N-30D/A 1 0001.txt AMERIPRIME FUNDS Dear Shareholders: INVESTMENT RESULTS - FISCAL YEAR ENDED OCTOBER 31, 2000 The AAM Equity Fund (the "Fund") ended its October fiscal year with a positive return of 5.28%. Investment Results --------------------------------------------------------------------------- Comparative AAM S&P 500 Dow Jones Investment Returns (a)(b) Equity Fund Index (c) Industrial Average (c) ---------------------------------------------------------------------------- 1 Year Ending 10/31/2000 5.28% 6.08% 3.82% ---------------------------------------------------------------------------- Since Inception (d) 15.90% 29.86% 27.16% ---------------------------------------------------------------------------- Average Annual 6.50% 11.80% 10.80% Since Inception ---------------------------------------------------------------------------- AAM Equity Fund $11,590 S&P 500 $12,986 Dow Jones $12,716 06/30/1998 10/31/98 10/31/99 10/31/2000 (Since Inception) (Fiscal Year End) 10,000 9,430 11,009 11,590 10,000 9,740 12,242 12,986 10,000 9,651 12,249 12,716 The chart shows the value of a hypothetical initial investment of $10,000 in the Fund, the S&P 500 Index and the Dow Jones Industrial Average on June 30, 1998 and held through October 31, 2000. a. Past performance is not indicative of future results. b. The AAM Equity Fund's historical returns are presented net of all fees and expenses, versus the gross market benchmarks (the S&P 500 Index and the Dow Jones Industrial Average). Investors should keep in mind that when trying to achieve benchmark returns, investment management fees, transaction costs and execution costs will be incurred. c. The S&P 500 Index is an unmanaged index of 500 selected common stocks, most of which are listed on the NY Stock Exchange. The Index is adjusted for dividends and weighted toward stocks with large market capitalizations. The Dow Jones Industrial Average is an unmanaged index of 30 selected common stocks, which are listed on the NY Stock Exchange. The Dow Jones Industrial Adverage is adjusted for dividends and is made up of leading industrial and consumer stocks with large capitalizations. d. From June 30, 1998. INVESTMENT APPROACH To remind our shareholders, the AAM Equity Fund's investment approach is to achieve long-term growth of capital by investing in high quality large and mid-cap U.S. companies. We select companies which are leaders in their various industries which we believe will provide the greatest potential return over an 18 month to two year time horizon. COMMENTARY AND OUTLOOK So far, the year 2000 has proven tough for most stock market investors. As of the end of September, all three common measures of stock market performance (the Dow, S&P 500, and Nasdaq indices) had dropped in value since January 1. In the medium and long-term, we believe that companies with sound fundamentals and a history of earnings will outperform cash and bond investments. Historically, this has been true even in ugly times - even on the eve of the stock market decline in the early 1970's, an investor would have been better off 10 years later having invested in stocks rather than Treasury notes. These days, more than ever, we believe the risks of getting out of the stock market are greater than staying in. In 1998, the S&P 500 Index increased about 28%. However, if an investor happened to be out of the market during the best five days of that year, his return for that year would have dropped to roughly 1%. In short, we believe dramatic shifts into and out of stocks, or between styles of stock investing, suggest a power to "time the market" that we do not have. Though some of our holdings may go down before they go up, we anticipate they will generate solid returns in the long run. Of course, there are no guarantees: however, whenever the market takes off next, we will be there with company holdings that we perceive to have a strong record of impressive bottom line profits. Sincerely, Knox H. Fuqua President and Chief Investment Officer 2 THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND; THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE SHAREHOLDERS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. AAM EQUITY FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 Common Stocks - 91.8% SHARES VALUE BASIC INDUSTRIES - 5.9% CONSTRUCTION - 2.9% Martin Marietta Materials, Inc. 2,000 $ 76,800 Tredegar Corp. 4,000 76,250 ------------------ 153,050 ------------------ METALS & MINING - 1.6% Alcoa, Inc. 3,000 86,063 ------------------ PAPER & FOREST PRODUCTS - 1.4% Avery Dennison Corp. 1,500 75,750 ------------------ TOTAL BASIC INDUSTRIES 314,863 ------------------ CAPITAL GOODS - 8.2% AEROSPACE & DEFENSE - 4.1% Honeywell International, Inc. 2,000 107,625 General Dynamics Corp. 1,500 107,344 ------------------ 214,969 ------------------ ELECTRICAL EQUIPMENT - 4.1% Emerson Electric Co. 1,500 110,156 General Electric Co. 2,000 109,625 ------------------ 219,781 ------------------ TOTAL CAPITAL GOODS 434,750 ------------------ CONSUMER CYCLICAL - 0.9% CONSUMER ELECTRONICS - 0.9% Circuit City Group 3,500 46,375 ------------------ CONSUMER GROWTH STAPLE - 15.3% BEVERAGES - 4.0% Anheuser-Busch Companies, Inc. 1,950 89,212 The Coca-Cola Co. 2,000 120,750 ------------------ 209,962 ------------------ FOODS - 1.4% Sara Lee Corp. 3,500 75,469 ------------------ MEDIA - DIVERSIFIED - 1.7% The Walt Disney Co. 2,500 89,531 ------------------ PUBLISHING - NEWSPAPERS - 1.1% Media General, Inc. - Class A 1,500 57,000 ------------------ AAM EQUITY FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 - CONTINUED COMMON STOCKS - CONTINUED SHARES VALUE CONSUMER GROWTH STAPLE - continued RESTAURANT - 3.0% McDonald's Corp. 2,500 $ 77,500 Outback Steakhouse, Inc. (a) 2,850 81,225 ------------------ 158,725 ------------------ RETAIL & WHOLESALE - 4.1% SYSCO Corp. 2,000 104,375 Walgreen Co. 2,500 114,062 ------------------ 218,437 ------------------ TOTAL CONSUMER GROWTH STAPLE 809,124 ------------------ ENERGY - 11.6% ENERGY SERVICES - 5.4% Enron Corp. 1,200 98,475 Halliburton Co. 2,000 74,125 Schlumberger Ltd. 1,500 114,187 ------------------ 286,787 ------------------ OIL & GAS - 6.2% Ashland, Inc. 2,500 81,875 BP Amoco PLC (c) 1,640 83,538 Chevron Corp. 1,000 82,125 Conoco, Inc. - Class A 3,000 77,437 ------------------ 324,975 ------------------ TOTAL ENERGY 611,762 ------------------ FINANCIAL - 12.3% BANKS - 5.6% BB&T Corp. 3,500 111,563 Citigroup Inc. 2,000 105,250 SunTrust Banks, Inc. 1,600 78,100 ------------------ 294,913 ------------------ DIVERSIFIED - 1.3% Capital One Financial Corp. 1,125 71,016 ------------------ INSURANCE - 5.4% American International Group, Inc. 1,250 122,500 Berkshire Hathaway, Inc. - Class B 50 105,150 Markel Corp. (a) 400 57,950 ------------------ 285,600 ------------------ TOTAL FINANCIAL 651,529 ------------------ AAM EQUITY FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 - CONTINUED COMMON STOCKS - CONTINUED SHARES VALUE HEALTH CARE - 12.5% DIVERSIFIED - 5.9% American Home Products Corp. 1,800 $ 114,300 Bristol-Myers Squibb Co. 1,750 106,641 Johnson & Johnson 1,000 92,125 ------------------ 313,066 ------------------ DRUGS & PHARMACEUTICALS - 6.6% Amgen, Inc. (a) 1,500 86,906 Merck & Co., Inc. 1,500 134,906 Schering-Plough, Corp. 2,500 129,219 ------------------ 351,031 ------------------ TOTAL HEALTH CARE 664,097 ------------------ TECHNOLOGY - 19.6% BROADCASTING - 2.9% Liberty Media Group - Class A (a) 3,550 63,900 Cox Communications, Inc. - Class A (a) 2,000 88,125 ------------------ 152,025 ------------------ COMMUNICATIONS EQUIPMENT - 1.5% Lucent Technologies, Inc. 1,025 23,895 Motorola, Inc. 2,250 56,109 ------------------ 80,004 ------------------ COMPUTER SERVICES & SOFTWARE - 4.6% EMC Corp. (a) 1,250 111,328 Citrix Systems, Inc. (a) 1,200 26,550 Microsoft Corp. (a) 1,500 103,313 ------------------ 241,191 ------------------ COMPUTER & OFFICE EQUIPMENT - 5.6% Avaya Inc. (a) 85 1,142 Cisco Systems, Inc. (a) 2,000 107,750 Hewlett-Packard Co. 2,000 93,000 International Business Machines Corp. 1,000 98,500 ------------------ 300,392 ------------------ ELECTRONIC - INSTRUMENTS - 2.1% Agilent Technologies, Inc. (a) 266 12,319 Koninklijke Phillips Electronics N.V. (c) 2,500 99,844 ------------------ 112,163 ------------------ ELECTRONIC - SEMICONDUCTOR - 1.7% Intel Corp. 2,000 90,000 ------------------ TELECOMMUNCATIONS SERVICES - 1.2% AT&T Corp. 2,671 61,934 ------------------ TOTAL TECHNOLOGY 1,037,709 ------------------ AAM EQUITY FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 - CONTINUED COMMON STOCKS - CONTINUED SHARES VALUE UTILITIES - 5.5% ELECTRICAL EQUIPMENT - 2.3% Dominion Resources, Inc. 2,000 $ 119,125 ------------------ TELEPHONE SERVICES - 3.2% SBC Communications Inc. 2,000 115,375 Ericsson L M Tel Co. (c) 4,000 55,500 ------------------ 170,875 ------------------ TOTAL UTILITIES 290,000 ------------------ TOTAL COMMON STOCK (COST $4,161,695) 4,860,209 ------------------ PRINCIPAL AMOUNT VALUE Money Market Securities - 7.8% Firstar Treasury Fund, 5.53% (b) (Cost $413,863) 413,863 $ 413,863 ------------------ TOTAL INVESTMENTS (COST $4,575,558) - 99.6% 5,274,072 ------------------ OTHER ASSETS LESS LIABILITIES - 0.4% 20,458 ------------------ TOTAL NET ASSETS - 100.0% $ 5,294,530 ================== (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000. (c) American Depositary Receipt
See accompanying notes which are an integral part of the financial statements. AAM Equity Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend Income $ 48,963 Interest Income 13,844 ------------------- Total Income 62,807 Expenses Investment advisory fee 52,693 Organizational expenses 6,215 Trustees' fees 3,064 ------------------- Total expenses before reimbursement 61,972 Reimbursed expenses (9,279) ------------------- Total operating expenses 52,693 ------------------- Net Investment Income 10,114 ------------------- Realized & Unrealized Gain (Loss) Net realized loss on investment securities (30,026) Change in net unrealized appreciation / (depreciation) on investment securities 230,800 ------------------- Net gain on investment securities 200,774 ------------------- Net increase in net assets resulting from operations $ 210,888 ===================
AAM Equity 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 $ 10,114 $ 16,393 Net realized loss on investment securities (30,026) (54,500) Change in net unrealized appreciation / (depreciation) 230,800 568,946 ----------------- ----------------- Net increase in net assets resulting from operations 210,888 530,839 ----------------- ----------------- Distributions to shareholders From net investment income (16,393) (7,205) From net realized gains 0 0 ----------------- ----------------- Total distributions (16,393) (7,205) Share Transactions Net proceeds from sale of shares 1,722,471 1,493,997 Shares issued in reinvestment of dividends 10,990 4,455 Shares redeemed (970,172) (537,268) ----------------- ----------------- Net increase in net assets resulting from share transactions 763,289 961,184 ----------------- ----------------- Total increase in net assets 957,784 1,484,818 Net Assets Beginning of period 4,336,746 2,851,928 ----------------- ----------------- End of period [including accumulated undistributed net investment income of $10,114 and $16,393, respectively] $ 5,294,530 $ 4,336,746 ================= =================
See accompanying notes which are an integral part of the financial statements. AAM Equity Fund Financial Highlights Year Year Period ended ended ended October 31, October 31, October 31, 2000 1999 1998 (a) ----------------- ----------------- ----------------- Selected Per Share Data Net asset value, beginning of period $ 10.99 $ 9.43 $ 10.00 ----------------- ----------------- ----------------- Income from investment operations Net investment income 0.03 0.05 0.03 Net realized and unrealized gain (loss) 0.55 1.53 (0.60) ----------------- ----------------- ----------------- Total from investment operations 0.58 1.58 (0.57) ----------------- ----------------- ----------------- Distribution to shareholders from: Net investment income (0.04) (0.02) 0.00 Net realized gains 0.00 0.00 0.00 ----------------- ----------------- ----------------- Total distributions (0.04) (0.02) 0.00 ----------------- ----------------- ----------------- Net asset value, end of period $ 11.53 $ 10.99 $ 9.43 ================= ================= ================= Total Return 5.28% 16.74% (5.70)(b) Ratios and Supplemental Data Net assets, end of period (000) $5,295 $4,337 $2,852 Ratio of expenses to average net assets 1.15% 1.15% 1.14% (c) Ratio of expenses to average net assets 1.35% 1.35% 1.40% (c) before reimbursement Ratio of net investment income to average net assets 0.22% 0.43% 0.90% (c) Ratio of net investment income to average net assets before reimbursement 0.02% 0.23% 0.64% (c) Portfolio turnover rate 32.79% 27.34% 14.41% (c) (a) June 30, 1998 (commencement of operations) to October 31, 1998 (b) For periods of less than a full year, the total return is not annualized. (c) Annualized See accompanying notes which are an integral part of the financial statements.
