OPPORTUNITIES FUND JUNE 30, 2003
-------------------------------
CLASS A SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 15,196 $154,654
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- --
------- --------
NET INCREASE 15,196 $154,654
======= ========
CLASS C SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 2,056 $ 21,500
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- --
------- --------
NET INCREASE 2,056 $ 21,500
======= ========
CLASS Y SHARES AMOUNT
- ------- ------ ------
SHARES SOLD 50,865 $522,285
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- --
------- --------
NET INCREASE 50,865 $522,285
======= ========
7. INVESTMENTS
For the year ended June 30, 2003, the WWW Internet Fund made $18,684,961 in
purchases and $19,583,418 in sales of investment securities, other than
short-term investments. The Growth Flex Fund made $1,065,226 in purchases and
$172,458 in sales of investment securities, other than short-term investments
and U.S. government obligations. The Market Opportunities Fund made $2,415,802
in purchases and $1,869,579 in sales of investment securities, other than
short-term investments.
The U.S. federal income tax cost basis of the investments in securities owned by
each Fund and the respective gross unrealized appreciation and depreciation at
June 30, 2003, were as follows:
Net Unrealized
Federal Income Gross Unrealized Gross Unrealized Appreciation
Tax Cost Basis Appreciation (Depreciation) (Depreciation)
-------------- ------------ -------------- --------------
WWW INTERNET FUND $ 9,204,221 $ 2,022,874 $(1,323,009) $ 699,865
GROWTH FLEX FUND $ 1,074,123 $ 47,825 $ (12,437) $ 35,388
MARKET OPPORTUNITIES FUND $ 589,404 $ 19,277 $ (21,991) $ (2,714)
8. RELATED PARTY TRANSACTIONS
The amounts listed on the Statements of Assets and Liabilities under the
captions "Receivable from affiliated funds" and "Payable to affiliated funds"
represent the amounts the Growth Flex Fund and Market Opportunities Fund owe to
the WWW Internet Fund for Trust level expense allocations based on each Funds'
relative net assets.
The amounts listed on the Statements of Assets and Liabilities under the caption
"Receivable from adviser" represent the amounts the Adviser owes to the Growth
Flex Fund and Market Opportunities Fund for expense reimbursements.
26
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
8. RELATED PARTY TRANSACTIONS - CONTINUED
Certain owners/officers of WWW Advisors, Inc. (the "Manager"), are also owners
and/or trustees/officers of the Trust. These individuals may receive benefits
from any management and distribution fees paid to the Manager. For the year
ended June 30, 2003, the amount paid or accrued by the WWW Internet Fund, Growth
Flex Fund and Market Opportunities Fund for Management Fees was $55,627, $1,678
and $751, respectively. In addition, the Manager received distribution fees paid
or accrued by Class Y shares of the WWW Internet Fund in the amount of $39,854.
Certain owners/officers of Interactive Planning Corp. (the "Distributor"), are
also owners and/or trustees/officers of the Trust. These individuals may receive
benefits from any sales commissions and distribution fees paid to the
Distributor. During the year ended June 30, 2003, the Distributor received sales
commission from the sale of Class A shares of the Growth Flex Fund and the
Market Opportunities Fund in the amounts of $11,587 and $9,895, respectively;
and, distribution fees paid or accrued by Class A shares of the Growth Flex Fund
and the Market Opportunities Fund in the amounts of $135 and $95, respectively;
distribution fees paid or accrued by Class C shares of the WWW Internet Fund,
the Growth Flex Fund and the Market Opportunities Fund in the amounts of $1, $24
and $18, respectively; and distribution fees paid or accrued by Class Y shares
of the Growth Flex Fund and the Market Opportunities Fund of $692 and $271,
respectively.
Certain owners/officers of Capital Fund Services, Inc. (CFS), which provides
transfer agent, accounting, and administration services to the Funds, are also
owners and/or trustees/officers of the Trust. These individuals may receive
benefits from any fees paid to CFS. For the year ended June 30, 2003, the fees
paid or accrued by the Funds for such services amounted to $136,802. In
addition, the Funds reimbursed CFS for certain out of pocket expenses incurred
on behalf of the Funds totaling $90,207.
