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: June 30, 2004
-------------
Item 1. Report to Stockholders.
IPC FUNDS [LOGO]
ANNUAL REPORT
JUNE 30, 2004
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__________________________________________________________ 8
Financial Highlights_________________________________________________________ 12
WWW Internet Fund Schedule of Investments in Securities of
Unaffiliated Issuers_______________________________________________________ 18
WWW Internet Fund Schedule of Investments in Securities of
Affiliated Issuers ________________________________________________________ 21
Growth Flex Fund Schedule of Investments in Securities of
Unaffiliated Issuers ______________________________________________________ 22
Growth Flex Fund Schedule of Investments in Securities of
Affiliated Issuers_________________________________________________________ 26
Market Opportunities Fund Schedule of Investments in Securities of
Unaffiliated Issuers_____________________________________________________ 27
Notes to Financial Statements________________________________________________ 31
Report of Independent Registered Public Accounting Firm______________________ 39
Trustees and Officers________________________________________________________ 40
LETTER TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Fellow Shareholders,
Another year has elapsed since our last Annual Report to Shareholders and what
began as a most promising year deteriorated in the second quarter of 2004, our
fiscal fourth quarter and year end. Concerns about US economic growth, rising
interest rates and energy prices, the outcome of the US Presidential election,
and the post war problems in Iraq continued to generally dampen interest in the
US stock market. Indeed this investor sentiment was evidenced by low volume
trading and high market volatility accompanied by reversals in sector leadership
as investors moved to the sidelines.
Since June 30, stocks have continued to lose additional ground led by Internet
and Technology issues that had ushered the market's recovery last year and early
this year. From a fundamental analysis perspective, this retrenchment is
confusing because the majority of reporting companies have beat their earnings
estimates and a full 82% have met or exceeded earnings estimates. Moreover
during this time Consumer Confidence, as measured by the University of Michigan,
was reportedly improving and there appeared to be clear signs that the US
economy has entered its expansion cycle that ordinarily supports higher stock
prices. As a matter of historical precedent, stocks as an asset class have
appeared to be priced to offer a greater total return to investors than
competing fixed income asset classes. Yet the markets have not yet followed that
script.
In this environment the IPC Funds remained fully invested producing positive
returns with the exception of Market Opportunities Fund which performed poorly
and turned in negative results for the year. WWW Internet Fund's performance
significantly lagged the IIX Internet Fund index, but was generally in line with
several of its peer Internet funds. WWW Internet Fund's results were adversely
impacted by our positioning of the portfolio in Voice Over Internet Protocol
(VOIP) related stocks that led the market in Q1 04, but were savaged by Nortel's
fraud announcement that rippled through suppliers, semiconductor companies and
related optical and networking providers. The other factor was the fund's higher
expense ratio of 5.6% reflecting both the increased cost of operations due to
legal and regulatory compliance and the termination of the Advisor's cap on
expenses which subsidize the Funds.
-2-
LETTER TO THE SHAREHOLDERS - CONTINUED
- --------------------------------------------------------------------------------
The table below presents the performance of Class Y (no sales charge) shares for
each of the IPC Funds and various market indices for the fiscal year as well as
for the first and second quarter of 2004.
Fiscal Year 1st Qtr 2nd Qtr
ended 6/30/04 2004 2004
WWW Internet Fund 23.24% 4.54% -3.14%
Growth Flex Fund 7.31% 0.80% -2.46%
Market Opportunities Fund -7.60% 6.87% -14.39%
S&P 500 Index 19.10% 1.69% 1.72%
NASDAQ Composite 21.82% -0.02% 3.45%
IIX Index 45.63% 4.67% 8.11%
Last fiscal year marked the first full year of operations of our two newest
funds which were launched in May 2003: Growth Flex Fund and Market Opportunities
Fund. Growth Flex Fund had an inception to date return of 10.38 % while Market
Opportunities Fund's return since inception was only -2.7%. Both fund's
performance was analyzed thoroughly, and we found that the poorer results of
Market Opportunity Fund was related primarily to adverse events beyond our
control in our long, "catalyst event" trades that failed, and due to
concentrations or stock weightings in those positions which we could control.
Based upon this evaluation we modified our trading and portfolio construction,
but over-weighted positions in some issues were held believing that they were
oversold. Since the market has continued to suffer from a general uncertainty
and lack of investor commitment, Market Opportunities Fund has not yet regained
our expected appreciation and continues to show lagging results.
As many of you now know, we are closing the funds and making distributions to
all of our shareholders. From the very beginning our objective was to capture
the opportunity of the Internet for our shareholders. Yet as a result of the
adverse market conditions over the last several years and the high expenses
associated with administering a small family of mutual funds, we saw that it was
not in the best interest of our shareholders to continue unless we significantly
increased our asset base. After looking into several merger or acquisition
opportunities we felt that the best interest of our shareholders was to let them
decide where to invest for themselves. On August 17th the Board of Trustees
voted to initiate a speedy liquidation in order to reduce costs and expedite
distributions.
-3-
LETTER TO THE SHAREHOLDERS - CONTINUED
- --------------------------------------------------------------------------------
I still strongly believe in the promise and opportunity of the Internet as an
emerging global, communication, information and distribution network. Great,
unimagined opportunities still have yet to be invented and discovered and
Internet and Technology companies will one day again continue to offer above
average investment returns. I know many of you have steadfastly held the course
staying invested because you understand this. I encourage you to keep some part
of your money invested in the Internet Sector to realize that opportunity. I
also want to personally thank you on behalf of the Advisor and the Board for
your trust and commitment over all these years.
Sincerely,
/S/ LAWRENCE YORK
- -----------------
Lawrence York
Chairman & CIO
-4-
WWW INTERNET FUND CLASS Y SHARES PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
FROM AUGUST 1, 1996 (*INCEPTION) TO JUNE 30, 2004
AVERAGE ANNUAL TOTAL RETURN
---------------------------
*SINCE
1 YEAR 5 YEAR INCEPTION
------ ------ ---------
WWW INTERNET FUND CLASS Y 23.24% -19.36% -0.81%
S&P 500 INDEX 19.04% - 2.20% 9.24%
NASDAQ COMPOSITE INDEX 26.70% - 4.94 8.80%
NEED PLOT POINTS
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 A and 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.
-5-
GROWTH FLEX FUND CLASS Y SHARES PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
FROM MAY 5, 2003 (*INCEPTION) TO JUNE 30, 2004
AVERAGE ANNUAL TOTAL RETURN
---------------------------
*SINCE
1 YEAR INCEPTION
------ ---------
GROWTH FLEX FUND CLASS Y 7.31% 10.12%
S&P 500 INDEX 19.04% 21.26%
NEED PLOT POINTS
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.
