-----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, H1O+yNV0YI1PFA+G2VQeo3Vu91KNxWoDqQ+Hz8f9gzvZ0qnFYxle797KzPEeGnaf /35JxjRrZZ7/LbNYlCR1+Q== 0001000579-01-000004.txt : 20010123 0001000579-01-000004.hdr.sgml : 20010123 ACCESSION NUMBER: 0001000579-01-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001031 FILED AS OF DATE: 20010119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIPRIME FUNDS CENTRAL INDEX KEY: 0001000579 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 752616671 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09096 FILM NUMBER: 1511494 BUSINESS ADDRESS: STREET 1: 1793 KINGSWOOD DR STREET 2: STE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 BUSINESS PHONE: 8174311297 MAIL ADDRESS: STREET 1: 1793 KINGSWOOD DRIVE STREET 2: SUITE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 N-30D 1 0001.txt AMERIPRIME FUNDS Corbin Small-Cap Value Fund November 20, 2000 Dear Shareholder: This is the week of Thanksgiving, and, in reflecting upon this year, I realize that I and the Fund's shareholders have much to be thankful for. At this time, the nation has not concluded the presidential election, the economy appears to be slowing, the dot.coms have collapsed, last year's fascination with technology and telecommunications has evaporated, and now the press is starting to use the "V" word again. The "V" word (as in value) has not been much of a force on Wall Street over the past few years, as investors focused their attention on the vapors that were passing as businesses on Wall Street. While these are things that were addressed in last year's annual report, they bear mentioning as a matter of history, as well as evidence of how fast people's attitudes change these days. It certainly seems that the pendulum has begun a multi-year swing back toward the kinds of companies and sectors that we customarily invest in for the Fund. The overall level of investor frustration is high. Investors who had a belief in true economic value have been frustrated the last several years, while the growth crowd have seen their portfolio values massacred over the last six months. Bonds have produced a low total return, and international stocks have been mediocre performers. What is the next big thing, and when will it come to pass? I believe that the answers lie right in your hands, for a number of reasons. While clearly I am a biased source of information, allow me to make the case as strongly as possible for small-cap value. In the slower growth environment that we are entering, companies are going to look for ways to grow their businesses, and one of the major opportunities is through mergers/acquisitions. In the last few years, the bulk of these acquisitions/mergers have centered on large business combinations that have involved stock swaps. Due to the flagging price of most companies' stocks, this is no longer an option. Many of these companies are also in a position in which they cannot afford earnings dilution or cash flow problems. Therefore, the acquisitions made must be cheap, profitable companies that can be easily acquired for cash or financed by lending syndicates. The Fund has experienced this activity several times in the last few months. Firms like Republic Group and Taco Cabana are examples of this principle in action. In addition, solidly profitable companies have reduced risk in a sluggish market environment because they can pay down debt, repurchase shares, or take advantage of other opportunities not available to the more leveraged/less profitable firms. Currently, over one-third of our portfolio companies are repurchasing their own shares in the marketplace, in some cases in large quantities. This means that current shareholders will get a larger percentage of future earnings, eventually leading to a higher stock price. Stock prices follow profits in the long term. Coming out of an economic slowdown is when small-cap value stocks shine, because, in a profit-filled environment with a growing business sector, smaller companies can usually grow at a much faster pace than larger companies. This fact, coupled with attractive valuations, leads investors to bid up the prices of such companies. This in turn attracts more investors and causes prices to move higher. This is the scenario I envision for small-cap value stocks. In last year's report, I talked about "the giant sucking sound" that had removed money from all sectors of the marketplace to go into technology and the hyper-growth stocks of the day. That has come to an end, and investors will feel the consequences of those decisions for years to come. Small-cap value is not the "New New Thing," it is the same thing that it has been over the years: the best asset class to be in for maximizing return, while minimizing risk, over the long term. I said in one report a few years ago that what we do here will not be measured over quarters, but over years. While our first calendar year (1998) was a disaster for small-cap value investors in general, and our Fund in particular, in the 1999 calendar year this was one of the best small-cap value funds in the country. For the 12-month period ending December 31, 1999, Morningstar ranked it 21st out of 235 funds in that category. I am going to continue to work as hard as possible to insure the success of this venture for a number of reasons, chief among them being that my name is on this Fund, my liquid net worth is primarily invested in this Fund, and most members of my family have holdings in it. In addition, I know many of the Fund's shareholders and do not wish to let them down. I feel that great days are ahead, and I look forward to enjoying them together. PERFORMANCE REVIEW For the six-month period ended October 31st, your Fund returned -10.57%, versus the Russell 2000 Index at -1.11% and the S&P 600 Small-Cap Index at 6.83%. For the year, the Corbin Small-Cap Value Fund returned 5.33%, and the Russell 2000 and S&P 600 Small-Cap were at 17.41% and 20.18%, respectively. Returns for the Year Ended October 31, 2000 - ------------------------------------------------------------------------------ Fund/Index 1 Year Average Annual Total Return Since Inception June 30, 1997 - ------------------------- ----------- ---------------------------------------- Corbin Small-Cap Fund 5.33% -7.98% S&P 600 20.18% 10.02% Russell 2000 17.41% 8.11% - ------------------------------------------------------------------------------- Corbin S&P 600 Russell 2000 ---------------------------------------------------- 6/30/97 10,000 10,000 10,000 7/31/97 10,310 10,629 10,465 10/31/97 11,030 11,116 10,984 1/31/98 10,577 11,037 10,928 4/30/98 11,173 12,577 12,288 7/31/98 9,597 11,031 10,708 10/31/98 7,051 9,887 9,683 1/31/99 6,593 10,969 10,965 4/30/99 7,126 10,777 11,151 7/31/99 7,882 11,564 11,501 10/31/99 7,189 11,075 11,123 1/31/00 8,255 12,098 12,910 4/28/00 8,468 12,978 13,205 7/31/00 7,573 13,011 13,085 10/31/00 7,573 13,864 13,059 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 600 Index and the Russell 2000 Index on June 30, 1997 (the inception of the Fund) and held through October 31, 2000. The S&P 600 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. I dislike using these comparison periods, because they are not the way I that I view performance. When I judge performance, I usually look at calendar quarters and years. During the period December 31, 1998, through December 31, 1999, the Fund's return was 26.50%, the Russell 2000 was 21.35%, and the S&P 600 Small-Cap was 12.10%. And for the period January 1, 2000 to October 31, 2000, the Fund's return was -11.35%, the Russell 2000 was -0.47%, and the S&P 600 Small-Cap was 11.11%. The Fund's performance would probably have been spectacular this year if it had not been for one decision: not selling Titan Corporation in the month of March. Titan had been purchased by the Fund at between $5 and $6 per share in 1998, and in March of 2000 it briefly touched $60 per share. Since that time, it has retreated to about $20 per share. While we did sell some on the way down, the sales prices did not approach the stock's price in March. We have since repurchased that position and have added to it. In the short term, the stock did not help performance. In the long term, I believe that this could be one of the most profitable stocks of our time. FIVE STOCKS TO WATCH I would like to highlight a few of the Fund's holdings that we believe will be particularly interesting over the next year. These are: Titan Corporation - The company is primarily in the defense business, but has three rapid-growth subsidiaries that are outgrowths of its primary business. The first, Cayenta.com, is an information technology company. The second, Surebeam, is in the food-sterilization business. The third, Titan Technologies, is in the mobile-telecom business. We believe that at least one of these fast-growth subsidiaries will be brought public in 2001, unlocking value. The defense business should continue its steady growth, making acquisitions and building value in a consolidating industry. Successories, Inc. - The company is a leader in the motivational and people-recognition business. Currently, it has just finished the process of cleaning up its balance sheet through a rights offering. Jack Miller, the well-known Chicago catalog entrepreneur, has used the offering to increase his stake in the company to 27% and serves as the company's chairman of the board. The company has high-margin products and an improving financial position, which, when coupled with sales growth, could yield spectacular profitability. Lancer Corporation- The company provides soft-drink dispensing equipment and valve systems worldwide. Lancer's products are primarily used to dispense Coca-Cola, one of the best-known brand names in the world. Duckwall-Alco Stores Inc. - Duckwall operates general merchandise stores in Midwestern and Southwestern towns with under 20,000 residents. The company is currently trading at a very cheap valuation, is repurchasing shares, and is looking for other ways to enhance shareholder value. VTEL Corporation- VTEL is one of the largest players in the area of digital video communications. The company is moving from a hardware-based platform to software-based products. It is looking forward to quick revenue growth as it attempts to build a large service business based on providing the expertise to build and enable video over private networks. CONCLUSION In my opinion, the time is rapidly approaching when the Fund's investors will be rewarded for their patience. We have stayed the course, have remained faithful to our discipline, and have been diligent in our research. If you ever have any questions or comments about the Fund, please let me know. I am willing to do what it takes to make this a successful experience for all shareholders. If you would like to reach me, please e-mail me at dcorbin@corbincom.com, call me, or send a letter to our office in Fort Worth. As always, I thank you for your faith in our efforts. We are working hard to make your investment profitable, and we appreciate your support over the last year. Sincerely, David A. Corbin, CFA President & Chief Investment Officer Corbin Small-Cap Value Fund Schedule of Investments - October 31, 2000 Common Stocks - 91.2% Shares Value Basic Industry - 8.9% Chemicals - 4.8% Schulman A. , Inc. 5,000 $ 54,687 International Flavors & Fragrance, Inc. 5,000 83,750 ---------------- 138,437 ---------------- Steel - 4.1% Quanex Corp. 6,000 118,875 ---------------- TOTAL BASIC INDUSTRIES 257,312 ---------------- Durables - 13.8% Autos & Trucks - 3.0% Rush Enterprises, Inc. (a) 9,700 47,894 Wabash National Corp. 4,715 37,720 ---------------- 85,614 ---------------- Electrical Equipment - 4.1% Hubbell, Inc. - Class B 5,000 119,687 ---------------- Machinery - 6.7% Lancer Corp. (a) 28,000 175,000 Perceptron, Inc. (a) 7,200 19,238 ---------------- 194,238 ---------------- TOTAL DURABLES 399,539 ---------------- Energy - 3.3% Offshore Construction - 3.3% Unifab International, Inc. (a) 10,000 96,250 ---------------- Financials - 3.9% Banks - 1.9% First Financial Bankshares, Inc. 1,800 55,350 ---------------- Specialty Finance - 2.0% Delta Financial Corp. (a) 20,000 10,000 Onyx Acceptance Corp. (a) 13,000 46,313 ---------------- 56,313 ---------------- TOTAL FINANCE 111,663 ---------------- Housing & Construction - 1.0% Fabricated - 1.0% NCI Building Systems, Inc. (a) 1,800 28,013 ---------------- Corbin Small-Cap Value Fund Schedule of Investments - October 31, 2000 Common Stocks - continued Shares Value Media & Leisure - 18.3% Publishing - 3.0% Thomas Nelson Publishers, Inc. 13,000 $ 86,937 ---------------- Restaurants - 13.0% BUCA, Inc. (a) 7,000 109,375 Lone Star Steakhouse & Saloon, Inc. 10,000 84,375 Pizza Inn, Inc. 31,000 93,000 Taco Cabana, Inc. - Class A (a) 10,300 86,585 ---------------- 373,335 ---------------- Television - 2.3% Hispanic Television Network (a) 20,000 67,500 ---------------- TOTAL MEDIA & LEISURE 527,772 ---------------- Non-Durables - 5.8% Beverages - 3.0% Liqui - Box Corp. 2,400 85,950 ---------------- Family Services - 2.8% Koala Corp. (a) 8,000 80,000 ---------------- TOTAL NON-DURABLES 165,950 ---------------- Retail & Wholesale - 11.3% General Merchandise - 3.5% Duckwall - Alco Stores, Inc. (a) 13,000 100,750 ---------------- Grocery Stores - 3.4% Ingles Markets, Inc. - Class A 10,000 98,750 ---------------- Specialty Stores - 4.4% Successories, Inc. (a) 75,000 126,562 ---------------- TOTAL RETAIL & WHOLESALE 326,062 ---------------- Corbin Small-Cap Value Fund Schedule of Investments - October 31, 2000 Common Stocks - continued Shares Value Technology - 24.9% Consulting Services - 12.7% Nextera Enterprises, Inc. (a) 47,300 $ 76,863 VTEL Corp. (a) 154,600 289,875 ---------------- 366,738 ---------------- Electronic Defense - 12.2% Herley Industries, Inc. (a) 5,500 112,062 Titan Corp. (a) 18,000 240,750 ---------------- 352,812 ---------------- TOTAL TECHNOLOGY 719,550 ---------------- COMMON STOCKS (Cost $3,254,360) 2,632,111 ---------------- Principal Amount Value Money Market Securities - 12.5% Firstar Treasury Fund, 5.55% (b) (Cost $361,371) 361,371 $ 361,371 ---------------- TOTAL INVESTMENTS - 103.7% (Cost $3,615,731) 2,993,482 ---------------- Other assets less liabilities - (3.7)% (105,884) ---------------- Total Net Assets - 100.0% $ 2,887,598 ================ (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000.
