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
---------
IPC 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 services)
Registrant's telephone number, including area code: 859-263-2204
------------
Date of fiscal year end: JUNE 30, 2004
-----------------
Date of reporting period: DECEMBER 31, 2003
-----------------
ITEM 1. REPORT TO STOCKHOLDERS.
IPC FUNDS
SEMI-ANNUAL REPORT
December 31, 2003
(Unaudited)
WWW Internet Fund
Growth Flex Fund
Market Opportunities Fund
HOW TO CONTACT IPC FUNDS
- --------------------------------------------------------------------------------
By mail:
IPC Funds
P.O. Box 25910
Lexington, KY 40524-5910
By phone:
1-888-999-8331
By email:
advisor@ipcfunds.us
Website:
www.ipcfunds.us
This report is intended for the Funds' shareholders. It may not be distributed
to prospective investors unless preceded or accompanied by the current
prospectus.
PROXY VOTING POLICIES AND PROCEDURES
- ------------------------------------
A description of the policies and procedures that the Fund Manager uses to
determine how to vote proxies relating to the Funds' portfolio securities is
available:
o Without charge, upon request by calling 1-888-999-8331
o On the Funds' website at www.ipcfunds.us
o On the SEC website at www.sec.gov
CONTENTS
Letter to the Shareholders__________________________________________________ 2
Financial Statements________________________________________________________ 4
Financial Highlights________________________________________________________ 8
WWW Internet Fund Schedule of Investments___________________________________14
Growth Flex Fund Schedule of Investments____________________________________17
Market Opportunities Fund Schedule of Investments___________________________21
Notes to Financial Statements_______________________________________________24
Trustees and Officers_______________________________________________________31
LETTER TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
Last year was a monumental period of change and opportunity. We changed the name
of our fund family from THE WWW FUNDS to IPC FUNDS. The intent is to more
clearly reflect the diversity of our fund family given the launch our two newest
funds: GROWTH FLEX FUND and MARKET OPPORTUNITIES FUND. At the same time, we
added share classes (Classes A, C, and Y) to WWW INTERNET FUND and the two new
funds. The expected outcome favors a greater distribution of the funds in the
dealer channel by making our funds available to fee-based advisors and
registered representatives of NASD broker dealers.
These decisive steps were followed by an appropriate name change for the fund
manager from WWW ADVISORS to IPC ADVISORS, to strengthen brand identity in the
future. Ownership and fund management remain unchanged. WWW INTERNET FUND
continues with its same investment objective, utilizing the three-tier mix of
mature, midlife, and adolescent companies under our original definition of the
Internet as an emerging global communication, information, and distribution
system. I continue as chairman and chief investment officer, leading the
investment policy committee.
The turnaround in the stock market was hastened by accommodative fiscal and
monetary policies implemented by the Bush administration to stimulate growth.
Consumer spending held steady across the board, but it was impressive capital
spending for Internet-related technologies that lifted our funds and the
Internet and technology sectors.
We are pleased to report very positive results for our semiannual period that
ended December 31, 2003. WWW INTERNET FUND (Class C shares) gained 21.6% for the
six-month period; Class Y shares gained 21.7%. For the full year, Class Y shares
were up 70.4%. GROWTH FLEX FUND (Class C shares) gained 9.2% for the six-month
period and 13.7% for its first seven months of operations. MARKET OPPORTUNITIES
FUND (Class Y shares) gained 1.0% for the six-month period and 5.3% for its
first seven months of operations. WWW INTERNET FUND's Class C shares' six-month
results did, however, lag both the IIX Internet Index (+26.6%) and TheStreet.com
Internet Index (+24.3%), but this fund's performance for the period
significantly surpassed Munder NetNet Class C shares, which returned 13.6% for
the same period. GROWTH FLEX FUND Class Y shares (+9.2%) modestly underperformed
the 80% S&P 500 and 20% Aggregate Bond Index for the six-month period as well as
its peer fund, Dodge & Cox Balanced (no-load shares), which gained 13.8% during
the same period. MARKET OPPORTUNITIES FUND Class Y shares (+1.0%) likewise
underperformed both its benchmark index and its peer fund, James Market Neutral,
which gained 6.6% for the six-month period. The S&P 500 gained 14.2% during this
time, while the Intermediate Bond Index lost 1.9% for the same six-month period.
We believe the impact associated with the start-up of the new funds accounted
for the early lagging performance of GROWTH FLEX FUND and MARKET OPPORTUNITIES
FUND. That is, indices record point-to-point returns without effect of purchases
and redemptions. As both funds were launched in May of 2003 and made initial
portfolio purchases over the entire period, we believe future results should
fall in line with or beat the benchmark indices. MARKET OPPORTUNITIES FUND's
results were especially disappointing, having lagged the results of its peers by
an unacceptable margin. Its results were negatively affected by the FDA's
December 31 ban on the nutritional supplement ephedra and by the latent
performance of several key portfolio holdings that didn't start moving until
after year-end. These positions were held and account for the better-than-peer
results for year-to-date 2004.
-2-
LETTER TO THE SHAREHOLDERS - CONTINUED
- --------------------------------------------------------------------------------
Our performance for the six months was attributed to the overall turnaround in
the stock market, particularly in Internet and technology stocks, and to our
investment committee's macro- and microeconomic forecasts that were complemented
by our stock picking. The forecasts rightly guided us to favor stocks and
sub-sectors that performed well and continue to do so. Many of our stock picks
appreciated handsomely, and we expect that they will cause us to outperform in
2004. The theme underlying our stock picks is that an economic recovery in the
near term is imminent, due to a confluence of factors: Low interest rates and
stimulative fiscal policies will lead to more business spending and greater
productivity, which will result in better company profits. Higher company
profits should lead to analysts' reevaluations of company earnings prospects and
stock upgrades. High price-earnings multiples will fall with improved earnings
results, which in turn should lead to higher stock prices, propelled in part by
little or no competition from other financial investments. Our microanalysis led
us to focus on value and growth overweighting small- and mid-cap companies.
