-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UXbzKcTvJV1D1zXxpi3CMpJPFjlnY1wAVF7twg5Oe/jVLsvK10Oj5A7cMhcHPta5 U9riKSTBSwp8ceLjce3b2g== 0001000579-97-000020.txt : 19971216 0001000579-97-000020.hdr.sgml : 19971216 ACCESSION NUMBER: 0001000579-97-000020 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971215 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIPRIME FUNDS CENTRAL INDEX KEY: 0001000579 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 752616671 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09096 FILM NUMBER: 97738585 BUSINESS ADDRESS: STREET 1: 1793 KINGSWOOD DR STREET 2: STE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 BUSINESS PHONE: 8174311297 MAIL ADDRESS: STREET 1: 1793 KINGSWOOD DRIVE STREET 2: SUITE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 N-30D 1 ANNUAL FILING AIT Vision Fund Investment Results - For the Fiscal Year Ended October 31, 1997 Dear Fellow Shareholders: As of the fiscal year ended October 31, 1997, the AIT Vision Fund appreciated by 19.9% and 24.6% over the trailing six months and one year, respectively. According to Lipper Analytical Services, Inc. the Lipper Growth Fund Index rose 18.3% and 28.4% during the last six months and one year, respectively. The Fund's investment results are compared to the unmanaged S&P 500 and Russell 3000 indices below.
- ------------------------------------------------- -- ---- ----- ------------------- ------- ----------------- Returns for the Periods Ended 10/31/97 - ------------------------------------------------- -- ---- ----- ------------------- ------- ----------------- Since Inception Average Fund/Index 6 Months 1 Year 12/28/95 Annual - ---------- -------- ------ -------- ------ AIT Vision Fund 19.9% 24.6% 57.3% 27.9% S&P 500 15.2% 32.1% 54.4% 26.6% Russell 3000 17.6% 31.6% 52.1% 25.6% - ----------------------- ----- --------------------- ------------------- --------------------- --- -----------
Comparison of the Change in Value of a $10,000 Investment in the AIT Vision Fund, the Unmanaged S&P 500 Index, and the Unmanaged Russell 3000 Index [OBJECT OMITTED]This chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 500 Index, and the Russell 3000 Index on December 28, 1995 and held through October 31, 1997. The S&P 500 Index and the Russell 3000 Index are widely recognized unmanaged indices of common stock prices. Performance figures include the change in value of the stocks in the indices, reinvestment of dividends, and are not annualized. The index returns do not reflect expenses, which have been deducted from the Fund's return. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS. Portfolio Overview While the Fund has provided a solid return of 24.6% over the past year, the last six months have been particularly strong. For the last six months the Fund has generated a total return of 19.9% which compares very favorably to the 17.6% return for the Russell 3000 benchmark. The primary sources of the Fund's outperformance of the Russell 3000 are superior individual stock selection, greater exposure to smaller capitalization stocks with strong earnings growth trends, and an overweighting of the oil service industry. Detailed below are the economic sector weightings and the largest holdings for the Fund as of October 31, 1997. - -------------------------------------- ------------ -------------- Economic Sector Weightings - -------------------------------------- ------------ -------------- Percent of Net Assets 10/31/97 Basic Materials 3.5% Consumer Durables 0.0% Capital Goods 1.8% Consumer Nondurables 8.0% Energy 12.0% Financial Services 23.8% Health Care 8.8% Retail Trade 5.5% Services 8.0% Technology 16.0% Telecommunication 4.1% Transportation 3.6% Utilities 3.1% Cash 1.8% -- ---- Total 100.0% - ------------------------------------ -------------- -------------- - ------------------------------------ -------------- -------------- Ten Largest Holdings - ------------------------------------ -------------- -------------- Percent of Net Assets 10/31/97 Eli Lilly and Co. 3.0% Warner Lambert Co. 2.9% Northern Trust Corp. 2.6% US Bancorp 2.5% Gap Inc. 2.4% Helmerich and Payne Inc. 2.3% CNF Transportation Inc. 2.3% Robert Half International Inc. 2.3% Dean Foods Co. 2.2% ENSCO International Inc. 2.2% -- ---- Total 24.7% - ------------------------------------ -------------- -------------- Commentary - Will The Good Times Continue To Roll? The recent "Goldilocks Phase" of the current economic expansion - where economic growth has been not "too hot" to cause inflation nor "too cold" to create a recession - has provided an environment which has been "just right" for the U.S. equity markets. From January 1995 through October 1997, the S&P 500 has risen 112.0%, or 30.4% annually on average. Will these robust equity returns continue? Forever? The equity market can be viewed as a twin-engine vehicle whose engines are corporate earnings and interest rates running on the fuel of sentiment and liquidity which propels the market through a landscape of diverse global influences. Investors have enjoyed a phenomenal ride driven by steady earnings growth and stable-to-falling interest rates which in turn have been fueled by complacent sentiment and tremendous demographically derived liquidity. Looking into the next year, earnings growth still appears favorable and long term interest rates are fundamentally trending downward with little signs of significant inflation on the horizon. Baby boom investors should continue to provide considerable demand for equity investments which in turn tends to establish a cushioned floor to potential market downturns. Also, the current sentiment of market strategists is very negative which has historically been a contrarian indicator of actual future equity potential. Therefore, while 30% annual returns will not likely persist, the characteristics of the upcoming year still cause us to be bullish overall on the U.S. equity market. However, given the prevailing Emerging Markets currency crisis and unsettled Middle Eastern politics, volatility should remain elevated in the near term and major movements to the upside subdued. The quantitative investment discipline employed within the Fund will continue to emphasize stocks of companies whose earnings trends are superior to other companies and whose valuations are cheap relative to their industrial peers. Our selection universe will continue to be broad in order to allow the Fund maximum flexibility in identifying superior investment opportunities. Furthermore, the Fund will continue to maintain a near fully invested cash position and avoid the dubious seductions of broad market timing. Thank you for your trust and continued confidence. Respectfully, Douglas W. Case, CFA Managing Director Advanced Investment Technology, Inc.
AIT Vision U.S. Equity Portfolio Schedule of Investments - October 31, 1997 Common Stocks - 98.2% Shares Value Aerospace & Defense - 1.3% Lockheed Martin Corp. 700 $ 66,544 ------------------- Apparel - 2.0% TJX Companies Inc. 3,300 97,763 ------------------- Banks - 10.2% Citicorp 700 87,544 H.F. Ahmanson & Co. 1,300 76,700 Mellon Bank Corp. 1,800 92,813 Northern Trust Corp. 2,200 128,700 U.S. Bank Corp. Delaware 1,200 122,025 ------------------- 507,782 ------------------- Chemicals - 1.8% Rohm & Hass & Co. 1,100 91,644 ------------------- Communications & Communications Equipment - 6.2% Aliant Communications 2,100 53,812 Bell South Corp. 1700 80,430 Clear Channel Communications (a) 1,600 105,600 Northern Telecom Ltd. 800 71,750 ------------------- 311,592 ------------------- Computers, Periphals & Software- 12.1% Cisco Systems Inc. (a) 1,200 98,437 Computer Associates International 1,400 104,387 Dell Computer (a) 1,100 88,137 IBM Corp. 900 88,255 Intel Corp. 1,200 92,400 Microsoft Corp. (a) 700 91,000 Texas Instruments Inc. 400 42,675 ------------------- 605,291 ------------------- Cosmetics - 1.9% Alberto-Culver Co. Class B 3,100 93,581 ------------------- Drugs - 5.8% Lilly Eli & Co. 2,200 147,125 Warner Lambert Co. 1,000 143,188 ------------------- ------------------- 290,313 ------------------- AIT Vision U.S. Equity Portfolio - continued Common Stocks - continued Electric Utilities - 3.1% Shares Value Long Island Lighting Co. 2,900 $ 73,044 Oneok Inc. 2,400 82,350 ------------------- ------------------- 155,394 ------------------- Electronics - 4.4% Magnatek Inc. (a) 4,400 89,375 Maxim Integrated Products (a) 800 53,000 Perkin-Elmer Corp. 1,200 75,000 ------------------- 217,375 ------------------- Energy - Oil & Gas - 11.8% Chevron Corp. 1,300 107,819 Ensco International Inc. 2,600 109,363 First American Corp. 2,200 104,500 Noble Drilling Corp. (a) 2,700 96,019 Phillips Petroleum Corp. 2,100 101,588 Texaco Inc. 1,200 68,325 ------------------- 587,614 ------------------- Financial Services - 4.3% Franklin Resources Inc. 500 44,938 Green Tree Financial Corp. 1,800 75,825 MBNA Corp. 3,500 92,094 ------------------- ------------------- 212,857 ------------------- Food - 6.1% Dean Foods Co. 2,300 108,819 Interstate Bakeries 1,600 102,200 Quaker Oats Co. 2,000 95,750 ------------------- 306,769 ------------------- Healthcare - 4.2% Helmerich & Payne 1,400 112,963 Tenet Healthcare (a) 3,200 97,800 ------------------- 210,763 ------------------- Holding Companies - 1.2% Fremont General Corp. 1,300 60,613 ------------------- Insurance - 6.0% Conseco Inc. 1,500 65,438 Protective Life Corp. 1,500 79,313 Travelers Group 1,300 91,000 Washington Mutual Inc. 900 61,593 ------------------- 297,344 ------------------- AIT Vision U.S. Equity Portfolio - continued Common Stocks - continued Paper Mills - 1.7% Shares Value Bowater Inc. 2,000 $ 83,625 ------------------- Newspapers, Publishing & Printing - 3.6% Belo A.H. Corp. 2,000 94,500 Washington Post Co. 200 86,800 ------------------- 181,300 ------------------- Railroads - 2.2% Consolidated Freightways Co. 2,500 111,562 ------------------- Retail - 3.6% GAP Inc. 2,200 117,013 Nordstrom Inc. 1,000 61,250 ------------------- 178,263 ------------------- Services - 3.3% HBO & Co. 1,200 52,200 Robert Half International Inc. (a) 2,700 110,530 ------------------- ------------------- 162,730 ------------------- Transportation - 1.4% Yellow Corp. (a) 2,500 68,593 ------------------- TOTAL COMMON STOCKS (Cost $4,399,842) $4,899,312 ------------------- AIT Vision U.S. Equity Portfolio - continued Money Market Securities - 1.8% Principal Amount Star Treasury 4.96%, 10/31/97 $88,006 $88,006 ------------------- Total Bonds & Notes (Cost $88,006) TOTAL INVESTMENTS - 100.0% (Cost $4,487,848) $4,987,318 ------------------- Other Assets less liabilities - 0.0% 2,026 ------------------- TOTAL NET ASSETS - 100% $4,989,344 =================== (a) non-income producing security
AIT Vision U.S. Equity Portfolio October 31,1997 Statement of Assets and Liabilities Assets Investment in securities, at value (cost $4,487,848) $ 4,987,318 Dividends receivable 3,783 Interest receivable 313 Receivable from advisor for trustees fees 1,336 -------------------- Total assets 4,992,750 Liabilities Accrued advisory fee $ 3,065 Accrued trustees' fees 341 ------------------ Total liabilities 3,406 -------------------- Net Assets 4,989,344 ==================== Net Assets consist of: Paid in capital $ 4,202,071 Accumulated undistributed net investment income 15,530 Accumulated undistributed net realized gain 272,273 Net unrealized appreciation on investments 499,470 -------------------- Net Assets, for 361,850 shares 4,989,344 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($4,988,008/361,850) $ 13.79 ====================
AIT Vision U.S. Equity Portfolio Statement of Operations for the year ended October 31, 1997 Investment Income Dividend Income $ 34,491 Interest Income 2,630 ------------------- Total Income 37,121 Expenses Investment advisory fee $ 21,591 Trustee's fees 1,336 ------------------- Total Expenses before reimbursement 22,927 Reimbursed trustees fees (1,336) ------------------- Total operating expenses 21,591 ------------------- Net Investment Income 15,530 ------------------- Realized & Unrealized Gain Net realized gain on investment securities 271,121 Change in net unrealized appreciation of investment securities 465,335 ------------------- Net gain 736,456 ------------------- Net increase in net assets resulting from operations $ 751,986 ===================
AIT Vision U.S. Equity Portfolio Statement of Changes in Net Assets November 6, 1995 For the year (commencement of ended October 31, operations) to October 31, Increase/(Decrease) in Net Assets 1997 1996 Operations Net investment income (loss) $ 15,530 $ (2,866) Net realized gain 271,121 82,838 Change in net unrealized appreciation 465,335 34,135 ---------------- ---------------- Net Increase in net assets resulting from operations 751,986 114,107 ---------------- ---------------- Distributions to shareholders: From net investment income - 0 From net realized gain (81,686) 0 ---------------- ---------------- Total distributions (81,686) Share Transactions Net proceeds from sale of shares 3,706,126 536,013 Shares issued in reinvestment of distributions 81,686 0 Shares redeemed (95,927) (47,961) ---------------- ---------------- Net increase in net assets resulting from share transactions 3,691,885 488,052 ---------------- ---------------- Total increase in net assets 4,362,185 602,159 Net Assets Beginning of period 627,159 25,000 ---------------- ---------------- End of period [including undistributed net investment income(loss) of $15,530 and $(2,866)] $ 4,989,344 $ 627,159 ================ ================
AIT Vision U.S. Equity Portfolio Financial Highlights November 6, 1995 For the year (commencement of Selected Per Share Data ended October 31, operations) to October 31, 1997 1996 Net asset value, beginning of period $12.62 $10.00 --------------- --------------- Income from investment Operations Net investment income (loss) 0.06 (0.07) Net realized and unrealized gain (loss) 2.71 2.69 --------------- --------------- Total from investment operations 2.77 2.62 Less Distributions From net investment income (1.60) 0.00 --------------- --------------- Net asset value, end of period $13.79 $12.62 =============== =============== Total Return 21.95% 26.(a) Ratios and Supplemental Data Net assets, end of period (000) $4,989 $627 Ratio of expenses to average net assets 0.70% 1.87(a) Ratio of expenses to average net assets before reimbursement 0.74% 1.87(a) Ratio of net investment income to average net assets 0.50% (0.70)(a) Ratio of net investment income to average net assets before reimbursement 0.46% - Portfolio turnover rate 0.00% 238.63(a) Average commission rate 0.03361 0.0471 (a) Annualized
AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1997 NOTE 1. ORGANIZATION The AIT Vision U.S. Equity Portfolio (the "Fund") is organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust). The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified series, open end management investment company whose investment objective is to provide long term growth of capital. The Trust Agreement permits the Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuations- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Advanced Investment Technology, Inc. (the "Adviser") to manage the Fund's investments. The adviser is controlled by its majority shareholder, State Street Global Advisers, a division of State Street Bank & Trust Company. Douglas W. Case, CFA, Chief Investment Officer, Dean S. Barr, Chairman and Chief Executive Officer and Susan L. Reigel, Portfolio Management, are primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage, taxes, interest, fees and expenses of non-interested person trustees, and extraordinary expenses. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser of 0.70% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the period from November 1, 1996 through October 31, 1997, the Adviser has received a fee of $21,591 from the Fund. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $4,202,071. Transactions in capital stock were as follows:
For the period For the period November 6, 1995 from November 6, (Commencement of 1995 (Commencement Operations) through of Operations) For the year ended For the year ended October 31, 1996 through October October 31, 1997 October 31, 1997 31, 1996 Shares Dollars Shares Dollars Shares sold 312,107 $3,706,126 51,315 $536,013 Shares issued in reinvestment of dividends 7,210 81,686 0 0 Shares redeemed (7,160) (91,927) (4,122) (47,961) ------- -------- ------- -------- 312,158 $3,695,885 47,193 $488,052
NOTE 5. INVESTMENTS For the period from November 1, 1996 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $5,354,480 and $2,256,474 respectively. The gross unrealized appreciation for all securities totaled $602,868 and the gross unrealized depreciation for all securities totaled $103,398 for a net unrealized appreciation of $499,470. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $4,487,848. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1997 NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, LBS Capital Management Inc., and entities which the Adviser could be deemed to control or have discretion over owned in aggregate more than 25% of the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees AIT Vision U.S. Equity Portfolio We have audited the accompanying statement of assets and liabilities of AIT Vision U.S. Equity Portfolio (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1997, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the year then ended and for the period from November 6, 1995 (commencement of operations) to October 31, 1996 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. Our procedures included confirmation of investments and cash held by the custodian as of October 31, 1997, by corre- spondence with the custodian and brokers. 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 AIT Vision U.S. Equity Portfolio as of October 31, 1997, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the year then ended and for the period from November 6, 1995 (commencement of operations) to October 31, 1996 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 RESULTS OF SPECIAL MEETING OF SHAREHOLDERS On November 10, 1997, a Special Meeting of the Shareholders of AIT Vision: U.S. Equity Portfolio was held to approve the investment advisory agreement between the fund and Advanced Investment Technology, Inc. of the 361,849.462 outstanding shares, 299,807.33, all of which voted in favor of the agreement. November 1997 Dear Shareholders: Once again, we are pleased to present the investment results for the Carl Domino Equity Income Fund. Since inception in December 1995, the Fund has returned an average annual total return of 29.8%, outpacing the S&P 500 while taking less risk and significantly outperforming many of our competitors. Over the past year, the Fund has repeatedly appeared among the top performing equity income funds in the Wall Street Journal=s Mutual Fund Scoreboard.