Past performance is no guarantee of future results.
The line graph of the Growth Flex Fund represents the performance of the Class Y
shares of the Growth Flex Fund. The performance of Class A and Class C shares of
the Growth Flex 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.
-6-
MARKET OPPORTUNITIES FUND CLASS Y SHARES PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
FROM MAY 6, 2003 (*INCEPTION) TO JUNE 30, 2004
AVERAGE ANNUAL TOTAL RETURN
---------------------------
*SINCE
1 YEAR INCEPTION
------ ---------
MARKET OPPORTUNITIES FUND CLASS Y - 7.60% - 2.98%
NASDAQ COMPOSITE INDEX 26.70% 31.20%
NEED PLOT POINTS
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 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 Market Opportunities Fund represents the performance of
the Class Y shares of the Market Opportunities Fund. The performance of Class A
and Class C shares of the Market Opportunities 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.
-7-
FINANCIAL STATEMENTS
STATEMENTS OF ASSETS AND LIABILITIES
As of June 30, 2004
- ------------------------------------------------------------------------------------------------------
MARKET
WWW INTERNET GROWTH FLEX OPPORTUNITIES
FUND FUND FUND
- ------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities of unaffiliated
issuers, at value (cost $10,006,908,
$1,670,355 and $1,226,437, respectively) $ 11,026,097 $ 1,731,404 $ 1,158,035
Investments in securities of affiliated
issuers, at value (cost $338,750, $50,000) 350,000 50,000 --
- ------------------------------------------------------------------------------------------------------
Total Investments in securities 11,376,097 1,781,404 1,158,035
- ------------------------------------------------------------------------------------------------------
Receivable from dividends and interest 2 2,735 --
Receivable from securities sold 1,090,952 65,010 79,790
Receivable from fund shares sold 150 25 --
Receivable from affiliated funds 8,277 -- --
Other assets 20,798 405 395
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS 12,496,276 1,849,579 1,238,220
- ------------------------------------------------------------------------------------------------------
LIABILITIES
Payable for securities purchased 959,957 38,324 86,104
Payable for fund shares redeemed 41,184 89,631 --
Payable for other accrued expenses 91,922 1,419 2,001
Payable for investment advisory fees 18,643 14,937 3,119
Payable for distribution fees 4,537 749 433
Payable for administration fees 6,002 -- --
Payable to affiliated fund -- 5,274 3,003
Payable to custodian bank 97,191 6 154,618
- ------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,219,436 150,340 249,278
- ------------------------------------------------------------------------------------------------------
NET ASSETS $ 11,276,840 $ 1,699,239 $ 988,942
======================================================================================================
NET ASSETS CONSIST OF
Capital shares $ 63,978,810 $ 1,580,655 $ 1,062,833
Net investment loss (643,003) (49,192) (982)
Accumulated net realized gain (loss) from
investment transactions (53,089,406) 106,727 (4,507)
Net unrealized appreciation (depreciation) 1,030,439 61,049 (68,402)
- ------------------------------------------------------------------------------------------------------
NET ASSETS $ 11,276,840 $ 1,699,239 $ 988,942
======================================================================================================
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
$105,410, $445,593 and $301,530, and shares
outstanding of 16,202, 40,136 and 31,811,
respectively $ 6.51 $ 11.10 $ 9.48
======================================================================================================
CLASS A - public offering price $6.51, $11.10 and
$9.48 divided by .9425, .9425 and .94, respectively $ 6.91 $ 11.78 $ 10.09
======================================================================================================
CLASS C - based on net assets of $37,934, $48,616
and $44,262, and shares outstanding of 5,852, 4,394
and 4,689, respectively $ 6.48 $ 11.06 $ 9.44
======================================================================================================
CLASS Y - based on net assets of $11,133,496
$1,205,030 and $643,150, and shares outstanding
of 1,720,702, 108,719 and 67,968, respectively $ 6.47 $ 11.08 $ 9.46
======================================================================================================
See notes to financial statements
-8-
STATEMENTS OF OPERATIONS
For the Year ended June 30, 2004
- ---------------------------------------------------------------------------------------
MARKET
WWW GROWTH FLEX OPPORTUNITIES
INTERNET FUND FUND FUND
INVESTMENT INCOME
Dividends $ 4,580 $ 19,125 $ 1,504
Interest from unaffiliated issuers 240 4,821 307
Interest from affiliated issuers -- 5,014 --
Other income 403 144 552
- ---------------------------------------------------------------------------------------
Total investment income 5,223 29,104 2,363
- ---------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 169,586 15,082 16,991
Distribution fees-Class A 342 1,551 1,415
Distribution fees-Class C 259 329 393
Distribution fees-Class Y 57,712 5,846 4,068
Administration fees 213,182 27,242 20,879
Custody fees 8,675 4,901 7,594
Auditor fees 34,906 6,049 4,784
Legal fees 69,474 9,692 6,358
Trustees fees 19,743 2,565 1,919
Interest 29,397 1,768 2,997
Other expenses 44,950 3,271 7,598
- ---------------------------------------------------------------------------------------
Total gross expenses 648,226 78,296 74,996
More/Less expense reimbursement -- -- (12,278)
- ---------------------------------------------------------------------------------------
Total net expenses 648,226 78,296 62,718
- ---------------------------------------------------------------------------------------
NET INVESTMENT LOSS (643,003) (49,192) (60,355)
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS
Net realized gain from investment
securities of unaffiliated issuers 2,623,091 106,727 108,806
Net realized loss from closed short
positions in securities (5,612) -- (107,824)
Net change in unrealized appreciation
(depreciation) on investments 279,264 28,554 (61,981)
- ---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 2,896,743 135,281 (60,999)
- ---------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 2,253,740 $ 86,089 $ (121,354)
=======================================================================================
See notes to financial statements
-9-
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
WWW INTERNET FUND
FOR THE YEAR
ENDED JUNE 30, For the year ended
2004 June 30, 2003
------------------------------------
FROM OPERATIONS
Net investment loss $ (643,003) $ (413,729)