As of June 30, 2003, the WWW Internet Fund holds an investment, which represents
10% ownership of the outstanding voting rights in Collection Express Services,
Inc (an affiliated issuer), a privately held company whose majority ownership is
held by the brother of an owner of the Fund's Manager, who is also an owner,
officer and Trustee of the Trust. As a result of the relationship with
Collection Express, Inc during the year ended June 30, 2003 the Fund received,
at no cost, a 10% interest in Credit Care Systems LLC, a development stage
enterprise.
As of June 30, 2003, the WWW Internet Fund's investment in Owens Direct LLC (an
affiliated issuer) represents 17.75% ownership of the outstanding voting rights.
During the year ended June 30, 2003 the Fund realized a gain of $7,500 on
subsequent sale transactions (75 units, proceeds $15,000, cost $7,500) with
Owens Direct LLC.
27
INDEPENDENT ACCOUNTANTS' REPORT
- --------------------------------------------------------------------------------
To the Shareholders and
Board of Trustees
The WWW Funds
Lexington, Kentucky
We have audited the accompanying statements of assets and liabilities of The WWW
Funds, an Ohio business trust, (comprising the WWW Internet Fund, the Growth
Flex Fund and the Market Opportunities Fund) including the schedules of
investments in securities, as of June 30, 2003; the related statements of
operations and changes in net assets and financial highlights of the WWW
Internet Fund for the year then ended; the related statements of operations and
changes in net assets and financial highlights of the Growth Flex Fund for the
period from inception (May 5, 2003) through June 30, 2003; and the related
statements of operations and changes in net assets and financial highlights of
the Market Opportunities Fund for the period from inception (May 6, 2003)
through June 30, 2003. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The financial statements of the WWW Internet Fund as of June 30, 2002 and
the related financial highlights for each of the four years in the period then
ended, were audited by Berge & Company LTD, who merged with BKD, LLP as of
December 1, 2002, and whose report dated August 8, 2002, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of June 30, 2003, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
the respective portfolios constituting The WWW Funds as of June 30, 2003, the
results of their operations, the changes in their net assets and the financial
highlights of the WWW Internet Fund for the year then ended, the Growth Flex
Fund for the period from inception (May 5, 2003) through June 30, 2003 and the
Market Opportunities Fund for the period from inception (May 6, 2003) through
June 30, 2003 in conformity with accounting principles generally accepted in the
United States of America.
BKD, LLP
Cincinnati, Ohio
August 1, 2003
28
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
NAME
ADDRESS
AGE
POSITION(S) HELD
TERM OF OFFICE/LENGTH OF TIME SERVED
#PORTFOLIOS IN FUND COMPLEX OVERSEEN
OTHER DIRECTORSHIPS HELD BY TRUSTEE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
INDEPENDENT TRUSTEES
ROBERT C. THURMOND Managing Director, ITF Global Partners, since 2003; Vice
4855 Gedney View President and General Manager of Quality Communications
Clinton, WA 98236 Inc. (telecommunications consulting firm) from 1997-2001;
Age: 52 Director, Telecommunications Research Center of the
Trustee University of Louisville from 1990-1997.
Indefinite/Since 1997
4
None
RICHARD T. DIDIEGO Director of Corporate Strategy and Business Development
2213 Palm Grove Court (since 1998) and Director of International Business
Lexington KY 40513 Development (from 1996-1998) for Lexmark International, Inc.
Age: 44 (manufacturer and marketer of network and personal printers,
Trustee multifunction devices and related document workflow solutions
Indefinite/Since 2000 and services).
4
None
TERRY L. CHILDERS Gatton Endowed Chair in Electronic Marketing, University of
207 Catalpa Road Kentucky since 2001; Professor of Marketing, University of
Lexington KY 40502 Minnesota from 1993-2000.