Comparative Investment YTD*** Last Average** Returns (As of 10/31/97) 1997 1 Year Annual Return ----------------------------------- -------- -------- ------------------- (Since Inception) Carl Domino Equity Income Fund 28.3% 36.6% 29.8% S&P 500 * 25.4% 32.1% 26.4%
Past performance is not predictive of future performance. This chart assumes an initial investment of $10,000 in the Fund and the S&P 500 Index on December 1, 1995 and held through October 31, 1997. The S&P 500 Index is a widely recognized unmanaged index of common stock prices. Performance figures include the change in value of the stocks in the index and reinvestment of dividends, and are not annualized. **Since inception on December 1, 1995. For the period January 1,1997 to October 31, 1997. Notwithstanding the good fundamentals within the U.S. economy, some disquieting signs did appear in the past few months. The strong bull market of the last two and a half years ran into some stiff headwinds. In particular, several Asian markets stumbled sharply in October following currency devaluations in many countries in southeast Asia. Worries concerning reduced international trade and its potentially negative effect on profit growth sent shivers throughout every major market. Within this environment, virtually all sectors experienced some difficulty. With respect to the results of the Fund, investment performance has been very favorable. Although the S&P 500 posted a negative return of 3.7% in the most recent three month period, the Fund produced positive results of 1.7%, thus demonstrating the defensive nature of our conservative equity discipline. This outperformance is especially pleasing because our investment style has produced these superior returns while taking less risk than the market. Carl Domino Associates, L.P. continues to look for stocks which provide capital appreciation opportunities with downside protection. In these uncertain markets, we believe dividends will play a more important role in total returns than they did in the last two years, and that our larger companies with above-average yields will provide superior relative investment performance. Be assured that although we cannot guarantee future results, the investment professionals at Carl Domino Associates, L.P. will continue to work hard to avoid disappointments and take advantage of opportunities as they arise. Best regards, Carl J. Domino
CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1997 Common Stocks Shares Value Autos, Auto Parts - 3.1% Chrysler Corp. 1,635 57,634 Tenneco, Inc. 1,300 58,419 ------------------ ------------------ 116,053 ------------------ Building Materials - 0.6% Home Security International Inc. (a) 2,000 22,000 ------------------ Chemicals - 1.6% Witco Corp. 1,400 60,900 ------------------ Paper & Forest Products - 2.0% Union Camp Corp. 1,400 75,863 ------------------ Energy Oil & Gas - 12.4% Gulf Indonesia Resources Ltd. (a) 100 2,100 Midcoast Energy Resources 4,000 96,250 Mobil Corporation 700 50,969 Sonat Corporation 2,100 96,469 Sun Co., Inc. 1,500 60,094 USX Marathon Group 1,300 46,475 Williams Companies 800 40,750 YPF Sociedad Anonima 2,200 70,400 ------------------ 463,507 ------------------ Publishing - 2.1% CMP Media (a) 500 9,250 Readers Digest Association 3,020 68,705 ------------------ ------------------ 77,955 ------------------ Retail - 5.5% Intimate Brands 4,100 87,638 May Department Stores 900 48,488 Penney (J.C.) 1,200 70,425 ------------------ ------------------ 206,551 ------------------ Lodging, Restaurants, Leisure - 1.3% Patriot American Hospitality Inc. 1,500 49,500 ------------------ CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Shares Value Non-Durables Cosmetics - 1.6% International Flavors & Fragrances 1,200 $ 58,050 ------------------ Food - 4.4% General Mills 800 52,800 Heinz (H.J.) 1,200 55,725 Quaker Oats 1,200 57,450 ------------------ 165,975 ------------------ Household Products - 1.1% Kimberly-Clark Group 800 41,550 ------------------ Tobacco - 1.1% Philip Morris 1,050 41,606 ------------------ Health Drugs - 7.6% American Home Products Corp. 1,400 103,775 Bristol-Myers Squibb Co. 540 47,385 Glaxo Wellcome PLC 1,800 77,063 Pharmacia & Upjohn Inc. 1,800 57,150 ------------------ 285,373 ------------------ Diversified Medical - 1.7% Pall Corporation 3,000 62,063 ------------------ Health Care - 2.3% Baxter International Inc. 1,500 69,375 Capital Senior Living Corp. (a) 1,000 16,750 ------------------ ------------------ 86,125 ------------------ Staples/Miscellaneous Services - 1.4% Deluxe Corporation 1,600 52,400 ------------------ Services/Miscellaneous - 7.1% Avis Rent A Car Inc. (a) 4,300 117,981 Boron Lepour Associates (a) 1,000 24,375 Didax Inc. 4,500 17,859 Sterigenics (a) 500 11,250 Radcom Ltd. (a) 3,300 30,525 Unisource Worldwide 4,000 65,250 ------------------ ------------------ 267,240 ------------------ CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Shares Value Electrical Equipment - 1.6% Thomas & Betts 1,200 $ 59,700 ------------------ Diversified Machinery - 1.9% Federal Signal Corp. 2,965 71,716 ------------------ Airlines, Truckers, & Railroads - 3.9% Knightsbridge Tankers Ltd. 2,000 60,000 Union Pacific Corp. 1,400 85,750 ------------------ ------------------ 145,750 ------------------ Electronics - 0.7% Galileo International Inc. 1,000 25,125 ------------------ Photography/Office Equipment - 2.9% Eastman Kodak 1,050 62,869 Minnesota Mining & Manufacturing 500 45,750 ------------------ ------------------ 108,619 ------------------ Finance Major Regional & Other Banks - 7.8% Chase Manahattan Corp. 300 34,613 Corestates Financial Corp. 800 58,200 First Union Corp. 1,500 73,594 Nations Bank Corp. 522 31,255 South Trust Corp. 1,100 52,800 Summitt Bancorp 1,000 42,688 ------------------ 293,150 ------------------ Insurance-multi/ Property, Casualty & Life - 1.4% Hartford Financial Services 400 32,400 Hartford Life Inc. Class A 500 18,469 ------------------ ------------------ 50,869 ------------------ Finance - 1.6% Ocwen Asset Management 3,000 59,625 ------------------ Utilities Electric Power Companies - 0.9% Electricidade de Portugal (a) 1,000 34,938 ------------------ Natural Gas - 2.7% Atmos Energy Corp. 1,630 41,158 El Paso Natural Gas Company 1,027 61,555 ------------------ ------------------ 102,713 ------------------ CARL DOMINO EQUITY INCOME FUND - continued Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Shares Value Telephone Other - 11.0% AT&T Corp. 1,800 $ 88,087 Amerilink Corp. (a) 2,500 65,625 China Telecomm (a) 2,150 69,605 France Telecom (a) 500 18,937 Frontier Corp. 4,000 86,500 Telefonica de Argentina 3,000 84,375 ------------------ 413,129 ------------------ REITs - 6.0% CCA Prison Realty Corp. 2,000 69,000 Glimcher Realty Corp. 700 15,530 Mid-America Apartment Communities Inc. 1,000 28,250 SL Green Realty Trust (a) 4,500 112,780 ------------------ 225,560 ------------------ TOTAL COMMON STOCKS - 99.3% (Cost $3,204,108) 3,723,605 ------------------ Money Market Securities - 0.8% Star Treasury 4.96% 10/31/97(Cost $31,184) 31,184 ------------------ TOTAL INVESTMENTS - 101.1% (Cost $3,235,292) 3,754,789 Liabilities less other assets (4,411) ------------------ TOTAL NET ASSETS - 100.0% 3,750,378 ------------------ (a) non-income producing
Carl Domino Equity Income Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $3,235,292) $ 3,754,789 Receivable for securities sold 37,504 Subscriptions receivable 50,000 Dividends receivable 4,474 Interest receivable 296 Reimbursement receivable 1,335 -------------------- Total assets 3,848,398 Liabilities Payable for investments purchased 93,180 Accrued investment advisory fee payable 4,501 Other payables and accrued expenses 339 ------------------- Total liabilities 98,020 -------------------- Net Assets 3,750,378 ==================== Net Assets consist of: Paid in capital $ 2,979,645 Accumulated undistributed net investment income 28,588 Accumulated undistributed net realized gain (loss) on investments 222,648 Net unrealized appreciation on investments 519,497 -------------------- Net Assets, for 232,251 shares $ 3,750,378 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($3,750,378/232,251) $ 16.15 ====================
Carl Domino Equity Income Fund Statement of Operations for the year ended October 31, 1997 Investment Income Dividend income $ 59,507 Interest income 2,584 -------------------- Total Investment Income 62,091 Expenses Investment advisory fee $ 33,503 Trustees' fees 1,335 --------------- Total Expenses before Reimbursement 34,838 Reimbursed expenses (1,335) --------------- Total Operating Expenses 33,503 -------------------- Net Investment Income (Loss) 28,588 -------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment transactions 224,774 Change in net unrealized appreciation (depreciation) on investment securities 392,756 --------------- Net gain (loss) on investment securities 617,530 -------------------- Net increase (decrease) in net assets resulting from operations $ 646,118 ====================
Carl Domino Equity Income Fund November 6, 1995 Statement of Changes in Net Assets For the year (commencement of ended October 31, operations) 1997 to October 31, 1996 Increase/(Decrease) in Net Assets Operations Net investment income $ 28,588 11,996 Net realized gain on investment transactions 224,774 8,455 Change in net unrealized appreciation 392,756 126,741 --------------- --------------- Net Increase in net assets resulting from operations 646,118 147,192 --------------- --------------- Distributions to shareholders: From net investment income (11,997) - --------------- --------------- From net realized gain (10,581) - --------------- --------------- --------------- --------------- Total distributions (22,578) - --------------- --------------- Capital Share Transactions Net proceeds from sale of shares 2,354,635 971,640 Shares issued in reinvestment of distributions 20,953 - Shares redeemed (371,396) (21,186) --------------- --------------- Net increase in net assets resulting from share transactions 2,004,192 950,454 --------------- --------------- Total increase in net assets 2,627,732 1,097,646 Net Assets Beginning of period 1,122,646 25,000 --------------- --------------- End of period [including undistributed net investment income of $28,588 and $11,996, respectively.] $ 3,750,378 $ 1,122,646 =============== ===============
Carl Domino Equity Income Fund Financial Highlights November 6,1996 For the year (Commencement of Operations) ended October 31, to October 31, Selected Per Share Data 1997 1996 Net asset value, begining of period $12.03 $10.00 --------------- --------------- Income from investment operations Net investment income 0.19 0.16 Net realized and unrealized gain (loss) 4.15 1.87 --------------- --------------- Total from investment operations 4.34 2.03 --------------- --------------- Less Distributions From net investment income (0.22) 0.00 --------------- --------------- Net asset value, end of period $16.15 $12.03 Total Return 36.58% 20.64%(a) Ratios and Supplemental Data Net assets, end of period (000) $3,750 $1,122 Ratio of expenses to average net assets before expense reductions 1.55% 1.73%(a) Ratio of expenses to average net assets 1.50% 1.51%(a) Ratio of net investment income to average net assets before expense reductions 1.22% 1.35%(a) Ratio of net investment income to average net assets 1.28% 1.57%(a) Portfolio turnover rate 52.49% 62.51%(a) Average commission rate 0.0137 0.0604 (a) Annualized
CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1997 NOTE 1. ORGANIZATION The Carl Domino Equity Income Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on August 8, 1995, and commenced operations on November 6, 1995. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified series, open end management investment company. The investment objective of the fund is to provide long-term growth of capital together with current income. The Trust Agreement permits the Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuations- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Carl Domino Associates, L.P. (the "Adviser") to manage the Fund's investments. The Adviser is a limited partnership organized in Delaware and its general partner is Carl Domino, Inc. The controlling shareholder of Carl Domino, Inc. is Carl Domino. Mr. Domino is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage, taxes, interest, fees and expenses of non-interested person trustees, and extraordinary expenses. The Adviser is voluntarily reimbursing the Fund for trustees fees. There is no assurance that such reimbursement will continue in the future. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.50% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the period from November 1, 1996 through October 31, 1997, the Adviser has received a fee of $33,503 from the Fund. CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $2,979,645.
Transactions in capital stock were as follows: For the period from For the period November 6, 1995 from November 6, (Commencement of 1995 (Commencement Operations) through of Operations) For the year ended For the year ended October 31, 1996 through October 31, 1997 October 31, 1997 October 31, 1996 Shares Dollars Shares Dollars Shares sold 165,650 $2,354,635 92,689 $971,640 Shares issued in reinvestment of dividends 1,664 20,953 0 0 Shares redeemed (28,359) (371,396) (1,893) (21,186) -------- --------- ------- -------- 138,955 2,004,192 90,796 $950,454
NOTE 5. INVESTMENTS For the period from November 1, 1996 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $3,197,807 and $1,158,094, respectively. The gross unrealized appreciation for all securities totaled $585,990 and the gross unrealized depreciation for all securities totaled $66,493for a net unrealized appreciation of $519,497. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $3,235,292. CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1997 NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Carl Domino Associates, L.P., and entities which the Adviser could be deemed to control or have discretion over owned in aggregate more than 25% of the Fund. November 11, 1997 Dear Shareholder: As I look out the window on this bright, sunny day in Fort Worth, it is hard to remember the number of extraordinary events that have occurred in the marketplace over the four months since the fund's inception. The largest single day point decline in the history of the NYSE, the collapse of currencies in Southeast Asia, the narrowing of the budget deficit to its lowest level in a quarter century, and numerous other events have made this period one of opportunity, as well as danger. Perhaps the question most on my mind today is whether the events of this last four months mark a "bump in the road" or the beginning of a change in market action that will ultimately begin a new market cycle. While I will perhaps be able to answer that question in my letter next year, let me give my opinion on how pertinent it is to the management of this fund. The answer is that all of these things are not important to your investment in this fund. That is because every day we intend to invest your dollars into equities that have limited exposure to the macro-economic events that drive large stocks and influence major markets. Instead, we are building this fund around the philosophy of investing in firms that are attractive based on a fundamental process of valuation and characteristics that most investors would find desirable. That is why I consider our fund to be a cornerstone for everyone's portfolio. Historically, the value style outperforms the growth style over time and that small-cap investing outperforms large-cap investing over time. The idea of having a small-cap value fund means that you are placing your money in a position were you can capitalize on both of these phenomena. Therefore, for long-term oriented investors, what we do here is not to be measured over a one or two year period of time but rather in the context of five to ten year time periods. To give you a better understanding of how we invest your funds, I would like to take you through our equity investment process because I think it will clarify why the fund should be looked upon as a core holding for your portfolio. THE VALUE PHILOSOPHY Modern security analysis was "invented" in 1932 by the father of value investing, Ben Graham. Professor Graham, using a process based solely on balance sheet items and a stock's current market price, built a small fortune for himself but, most importantly, laid the ground work for future analysts in the value philosophy. One of Graham's greatest disciples, and his most famous, is Warren Buffet. The "Oracle of Omaha," as Mr. Buffet is called, started his career by strictly following Graham's techniques. After many years and much success, Mr. Buffet began to modify his philosophy to encompass a range of other factors besides balance sheet items and price. Factors such as industry position, non-tangible items (things like patents and brand names), and pricing power grew into a concept termed "franchise value." This helps to provide the definition, along with Graham's work, that we use for value investing here at Corbin & Company. For us, value investing has the goal of identifying equities that, either on an ongoing or terminal (liquidation) basis, have an economic value substantially greater than the market as a whole. There are a few other investment philosophies besides value available for consideration: growth, momentum, and market timing are the best known. Numerous studies have been done showing the folly of market timing as a strategy, with most serious analysts agreeing that the markets cannot be timed with any accuracy over the long-term. Momentum investors, who believe that investment dollars follow earnings that increase at an increasing rate, have done well during certain "up" market cycles. During "down" market cycles, these managers have proven nearly lethal to the portfolios they manage. Growth managers look for companies that have producing earnings per share and sales growth in excess of the market. This cheery consensus is often paid for, though, in a higher than market P/E ratio. Over the years this has left growth managers at a significant disadvantage to value investors, as numerous studies have indicated that the low P/E stocks value investors purchase outperform the higher P/E stocks that comprise growth portfolios. This has led to many more studies; the most recent, published by the Association for Investment Management and Research (AIMR), indicates that the average value manager outperforms the average growth manager by 200 basis points (2%) per year. I believe that value has been proven to be better than other philosophies at generating returns for investors over the long-term. From a psychological standpoint, the value philosophy fits exceptionally well with the people in our firm. Whereas the other philosophies concentrate on hitting "home runs," value is concerned with "making contact" and not "striking out." Consistency and safety are the mottoes for value investors which goes very nicely with our conservative nature. Therefore, it is from this intellectual and psychological viewpoint that we have chosen value as our investment philosophy. THE RESEARCH PROCESS To determine if a stock is a "value" versus the market as a whole, a method is needed to ascertain exactly how much a security is worth. As in any purchase, we must determine what we are getting and what we are paying for it. For an equity, we are expected to receive some increase in earnings (earnings per share growth) and, potentially, some current cash flow (dividend yield). What we pay for this combination is best symbolized by the price-earnings ratio based on next year's estimated earnings per share. Out of these three factors we create what is called a "value score", which is the numerical economic value for a security. The estimated EPS growth rate added to the dividend yield gives us a number we call the "return score". We take this return score and divide it by our "cost score" (which is the P/E ratio) to give us our value score for a stock. Therefore, a stock with earnings growth of 10%, a dividend yield of 5%, and a P/E ratio of 10 produces a value score of 1.5 [(10+5)/10]. Another way to look at it is that an investor is getting 1.5 points of return for every point of cost. Every month we screen over 5000 stocks and develop a value score for each one. Then we develop a value score for the market as a whole, using the Russell 2000 as a benchmark. From there we narrow our list to all of the stocks that have a value score 50% greater than the market. At this point, our work has just begun. We put each security through a rigorous research process that is one of the most comprehensive in the industry. The first thing we look at is a firm's financial position. We need to find those firms who are generating free cash flow, whose long-term debt-to- total capitalization is very conservative, who have ample short-term liquidity, and who have solid margins for their industry. A solid financial position gives the firm the ability to enhance shareholder wealth in numerous ways: share repurchases, increased dividends, acquisitions and taking advantage of business opportunities. This focuses attention on the next factor we closely examine, which is a company's management. Management must be active in enhancing shareholder value and be motivated to do so. We look for those situations where enhanced shareholder wealth translates into management wealth, whether it is