N-30D 1 amp0502fye.txt AMERIPRIME FUNDS TRUST The Perfect Storm First the tech wreck, then terrorism, then the instant shut down of the economy, and now "fraud-gate". The extraordinary confluence of negative events has combined to create the worst run in the S&P 500 since Hitler invaded Poland. Obviously, the most important of these events (and the one that had the greatest impact) was the 9/11 attack. Or portfolios were battered by the shock waves that initially went through all equity markets. However, when the market rebounded dramatically in December, we enjoyed one of the best "bounces" in the industry. Still the weakening effect on the economy - particularly the growth areas in which we invest was significant. Our fund's performance tracked closely with the NASDAQ 100 but managed a better performance due to its holdings in pharmaceuticals and financial stocks. Of course, a significant decline in share value is disappointing regardless of relative performance measures or peer comparisons. It is particularly frustrating to have stuck to our long-term investment strategy through the slowdown in the economy and terrorist attack only to have the rug yanked out from under us by CEO fraud. While we recognize that even the accounting scandals will ultimately become old news, their impact on the three sectors in which we usually invest is tremendous. The reason we are so concerned is that we believe that the CEOs of growth companies in the tech and pharmaceutical sectors are the most likely to have succumbed to the temptation to cook the books. The domino effect this has on the broad market is potentially very dramatic because the country's largest financial companies have significant exposure through loans and stock underwriting for the same technology and pharmaceutical corporations in which we have invested. Consequently we must take some action. During the last two trading days of June, we repositioned a significant portion of our portfolio's holdings into more defensive, consumer driven securities. This move came just in time to save us from losing a few percent when some accounting problems were revealed at Merck and Bristol Meyers Squibb. In contrast to the assets we have held historically, we have now added energy stocks, consumer staples stocks, consumer durable stocks, utilities, and other industry sectors that we just would not have normally given a second look. Please don't mistake this move as abandoning our "buy and hold" strategy - we still have more than half of the money in the financial, pharmaceutical, and technology stocks that we believe may do well as the economy continues to improve. However, we have significantly reduced the overall risk and volatility scores of the portfolio. While it has been tracking with the NASDAQ and Aggressive Growth Large Cap fund category, it will now track with a very high correlation to the S&P 500. It would be fair to say that for the time being, the Fund has been switched from being an Aggressive Growth portfolio to a more centralized Growth portfolio. The most recent technical bulletin, published by Standard & Poor's research, suggests that a significant bounce is in the making at least for the short-term. Indeed, we have seen the NASDAQ actually post gains the last couple of days even though the DOW and S&P 500 were negative. This suggests to me that at least in the short-term, the techs may have seen enough bloodshed and that some intermediate buying may materialize. If this is the case, we will enjoy a significant lift but will likely hang on to our new, more conservative stocks for a while as we wait to see what new "scandals" are unearthed. I know that you are frustrated with the disappointing tone of the market and the losses in your accounts - we are too! Every indication is that we should be able to work through the remaining negative issues relatively soon and we may start seeing stock prices reflecting the significant improvement in earnings that is currently underway. Please call our offices if you have any questions or would like additional information. Sincerely, Randy Cloud Cloud, Neff & Associates, Inc. For a prospectus and more information, including charges and expenses, call toll free 1-888-464-6815. The prospectus should be read carefully before investing. Past performance does not guarantee future results. Shares when redeemed may be worth more or less than their original cost. Distributed by Unified Financial Securities, Inc. 3 Months 6 Months One Year Average Annual Return Actual Actual Actual Since Inception Return Return Return (June 1, 2000) ---------------------------------------------------------------------------- Cloud, Neff Capital Appreciation Fund -5.52% -15.26% -28.27% -35.89% NASDAQ Composite Index -6.59% -16.15% -13.86% -32.65% Standard & Poor's 500 Stock Index -3.27% -5.70% -23.18% -13.08%
Cloud, Neff S&P 500Index NASDAQ Composite Index 6/1/00 10,000.00 10,000.00 10000 6/30/00 10,110.00 10,047 11,073 7/31/00 9,580.00 9,890 10,517 8/31/00 10,850.00 10,504 11,746 9/30/00 9,720.00 9,950 10,258 10/31/00 9,240.00 9,907 9,412 11/30/00 7,560.00 9,127 7,258 12/29/00 7,450.00 9,172 6,904 1/31/01 7,730.00 9,497 7,750 2/28/01 5,920.00 8,632 6,016 3/31/01 5,180.00 8,085 5,147 4/30/01 6,140.00 8,713 5,920 5/31/01 5,720.00 8,771 5,905 6/30/01 5,690.00 8,558 6,049 7/31/01 5,320.00 8,473 5,675 8/31/01 4,730.00 7,943 5,055 9/30/01 3,670.00 7,302 4,198 10/31/01 4,350.00 7,441 4,735 11/30/01 4,850.00 8,012 5,410 12/31/01 4,800.00 8,082 5,467 1/31/02 4,730.00 7,964 5,423 2/28/02 4,350.00 7,811 4,856 3/31/02 4,670.00 8,104 5,178 4/30/02 4,270.00 7,612 4,738 5/31/02 4,110.00 7,555 4,536
This graph, prepared in accordance with SEC regulations, shows the value of a hypothetical initial investment of $10,000 in the Fund S&P 500 Index, and the NASDAQ Composite Index on June 1, 2000 (inception of the Fund) and held through May 31, 2002. The S&P 500 Index and NASDAQ Composite Index are widely recognized unmanaged indices of common stock prices and are representative of a broader market and range of securities than is found in the Fund portfolio. Individuals cannot invest directly in the indices. Performance figures reflect the change in value of the stocks in the indices, and reinvestment of dividends. The indices returns do not reflect expenses, which have been deducted from the Fund's return. The performance of the Fund is computed on a total return basis, which includes reinvestment of all dividends. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT PREDICT FUTURE RESULTS. Investment returns and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Cloud, Neff Capital Appreciation Fund Schedule of Investments May 31, 2002 Common Stocks - 87.6% Shares Value Cable & Other Pay Television Services - 0.9% Comcast Corp. - Class A (a) 1,600 $ 45,056 --------------- Calculating & Accounting Machines (No Electronic Computers) - 0.4% NCR Corp. (a) 572 20,907 --------------- Communications Equipment - 0.0% McData Corp. (a) 172 1,488 --------------- Computer Communication Equipment - 2.3% Adaptec, Inc. (a) 2,298 29,805 Cisco Systems, Inc. (a) 3,084 48,666 Enterasys Networks, Inc. (a) 1,825 3,121 Foundry Networks, Inc. (a) 2,464 16,238 Juniper Networks, Inc. (a) 1,350 12,515 Riverstone Networks, Inc. (a) 936 3,304 --------------- 113,649 --------------- Computer Peripheral Equipment - 0.9% Symbol Technologies, Inc. 808 6,925 Xerox Corp. (a) 4,355 39,064 --------------- 45,989 --------------- Computer Storage Devices - 0.4% EMC Corp. (a) 2,642 19,155 --------------- Computer Terminals - 0.1% Palm, Inc. (a) 1,438 2,286 --------------- Computers & Office Equipment - 2.2% Gateway, Inc. (a) 1,587 8,506 Hewlett-Packard Co. 1,673 31,938 International Business Machines, Inc. 236 18,986 Lexmark International, Inc. (a) 500 31,225 Micron Technology, Inc. (a) 696 16,412 --------------- 107,067 --------------- Drawing & Insulating of Nonferrous Wire - 0.6% Andrew Corp. (a) 1,639 28,240 --------------- Drilling Oil & Gas Wells - 4.6% Global Santa Fe Corp. 6,639 224,066 --------------- Electrical Industrial Apparatus - 0.6% American Power Conversion, Inc. (a) 2,139 29,860 --------------- Cloud, Neff Capital Appreciation Fund Schedule of Investments May 31, 2002 Common Stocks - 87.6% - continued Shares Value Electronic Computers - 3.1% Apple Computer, Inc. (a) 1,333 $ 31,059 Ceridian Corp. (a) 1,194 27,295 Dell Computer Corp. (a) 2,198 59,016 Sun Microsystems, Inc. (a) 4,523 31,163 --------------- 148,533 --------------- Electronic Connectors - 1.9% Amphenol Corp. - Class A (a) 1,000 44,950 Molex, Inc. - New Class A 662 24,991 Tyco International Ltd. 1,100 24,145 --------------- 94,086 --------------- General Industrial Machinery & Equipment - 1.5% Zebra Technologies Corp. (a) 1,300 74,932 --------------- Instruments for Meas & Testing of Electricity & Elec Signals - 1.2% Agilent Technologies, Inc. (a) 653 17,220 Tektronix, Inc. (a) 1,000 20,280 Teradyne, Inc. (a) 806 21,826 --------------- 59,326 --------------- Investment Companies / Unit Investment Trusts - 13.1% AMEX Financial Select Sector SPDR Fund 13,500 356,130 Standard & Poor's Depositary Receipts, Series 1 2,625 280,875 --------------- 637,005 --------------- Laboratory Analytical Instruments - 0.9% Cytyc Corp. (a) 2,700 43,983 --------------- Optical Instruments & Lenses - 1.8% KLA-Tencor Corp. (a) 1,667 86,901 --------------- Printed Circuit Boards - 2.1% Jabil Circuit, Inc. (a) 2,790 64,058 Sanmina Corp. (a) 870 10,005 Solectron Corp. (a) 3,419 27,626 --------------- 101,689 --------------- Radio & TV Broadcasting & Communications Equipment - 2.9% Motorola, Inc. 3,941 63,017 Nokia Corp. (c) 2,400 33,312 QUALCOMM, Inc. (a) 1,109 35,089 Scientific Atlanta, Inc. 542 10,542 --------------- 141,960 --------------- Security Brokers, Dealers & Flotation Companies - 16.8% Biotech HOLDRS Trust Depositary Receipts 2,000 189,000 Pharmaceutical HOLDRS Trust Depositary Receipts 7,400 627,594 --------------- 816,594 --------------- Cloud, Neff Capital Appreciation Fund Schedule of Investments May 31, 2002 Common Stocks - 87.6% - continued Shares Value Semiconductors & Related Devices - 13.4% Advanced Micro Devices, Inc. (a) 1,193 $ 13,636 Altera Corp. (a) 985 17,760 Analog Devices, Inc. (a) 607 22,228 Applied Micro Circuits Corp. (a) 2,046 12,583 Broadcom Corp. - Class A (a) 921 20,769 Conexant Systems, Inc. (a) 1,923 13,749 Intel Corp. 2,098 57,947 JDS Uniphase Corp. (a) 78 274 Linear Technology Corp. 1,853 69,024 LSI Logic Corp. (a) 3,642 41,519 Maxim Integrated Products, Inc. (a) 1,573 72,358 Microchip Technology, Inc. (a) 3,150 94,185 National Semiconductor Corp. (a) 1,152 35,366 PMC Sierra, Inc. (a) 1,070 15,215 Qlogic Corp. (a) 642 29,352 Texas Instruments, Inc. 1,472 42,202 Triquint Semiconductor, Inc. (a) 3,180 28,620 Vitesse Semiconductor Corp. (a) 598 3,007 Xilinx, Inc. (a) 1,772 62,481 --------------- 652,275 --------------- Services - Business Services - 0.0% EXDS, Inc. (a) 4,027 60 --------------- Services - Computer Integrated Systems Design - 1.9% Computer Sciences Corp. (a) 419 19,848 Network Appliance, Inc. (a) 2,735 35,582 Sapient Corp. (a) 1,923 2,827 Unisys Corp. (a) 1,471 16,828 Yahoo, Inc. (a) 1,023 16,388 --------------- 91,473 --------------- Services - Computer Processing & Data Preparation - 1.2% Arbitron, Inc. (a) 238 8,699 First Data Corp. 402 31,838 IMS Health, Inc. 925 19,471 --------------- 60,008 --------------- Services - Computer Programming, Data Processing - 0.6% AOL Time Warner, Inc. (a) 568 10,622 Electronic Data Systems Corp. 387 20,441 --------------- 31,063 --------------- Services - Prepackaged Software - 7.1% Adobe Systems, Inc. 1,891 68,265 Autodesk, Inc. 1,302 17,577 BMC Software (a) 840 14,204 Brocade Communications Systems, Inc. (a) 1,956 38,435 Citrix Systems, Inc. (a) 957 10,211 Computer Associates International, Inc. 796 13,819 Cloud, Neff Capital Appreciation Fund Schedule of Investments May 31, 2002 Common Stocks - 87.6% - continued Shares Value Services - Prepackaged Software - 7.1% - continued Compuware Corp. (a) 2,478 $ 18,263 Intuit, Inc. (a) 565 24,707 Mercury Interactive Corp. (a) 424 14,357 Microsoft Corp. (a) 1,086 55,397 Novell, Inc. (a) 3,962 13,590 Oracle Corp. (a) 1,169 9,235 Parametric Technology Corp. (a) 1,970 6,856 Peoplesoft, Inc. (a) 734 15,054 Roxio, Inc. (a) 378 6,332 Siebel Systems, Inc. (a) 560 10,220 VERITAS Software Corp. (a) 354 8,025 --------------- 344,547 --------------- Special Industry Machinery - 2.8% Applied Materials, Inc. (a) 3,138 69,601 Novellus Systems, Inc. (a) 1,571 66,736 --------------- 136,337 --------------- Telephone & Telegraph Apparatus - 1.3% ADC Telecommunications, Inc. (a) 2,760 9,246 CIENA Corp. (a) 2,324 13,154 Comverse Technology, Inc. (a) 327 3,875 Corning, Inc. (a) 2,442 11,722 Covad Communication Group, Inc. (a) 2,000 2,430 Nortel Networks Corp. (a) 1,352 2,988 Sycamore Networks, Inc. (a) 1,790 6,426 Tellabs, Inc. (a) 1,578 15,243 --------------- 65,084 --------------- Telephone Communications (No Radio Telephone) - 0.2% Lucent Technologies, Inc. (a) 2,083 9,686 XO Communications, Inc. - Class A (a) 2,700 143 --------------- 9,829 --------------- Television Broadcasting Stations - 0.8% Univision Communications, Inc. (a) 1,000 40,000 --------------- TOTAL COMMON STOCKS (Cost $8,462,413) 4,273,448 --------------- Money Market Securities - 12.5% Huntington Money Fund - Investment A, 0.78%, (Cost $612,615) (b) 612,615 612,615 --------------- TOTAL INVESTMENTS (Cost $9,075,028) - 100.1% $ 4,886,063 --------------- Liabilities in excess of other assets - (0.1%) (6,039) --------------- TOTAL NET ASSETS - 100.0% $ 4,880,024 =============== (a) Non-income producing. (b) Variable rate security; the coupon rate shown represents the rate at May 31, 2002. (c) American Depository Receipt See accompanying notes which are an integral part of these financial statements.