Central to this forecast was the belief that consumer tech spending was rising
for wireless, digital cameras, cell phones, PCs, broadband, and specialty
software. This, we assessed, would benefit certain equipment makers, specialty
semiconductor suppliers, and software companies. One theme of consensus among
our investment committee members was that it has been three years since the Y2K
spending rampage, and off-the-shelf computing power has risen by tenfold since
then. We selected stocks on the belief that a new PC replacement cycle is
imminent for both consumers and businesses. We additionally forecast increased
spending for wireless and broadband deployment among the Baby Bells and their
competitors, viewing Voice over Internet Protocol (VoIP) as a driving catalyst.
Certain companies poised to benefit as IP telephony is widely implemented were
selected to become core holdings for the portfolios as this theme develops.
Looking forward, we anticipate a return to growth and a market that initially
favors small-cap stocks over large-cap stocks. Therefore, we expect to continue
to modestly underweight large-cap stocks until we see widespread evidence of the
economic recovery in place. We will stay invested in the sub-sectors in which we
expect improving growth prospects. While we are cognizant of various economic
risks associated with our forecasts and the deficit-spending-for-growth
policies, we rely on expected outcome probabilities and evolving economic data
to assist us in making warranted adjustments. The bottom line is that our
internal research indicates that growth in the economy is now under way and will
be broad based. In particular, it reveals that this swing will be led by the
Internet and technology sectors.
Thank you for your confidence and trust in our fund management. We are pleased
to now offer two new fund choices and a money market account option to provide
shareholders with new investment opportunities. If you have any questions about
your current investments or any of the IPC funds that have been added, please
contact us at 888.263.2204 or visit our Web site at www.ipcfunds.us.
Sincerely,
/s/ LAWRENCE YORK
- -----------------
Lawrence York
Chairman & CIO
-3-
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
As of December 31, 2003 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
MARKET
WWW INTERNET GROWTH FLEX OPPORTUNITIES
FUND FUND FUND
- -----------------------------------------------------------------------------------------------------
ASSETS
Investments in securities of unaffiliated
issuers, at value (cost $9,546,713, $1,534,353
and $1,219,673, respectively) $ 11,638,784 $ 1,641,977 $ 1,266,317
Investments in securities of affiliated
issuers, at value (cost $338,750) 350,000 -- --
- -----------------------------------------------------------------------------------------------------
Total Investments in securities 11,988,784 1,641,977 1,266,317
- -----------------------------------------------------------------------------------------------------
Deposits with brokers for securities sold short 138 -- 55
Receivable from dividends and interest -- 3,242 573
Receivable from securities sold 323,454 76,159 240,045
Receivable from fund shares sold 1,560 -- --
Receivable from affiliated fund 16,714 -- --
Receivable from adviser -- 418 5,791
Other assets (prepaid expenses) 10,482 -- --
- -----------------------------------------------------------------------------------------------------
TOTAL ASSETS 12,341,132 1,721,796 1,512,781
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 355,542 141,318 182,276
Payable for fund shares redeemed 16,197 23 169
Payable for other accrued expenses 51,537 1,090 1,394
Payable for investment advisory fees 14,411 8,250 8,823
Payable for distribution fees 4,816 653 551
Payable to affiliated fund -- 9,088 7,749
Payable to custodian bank 253,869 366 80,449
- -----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 696,372 160,788 281,411
- -----------------------------------------------------------------------------------------------------
NET ASSETS $ 11,644,760 $ 1,561,008 $ 1,231,370
=====================================================================================================
NET ASSETS CONSIST OF
Capital shares $ 64,483,288 $ 1,406,831 $ 1,267,985
Net investment loss (293,380) (19,214) (25,787)
Accumulated net realized gain (loss) from
investment transactions (54,648,469) 65,767 (57,472)
Net unrealized appreciation (depreciation) 2,103,321 107,624 46,644
- -----------------------------------------------------------------------------------------------------
NET ASSETS $ 11,644,760 $ 1,561,008 $ 1,231,370
=====================================================================================================
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 $70,923,
$291,633 and $283,551, and shares outstanding
of 11,054, 25,863 and 27,435, respectively $ 6.42 $ 11.28 $ 10.34
=====================================================================================================
CLASS A - public offering price $6.42, $11.28 and
$10.34 divided by .9425, .9425 and .94, respectively $ 6.81 $ 11.97 $ 11.00
=====================================================================================================
CLASS C - based on net assets of $31,657, $36,362
and $44,764, and shares outstanding of 4,940, 3,227
and 4,337, respectively $ 6.41 $ 11.27 $ 10.32
=====================================================================================================
CLASS Y - based on net assets of $11,542,180,
$1,233,013 and $903,055, and shares outstanding
of 1,806,958, 109,359 and 87,369, respectively $ 6.39 $ 11.27 $ 10.34
=====================================================================================================
See notes to financial statements
-4-
STATEMENTS OF OPERATIONS
For the six month period ended December 31, 2003 (UNAUDITED)