Age: 53
Trustee
Indefinite/Since 2002
4
None
INTERESTED TRUSTEES/OFFICERS
LAWRENCE S. YORK President of Capital Fund Services, Inc. (transfer agent,
131 Prosperous Place accounting and administrative service provider of the Trust)
Suite 17 since 2001; President of Interactive Planning Corp.
Lexington KY 40509 (broker/dealer) since 1999; President of WWW Advisors, Inc.
Age: 52 (Fund Manager) since 1996; President of Capital Advisors
Trustee, Chairman, President Group, Inc. (investment advisor) since 1989.
Indefinite/Since 1996
4
Interactive Planning Corp. (B/D)
JAMES D. GREEN Sr. Product Manger, Microsoft Business Solutions, Retail
35517 S.E. English St. Division, since 2002; Vice President of Marketing of AfterBot
Snoqualmie, WA 98065 (software company) from 2001-2002; Senior Consultant of i2
Age: 46 (software company) from 2000-2001; Director of E-Commerce
Trustee, Vice President, Treasurer of NCR Corporation (point of sale hardware company) from
Indefinite/Since 1996 1997-2000; Vice President of WWW Advisors, Inc. (Fund
4 Manager) since 1996.
None
DIANE SNAPP Vice President and Secretary of Capital Fund Services, Inc.
131 Prosperous Place (transfer agent, accounting and administrative service provider
Suite 17 of the Trust) since 2001; Secretary of Interactive Planning
Lexington KY 40509 Corp. (broker-dealer) since 1999; Secretary of WWW Advisors,
Age: 40 Inc. (Fund Manager) since 1999; Secretary of Capital Advisors
Secretary Group, Inc. (investment adviser) since 1996.
Indefinite/Since 1999
N/A
N/A
29
ITEM 2. CODE OF ETHICS.
The code of ethics disclosure requirements are not applicable to the
Registrant at this time because this annual report on Form N-CSR related to a
fiscal year ended before July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The audit committee financial expert disclosure requirements are not
applicable to the Registrant at this time because this annual report on Form
N-CSR is filed with respect to a fiscal year ended before July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The disclosure provisions of Item 4 of Form N-CSR are not applicable to
the Registrant at this time because this annual report on Form N-CSR is filed
with respect to a fiscal year ended on or before December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the Registrant's disclosure controls and
procedures as defined in Rule 30a-3(c) under the Investment Company Act of 1940,
as amended, (the "Disclosure Controls and Procedures") within the 90-day period
prior to the filing date (the "Filing Date") of this report on Form N-CSR and,
the Registrant's President and Treasurer have concluded that (1) the
Registrant's Disclosure Controls and Procedures are designed to ensure that
information required to be disclosed by the Registrant on Form N-CSR is
recorded, processed, summarized, and reported by the Filing Date and (2) the
Registrant's Disclosure Controls and Procedures include controls and procedures
designed to ensure that information required to be disclosed by Registrant on
Form N-CSR is accumulated and communicated to Registrant's management, including
its President and Treasurer, as appropriate to allow timely decisions regarding
required disclosure.
Page 1
(b) There were no changes in Registrant's internal control over financial
reporting as defined in Rule 30a-3(d) under the Investment Company Act of 1940,
as amended, that occurred during the Registrant's second fiscal half-year that
has materially affected, or is reasonably likely to materially effect, the
Registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable at this time because this annual report on Form
N-CSR is filed with respect to a fiscal year ended before July 15, 2003.
(a)(2) Certifications required by Rule 30a-2(a) under the Investment
Company Act of 1940, as amended, are filed herewith.
(b) Certification required by Rule 30a-2(b) under the Investment Company
Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 is
filed herewith.
Page 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
WWW FUNDS
Date: August 23, 2003 By: /s/ Lawrence S. York
Name: Lawrence S. York
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on its behalf by the registrant and in the capacities and on
the dates indicated.
Date: August 23, 2003 By: /s/ Lawrence S. York
Name: Lawrence S. York
Title: President
Date: August 23, 2003 By: /s/ James D. Greene
Name: James D. Greene
Title: Treasurer
Page 3