See accompanying notes which are an integral part of the financial statements. Corbin Small-Cap Value Fund October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $3,615,731) $ 2,993,482 Cash 12,144 Receivable for fund shares sold 1,475 Interest receivable 1,721 Dividends receivable 675 ------------------- Total assets 3,009,497 Liabilities Accrued investment advisory fee $ 2,873 Payable for securities purchased 107,995 Payable for fund shares redeemed 11,031 ------------------ Total liabilities 121,899 ------------------- Net Assets $ 2,887,598 =================== Net Assets consist of: Paid - in capital $ 3,880,260 Accumulated undistributed net investment income 4,908 Accumulated net realized loss on investments (375,321) Net unrealized depreciation on investments (622,249) ------------------- Net Assets, for 406,045 shares $ 2,887,598 =================== Net Asset Value Net Assets Offering price and redemption price per share ($2,887,598/406,045) $ 7.11 ===================
See accompanying notes which are an integral part of the financial statements. Corbin Small-Cap Value Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 29,343 Interest income 10,432 --------------- Total Income 39,775 Expenses Investment advisory fee $ 33,423 Trustees' fees 3,064 --------------- Total expenses before reimbursement 36,487 Reimbursed expenses (3,064) --------------- Total operating expenses 33,423 --------------- Net Investment Income 6,352 --------------- Realized & Unrealized Gain (Loss) Net realized gain on investment securities 477,022 Change in net unrealized depreciation on investment securities (395,107) --------------- Net realized & unrealized gain on investment securities 81,915 --------------- Net increase in net assets resulting from operations $ 88,267 ===============
See accompanying notes which are an integral part of the financial statements. Corbin Small-Cap Value Fund Statement of Changes in Net Assets Year Year ended ended October 31, October 31, 2000 1999 ------------------- ------------------- Increase/(Decrease) in Net Assets Operations Net investment income (loss) $ 6,352 $ (4,598) Net realized gain (loss) on investment securities 477,022 (300,255) Change in net unrealized appreciation (depreciation) (395,107) 327,949 ------------------- ------------------- Net increase in net assets resulting from operations 88,267 23,096 ------------------- ------------------- Distributions to shareholders From net investment income 0 0 From net realized gain 0 0 ------------------- ------------------- Total distributions 0 0 ------------------- ------------------- Share Transactions Net proceeds from sale of shares 1,151,984 747,375 Shares issued in reinvestment of dividends 0 0 Shares redeemed (646,942) (765,186) ------------------- ------------------- Net increase(decrease) in net assets resulting from share transactions 505,042 (17,811) ------------------- ------------------- Total increase in net assets 593,309 5,285 Net Assets Beginning of period 2,294,289 2,289,004 ------------------- ------------------- End of period [including accumulated net investment income (loss) of $4,908 and $(1,444), respectively] $ 2,887,598 $ 2,294,289 =================== ===================
See accompanying notes which are an integral part of the financial statements. Corbin Small-Cap Value Fund Financial Highlights Year Year Year Period Ended ended ended ended October 31, October 31, October 31, October 31, 2000 1999 1998 1997 (a) ----------------- ----------------- ----------------- ----------------- Selected Per Share Data Net asset value, beginning of period $ 6.75 $ 6.62 $ 11.03 $ 10.00 ----------------- ----------------- ----------------- ----------------- Income from investment operations: Net investment income (loss) 0.02 (0.01) (0.01) 0.00 Net realized and unrealized gain (loss) 0.34 0.14 (3.76) 1.03 ----------------- ----------------- ----------------- ---------------- Total from investment operations 0.36 0.13 (3.77) 1.03 ----------------- ----------------- ----------------- ----------------- Less Distributions From net investment income 0.00 0.00 (0.01) 0.00 From net realized gain 0.00 0.00 (0.63) 0.00 ----------------- ----------------- ----------------- ---------------- Total distributions 0.00 0.00 (0.64) 0.00 ----------------- ----------------- ----------------- ----------------- Net asset value, end of period $ 7.11 $ 6.75 $ 6.62 $ 11.03 ================= ================= ================= ================= Total Return 5.33% 1.96% (36.07)% 10.30% (b) Ratios and Supplemental Data Net assets, end of period (000) $ 2,888 $ 2,294 $ 2,289 $ 1,334 Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.23% (c) Ratio of expenses to average net assets before reimbursement 1.36% 1.31% 1.30% 1.23% (c) Ratio of net investment income to average net assets 0.24% (0.20)% (0.15)% 0.00% Ratio of net investment income to average net assets before reimbursement 0.12% (0.26)% (0.20)% 0.00% Portfolio turnover rate 94.69% 65.66% 86.42% 20.41% (c)
(a) June 30, 1997 (commencement of operations) to October 31, 1997 (b) For periods of less than a full year, total returns are not annualized. (c) Annualized See accompanying notes which are an integral part of the financial statements. PAGE> Corbin Small-Cap Value Fund Notes to Financial Statements October 31, 2000 NOTE 1. ORGANIZATION The Corbin Small-Cap Value Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust") on June 10, 1997, and commenced operations on June 30, 1997. The Fund 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 Declaration of Trust Agreement permits the Board of Trustees (the "Board") 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 opinion of the Advisor (as such term is defined in note 3 of this document), 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. 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. 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. Loss carryforwards total $375,321 as of October 31, 2000: $300,255 expiring in 2007, and $75,066 expiring in 2006. Dividends and Distributions - The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on at least 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. Corbin Small-Cap Value Fund Notes to Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Corbin & Company (the "Advisor") to manage the Fund's investments. David A. Corbin, 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 and pays all of the expenses of the Fund except brokerage fees and commissions, taxes, interest and, 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 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. 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, 2000, the Advisor received a fee of $33,423 from the Fund. The Advisor has contractually agreed to reimburse other expenses to maintain total fund operating expenses at the rate of 1.25% of net assets through March 1, 2001. For the year ended October 31, 2000, the Advisor reimbursed expenses of $3,064. There is no assurance that such contractual agreement will continue in the future. Effective October 12, 2000, AmeriPrime Financial Services, Inc. and Unified Fund Services, Inc. ("Unified"), both wholly owned subsidiaries of Unified Financial Services, Inc., merged with one another. Prior to the merger, Ameriprime Financial Services, Inc. served as Administrator to the Fund. The result of this merger is now Unified Fund Services, Inc., still a wholly owned subsidiary of Unified Financial Services, Inc. The Fund retains Unified Fund Services, Inc., a wholly owned subsidiary of Unified Financial Services, Inc., to manage the Fund's business affairs and provide the Fund with administrative, transfer agency, and fund accounting services, including all regulatory reporting and necessary office equipment and personnel. The Advisor paid all administrative, transfer agency, and fund accounting fees on behalf of the Fund per the management agreement. The Fund retains AmeriPrime Financial Securities, Inc. ( the "Distributor"), a wholly owned subsidiary of Unified Financial Services, Inc., 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, 2000. Certain members of management of Unified Fund Services, Inc. and the Distributor are also directors and/or officers of Trust. Corbin Small-Cap Value Fund Notes to Financial Statements October 31, 2000 - continued NOTE 4. SHARE TRANSACTIONS As of October 31, 2000, there were an unlimited number of authorized shares for the Fund. Paid-in capital at October 31, 2000 was $3,880,260. Transactions in shares were as follows: Year ended Year ended October 31, 2000 October 31, 1999 Shares Dollars Shares Dollars Shares sold 151,045 $1,151,984 114,423 $747,375 Shares issued in reinvestment of dividends 0 0 0 0 Shares redeemed (85,113) (646,942) (120,150) (765,186) --------- ---------- ------------ --------- 65,932 $ 505,042 (5,727) $(17,811) ========= ========== ============ ========== NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $2,708,903 and $2,344,641, respectively. The gross unrealized appreciation for all securities totaled $138,984, and the gross unrealized depreciation for all securities totaled $761,233, for a net unrealized depreciation of $622,249. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $3,615,731. 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, 2000, Charles Schwab & Co., for the benefit of its customers, beneficially owned over 41% of the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Corbin Small-Cap Value Fund We have audited the accompanying statement of assets and liabilities of the Corbin Small-Cap Value Fund, including the schedule of portfolio investments as of October 31, 2000, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and for the period of June 30, 1997 (commencement of operation) through October 31, 1997. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted 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, 2000, 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, 2000, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended, and for the period of June 30, 1997 (commencement of operations) through October 31, 1997, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 Fountainhead Kaleidoscope Fund Annual Report October 31, 2000 marked the end of Fountainhead Kaleidoscope's first fiscal year. We are proud to announce that it was a successful one as the Fund handily outperformed all of its comparable benchmarks. Kaleidoscope returned 44.9% for the one-year period ended 10/31/00, while the Russell 2000 Index returned 17.4% and the S&P 500 Index returned 6.1% over the same period. Returns for the Year Ended October 31, 2000 - ---------------------------------------- ---------------------------------- Fund/Index Total Return Since Inception November 1, 1999 - ---------------------------------------- ---------------------------------- Fountainhead Kaleidoscope Fund 44.9% - ---------------------------------------- ---------------------------------- S&P 500 Index 6.1% Russell 2000 Index 17.4% - ---------------------------------------- ---------------------------------- Fountainhead Kaleidoscope Russell 2000 S&P 500 Fund - $14,490 Index - $11,742 Index - $10,608 $10,000 $10,000 $10,000 11/99 $12,600 $10,598 $10,203 12/99 $13,800 $11,798 $10,804 1/00 $12,820 $11,609 $10,261 2/00 $12,860 $13,525 $10,067 3/00 $13,600 $12,634 $11,051 4/00 $13,470 $11,873 $10,719 5/00 $13,280 $11,181 $10,499 6/00 $14,570 $12,156 $10,758 7/00 $14,280 $11,765 $10,590 8/00 $14,970 $12,663 $11,247 9/00 $14,470 $12,291 $10,653 10/00 $14,490 $11,742 $10,608 The Chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the Russell 2000 Index, and the S&P 500 Index on November 1, 1999 (the inception of the Fund) and held through October 31, 2000. The Russell 2000 Index and S&P 500 Index are widely recognized, unmanaged indices of common stock prices. Performance figures include the change in value of the stocks in the indices and the reinvestment of dividends; they 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. During the Fund's first fiscal year, the market environment was very favorable from November 1999 through early spring 2000. In March 2000, the financial markets took a turn for the worse and have traded in a volatile and generally downward trend. Despite a less-than-favorable environment, we were able to successfully uncover some diamonds in the rough, whose values were eventually recognized by the market. ReliaStar Financial, VoiceStream Wireless and Dura Pharmaceuticals all entered into agreements to be acquired during the year, appreciating 99%, 6%, and 184%, respectively. In addition to these stocks, the Fund was helped by our healthcare holdings (AmeriSource Health +268% for the year end 10/31/00, St. Jude Medical +106%, Watson Pharmaceuticals +85%, Beckman Coulter +47%, and King Pharmaceuticals +40%), our financial issues (ACE Limited 133%, Countrywide Credit +52%, and LaBranche +31%), select media/broadcasting stocks (Gemstar International Group +74% and Meredith Corp. +40%), a couple of food/soft drink companies (Pepsi Bottling Group +55% and Wild Oats Markets +37%), and some special situations (Equifax +69%, Charter Communications +49%, and Broadwing +36%). The Fund's results were hampered, on the other hand, by some of our telecommunications holdings (Viatel, Intermedia Communications, and