What happens when your fund gets too hot, and you've done too good a job of selling your story? You may not know, but the New York-based Internet Fund is finding out.

The Internet Fund (wwwfx) of North Babylon, New York has literally run out of shares. The fund admitted today that it reached the limit of shares that it is authorized by the State of New York to offer to the public yesterday. The result: shares of the fund will remain restricted until shareholders vote on March 29th to approve an amendment to increase the number of authorized shares of common stock from 10 million to 50 million. The fund's NAV is currently $27.51, implying a total asset base of $275 million.

To fix the problem, the fund's board of directors approved a proxy statement to be sent today to current shareholders to increase the number of authorized shares of common stock. Upon approval of the recommendation by the shareholders, the fund expects to begin selling shares to the public two weeks from today on March 30, 1999.

The top-performing mutual fund, run out of a bungalow on Long Island until the recent Internet feeding frenzy, had a return of almost 200% in 1998, and already has returned 76.7% this year. But the resulting publicity and subsequent inflows appear to have exceeded the once-small fund's sales projections. Not hard to do when your fund's assets increase from $200,000 to well over $200 million in the short time since Ryan Jacob took over as portfolio manager in the spring of 1998.

Yesterday the Internet Fund hired a public relations firm in anticipation of inquiries about this unusual situation but the company representative simply forwarded questions to fund specialists. The transfer agency recently hired by the Internet fund, Firstar Mutual Fund Investor Services, reported that due to a "prospectus limitation," no new investor kits were being mailed out at this time. Current investors were being told that they would be unable to purchase additional shares but would be able to redeem current shares.

The Internet fund is not the only net fund experiencing growing pains--the Munder Net Net fund recently had First Data Investor Services add 20 staffers, trained in two weeks, to accommodate the increased need for shareholder servicing and transfer agent functions for the fund. 

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