AAM EQUITY FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 NOTE 1. ORGANIZATION AAM Equity Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on June 30, 1998 and commenced operations on June 30, 1998. The Trust is established under the laws of Ohio by an Agreement and Declaration of Trust (the "Trust Agreement") dated August 8, 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 capital appreciation. The 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 VALUATIONS - Securities, which are traded on any exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, 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 value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. When prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, subject to review of the Board. 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. At October 31, 2000, loss carryovers totaled $122,366: $30,026 expiring in 2008, $74,070 expiring in 2007, and $18,270 expiring in 2006. AAM EQUITY FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 - CONTINUED NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 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. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Appalachian Asset Management, Inc. (the "Advisor") to manage the Fund's investments. Its President, Knox H. Fuqua, controls the advisor. Mr. Fuqua is primarily responsible for the day-to-day management of the Fund's portfolio. Under the terms of the management agreement (the "Agreement"), the 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, fees and expenses of non-interested person trustees, and extraordinary expenses (including organizational 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 1.15% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Advisor. For the year ended October 31, 2000, the Advisor received a fee of $52,693 from the Fund. The Advisor has voluntarily agreed to reimburse other expenses to the extent necessary to maintain total operating expenses at the rate of 1.15%. For the year ended October 31, 2000, the Advisor reimbursed expenses of $9,279. There is no assurance that such reimbursement 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 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 AAM EQUITY FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 - CONTINUED NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED year ended October 31, 2000. Certain members of management of Unified Fund Services, Inc. and the Distributor are also directors and/or officers of AmeriPrime 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 $4,708,268. Transactions in shares were as follows: YEAR ENDED YEAR ENDED OCTOBER 31, 2000 OCTOBER 31, 1999 SHARES DOLLARS SHARES DOLLARS Shares sold 149,804 $1,722,471 144,204 $1,493,997 Shares issued in reinvestment of Shares redeemed (86,503) (970,172) (52,307) (537,268) ------------- ------------- -------------- ------------- 64,261 $763,289 92,290 $961,184 ============= ============= ============== =============
NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $1,997,347 and $1,406,039, respectively. At October 31, 2000, the unrealized appreciation for all securities totaled $990,835 and the gross unrealized depreciation for all securities totaled $292,321 for a net unrealized appreciation of $698,514. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $4,575,558. 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, National Financial Services Corp. owned of record in aggregate more than 62% of the Fund. AAM EQUITY FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 - CONTINUED NOTE 8. SUBSEQUENT EVENTS Effective December 31, 2000, AmeriPrime Financial Securities, Inc. sold substantially all of its assets to Unified Financial Securities, Inc. Both companies are wholly owned subsidiaries of Unified Financial Services, Inc. Effective as of the same date, the Fund will retain Unified Financial Securities, Inc. to act as the principal distributor of its shares. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees AAM Equity Fund We have audited the accompanying statement of assets and liabilities of the AAM Equity 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, 1998 (commencement of operation) through October 31, 1998. 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 auditing standards generally accepted in the United States of America. 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. 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 AAM Equity 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, 1998 (commencement of operations) through October 31, 1998, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 December 2000 Dear Shareholders: We are pleased to provide the Annual Report and investment results for the Carl Domino Equity Income Fund. Since inception, on December 1,1995, through October 31, 2000 the Fund has returned an average annual return of 11.93%. Average Annual Return Comparative Investment Returns 12 Months Since Inception (Dec. 1, 1995) ------------------------------ --------- ------------------------------ Carl Domino Equity Income Fund -1.84% 11.93% S&P Barra Value Index 9.67% 17.77% S&P 500 Index 6.08% 20.98% [OBJECT OMITTED] Carl Domino S&P Barra Equity Income Fund S&P 500 Index Value Index 12/31/95 $10,000 $10,000 $10,000 03/31/96 10,830 10,740 10,933 06/30/96 11,540 11,221 11,156 09/30/96 11,820 11,568 11,451 12/31/96 12,808 12,531 12,531 03/31/97 13,195 12,868 12,754 06/30/97 15,057 15,113 14,589 09/30/97 16,898 16,245 15,930 12/31/97 17,335 16,711 16,282 03/31/98 18,663 19,040 18,161 06/30/98 17,433 19,669 18,255 09/30/98 14,604 17,716 15,904 12/31/98 16,874 21,486 18,671 03/31/99 16,995 22,557 19,204 06/30/99 19,548 24,146 21,272 09/30/99 17,611 22,640 19,311 12/31/99 16,995 26,007 21,045 03/31/00 17,740 26,603 21,092 06/30/00 17,318 25,896 20,187 09/30/00 17,218 25,645 21,965 12/31/00 17,417 25,536 22,374 This chart assumes a hypothetical initial investment of $10,000 in the Fund, the S&P 500 Index and the S&P Barra Value Index on December 1, 1995 and held through October 31, 2000. The S&P 500 Index and the S&P Barra Value Index are widely recognized unmanaged indexes of common stock prices. Performance figures include the change in value of the stocks in the index and reinvestment of dividends. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. We believe that the fund is poised to take advantage of what we perceive as a market shift back to value stocks. Value stocks performed well in the second quarter of this year and continued the trend into the third quarter. In the third quarter, value stocks outperformed growth stocks by the greatest margin in twenty-five years. During 1998 and 1999, most of the return of the S&P 500 was derived from about ten to fifteen stocks. In 2000, however, some of the former leaders have become some of the largest laggards. Not only have the leaders broken down, but the whole market has broadened. The once highflying technology and growth stocks still have their fans, but investors are also becoming reacquainted with stocks that actually make profits. With some of the technology stocks down greater than 50% from their highs, companies with positive earnings are again fashionable. Valuations are now much more reasonable and consistent achievable earnings growth is being rewarded. Also with a perceived slowdown in the economy, growth stocks will have a much more difficult time producing the returns of the past few years. All of these issues bode well for a sustained return to value investing, as well as an argument for increasing the allocation to this area of the market. Best regards, Carl J. Domino
