-----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, OuFrzAblB2MEUMZFK19S6swT+DLf/q8JHEqsMOHXvqWq2JTwqdWzttv6hcDGQLSC PLnxZjeiU8YQbBTn7HDsEw== 0001000579-99-000024.txt : 19990215 0001000579-99-000024.hdr.sgml : 19990215 ACCESSION NUMBER: 0001000579-99-000024 CONFORMED SUBMISSION TYPE: N-30D/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19990212 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/A SEC ACT: SEC FILE NUMBER: 811-09096 FILM NUMBER: 99534437 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/A 1 AMERIPRIME FUNDS 1998 ANNUAL REPORTS Dear Shareholders: Investment Results - Fiscal Year Ended October 1998 The AAM Equity Fund (the "Fund") ended its first October fiscal year with a negative 5.7% total return for four months since the Fund's inception. 30-Jun-98 3rd Quarter 1998 Since Inception AAM Equity Fund 10000 8,710.00 9,430.00 S&P 500 10000 9,010.00 9,749.00 Dow Jones 10000 8,800.00 9,660.00 S&P MidCap 400 10000 8,550.00 9,320.00 Blended Benchmark 10000 8,864.00 9,634.00
Investment results since inception (not annualized): - ------------------------------- ---------------- ------------- ------------- ------------------ ----------------- Comparative AAM S&P 500 Dow Jones S&P Mid-Cap 400 Blended Investment Returns ab Equity Fund Index c Index c Index c Benchmark d - ------------------------------- ---------------- ------------- ------------- ------------------ ----------------- Quarter Ending 9/30/98 -12.90% -9.90% -12.00% -14.50% -11.36% - ------------------------------- ---------------- ------------- ------------- ------------------ ----------------- Since Inception e - 5.70% -2.51% - 3.40% - 6.80% - 3.66% - ------------------------------- ---------------- ------------- ------------- ------------------ -----------------
a Past performance is not indicative of future results. b The AAM Equity Fund's historical returns are presented NET of all fees and expenses, versus the GROSS market benchmarks (the S&P 500 Index, the Dow Jones Index, the S&P Mid-Cap 400, and the Blended Benchmark). Investors should keep in mind that when trying to achieve benchmark returns, investment management fees, transaction costs and execution costs will be incurred. c The S&P Index is an unmanaged index of 500 selected common stocks, most of which are listed on the NY Stock Exchange. The Index is adjusted for dividends and weighted toward stocks with large market capitalizations. The Dow Jones Index is an unmanaged index of 30 selected common stocks, which are listed on the NY Stock Exchange. The Index is adjusted for dividends and is made up of leading industrial and consumer stocks with large capitalizations. The S&P Mid-Cap 400 is an unmanaged index of 400 selected common stocks, most of which are listed on the NY Stock Exchange. The Index is adjusted for dividends and weighted toward stocks with medium market capitalizations. d The Blended Benchmark is comprised of 60% S&P 500 Index, 15% Dow Jones Index, and 25% S&P Mid-Cap 400 Index, which concurs with the current investment mix of the Fund. e From June 30, 1998. From inception on June 30, 1998, the Fund has accumulated $2,851,928 in net assets during what has been a difficult market environment. Investment Approach To remind our shareholders, the AAM Equity Fund's investment approach is to achieve long-term growth of capital by investing in high quality large and mid-cap U.S. companies. We select companies which are leaders in their various industries which we believe will provide the greatest potential return over an 18 month to two year time horizon. Commentary and Outlook As everyone knows by now, the stock market, after having a tremendous upward spiral in the first six months of 1998, lost about 75% of that gain in the 3rd quarter of 1998. Since the end of September 1998, the market has recovered some of the major losses from earlier this summer, thanks in part to an accommodating Federal Reserve policy. The underlying problem has been fears of a growing global economic slowdown and the uncertainty as to what effect this will have on U.S. corporate profit growth. As has been the case during all of 1998, the Dow Jones and the S&P 500 returns tell only a small part of the story. The downward benchmark returns for the S&P 500, Dow Jones, and S&P Mid-Cap 400 indices for the 3rd quarter are shown above. During that same period, the average stock fund was down 15%. To make matters actually worse, the average stock is down much more than the indices indicate. These statistics are grim, but there is a silver lining in the cloud. Behind these numbers lie great opportunities for investment in some of the world's best companies at prices significantly lower than they were just three or four months ago. AAM remains fully invested and, on market weakness, will look to add to our positions in these superb companies. Our expectation over the next few quarters is for financial markets to continue to experience abnormal volatility and for there to be a major flight to quality. The economically strong nations of the world will pull together to develop a plan to protect themselves from creeping global economic weakness. This will take time and may test our fortitude, but we remain convinced that the companies we hold are fine future prospects. I will always remember the first investment lesson taught to me by Charles Robinson in Nashville, Tennessee... "Markets don't always go up, but great companies held through tough times will make you a wise investor." Sincerely, Knox H. Fuqua President and Chief Investment Officer AAM Equity Fund Schedule of Investments - October 31, 1998 Common Stock - 98.0% Shares Value Aerospace & Defence - 4.7% Allied Signal Inc. 1,025 $ 39,911 Lockheed Martin Corp. 500 55,687 St. Paul Companies 1,125 37,266 --------------- 132,864 --------------- Automobiles - 1.5% Ford Motor Company 800 43,400 --------------- Banks - 10.1% BB&T 1,500 53,532 Capital One Financial Corp. 375 38,156 CCB Financial Corp. 900 47,362 Citigroup 1,500 70,595 Crestar Financial Corp. 500 32,938 Wachovia Corp 500 45,437 --------------- 288,020 --------------- Chemicals - 3.3% Air Products & Chemicals Inc. 1,400 52,850 Du Pont (E.I) 725 41,688 --------------- 94,538 --------------- Communications - 1.7% Media General, Inc. Class A 1,075 48,106 --------------- Computer Components - 1.6% Intel Corp. 500 44,594 --------------- Computer Systems - 3.9% Cisco Systems, Inc. (a) 825 51,975 Hewlett-Packard Co. 1,000 60,188 --------------- 112,163 --------------- Data Telecommunications - 1.9% SBC Communications 1,175 54,418 --------------- Diversified Conglomerates - 1.5% General Electric Co. 500 43,750 --------------- Drugs & Healthcare - 8.5% Amgen, Inc. 600 47,138 Bristol Myers Squibb 500 55,281 Johnson & Johnson 500 40,750 Merck & Co., Inc. 325 43,956 Schering-Plough & Corp. 525 54,009 --------------- 241,134 --------------- Electronics - 3.3% Motorola, Inc. 725 37,700 Royal Philips Electronics 1,000 54,875 --------------- 92,575 --------------- AAM Equity Fund Schedule of Investments - October 31, 1998 - continued Common Stock - continued Shares Value Entertainment - 1.3% Disney (Walt) & Co. 1,400 $ 37,713 --------------- Food & Beverage - 5.4% Anheuser Busch Cos. 975 57,952 Coca Cola & Company 700 47,337 Sysco Corp. 1,800 48,488 --------------- 153,777 --------------- Household Products - 3.0% American Home Products Corp. 825 40,219 Gillette Co. 1,000 44,938 --------------- 85,157 --------------- Insurance - 3.4% American International 700 59,675 Markel Corp. (a) 250 37,156 --------------- 96,831 --------------- Medical Products - 2.0% Owens & Minor 3,575 56,753 --------------- Manufacturing - 7.4% Chemfirst 2,400 46,500 Chesapeake Corp. 1,500 52,500 Deere & Co. 1,300 45,987 International Flavor & Fragrances 875 32,758 Mattel, Inc. 950 34,081 --------------- 211,826 --------------- Mining & Building Materials - 4.8% Aluminum Company of America 600 47,550 Cleveland Cliffs, Inc. 950 37,703 Martin Marietta Materials 1,075 52,743 --------------- 137,996 --------------- Mutual Fund Services - 0.7% Pioneer Group, Inc. (a) 1,475 21,112 --------------- Oil Field Services - 0.9% Halliburton Co. 700 25,156 --------------- Oil & Natural Gas - 9.6% Amoco Corp. 925 51,916 Atlantic Richfield 700 48,213 Chevron Corp. 500 40,750 Enron Corp. 700 36,925 Schlumberger Ltd. 900 47,250 Valero Energy Corp. 2,000 50,000 --------------- 275,054 --------------- AAM Equity Fund Schedule of Investments - October 31, 1998 - continued Common Stock - continued Shares Value Other Consumer Goods - 2.9% Cracker Barrel 1,500 $ 38,813 Tredegar Industries, Inc. 2,000 45,126 --------------- 83,939 --------------- Real Estate Investment Trusts - 3.8% Federal Realty Investments 1,600 36,200 MGI Properties 1,350 39,489 Union Dominion Realty 3,000 33,376 --------------- 109,065 --------------- Retail - 5.6% Circuit City Stores, Inc. 1,500 54,282 Saks Holdings, Inc. (a) 2,000 45,500 Walgreen Co. 1,200 58,426 --------------- 158,208 --------------- Transportation - 5.2% CSX Corp. 1,025 40,231 Norfolk Southern 1,550 51,054 Tidewater, Inc. 2,000 56,626 --------------- 147,911 --------------- Total Common Stock - (Cost $2,897,292) 2,796,060 --------------- Money Market Securities - 0.9% Principal Amount Value Star Treasury, 4.96% 11/2/98 (Cost $24,602) $ 24,602 24,602 --------------- TOTAL INVESTMENTS - (Cost $2,921,894) - 98.9% 2,820,662 --------------- Other assets less liabilities - 1.1% 31,266 --------------- Total Net Assets - 100.0% $ 2,851,928 =============== (a) non-income producing AAM Equity Fund Statement of Assets and Liabilities October 31, 1998 Assets Investment in securities, at value (cost $2,921,894) $ 2,820,662 Receivables: Dividends 2,268 Interest 480 From advisor for organizational costs 2,106 Deferred organizational costs 28,890 ------------------- Total assets 2,854,406 Liabilities Payables: Accrued advisory fee $ 2,478 ------------------ Total liabilities 2,478 -------------------- Net Assets $ 2,851,928 ==================== Net Assets consist of: Paid in capital $ 2,983,795 Accumulated undistributed net investment income 7,205 Accumulated undistributed net realized gain (37,840) Net unrealized appreciation on investments (101,232) -------------------- Net Assets, for 302,471 shares $ 2,851,928 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($2,851,928/302,471) $ 9.43 ==================== AAM Equity Fund Statement of Operations for the period June 30, 1998 (Commencement of Operations) to October 31, 1998 Investment Income Dividend Income $ 13,063 Interest Income 3,171 ------------------- Total Income 16,234 Expenses Investment advisory fee $ 8,847 Organizational expenses 2,105 Trustee's fees 182 ------------------- Total operating expenses 11,134 Reimbursed expenses (2,105) ------------------- Net operating expenses 9,029 ------------------- Net Investment Income 7,205 ------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (37,840) Change in net unrealized depreciation of investment securities (101,232) ---------------- Net Gain (Loss) (139,072) ------------------- Net increase (decrease) in net assets resulting from operations $ (131,867) =================== AAM Equity Fund Statement of Changes in Net Assets Period ended Increase/(Decrease) in Net Assets October 31, 1998 (a) Operations Net investment income (loss) $ 7,205 Net realized gain (loss) (37,840) Change in net unrealized appreciation (depreciation) (101,232) ---------------- Net Decrease in net assets resulting from operations (131,867) ---------------- Net proceeds from sale of shares 2,990,242 Shares redeemed (6,447) ---------------- Net increase in net assets resulting from share transactions 2,983,795 ---------------- Total increase in net assets 2,851,928 Net Assets Beginning of period - ---------------- End of period [including undistributed net investment income of $7,205 ] $ 2,851,928 ================ (a) June 30, 1998 (commencement of operations) to October 31, 1998. AAM Equity Fund Financial Highlights Period ended October 31, 1998 (b) Selected Per Share Data Net asset value, beginning of period $10.00 -------------- Income from investment operations Net investment income (loss) 0.03 Net realized and unrealized gain (loss) (0.60) -------------- Total from investment operations (0.57) -------------- Net asset value, end of period $9.43 ============== Total Return (5.70)% Ratios and Supplemental Data Net assets, end of period (000) $2,852 Ratio of expenses to average net assets before reimbursement 1.40% (a) Ratio of expenses to average net assets after reimbursement 1.14% (a) Ratio of net investment income to average net assets before reimbursement 0.64% (a) Ratio of net investment income to average net assets after reimbursement 0.90% (a) Portfolio turnover rate 14.41% (a) Annualized (b) June 30, 1998 (commencement of operations) to October 31, 1998. AAM EQUITY FUND Notes to Financial Statements October 31, 1998 NOTE 1. ORGANIZATION AAM Equity Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust), on April 8, 1998 and commenced operations on June 30, 1998. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company whose investment objective is to provide long-term capital appreciation. 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, and 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. AAM EQUITY FUND Notes to Financial Statements October 31, 1998 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 Appalachian Asset Management, Inc. (the "Adviser") to manage the Fund's investments. The adviser is controlled by its President, Knox H. Fuqua. Mr. Fuqua 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 commission, 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 of 1.15% 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 June 30, 1998 (commencement of operations) through October 31, 1998, the Adviser received a fee of $8,847 from the Fund. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the period from June 30, 1998 (commencement of operations) to October 31, 1998, the Administrator received fees of $10,000 from the Adviser for administrative services provided to the Fund. AAM EQUITY FUND Notes to Financial Statements October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Securities, Inc. ("the Distributor") to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor from June 30, 1998 (commencement of operations) to October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $2,983,795. Transactions in capital stock were as follows: For the period ended October 31: Shares Dollars Shares sold 303,178 $2,990,242 Shares redeemed (707) (6,447) --------- ------------- 302,471 $2,983,795 NOTE 5. INVESTMENTS For the period from June 30, 1998 through October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $3,140,557 and $205,425, respectively. As of October 31, 1998, the gross unrealized appreciation for all securities totaled $134,590 and the gross unrealized depreciation for all securities totaled $235,822 for a net unrealized depreciation of $101,232. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $2,921,894. AAM EQUITY FUND Notes to Financial Statements October 31, 1998 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. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the fund could be adversely affected if the computer systems used by the Adviser, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Adviser and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees AAM Equity Fund We have audited the accompanying statement of assets and liabilities of AAM Equity Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the period from June 30, 1998(commencement of operations) to October 31, 1998 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, 1998, 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 AAM Equity Fund as of October 31, 1998, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the period from June 30, 1998 (commencement of operations) to October 31, 1998 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 9, 1998 AIT Vision US Equity Fund Investment Results - For the Period Ended October 31, 1998 Dear Fellow Shareholders: As of the period ended October 31, 1998, the AIT Vision Fund appreciated by 12.9% during the last twelve months and declined by -2.7% over last six months. The Fund's investment results are compared to the unmanaged S&P 500 and Russell 3000 indices in the table and chart below. The Fund uses the Russell 3000 as its selection universe and performance benchmark. - ------------------------------------------------- -- ---- ----- ---------------- Returns for the Periods Ended 10/31/98 - ------------------------------------------------- -- ---- ----- ---------------- Since Inception Annualized Fund/Index 6 Months 1 Year 12/28/95 Since Inception - ---------- -------- ------ -------- --------------- AIT Vision Fund -2.7% 12.9% 78.8% 22.8% S&P 500 -0.4% 22.0% 88.8% 25.1% Russell 3000 -3.7% 16.5% 77.9% 22.5% - --------------------- ---- --------------- ------------------ ------------------ 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 AIT S&P 500 Russell 3000 AIT Vision Fund S&P 500 Russell 3000 12/28/95 $10,000 $10,000 $10,000 1/31/96 $10,070 $10,387 $10,365 2/29/96 $10,513 $10,484 $10,518 3/31/96 $10,482 $10,584 $10,624 4/30/96 $11,177 $10,740 $10,826 5/31/96 $12,063 $11,017 $11,103 6/30/96 $11,973 $11,059 $11,068 7/31/96 $11,247 $10,570 $10,488 8/31/96 $11,690 $10,793 $10,806 9/30/96 $12,395 $11,401 $11,394 10/31/96 $12,708 $11,715 $11,602 11/30/96 $13,292 $12,601 $12,421 12/31/96 $12,899 $12,351 $12,271 1/31/97 $13,508 $13,123 $12,950 2/28/97 $13,427 $13,225 $12,964 3/31/97 $12,610 $12,682 $12,377 4/30/97 $13,208 $13,439 $12,987 5/31/97 $14,174 $14,257 $13,874 6/30/97 $14,426 $14,896 $14,451 7/31/97 $16,184 $16,081 $15,583 8/31/97 $15,391 $15,180 $14,951 9/30/97 $16,323 $16,011 $15,799 10/31/97 $15,839 $15,477 $15,268 11/30/97 $16,277 $16,193 $15,853 12/31/97 $16,648 $16,472 $16,171 1/31/98 $16,385 $16,654 $16,255 2/28/98 $17,289 $17,855 $17,417 3/31/98 $18,217 $18,769 $18,281 4/30/98 $18,381 $18,958 $18,461 5/31/98 $18,093 $18,632 $18,005 6/30/98 $18,645 $19,389 $18,614 7/31/98 $18,244 $19,183 $18,276 8/31/98 $15,695 $16,409 $15,476 9/30/98 $16,976 $17,460 $16,531 10/31/98 $17,881 $18,881 $17,786
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, 1998. 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 The Fund's solid 12.9% return over the past year was generated in an environment of increasing stock market volatility and growing investor nervousness. Some of the investment policies that served the Fund well during the last twelve months include emphasizing stocks with attractive price/earnings ratios coupled with our holdings from the technology, airline, and drug industries. However, a continuation of the market's very narrow leadership by a relatively few very large companies significantly limited any benefits the Fund derives from its broad Russell 3000 selection universe. Detailed below are the economic sector weightings and the largest holdings for the Fund as of October 31, 1998. - -------------------------------------- ------------ -------------- Economic Sector Weightings - -------------------------------------- ------------ -------------- Percent of Net Assets 10/31/98 Basic Materials 0.0% Consumer Durables 4.6% Capital Goods 1.5% Consumer Nondurables 5.5% Energy 1.4% Financial Services 12.9% Health Care 16.4% Retail Trade 9.7% Services 7.9% Technology 18.2% Telecommunication 10.2% Transportation 4.2% Utilities 6.1% Cash 1.4% -- ---- Total 100.0% - ------------------------------------ -------------- -------------- - ----------------------------------------- --------- -------------- Ten Largest Holdings - ----------------------------------------- --------- -------------- Percent of Net Assets 10/31/98 International Business Machines 3.5% Microsoft Corp. 3.2% PECO Energy Co. 2.6% BellSouth Corp. 2.6% Schering Plough Corp. 2.4% Allergan Inc. 2.4% Bell Atlantic Corp. 2.4% Bristol Myers Squibb Co. 2.4% Amgen Inc. 2.4% Tricon Global Restaurants Inc. 2.3% -- ---- Total 26.2% - ----------------------------------------- --------- -------------- Market Review The phenomenal strength and stability of US economic growth since the early 1980's left some economists wondering about the demise of the business cycle and allowed domestic investors to enjoy equity returns that were far above-average. Not only did equity returns run at a rate nearly double historical standards, but also the returns for much of the 1990's occurred with historically low volatility. Therefore, stock market valuation measures were allowed to rise to historical highs as investors greatly reduced their perceptions of the risk of US equity investments. Late last year, a wildfire of global economic instability began in the Pacific Basin, spread through Russia, and moved on to threaten the emerging countries of Latin America. The currencies of these countries were challenged, or even devalued, and an investor flight to safety led to tremendous capital inflows into the safe haven of the US treasury market. Such extreme global economic stress and the sudden shifts in capital flows assisted in the leveraged implosion of Long Term Capital, a large high profile hedge fund manager. This development, in turn, threatened the financial integrity of many US money center banks and security brokers by confronting them with the latest unforeseen meltdown of their derivative-related positions. Very quickly the excesses built up within the financial markets during the last decade were being wrung out and all investors were quickly reminded of the potential risks associated with their equity investments. Just as the financial prospects appeared most bleak, the Japanese parliament approved a plan for aiding their banking system, emerging market economies appeared to show signs of stabilization, the US Congress approved a contribution to the IMF rescue fund, and then, most importantly, the Fed quickly lowered short term interest rates twice with European countries following suit. The US stock market responded by building a base throughout the month of September 1998 and promptly rallied to retrace much of its losses from the July 1998 high. Within the US equity market over the last year, those companies that have been able to grow their earnings more robustly despite an environment of generally slowing profit growth have been rewarded. The returns for growth stocks generally exceeded the returns of value stocks during this period. Smaller company stocks continued to significantly underperform their larger company counterparts despite rather compelling relative valuations. Investors were willing to pay a premium for being involved with the relatively more liquid investments of popular US "franchise" companies. All of these relative performance distinctions reflect investment choices that were based on more, rather than less, risk aversion. In such a dynamic financial environment, the disciplined quantitative process employed within the Fund helps to ensure consistent implementation of our rigorous investment approach. The stock selection process used within the Fund was recently awarded a patent by the US Patent and Trademark Office, the first of its kind ever awarded. We believe our comprehensive investment approach allows us to uniquely discover the financial linkages between macro conditions, fundamental measures, and inherent price momentum. While financial markets are always complex, we look forward to the constant challenges of adding value to your investments within the US equity market. Thank you for your trust and continued confidence. Respectfully, Douglas W. Case, CFA Chief Investment Officer Advanced Investment Technology, Inc.