Flag Telecom) and by several of our cable/media positions (PrimaCom AG, Granite Broadcasting, and Adelphia Communications). Going forward, we believe that the macro environment may continue to be difficult over the intermediate-term, as the economy slows and the credit markets continue to be constrained. However, the longer-term picture appears to be an optimistic one. Although painful to many, the recent pullback in share prices has been positive for several reasons, but two in particular. First, much of the speculative froth has been flushed out of the stock market as Internet-related start-ups with no credible business plans have been decimated. In addition, many so-called "safe", quality high P/E growth stocks such as Nortel (-55% from its 52-week high), Home Depot (-44%), Circuit City (-80%), and Intel (-47%), Cisco (-36%), Oracle (-41%), Microsoft (-43%), Dell (-58%), and Lucent (-70%), descended to earth as their valuation levels began to compress and as investors began reevaluating the multiples they wanted to pay for these former large-cap growth darlings. The positive implication of these developments is that as capital does flow back into the equity markets, it should go to viable, "real" companies, which have valuations that are more realistic. - ------------------------- * Unlike a traditional value manager who buys solely low P/E, low price/book, low price/sales, or low price/cash flow stocks; the Fund may own some stocks which have traditionally been classified as growth stocks. The Advisor utilizes a broader definition of value, which includes purchasing stocks, which are trading at either a discount to their five-year projected growth rate, or at a discount to their private-market value. The fund's Advisor looks favorably at purchasing stocks of companies, which are growing their earnings, it is just sensitive to the price it will pay for that growth. In the Advisor's opinion, this approach allows for more flexibility and provides the opportunity for the Advisor to take advantage of more opportunities in the market. This, in turn, should lead to a more rational and healthy market. In addition, this should have positive economic implications, as capital should be allocated to more productive and efficient areas of the economy, which have true viability, not those companies which receive major inflows of money only to cease to exist after 18 to 24 months. Most investors have heard the phrase "reversion to the mean." This terminology, used constantly in recent years, contrasts the high double-digit returns that have been generated over the last few years as evidenced by the major cap-weighted equity indices, such as the S&P 500 or the Dow Jones Industrial Average, with historical norms. However, rather than being just a theoretical issue, it now appears likely that the major indices may be returning to their long-term average returns of 10% to 12%, and that the days of "easy money" may well be gone. With that said, the implications of this possibility are not all that negative, as the last several quarters bear striking similarities to the 1972 through 1974 period when the broader market declined substantially in 1972 and 1973, but the major indices did not reflect the anguish until 1973 and 1974, after the Nifty Fifty finally broke down. As was the case during that prior time period, the broader market in recent times started its decline in the spring of 1998 and continued through 1999; despite the pain felt by the majority of market participants, the S&P 500 and NASDAQ Composite all posted high double-digit returns during that time frame. Although higher returns were posted by the major averages, they were not reflective of a healthy market. If a handful of the largest tech stocks (which because of their large market caps, have returns which impact the indices by a larger degree than the smaller counterparts--often distorting returns), the indices would have been in a negative territory. This skewed result essentially masked the difficulties borne by approximately 80% to 90% of stock prices during 1998 and the first part of 1999. Just as in the 1973 - - 1974 period, the major indices turned into negative territory this year, although many industry groups of the broader market (such as healthcare, financials, and energy) were generally rising. Although it is unlikely that the downturn will be as severe or as long lasting as the early `70s, the similarities of the timing are interesting. In addition, indeed, we may be closer to the proverbial light at the end of the tunnel. Going forward, there are several reasons why the worst may actually be behind us and the equity markets should begin to stabilize and produce modest positive results over the next year or so. During the months of September and October, many mutual funds were heavy sellers as they took losses to offset capital gains realized earlier in the year. During this same period, and continuing into the end of the calendar year, there have been both heavy selling by individuals taking losses and involuntary investor selling in the form of margin calls. Historically when investors have been forced to sell their holdings regardless of the attractiveness of the stocks in their portfolio, it always seems to be the final impetus behind the formation of an important market bottom. In addition, while the economy is certainly slowing, per the Federal Reserve's desires and orchestration, it is worth noting that it is from a very fast pace. The potential still exists for the economy to continue to grow, but at a slower and much healthier pace. Projections for earnings growth for 2001 for the overall market vary widely. Many economists forecast earnings to grow in the 3.0% to 10.5% range, a much slower pace from 1999 and early 2000. As a comparison, earnings have grown at an average rate of 7.5% since World War II and at an average rate of 8.1% during the 1990s. Pardon the old adage, but it is important to realize that things are different today, in that the recent breakthroughs in technology have been revolutionary and have changed the way companies do business. Today we are significantly more efficient than we were even a decade ago. These breakthroughs should help keep inflation low and allow for the potential for a profitable landscape for those companies that take advantage of the opportunities provided. For those that resist change or are slow to adapt, they will fall to the wayside much quicker than they would have in past years. As with all periods of revolutionary change marked by substantial technological breakthroughs, a price is paid on the journey to better times, as with this excitement come pockets of "growing pains" where shakeouts occur in both the fixed-income and equity markets. It appears that we have been in one of those periods since March 2000. A perfect illustration of this point has been the developments, concerns, and negative equity returns generated by the telecommunications industry during 2000, an industry in which the Fund does have exposure. Telecommunications has been an exciting area over the last few years. It has been one marked by consolidation, explosion in growth, and very favorable equity returns through the better part of the first quarter of 2000. Similar to many areas in which Wall Street is involved, the excitement for the industry turned euphoric and many companies with less-than-stellar track records and flawed business plans (such as ICG Telecommunications, RSL Communications, and GST Telecommunications, all now bankrupt or on the verge of bankruptcy) received funding from the capital markets; a huge quantity of secondary offerings took place, further pulling money into the group; IPOs for third-, fourth-, and fifth-tier players occurred; and many telecommunications sector funds were spawned. The downside? These events marked the end of the extreme optimism for the group and turned telecom stocks into a tailspin as market participants watched as their share prices fell precipitously. The majority of the huge amounts of money plowed into the industry by fund/portfolio managers, investors, and shareholders sits at a loss. As a result, tax loss selling was heavy in September and October and will probably remain that way through the end of the year, further pressuring share prices. Although concerns have been raised about some fundamental issues such as too much capacity being laid in the ground in fiber optics, a lack of spectrum in the wireless industry, and a lack of funding, the basic arguments for huge growth and much potential still exists for those telecom players that are well-positioned, prepared, and are adequately funded. Several unique niche companies such as Western Wireless, Broadwing, Telephone & Data Systems, Dobson Communications, and Nextel Partners, should emerge as much stronger entities after this painful period plays out, as many are able to pick off weaker operators with strong or complementary assets at very favorable and sometimes even cheap prices. Despite the downturn in share prices for many of our telecom holdings, in some cases their fundamentals have actually improved since the start of the year and their intrinsic value has risen. For example, Nextel Partners, Dobson Communications, and Western Wireless all possess assets which are scarce and becoming increasingly valuable. That asset is spectrum and it is an asset that most of the larger wireless communications companies must acquire in order to compete and to survive. Society's needs for telecommunication services has not diminished or declined. Personal cellular use is on the rise. Devices such as Palm Pilots, wireless handsets, and other personal communication devices have quickly moved from voice to data transmission. In addition, demand for DSLs and Internet access is still high. The long-term outlook is very bright as these tools become part of the mainstream of our society and other technological aids become embraced. While we are certainly going through a painful, but unfortunately necessary weeding out period, we believe we are nearer to a positive resolution and that the inherent value in our holdings will eventually be unlocked and realized by the market. Finally, another reason for optimism over the intermediate-term lies in our outlook for monetary policy. Although the labor market remains tight, most inflationary measures remain well behaved. In addition, developments around the world could hold promise on the inflationary front for the United States. Competition from Europe, which is hungry to grow but facing slow growth at home, may become more intense in many areas. Even where the U.S. may have a quality advantage, lower prices for similar quality goods may put downward pressure on prices. Moreover, for U.S. inflation, this is good news. If these trends were to continue, the Fed should have room to lower rates in early- to mid-2001, an event which would be well-received by both the equity and fixed-income markets. With this said, there are some dark clouds on the horizon in the form of a negatively charged U.S. political environment, high oil and gas prices, continued violence and an unclear future in the Middle East, tight labor markets, and the risk of the U.S. economy slowing too quickly and by too much. We believe that in this type of environment, individual stock selection will continue to be extremely important. Returns will probably be more difficult to generate as has been the case in many past years, but we do see many attractive individual opportunities out there and will continue to try and exploit them for the benefit of our shareholders. In addition, we are pleased to report a significant milestone has been achieved for the Fund. Shortly, Fountainhead Kaleidoscope Fund will be assigned a ticker symbol. The new ticker symbol will be KALEX. This milestone is significant for our shareholders, as it will become easier to get information on the Fund. As always, information is available on our website at www.kingadvisors.com. The Fund's NAV is updated and posted daily. In addition, the Fund's top 5 holdings, top 5 industry weightings, asset level, and total returns are updated on a quarterly basis. The prospectus and shareholder reports are also available for viewing. Thank you for your support of Fountainhead Kaleidoscope Fund during our first fiscal year. Sincerely, Roger E. King Chairman and President Fountainhead Kaleidoscope Fund Schedule of Investments - October 31, 2000 Common Stocks - 98.4% Shares Value Biological Products (No Diagnostic Substances) - 3.2% BioChem Pharma, Inc. (a) 3,500 $ 86,625 ---------------- Bottled & Canned Soft Drinks & Carbonated Waters - 2.9% Whitman Corp. 6,000 78,000 ----------------- Cable & Other Pay Television Services - 14.7% Adelphia Communications Corp. - Class A (a) 2,450 81,309 Charter Communications, Inc. (a) 6,000 117,000 PrimaCom AG (a) (c) 12,900 122,550 UnitedGlobalCom, Inc. (a) 2,500 79,531 ----------------- 400,390 ----------------- Calculating & Accounting Machines (No Electronic Computers) - 2.9% Diebold, Inc. 3,000 78,000 ----------------- Commercial Banks & Trusts - 3.8% Golden State Bancorp, Inc. 4,000 104,500 ----------------- Electromedical & Electrotherapeutic Apparatus - 4.6% St. Jude Medical, Inc. (a) 2,300 126,500 ----------------- Miscellaneous Chemical Products - 