-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C2M/gMgRj5nbX3FIyBzGQgqM1XyN+Z2avlFJnzAgPHLNCz7ASbQz8y2GD8/XRWaL sCPlDmplhqw1lAQLBBbUZw== 0001000579-99-000099.txt : 20000211 0001000579-99-000099.hdr.sgml : 20000211 ACCESSION NUMBER: 0001000579-99-000099 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIPRIME FUNDS CENTRAL INDEX KEY: 0001000579 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 752616671 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-09096 FILM NUMBER: 99719632 BUSINESS ADDRESS: STREET 1: 1793 KINGSWOOD DR STREET 2: STE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 BUSINESS PHONE: 8174311297 MAIL ADDRESS: STREET 1: 1793 KINGSWOOD DRIVE STREET 2: SUITE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 N-30D 1 AMERIPRIME FUND We are pleased to present the first annual report of the Dobson Covered Call Fund (DCCF). The Fund began investing on March 24, 1999 and through July 31, 1999 has returned 7.8% versus 5.1% for the S&P 500 Index. The Fund achieved these results with a volatility or risk level that was 62.7% of the S&P 500 Index. Volatility was measured using the daily standard deviation of return from inception of the Fund. A summary of the inception to date statistics follows: DCCF S&P 500 Index Second Quarter (Calendar) 5.5% 7.0% Inception to date 7.8% 5.1% Standard Deviation (Risk Level) .69 1.1 Looking at the four complete months of operation (April - July) the S&P 500 Index return ranged from a high of 5.6% to a low of -3.1%. The DCCF ranged from a high of 3.3% to a low of -1.6%. Selling options on stocks we own not only reduced our volatility by approximately 37% as shown above but also increased our total return. For the four-month period the S&P 500 Index returned 3.7% while the DCCF's return was 3.8%. It should also be noted that the DCCF return is net of all fees and expenses. DCCF S&P 500 Index April 3.0% 3.9% May -0.8% -2.4% June 3.3% 5.6% July -1.6% -3.1% These past four months are a textbook example of how a covered call strategy with a risk level of approximately 60% of the S&P 500 Index is expected to perform. Typically markets don't appreciate one month and then depreciate the next but markets do go up and they do go down. As a result, and as stated in the prospectus, the Fund expects to equal or exceed the return of the S&P 500 Index if the Index appreciates up to 10% (annualized) and do so with less volatility or risk. The Fund can be expected to under-perform the Index for annualized advances over 10%. It can also be expected to decline approximately one-half of the Index in declining markets as seen in May and June. Although results cannot be predicted with certainty, reasonable expectations can be made particularly given the nineteen years experience of the portfolio manager. The Fund's results to date have exceeded these expectations. These results were achieved by first diversifying within S&P 500 Industry weights. Although we do not hold or intend to ever hold all of the stocks in the S&P 500 Index, our stocks are close to S&P 500 Industry weights. Therefore, our underlying stocks will normally come close to the S&P 500 Index returns but will vary somewhat. Second, we sell individual call options on our underlying stocks. The premium or money we receive from selling individual call options is more than can be received from selling index call options. Third, option premiums tend to be higher in more volatile markets as have occurred over this period. The duration and strike price of the options we sell are determined by our proprietary option analysis, with the overall objective of providing a risk level that is approximately 60% of the S&P 500 Index. A reasonable question is why 60%? That level of risk is higher than bonds and less than the S&P 500 Index. We feel this risk level provides an advantage to many investors. Two examples: 1. As part of an overall asset allocation. An investor may want to commit a portion of his/her assets to the volatile technology sector. To reduce volatility of their overall portfolio another portion of their assets could be committed to the DCCF. If one were to decide that 40% of their portfolio should be in bonds, a covered call strategy would be an alternative for the bond allocation. 2. Other investors may not want the volatility of the overall market but want a superior return to bonds. There are other reasons but the above are the two most common. We trust the preceding helps you understand our results and investment process. We welcome your calls and comments. We would also like to acknowledge the work of Dr. Sheen Kassouf from the University of California, Irvine for his work in the options area. His study `Long Term Investment Alternatives for Fiduciaries - An Analysis of Returns from Stocks, Bonds, and Optioned Equities (1950-1974)' is the basis for the investment strategy used by the DCCF. If you would like a copy of this pioneering work, please call or write the advisor. Thank you for investing with us. Charles L. Dobson Portfolio Manager Dobson Covered Call