AIT Vision U.S. Equity Portfolio Schedule of Investments - October 31, 1998 Common Stocks - 98.6% Shares Value Apparel - 1.8% % TJX Companies, Inc. 4,400 $ 83,325 ---------------- Auto Manufacturers - 3.4% Chrysler Corp. 1,500 72,187 Ford Motor Company 1,600 86,800 ---------------- ---------------- 158,987 ---------------- Banks - 2.4% Mellon Bank Corp. 800 48,100 PNC Bank Corp. 1,300 65,000 ---------------- 113,100 ---------------- Building - 1.2% Centex Corp. 1,600 53,600 ---------------- Business Equipment - 1.5% Xerox Corp. 700 67,813 ---------------- Capital Goods - 1.5% Ingersoll Rand Co. 1,400 70,700 ---------------- Communications & Communications Equipment - 10.2% AT&T Corp. 1,700 105,825 Alltel Corp. 1,402 65,631 Bell Atlantic Corp. 2,100 111,563 Bell South Corp. 1,500 119,719 GTE Corp. (a) 1,200 70,425 ---------------- 473,163 ---------------- Computers, Peripherals & Software- 16.2% BMC Software, Inc. (a) 1,500 72,094 Cisco Systems, Inc. (a) 1,350 85,050 Dell Computer (a) 1,600 105,000 International Business Machines Corp. 1,100 163,280 Microsoft Corp. (a) 1,400 148,225 Sterling Software (a) 2,300 60,231 Synopsys, Inc. (a) 1,300 58,825 Tandy Corp. 1,200 59,475 ---------------- 752,180 ---------------- Drugs - 10.3% Amgen, Inc. (a) 1,400 109,988 Bristol Myers Squibb 1,000 110,563 Pfizer, Inc. 600 64,387 Schering-Plough Corp. 1,100 113,163 Watson Phamaceuticals, Inc. (a) 1,400 77,875 ---------------- ---------------- 475,976 ---------------- Electrical & Electronics - 2.6% Peco Energy Co. 3,100 119,931 ---------------- AIT Vision U.S. Equity Portfolio Schedule of Investments - October 31, 1998 Shares Value Common Stocks - continued Energy - Oil & Gas - 1.4% Chevron Corp. 800 $ 65,200 ---------------- Financial Services - 4.3% Edwards A.G. 1,600 55,300 Fannie Mae 1,100 77,894 Fleet Financial Group, Inc. 1,600 63,900 ---------------- 197,094 ---------------- Food - 6.9% IBP, Inc. 3,100 83,894 Quaker Oats Co. 1,700 100,406 Safeway, Inc. (a) 1,400 66,937 Tyson Foods Inc. Class A 3,000 69,000 ---------------- ---------------- 320,237 ---------------- Insurance - 5.0% Allstate Corp. 1,400 60,288 Cigna Corp. 900 65,644 Protective Life Corp. 2,800 103,775 ---------------- 229,707 ---------------- Medical Supplies - 4.1% Allergan Inc. 1,800 112,387 Becton Dickinson and Co. 1,800 75,825 ---------------- ---------------- 188,212 ---------------- Office Equipment - 1.8% Lexmark International Group (a) 1,200 83,925 ---------------- Oil & Gas Services - 1.8% Coastal Corp. 2,400 84,600 ---------------- Restaurants - 3.5% Brinker International, Inc. (a) 2,300 55,631 Tricon Global Restaurants (a) 2,500 108,750 ---------------- ---------------- 164,381 ---------------- Retail - 5.2% Best Buy Company, Inc. (a) 1,600 76,800 GAP, Inc. 1,100 66,137 Walmart Stores, Inc. 1,400 96,600 ---------------- ---------------- 239,537 ---------------- Savings & Loans - 1.2% Dime Bancorp, Inc. 2,400 57,150 ---------------- Services - 5.0% Dun & Bradstreet Corp. 2,400 68,100 HBO & Co. 3,700 97,125 Interpublic Group Cos., Inc. 1,100 64,350 ---------------- ---------------- 229,575 ---------------- Toys -1.4% Hasbro, Inc. 1,900 66,619 ---------------- AIT Vision U.S. Equity Portfolio Schedule of Investments - October 31, 1998 Shares Value Common Stocks - continued Transportation - 4.2% AMR Corp. (a) 1,200 $ 80,400 Delta Airlines 600 63,337 Consolidated Freightways 1,700 51,426 ---------------- 195,163 ---------------- Utilities - 1.7% First Energy Corp. 2,600 78,000 ---------------- ---------------- TOTAL COMMON STOCKS (Cost $3,985,539) 4,568,175 ---------------- Money Market Securities -1.4% Principal Amount Star Treasury, 4.96%, 11/02/98 (Cost $66,598) $ 66,698 66,598 ------ TOTAL INVESTMENTS - 100.0% (Cost $4,052,137) $ 4,634,773 Other assets less liabilities - 0.0% 1,505 ---------------- TOTAL NET ASSETS - 100.0% $ 4,636,278 ================ (a) non-income producing security
AIT Vision U.S. Equity Portfolio Statement of Assets and Liabilities October 31, 1998 Assets Investment in securities, at value (cost $4,052,137) $ 4,634,773 Receivables: Dividends 3,712 Interest 276 Reimbursement of trustees fees 1,804 -------------------- Total assets 4,640,565 Liabilities Payables: Accrued advisory fee $ 2,587 Accrued trustees' fees 1,700 ------------------ Total liabilities 4,287 -------------------- Net Assets $ 4,636,278 ==================== Net Assets consist of: Paid in capital $ 3,716,133 Accumulated undistributed net investment income 25,580 Accumulated undistributed net realized gain 311,929 Net unrealized appreciation on investments 582,636 -------------------- Net Assets, for 325,449 shares $ 4,636,278 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($4,634,278/325,449) $ 14.25 ====================
AIT Vision U.S. Equity Portfolio Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 60,646 Interest Income 4,388 ------------------- Total Income 65,034 Expenses Investment advisory fee $ 33,471 Trustee's fees 1,804 ------------------- Total expenses before reimbursement 35,275 Reimbursed trustees fees (1,804) ------------------- Total operating expenses 33,471 ------------------- Net Investment Income 31,563 ------------------- Realized & Unrealized Gain Net realized gain on investment securities 437,654 Change in net unrealized appreciation of investment securities 83,166 ------------------- Net gain 520,820 ------------------- Net increase in net assets resulting from operations $ 552,383 ===================
AIT Vision U.S. Equity Portfolio Statement of Changes in Net Assets For the year For the year ended ended Increase/(Decrease) in Net Assets October 31, 1998 October 31, 1997 Operations Net investment income (loss) $ 31,563 $ 15,530 Net realized gain (loss) 437,654 271,121 Change in net unrealized appreciation 83,166 465,335 ---------------- ---------------- Net Increase in net assets resulting from operations 552,383 751,986 ---------------- ---------------- Distributions to shareholders: From net investment income (loss) (21,513) - From net realized gain (loss) (397,998) (81,686) ---------------- ---------------- Total distributions (419,511) (81,686) Share Transactions Net proceeds from sale of shares 96,094 3,706,126 Shares issued in reinvestment of distributions 129,848 81,686 Shares redeemed (711,880) (95,927) ---------------- ---------------- Net increase in net assets resulting from share transactions (485,938) 3,691,885 ---------------- ---------------- Total increase in net assets (353,066) 4,362,185 Net Assets Beginning of period $ 4,989,344 $ 627,159 ---------------- ---------------- End of period [including undistributed net investment income(loss) of $25,580 and $15,530] $ 4,636,278 $ 4,989,344 ================ ================
AIT Vision U.S. Equity Portfolio Financial Highlights For the year For the year For the period ended ended ended October 31, 1998 October 31, 1997 October 31, 1996 (b) Selected Per Share Data Net asset value, beginning of period $13.79 $12.62 $10.00 -------------- --------------- --------------- Income from investment operations Net investment income (loss) 0.09 0.06 (0.07) Net realized and unrealized gain (loss) 1.54 2.71 2.69 -------------- --------------- --------------- Total from investment operations 1.63 2.77 2.62 -------------- --------------- --------------- Less Distributions From net investment income (0.06) (1.60) From net realized gain (1.11) 0.00 0.00 -------------- --------------- --------------- Total Distributions (1.17) (1.60) -------------- --------------- Net asset value, end of period $14.25 $13.79 $12.62 ============== =============== =============== Total Return 12.87% 24.65% 26.63% (a) Ratios and Supplemental Data Net assets, end of period (000) $4,636 $4,989 $627 Ratio of expenses to average net assets 0.70% 0.70% 1.87% (a) Ratio of expenses to average net assets before reimbursement 0.74% 0.74% - Ratio of net investment income to average net assets 0.66% 0.50% (0.70)%(a) Ratio of net investment income to average net assets before reimbursement 0.62% 0.46% - Portfolio turnover rate 147.89% 253.52% 238.63% (a) (a) Annualized (b) November 6, 1995 (commencement of operations) to October 31, 1996.
AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1998 NOTE 1. ORGANIZATION The AIT Vision U.S. Equity Portfolio (the "Fund") is 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. 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, and 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 Advisor 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. 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. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1998 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued 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 Reigel Gilbreath, 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 commissions, 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 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, 1997 through October 31, 1998, the Adviser received a fee of $33,471 from the Fund. The Advisor agreed to pay other expenses to the extent necessary to maintain total expenses at the contractual rate of 0.70%, for the period the Advisor reimbursed expenses of $1,804. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $30,000 from the Adviser for administrative services provided to the Fund. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Sercurities, Inc. ("the Distributor") to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $3,716,133. Transactions in capital stock were as follows: For the periods ended October 31:
1998 1998 1997 1997 Shares Dollars Shares Dollars Shares sold 6,996 $96,094 312,107 $3,706,126 Shares issued in reinvestment of dividends 10,232 129,848 7,210 81,686 Shares redeemed (53,629) (711,880) (7,160) (95,927) -------- --------- ------- -------- (36,401) ($485,938) 312,157 $3,691,885
NOTE 5. INVESTMENTS For the period from year ended October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $7,076,453 and $7,930,697, respectively. The gross unrealized appreciation for all securities totaled $681,306 and the gross unrealized depreciation for all securities totaled $98,670 for a net unrealized appreciation of $582,636. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $4,052,137. AIT VISION U.S. EQUITY PORTFOLIO Notes to Financial Statements October 31, 1998 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. YEAR 2000 ISSUE Like other mutual funds, financial and business organizations and individuals around the world, the fund could be adversely affected if the computer systems used by the Adviser, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue" The Adviser and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on 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, 1998, 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 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, 1998, 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 AIT Vision U.S. Equity Portfolio as of October 31, 1998 and 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 9, 1998 CORBIN SMALL-CAP VALUE FUND November 6, 1998 Dear Shareholder: Thank you once again for your investment in the Corbin Small-Cap Value Fund. All of the employees of the investment advisor, Corbin & Company, have been working very hard this year trying to achieve the best overall performance for this fund. Unfortunately, some factors did not allow us to achieve the results we had anticipated for this year. A poor market for smaller stocks, a continued lack of interest in value investing, disappointments at portfolio companies, and plain old "bad luck" were all factors in the results. Last year in the annual report, I mentioned that what we are doing is to be measured over a period of five-to-ten years, not over one-to-two year periods. That is what separates speculators from investors. OVERALL PORTFOLIO CHARACTERISTICS AND COMMENTARY As of October 31st, the portfolio contained 26 equities, with 92.6% of the money in equity securities, and 7.4% in cash. I can honestly say that this has been the most frustrating year that I have ever experienced during my time as an investment professional. While the loss in value by our stocks is always disheartening, what is truly maddening is that, by and large, earnings were above or in-line with analysts' estimates. Several of our stocks have seen their estimates rise over the past few quarters, while others have remained relatively intact. This is despite an environment that has been relatively inhospitable to the vast majority of companies. Thinking that the situation must be changing, I have spent the last few weeks on the telephone, in talks with top management at several of our portfolio companies. With two notable exceptions, business remains substantially above the levels of last year and even above internal expectations. This is witnessed by the fact that a large number of our companies announced buybacks of their shares, or are about to do so. It is clear that, in the next few months, several firms will be taking the opportunity to repurchase their shares at depressed valuations. Why has the market wiped the value of the Russell 2000 down by almost 33% since April 21, and the average NYSE stock is 45% off of its highs? It comes down to one word - fear. Fear that the big banks are going to implode due to derivative exposure. Fear due to the belief that interest rates are not low enough and that the Federal Reserve cannot be decisive. Fear that an economic slowdown will hurt U.S. corporate profits. Personally, I abhor fear, because it begets more fear. If bankers, investors, and consumers give in to these fears, it will result in the thing they most fear - a recession brought on by a credit crunch. Just as in our personal lives, 99% of the things we worry about never come to pass, that is also true about the economy. I am not saying that there may not be a continuation of the "bumps in the road" suffered over the last few months, but what I am saying is that the dire predictions of the failure of major money-center banks, brokerage firms, and mega-hedge funds will not come to pass. In fact, we have positioned ourselves to profit from this time, even though it should not be as bad as predicted by many seers. Bonded Motors should thrive if the economy slows down, as people keep their vehicles longer. Durakon Industries' Jerr-Dan division should prosper as towing demand and low interest rates increase the demand for towing vehicles, while Duraliner benefits from the same factor as Bonded. Wabash National will benefit from lower rates and its position as the premier truck trailer firm. Our specialty metals companies will benefit from strong cash flow and contracts with premier companies in the different industries they service. Duckwall-Alco's small town exposure and sales mix leave it unsusceptible to many of the problems facing bigger retailers. VTEL will capitalize on the "time and money" factor to help reduce costs for business. If it sounds like I am bullish on our securities and our positioning, that would be correct. Share price means something only if you are intending to sell these securities in the short-term, which we are not expecting to do to any large extent. I believe as much today in the companies we own as the day we bought them, and we are going to concentrate our funds in them. SPECIAL NOTE ON SHAREHOLDER ACTIVISM Due to the extraordinary opportunities that have evolved in the last six months, our firm has been active in the area of corporate governance and working with company managements to increase shareholder value. I believe that when you look at the number of companies we own that have chosen to make strategic operational and financial moves, you can appreciate our work. In three cases, we have filed Schedule 13D with the Securities and Exchange Commission concerning our interests. A Schedule 13D is filed when a firm controls more than 5% of a company's stock and is requesting a change in capitalization or dividend policy, or representation on the board. While a Schedule 13D often represents a confrontation situation, we are using it as a public forum to express our views to the board of directors. We do not consider this confrontational, but rather a way to address the concerns that investors are feeling. It also helps to draw public attention to the company and its prospects. I believe that you will see more of this action from our firm in the future. We pride ourselves as being patient investors and have given substantial opportunity for some of these situations to develop. Sometimes it is important to refocus a firm on what it is primarily trying to accomplish, which is the addition of shareholder value. In those cases where we feel that a reminder is in order, and we control more than 5% of a firm's shares, I would look for a 13D to be filed. PERFORMANCE DISCUSSION The fund generated a total return of -36.07% for the twelve months ended October 31, 1998. The Russell 2000 returned -11.64%, and the S&P 600 Small-Cap returned - -11.07%. Clearly, there is no use talking about which stocks surprised us on the upside or downside, because the individual securities in this situation do not matter. What matters is the investment market's complete markdown of small-cap equity securities, and the belief that now is the time for "taking chips off the table." It is my belief that there will continue to be a tremendous number of economic bargains in the marketplace, and that investors will eventually gravitate toward them. I also believe that it is important to mention that this situation represents an excellent opportunity to add to the fund at these lower levels. Employees and their family members own approximately 15% of the fund, and many of these have used the price weakness to add to their positions. Investment programs that utilize dollar-cost averaging, or regular contributions, are able to take advantage of times of market instability to create an attractive investment average over a period of time. ------------------------------------------------------------- Returns for the Periods Ended 10/31/98 ------------------------------------------------------------- Total Average Annual Return Since Inception Fund/Index 1 Year June 30, 1997 ---------- ------ ------------- Corbin Small-Cap Value Fund -36.07% -22.96% S&P 600 Small-Cap -11.07% -.75% Russell 2000 -11.64% -2.29% ----------------------------------- ------------------ ----------------- Corbin S&P 600 Russell 2000 ---------------------------------------------------- 6/30/97 10,000 10,000 10,000 7/31/97 10,310 10,629 10,467 8/31/97 10,520 10,897 10,703 9/30/97 11,330 11,617 11,485 10/31/97 11,030 11,116 10,975 11/30/97 11,209 11,035 10,900 12/31/97 10,916 11,257 11,095 1/31/98 10,575 11,037 10,926 2/28/98 10,853 12,043 11,746 3/31/98 11,257 12,503 12,239 4/30/98 11,171 12,577 12,306 5/30/98 10,617 11,910 11,646 6/30/98 10,511 11,945 11,680 7/31/98 9,595 11,031 10,726 8/31/98 7,401 8,905 8,646 9/30/98 7,187 9,448 9,272 10/31/98 7,049 9,887 9,652 This chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 600 Small-Cap Index, and the Russell 2000 Index on June 30, 1997 and held through October 31, 1998. The S&P 600 Small-Cap Index and the Russell 2000 Index are widely recognized unmanaged indices of common stock prices. Performance figures include the change in value of the stocks in the indices, and 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. DESCRIPTION OF INDIVIDUAL SECURITY ISSUES As in the past report, I would like to very briefly discuss the securities now held in the portfolio. Aames Financial (AAM) - The company is a leader in the sub-prime lending business. This category of stocks has dramatically under-performed the market and other financial service stocks, due to gain-on-sale accounting issues. Aames has significant service revenue, compared to other firms in the industry. American Buildings Company (ABCO) - ABCO is a manufacturer of metal building systems, which are used for residential and non-residential markets. Bonded Motors (BMTR) -The company is the leader in the area of rebuilding auto engines. It is also expected to be a premier consolidator in this industry. Butler Manufacturing (BBR) - The company is the leading maker of metal buildings worldwide. The metal building market is growing rapidly and is highly lucrative in terms of margins and return on investment. Cott Corporation (COTTF) - Cott is the premier producer of retail brand beverages, including soft drinks, juice drinks and bottled water. Delta Financial Corp. (DFC) - DFC is a sub-prime lender in the same industry as Aames Financial. Delta has some of the most conservative gain-on-sale accounting practices in the business, which, after our meeting with management, appeared to make the stock dramatically undervalued. Dawson Geophysical (DWSN) - Dawson processes three-dimensional seismic data used in the exploration and development of oil and natural gas reserves. Duckwall-Alco Stores (DUCK) - The company operates a chain of over 200 discount variety stores, primarily in the central United States. Durakon Industries (DRKN) - We believe DRKN to be one of the most dramatically undervalued companies in American manufacturing. The company produces the Duraliner pickup truck bedliners and Jerr-Dan towing vehicles. Griffon Corp. (GFF) - Griffon manufactures building products, specialty plastic films, and electronic information and communications systems. The recent downturn in the market allowed us to purchase the stock at less than 8X expected earnings. Ingles Markets (IMKTA) - This supermarket chain operator serves as a defensive stock in case of economic difficulties and offers a 5%+ dividend yield. Kuhlman Corp. (KUH) - Kuhlman serves the consumer and utility markets by manufacturing power transformers and electrical wires and cables. Lone Star Steakhouse & Saloon (STAR) - This provider of premium and mid-priced steaks obtained a cheap valuation due to several earnings disappointments on Wall Street. The company announced plans to begin aggressively marketing its products, which should increase earnings within a few quarters. Onyx Acceptance Corp. (ONYX) - Onyx is a specialty finance company, which focuses on prime and non-prime automobile lending. Play-By-Play Toys & Novelties (PBYP) - The company is a leader in the plush, stuffed toy business, as well as games for amusement parks. The company trades at a low multiple to this year's expected earnings. Quanex (NX) - Quanex manufactures specialty metal products from carbon and alloy steel and aluminum. The company is focused on manufacturing proprietary and customized products. RailTex (RTEX) - RailTex operates short-line railroads and also consults on the management of international railroads. The stock is very cheap compared to the market, as well as its peer group, and is in a business that is rapidly consolidating. Republic Group (RGC) - The company recycles paper and makes gypsum wallboard. In addition, the company has excellent financial statements, with no debt. Rush Enterprises (RUSH) - Rush operates a regional network of truck dealerships, primarily "Peterbilt" ones. The stock was purchased at less than 8X expected earnings, despite the estimate of 20% per year growth for the company. Seitel Corp. (SEI) - The drop in oil prices led us to this high-quality geophysical firm. We feel the company has been unrecognized due to its "oil patch" label. Steel of West Virginia (SWVA) - Steel of West Virginia is a producer of specialty steel products, which are used in the construction of truck trailers, industrial lift trucks, and manufactured housing. Successories (SCES) - The company designs and manufactures recognition and motivation products. Same-store sales continue to show strong comparisons, and prospects are brightening considerably. Titan Corp. (TTN) - TTN manufactures information and electronic systems. The company is attempting to receive FDA approval on its latest product, which will be used for food pasteurization and should boost sales tremendously. Unifab (UFAB) - The company is a leader in the manufacturing of off-shore oil platforms. The firm sells for the highest value score in our universe of stocks. VTEL (VTEL) - VTEL is a maker of video-telecommunication equipment. We continue to believe that this is going to be a huge gainer in the near future. Wabash National (WNC) - Wabash is the leading manufacturer of truck trailers. FINAL THOUGHTS Over the last few months I have come to the conclusion that America is now in the midst of a bubble concerning large-cap securities, with the public speculating frantically on equity securities of questionable value. They have ignored the places where true value still exists, eschewing fundamentals. I remember during the 1988-1989 time period, people in this country said that Japanese stocks could not continue to trade at 30X-50X earnings. Many people came to reason that they would be able to do it and invested in that market, with dire consequences for portfolios. Today the P/E of the S&P 500 stands at 23.8X next year's earnings estimates, with the "mega-cap" stocks having average P/E ratios substantially higher. Clearly, this is not something that is sustainable over the long-term. I personally have only three investments: my stake in Corbin & Company and the Corbin Small-Cap Value Fund are 99% of the total. Clearly, I believe in this process and these securities. I am taking every opportunity to personally add to what we are doing here, and I urge you, at these prices, to continue to do the same. Some of America's best companies are on sale, and, although there is no blue light flashing to indicate it, I believe that it is as apparent as when the Gulf War Crisis caused a vast markdown of stocks in 1991, rising rates triggered the Crash of 1987, and the political and economic events of 1973 caused that decline. I thank you for your support and can promise you that we are doing everything possible to achieve the maximum results, while not straying from our discipline. Sincerely, David A. Corbin, CFA President and Chief Investment Officer
Corbin Small-Cap Value Fund Schedule of Investments - October 31, 1998 Common Stocks - 92.6% Shares Value Auto Parts & Accessories - 4.2% Bonded Motors, Inc. (a) 12,000 $ 96,000 ----------------- Bottled & Canned Soft Drinks - 3.2% Cott Corp (Quebec) (a) 12,440 73,085 ----------------- Business Services - 4.0% VTEL Corp. (a) 20,000 91,250 ----------------- Building Materials - 2.6% Republic Group, Inc. 4,000 59,250 ----------------- Catalog & Mail Order Services - 7.7% Successories, Inc. (a) 59,000 177,000 ----------------- Communications - 3.7% Unifab International Inc. (a) 7,000 85,312 ----------------- Department Stores - 3.7% Duckwall Alco Stores, Inc. (a) 7,500 84,375 ----------------- Diversified Industrials - 3.0% Griffon Corporation (a) 7,000 68,687 ----------------- Electrical Components - 3.5% Kuhlman Corp. 3,000 79,500 ----------------- Fabricated Metal Products - 7.4% American Buildings Co. (a) 4,630 111,120 Butler Manufacturing Co. 2,600 58,500 ----------------- 169,620 ----------------- Financial Services - 17.0% Aames Financial Corp. 67,100 276,788 Delta Financial Corp. (a) 5,000 28,438 Onyx Acceptance Corp. (a) 13,600 85,000 ----------------- ----------------- 390,226 ----------------- Food Retailers - 1.1% Ingles Markets Inc., Class A 2,000 25,000 ----------------- Oil Drilling & Exploration - 1.3% Dawson Geophysical (a) 3,000 30,000 ----------------- Oil & Gas Services - 3.0% Seitel Corp. (a) 5,100 67,575 ----------------- Corbin Small-Cap Value Fund Schedule of Investments - October 31, 1998 - continued Common Stocks - continued Shares Value Railroads - 0.8% Rail Tex, Inc. (a) 1,700 $ 18,381 ----------------- Recreational Vehicles - 4.6% Durakon Industries, Inc. (a) 11,000 105,875 ----------------- Restaurants - 2.8% Lone Star Steakhouse & Saloon (a) 8,030 64,240 ----------------- Retailers - 5.3% Rush Enterprises, Inc. (a) 8,400 95,550 Titan Corp. (a) 5,000 25,938 ----------------- ----------------- 121,488 ----------------- Toys - 3.4% Play by Play Toys & Novelties (a) 9,500 78,375 ----------------- Trucks/Trailers - 3.7% Wabash National Corp. 4,715 83,690 ----------------- Steel Manufacturing - 6.6% Quanex Corp. 3,780 63,788 Steel of West Virginia, Inc. (a) 14,540 86,332 ----------------- 150,120 ----------------- ----------------- TOTAL COMMON STOCKS (Cost $2,674,140) 2,119,049 ----------------- Money Market Securities - 8.0% Principal Amount Value Star Treasury 4.83% 11/2/98 (Cost $183,279) $ 183,279 $ 183,279 ----------------- TOTAL INVESTMENTS - 100.6% (Cost $2,857,419) 2,302,328 Excess of liabilities over other assets - (0.6%) (13,324) ----------------- Total Net Assets - 100.0% $ 2,289,004 ================= Legend (a) non-income producing
Corbin Small-Cap Value Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $2,857,419) $ 2,302,328 Interest receivable 220 -------------------- Total assets 2,302,548 Liabilities Redemptions payable $ 11,405 Accrued investment advisory fee payable 2,139 --------------- Total liabilities 13,544 -------------------- Net Assets $ 2,289,004 ==================== Net Assets consist of: Paid in capital $ 3,397,627 Accumulated undistributed net investment income (loss) (1,444) Accumulated undistributed net realized gain (loss) on investments (552,088) Net unrealized appreciation (depreciation) on investments (555,091) -------------------- Net Assets, for 345,840 shares $ 2,289,004 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($2,289,004/345,840) $ 6.62 ====================
Corbin Small-Cap Value Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 16,124 Interest Income 6,197 -------------------- Total Income 22,321 Expenses Investment advisory fee $ 25,371 Trustees' fees 954 ---------------- Total expenses before reimbursement 26,325 Reimbursed expenses (954) ---------------- Total Operating Expenses 25,371 -------------------- Net Investment Income (Loss) (3,050) -------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (467,038) Change in net unrealized depreciation on investment securities (599,782) ----------------- -------------------- Net gain (loss) on investment securities (1,066,820) -------------------- Net increase (decrease) in net assets resulting from operations $ (1,069,870) ====================
Corbin Small-Cap Value Fund Statement of Changes in Net Assets For the periods ended October 31 Increase/(Decrease) in Net Assets 1998 1997 (a) Operations Net investment income (loss) $ (3,050) $ (5) Net realized gain (loss) (467,038) 5,918 Change in net unrealized appreciation (depreciation) (599,782) 44,691 ---------------- ---------------- Net Increase in net assets resulting from operations (1,069,870) 50,604 ---------------- ---------------- Distributions to shareholders: From net investment income (1,444) - From net realized gain (90,963) - ---------------- ---------------- ---------------- Total distributions (92,407) - ---------------- Share Transactions Net proceeds from sale of shares 2,309,098 1,283,875 Shares issued in reinvestment of distributions 86,814 - Shares redeemed (279,062) (48) ---------------- ---------------- Net increase in net assets resulting from share transactions 2,116,850 1,283,827 ---------------- ---------------- Total increase in net assets 954,573 1,334,431 Net Assets Beginning of period $ 1,334,431 $ - ---------------- ---------------- End of period [including undistributed net investment income(loss) of ($3,050) and ($5)] $ 2,289,004 $ 1,334,431 ================ ================ (a) June 30, 1997 (Commencement of Operations) to October 31, 1997.