- ------------------------------------------------------------------------------------------
MARKET
WWW GROWTH FLEX OPPORTUNITIES
INTERNET FUND FUND FUND
- ------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 2,780 $ 8,536 $ 1,507
Interest 233 4,995 210
Short sale rebates 196 -- 360
Other income 85 114 8
- ------------------------------------------------------------------------------------------
Total investment income 3,294 13,645 2,085
- ------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 84,835 6,572 8,072
Distribution fees-Class A 104 603 633
Distribution fees-Class C 80 111 155
Distribution fees-Class Y 28,134 2,628 1,980
Administration fees 105,839 12,182 9,998
Custody fees 4,390 2,481 4,240
Auditor fees 12,475 1,889 1,636
Legal fees 18,553 1,851 1,516
Trustees fees 9,910 1,150 940
Other expenses 32,354 3,392 2,149
- ------------------------------------------------------------------------------------------
Total gross expenses 296,674 32,859 31,319
Less expense reimbursement -- -- (3,447)
- ------------------------------------------------------------------------------------------
Total net expenses 296,674 32,859 27,872
- ------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (293,380) (19,214) (25,787)
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gain (loss) from investment
securities of unaffiliated issuers 1,064,028 65,767 38,143
Net realized gain (loss) from closed short
positions in securities (5,612) -- (90,126)
Net change in unrealized appreciation
(depreciation) on investments 1,352,146 75,129 53,065
- ------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 2,410,562 140,896 1,082
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 2,117,182 $ 121,682 $ (24,705)
==========================================================================================
See notes to financial statements
-5-
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
WWW INTERNET FUND
FOR THE SIX MONTH For the
PERIOD ENDED year ended
DECEMBER 31, 2003 June 30, 2003
----------------- -------------
FROM OPERATIONS
Net investment income (loss) $ (293,380) $ (413,729)
Net realized gain (loss) from investment transactions 1,058,416 (4,012,014)
Net change in unrealized appreciation (depreciation) 1,352,146 6,376,054
- -------------------------------------------------------------------------------------
Net increase (decrease) in net assets from operations 2,117,182 1,950,311
- -------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains -- --
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) from
capital share transactions (363,917) (789,911)
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 1,753,265 1,160,400
- -------------------------------------------------------------------------------------
NET ASSETS
Beginning of period 9,891,495 8,731,095
- -------------------------------------------------------------------------------------
End of period $ 11,644,760 $ 9,891,495
=====================================================================================
See notes to financial statements
-6-
GROWTH FLEX FUND MARKET OPPORTUNITIES FUND
---------------- -------------------------
FOR THE SIX MONTH From inception FOR THE SIX MONTH From inception
PERIOD ENDED (May 5, 2003) to PERIOD ENDED (May 6, 2003) to
DECEMBER 31, 2003 June 30, 2003 DECEMBER 31, 2003 June 30, 2003
- ------------------------------------------------------------------------------------------------
$ (19,214) $ (4,916) $ (25,787) $ (3,675)
65,767 18,434 (51,983) 23,219
75,129 32,495 53,065 (6,421)
- ------------------------------------------------------------------------------------------------
121,682 46,013 (24,705) 13,123
- ------------------------------------------------------------------------------------------------
(13,518) -- (25,033) --
304,698 1,102,133 569,546 698,439
- ------------------------------------------------------------------------------------------------
412,862 1,148,146 519,808 711,562
- ------------------------------------------------------------------------------------------------
1,148,146 -- 711,562 --
- ------------------------------------------------------------------------------------------------
$ 1,561,008 $ 1,148,146 $ 1,231,370 $ 711,562
================================================================================================
-7-
FINANCIAL HIGHLIGHTS (UNAUDITED)
For a share outstanding throughout each period
WWW INTERNET FUND CLASS A CLASS C
FROM INCEPTION FOR THE SIX From inception
(JULY 8, 2003) MONTH PERIOD (June 9, 2003)
THROUGH ENDED DEC. 31 through
DEC. 31, 2003 2003 June 30, 2003
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 5.67 $ 5.27 $ 5.18
- -------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) (0.15) (0.16) (0.02)
Net realized and unrealized
gain (loss) on investments 0.90 1.30 0.11
- -------------------------------------------------------------------------------------------------
Total from investment operations 0.75 1.14 0.09
- -------------------------------------------------------------------------------------------------
Less distributions -- -- --
- -------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 6.42 $ 6.41 $ 5.27
=================================================================================================
TOTAL RETURN 2 3 4 13.23% 21.63% 1.74%
=================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 71 $ 32 $ 2
Ratio of expenses to average net assets
before expenses reimbursement1 5.24% 5.74% 6.35%
Ratio of expenses to average net assets
after expenses reimbursement1 N/A N/A N/A
Ratio of net investment loss
to average net assets1 (6.19%) (6.69%) (5.99%)
Ratio of net investment loss to average
net assets net of reimbursement1 N/A N/A N/A
Portfolio turnover rate 90.67% 90.67% 242.29%
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
-8-
CLASS Y
FOR THE SIX