through bonuses, employee stock ownership, or stock options. We often own those firms where the person's name is "over the door" because we believe that they have their "heart and soul" in the business. When our customers own a share of stock, they own part of a business. It seems insane that most analysts do not pay much attention to who is running this business for their customers. No one would privately go into business with someone they do not know anything about, but it occurs all the time in the public equity market. The third factor that we analyze is a firm's long-term business prospects. We need to see that the company is solidly positioned in their industry, that the industry has a viable future, and most importantly, substantial and sustainable profitability can be achieved. The next item that we look for is an element of contrarianism. This means that the stock is either overlooked or out of favor with Wall Street analysts. Typically, we like to see that five or less analysts are following a firm or that investors are apathetic towards a firm or industry. These factors mean that Corbin & Company can add value through its research process and gain valuable, profitable insights not readily disseminated to the rest of Wall Street. In many cases this leads us to the smaller to mid-sized firms, allowing our investors to own stock in companies at the early stages of major opportunities. The final element we look for is a business that is fairly easy to understand. As I often tell people, the chances that I will ever understand recombinant DNA, ribosome therapy, or genetic encryption is slim. In fact, most of the people who analyze those situations either do not understand the technology or do not understand finance. On the other hand, I do understand how bug shields, greeting cards and hamburgers are made and sold. Therefore, if the business cannot readily be explained to a customer or my mother, it is probably not a simple enough business to understand. Once the value score is deemed high enough and the five other factors examined, the difficult aspect of our research method begins. First, we have to re-examine the variables that went into the value score equation based on insights gleaned thus far. Usually a few stocks will drop out of consideration at this time. Next, we either go to see the company, recall our notes from past experiences, or contact someone who is very familiar with the company and industry, along with being a disinterested source in our decision making process. Here we utilize a variety of sources: investor conferences, industry specialists, and sometimes customers, all of which yield a different insight from a company visit. We try to visit at least 125 firms a year, with most being in the Midwest, South, and Southwest. Once this is done, we must re-verify all of the facts, including the value score, then make a decision. The final decision as to a stock's purchase rests on its own merits with very little "gut" feeling involved. This is due to the fact that after going through the whole process, resolving all issues before us, and looking at the facts, I am confident that my reservations are something I can live with. THE PORTFOLIO MANAGEMENT PROCESS After developing a list of stocks, putting them together in a portfolio should be the easiest part in most people's minds. Nothing could be further from the truth because numerous risks must be analyzed before the portfolio is finalized. In most cases, another big decision comes in the timing of purchases. This is because the value manager is extremely price sensitive, which can sometimes make the process take longer than expected. Once a portfolio of stocks is assembled by Corbin & Company, it typically has a number of defining characteristics. The first is that the portfolio will have anywhere from 20-40 securities in it and the initial positions will range in size from 1%-5%. Most positions will be in the 2.5%-4.0% range, which gives us the opportunity to add to those positions. Typically, no positions will be in excess of 20% of the portfolio. Secondly, the portfolio will begin with an estimated earnings per share growth rate and dividend yield in excess of the market and a price/earnings ratio substantially below the market's. This means that the overall portfolio's value score is in excess of the market, making the combined group of securities a greater value than the market. The role of cash is an important one in our process. At no time do we purchase securities that are not outstanding bargains. Therefore, if we do not have enough ideas that meet our criteria, the money will sit in cash. Once we get "fully invested" (defined as over 90% of the money in stocks), we will stay fully invested. It is not our policy to try to raise cash if we foresee a downturn in the market. Instead, we believe that our portfolio's companies can use a downturn to their advantage to advance their long-term prospects and build shareholder wealth. Additionally, as mentioned earlier, the ability to time the market is not one that can be done with any accuracy over the long-term. We are wiser to stay in stocks and choose the best ones than we are to try to raise cash at suspected advantageous times. Equities are sold out of the portfolio for two reasons. First, the fundamentals around the security begin to dramatically change. Second, when a stock's value score becomes equal to or less than the market, the security is sold. This typically means that securities are held for the long-term and portfolio turnover is relatively low, which has the advantage of lowering overall portfolio expenses and giving Corbin & Company a rigorous sell process. OVERALL PORTFOLIO CHARACTERISTICS AND COMMENTARY As of October 31st, the portfolio contained 37 equities, with 96.6% of the money in equity securities, and 3.4% in cash. On a weighted-average basis, the portfolio has an estimated earnings growth rate of 17.27%, a dividend yield of 1.12%, a p/e ratio based on next year's earnings of 11.32X, and a price-to-book value of 2.14X. The same figures for the Russell 2000 at the end of the quarter were 19.69%, 1.26%, 18.80X, and 3.91X, respectively. The portfolio has a value score 46.8% higher than the market (1.63 vs. 1.11 ). Our portfolio continues to have an economic value substantially in excess of the market, which is still not recognized in our securities. Over the last year I have been perplexed by investors' fascination with liquidity, as opposed to value. While the feeding frenzy that has engulfed the areas of technology and finance continued unabated until October, clearly it seems that investors are beginning to refocus on value, particularly small-cap value. Many analysts are attributing the latest move in the smaller stocks as a sign of the speculative nature of this market, but I feel that it is instead a good indicator that most investors are clearly focusing again on economic fundamentals. While the last few months may have signaled the beginning of the end in this cycle for the outperformance of the "jumbo" caps, it may also mark the beginning of a cycle of outperformance in the smaller and secondary stocks. This should favor managers over indexing and value over growth. I remain optimistic that small-cap value is situated in the perfect position for the next few quarters. I am also hopeful that basic businesses will return to vogue. While this happened to a certain extent in the last few months, I believe that it should continue, due to a number of factors. The first is that the technology and financial stocks have been outperforming for close to three years, which is approximately the length of their historical performance cycles over the past twenty years. Since they are also two of the most volatile components of the index, when they fall out of favor, typically they fall very hard. Additionally, the continuing strong U.S. economy has boosted earnings for many stocks with strong cyclical domestic activities. In the past few years, much of the focus in the stock market has been on U.S. firms that have substantial sales abroad. With the rout of the Southeast Asian countries' equity and currency markets, much of the glamour has been removed from those markets in the near-term. While clearly substantial opportunities exist overseas for many firms, the recent strength of the U.S. dollar and the myriad of problems faced by many countries have taken much of the bloom off the international rose. This will lead many investors back to this country's companies with domestic sales, many of which are not the major S&P stocks. As you can see from the chart below, we are concentrating our dollars currently where there is not a large amount of overseas influence. The sector allocation of the equity portfolio at the end of the quarter was as follows: Sector Percentage Raw Materials 13.0% Financial Services 0.0% Transportation 3.9% Technology 18.5% Capital Goods 18.4% Consumer Non-Durables 4.7% Consumer Durables 10.0% Consumer Services 3.0% Conglomerates 0.0% Shelter 8.5% Utilities 0.0% Health Care 0.0% Retail 11.3% Business Equipment & Services 6.7% Energy 2.0% PERFORMANCE DISCUSSION The fund generated an annualized return of 30.32% and a cumulative total return of 10.3% for the time period of June 30th through October 31st. The S&P 600 Small-Cap returned 11.16%, and the Russell 2000 finished at 9.74%. We have had a number of stocks in our portfolio receive takeover offers since the fund's inception. Sterling Electronics got an offer from Marshall Industries, Computational Services agreed to a deal with Emerson Electric, and Oregon Metallurgical decided to merge with Allegheny Teledyne. I have always said that a takeover is the ultimate test of value, because obviously someone believes that the company is worth owning at a substantially higher price. Some other stocks that had a major positive impact on the portfolio were VTEL, Successories, Duckwall-Alco, and Outback Steakhouses. Our portfolio has a number of stocks that I believe have the potential to be worth five-to-ten fold over the next five years. These would include our positions in Duckwall-Alco, Durakon, Quanex, Perceptron, Successories, VTEL, and Wabash National. It is our belief that if just one of these companies works out according to our expectations, it would be more than enough to carry the performance of the portfolio ahead of that of the indexes. While we do not have a "bet the ranch" mentality on any single one of these stocks, collectively they comprise over 25% of the portfolio. Over the next few quarters, these must be the key contributors in our outperforming the market. DISCRIPTION OF INDIVIDUAL SECURITY ISSUES I would like to very briefly describe the securities now held in the portfolio. The individual securities, and any interesting characteristics, are: Alrenco (RNCO) - The company operates a chain of rent-to-own stores that are primarily based in the Midwest, Southwest, and Southeast. Alrenco is based in New Albany, Indiana. Altron, Inc. (ALRN) - Altron manufactures interconnect products, such as backplanes and circuit boards, for electronic equipment. The firm is located in Wilmington, Massachusetts. American Building Company (ABCO) - ABCO is one of the largest makers of metal buildings in the country. It is located in Eufala, Alabama. Artic Cat Company (ACAT) - The firm makes snowmobiles, ATVs, and jet skis under the Artic Cat and Tigershark names. The company is in Thief River Falls, Minnesota. Award Software (AWRD) - AWRD, which is based in Mountain View, California, develops software that provides an interface between a computer's operating system software and its hardware. Brooktrout Technology (BRKT) - The company is supplier of software and hardware products for providers of the electronic messaging market, such as faxes and modems. BRKT is located in Needham, Massachusetts. Butler Manufacturing (BTLR) - Butler is the largest maker of metal buildings in the United States. In addition, it has operations all over the world and is headquartered in Kansas City, Missouri. Commercial Intertech (TEC) - Commercial Intertech is a large manufacturer of industrial pumps and has substantial overseas operations. The company is headquartered in Youngstown, Ohio. Computer Language Research (CLRI) - The company has a virtual monopoly on tax software for trust companies and Fortune 2000 firms. Located in Carrolton, Texas, the company also has a number of other developing businesses in the software industry. Computational Systems Inc. (CSIN) - The firm makes preventive maintenance and monitoring devices used primarily on electric motors. The company is being acquired by Emerson Electric. CSIN is located in Knoxville, Tennessee. Cott Corporation (COTTF) - Based in Toronto, Canada, Cott is a major producer of private label drinks both in North America and abroad. The company makes Albertson's A+ Brand drinks, as well as Sam's Choice for WalMart. Deflecta-Shield (TRUX) - Indianola, Iowa is the home for this truck accessories firm. The company is best known for its bug shields and air deflectors. Duckwall-Alco Stores, Inc. (DUCK) - The company is a retailer to small towns in the Midwest and Southwest. It is based in Abilene, KS and primarily operates in towns of less than 20,000. Durakon Industries Inc. (DRKN) - Durakon makes specialized towing vehicles, as well as, bedliners for pick-up trucks. Its Duraliner product is the dominant name in the bedliner business. The company is located in Lapeer, Michigan. Flexsteel Industries (FLXS) - This is the tenth largest furniture company in the United States. It is located in Dubuque, Iowa. Glenayre Technology (GEMS) - Glenayre manufactures telecommunications equipment software, particularly for paging systems, and is located in Charlotte, North Carolina. Haggar Corp. (HGGR) - The company makes apparel items such as wrinkle-free slacks. The firm is located in Dallas, Texas. Insteel Industries (III) - III is a manufacturer of welded wire reinforcement, used primarily by the construction, furniture and automotive industry. Insteel is based in Mount Airy, North Carolina. Lone Star Steakhouse (STAR) - The company owns three steakhouse concepts: Lone Star Steakhouse & Saloon, Sullivan's, and Del Frisco's. It is based in Wichita, Kansas. Oregon Metallurgical (OREM) - The company processes titanium into products for heavy industrial uses. Oregon Metallurgical is based in Albany, Oregon. Outback Steakhouse (OSSI) - The Outback Steakhouse chain caters to middle-market diners who are looking for a substantial dining experience. It is based in Tampa, Florida. Perceptron (PRCP) - The company's products use light in the measurement of industrial products. Additionally, the company has a rapidly growing business using its products for the lumber industry. The company is based in Plymouth, Michigan. Quanex Corp. (NX). - The company operates steel and aluminum mini-mills throughout the United States. Its products typically require some level of engineering and the firm's mills are considered the lowest cost producers in the world. The firm is based in Houston, Texas. RMI Titanium (RTI) - RMI is a processor of titanium used in manufactured products. The company is 25% owned by USX Corp. It is based in Niles, Ohio. RailTex (RTEX) - RailTex is the nation's sixth largest railroad, with over 4,000 miles of track. RailTex is based in San Antonio, Texas. Raster Graphics (RGFX) - Raster Graphics is a producer of high-performance color printing systems and is located in San Jose, California. Steel of West Virginia Inc. (SWVA) - Steel of West Virginia is located in Huntington, West Virginia. This operator of a steel mini-mill manufactures its products for the truck trailer market, as well as manufactured housing. Sterling Electronics (SEC) - Sterling electronics distributes electrical parts to companies across the country. It is currently being bought out by Marshall Industries. It is in Houston, Texas. Successories Inc. (SCES) - The company is a leader in the motivation and people recognition business. It sells products through mall-based shops, airline catalogs, promotional catalogs, and other retailers. It is based in Naperville, Illinois. Ultratech Stepper (UTEK) - UTEK manufactures products, known as steppers, which are used in the fabrication of semiconductors and thin film heads for disk drives. The company is located in San Jose, California. VTEL Corporation (VTEL) - VTEL is the second largest competitor in the video teleconferencing business. Intel has a large interest in the firm, which has a 25% market share. VTEL is based in Austin, Texas. Wabash National Corp. (WNC) - West Lafayette, Indiana is the home to Wabash National, the largest truck trailer firm in the nation. In a decade the company has moved from being new to the marketplace to being the dominant firm, with the ability to produce 90,000 trailers per year. Walden Residential Properties (WDN) - Walden is a real estate investment trust that offers upscale apartment living. The company is located in Dallas, Texas. Webco Industries (WEB) - The company makes HVAC products and is a dominant supplier in certain segments of the market. Webco is based in Sand Springs, Oklahoma. Wellman Inc. (WLM) - The company recycles plastic bottles into fibers. These fibers are used to make carpets, along with other uses. The firm is based in Shrewsburry, New Jersey. FINAL THOUGHTS Thank you once again for your support of the fund. Everyone at Corbin & Company is excited about its long-term potential to increase wealth for the shareholders and is committed toward that purpose. For myself, I only hold three investments; shares in this fund and shares in Corbin & Company comprise the largest of those investments. If there is ever anything we can do in the way of service, please let me know. Thank you once again for your confidence in us, and we will continue to work hard to make sure we are deserving of it. Sincerely, David A. Corbin, CFA President and Chief Investment Officer
Corbin Small-Cap Value Fund Schedule of Investments - October 31, 1997 Common Stocks - 88.2% Shares Value Apparel - 2.3% Haggar Corp. 2,010 $ 30,904 ----------------- Auto Parts & Accessories - 4.2% Deflecta Shield Corp. (a) 5,800 55,825 ----------------- Bottled & Canned Soft Drinks - 1.9% Cott Corp (Quebec) (a) 2,440 25,315 ----------------- Business Services - 11.3% Computational Systems Corp. (a) 2,000 57,250 Computer Language Research 2,000 23,500 Vtel Corp. (a) 9,410 69,399 ----------------- ----------------- 150,149 ----------------- Catalog & Mail Order Services - 2.2% Successories Inc. (a) 4,350 29,091 ----------------- Computer Programming Services - 1.5% Raster Graphics Inc. (a) 3,860 20,265 ----------------- Computer Software - 0.5% Award Software International, Inc. (a) 570 6,519 ----------------- Construction - 1.1% American Residential Services, Inc. (a) 1,000 14,625 ----------------- Department Stores - 2.6% Duckwall Alco Stores (a) 2,360 35,105 ----------------- Electrical Parts & Equipment - 1.6% Altron Inc. (a) 190 3,016 Glenayre Technologies Inc. (a) 190 2,470 Sterling Electronics Corp. 780 15,892 ----------------- ----------------- 21,378 ----------------- Equipment Rental & Leasing - 2.3% Alrenco Inc. (a) 1810 30,770 ----------------- Fabricated Metal Products - 4.3% American Buildings Co. (a) 630 17,640 Butler Manufacturing Co. 1180 39,973 ----------------- ----------------- 57,613 ----------------- Corbin Small-Cap Value Fund Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Shares Value Furniture & Fixtures - 4.4% Flexsteel Industries, Inc. 5,220 $ 58,725 ----------------- Hydraulic Equipment - 3.0% Commercial Intertech Corp. 2,490 40,463 ----------------- Measuring & Controlling Devices - 4.3% Perceptron Inc. (a) 2,050 49,456 Ultratech Stepper Inc. (a) 300 8,175 ----------------- ----------------- 57,631 ----------------- Metal Mining - 1.8% Oregon Metallurgical Corp. (a) 500 11,719 RMI Titanium (a) 500 11,875 ----------------- ----------------- 23,594 ----------------- Power Distribution - 2.6% Reliability Inc. (a) 2,000 35,000 ----------------- Railroads - 3.5% Rail Tex Inc. (a) 2,900 46,763 ----------------- Real Estate - 3.3% Walden Residential Properties 1,800 43,875 ----------------- Recreational Vehicles - 7.5% Arctic Cat Inc. 3,070 36,073 Durakon Industries Inc. (a) 7,080 63,720 ----------------- ----------------- 99,793 ----------------- Restaurants - 5.3% Lone Star Steakhouse & Saloon (a) 2,230 51,569 Outback Steakhouse Inc. (a) 720 19,485 ----------------- ----------------- 71,054 ----------------- Textiles - 2.1% Wellman Inc. 1,350 27,422 ----------------- Trucks/Trailers - 1.7% Wabash National Corp. 765 22,853 ----------------- Steel Manufacturing - 12.9% Insteel Industries 5,680 43,310 Quanex Corp. 2,230 61,603 Steel West Virgina Inc. (a) 4,840 51,425 Webco Industries (a) 2,000 15,375 ----------------- ----------------- 171,713 ----------------- ----------------- TOTAL COMMON STOCKS (Cost $1,131,754) $ 1,176,445 ----------------- Corbin Small-Cap Value Fund Schedule of Investments - October 31, 1997 - continued Money Market Securities - 6.2% Star Treasury, 4.80%, 10/31/97 (Cost $83,063) 83,063 ----------------- TOTAL INVESTMENTS - 94.4% (Cost $1,214,817) 1,259,508 Other Assets less liabilities - 5.6% 74,923 ----------------- Total Net Assets - 100.0% $ 1,334,431 =================