Net realized gain (loss) from
investment transactions 2,617,479 (4,012,014)
Net change in unrealized appreciation
(depreciation) 279,264 6,376,054
- -------------------------------------- ------------------------------------
Net increase (decrease) in net assets
from operations 2,253,740 1,950,311
- -------------------------------------- ------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
from net capital gains on investments -- --
- -------------------------------------- ------------------------------------
CAPITAL SHARE TRANSACTIONS
Net increase (decrease) from
capital share transactions (868,395) (789,911)
- -------------------------------------- ------------------------------------
NET INCREASE IN NET ASSETS 1,385,345 1,160,400
- -------------------------------------- ------------------------------------
NET ASSETS
Beginning of period 9,891,495 8,731,095
- -------------------------------------- ------------------------------------
End of period $ 11,276,840 $ 9,891,495
====================================== ====================================
See notes to financial statements
-10-
GROWTH FLEX FUND MARKET OPPORTUNITIES FUND
FOR THE YEAR From inception FOR THE YEAR From inception
ENDED JUNE 30, (May 5, 2003) to ENDED JUNE 30, (May 6, 2003) to
2004 June 30, 2003 2004 June 30, 2003
- ---------------------------------------- -------------------------------------
$ (49,192) $ (4,916) $ (60,355) $ (3,675)
106,727 18,434 982 23,219
28,554 32,495 (61,981) (6,421)
- ---------------------------------------- -------------------------------------
86,089 46,013 (121,354) 13,123
- ---------------------------------------- -------------------------------------
(13,518) -- (25,032) --
- ---------------------------------------- -------------------------------------
478,522 1,102,133 423,766 698,439
- ---------------------------------------- -------------------------------------
551,093 1,148,146 277,380 711,562
- ---------------------------------------- -------------------------------------
1,148,146 -- 711,562 --
- ---------------------------------------- -------------------------------------
$ 1,699,239 $ 1,148,146 $ 988,942 $ 711,562
======================================== =====================================
-11-
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- --------------------------------------------------------------------------------
WWW INTERNET FUND CLASS A CLASS C
FROM INCEPTION From inception
(JULY 8, 2003) FOR THE YEAR (June 9, 2003)
THROUGH ENDED through
JUNE 30, 2004 JUNE 30, 2004 June 30, 2003
- ----------------------------------------- --------------- ---------------------------------
Net asset value, beginning of period $ 5.67 $ 5.27 $ 5.18
- ----------------------------------------- --------------- ---------------------------------
Income (loss) from investment operations:
Net investment loss (0.35) (0.38) (0.02)
Net realized and unrealized
gain (loss) on investments 1.19 1.59 0.11
- ----------------------------------------- --------------- ---------------------------------
Total from investment operations 0.84 1.21 0.09
- ----------------------------------------- --------------- ---------------------------------
Less distributions from capital gains -- -- --
- ----------------------------------------- --------------- ---------------------------------
Net asset value, end of period $ 6.51 $ 6.48 $ 5.27
========================================= =============== =================================
Total return (2) (3) (4) 14.82% 22.96% 1.74%
========================================= =============== =================================
Ratios/supplemental data
Net assets, end of period (in thousands) $ 106 $ 38 $ 2
Ratio of expenses to average net assets
before expenses reimbursement(1) 5.58% 6.08% 6.35%
Ratio of expenses to average net assets
after expenses reimbursement(1) N/A N/A N/A
Ratio of net investment loss
to average net assets(1) (5.54%) (6.04%) (5.99%)
Ratio of net investment loss to average
net assets net of reimbursement(1) N/A N/A N/A
Portfolio turnover rate 194.06% 194.06% 242.29%
<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
(3) Total return excludes the effect of sales charges
See notes to financial statements
</FN>
-12-
CLASS Y
FOR THE YEAR For the year For the year For the year For the year
ENDED ended ended ended ended
JUNE 30, 2004 June 30, 2003 June 30, 2002 June 30, 2001 June 30, 2000
- --------------------------------------------------------------------------------
$ 5.25 $ 4.18 $ 10.21 $ 36.63 $ 22.64
- --------------------------------------------------------------------------------
(0.37) (0.22) (0.25) (0.49) (0.52)
1.59 1.29 (5.78) (22.98) 14.91
- --------------------------------------------------------------------------------
1.22 1.07 (6.03) (23.47) 14.39
- --------------------------------------------------------------------------------
-- -- -- (2.95) (0.40)
- --------------------------------------------------------------------------------
$ 6.47 $ 5.25 $ 4.18 $ 10.21 $ 36.63
================================================================================
23.24% 25.60% (59.06%) (67.19%) 63.56%
================================================================================
$ 11,133 $ 9,889 $ 8,731 $ 25,484 $ 102,226
5.58% 5.55% 3.75% 2.42% 2.51%
N/A N/A 3.47% 2.42% 2.49%
(5.54%) (5.19%) (3.63%) (2.25%) (2.13%)
N/A N/A (3.34%) (2.25%) (2.11%)
194.06% 242.29% 268.13% 501.71% 229.28%
-13-
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- --------------------------------------------------------------------------------
GROWTH FLEX FUND CLASS A
From inception
FOR THE YEAR (May 5, 2003)
ENDED through
JUNE 30, 2004 June 30, 2003
- ----------------------------------------- --------------------------------------
Net asset value, beginning of period $ 10.43 $ 10.00
- ----------------------------------------- --------------------------------------
Income (loss) from investment operations:
Net investment loss (0.32) (0.04)
Net realized and unrealized
gain on investments 1.08 0.47
- ----------------------------------------- --------------------------------------
Total from investment operations 0.76 0.43
- ----------------------------------------- --------------------------------------
Less distributions from capital gains (0.10) --
- ----------------------------------------- --------------------------------------
Net asset value, end of period $ 11.09 $ 10.43
========================================= ======================================
Total return (2)(3)(4) 7.52% 4.30%
========================================= ======================================
Ratios/supplemental data
Net assets, end of period (in thousands) $ 445 $ 192
Ratio of expenses to average net assets
before expenses reimbursement(1) 5.18% 6.10%