Fund Schedule of Investments - July 31, 1999 Common Stocks - 100.7% Shares Value BASIC INDUSTRIES - 8.4% Manufacturers - Diversified - 4.7% AlliedSignal, Inc. (a) 1,000 $ 64,687 ----------------- Paper & Forest Products - 3.7% International Paper, Inc. (a) 1,000 51,125 ----------------- TOTAL BASIC INDUSTRIES 115,812 ----------------- DURABLES - 3.5% Autos & Auto Parts - 3.5% Ford Motor Co. (a) 1,000 48,625 ----------------- ENERGY - 8.9% Energy Services - 4.4% Schlumberger Ltd. (a) 1,000 60,563 ----------------- Oil & Gas - 4.5% Royal Dutch Petroleum ADR (a) 1,000 61,000 ----------------- TOTAL ENERGY 121,563 ----------------- FINANCE - 12.5% Banks - 12.5% Bank of America Corp. (a) 1,000 66,375 Citigroup, Inc. (a) 1,500 66,844 Wells Fargo, Inc. (a) 1,000 39,000 ----------------- 172,219 ----------------- HEALTH - 12.1% Diversified - 8.5% American Home Products, Inc. (a) 1,000 51,000 Bristol-Myers Squibb, Inc. (a) 1,000 66,500 ----------------- 117,500 ----------------- Drugs & Pharmaceuticals - 3.6% Schering-Plough, Inc. (a) 1,000 49,000 ----------------- TOTAL HEALTH 166,500 ----------------- INDUSTRIAL MACHINERY & EQUIPMENT - 4.3% Industrial Machinery & Equipment - 4.3% Caterpillar, Inc. (a) 1,000 58,625 ----------------- MEDIA & LEISURE - 5.0% Entertainment - 2.0% Disney (Walt) Co. (a) 1,000 27,625 ----------------- See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Schedule of Investments - July 31, 1999 - continued Common Stocks - continued Shares Value MEDIA & LEISURE - continued Restaurants - 3.0% McDonald's Corp. (a) 1,000 $ 41,687 ----------------- TOTAL MEDIA & LEISURE 69,312 ----------------- NON-DURABLES - 7.6% Beverages - 4.4% Coca-Cola Co. (a) 1,000 60,312 ----------------- Household Products - 3.2% Gillette Co. (a) 1,000 43,813 ----------------- TOTAL NON-DURABLES 104,125 ----------------- RETAIL & WHOLESALE - 7.0% Building Supplies - 7.0% Home Depot, Inc. (a) 1,500 95,719 ----------------- TECHNOLOGY - 20.3% Communications Equipment - 4.7% Lucent Technologies, Inc. (a) 1,000 65,062 ----------------- Computers & Office Equipment - 10.6% Dell Computer Corp. (a) (b) 1,000 40,875 Hewlett-Packard Co. (a) 1,000 104,688 ----------------- 145,563 ----------------- Electronics - 5.0% Intel Corp. (a) 1,000 69,000 ----------------- TOTAL TECHNOLOGY 279,625 ----------------- UTILITIES - 11.1% Electric Utility - 3.8% Duke Energy, Inc. 1,000 52,938 ----------------- Telephone Services - 7.3% AT&T Corp. (a) 1,000 51,937 BellSouth Corp. (a) 1,000 48,000 ----------------- 99,937 ----------------- TOTAL UTILITIES 152,875 ----------------- TOTAL COMMON STOCKS (Cost $1,354,157) 1,385,000 ----------------- See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Schedule of Investments - July 31, 1999 - continued Principal Value Value Money Market Securities - 4.7% Federal Prime Obligation, 4.77% (c) (Cost $64,758) $ 64,758 $ 64,758 ----------------- TOTAL INVESTMENTS - 105.4% (Cost $1,418,915) 1,449,758 ----------------- Other assets less liabilities - (5.4%) (74,515) ================= Total Net Assets - 100.0% $ 1,375,243 =================
(a) Security is segregated as collateral for options written. (b) Non-income producing (c) Variable rate security; the coupon rate shown represents the rate at July 31, 1999. Call Options Written July 31, 1999 Shares Subject Common Stocks / Expiration Date @ Exercise Price to Call Value AlliedSignal, Inc. / September 1999 @ 70 1,000 $ 1,094 American Home Products, Inc. / October 1999 @ 60 1,000 937 AT&T Corp. / August 1999 @ 60 1,000 125 Bank of America Corp. / August 1999 @ 75 1,000 188 BellSouth Corp. / August 1999 @ 45 1,000 3,437 Bristol-Myers Squibb, Inc. / September 1999 @ 70 1,000 2,250 Caterpillar, Inc. / August 1999 @ 60 1,000 1,438 Citigroup, Inc. / September 1999 @ 50 1,500 1,406 Coca-Cola Co. / August 1999 @ 60 1,000 2,000 Dell Computer Corp. / August 1999 @ 40 1,000 2,375 Disney (Walt) Co. / October 1999 @ 30 1,000 812 Ford Motor Co. / September 1999 @ 60 1,000 250 Gillette Co. / September 1999 @ 55 1,000 125 Hewlett-Packard Co. / August 1999 @ 70 1,000 36,125 Home Depot, Inc. / August 1999 @ 65 1,500 2,250 Intel Corp. / October 1999 @ 70 1,000 5,000 International Paper, Inc. / October 1999 @ 55 1,000 1,875 Lucent Technologies, Inc. / October 1999 @ 65 1,000 5,750 McDonald's Corp. / September 1999 @ 45 1,000 813 Royal Dutch Petroleum ADR / August 1999 @ 65 1,000 312 Schering-Plough, Inc. / August 1999 @ 45 1,000 4,500 Schlumberger Ltd. / August 1999 @ 65 1,000 625 Wells Fargo, Inc. / October 1999 @ 45 1,000 438 ----------------- Total (premiums received $71,908) $ 74,125 =================