CARL DOMINO EQUITY INCOME FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 COMMON STOCKS - 82.8% SHARES VALUE AIRLINES - 1.9% UAL Corp. 1,900 $ 72,081 ----------------- APPLIANCES & TOOLS - 2.0% Snap-On, Inc. 2,900 74,131 ----------------- AUTO & TRUCK MANUFACTURING - 2.6% Ford Motor Co. 3,693 96,480 ----------------- AUTOS & AUTO PARTS - 0.1% American Quantum Cycles, Inc. (a) 15,000 3,282 ----------------- BUILDING MATERIALS - 1.2% Masco Corp. 2,388 44,626 ----------------- CHEMICAL MANUFACTURING - 2.1% DuPont (E.I.) de NeMours & Co. 1,759 79,815 ----------------- COMPUTER SOFTWARE & SERVICES - 1.9% Hypercom Corp. 4,000 27,500 Korea Thrunet Co., Ltd. - Class A (a) 6,700 43,131 ----------------- 70,631 ----------------- CONGLOMERATES - 2.6% Minnesota Mining & Manufacturing Co. 1,000 96,625 ----------------- CONSTRUCTION & AGRICULTURAL MACHINERY - 3.6% Caterpillar, Inc. 1,900 66,619 Deere & Co. 1,800 66,262 ----------------- 132,881 ----------------- DRUGS - 2.6% American Home Products Corp. 1,500 95,250 ----------------- FOODS - 4.9% General Mills Inc. 2,200 91,850 Heinz (H.J.) Co. 2,200 92,263 ----------------- 184,113 ----------------- HEALTHCARE - 1.8% Baxter International, Inc. 800 65,750 ----------------- INSURANCE - 3.5% Allstate Corp. 2,000 80,500 Lincoln National Corp. 1,000 48,375 ----------------- 128,875 ----------------- See accompanying notes which are an integral part of the financial statements. CARL DOMINO EQUITY INCOME FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 - CONTINUED COMMON STOCKS - CONTINUED SHARES VALUE LODGING - 0.6% Interstate Hotels Corp. (a) 566 $ 1,114 Wyndham International, Inc. - Class A (a) 13,500 21,938 ----------------- 23,052 ----------------- MAJOR REGIONAL BANKS / OTHER BANKS - 8.2% Community Savings Bankshares, Inc. 8,411 103,035 First Union Corp. 2,300 69,719 SouthTrust Corp. 2,150 69,606 Summit Bancorp 1,700 63,750 ----------------- 306,110 ----------------- NATURAL GAS / UTILITIES - 3.9% El Paso Energy Corp. 1,000 62,687 Williams Companies, Inc. 2,000 83,625 ----------------- 146,312 ----------------- OFFICE SUPPLIES - 2.0% Mead Corp. 2,600 75,238 ----------------- OIL & GAS - DOMESTIC - 4.4% Conoco, Inc. - Class B 3,000 81,562 Midcoast Energy Resources, Inc. 4,000 81,000 ----------------- 162,562 ----------------- OIL & GAS - INTEGRATED - 5.7% Sunoco, Inc. 2,600 77,838 USX-Marathon Group, Inc. 2,400 65,250 Unocal Corp. 2,000 68,250 ----------------- 211,338 ----------------- OIL & GAS - INTERNATIONAL - 2.4% Statia Terminals Group NV 12,100 88,481 ----------------- OIL & WELL SERVICES & EQUIPMENT - 1.4% Baker Hughes, Inc. 1,500 51,562 ----------------- PAPER & PAPER PRODUCTS - 2.7% Kimberly-Clark Corp. 1,500 99,000 ----------------- PERSONAL & HOUSEHOLD PRODUCTS - 6.9% Avon Products, Inc. 1,940 94,090 International Flavors & Fragrances, Inc. 4,100 68,675 Tupperware Corp. 4,600 78,775 Ultralife Batteries, Inc. (a) 1,500 14,062 ----------------- 255,602 ----------------- See accompanying notes which are an integral part of the financial statements. CARL DOMINO EQUITY INCOME FUND SCHEDULE OF INVESTMENTS - OCTOBER 31, 2000 - CONTINUED COMMON STOCKS - CONTINUED SHARES VALUE PHOTOGRAPHY / OFFICE EQUIPMENT - 4.0% Eastman Kodak Co. 1,550 $ 69,556 Pitney Bowes, Inc. 1,313 38,980 Xerox Corp. 4,676 39,454 ----------------- 147,990 ----------------- SCIENTIFIC & TECHNICAL INSTRUMENTS - 2.5% Pall Corp. 4,300 92,719 ----------------- SERVICES - MISCELLANEOUS - 2.4% Block (H&R), Inc. 2,000 71,375 Rare Medium Group, Inc. (a) 4,000 18,500 ----------------- 89,875 ----------------- SPECIALTY - 1.7% Callaway Golf Co. 4,000 64,000 ----------------- TELECOMMUNICATIONS - 1.2% AT&T Corp. 2,000 46,375 ----------------- TRANSPORTATION - 2.0% Knightsbridge Tankers Ltd. 3,500 75,469 ----------------- TOTAL COMMON STOCKS (COST $3,550,453) 3,080,225 ----------------- PREFERRED STOCK - 0.5% INSURANCE - 0.5% Conseco Financial Preferred Series F, 7% (Cost $100,000) 2,000 18,375 ----------------- WARRANTS - 0.0% REAL ESTATE DEVELOPMENT - 0.0% New China Homes Ltd. Warrants (Cost $312) Expire 03/09/05 2,500 937 ----------------- PRINCIPAL AMOUNT VALUE MONEY MARKET SECURITIES - 3.4% Firstar Treasury Fund, 5.55% (b) (Cost $127,705) 127,705 127,705 ----------------- TOTAL INVESTMENTS - 86.7% (COST $3,778,470) 3,227,242 ----------------- OTHER ASSETS LESS LIABILITIES - 13.3% 493,186 ----------------- TOTAL NET ASSETS - 100.0% $ 3,720,428 ================= (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.
CARL DOMINO EQUITY INCOME FUND OCTOBER 31, 2000 STATEMENT OF ASSETS & LIABILITIES ASSETS Investment in securities, at value (cost $3,778,470) $ 3,227,242 Cash 418,593 Dividends receivable 13,703 Interest receivable 550 Receivable for fund shares sold 1,680 Receivable for securities sold 63,231 ------------------ TOTAL ASSETS 3,724,999 LIABILITIES Accrued investment advisory fee $ 4,571 ----------------- TOTAL LIABILITIES 4,571 ------------------ NET ASSETS $ 3,720,428 ================== Net Assets consist of: Paid in capital $ 3,827,279 Accumulated undistributed net investment income 75,284 Accumulated undistributed net realized gain on investments 369,093 Net unrealized depreciation on investments (551,228) ------------------ NET ASSETS, for 265,213 shares $ 3,720,428 ================== NET ASSET VALUE Net Assets Offering price and redemption price per share ($3,720,428 / 265,213) $ 14.03 ================== See accompanying notes which are an integral part of the financial statements.
CARL DOMINO EQUITY INCOME FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2000 INVESTMENT INCOME Dividend income $ 182,173 Interest income 3,916 ----------------- TOTAL INCOME 186,089 EXPENSES Investment advisory fee $ 90,769 Trustees' fees 2,892 Tax expense 151 --------------- Total expenses before reimbursement 93,812 Reimbursed expenses (2,892) --------------- Total operating expenses 90,920 ----------------- NET INVESTMENT INCOME 95,169 ----------------- REALIZED & UNREALIZED GAIN (LOSS) Net realized gain on investment securities 412,205 Change in net unrealized appreciation (depreciation) on investment securities (682,002) --------------- Net realized and unrealized gain (loss) on investment securities (269,797) ----------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (174,628) ================= See accompanying notes which are an integral part of the financial statements.
CARL DOMINO EQUITY INCOME 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 $ 95,169 $ 111,504 Net realized gain on investment securities 412,205 693,933 Change in net unrealized appreciation (depreciation) (682,002) (47,202) ----------------- ----------------- Net increase (decrease) in net assets resulting from operations (174,628) 758,235 ----------------- ----------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income (112,488) (87,853) From net realized gain (693,933) 0 ----------------- ----------------- Total distributions (806,421) (87,853) ----------------- ----------------- SHARE TRANSACTIONS Net proceeds from sale of shares 1,167,265 1,016,253 Shares issued in reinvestment of distributions 795,280 83,004 Shares redeemed (4,940,290) (1,428,177) ----------------- ----------------- Net increase (decrease) in net assets resulting from share transactions (2,977,745) (328,920) ----------------- ----------------- TOTAL INCREASE (DECREASE) IN NET ASSETS (3,958,794) 341,462 NET ASSETS Beginning of period 7,679,222 7,337,760 ----------------- ----------------- End of period [including accumulated undistributed net investment income of $75,284 and $92,603, respectively] $ 3,720,428 $ 7,679,222 ================= ================= See accompanying notes which are an integral part of the financial statements.
CARL DOMINO EQUITY INCOME FUND FINANCIAL HIGHLIGHTS PERIOD YEARS ENDED OCTOBER 31, ENDED ---------------------------------------------------------------- OCTOBER 31, 2000 1999 1998 1997 1996 (A) ---------------- -------------- -------------- ------------- ------------ SELECTED PER SHARE DATA Net asset value, beginning of period $ 16.12 $ 14.68 $ 16.15 $ 12.03 $ 10.00 ---------------- -------------- -------------- ------------- ------------ Income from investment operations: Net investment income 0.22 0.23 0.21 0.19 0.16 Net realized and unrealized gain (loss) (0.58) 1.38 (0.60) 4.15 1.87 ---------------- -------------- -------------- ------------- ------------ Total from investment operations (0.36) 1.61 (0.39) 4.34 2.03 ---------------- -------------- -------------- ------------- ------------ Less distributions: From net investment income (0.24) (0.17) (0.14) (0.22) 0.00 From net realized gain (1.49) 0.00 (0.94) 0.00 0.00 ---------------- -------------- -------------- ------------- ------------ Total distributions (1.73) (0.17) (1.08) (0.22) 0.00 ---------------- -------------- -------------- ------------- ------------ Net asset value, end of period $ 14.03 $ 16.12 $ 14.68 $ 16.15 $ 12.03 ================ ============== ============== ============= ============ TOTAL RETURN (1.84)% 11.52% (3.17)% 36.58% 20.30%(b) RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000) $3,720 $7,679 $7,338 $3,750 $1,122 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.51%(c) Ratio of expenses to average net assets before reimbursement 1.55% 1.52% 1.53% 1.55% 1.73%(c) Ratio of net investment income to average net assets 1.57% 1.43% 1.37% 1.28% 1.57%(c) Ratio of net investment income to average net assets before reimbursement 1.52% 1.41% 1.33% 1.22% 1.35%(c) Portfolio turnover rate 26.10% 69.92% 75.95% 52.49% 62.51%(c) (a) December 1, 1995 (commencement of operations) to October 31, 1996 (b) For periods of less than a full year, the total return is not annualized. (c) Annualized See accompanying notes which are an integral part of the financial statements.