MONTH PERIOD For the year For the year For the year For the year
ENDED DEC. 31 ended ended ended ended
2003 June 30, 2003 June 30, 2002 June 30, 2001 June 30, 2000
- ------------------------------------------------------------------------------------------------------------
$ 5.25 $ 4.18 $ 10.21 $ 36.63 $ 22.64
- ------------------------------------------------------------------------------------------------------------
(0.16) (0.22) (0.25) (0.49) (0.52)
1.30 1.29 (5.78) (22.98) 14.91
- ------------------------------------------------------------------------------------------------------------
1.14 1.07 (6.03) (23.47) 14.39
- ------------------------------------------------------------------------------------------------------------
-- -- -- (2.95) (0.40)
- ------------------------------------------------------------------------------------------------------------
$ 6.39 $ 5.25 $ 4.18 $ 10.21 $ 36.63
============================================================================================================
21.71% 25.60% (59.06%) (67.19%) 63.56%
============================================================================================================
$ 11,542 $ 9,889 $ 8,731 $ 25,484 $ 102,226
5.24% 5.55% 3.75% 2.42% 2.51%
N/A N/A 3.47% 2.42% 2.49%
(6.19%) (5.19%) (3.63%) (2.25%) (2.13%)
N/A N/A (3.34%) (2.25%) (2.11%)
90.67% 242.29% 268.13% 501.71% 229.28%
-9-
FINANCIAL HIGHLIGHTS (UNAUDITED)
For a share outstanding throughout each period
GROWTH FLEX FUND CLASS A
FOR THE SIX From inception
MONTH PERIOD (May 5, 2003)
ENDED DEC. 31 through
2003 June 30, 2003
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.43 $ 10.00
- ----------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) (0.14) (0.04)
Net realized and unrealized
gain (loss) on investments 1.09 0.47
- ----------------------------------------------------------------------------------------------
Total from investment operations 0.95 0.43
- ----------------------------------------------------------------------------------------------
Less distributions (0.10) --
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.28 $ 10.43
==============================================================================================
TOTAL RETURN 2 3 4 9.26% 4.30%
==============================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 292 $ 192
Ratio of expenses to average net assets
before expenses reimbursement1 4.99% 6.10%
Ratio of expenses to average net assets
after expenses reimbursement1 N/A 5.01%
Ratio of net investment loss
to average net assets1 (2.92%) (4.01%)
Ratio of net investment loss to average
net assets net of reimbursement1 N/A (2.92%)
Portfolio turnover rate 59.32% 23.49%
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
-10-
CLASS C CLASS Y
FOR THE SIX From inception FOR THE SIX From inception
MONTH PERIOD (May 5, 2003) MONTH PERIOD (May 5, 2003)
ENDED DEC. 31 through ENDED DEC. 31 through
2003 June 30, 2003 2003 June 30, 2003
- -----------------------------------------------------------------------------------------------
$ 10.42 $ 10.00 $ 10.43 $ 10.00
- -----------------------------------------------------------------------------------------------
(0.15) (0.05) (0.14) (0.04)
1.10 0.47 1.08 0.47
- -----------------------------------------------------------------------------------------------
0.95 0.42 0.94 0.43
- -----------------------------------------------------------------------------------------------
(0.10) -- (0.10) --
- -----------------------------------------------------------------------------------------------
$ 11.27 $ 10.42 $ 11.27 $ 10.43
===============================================================================================
9.24% 4.20% 9.15% 4.30%
===============================================================================================
$ 36 $ 16 $ 1,233 $ 940
5.49% 6.60% 4.99% 6.10%
N/A 5.51% N/A 5.01%
(3.42%) (4.51%) (2.92%) (4.01%)
N/A (3.42%) N/A (2.92%)
59.32% 23.49% 59.32% 23.49%
-11-
FINANCIAL HIGHLIGHTS (UNAUDITED)
For a share outstanding throughout each period
MARKET OPPORTUNITIES FUND CLASS A
FOR THE SIX From inception
MONTH PERIOD (May 6, 2003)
ENDED DEC. 31 through
2003 June 30, 2003
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.45 $ 10.00
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) (0.22) (0.06)
Net realized and unrealized
gain (loss) on investments 0.33 0.51
- ---------------------------------------------------------------------------------------------
Total from investment operations 0.11 0.45
- ---------------------------------------------------------------------------------------------
Less distributions (0.22) --
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.34 $ 10.45
=============================================================================================
TOTAL RETURN 2 3 4 1.02% 4.50%
=============================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $ 284 $ 159
Ratio of expenses to average net assets
before expenses reimbursement1 5.81% 8.36%
Ratio of expenses to average net assets
after expenses reimbursement1 5.16% 5.25%
Ratio of net investment loss
to average net assets1 (5.42%) (7.98%)
Ratio of net investment loss to average
net assets net of reimbursement1 (4.78%) (4.87%)
Portfolio turnover rate 363.53% 497.88%
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
-12-
CLASS C CLASS Y
FOR THE SIX From inception FOR THE SIX From inception
MONTH PERIOD (May 13, 2003) MONTH PERIOD (May 6, 2003)
ENDED DEC. 31 through ENDED DEC. 31 through
2003 June 30, 2003 2003 June 30, 2003
- --------------------------------------------------------------------------------
$ 10.44 $ 9.98 $ 10.45 $ 10.00
- --------------------------------------------------------------------------------
(0.23) (0.05) (0.22) (0.06)
0.31 0.51 0.32 0.51
- --------------------------------------------------------------------------------