Cloud, Neff Capital Appreciation Fund Statement of Assets and Liabilities May 31, 2002 Assets Investments in securities, at value (cost $9,075,028) $ 4,886,063 Interest receivable 402 Dividends receivable 950 Receivable for fund shares sold 3,935 Due from administrator 15,713 --------------- Total assets 4,907,063 --------------- Liabilities Accrued advisory fees 6,996 Other payables and accrued expenses 20,043 --------------- Total liabilities 27,039 --------------- Net Assets $ 4,880,024 =============== Net Assets consist of: Paid in capital 11,428,987 Accumulated net realized gain (loss) on investments (2,359,998) Net unrealized appreciation (depreciation) on investments (4,188,965) --------------- Net Assets, for 1,188,741 shares $ 4,880,024 =============== Net Assets Value Net Assets Offering price and redemption price per share ($4,880,024 / 1,188,741) $ 4.11 =============== See accompanying notes which are an integral part of these financial statements.
Cloud, Neff Capital Appreciation Fund Statement of Operations Year ended May 31, 2002 Investment Income Dividend income $ 14,456 Interest income 4,189 ---------------- Total Income 18,645 ---------------- Expenses Investment advisor fee 106,513 Administration expenses 30,000 Fund accounting expenses 14,400 Transfer agent expenses 13,925 Pricing expenses 8,400 Auditing expenses 6,813 Legal expenses 5,772 Printing expenses 4,478 Custodian expenses 3,931 Registration & filing expenses 3,865 Miscellaneous expenses 2,970 Trustee expenses 1,740 Insurance expenses 506 ---------------- Total Expenses 203,313 Reimbursed expenses by Administrator (21,527) Reimbursed expenses by Adviser (22,095) ---------------- Total operating expenses 159,691 ---------------- Net Investment Income (Loss) (141,046) ---------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (674,710) Change in net unrealized appreciation (depreciation) on investment securities (1,049,580) ---------------- Net realized and unrealized gain (loss) on investment securities (1,724,290) ---------------- Net increase (decrease) in net assets resulting from operations $ (1,865,336) ================ See accompanying notes which are an integral part of these financial statements.
Cloud, Neff Capital Appreciation Fund Statement of Changes In Net Assets Year ended Year ended Increase (Decrease) in Net Assets May 31, 2002 May 31, 2001 ---------------- -------------- Operations Net investment income (loss) $ (141,046) $ (182,614) Net realized gain (loss) on investment securities (674,710) (1,685,288) Change in net unrealized appreciation (depreciation) (1,049,580) (3,139,385) ---------------- -------------- Net increase (decrease) in net assets resulting from operations (1,865,336) (5,007,287) ---------------- -------------- Distributions From net investment income - - From net realized gain - - ---------------- Total distributions - - ---------------- -------------- Capital Share Transactions Proceeds from shares sold 1,127,227 12,257,524 Reinvestment of distributions - - Amount paid for shares repurchased (836,198) (795,906) ---------------- -------------- Net increase (decrease) in net assets resulting from share transactions 291,029 11,461,618 ---------------- -------------- Total Increase (Decrease) in Net Assets (1,574,307) 6,454,331 ---------------- -------------- Net Assets Beginning of period 6,454,331 - ---------------- -------------- End of period $ 4,880,024 $ 6,454,331 ================ ============== Capital Share Transactions Shares sold 239,746 1,243,926 Shares issued in reinvestment of distributions - - Shares repurchased (177,536) (117,395) ---------------- -------------- Net increase (decrease) from capital transactions 62,210 1,126,531 ================ ============== See accompanying notes which are an integral part of these financial statements.
Cloud, Neff Capital Appreciation Fund Financial Highlights Year ended Year ended May 31, 2002 May 31, 2001 ----------------- ---------------- Selected Per Share Data Net asset value, beginning of period $ 5.73 $ 10.00 ----------------- ---------------- Income from investment operations Net investment income (loss) (0.13) (0.19) Net realized and unrealized gain (loss) (1.49) (4.08) ----------------- ---------------- Total from investment operations (1.62) (4.27) ----------------- ---------------- Less Distributions to shareholders: From net investment income 0.00 0.00 From net realized gain 0.00 0.00 ----------------- ---------------- Total distributions 0.00 0.00 ----------------- ---------------- Net asset value, end of period $ 4.11 $ 5.73 ================= ================ Total Return (28.27)% (42.70)% Ratios and Supplemental Data Net assets, end of period (000) $ 4,880 $6,454 Ratio of expenses to average net assets 3.00% 2.97% Ratio of expenses to average net assets before waiver & reimbursement 3.82% 3.09% Ratio of net investment income to average net assets (2.65)% (2.37)% Ratio of net investment income to average net assets before waiver & reimbursement (3.47)% (2.49)% Portfolio turnover rate 28.34% 125.70% See accompanying notes which are an integral part of these financial statements.