CARL DOMINO EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 NOTE 1. ORGANIZATION Carl Domino Equity Income Fund (the "Fund") was organized as a series of AmeriPrime Funds (the "Trust") on August 8, 1995 and commenced operations on December 1, 1995. The Trust is established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). 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 together with current income. The Declaration of Trust 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 VALUATIONS - Securities, which are traded on any exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the adviser, in conformity with guidelines adopted by and subject to review of the Board. 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. The Fund incurred a tax expense of $151 during the year ended October 31, 2000. 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. CARL DOMINO EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 - CONTINUED NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retained Northern Trust Investments, Inc. (the "Adviser") to manage the Fund's investments. On April 29, 2000, a majority of shareholders of Carl Domino Equity Income Fund approved the selection of Northern Trust Investments, Inc. ("NTI") as the new investment adviser to the Fund, effective May 1, 2000. On that date, NTI acquired substantially all of the assets of Carl Domino Associates, L.P. ("Domino LP"), the Fund's former investment adviser, and converted Domino LP into a division of NTI known as Northern Trust Value Investors ("NT Value"). The portfolio manager of the Fund, Carl Domino, is now a portfolio manager with NT Value and will remain responsible for the day-to-day management of the Fund's portfolio. Total votes at the shareholder meeting were as follows: For Approval: 297,920 Against Approval: 2,622 Abstain: 0 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, 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 Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.50% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the year ended October 31, 2000, the Adviser received a fee of $90,769 from the Fund. The Adviser has voluntarily agreed to reimburse other expenses to the extent necessary to maintain total operating expenses at the rate of 1.50%. For the year ended October 31, 2000, the Adviser reimbursed expenses of $2,892. There is no assurance that such reimbursement 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 Administrator to the Fund. The result of this merger is now Unified Fund Services, Inc. ("Unified"), still a wholly owned subsidiary of Unified Financial Services, Inc. A Trustee and the officers of the Trust are members of management and/or employees of Unified. The Fund retains Unified to manage the Fund's business affairs and to 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. A Trustee and officer of the Trust may be deemed to be an affiliate of the Distributor. CARL DOMINO EQUITY INCOME 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 $3,827,279. Transactions in shares were as follows: Year ended Year ended October 31, 2000 October 31, 1999 Shares Dollars Shares Dollars Shares sold 79,589 $ 1,167,265 62,316 $ 1,016,253 Shares issued in reinvestment of dividends 58,265 795,280 5,461 83,004 Shares redeemed (349,001) (4,940,290) (91,234) (1,428,177) ----------- ------------ ---------- ------------ (211,147) $(2,977,745) (23,457) $ (328,920) =========== ============ ========== ============ NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $1,519,596 and $5,793,582, respectively. The gross unrealized appreciation for all securities totaled $390,815 and the gross unrealized depreciation for all securities totaled $942,043 for a net unrealized depreciation of $551,228. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $3,778,470. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Funds. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 2000, Carl J. Domino beneficially owned or controlled, in aggregate, more than 34% of the Fund. CARL DOMINO EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 2000 - CONTINUED NOTE 8. SUBSEQUENT EVENTS Effective December 31, 2000, AmeriPrime Financial Securities, Inc. sold substantially all of its assets to Unified Financial Securities, Inc. Both companies are wholly owned subsidiaries of Unified Financial Services, Inc. Effective as of the same date, the Fund retained Unified Financial Securities, Inc. to act as the principal distributor of its shares. A Trustee and officer of the Trust may be deemed to be an affiliate of Unified Financial Securities, Inc. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Carl Domino Equity Income Fund We have audited the accompanying statement of assets and liabilities of the Carl Domino Equity Income 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 auditing standards generally accepted in the United States of America. 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 Carl Domino Equity Income 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 operations) through October 31, 1996, in conformity with accounting principles generally accepted in the United States of America. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 December 2000 Dear Shareholders: We are pleased to provide the Annual Report and investment results for the Carl Domino Global Equity Income Fund. During the twelve-month period ending October 31, 2000 the Fund has returned 3.42%. Average Annual Return Comparative Investment Returns Last 12 Months Since Inception (Dec. 31, 1998) ------------------------------ --------------- -------------------------------- Carl Domino Global Equity Income Fund 3.42% 10.82% MSCI World Index 0.09% 6.19% S&P 500 5.85% 9.52%
Carl Domino Global MSCI S&P 500 Equity Income Fund World Index $ 12,079.00 $11,166.00 $ 11,819.00 Date 12/31/98 $ 10,000.00 $ 10,000.00 $ 10,000.00 01/31/99 $ 11,070.00 $ 10,223.31 $ 10,395.27 2/28/99 $ 10,880.00 $ 9,940.12 $ 10,072.37 3/31/99 $ 11,250.00 $ 10,342.64 $ 10,475.25 4/30/99 $ 12,160.00 $ 10,739.02 $ 10,880.90 5/31/99 $ 11,840.00 $ 10,335.29 $ 10,624.32 6/30/99 $ 12,300.00 $ 10,806.02 $ 11,213.47 7/31/99 $ 12,020.00 $ 10,762.04 $ 10,863.67 8/31/99 $ 11,790.00 $ 10,731.21 $ 10,809.91 9/30/99 $ 11,410.00 $ 10,615.69 $ 10,501.40 10/31/99 $ 11,680.00 $ 11,156.06 $ 11,165.67 11/30/99 $ 11,720.00 $ 11,458.56 $ 11,378.65 12/31/99 $ 12,352.18 $ 12,374.86 $ 12,036.95 1/31/00 $ 11,836.25 $ 11,655.13 $ 11,432.25 2/29/00 $ 11,775.55 $ 11,675.49 $ 11,216.05 3/31/00 $ 12,342.07 $ 12,471.12 $ 12,312.62 4/30/00 $ 12,099.27 $ 11,932.63 $ 11,942.32 5/31/00 $ 11,998.11 $ 11,619.34 $ 11,697.16 6/30/00 $ 11,846.36 $ 11,998.94 $ 11,985.58 7/31/00 $ 11,573.22 $ 11,649.92 $ 11,798.34 8/31/00 $ 12,200.44 $ 12,017.65 $ 12,530.74 9/30/00 $ 12,028.46 $ 11,367.72 $ 11,869.36 10/31/00 $ 12,079.00 $ 11,166.47 $ 11,819.02 This chart assumes a hypothetical initial investment of $10,000 in the Fund, the S&P 500 Index and the MSCI World Index on December 31, 1998 and held through October 31, 2000. The S&P 500 Index and the MSCI World Index are unmanaged indices of common stock prices. Performance figures include the change in value of the stocks in the index and reinvestment of dividends. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. Over the last year the Fund has favored the energy, financial, and telecommunications sectors. The energy sector has performed well due primarily to rising oil prices. Exploration activity that had been deferred (due to low oil prices of roughly $10 a barrel in 1999) has been accelerating with oil prices now in the $30 plus range. While telecommunications has enjoyed strong growth over the past few years, increased competitive pressure has continued to erode earnings and made this a difficult sector of the economy. Our telecommunications stocks as a whole have been disappointing this year. As we look back over the past year, the global economy faced a number of challenges. The Euro, which was created to stimulate the European economy, has been under a great deal of pressure and has lost almost 15% of its value since its inception. This not only has hurt European buying power, but it has also caused earning problems for US companies selling in Europe. Europe has lagged behind the US with high unemployment, sluggish economies, and lower productivity. In the US the previous Federal Reserve rate increases look like they will cause a "soft landing" and not trigger a recession. As a result, the Federal Reserve probably will not need to raise interest rates in the near term. S&P 500 earnings growth is projected to be in the respectable 12% range, and profit growth should be continuing. Demand is relatively healthy; it appears that productivity growth is continuing, and costs are under control. Technological innovation in the communications and computer industries remains healthy. Our goal is to invest in dividend paying large companies that exhibit reasonable value. These companies, in our view, offer solid price appreciation potential for the year ahead. Sincerely, Bruce Honig Portfolio Manager Carl Domino Global Equity Income Fund Schedule of Investments - October 31, 2000 Common Stocks - 101.5% Shares Value Aerospace / Defense - 1.5% Honeywell International, Inc. 300 $ 16,144 -------------- Air Delivery, Freight & Parcel Services - 2.8% United Parcel Service, Inc. - Class B 500 30,375 --------------- Appliances & Tools - 0.8% Snap-On, Inc. 350 8,947 -------------- Auto & Truck Manufacturing - 1.6% Ford Motor Co. 349 9,118 Visteon Corp. 26 463 Volvo Aktiebolaget - Series B (c) 500 7,812 --------------- 17,393 --------------- Business Forms & Other Office Supplies - 1.1% Avery Dennison Corp. 250 12,625 --------------- Chemical Manufacturing - 1.9% DuPont (E.I.) de NeMours & Co. 176 7,986 PPG Industries, Inc. 300 13,388 --------------- 21,374 --------------- Computer Software & Services - 1.9% SAP Aktiengesellschaft (c) 400 20,400 ---------------- Conglomerates - 2.7% E. On AG (c) 200 10,162 Minnesota Mining & Manufacturing Co. 200 19,325 --------------- 29,487 --------------- Construction & Agricultural Machinery - 1.6% Caterpillar, Inc. 500 17,531 --------------- Drugs - 6.1% American Home Products Corp. 200 12,700 Glaxo Wellcome PLC (c) 600 34,912 SmithKline Beecham PLC (c) 300 19,556 --------------- 67,168 --------------- Tektronix Inc. (a) 500 35,625 -------------- Finance - Miscellaneous - 4.9% AXA (c) 300 19,931 Barclays PLC (c) 200 23,625 ING Groep N.V. (c) 154 10,655 -------------- 54,211 -------------- Carl Domino Global Equity Income Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Healthcare - 3.0% Baxter International, Inc. 400 $ 32,875 -------------- Insurance - 4.9% Hartford Financial Services Group, Inc. 550 40,941 SAFECO Corp. 550 13,303 -------------- 54,244 -------------- Machinery - Diversified - 0.9% CNH Global N.V. (c) 1,000 9,688 -------------- Major Regional Banks / Other Banks - 1.0% First Union Corp. 350 10,609 -------------- Metals & Mining - 5.1% Phelps Dodge Corp. 500 23,375 Rio Tinto PLC (c) 500 32,563 -------------- 55,938 -------------- Money Center Banks - 2.7% Bank of America Corp. 400 19,225 Chase Manhattan Corp. 225 10,238 -------------- 29,463 -------------- Natural Gas / Utilities - 6.6% El Paso Energy Corp. 700 43,881 Williams Companies, Inc. 700 29,269 -------------- 73,150 -------------- Oil & Gas - Domestic - 0.9% Conoco, Inc. - Class B 365 9,923 -------------- Oil & Gas Equipment / Services / Drilling - 3.2% Schlumberger Ltd. (d) 300 22,837 Transportadora de Gas del Sur S.A. (c) 1,500 12,656 -------------- 35,493 -------------- Oil & Gas - Integrated - 9.1% Royal Dutch Petroleum Co. (e) 400 23,750 Shell Transport & Trading Co. PLC (c) 600 29,513 Texaco, Inc. 200 11,812 USX-Marathon Group, Inc. 1,300 35,344 -------------- 100,419 -------------- Oil & Gas - International - 4.5% BG Group PLC (c) 444 9,102 Lattice Group PLC (a) (f) 2,220 4,738 Total Fina Elf S.A. (c) 500 35,813 -------------- 49,653 -------------- Carl Domino Global Equity Income Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Oil Well Services & Equipment - 1.2% Baker Hughes, Inc. 400 $ 13,750 -------------- Paper Products - 1.2% Kimberly-Clark Corp. 200 13,200 --------------- Personal & Household Products - 5.9% Avon Products, Inc. 500 24,250 Procter & Gamble Co. 300 21,431 Unilever PLC (c) 714 19,903 ---------------- 65,584 ----------------- Photography / Office Equipment - 1.2% Eastman Kodak Co. 200 8,975 Xerox Corp. 500 4,219 ---------------- 13,194 ---------------- Publishing / Business Services - 2.3% McGraw-Hill Companies, Inc. 400 25,675 ---------------- Publishing & Entertainment - 2.3% News Corp. Ltd. (c) 600 25,800 ---------------- Recreational Activities - 0.8% Cedar Fair, L.P. 500 8,906 ---------------- Services - Miscellaneous - 1.6% Block (H&R), Inc. 500 17,844 ----------------- Telecommunications - 13.0% AT&T Corp. 1,100 25,506 British Telecommunications PLC (c) 150 17,850 Global Crossing Ltd. (a) 500 11,812 Nippon Telegraph & Telephone Corp. (c) 400 18,275 SBC Communications, Inc. 500 28,844 Telecom Italia S.p.A. (c) 200 23,500 Verizon Communications 200 11,563 VersaTel Telecom International N.V. (a) (c) 300 6,000 -------------- 143,350 -------------- TOTAL COMMON STOCKS (Cost $ 1,029,680) $ 1,120,038 -------------- Carl Domino Global Equity Income Fund Schedule of Investments - October 31, 2000 - continued Principal Amount Value Money Market Securities - 11.0% Firstar Treasury Fund, 5.55% (b) (Cost $121,452) 121,452 $ 121,452 ------------- TOTAL INVESTMENTS - 112.5% (Cost $1,151,132) 1,241,490 ------------- Liabilities in excess of other assets - (12.5)% (138,353) ------------- TOTAL NET ASSETS - 100.0% $ 1,103,137 ============= (a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000. (c) American Depositary Receipt (d) Ordinary Shares (e) New York Registry Shares (f) Represents foreign ordinary shares; the exchange rate used was $1.4520 per GBP on October 31, 2000. Carl Domino Global Equity Income Fund October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $1,151,132) $ 1,241,490 Dividends receivable 1,073 Interest receivable 628 Other receivable 209 ------------------ Total assets 1,243,400 Liabilities Accrued investment advisory fee payable $ 1,419 Payable to custodian 138,844 ----------------- Total liabilities 140,263 ------------------ Net Assets $ 1,103,137 ================== Net Assets consist of: Paid in capital $ 1,020,479 Accumulated undistributed net investment income 9,335 Accumulated net realized loss on investments (17,035) Net unrealized appreciation on investments 90,358 ------------------ Net Assets, for 92,427 shares $ 1,103,137 ================== Net Asset Value Net Assets Offering price and redemption price per share ($1,103,137 / 92,427) $ 11.94 ==================