0.08 0.46 0.10 0.45
- --------------------------------------------------------------------------------
(0.20) -- (0.21) --
- --------------------------------------------------------------------------------
$ 10.32 $ 10.44 $ 10.34 $ 10.45
================================================================================
0.77% 4.61% 1.00% 4.50%
================================================================================
$ 45 $ 21 $ 903 $ 531
6.31% 8.86% 5.81% 8.36%
5.66% 5.75% 5.16% 5.25%
(5.92%) (8.48%) (5.42%) (7.98%)
(5.28%) (5.37%) (4.78%) (4.87%)
363.53% 497.88% 363.53% 497.88%
-13-
WWW INTERNET FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 102.07%
COLLECTION AGENCY 2.15%
Collection Express Services Inc 1 2 ** 5,000 $ 250,000
COMPUTERS 9.48%
Brocade Communications Systems Inc ** 15,000 86,700
Dell Inc ** 15,000 509,700
International Business Machines Corp 5,000 463,400
Sun Microsystems Inc ** 10,000 44,700
------------
1,104,500
COMPUTERS-MEMORY DEVICES 1.11%
EMC Corp/Massachusetts ** 10,000 129,200
E-COMMERCE/PRODUCTS 3.98%
Amazon.Com Inc ** 5,000 263,100
iHigh.Inc ** 1 3,280 200,080
------------
463,180
E-COMMERCE/SERVICES 11.92%
Homestore Inc ** 150,000 709,500
InterActiveCorp ** 20,000 678,600
------------
1,388,100
ELECTRONICS 1.43%
AVX Corp 10,000 166,200
E-MARKETING/INFO 4.73%
DoubleClick Inc ** 53,500 551,050
ENTERTAINMENT 2.50%
Lions Gate Entertainment Corp ** 65,000 291,200
FINANCE-INVEST BNKR/BRKR 2.71%
E*Trade Financial Corp ** 25,000 316,250
INTERNET CONTENT-INFO 12.08%
iVillage Inc ** 240,000 859,200
TheStreet.com Inc ** 135,000 548,100
------------
1,407,300
See notes to financial statements
-14-
WWW INTERNET FUND - Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
MEDIA 10.59%
Charter Communications Inc ** 150,000 603,000
Time Warner Inc ** 35,000 629,650
------------
1,232,650
NETWORKING PRODUCTS 4.04%
3Com Corp ** 10,000 81,700
Extreme Networks ** 15,000 108,150
Juniper Networks Inc ** 15,000 280,200
------------
470,050
SEMICONDUCTORS 8.74%
Bookham Technology Plc ** 25,000 62,500
Broadcom Corp ** 10,000 340,200
Intel Corp 15,000 480,750
Micron Technology Inc ** 10,000 134,700
------------
1,018,150
SOFTWARE 3.53%
Microsoft Corp 15,000 410,550
TELECOM EQ FIBER OPTICS 8.90%
Avanex Corp ** 25,000 124,750
Ciena Corp ** 10,000 65,600
Finisar Corp ** 200,000 626,000
JDS Uniphase Corp ** 50,000 182,000
MRV Communications Inc ** 10,000 37,600
------------
1,035,950
TELECOMMUNICATION EQUIP 6.36%
AudioCodes Ltd ** 50,000 522,000
Comverse Technology Inc ** 10,000 175,900
Nortel Networks Corp ** 10,000 42,300
------------
740,200
TELEPHONE-INTEGRATED 1.85%
Qwest Communications International ** 50,000 216,000
See notes to financial statements
-15-
WWW INTERNET FUND - Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
WEB PORTALS/ISP 5.97%
hongkong.com ** 250,000 20,000
Yahoo! Inc ** 15,000 675,450
------------
695,450
------------
TOTAL COMMON STOCKS
(Cost $9,429,009) 11,885,980
- --------------------------------------------------------------------------------
CALL OPTIONS PURCHASED 0.02%
COMMON STOCK EXPIRE DATE STRIKE PRICE
Time Warner Inc 1/17/04 $30.00 20,000 500
Schwab (Charles) Corp 1/17/04 $15.00 20,000 500
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) 2,000
- --------------------------------------------------------------------------------
LIMITED LIABILITY COMPANIES 0.86%
E-COMMERCE/SERVICES
Owens Direct LLC 1 2 ** (Cost $88,750) 888 100,000
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES 0.01%
MONEY MARKET FUND
First American Treasury Obiligation
Fund Cl S (Cost $804) 804 804
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 102.96%
(COST $9,885,463) 11,988,784
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.96%) (344,024)
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $ 11,644,760
================================================================================
**Non-income producing securities
1 Illiquid securities
2 Affiliated issuer
See notes to financial statements
-16-
GROWTH FLEX FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 83.35%
AEROSPACE/DEFENSE 0.54%
Boeing Co/The 200 $ 8,428
AGRICULTURE 0.55%
Monsanto Co 300 8,634
BANKS 6.92%
BB&T Corp 300 11,592
Keycorp 1,000 29,320
PNC Financial Services Group Inc 300 16,419
US Bancorp 1,700 50,626
------------
107,957
BIOTECHNOLOGY 2.38%
Amgen Inc ** 300 18,537
Millennium Pharmaceuticals Inc ** 1,000 18,650
------------
37,187
COMMERCIAL SERVICES 1.43%
Cendant Corp ** 1,000 22,270
COMPUTERS 6.27%
Dell Inc ** 1,000 33,980
Hewlett-Packard Co 1,000 22,970
International Business Machines Corp 200 18,536
Sun Microsystems Inc ** 5,000 22,350
------------
97,836
COMPUTERS-MEMORY DEVICES 0.83%
EMC Corp/Massachusetts ** 1,000 12,920
E-COMMERCE/SERVICES 2.75%
InterActiveCorp ** 1,000 33,930
WebMD Corp ** 1,000 8,990
------------
42,920
ELECTRIC 3.02%
AES Corp/The ** 5,000 47,200
ENTERTAINMENT 2.40%
Lions Gate Entertainment Corp ** 5,000 22,400
Six Flags Inc ** 2,000 15,040
------------
37,440
See notes to financial statements
-17-
GROWTH FLEX FUND - Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
FINANCE-INVEST BNKR/BRKR 7.00%
E*Trade Financial Corp ** 1,000 12,650
Goldman Sachs Group Inc 800 78,984
Merrill Lynch & Co Inc 300 17,595
------------
109,229
FOOD 0.66%
Kraft Foods Inc 200 6,444
Wild Oats Markets Inc ** 300 3,879
------------
10,323
HEALTHCARE-PRODUCTS 3.31%
Johnson & Johnson 1,000 51,660
HEALTHCARE-SERVICES 1.03%
Tenet Healthcare Corp ** 1,000 16,050
INSURANCE 4.10%
American International Group Inc 200 13,256
AON Corp 500 11,970
Chubb Corp 100 6,810
Lincoln National Corp 200 8,074
Marsh & McLennan Cos Inc 500 23,945
------------
64,055
MEDIA 10.21%
Charter Communications Inc ** 11,000 44,220
Comcast Corp ** 1,000 31,290
Liberty Media Corp ** 1,000 11,890
Time Warner Inc ** 4,000 71,960
------------
159,360
MISCELLANEOUS MANUFACTUR 5.67%
General Electric Co 2,000 61,960