Ratio of expenses to average net assets
after expenses reimbursement(1) N/A 5.01%
Ratio of net investment loss
to average net assets(1) (3.37%) (4.01%)
Ratio of net investment loss to average
net assets net of reimbursement(1) N/A (2.92%)
Portfolio turnover rate 102.03% 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
</FN>
See notes to financial statements
-14-
CLASS C CLASS Y
From inception From inception
FOR THE YEAR (May 5, 2003) FOR THE YEAR (May 5, 2003)
ENDED through ENDED through
JUNE 30, 2004 June 30, 2003 JUNE 30, 2004 June 30, 2003
- ---------------------------------- ----------------------------------
$ 10.42 $ 10.00 $ 10.43 $ 10.00
- ---------------------------------- ----------------------------------
(0.36) (0.05) (0.34) (0.04)
1.09 0.47 1.08 0.47
- ---------------------------------- ----------------------------------
0.73 0.42 0.74 0.43
- ---------------------------------- ----------------------------------
(0.10) -- (0.10) --
- ---------------------------------- ----------------------------------
$ 11.05 $ 10.42 $ 11.07 $ 10.43
================================== ==================================
7.21% 4.20% 7.31% 4.30%
================================== ==================================
$ 49 $ 16 $ 1,205 $ 940
5.68% 6.60% 5.18% 6.10%
N/A 5.51% N/A 5.01%
(3.87%) (4.51%) (3.37%) (4.01%)
N/A (3.42%) N/A (2.92%)
102.03% 23.49% 102.03% 23.49%
-15-
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
- --------------------------------------------------------------------------------
MARKET OPPORTUNITIES FUND CLASS A
From inception
FOR THE YEAR (May 6, 2003)
ENDED through
JUNE 30, 2004 June 30, 2003
- ----------------------------------------- -------------- ---------------
Net asset value, beginning of period $ 10.45 $ 10.00
- ----------------------------------------- -------------- ---------------
Income (loss) from investment operations:
Net investment loss (0.57) (0.06)
Net realized and unrealized
gain (loss) on investments (0.18) 0.51
- ----------------------------------------- -------------- ---------------
Total from investment operations (0.75) 0.45
- ----------------------------------------- -------------- ---------------
Less distributions from capital gains (0.22) --
- ----------------------------------------- -------------- ---------------
Net asset value, end of period $ 9.48 $ 10.45
========================================= ============== ===============
Total return (2)(3)(4) (7.38%) 4.50%
========================================= ============== ===============
Ratios/supplemental data
Net assets, end of period (in thousands) $ 302 $ 159
Ratio of expenses to average net assets
before expenses reimbursement(1) 6.60% 8.36%
Ratio of expenses to average net assets
after expenses reimbursement(1) 5.52% 5.25%
Ratio of net investment loss
to average net assets(1) (6.39%) (7.98%)
Ratio of net investment loss to average
net assets net of reimbursement(1) (5.31%) (4.87%)
Portfolio turnover rate 682.01% 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
</FN>
See notes to financial statements
-16-
CLASS C CLASS Y
From inception From inception
FOR THE YEAR (May 13, 2003) FOR THE YEAR (May 6, 2003)
ENDED through ENDED through
JUNE 30, 2004 June 30, 2003 JUNE 30, 2004 June 30, 2003
- ----------------------------------- -------------------------------------
$ 10.44 $ 9.98 $ 10.45 $ 10.00
- ----------------------------------- -------------------------------------
(0.61) (0.05) (0.58) (0.06)
(0.19) 0.51 (0.20) 0.51
- ----------------------------------- -------------------------------------
(0.80) 0.46 (0.78) 0.45
- ----------------------------------- -------------------------------------
(0.20) -- (0.21) --
- ----------------------------------- -------------------------------------
$ 9.44 $ 10.44 $ 9.46 $ 10.45
=================================== =====================================
(7.82%) 4.61% (7.60%) 4.50%
=================================== =====================================
$ 44 $ 21 $ 643 $ 531
7.10% 8.86% 6.60% 8.36%
6.02% 5.75% 5.52% 5.25%
(6.89%) (8.48%) (6.39%) (7.98%)
(5.81%) (5.37%) (5.31%) (4.87%)
682.01% 497.88% 682.01% 497.88%
-17-
WWW INTERNET FUND
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- --------------------------------------------------------------------------------
SHARES/
% OF NET UNITS/FACE
ASSETS VALUE VALUE
- --------------------------------------------------------------------------------
COMMON STOCK 97.78%
COMPUTERS 3.84%
Sun Microsystems Inc** 100,000 $ 433,000
COMPUTERS-MEMORY DEVICES 5.06%
EMC Corp/Massachusetts** 50,000 570,000
E-COMMERCE/PRODUCTS 1.78%
iHigh.Inc1 2** 3,280 200,080
E-COMMERCE/SERVICES 6.64%
Homestore Inc** 150,000 598,500
InterActiveCorp** 5,000 150,700
-----------
749,200
INTERNET CONTENT-ENTMNT 3.19%
NetFlix Inc** 10,000 360,000
INTERNET CONTENT-INFO/NE 5.63%
iVillage Inc** 100,000 635,000
INTERNET INFRASTR SFTWR 0.37%
TIBCO Software Inc** 5,000 42,250
INTERNET SECURITY 0.88%
VeriSign Inc** 5,000 99,500
MEDIA 7.63%
Charter Communications Inc** 175,000 684,250
Time Warner Inc** 10,000 175,800
-----------
860,050
NETWORKING PRODUCTS 6.54%
Juniper Networks Inc** 30,000 737,100
See notes to financial statements
-18-
WWW INTERNET FUND -- Continued
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- --------------------------------------------------------------------------------
SHARES/
% OF NET UNITS/FACE
ASSETS VALUE VALUE
- --------------------------------------------------------------------------------
SEMICONDUCTORS 11.99%
Bookham Technology Plc** 150,000 144,000
Broadcom Corp** 20,000 932,000
Intel Corp 10,000 276,000
-----------
1,352,000
SOFTWARE 14.85%
Blackboard Inc** 1,500 30,075
Electronic Arts Inc** 5,000 272,750
Intuit Inc** 5,000 192,900
Microsoft Corp 10,000 285,600
Peoplesoft Inc** 10,000 185,000
Pixar ** 4,000 278,040
Red Hat Inc** 10,000 229,700
Salesforce.com Inc** 2,500 40,175
Siebel Systems Inc** 15,000 160,350
-----------
1,674,590
TELECOM EQ FIBER OPTICS 5.71%
Finisar Corp** 325,000 643,500
TELECOMMUNICATION EQUIP 9.11%
AudioCodes Ltd** 40,000 478,000
Comverse Technology Inc** 10,000 199,400
Nortel Networks Corp** 70,000 349,300
-----------
1,026,700
TELEPHONE-INTEGRATED 3.18%
Qwest Communications International** 100,000 359,000
WEB PORTALS/ISP 9.44%
Amazon.Com Inc** 5,000 272,000
Hongkong.com** 250,000 22,500
United Online Inc** 2,400 42,264
Yahoo! Inc** 20,000 728,000
-----------
1,064,764
WIRELESS EQUIPMENT 1.94%
Qualcomm Inc 3,000 218,940
See notes to financial statements
-20-
WWW INTERNET FUND -- Continued
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- --------------------------------------------------------------------------------
SHARES/
% OF NET UNITS/FACE
ASSETS VALUE VALUE
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $10,006,485) 97.78% 11,025,674