Corbin Small-Cap Value Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $1,214,817) $ 1,259,508 Receivable for fund shares sold 100,036 Interest receivable 255 -------------------- Total assets 1,359,799 Liabilities Payable for investments purchased $ 24,070 Accrued investment advisory fee payable 1,250 Payable for fund shares redeemed 48 ------------------- Total liabilities 25,368 -------------------- Net Assets $ 1,334,431 ==================== Net Assets consist of: Paid in capital $ 1,283,827 Accumulated undistributed net realized gain 5,913 Net unrealized appreciation on investments 44,691 -------------------- Net Assets, for 120,981 shares $ 1,334,431 ====================
Corbin Small-Cap Value Fund Statement of Operations for the period June 30, 1997 (Commencement of Operations) to October 31, 1997 Investment Income Dividend Income $ 1,812 Interest Income 1,174 ------------------- Total Income 2,986 Expenses Investment advisory fee $ 2,991 Trustees' fees 0 ------------------- Total Operating Expenses 2,991 ------------------- Net Investment Income (Loss) (5) ------------------- Realized & Unrealized Gain Net realized gain on investment securities 5,918 Change in net unrealized appreciation on investment securities 44,691 ------------------- ------------------- Net gain (loss) on investment securities 50,609 ------------------- Net increase in net assets resulting from operations $ 50,604 ===================
Corbin Small-Cap Value Fund Statement of Changes in Net Assets for the period June 30, 1997 (commencement of operations) to October 31, 1997 Increase/(Decrease) in Net Assets Operations Net investment income (loss) $ (5) Net realized gain 5,918 Change in net unrealized appreciation 44,691 --------------- Net Increase in net assets resulting from operations 50,604 --------------- Distributions to shareholders: From net investment income - --------------- Share Transactions Net proceeds from sale of shares 1,283,875 Shares issued in reinvestment - Shares redeemed (48) --------------- Net increase in net assets resulting from share transactions 1,283,827 --------------- Total increase in net assets 1,334,431 Net Assets Beginning of period - --------------- End of period [including undistributed net investment loss of ($5)] $ 1,334,431 ===============
Corbin Small-Cap Value Fund Financial Highlights for the period June 30, 1997 (Commencement of Operations) to October 31, 1997 Selected Per Share Data Net asset value, beginning of period $10.00 ------------ Income from investment Operations Net investment income 0.00 Net realized and unrealized gain (loss) 1.03 ------------ Total from investment operations 1.03 ------------ Less Distributions From net interest income 0.00 From net realized gain 0.00 ------------ Net asset value, end of period $11.03 ============ Total Return 30.(a) Ratios and Supplemental Data Net assets, end of period (000) $1,334 Ratio of expenses to average net assets 1.(a) Ratio of net investment income to average net assets 0.(a) Portfolio turnover rate 20.(a) Average commissions paid 0.0681 (a) Annualized CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 1. ORGANIZATION The Corbin Small-Cap Value Fund. (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on June 10, 1997 and commenced operations on June 30, 1997. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company The investment objective of the Fund is to provide long term capital appreciation to its shareholders. The Trust Agreement permits the trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market values of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long-term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Corbin & Company (the "Adviser") to manage the Fund's investments. David A. Corbin , President of the Adviser, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees. As compensation for its management services the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.25% of the average daily net assets of the Fund. For the period from June 30, 1997 through October 31, 1997, the Adviser has received a fee of $2,991 from the Fund. CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $1,283,827. Transactions in capital stock were as follows: For the period from June 30, 1997 (Commencement of Operations) through October 31, 1997 Shares Amount --------- ---------- Shares sold 120,985 $1,283,875 Shares issued in reinvestment of dividends - - Shares redeemed (4) (48) ----------- -------------- Net increase 120,981 $1,283,827 ====== ========== NOTE 5. INVESTMENTS For the period from June 30, 1997 (commencement of operations) through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $1,175,485 and $49,549, respectively. The gross unrealized appreciation for all securities totaled $79,685 and the gross unrealized depreciation for all securities totaled $34,994 for a net unrealized appreciation of $44,691. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $1,214,817. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 7. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1997 the fund recorded permanent book/tax differences of ($5) from undistributed net investment income to undistributed realized gain on investments. This reclassification has no impact on the net asset value of the fund and is designed generally to present undistributed income and realized gains on a tax basis which is considered to be more informative to shareholders. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Corbin Small Cap Value Fund We have audited the statement of assets and liabilities including the portfolio of investments, of the Corbin Small Cap Value Fund (a member of the Ameriprime Fund Series) as of October 31, 1997, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the period from June 30, 1997 (commencement of operations) to October 31, 1997. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted audit- ing standards. 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. Our procedures included confirmation of securities owned as of October 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Corbin Small Cap Value Fund as of October 31, 1997, the results of its operations, the changes in its net assets, and the financial highlights for the period from June 30, 1997 (commencement of operations) to October 31, 1997 in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 Florida Street Funds Letter to Shareholders October 31, 1997 Dear Fellow Shareholders, I am pleased to present the first annual report of the Florida Street Funds, which completed their first fiscal year on October 31, 1997. Since the Florida Street Bond Fund and the Florida Street Growth Fund commenced operations on August 4 and August 6,1997, respectively, the period covered by this report is unusually short. The report includes an investment review by each fund's portfolio manager, followed by a complete list of securities held and the financial statements for the period. During this fiscal period , the U.S. financial markets were characterized by a level of volatility not seen in seven years. From August through early October, both stock and bond prices were on a rising course. On October 17, the Taiwanese government announced that it would allow its currency to float. This led to speculation that Hong Kong would do the same, and speculators began shorting the Hong Kong currency. As officials moved to defend the currency, interest rates in Hong Kong rose precipitously. Such rates are likely to slow economic growth there, and U.S. investors worried that this could cause a slowing in the U.S. economy, particularly in the technology sector. With valuations at lofty levels investors suddenly saw a reason to sell stocks and corporate bonds. The safe haven features of U.S. Treasury securities caused prices in that market to rise. We view this event as a market correction, not an economic event. Southeast Asia consumes about 12% of U.S. exports and contributes 7% of U.S. earnings. Therefore, the turmoil in Southeast Asia should not have a meaningful impact on domestic economic growth, which continues to be steady. Also, the holdings of the Florida Street Funds have no conspicuous exposure to Southeast Asia. We will continue to monitor the markets and the funds' holdings to manage risk. Our risk management efforts are designed to insure that the holdings adequately represent numerous sectors of the U.S. economy and that security selection is an important determinant of investment results. Thank you for joining us as fellow shareholders of the Florida Street Funds. We will continue to work to justify your confidence. Sincerely, Walter A. Morales President and Chief Investment Officer Commonwealth Advisors, Inc. Dear Fellow Shareholder, The Florida Street Bond Fund began operation on August 4, 1997. The Fund achieved a cumulative total return of 0.70% and an annualized toal return of 3.69% for the short fiscal year ended October 31, 1997. This result lagged the return of the Lipper High Current Yield Index which returned 2.34%. We do not believe that the performance interval since inception is meaningful due to the short time-span involved. The Fund is being managed according to an investment process that should allow it to perform well over time versus its benchmark and the bond market in general. The investment objective of the Fund is to provide a total return by pursuing high yield, non-investment grade bond and other income-oriented securities. As of the end of October, the fund's allocation consisted of 92% fixed income securities, 3% REITS, and 5% cash equivalents. The last two weeks of October were characterized by significant volatility as turmoil in the Asia-Pacific countries caused a sharp change in investor sentiment and widespread selling of equities in the U.S. and markets around the world. The sudden aversion to credit risk caused the selling pressure to spill over to the U.S. corporate bond market as investors sought safety in U.S. Treasury securities. The decline in the Lipper High Current Yield Index was approximately 1.5% on October 27th, the day the U.S. stock markets declined nearly 7 percent. Events such as this should create opportunities for the fund in our search for securities offering potentially above-average total return. For example, the high grade Yankee issue Hutchison Whampoa (Hutch 07) has experienced a widening of spread versus U.S. Treasury securities of about 100 basis points since mid-October. This seems to be due mostly to market sentiment than to any deterioration in credit fundamentals of the issuer. We make decisions concerning securities such as this one only after considerable research and the application of sound judgement. We continue to expect high-yield bonds to generate attractive returns in an the current economic environment. The operating performance of the underlying issuers is expected to be favorable, and we will consistently monitor their progress Walter A. Morales Portfolio Manager
Florida Street Bond Fund Schedule of Investments October 31, 1997 Common Stock - 2.7% Shares Value Colonial Properties Trust 700 $ 19,863 Jameson Inns 1,800 20,700 JDN Realty Corp. 700 23,888 JPS Textile Group Inc. 4,997 67,460 Liberty Property Trust 800 22,400 LTC Properties Inc. 1,100 22,275 Walden Residential Properties Inc. 900 21,938 ------------------ TOTAL COMMON STOCK (Cost $199,434) 198,524 ------------------ Par Corporate Bonds - 75.7% Value Value Allied Waste Industries, 0.00%, 6/1/02 150,000 102,000 American Rice Inc., 13%, 7/31/05 260,000 265,200 Argentina Buenas Aires, 8.50%, 12/29/00 150,000 133,125 Bally's Health & Tennis, 13%, 1/19/03 150,000 147,750 Brazos Sportswear, 10.50%, 7/1/07 150,000 148,500 Brauns Fashions, 12.00%, 1/1/05 400,000 394,000 Building Materials Corp, 8.00% 10/15/07 100,000 99,000 Cablevision Systems, 8.125%, 8/15/09 150,000 151,125 Callon Petroleum, 10%, 12/15/01 135,000 135,338 Cleveland Electric Illum, 9.00%, 7/01/23 100,000 107,805 DiGiorgio Corp., 10%, 6/15/07 100,000 98,250 Family Restaurants, 9.75% 2/1/02 100,000 83,000 Farm Fresh, 12.25%, 10/1/00 100,000 89,500 Global Star, 11.25%, 6/15/04 200,000 196,000 HIH Capital Ltd., 7.50%, 9/25/06 250,000 205,000 Hovnanian K Enterprises, 9.75% 6/1/05 100,000 99,500 Homeland Stores, 10% 8/1/03 25,000 23,125 Integrated Health Services, 9.25%, 1/15/08 250,000 256,250 Iron Mountain Inc. 8.75%, 9/30/09 100,000 101,500 Lechters Inc. 5.00%, 9/27/01 150,000 117,750 Maxim Group Inc. 9.25%, 10/15/07 150,000 146,250 McLeod USA Inc. 10.50% 3/1/07 150,000 104,250 Microcell Telecom, 0%, 12/01/11 300,000 201,000 Niagra Mohawk Power Corp., 9.50% 3/1/21 250,000 264,260 Nine West Group Inc. 9%, 8/15/07 150,000 149,625 Ohio Savings Capital Trust I, 9.50%, 6/30/27 250,000 268,990 Pamida Inc. 11.75% 3/15/03 95,000 96,900 Pathmark Stores 0.0%, 11/1/03 250,000 172,500 Phar-Mor Inc. 11.72% 9/11/02 55,000 57,200 Specialty Foods Corp. 11.25%, 8/15/03 100,000 93,500 Specialty Foods 0.00%, 8/15/05 250,000 108,750 Florida Street Bond Fund Schedule of Investments October 31, 1997 - continued Par Corporate Bonds - continued Value Value Speedy Muffler King 10.875% 10/1/6 100,000 71,000 Triangle Capital Trust 9.375%, 6/1/27 250,000 272,739 Trico Marine Services 8.50, 8/1/05 115,000 116,725 UDC Homes, 12.50%, 5/1/00 135,000 141,075 U.S. Air Inc. 10.00%, 7/1/03 110,000 114,125 United Refining Co. 10.75%, 6/15/07 180,000 186,300 ------------------ TOTAL CORPORATE BONDS (Cost $5,537,301) 5,518,906 ------------------ U.S. Government Obligations - 16.5% FHR 1496 PA, 8/15/22 221,859 200,460 FHR 1652 SC 123,698 122,778 Freddie Mac 214,390 188,541 USTN 700,000 687,093 ------------------ ------------------ TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $1,139,508) 1,198,872 ------------------ Money Market Securities - 3.5% Star Treasury 4.482% 10/31/97(Cost $256,928) 256,928 256,928 ------------------ TOTAL INVESTMENTS - 98.4% (Cost $7,133,171) 7,173,230 Other Assets less liabilities - 1.6% 115,778 ------------------ TOTAL NET ASSETS - 100.0% $ 7,289,008 ================== Legend (a) non-income producing
Florida Street Bond Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $7,133,171) $ 7,173,230 Receivable for securities sold 102,594 Dividends receivable 778 Interest receivable 124,231 -------------------- Total assets 7,400,833 Liabilities Accrued advisory fee 6,386 Dividends payable 105,439 ------------------- Total liabilities 111,825 -------------------- Net Assets $ 7,289,008 ==================== Net Assets consist of: Paid in capital $ 7,248,914 Accumulated undistributed net investment income 35 Net unrealized appreciation on investments 40,059 -------------------- Net Assets, for 732,724 shares $ 7,289,008 ==================== Net Asset Value
Florida Street Bond Fund Statement of Operations for the period August 4, 1997 (Commencement of Operations) to October 31, 1997 Investment Income Dividend Income $ 2,300 Interest Income 117,254 -------------------- Total Income 119,554 Expenses Management fee $ 14,080 -------------------- Total Expenses 14,080 -------------------- Net Investment Income 105,474 -------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (97,781) Change in net unrealized appreciation (depreciation) on investment securities 40,059 -------------------- Net gain (loss) (57,722) -------------------- Net increase (decrease) in net assets resulting $ 47,752 ==================== from operations
Florida Street Bond Fund Statement of Changes in Net Assets August 4, 1997 (commencement of operations) to October 31, Increase in Net Assets 1997 Operations Net investment income $ 105,474 Net realized gain (loss) on securities transactions (97,781) Change in net unrealized appreciation 40,059 --------------- Net Increase in net assets resulting from operations 47,752 --------------- Distributions to shareholders: From net investment income (7,658) From net realized gain - Return of capital (97,781) --------------- Total distributions (105,439) Share Transactions Net proceeds from sale of shares 7,463,588 Shares issued in reinvestment - Shares redeemed (116,893) --------------- Net increase in net assets resulting from share transactions 7,346,695 --------------- Total increase in net assets 7,289,008 Net Assets Begining of period - --------------- End of period [including undistributed net investment income of $35] $ 7,289,008 ===============
Florida Street Bond Fund Financial Highlights For the period August 4, 1997 (Commencement of Operations) to October 31, 1997 Selected Per Share Data Net asset value, $10.00 --------------- beginning of period Income from investment Operations Net investment income 0.21 Net realized and unrealized gain(loss) (0.12) --------------- Total from investment operations 0.09 --------------- Less Distributions From net interest income (0.02) From net realized gain(loss) (0.12) --------------- --------------- Total distributions (0.14) --------------- Net asset value, end of period $9.95 Total Return 3.69%(a) Ratios and Supplemental Data Net assets, end of period (000) $7,289 Ratio of expenses to average net assets 0.53(a) Ratio of net investment income to average net assets 3.95(a) Portfolio turnover rate 60.55(a) Average commission rate 0.0339 (a) Annualized Florida Street Growth Fund Letter to Shareholders October 31, 1997 Fellow Shareholders, During the abbreviated period since the inception of the Florida Street Growth Fund on August 6, 1997, the Fund achieved a cumulative total return of 1.90%and an annualized total return of 7.97%. This performance masks a great deal of volatility during the final week of October. The table below indicates how the fund fared versus comparative indexes. The fund's broad capitalization range makes it meaningful to compare results with mid-cap and small-cap indexes. ------------------------------------------------------------------ ------------------------------------------------------------------ The stock market took investors on a wild ride as October came to a close. Returns for the market indexes shown above were substantially higher through the first week of the month. Then the market began to drift lower , culminating in a drop of over 6 percent on October 27 before recovering a portion of the losses by month end. This was the first meaningful correction since the fall of 1990. Typically, corrections of at least ten percent occur, on average, every two years, so this was long overdue. Investors, fearing a spill-over of Southeast Asia's economic crisis into the U.S. economy, dumped stocks, especially those in which substantial unrealized gains existed. The Fund owns shares in many of these successful companies so the fund declined along with the market averages, with some cushion provided by a cash and government bond reserve position totaling 21% of assets. We are pleased to see that once the market stabilized, prices recovered substantially from the lows. We would not be surprised to see additional periods of extreme volatility given the stellar returns earned during the last fifteen years, and the dearth of volatility during this decade. Our strategy will continue to be aimed at finding well-managed companies across all market sectors with above average prospects and which are undervalued according to one or more important measures . This process should prove rewarding to shareholders in the market environment we expect over the next few years. We expect the market to rise , but at a slower pace and with greater volatility as investors become protective of their gains when events unfold which shake their confidence in the future. The Fund's flexibility with regard to company size should allow us to capitalize on opportunities that will likely arise in an environment of investor "skiddishness". Several holdings provided impetus to the Fund's positive return during this brief period. Most noteworthy were the shares of Superior Energy Services, a provider of oil and gas plug and abandonment services, which rose 93.8%, and Sirrom Capital, a company that invests in growing small businesses, whose shares increased by 41.1%. Dampening results during the period were the shares of Miller Industries which declined 42.4%. Miller manufactures towing equipment and provides towing services. A slowing of revenue growth in the manufacturing segment caused investors to question the company's growth potential. We believe the slowdown is temporary and are continuing to hold the stock. Advanced Micro Devices shares were down 40.9% due to a small earnings shortfall. We are pleased with the Fund's performance during its initial fiscal period , realizing that the time span is too short for a meaningful evaluation. Our personal and professional success is directly tied to that of the Fund, so you can be assured that we are working toward a common goal. Thank you for the trust you have placed in us. Richard L. Chauvin, Jr. Portfolio Manager