Tyco International Ltd 1,000 26,500
------------
88,460
NETWORKING PRODUCTS 1.20%
Juniper Networks Inc ** 1,000 18,680
See notes to financial statements
-18-
GROWTH FLEX FUND - Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
OIL&GAS 0.79%
Exxon Mobil Corp 300 12,300
OIL&GAS SERVICES 1.29%
BJ Services Co ** 200 7,180
Halliburton Co 500 13,000
------------
20,180
PHARMACEUTICALS 9.22%
AstraZeneca Plc 200 9,676
Merck & Co Inc 1,000 46,200
Pfizer Inc 2,000 70,660
Schering-Plough Corp 1,000 17,390
------------
143,926
PIPELINES 3.57%
Dynegy Inc ** 5,000 21,400
El Paso Corp 3,000 24,570
Williams Cos Inc 1,000 9,820
------------
55,790
RETAIL-APPAREL/SHOE 0.71%
Chico's FAS Inc ** 300 11,085
RETAIL-MAJOR DEPT STORE 0.56%
May Department Stores Co/The 300 8,721
RETAIL-RESTAURANTS 0.64%
Starbucks Corp ** 300 9,948
SEMICONDUCTORS 1.03%
Intel Corp 500 16,025
SOFTWARE 1.75%
Microsoft Corp 1,000 27,370
TELECOM EQ FIBER OPTICS 0.79%
Avanex Corp ** 1,000 4,990
JDS Uniphase Corp ** 2,000 7,280
------------
12,270
TELECOMMUNICATION EQUIP 1.35%
Nortel Networks Corp ** 5,000 21,150
See notes to financial statements
-19-
GROWTH FLEX FUND - Continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
TELEPHONE-INTEGRATED 1.38%
Qwest Communications International ** 5,000 21,600
------------
TOTAL COMMON STOCKS
(Cost $1,185,914) 1,300,974
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST 0.61%
United Dominion Realty Trust Inc
(Cost $8,841) 500 9,600
- --------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 9.90%
U.S. Treasury 2% notes due 5/15/06 40,000 40,012
U.S. Treasury 2.625% notes due 5/15/08 40,000 39,420
U.S. Treasury 3.625% notes due 5/15/13 40,000 38,512
U.S. Treasury 5.375% bonds due 2/15/31 35,000 36,542
------------
(Cost $162,635) 154,486
- --------------------------------------------------------------------------------
UNSECURED NOTE 3.20%
LIMITED LIABILITY COMPANIES
Owens Direct LLC, 10% due 5/31/05 1
(Cost $50,000) 50,000 50,000
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES 8.13%
INDEX FUND-DEBT 6.88%
iShares Lehman 1-3 Year Treasury
Bond Fund 500 41,235
iShares Lehman Treasury Inflation
Protected Securities Fund 650 66,112
------------
107,347
MONEY MARKET FUND 1.25%
First American Treasury Obiligation
Fund Cl S (Cost $19,570) 19,570 19,570
------------
TOTAL INVESTMENT COMPANIES
(Cost $126,963) 126,917
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(COST $1,534,353) 105.19% 1,641,977
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (5.19%) (80,969)
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $ 1,561,008
================================================================================
**Non-income producing securities
1 Illiquid securities
See notes to financial statements
-20-
MARKET OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 102.77%
BIOTECHNOLOGY 1.52%
Millennium Pharmaceuticals Inc ** 1,000 $ 18,650
COMMERCIAL SERVICES 1.81%
Cendant Corp ** 1,000 22,270
COMPUTERS 6.86%
Brocade Communications Systems Inc ** 1,000 5,780
Dell Inc ** 1,000 33,980
Sun Microsystems Inc ** 10,000 44,700
------------
84,460
E-COMMERCE/SERVICES 13.19%
Homestore Inc ** 20,000 94,600
InterActiveCorp ** 2,000 67,860
------------
162,460
ELECTRIC 3.83%
AES Corp/The ** 5,000 47,200
ELECTRONICS 1.35%
AVX Corp 1,000 16,620
ENTERTAINMENT 5.46%
Lions Gate Entertainment Corp ** 15,000 67,200
HEALTHCARE-SERVICES 1.30%
Tenet Healthcare Corp ** 1,000 16,050
INTERNET CONTENT-INFO/NE 14.06%
iVillage Inc ** 20,000 71,600
TheStreet.com Inc ** 25,000 101,500
------------
173,100
MEDIA 12.05%
Charter Communications Inc ** 25,000 100,500
Liberty Media Corp ** 1,000 11,890
Time Warner Inc ** 2,000 35,980
------------
148,370
See notes to financial statements
-21-
MARKET OPPORTUNITIES FUND-continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS 2.10%
Extreme Networks ** 1,000 7,210
Juniper Networks Inc ** 1,000 18,680
------------
25,890
PIPELINES 5.06%
Dynegy Inc ** 5,000 21,400
El Paso Corp 5,000 40,950
------------
62,350
SEMICONDUCTORS 7.75%
Bookham Technology Plc ** 10,000 25,000
Conexant Systems Inc ** 5,000 24,850
Intel Corp 1,000 32,050
Micron Technology Inc ** 1,000 13,470
------------
95,370
TELECOM EQ FIBER OPTICS 17.60%
Avanex Corp ** 10,000 49,900
Ciena Corp ** 1,000 6,560
Corvis Corp ** 3,500 5,950
Finisar Corp ** 30,000 93,900
JDS Uniphase Corp ** 10,000 36,400
MRV Communications Inc ** 5,000 18,800
Sycamore Networks Inc ** 1,000 5,220
------------
216,730
TELECOMMUNICATION EQUIP 5.32%
ADC Telecommunications Inc ** 2,000 5,940
AudioCodes Ltd ** 2,000 20,880
Comverse Technology Inc ** 1,000 17,590
Nortel Networks Corp ** 5,000 21,150
------------
65,560
See notes to financial statements
-22-
MARKET OPPORTUNITIES FUND-continued
SCHEDULE OF INVESTMENTS IN SECURITIES
As of December 31, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/
UNITS/FACE
VALUE VALUE
- --------------------------------------------------------------------------------
TELEPHONE-INTEGRATED 3.51%
Qwest Communications International ** 10,000 43,200
TOTAL COMMON STOCKS
(Cost $1,218,836) 1,265,480
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES 0.07%
MONEY MARKET FUND
First American Treasury Obiligation
Fund Cl S (Cost $837) 837 837
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(COST $1,219,673) 102.84% 1,266,317
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (2.84%) (34,947)
- --------------------------------------------------------------------------------
NET ASSETS 100.00% $ 1,231,370
================================================================================
**Non-income producing securities
See notes to financial statements
-23-
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
IPC 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.
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 IPC 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.