3.1% Great Lakes Chemical Corp. 2,500 83,438 ----------------- Mortgage Bankers & Loan Correspondents - 1.5% Countrywide Credit Industries, Inc. 1,100 41,181 ----------------- Natural Gas Transmission & Distribution - 2.5% Southwest Gas Corp. 3,300 68,887 ----------------- Office Machines - 2.6% Bell & Howell Co. (a) 3,800 72,200 ----------------- Periodicals: Publishing, or Publishing & Printing - 3.1% Meredith Corp. 2,700 85,725 ----------------- Fountainhead Kaleidoscope Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Pharmaceutical Preparations - 12.2% Dura Pharmaceuticals, Inc. (a) 4,500 $ 154,969 King Pharmaceuticals, Inc. (a) 3,000 134,438 Watson Pharmaceuticals, Inc. (a) 700 43,794 ----------------- 333,201 ----------------- Radio Broadcasting Stations - 2.8% Paxson Communications Corp. - Class A (a) 6,600 75,075 ----------------- Radio Telephone Communications - 11.9% Dobson Communications Corp. (a) 12,000 156,000 Nextel Partners, Inc. (a) 3,800 93,100 Western Wireless Corp. - Class A (a) 1,600 76,000 ----------------- 325,100 ----------------- Security Brokers, Dealers & Flotation Companies - 6.7% LaBranche & Co, Inc. (a) 4,600 182,275 ----------------- Services - Advertising - 3.2% Ackerley Group, Inc. 8,400 87,150 ----------------- Services - Auto Rental & Leasing (No Drivers) - 2.7% Dollar Thrifty Automotive Group, Inc. (a) 4,800 73,800 ----------------- Services - Consumer Credit Reporting, Collection Agencies - 1.6% Equifax, Inc. 1,300 44,850 ----------------- Surgical & Medical Instruments & Apparatus - 2.6% Boston Scientific Corp. (a) 4,500 71,719 ----------------- Telephone Communications (No Radio Telephone) - 8.5% Broadwing, Inc. (a) 943 26,640 Telephone & Data Systems, Inc. 800 84,400 Viatel, Inc. (a) 12,500 120,312 ----------------- 231,352 ----------------- Television Broadcasting Stations - 1.3% Granite Broadcasting Corp. (a) 11,000 34,375 ----------------- TOTAL COMMON STOCKS (Cost $2,429,816) $ 2,684,343 ----------------- Fountainhead Kaleidoscope Fund Schedule of Investments - October 31, 2000 - continued Principal Amount Value Money Market Securities - 0.6% Firstar Treasury Fund, 5.54% (b) (Cost $15,774) 15,774 $ 15,774 ----------------- TOTAL INVESTMENTS - 99.0% (Cost $2,445,590) 2,700,117 ----------------- Other Assets less Liabilities - 1.0% 27,509 ----------------- Total Net Assets - 100.0% $ 2,727,626 ================= (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000. (c) American Depository Receipt
Fountainhead Kaleidoscope Fund October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (Cost $2,445,590) $ 2,700,117 Cash 610 Receivable for investment sold 248,698 Interest receivable 68 ----------------- Total assets 2,949,493 Liabilities Accrued investment advisory fee payable $ 2,677 Payable for securities purchased 219,190 ----------------- Total liabilities 221,867 ----------------- Net Assets $ 2,727,626 ================= Net Assets consist of: Paid in capital $ 2,474,114 Accumulated net realized loss on investments (1,015) Net unrealized appreciation on investments 254,527 ----------------- Net Assets, for 188,306 shares $ 2,727,626 ================= Net Asset Value Net Assets Offering price and redemption price per share ($ 2,727,626 / 188,306) $ 14.49 =================
See accompanying notes which are an integral part of the financial statements. Fountainhead Kaleidoscope Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 6,653 Interest income 6,368 ---------------- Total Income 13,021 Expenses Investment advisory fee $ 30,115 Trustees' fees 1,843 --------------- Total expenses before waivers and reimbursements 31,958 Waived fees and reimbursed expenses (10,447) --------------- Total operating expenses 21,511 ---------------- Net Investment Loss (8,490) ---------------- Realized & Unrealized Gain (Loss) Net realized loss on investment securities (1,015) Change in net unrealized appreciation (depreciation) on investment securities 254,527 --------------- Net gain on investment securities 253,512 ---------------- Net increase in net assets resulting from operations $ 245,022 ================
See accompanying notes which are an integral part of the financial statements. Fountainhead Kaleidoscope Fund Statement of Changes in Net Assets Year ended October 31, 2000 -------------------- Increase/(Decrease) in Net Assets Operations Net investment loss $ (8,490) Net realized loss on investment securities (1,015) Change in net unrealized appreciation (depreciation) 254,527 -------------------- Net increase in net assets resulting from operations 245,022 -------------------- Distributions to shareholders From net investment income 0 From net realized gain 0 -------------------- Total distributions 0 -------------------- Share Transactions Net proceeds from sale of shares 2,508,109 Shares issued in reinvestment of distributions 0 Shares redeemed (25,505) -------------------- Net increase in net assets resulting from share transactions 2,482,604 -------------------- Total increase in net assets 2,727,626 Net Assets Beginning of period 0 -------------------- End of period [including accumulated undistributed net investment income of $0] $ 2,727,626 ==================== See accompaning notes which are an integral part of the financial statements. Fountainhead Kaleidoscope Fund Financial Highlights for the year ended October 31, 2000 Selected Per Share Data Net asset value, beginning of period $ 10.00 ------------------ Income from investment operations Net investment loss (0.07) Net realized and unrealized gain (loss) 4.56 ------------------ Total from investment operations 4.49 ------------------ Less Distributions From net investment income 0.00 From net realized gain 0.00 ------------------ Total distributions 0.00 ------------------ Net asset value, end of period $ 14.49 ================== Total Return 44.90% Ratios and Supplemental Data Net assets, end of period (000) $2,728 Ratio of expenses to average net assets 1.25% Ratio of expenses to average net assets before fee waivers and reimbursement 1.86% Ratio of net investment loss to average net assets (0.49)% Ratio of net investment loss to average net assets before fee waivers and reimbursement (1.10)% Portfolio turnover rate 195.96% See accompanying notes which are an integral part of the financial statements. Fountainhead Kaleidoscope Fund Notes To Financial Statements October 31, 2000 NOTE 1. ORGANIZATION The Fountainhead Kaleidoscope Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on September 29, 1999 and commenced operations on November 1, 1999. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund's investment objective is to provide long-term capital growth. The Declaration of Trust Agreement for the Fund permits the Board of Trustees (the "Board") 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 opinion of the Advisor (as such term is defined in note 3 of this document), 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. 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, 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 by the Board. 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 its net investment income and any realized capital gains. Dividends and Distributions - The Fund intends to comply with federal tax rules regarding distribution of substantially all its net investment income and capital gains. These rules may cause multiple distributions during the course of the year. Redemption Fees - The Fund charges a redemption fee of 1% of the current net asset value of shares redeemed if the shares are owned less than 180 days. The fee is charged for the benefit of remaining Fountainhead Kaleidoscope Fund Notes To Financial Statements October 31, 2000 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued shareholders to defray Fund portfolio transaction expenses and facilitate portfolio management. This fee applies to shares being redeemed in the order in which they are purchased. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital. 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. Generally accepted accounting principals require that permanent financial reporting tax differences relating to shareholder distributions be reclassified to paid-in capital. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains King Investment Advisors, Inc., 1980 Post Oak Boulevard, Suite 2400, Houston, Texas 77056-3898 (the "Advisor") to manage the Fund's investments. Roger E. 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 and pays all of the expenses of the Fund except brokerage commissions, taxes, borrowing costs (such as (a) interest and (b) dividend expenses on securities sold short), 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 1.75% of the average daily net assets of the Fund. For the year ended October 31, 2000, the Advisor earned a fee of $30,115 from the Fund. The Advisor contractually agreed to waive fees by 0.50% of the average daily net assets of the Fund through February 28, 2001. For the year ended October 31, 2000, the Advisor waived fees of $8,604. In addition, the Advisor has agreed to reimburse expenses for the Fund to the extent necessary to maintain total operating expenses at the rate of 1.25%. For the year ended October 31, 2000, the Advisor reimbursed expenses of $1,843. There is no assurance that such an arrangement will continue in the future. Effective October 12, 2000, AmeriPrime Financial Services, Inc. and Unified Fund Services, Inc., both wholly owned subsidiaries of Unified Financial Services, Inc., merged with one another. Prior to the merger, Ameriprime Financial Services, Inc. served as the administrator for the Fund. Prior to the merger, AmeriPrime Financial Services, Inc. served as Administrator to the Fund. The result of this merger is now Unified Fund Services, Inc., still a wholly owned subsidiary of Unified Financial Services, Inc. The Fund retains Unified Fund Services, Inc., a wholly owned subsidiary of Unified Financial Services, Inc., to manage the Fund's business affairs and provide the Fund with administrative, transfer agency, and fund accounting services, including all regulatory reporting and necessary office equipment and personnel. The Advisor paid all administrative, transfer agency, and fund accounting fees on behalf of the Fund per the management agreement. The Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor"), a wholly owned subsidiary of Unified Financial Services, Inc., 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, 2000. Certain members of management of Unified Fund Services, Inc. and the Distributor are also directors and/or officers of the Trust. Fountainhead Kaleidoscope Fund Notes To Financial Statements October 31, 2000 - continued NOTE 4. SHARE TRANSACTIONS As of October 31, 2000, the Fund had an unlimited number of authorized shares. Paid-in capital at October 31, 2000 was $2,474,114. Transactions in shares were as follows: Year ended October 31, 2000 Shares Dollars Shares sold 190,041 $2,508,109 Shares issued in reinvestment of distributions 0 0 Shares redeemed (1,735) (25,505) -------- ------------ 188,306 $2,482,604 ======== ============ NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, totaled $5,536,737 and $3,105,906, respectively. The gross unrealized appreciation for all securities totaled $464,296 and the gross unrealized depreciation for all securities totaled $209,769 for a net unrealized appreciation of $254,527. The total cost of securities for federal income tax purposes at October 31, 2000 was $2,445,590. 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 the 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, 2000, Roger E. King owned of record, in aggregate, 26% of the Fund. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Fountainhead Kaleidoscope Fund We have audited the accompanying statement of assets and liabilities of the Fountainhead Kaleidoscope Fund, including the schedule of portfolio investments as of October 31, 2000, and the related statement of operations, the statement of changes in net assets, and financial highlights for the period from November 1, 1999 (commencement of operations) to October 31, 2000 in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our 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 as of October 31, 2000 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 the Fountainhead Kaleidoscope Fund as of October 31, 2000, the results of its operations, the changes in its net assets, and the financial highlights for the period from November 1, 1999 (commencement of operations) to October 31, 2000 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 Fountainhead Special Value Fund Annual Report October 31, 2000 marked the end of Fountainhead Special Value Fund's (KINGX) fourth fiscal year. After an outstanding 1999, the year of 2000 has proven to be a difficult one. Thanks to a strong start during our most recent year, the Fund was able to outperform its comparable benchmarks, returning 23.4% for the one-year period ended 10/31/00, while the Russell Midcap Index returned 23.7%, the Russell 2000 returned 17.4%, and the S&P 500 Index returned 6.8% over the same time period. Since inception, the Fund continued to handily outperform its benchmarks, turning in a compound annual return of 31.4% versus 17.5% for the Russell Midcap, 10.0% for the Russell 2000, and 19.7% for the S&P 500. Returns for the Year Ended October 31, 2000 - ------------------------------------------------------------------------------ Fund/Index 1 Year Average Annual Return Since Inception December 31, 1996 - ------------------------------------------------------------------------------ Fountainhead Special Value 23.4% 31.4% Fund - ------------------------------------------------------------------------------ S&P 500 Index 6.8% 19.7% Russell 2000 Index 17.4% 10.0% Russell Midcap Index 23.7% 17.5% - ------------------------------------------------------------------------------ Fountainhead Special Russell 2000 Russell Midcap Value Fund - $28,462 Index - $14,400 Index - $18,563 12/96 $10,000 $10,000 $10,000 1/97 $10,420 $10,200 $10,374 4/97 $9,860 $9,509 $10,165 7/97 $11,990 $11,533 $12,203 10/97 $13,370 $12,105 $12,263 1/98 $13,433 $12,043 $12,659 4/98 $16,476 $13,540 $14,332 7/98 $15,424 $11,798 $13,409 10/98 $12,481 $10,669 $12,810 1/99 $13,967 $12,088 $14,181 4/99 $16,534 $12,296 $15,182 7/99 $19,008 $12,683 $15,242 10/99 $23,100 $12,266 $15,003 1/00 $29,384 $14,237 $16,237 4/00 $27,511 $14,561 $17,611 7/00 $26,026 $14,428 $17,454 10/00 $28,462 $14,400 $18,563 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the Russell MidCap Index, and the Russell 2000 Index on December 31, 1996 and held through October 31, 2000. The Russell 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 and the reinvestment of dividends; they 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. During the Fund's most recent fiscal year, the market environment was very favorable from November 1999 through early spring 2000. The financial markets took a turn for the worse in March 2000, and since then they have traded in a volatile and generally downward trend. Despite a less-than-favorable environment, we were able to successfully uncover some diamonds in the rough, whose values were eventually recognized by the market. VoiceStream Wireless and Dura Pharmaceuticals entered into agreements to be acquired during the year, appreciating 60% and 184%, respectively. In addition to these stocks, the Fund was helped by our healthcare holdings (St. Jude Medical +97% for the one-year ended 10/31/00, Watson Pharmaceuticals +85%, Beckman Coulter +47%, Elan Corp +66%, and King Pharmaceuticals +40%), our financial issues (Countrywide Credit Industries +52%, LaBranche +32%, and Golden State Bancorp +25%), a few media/broadcasting stocks (Gemstar International Group +70%), select local exchange telecom carriers (CenturyTel +47% and Broadwing +36%), and some special situations (Equifax +36% and Charter Communications +41%). The Fund's results were hampered by some of our telecommunications holdings (Viatel, Global Crossing, Intermedia Communications, WinStar Communications, Net2Phone, and Flag Telecom) and by certain of our cable and technology positions (PrimaCom AG, UnitedGlobalCom, EarthLink, ACTV, Granite Broadcasting, Adelphia Communications, and Siliconix). Some of these positions have been eliminated where the fundamentals appear less promising. Those that have been retained offer, in our opinion, good potential for recovery. Going forward, we believe that the macro environment may continue to be difficult over the intermediate-term, as the economy slows and the credit markets continue to be constrained. However, the longer-term picture appears to be an optimistic one. Although painful to many, the recent pullback in share prices has been positive for several reasons, but two in particular. First, much of the speculative froth has been flushed out of the stock market as Internet-related start-ups with no credible business plans have been decimated. In addition, many so-called "safe", quality high P/E growth stocks such as Nortel (-55% from its 52-week high), Home Depot (-44%), Circuit City (-80%), Intel (-47%), Cisco (-36%), Oracle (-41%), Microsoft (-43%), Dell (-58%), and Lucent (-70%), descended to earth as their valuation levels began to compress and as investors began reevaluating the multiples they wanted to pay for these former large-cap growth darlings. The positive implication of these developments is that as capital does flow back into the equity markets, it should go to viable, "real" companies which have more realistic valuations. This, in turn, should lead to a more rational and healthy market. In addition, this should have positive economic implications as capital should be allocated to more productive and efficient areas of the economy which have true viability, not those companies which receive major inflows of money only to cease to exist after 18 to 24 months. Most investors have heard the phrase "return to the mean." This terminology, used constantly in recent years, contrasts the high double-digits returns that have been generated over the last few years as evidenced by the major cap-weighted equity indices, such as the S&P 500 or the Dow Jones Industrial Average, with historical norms. However, rather than being just a theoretical issue, it now appears likely that the major indices may be returning to their long-term average returns of 10% to 12%, and that the days of "easy money" may well be gone. With that said, the implications of this possibility are not all that negative, as the last several quarters bear striking similarities to the 1972 through 1974 period when the broader market declined substantially in 1972 and 1973, but the major indices did not reflect the anguish until 1973 and 1974, after the Nifty Fifty finally broke down. As was the case during that prior time period, the broader market in recent times started its decline in the spring of 1998 and continued through 1999; despite the pain felt by the majority of market participants, the S&P 500 and NASDAQ Composite all posted high double-digit returns during that time frame. Although higher returns were posted by the major averages, they were not reflective of a healthy market. After removing a handful of the largest tech stocks (which because of their large market caps, have returns which impact the indices by a larger degree than the smaller counterparts--often distorting returns), the indices moved into negative territory. This skewed result essentially masked the difficulties borne by approximately 80% to 90% of stock prices during 1998 and the first part of 1999. Just as in the 1973 - 1974 period, the major indices turned into negative territory this year, although many industry groups of the broader market (such as healthcare, financials, and energy) were generally rising. Although it is unlikely that the downturn will be as severe or as long-lasting as the early `70s, the similarities of the timing are interesting. And indeed, we may be closer to the proverbial light at the end of the tunnel. Going forward, there are several reasons why the worst may actually be behind us and the equity markets should begin to stabilize and produce modest positive results over the next year or so. During the months of September and October, many mutual funds were heavy sellers as they took losses to offset capital gains realized earlier in the year. During this same time period, and continuing on into the end of the calendar year, there have been both heavy selling by individuals taking losses and involuntary investor selling in the form of margin calls. Historically when investors have been forced to sell their holdings regardless of the attractiveness of the stocks in their portfolio, it always seems to be the final impetus behind the formation of an important market bottom. In addition, while the economy is certainly slowing, per the Federal Reserve's desires and orchestration, it is worth noting that it is from a very fast pace. The potential still exists for the economy to continue to grow, but at a slower and much healthier pace. Projections for earnings growth for 2001 for the overall market vary widely. Most economists forecast earnings to grow in the 9.0% to 13.5% range, a slower pace from 1999 and early 2000, but a far cry from one that is anemic or recessionary. As a comparison, earnings have grown at an average rate of 7.5% since World War II and at an average rate of 8.1% during the 1990s. Pardon the old adage, but it is important to realize that things are different today, in that the recent breakthroughs in technology have been revolutionary and have changed the way companies do business. Today we are significantly more efficient than we were even a decade ago. These breakthroughs should help keep inflation low and allow for the potential for a profitable landscape for those companies that take advantage of the opportunities provided. For those which resist change or are slow to adapt, they will fall to the wayside much quicker than they would have in past years. As with all periods of revolutionary change marked by substantial technological breakthroughs, a price is paid on the journey to better times, as with this excitement come pockets of "growing pains" where shakeouts occur in both the fixed-income and equity markets. It appears that we have been in one of those periods since March 2000. A perfect illustration of this point has been the developments, concerns, and negative equity returns generated by the telecommunications industry during 2000, an industry in which the Fund does have exposure. Telecommunications has been an exciting area over the last few years. It has been one marked by consolidation, explosion in growth, and very favorable equity returns through the better part of the first quarter of 2000. Similar to many areas in which Wall Street is involved, the excitement for the industry turned euphoric and many companies with less-than-stellar track records and flawed business plans (such as ICG Telecommunications, RSL Communications, and GST Telecommunications, all now bankrupt or on the verge of bankruptcy) received funding from the capital markets; a huge quantity of secondary offerings took place, further pulling money into the group; IPOs for third-, fourth-, and fifth-tier players occurred; and many telecommunications sector funds were spawned. The downside? These events marked the end of the extreme optimism for the group and turned telecom stocks into a tailspin as market participants watched as their share prices fell precipitously. The majority of the huge amounts of money plowed into the industry by fund/portfolio managers, investors, and shareholders all sits at a loss. As a result, tax loss selling was heavy in September and October and will probably remain that way through the end of the year, further pressuring share prices. Although concerns have been raised about some fundamental issues such as too much capacity being laid in the ground in fiber optics, a lack of spectrum in the wireless industry, and a lack of funding, the basic arguments for huge growth and much potential still exists for those telecom players that are well-positioned, prepared, and are adequately funded. Several unique niche companies such as Global Crossing, WinStar, Western Wireless, Rural Cellular, and Nextel Communications, should emerge as much stronger entities after this painful period plays out, as many are able to pick off weaker operators with strong or complementary assets at very favorable and sometimes even cheap prices. Despite the downturn in share prices for many of our telecom holdings, in some cases their fundamentals have actually improved since the start of the year and their intrinsic value has risen. Global Crossing, for example, recently raised expectations for the year, as the company expects cash flow and EBITDA growth to be above analysts' expectations. In addition, the Company is fully funded until it projects to turn cash flow positive, sometime in 2002. WinStar Communications, a unique competitive local exchange carrier (CLEC), also recently reported better-than-expected results. It too announced its funding status was in excellent shape as a consortium led by Microsoft, Compaq Computer, Nortel and others injected $200 million into the company. Management believes that this is more than enough to carry the company through until it turns profitable (on a cash flow basis). Finally, Rural Cellular, Nextel Communication, and Western Wireless all possess assets which are scarce and becoming increasingly valuable. That asset is spectrum and it is an asset that most of the larger wireless communications companies must acquire in order to compete and to survive. Society's needs for telecommunication services has not diminished or declined. Personal cellular use is on the rise. Devices such as Palm Pilots, wireless handsets, and other personal communication devices have quickly moved from voice to data transmission. In addition, demand for DSLs and Internet access is still high. The long-term outlook is very bright as these tools become part of the mainstream of our society and other technological aids become embraced. While we are certainly going through a painful, but unfortunately necessary weeding out period, we believe we are nearer to a positive resolution and that the inherent value in our holdings will eventually be unlocked and realized by the market. Finally, another reason for optimism over the intermediate-term lies in our outlook for monetary policy. Although the labor market remains tight, most inflationary measures