See accompanying notes which are an integral part of the financial statements. Carl Domino Global Equity Income Fund Statement of Operations For the year ended October 31, 2000 Investment Income Dividend income $ 26,707 Interest income 2,750 ------------------ Total Income 29,457 Expenses Investment advisory fee $ 18,948 Trustees' fees 1,196 --------------- Total Expenses before Reimbursement 20,144 Reimbursed expenses (1,196) --------------- Total Operating Expenses 18,948 ------------------ Net Investment Income 10,509 ------------------ Realized & Unrealized Gain (Loss) Net realized gain on investment securities 2,293 Change in net unrealized appreciation (depreciation) on investment securities 33,253 --------------- Net realized and unrealized gain on investment securities 35,546 ------------------ Net increase in net assets resulting from operations $ 46,055 ==================
See accompanying notes which are an integral part of the financial statements. Carl Domino Global Equity Income Fund Statement of Changes In Net Assets Year ended Period ended October 31, 2000 October 31, 1999 (a) ----------------- ------------------ Increase/(Decrease) in Net Assets Operations Net investment income $ 10,509 $ 14,817 Net realized gain (loss) on investment securities 2,293 (19,328) Change in net unrealized appreciation (depreciation) 33,253 57,105 ----------------- ------------------ Net increase in net assets resulting from operations 46,055 52,594 ----------------- ------------------ Distributions From net investment income (15,991) 0 From net realized gain 0 0 ----------------- ------------------ Total distributions (15,991) 0 ----------------- ------------------ Share Transactions Net proceeds from sale of shares 0 1,382,789 Shares issued in reinvestment of distributions 15,991 0 Shares redeemed (268,401) (109,900) ----------------- ------------------ Net increase (decrease) in net assets resulting from share transactions (252,410) 1,272,889 ----------------- ------------------ Total increase (decrease) in net assets (222,346) 1,325,483 Net Assets Beginning of period 1,325,483 0 ----------------- ------------------ End of period [including accumulated undistributed net investment income of $9,335 and $14,817, respectively] $ 1,103,137 $ 1,325,483 ================= ==================
(a) December 31, 1998 (commencement of operations) to October 31, 1999 See accompanying notes which are an integral part of the financial statements. Carl Domino Global Equity Income Fund Financial Highlights Year ended Period ended October 31, 2000 October 31, 1999 (a) -------------------- ------------------- Selected Per Share Data Net asset value, beginning of period $ 11.68 $ 10.00 --------------- ----------------- Income from investment operations Net investment income 0.10 0.14 Net realized and unrealized gain 0.30 1.54 --------------- ----------------- Total from investment operations 0.40 1.68 --------------- ----------------- Distributions to shareholders From net investment income (0.14) 0.00 From net realized gain 0.00 0.00 --------------- ----------------- Total distributions (0.14) 0.00 --------------- ----------------- Net asset value, end of period $ 11.94 $ 11.68 =============== ================= Total Return 3.42% 16.80% (b) Ratios and Supplemental Data Net assets, end of period (000) $1,103 $1,325 Ratio of expenses to average net assets 1.50% 1.50% (c) Ratio of expenses to average net assets before reimbursement 1.59% 1.55% (c) Ratio of net investment income to average net assets 0.83% 1.42% (c) Ratio of net investment income to average net assets before reimbursement 0.74% 1.37% (c) Portfolio turnover rate 11.65% 28.34% (c)
(a) December 31, 1998 (commencement of operations) to October 31, 1999 (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. Carl Domino Global Equity Income Fund Notes to Financial Statements October 31, 2000 NOTE 1. ORGANIZATION Carl Domino Global Equity Income Fund (the "Fund") was organized as a series of the AmeriPrime Funds (the "Trust) on October 28, 1998 and commenced operations on December 31, 1998. The Trust is established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). 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 together with current income. The Declaration of Trust 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 Valuations - Securities, which are traded on any exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, and the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board. 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. Carl Domino Global Equity Income Fund Notes to Financial Statements October 31, 2000 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued 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. As of October 31, 2000, loss carryovers totaled $17,035, expiring in 2007. 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. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retained Northern Trust Investments, Inc. (the "Adviser") to manage the Fund's investments. On April 29, 2000, a majority of shareholders of Carl Domino Global Equity Income Fund approved the selection of Northern Trust Investments, Inc. ("NTI") as the new investment adviser to the Fund, effective May 1, 2000. On that date, NTI acquired substantially all of the assets of Carl Domino Associates, L.P. ("Domino LP"), the Fund's former investment adviser, and converted Domino LP into a division of NTI known as Northern Trust Value Investors ("NT Value"). The portfolio manager of the Fund, John Wagstaff-Callahan, is now a portfolio manager with NT Value and remained responsible for the day-to-day management of the Fund's portfolio through September, 2000. Bruce Honig became the portfolio manager for the Fund beginning in October, 2000 and is now responsible for the day-to-day management of the Fund's portfolio. Total votes at the shareholder meeting were as follows: For Approval: 114,817 Against Approval: 0 Abstain: 0 Carl Domino Global Equity Income Fund Notes to Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued Under the terms of the management agreement (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage commissions, taxes, 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 Adviser a fee of 1.50% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the year ended October 31, 2000, the Adviser received a fee of $18,948 from the Fund. The Adviser has voluntarily agreed to reimburse other expenses to the extent necessary to maintain total operating expenses at the rate of 1.50%. For the year ended October 31, 2000, the Adviser reimbursed expenses of $1,196. There is no assurance that such reimbursement 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 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 trustees and/or officers of the Trust. Carl Domino Global Equity Income 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 $1,020,479. Transactions in shares were as follows: For the period December 31, 1998 For the year (Commencement of Operations) Ended October 31, 2000 through October 31, 1999 Shares Dollars Shares Dollars Shares sold 0 $ 0 123,489 $1,382,789 Shares issued in reinvestment of 1,328 15,991 0 0 distributions Shares redeemed (22,390) (268,401) (10,000) (109,900) ---------- ---------- ------------- -------- (21,062) $(252,410) 113,489 $1,272,889 ======= ======== ======= ========
NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $142,957 and $381,003, respectively. As of October 31, 2000, the gross unrealized appreciation for all securities totaled $224,849 and the gross unrealized depreciation for all securities totaled $134,491 for a net unrealized appreciation of $90,358. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $1,151,132. 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. Carl Domino Global Equity Income Fund Notes to Financial Statements October 31, 2000 - continued NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the Fund. The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of October 31, 2000, Carl J. Domino beneficially owned or controlled, in aggregate, more than 95% of the Fund. NOTE 8. SUBSEQUENT EVENTS Effective December 31, 2000, AmeriPrime Financial Securities, Inc. sold substantially all of its assets to Unified Financial Securities, Inc. Both companies are wholly owned subsidiaries of Unified Financial Services, Inc. Effective as the same date, the Fund retained Unified Financial Securities, Inc. to act as the principal distributor of its shares. A Trustee and officer of the Trust may be deemed to be an affiliate of Unified Financial Securities, Inc. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Carl Domino Global Equity Income Fund We have audited the accompanying statement of assets and liabilities of the Carl Domino Global Equity 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 and financial highlights for the year then ended and the period of December 31, 1998 (commencement of operations) through October 31, 1999. 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 auditing standards generally accepted in the United States of America. 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. 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 Carl Domino Global Equity Income Fund as of October 31, 2000, the results of their operations for the year then ended, the changes in their net assets and financial highlights for the year then ended, and the period of December 31, 1998 (commencement of operations) through October 31, 1999, in conformity with accounting principles generally accepted in the United States of America. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 December 2000 Dear Shareholders: We are pleased to provide the Annual Report and investment results for the Carl Domino Growth Fund. During the twelve-month period ending October 31, 2000 the Fund has returned 7.38%. Average Annual Return Since Inception Comparative Investment Returns Last 12 Months (Dec. 31, 1998) Carl Domino Growth Fund 7.38% 7.85% S&P 500 Index 5.85% 9.52% Carl Domino S&P 500 Growth Fund Index Date $11,490.00 $11,819.00 12/31/98 10,000.00 10,000.00 01/31/99 10,650.00 10,395.27 2/28/99 10,180.00 10,072.37 3/31/99 10,700.00 10,475.25 4/30/99 10,450.00 10,880.90 5/31/99 10,010.00 10,624.32 6/30/99 10,530.00 11,213.47 7/31/99 10,240.00 10,863.67 8/31/99 10,300.00 10,809.91 9/30/99 10,020.00 10,501.40 10/31/99 10,700.00 11,165.67 11/30/99 11,140.00 11,378.65 12/31/99 12,130.00 12,036.95 1/31/00 11,260.00 11,432.25 2/29/00 11,690.00 11,216.05 3/31/00 12,790.00 12,312.62 4/30/00 12,160.00 11,942.32 5/31/00 11,230.00 11,697.16 6/30/00 12,490.00 11,985.58 7/31/00 12,220.00 11,798.34 8/31/00 13,530.00 12,530.74 9/30/00 12,220.00 11,869.36 10/31/00 11,490.00 11,819.02 This chart assumes a hypothetical initial investment of $10,000 in the Fund and the S&P 500 Index on December 31, 1998 and held through October 31, 2000. The S&P 500 Index is a widely recognized unmanaged index of common stock prices. Performance figures include the change in value of the stocks in the index and reinvestment of dividends. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. This has been an unsettled year in the U.S. stock market. The market over the short term seems to have been driven by four major factors: energy prices, the Euro, earnings, and the election. Until some of these challenges are resolved, the market will probably continue to be volatile. Also, companies that have negative earnings "surprises" will probably continue to be punished with dramatic price swings. Even with these market problems, we continue to be optimistic for reasonable stock market growth. The previous Federal Reserve rate increases look like they will cause a "soft landing" and not trigger a recession. So, the Federal Reserve probably will not need to raise interest rates in the near term. S&P 500 earnings growth is projected to be in the respectable 12% range, and profit growth should be continuing. Demand inside and outside the U.S. is healthy; it appears that productivity growth is continuing, and costs are under control. Technological innovation in the communications and computer industries continues. In our view, your portfolio continues to be well positioned for long term appreciation. We continue to remain true to our theme of searching out companies with stable products, strong brand names, and dominant positions in their markets. We like management that is seasoned and that own a solid position in their company. We also look hard for companies that have demonstrated consistent revenue growth, as well as, consistent earnings per share growth. Finally, having a focused business plan, a unique product, and reasonable market dominance are important criteria in our company selections. Our goal is to invest in growing large U.S. companies that will reward our investors with solid growth and price appreciation over the long term. Sincerely, Bruce Honig Portfolio Manager Carl Domino Growth Fund Schedule of Investments - October 31, 2000 Common Stocks - 90.2% Shares Value Computer Hardware - 15.6% Cisco Systems, Inc. (a) 940 $ 50,642 EMC Corp. (a) 1,730 154,078 ---------------- 204,720 ----------------- Computer Services & Software - 17.4% America Online, Inc. (a) 660 33,330 Microsoft Corp. (a) 1,360 93,670 Oracle Corp. (a) 3,080 101,640 ----------------- 228,640 ----------------- Computer Systems - 11.1% Automatic Data Processing, Inc. 440 28,738 International Business Machines Corp. 290 28,565 Sun Microsystems, Inc. (a) 800 88,700 ----------------- 146,003 ----------------- Drug Manufacturers - 2.3% Schering-Plough Corp. 600 31,012 ----------------- Electrical Power Co. 1.5% AES Corp. (a) 360 20,340 ----------------- Electronics - Equipment & Instruments - 4.5% Nokia Corp. (c) 760 32,490 Tellabs, Inc. (a) 540 26,966 ----------------- 59,456 ----------------- Finance - Miscellaneous - 7.0% MBNA Corp. 1,000 37,563 MGIC Investment Corp. 800 54,500 ----------------- 92,063 ----------------- Health Care - 9.2% Johnson & Johnson 360 33,165 Medtronic, Inc. 1,620 87,986 ----------------- 121,151 ----------------- Major Reg. Banks/Other Banks - 0.4% Citigroup, Inc. 100 5,263 ----------------- Oil & Gas Domestic - 2.7% Enron Corp. 430 35,287 ----------------- Retail - 3.6% Wal-Mart Stores, Inc. 1,030 46,736 ----------------- Semiconductor - 6.8% Intel Corp. 2,000 90,000 ----------------- Specialty - 4.5% Home Depot, Inc. 1,365 58,695 ----------------- Carl Domino Growth Fund Schedule of Investments - October 31, 2000 - continued Common Stocks - continued Shares Value Telecommunications - 3.6% WorldCom, Inc. (a) 940 $ 22,325 Vodafone Group PLC (c) 600 25,538 ----------------- 47,863 ----------------- TOTAL COMMON STOCKS (Cost $966,671) 1,187,229 ----------------- Principal Amount Value Money Market Securities - 2.7% Firstar Treasury Fund, 5.55% (b) (Cost $35,408) 35,408 35,408 ----------------- TOTAL INVESTMENTS - 92.9% (Cost $1,002,079) 1,222,637 ----------------- Other assets less liabilities - 7.1% 93,653 ----------------- TOTAL NET ASSETS - 100.0% $ 1,316,290 =================
(a) Non-income producing (b) Variable rate security; the coupon rate shown represents the rate at October 31, 2000. (c) American Depositary Receipt See accompanying notes which are an integral part of the financial statements. Carl Domino Growth Fund October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (cost $1,002,079) $ 1,222,637 Cash 94,289 Dividend receivable 54 Interest receivable 224 Other receivable 1,281 ---------------- Total assets 1,318,485 Liabilities Accrued investment advisory fee 2,195 ---------------- Total liabilities 2,195 ------------------- Net Assets $ 1,316,290 =================== Net Assets consist of: Paid in capital $ 1,154,714 Accumulated net realized loss on investments (58,982) Net unrealized appreciation on investments 220,558 ------------------- Net Assets, for 114,548 shares $ 1,316,290 =================== Net Asset Value Net Assets Offering price and redemption price per share ($1,316,290 / 114,548) $ 11.49 ==================== See accompanying notes which are an integral part of the financial statements.
Carl Domino Growth Fund Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 2,942 Interest income 675 ------------------ Total Income 3,617 Expenses Investment advisory fee $ 20,651 Trustees' fees 884 --------------- Total expenses before reimbursement 21,535 Reimbursed expenses (884) --------------- Total operating expenses 20,651 ------------------ Net Investment Loss (17,034) ------------------ Realized & Unrealized Gain (Loss) Net realized loss on investment securities (37,616) Change in net unrealized appreciation (depreciation) on investment securities 143,522 --------------- Net gain on investment securities 105,906 ------------------ Net increase in net assets resulting from operations $ 88,872 ==================
See accompanying notes which are an integral part of the financial statements. Carl Domino Growth Fund Statement of Changes In Net Assets For the For the Year ended period ended October 31, October 31, 2000 1999 (a) ----------------- ---------------- Increase/(Decrease) in Net Assets Operations Net investment loss $ (17,034) $ (8,365) Net realized loss on investment securities (37,616) (21,366) Change in net unrealized appreciation / (depreciation) 143,522 77,036 ----------------- ---------------- Net increase in net assets resulting from operations 88,872 47,305 ----------------- ----------------- Distributions From net investment income 0 0 From net realized gain 0 0 ----------------- ----------------- Total distributions 0 0 ----------------- ----------------- Share Transactions Net proceeds from sale of shares 106,000 1,227,300 Shares issued in reinvestment of dividends 0 0 Shares redeemed (49,372) (103,815) ----------------- ----------------- Net increase in net assets resulting from share transactions 56,628 1,123,485 ----------------- ----------------- Total increase in net assets 145,500 1,170,790 Net Assets Beginning of period 1,170,790 0 ---------------- ----------------- End of period $ 1,316,290 $ 1,170,790 ================= =================
(a) December 31, 1998 (commencement of operations) to October 31, 1999. See accompanying notes which are an integral part of the financial statements. Carl Domino Growth Fund Financial Highlights For the For the Year ended period ended October 31, October 31, 2000 1999 (c) ----------------- ---------------- Selected Per Share Data Net asset value, beginning of period $ 10.70 $ 10.00 ----------------- ---------------- Income from investment operations: Net investment loss (0.15) (0.09) Net realized and unrealized gain 0.94 0.79 ----------------- ---------------- Total from investment operations 0.79 0.70 ----------------- ---------------- Less distributions: From net realized gain 0.00 0.00 From net investment income 0.00 0.00 ----------------- ---------------- Total distributions 0.00 0.00 ----------------- ---------------- Net asset value, end of period $ 11.49 $ 10.70 ================= ================ Total Return 7.38% 7.00% (a) Ratios and Supplemental Data Net assets, end of period (000) $1,316 $1,171 Ratio of expenses to average net assets 1.50% 1.50% (b) Ratio of expenses to average net assets before reimbursement 1.56% 1.56% (b) Ratio of net investment income (loss) to average net assets (1.24)% (0.99)(b) Ratio of net investment income (loss) to average net assets before reimbursement (1.30)% (1.06)(b) Portfolio turnover rate 25.30% 34.37% (b)
(a) For periods of less than a full year, the total return is not annualized. (b) Annualized (c) December 31, 1998 (commencement of operations) to October 31, 1999. See accompanying notes which are an integral part of the financial statements. Carl Domino Growth Fund Notes to Financial Statements October 31, 2000 NOTE 1. ORGANIZATION Carl Domino Growth Fund (the "Fund") was organized as a series of AmeriPrime Funds (the "Trust") on October 28, 1998 and commenced operations on December 31, 1998. The Trust is established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The Fund is registered under the Investment Company Act of 1940, as amended, as a non-diversified open-end management investment company. The Fund's investment objective is to provide long-term growth of capital. The Declaration of Trust 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 Valuations - Securities, which are traded on any exchange or on the NASDAQ over-the-counter market, are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Adviser's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Adviser determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Adviser, in conformity with guidelines adopted by and subject to review of the Board. 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. As of October 31, 2000, loss carryovers totaled $58,982: $37,616 expiring in 2008, and $21,366 expiring in 2007. 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 Carl Domino Growth Fund Notes to Financial Statements October 31, 2000 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued 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. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retained Northern Trust Investments, Inc. (the "Adviser") to manage the Fund's investments. On April 29, 2000, a majority of shareholders of Carl Domino Growth Fund approved the selection of Northern Trust Investments, Inc. ("NTI") as the new investment adviser to the Fund, effective May 1, 2000. On that date, NTI acquired substantially all of the assets of Carl Domino Associates, L.P. ("Domino LP"), the Fund's former investment adviser, and converted Domino LP into a division of NTI known as Northern Trust Value Investors ("NT Value"). The portfolio manager of the Fund, Bruce Honig, is now a portfolio manager with NT Value and remains responsible for the day-to-day management of the Fund's portfolio. Total votes at the shareholder meeting were as follows: For Approval: 107,697 Against Approval: 0 Abstain: 0 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, 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 or non-recurring expenses that may arise. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Adviser a fee of 1.50% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Adviser. For the year ended, October 31, 2000, the Adviser received a fee of $20,651 from the Fund. The Adviser has voluntarily agreed to reimburse other expenses to the extent necessary to maintain total operating expenses at the rate of 1.50%. For the year ended October 31, 2000, the Adviser reimbursed expenses of $884. There is no assurance that such reimbursement 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 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. Carl Domino Growth Fund Notes to Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued Certain members of management of Unified Fund Services, Inc. and the Distributor are also directors and/or officers of the AmeriPrime 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 $1,154,714. Transactions in shares were as follows: Year ended For the period December 31, 1998 October 31, 2000 (Commencement of Operations) to October 31, 1999 Shares Dollars Shares Dollars Shares sold 8,914 $106,000 119,405 $1,227,300 Shares redeemed (3,769) (49,372) (10,001) (103,815) -------- ----------- ----------- ----------- 5,145 $56,628 109,404 $1,123,485 ====== ======== ======== ==========
NOTE 5. INVESTMENTS For the year ended October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $550,410 and $633,426, respectively. The gross unrealized appreciation for all securities totaled $292,177 and the gross unrealized depreciation for all securities totaled $71,619 for a net unrealized appreciation of $220,558. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $1,002,079. NOTE 6. ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 7. RELATED PARTY TRANSACTIONS The Adviser is not a registered broker-dealer of securities and thus does not receive commissions on trades made on behalf of the 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, Carl J. Domino, beneficially owned or controlled, in aggregate, more than 66% of the Fund. Carl Domino Growth Fund Notes to Financial Statements October 31, 2000 - continued NOTE 8. SUBSEQUENT EVENTS Effective December 31, 2000, AmeriPrime Financial Securities, Inc. sold substantially all of its assets to Unified Financial Securities, Inc. Both companies are wholly owned subsidiaries of Unified Financial Services, Inc. Effective as the same date, each Fund will retain Unified Financial Securities, Inc. to act as the principal distributor of its shares. A Trustee and officer of the Trust may be deemed to be an affiliate of Unified Financial Securities, Inc. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Carl Domino Growth Fund We have audited the accompanying statement of assets and liabilities of the Carl Domino 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 and financial highlights for the year then ended and the period of December 31, 1998 (commencement of operations) through October 31, 1999 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. 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 Carl Domino Growth Fund as of October 31, 2000, the results of their operations for the year then ended, the changes in their net assets and financial highlights for the year then ended, and the period of December 31, 1998 (commencement of operations) through October 31, 1999, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000 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% ------------------------- ----------- ------------------------------------------ Growth of $10,000 Corbin Small Cap Fund - $7,573 S&P 600 - $13,864 Russell 2000 - $13,059 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 ---------------- TOTAL 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) 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. 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 three 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 three 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 an 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 ================= See accompanying notes which are an integral part of the financial statements.