Corbin Small-Cap Value Fund Financial Highlights For the periods ended October 31 1998 1997 (b) Selected Per Share Data Net asset value, beginning of period $ 11.03 $ 10.00 ------------ ------------- Income from investment operations Net investment income (0.01) - Net realized and unrealized gain (loss) (3.76) 1.03 ------------ ------------- Total from investment operations (3.77) 1.03 ------------ ------------- Less Distributions From net interest income (0.01) - From net realized gain (loss) (0.63) - ------------ ------------- Total Distributions (0.64) - ------------ ------------- Net asset value, end of period $ 6.62 $ 11.03 ============ ============= Total Return -36.07% 30.32% (a) Ratios and Supplemental Data Net assets, end of period (000) $2,289 $1,334 Ratio of expenses to average net assets 1.25% (a) 1.23% (a) Ratio of expenses to average net assets before reimbursement 1.30% (a) 1.23% (a) Ratio of net investment income to average net assets (0.15)% (a) 0.00% before reimbursement (0.20)% (a) 0.00% Portfolio turnover rate 86.42% 20.41% (a) (a) Annualized (b) June 30, 1997 (Commencement of Operations) to October 31, 1997
CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 1. ORGANIZATION The Corbin Small-Cap Value Fund (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. 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, and 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. 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 and pays all of the expenses of the Fund except brokerage commissions, taxes, interest, fees and expenses of the 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 1.25% 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 year ended October 31, 1998, the Adviser has received a fee of $25,371 from the Fund. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Fund's business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $30,000 from the Adviser for administrative services provided to the Fund. The Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor") to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the CORBIN SMALL-CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $3,397,627. Transactions in capital stock were as follows: For the periods ended October 31: 1998 1998 1997 (a) 1997 (a) Shares Dollars Shares Dollars -------------------- --------------------- --------------------- -------------------- Shares sold 248,212 $2,309,098 120,985 $1,283,875 Shares issued in reinvestment of dividends 8,831 86,814 - - Shares redeemed (32,184) (279,062) (4) (48) -------- ------------ ----------- ------------ 224,859 $2,116,850 120,981 $1,283,827 -------------------- --------------------- --------------------- --------------------
(a) June 30, 1997 Commencement of Operations) to October 31, 1997 NOTE 5. INVESTMENTS For the year ended October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $3,758,019 and $1,748,592, respectively. The gross unrealized appreciation for all securities totaled $56,580 and the gross unrealized depreciation for all securities totaled $611,671, for a net unrealized depreciation of $555,091. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $2,857,419. 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, 1998 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 Fund. 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, 1998, Charles Schwab & Co. owned in aggregate more than 25% of the Fund. NOTE 8. RECLASSIFICATION In accordance with SOP 93-2, the Fund has recorded a reclassification in the capital accounts. As of October 31, 1998, the Fund recorded permanent book/tax differences of $3,050 from undistributed net investment income to paid in capital. 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. NOTE 9. YEAR 2000 ISSUE Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Adviser, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Adviser and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. 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, 1998, 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 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 securities owned as of October 31, 1998, 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, 1998, 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 9, 1998 CARL DOMINO EQUITY INCOME FUND November 1, 1998 Dear Shareholders, Since its inception, the Fund has produced an average annual return of 17.3%, handily outperforming historical norms and the CPI. In the past year, the market has rewarded investment vehicles that focus on growth stocks in glamorous industries like the internet, personal computers and telecommunications. Within this environment, our disciplined, risk averse style failed to keep pace with the higher multiple stocks that have kept the market in positive territory. Comparative Investment 12 Months Average** Returns* Ended 10/31/98 Annual Return - ----------------------------------- ----------------- ----------------- Carl Domino Equity Income Fund -3.2% 17.3% S&P 500 22.0% 24.9% Carl Domino Equity Income Fund S&P 500 03/31/96 $ 10,515.00 $ 10,539.00 6/30/96 $ 11,204.78 $ 11,004.82 9/30/96 $ 11,475.94 $ 11,349.27 12/31/96 $ 12,435.33 $ 12,301.48 3/31/97 $ 12,810.88 $ 12,631.16 6/30/97 $ 14,618.49 $ 14,834.03 9/30/97 $ 16,406.33 $ 15,942.13 12/31/97 $ 16,831.26 $ 16,404.46 3/31/98 $ 18,120.53 $ 18,691.24 6/30/98 $ 16,926.39 $ 19,304.31 9/30/98 $ 14,179.23 $ 17,381.60 10/31/98 $ 15,446.86 $ 18,805.15 * 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, 1998. 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. At times like this, we must remember the markets move in cycles and, during the past year, we have simply been on the downside of the cycle. One of factors which influences the cycle is that growth stocks tend to outperform in periods of low and falling inflation when future earnings are worth more. At the peak of a growth cycle, when the market is expensive or overvalued, it becomes difficult to purchase growth stocks. Therefore, value stocks return to favor. We remain committed to our proven investment strategy and we will continue to do what we always do, which is to identify, research and buy good companies that are currently unappreciated by the market and represent good long term value. While it is impossible to predict the timing of a definitive upturn for value stocks, this should be a good time to invest or commit additional assets to the Fund. Indeed, as the October results indicate (up 8.9% vs. 8.2% for the S&P) the summer market weakness created buying opportunities not seen for years. We appreciate your confidence in us during the past year and want you to know that we will continue to do our best to uncover the best values to own in your Fund. Best regards, Carl J. Domino
CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1998 Common Stocks - 96.6% Shares Value Autos, Auto Parts - 3.0% Chrysler Corp. 1,635 $ 78,684 Snap On Inc. 4,000 141,750 ---------------- ---------------- 220,434 ---------------- Chemicals - 3.0% DuPont (E.I.) De Nemours 2,000 115,000 Witco Corp. 5,400 101,588 ---------------- ---------------- 216,588 ---------------- Paper & Forest Products - 1.9% Weyerhaeuser Co. 3,000 140,438 ---------------- ENERGY Oil & Gas - 18.0% Conoco Inc. (a) 10,000 248,750 Midcoast Energy Resources 4,400 83,600 Mobil Corporation 2,000 151,375 Sonat Corporation 4,100 124,281 Sun Co., Inc. 3,500 120,094 Unocal Corp. 4,500 152,719 USX Marathon Group 3,800 124,213 Williams Companies 7,100 194,806 YPF Sociedad Anonima 4,200 121,538 ---------------- 1,321,376 ---------------- Retail - 4.7% Intimate Brands 7,600 170,050 May Department Stores 2,900 176,900 ---------------- 346,950 ---------------- Lodging, Restaurants, Leisure - 2.0% Adams Golf (a) 4,000 18,500 Cedar Fair, LP 1,000 24,812 Patriot American Hospitality Inc. 11,980 106,322 ---------------- 149,634 ---------------- NON-DURABLES Cosmetics 4.7% Avon Products 4,740 188,118 International Flavors & Fragrances 4,100 153,494 ---------------- ---------------- 341,612 ---------------- Food - 5.0% General Mills Inc. 1,800 132,300 Heinz (H.J.) 1,800 104,625 Quaker Oats 2,200 129,937 ---------------- ---------------- 366,862 ---------------- Household Products - 1.6% Kimberly-Clark Group 2,400 115,800 ---------------- CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1998 - continued Common Stocks - continued Shares Value Tobacco - 1.8% Philip Morris 2,550 $ 130,369 ---------------- HEALTH Drugs - 6.2% American Home Products Corp. 3,300 160,875 Glaxo Wellcome PLC 2,300 143,175 Pharmacia & Upjohn Inc. 2,800 148,225 ---------------- ---------------- 452,275 ---------------- Diversified Medical - 2.4% Pall Corporation 7,000 176,750 ---------------- Health Care - 1.2% Baxter International Inc. 1,500 89,906 ---------------- Staples/Miscellaneous Services - 1.1% Deluxe Corporation 2,600 84,175 ---------------- Services/Miscellaneous - 2.7% DA Consulting Group 1,000 15,000 EPL Technologies 3,000 15,562 Genisis Direct, Inc. (a) 1,000 4,625 Healthword Corp (a) 3,000 45,000 Unisource Worldwide 12,550 115,303 ---------------- 195,490 ---------------- Technology- 1.0% Hypercom Corp.(a) 8,000 76,000 ---------------- Electrical Equipment - 3.3% AMP Inc. 2,617 107,460 SPX Corp. 1 16 Thomas & Betts 3,000 134,063 ---------------- ---------------- 241,539 ---------------- Diversified Machinery - 2.1% Federal Signal Corp. 6,465 155,564 ---------------- Diversified Technology- 1.9% Tektronix Inc. 8,000 143,000 ---------------- Airlines, Truckers, & Railroads - 1.5% Knightsbridge Tankers Ltd. A 5,000 108,750 ---------------- Consumer Non-Durables - 0.4% Ultralife Batteries, Inc. 5,000 26,719 ---------------- Photography/Office Equipment - 3.2% Eastman Kodak 1,850 143,375 Minnesota Mining & Manufacturing 1,100 88,000 ---------------- ---------------- 231,375 ---------------- Finance Major Regional & Other Banks - 8.5% BankAmerica Corp. 1,700 97,750 Community Savings Bankshares 7,000 156,625 PNC Bank Corp. 2,200 110,000 South Trust Corp. 3,650 133,225 Summitt Bancorp 3,400 128,988 ---------------- 626,588 ---------------- Insurance - 2.0% ITT Hartford Financial Service Group 1,700 90,313 Penn-American Group 6,000 56,625 ---------------- ---------------- 146,938 ---------------- Utilities Electric - 2.2% Korea Electric Power Corp.-SP ADR 13,000 165,750 ---------------- Natural Gas - 2.0% El Paso Energy Corp. 4,054 143,664 ---------------- Telephone/Communications- 8.1% AT&T Corp. 2,700 168,075 Amerilink Corp. (a) 1,900 16,150 Frontier Corp. 4,500 135,281 Harris Corp. 5,000 175,313 Telefonica de Argentina 3,000 99,187 ---------------- 594,006 ---------------- REITs - 1.1% CCA Prison Realty Corp. 3,500 82,250 ---------------- TOTAL COMMON STOCKS - % (Cost $6,898,701) 7,090,802 ---------------- Preferred Stock - 1.2% Conseco Financial Preferred Series F (Cost $100,000) 2,000 85,875 ---------------- CARL DOMINO EQUITY INCOME FUND Schedule of Investments - October 31, 1998 - continued Principal Amount Amount Money Market Securities - 1.3% Star Treasury 4.96% 11/2/98 (Cost $93,675) $ 93,675 $ 93,675 ---------------- TOTAL INVESTMENTS - 99.1% (Cost $ 7,092,376) 7,270,352 Other assets less liabilities - 0.9% 67,408 ---------------- TOTAL NET ASSETS - 100.00% 7,337,760 ---------------- (a) non-income producing
Carl Domino Equity Income Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $7,092,376) $ 7,270,352 Cash 175,660 Receivables: Investments sold 38,466 Subscriptions 1,000 Dividends 9,808 Interest 424 Reimbursement receivable 1,864 -------------------- Total assets 7,497,574 Liabilities Payables: Investments purchased 149,412 Advisory fee 8,648 Trustees fees 1,754 ------------------ Total liabilities 159,814 -------------------- Net Assets $ 7,337,760 ==================== Net Assets consist of: Paid in capital $ 7,133,944 Accumulated undistributed net investment income 68,952 Accumulated undistributed net realized gain (loss) on investments (43,112) Net unrealized appreciation on investments 177,976 -------------------- Net Assets, for 499,817 shares $ 7,337,760 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($7,337,760/499,817) $ 14.68 ====================
Carl Domino Equity Income Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend income $ 157,609 Interest income 5,223 -------------------- Total Investment Income 162,832 Expenses Investment advisory fee $ 85,109 Trustees' fees 1,844 --------------- Total Expenses before Reimbursement 86,953 Reimbursed expenses (1,844) --------------- Total Operating Expenses 85,109 -------------------- Net Investment Income (Loss) 77,723 -------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment transactions (14,920) Change in net unrealized appreciation (depreciation) on investment securities (341,521) --------------- Net gain (loss) on investment securities (356,441) -------------------- Net increase (decrease) in net assets resulting from operations $ (278,718) ====================
Carl Domino Equity Income Fund Statement of Changes in Net Assets For the year For the year ended ended October 31, 1998 October 31, 1997 Increase/(Decrease) in Net Assets Operations Net investment income $ 77,723 28,588 Net realized gain on investment transactions (14,920) 224,774 Change in net unrealized appreciation (341,521) 392,756 --------------- --------------- Net Increase in net assets resulting from operations (278,718) 646,118 --------------- --------------- Distributions to shareholders: From net investment income (37,359) (11,997) From net realized gain (250,840) (10,581) --------------- --------------- --------------- --------------- Total distributions (288,199) (22,578) --------------- --------------- Capital Share Transactions Net proceeds from sale of shares 4,543,528 2,354,635 Shares issued in reinvestment of distributions 285,845 20,953 Shares redeemed (675,074) (371,396) --------------- --------------- Net increase in net assets resulting from share transactions 4,154,299 2,004,192 --------------- --------------- Total increase in net assets 3,587,382 2,627,732 Net Assets Beginning of period $ 3,750,378 $ 1,122,646 --------------- --------------- End of period [including undistributed net investment income of $68,952 and $28,588, respectively.] $ 7,337,760 $ 3,750,378 =============== ===============
Carl Domino Equity Income Fund Financial Highlights For the periods ended October 31 1998 1997 1996 (b) Selected Per Share Data Net asset value, end of period $16.15 $12.03 $10.00 --------------- --------------- --------------- Income from investment operations Net investment income 0.21 0.19 0.16 Net realized and unrealized gain (loss) (0.60) 4.15 1.87 --------------- --------------- --------------- Total from investment operations (0.39) 4.34 2.03 --------------- --------------- --------------- Less Distributions From net investment income (0.14) (0.22) - From net realized gain (0.94) - - --------------- --------------- --------------- Total distributions (1.08) (0.22) - --------------- --------------- --------------- Net asset value, end of period $14.68 $16.15 $12.03 =============== =============== =============== Total Return (3.17)% 36.58% 20.64% (a) Ratios and Supplemental Data Net assets, end of period (000) $7,338 $3,750 $1,122 Ratio of expenses to average net assets before expense reductions 1.53% 1.55% 1.73% (a) Ratio of expenses to average net assets 1.50% 1.50% 1.51% (a) Ratio of net investment income to average net assets before expense reductions 1.33% 1.22% 1.35% (a) Ratio of net investment income to average net assets 1.37% 1.28% 1.57% (a) Portfolio turnover rate 75.95% 52.49% 62.51% (a) (a) Annualized (b) For the period November 6, 1995 (commencement of operations) to October 31, 1996
CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1998 NOTE 1. ORGANIZATION Carl Domino Equity Income Fund (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. 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, 1998 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 year ended October 31, 1998, the Adviser received a fee of $85,109 from the Fund. CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES -continued The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Fund's business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $30,000 from the Adviser for administrative services provided to the Fund. The Fund retains AmeriPrime Financial Securities, Inc. (the Distributor) to act as the principal distributor of Fund shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $7,133,944. Transactions in capital stock were as follows: For the periods ended October 31: 1998 1998 1997 1997 Shares Dollars Shares Dollars Shares sold 293,838 $4,543,528 165,650 $2,354,635 Shares issued in reinvestment of dividends 18,442 285,845 1,664 20,953 Shares redeemed (44,714) (675,074) (28,359) (371,396) -------- --------- -------- --------- 267,566 $4,154,299 138,955 $2,004,192 ======== ========= ======== =========
CARL DOMINO EQUITY INCOME FUND Notes to Financial Statements October 31, 1998 NOTE 5. INVESTMENTS For the period ended October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $6,005,233 and $4,206,319, respectively. The gross unrealized appreciation for all securities totaled $818,695 and the gross unrealized depreciation for all securities totaled $640,719 for a net unrealized appreciation of $177,976. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $7,092,376. 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 April 30, 1998, Carl Domino Associates, L.P., and entities which the Adviser could be deemed to control or have investment discretion over, owned in aggregate more than 25% of the Fund. NOTE 8. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Carl Domino Equity Income Fund We have audited the accompanying statement of assets and liabilities of Carl Domino Equity Income Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, and the related statement of operations, the statement of changes in net assets, and 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 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, 1998, 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 Carl Domino Equity Income Fund as of October 31, 1998 and 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 9, 1998 Fountainhead Special Value Fund Shareholder Letter Dear Fellow Shareholders: October 31, 1998 marked the completion of the Fountainhead Special Value Fund's second year of operation. Since the Fund's inception on December 31, 1996, our cumulative return is 27.44%. The annualized return for these 22 months is 14.12%. 1998 proved difficult for small- and mid-cap stocks. However, despite a trying environment, Fountainhead performed relatively well, better than both the S&P 400 MidCap and the Russell 2000. For the 1998 fiscal year, which ended October 31, the Fund returned (4.67)%, compared to (11.86)% for the Russell 2000 and (6.70)% for the S&P 400 MidCap. While negative returns are never a delight, we are confident that the future looks rewarding for our holdings, and that the market will eventually realize the value in small- and mid-cap stocks. This should lead to significant appreciation over the long term.