Florida Street Growth Fund Schedule of Investments - October 31, 1997 Common Stock - 79.6% Shares Value Banks & Bank Holding Companies - 4.1% Carolina First Corp. 1,500 $ 32,813 CCB Financial Corp. 300 27,300 Concord EFS (a) 900 26,719 ---------------- ---------------- 86,832 ---------------- Buildings/Construction - 2.0% NCI Buildings Systems (a) 700 25,506 Palm Harbor Homes Inc. (a) 600 16,050 ---------------- ---------------- 41,556 ---------------- Business Equipment & Services - 5.2% Accustaff Inc. (a) 600 17,138 Acxiom Corp. (a) 1,200 19,725 Billing Information Concepts (a) 400 15,700 Corestaff Inc. (a) 700 17,325 Cotelligent Group Inc. 1,000 20,500 PMT Services Inc. 1,200 19,350 ---------------- 109,738 ---------------- Capital Goods - 4.7% Cincinnati Milacron 600 16,650 Deere & Co. 400 21,050 Illinois Tool Works Inc. 300 14,756 Miller Industrial Inc. (a) 1,200 12,150 Nucor Corp. 500 26,125 Unifab International (a) 300 9,600 ---------------- ---------------- 100,331 ---------------- Chemicals - 2.9% IMC Global Inc. 600 20,213 PPG Industries 300 16,988 SCP Pool Corp. (a) 1,050 25,200 ---------------- 62,401 ---------------- Consumer Durables - 1.1% Action Performance Cos. (a) 900 23,063 ---------------- Consumer Non - Durables - 5.8% Flowers Industries 1,000 19,000 Kimberly Clark Corp. 400 20,775 Lance Inc. 1,000 21,375 Movado Group Inc. 1,200 25,350 Performance Food Group Co. (a) 900 16,650 Richfood Holdings 800 19,300 ---------------- 122,450 ---------------- Electronics - 3.2% Kuhlman Corp. 500 17,438 SCI Systems Inc. 700 30,800 TII Industries Inc. 3,000 18,750 ---------------- ---------------- 66,988 ---------------- Florida Street Growth Fund Schedule of Investments -October 31, 1997- continued Energy Sector - 10.4% Shares Value Consolidated Natural Gas Co. 350 18,922 Core Labratories (a) 500 20,000 Domain Energy Corp. (a) 1,000 17,250 Mitcham Industries 800 20,900 Mobil Corp. 300 21,844 Nabors Industries (a) 400 16,450 Newpark Resources Inc. (a) 400 16,600 Pride International Inc. (a) 600 19,800 Southern Mineral Inc. 2,800 19,600 Superior Energy Services Inc. (a) 2,500 29,375 Tuboscope Vetco International Corp. (a) 600 19,050 ---------------- 219,791 ---------------- Financial Services - 10.3% Amresco Inc. (a) 700 21,963 Bear Stearns Cos. Inc. 200 7,938 Fleet Financial Group Inc. 350 22,509 First Data Corp. 800 23,250 Greentree Financial 600 25,275 Interstate/Johnson Lane 550 14,850 Lehman Brothers Holdings Inc. 200 9,413 MBNA Corp. 825 21,708 Raymond James Financial Inc. 300 9,000 Sirrom Capital Corp. 800 40,300 SunAmerica Inc. 600 21,563 ---------------- 217,769 ---------------- Health Care - 2.9% Diagnostic Health Services (a) 2,000 24,250 Healthcare Compare (a) 300 16,125 Smithkline Beecham PLC ADR 200 9,525 Vencor Inc. (a) 400 10,800 ---------------- ---------------- 60,700 ---------------- Hotels/Lodging - 0.9% HFS Inc. (a) 300 21,150 ---------------- Florida Street Growth Fund Schedule of Investments -October 31, 1997- continued Insurance - 2.7% Shares Value Capital RE 350 20,628 Protective Life Corp. 400 21,150 Reliastar Financial Cos. 400 14,950 ---------------- ---------------- 56,728 ---------------- Restaurants - 3.0% Landrys Seafood Restaurants Inc. (a) 1,000 28,000 Piccadilly Cafeteria 1,000 14,875 Rare Hospitality Inc. 2,200 20,625 ---------------- 63,500 ---------------- Retail Stores - 6.0% Autozone Inc. (a) 700 20,694 Consolidated Stores Corp. (a) 600 23,925 Dollar General Corp. 500 16,531 Heilig Myers Co. 800 10,700 Home Depot Inc. 400 22,250 Just for Feet Inc. (a) 1,300 19,256 Paul Harris Stores Inc. (a) 800 14,700 ---------------- ---------------- 128,056 ---------------- Technology Sector - 5.8% Advanced Micro Devices Inc. (a) 500 11,500 Applied Materials, Inc. (a) 700 23,363 C-Cube Microsystems (a) 400 9,500 Coherent Communication Corp. 700 21,175 Novell Inc. 1,000 8,437 PairGain Technology (a) 400 11,300 Premier Technologies 600 20,400 Tech Data 400 17,800 ---------------- 123,475 ---------------- Telecommunications - 3.3% Frontier Corp. 800 17,300 GTE Corp. 400 16,974 World Access Inc. (a) 600 15,900 Worldcom Inc. (a) 600 20,174 ---------------- 70,348 ---------------- Transportation/Commercial - 1.8% Halter Marine Group Inc. (a) 400 20,924 Smithway Motor Express Corp. (a) 1,200 16,200 ---------------- ---------------- 37,124 ---------------- Transportation/Travel - 1.9% ASA Holdings 400 11,150 Carnival Corp. Class A 600 29,100 ---------------- ---------------- 40,250 ---------------- U.S. Government Agencies - 1.6% Federal National Mortgage Assoc. 700 33,905 ---------------- Total Common Stock (Cost $1,661,677) 1,686,155 ---------------- Florida Street Growth Fund Schedule of Investments - continued Shares Value U.S. Treasury Obligations - 11.6% U.S. Treasury Notes 5.625%, 2/15/06 250,000 $ 245,391 ---------------- (Cost $237,541) Money Market Securities - 9.0% Star Treasury 4.482% 10/31/97 190,132 $ 190,132 ---------------- Total Money Market Securities (Cost $190,132) TOTAL INVESTMENTS - 100.0% (Cost $2,089,350) $ 2,121,678 ================ Other Assets less liabilities - (0.0%) (4,197) Total Net Assets - 100.0% $ 2,117,481 ================ (a) non-income producing
Florida Street Growth Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $2,089,350) $ 2,121,678 Dividends receivable 1,697 Interest receivable 3,756 -------------------- Total assets 2,127,131 Liabilities Payable for investments purchased $ 7,175 Accrued advisory fee payable 2,475 ------------------- Total liabilities 9,650 -------------------- Net Assets 2,117,481 ==================== Net Assets consist of: Paid in capital $ 2,084,419 Accumulated undistributed net investment income 734 Net unrealized appreciation on investments 32,328 -------------------- Net Assets, for 207,706 shares 2,117,481 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($2,117,481/207,706) $ 10.19 ====================
Florida Street Growth Fund Statement of Operations for period August 6, 1997 (commencement of operations) to October 31, 1997 Investment Income Dividend Income $ 2,897 Interest Income 8,591 Other income 197 ------------------- Total Income 11,685 Expenses Advisory fee $ 6,339 ---------------------- Total Expenses 6,339 ------------------- Net Investment Income (Loss) 5,346 ------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (4,612) Change in net unrealized appreciation (depreciation) on investment securities 32,328 ---------------------- Net gain (loss) on investment securities 27,716 ------------------- Net increase (decrease) in net assets resulting from operations $ 33,062 ===================
Florida Street Growth Fund Statement of Changes in Net Assets August 6, 1997 (commencement of operations) to October 31,1997 Increase in Net Assets Operations Net investment income $ 5,346 Net realized gain(loss) on securities transactions (4,612) Change in net unrealized appreciation 32,328 --------------- Net Increase in net assets resulting from operations 33,062 --------------- Distributions to shareholders: From net investment income - From net realized gain - --------------- Total Distributions - Share Transactions Net proceeds from sale of shares 2,127,711 Shares issued in reinvestment - Shares redeemed (43,292) --------------- Net increase in net assets resulting from share transactions 2,084,419 --------------- Total increase in net assets 2,117,481 Net Assets Begining of period - --------------- End of period [including undistributed net investment income of $5,346]. $ 2,117,481 ===============
Florida Street Growth Fund Financial Highlights For the period August 4, 1997 (Commencement of Operations) to October 31, 1997 Selected Per Share Data Net asset value, beginning of period $10.00 ------------ Income from investment Operations Net investment income 0.03 Net realized and unrealized gain (loss) 0.16 ------------ Total from investment operations 0.19 ------------ Less Distributions From net interest income - ------------ Net asset value, end of period $10.19 ============ Total Return 7.97(a) Ratios and Supplemental Data Net assets, end of period (000) $2,117 Ratio of expenses to average net assets 1.35(a) Ratio of net investment income to average net assets 1.14(a) Portfolio turnover rate 0.87(a) Average commissions paid 0.0973 (a) Annualized FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1997 NOTE 1. ORGANIZATION The Florida Bond Fund (the "Bond Fund") and the Florida Street Growth Fund (the "Growth Fund") were organized as series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on June 15, 1997, and commenced operations on August 4 and August 6, 1997, respectively. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified series, open end management investment company. The investment objective of the Bond Fund is to provide total return to shareholders over the long term. The investment objective of the Florida Street Growth Fund is to provide total return to its shareholders over the long term. The Trust Agreement permits the Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuations- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Funds retain Commonwealth Advisors, Inc. (the "Adviser") to manage the Fund's investments. The Adviser is a Louisiana corporation. Walter A. Morales, the adviser's president and chief investment manager is responsible for the day to day management of the bond fund, Richard L. Chauvin, Senior Vice-President and Fund Manager of the adviser is responsible for the day to day management of the Growth Fund. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage, taxes, interest, fees and expenses of non-interested person trustees, and extraordinary expenses. As compensation for its management services and agreement to pay the Funds expenses, the Funds are obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.10% and 1.35% of the average daily net assets of the Bond Fund and the Growth Fund, respectively. It should be noted that most investment companies pay their own operating expenses directly, while the Funds expenses, except those specified above, are paid by the Adviser. For the period from August 4, 1997 through October 31, 1997, the Adviser has received a fee of $14,080 from the Bond Fund. For the period from August 6, 1997 through October 31, 1997, the Adviser has received a fee of $6,339 from the Growth Fund. FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS Florida Street Bond Fund. As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $7,248,914. Transactions in capital stock were as follows:
For the period For the period from from August 4, 1997 August 4, 1997 (Commencement of (Commencement of Operations) through Operations) October 31, 1996 through October 31, 1997 Shares Dollars Shares sold 744,446 $7,463,588 Shares issued in reinvestment of dividends 0 0 Shares redeemed (11,722) (116,893) -------- --------- 732,724 $7,346,695
Florida Street Growth Fund. As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $2,084,419. Transactions in capital stock were as follows: For the period For the period from from August 6, 1997 August 6, 1997 (Commencement of (Commencement of Operations) through Operations) through October 31, 1997 October 31, 1997 Shares Dollars Shares sold 211,885 $2,127,711 Shares redeemed (4,179) (43,292) ------- -------- 207,706 $2,084,419
FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1997 NOTE 5. INVESTMENTS Florida Street Bond Fund. For the period from August 4, 1997 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $9,352,754 and $1,607,791, respectively. The gross unrealized appreciation for all securities totaled $120,593 and the gross unrealized depreciation for all securities totaled $80,534 for a net unrealized appreciation of $40,059. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $7,133,171. Florida Street Growth Fund. For the period from August 6, 1997 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $1,708,252 and $41,963, respectively. The gross unrealized appreciation for all securities totaled $127,420 and the gross unrealized depreciation for all securities totaled $95,092 for a net unrealized appreciation of $32,328. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $2,089,350. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Charles Schwab & Co. owned in aggregate more than 25% of the Funds. FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1997 NOTE 9. RECLASSIFICATIONS In accordance with SOP 93-2, the funds have recorded a reclassification in the capital accounts. As of October 31, 1997 the bond fund recorded permanent book/tax differences of ($97,781) from undistributed net investment income to undistributed realized gain on investments. As of October 31, 1997 the growth fund recorded permanent book/tax differences of ($4,612) from undistributed net realized gain(loss) to undistributed net investment income. This reclassification has no impact on the net asset value of the fund and is designed generally to present undistributed income and realized gains on a tax basis which is considered to be more informative to shareholders. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Florida Street Bond Fund and Florida Street Growth Fund We have audited the statement of assets and liabilities including the portfolio of investments, of the Florida Street Bond Fund and Florida Street Growth Fund (members of the Ameriprime Fund Series) as of October 31, 1997, and the related statement of operations, the statement of changes in net assets, and the financial highlights for each of the periods indicated. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted audit- ing standards. 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. Our procedures included confirmation of securities owned as of October 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting prin ciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Florida Street Bond Fund and Florida Street Growth Fund as of October 31, 1997, the results of its operations, the changes in its net assets, and the financial highlights for each of the periods indicated in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 Dear Fellow Shareholders: Investment Results - Fiscal Year Ended October 1997 The GLOBALT Growth Fund (the "Fund") ended its second October fiscal year with a 27.15% total return for the year. The fund has returned 58.68% (net of fees) since inception December 1, 1995, surpassing a 57.05% gain for the S&P 500 Index during the same time period. The Fund will declare a capital gains distribution on December XX, 1997. Investment results since inception have been as follows: - ------------------------------- --------------------- --------------------- Comparative GLOBALT S&P 500 Investment Returns (a) Growth Fund Index (b) - ------------------------------- --------------------- --------------------- - ------------------------------- ------------------------------------------- Quarter Ending: - ------------------------------- ------------------------------------------- - ------------------------------- --------------------- --------------------- 3/31/96 7.3% 5.4% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 6/30/96 3.0% 4.5% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 9/30/96 4.2% 3.1% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 12/31/96 4.1% 8.3% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 3/31/97 -1.1% 2.7% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 6/30/97 18.9% 17.5% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- 9/30/97 9.1% 7.5% - ------------------------------- --------------------- --------------------- - ------------------------------- --------------------- --------------------- Since Inception (c) 58.7% 57.1% - ------------------------------- --------------------- --------------------- (a) Past performance is not predictive of future performance. (b) The S&P 500 Index is an unmanaged index of 500 selected common stocks, most of which are listed on the New York Stock Exchange. The Index is adjusted for dividends and weighted toward stocks with large market capitalizations. (c) From December 1, 1995.
GLOBALT Growth Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $7,477,758) $ 8,310,562 Receivable for securities sold 106,426 Subscriptions receivable 2,500 Dividends receivable 6,025 Interest receivable 1,979 Reimbursement receivable from advisor 1,335 -------------------- Total assets 8,428,827 Liabilities Payable for investments purchased $ 418,353 Accrued management fee payable 7,465 Other payable and accrued expenses 335 ------------------- Total liabilities 426,153 -------------------- Net Assets 8,002,674 ==================== Net Assets consist of: Paid in capital $ 6,507,953 Accumulated undistributed net investment income 3,398 Accumulated undistributed net realized gain 658,519 Net unrealized appreciation on investments 832,804 -------------------- Net Assets, for 510,876 shares 8,002,674 ==================== Net Asset Value
GLOBALT Growth Fund Statement of Operations for the year ended October 31, 1997 Investment Income Dividend Income $ 56,832 Interest Income 9,489 ------------------- Total Income 66,321 Expenses Management fee $ 62,923 Trustees' fees 1,335 ------------------- Total Expenses before reimbursement 64,258 Reimbursed expenses (1,335) ------------------- Total Expenses 62,923 ------------------- Net Investment Income (Loss) 3,398 ------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities 659,135 Change in net unrealized appreciation (depreciation) on investment securities 524,623 ------------------- Net gain (loss) on investment securities 1,183,758 ------------------- Net increase (decrease) in net assets resulting $ 1,187,156 =================== from operations
GLOBALT Growth Fund December 1, 1995 Statement of Changes in Net Assets (commencement of For the year ended operations) to October 31, October 31,1997 1996 Increase in Net Assets Operations Net investment income $ 3,398 2,033 Net realized gain 659,135 51,568 Change in net unrealized appreciation 524,623 308,181 --------------- ------------------ Net Increase in net assets resulting from operations 1,187,156 361,782 --------------- ------------------ Distributions to shareholders: From net investment income (2,033) - From net realized gain (52,184) - --------------- ------------------ Total Distributions (54,217) Share Transactions Net proceeds from sale of shares 3,528,668 3,056,354 Shares issued in reinvestment 54,217 - Shares redeemed (156,226) (60) --------------- ------------------ Net increase in net assets resulting from share transactions 3,426,659 3,056,294 --------------- ------------------ Total increase in net assets 4,559,598 3,418,076 Net Assets Beginning of period 3,443,076 25,000 --------------- ------------------ End of period [including undistributed net investment income of $3,398 and $2,033, respectively] $ 8,002,674 $ 3,443,076 =============== ==================
GLOBALT Growth Fund December 1, 1995 Statement of Changes in Net Assets (commencement of For the year ended operations) to October 31, October 31,1997 1996 Increase in Net Assets Operations Net investment income $ 3,398 2,033 Net realized gain 659,135 51,568 Change in net unrealized appreciation 524,623 308,181 --------------- ------------------ Net Increase in net assets resulting from operations 1,187,156 361,782 --------------- ------------------ Distributions to shareholders: From net investment income (2,033) - From net realized gain (52,184) - --------------- ------------------ Total Distributions (54,217) Share Transactions Net proceeds from sale of shares 3,528,668 3,056,354 Shares issued in reinvestment 54,217 - Shares redeemed (156,226) (60) --------------- ------------------ Net increase in net assets resulting from share transactions 3,426,659 3,056,294 --------------- ------------------ Total increase in net assets 4,559,598 3,418,076 Net Assets Beginning of period 3,443,076 25,000 --------------- ------------------ End of period [including undistributed net investment income of $3,398 and $2,033, respectively] $ 8,002,674 $ 3,443,076 =============== ==================
GLOBALT Growth Fund December 1, 1995 Financial Highlights For the year ended (commencement of operations) October 31, 1997 to October 31, 1996 Selected Per Share Data Net asset value, beginning of period $12.48 $10.00 --------------- --------------- Income from investment Operations Net investment income 0.01 0.01 Net realized and unrealized gain (loss) 3.34 2.47 --------------- --------------- Total from investment operations 3.35 2.48 --------------- --------------- Less Distributions From net investment income (0.17) 0.00 --------------- --------------- Net asset value, end of period $15.66 $12.48 Total Return 27.15% 27.(a) Ratios and Supplemental Data Net assets, end of period (000) $8,003 $3,443 Ratio of expenses to average net assets 1.17% 1.16%(a) Ratio of expenses to average net assets before reimbursement 1.19% 1.25%(a) Ratio of net investment income to average net assets 0.06% 0.11%(a) Ratio of net investment income to average net assets before reimbursement 0.04% 0.02%(a) Portfolio turnover rate 110.01% 66.42%(a) Average commission rate 0.06147 0.0740
GLOBALT GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 1. ORGANIZATION The GLOBALT Growth Fund Inc. (the "Fund") is organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company whose objective is to provide long term capital growth. The Trust Agreement permits the trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market values of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal instiutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. GLOBALT GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains GLOBALT , Inc. (the "Adviser") to manage the Fund's investments. The Adviser was organized as a Georgia Corporation in 1990. Angela Allen, President of the Adviser, and Samuel Allen, Chairman of the Adviser, are the controlling shareholders of GLOBALT, Inc. The investment decisions for the Fund are made by a committee of the Adviser, which is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage, taxes, interest fees and expenses of non-interested person trustees and extraordinary expenses. The Adviser is voluntarily reimbursing the Fund for trustees fees. There is no assurance that such reimbursement will continue in the future. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.17% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the period from November 1, 1996 through October 31, 1997, the Adviser has received a fee of $62,923 from the Fund. GLOBALT GROWTH FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $6,507,953.