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, ---------------------------------------------------- 1997 (a) 2000 1999 1998 -------------- -------------- -------------- --------------- 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 accompanying 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 22,666 651,634 0 0 reinvestment of dividends 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. INDEPENDENT AUDITOR'S REPORT 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 Growth Date Fund S&P 500 -------- ----------- Dec-95 $ 26,600 $ 25,483 Jan-96 27,600 26,349 Apr-96 29,074 27,244 Jul-96 28,074 26,813 Oct-96 31,195 29,718 Jan-97 33,914 33,289 Apr-97 33,862 34,092 Jul-97 40,773 40,795 Oct-97 39,663 39,262 Jan-98 41,342 42,247 Apr-98 47,663 48,092 Jul-98 48,219 48,662 Oct-98 44,929 47,894 Jan-99 54,438 55,970 Apr-99 54,237 58,585 Jul-99 54,266 57,219 Oct-99 56,920 58,877 Jan-00 61,416 60,417 Apr-00 63,306 63,113 Jul-00 63,544 62,358 Oct-00 63,060 62,470 Past performance is not predictive of future performance. 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. 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. 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 are likely to be overweighted compared to others because the Fund's advisor seeks the best investment values regardless of sector. Please see the Fund's prospectus for an explanation of some of the risks associated with an overweighting in the telecommunications sector. 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 financial 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 financial 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 financial 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 financial 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) (130,001) (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 Dear Marathon Value Portfolio Shareholder: Marathon Value Portfolio, ("MVP") ended its current period (3/28/00 - 10/31/00) as managed by Spectrum Advisory Services, Inc. ("Spectrum") with a return of +11.37%. The Standard & Poor's 500 index (including dividends) was down for the same period -5.60%. These are not annualized returns. During this period, no IPOs were purchased to boost the return. Since the Fund has a residual capital loss carry-forward from its prior manager, the Fund did not issue any taxable capital gain distributions. Returns for the Period March 28, 2000 through October 31, 2000* Fund/Index Total Return* Marathon Value Portfolio 11.37% S&P 500 Index -5.60% Marathon Value Portfolio S&P 500 Index 03/28/00 $10,000 $10,000 04/30/00 10,504 9,538 05/31/00 10,644 9,343 06/30/00 10,558 9,573 07/31/00 10,644 9,423 08/31/00 10,987 10,008 09/30/00 10,773 9,480 10/31/00 11,137 9,440 * This chart shows the value of a hypothetical initial investment of $10,000 in the Fund and the S&P 500 Index on March 28, 2000 (commencement of operations under Spectrum) and held through October 31, 2000. The S&P 500 Index is a widely recognized unmanaged index of common stock prices. Performance figures reflect the change in value of the stocks in the index, reinvestment of dividends and are not annualized. The index returns do not reflect expenses, which have been deducted from the Fund's return. Periods prior to 3/28/00, when another investment advisor managed the Fund, are not shown. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS. Most of the Fund's assets were invested in stocks that are included in the S&P 500. We also own the market's largest company that is not in the index. The largest contributors to the Fund's returns were diversified manufacturing companies such as Emerson Electric (2.72% of portfolio) and 3M (2.04% of portfolio) and consumer product companies including Procter & Gamble (1.32% of portfolio) and Kimberly Clark (3.49% of portfolio). During certain periods of the year, the Fund held large cash positions when attractive opportunities were not available. MVP is a general equity fund that seeks to provide shareholders with an opportunity to have a diverse portfolio made up principally of domestic equities. It will focus on the purchase of sound businesses that I believe are reasonably priced relative to their "true" profitability and the value of their assets, both tangible and intangible. True profitability is the generation of cash in excess of what is needed to maintain the current level of business. In 1998 and 1999, many investments were made in companies that entered growth markets, without regard to the profitability or valuation of those individual companies. You should welcome the return of sound investment fundamentals of this past year. I believe reasoned analysis will once again be rewarded in the stock market. At the start of year 2000, in a letter reprinted on our web site, www.spectrumadvisory.com, I argued that the difference between investment and speculation would become apparent in this year. Investments would always fluctuate but could be trusted to retain their value while speculations were unlikely to again see their value restored. What is the relationship between you the shareholder and me as the portfolio manager? At business schools today much attention is directed to such relationships under the topic of "agency theory." A good example of an "agency" is when a person hires a manager to run his business. It also applies to the relationship between a shareholder in a mutual fund and the portfolio manager. MVP in its current form addresses the issue in a very elegant way. As portfolio manager, I have two important economic interests in the Fund. With my corporation, I am the largest shareholder in the Fund so my funds are at risk along with yours. In addition, as the manager of the Fund, it is my desire that the Fund is economically successful, and to that end, I want excellent investment results to follow. These two interests align me very well with you, the shareholder. That is not always the case with a mutual fund. For some large mutual funds, the objective may only be the latter objective, to outperform their peers and benchmark. Having a substantial ownership interest in the Fund reinforces my concern that the Fund not chase returns without regard to risk. The benefits of my dual role of managing individual portfolios and managing the Fund have proven valuable to both the Fund shareholders and my private clients. The Fund has benefited from the large number of companies that I have followed over the past twenty-five years of managing accounts for individuals. My individual clients have benefited from my concentrated efforts to identify current market opportunities due to investing the continuous influx of funds to MVP. In this process, I strive to understand the broad outlines of a company's business and at what rate the earnings should be valued. I am not as concerned with the near-term earnings as with the long-term soundness of the business and how it is priced to the market. I believe the Fund will benefit from the market's reinforced commitment to sound business fundamentals. In the coming years, MVP will continue to measure itself against the Standard & Poor's 500 index. During the year, our web site www.spectrumadvisory.com will update the fund's largest ten holdings and its performance against its benchmarks. Our prospectus is now available on the web and I may periodically make comments on the Fund. While we enter the year with a tax loss carry-forward, inherited from the predecessor manager, it is too early to predict if we will make any taxable capital gain distributions for 2001. I have personally just invested additional funds in MVP because I believe it will continue to be a good investment for the long haul. Very truly yours, Marc S. Heilweil Portfolio Manager Marathon Value Portfolio Schedule of Investments - October 31, 2000 Common Stocks - 74.3% Shares Value Aerospace & Defense - 0.4% Spacehab, Inc. (a) 4,200 $ 16,800 ------------ Banking - 2.7% U.S. Bancorp 2,000 48,375 Wachovia Corp. 1,000 54,000 ------------ 102,375 ------------ Capital Goods - 5.1% Dionex Corp. (a) 2,000 64,875 Illinois Tool Works, Inc. 1,500 83,344 Zebra Technologies Corp. - Class A (a) 1,000 43,813 ------------ 192,032 ------------ Cellular Telephone - 0.5% CoreComm Ltd. (a) 3,500 20,125 ------------ Chemicals - 1.3% Cabot Corp. 1,900 41,800 International Flavors & Fragrances, Inc. 500 8,375 ------------ 50,175 ------------ Communications Equipment - 0.9% CDI Corp. (a) 2,000 31,750 ------------ Computer Hardware - 1.1% Compaq Computer Corp. 1,300 39,533 ------------ Containers & Packaging - 1.4% Temple-Inland, Inc. 1,200 53,700 ------------ Electric Equipment - 5.6% Cabot Microelectronics Corp. (a) 532 23,508 Cooper Industries, Inc. 1,600 61,200 Emerson Electric Co. 1,400 102,812 SCI Systems, Inc. (a) 600 25,800 ------------ 213,320 ------------ Financial - 7.2% Allied Capital Corp. 1,500 30,937 Berkshire Hathaway, Inc. - Class B (a) 100 210,300 Moody's Corp. 1,200 31,575 ------------ 272,812 ------------ Foods - 0.6% Tootsie Roll Industries, Inc. 600 23,025 ------------ Marathon Value Portfolio Schedule of Investments - October 31, 2000 (Continued) Shares Value Health Care - 6.2% Becton, Dickinson & Co. 3,200 $ 107,200 Bristol-Myers Squib Co. 1,200 73,125 Merck & Co., Inc. 600 53,963 ------------ 234,288 ------------ Household Products - 5.7% Kimberly-Clark Corp. 2,000 132,000 Leggett & Platt, Inc. (a) 2,000 32,750 Procter & Gamble Co. 700 50,006 ------------ 214,756 ------------ Housewares - 0.5% Tupperware Corp. 1,200 20,550 ------------ Insurance - 1.6% Baldwin & Lyons, Inc. - Class B 1,000 18,938 HSB Group, Inc. 1,000 39,562 ------------ 58,500 ------------ Lodging - Hotels - 0.6% Host Marriott Corp. 2,000 21,250 ------------ Manufacturing - 0.7% Lawson Products, Inc. 1,000 27,125 ------------ Office Equipment & Supply - 0.3% Hunt Corp. 2,000 11,875 ------------ Oil - Domestic - 2.5% Phillips Petroleum Co. 1,500 92,625 ------------ Paper & Forest Products - 2.0% Minnesota Mining & Manufacturing Co. 800 77,300 ------------ Publishing - Newspaper - 1.8% Gannett Co., Inc. 1,200 69,600 ------------ Railroads - 1.1% Florida East Coast Industries, Inc. - Class A 1,200 42,900 ------------ Marathon Value Portfolio Schedule of Investments - October 31, 2000 - continued Shares Value Real Estate Property - 5.7% Avatar Holdings, Inc. (a) 1,500 $ 29,016 Crescent Real Estate Equities Co. 1,500 30,187 TrizecHahn Corp. 3,500 52,281 Post Properties, Inc. 3,000 104,813 ------------ 216,297 ------------ Retail-Food Chains - 2.4% Delhaize America, Inc. - Class A 2,500 42,500 Delhaize America, Inc. - Class B 2,000 33,500 Weis Markets, Inc. 400 14,700 ------------ 90,700 ------------ Retail-General Merchandise - 2.6% Costco Wholesale Corp. (a) 2,700 98,887 ------------ Services - Data Processing - 3.1% First Data Corp. 2,300 115,287 ------------ Services - Facilities & Environmental - 0.4% ServiceMaster Co. 1,600 14,600 ------------ Telecommunication - Long Distance - 0.7% Global TeleSystems Group, Inc. (a) 10,000 26,875 ------------ Telephone - 3.6% Bellsouth Corp. 2,800 135,275 ------------ Textile - Apparel - 1.4% Jones Apparel Group, Inc. (a) 1,900 52,844 ------------ Transportation Equipment - 2.9% Eaton Corp. 1,600 108,900 ------------ Trucking - 0.7% Rollins Truck Leasing Corp. 5,000 26,250 ------------ Water Transportation - 1.0% Kirby Corp. (a) 2,000 36,875 ------------ TOTAL COMMON STOCKS (Cost $2,635,021) 2,809,206 ------------ Marathon Value Portfolio Schedule of Investments - October 31, 2000 - continued Principal Amount Value AGENCY OBLIGATIONS - 6.8% Federal Home Loan Mtg. Co., 7.00%, 03/11/2013 65,000 $ 61,626 FNMA Discount Note, 6.275%, 03/01/2001, (Cost $255,728) 200,000 195,817 ------------ 257,443 ------------ CORPORATE COMMERCIAL PAPER - 10.6% American Express, 6.48%, 11/13/2000 (Cost $400,000) 400,000 400,000 ------------ MONEY MARKET SECURITIES - 8.4% Firstar Treasury Fund, % (b) (Cost $317,621) 317,621 317,621 ------------ TOTAL INVESTMENTS - 100.1% (Cost $3,608,370) 3,784,270 ------------ Liabilities in excess of Other Assets - (0.1%) (2,499) ------------ TOTAL NET ASSETS - 100.0% $ 3,781,771 ============ (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. Marathon Value Portfolio October 31, 2000 Statement of Assets & Liabilities Assets Investment in securities, at value (Cost $3,608,370) $3,784,270 Dividends receivable 2,292 Interest receivable 1,688 Receivable for fund shares sold 385 ---------------- Total Assets 3,788,635 Liabilities Payable to custodian bank $ 1,106 Accrued investment advisory fee payable 4,186 Accrued trustee fees 1,572 -------------- Total Liabilities 6,864 ---------------- Net Assets $ 3,781,771 ================ Net Assets consist of: Paid in capital $3,756,282 Accumulated undistributed net investment income 19,558 Accumulated net realized loss on security transactions (157,624) Accumulated net realized loss on options transactions (12,345) Net unrealized appreciation on investments 175,900 ---------------- Net Assets, for 364,251 shares $ 3,781,771 ================ Net Asset Value Net Assets Offering price and redemption price per share ($3,781,771 / 364,251) $ 10.38 ================