----------------------------------------------------------------- Returns for the Periods Ended 10/31/98 ----------------------------------------------------------------- Total Average Annual Return Since Inception Fund/Index 1 Year December 31, 1996 ---------- ------ ----------------- Fountainhead Special Value Fund -4.67% 14.12% S&P 400 MidCap -6.70% 17.22% Russell 2000 -11.86% 3.59%
Fountainhead Special Value S&P 400 Russell 2000 Year Fund MidCap - ------------------------------------------------------------------------------- 12/31/96 $ 10,000 $ 10,000 $ 10,000 1/31/97 $ 10,420 $ 10,375 $ 10,200 2/28/97 $ 10,830 $ 10,290 $ 9,952 3/31/97 $ 10,140 $ 9,852 $ 9,482 4/30/97 $ 9,860 $ 10,107 $ 9,509 5/31/97 $ 10,869 $ 10,991 $ 10,567 6/30/97 $ 11,560 $ 11,300 $ 11,021 7/31/97 $ 11,990 $ 12,419 $ 11,533 8/31/97 $ 11,860 $ 12,404 $ 11,797 9/30/97 $ 12,950 $ 13,117 $ 12,661 10/31/97 $ 13,370 $ 12,546 $ 12,105 11/30/97 $ 13,070 $ 12,732 $ 12,026 12/31/97 $ 13,665 $ 13,226 $ 12,237 1/31/98 $ 13,433 $ 12,975 $ 12,043 2/28/98 $ 14,757 $ 14,050 $ 12,933 3/31/98 $ 15,910 $ 14,684 $ 13,466 4/30/98 $ 16,476 $ 14,951 $ 13,540 5/31/98 $ 15,758 $ 14,278 $ 12,810 6/30/98 $ 16,232 $ 14,368 $ 12,837 7/31/98 $ 15,424 $ 13,811 $ 11,798 8/31/98 $ 11,976 $ 11,241 $ 9,506 9/30/98 $ 12,229 $ 12,291 $ 10,251 10/31/98 $ 12,744 $ 13,387 $ 10,669 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 400 MidCap Index and the Russell 2000 Index on December 31, 1996 and held through October 31, 1998. The S&P 400 MidCap Index and the Russell 2000 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. Thus, our performance was in between the small- and mid-cap indices, which could generally be expected for a fund with a mix of small- and mid-cap stocks. In 1998, most mutual-fund returns were highly correlated with the market capitalization of the stocks in which they invested, as well as their investment style (e.g., value versus growth). The turbulent 1998 market shifts had an enormous magnifying impact on investment-fund returns. Common Equity Unweighted Price Performance (YTD as of 10-31-98) By Capitalization Unweighted Performance < $250 million (27.60)% $250 million - $2 billion (21.75)% $2 billion - $5 billion (11.39)% $5 billion - $20 billion (0.61)% > $20 billion 13.36% Courtesy: Salomon Smith Barney The Fountainhead Special Value Fund had a stellar performance during the first three quarters of fiscal 1998, with share net asset value increasing 23%. However, the violent sell-off in August, September, and early October caused our Fund to give up all the gain achieved earlier in the year. Key questions asked by investors are what caused the market downturn and why small- and mid-cap stocks were hurt much more than large-caps. The initial market drop was precipitated when the Russian government signaled that it would default on its debt obligations, thus beginning the toppling of a long line of financial dominoes. Successive waves of selling--first foreign securities, then US securities--by hedge funds and mutual funds scrambling for liquidity fed the panic which swept world markets already wrestling with the Asian contagion. Further panic resulted from the implosion of the giant Long-Term Capital Management hedge fund. As some of America's most respected banks and brokerage houses reported major losses from trading and hedge-fund loans, investors began to fear a financial meltdown. Mutual funds investing in foreign securities, forced to meet redemptions, were unable to sell many foreign securities and thus were compelled to dump their other bonds and stocks (primarily U.S. holdings), further driving down prices. The result was a massive flight to liquidity, replacing the earlier irrational exuberance with irrational fear. Not knowing the extent of the global problems, investors shifted funds to the most liquid securities, US Treasury bonds and large-cap stocks. Small- and mid-cap stocks were sold off at fire-sale levels. As indicated in the chart below, by October 31 the average NASDAQ stock was down 43.7% from its 52-week high, and the average NYSE stock was down 31.6%. Common Equity Decline from 52-Week High (YTD as of 10-31-98) Average % Down % Down % Down Decline 10%+ 20%+ 30%+ NASDAQ 43.7% 94.4% 84.7% 69.4% NYSE 31.6% 85.9% 67.8% 47.5% S&P 500 22.6% 76.2% 51.2% 29.6% Courtesy: Salomon Smith Barney During this time of investor disarray, we remained committed to our investment philosophy. We did not sell stocks just because they declined, nor did we join the stampede to highly liquid large-cap securities. Since our portfolio consists of stocks carefully screened by our long-time investment criteria, we felt confident that our undervalued stocks would bounce back. After the market bottom of October 8, the Fund's net asset value made a major recovery as markets were reassured by Federal Reserve actions and other positive developments. It is important to emphasize that regardless of market conditions, we will continue to adhere to our long-term investment style, which includes three buy criteria. The first element includes stocks selling well below their estimated private-market value, defined as what these companies are worth to a strategic or financial buyer as a going business. Second, we buy stocks of companies selling at significant discounts to their projected EPS growth rates. Finally, we invest in stocks selling at low valuation multiples, such as price-to-earnings or price-to-book, but which have sound fundamentals. Our portfolio includes securities meeting these rigorous tests and offering extraordinary value. Included with this report is a capsule description of the securities held by your Fund at the end of the fiscal year. 1998 Achievements Fund assets increased from $2.6 million to $6.6 million. The Fund experienced positive cash inflows (i.e., more new buyers than sellers) in every month during fiscal 1998. Shareholders had no liability for capital-gains tax. In summary, while fiscal 1998 was a difficult year for most small- and mid-cap mutual funds (including Fountainhead), we are quite pleased with our performance since the market bottom on October 8, and we believe we are well-positioned for an excellent 1999. This optimism is indicated by the fact that all our investment team and key administrative staff are shareholders in the Fund. Sincerely, Roger E. King Chairman and President Highlights of Selected Fountainhead Holdings as of October 31, 1998 Banks Riggs National Corp. - RIGS is a multi-bank holding company based in Washington, DC involved in a variety of banking-related activities through its subsidiaries. RIGS operates in Washington, DC; New Haven, Connecticut; Miami, Florida; London, England; Paris, France; and Nassau, Bahamas. The Company also provides domestic investment-advisory services. Broadcasting/Cable Cablevision Systems Corporation - CVC owns and operates cable-TV systems in eighteen states, with operations in Boston, Cleveland, and metropolitan New York. The Company also manages entertainment, news, and sports programming; owns a majority interest in Madison Square Garden; and manages the operations of Radio City Music Hall. Century Communications - Class A - CTYA, one of the ten largest cable operators in the United States, owns, operates, and manages 72 cable TV systems in 25 states and Puerto Rico. The Company also owns and operates cellular-telephone systems throughout the United States. MediaOne Group, Inc. - UMG, formerly US WEST Media Group, is a broadband communications company. The Company provides the use of broadband communications and the Internet to customers in the United States, Europe, and Asia. UMG holds interests in wireless communications businesses outside the United States. Paxson Communications, Inc. - PAX owns and operates a nationwide network of 73 owned, operated, and affiliated TV stations. PAX recently launched its PaxNet(C) family entertainment network; its schedule consists of shows like Touched by an Angel, Promised Land, Dr. Quinn, Medicine Woman, Life Goes On, I'll Fly Away, and Christy. Consumer Goods: Foods Opta Foods Ingredients, Inc. - OPTS develops, makes, and market proprietary food ingredients to consumer food companies and food-service companies. The Company's products improve food's nutritional content, healthfulness, texture, and taste. OPTS' food ingredients are used by more than 150 food companies, including five of the ten largest US consumer packaged-food companies and three of the world's largest quick-service restaurant chains. Health-Care Services Capital Senior Living Corp. - CSU, one of the country's largest developers and operators of senior living communities, currently operates in 33 communities in seventeen states. The Company's operating philosophy emphasizes a continuum of care, which integrates independent living, assisted living, and personal care to provide residents the opportunity to age in place. Integrated Health Services, Inc. - IHS is the fourth largest home-health company and the fifth largest long-term care company, operating 1,000 service locations, 77 of which contain medical specialty units, in forty states. The Company has undergone a significant shift in the past year to home-health from sub-acute and long-term care, trying to become a leading post-acute provider with networks of home-health agencies, specialty post-acute medical units, and long-term care facilities. Insurance American Bankers Insurance Group, Inc. - ABI provides specialty credit-related insurance products, including credit unemployment, accidental death and dismemberment, disability, property, and life insurance. The Company's products are primarily sold through financial institutions and other entities providing consumer financing in the United States, Canada, the United Kingdom, Latin America, and the Caribbean. Medical Devices Respironics, Inc. - RESP is a leading designer, manufacturer, and marketer of technologically advanced medical devices for use in home, hospital, and alternative clinical-care settings. In addition to therapy products for obstructive sleep apnea and portable ventilation, the Company's major product lines include monitoring devices for newborns, sleep diagnostics, and a variety of products for the treatment of respiratory disorders, including asthma-management devices. St. Jude Medical, Inc. - STJ, the world's largest manufacturer of mechanical heart valves, serves physicians worldwide with cardiovascular and vascular products. The Company's products include prosthetic heart valves, vascular grafts, an intra-aortic balloon pump system, a centrifugal blood-pump system, and cardiac rhythm-management products. The Company has great franchise value as the #1 or #2 player in all its markets. Savings & Loans Astoria Financial Corp. - ASFC ranks as the second largest publicly traded thrift in New York and the sixth largest in the country, with more than $18 billion in assets. ASFC provides retail banking, mortgages, and consumer-loan services to more than 700,000 customers, and originates mortgage loans through extensive broker networks and loan-production offices. Telecommunications Alltel Corp. - AT provides wireline local, long-distance, network access and Internet services, wireless communications, wide-area paging service and information-processing management services, and advanced applications software. Clearnet Communications, Inc. -CLNTF operates enhanced specialized mobile radio, a digital wireless service. The Company provides the ability to integrate enhanced dispatch, mobile telephone, text messaging with acknowledgment paging, and mobile data services. CLNTF, which provides analog dispatch services across Canada, operates a multi-location mobile communications retailer. Nextel Communications, Inc. - NXTL provides digital and analog wireless-communications services to its US customers under the Nextel(C) name. NXTL provides specialized mobile-radio wireless-communications services in the United States and Hawaii. Rural Cellular Corp. - RCCC provides wireless telecommunications in selected markets in Maine, Minnesota, North Dakota, South Dakota, and Wisconsin. Western Wireless Corp. - WWCA, a leading provider of wireless-communications services in the western United States, offers cellular service under the Cellular One name in seventeen states. As a result of the Company's combined cellular and PCS licenses, as well as its joint ventures, WWCA provides service covering 59% of the continental United States.
Fountainhead Special Value Fund Schedule of Investments - October 31, 1998 Common Stocks - 92.7% Shares Value Banks and Bank Holding Companies - 1.7% Riggs National Corp. 4,600 110,975 ---------------- Broadcasting - 9.7% Cablevision Systems (a) 8,000 386,000 Mediaone Group Inc. 1,400 59,238 Paxson Communications Corp. (a) 24,000 201,000 ---------------- 646,238 ---------------- Communications - 14.7% Alltel Corp. 3,404 159,350 Clearnet Communications Inc. (a) 31,500 230,344 Nextel Communications, Inc. (a) 14,900 270,063 Rural Cellular Corp (a) 15,400 184,800 Western Wireless Corp.(a) 6,400 129,600 ---------------- ---------------- 974,157 ---------------- Drugs - 2.7% Dura Pharmaceuticals, Inc. (a) 14,900 179,731 ---------------- Financial Services - 3.7% Arcadia Financial Ltd. (a) 30,000 125,625 Astoria Financial Corp. 2,760 118,680 ---------------- ---------------- 244,305 ---------------- Food - 3.1% Opta Food Ingredients Inc. (a) 50,000 203,125 ---------------- Healthcare & Healthcare Services - 15.1% Capital Senior Living Corp. (a) 10,000 117,500 Integrated Health Services 18,000 291,375 Mariner Health Corp. (a) 53,600 311,550 Sun Healthcare Group (a) 48,000 282,000 ---------------- ---------------- 1,002,425 ---------------- Insurance - 8.8% American Bankers Insurance Group 11,000 491,563 Amerin Corp. (a) 4,300 91,912 ---------------- ---------------- 583,475 ---------------- Media & Leisure - 9.8% Century Communications-Class A 29,500 652,687 ---------------- Medical Devices - 9.0% Respironics, Inc. (a) 19,500 301,030 St. Jude Medical Inc. (a) 10,400 293,800 ---------------- ---------------- 594,830 ---------------- Oil & Gas Services - 7.1% R & B Falcon Corp. (a) 17,200 233,275 Santa Fe International Corp. 13,000 239,687 ---------------- ---------------- 472,962 ---------------- Oil & Gas Exploration & Production - 2.6% Nuevo Energy Co. (a) 8,200 173,738 ---------------- Technology - 4.7% Cabletron Systems (a) 27,300 310,538 ---------------- TOTAL COMMON STOCKS (Cost $6,439,696) 6,149,186 ---------------- Money Market Securities - 6.3% Principal Amount Star Treasury, 4.92%, 11/2/98 (Cost $419,228) $419,228 419,228 ---------------- TOTAL INVESTMENTS - 99.0% (Cost $6,858,924) 6,568,414 Liabilities less other assets - 1.0% 68,906 ---------------- Total Net Assets - 100.0% $ 6,637,320 ================ (a) non-income producing
Fountainhead Special Value Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (Cost $6,858,924) $ 6,568,414 Receivables: Investments sold 68,375 Subscriptions 4,516 Dividends 705 Interest 1,617 -------------------- Total assets 6,643,627 Liabilities Accrued investment advisory fee payable $ 6,301 Other payables and accrued expenses 6 ------------------ Total liabilities 6,307 -------------------- Net Assets $ 6,637,320 ==================== Net Assets consist of: Paid in capital $ 6,944,470 Accumulated undistributed net realized gain (16,640) Net unrealized appreciation on investments (290,510) -------------------- Net Assets, for 526,479 shares $ 6,637,320 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($6,637,320/526,479) $ 12.61 ====================
Fountainhead Special Value Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 6,894 Interest Income 23,052 ----------------- Total Income 29,946 Expenses Investment advisory fee 63,759 Administration fees 30,000 Transfer agent fees 15,926 Pricing & bookkeeping fees 11,598 Legal fees 5,532 Custodian fees 6,329 Audit fees 899 Registration fees 12,295 Shareholder reports 6,180 Trustees' fees 780 Miscellaneous 1,750 -------------- Total operating expenses before reimbursement 155,048 Reimbursed expenses (87,661) -------------- Total operating expenses 67,387 ----------------- Net Investment Income (Loss) (37,441) ----------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (188) Change in net unrealized appreciation(depreciation) on investment securities (655,499) ------------- Net gain (loss) on investment transactions (655,687) ----------------- Net increase in net assets resulting from operations $ (693,128) =================
Fountainhead Special Value Fund Statement of Changes in Net Assets For the year For the ended period ended Increase/(Decrease) in Net Assets October 31, 1998 October 31, 1997 (a) Operations Net investment (loss) $ (37,441) $ (1,544) Net realized gain (loss) (188) 19,269 Change in net unrealized appreciation (depreciation) (655,499) 364,989 ------------------ ------------------ Net Increase in net assets resulting from operations (693,128) 382,714 ------------------ ------------------ Distributions to shareholders: From net investment income - - From net realized gain (34,177) - ------------------ ------------------ Total distributions (34,177) - ------------------ ------------------ Share Transactions Net proceeds from sale of shares 4,888,881 2,274,079 Shares issued in reinvestment 34,164 - Shares redeemed (187,621) (27,592) ------------------ ------------------ Net increase in net assets resulting from share transactions 4,735,424 2,246,487 ------------------ ------------------ Total increase in net assets 4,008,119 2,629,201 Net Assets Beginning of period 2,629,201 - ------------------ ------------------ End of period [including undistributed net investment loss of ($37,441) and ($1,544), respectively. $ 6,637,320 $ 2,629,201 ================== ================== (a) December 31, 1996 (commencement of operations) to October 31, 1997
Fountainhead Special Value Fund Financial Highlights For periods ended October 31 1998 1997 (c) Selected Per Share Data Net asset value, beginning of period $ 13.35 $ 10.00 ------------ ------------- Income from investment operations Net investment income (0.09) (0.02) Net realized and unrealized gain (loss) (0.51) 3.37 ------------ ------------- Total from investment operations (0.60) 3.35 ------------ ------------- Less Distributions From net interest income - - From net realized gain (0.14) - ------------ ------------- Total distributions (0.14) - ------------ ------------- Net asset value, end of period $ 12.61 $ 13.35 ============ ============= Total Return (4.67)% 40.09% (a) Ratios and Supplemental Data Net assets, end of period (000) $6,637 $2,629 Ratio of expenses to average net assets 1.20% (a)(b) 0.97% (a) Ratio of expenses to average net assets before reimbursement 2.76% (a)(b) 8.25% (a) Ratio of net investment income to average net assets after reimbursement (0.67)% (a) (0.16)% (a) Ratio of net investment income to average net assets before reimbursement (2.22)% (a) (7.45)% (a) Portfolio turnover rate 108.31% (a) 130.63% (a) (a) Annualized (b) For the period November 1, 1997 to October 31, 1998 the fund's advisor agreed to reimburse expenses. (c) December 31, 1996 (commencement of operations)to October 31, 1997
FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 1. ORGANIZATION The Fountainhead Special Value Fund. (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. 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 Advisor'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 Advisor 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 Advisor, 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 Advisor 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 Advisor, 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, 1998 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 King Investment Advisors, Inc. (the "Advisor") to manage the Fund's investments. Roger King, President of the Advisor, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Advisor 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 Advisor 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 November 1, 1997 through October 31, 1998, the Advisor has received a fee of $63,759 from the Fund. The Advisor is voluntarily reimbursing certain Fund expenses. There is no assurance that such reimbursement will continue in the future. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage each Fund's business affairs and to provide each Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $25,000 from the Advisor for administrative services provided to each Fund. FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor") to act as the principal distributor of each Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $6,944,470. Transactions in capital stock were as follows: For the periods ended October 31: 1998 1998 1997 (a) 1997 (a) Shares Dollars Shares Dollars Shares sold 341,534 $4,888,881 199,337 $2,274,079 Shares issued in reinvestment of dividends 2,614 34,164 Shares redeemed (14,634) (187,621) (2,375) (27,592) -------- --------- ------- -------- 329,514 $4,735,424 196,962 $2,246,487 ======== ========= ======= ======== (a) For the period December 31, 1996 (commencement of operations) to October 31, 1997.
NOTE 5. INVESTMENTS For the period from November 1, 1997 through October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $10,724,465 and $6,132,252, respectively. The gross unrealized appreciation for all securities totaled $682,683 and the gross unrealized depreciation for all securities totaled $973,193 for a net unrealized depreciation of $290,510. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $6,858,924. FOUNTAINHEAD SPECIAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 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. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1998 the fund recorded permanent book/tax differences of $37,441 from undistributed net investment income to paid in capital. 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. NOTE 8. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the fund could be adversely affected if the computer systems used by the advisor, administrator and servicers do not properly process and calculate date related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The advisor and administrator have taken steps that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. 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, 1998, 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 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 securities owned as of October 31, 1998, 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, 1998 and 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 9, 1998 Dear Fellow Shareholders: Investment Results - Fiscal Year Ended October 1998 The GLOBALT Growth Fund (the "Fund") ended its third October fiscal year with a 13.28% total return for the year. The Fund has returned 79.76% (net of fees) since inception December 1, 1995. Please note that the Fund will pay a dividend on December 30, 1998. Growth of $25,000 GLOBALT S&P 500 Russell 1000 Period Growth Index Index - ------------------------- ------------ ------------ Beginning 12/1/95 $25,000 $25,000 $25,000 Dec-95 $26,600 $25,483 $25,143 Jan-96 $27,600 $26,349 $25,984 Feb-96 $28,199 $26,594 $26,460 Mar-96 $28,549 $26,849 $26,495 Apr-96 $29,074 $27,244 $27,190 May-96 $29,400 $27,947 $28,142 Jun-96 $29,400 $28,053 $28,180 Jul-96 $28,074 $26,813 $26,537 Aug-96 $28,871 $27,379 $27,217 Sep-96 $30,647 $28,920 $29,198 Oct-96 $31,195 $29,718 $29,372 Nov-96 $33,295 $31,965 $31,577 Dec-96 $31,913 $31,332 $30,966 Jan-97 $33,914 $33,289 $33,133 Feb-97 $33,052 $33,550 $32,908 Mar-97 $31,558 $32,172 $31,128 Apr-97 $33,862 $34,092 $33,195 May-97 $35,836 $36,168 $35,597 Jun-97 $37,506 $37,788 $37,025 Jul-97 $40,773 $40,795 $40,303 Aug-97 $39,077 $38,510 $37,947 Sep-97 $40,902 $40,619 $39,814 Oct-97 $39,663 $39,262 $38,343 Nov-97 $40,424 $41,080 $39,967 Dec-97 $41,063 $41,785 $40,415 Jan-98 $41,342 $42,247 $41,623 Feb-98 $44,377 $45,294 $44,753 Mar-98 $46,382 $47,613 $46,539 Apr-98 $47,663 $48,092 $47,181 May-98 $46,466 $47,266 $45,841 Jun-98 $48,859 $49,186 $48,651 Jul-98 $48,219 $48,662 $48,330 Aug-98 $40,533 $41,626 $41,076 Sep-98 $42,203 $44,293 $44,231 Oct-98 $44,929 $47,894 $47,787 Past performance is not predictive of future performance. The GLOBALT Growth Fund's historical results are net of all expenses, versus the gross market benchmarks (the S&P 500 Index and the Russell 1000 Growth Index). Investors are reminded that when trying to achieve benchmark returns, investment management fees, transaction costs and execution costs will be incurred. 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. The Russell 1000 Growth Index is an unmanaged index of 1000 selected "growth" oriented 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. Inception Date: December 1, 1995. From a standing start on December 1, 1995, the Fund ended October 1998 with $11,709,108 in net assets and more than 80 shareholders. We welcome our new shareholders and look forward to furthering the investment objectives of all our shareholders. We believe it is important to note that all GLOBALT 401(k) plan participants have elected to be investors in the Fund. Investment Approach To review, our approach to managing the GLOBALT Growth Fund is to achieve long-term growth of capital by investing in U.S. companies which we believe offer superior growth potential through exposure to rapidly growing foreign markets. The Fund only invests in stocks of U.S. companies that are expected to derive at least 20% of their revenues outside the U.S. Once we construct portfolios, the connection you have to the global marketplace, by being an investor in the GLOBALT Growth Fund, is much greater: the portfolio derives at least 40% of revenues from outside the U.S. GLOBALT's investment team seeks to optimize the Fund's exposure to the best global opportunities. Performance Review The period that just ended was difficult for all equity managers. Developments around the world exerted such pressure on markets that the month of August was the worst August for investors in over 70 years. We continue to invest in high-quality, strong U.S. companies and will use the market volatility to take advantage of attractive investment opportunities as they present themselves. While the Fund trailed the benchmarks for the fiscal year, we believe we have the best opportunity since we established GLOBALT to identify those companies that can grow through these challenging times. Commentary and Outlook Update on the Year 2000 Issue GLOBALT continues to actively and aggressively monitor the Year 2000 compliance initiatives and subsequent progress of companies we own or may potentially own. We feel confident that our ongoing efforts should help decrease the risk to the Fund by being aware of potential negative consequences our companies may face in their transition to the new millenium. Has the World Order Really Changed? The turmoil in emerging markets around the globe is indeed significant, and with respect to Asia, unprecedented. (Uncertainty in Russia and Latin America is not new.) However, useful investment perspective on the economic state of affairs has been woefully lacking. Much of the information being disseminated comes from the evening news, where press accounts have been sensationalized for the sake of headlines and expediency. Events are often presented as having equal importance or gravity, with little distinction between economic and political importance. For example, Russia (2.7% of world GDP) inspired as much fear as Asia (nearly 26% of world GDP) after 14 months in the news. But, has the world order really changed? More specifically, have opportunities for U.S. companies operating in international markets changed substantially or merely situationally? We endeavor each day to develop and reassess an independent point of view that incorporates hard reality, but avoids conventional wisdom and a herd mentality. This is what we conclude: 1. U.S./global companies grow faster U.S. companies with significant international revenues (exports and/or foreign-based operations) still grow faster than domestic-only companies (international operations still add to revenues, not subtract) although at a cyclically lower rate currently. 2. U.S./global companies dominate world markets U.S. multi-nationals (GLOBALT global growers) dominate world markets in numerous sectors, e.g., capital goods, pharmaceuticals, software, entertainment. They sell technologically advanced, productivity-enhancing or non-duplicable products that are essential or highly desired - and in many cases, the leads these companies enjoy are likely to increase because they outspend competitors in research, product development, marketing and distribution. Their positions are further enhanced by access to abundant low cost capital. 3. U.S. domestic-only companies are not immune The notion that domestic companies are immune from "contagion" is simply fallacious. Events in Asia have demonstrated conclusively that all the world economies are irrevocably interdependent. A compelling illustration is the flood of imports entering the U.S. markets from Asian countries trying to earn hard currency, eroding the volume and pricing structure of domestic products in the process. 4. U.S. equity market and U.S. dollar are preferred worldwide The U.S. equity market, with its unmatched liquidity and well-regulated trading, is the market of choice worldwide. The strong U.S. currency is the critical element that assures this. With the decline of Japan, there is no other significant reserve currency in the world. Upheavals in other regions of the world invariably prompt a "flight to safety" to broad, dollar denominated markets. 5. U.S. global companies seize opportunities The best and most opportunistic companies (the core GLOBALT names) use times like these to gain market share and buy facilities and businesses overseas at bargain prices. We have systematically tracked these investments by major U.S. companies, and their cumulative effect over several years will be measurable. 6. The developing world will grow faster The long-term, secular growth rate of the Rest of the World (ROW) remains greater than the U.S. 7. GLOBALT thoroughly researches company specific global data The GLOBALT strategy does not generalize "globalization". It is highly specific as to economic sectors, geographic regions, markets served and individual companies. 8. GLOBALT's "New Growth" database points us in the right direction GLOBALT's New Growth Universe (proprietary database) enables our analysts and portfolio managers to make effective tactical shifts in portfolio composition - e.g., away from given emerging markets toward Western Europe. Investment Conclusion Events in emerging markets are giving U.S. companies and world central banks their strongest test in recent times and it is not over yet. However, the pieces are gradually sorting themselves out, with long-term winners and losers more clearly revealed. While business for many companies is slowing cyclically - in most instances moderately - the winners will experience leveraged or magnified recoveries; i.e., faster future growth. Some of their competitors are weakened or gone, industries are consolidating into more stable business environments, acquisition opportunities are more available at better prices, and U.S. companies sourcing abroad in local currencies are seeing their costs lowered dramatically. It is still a global economy, and this is the best opportunity GLOBALT has had to evaluate management capabilities and build powerful portfolios for the 21st century. As always, your questions and comments are welcome. We appreciate your confidence in the GLOBALT Growth Fund. Sincerely, Angela Z. Allen President and Chief Executive Officer Fund Investment Shares of the Fund are sold on a continuous basis. Through the Fund's transfer agent, Unified Fund Services, you may invest any amount you choose as often as you wish, subject to a minimum initial investment of $25,000 and minimum subsequent investments of $5,000 ($2,000 for IRA accounts) by calling 1-877-BUY-GROWX (877-289-4769). Shares may also be purchased through a broker-dealer or other financial institution authorized by the Fund's distributor (investors may be charged a fee for this service). Purchases can be made by mail or by bank wire (please see prospectus for more information). The Fund is available through the following brokers' no fee transaction programs: J.C. Bradford & Co., Interstate Johnson Lane, NBC Securities, Pacific-American Securities LLC and Jack White & Co. The Fund is also available through Fidelity's FUNDSNetwork with a minimum investment of $2,500 ($1,000 through a qualified retirement plan). It is listed as GLOBALT Growth Fund (symbol: GROWX). Fidelity can be reached at 1-800-544-9697. The Fund is also available through the Schwab Mutual Fund OneSource service at 1-800-435-4000 or on the Internet at www.schwab.com. The minimum investment in the Fund through this service is $2,500 ($1,000 through a qualified retirement plan). The GLOBALT Growth Fund's mutual fund symbol at Schwab is GROWX. The GLOBALT Growth Fund may be made available as an investment option in 401(k) plans custodied at any broker listed above.