Cloud, Neff Capital Appreciation Fund Notes to Financial Statements May 31, 2002 NOTE 1. ORGANIZATION The Cloud, Neff Capital Appreciation Fund (the "Fund") was organized as a diversified series of the AmeriPrime Advisors Trust (the "Trust") on April 10, 2000 and commenced operations on June 1, 2000. The Trust is established under the laws of Ohio by an Agreement and Declaration of Trust dated August 3, 1999 (the "Trust Agreement"). The Trust Agreement permits the Board of Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. The Fund is one of a series of funds currently authorized by the Board of Trustees. The Fund's investment objective is long-term capital appreciation. The investment adviser to the Fund is Cloud, Neff & Associates, Inc. (the "Adviser"). 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 that 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 Adviser 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. 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. If the Adviser decides that a price provided by the pricing services does not accurately reflect the fair market value of the securities, 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, in conformity with guidelines adopted by and subject to review of the Board of Trustees. Short-term investments in fixed-income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board of Trustees has determined will represent fair value. Federal Income Taxes - The Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions - The Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on an annual basis. The Fund intends to distribute its net long-term capital gains and its net short-term capital gains at least once a year. Other - The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Generally accepted accounting principles require that permanent financial reporting tax differences relating to shareholder distributions be reclassified to paid in capital. Cloud, Neff Capital Appreciation Fund Notes to Financial Statements May 31, 2002 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Fund retains Cloud, Neff & Associates, Inc., to manage the Fund's investments. Cloud, Neff & Associates, Inc. was founded in 1990 by Richard R. Cloud and David L. Neff, CPA. David L. Neff is the President of the Adviser. Richard R. Cloud is the Vice President of the Adviser and has been primarily responsible for the day-to-day management of the Fund's portfolio since its inception. Richard R. Cloud and David L. Neff may be deemed to control the Adviser due to their respective share of the ownership of the Adviser. Under the terms of the management agreement (the "Agreement"), the Adviser manages the Fund's investments subject to approval of the Board of Trustees. As compensation for its management services, the Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 2.00% of the average daily net assets of the Fund. For the year ended May 31, 2002, the Adviser earned fees of $106,513 from the Fund. The Advisor has contractually agreed to waive management fees and/or reimburse the Fund for expenses it incurs, but only to the extent necessary to maintain the Fund's operating expenses at 3.00% of its average daily net assets through September 30, 2002. For the year ended May 31, 2002, the Adviser reimbursed expenses of $22,095. The Fund retains Unified Fund Services, Inc. ("Unified"), a wholly owned subsidiary of Unified Financial Services, Inc., to manage the Fund's business affairs and provide the Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. Unified receives a monthly fee from the Fund equal to an annual rate of 0.10% of the Fund's average daily net assets up to $50 million, 0.075% of the Fund's average daily net assets from $50 million to $100 million, and 0.050% of the Fund's average daily net assets over $100 million (subject to a minimum fee of $2,500 per month). These services include transfer agency, fund accounting, administration, custody and related out-of-pocket expenses. For the year ended May 31, 2002, Unified earned fees of $30,000 from the Fund for administrative services provided to the Fund. On December 1, 2001, Unified contractually agreed, through May 31, 2002, to provide all contracted services to the Fund for 1% (annualized) of daily fund assets. For the year ended May 31, 2002, Unified reimbursed the Fund $21,527. A Trustee and the officers of the Trust are members of management and/or employees of Unified. The Fund also retains Unified to act as the Fund's transfer agent and fund accountant. For its services as transfer agent, Unified earned a monthly fee from the Fund of $1.20 per shareholder (subject to a minimum monthly fee of $1,250). For the year ended May 31, 2002, Unified earned fees of $11,930 from the Fund for transfer agent services provided to the Fund and fees of $1,995 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 $2,100 per month for assets of $20 million to $100 million). For the year ended May 31, 2002, Unified earned fees of $14,400 from the Fund for fund accounting services provided to the Fund. The Fund retains Unified Financial Securities, Inc., a wholly owned subsidiary of Unified Financial Services, Inc., to act as the principal distributor of its shares. There were no payments made to the distributor during the year ended May 31, 2002. A Trustee and officer of the Trust may be deemed to be an affiliate of Unified Financial Securities, Inc. Cloud, Neff Capital Appreciation Fund Notes to Financial Statements May 31, 2002 - continued NOTE 4. INVESTMENTS For the year ended May 31, 2002, purchases and sales of investment securities, other than short-term investments, aggregated $1,401,061 and $1,682,920, respectively. As of May 31, 2002, the gross unrealized appreciation for all securities totaled $143,076 and the gross unrealized depreciation for all securities totaled $4,332,041 for a net unrealized depreciation of $4,188,965. The aggregate cost of securities for federal income tax purposes at May 31, 2002 was $9,382,320. The difference between book cost and tax cost consists of wash sales in the amount of $307,292. NOTE 5. 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 6. RELATED PARTY TRANSACTIONS 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 May 31, 2002, National Investor Services Corp. held 100% of the Fund in an omnibus account for the benefit of others. NOTE 7. LOSS CARRYFORWARDS At May 31, 2002, the Fund had available for federal tax purposes an unused capital loss carryforward of $2,052,706, of which $1,377,996 expires in 2009 and $674,710 expires in 2010. Capital loss carryforwards are available to offset future realized capital gains. To the extent that these carryforwards are used to offset future capital gains, it is probable that the amount, which is offset, will not be distributed to shareholders. Information Regarding Trustees and Officers The following table provides information regarding each Trustee who is not an "interested person" of the Trust, as defined in the Investment Company Act of 1940. --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex Name, Age and Address with Trust Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Mark W. Muller Trustee Trustee since 1999 18 5016 Cedar River Tr. Ft. Worth, Texas 76137 Year of Birth: 1964 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- President of JAMAR Resources, Inc., a manufacturers representative None firm, September 2001 to present. Account Manager for SCI, Inc., a custom manufacturer, from April 2000 to September 2001. Account Manager for Clarion Technologies, a manufacturer of automotive, heavy truck, and consumer goods, from 1996 to April 2000. From 1986 to 1996, an engineer for Sicor, a telecommunication hardware company. ----------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex Name, Age and Address with Trust Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Richard J. Wright, Jr. Trustee Trustee since 1999 18 13532 N. Central Expressway MS 3800 Dallas, Texas 75243 Year of Birth: 1962 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- Various positions with Texas Instruments, a technology company, since None 1985, including the following: Program Manager for Semi-Conductor Business Opportunity Management System, 1998 to present; Development Manager for web-based interface, 1999 to present; Systems Manager for Semi-Conductor Business Opportunity Management System, 1997 to 1998; Development Manager for Acquisition Manager, 1996-1997; Operations Manager for Procurement Systems, 1994-1997. ----------------------------------------------------------------------- ----------------------------------------------
The following table provides information regarding each Trustee who is an "interested person" of the Trust, as defined in the Investment Company Act of 1940, and each officer of the Trust. --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) In Length of in Fund Complex Name, Age and Address Fund Complex Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Kenneth D. Trumpfheller* President, Trustee and 34 1725 E. Southlake Blvd. Secretary and President since 1999 Suite 200 Trustee Secretary since 2000 Southlake, Texas 76092 Year of Birth: 1958 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- President and Managing Director of Unified Fund Services, Inc., the None Fund's transfer agent, fund accountant and administrator, since October 2000. President, Treasurer and Secretary of AmeriPrime Financial Services, Inc., a fund administrator, (which merged with Unified Fund Services, Inc.) from 1994 through October 2000. President, Treasurer and Secretary of AmeriPrime Financial Securities, Inc., the Trust's distributor through December 2000, from 1994 through December 2000. ----------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) in Length of in Fund Complex Name, Age and Address Fund Complex Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Robert A. Chopyak Treasurer and Treasurer and CFO N/A 1725 E. Southlake Blvd. Chief Financial since 2000 Suite 200 Officer Southlake, Texas 76092 Year of Birth: 1968 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- Assistant Vice-President of Financial Administration of Unified Fund None Services, Inc., the Fund's transfer agent, fund accountant and administrator, since August 2000. Manager of AmeriPrime Financial Services, Inc. from February 2000 to August 2000. Self-employed, performing Y2K testing, January 1999 to January 2000. Vice President of Fund Accounting, American Data Services, Inc., a mutual fund services company, October 1992 to December 1998. ----------------------------------------------------------------------- ---------------------------------------------- * Mr. Trumpfheller in an "interested person" of the Trust because he is an officer of the Trust. In addition, he may be deemed to be and "interested person" of the Trust because he is a registered principal of the Trust's distributor.