See accompanying notes which are an integral part of the financial statements. Marathon Value Portfolio Statement of Operations for the year ended October 31, 2000 Investment Income Dividend income $ 20,486 Interest income 31,804 ---------------- Total Income 52,290 Expenses Investment advisory fee $ 31,144 Trustees' fees 3,064 -------------- Total expenses before reimbursement 34,208 Expenses reimbursed by predecessor advisor (1,492) -------------- Total operating expenses 32,716 ---------------- Net Investment Income 19,574 ---------------- Realized & Unrealized Gain Net realized gain on securities transactions 180,290 Net realized loss on options transactions (70,563) Change in net unrealized depreciation on investment securities 128,612 -------------- Net gain on investment securities 238,339 ---------------- Net increase in net assets resulting from operations $ 257,913 ================
See accompanying notes which are an integral part of the financial statements. Marathon Value Portfolio 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) $ 19,574 $ (2,713) Net realized gain (loss) on investment securities 180,290 (79,076) Net realized gain (loss) on options transactions (70,563) 39,468 Change in net unrealized appreciation 128,612 352,742 -------------- ----------------- Net increase in net assets resulting from operations 257,913 310,421 -------------- ----------------- Distributions to shareholders From net investment income 0 (6,342) From net realized gain 0 0 -------------- ----------------- Total distributions 0 (6,342) -------------- ----------------- Share Transactions Net proceeds from sale of shares 3,655,135 617,317 Shares issued in reinvestment of distributions 0 6,329 Shares redeemed (4,247,371) (70,282) -------------- ----------------- Net increase(decrease) in net assets resulting from share transactions (592,236) 553,364 -------------- ----------------- Total increase(decrease) in net assets (334,323) 857,443 Net Assets Beginning of period 4,116,094 3,258,651 -------------- ----------------- End of period [including accumulated net investment income of $19,574 and $0, respectively] $ 3,781,771 $ 4,116,094 ============== =================
See accompanying notes which are an integral part of the financial statements. Marathon Value Portfolio Financial Highlights Year Year Period ended ended ended October 31, October 31, October 31, 2000 1999 1998 (a) ------------- ------------- ------------- Selected Per Share Data Net asset value, beginning of period $ 9.23 $ 8.48 $ 10.00 ------------- ------------- ------------- Income from investment operations Net investment income (loss) 0.08 (0.01) 0.02 Net realized and unrealized gain (loss) 1.07 0.78 (1.54) ------------- ------------- ------------- Total from investment operations 1.15 0.77 (1.52) ------------- ------------- ------------- Less Distributions From net investment income (loss) 0.00 (0.02) 0.00 From realized gain 0.00 0.00 0.00 Return of capital 0.00 0.00 0.00 ------------- ------------- ------------- Net asset value, end of period $ 10.38 $ 9.23 $ 8.48 ============= ============= ============= Total Return 12.46% (d) 9.04% (15.20)%(b) Ratios and Supplemental Data Net assets, end of period (000) $3,782 $4,116 $3,259 Ratio of expenses to average net assets 1.42% (e) 1.48% 1.47% (c) Ratio of expenses to average net assets before reimbursement 1.49% 1.51% 1.50% (c) Ratio of net investment income (loss) to average net assets 0.85% (0.07)% 0.36% (c) Ratio of net investment income (loss) to average net assets before reimbursement 0.79% (0.11)% 0.33% (c) Portfolio turnover rate 207.02% 140.37% 61.04% (c) (a) March 12, 1998 (commencement of operations) to October 31, 1998 (b) For periods of less than a full year, the total return is not annualized. (c) Annualized (d) Effective March 28, 2000 the Fund obtained a new advisor. The total return from March 28, 2000 (date of change in adviser) through October 31, 2000 was 11.37%. (e) The rate for the current fiscal year is higher than the rate in the prospectus due to activity by the predecessor advisor. The predecessor advisor charged higher fees.
See accompanying notes which are an integral part of the financial statements. Marathon Value Portfolio Notes To Financial Statements October 31, 2000 NOTE 1. ORGANIZATION Marathon Value Portfolio (the "Fund") was organized as a series of AmeriPrime Funds (the "Trust") on December 29, 1997 and commenced operations on March 12, 1998. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The Fund's investment objective is to provide long-term capital appreciation. The Declaration of Trust 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 Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board. 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. Marathon Value Portfolio Notes To Financial Statements October 31, 2000 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued Option writing - When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option. 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. The Fund has loss carryforwards of $169,969 at October 31, 2000; $39,608 expiring in 2007 and $130,361 expiring in 2006. 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 differences relating to shareholder distributions be reclassified to paid-in-capital. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Prior to March 28, 2000 the Fund retained Burroughs & Hutchinson, Inc. (the "Predecessor Advisor") to manage the Fund's investments. Mark Matsko, the Fund's portfolio manager, was primarily responsible for the day-to-day management of the Fund's portfolio. Effective March 28, 2000, the Fund retained Spectrum Advisory Services, Inc. Marathon Value Portfolio Notes To Financial Statements October 31, 2000 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued (the "Advisor") to manage the Fund's investments. Marc S. Heilweil, 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 expenses of the Fund except brokerage fees and commissions, taxes, borrowing costs (such as (a) interest and (b) dividend expenses on securities sold short), 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 was 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. As compensation for its management services and agreement to pay the Fund's expenses, the Fund was obligated to pay the Predecessor Advisor a fee computed and accrued daily and paid monthly at an annual rate of 1.48% of the average daily net assets of the Fund. It should be noted that most investment companies pay their own operating expenses directly, while the Fund's expenses, except those specified above, are paid by the Advisor. For the period March 28, 2000 through October 31, 2000, the Advisor received a fee of $15,460 from the Fund. For the period November 1, 1999 through March 7, 2000, the Predecessor Advisor received a fee of $15,684 from the Fund. The Predecessor Advisor voluntarily agreed to reimburse other expenses for the period ended March 7, 2000 to the extent necessary to maintain total operating expenses at the rate of 1.48%. For the period November 1, 1999 through March 7, 2000, the Predecessor Advisor reimbursed expenses of $1,492. 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. Marathon Value Portfolio Notes To Financial Statements October 31, 2000 - continued NOTE 4. SHARE TRANSACTIONS- continued As of October 31, 2000, there were an unlimited number of authorized shares for the Fund. Paid in capital at October 31, 2000 was $3,756,282. Transactions in shares were as follows: Year ended Year ended October 31, 2000 October 31, 1999 Shares Dollars Shares Dollars Shares sold 370,660 $3,655,135 69,009 $617,317 Shares issued in reinvestment of dividends 0 0 718 6,329 Shares redeemed (452,475) (4,247,371) (7,846) (70,282) --------- ----------- ------- -------- (81,815) ($592,236) 61,881 $553,364 ====== ======== ======= ========
NOTE 5. INVESTMENTS For the fiscal year end of October 31, 2000, purchases and sales of investment securities, other than short-term investments, aggregated $3,684,619 and $4,781,122, respectively. As of October 31, 2000, the gross unrealized appreciation for all securities totaled $282,027 and the gross unrealized depreciation for all securities totaled $106,127 for a net unrealized appreciation of $175,900. The aggregate cost of securities for federal income tax purposes at October 31, 2000 was $3,608,370. 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. Marathon Value Portfolio Notes To Financial Statements October 31, 2000 - continued NOTE 7. RELATED PARTY TRANSACTIONS The Advisor and the Predecessor Advisor are not registered broker-dealers of securities and thus do 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. owned of record, in aggregate, more than 62% of the Fund. NOTE 8. CALL OPTIONS WRITTEN Transactions in options written during the fiscal year ended October 31, 2000 were as follows: Number of Premiums Contracts Received Options outstanding at October 31, 1999 25 $18,312 Options terminated in closing purchase transactions (25) (18,312) ------------ -------- Options outstanding at October 31, 2000 0 $ 0 ======= =========
NOTE 9. SUBSEQUENT EVENT Effective December 31, 2000 AmeriPrime Financial Securities, Inc. and Unified Financial Securities, Inc., both wholly owned subsidiaries of Unified Financial Services, Inc., merged with one another. The result of this merger will be Unified Financial Securities, Inc. still a wholly owned subsidiary of Unified Financial Services, Inc. INDEPENDENT AUDITOR'S REPORT To The Shareholders and Board of Trustees Marathon Value Portfolio We have audited the accompanying statement of assets and liabilities of Marathon Value Portfolio, 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 March 12, 1998 (commencement of operation) through October 31, 1998. 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 auditing standards generally accepted in the United States of America. 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. 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 Marathon Value Portfolio 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 March 12, 1998 (commencement of operation) through October 31, 1998, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio 44145 November 19, 2000