GLOBALT Growth Fund Schedule of Investments - October 31, 1998 Common Stock - 91.5% Shares Value Business Equipment & Services - 8.2% Eastman Kodak 4,500 $ 348,750 Minnesota Mining & Manufacturing, Inc. 4,000 320,000 Omnicom Group 5,800 286,738 --------------- --------------- 955,488 --------------- Capital Goods - 8.8% General Electric Co. 6,200 542,500 GTE Corp. 8,300 487,106 --------------- --------------- 1,029,606 --------------- Chemicals - 2.3% Monsanto Co. 6,700 272,188 --------------- Consumer Non-Durables - 8.9% Coca Cola Company 2,450 165,681 Coca Cola Enterprises 6,800 245,225 Gillette Co. 8,000 359,500 Procter & Gamble Co. 3,100 275,513 --------------- 1,045,919 --------------- Consumer Services - 4.7% Service Corp. International 5,400 192,375 Time Warner Inc. 3,900 361,969 --------------- --------------- 554,344 --------------- Energy Sector - 5.1% Exxon Corp. 2,900 206,625 Halliburton Co. 10,900 391,719 --------------- --------------- 598,344 --------------- Financial Services - 8.5% American Express 4,300 380,012 American International Group 3,362 286,610 Franklin Resources Inc. 4,400 166,375 Marsh & McLennan Co. 2,900 160,950 --------------- 993,947 --------------- Health Care - 19.5% Baxter International Inc. 7,100 425,556 Becton Dickinson 7,800 328,575 Bristol Myers Squibb 2,200 243,237 Guidant Corp. 4,400 336,600 Johnson & Johnson 3,812 310,678 Lilly Eli & Co. 5,300 428,969 Pfizer Inc. 1,900 203,894 --------------- 2,277,509 --------------- GLOBALT Growth Fund Schedule of Investments - October 31, 1998 - continued Common Stock - continued Technology Sector - 23.4% Shares Value Cisco Systems Inc. (a) 2,962 $ 186,606 Compaq Computer Corp. 7,800 246,675 Computer Sciences 5,300 279,575 Emerson Electric Co. 3,300 217,800 International Business Machines, Inc. 2,700 400,781 Microsoft Corp. (a) 2,900 307,038 Oracle Corp. (a) 7,600 224,675 Seagate Technology Inc. 6,300 166,163 Sun Microsystems (a) 5,600 326,200 Xerox Corp. 3,900 377,812 --------------- 2,733,325 --------------- Transportation - 2.1% AMR Corp.(a) 3,700 247,900 --------------- Total Common Stock - (Cost $9,379,538) 10,708,570 --------------- Money Market Securities - 6.3% Principal Amount Star Treasury - 4.96% 11/2/98 (Cost $743,064) $ 743,064 743,064 --------------- TOTAL INVESTMENTS - (Cost $10,122,602) - 97.8% 11,451,634 =============== --------------- Other assets less liabilites - 2.2% 257,474 --------------- Total Net Assets - 100.0% $ 11,709,108 =============== (a) non-income producing
GLOBALT Growth Fund Statement of Assets and Liabilities October 31, 1998 Assets Investment in securities, at value (cost $10,122,602) $ 11,451,634 Receivables: Securities sold 258,926 Dividends 5,708 Interest 2,958 Reimbursement of trustees fees 1,844 -------------------- Total assets 11,721,070 Liabilities Payables: Accrued advisory fee $ 10,207 Accrued trustees' fees 1,755 -------------- Total liabilities 11,962 -------------------- Net Assets $ 11,709,108 ==================== Net Assets consist of: Paid in capital $ 9,775,155 Accumulated undistributed net investment income 12,698 Accumulated undistributed net realized gain 592,223 Net unrealized appreciation on investments 1,329,032 -------------------- Net Assets, for 725,607 shares $ 11,709,108 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($11,709,108/725,607) $ 16.14 ====================
GLOBALT Growth Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 102,053 Interest Income 35,171 ------------------- Total Income 137,224 Expenses Investment advisory fee $ 122,484 Trustee's fees 1,844 ---------------- Total Expenses before reimbursement 124,328 Reimbursed trustees fees (1,844) ---------------- Total operating expenses 122,484 ------------------- Net Investment Income 14,740 ------------------- Realized & Unrealized Gain Net realized gain on investment securities 687,055 Change in net unrealized appreciation of investment securities 496,228 ------------------- Net gain 1,183,283 ------------------- Net increase in net assets resulting from operations $ 1,198,023 ===================
GLOBALT Growth Fund Statement of Changes in Net Assets For the year For the year ended ended Increase/(Decrease) in Net Assets October 31, 1998 October 31, 1997 Operations Net investment income (loss) $ 14,740 $ 3,398 Net realized gain 687,055 659,135 Change in net unrealized appreciation 496,228 524,623 ---------------- ---------------- Net Increase in net assets resulting from operations 1,198,023 1,187,156 ---------------- ---------------- Distributions to shareholders: From net investment income (5,420) (2,033) From net realized gain (753,352) (52,184) ---------------- ---------------- Total distributions (758,772) (54,217) Share Transactions Net proceeds from sale of shares 3,441,709 3,528,668 Shares issued in reinvestment of distributions 758,704 54,217 Shares redeemed (933,230) (156,226) ---------------- ---------------- Net increase in net assets resulting from share transactions 3,267,183 3,426,659 ---------------- ---------------- Total increase in net assets 3,706,434 4,559,598 Net Assets Beginning of period $ 8,002,674 $ 3,443,076 ---------------- ---------------- End of period [including undistributed net investment income(loss) of $12,698 and $3,398] $ 11,709,108 $ 8,002,674 ================ ================
GOLBALT Growth Fund Financial Highlights For the year For the year For the period ended ended ended October 31, 1998 October 31, 1997 October 31, 1996 (b) Selected Per Share Data Net asset value, beginning of period $15.66 $12.48 $10.00 -------------- --------------- --------------- Income from investment operations: Net investment income (loss) 0.02 0.01 0.01 Net realized and unrealized gain (loss) 1.86 3.34 2.47 -------------- --------------- --------------- Total from investment operations 1.88 3.35 2.48 -------------- --------------- --------------- Less Distributions From net investment income (0.01) - - From net realized gain (1.39) (0.17) - -------------- --------------- --------------- Total Distributions (1.40) (0.17) - -------------- --------------- --------------- Net asset value, end of period $16.14 $15.66 $12.48 ============== =============== =============== Total Return 13.28% 27.15% 27.01% (a) Ratios and Supplemental Data Net assets, end of period (000) $11,709 $8,003 $3,443 Ratio of expenses to average net assets 1.17% 1.17% 1.16% (a) Ratio of expenses to average net assets before reimbursement 1.19% 1.19% 1.25% (a) Ratio of net investment income to average net assets 0.14% 0.06% 0.11% (a) Ratio of net investment income to average net assets before reimbursement 0.12% 0.04% 0.02% (a) Portfolio turnover rate 83.78% 110.01% 66.42% (a) (a) Annualized (b) December 1, 1995 (commencement of operations) to October 31, 1996
GLOBALT GROWTH FUND Notes to Financial Statements October 31, 1998 NOTE 1. ORGANIZATION GLOBALT Growth Fund (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 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 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 Advisor'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, and the Advisor 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 Advisor, 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 Advisor 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 Advisor, 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, 1998 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 "Advisor") to manage the Fund's investments. The advisor was organized as a Georgia corporation in 1990. Angela Allen, President of the Advisor, and Samuel Allen, Chairman of the Advisor, are the controlling shareholders of GLOBALT, Inc. The investment decisions for the Fund are made by a committee of the Advisor, 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 Advisor manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage commissions, 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 Advisor 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 Advisor. For the year ended October 31, 1998, the Advisor received a fee of $122,484 from the Fund. The Advisor agreed to pay other expenses to the extent necessary to maintain total expenses at the contractual rate of 1.17%, for the period the Advisor reimbursed expenses of $1,844. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $30,000 from the Advisor for administrative services provided to the Fund. The Fund retains AmeriPrime Financial Securities, Inc. ("the Distributor") to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998 there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $9,775,155. Transactions in capital stock were as follows: For the periods ended October 31: 1998 1998 1997 1997 Shares Dollars Shares Dollars -------------------- --------------------- --------------------- -------------------- Shares sold 216,459 $3,441,709 241,426 $3,528,668 Shares issued in reinvestment of dividends 53,733 758,704 4,216 54,217 Shares redeemed (55,461) (933,230) (10,682) (156,226) -------------------- --------------------- --------------------- -------------------- 214,731 3,267,183 234,960 $3,426,659
NOTE 5. INVESTMENTS For the period from November 1, 1997 through October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $11,979,755 and $8,782,535, respectively. The gross unrealized appreciation for all securities totaled $1,371,166 and the gross unrealized depreciation for all securities totaled $42,134 for a net unrealized appreciation of $1,329,032. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $10,122,602. GLOBALT GROWTH FUND Notes to Financial Statements October 31, 1998 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. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Globalt Growth Fund We have audited the accompanying statement of assets and liabilities of Globalt Growth Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, 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 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, 1998, 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, 1998 and 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 November 9, 1998 Dear Fellow Shareholders, In an attempt to keep pace with the current market frenzy, many value managers have softened their discipline to allow the ownership of such high flyers as America Online (p/e 160), Microsoft (p/e 50) and Dell (p/e 62). In contrast, we have been taking advantage of the market's recent 40% off sale to add lower p/e, high-quality growers to our portfolio. As true long-term investors, we welcome the occasional correction as an opportunity to buy blue chip companies at historically low prices. Without compromising our strict value approach, we have added some of the world's best run franchises and most valuable global brands to our portfolio. Purchases since our last shareholder report include AT&T, Pepsi, Hewlett-Packard, Mobil, Nike, Kodak and American Home Products. Our portfolio continues to trade at very attractive discounts to the market across all four traditional measures of fundamental value (see table). For example, our Fund trades at a p/e of just 17 times 1999 estimates, 30% below the market's p/e of 24. The objective of the IMS Capital Value Fund is to provide long-term growth for its shareholders. We seek to meet this objective by investing in blue chip stocks with strong value characteristics and improving business momentum. The Fund holds approximately forty companies, well-diversified across all sectors of the S & P 500 Index. Our Fund's low turnover helps keep taxable gains and trading costs to a minimum in an effort to produce superior risk-adjusted, after-tax returns. For example, while the fund had a positive return during our fiscal year which ended October 31, 1998, our shareholders will have no taxable dividend or capital gains distributions to report. Year-to-date, as of October 31, 1998, the IMS Capital Value Fund had a total return of +2.3%, outperforming the broad market, as measured by the 1500-stock Value Line index, which was down -2.9%. While we are pleased with the fund's year-to-date returns, we are still unhappy with our "since inception" performance relative to our peers. We fully expect and intend to produce better relative performance in the future. Although the market's recent correction was painful, it was also short-lived. Our Fund held up about as well as the average equity fund during the correction, according to Lipper Analytical Services. Recent articles chastising value managers for not holding up better than the market during the last correction, miss the fact that it's normal for value to perform in-line with the market during sharp corrections. Value tends to outperform in general over the long haul and even more so during periods of economic recovery and slow growth. Value will eventually regain its position of leadership and while it's still very early, several indicators suggest the landscape may already be shifting towards a more favorable value environment. In any event, we will continue searching out undervalued, quality businesses with improving fundamentals. We will continue striving to both grow and protect our shareholders assets. And we will continue working diligently towards our goal of making the IMS Capital Value Fund one of the most successful and respected funds in the industry. Thank you for joining us as shareholders in the IMS Capital Value Fund. We appreciate your confidence and trust. Sincerely, Carl W. Marker Douglas E. Johanson, CFA Portfolio Manager Research Analyst IMS Capital Value Fund Portfolio Profile Data as of October 31, 1998 Comparative Valuations Discount to S&P 500 Index Price/Book Ratio 44% Price/Cashflow Ratio 32% Price/Sales Ratio 19% Price/Earnings Ratio 19% *Sources: Donaldson, Lufkin & Jenrette, Bloomberg, Value Line, and Morningstar. Earnings and Cashflow are based on 1998 estimates. Fund Facts (10/31/98) Growth of $10,000 since inception (8/5/96) ............. $12,157 Median Market Cap. ...................... $12.0 bil. Number of Holdings ...................... 38 Net Assets .............................. $11,523,989 Share Price ............................. 11.28 Performance Summary (10/31/98) IMS Capital Value Fund S&P 500 Value Line 8/5/96 $10,000 $10,000 $10,000 10/31/96 $10,760 $10,739 $10,610 4/30/97 $11,360 $12,320 $11,494 10/31/97 $12,060 $14,189 $14,047 4/30/98 $13,612 $17,380 $16,239 10/31/98 $12,157 $17,308 $14,029 Since Inception Average Annual Returns 12 months 8/5/96 IMS Capital Value Fund 0.8% 9.1% Value Line Index -0.1% 16.3% S&P 500 Index 22.0% 27.5% This graph shows the value of a hypothetical initial investment of $10,000 in the Fund, the Value Line Composite Index, and the S&P 500 Index on August 5, 1996, and held through October 31, 1998. The Value Line Index is an equally-weighted average of 1,600 companies, including those that make up the S&P 500. The S&P 500 Index is a widely recognized, capitalization-weighted average of 500 of the largest U.S. companies. Both indexes are unmanaged and the S&P 500 Index includes the reinvestment of dividends. The Value Line and S&P 500 Index returns do not reflect expenses, which have been deducted from the Fund's return. 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. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. Top Ten Holdings (10/31/98) Rubbermaid 4.8% RJR Nabisco 4.2 Electronic Data Systems 4.1 H&R Block 3.5 Alcoa 3.4 Waste Management 3.4 Amgen 3.4 Intel 3.3 Mobil 3.3 AT&T 3.2 Top Ten Industries (10/31/98) Computers & Related Technologies 15.0% Drugs 7.3 Retail 7.1 Food & Tobacco 7.0 Other Consumer Goods & Services 6.0 Basic Materials 6.0 Household Products 5.9 Other Services 5.9 Environmental 3.4 Apparel 3.4 Company Description AT&T - leading provider of communication services and products Alcoa - world's largest aluminum producer with operations in 30 countries Amgen - world's largest biotech firm with double the sales of its nearest competitor American Home Products - manufacturer of prescription and otc drugs, and other healthcare products Bank One - fifth largest bank in U.S. and second biggest credit card issuer Bausch & Lomb - leading maker of contact lenses, solutions, sunglasses, hearing aids, etc. Citigroup - created by the merger of Citicorp and Travelers - worldwide financial services company Columbia Healthcare - largest hospital management company in the United States Conseco - major financial services company specializing in insurance products Eastman Kodak - manufactures and markets consumer and commercial photography /imaging products Electronic Data Systems - provides information technology services to companies worldwide Fruit of the Loom - largest U.S. producer of cotton T-shirts and underwear H & R Block - world's largest tax preparation firm, second only to McDonald's in number of outlets Hewlett-Packard - leading producer of printers, fax machines, computers, and other technology Intel - manufactures computer chips and other computer-related products IVAX - world's leading generic drug manufacturer Marvel - toy company operating in the licensing, comic book, toy, trading card and sticker businesses Mobil - one of the largest integrated oil companies in the world Motorola - leading manufacturer of electronic equipment, cell phones, and pagers Nike - makes and designs high quality footwear and apparel Newmont Mining - North America's largest gold producer 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 Oracle - world's largest maker of database management software PETsMART - world's largest operator of superstores specializing in pet supplies and services Pepsi - markets and distributes soft drinks and snack food on a worldwide basis 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 Shaw Industries - largest U.S. carpet manufacturer and retailer Singer - world's largest manufacturer of sewing machines and a leading emerging market retailer Sunbeam - makes and markets brand name consumer products (housewares, personal care, etc.) Symantec - leading software provider of PC productivity tools Texas Utilities - one of the U.S.'s largest electric and gas utilities Toys `R' Us - children's products retailer U.S. West Media Group - third largest cable company in the U.S. Union Pacific - largest railroad in U.S. - 35,000 miles of track in western two-thirds of country United Healthcare - one of the nation's largest Health Maintenance Organizations (HMO's) Waste Management - world's largest solid waste collection and disposal company
IMS Capital Value Fund Schedule of Investments - October 31, 1998 Common Stocks - 99.6% Shares Value Basic Materials - 6.0% Aluminum Company of America 5,000 396,250 Newmont Mining 14,000 297,500 ------------------- ------------------- 693,750 ------------------- Apparel - 3.4% Fruit of the Loom, Inc. (a) 14,700 224,175 Nike, Inc. (Class B) 4,000 174,750 ------------------- ------------------- 398,925 ------------------- Banks - 2.8% Bank One Corp. 6,500 317,688 ------------------- Broadcasting - 2.2% Media One Group, Inc. (a) 6,000 253,875 ------------------- Communications - 2.7% Motorola, Inc. 6,000 312,000 ------------------- Computer & Related Technologies - 15.0% Electronic Data Systems Corp. 11,500 467,906 Hewlett Packard Co. 6,000 361,125 Intel Corp. 4,300 383,506 Oracle Corporation (a) 12,000 354,750 Symantec Corp. 10,000 160,000 ------------------- ------------------- 1,727,287 ------------------- Drugs - 7.3% American Home Products Corp. 4,500 219,375 Amgen, Inc. (a) 5,000 392,812 IVAX Corp. (a) 24,000 228,000 ------------------- ------------------- 840,187 ------------------- Entertainment - 1.7% Marvel Enterprises, Inc. (a) 34,000 195,500 ------------------- Environmental - 3.4% Waste Management, Inc. 8,600 388,075 ------------------- Financial Services - 2.4% Citigroup, Inc. 6,000 282,375 ------------------- Food & Tobacco - 7.0% PepsiCo, Inc. 9,500 320,625 RJR Nabisco Holdings Corp. 17,000 485,563 ------------------- ------------------- 806,188 ------------------- Other Services - 5.9% H & R Block 9,000 403,312 Olsten Corp. 30,000 275,625 ------------------- ------------------- 678,937 ------------------- Healthcare Products - 2.7% Bausch & Lomb 7,500 312,656 ------------------- IMS Capital Value Fund Schedule of Investments - October 31, 1998 - continued Common Stocks - continued Shares Value Hospitals & Managed Care - 3.3% Columbia HCA Healthcare Corp. 7,500 $ 157,500 United Healthcare Corp. 5,000 217,812 ------------------- ------------------- 375,312 ------------------- Other Consumer Goods & Services - 6.0% Eastman Kodak Inc. 3,200 248,000 Shaw Industries, Inc. 16,000 278,000 Singer Co. 30,000 168,750 ------------------- 694,750 ------------------- Household Products - 5.9% Rubbermaid, Inc. 16,500 547,594 Sunbeam Corp. 19,000 128,250 ------------------- ------------------- 675,844 ------------------- Insurance - 2.4% Conseco, Inc. 8,000 277,500 ------------------- Oil & Gas - 3.3% Mobil Corp. 5,000 378,437 ------------------- Railroads - 2.7% Union Pacific Corp. 6,500 309,563 ------------------- Retail - 7.1% Office Depot, Inc. (a) 11,000 275,000 PETsMART, Inc. (a) 37,000 265,938 Toys R Us 14,000 273,875 ------------------- ------------------- 814,813 ------------------- Telecommunications - 3.2% AT&T Corp. 6,000 373,500 ------------------- Utilities - 3.2% Texas Utilities Co. 8,500 371,876 ------------------- TOTAL COMMON STOCKS (Cost $11,194,766) $ 11,479,038 =================== TOTAL INVESTMENTS - 99.6% (Cost $11,194,766) 11,479,038 Other assets less liabilities -0.4% 44,951 ------------------- TOTAL NET ASSETS - 100% $ 11,523,989 =================== (a) non-income producing IMS Capital Value Fund Securities Sold Short - October 31, 1998 Short Options Shares Value Rubbermaid, Inc. 80 $ 51,000 ------------------- TOTAL OPTIONS (proceeds $35,639) $ 51,000 ===================
IMS Capital Value Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $11,194,766) $ 11,479,038 Receivable for securities sold 35,639 Subscriptions receivable 59,000 Dividends receivable 3,210 Interest receivable 1,405 Deferred organizational costs 17,837 --------------------- Total assets 11,596,129 Liabilities Payable to custodian bank 7,469 Accrued advisory fee payable 13,671 Securities sold short, at value - proceeds $35,639 51,000 --------------- Total liabilities 72,140 --------------------- Net Assets $ 11,523,989 ===================== Net Assets consist of: Paid in capital $ 11,306,483 Accumulated undistributed net realized gain (loss) on investments (45,397) Accumulated undistributed net realized gain (loss) on options transactions (6,008) Net unrealized appreciation on investments 268,911 --------------------- Net Assets, for 1,021,777 shares $ 11,523,989 ===================== Net Asset Value Net Assets Offering price and redemption price per share ($11,523,989/1,021,777) $ 11.28 =====================
IMS Capital Value Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 122,970 Interest Income 12,431 ----------------- Total Income 135,401 Expenses Investment advisory fee $ 164,074 Administration fee 30,000 Transfer agent fee 19,732 Fund accounting fee 16,794 Legal fees 6,353 Custodian fee 7,549 Amortization of ogranizational expenses 4,793 Audit fees 898 Registration fees 5,402 Shareholder reports 3,877 Trustees fees 781 Miscellaneous 4,607 ----------------- Total operating expenses before reimbursement 264,860 Reimbursed expenses (69,029) ----------------- Total operating expenses 195,831 ----------------- Net Investment Income (Loss) (60,430) ----------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities 26,314 Net realized gain (loss) on options transactions (6,008) Change in net unrealized appreciation (depreciation) on on investment securities 69,368 ---------------- Net gain (loss) on investment securities 89,674 ----------------- Net increase (decrease) in net assets resulting from operations $ 29,244 =================
IMS Capital Value Fund Statement of Changes in Net Assets For the For the year ended year ended October 31, 1998 October 31, 1997 Increase/(Decrease) in Net Assets Operations Net investment income (loss) $ (60,430) (48,844) Net realized gain (loss) on investments 26,314 672,917 Net realized gain (loss) on options transactions (6,008) Change in net unrealized appreciation (depreciation) 69,368 (44,863) --------------- --------------- Net Increase in net assets resulting from operations 29,244 579,210 --------------- --------------- Distributions to shareholders: Return of capital (25,273) - From net capital gain (682,377) - --------------- --------------- --------------- --------------- Total distributions (707,650) - --------------- --------------- Share Transactions Net proceeds from sale of shares 3,955,446 5,141,834 Shares issued in reinvestment 702,348 - Shares redeemed (2,387,348) (529,761) --------------- --------------- Net increase in net assets resulting from share transactions 2,270,446 4,612,073 --------------- --------------- Total increase in net assets 1,592,040 5,191,283 Net Assets Beginning of period 9,931,949 4,740,666 --------------- --------------- End of period [including undistributed net investment income (loss) $0 and $(48,844), respectively$] 11,523,989 $ 9,931,949 =============== ===============
IMS Capital Value Fund Financial Highlights For the periods ended October 31 Selected Per Share Data 1998 1997 1996 (b) Net asset value, beginning of period $12.06 $10.76 $10.00 ----------------- ---------------- ---------------- Income from investment operations Net investment income (loss) (0.06) (0.08) (0.01) Net realized and unrealized gain (loss) 0.12 1.38 0.77 ----------------- ---------------- ---------------- Total from investment operations 0.06 1.30 0.76 ----------------- ---------------- ---------------- Less Distributions Return of capital (0.03) - - From net capital gain (0.81) - - ----------------- ---------------- ---------------- Total distributions (0.84) - - ----------------- ---------------- ---------------- Net asset value, end of period $11.28 $12.06 $10.76 ================= ================ ================ Total Return 2.27% 12.08% 30.23% (a) Ratios and Supplemental Data Net assets, end of period (000) $11,524 $9,932 $4,741 Ratio of expenses to average net assets 1.73% 1.97% 1.84% (a) Ratio of expenses to average net assets before reimbursement 2.34% 2.54% 3.92% (a) Ratio of net investment income to average net assets (0.53)% (0.64)% (0.25)% (a) Ratio of net investment income to average net assets before reimbursement (1.14)% (1.20)% (2.32)% (a) Portfolio turnover rate 81.74% 34.76% 3.56% (a) (a) Annualized (b) August 5, 1996 (commencement of operations) to October 31, 1996
IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 1. ORGANIZATION IMS Capital Value Fund. (the "Fund") is a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on July 30, 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. 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 Advisor'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, and the Advisor 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 Advisor, 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 Advisor 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 Advisor, 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, 1998 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 "Advisor") to manage the Fund's investments. Carl W. Marker, Chairman and President of the Advisor, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Advisor 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 Advisor a fee computed and accrued daily and paid monthly at an annual rate of 1.36% of the average daily net assets of the Fund. For the year ended October 31, 1998, the Advisor received a fee of $164,074 from the Fund. The Advisor is voluntarily reimbursing certain Fund expenses. There is no assurance that such reimbursement will continue in the future. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $30,000 from the Advisor for administrative services provided to the fund. IMS CAPITAL VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor") to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $11,306,483. For the years ended October 31: - ---------------------------------- ----------------- ------------------- ---------------- ------------------ 1998 1998 1997 1997 - ---------------------------------- ----------------- ------------------- ---------------- ------------------ Shares Dollars Shares Dollars Shares sold 338,518 $3,955,446 426,253 $5,141,834 Shares issued in reinvestment of dividends 65,032 702,348 - - Shares redeemed (205,539) (2,387,348) (43,144) (529,761) --------- -- ----------- -- -------- ----- --------- 198,011 $2,270,446 383,109 $4,612,073 - ---------------------------------- ----------------- ------------------- ---------------- ------------------
NOTE 5. INVESTMENTS For the year ended October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $10,696,139 and $9,199,428, respectively. The gross unrealized appreciation for all securities totaled $1,345,452 and the gross unrealized depreciation for all securities totaled $1,076,541 for a net unrealized appreciation of $268,911. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $11,159,127. 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, 1998 NOTE 7. RECLASSIFICATIONS In accordance with SOP 93-2, the fund has recorded a reclassification in the capital accounts. As of October 31, 1998 the fund recorded permanent book/tax differences of $25,273 from undistributed net investment income to paid in capital and a permanent book tax difference of $25,273 from undistributed net investment income to paid in capital. 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. NOTE 8. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees IMS Capital Value Fund We have audited the accompanying statement of assets and liabilities of IMS Capital Value Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, 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 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, 1998, 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, 1998 and 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 9, 1998 December 8, 1998 Dear Shareholders: What a wild and brutal summer it was in the stock market. During the first four months of the year, stock market returns were in hyper-speed and everybody was jumping on the stock market bandwagon. This environment changed abruptly and dramatically. In the third quarter, the average diversified U.S. stock fund delivered a negative 15.02% return, according to Lipper Analytical Services - a steeper loss than the 11.9% drop in the Dow Jones Industrials and the 9.95% drop in the S&P 500 index. Funds that buy small cap stocks were particularly hard hit, with a loss of 21.55% in the quarter and a loss of 16.53% year to date. Results The Marathon Value Fund's fiscal year ended on October 31, 1998. During the last six months the Fund was down 17.8%, while the Russell 2000 was down 21.2%. Since the fund's inception on March 9, 1998, the fund has shown a loss of 15.2% versus a decline in the Russell 2000 of 18.0%.
----------------------------------------------------------------- Returns for the Periods Ended 10/31/98 ----------------------------------------------------------------- Total Return Since Inception Fund/Index 6 months March 9, 1998 ---------- -------- ------------- Marathon Value Fund -17.8% -15.2% Russell 2000 -21.2% -18.0%
Date Russell 2000 MVF - ------ -------------- ----- 3/9/98 $ 10,000.00 $ 10,000.00 3/31/98 $ 10,424.18 $ 10,050.00 4/30/98 $ 10,472.11 $ 10,320.00 5/31/98 $ 9,902.41 $ 9,920.00 6/30/98 $ 9,919.11 $ 9,510.00 7/31/98 $ 9,102.84 $ 8,800.00 8/31/98 $ 7,328.89 $ 7,310.00 9/30/98 $ 7,884.93 $ 7,600.00 10/30/98 $ 8,201.00 $ 8,480.00
The chart shows the value of a hypothetical initial investment of $10,000 in the Fund and the Russell 2000 Index on March 9, 1998 and held through October 31, 1998. The Russell 2000 Index is a widely recognized unmanaged index 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 return does 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's Largest Positions As of October 31, we were 92.3% invested in stocks and 7.7% in cash. At period end our five largest holdings consisted of the following: Telxon Corp designs and manufactures wireless and mobile information systems. The company integrates wireless technology with a wide array of peripherals and software. St. John Knits designs, manufactures, and markets women's clothing and accessories. Ventas Inc. is a self administered, self managed real estate company that operates and acquires long-term acute care hospitals, nursing centers, and assisted living centers. Bear Stearns Companies Inc. offers investment banking and securities trading and brokerage services. The Company's business includes corporate finance and mergers and acquisitions, institutional equities and fixed income sales and trading, private client services and more. Arctic Cat designs, engineers, manufactures, and markets snowmobiles and all-terrain vehicles under the "Arctic Cat" brand name. The Company also sells personal watercrafts under the "Tigershark" brand name. Investment Outlook In my last few letters to our individually managed accounts, I have encouraged our clients to moderate their expectations and warned that stock market investing would become more difficult and volatile going forward. I had absolutely no idea how much more difficult and volatile. Last summer and early fall were excruciatingly painful for investors in stocks. Nobody enjoys seeing their investments pull back by 20% in a month. This has been an unusually difficult time period not only for small cap stocks, but also the value investment philosophy. In general terms, the best performing stocks over the past twelve months have been those that make up the largest market capitalization of the stock indices. The advance has been highly concentrated on the largest companies that have continued to report positive earnings momentum, without regard to their valuation. An astounding fourteen stocks accounted for 99% of the S&P 500's performance in the first nine months. If you didn't own Microsoft, Dell and Lucent you had very little chance of good performance. We are value investors and buying companies whose stock prices are depressed relative to their future prospects is our focus. Unfortunately, as more and more money has been concentrated on the largest 50 companies during the first nine months of the year, the "out of favor" companies and many smaller capitalization issues have fallen further behind in relative performance. On September 30, the Russell 2000 index of small cap stocks was lower than it was 2 1/2 years ago in the spring of 1996. Were that true of the Dow, it would be below 5000. Like our clients, we have been very frustrated by this large divergence in performance. We believe, however, that this trend is now beginning to reverse itself and the same portfolio we have struggled with the last six months will be a winning hand over the next year. The recent returns have been very encouraging. MARKET INDICIES (9/30 - 12/4) Marathon Value Fund 18.96 % S&P 500 Index 16.01 % Russell 2000 Index 9.79 % Summary This year has proven to be a very difficult time to begin a small cap fund. In the last sixty years small stocks have fallen while large caps have risen on only five occasions. This year will be the sixth. It will also be the greatest disparity of performance in history. As of December 8, the S&P 500 Index (the standard measure of big stocks among money managers) was up 22%, while the Russell 2000 (a common measure of small-stock performance) is down 8%. We are confident going forward that the huge divergence between value stocks and growth stocks, and small stocks and large stocks will not continue. As long-term value investors we are not attempting any quick fixes to quickly bandage our portfolios. We have been through up periods and down periods and will continue doing what we always do, looking for the best stock values available. We are not devastated by the recent declines, but are actually incredibly excited about some of the opportunities that have been created during the decline. Market bottoms are not made of smiles and pleasant feelings. They come with a great deal of pain and you are not sure if you can take any more of the decline. In fact, you feel like calling your manager and screaming "get me out now." In our opinion most of that has already happened. The stock market will continue with the volatility it has recently experienced; however, stocks continue to be the asset class of choice for long term investors and we are optimistic that small cap stocks will perform even better. Please feel free to call me if you have any questions concerning the fund and thank you for your support during this difficult beginning. Sincerely, Mark Matsko, CFA Portfolio Manager
Marathon Value Fund Schedule of Investments - October 31, 1998 Common Stocks - 92.3% Shares Value Apparel - 3.0% St. John's Knits, Inc. 4,800 $ 96,900 ------------------ Banks & Bank Holding Companies - 1.3% First Security Corp. 2,130 43,532 ------------------ Business Equipment & Services - 7.4% Analysts International Corp. 4,800 84,300 (John H.) Harland Co. 6,000 87,000 Olsten Corp. 7,700 70,744 ------------------ ------------------ 242,044 ------------------ Chemicals - 2.4% IMC Global Inc. 3,000 78,000 ------------------ Consumer Products (Durables) - 2.4% Fibermark, Inc. (a) 3,000 42,750 QEP Co. (a) 5,000 36,875 ------------------ 79,625 ------------------ Consumer Products (Non-Durables) - 5.4% Del Labratories, Inc. 1,700 34,850 Food Lion Inc. - Class B 9,000 92,250 Morton International, Inc. 2,000 49,750 ------------------ ------------------ 176,850 ------------------ Computers & Peripherals - 2.1% Adflex Solutions, Inc. (a) 9,300 67,425 ------------------ Financial Services - 7.4% Bear Stearns Companies, Inc. 4,700 167,731 United Asset Management Corp. 3,000 72,750 ------------------ ------------------ 240,481 ------------------ Healthcare Products - 6.0% Ballard Medical Products 4,000 85,000 Corvel Corp. (a) 3,000 109,875 ------------------ 194,875 ------------------ Hospitals - 8.3% Healthsouth Corp. (a) 10,000 121,250 Ventas Inc. 13,000 148,688 ------------------ ------------------ 269,938 ------------------ Measuring Equipment - 3.2% Thermospectra Corp. (a) 9,000 105,750 ------------------ Marathon Value Fund Schedule of Investments - October 31, 1998 - continued Common Stocks - continued Shares Value Oil & Gas Services - 2.3% Nabors Industries, Inc. (a) 4,000 74,000 ------------------ Recreational Vehicles - 4.7% Artic Cat, Inc. 16,600 153,550 ------------------ Retail - 3.9% Dress Barn, Inc. (a) 9,100 128,538 ------------------ Restaurants - 7.2% Applebee's International, Inc. 2,800 57,050 Cracker Barrel Old Country Stores 5,000 129,375 Schlotzsky's, Inc. (a) 5,000 48,437 ------------------ ------------------ 234,862 ------------------ Telecommunications - 11.7% ADC Telecommunications (a) 3,000 69,000 Tele-Communications, Inc. (a) 3,000 126,375 Telxon Corp. 9,000 184,500 ------------------ ------------------ 379,875 ------------------ Transportation - 13.6% Arnold Industries, Inc. 11,000 140,250 Covenant Transport Inc. Class A (a) 8,000 121,000 Expeditors International of Washington, Inc. 2,500 84,687 Trico Marine Services, Inc. (a) 6,000 42,750 Werner Enterprises, Inc. 3,000 54,000 ------------------ ------------------ 442,687 ------------------ ------------------ TOTAL COMMON STOCKS (Cost $3,304,892) 3,008,932 ------------------ Principal Value MONEY MARKET SECURITIES - 9.4% Star Treasury 4.83% 11/2/98 (Cost $306,131) $ 306,131 306,131 ------------------ TOTAL INVESTMENTS - 101.7% (Cost $3,611,023) 3,315,063 Excess of liabilities over other assets (56,412) ------------------ TOTAL NET ASSETS - 100.0% $ 3,258,651 ================== (a) non-income producing security
Marathon Value Fund Securities Sold Short - October 31, 1998 Short Options Shares Value Dress Barn, Inc. 65 (4,469) Dress Barn, Inc. 25 (5,850) Tele-Communications, Inc. 30 (8,813) Telxon Corp. 90 (35,437) ------------------ TOTAL OPTIONS (proceeds $45,075) $ (54,569) ==================
Marathon Value Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $3,611,023) $ 3,315,063 Receivables: Dividends 480 Interest 1,426 ----------------------- Total assets 3,316,969 Liabilities Accrued investment advisory fee payable 3,749 Securities sold short, at value - proceeds $45,075 54,569 ------------------ Total liabilities 58,318 ----------------------- Net Assets $ 3,258,651 ======================= Net Assets consist of: Paid in capital $ 3,797,867 Accumulated undistributed net investment income 6,326 Accumulated undistributed net realized loss on security transactions (258,838) Accumulated undistributed net realized gain on options transactions 18,750 Net unrealized appreciation (depreciation) on investments (305,454) ----------------------- Net Assets, for 384,185 shares $ 3,258,651 ======================= Net Asset Value Net Assets Offering price and redemption price per share ($3,258,651/384,185) $ 8.48 =======================
Marathon Value Fund Statement of Operations for the period March 12, 1998 (Commencement of Operations) to October 31, 1998 Investment Income Dividend Income $ 14,435 Interest Income 17,557 ----------------- Total Income 31,992 Expenses Investment advisory fee $ 25,666 Trustees fees 510 ---------------- Total expenses before reimbursement 26,176 Reimbursed expenses (510) ---------------- Total Operating Expenses 25,666 ----------------- Net Investment Income (Loss) 6,326 ----------------- Realized & Unrealized Gain Net realized gain (loss) on investment securities (258,838) Net realized gain (loss) on options transactions 18,750 Change in net unrealized appreciation(depreciation (305,454) on investment securities ---------------- ----------------- Net gain (loss) on investment securities (545,542) ----------------- Net increase (decrease) in net assets resulting from operations $ (539,216) =================
Marathon Value Fund Statement of Changes in Net Assets for the period March 12, 1998 (Commencement of Operations) to October 31, 1998 Increase/(Decrease) in Net Assets Operations Net investment income (loss) $ 6,326 Net realized gain (loss) on investments (258,838) Net realized gain (loss) on options transactions 18,750 Change in net unrealized appreciation (depreciation) (305,454) --------------- Net Increase (Decrease) in net assets resulting from operations (539,216) --------------- Share Transactions Net proceeds from sale of shares 3,806,088 Shares redeemed (8,221) --------------- Net increase (decrease) in net assets resulting from share transactions 3,797,867 --------------- Total increase in net assets 3,258,651 Net Assets Beginning of period - --------------- End of period [including undistributed net investment income of $6,326] $ 3,258,651 ===============
Marathon Value Fund Financial Highlights for the period March 12, 1998 (Commencement of Operations) to October 31, 1998 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) (1.54) ------------ Total from investment operations (1.52) ------------ Net asset value, end of period $8.48 ============ Total Return -15.20% Ratios and Supplemental Data Net assets, end of period (000) $3,259 Ratio of expenses to average net assets 1.47% (a) Ratio of expenses to average net assets before reimbursement 1.50% (a) Ratio of net investment income to average net assets 0.36% (a) Ratio of net investment income to average net assets before reimbursement 0.33% (a) Portfolio turnover rate 61.04% (a) (a) Annualized
MARATHON VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 1. ORGANIZATION Marathon Value Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on March 9, 1998 and commenced operations on March 12, 1998. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company, whose investment objective is to provide maximum long-term capital appreciation. 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 Advisor'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 Advisor 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 Advisor, 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 Advisor 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 Advisor, 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. MARATHON VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 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 Burroughs & Hutchinson, Inc. (the "Advisor") to manage the Fund's investments. Mark Matsko, the Fund's portfolio manager is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Advisor manages the Fund's investments subject to approval of the Board of Trustees and pays all expenses of the Fund except brokerage commissions, 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 Advisor a fee computed and accrued daily and paid monthly at an annual rate of 1.48% 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 advisor. For the period from March 12, 1998 (commencement of operations) through October 31, 1998, the Advisor has received a fee of $26,666 from the Fund. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the period ended October 31, 1998, the Administrator received fees of $17,500 from the Advisor for administrative services provided to the Fund. MARATHON VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 The Fund retains AmeriPrime Financial Securities, Inc. (the Distributor) to act as the principal distributor of the Fund's shares. There were no payments made to the Distributor for the period from March 12, 1998 (commencement of operations) to October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $3,797,867. Transactions in capital stock were as follows:
For the period from March 12, 1998 (Commencement of Operations) through October 31, 1998 Shares Amount --------- ---------- Shares sold 385,265 $3,806,088 Shares issued in reinvestment of dividends - - Shares redeemed (1,080) (8,221) ----------- -------------- Net increase 384,185 $3,797,867 ======== ========
NOTE 5. INVESTMENTS For the period from March 12, 1998 (commencement of operations) through October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $4,826,476 and $1,734,209, respectively. As of October 31, 1998, the gross unrealized appreciation for all securities totaled $183,201 and the gross unrealized depreciation for all securities totaled $488,655 for a net unrealized depreciation of $305,454. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $3,565,948. MARATHON VALUE FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 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 Advisor is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Fund. 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, 1998, Charles Schwab & Co. owned in aggregate more than 25% of the Fund. NOTE 8. YEAR 2000 ISSUE Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Marathon Value Fund We have audited the accompanying statement of assets and liabilities of Marathon Value Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, and the related statement of operations for the year then ended, and the statement of changes in net assets, and financial highlights for the period from March 12, 1998 (commencement of operations) to October 31, 1998 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, 1998, 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 Marathon Value Fund as of October 31, 1998, the results of its operations for the year then ended, and the changes in its net assets, and the financial highlights for the period from March 12, 1998 (commencement of operations) to October 31, 1998 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 9, 1998 November 15, 1998 Dear Shareholders, As you are aware, on October 16, 1998, the Board of Trustees of the AmeriPrime Funds determined that the NewCap Contrarian Fund should no longer pursue its investment objective and instead invest 100% of its assets in cash equivalents, money market funds and investment grade debt securities. For the twelve months ended October 31, 1998, the fund generated a total return of -44.60%. This compares to a comparative benchmark index return of -1.39% (60% Standard & Poor's Mid-cap 400 and 40% Philadelphia Gold and Silver Index). The under- performance of the fund can be primarily attributed to the following factors: The under-performance of the small and mid-cap stock index relative to the broad market; the falling prices of stocks in the precious metal industry; and the individual stock selection and concentration of stocks in each of these areas. As always, your questions and comments are welcome. We appreciate the support you have provided. Sincerely, Kenneth D. Trumpfheller President & Trustee 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 60% S&P 400 Midcap Index and 40% Philadelphia Gold & Silver Philadelphia S&P 400 NewCap Blend Gold & Silver MidCap Contrarian 60% S&P MidCap Index Index Fund 40% Philadelphia 5/5/96 10,000 10,000 10,000 10,000 6/30/96 8,529 10,095 9,460 9,469 9/30/96 7,950 10,391 9,580 9,415 12/31/96 8,080 11,021 9,010 9,844 3/31/97 7,218 10,857 7,650 9,401 6/30/97 6,738 12,314 8,570 10,084 9/30/97 7,732 14,293 9,470 11,669 10/31/97 6,210 13,671 8,760 10,687 12/31/97 5,257 14,411 7,833 10,749 3/31/98 5,794 15,997 9,098 11,916 6/30/98 5,098 15,654 6,075 11,431 9/30/98 5,341 13,391 4,428 10,171 10/31/98 5,374 14,585 4,853 10,901 This chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 400 MidCap Index, the Philadelphia Gold & Silver Index and a composite of 60% 400 MidCap Index and 40% Philadelphia Gold & Silver Mining Index and held through October 31, 1998. The indices 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. AVERAGE ANNUAL RETURNS One Since Year Inception S&P 400 MidCap 6.71% 16.29% Phil. Gold & Silver Mining -13.53% -21.99% Blend 60% S&P / 40% Phil. -1.39% 3.51% NewCap Contrarian Fund -44.60% -25.43%
New Cap Contrarian Fund Schedule of Investments - October 31, 1998 Principal Amount Value Money Market Securities - 61.5% Star Treasury, 4.96%, 11/2/98 (Cost $220,240) $ 220,240 $ 220,240 Other assets less liabilites - 38.5% 137,928 ------------------ TOTAL NET ASSETS - 100.0% $ 358,168 ==================
New Cap Contrarian Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $220,240) $ 220,240 Receivable for securities sold 143,128 Dividend receivable 122 Interest receivable 330 --------------------- 363,820 Liabilities Accrued advisory fee 1,045 Accrued trustees' fees 1,335 Accrued distribution fees 3,257 Other payables and accrued expenses 15 --------------- Total liabilities 5,652 --------------------- Net Assets $ 358,168 ===================== Net Assets consist of: Paid in capital $ 1,333,179 Accumulated undistributed net realized gain(loss) (975,011) Net unrealized (depreciation) on investments - --------------------- Net Assets, for 87,229 shares $ 358,168 ===================== Net Asset Value Net Assets Offering price and redemption price per share ($358,168/87,229) $ 4.11 =====================
New Cap Contrarian Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 6,190 Interest Income 1,806 ----------------- Total Income 7,996 Expenses Investment Advisory $ 30,486 12-B1 fees 2,458 Trustees' fees 1,280 -------------- Total Expenses 34,224 ----------------- Net Investment Income (Loss) (26,228) ----------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (964,807) Net realized gain (loss) on options transactions 0 Change in net unrealized appreciation (depreciation) on investment securities 224,955 --------------- Net gain (loss) (739,852) ----------------- Net increase (decrease) in net assets resulting from operations $ (766,080) =================
New Cap Contrarian Fund Statement of Changes in Net Assets For the year For the year ended ended Increase/(Decrease) in Net Assets October 31, 1998 October 31, 1997 Operations Net investment income (loss) $ (26,228) (44,549) Net realized gain (loss) on securities transactions (964,807) 171,581 Net realized gain (loss) on options transactions - (75,762) Change in net unrealized appreciation (depreciation) 224,955 (177,571) --------------- ------------------ Net Increase (decrease) in net assets resulting from operations (766,080) (126,301) --------------- ------------------ Distributions to shareholders: From net capital gains (38,200) - --------------- ------------------ Share Transactions Net proceeds from sale of shares 56,807 762,466 Shares issued in reinvestment 38,200 - Shares redeemed (614,657) (461,769) --------------- ------------------ Net increase (decrease) in net assets resulting from share transactions (519,650) 300,697 --------------- ------------------ Total increase (decrease) in net assets (1,323,930) 174,396 Net Assets Beginning of period 1,682,098 1,507,702 --------------- ------------------ End of period [including net investment income (loss) of of $0 and $(44,549), respectively] $ 358,168 $ 1,682,098 =============== ==================
New Cap Contrarian Fund Financial Highlights For the periods ended October 31 1998 1997 1996 (b) Selected Per Share Data Net asset value, $8.76 $9.21 $10.00 --------------- ------------ ------------- begining of period Income from investment operations Net investment income (0.15) (0.22) (0.05) Net realized and unrealized gain (loss) (4.43) (0.23) (0.74) --------------- ------------ ------------- Total from investment operations (4.58) (0.45) (0.79) --------------- ------------ ------------- Less Distributions From net capital gain (0.07) - - --------------- ------------ ------------- Net asset value, end of period $4.11 $8.76 $9.21 =============== ============ ============= Total Return (51.76)% (4.89)% (15.80)% (a) Ratios and Supplemental Data Net assets, end of period (000) $358 $1,682 $1,508 Ratio of expenses to average net assets 2.82% 2.83% 2.89% (a) Ratio of net investment income to average net assets (2.16)% (2.56)% (1.16)% (a) Portfolio turnover rate 146% 92% (a) (a) Annualized (b) May 2, 1996 (Commencement of Operations) to October 31, 1996.
NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 1. ORGANIZATION New Cap Contrarian Fund (the "Fund") is 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 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 Advisor'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, and the Advisor 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 Advisor, 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 Advisor 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 Advisor, 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, 1998 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 -erm 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 "Advisor") to manage the Fund's investments. Kenneth M. Holeski, president and controlling shareholder of the Advisor, is primarily responsible for the day to day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Advisor 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 commissions, 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 Advisor 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 Advisor. For the year ended October 31, 1998, the Advisor received a fee of $30,486 from the Fund. NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Funds business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October, 1998, the Administrator received fees of $30,000 from the Advisor for administrative services provided to the fund. The Fund retains AmeriPrime Financial Securities, Inc. (the Distributor) to act as the principal distributor of the Fund's share. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. CAPITAL SHARE TRANSACTIONS As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $1,333,179. Transactions in capital stock were as follows: For the years ended October 31: 1998 1998 1997 1997 Shares Dollars Shares Dollars Shares sold 7,565 $56,807 82,953 $762,466 Shares issued in reinvestment of dividends 5,107 - - Shares redeemed 38,200 (117,468) (614,657) (54,641) (461,769) --------- --------- -------- --------- (104,796) $519,650 28,312 $300,697
NOTE 5. INVESTMENTS For the year ended October 31,1998, purchases and sales of investment securities, other than short-term investments, aggregated $992,543 and $1,961,009, respectively. At October 31, 1998 the fund had no unrealized appreciation/depreciation. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $220,240. NEW CAP CONTRARIAN FUND NOTES TO FINANCIAL STATEMENTS October 31, 1998 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 Advisor 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, 1998, 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, 1998 the fund recorded permanent book/tax differences of $26,228 from undistributed net investment income to paid in capital. 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. NOTE 9. Year 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees New Cap Contrarian Fund We have audited the accompanying statement of assets and liabilities of New Cap Contrarian Fund (a member of the Ameriprime Fund series), including the schedule of portfolio investments, as of October 31, 1998, 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 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, 1998, 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, 1998, and 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 9, 1998 Florida Street Funds Report to Shareholders for the Year Ended October 31, 1998 Dear Fellow Shareholders, The price action in the financial markets over the past two months spoke volumes concerning the status of the global economy and financial system. The decline in equities and the widening of high yield spreads over Treasuries had fear of recession written all over them. The tremendous rally in U.S. Treasuries left almost all other fixed-income instruments in the dust on the road to safer havens. The entire process was a clear case of "flight to quality". The prices of capital-dependant equities declined sharply, spelling out in capital letters-CREDIT CRUNCH. All of these responses have been quite rational. All that was necessary to join the selling was a relatively short investment holding period. This characteristic will prove key because the current news is bad and more is visible on the horizon. Fortunately however, the forces of equilibrium are already in motion. Let's review the bad news first. The U.S. export sector is under great pressure from contractions underway in Far Eastern economies and imminent in several South American countries. The contribution to economic growth should be nil in the near-term. A general slowdown in capital expenditures is likely given current demand weakness and multiple years of high spending behind us. An erosion in revenue growth is plaguing U.S. corporations. With S&P 500 revenue growth now slightly negative, unit growth and cost reductions are the only route to higher earnings. With near-term pressure on corporate earnings intensifying, bottom-up estimates in the financial community remain too high for 1999. A drift toward reality is underway, which is healthy. But this correction could be a nagging burden for equities near-term. If we do no further analysis, the equity market's 17% recovery from its trough on 8/31/98 seems premature at best. It may indeed be early in its speed and magnitude. But it is entirely rational in our view. There are many signs indicating the emergence of forces whose effect will be to counter the squeeze on corporate earnings and economic growth. Short-term interest rates are plummeting. In response, mortgage refinancing activity has hit new highs. Each refinancing creates more income for discretionary consumer spending or saving. The Fed has declared war on the credit crunch with 75 basis points of easing in the past seven weeks, including a surprise easing between monthly meetings, apparently to ensure the markets got the message. The important point is that the Fed has shifted 180 degrees from a bias toward restricting credit to one of accelerated easing in a matter of months. Inflation continues at a very subdued pace. We have long argued that a year of sub-2% inflation is positive for equities, but the prospect of multiple years of low inflation can have an effect on equity valuations similar to accelerants on fires. With import prices declining all around us, prices should remain fairly stable. The dollar's strongest increase over the currencies of our major trading partners is behind us. It will continue to affect corporate earnings into the first half of 1999, but should become neutral to corporate earnings thereafter. Signs are appearing that indicate a slowing in the red-hot U.S. labor market. This has been a major concern of the Fed and a threat to profit margins during an economic slowdown. The factors that have roiled the capital markets are real and have not yet run their course. However, ignoring the emergence of new positives is equally shortsighted. We recommend that investors with longer investment horizons stay the course with their allocations to the equity and fixed income markets. Sincerely, The staff of Commonwealth Advisors, Inc. Florida Street Bond Fund Report to Shareholders for the fiscal year ended October 31, 1998 The first full fiscal year for the Florida Street Bond Fund began uneventfully. Bonds delivered fairly normal returns with volatility greater than risk-free investments but lower than equities. During the final quarter of the year, financial markets experienced a flight to quality that increased corporate bond yield premiums to levels not seen in many years. During the past two years, corporate bonds have yielded approximately 350 basis points over U.S. Treasury bonds. By the end of October, the spread rose to nearly 700 basis points. The increase in risk premiums was not limited to high yield bonds. The spread on investment grade (high quality) bonds rose to nearly 270 basis points over U.S. Treasury bonds. This is the highest spread level since 1986 and higher than in the 1990-91 recession. Even mortgage -backed securities issued by the Federal Home Loan Mortgage Corporation (FHLMC) fell in price to yield nearly 200 basis points over U.S. Treasuries. They had yielded 125 basis points over Treasuries at the beginning of the fiscal year. ----------------------------------------------------------------- Returns for the Periods Ended 10/31/98 ----------------------------------------------------------------- Average Annual Return Since Inception Fund/Index One year August 4, 1997 Florida Street Bond Fund 0.33% 0.99% Merrill Lynch High Yield Index 1.00% 2.85% Month Ended MLHY FSB 8/4/97 $10,000.00 $10,000.00 8/30/97 $10,020.60 $ 9,970.00 9/30/97 $10,200.87 $10,100.00 10/31/97 $10,252.90 $10,090.00 11/30/97 $10,345.17 $10,079.86 12/31/97 $10,425.86 $10,174.82 1/31/98 $10,613.53 $10,439.59 3/1/98 $10,675.09 $10,367.24 3/31/98 $10,783.97 $10,511.84 4/30/98 $10,824.95 $10,583.51 5/31/98 $10,955.93 $10,569.55 6/30/98 $10,957.03 $10,594.46 7/31/98 $11,065.50 $10,767.12 8/31/98 $10,394.93 $10,251.32 9/30/98 $10,513.44 $10,181.13 10/31/98 $10,354.68 $10,123.08 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund and the Merrill Lynch High Yield Index on August 4, 1997 and held through October 31, 1998. The Merrill Lynch High Yield Index is a widely recognized unmanaged index of non-investment grade U.S. domestic bonds. Performance figures include the change in value of the bonds in the index, reinvestment of dividends, and are not annualized. The index return does 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. The widening of spreads on corporate bonds reflects an increased risk premium demanded by investors. This has been blamed on numerous factors- the turmoil in foreign markets, the economic crisis in Russia, and the collapse of many hedge funds, to name a few. While these factors are important to analyze, it is also possible that yield spreads rose because they were simply too low. The Florida Street Bond Fund was not immune to these events. The fund posted a total return of 0.33% for the year versus 1.00% for the Merrill Lynch High Yield Index. The fund distributed $0.85 in dividends per share during the year, and the net asset value per share on 10/31/98 was $9.16. The SEC yield at year-end was 11.22%. The aforementioned widening of yield spreads caused many of the bonds held by the fund to decline in value. Stock prices also declined towards the end of the fiscal year. Investors are becoming concerned that corporate profits are not growing sufficiently to justify current stock prices. We are also concerned about the possibility of a recession and the instability of the world financial markets. The recent easing moves by the Federal Reserve and the continued high level of consumer confidence bodes well for the domestic economy. We acknowledge the dampened outlook for corporate profits, but we do not believe this crisis will result in a deep recession. A mild recession, generally referred to as a profit recession, is more likely. We do not expect this will have a substantially negative effect on corporate bonds because we believe the bond market has already discounted such an economic landscape. Going forward, we expect less volatile performance. Many sectors of the bond market have declined during the year and we expect recovery in several of them. We are focusing on the telecommunications and energy sectors, where we find much value. We expect to increase our exposure to these sectors, as well as to the consumer services sector. Thank you for your support. Walter A. Morales CFA Portfolio Manager
Florida Street Bond Fund Schedule of Investments - October 31, 1998 Common Stock - 0.8% Shares Value Golden State Bancorp Litigation Warrants 25,000 $ 121,875 JPS Textile Group, Inc. 8,245 45,348 ------------------- TOTAL COMMON STOCK (Cost $209,931) 167,223 ------------------- Preferred Stock - 1.6% Phone Tel Technologies (Cost $216,000) 4,000 312,000 ------------------- Principal Corporate Bonds - 79.0% Amount Value Allied Waste Industries, 0%, 6/1/07 (a) 150,000 $ 112,500 American Eco Corp., 9.625%, 5/15/08 500,000 396,250 American Restaurant, 11.50%, 2/15/03 500,000 452,500 American Rice, Inc., 13%, 7/31/02 (b) 270,000 157,950 Amresco, 10%, 3/15/04 110,000 66,550 Amscan Holdings, Inc., 9.875%, 12/15/07 (c) 250,000 201,250 Bally Total Fitness Holding Series B, 9.875%, 10/15/07 150,000 136,500 Beazer Homes USA, 8.875%, 4/1/08 250,000 228,750 Bigco Productions, 12%, 3/1/25 (e) 100,000 40,000 Brazos Sportswear, Inc., 10.50%, 7/1/07 350,000 134,750 Brauns Fashions, 12%, 1/1/05 445,000 440,550 Building Materials Corp., 8%, 10/15/07 (c) 100,000 95,500 CD Radio, Inc., 0%,12/1/07 (a) 250,000 120,000 Cafeteria Operators, 12%, 12/31/01 250,000 236,875 Callon Petroleum, 10%, 12/15/01 145,000 139,744 Cirrus Logic, Inc., 6%, 12/15/03 205,000 138,119 Cleveland Electric Illumination, 9%, 7/1/23 70,000 77,649 Covad Communications Group, 0%, 3/15/08 (a) 250,000 86,250 Dairy Mart Stores, 10.25%, 3/15/04 20,000 18,500 DiGiorgio Corp., 10%, 6/15/07 100,000 91,750 Emcor (EMCG) Group, Inc., 5.75%, 4/1/05 500,000 411,875 Edison Brothers Stores, 11%, 9/26/07 600,000 369,000 Equimar Shipholding, 9.875%, 7/1/07 250,000 193,750 Executive Risk Cap Trust, 8.675%, 2/1/27 200,000 200,479 Global Star, 11.25%, 6/15/04 135,000 91,125 Hill Stores Co., 12.50%, 7/1/03 500,000 196,875 Homeland Stores, Inc., 10%, 8/1/03 595,000 532,525 Integrated Health Services, 9.25%, 1/15/08 250,000 228,750 Intrawest Corp., 9.75%, 8/15/08 500,000 498,750 Iridium Capital Series B, 14%, 7/15/05 300,000 256,500 Iron Mountain, Inc., 8.75%, 9/30/09 100,000 99,500 Jackson Products, Inc., 9.50%, 4/15/05 125,000 119,375 K Mart Corp., 8%, 12/13/01 15,000 15,367 Mail-Well, Inc., 5%, 11/1/02 250,000 223,125 Mastellone Hermanos, 11.75%, 4/1/08 250,000 150,000 Maxim Group, Inc., 9.25%, 10/15/07 150,000 143,250 McLeod USA, Inc., 0%, 3/1/07 (a) 150,000 107,250 McMillin Cos. LLC, 13%, 8/31/06 1,020,000 1,020,000 Microcell Telecom, 0%, 6/1/06 (a) 300,000 193,500 Florida Street Bond Fund Schedule of Investments - October 31, 1998 - continued Principal Corporate Bonds - continued Amount Value Mrs. Fields Orig., 10.125%, 12/1/04 350,000 $ 313,250 National Equipment, 10%, 11/30/04 (c) 150,000 129,750 Niagra Mohawk Power Corp., 9.50%, 3/1/21 250,000 266,226 Ocean Energy, Inc., 7.625%, 7/1/05 435,000 419,775 Packaged Ice, Inc., 9.75%, 2/1/05 750,000 686,250 Paging Net Brasi, 13.50%, 6/6/05 200,000 120,500 Pamida, Inc., 11.75%, 3/15/03 150,000 145,500 Pathmark Stores, 0%, 11/1/03 (a) 250,000 183,750 Perkins Family Restaurants, 10.125%, 12/15/07 (c) 80,000 83,600 Petroleum Heat & Power, 12.25%, 2/1/05 100,000 96,500 Phar-Mor, Inc., 11.72%, 9/11/02 65,000 64,512 Pride International, Inc., 6.25%, 2/15/06 250,000 263,750 Prudential Home Mortgage Securities, 9.9207%, 12/25/23 168,804 166,342 RCN Corp., 0%, 2/15/03 (a) 250,000 126,250 Ram Energy, 11.50%, 2/15/08 500,000 412,500 Revlon Consumer Products, 8.625%, 2/1/08 (c) 310,000 281,325 Rockfeller Center, 0%, 12/31/00 165,000 124,575 Service Merchandise, 9%, 12/15/04 1,596,000 774,060 Speciality Foods Corp.: 11.25%, 8/15/03 255,000 116,025 0%, 8/15/05 (a) 250,000 17,500 Telewest PLC, 0%, 10/1/07 (a) 250,000 200,000 Tops Appliance, 6.50%, 11/30/03 150,000 90,000 Transamerica Energy, 11.50%, 6/15/02 350,000 124,250 Trico Marine Services, 8.50%, 8/1/05 355,000 296,425 Tricon Global Restaurant: 7.45% 5/15/05 300,000 306,008 7.65% 5/15/08 405,000 422,214 Trump Atlantic Association Funding, Inc., 11.25%, 5/2/06 100,000 87,375 Unisys Corp., 7.875%, 4/1/08 55,000 55,550 United Refining Co., 10.75%, 6/15/07 220,000 144,100 Webb Dell, 9.375%, 5/1/09 180,000 167,400 Wright Medical Technology, 11.75%, 7/1/00 260,000 264,750 Zilog, Inc., 9.5%, 3/1/05 500,000 365,000 ------------------- TOTAL CORPORATE BONDS (Cost $17,919,391) 15,737,945 ------------------- Convertible Bonds - 1.3% HIH Capital Ltd., 7.50%, 9/25/06 (c) 250,000 158,438 Lechters, Inc., 5%, 9/27/01 150,000 103,500 ------------------- TOTAL CORPORATE BONDS (Cost $337,271) 261,938 ------------------- Florida Street Bond Fund Schedule of Investments - October 31, 1998 - continued U.S. Government Obligations - 17.7% Fannie Mae: Series 1993-121 PH, 7%, 1/25/19 11,193,936 1,011,450 Series 1993-167 SE, 5.094%, 9/25/23 (d) 82,094 82,093 Series 1993-217 H, 0%, 8/25/23 1,105,363 704,606 Series 1993-94 S, 6.615%, 5/25/23 99,648 92,234 Series 1994-51 SA, 0%, 3/25/24 100,000 89,751 Series 1995-10 PC, 0%, 12/25/23 204,504 149,593 Freddie Mac: Series 1496 PA, 7.642%, 8/15/22 (d) 170,109 170,704 Series 1591 SH, 0%, 9/15/22 100,000 97,184 Series 1629 OE, 10%, 12/15/23 240,000 262,491 Series 1652 SC, 8.896%, 6/15/23 (d) 115,153 118,877 Series 1856 SA, 3.0625%, 3/15/24 18,888,750 750,148 ------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $2,877,156) 3,529,131 ------------------- ------------------- TOTAL INVESTMENTS - 100.4% (Cost $21,559,749) 20,008,237 ------------------- Other Assets less liabilities - (0.4)% (79,640) ------------------- TOTAL NET ASSETS - 100.0% 19,928,597 =================== Legend (a) Security initially issued in zero coupon form which converts to coupon form at a specified rate and date. The coupon rate shown is the rate at October 31, 1998. (b) Non-income producing - issuer filed for protection under the Federal Bankruptcy Code. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 1998, the value of these securities amounted to $949,863 or 4.8% of net assets. (d) Floating rate security; the coupon rate shown represents the rate at October 31, 1998. (e) Security not registered under the Securities Act of 1933. This security is subject to legal or contractual restrictions on resale. At the end of the period, restricted securities amounted to $40,000 or 0.2% of net assets.