June 30, 2002 The Stock Market This market environment has been incredibly difficult. The major indexes are once again back at the levels they first crossed in 1997 and 1998. To put things in perspective, let's look at the last two and a half years of this beleaguered market: o The market peaked in March 2000. o Following March 2000, the market entered a period of extreme volatility subsequently hitting multi-year lows April 4, 2001. o The market rallied significantly for a few months, only to eventually roll over and revisit the April lows on September 10, 2001. o It looked as if the April lows would hold; however, the September 11 terrorist attacks occurred sending the market reeling to even lower lows. o During the Fourth Quarter 2001 the market again rallied significantly, and it appeared that with the recession behind us, stability would return. o The gains held during the First Quarter 2002. Then in the Second Quarter, once again, the market headed south. o The last two weeks of June the major market indices revisited the post September 11 lows and have been bouncing around that level. The difficulty in this bear market lies in its unprecedented length and the extreme levels of its swings. Since 1900, there have been thirty-two bear markets. The median length of those bear markets has been 294 days. This current bear market is within a week of lasting 900 days-606 days longer than the median bear! Only twice in the history of the stock market has a bear lasted this long. The first one followed the Great Depression collapse in 1929 and lasted just over 813 days. The second occurred while Hitler was on his tyrannical rampage beginning 1939 and lasting 959 days. The Economic Market Unlike the economies of the previously mentioned bear markets, our economy is relatively sound. There aren't any massive bank failures. No one is trying to take over the world. The economic and world events resemble nothing to the events and havoc during WWII. And unlike the unemployment rate of 35% during the Great Depression, our unemployment is currently 5.8%. As a matter of fact, in the first quarter, the economy came out of its very short, much publicized recession. Gross Domestic Product, which is the primary measure of goods and services produced in the U.S., was 6.1% in the first quarter, doubling most estimates. The housing market is booming, interest rates are at all time lows, business inventories are trim, and consumer spending has been strong. And, according to a Wall Street Journal survey, during the next twelve months economists expect companies to register double-digit percentage profit gains. So, what's the deal? Why a dark cloud over a fairly bright economy? I think of the movie A Beautiful Mind where Russell Crowe plays the part of a brilliant mathematician, John Nash, who suffers from Paranoid Schizophrenia. Nash believes that imaginary beings and events are real, and to him they are real. A corollary to life, whether something is real or not, if we believe it is real then our behaviors and our reality reflect our belief. Apparently, many believe the economy is dead. While there are ailments that plague our economy, as discussed above it is relatively healthy and strong. However, some of the economic ills have been exaggerated-especially in the equity markets. I believe the media lends to the perceived distortions regarding our current economic landscape. Let's look at a few of the events addressed in the media from a different perspective, one that doesn't suggest corporate America's demise. We have an unstable Middle East situation. When has it been stable? Yes, Enron and WorldCom have had significant accounting irregularities; this doesn't mean all the thousands of U.S. companies also have accounting irregularities. As a scapegoat for Enron, Arthur Anderson gets dismantled by the government and its 28,000 employees lose their jobs. And then Martha Stewart sells just over 3,000 shares of stock that she no longer wants, and it turns into a juicy media insider trading scandal. The hyperbole surrounding these issues seems to suggest to investors that corporate America is in shambles. It isn't. Consequently, we have an economy that is quite sound, but a stock market that looks like Armageddon. Market Outlook Usually the stock market leads the economy. If you review the past nine recessions, the stock market hit bottom, on average, 135 days before the economy hit bottom. Last year, our expectation was that the market would turn positive about four months before the economy turned positive. And that is exactly what happened with the market turning positive last October. This current decline, however, and the retest of the September lows is not the expected market course. Based on the status of economy, the market should be much stronger than it is. The market may eventually align itself with the economy, as it always has in the past. The question is whether this will occur next week, next month or next year. With the extended length of this bear market, the probabilities favor it happening sooner rather than later. We have managed both the Paragon Fund and the Dynamic Fortress Fund with the expectation that the market lows were reached last September. Obviously, this was not the case. As a result, we have done little to cushion the decline, and both funds have experienced significant decline in asset value. We do anticipate a market rally soon, and we are positioning the portfolios to take advantage of such a rally. Most of our current holdings are in the Health, Technology, Retail, and Telecom sectors. We believe these traditional growth sectors will see the biggest ramp up in expected earnings once business investment broadens, and that the market, which discounts expectations, will reward these stocks accordingly, at least in the short to intermediate term. Sincerely, David A. Young President Fund Performance Paragon Dynamic Fortress Fund - Returns for Periods Ended May 31, 2002 - Average Annual Total Return Since Inception Last 3 Last 6 (June 8, 2000) Fund/Index Months Months One Year Paragon Dynamic Fortress Fund -3.46% -3.71% -10.12% -6.14% S&P 500 -3.27% -5.70% -13.86% -13.75% NASDAQ Composite -6.59% -16.15% -23.18% -35.17% Index
Paragon Dynamic Fund S&P500 NASDAQ Composite 6/8/00 10000 10000 10000 6/30/00 10030 9893 10332 7/31/00 10140 9739 9814 8/31/00 10260 10343 10960 9/30/00 10520 9797 9572 10/31/00 10170 9756 8783 11/30/00 10000 8987 6773 12/31/00 10587 9031 6443 1/31/01 10668 9351 7232 2/28/01 10179 8499 5614 3/31/01 9557 7961 4803 4/30/01 10067 8579 5524 5/31/01 9813 8637 5510 6/30/01 9606 8426 5645 7/31/01 9398 8343 5295 8/31/01 9222 7822 4717 9/30/01 8828 7190 3917 10/31/01 8859 7327 4419 11/30/01 9160 7889 5048 12/31/01 9397 7958 5102 1/31/02 9299 7842 5061 2/28/02 9136 7691 4532 3/31/02 9451 7980 4831 4/30/02 9332 7495 4422 5/31/02 8820 7440 4233