- --------------------------------------------------------------------------------
INVESTMENT COMPANIES 0.00%
MONEY MARKET FUND
First American Treasury Obiligation
Fund Cl S (Cost $423) 423 423
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES 97.78%
OF UNAFFILIATED ISSUERS (Cost $10,006,908) $11,026,097
================================================================================
(1) Restricted security
(2) Illiquid security
** Non-income producing security
See notes to financial statements
-20-
WWW INTERNET FUND
INVESTMENTS IN SECURITIES OF AFFILIATED ISSUERS
As of June 30, 2004
- --------------------------------------------------------------------------------
DIVIDENDS
SHARES/ CREDITED TO
UNITS INCOME VALUE
- --------------------------------------------------------------------------------
Collection Express Services Inc(1)(2)**
Common Stock 10% 5,000 $ -- $ 250,000
Owens Direct LLC(1)(2)**
Limited Liabilities Company 17% 888 -- 100,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
OF AFFILIATED ISSUERS (COST $338,750) $ -- $ 350,000
================================================================================
1 Restricted security
2 Illiquid security
**Non-income producing security
See notes to financial statements
-21-
GROWTH FLEX FUND
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- -------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- -------------------------------------------------------------------------------------------------
COMMON STOCK 82.85%
AEROSPACE/DEFENSE 0.60%
Boeing Co/The 200 $ 10,218
BANKS 8.92%
Bank of New York Co Inc/The 1,000 29,480
BB&T Corp 300 11,091
Colonial BancGroup Inc/The 1,000 18,170
Keycorp 1,000 29,890
PNC Financial Services Group Inc 300 15,924
US Bancorp 1,700 46,852
---------
151,407
BIOTECHNOLOGY 0.96%
Amgen Inc ** 300 16,371
CHEMICALS 1.31%
EI Du Pont de Nemours & Co 500 22,210
COMMERCIAL SERVICES 1.44%
Cendant Corp 1,000 24,480
COMPUTERS 4.49%
Dell Inc ** 1,000 35,820
EMC Corp/Massachusetts ** 2,000 22,800
International Business Machines Corp 200 17,630
---------
76,250
COSMETICS/PERSONAL CARE 5.93%
Avon Products Inc 1,000 46,140
Procter & Gamble Co 1,000 54,440
---------
100,580
ELECTRONICS 0.85%
AVX Corp 1,000 14,450
FINANCE-INVEST BNKR/BRKR 6.72%
Charles Schwab Corp/The 1,000 9,610
Citigroup Inc 400 18,600
Goldman Sachs Group Inc 500 47,080
JP Morgan Chase & Co 1,000 38,770
114,060
See notes to financial statements
-22-
GROWTH FLEX FUND - CONTINUED
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- -------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- -------------------------------------------------------------------------------------------------
FOOD 0.37%
Kraft Foods Inc 200 6,336
HEALTHCARE-PRODUCTS 3.28%
Johnson & Johnson 1,000 55,700
HOME FURNISHINGS 0.83%
Tempur-Pedic International Inc ** 1,000 14,010
INSURANCE 2.50%
American International Group Inc 500 35,640
Chubb Corp 100 6,818
---------
42,458
INTERNET SECURITY 0.89%
Checkfree Corp ** 500 15,000
MEDIA 5.68%
Charter Communications Inc ** 11,000 43,010
Clear Channel Communications Inc 700 25,865
Comcast Corp ** 1,000 27,610
---------
96,485
MINING 0.97%
Alcoa Inc 500 16,515
MISCELLANEOUS MANUFACTUR 7.78%
General Electric Co 2,000 64,800
Ingersoll-Rand Co 500 34,155
Tyco International Ltd 1,000 33,140
---------
132,095
NETWORKING PRODUCTS 1.45%
Juniper Networks Inc ** 1,000 24,570
OFFICE/BUSINESS EQUIP 1.04%
Pitney Bowes Inc 400 17,700
See notes to financial statements
-23-
GROWTH FLEX FUND - CONTINUED
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- -------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- -------------------------------------------------------------------------------------------------
OIL&GAS 3.97%
Anadarko Petroleum Corp 500 29,300
Exxon Mobil Corp 500 22,205
NGAS Resources Inc ** 3,500 15,855
---------
67,360
OIL&GAS SERVICES 2.24%
BJ Services Co ** 500 22,920
Halliburton Co 500 15,130
---------
38,050
PHARMACEUTICALS 4.00%
Pfizer Inc 1,000 34,280
Teva Pharmaceutical Industries Ltd 500 33,590
---------
67,870
RETAIL-RESTAURANTS 1.21%
Darden Restaurants Inc 1,000 20,550
SEMICONDUCTORS 6.13%
Broadcom Corp ** 1,000 46,600
Intel Corp 1,000 27,600
Micron Technology Inc ** 1,000 15,310
Texas Instruments Inc 600 14,508
---------
104,018
SOFTWARE 2.67%
Microsoft Corp 1,000 28,560
Oracle Corp ** 1,400 16,702
---------
45,262
TELECOM EQ FIBER OPTICS 1.04%
Avanex Corp ** 2,000 7,780
Finisar Corp ** 5,000 9,900
---------
17,680
TELECOMMUNICATION EQUIP 1.92%
Lucent Technologies Inc ** 2,000 7,560
Nortel Networks Corp ** 5,000 24,950
---------
32,510
TELEPHONE-INTEGRATED 3.66%
BellSouth Corp 1,000 26,220
Qwest Communications International ** 10,000 35,900
---------
62,120
See notes to financial statements
-24-
GROWTH FLEX FUND - Continued
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- -------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- -------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost $1,332,635) 1,406,315
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS 8.91%
U.S. Treasury 2% notes due 5/15/06 40,000 39,550
U.S. Treasury 2.625% notes due 5/15/08 40,000 38,797
U.S. Treasury 3.625% notes due 5/15/13 40,000 37,519
U.S. Treasury 5.375% bonds due 2/15/31 35,000 35,394
(Cost $162,393) ---------
151,260
- -------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES 10.24%
INDEX FUND-DEBT 9.61%
iShares Lehman 1-3 Year Treasury
Bond Fund 500 40,845
iShares Lehman Treasury Inflation
Protected Securities Fund 1,200 122,304
---------
163,149
MONEY MARKET FUND 0.63%
First American Treasury Obiligation
Fund Cl S 10,680 10,680
---------
TOTAL INVESTMENT COMPANIES
(Cost $175,327) 173,829
- -------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,670,355) 102.00% $ 1,731,404
=================================================================================================
**Non-income producing security
See notes to financial statements
-25-
GROWTH FLEX FUND
INVESTMENTS IN SECURITIES OF AFFILIATED ISSUERS
As of June 30, 2004
- -------------------------------------------------------------------------------------------------
Interest
Face Credited to
Value Income Value
- -------------------------------------------------------------------------------------------------
Owens Direct LLC1 2
Unsecured Note 10% due 5/31/05
(Cost $50,000) 50,000 $ 5,014 $ 50,000
=================================================================================================
1 Restricted security
2 Illiquid security
See notes to financial statements
-26-
MARKET OPPORTUNITIES FUND
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- ------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- ------------------------------------------------------------------------------------------------
COMMON STOCK 117.09%