Florida Street Bond Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $21,559,749) $ 20,008,237 Interest receivable 589,720 -------------------- Total assets 20,597,957 Liabilities Payable to custodian bank 482,346 Accrued advisory fee 11,511 Dividends payable 175,503 ------------------ Total liabilities 669,360 -------------------- Net Assets $ 19,928,597 ==================== Net Assets consist of: Paid in capital $ 21,423,526 Accumulated undistributed net investment income (14,436) Accumulated undistributed net realized gain (loss) on investments 71,019 Net unrealized depreciation on investments (1,551,512) -------------------- Net Assets, for 2,175,757 shares $ 19,928,597 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($19,928,597/2,175,757) $ 9.16 ====================
Florida Street Bond Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 27,268 Interest Income 1,300,040 --------------------- Total Income 1,327,308 Expenses Advisory fee $ 153,078 Trustees fees 954 -------------------- Total Expenses before reimbursement 154,032 Reimbursed expenses (49,278) -------------------- Total Operating Expenses 104,754 --------------------- Net Investment Income 1,222,554 --------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities 71,019 Change in net unrealized appreciation (depreciation) on investment securities (1,591,571) -------------------- Net gain (loss) on investment securities (1,520,552) --------------------- Net increase (decrease) in net assets resulting from operations $ (297,998) =====================
Florida Street Bond Fund Statement of Changes in Net Assets For the year For the period ended ended October 31, 1998 October 31, 1997 (a) Increase in Net Assets Operations Net investment income $ 1,222,554 105,474 Net realized gain (loss) on securities transactions 71,019 (97,781) Change in net unrealized appreciation (1,591,571) 40,059 ------------------ --------------- Net Increase in net assets resulting from operations (297,998) 47,752 ------------------ --------------- Distributions to shareholders: From net investment income (1,237,025) (7,658) From net realized gain - - Return of capital - (97,781) ------------------ --------------- Total distributions (1,237,025) (105,439) Share Transactions Net proceeds from sale of shares 13,541,571 7,463,588 Shares issued in reinvestment 1,166,552 - Shares redeemed (533,511) (116,893) ------------------ --------------- Net increase in net assets resulting from share transactions 14,174,612 7,346,695 ------------------ --------------- Total increase in net assets 12,639,589 7,289,008 Net Assets Begining of period 7,289,008 - ------------------ --------------- End of period [including undistributed net investment income of $(14,436) and $35, respectively] $ 19,928,597 $ 7,289,008 ================== =============== (a) For the period August 4, 1997 (commencement of operations) to October 31, 1997
Florida Street Bond Fund Financial Highlights For the year For the period Selected Per Share Data ended ended October 31, 1998 October 31, 1997 (b) Net asset value, beginning of period $9.95 $10.00 ---------------- ------------- Income from investment operations Net investment income 0.85 0.21 Net realized and unrealized gain(loss) (0.79) (0.12) ---------------- ------------- Total from investment operations 0.06 0.09 ---------------- ------------- Less Distributions From net investment income (0.85) (0.02) From net realized gain(loss) --- (0.12) ---------------- ------------- Total distributions (0.85) (0.14) ---------------- ------------- Net asset value, end of period $9.16 $9.95 ================ ============= Total Return 0.33% 3.69% (a) Ratios and Supplemental Data Net assets, end of period (000) $19,929 $7,289 Ratio of expenses to average net assets 0.75% 0.53% (a) Ratio of expenses to average net assets before reimbursement 1.10% 1.10% (a) Ratio of net investment income to average net assets 8.73% 3.95% (a) Ratio of net investment income to average net assets before reimbursement 8.38% 3.38% (a) Portfolio turnover rate 10.45% 60.55% (a) (a) Annualized (b) For the period August 4, 1997 (commencement of operations) to October 31, 1997
Florida Street Growth Fund Report to Shareholders for the Year Ended October 31, 1998 Dear Fellow Shareholders, As shown in the graph below, fiscal 1998 was a turbulent year for the equity market. Following a strong first half, the market began showing signs of weakness in May and this trend became more prevalent as the year progressed. By late August nearly all segments of the market were in a sharp correction. Small and mid-sized issues were hurt more than large, liquid ones despite the fact that they had been generally weak and not subject to much profit taking. In October, a broad rebound occurred, especially in smaller issues. ----------------------------------------------------------------- Returns for the Periods Ended 10/31/98 ----------------------------------------------------------------- Average Annual Return Since Inception Fund/Index 1 Year August 6, 1997 - ---------- ------ -------------- Florida Street Growth Fund (9.73)% (6.48)% S&P 400 Midcap Index 6.69% 5.00% S&P 600 Smallcap Index (11.06)% (5.73)% Florida S&P 400 S&P 600 Period Street Mid-Cap Small-Cap Ended Growth Index Index 8/6/97 $10,000 $10,000 $10,000 08/31/97 $9,900 $9,848 $10,240 09/30/97 $10,550 $10,414 $10,917 10/30/97 $10,340 $9,961 $10,446 11/30/97 $10,120 $10,108 $10,337 12/31/97 $10,090 $10,500 $10,579 01/30/98 $9,939 $10,300 $10,373 02/28/98 $10,702 $11,153 $11,317 03/31/98 $11,214 $11,655 $11,749 04/30/98 $11,365 $11,868 $11,818 05/31/98 $10,803 $11,334 $11,192 6/30/98 $10,712 $11,405 $11,224 7/31/98 $10,200 $10,963 $10,366 8/31/98 $8,122 $8,924 $8,368 9/30/98 $8,634 $9,756 $8,879 10/31/98 $9,198 $10,627 $9,291 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 400 Mid-Cap Index and the S&P 600 Small-Cap Index on Augus 6, 1997 and held through October 31, 1998. The S&P 400 Mid-Cap Index and the S&P 600 Small-Cap 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. However, despite the rebound most investors would not consider the preceding twelve months rewarding. Only those holding the 50-60 largest company stocks were likely to have double digit returns for the year ended 10/31/98. How did the Florida Street Growth Fund perform in this environment? The fund experienced a loss of -9.73% during the year ended October 31, 1998. Benchmarks for comparison include the S&P 400 Mid-Cap Index which earned a positive return of 6.7%, and the S&P 600 Small-Cap Index which declined 11.1% during the year . The primary factor in the fund's decline is its holdings of small and midcap stocks. Size has continued to be the most important factor influencing returns in the stock market. The larger, more liquid stocks have led the market with the highest returns, on average. We have avoided most of these stocks due their rich prices which , in our opinion, hinder future returns. What other factors influenced results during the year? Turmoil in the global financial markets hurt performance, especially during the last quarter. Though we are careful about the price we pay for shares, we recognize that any stock can fall 20-30% at any time for very little reason. However, it is unlikely that shares of all companies will fall 20-30% at the same time without negative company-specific reasons. The exception is during world crises when traders are given a compelling excuse to sell almost any stock. Which stocks and sectors had the greatest influence on fund results during the year? Several small company stocks exerted downward pressure on the fund as they succumbed to investors preference for size and liquidity over value. Iteq, Inc., a consolidator of pollution control and pressure vessel manufacturers, declined approximately 75% from its original purchase price. Several energy service stocks, including Input/Output, and Pride International continued falling until late in the year. While most financial stocks held up well, exceptions were Amresco and Sirrom Capital, which underwent significant declines. Sirrom was sold due to a deteriorating outlook. Amresco has a strong management team and good prospects. It is one of the funds larger holdings. Results were helped by a strong showing by technology stocks, a sector we have overweighted. Oracle Corp. and Qlogic were particularly strong performers for your fund. What are the fund's ten largest holdings as of the end of the fiscal year? --------------------------------------------------- Top Ten Holdings Security Name % of Fund NAV American Express 2.93% Cisco Systems 2.56 Fannie Mae 2.56 Oracle Corp. 2.49 Allied Capital Corp. 2.48 MBNA Corp. 2.40 MCI Worldcom 2.33 Protective Life 2.23 Amresco Inc. 2.19 Kimberly Clark 2.18 ------ 24.35 --------------------------------------------------- How is the fund positioned for the market environment ahead? Having resigned ourselves to endure volatile performance during the rare and short periods when world events are so unsettled that markets overreact to current events, we have used this volatility to better anchor the fund with several large capitalization stocks listed in the table above. We have also increased the mid-cap portion of the fund due to the increased liquidity of these issues versus small caps. Mid-cap stocks now comprise approximately forty percent of the fund's net assets. Small cap exposure has been reduced somewhat though we will continue to invest in these stocks because they offer high potential returns according to our research. We believe the equity market will offer returns at or slightly below the long term historical average in the foreseeable future. Midsize and small company stocks are expected to exceed the average returns of the larger stocks. The fund is being positioned to benefit from this trend. We have and will continue to reduce the range of company sizes in the fund while emphasizing mid-cap stocks, which offer the best combination of potential return and risk in the market today. Thank you for your support. Richard L. Chauvin, Jr. CFA
Florida Street Growth Fund Schedule of Investments - October 31, 1998 Common Stock - 95.0% Shares Value Banks & Bank Holding Companies -5.3% Carolina First Corp. 1,500 $ 34,594 CCB Financial Corp. 800 42,100 First Tennessee National Corp. 1,200 38,025 National Commerce Bancorporation 1,000 17,750 Regions Financial Corp. 1,200 44,400 --------------- 176,869 --------------- Capital Equipment & Services - 7.5% Applied Materials, Inc. (a) 900 31,219 Allied Signal, Inc. 1,050 40,884 Deere & Co. 1,500 53,062 Illinois Tool Works, Inc. 700 44,888 Iteq, Inc. (a) 13,500 36,281 NCI Buildings Systems (a) 2,000 43,250 --------------- 249,584 --------------- Consumer Cyclicals - 8.5% Consolidated Stores Corp. (a) 1,100 18,081 Dollar General Corp. 781 18,646 Edison Brothers Stores, Inc. (a) 4,500 10,125 Fastenal Co. 1,200 43,350 Ford Motor Company, Inc. 1,100 59,675 Goody's Clothing, Inc.(a) 1,500 16,031 Lowe's Companies 1,000 33,688 Palm Harbor Homes, Inc. (a) 1,900 47,975 Saks Incorporated (a) 1,500 34,125 --------------- 281,696 --------------- Consumer Services - 10.1% Acxiom Corp. (a) 1,200 30,150 Carnival Corp. Class A 1,200 38,850 Cendant Corp. (a) 3,020 34,541 Kimberly Clark Corp. 1,500 72,375 Landry's Seafood Restaurants, Inc. (a) 1,000 8,375 Metamor Worldwide, Inc. (a) 1,200 30,825 Modis Professional Services (a) 4,100 72,262 NCO Group, Inc. (a) 1,500 47,250 --------------- 334,628 --------------- Consumer Non - Durables - 6.5% Gillette Company 1,400 62,912 Pepsico, Inc. 500 16,875 Performance Food Group Co. (a) 900 21,825 Richfood Holdings, Inc. 1,350 23,962 SCP Pool Corp. (a) 3,075 42,666 U.S. Foodservice, Inc. (a) 1,000 47,500 --------------- 215,740 --------------- Florida Street Growth Fund Schedule of Investments - October 31, 1998 - continued Common Stock - continued Shares Value Energy Sector - 3.9% Core Laboratories (a) 1,200 27,075 Gulf Island Fabric (a) 1,400 20,125 Input/Output, Inc. (a) 2,300 20,413 Mobil Corp. 300 22,706 Newpark Resources, Inc. (a) 1,600 15,100 Pride International, Inc. (a) 2,050 23,831 --------------- 129,250 --------------- Financial Services - 18.2% Allied Capital Corp. 4,400 82,500 American Express Co. 1,100 97,213 Amresco, Inc. 10,500 72,844 Capital RE 700 12,819 Fannie Mae 1,200 84,975 Fleet Financial Group, Inc. 1,500 59,906 Interstate/Johnson Lane, Inc. 550 16,844 Lehman Brothers Holdings, Inc. 200 7,588 MBNA Corp. 3,487 79,547 Protective Life Corp. 2,000 74,125 Raymond James Financial, Inc. 750 17,203 --------------- 605,564 --------------- Health Care - 5.2% American Home Products Corp. 700 34,125 Bristol-Myers Squibb Co. 600 66,338 Diagnostic Health Services (a) 1,450 5,438 HBO & Company 1,000 26,250 IMS Health, Inc. 600 39,900 --------------- --------------- 172,051 --------------- Natural Resources/Basic Materials - 0.5% IMC Global, Inc. 600 15,600 --------------- REIT - 2.4% Colonial Properties Trust 1,400 38,500 Post Properties, Inc. 1,100 42,556 --------------- --------------- 81,056 --------------- Technology Sector - 20.0% Cisco Systems, Inc. (a) 1,350 85,050 Compaq Computer Corp. 1,200 37,950 Concord EFS, Inc. (a) 1,850 52,725 Cotelligent Group, Inc. (a) 2,000 37,750 Datastream Systems (a) 1,000 10,063 Dycom Industries (a) 1,500 52,594 Nova Corporation (a) 858 24,775 Oracle Corp. (a) 2,800 82,775 Qlogic Corp. (a) 500 46,187 SCI Systems, Inc. (a) 1,000 39,500 Tech Data Corp. (a) 1,000 39,375 Tellabs Inc. (a) 1,304 71,720 World Access, Inc. (a) 1,100 23,512 Xerox Corp. 600 58,125 --------------- --------------- 662,101 --------------- Florida Street Growth Fund Schedule of Investments - October 31, 1998 - continued Common Stock - continued Shares Value Transportation/Commercial - 1.3% ASA Holdings, Inc. 1,200 43,050 --------------- Telecommunications - 4.7% Alltel Corp. 900 42,131 Frontier Corp. 1,200 36,075 MCI WorldCom, Inc. (a) 1,400 77,350 --------------- --------------- 155,556 --------------- Utilities - 0.9% Consolidated Natural Gas Co. 550 29,047 --------------- Total Common Stock (Cost $3,243,211) 3,151,792 --------------- Principal Amount Convertible Bonds - 0.6% Premiere Technologies, 5.75%, 7/1/04 (Cost $43,478) $ 40,000 21,200 --------------- Money Market Securities - 4.4% Star Treasury, 4.86%, 11/2/98 (Cost $145,888) 145,888 145,888 --------------- TOTAL INVESTMENTS - 100.0% (Cost $3,432,577) 3,318,880 Other Assets less liabilities - 0.0% 1,091 --------------- Total Net Assets - 100.0% $ 3,319,971 =============== (a) non-income producing
Florida Street Growth Fund October 31, 1998 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $3,432,577) $ 3,318,880 Receivables: Dividends 3,226 Interest 1,252 -------------------- Total assets 3,323,358 Liabilities Accrued advisory fee payable 3,387 ------------------ Total liabilities 3,387 -------------------- Net Assets $ 3,319,971 ==================== Net Assets consist of: Paid in capital $ 3,731,077 Accumulated undistributed net investment income 4,693 Accumulated undistributed net realized gain (loss) on investments (302,102) Net unrealized appreciation (depreciation) on investments (113,697) -------------------- Net Assets, for 362,562 shares $ 3,319,971 ==================== Net Asset Value Net Assets Offering price and redemption price per share ($3,319,971/362,562) $ 9.16 ====================
Florida Street Growth Fund Statement of Operations for the year ended October 31, 1998 Investment Income Dividend Income $ 22,849 Interest Income 18,779 ------------------- Total Income 41,628 Expenses Advisory fee $ 37,385 Trustees fees 954 ------------------ Total Expenses before reimbursement 38,339 Reimbursed expenses (2,745) ------------------ Total Operating Expenses 35,594 ------------------- Net Investment Income (Loss) 6,034 ------------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (295,878) Change in net unrealized appreciation (depreciation) on investment securities (146,025) ------------------- Net gain (loss) on investment securities (441,903) ------------------- Net increase (decrease) in net assets resulting from operations $ (435,869) ===================
Florida Street Growth Fund Statement of Changes in Net Assets For the year For the period ended ended October 31, 1998 October 31,1997 (a) Increase in Net Assets Operations Net investment income $ 6,034 $ 5,346 Net realized gain(loss) on securities transactions (295,878) (4,612) Change in net unrealized appreciation (depreciation) (146,025) 32,328 ------------------- ------------------- Net Increase (Decrease) in net assets resulting ------------------- from operations (435,869) 33,062 ------------------- ------------------- Distributions to shareholders: From net investment income (2,075) - From net realized gain (6,224) - ------------------- ------------------- Total Distributions (8,299) - Share Transactions Net proceeds from sale of shares 1,857,985 2,127,711 Shares issued in reinvestment 8,299 - Shares redeemed (219,626) (43,292) ------------------- ------------------- Net increase in net assets resulting from share transactions 1,646,658 2,084,419 ------------------- ------------------- Total increase in net assets 1,202,490 2,117,481 Net Assets Begining of period 2,117,481 - ------------------- ------------------- End of period [including undistributed net investment income of $4,693 and $734]. $ 3,319,971 $ 2,117,481 =================== =================== (a) August 6, 1997 (commencement of operations) to October 31, 1997
Florida Street Growth Fund Financial Highlights For the year For the period Selected Per Share Data ended ended October 31, 1998 October 31, 1997 (b) Net asset value, beginning of period $ 10.19 $ 10.00 ------------ ------------- Income from investment operations Net investment income 0.02 0.03 Net realized and unrealized gain (loss) (1.01) 0.16 ------------ ------------- Total from investment operations (0.99) 0.19 ------------ ------------- Less Distributions From net investment income (0.01) - From net realized gain (loss) (0.03) - ------------ ------------- Total Distributions (0.04) - ------------ ------------- Net asset value, end of period $ 9.16 $ 10.19 ============ ============= Total Return (9.73)% 7.97% (a) Ratios and Supplemental Data Net assets, end of period (000) $3,320 $2,117 Ratio of expenses to average net assets 1.25% 1.35% (a) Ratio of expenses to average net assets before reimbursement 1.35% 1.35% (a) Ratio of net investment income to average net assets 0.21% 1.14% (a) Ratio of net investment income to average net assets before reimbursement 0.12% 1.14% (a) Portfolio turnover rate 63.10% 0.87% (a) (a) Annualized (b) August 6, 1997 (commencement of operations) to October 31, 1997
FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1998 NOTE 1. ORGANIZATION Florida Street Bond Fund (the "Bond Fund") and Florida Street Growth Fund (the "Growth Fund") are 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. The investment objective of the each Fund is to provide total return 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 Advisor'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, and the Advisor 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 Advisor, 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 Advisor 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 Advisor, 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. Federal Income Taxes- Each Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, each 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. FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1998 NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued Dividends and Distributions- Each Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. Each Fund intends to distribute its net long-term capital gains and its net short-term capital gains at least once a year. Other- Each 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. OPERATING POLICIES Restricted Securities- The funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of each applicable fund's schedule of investments. NOTE 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Funds retain Commonwealth Advisors, Inc. (the "Advisor") to manage the Fund's investments. Walter A. Morales, the Advisor's president and chief investment manager, is responsible for the day to day management of the Bond Fund; Richard L. Chauvin, Senior Vice-President of the Advisor, is responsible for the day to day management of the Growth Fund. Under the terms of the management agreement (the "Agreement"), the Advisor manages each Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of each Fund except brokerage commissions, taxes, interest, fees and expenses of non-interested person trustees, and extraordinary expenses. As compensation for its management services and agreement to pay each Fund's expenses, the Funds are obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 0.75% and 1.35% of the average daily net assets of the Bond Fund and the Growth Fund, respectively. During the year ended October 31, 1998, the Advisor voluntarily waived a portion of its advisory fee in order to reduce total operating expenses of each Fund. 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 Notes to Financial Statements FLORIDA STREET FUNDS October 31, 1998 NOTE 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued the Advisor. For the year ended October 31, 1998, the Advisor received fees of $153,078 and $37,385 from the Bond Fund and the Growth Fund, respectively. Each Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage each Fund's business affairs and to provide each Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the year ended October 31, 1998, the Administrator received fees of $25,000 from the Advisor for administrative services provided to each Fund. Each Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor") to act as the principal distributor of each Fund's shares. There were no payments made to the Distributor for the year ended October 31, 1998. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 5. CAPITAL SHARE TRANSACTIONS Florida Street Bond Fund. As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $21,423,526. Transactions in capital stock were as follows: - --------------------------------- -------------------------------------- ---------------------------------------- For the Year Ended For the period August 4, 1997 October 31, (Commencement of Operations) through October 31, - --------------------------------- -------------------------------------- ---------------------------------------- 1998 1998 1997 1997 - --------------------------------- ------------------ ------------------- ---------------- ----------------------- Shares Dollars Shares Dollars Shares sold 1,379,576 $13,541,571 744,446 $7,463,588 Shares issued in reinvestment of dividends 118,681 1,166,552 - - Shares redeemed (55,224) (533,511) (11,722) (116,893) -------- ---- --------- ---- -------- ---- --------- 1,443,033 $14,174,612 732,724 $7,346,695 - --------------------------------- ------------------ ------------------- ---------------- -----------------------
FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1998 NOTE 5. CAPITAL SHARE TRANSACTIONS - continued Florida Street Growth Fund. As of October 31, 1998, there was an unlimited number of no par value shares of capital stock authorized for the Fund. Paid in capital at October 31, 1998 was $3,731,077. Transactions in capital stock were as follows: - ------------------------------------ ------------------------------------ --------------------------------------- For the Year Ended For the period August 4, 1997 October 31, (Commencement of Operations) through October 31, 1998 1998 1997 1997 Shares Dollars Shares Dollars Shares sold 175,386 $1,857,985 211,885 $2,127,711 Shares issued in reinvestment of dividends 867 8,299 - - Shares redeemed (21,397) (219,626) (4,179) (43,292) -------- ---- --------- ---- ------- ---- -------- 154,856 $1,646,658 207,706 $2,084,419 - ------------------------------------ ----------------- ------------------ --------------- -----------------------
NOTE 6. INVESTMENTS Florida Street Bond Fund. For the year ended to October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $1,547,517 and $1,102,364, respectively. The gross unrealized appreciation for all securities totaled $1,019,672 and the gross unrealized depreciation for all securities totaled $2,571,184 for a net unrealized depreciation of $1,551,512. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $21,559,749. Florida Street Growth Fund. For the year ended October 31, 1998, purchases and sales of investment securities, other than short-term investments, aggregated $3,401,160 and $1,513,378, respectively. The gross unrealized appreciation for all securities totaled $320,331 and the gross unrealized depreciation for all securities totaled $434,028 for a net unrealized depreciation of $113,697. The aggregate cost of securities for federal income tax purposes at October 31, 1998 was $3,432,577. NOTE 7. 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. FLORIDA STREET FUNDS Notes to Financial Statements October 31, 1998 NOTE 8. YEAR 2000 Issue Like other mutual funds, financial and business organizations and individuals around the world, each Fund could be adversely affected if the computer systems used by the Advisor, Administrator or Servicers do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Funds. 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, 1998, 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 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 securities owned as of October 31, 1998, 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 Florida Street Bond Fund and Florida Street Growth Fund as of October 31, 1998, 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 9, 1998 Board of Trustees The Ameriprime Funds In planning and performing our audit of the financial statements of The Ameriprime Funds for the year ended October 31, 1998, we considered its internal control structure, including procedures for safeguarding securities, in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-SAR, not to provide assurance on the internal control structure. The management of The Ameriprime Funds is responsible for estab- lishing and maintaining an internal control structure. In ful- filling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. Two of the objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and transactions are executed in accordance with management's authorization and recorded properly to permit preparation of financial statements in conformity with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may occur and may not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that it may become inadequate because of changes in conditions or that the effectiveness of the design and operation may deteriorate. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control structure, including procedures for safeguarding securities, that we consider to be material weaknesses as defined above as of October 31, 1998. Board of Trustees The Ameriprime Funds Page 2 This report is intended solely for the information and use of management and the Securities and Exchange Commission. McCurdy & Associates CPA's, Inc. Westlake, Ohio November 9, 1998 -----END PRIVACY-ENHANCED MESSAGE-----