This graph, prepared in accordance with SEC regulations, shows the value of a hypothetical initial investment of $10,000 in the Funds, S&P 500 Index, and the NASDAQ Composite Index on June 8, 2000 (inception of the Fund) and held through May 31, 2002. The S&P 500 Index and NASDAQ Composite Index are widely recognized unmanaged indices of common stock prices and are representative of a broader market and range of securities than is found in the Fund portfolio. Individuals cannot invest directly in the indices. Performance figures reflect the change in value of the stocks in the indices, and reinvestment of dividends. The indices returns do not reflect expenses, which have been deducted from the Fund's return. The performance of the Fund is computed on a total return basis, which includes reinvestment of all dividends. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT PREDICT FUTURE RESULTS. Investment returns and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Fund Performance Paragon Fund - Returns for Periods Ended May 31, 2002 - Average Annual Total Return Since Inception Last 3 Last 5 (December 20, 2001) Fund/Index Months Months Year to Date Paragon Fund -10.08% -15.30% -18.56% -15.30% S&P 500 -3.27% -5.80% -6.52% -5.80% NASDAQ Composite -6.59% -15.64% -17.03% -15.64% Index
Paragon Fund S&P 500 NASDAQ Composite 12/20/01 10,000 10,000 10,000 12/31/01 10,400 10,077 10,168 1/31/02 9,740 9,930 10,085 2/28/02 9,420 9,738 9,031 3/31/02 9,780 10,104 9,629 4/30/02 9,490 9,490 8,812 5/31/02 8,470 9,420 8,436
This graph, prepared in accordance with SEC regulations, shows the value of a hypothetical initial investment of $10,000 in the Funds, S&P 500 Index, and the NASDAQ Composite Index on December 20, 2001 (inception of the Fund) and held through May 31, 2002. The S&P 500 Index and NASDAQ Composite Index are widely recognized unmanaged indices of common stock prices and are representative of a broader market and range of securities than is found in the Fund portfolio. Individuals cannot invest directly in the indices. Performance figures reflect the change in value of the stocks in the indices, and reinvestment of dividends. The indices returns do not reflect expenses, which have been deducted from the Fund's return. The performance of the Fund is computed on a total return basis, which includes reinvestment of all dividends. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. THE FUND'S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT PREDICT FUTURE RESULTS. Investment returns and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% Shares Value Air Courier Services - 1.0% FedEx Corp. (a) 1,900 $ 102,505 ---------------- Ball & Roller Bearings - 0.7% Timken Co. 3,200 71,680 ---------------- Biological Products (No Diagnostic Substances) - 3.5% Amgen, Inc. (a) 2,100 100,023 Charles River Laboratories International, Inc. (a) 2,100 77,175 Medimmune, Inc. (a) 3,100 100,812 Sangstat Medical Corp. (a) 3,800 83,600 ---------------- 361,610 ---------------- Bottled & Canned Soft Drinks Carbonated Waters - 0.8% Coca-Cola FEMSA, S.A. (c) 3,100 79,050 ---------------- Broadcasting - 0.8% Media General, Inc. - Class A 1,200 78,132 ---------------- Carpets & Rugs - 0.8% Interface, Inc. - Class A 9,100 82,173 ---------------- Chemicals & Allied Products - 0.4% Octel Corp. (a) 1,900 40,869 ---------------- Computer Communication Equipment - 1.0% Cisco Systems, Inc. (a) 6,400 100,992 ---------------- Computer Peripheral Equipment - 1.0% Xerox Corp. (a) 12,000 107,640 ---------------- Computer Storage Devices - 0.9% Simple Tech, Inc. (a) 6,700 36,515 Western Digital Corp. (a) 13,300 61,180 ---------------- 97,695 ---------------- Computers & Office Equipment - 1.0% International Business Machines, Inc. 1,300 104,585 ---------------- Construction Machinery & Equipment - 0.7% Astec Industries, Inc. (a) 4,400 73,832 ---------------- Consumer Products (Non - Durables) - Apparel, Footwear & Accessories - 0.8% Kenneth Cole Productions, Inc. (a) 3,000 79,260 ---------------- Electromedical & Electrotherapeutic Apparatus - 1.0% Medtronic, Inc. 2,300 106,145 ---------------- Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% - continued Shares Value Electronic Connectors - 1.0% Tyco International Ltd.. 4,800 105,360 ---------------- Electronic Instruments - 0.8% Herley Industries, Inc. (a) 3,800 77,900 ---------------- Energy Services - 1.0% Halliburton Co. 5,700 105,735 ---------------- Engines & Turbines - 0.7% Brunswick Corp. 2,800 74,480 ---------------- General Medical & Surgical Hospitals - 0.8% Medcath Corp. (a) 4,200 81,270 ---------------- Hospital & Medical Service Plans - 0.9% Triad Hospitals, Inc. (a) 2,000 90,380 ---------------- Hotels & Motels - 1.4% Four Seasons Hotels, Inc. 1,700 80,240 Hollywood Casino Corp. - Class A (a) 5,300 69,059 ---------------- 149,299 ---------------- Iron & Steel Foundries - 1.6% INTERMET Corp. 15,700 167,048 ---------------- Lumber, Wood Products (No furniture) - 0.7% Trex Company, Inc. (a) 2,600 72,020 ---------------- Miscellaneous Electrical Machinery, Equipment & Supplies - 0.4% Excel Technology, Inc. (a) 1,800 42,894 ---------------- Miscellaneous Fabricated Metal Products - 0.4% Barnes Group, Inc. 2,000 46,400 ---------------- Mortgage Bankers & Loan Correspondents - 0.9% New Century Financial Corp. 3,500 94,780 ---------------- Motor Vehicle Parts & Accessories - 0.9% American Axle & Manufacturing Holdings, Inc. (a) 3,200 96,640 ---------------- Motor Vehicles & Passenger Car Bodies - 1.5% General Motors Corp. 1,300 80,795 PACCAR, Inc. 1,700 75,208 ---------------- 156,003 ---------------- Newspapers: Publishing Or Publishing & Printing - 2.3% Pulitzer, Inc. 1,600 79,920 Scripps E.W. Co. - Class A 1,000 76,690 Tribune Co. 1,800 76,518 ---------------- 233,128 ---------------- Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% - continued Shares Value Orthopedic, Prosthetic & Surgical Appliances & Supplies - 2.3% American Medical Systems Holdings, Inc. (a) 3,700 85,100 Inamed, Inc. (a) 2,500 81,125 STERIS Corp. (a) 3,500 74,025 ---------------- 240,250 ---------------- Periodicals: Publishing or Publishing & Printing - 0.7% Meredith Corp. 1,900 76,836 ---------------- Pharmaceutical Preparations - 1.0% Pharmacia Corp. 2,400 103,656 ---------------- Photographic Equipment & Supplies - 0.8% Canon, Inc. (c) 2,100 81,480 ---------------- Plastics Products - 0.9% Alltrista Corp. (a) 2,500 92,850 ---------------- Printed