Aerospace/Defense-Equip 3.54%
United Defense Industries Inc ** 1,000 $ 35,000
Bldg Prod-Air&Heating 0.65%
Comfort Systems USA Inc ** 1,000 6,390
Brewery 2.03%
Boston Beer Co Inc ** 1,000 20,140
Cable TV 19.77%
Charter Communications Inc ** 50,000 195,500
Coal 2.83%
Peabody Energy Corp 500 27,995
Commer Banks-Southern US 4.83%
First Financial Service Corp 1,000 24,400
SY Bancorp Inc 1,000 23,410
---------
47,810
Computers 3.29%
Apple Computer Inc ** 1,000 32,540
Cosmetics&Toiletries 0.59%
Revlon Inc ** 2,000 5,900
Electronic Compo-Semicon 4.71%
Broadcom Corp ** 1,000 46,600
Electronics-Military 2.96%
Engineered Support Systems Inc 500 29,255
Enterprise Software/Serv 0.83%
BEA Systems Inc ** 1,000 8,220
Footwear&Related Apparel 1.31%
Skechers U.S.A. Inc ** 1,000 13,000
See notes to financial statements
-27-
MARKET OPPORTUNITIES FUND - CONTINUED
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- ------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- ------------------------------------------------------------------------------------------------
Gambling (Non-Hotel) 1.36%
Nevada Gold & Casinos Inc ** 1,000 13,450
Human Resources 1.57%
Labor Ready Inc ** 1,000 15,500
Internet Content-Info/Ne 3.64%
Mamma.com Inc ** 3,000 35,970
Internet Financial Svcs 1.36%
E-Loan Inc ** 5,000 13,500
Medical-Hospitals 2.00%
United Surgical Partners International Inc ** 500 19,735
Metal-Copper 3.92%
Phelps Dodge Corp 500 38,755
Motion Pictures&Services 1.41%
Lions Gate Entertainment Corp ** 2,000 13,960
Networking Products 9.94%
Juniper Networks Inc ** 4,000 98,280
Oil Comp-Explor&Prodtn 4.00%
Houston Exploration Co ** 500 25,920
NGAS Resources Inc ** 3,000 13,590
---------
39,510
Oil Field Mach&Equip 1.59%
National-Oilwell Inc ** 500 15,745
Oil&Gas Drilling 1.69%
Patterson-UTI Energy Inc 500 16,705
Pharmacy Services 1.97%
Accredo Health Inc ** 500 19,475
Pipelines 0.80%
El Paso Corp 1,000 7,880
See notes to financial statements
-28-
MARKET OPPORTUNITIES FUND - CONTINUED
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- ------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- ------------------------------------------------------------------------------------------------
Radio 1.38%
XM Satellite Radio Holdings Inc ** 500 13,645
Resorts/Theme Parks 0.73%
Six Flags Inc ** 1,000 7,260
Retail-Apparel/Shoe 4.26%
Chico's FAS Inc ** 500 22,580
Talbots Inc 500 19,575
---------
42,155
Retail-Catalog Shopping 1.87%
Coldwater Creek Inc ** 700 18,529
Retail-Restaurants 1.68%
Buffalo Wild Wings Inc ** 600 16,590
Retail-Sporting Goods 1.69%
Dick's Sporting Goods Inc ** 500 16,675
Telecom Eq Fiber Optics 10.01%
Finisar Corp ** 50,000 99,000
Telecommunication Equip 5.05%
Nortel Networks Corp ** 10,000 49,900
Telephone-Integrated 1.82%
Qwest Communications International ** 5,000 17,950
Transport-Air Freight 2.10%
CNF Inc 500 20,780
Transport-Marine 1.89%
Teekay Shipping Corp 500 18,690
Transport-Truck 2.02%
Yellow Roadway Corp ** 500 19,930
See notes to financial statements
-29-
MARKET OPPORTUNITIES FUND - CONTINUED
INVESTMENTS IN SECURITIES OF UNAFFILIATED ISSUERS
As of June 30, 2004
- ------------------------------------------------------------------------------------------------
Shares/
% of Net Units/Face
Assets Value Value
- ------------------------------------------------------------------------------------------------
Total Common Stocks
(Cost $1,226,321) 117.09% 1,157,919
- ------------------------------------------------------------------------------------------------
INVESTMENT COMPANIES 0.01%
Money Market Fund
First American Treasury Obiligation
Fund Cl S (Cost $116) 116 116
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,226,437) 117.10% $ 1,158,035
================================================================================================
**Non-income producing security
See notes to financial statements
-30-
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.
-31-
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.
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 $450,000 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, 2004), payable monthly. For the year
ended June 30, 2004, the WWW Internet Fund paid interest expense of $29,397, on
an average borrowed amount of $849,257 at an average rate of 4.00%. For the year
ended June 30, 2004, the Growth Flex Fund paid interest expense of $1,768, on an
average borrowed amount of $86,840 at an average rate of 4.00%. For the year
ended June 30, 2004, the Market Opportunities Fund paid interest expense of
$2,997, on an average borrowed amount of $128,184 at an average rate of 4.00%.
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 year ended June 30, 2004, 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 year ended June 30, 2004, the Market Opportunities Fund Class A,
Class C and Class Y
-32-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION - CONTINUED DISTRIBUTIONS TO
SHAREHOLDERS - CONTINUED
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 year ended June 30, 2004.
A Fund may periodically make reclassifications among certain of its capital
accounts as a result of the timing and characterization of certain income and
capital gains distributions determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These reclassifications are due to differing
treatment for items such as deferral of wash sales and net operating losses.
Accordingly, at June 30, 2004, reclassifications were recorded for the Market
Opportunities Fund to decrease capital and to decrease net investment loss by
$59,373.
As of June 30, 2004, the components of distributable earnings on a tax basis
were as follows:
WWW INTERNET GROWTH FLEX OPPORTUNITIES
FUND FUND FUND
------------ ------------- --------------
Accumulated net realized
gain (loss) from
investment transactions $(53,702,890) $ 57,535 $ (1,763)
Net unrealized appreciation
(depreciation ) 1,000,920 61,049 (72,128)
------------ ------------- --------------
$(52,701,970) $ 118,584 $ (73,891)
============ ============= ==============
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. For U.S. federal income tax purposes, the WWW Internet
Fund has capital loss carry-forwards as of June 30, 2004 of approximately
$33,800,000, 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. RESTRICTED SECURITIES
Securities held by the Funds may be restricted, which means that the security
was acquired directly from the issuer in a transaction or chain of transactions
not involving any public offering. Restricted securities 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. No
quoted market price exists for the restricted shares. It is possible that the
estimated value may differ significantly from the amount that might ultimately
be realized in the near term, and the difference could be material.