Transactions in capital stock were as follows: For the period from For the period December 1, 1995 from December 1, (Commencement of 1995 (Commencement Operations) through of Operations) For the year ended For the year ended October 31, 1996 through October 31, 1997 October 31, 1997 October 31, 1996 Shares Dollars Shares Dollars Shares sold 241,426 $3,528,668 273,421 $3,056,354 Shares issued in reinvestment of dividends 4,216 54,217 0 0 Shares redeemed (10,682) (156,226) (5) (60) -------- --------- --- ---- 234,960 $3,426,659 273,416 $3,056,294
NOTE 5. INVESTMENTS For the period from November 1, 1996 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $7,641,469 and $5,877,038, respectively. The gross unrealized appreciation for all securities totaled $941,950 and the gross unrealized depreciation for all securities totaled $109,146 for a net unrealized appreciation of $832,804. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $7,477,758. . NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Globalt Growth Fund We have audited the accompanying statement of assets and liabili ties of Globalt Growth Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1997, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the year then ended and for the period from December 1, 1995 (commencement of operations) to October 31, 1996 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. Our procedures included confirmation of investments and cash held by the custodian as of October 31, 1997, by correspondence with the custodian and brokers. 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 Globalt Growth Fund as of October 31, 1997, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the year then ended and for the period from December 1, 1995 (com mencement of operations) to October 31, 1996 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 Dear Fellow Shareholders: Summary The recent stock market correction has left many investors wondering if this historic bull market is coming to an end. Our feelings on the market have not changed. We remain very optimistic about stocks over the long term. However, as October demonstrated, the stock market is not without risk. Our convictions have never been stronger that a large-company, value-oriented approach is both prudent and timely. In our approach, we seek to participate in rising markets and provide our shareholders protection during market downturns. We expect our style to occasionally lag during powerful, momentum-driven "up" markets, knowing that we are providing excellent downside protection and superior risk-adjusted returns over the long term. Though we are diversified in over twenty industries, we are concentrated in the stocks of about thirty companies. Because of our concentrated style, we don't expect to mirror the performance of the market. We expect to have periods of both under-performance and out-performance. Our goal is to provide superior risk-adjusted returns to our shareholders over three and five-year periods, regardless of what the market is doing. The IMS Capital Value Fund was one of only 11 funds selected by SmartMoney magazine as a finalist for their "Best New Mutual Funds" story (273 funds were eligible, August 1997 issue). We missed the final cut of 6 funds because our historical performance was not available on the particular database they chose to use. However, they did make a point to mention that one of the reasons they were so intrigued with our fund was its excellent performance during the 8.5% market correction in the first quarter of this year. In fact, since its inception, on the days when the Dow dropped by 100 points or more, our fund has held up better than the market by a 3-to-2 ratio (as measured by the S & P 500). As of October 31, 1997, the IMS Capital Value had returned 20.6% since its inception (August 5, 1997) and 12.1% over the 12 months. Although we would usually consider these to be excellent returns, they pale by comparison to the returns of the S&P 500 index, 41.4% and 32.1%, respectively. Even though we happen to be looking at a very short period of time and a nearly unprecedented "go-go" market, we can't help but be disappointed that we didn't compare more favorably on the short term. Nothing about our investment approach, which has been very successful in the past, has changed. Some of the fund's largest holdings have simply not participated in the market's huge upswing. Rubbermaid, Waste Management, Fruit of the Loom and RJR Nabisco are all significant holdings in the fund which have made little or no contribution to the fund's performance. These quality, undervalued companies will eventually have their day in the sun, and therefore we view this as a buying opportunity and feel the fund's best relative performance lies in the months and years ahead. The Technology Revolution As value managers, finding an undervalued technology company in today's stock market is not easy. Our challenge is not only to find technology companies that are cheap relative to both historical valuations and their industry, but companies that are also undervalued due to short-term circumstances. Unlike most of the companies in which we invest where there is little doubt about demand for a quality product (i.e. Rubbermaid or Fruit of the Loom) technology companies often see demand for their products drop off overnight due to new products and innovations. We seek to identify undervalued technology companies that will be beneficiaries of change, not victims. Electronic Data Systems (EDS, $37, Yld 1.6%) is the fund's second largest position and an example of a company that exemplifies the above criteria. EDS is a 15-billion-dollar-a-year, international computer consulting firm that stands to win regardless of technology's direction. In fact, the more things change, the more EDS will benefit. EDS recently signed a 10-year, $3 billion deal with one of Australia's largest banks that highlights the types of services they can provide. The Commonwealth Bank of Australia hired EDS to take over its entire information technology department. As was the case with most of EDS's clients, the bank was finding it nearly impossible to keep pace with changing technology. The bank expects the deal to increase its productivity and decrease the risk of falling behind the technology curve. The bank also hopes to hand over responsibility for resolving its Year 2000 conversion issues. It's also noteworthy that the Commonwealth Bank of Australia was so impressed with EDS's future that it invested $175 million to acquire a 35% stake in EDS's Australian subsidiary. Amid all of this opportunity, EDS's stock has fallen from a high of $63 in 1996 to $37 today. The company has disappointed investors lately with lower than expected profits. Profit margins are being squeezed by tough competition. EDS also experienced a drought in 1996 when it failed to win any billion-dollar contracts. The stock is trading near 10-year lows by virtually any valuation measure: price versus sales, cash flow, earnings, and book value. Throw in an unusually high yield for a technology company and the fact that 75% of the analysts following it are negative and what you have is a stock that has been left for dead. We see the current situation quite differently. We see an opportunity to buy the world's largest, globally-diversified computer consulting company at a significant discount. Although the impact has just started to be felt on the bottom line, EDS has taken several steps to turn things around. Management has announced a restructuring plan that will trim up to 9,000 jobs from its 100,000 person work force and is aggressively looking to cut costs in other areas. They are expected to win a minimum of $15 billion in new business in 1997 and turn their focus to more profitable areas such as internet-related projects, work involving the Year 2000 problem and electronic commerce. Keep in mind EDS has historically been a well-run company - management is respected and has a long-term track record of increasing sales, earnings and dividends. We believe that EDS is less risky than the typical technology stock and will reward patient investors over time. Everyone at IMS Capital Management is a shareholder in the fund and a strong believer in the principles of long-term value investing. We thank you for joining us as shareholders as we continue working towards our goal of making the IMS Capital Value Fund one of the most respected and successful value funds in the industry. Carl Marker Doug Johanson Carl W. Marker Douglas E. Johanson, CFA Portfolio Manager Research Analyst IMS Capital Value Fund Portfolio Profile Data as of October 31, 1997 Comparative Valuations
IMS Capital S&P 500 Discount to Value Fund Index S&P 500 Index Price/Sales Ratio 1.1X 1.5X 27% Price/Book Ratio 2.7X 3.7X 27% Price/Earnings Ratio 17.5X 19.6X 11% Price/Cashflow Ratio 10.2X 11.4X 11% Note: The average stock in the Fund is trading 43% below its all-time high vs. the S&P 500 Index which is trading only 7% below its all-time high. *Sources: Donaldson, Lufkin & Jenrette and Bloomberg. Earnings and Cashflow are based on 1997 estimates.
Fund Facts Growth of $10,000 since inception (8/5/96) .......... $12,060 Average Market Cap. ............... $8.7 bil. Number of Holdings ......................... 30 Net Assets ........................... $9,931,949 Share Price ................................... 12.06 Performance Summary (insert graph here) Since Inception Average Annual Returns 12 months 8/5/96 IMS Capital Value Fund 12.1% 16.3% S&P 500 Index 32.1% 32.2% This graph shows the value of a hypothetical initial investment of $10,000 in the Fund and the S&P 500 Index on August 5, 1996, and held through October 31, 1997. The S&P 500 Index is a widely recognized, unmanaged index of common stocks. Performance figures include the change in value of the stocks in the S&P 500 Index and the reinvestment of dividends. The S&P 500 Index returns do not reflect expenses, which have been deducted from the Fund's return. The fund's return represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate, so an investor's shares, when redeemed, may be worth more or less than their original cost. Top Ten Holdings Rubbermaid 7.5% Electronic Data Systems 6.2 Fruit of the Loom 5.0 Chiquita Brands 4.7 American Power Conversion 4.7 Waste Management 4.5 RJR Nabisco 4.5 U.S. West Media Group 4.2 Paging Network 3.7 Olsten 3.7 Top Ten Industries Household Products 10.7% Retail 9.9 Communications 7.9 Computers & Peripherals 7.1 Computer Services 6.2 Healthcare Products 5.6 Apparel 5.0 Food 4.7 Environmental 4.5 Food & Tobacco 4.4 Below is a brief description of each of the holdings in your mutual fund. American Power Conversion world's leading maker of surge protection & uninterruptible power supply systems for computers Bausch & Lomb leading maker of contact lenses, solutions, sunglasses, hearing aids, etc. Chiquita Brands global leader in the marketing and distribution of bananas and other fruits Circus Circus largest gaming and lodging company in the U.S. - owns six major properties in Nevada Cooper Tire manufactures auto and truck tires under several names - produces various rubber products Electronic Data Systems provides information technology services to companies worldwide Fleming largest U.S. wholesale food distributor (delivers food to grocery stores) Fruit of the Loom largest U.S. producer of cotton T-shirts and underwear H & R Block world's largest tax preparation firm - owns 80% of Compuserve (on-line service) Hewlett-Packard leading worldwide producer of printers, fax machines, calculators, PC's , etc. IVAX largest generic drug maker Louisiana-Pacific building materials company - strongest balance sheet in the industry Marvel comic books, trading cards, toys, character licensing (including Incredible Hulk and Spider-Man) NextLevel leading maker of high-end cable, satellite, and telephone equipment Nike makes and designs high quality footwear and apparel Office Depot largest office supply superstore chain in North America Olsten largest U.S. provider of home health-care and third largest temporary help service PacifiCare one of the nation's largest Health Maintenance Organizations (HMO's) Paging Network (a.k.a. PageNet) world's largest provider of paging and wireless messaging services PETsMART world's largest operator of superstores specializing in pet supplies and services RJR Nabisco second largest food and tobacco company in the world - owns 80% of Nabisco Foods. Rubbermaid leading maker of household plastic and rubber products - owns Little Tykes and Graco Sensormatic leading manufacturer of security surveillance systems, tags and sensor labels Shaw Industries largest U.S. carpet manufacturer Singer world's largest manufacturer of sewing machines - focus on emerging markets Sunbeam makes and markets brand name consumer products (housewares, personal care, etc.) Toys "R" Us worldwide retailer of children's products U.S. West Media Group provides cable and wireless communications, and directory and information services Wal-Mart the largest and most profitable discount retailer in the world Waste Management world's largest solid waste collection and disposal company
IMS Capital Value Fund Schedule of Investments - October 31, 1997 Common Stocks - 99.4% Shares Value Hotels & Gaming - 2.9% Circus Circus Enterprises Inc. (a) 13,000 289,250 -------------------- Apparel - 5.0% Fruit of the Loom (a) 19,000 495,188 -------------------- Communications - 7.9% Paging Network Inc. (a) 30,000 371,250 U.S. West Media Group (a) 16,500 416,625 -------------------- -------------------- 787,875 -------------------- Computer Services - 6.2% Electronic Data Systems 16,000 619,000 -------------------- Computers & Peripherals - 7.1% American Power Conversion (a) 17,000 463,250 Hewlett Packard Co. 4,000 246,750 -------------------- 710,000 -------------------- Electronics - 2.6% Sensormatic Electronics Corp. 17,000 253,938 -------------------- Environmental - 4.5% Waste Management Inc. 19,000 444,125 -------------------- Financial Services - 2.3% H & R Block 6,100 225,700 -------------------- Food - 4.7% Chiquita Brands International Inc. 28,000 470,750 -------------------- Food & Tobacco - 4.4% RJR Nabisco Holdings Corp. 14,000 443,625 -------------------- Food Distribution - 2.7% Fleming Companies 16,055 270,928 -------------------- Forest Products - 2.1% Lousiana Pacific Corp. 9,800 205,800 -------------------- Staffing Services - 3.7% Olsten Corp. 24,000 366,000 -------------------- IMS Capital Value Fund Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Healthcare Products - 5.6% Shares Value Bausch & Lomb 8,250 323,813 IVAX Corp. (a) 30,000 226,875 -------------------- 550,688 Home Furnishings - 2.8% Shaw Industries, Inc. 23,000 278,875 -------------------- Hospital & Healthcare - 3.5% PacifiCare Health Systems, Inc. (Class A) (a) 5,500 349,938 -------------------- Household Products - 10.7% Sunbeam Corp. 7,000 317,188 Rubbermaid Inc. 31,000 745,938 -------------------- -------------------- 1,063,126 -------------------- Manufacturing - 2.2% Singer Co. 16,300 221,068 -------------------- Publishing - 1.8% Marvel Entertainment (a) 100,000 181,250 -------------------- Retail - 9.9% PETsMART, Inc. (a) 28,000 213,500 Office Depot Inc. (a) 15,000 309,374 Toys R Us (a) 7,000 238,437 Wal-Mart Stores (a) 6,220 218,477 -------------------- -------------------- 979,788 -------------------- Communications Equipment- 1.8% Nextlevel Systems Inc. (a) 13,000 175,500 -------------------- Shoes - 3.1% Nike Inc. (Class B) 6,500 305,500 -------------------- Tire & Rubber - 1.9% Cooper Tire & Rubber Corp. 8,650 183,272 -------------------- TOTAL COMMON STOCKS (Cost $9,671,641) 9,871,184 Money Market Securities - 1.3% Principal Amount Star Treasury 4.61%, 10/31/97 $129,478 $129,478 -------------------- Total Bonds & Notes (Cost $129,478) TOTAL INVESTMENTS - 100.7% (Cost $9,801,119) $10,000,662 -------------------- Other liabilities less assets - 0.7% ($68,713) -------------------- ==================== TOTAL NET ASSETS - 100% 9,931,949 ====================
IMS Capital Value Fund Statement of Assets & Liabilities October 31, 1997 Assets Investment in securities, at value (cost $9,801,119) $ 10,000,662 Subscriptions receivable 91,880 Interest receivable 449 Deferred Organizational Costs 22,552 ---------------------- Total assets 10,115,543 Liabilities Redemptions payable 88,663 Payable for investments purchased 77,105 Accrued advisory fee payable 14,338 Other payables and accrued expenses 3,488 ------------------- Total liabilities 183,594 ---------------------- Net Assets $ 9,931,949 ====================== Net Assets consist of: Paid in capital $ 9,121,740 Accumulated undistributed net realized gain 610,666 Net unrealized appreciation on investments 199,543 ---------------------- Net Assets, for 823,766 shares $ 9,931,949 ====================== Net Asset Value Net Assets Offering price and redemption price per share ($9931,949/823,766) $ 12.06 ======================
IMS Capital Value Fund Statement of Operations for the year ended October 31, 1997 Investment Income Dividend Income $ 92,735 Interest Income 9,514 --------------------- Total Income 102,249 Expenses Investment advisory fee $ 108,433 Administration fee 30,000 Transfer agent fee 12,708 Fund accounting fee 11,700 Custodian fee 7,688 Audit fees 7,574 Legal fees 5,188 Registration fees 7,387 Shareholder reports 355 Trustees fees 150 Miscellaneous 3,332 --------------------- Total operating expenses before reimbursement 194,515 Reimbursed expenses (43,422) --------------------- Total operating expenses 151,093 --------------------- Net Investment Income (Loss) (48,844) --------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities 672,917 Change in net unrealized appreciation (depreciation) on on investment securities (44,863) --------------------- Net gain (loss) on investment securities 628,054 --------------------- Net increase (decrease) in net assets resulting from operations $ 579,210 =====================
IMS Capital Value Fund August 5, 1996 Financial Highlights For the year (commencement of ended October 31, operations) to October 31, Selected Per Share Data 1997 1996 Net asset value, begining of period $10.76 $10.00 ----------------- ---------------- Income from investment operations Net investment income (0.08) (0.01) Net realized and unrealized gain (loss) 1.38 0.77 ----------------- ---------------- Total from investment operations 1.30 0.76 ================= ================ Less Distributions From net interest income 0.00 0.00 ----------------- ---------------- Net asset value, end of period $12.06 $10.76 ================= ================ Total Return 12.08% 30.23%(a) Ratios and Supplemental Data Net assets, end of period (000) $9,932 $4,741 Ratio of expenses to average net assets 2.54% 1.84%(a) Ratio of expenses to average net assets before reimbursement 1.97% 3.92%(a) Ratio of net investment income to average net assets (0.64%) (0.25)%(a) Ratio of net investment income to average net assets before reimbursement 1.20% (2.32)%(a) Portfolio turnover rate 34.76% 3.56% Average commission rate 0.0439 0.0416 (a) Annualized
IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 1. ORGANIZATION The IMS Capital Value Fund. (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on July 30, 1996 and commenced operations on August 5, 1996. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The investment objective of the fund is to provide long-term growth to its shareholders a value oriented contrarian philosophy by investing in large high quality dividend paying U.S. companies. The Trust Agreement permits the trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market values of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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.Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains IMS Capital Management, Inc. (the "Adviser") to manage the Fund's investments. Carl W. Marker, Chairman and President of the Adviser, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees. As compensation for its management services the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.59% of the average daily net assets of the Fund. For the period from November 1, 1996 through October 31, 1997, the Adviser has received a fee of $108,433 from the Fund. The Adviser is voluntarily reimbursing certain Fund expenses. There is no assurance that such reimbursement will continue in the future. IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $9,121,740. Transactions in capital stock were as follows:
For the period from For the period August 1, 1996 from August 1, (Commencement of 1996 (Commencement Operations) through of Operations) For the six month For the six month October 31, 1996 through period ended period ended October 31, 1996 October 31, 1997 October 31, 1997 Shares Dollars Shares Dollars Shares sold 426,253 $5,141,834 441,933 $4,524,858 Shares issued in reinvestment of dividends 0 0 0 0 Shares redeemed (43,144) (529,761) (1,276) (13,500) -------- --------- ------- -------- 383,109 $5,612,073 440,657 $4,511,358
NOTE 5. INVESTMENTS For the period from November 1, 1996 through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $7,446,766 and $2,669,357, respectively. The gross unrealized appreciation for all securities totaled $1,021,809 and the gross unrealized depreciation for all securities totaled $822,266 for a net unrealized appreciation of $199,543. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $9,801,119. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 7. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1997 the fund recorded permanent book/tax differences of ($48,844) from undistributed net investment income to undistributed realized gain on investments. This reclassification has no impact on the net asset value of the fund and is designed generally to present undistributed income and realized gains on a tax basis which is considered to be more informative to shareholders. Dear Fellow Shareholders: Summary The recent stock market correction has left many investors wondering if this historic bull market is coming to an end. Our feelings on the market have not changed. We remain very optimistic about stocks over the long term. However, as October demonstrated, the stock market is not without risk. Our convictions have never been stronger that a large-company, value-oriented approach is both prudent and timely. In our approach, we seek to participate in rising markets and provide our shareholders protection during market downturns. We expect our style to occasionally lag during powerful, momentum-driven "up" markets, knowing that we are providing excellent downside protection and superior risk-adjusted returns over the long term. Though we are diversified in over twenty industries, we are concentrated in the stocks of about thirty companies. Because of our concentrated style, we don't expect to mirror the performance of the market. We expect to have periods of both under-performance and out-performance. Our goal is to provide superior risk-adjusted returns to our shareholders over three and five-year periods, regardless of what the market is doing. The IMS Capital Value Fund was one of only 11 funds selected by SmartMoney magazine as a finalist for their "Best New Mutual Funds" story (273 funds were eligible, August 1997 issue). We missed the final cut of 6 funds because our historical performance was not available on the particular database they chose to use. However, they did make a point to mention that one of the reasons they were so intrigued with our fund was its excellent performance during the 8.5% market correction in the first quarter of this year. In fact, since its inception, on the days when the Dow dropped by 100 points or more, our fund has held up better than the market by a 3-to-2 ratio (as measured by the S & P 500). As of October 31, 1997, the IMS Capital Value had returned 20.6% since its inception (August 5, 1997) and 12.1% over the 12 months. Although we would usually consider these to be excellent returns, they pale by comparison to the returns of the S&P 500 index, 41.4% and 32.1%, respectively. Even though we happen to be looking at a very short period of time and a nearly unprecedented "go-go" market, we can't help but be disappointed that we didn't compare more favorably on the short term. Nothing about our investment approach, which has been very successful in the past, has changed. Some of the fund's largest holdings have simply not participated in the market's huge upswing. Rubbermaid, Waste Management, Fruit of the Loom and RJR Nabisco are all significant holdings in the fund which have made little or no contribution to the fund's performance. These quality, undervalued companies will eventually have their day in the sun, and therefore we view this as a buying opportunity and feel the fund's best relative performance lies in the months and years ahead. The Technology Revolution As value managers, finding an undervalued technology company in today's stock market is not easy. Our challenge is not only to find technology companies that are cheap relative to both historical valuations and their industry, but companies that are also undervalued due to short-term circumstances. Unlike most of the companies in which we invest where there is little doubt about demand for a quality product (i.e. Rubbermaid or Fruit of the Loom) technology companies often see demand for their products drop off overnight due to new products and innovations. We seek to identify undervalued technology companies that will be beneficiaries of change, not victims. Electronic Data Systems (EDS, $37, Yld 1.6%) is the fund's second largest position and an example of a company that exemplifies the above criteria. EDS is a 15-billion-dollar-a-year, international computer consulting firm that stands to win regardless of technology's direction. In fact, the more things change, the more EDS will benefit. EDS recently signed a 10-year, $3 billion deal with one of Australia's largest banks that highlights the types of services they can provide. The Commonwealth Bank of Australia hired EDS to take over its entire information technology department. As was the case with most of EDS's clients, the bank was finding it nearly impossible to keep pace with changing technology. The bank expects the deal to increase its productivity and decrease the risk of falling behind the technology curve. The bank also hopes to hand over responsibility for resolving its Year 2000 conversion issues. It's also noteworthy that the Commonwealth Bank of Australia was so impressed with EDS's future that it invested $175 million to acquire a 35% stake in EDS's Australian subsidiary. Amid all of this opportunity, EDS's stock has fallen from a high of $63 in 1996 to $37 today. The company has disappointed investors lately with lower than expected profits. Profit margins are being squeezed by tough competition. EDS also experienced a drought in 1996 when it failed to win any billion-dollar contracts. The stock is trading near 10-year lows by virtually any valuation measure: price versus sales, cash flow, earnings, and book value. Throw in an unusually high yield for a technology company and the fact that 75% of the analysts following it are negative and what you have is a stock that has been left for dead. We see the current situation quite differently. We see an opportunity to buy the world's largest, globally-diversified computer consulting company at a significant discount. Although the impact has just started to be felt on the bottom line, EDS has taken several steps to turn things around. Management has announced a restructuring plan that will trim up to 9,000 jobs from its 100,000 person work force and is aggressively looking to cut costs in other areas. They are expected to win a minimum of $15 billion in new business in 1997 and turn their focus to more profitable areas such as internet-related projects, work involving the Year 2000 problem and electronic commerce. Keep in mind EDS has historically been a well-run company - management is respected and has a long-term track record of increasing sales, earnings and dividends. We believe that EDS is less risky than the typical technology stock and will reward patient investors over time. Everyone at IMS Capital Management is a shareholder in the fund and a strong believer in the principles of long-term value investing. We thank you for joining us as shareholders as we continue working towards our goal of making the IMS Capital Value Fund one of the most respected and successful value funds in the industry. Carl Marker Doug Johanson Carl W. Marker Douglas E. Johanson, CFA Portfolio Manager Research Analyst IMS Capital Value Fund Portfolio Profile Data as of October 31, 1997 Comparative Valuations
IMS Capital S&P 500 Discount to Value Fund Index S&P 500 Index Price/Sales Ratio 1.1X 1.5X 27% Price/Book Ratio 2.7X 3.7X 27% Price/Earnings Ratio 17.5X 19.6X 11% Price/Cashflow Ratio 10.2X 11.4X 11% Note: The average stock in the Fund is trading 43% below its all-time high vs. the S&P 500 Index which is trading only 7% below its all-time high. *Sources: Donaldson, Lufkin & Jenrette and Bloomberg. Earnings and Cashflow are based on 1997 estimates.