-24-
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 price 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. Class specific expenses are charged directly to the class incurring
the expense. Common expenses that are not attributable to a specific class are
allocated daily to each class of shares based upon its proportionate share of
the total net assets of the Fund. 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.
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 $375,000 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 $150,000 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 (4.00% at December 31, 2003), payable monthly. For the six
month period ended December 31, 2003, the WWW Internet Fund paid interest
expense of $10,858, on an average borrowed amount of $534,749 at an average rate
of 4.00%. For the six month period ended December 31, 2003, the Growth Flex Fund
paid interest expense of $428, on an average borrowed amount of $108,250 at an
average rate of 4.00%. For the six month period ended December 31, 2003, the
Market Opportunities Fund paid interest expense of $500, on an average borrowed
amount of $125,083 at an average rate of 4.00%.
-25-
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.
During the six month period ended December 31, 2003, the Growth Flex Fund Class
A, Class C and Class Y made distributions from Short Term Capital Gains of
$0.1004 aggregating $2,447, $0.0981 aggregating $299 and $0.0996 aggregating
$10,773, respectively. During the six month period ended December 31, 2003, the
Market Opportunities Fund Class A, Class C and Class Y made distributions from
Short Term Capital Gains of $0.2170 aggregating $5,759, $0.2013 aggregating $853
and $0.2149 aggregating $18,419, respectively. The WWW Internet Fund made no
distributions during the six month period ended December 31, 2003.
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 December 31, 2003, for U.S. federal income tax
purposes, the WWW Internet Fund has capital loss carry-forwards of approximately
$35,300,000, expiring in 2009; approximately $14,600,000, expiring in 2010; and
approximately $4,000,000, expiring in 2011.
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 December 31, 2003, illiquid securities
represented 4.72% of the WWW Internet Fund's net assets and 3.20% 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 IPC 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
-26-
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 six month period ended December 31, 2003, the Manager voluntarily
reimbursed expenses of the Market Opportunities Fund in the amount of $3,447.
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.
-27-
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 SIX MONTH PERIOD ENDED For the year ended
WWW INTERNET FUND DECEMBER 31, 2003 June 30, 2003
------------------------------ ---------------------
CLASS A SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 11,142 $ 67,424 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (88) (550) -- --
-------- ----------- --------- -----------
NET INCREASE 11,054 $ 66,874 -- $ --
======== =========== ========= ===========
CLASS C SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 4,535 $ 27,946 405 $ 2,100
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- (2) -- --
-------- ----------- --------- -----------
NET INCREASE 4,535 $ 27,944 405 $ 2,100
======== =========== ========= ===========
CLASS Y SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 146,493 $ 878,137 232,134 $ 967,300
SHARES REDEEMED
(NET OF REDEMPTION FEES) (222,051) (1,336,872) (436,587) (1,759,311)
-------- ----------- --------- -----------
NET DECREASE (75,558) $ (458,735) (204,453) $ (792,011)
======== =========== ========= ===========
- ----------------------------------------------------------------------------------------------
FOR THE SIX MONTH PERIOD ENDED From inception (May 5, 2003)
GROWTH FLEX FUND DECEMBER 31, 2003 to June 30, 2003
------------------------------ ---------------------------
CLASS A SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 8,196 $ 87,688 22,718 $ 227,753
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 226 $ 2,446 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (941) (10,000) (4,336) (43,355)
-------- ----------- --------- -----------
NET INCREASE 7,481 $ 80,134 18,382 $ 184,398
======== =========== ========= ===========
CLASS C SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 1,670 $ 18,000 1,530 $ 15,300
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 28 $ 299 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (1) (7) -- --
-------- ----------- --------- -----------
NET INCREASE 1,697 $ 18,292 1,530 $ 15,300
======== =========== ========= ===========
CLASS Y SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 38,909 $ 415,938 90,729 $ 907,967
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 996 $ 10,772 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (20,728) (220,438) (547) (5,532)
-------- ----------- --------- -----------
NET INCREASE 19,177 $ 206,272 90,182 $ 902,435
======== =========== ========= ===========
-28-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS - CONTINUED
FOR THE SIX MONTH PERIOD ENDED From inception (May 6, 2003)
MARKET OPPORTUNITIES FUND DECEMBER 31, 2003 to June 30, 2003
------------------------------ ---------------------------
CLASS A SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 11,878 $ 133,378 15,196 $ 154,654
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 554 $ 5,759 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (193) (2,000) -- --
-------- ----------- --------- -----------
NET INCREASE 12,239 $ 137,137 15,196 $ 154,654
======== =========== ========= ===========
CLASS C SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 2,199 $ 24,000 2,056 $ 21,500
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 82 $ 853 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) -- (2) -- --
-------- ----------- --------- -----------
NET INCREASE 2,281 $ 24,851 2,056 $ 21,500
======== =========== ========= ===========
CLASS Y SHARES AMOUNT Shares Amount
- ------- ------ ------ ------ ------
SHARES SOLD 35,232 $ 394,561 50,865 $ 522,285
SHARES ISSUED BY REINVESTMENT
OF DIVIDENDS/DISTRIBUTIONS 1,613 $ 16,765 -- $ --
SHARES REDEEMED
(NET OF REDEMPTION FEES) (341) (3,768) -- --
-------- ----------- --------- -----------
NET INCREASE 36,504 $ 407,558 50,865 $ 522,285
======== =========== ========= ===========
7. INVESTMENTS
For the six month period ended December 31, 2003, the WWW Internet Fund made
$10,320,243 in purchases and $10,602,474 in sales of investment securities,
other than short-term investments. The Growth Flex Fund made $1,156,212 in
purchases and $782,076 in sales of investment securities, other than short-term
investments and U.S. government obligations. The Market Opportunities Fund made
$4,149,968 in purchases and $3,558,649 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
December 31, 2003, were as follows:
Federal Gross Gross Net Unrealized
Income Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
Basis
-------------------------------------------------------------
WWW INTERNET FUND $ 9,884,659 $ 3,445,812 $(1,342,491) $ 2,103,321
GROWTH FLEX FUND $ 1,515,094 $ 127,700 $ (20,387) $ 107,313
MARKET OPPORTUNITIES FUND $ 1,232,107 $ 83,998 $ (50,625) $ 33,373
-29-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
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.