See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund July 31,1999 Statement of Assets & Liabilities Assets Investment in securities (cost $1,418,915) $ 1,449,758 Cash 99 Dividends receivable 1,488 Interest receivable 397 Receivable from investment advisor for reimbursed expenses 17,642 ------------------ Total assets 1,469,384 Liabilities Accrued investment advisory fee payable $ 986 Accrued distribution fee payable 1,035 Other payables and accrued expenses 17,995 Covered call options written - premiums received $71,908 74,125 ----------------- Total liabilities 94,141 ------------------ Net Assets $ 1,375,243 ================== Net Assets consist of: Paid in capital 1,340,688 Accumulated undistributed net investment income 1,310 Accumulated undistributed net realized gain on investments 3,690 Accumulated undistributed net realized gain on options transactions 929 Net unrealized appreciation on investments 28,626 ------------------ Net Assets, for 127,555 shares $ 1,375,243 ================== Net Asset Value Net Assets Offering price and redemption price per share ($1,375,243/127,555) $ 10.78 ==================
See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Statement of Operations for the period March 24, 1999 (Commencement of Operations) to July 31, 1999 Investment Income Dividend income $ 4,471 Interest income 3,053 --------------- Total Income 7,524 Expenses Investment advisory fees $ - Administration fees 10,625 Legal fees 8,488 Transfer agent fees 6,023 Audit fees 5,500 Pricing & bookkeeping fees 3,896 Custodian fees 2,087 Shareholder reports 1,352 Trustees' fees 1,083 Distribution fees 1,035 Registration fees 256 Miscellaneous 119 ------------------ Total expenses before reimbursement 40,464 Reimbursed expenses (34,250) ------------------ Total operating expenses 6,214 --------------- Net Investment Income 1,310 --------------- Realized & Unrealized Gain (Loss) Net realized gain on investment securities 3,690 Net realized gain on options transactions 929 Change in net unrealized appreciation (depreciation) on investment securities 28,626 ------------------ Net gain on investment securities 33,245 --------------- Net increase in net assets resulting from operations $ 34,555 ===============
See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Statement of Changes in Net Assets for the period March 24, 1999 (Commencement of Operations) to July 31, 1999 Increase (Decrease) in Net Assets Operations Net investment income $ 1,310 Net realized gain on investment securities 3,690 Net realized gain on options transactions 929 Change in net unrealized appreciation (depreciation) 28,626 -------------- Net increase in net assets resulting from operations 34,555 -------------- Share Transactions Net proceeds from sale of shares 1,340,688 -------------- Net increase in net assets resulting from share transactions 1,340,688 -------------- Total increase in net assets 1,375,243 -------------- Net Assets Beginning of period - -------------- End of period [including accumulated undistributed net investment income of $1,310] $ 1,375,243 ============== See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Financial Highlights for the period March 24, 1999 (Commencement of Operations) to July 31, 1999 Selected Per Share Data Net asset value, beginning of period $ 10.00 -------------- Income from investment operations Net investment income 0.01 Net realized and unrealized gain 0.77 -------------- Total from investment operations 0.78 -------------- Net asset value, end of period $ 10.78 ============== Total Return (b) 7.80% Ratios and Supplemental Data Net assets, end of period (000) $1,375 Ratio of expenses to average net assets 1.50% (a) Ratio of expenses to average net assets before reimbursement 9.77% (a) Ratio of net investment income to average net assets 0.32% (a) Ratio of net investment income to average net assets before reimbursement (7.95)% (a) Portfolio turnover rate 47.01% (a) (a) Annualized (b) For periods of less than a full year, total returns are not annualized. See accompanying notes which are an integral part of the financial statements Dobson Covered Call Fund Notes to Financial Statements July 31, 1999 NOTE 1. ORGANIZATION Dobson Covered Call Fund (the "Fund") was organized as a series of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on March 22, 1999 and commenced operations on March 24, 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 achieve above average return consistent with lower risk than the S&P 500 Index. The Declaration of Trust permits the Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. Securities Valuations- Securities which are traded on any exchange or on the NASDAQ over-the-counter market are valued at the last quoted sale price. Lacking a last sale price, a security is valued at its last bid price except when, in the Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust (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. 