remain well-behaved. In addition, developments around the world could hold promise on the inflationary front for the United States. Competition from Europe, which is hungry to grow but facing slow growth at home, may become more intense in many areas. Even where the U.S. may have a quality advantage, lower prices for similar quality goods may put downward pressure on prices. And for U.S. inflation, this is good news. If these trends were to continue, the Fed should have room to lower rates in early- to mid-2001, an event which would be well-received by both the equity and fixed-income markets. With this said, there are some dark clouds on the horizon in the form of a negatively charged U.S. political environment, high oil and gas prices, continued violence and an unclear future in the Middle East, tight labor markets, and the risk of the U.S. economy slowing too quickly and by too much. We believe that in this type of environment, individual stock selection will continue to be extremely important. Returns will probably be more difficult to generate as has been the case in many past years, but we do see many attractive individual opportunities out there and will continue to try and exploit them for the benefit of our shareholders. In addition, we are pleased to report a significant milestone has been achieved for the Fund. The Fund's NAV will now be listed in many newspapers. The listing will appear under the abbreviation "FountnhdSpV". As always, information on the Fund is also available on our website at www.kingadvisors.com. The Fund's NAV is updated and posted daily. In addition, the Fund's top 5 holdings, top 5 industry weightings, asset level, and total returns are updated on a quarterly basis. The prospectus and shareholder reports are also available for viewing. Thank you for your continued support of the Fountainhead Special Value Fund. Sincerely, Roger E. King Chairman and President Fountainhead Special Value Fund Schedule of Investments - October 31, 2000 Common Stocks - 100.1% Shares Value Cable and Other Pay Television Services - 17.1% Adelphia Communication Corp. - Class A (a) 41,228 $ 1,368,254 Cablevision Systems Corp. - Class A (a) 15,000 1,117,500 Charter Communications, Inc. - Class A (a) 51,000 994,500 PrimaCom AG (a) (c) 4,500 42,750 UnitedGlobalCom, Inc. (a) 23,000 731,687 --------------- 4,254,691 --------------- Laboratory Analytical Instruments - 0.7% Beckman Coulter, Inc. 2,400 168,150 --------------- Miscellaneous Chemical Products - 3.1% Great Lakes Chemical Corp. 23,000 767,625 --------------- Pharmaceuticals - 15.9% Biochem Pharma, Inc. (a) 31,000 767,250 Dura Pharmaceuticals, Inc. (a) 51,000 1,756,313 King Pharmaceuticals, Inc. (a) 20,000 896,250 Watson Pharmaceuticals, Inc. (a) 8,900 556,806 --------------- 3,976,619 --------------- Radio and TV Broadcasting & Communications Equipment - 1.4% ACTV, Inc. (a) 36,100 355,361 --------------- Savings and Loans - 3.0% Golden State Bancorp, Inc. 28,800 752,400 --------------- Security Brokers, Dealers - 4.1% LaBranche & Co., Inc. (a) 25,600 1,014,400 --------------- Services - advertising - 2.6% Ackerley Group, Inc. 62,000 643,250 --------------- Services - Consumer Credit Reporting Collection Agencies - 1.7% Equifax, Inc. 12,000 414,000 --------------- Surgical/Medical Instruments - 4.5% Boston Scientific Corp. (a) 43,000 685,312 St. Jude Medical, Inc. 8,200 451,000 --------------- 1,136,312 --------------- Technology - Electronic Components - 1.4% Diebold, Inc. 13,700 356,200 --------------- Fountainhead Special Value Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Telephone Communications (No Radiotelephone) - 22.9% Broadwing, Inc. (a) 36,300 $ 1,025,475 CenturyTel, Inc. 23,000 885,500 Global Crossing Ltd. (a) 27,290 644,726 Telephone & Data Systems, Inc. 8,300 875,650 Viatel Inc. (a) 177,600 1,709,400 WinStar Communications, Inc. (a) 29,500 575,250 --------------- 5,716,001 --------------- Television Broadcasting Stations - 0.1% Granite Broadcasting Group, Inc. (a) 6,000 18,750 --------------- Wireless Communications - 21.6% Dobson Communications Corp. (a) 100,000 1,300,000 NEXTEL Communications, Inc. - Class A (a) 12,200 468,938 NEXTEL Partners, Inc. - Class A (a) 31,200 764,400 Voicestream Wireless Corp. (a) 12,775 1,679,913 Western Wireless Corp. - Class A (a) 24,600 1,168,500 --------------- 5,381,751 --------------- TOTAL COMMON STOCKS 24,955,510 --------------- TOTAL INVESTMENTS - 100.1% (Cost $19,289,217) 24,955,510 --------------- Other assets less liabilities - (0.1)% (34,786) --------------- Total Net Assets - 100.0% $ 24,920,724 =============== (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000. (c) American Depository receipt
See accompanying notes which are an integral part of the financial statements. Fountainhead Special Value Fund October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (Cost $19,289,217) $ 24,955,510 Receivable for investment sold 600,162 Dividend receivable 408 Interest receivable 3,316 ------------------- Total assets 25,559,396 Liabilities Accrued investment advisory fee $ 44,421 Payable to custodian bank 578,801 Other payables and accrued expenses 15,450 ---------------- Total liabilities 638,672 ------------------- Net Assets $ 24,920,724 =================== Net Assets consist of: Paid in capital $ 16,601,316 Accumulated undistributed net realized gain on investments 2,653,115 Net unrealized appreciation on investments 5,666,293 ------------------- Net Assets, for 916,034 shares $ 24,920,724 =================== Net Asset Value Net Assets Offering price and redemption price per share ($24,920,724/916,034) $ 27.21 ===================
See accompanying notes which are integral part of the financial statements. Fountainhead Special Value Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 33,125 Interest income 22,973 ----------------- Total Income 56,098 Expenses Investment advisory fee $ 296,201 Administration fees 30,000 Audit fees 7,917 Custodian fees 10,289 Insurance fees 8,426 Legal fees 1,725 Pricing & bookkeeping fees 24,500 Registration fees 12,743 Shareholder reports 9,198 Transfer agent fees 15,972 Trustees' fees 2,814 Miscellanoues expenses 590 ---------------- Total expenses before waivers and reimbursements 420,375 Waived fees and reimbursed expenses (125,396) ---------------- Total operating expenses 294,979 ----------------- Net Investment Loss (238,881) ----------------- Realized & Unrealized Gain (Loss) Net realized gain on investment securities 2,763,544 Change in net unrealized appreciation on investment securities 841,203 --------------- Net realized & unrealized gain on investment securities 3,604,747 ----------------- Net increase in net assets resulting from operations $ 3,365,866 =================
Fountainhead Special Value Fund Statement of Changes in Net Assets For the For the Year ended Year ended October 31, 2000 October 31, 1999 ------------------ ------------------- Increase/(Decrease) in Net Assets Operations Net investment loss $ (238,881) $ (85,772) Net realized gain on investment securities 2,763,544 670,151 Change in net unrealized appreciation 841,203 5,115,600 ------------------ ------------------- Net increase in net assets resulting from operations 3,365,866 5,699,979 ------------------ ------------------- Distributions to shareholders From net realized gain (680,581) 0 ------------------ ------------------- Share Transactions Net proceeds from sale of shares 12,130,823 3,403,006 Shares issued in reinvestment of distributions 651,634 0 Shares redeemed (4,614,823) (1,672,500) ------------------ ------------------- Net increase in net assets resulting from share transactions 8,167,634 1,730,506 ------------------ ------------------- Total increase in net assets 10,852,919 7,430,485 Net Assets Beginning of period 14,067,805 6,637,320 ------------------ ------------------- End of period [including accumulated undistributed net investment income (loss) of $0 and $0, respectively] $ 24,920,724 $ 14,067,805 ================== ===================
See accompanying notes which are an integral part of the financial statements. Fountainhead Special Value Fund Financial Highlights Period ended For the year ended October 31, October 31, ------------------------------------------------------------- 2000 1999 1998 1997 (a) -------------- -------------- -------------- --------------- Selected Per Share Data Net asset value, beginning of period $ 22.86 $ 12.61 $ 13.35 $ 10.00 -------------- -------------- -------------- --------------- Income from investment operations Net investment income (loss) (0.31) (0.16) (0.09) (0.02) Net realized and unrealized gain (loss) 5.70 10.41 (0.51) 3.37 -------------- -------------- -------------- --------------- Total from investment operations 5.39 10.25 (0.60) 3.35 -------------- -------------- -------------- --------------- Less Distributions From net realized gain (1.04) 0.00 (0.14) 0.00 -------------- -------------- -------------- --------------- Net asset value, end of period $ 27.21 $ 22.86 $ 12.61 $ 13.35 ============== ============== ============== =============== Total Return 23.35% 81.28% (4.67)% 33.70% (b) Ratios and Supplemental Data Net assets, end of period (000) $ 24,921 $ 14,068 $ 6,637 $ 2,629 Ratio of expenses to average net assets 1.42% 1.25% 1.20% 0.97% (c) Ratio of expenses to average net assets before fee waivers and reimbursement 2.03% 2.50% 2.76% 8.25% (c) Ratio of net investment income (loss) to average net assets (1.15)% (0.95)% (0.67)% (0.16)(c) Ratio of net investment income (loss) to average net assets before fee waivers and reimbursement (1.76)% (2.20)% (2.22)% (7.45)(c) Portfolio turnover rate 125.24% 177.56% 108.31% 130.63% (c) (a) December 31, 1996 (commencement of operations) to October 31, 1997 (b) For periods of less than a full year, total return is not annualized. (c) Annualized
See accompaning notes which are an integral part of the financial statements. Fountainhead Special Value Fund Notes To Financial Statements October 31, 2000 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 Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund's investment objective is to provide long-term capital growth. The Declaration of Trust Agreement for the fund permits the Board of Trustees (the "Board") 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 opinion of the Advisor (as such term is defined in note 3 of this document), 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. 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 by the Board. 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 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 at least 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. Redemption Fees - The Fund charges a redemption fee of 1% of the current net asset value of shares redeemed if the shares are owned less than 180 days. The fee is charged for the benefit of remaining shareholders to defray Fund portfolio transaction expenses and facilitate portfolio management. This fee applies to shares being redeemed in the order in which they are purchased. The fee, which is retained by the Fund, is accounted for as an addition to paid-in capital. Fountainhead Special Value Fund Notes To Financial Statements October 31, 2000 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued 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. Generally accepted accounting principles require that permanent financial reporting tax differences relating to shareholder distributions be reclassified to paid-in capital for the Fund. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains King Investment Advisors, Inc. (the "Advisor") to manage the Fund's investments. Roger E. 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. 