Fund Facts Growth of $10,000 since inception (8/5/96) .......... $12,060 Average Market Cap. ............... $8.7 bil. Number of Holdings ......................... 30 Net Assets ........................... $9,931,949 Share Price ................................... 12.06 Performance Summary (insert graph here) Since Inception Average Annual Returns 12 months 8/5/96 IMS Capital Value Fund 12.1% 16.3% S&P 500 Index 32.1% 32.2% This graph shows the value of a hypothetical initial investment of $10,000 in the Fund and the S&P 500 Index on August 5, 1996, and held through October 31, 1997. The S&P 500 Index is a widely recognized, unmanaged index of common stocks. Performance figures include the change in value of the stocks in the S&P 500 Index and the reinvestment of dividends. The S&P 500 Index returns do not reflect expenses, which have been deducted from the Fund's return. The fund's return represents past performance and is not a guarantee of future results. The investment return and principal value of an investment will fluctuate, so an investor's shares, when redeemed, may be worth more or less than their original cost. Top Ten Holdings Rubbermaid 7.5% Electronic Data Systems 6.2 Fruit of the Loom 5.0 Chiquita Brands 4.7 American Power Conversion 4.7 Waste Management 4.5 RJR Nabisco 4.5 U.S. West Media Group 4.2 Paging Network 3.7 Olsten 3.7 Top Ten Industries Household Products 10.7% Retail 9.9 Communications 7.9 Computers & Peripherals 7.1 Computer Services 6.2 Healthcare Products 5.6 Apparel 5.0 Food 4.7 Environmental 4.5 Food & Tobacco 4.4 Below is a brief description of each of the holdings in your mutual fund. American Power Conversion world's leading maker of surge protection & uninterruptible power supply systems for computers Bausch & Lomb leading maker of contact lenses, solutions, sunglasses, hearing aids, etc. Chiquita Brands global leader in the marketing and distribution of bananas and other fruits Circus Circus largest gaming and lodging company in the U.S. - owns six major properties in Nevada Cooper Tire manufactures auto and truck tires under several names - produces various rubber products Electronic Data Systems provides information technology services to companies worldwide Fleming largest U.S. wholesale food distributor (delivers food to grocery stores) Fruit of the Loom largest U.S. producer of cotton T-shirts and underwear H & R Block world's largest tax preparation firm - owns 80% of Compuserve (on-line service) Hewlett-Packard leading worldwide producer of printers, fax machines, calculators, PC's , etc. IVAX largest generic drug maker Louisiana-Pacific building materials company - strongest balance sheet in the industry Marvel comic books, trading cards, toys, character licensing (including Incredible Hulk and Spider-Man) NextLevel leading maker of high-end cable, satellite, and telephone equipment Nike makes and designs high quality footwear and apparel Office Depot largest office supply superstore chain in North America Olsten largest U.S. provider of home health-care and third largest temporary help service PacifiCare one of the nation's largest Health Maintenance Organizations (HMO's) Paging Network (a.k.a. PageNet) world's largest provider of paging and wireless messaging services PETsMART world's largest operator of superstores specializing in pet supplies and services RJR Nabisco second largest food and tobacco company in the world - owns 80% of Nabisco Foods. Rubbermaid leading maker of household plastic and rubber products - owns Little Tykes and Graco Sensormatic leading manufacturer of security surveillance systems, tags and sensor labels Shaw Industries largest U.S. carpet manufacturer Singer world's largest manufacturer of sewing machines - focus on emerging markets Sunbeam makes and markets brand name consumer products (housewares, personal care, etc.) Toys "R" Us worldwide retailer of children's products U.S. West Media Group provides cable and wireless communications, and directory and information services Wal-Mart the largest and most profitable discount retailer in the world Waste Management world's largest solid waste collection and disposal company INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees IMS Capital Value Fund We have audited the accompanying statement of assets and liabili ties of IMS Capital Value Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1997, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the year then ended and for the period from August 5, 1995 (commencement of operations) to October 31, 1996 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. Our procedures included confirmation of investments and cash held by the custodian as of October 31, 1997, by correspondence with the custodian and brokers. 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 IMS Capital Value Fund as of October 31, 1997, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the year then ended and for the period from August 5, 1995 (com mencement of operations) to October 31, 1996 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 Dear Fellow Shareholders: The Fountainhead Special Value Fund ended its first fiscal year with outstanding results. We are pleased to say that the Fund returned a cumulative return of 33.7%and an annualized return of 40.09% between December 31, 1996 and October 31, 1997. This compares quite favorably to the S&P 500, the S&P 400 MidCap, and the Russell 2000, which returned 25.3%, 25.4%, and 20.9% respectively over the same time period. Chart The Fund encountered much market turbulence over its first ten months of operation. However, as the chart demonstrates, we weathered the storms quite well. Our outstanding performance was driven primarily by our financial holdings (TR Financial, 88%; Eaton Vance, 65%; First Palm Beach Bancorp, 60%; American National Bancorp, 55%; Dime Bancorp, 42%; and Coast Savings Financial, 38%) and healthcare stocks (Healthsource, 72%; Watson Pharmaceutical, 69%; Sun Healthcare Group, 68%; Mariner Health Group, 65%; DVI, 51%; TheraTx, 49%; and Horizon/CMS Healthcare, 35%). In addition, many special-situation stocks (Mitcham Industries, 237%; AirTouch Communications, 54%; General Nutrition Companies, 52%; Rainforest Cafe, 46%; Policy Management Systems, 41%; and Intuit, 41%) significantly aided results. Overall, seventeen of the Fund's stocks appreciated more than forty percent over the ten-month period. After strong outperformance for the last four years, there is evidence that the tide is turning from large-cap leadership. When leadership changes occur, cycles of underperformance or outperformance tend to last for prolonged periods. If indeed mid- and small-cap stocks are taking the lead, we believe we are well positioned to capitalize on this cycle. JKA's investment style We are a bottom-up value manager which adheres to what we call the Business Valuation Approach. This highly-disciplined approach seeks to identify attractive investment opportunities using a broad definition of value, uncovering securities often overlooked by other investors. We believe value can be found in different types of securities at different points in the economic cycle. This approach has served our clients well for many years in many different economic environments. Our buy criteria consist of three elements. Essentially, we will buy a stock that trades at a discount to its five-year projected earnings growth rate, its seven-year historical valuation based on its price-to-earnings, price/book, price/cash flow, or price/sales ratios, or its private-market value. Growth at a reduced price Unlike many typical value managers who practice only a Graham and Dodd approach (buying only low P/E or price/book stocks), our buy criteria does allow us to purchase growth stocks, but at a reasonable price. Earnings growth is certainly a positive attribute of a company, but an attribute for which investors often pay too much. However, if purchased at a value price, a growth stock can be an excellent investment. One criterion we examine when purchasing a stock is whether it is trading at a discount to its growth rate of earnings or cash flow. For example, in April we purchased Watson Pharmaceutical, a specialty generic-drug company trading at 14x 1997 earnings estimates, yet growing its earnings at 25% annually. The company, which operates in a unique market niche, has a solid balance sheet (no long-term debt and ample cash), a high percentage of insider ownership, and a stable drug pipeline. Through the end of October, the stock had appreciated 69% for our shareholders. A second example is Mitcham Industries, our biggest winner in our first fiscal year, appreciating 237% since March. When we met with Mitcham's management in early 1997, the stock was relatively unknown to Wall Street. The company, the largest lessor of seismic equipment to the oil and gas industry, appears perfectly positioned to take advantage of the developing boom in oilfield services. During the first six months of 1997, revenues rose 279% while net income rose 234%. As a result, the stock price rose from our purchase price of $7.50 to $26.13 on October 31. Historical valuation Another criterion when purchasing a stock is whether it trades at a discount to its historical valuation on either a price-to-earnings, cash flow, book, or sales basis--a measurement rarely applied today because of the run-up in financial assets over the last several years. Today, even when most stocks decline in price, they rarely trade at a discount to their historical valuation parameters. One exception, however, is Sun Healthcare Group. Sun, a long-term healthcare provider which furnishes ancillary services for the healthcare industry in the United States and the United Kingdom, was one of the first stocks we bought for the Fund. When purchased, the stock traded at 9x 1997 earnings estimates. On a historical basis, Sun had an average low price-to-earnings ratio of 21.3x and an average high price-to-earnings ratio of 44.2x. If Sun, whose fundamentals were improving, approached the lower level of its average P/E range, it would trade at $30 per share. As of October 31, the stock was $21.63 and had appreciated 68% from our purchase price. Private-market value Finally, what makes us (if not unique) certainly one of a distinctive minority is our emphasis on private-market value. Essentially, a company's private-market value is the amount an individual or institution would be willing to pay for an entire publicly traded company. The target price takes into account characteristics such as a company's cash flow, assets, management team, and goodwill, plus the assumption of debt (if any). In addition, a premium is usually paid to take sole control of a company. Our focus on this type of analysis over the past seventeen years has successfully identified undervalued companies for our managed accounts, and now we are exploiting its strengths for the benefit of the Fountainhead Special Value Fund, as evidenced by the five takeovers from inception through the end of October. We buy a stock when its perceived value (the price at which the market values it) is at a significant discount to its private-market value; the wider the gap, the better. Quite simply, we try to buy $1.00 for fifty cents. This spread can be closed through price appreciation arising from many factors, including a takeover, a restructuring, a spin-off to shareholders, or other catalysts. Often the Board of Directors will seek to "create or enhance shareholder value" because they recognize that the public-market price does not reflect the company's private-market value, and they may be motivated by the fact that if they do not enhance shareholder value, someone else will. Even Wall Street may eventually recognize a company's hidden value vis-a-vis its stock price, but the Street (which gravitates toward the safe and comfortable and which has very short-term time horizons) displays a general unwillingness to dedicate significant resources to private-market value. By exploiting inefficient segments of the market--what we often refer to as the "unwanted and unloved"--we can buy low and sell high most of the time. As mentioned, Fountainhead had five takeovers during its first fiscal year; Healthsource, a small HMO, was purchased in February and bought by Cigna later that month. Over the two-month holding period, we realized a 72% return. Coast Savings Financial, a California thrift, entered into a definitive agreement to be acquired by H. F. Ahmanson in September. Over our six-month holding period, we experienced a 38% return. TheraTx was purchased by Vencor, producing a 30% return; Horizon Health, bought by Healthsouth, generated a 24% return; and finally, American National Bancorp was acquired by Crestar Financial, appreciating 55% for the fund. One of the salutary benefits of focusing on the value of a business (as opposed to trying to outguess Wall Street) arises from the inevitable swings in stock prices which create opportunity. Far from dreading volatility, the Business Valuation Approach welcomes it. If someone in a state of panic and fear is willing to part with some stock at a bargain price, we will gladly oblige, and if we have the conviction to wait until the market price catches up to the private-market value, we can better resist the temptation to sell. Further, when someone is willing to pay a fair (or premium) price, we will be happy to sell. We have often said that our clients own pieces of businesses, not "the market." In today's environment, in which stocks and bonds have become commoditized and are used as vehicles for speculation in the short run, it is easy to fall prey to the urge to "do something." We think it is impossible to time the market; we know of no one who has made a fortune doing so consistently. On the other hand, the patient investor can do quite well over long periods of time by buying a piece of a business at an opportunistic price. Outlook Our long-term outlook for financial assets remains cautiously optimistic against a background of favorable long-term economic and demographic developments. On occasion we will experience setbacks, such as the sell-off in late October and early November. The financial turmoil in Asia and Latin America and the political and military tension in the Middle East have accentuated market volatility. Future periods will give rise to other sources of investor angst or joy accompanied by emotional selling and buying. In such periods, value-based, selective stock purchases and sales should serve the Fund well. However, it is important to remember that stocks have had a tremendous run over the last two years, and that above-average returns such as we have seen over the past couple of years cannot be sustained. General market returns should eventually revert to the long-term mean (around 10%). We, of course, will strive to beat the average. We appreciate the confidence and trust of our shareholders, and we welcome inquiries from prospective investors. We look forward to many rewarding years with you as a shareholder. Sincerely, Roger E. King Chairman and President
Fountainhead Special Value Fund Schedule of Investments - October 31, 1997 Common Stocks - 98.6% Shares Value Banks and Bank Holding Companies - 6.0% Banc One Corp. 800 41,700 Riggs National Corp. 5,100 117,300 ------------------ 159,000 ------------------ Communications - 11.4% 360 Communications (a) 5,600 118,300 AirTouch Communications (a) 1,200 46,350 Clearnet Communications Inc. (a) 4,100 65,088 Southern New England Telecommunications Corp. 1,600 68,600 ------------------ 298,338 ------------------ Computer Services & Software - 3.7% Intuit Inc. (a) 1,500 48,938 Policy Management Systems Corp. (a) 800 49,000 ------------------ 97,938 ------------------ Drugs - 2.9% Watson Phamaceuticals (a) 2,400 76,200 ------------------ Financial Services - 6.4% Eaton Vance Corp. 1,200 43,350 Lehman Brothers Holdings 1,300 61,181 United Companies Financial 2,500 63,281 ------------------ 167,812 ------------------ Healthcare & Healthcare Services - 18.3% Capital Senior Living Corp. (a) 16,500 276,375 Living Centers of America (a) 1,600 64,500 Mid-Atlantic Medical Services Inc. (a) 4,000 58,250 St. Jude Medical Inc. (a) 2,700 81,844 ------------------ ------------------ 480,969 ------------------ Insurance - 3.1% Amerin Corp. (a) 3,500 80,063 ------------------ Media & Leisure - 9.8% Comcast United Kingdom Cable/ADR (a) 11,000 125,125 Lynch Corp. (a) 600 52,200 Media General Class A 300 12,225 US WEST Media Group, Inc. 1,600 40,400 Young Broadcasting Inc. (a) 800 29,000 ------------------ 258,950 ------------------ Fountainhead Special Value Fund - continued Schedule of Investments - October 31, 1997 - continued Common Stocks - continued Oil & Gas Services- 4.2% Shares Value Mitcham Industries (a) 1,500 $ 39,187 - Seitel Inc. (a) 1,000 47,125 Transcoastal Marine (a) 1,000 24,875 ------------------ ------------------ 111,187 ------------------ REIT - 6.3% Imperial Credit Commercial Mortgage Investment Corp. 10,000 165,000 ------------------ Restaurants - 2.2% Rainforest Cafe (a) 1,700 58,012 ------------------ Retail - 2.6% Pep Boys - Manny Moe & Jack 2,800 70,525 ------------------ Thrifts, Savings & Loans - 21.7% Bank United Financial (a) 13,000 170,625 Coast Savings Financial Inc. (a) 1,300 76,293 Dime Bancorp 1,900 45,600 First Palm Beach Bank Corp. 900 34,650 ITLA Capital Corp. (a) 1,600 32,000 Long Island Bancorp 2,400 106,800 St. Paul Bancorp 3,500 84,000 T R Financial Corp. 600 19,650 ------------------ ------------------ 569,618 ------------------ TOTAL COMMON STOCKS (Cost $2,228,623) 2,593,612 ------------------ Money Market Securities - 5.7% Star Treasury, 5.37%, 10/31/97 (Cost $150,144) 150,144 ------------------ TOTAL INVESTMENTS - 104.3% (Cost $2,378,767) 2,743,756 Liabilities less other assets (0.3%) (114,555) ------------------ Total Net Assets $ 2,629,201 ================== Legend (a) non-income producing
Fountainhead Special Value Fund October 31, 1997 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $2,378,767) $ 2,743,756 Receivable for securities sold 228,335 Subscriptions receivable 25,410 Dividends receivable 369 Interest receivable 618 -------------------- Total assets 2,998,488 Liabilities Payable for investments purchased 366,125 Accrued investment advisory fee payable 1,285 Other payables and accrued expenses $ 1,877 ------------------- Total liabilities 369,287 -------------------- Net Assets $ 2,629,201 ==================== Net Assets consist of: Paid in capital $ 2,246,487 Accumulated undistributed net realized gain 17,725 Net unrealized appreciation on investments 364,989 -------------------- Net Assets, for 196,962 shares $ 2,629,201 ==================== Net Asset Value
Fountainhead Special Value Fund Statement of Operations for the period December 31, 1996 (Commencement of Operations) to October 31, 1997 Investment Income Dividend Income $ 4,637 Interest Income 3,015 ------------------- Total Income 7,652 Expenses Investment advisory fee $ 6,173 Administration fees 27,500 Transfer agent fees 11,898 Pricing & bookkeeping fees 8,800 Legal fees 7,919 Custodian fees 4,846 Audit fees 4,570 Registration fees 2,795 Shareholder reports 2,141 Trustees' fees 170 Miscellaneous 1,651 ------------------- Tota operating expenses before reimbursement 78,463 Reimbursed expenses (69,267) ------------------- Total operating expenses 9,196 ------------------- Net Investment Income (1,544) ------------------- Realized & Unrealized Gain (Loss) Net realized gain on investment securities 19,269 Change in net unrealized appreciation on investment securities 364,989 ------------------- Net gain (loss) on investment transactions 384,258 ------------------- Net increase in net assets resulting from operations $ 382,714 ===================
Fountainhead Special Value Fund Statement of Changes in Net Assets For the period December 31, 1996 (Commencement of Operations) to October 31, 1997 Increase/(Decrease) in Net Assets Operations Net investment (loss) $ (1,544) Net realized gain 19,269 Change in net unrealized appreciation 364,989 --------------- Net Increase in net assets resulting from operations 382,714 --------------- Distributions to shareholders: From net investment income - --------------- Share Transactions Net proceeds from sale of shares 2,274,079 Shares issued in reinvestment - Shares redeemed (27,592) --------------- Net increase in net assets resulting from share transactions 2,246,487 --------------- Total increase in net assets 2,629,201 Net Assets Beginning of period - --------------- End of period [including undistributed net investment loss of ($1,544)] $ 2,629,201 ===============