Circuit Boards - 0.8% Benchmark Electronics, Inc. (a) 2,800 84,000 ---------------- Radio & TV Broadcasting & Communications Equipment - 0.7% Itron, Inc. (a) 2,400 69,648 ---------------- Radio Broadcasting Stations - 2.4% Cox Radio, Inc. - Class A (a) 2,800 76,580 Entercom Communications Corp. (a) 1,600 84,080 Regent Communications, Inc. (a) 11,600 89,900 ---------------- 250,560 ---------------- Retail - Auto & Home Supply Stores - 0.8% Advance Auto Parts, Inc. (a) 1,400 80,920 ---------------- Retail - Catalog & Mail - Order Houses - 0.8% J. Jill Group, Inc. (a) 2,400 78,192 ---------------- Retail - Department Stores - 1.0% Sears Roebuck & Co. 1,800 106,290 ---------------- Retail - Family Clothing Stores - 0.7% Urban Outfitters, Inc. (a) 2,600 76,908 ---------------- Retail - Home Furniture, Furnishings & Equipment Stores - 0.9% Williams-Sonoma, Inc. (a) 2,800 89,628 ---------------- Retail - Jewelry Stores - 0.8% Tiffany & Co. 2,100 78,750 ---------------- Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% - continued Shares Value Retail - Variety Stores - 0.7% Fred's, Inc. - Class A 2,200 75,240 ---------------- Semiconductors & Related Devices - 8.1% Actel Corp. (a) 3,200 78,720 Fairchild Semiconductor Int'l Corp. (a) 2,700 67,905 Intel Corp. 3,700 102,194 International Rectifier Corp. (a) 1,700 79,849 National Semiconductor Corp. (a) 3,400 104,380 Silicon Laboratories, Inc. (a) 3,000 71,640 Silicon Storage Technology, Inc. (a) 7,100 76,680 Standard Microsystems Corp. (a) 3,300 74,910 Texas Instruments, Inc. 3,600 103,212 Zoran Corp. (a) 3,450 83,663 ---------------- 843,153 ---------------- Service - Advertising - 1.0% Clear Channel Communications, Inc. (a) 2,000 106,460 ---------------- Services - Amusement & Recreation Services - 0.9% Westwood One, Inc. (a) 2,400 91,560 ---------------- Services - Business Services - 3.1% eSpeed, Inc. - Class A (a) 6,700 76,112 Hotels.com - Class A (a) 1,500 71,835 McAfee.com Corp. (a) 6,700 98,624 Neoforma, Inc. (a) 4,800 68,880 ---------------- 315,451 ---------------- Services - Computer Integrated Systems Design - 2.7% Cerner Corp. (a) 1,900 103,360 Computer Sciences Corp. (a) 2,200 104,214 Priceline.com, Inc. (a) 18,500 74,555 ---------------- 282,129 ---------------- Services - Computer Processing & Data Preparation - 0.8% Alliance Data Systems Corp. (a) 3,700 80,401 ---------------- Services - Computer Programming, Data Processing - 1.0% AOL Time Warner, Inc. (a) 5,600 104,720 ---------------- Services - Computer Programming Services - 1.3% JDA Software Group, Inc. (a) 2,800 74,144 Synaptics, Inc. (a) 4,000 64,800 ---------------- 138,944 ---------------- Services - Educational Services - 3.1% Apollo Group, Inc. - Class A (a) 2,300 79,304 ---------------- Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% - continued Shares Value Services - Educational Services - 3.1% - continued Career Education Corp. (a) 1,800 78,480 Corinthian Colleges, Inc. (a) 2,900 79,547 ITT Educational Services, Inc. (a) 1,700 83,980 ---------------- 321,311 ---------------- Services - Engineering Services - 1.6% URS Corp. (a) 5,500 162,360 ---------------- Services - Facilities Support Management Services - 0.3% Corrections Corp. of America (a) 2,000 32,440 ---------------- Services - General Medical & Surgical Hospitals - 1.6% Community Health Systems, Inc. (a) 2,700 79,488 Lifepoint Hospitals, Inc. (a) 2,100 81,711 ---------------- 161,199 ---------------- Services - Help Supply Services - 1.5% CDI Corp. (a) 2,700 75,546 Labor Ready, Inc. (a) 9,500 84,360 ---------------- 159,906 ---------------- Services - Medical Laboratories - 1.5% LabOne, Inc. (a) 3,400 79,220 Unilab Corp. (a) 2,800 78,736 ---------------- 157,956 ---------------- Services - Misc Health & Allied Services - 0.6% Hooper Holmes, Inc. 7,600 66,500 ---------------- Services - Personal Services - 0.5% Regis Corp. 1,900 54,720 ---------------- Services - Prepackaged Software - 3.8% Activision, Inc. (a) 2,500 81,550 Healtheon / WebMD Corp. (a) 12,000 78,240 Networks Associates, Inc. (a) 3,900 75,465 Verisity Ltd. (a) 9,200 153,925 ---------------- 389,180 ---------------- Special Industry Machinery - 1.5% Cymer, Inc. (a) 1,900 82,137 Novellus Systems, Inc. (a) 1,700 72,216 ---------------- 154,353 ---------------- Telegraph & Other Message Communications - 0.9% PayPal, Inc. (a) 3,200 91,904 ---------------- Paragon Dynamic Fortress Fund Schedule of Investments May 31, 2002 Common Stocks - 86.0% - continued Shares Value Telephone & Telegraph Apparatus - 0.2% Inet Technologies, Inc. (a) 2,100 20,496 ---------------- Telephone Communications (No Radio Telephone) - 3.0% Lucent Technologies, Inc. (a) 22,000 102,300 SBC Communications, Inc. 3,100 106,299 Verizon Communications, Inc. 2,400 103,200 ---------------- 311,799 ---------------- Title Insurance - 0.8% Landamerica Financial Group, Inc. 2,400 77,760 ---------------- Transportation Services - 0.8% Expedia, Inc. - Class A (a) 1,100 78,650 ---------------- Wholesale - Groceries & Related Products - 0.4% Nash Finch Co. 1,200 37,260 ---------------- TOTAL COMMON STOCKS (Cost $9,111,998) 8,905,325 ---------------- Investment Companies / Unit Investment Trusts - 11.6% Emerging Markets Telecommunications Fund, Inc. (a) 7,800 58,344 European Warrant Fund, Inc. (a) 14,000 46,200 ING Prime Rate Trust 16,000 107,040 John Hancock Bank and Thrift Opportunity Fund 10,000 86,800 Korea Fund, Inc. 2,900 50,112 LCM Internet Growth Fund, Inc. 21,365 49,994 Malaysia Fund, Inc. 25,000 122,000 Morgan Stanley Emerging Markets Debt Fund, Inc. 14,900 127,544 Morgan Stanley Eastern Europe Fund, Inc. (a) 3,900 79,482 Morgan Stanley Asia-Pacific Fund, Inc. (a) 5,875 53,815 New Ireland Fund, Inc. 18,400 205,160 Singapore Fund, Inc. 17,100 101,403 Templeton Russia Fund, Inc. 1,800 43,110 Thai Fund, Inc. 12,500 70,000 ---------------- TOTAL INVESMENT COMPANIES / UNIT INVESTMENT TRUSTS (Cost $1,392,796) 1,201,004 ---------------- Preferred Stocks Textile Mill Products - 1.8% U.S. Home & Garden, Inc. Tr I, 9.40% (Cost $131,935) 11,700 188,957 ---------------- Money Market Securities - 21.2% Huntington Money Fund - Invest A, 0.81%, (Cost $2,191,881) (b) 2,191,881 2,191,881 ---------------- TOTAL INVESTMENTS (Cost $12,828,610) - 120.6% $ 12,487,167 ---------------- Liabilities in excess of cash and other assets - (20.6%) (2,134,162) ---------------- TOTAL NET ASSETS - 100.0% $ 10,353,005 ================ (a) Non-income producing. (b) Variable rate security; the coupon rate shown represents the rate at May 31, 2002. (c) American Depositary Receipts. See accompanying notes which are an integral part of these financial statements.