-33-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
2. RESTRICTED SECURITIES - CONTINUED
As of June 30, 2004, the WWW Internet Fund held the following restricted
securities:
- --------------------------------------------------------------------------------
ACQUISITION SHARES/ VALUE PER VALUE % OF
ISSUER DATE COST UNITS SHARE/UNIT VALUE NET ASSETS
iHigh.Inc 11/10/99 $1,000,400 3,280 $ 61.00 $200,080 1.77%
Collection Express Services Inc 12/27/01 $ 250,000 5,000 $ 50.00 $250,000 2.22%
Owens Direct LLC 6/29/00 $ 25,000 250 $112.61 $ 28,153 0.25%
Owens Direct LLC 7/31/01 $ 63,750 638 $112.61 $ 71,847 0.64%
-------- ----
Total Restricted Securities $550,080 4.88%
======== ====
As of June 30, 2004, the Growth Flex Fund held the following restricted
securities:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
ACQUISITION VALUE % OF
ISSUER DATE COST FACE VALUE VALUE NET ASSETS
Owens Direct LLC 5/13/03 $50,000 $50,000 $50,000 2.94%
- --------------------------------------------------------------------------------------
3. 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. It is possible that the estimated value may differ significantly from
the amount that might ultimately be realized in the near term, and the
difference could be material. 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, 2004, illiquid
securities represented 4.88% of the WWW Internet Fund's net assets and 2.94% of
the Growth Flex Fund's net assets.
4. 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 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 Funds'
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
-34-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
4. INVESTMENT ADVISORY AGREEMENT - CONTINUED
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, 2004, the Manager voluntarily reimbursed expenses
of the Market Opportunities Fund in the amount of $12,278.
5. UNDERWRITING AGREEMENT
Interactive Planning Corp. (the "Distributor), an affiliated person of the
Funds' Manager, is the principal underwriter of the
Funds.
6. 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.
7. 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, 2004 June 30, 2003
-------------------- ----------------------
Class A Shares Amount Shares Amount
------ ------- -------- -------
Shares sold 16,705 $ 106,036 -- $ --
Shares redeemed (503) (3,162) -- --
------ ----------- -------- ----------
NET INCREASE 16,202 $ 102,874 -- $ --
====== =========== ======== ==========
Class C Shares Amount Shares Amount
------ ------- -------- -------
Shares sold 5,447 $ 34,346 405 $ 2,100
Shares redeemed -- (3) -- --
------ ----------- -------- -----------
NET INCREASE 5,447 $ 34,343 405 $ 2,100
====== =========== ======== ===========
Class Y Shares Amount Shares Amount
------ ------- -------- -------
Shares sold 310,267 $ 2,006,113 232,134 $ 967,300
Shares redeemed
(net of redemption fees) (472,083) (3,011,725) (436,587) (1,759,311)
-------- ----------- -------- -----------
NET DECREASE (161,816) $(1,005,612) (204,453) $ (792,011)
======== =========== ======== ===========
-35-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
7. CAPITAL SHARE TRANSACTIONS - CONTINUED
- --------------------------------------------------------------------------------
For the year ended From inception (May 5, 2003) to
GROWTH FLEX FUND June 30, 2004 June 30, 2003
-------------------- --------------------------------
Class A Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 23,882 $ 266,863 22,718 $ 227,753
Shares issued by reinvestment
of distributions 226 2,447
Shares redeemed (2,354) (25,506) (4,336) (43,355)
------- --------- ------- ---------
NET INCREASE 21,754 $ 243,804 18,382 $ 184,398
======= ========= ======= =========
Class C Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 2,837 $ 31,544 1,530 $ 15,300
Shares issued by reinvestment
of distributions 28 299
Shares redeemed (1) (7) -- --
------- --------- ------- ---------
NET INCREASE 2,864 $ 31,836 1,530 $ 15,300
======= ========= ======= =========
Class Y Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 47,259 $ 512,568 90,729 $ 907,967
Shares issued by reinvestment
of distributions 996 10,773
Shares redeemed
(net of redemption fees) (29,718) (320,459) (547) (5,532)
------- --------- ------- ---------
NET INCREASE 18,537 $ 202,882 90,182 $ 902,435
======= ========= ======= =========
- -----------------------------------------------------------------------------------------
For the year ended From inception (May 5, 2003) to
June 30, 2004 June 30, 2003
-------------------- --------------------------------
MARKET OPPORTUNITIES FUND
Class A Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 16,866 $ 188,453 15,196 $ 154,654
Shares issued by reinvestment
of distributions 554 5,759
Shares redeemed (806) (7,695) -- --
------- --------- ------- ---------
NET INCREASE 16,614 $ 186,517 15,196 $ 154,654
======= ========= ======= =========
Class C Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 2,797 $ 30,850 2,056 $ 21,500
Shares issued by reinvestment
of distributions 82 853
Shares redeemed
(net of redemption fees) (245) (2,433) -- --
------- --------- ------- ---------
NET INCREASE 2,634 $ 29,270 2,056 $ 21,500
======= ========= ======= =========
Class Y Shares Amount Shares Amount
------ ------ ------ ------
Shares sold 39,291 $ 440,664 50,865 $ 522,285
Shares issued by reinvestment
of distributions 1,613 16,765
Shares redeemed
(net of redemption fees) (23,801) (249,450) -- --
------- --------- ------- ---------
NET INCREASE 17,103 $ 207,979 50,865 $ 522,285
======= ========= ======= =========
-36-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
8. INVESTMENTS
For the year ended June 30, 2004, the WWW Internet Fund made $24,280,153 in
purchases and $23,257,725 in sales of investment securities, other than
short-term investments. The Growth Flex Fund made $2,105,105 in purchases and
$1,575,747 in sales of investment securities, other than short-term investments
and U.S. government obligations. The Market Opportunities Fund made $8,217,624
in purchases and $7,689,513 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, 2004, were as follows:
Net Unrealized
Federal Income Gross Unrealized Gross Unrealized Appreciation
Tax Cost Basis Appreciation (Depreciation) (Depreciation)
-------------- ------------ -------------- --------------
WWW Internet Fund $ 10,375,177 $ 2,423,886 $ (1,422,966) $ 1,000,920
Growth Flex Fund $ 1,720,355 $ 98,712 $ (37,663) $ 61,049
Market Opportunities Fund $ 1,230,163 $ 42,870.53 $ (114,998) $ (72,127)
9. 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 year
ended June 30, 2004, the amount paid or accrued by the WWW Internet Fund, Growth
Flex Fund and Market Opportunities Fund for Management Fees was $169,586,
$15,082 and $16,991, respectively. In addition, the Manager received
distribution fees paid or accrued by Class Y shares of the WWW Internet Fund in
the amount of $57,712.