Fountainhead Special Value Fund Financial Highlights for the period December 31, 1996 (Commencement of Operations) to October 31, 1997 Selected Per Share Data Net asset value, beginning of period $10.00 ------------ Income from investment Operations Net investment income (0.02) Net realized and unrealized gain (loss) 3.37 ------------ Total from investment operations 3.35 ------------ Less Distributions From net interest income - ------------ Net asset value, end of period $13.35 ============ Total Return 40.09%(a) Ratios and Supplemental Data Net assets, end of period (000) $2,629 Ratio of expenses to average net assets 0.97(a) Ratio of expenses to average net assets before reimbursement 8.25%(a) Ratio of net investment income to average net assets (0.16)(a)% Ratio of net investment income to average net assets before reimbursement (7.45)(a)% Portfolio turnover rate 130.63(a) Average commissions paid 0.0637 (a) Annualized
FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 1. ORGANIZATION The Fountainhead Special Value Fund. (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on October 20, 1995 and commenced operations on December 31, 1996. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Funds investment objective is to provide long term capital growth. The Trust Agreement permits the trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market values of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Jenswold, King & Associates Inc. (the "Adviser") to manage the Fund's investments. Roger King, President of the Adviser, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees. As compensation for its management services the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.43% of the average daily net assets of the Fund. For the period from December 31, 1996 through October 31, 1997, the Adviser has received a fee of $6,173 from the Fund. The Adviser is voluntarily reimbursing certain Fund expenses. There is no assurance that such reimbursement will continue in the future. FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $2,246,487. Transactions in capital stock were as follows:
For the period from December 31, 1996 (Commencement of Operations) through October 31, 1997 Shares Amount --------- ---------- Shares sold 199,337 $2,274,079 Shares issued in reinvestment of dividends 0 0 Shares redeemed (2,375) (27,592) ----------- -------------- Net increase 196,962 $2,246,487 ====== ========
FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 5. INVESTMENTS For the period from December 31, 1996 (commencement of operations) through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $3,472,399 and $1,263,025, respectively. The gross unrealized appreciation for all securities totaled $373,561 and the gross unrealized depreciation for all securities totaled $8,572 for a net unrealized appreciation of $364,989. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $2,378,767. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Roger E. King (President of the Advisor) owns more than 25% of the fund. NOTE 8. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1997 the fund recorded permanent book/tax differences of ($1,544) from undistributed net investment income to undistributed realized gain on investments. This reclassification has no impact on the net asset value of the fund and is designed generally to present undistributed income and realized gains on a tax basis which is considered to be more informative to shareholders. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Fountainhead Special Value Fund We have audited the statement of assets and liabilities including the portfolio of investments, of the Fountainhead Special Value Fund (a member of the Ameriprime Fund Series) as of October 31, 1997, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the period from December 31, 1996 (commencement of operations) to October 31, 1997. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted audit- ing standards. 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. Our procedures included confirmation of securities owned as of October 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting prin ciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Fountainhead Special Value Fund as of October 31, 1997, the results of its operations, the changes in its net assets, and the financial highlights for the period from December 31, 1996 (commencement of operations) to October 31, 1997 in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 PORTFOLIO MANAGER'S LETTER December 10, 1997 Dear Fellow Shareholder: The past twelve months have been difficult for the sectors of the investment marketplace in which your Fund invests. For the twelve months ended October 31, 1997, the value of an investment in the Fund has fallen by (4.9%). This compares to a comparative benchmark index return of 6.5% (60% Standard &: Poor's Midcap 400 and 40% Philadelphia Gold and Silver Index). Past performance is not predictive of future success. A significant portion of the Fund is allocated to stocks of companies involved in natural resources and precious metals. As you have probably read and heard recently gold bullion prices have fallen to levels not seen for more than fifteen years. Not surprisingly, the share prices of precious metals companies have fallen substantially in response. While we are disappointed in the short term with these results on an absolute basis, the Fund's losses were much less than those reported by many other funds investing similarly. One achievement for the Fund this year occurred in August, when it ranked as the best performing stock fund in the United States and your portfolio manager appeared on CNBC television to discuss those results. We are hopeful that that brief success may be repeated on a much more meaningful time frame in the future. Listed below are the top holdings of the Fund. Crystallex International 14.5% Nevsun Resources 11.5% Banro Resource Corp. 6.5% SunAmerica, Inc. 5.3% Kaydon Corp. 5.0% As you can see, Crystallex International is the largest holding of the Fund. A world class gold and copper deposit which is also the largest in Venezuela is located on land titled to Crystallex. The property is the subject of a title dispute with Placer Dome Gold. The dispute is currently before the Supreme Court of Venezuela, and a decision is expected in early 1998. We believe that the decision will be rendered in Crystallex's favor. The property holds between 11.8 million and 24 million ozs. of gold and substantial quantities of other metals. Should the decision favor Crystallex, we expect to see a substantial rise in its share price. Our only reservation at this time is with respect to the very unfavorable sentiment toward gold bullion currently. We believe that an investment today in precious metals stocks will be richly rewarded in the future. The only question is how far in the future. We would not be surprised to see gold bullion prices fall to $250.00 per oz. before an eventual rise. At these prices, gold is not mined profitably by most companies and, therefore, mines are being shut down until more favorable pricing is realized. According to the CEO of Homestake Mining, demand for gold has outstripped supply for the past three years with the shortfall being made up by central bank selling of reserves. Eventually, such selling by central banks will cease, and the normal effects of supply and demand will prevail again. In addition, small and middle size companies - two areas that we favor with the Fund, have been under-performing the larger blue chip companies. We continue to invest in companies which we believe are undervalued and have strong prospects for the future. More and more lately, though, companies are beginning to report earnings disappointments. The currency woes of Asia are beginning to filter into U.S. companies earnings reports. We expect these challenges to continue for the next six to twelve months. The last twelve months have been challenging. We remain committed to focusing on fundamentals and pledge to strive for results in the future with which you may be proud. Your Fund invests aggressively and accordingly has the opportunity to quickly participate in a market more favorable to the areas in which it invests. We look forward to reporting better success for you next year at this time. Sincerely, Kenneth M. Holeski Portfolio Manager Comparison of the Change in Value of $10,000 Investment in NewCap Contrarian Fund, the Unmanaged S&P 400 Midcap Index, the Philadelphia Gold & Silver Index and a composite of 70% S&P 400 Midcap Index and 30% Philadelphia Gold & Silver [OBJECT OMITTED]
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Schedule of Investments October 31, 1997 Common Stock - 99.7% Shares Value Apparel - 2.7% Cutter & Buck Inc.(a) 1,000 $ 17,875 Tommy Hilfiger Corp. (a) 700 27,694 ------------------ ------------------ 45,569 ------------------ Chemicals - 2.1% Balchem Corp. 2,000 35,625 ------------------ Computer Services & Software - 2.9% 3Com* (a) 500 20,719 Software Spectrum Inc. (a) 2,000 28,000 ------------------ 48,719 ------------------ Computers & Peripherals - 2.7% Jabil Circuit Inc.(a) 1,000 45,375 ------------------ Electrical Equipment - 1.4% Applied Magnetics Corp. (a) 1000 23,000 ------------------ Financial Services - 2.5% Greentree Financial Corp. 1000 42,125 ------------------ Industrial Machinery & Equipment - 3.6% Gardner Denver Machinery Inc. (a) 1000 35,875 Met Pro Corp. 1500 25,125 ------------------ 61,000 ------------------ Industrial Services - 4.8% Kaydon Corp. 2,800 85,050 ------------------ Insurance - 7.7% CorVel Corp. (a) 1,000 39,500 Sun America Inc. 2,500 89,844 ------------------ 129,344 ------------------ Medical Services - 5.4% Dionex Corp. (a) 500 24,938 Gulf South Medical Supply, Inc. (a) 2,000 66,000 ------------------ 90,938 ------------------ Non-Precious Metals Mining - Exploration 2.6% Adrian Resources Ltd. (Panama) (a) 10,000 10,000 Consolidated Magna Ventures Ltd. (Canada) (a) 45,500 13,562 Farrallon Resources Ltd. (a) 6,000 20,226 ------------------ 43,788 ------------------ New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Schedule of Investments - October 31, 1997 - continued Common Stock - continued Shares Value Pharmaceuticals - 1.5% AMGEN Inc. 500 24,625 ------------------ Photofininshing Labs - 2.4% Seattle Filmworks, Inc. (a) 4,000 40,000 ------------------ Precious Metals Mining - Exploration - 17.4% Brandon Gold Corp. (a) (b) 38,800 47,584 Manhattan Minerals Corp. 12,500 47,018 Nevsun Resources (Ghana, Mali) (a) 55,400 192,655 Oliver Gold Corp. (Mali, Zimbabwe) (a) 18,600 5,412 ------------------ 292,669 ------------------ Precious Metals Mining - Producing - 21.7% Bema Gold Corp. (Chile) (a) 3,000 9,563 Banro Resource Corp. (Zaire) (a) 16,000 109,293 Crystallex International Corp. (a) 55,000 244,063 ------------------ ------------------ 362,919 ------------------ Oil & Oilfield Services - 6.9% Arakis Energy Corp. (a) 10,000 33,125 Noble Drilling Corp. (a) 1,000 35,562 World Fuel Services Corp. 2,000 48,000 ------------------ ------------------ 116,687 ------------------ Retail - 11.4% Paul Harris Stores (a) 3,000 55,125 Pier One Imports Inc. 4,500 82,125 Ross Stores 1,100 41,113 Stride Rite Corp. 1,000 11,750 ------------------ 190,113 ------------------ TOTAL COMMON STOCKS (Cost $1,906,819) 1,677,546 ------------------ Money Market Securities - 3.4% Principal Star Treasury 4.96% 10/31/97 (Cost $56,556) 56,556 56,556 ------------------ New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Schedule of Investments - October 31, 1997 - continued OPTIONS - 4.4% Short Options - (0.2%) Description Strike Price Expiration Contracts 3 Com $ 55 Jan. 1998 5 $ (594) AMGEN Inc. 60 Jan. 1998 5 (343) Applied Magnetics Corp. 40 Jan. 1998 10 (500) Jabil Circuit Inc. 70 Jan. 1998 10 (1,938) Paul Harris Stores Inc. 30 Apr. 1998 10 (500) ------------------ ------------------ (3875) ------------------ Long Options - 4.6% DR Horten Inc. 15 Nov. 1997 40 3250 S&P Index 100 860 Nov. 1997 20 74,000 ------------------ 77,250 ------------------ TOTAL OPTIONS (Cost $69,057) 73,375 ------------------ TOTAL INVESTMENTS - 107.5% (Cost $2,032,432) $ 1,807,477 Other Assets less liabilities (7.5%) (125,379) ------------------ TOTAL NET ASSETS - 100.0% $ 1,682,098 ================== Legend (a) non-income producing (b) private placement
New Cap Contrarian Fund October 31, 1997 (formerly the MAXIM Contrarian Fund) Statement of Assets & Liabilities Assets Investment in securities, at value (cost $2,032,432) $ 1,807,477 Receivable for investments sold 32,916 Dividends receivable 21 Interest receivable 83 --------------------- Total assets 1,840,497 Liabilities Payable to custodian bank 86,911 Payable for investments purchased 66,252 Accrued advisory fee 3,924 Accrued trustees' fees 498 Accrued distribution fees 799 Other payables and accrued expenses 15 ------------------ Total liabilities 158,399 --------------------- Net Assets $ 1,682,098 ===================== Net Assets consist of: Paid in capital $ 1,879,057 Accumulated undistributed net realized gain 27,996 Net unrealized (depreciation) on investments (224,955) --------------------- Net Assets, for 192,025 shares $ 1,682,098 ===================== Net Asset Value Net Assets Offering price and redemption price per share ($1,682,098/192,025) $ 8.76 =====================
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Statement of Operations for the year ended October 31, 1997 Investment Income Dividend Income $ 3,535 Interest Income 1,178 ----------------- Total Income 4,713 Expenses Management fee $ 43,568 12-B1 fees 4,357 Trustees' fees 1,337 ----------------- Total Expenses 49,262 ----------------- Net Investment Income (Loss) (44,549) ----------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities 171,581 Net realized gain (loss) on options transactions (75,762) Change in net unrealized appreciation (depreciation) on investment securities (177,571) ----------------- Net gain (loss) (81,752) ----------------- Net increase (decrease) in net assets resulting from operations $ (126,301) =================
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Statement of Changes in Net Assets May 2, 1996 For the year (commencement of ended October 31, operations) to October 31, Increase/(Decrease) in Net Assets 1997 1996 Operations Net investment income (loss) $ (44,549) $ (5,245) Net realized gain (loss) on securities transactions 171,581 (3,375) Net realized gain (loss) on options transactions (75,762) (19,899) Change in net unrealized appreciation (depreciation) (177,571) (47,384) --------------- ------------------ Net Increase (decrease) in net assets resulting from operations (126,301) (75,903) --------------- ------------------ Distributions to shareholders: From net investment income - - From net capital gains - - --------------- ------------------ Total distributions - - --------------- ------------------ Share Transactions Net proceeds from sale of shares 762,466 1,583,605 Shares issued in reinvestment - - Shares redeemed (461,769) - --------------- ------------------ Net increase (decrease) in net assets resulting from share transactions 300,697 1,583,605 --------------- ------------------ Total increase (decrease) in net assets 174,396 1,507,702 Net Assets Beginning of period 1,507,702 - --------------- ------------------ End of period [including net investment income (loss) of of $(44,549) and $(5,245), respectively] $ 1,682,098 $ 1,507,702 =============== ==================
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Financial Highlights May 2, 1996 For the year ended (commencement of Selected Per Share Data October 31, operations) to October 31, 1997 1996 Net asset value, $9.21 $10.00 --------------- ------------- begining of period Income from investment operations Net investment income (0.22) (0.05) Net realized and unrealized gain (loss) (0.23) (0.74) --------------- ------------- Total from investment operations (0.45) (0.79) --------------- ------------- Less Distributions From net interest income - - From net capital gain - - --------------- ------------- Total distributions - - --------------- ------------- Net asset value, end of period $8.76 $9.21 Total Return (4.89)% (15.80)%(a) Ratios and Supplemental Data Net assets, end of period (000) $1,682 $1,508 Ratio of expenses to average net assets 2.83% 2.89(a) Ratio of net investment income to average net assets -2.56% -1.16(a) Portfolio turnover rate 146% 92%(a) Average commission rate 0.0375 0.0497 (a) annualized
NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 1. ORGANIZATION On September 26, 1997, the Board of Trustess voted to change the name of the Maxim Contrarian to the New Cap Contrarian Fund, effective October 15, 1997. The New Cap Contrarian Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on December 26, 1995 and commenced operations on May 2, 1996. The Trust is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The investment objective of the fund is provide maximum long term growth. The Trust Agreement permits the trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuation- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices accurately reflect the fair market values of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Adviser, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 Federal Income Taxes- The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. However, for the taxable year ended October 31, 1996 the Fund did not qualify to be taxed as a "regulated investment company" for federal income tax purposes. The Fund intends to qualify as a "regulated investment company" in subsequent years. This non-qualification had no effect on net asset value or tax owed by the Fund. Dividends and Distributions- The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long term capital gains and its net short term capital gains at least once a year. Other- The Fund follows industry practice and records 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Newport Investment Advisors, Inc. (the "Adviser") to manage the Fund's investments. Kenneth M. Holeski, president and controlling shareholder of the Adviser, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except 12b-1 fees, brokerage, taxes, interest, fees and expenses of non-interested person trustees and extraordinary expenses. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 2.50% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the period from November 1, 1996 through October 31, 1997, the Adviser has received a fee of $43,568 from the Fund. NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1997 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1997 was $1,879,057. Transactions in capital stock were as follows:
For the period from For the period May 2, 1996 from May 2, 1996 (Commencement of (Commencement of Operations) through Operations) For the year ended For the year ended October 31, 1996 through October 31, 1997 October 31, 1997 October 31, 1996 Shares Dollars Shares Dollars Shares sold 82,953 $762,466 163,713 $1,583,605 Shares issued in reinvestment of dividends 0 0 0 0 Shares redeemed (54,641) (461,769) (0) (0) -------- --------- --- --- 28,312 $300,697 163,713 $1,583,605
NOTE 5. INVESTMENTS For the period from November 1, 1997 (commencement of operations) through October 31, 1997, purchases and sales of investment securities, other than short-term investments, aggregated $2,873,545 and $2,518,712, respectively. The gross unrealized appreciation for all securities totaled $189,426 and the gross unrealized depreciation for all securities totaled $414,381 for a net unrealized depreciation of $224,955. The aggregate cost of securities for federal income tax purposes at October 31, 1997 was $2,032,432. As of October 31, 1997 the Fund has invested 43.5% of its net assets in foreign securities. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1997 NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Cheryl Holeski (wife of the President and controlling shareholder of Newport Investment Advisor) owns more than 25% of the fund. NOTE 8. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1997 the fund recorded permanent book/tax differences of ($44,459) from undistributed net investment income to undistributed realized gain on investments. This reclassification has no impact on the net asset value of the fund and is designed generally to present undistributed income and realized gains on a tax basis which is considered to be more informative to shareholders. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees New Cap Contrarian Fund We have audited the accompanying statement of assets and liabili ties of New Cap Contrarian Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1997, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the year then ended and for the period from May 2, 1995 (commencement of operations) to October 31, 1996 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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. Our procedures included confirmation of investments and cash held by the custodian as of October 31, 1997, by correspondence with the custodian and brokers. 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 New Cap Contrarian Fund as of October 31, 1997, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the year then ended and for the period from May 2, 1995 (commencement of operations) to October 31, 1996 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 17, 1997 -----END PRIVACY-ENHANCED MESSAGE-----