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 1.43% of the average daily net assets of the Fund. For the year ended October 31, 2000 the Advisor received a fee of $296,201 from the Fund. The Advisor contractually agreed to waive fees and reimburse expenses for the Fund to the extent necessary to maintain total operating expenses at the rate of 1.25% of net assets through February 29, 2000 and 1.50% of net assets from March 1, 2000 through March 1, 2001. For the year ended October 31, 2000, the Advisor waived fees and reimbursed expenses of $125,396. Effective October 12, 2000, AmeriPrime Financial Services, Inc. and Unified Fund Services, Inc. ("Unified"), both wholly owned subsidiaries of Unified Financial Services, Inc., merged with one another. Prior to the merger, Ameriprime Financial Services, Inc. served as Administrator to the Fund. The result of this merger is now Unified Fund Services, Inc., still a wholly owned subsidiary of Unified Financial Services, Inc. The Fund retains Unified (the "Administrator), to manage the Fund's business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment, personnel and facilities. Unified receives a monthly fee from the Fund equal to an annual rate of 0.10% of the Fund's assets under $50 million, 0.075% of the Fund's assets from $50 million to $100 million, and 0.050% of the Fund's assets over $100 million (subject to a minimum fee of $2,500 per month). For the year ended October 31, 2000, Unified received fees of $30,000 from the Fund for administrative services provided to the Fund. The Fund also retains Unified to act as the Fund's transfer agent and fund accountant. For its services as transfer agent, Unified receives a monthly fee from the Fund of $1.20 per shareholder (subject to a minimum monthly fee of $900). For the year ended October 31, 2000, Unified received fees of $10,967 from the Fund for transfer agent services provided to the Fund and fees of $5,005 from the Fund for out of pocket expenses. For its services as fund accountant, Unified receives an annual fee from the Fund equal to 0.0275% of the Fund's assets up to $100 million, 0.0250% of the Fund's assets from $100 million to $300 million and 0.0200% of the Fund's assets over $300 million (subject to various monthly minimum fees, the maximum being $2,000 per month for assets of $20 million to $100 million). For the year ended October 31, 2000, Unified received fees of $24,500 from the Fund for fund accounting services provided to the Fund. Fountainhead Special Value Fund Notes To Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued The Fund retains AmeriPrime Financial Securities, Inc. (the "Distributor"), a wholly owned subsidiary of Unified Financial Services, Inc., to act as the principal distributor of the Fund's shares. No payments were made to the Distributor for the year ended October 31, 2000. Certain members of management of the Administrator, transfer agent and the Distributor are also members of management of the Trust. NOTE 4. SHARE TRANSACTIONS As of October 31, 2000, the Fund had an unlimited number of authorized shares. Paid-in capital at October 31, 2000 was $16,601,316. Transactions in shares were as follows: Year ended Year ended October 31, 2000 October 31, 1999 Shares Dollars Shares Dollars Shares sold 447,491 12,130,823 194,253 3,403,006 Shares issued in reinvestment of dividends 651,634 0 0 0 Shares redeemed (169,471) (4,614,823) (105,383) (1,672,500) ---------------------------------- ----------------------------------- 300,686 8,167,634 88,870 1,730,506 ================================== ===================================
NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, totaled $32,119,793 and $24,785,539, respectively. The gross unrealized appreciation for all securities totaled $6,725,720 and the gross unrealized depreciation for all securities totaled $1,059,427 for a net unrealized appreciation of $5,666,293. The total cost of securities for federal income tax purposes at October 31, 2000 was $19,289,217. 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, 2000, Charles Schwab & Co., for the benefit of its customers, beneficially owned over 28% of the Fund. To The Shareholders and Board of Trustees Fountainhead Special Value Fund We have audited the accompanying statement of assets and liabilities of the Fountainhead Special Value Fund, including the schedule of portfolio investments as of October 31, 2000, the related statement of operations, the statements 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 Funds' 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, 2000, 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 Fountainhead Special Value Fund as of October 31, 2000, the results of their operations, the changes in their net assets, and their financial highlights for each of the periods indicated in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 Dear Fellow Shareholders: Investment Results - Fiscal Year Ended October 2000 The GLOBALT Growth Fund (the "Fund"), whose ticker symbol is GROWX, ended its October fiscal year with a 10.78% total return for the year, net of all fees and expenses. The net asset value was $20.72 at fiscal year end. The Fund has returned 152.25% since inception December 1, 1995. Please note that the Fund paid its fiscal year dividend on December 21, 2000. Growth of $25,000 December 1, 1995 to October 31, 2000 Globalt Russell Growth 1000 Date Fund S&P 500 Growth -------- ----------- ---------- Dec-95 $ 26,600 $ 25,483 $ 25,143 Jan-96 27,600 26,349 25,984 Apr-96 29,074 27,244 27,190 Jul-96 28,074 26,813 26,537 Oct-96 31,195 29,718 29,372 Jan-97 33,914 33,289 33,133 Apr-97 33,862 34,092 33,195 Jul-97 40,773 40,795 40,303 Oct-97 39,663 39,262 38,343 Jan-98 41,342 42,247 41,623 Apr-98 47,663 48,092 47,181 Jul-98 48,219 48,662 48,330 Oct-98 44,929 47,894 47,787 Jan-99 54,438 55,970 59,353 Apr-99 54,237 58,585 59,703 Jul-99 54,266 57,219 59,951 Oct-99 56,920 58,877 64,153 Jan-00 61,416 60,417 71,141 Apr-00 63,306 63,113 76,157 Jul-00 63,544 62,358 74,556 Oct-00 63,060 62,470 70,130 |X| Past performance is not predictive of future performance. |X| The GLOBALT Growth Fund's historical results are net of all expenses, versus the gross market benchmark (the S&P 500 Index). Investors are reminded that when trying to achieve benchmark returns, investment management fees, transaction costs and execution costs will be incurred. |X| 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. |X| Inception Date: December 1, 1995. 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 international markets. The Fund only invests in stocks of U.S. companies that are expected to derive a portion of their revenues outside the U.S. GLOBALT's investment team seeks to optimize the Fund's exposure to the best global opportunities. Commentary and Outlook The stock market and the U.S. economy are both in a volatile transition that is confusing and unsettling for investors. Ironically, investors are getting what they have wanted -- a slower, more sustainable economic growth rate and a broader stock market. Nevertheless, market sentiment has turned distinctly negative. Suddenly there is anxiety that the economy won't achieve the expected "soft landing" and that we are now entering a bear market. We are in a corrective phase, in which prices are quickly being adjusted to the reality of lower corporate earnings and excessive speculation in some sectors. No one knows how the U.S. and global economies will unfold over the coming months, or how long it will take the stock market to adjust to these circumstances and the current uncertainty associated with national elections. However, since we believe the U.S. economy will remain in its best structural shape in decades, and the Federal Reserve is on the way to accomplishing its goals, it is reasonable to expect the interruption in earnings growth will be relatively short. The stock market is a discounting mechanism, and it is rather quickly discounting a slowdown in both economic growth and corporate profits. However, the market anticipates reversals in trends, and stocks can prosper even in a period of decelerating earnings growth following the Federal Reserve's period of active restraint. Shareholders know that we are long-term bulls on globally competitive U.S. companies, and we believe they are positioned to benefit following this period of uncertainty. Despite the sharp decline in many technology stocks, we consider it imperative to maintain exposure to this key sector.* As the new economy moves from hype to reality, the successful companies will be those that create value for their customers and shareholders by actually using the new technologies to make business more responsive and cost effective. We will use this period to endeavor to separate the long-term winners from the losers and position portfolios to keep shareholder value growing. 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 eligible GLOBALT 401(k) plan participants have elected to be investors in the Fund and collectively are among the Fund's largest shareholders. As always, your questions and comments are welcome. We appreciate your confidence in the GLOBALT Growth Fund. Sincerely, Samuel E. Allen Chief Executive Officer * While it is anticipated that the Fund will diversify its investments across a range of industries, certain sectors (such as the technology sector) are likely to be overweighted compared to others because the Fund's advisor seeks the best investment values regardless of sector. One of the risks associated with an overweighting in any sector is that a weakness in this sector could result in significant losses to the Fund. 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). 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 also available through Fidelity's FUNDSNetwork with a minimum investment of $2,500 ($1,000 through a qualified retirement plan). It is listed as the AmeriPrime Funds - GLOBALT Growth Fund (symbol: GROWX). Fidelity can be reached at 1-800-544-5555 or on the Internet at www.fidelity.com. 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. This enables the GLOBALT Growth Fund to be included as an investment option in 401(k) plans. GLOBALT Growth Fund Schedule of Investments - October 31, 2000 Common Stocks - 92.7% Shares Value Business Equipment & Services - 5.5% America Online, Inc. (a) 2,700 $ 136,350 BEA Systems, Inc. (a) 3,000 215,250 Computer Sciences Corp. (a) 1,500 94,500 MicroMuse, Inc. (a) 900 152,719 Omnicom Group, Inc. 3,800 350,550 Yahoo!, Inc. (a) 3,600 211,050 -------------- 1,160,419 -------------- Capital Goods - 6.1% Black & Decker Corp. 8,400 316,050 Emerson Electric Co. 3,500 257,031 Molex, Inc. - Class A 9,150 359,709 TYCO International, Ltd. 6,100 345,794 -------------- 1,278,584 -------------- Computer Hardware - 7.1% Cisco Systems, Inc. (a) 11,800 635,725 Compaq Computer Corp. 7,600 231,116 EMC Corp. (a) 1,700 151,406 International Business Machines Corp. 3,200 315,200 Juniper Networks, Inc. (a) 200 39,000 Sun Microsystems, Inc. (a) 1,100 121,963 -------------- 1,494,410 -------------- Computer Software - 10.9% Microsoft Corp. (a) 12,400 854,050 Network Appliance, Inc. (a) 2,020 240,380 Openwave Systems, Inc. (a) 1,200 111,075 Oracle, Corp. (a) 11,000 363,000 Portal Software, Inc. (a) 2,900 102,044 Rational Software Corp. (a) 2,200 131,312 Siebel Systems, Inc. (a) 700 73,456 Veritas Software Company (a) 3,000 423,047 -------------- 2,298,364 -------------- Consumer Durables - 1.2% Danaher, Corp. 4,100 258,813 -------------- Consumer Non - Durables - 2.9% Avon Products, Inc. 5,300 257,050 Kimberly Clark Corp. 3,900 257,400 Ralston - Ralston Purina Co. 3,700 89,725 -------------- 604,175 -------------- Consumer Services - 1.7% Viacom, Inc. - Class B (a) 6,400 364,000 -------------- GLOBALT Growth Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Electronic Equipment - 3.9% Conexant Systems, Inc. (a) 10,600 $ 278,913 Jabil Circuit, Inc. (a) 3,600 205,425 Maxim Integrated Products, Inc. (a) 1,400 92,837 SDL, Inc. (a) 1,000 259,250 -------------- 836,425 -------------- Energy - 4.5% Apache Corp. 1,000 55,313 Baker Hughes, Inc. 1,800 61,875 Ensco International, Inc. 7,500 249,375 Global Marine, Inc. (a) 7,000 185,500 Pride International, Inc. (a) 5,900 149,344 Tidewater, Inc. 5,600 258,650 -------------- 960,057 -------------- Financial Services - 8.0% AFLAC, Inc. 4,500 328,781 American Express Co. 3,900 234,000 American International Group, Inc. 2,400 235,200 Charles Schwab Corp. 3,000 105,375 Citigroup, Inc. 9,133 480,624 Donaldson, Lufkin, & Jenrette, Inc. 1,000 89,813 Franklin Resources, Inc. 3,600 154,224 State Street Corp. 500 62,370 -------------- 1,690,387 -------------- Health Care - 13.9% Amgen, Inc. (a) 6,600 382,387 Becton Dickinson, Inc. 4,300 144,050 Bristol - Myers Squibb Co. 9,900 603,281 Eli Lilly & Co. 1,900 169,812 Genzyme Corp. (a) 1,000 71,000 Immunex Corp. (a) 4,900 208,556 Johnson & Johnson 2,812 259,056 Medimmune, Inc. (a) 1,800 117,675 Merck & Co. 2,300 206,856 Pfizer, Inc. 12,850 554,959 Pharmacia Corp. 3,800 209,000 -------------- 2,926,632 -------------- Laboratory Analytical Instruments - 1.2% PE Corp. - PE Biosystems Group 2,100 245,700 -------------- GLOBALT Growth Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Multi - Industry - 10.4% Comverse Technology, Inc. (a) 1,820 $ 203,385 Corning, Inc. 900 68,850 General Electric Co. 17,700 970,181 Minnesota Mining and Manufacturing Co. 5,100 492,787 United Technologies Corp. 6,700 467,744 -------------- 2,202,947 -------------- Retail Sector - 2.6% Costco Wholesale Corp. (a) 12,500 457,813 Starbucks Corp. (a) 2,200 98,312 -------------- 556,125 -------------- Semi - Conductors - 6.0% Altera Corp. (a) 7,000 286,563 Analog Devices, Inc. (a) 1,700 110,500 Applied Micro Circuits Corp. (a) 2,000 152,000 Broadcom Corp. Class A (a) 400 88,950 Cree, Inc. (a) 2,400 238,200 Intel Corp. 8,600 387,000 -------------- 1,263,213 -------------- Telecommunications - 1.9% ADC Telecom, Inc. (a) 3,000 64,125 Avaya, Inc. (a) 875 11,758 Ciena Corp. (a) 800 84,100 ONI Systems Corp. (a) 800 64,850 Scientific - Atlanta, Inc. 2,600 177,937 -------------- 402,770 -------------- Utilities - 4.9% AES Corp. (a) 2,900 163,850 Qwest Communications International, Ltd. (a) 6,321 307,359 Williams Cos., Inc. 6,300 263,419 WorldCom, Inc. (a) 12,400 294,500 -------------- 1,029,128 -------------- TOTAL COMMON STOCKS (Cost $15,982,051) 19,572,149 -------------- GLOBALT Growth Fund Schedule of Investments - October 31, 2000 - continued Principal Amount Value Money Market Securities - 8.0% Firstar Treasury Fund, 5.55% (b) (Cost $1,695,706) 1,695,706 $ 1,695,706 -------------- TOTAL INVESTMENTS - (Cost $17,677,757) - 100.7% 21,267,855 -------------- Liabilities in excess of other assets - (0.7)% (158,112) -------------- Total Net Assets - 100.0% 21,109,743 ============== (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000.