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, 2004, 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 $5,372, $15,792,
and $11,750, 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 $342, $1,551 and $1,415, 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 $259,
$329 and $393, respectively; and distribution fees paid or accrued by Class Y
shares of the Growth Flex Fund and the Market Opportunities Fund of $5,846 and
$4,068, 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, 2004, the fees
paid or accrued by the Funds for such services amounted to $185,354. In
addition, the Funds reimbursed CFS for certain out of pocket expenses incurred
on behalf of the Funds totaling $69,838.
-37-
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
9. RELATED PARTY TRANSACTIONS - CONTINUED
As of June 30, 2004, 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 of June 30, 2004, the WWW Internet Fund's investment in Owens Direct LLC (an
affiliated issuer) represents 17.75% ownership of the outstanding voting rights.
By reason of the WWW Internet Fund's relationship with Owens Direct LLC (an
affiliated issuer), The Growth Flex Fund's investment in an unsecured note
issued by Owens Direct LLC is also considered to be an affiliated transaction.
10. PERFORMANCE BASED FEE CALCULATIONS
In April 2004, the staff of the Securities and Exchange Commission notified the
Trust that the staff believes that the performance component of the management
fee for the WWW Internet Fund was not being (and since the Fund's inception had
not been) computed in conformity with certain rules under the Investment
Advisers Act of 1940. It is the staff's position that, under the applicable
rules, the performance component of the management fee should be computed on the
basis of, and be assessed against, the average net assets for "rolling"
twelve-month periods. The performance component of the management fee, however,
was being computed according to the management agreement, which applies the
performance fee rate to the average net assets for the prior calendar month. If
the staff interpretation is correct, the Adviser may have received, over the
life of the Fund, between $400,000 and $500,000 more than it would have received
had the performance component of the fee been computed according to the
applicable rules. The Trust has requested that the Adviser determine the exact
amount of the overpayment and reimburse the Fund in this amount.
Based on the SEC staff interpretation, the Fund's financial statements should
include an approximate $450,000 receivable due from the Adviser. However, the
Fund has recorded a full valuation allowance of $450,000 against this receivable
due to uncertainty as to whether the Adviser has the resources or the
willingness to pay the requested amount. Therefore, the Fund's financial
statements at June 30, 2004 reflect a net due amount from the Adviser for past
management fees of $0.00.
11. SUBSEQUENT EVENT
On August 16, 2004, the Board of Directors of the Trust voted to liquidate the
Funds. Investments are reported at market value as of June 30, 2004 in the
accompanying financial statements. No gains and losses, if any, from ultimate
liquidation are reflected in these financial statements. Shareholders should
refer to prospectus supplements provided by the Funds for further information
with regard to the liquidation.
-38-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Audit Committee, Board of Directors
and Shareholders
IPC Funds
Lexington, Kentucky
We have audited the accompanying statements of assets and liabilities of the IPC
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, 2004, and the related statements of
operations and changes in net assets and financial highlights for the periods
indicated thereon. 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
audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, 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 audits provide 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
of the respective portfolios constituting the IPC Funds as of June 30, 2004, the
results of their operations, the changes in their net assets and their financial
highlights for the periods indicated thereon, in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 11, on August 16, 2004, the Board of Directors voted to
liquidate the IPC Funds.
BKD, LLP
Cincinnati, Ohio
July 29, 2004, except for Note 11,
as to which the date is August 16, 2004
-39-
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
207 Catalpa Road Kentucky since 2001; Professor of Marketing, University of
Lexington KY 40502 Minnesota from 1993-2000.
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
-40-
ITEM 2. CODE OF ETHICS.
Due to the planned liquidation of the Registrant, as of the end of the
period covered by this report, the Registrant had not adopted, as required by
amendments adopted by the Commission pursuant to Section 406 of Sarbanes-Oxley
Act, a code of ethics that applies to the Registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Trustees has determined that the Registrant does
not have an audit committee financial expert. At the March 1, 2003 meeting of
the Board of Trustees, the Trustees determined that, although as a group they
possess the attributes that an audit committee financial expert must possess
pursuant to the Commission's rules, no one Audit Committee member has the
requisite experience. The Board of Trustees also determined that, as a group,
they are able to perform the tasks assigned to the Audit Committee and that they
would consider adding an audit committee financial expert to the Audit Committee
if future developments warrant such action.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) AUDIT FEES
Fiscal Year Ended June 30, 2003 $32,000
Fiscal Year Ended June 30, 2004 $36,000
(b) AUDIT-RELATED FEES
Fiscal Year Ended June 30, 2003 None
Fiscal Year Ended June 30, 2004 None
(c) TAX FEES
Fiscal Year Ended June 30, 2003 $1,750
Fiscal Year Ended June 30, 2004 $4,500
These fees related to the preparation of tax filings and tax
consultation.
(d) ALL OTHER FEES
Fiscal Year Ended June 30, 2003 $ 360
Fiscal Year Ended June 30, 2004 $3,285
These fees related to consultation on various non-audit related issues.
(e)(1) AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has not adopted pre-approval policies and
procedures. The Audit Committee approves the engagement of the IPC
Funds' accountant to render audit or non-audit services before the
accountant is engaged by IPC Funds.
(e)(2) SERVICES FOR WHICH PRE-APPROVAL REQUIREMENT WAIVED
None of the services described in paragraphs (b) through (d) of this
Item were approved by the Audit Committee of the Board of Trustees of
IPC Funds pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
(f) NON-EMPLOYEES
Not applicable.
(g) AGGREGATE NON-AUDIT FEES
Fiscal Year Ended June 30, 2003 $2,910
Fiscal Year Ended June 30, 2004 $8,785
(h) BOARD CONSIDERATIONS
IPC Funds' Audit Committee of the Board of Trustees has considered
whether the provision of non-audit services that were rendered to IPC
Advisors, Inc. and any entity controlling, controlled by, or under
common control with IPC Advisors, Inc. that provides ongoing services
to IPC Funds that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 is compatible with maintaining BKD, LLP's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
A schedule of investments in securities of unaffiliated issuers is included
as part of the report to shareholders filed under Item I of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There has been no material change to the procedures by which shareholders
may recommend to the Registrant's Board of Trustees, since the Registrant last
filed a Schedule 14A with the Commission and transmitted proxy materials to its
shareholders.
ITEM 10. 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") as of a date within 90
days of 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 second 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. See explanation in Item 2 of this 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: September 9, 2004 By:
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: September 09, 2004 By:
Name: Lawrence S. York
Title: President
Date: September 24, 2004 By:
Name: James D. Greene
Title: Treasurer