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 Dobson Covered Call Fund Notes to Financial Statements July 31, 1999 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued 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 distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long-term capital gains and its net short-term capital gains at least once a year. Other- The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Dobson Capital Management, Inc., (the "Advisor") to manage the Fund's investments. The Advisor is a California corporation established in September 1998. Charles L. Dobson is the president, Director and sole shareholder of the advisor, and is primarily responsible for the day-to-day management of the Fund's portfolio. Under the terms of the management agreement, (the "Agreement"), the Advisor manages the Fund's investments subject to approval of the Board of Trustees. As compensation for its management services, the Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 0.80% of the average daily net assets of the Fund, less the amount total operating expenses, including management fees, exceed 1.50% of the average value of its daily net assets, to the extent the management fee equals zero. The remaining portion of expenses will be reimbursed by the Advisor. For the period March 24, 1999 (commencement of operations) to Dobson Covered Call Fund Notes to Financial Statements July 31, 1999 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued July 31, 1999, the Advisor received fees of $0 from the Fund. For the period March 24, 1999 (commencement of operations) to July 31, 1999, the Advisor reimbursed expenses of $34,250. Certain officers and directors of the Advisor are also officers and directors of the Trust. The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator") to manage the Fund's business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the period from March 24, 1999 (commencement of operations) to July 31, 1999, the Administrator received fees of $10,625 from the Advisor for administrative services provided to the Fund. The Fund retains AmeriPrime Financial Securities, Inc. ("the Distributor") to act as the principal distributor of the Fund's shares. The Fund has adopted a plan, pursuant to Rule 12b-1 under the Investment Company Act of 1940, which permits the Fund to pay directly, or reimburse the Fund's Advisor and Distributor, for certain distribution and promotion expenses related to marketing its shares, in an amount not to exceed 0.25% of the average daily net assets of the Fund. There were no payments made to the Distributor from March 24, 1999 (commencement of operations) to July 31, 1999. Certain members of management of the Administrator and the Distributor are also members of management of the AmeriPrime Trust. NOTE 4. SHARE TRANSACTIONS As of July 31, 1999, there were an unlimited number of authorized shares for the Fund. Paid in capital at July 31, 1999 was $1,340,688. Transactions in shares were as follows: For the period March 24, 1999 (Commencement of Operations) to July 31, 1999 Shares Dollars Shares sold 127,555 $1,340,688 Shares redeemed - - ------- ---------- 127,555 $1,340,688 ======= ========== Dobson Covered Call Fund Notes to Financial Statements July 31, 1999 - continued NOTE 5. INVESTMENTS For the period from March 24, 1999 (commencement of operations) through July 31, 1999, purchases and sales of investment securities, other than short-term investments, aggregated $1,495,403 and $144,935, respectively. As of July 31, 1999, the gross unrealized appreciation for all securities totaled $134,179 and the gross unrealized depreciation for all securities totaled $105,553 for a net unrealized appreciation of $28,626. The aggregate cost of securities for federal income tax purposes at July 31, 1999 was $1,418,915. 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 July 31, 1999, Charles L. Dobson, President of the Advisor, beneficially owned in aggregate more than 78% of the Fund. NOTE 8. CALL OPTIONS WRITTEN As of July 31, 1999, portfolio securities valued at $1,332,062 were held in escrow by the custodian as cover for call options written by the Fund. Transactions in options written during the period March 24, 1999 (commencement of operations) to July 31, 1999 were as follows: Number of Premiums Contracts Received Options written 420 $113,590 Options terminated in closing purchase transactions (90) (21,122) Options expired (70) (12,380) Options exercised (20) (8,180) --------- -------- Options outstanding at July 31, 1999 240 $ 71,908 ========= ======== Dobson Covered Call Fund Notes to Financial Statements July 31, 1999 - continued NOTE 9. YEAR 2000 ISSUE Like other mutual funds, financial and business organizations and individuals around the world, the Fund could be adversely affected if the computer systems used by the Advisor, Administrator or other service providers to the Fund do not properly process and calculate date-related information and data from and after January 1, 2000. This is commonly known as the "Year 2000 Issue." The Advisor and Administrator have taken steps that they believe are reasonably designed to address the Year 2000 Issue with respect to computer systems that are used and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's major service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the Fund. In addition, the Advisor cannot make any assurances that the Year 2000 Issue will not affect the companies in which the Fund invests or worldwide markets and economies. -----END PRIVACY-ENHANCED MESSAGE-----