See accompanying notes which are an integral part of the finanacial statements. GLOBALT Growth Fund October 31, 2000 Statement of Assets and Liabilities Assets Investment in securities, at value (cost $17,677,757) $ 21,267,855 Cash 497 Dividends receivable 2,916 Interest receivable 5,747 Receivable for fund shares sold 1,000 Receivable for investments sold 1,546,305 ----------------- Total assets 22,824,320 Liabilities Accrued investment advisory fee $ 23,349 Payable for investments purchased 1,691,228 ----------------- Total liabilities 1,714,577 ----------------- Net Assets $ 21,109,743 ================= Net Assets consist of: Paid in capital 15,329,649 Accumulated undistributed net investment loss (2,886) Accumulated undistributed net realized gain on investments 2,192,882 Net unrealized appreciation on investments 3,590,098 ----------------- Net Assets, for 1,019,026 shares $ 21,109,743 ================= Net Asset Value Net Assets Offering price and redemption price per share ($21,109,743 / 1,019,026) $ 20.72 ============== See accompanying notes which are an integral part of the finanacial statements.
GLOBALT Growth Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 108,385 Interest income 42,431 ---------------- Total Income 150,816 Expenses Investment advisory fee $ 238,783 Trustees' fees 3,064 --------------- Total operating expenses 241,847 ---------------- Net Investment Loss (91,031) ---------------- Realized & Unrealized Gain (Loss) Net realized gain on investment securities 2,192,866 Change in net unrealized depreciation on investment securities (228,467) --------------- Net realized & unrealized gain on investment securities 1,964,399 ---------------- Net increase in net assets resulting from operations $ 1,873,368 ================ See accompanying notes which are an integral part of the finanacial statements.
GLOBALT Growth Fund Statement of Changes in Net Assets Year Year ended ended October 31, October 31, 2000 1999 ----------------- ----------------- Increase/(Decrease) in Net Assets Operations Net investment loss $ (91,031) $ (42,743) Net realized gain on investment securities 2,192,866 844,362 Change in net unrealized appreciation (depreciation) (228,467) 2,489,533 ----------------- ----------------- Net increase in net assets resulting from operations 1,873,368 3,291,152 ----------------- ----------------- Distributions to shareholders From net investment income 0 (15,584) From net realized gain (843,736) (592,834) ----------------- ----------------- Total distributions (843,736) (608,418) ----------------- ----------------- Share Transactions Net proceeds from sale of shares 3,981,216 4,333,512 Shares issued in reinvestment of distributions 736,101 608,118 Shares redeemed (1,571,246) (2,399,432) ----------------- ----------------- Net increase in net assets resulting from share transactions 3,146,071 2,542,198 ----------------- ----------------- Total increase in net assets 4,175,703 5,224,932 Net Assets Beginning of period 16,934,040 11,709,108 ----------------- ----------------- End of period [including accumulated net investment loss of $2,886 and $2,886, respectively] $ 21,109,743 $ 16,934,040 ================= ================= See accompanying notes which are an integral part of the finanacial statements.
GLOBALT Growth Fund Financial Highlights Years ended October 31, Period ------------------------------------------------------------------ ended October 31, 2000 1999 1998 1997 1996 (a) -------------- -------------- -------------- --------------- --------------- Selected Per Share Data Net asset value, beginning of period $ 19.53 $ 16.14 $ 15.66 $ 12.48 $ 10.00 -------------- -------------- -------------- --------------- --------------- Income from investment operations: Net investment income (loss) (0.09) (0.05) 0.02 0.01 0.01 Net realized and unrealized gain 2.23 4.27 1.86 3.34 2.47 -------------- -------------- -------------- --------------- --------------- Total from investment operations 2.14 4.22 1.88 3.35 2.48 -------------- -------------- -------------- --------------- --------------- Less Distributions From net investment income 0.00 (0.02) (0.01) 0.00 0.00 From net realized gain (0.95) (0.81) (1.39) (0.17) 0.00 -------------- -------------- -------------- --------------- --------------- Total Distributions (0.95) (0.83) (1.40) (0.17) 0.00 -------------- -------------- -------------- --------------- --------------- Net asset value, end of period $ 20.72 $ 19.53 $ 16.14 $ 15.66 $ 12.48 ============== ============== ============== =============== =============== Total Return 10.78% 26.67% 13.28% 27.15% 24.80% (b) Ratios and Supplemental Data Net assets, end of period (000) $21,110 $16,934 $11,709 $8,003 $3,443 Ratio of expenses to average net assets 1.18% 1.17% 1.17% 1.17% 1.16% (c) Ratio of expenses to average net assets before reimbursement 1.18% 1.18% 1.19% 1.19% 1.25% (c) Ratio of net investment income (loss) to average net assets (0.45)% (0.27)% 0.14% 0.06% 0.11% (c) Ratio of net investment income (loss) to average net assets before reimbursement (0.45)% (0.28)% 0.12% 0.04% 0.02% (c) Portfolio turnover rate 159.09% 120.46% 83.78% 110.01% 66.42% (c) (a) December 1, 1995 (commencement of operations) to October 31, 1996 (b) For periods of less than a full year, total return is not annualized. (c) Annualized See accompanying notes which are an integral part of the finanacial statements.
GLOBALT Growth Fund Notes to Financial Statements October 31, 2000 NOTE 1. ORGANIZATION GLOBALT Growth Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust) on October 20, 1995 and commenced operations on December 1, 1995. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The Fund's investment objective is to provide long-term growth of capital. The Declaration of Trust Agreement permits the Board of Trustees (the "Board") 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 opinion of the Advisor (as such term is defined in note 3 of this document), 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. 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 comply with federal tax rules regarding distribution of substantially all of its net investment income and capital gains. These rules may cause multiple distributions during the course of the 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. Generally accepted accounting principles require that permanent financial reporting tax differences relating to shareholder distributions be reclassified to paid-in capital. GLOBALT Growth Fund Notes to Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains GLOBALT, Inc. (the "Adviser") to manage the Fund's investments. The adviser was organized as a Georgia corporation in 1990. Samuel Allen, Chairman of the Adviser, is the controlling shareholder of GLOBALT, Inc. The investment decisions for the Fund are made by a committee of the Adviser, which is primarily responsible for the day-to-day management of the Fund's portfolio. Under the terms of the management agreement (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage fees and 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 1.17% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the year ended October 31, 2000, the Adviser received a fee of $238,783 from the Fund. Effective October 12, 2000, AmeriPrime Financial Services, Inc. and Unified Fund Services, Inc. ("Unified"), both wholly owned subsidiaries of Unified Financial Services, Inc., merged with one another. Prior to the merger, Ameriprime Financial Services, Inc. served as Administrator to the Fund. The result of this merger is now Unified Fund Services, Inc., still a wholly owned subsidiary of Unified Financial Services, Inc. The Fund retains Unified Fund Services, Inc., a wholly owned subsidiary of Unified Financial Services, Inc., to manage the Fund's business affairs and provide the Fund with administrative, transfer agency, and fund accounting services, including all regulatory reporting and necessary office equipment and personnel. The Adviser paid all administrative, transfer agency, and fund accounting fees on behalf of the Fund per the management agreement. The Fund retains AmeriPrime Financial Securities, Inc. ( the "Distributor"), a wholly owned subsidiary of Unified Financial Services, Inc., 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, 2000. Certain members of management of Unified Fund Services, Inc. and the Distributor are also directors and/or officers of the Trust. NOTE 4. SHARE TRANSACTIONS As of October 31, 2000, there were an unlimited number of authorized shares for the Fund. Paid-in capital at October 31, 2000 was $15,329,649. Transactions in shares were as follows: Year ended Year ended October 31, 2000 October 31, 1999 Shares Dollars Shares Dollars Shares sold 191,757 $3,981,216 237,096 $4,333,512 Shares issued in 34,221 736,101 34,260 608,118 reinvestment of dividends Shares redeemed (73,904) (1,571,246) (130,011) (2,399,432) ---------------------------------------------------- 152,074 $3,146,071 141,345 $2,542,198 ==================================================== GLOBALT Growth Fund Notes to Financial Statements October 31, 2000 - continued NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $32,639,728 and $31,047,053, respectively. The gross unrealized appreciation for all securities totaled $3,841,709 and the gross unrealized depreciation for all securities totaled $251,611 for a net unrealized appreciation of $3,590,098. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $17,677,757. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees GLOBALT Growth Fund We have audited the accompanying statement of assets and liabilities of the GLOBALT Growth Fund, including the schedule of portfolio investments as of October 31, 2000, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended and for the period of December 1, 1995 (commencement of operation) through October 31, 1996. 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, 2000, 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 GLOBALT Growth Fund as of October 31, 2000, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, and for the period of December 1, 1995 (commencement of operation) through October 31, 1996, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 -----END PRIVACY-ENHANCED MESSAGE-----