Certain owners/officers of IPC 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 six month
period ended December 31, 2003, the amount paid or accrued by the WWW Internet
Fund, Growth Flex Fund and Market Opportunities Fund for Management Fees was
$84,835, $6,572 and $8,072, respectively. In addition, the Manager received
distribution fees paid or accrued by Class Y shares of the WWW Internet Fund in
the amount of $28,134.
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 six month period ended December 31, 2003, the
Distributor received sales commission from the sale of Class A shares of the WWW
Internet Fund, the Growth Flex Fund and the Market Opportunities Fund in the
amounts of $3,356, $17,173 and $8,497, respectively; and, distribution fees paid
or accrued by Class A shares of the WWW Internet Fund, the Growth Flex Fund and
the Market Opportunities Fund in the amounts of $104, $603 and $633,
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 $80, $111 and $155, respectively; and distribution fees paid or
accrued by Class Y shares of the Growth Flex Fund and the Market Opportunities
Fund of $2,628 and $1,980, 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 six month period ended December 31,
2003, the fees paid or accrued by the Funds for such services amounted to
$83,485. In addition, the Funds reimbursed CFS for certain out of pocket
expenses incurred on behalf of the Funds totaling $44,534.
As of December 31, 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. the Fund is due to receive, at no cost, a 10% interest
in Credit Care Systems LLC, a development stage enterprise.
As of December 31, 2003, the WWW Internet Fund's investment in Owens Direct LLC
(an affiliated issuer) represents 17.75% ownership of the outstanding voting
rights.
-30-
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 President and General
4855 Gedney View Manager of Quality Communications Inc. (telecommunications consulting firm) from
Clinton, WA 98236 1997-2001; Director, Telecommunications Research Center of the University of
Age: 52 Louisville from 1990-1997.
Trustee
Indefinite/Since 1997
3
None
RICHARD T. DIDIEGO Director of Corporate Strategy and Business Development (since 1998) and Director
2213 Palm Grove Court of International Business Development (from 1996-1998) for Lexmark International,
Lexington KY 40513 Inc. (manufacturer and marketer of network and personal printers, multifunction
Age: 44 devices and related document workflow solutions and services).
Trustee
Indefinite/Since 2000
3
None
TERRY L. CHILDERS Gatton Endowed Chair in Electronic Marketing, University of Kentucky since 2001;
207 Catalpa Road Professor of Marketing, University of Minnesota from 1993-2000.
Lexington KY 40502
Age: 53
Trustee
Indefinite/Since 2002
3
None
INTERESTED TRUSTEES/OFFICERS
LAWRENCE S. YORK Officer, IPC Insurance Management, Inc.(affiliate of the Fund Manager), since
131 Prosperous Place 2003; Officer, IPC Financial Group, Inc.(affiliate of the Fund Manager), since
Suite 17 2003; President, Interactive Planning Corp. (Fund Distributor and affiliate of the
Lexington KY 40509 Fund Manager) since 1999; President, IPC Advisors, Inc (Fund Manager) since 1996;
Age: 52 President, Capital Advisors Group, Inc. (investment advisor affiliate of the Fund
Trustee, Chairman, President Manager) since 1989; President, Capital Fund Services, Inc. (transfer agent,
Indefinite/Since 1996 accounting and administrative service provider of the Trust) from 2001-2003.
3
Interactive Planning Corp. (B/D)
JAMES D. GREENE Sr. Product Manger, Microsoft Business Solutions, Retail Division, since 2002;
35517 S.E. English St. Vice President of Marketing of AfterBot (software company) from 2001-2002; Senior
Snoqualmie, WA 98065 Consultant of i2 (software company) from 2000-2001; Director of E-Commerce of NCR
Age: 46 Corporation (point of sale hardware company) from 1997-2000; Vice President of WWW
Trustee, Vice President, Treasurer Advisors, Inc. (Fund Manager) since 1996.
Indefinite/Since 1996
3
None
DAVID SMYTH Agent, IPC Insurance Management, Inc.(affiliate of the Fund Manager), since 2003;
131 Prosperous Place Vice President, Investments, IPC Financial Group, Inc.(affiliate of the Fund
Suite 17 Manager), since 2003; Research Analyst, IPC Advisors, Inc. (Fund Manager), since
Lexington KY 40509 2000; Investment Advisor, Capital Advisors Group, Inc. (investment advisor
Age: 28 affiliate of the Fund Manager), since 1999; Registered Representative,
Secretary Interactive Planning Corp. (Fund Distributor and affiliate of the Fund Manager),
Indefinite/Since 2003 since 1999; Administration Specialist, Ashland, Inc., 1998-1999.
N/A
N/A
-31-
ITEM 2. CODE OF ETHICS.
The code of ethics disclosure requirements are not applicable because the
information required by this Item is required only in an annual report on Form
N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The audit committee financial expert disclosure requirements are not
applicable because the information required by this Item is required only in an
annual report on Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The disclosure provisions of Item 4 of Form N-CSR are not applicable
because the information required by this Item is required only in an annual
report on Form N-CSR.
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, 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.
(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 last fiscal half-year
that have materially affected, or is reasonably likely to materially effect, the
Registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable because the exhibit required by this Item relates to
the disclosure required by Item 2 of Form N-CSR, which is required only in an
annual report on Form N-CSR.
(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.
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.
IPC FUNDS
Date: February 27, 2004 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 behalf of the registrant and in the capacities and on
the dates indicated.
Date: February 27, 2004 By: /S/ LAWRENCE S. YORK
--------------------
Name: Lawrence S. York
Title: President
Date: February 23, 2004 By: /S/ JAMES D. GREENE
--------------------
Name: James D. Greene
Title: Treasurer