Paragon Fund Schedule of Investments May 31, 2002 Common Stocks - 97.5% Shares Value Ball & Roller Bearings - 0.8% Timken Co. 2,800 $ 62,720 ---------------- Biological Products (No Diagnostic Substances) - 4.6% Abgenix, Inc. (a) 6,300 81,270 Biogen, Inc. (a) 1,700 84,796 Charles River Laboratories International, Inc. (a) 1,700 62,475 Invitrogen Corp. (a) 2,400 84,312 SangStat Medical Corp. (a) 3,100 68,200 ---------------- 381,053 ---------------- Bottled & Canned Soft Drinks Carbonated Waters - 0.8% Coca-Cola FEMSA, S.A. (c) 2,600 66,300 ---------------- Broadcasting - 0.8% Media General, Inc. 1,000 65,110 ---------------- Chemicals & Allied Products - 0.4% Octel Corp. (a) 1,600 34,416 ---------------- Computer Communication Equipment - 2.0% Cisco Systems, Inc. (a) 5,200 82,056 Juniper Networks, Inc. (a) 8,900 82,503 ---------------- 164,559 ---------------- Computer Storage Devices - 0.6% Western Digital Corp. (a) 11,000 50,600 ---------------- Consumer Products (Non - Durables) - Apparel, Footwear & Accessories - 0.7% Kenneth Cole Productions, Inc. (a) 2,300 60,766 ---------------- Electronic Computers - 2.0% Dell Computer Corp. (a) 3,100 83,235 Sun Microsystems, Inc. (a) 12,000 82,680 ---------------- 165,915 ---------------- Fire, Marine, Casualty Insurance - 1.0% ACE Ltd.. 2,400 83,064 ---------------- Functions Related to Depository Banking - 1.0% Banco Bradesco S.A. (c) 3,200 84,480 ---------------- Hotels & Motels - 0.7% Hollywood Casino Corp. - Class A (a) 4,500 58,635 ---------------- Paragon Fund Schedule of Investments May 31, 2002 Common Stocks - 97.5% - continued Shares Value In Vitro & In Vivo Diagnostic Substances - 1.9% Human Genome Sciences, Inc. (a) 4,700 $ 81,075 Immunomedics, Inc. (a) 6,800 79,560 ---------------- 160,635 ---------------- Laboratory Analytical Instruments - 1.1% Mettler Toledo International, Inc. (a) 2,300 93,495 ---------------- Miscellaneous Manufacturing Industries - 1.2% International Game Technology (a) 1,600 100,000 ---------------- Mortgage Bankers & Loan Correspondents - 1.1% New Century Financial Corp. 3,400 92,072 ---------------- Motor Vehicle Parts & Accessories - 2.1% American Axle & Manufacturing Holdings, Inc. (a) 2,900 87,580 Autoliv, Inc. 3,800 89,148 ---------------- 176,728 ---------------- National Commercial Banks - 2.2% Citigroup, Inc. 2,000 86,360 PNC Financial Services Group, Inc. 1,700 95,625 ---------------- 181,985 ---------------- Newspapers: Publishing Or Publishing & Printing - 1.6% Pulitzer, Inc. 1,300 64,935 Scripps E.W. Co. - Class A 900 69,021 ---------------- 133,956 ---------------- Oil & Gas Exploration & Production - 1.0% Petroleo Brasileiro (d) 3,500 83,335 ---------------- Orthopedic, Prosthetic & Surgical Appliances & Supplies - 1.6% American Medical Systems Holdings, Inc. (a) 3,100 71,300 STERIS Corp. (a) 3,000 63,450 ---------------- 134,750 ---------------- Periodicals: Publishing or Publishing & Printing - 0.8% Meredith Corp. 1,600 64,704 ---------------- Pharmaceutical Preparations - 4.3% Bristol-Myers Squibb, Inc. 3,100 96,472 Cubist Pharmaceuticals, Inc. (a) 6,300 91,350 Genentech, Inc. (a) 2,500 88,750 Inhale Therapeutic Systems, Inc. (a) 11,500 84,295 ---------------- 360,867 ---------------- Plastics Products - 0.9% Alltrista Corp. (a) 2,100 77,994 ---------------- Paragon Fund Schedule of Investments May 31, 2002 Common Stocks - 97.5% - continued Shares Value Printed Circuit Boards - 1.9% Benchmark Electronics, Inc. (a) 2,500 $ 75,000 Sanmina Corp. (a) 7,200 82,800 ---------------- 157,800 ---------------- Radio & TV Broadcasting & Communications Equipment - 1.7% Itron, Inc. (a) 2,100 60,942 QUALCOMM, Inc. (a) 2,600 82,264 ---------------- 143,206 ---------------- Radio Broadcasting Stations - 0.4% Beasley Broadcast Group, Inc. - Class A (a) 600 8,652 Entercom Communications Corp. (a) 500 26,275 ---------------- 34,927 ---------------- Retail - Auto & Home Supply Stores - 0.8% Advance Auto Parts, Inc. (a) 1,200 69,360 ---------------- Retail - Catalog & Mail - Order Houses - 1.0% Amazon.com, Inc. (a) 4,500 82,035 ---------------- Retail - Home Furniture, Furnishings & Equipment Stores - 0.9% Williams-Sonoma, Inc. (a) 2,400 76,824 ---------------- Retail - Jewelry Stores - 0.8% Tiffany & Co. 1,700 63,750 ---------------- Retail - Variety Stores - 1.0% Wal-Mart Stores, Inc. 1,600 86,560 ---------------- Security Brokers, Dealers & Flotation Companies - 2.2% Ameritrade Holding Corp. - Class A (a) 16,000 85,120 Knight Trading Group, Inc. (a) 15,400 97,790 ---------------- 182,910 ---------------- Semiconductors & Related Devices - 17.5% Actel Corp. (a) 2,600 63,960 Advanced Micro Devices, Inc. (a) 7,500 85,725 Analog Devices, Inc. (a) 2,300 84,226 Applied Micro Circuits Corp. (a) 13,000 79,950 Atmel Corp. (a) 9,800 80,556 ESS Technology, Inc. (a) 4,200 66,864 Fairchild Semiconductor Int'l Corp. (a) 2,300 57,845 Intersil Holding Corp. - Class A (a) 2,600 62,452 International Rectifier Corp. (a) 1,400 65,758 Lattice Semiconductor Corp. (a) 7,600 81,320 Paragon Fund Schedule of Investments May 31, 2002 Common Stocks - 97.5% - continued Shares Value Semiconductors & Related Devices - 17.5% - continued Linear Technology Corp. 4,500 $ 167,625 Marvell Technology Group Ltd. (a) 2,000 62,960 Microchip Technology, Inc. (a) 2,200 65,780 Nvidia Corp. (a) 2,500 83,650 Qlogic Corp. (a) 1,800 82,296 Silicon Laboratories, Inc. (a) 2,500 59,700 Silicon Storage Technology, Inc. (a) 6,000 64,800 Standard Microsystems Corp. (a) 2,900 65,830 Zoran Corp. (a) 3,000 72,750 ---------------- 1,454,047 ---------------- Services - Advertising - 1.1% Doubleclick, Inc. (a) 10,700 88,168 ---------------- Services - Amusement & Recreation Services - 0.9% Westwood One, Inc. (a) 2,000 76,300 ---------------- Services - Business Services - 3.6% Accenture Ltd. (a) 3,500 72,975 eBAY, Inc. (a) 1,500 82,815 Hotels.com - Class A (a) 1,300 62,257 McAfee.com Corp. (a) 5,600 82,432 ---------------- 300,479 ---------------- Services - Commercial Physical & Biological Research - 0.6% Maxygen, Inc. (a) 4,800 48,336 ---------------- Services - Computer Integrated Systems Design - 2.6% Cerner Corp. (a) 1,200 65,280 Priceline.com, Inc. (a) 15,700 63,271 Vastera, Inc. (a) 15,000 89,250 ---------------- 217,801 ---------------- Services - Computer Programming Services - 2.8% CIBER, Inc. (a) 11,700 89,973 JDA Software Group, Inc. (a) 2,400 63,552 Verisign, Inc. (a) 8,400 81,312 ---------------- 234,837 ---------------- Services - Computer Programming, Data Processing, Etc. - 1.1% Red Hat, Inc. (a) 18,700 89,947 ---------------- Services - Educational Services - 0.8% Apollo Group, Inc. - Class A (a) 1,800 62,064 ---------------- Services - Help Supply Services - 0.8% CDI Corp. (a) 2,300 64,354 ---------------- Paragon Fund Schedule of Investments May 31, 2002 Common Stocks - 97.5% - continued Shares Value Services - Management Consulting Services - 0% Marchfirst, Inc. (a) 97,200 $ 68 ---------------- Services - Medical Laboratories - 0.7% LabOne, Inc. (a) 2,600 60,580 ---------------- Services - Prepackaged Software - 12.4% Activision, Inc. (a) 1,900 61,978 BEA Systems, Inc. (a) 7,600 81,776 BMC Software (a) 5,600 94,696 HPL Technologies, Inc. (a) 7,200 92,232 I2 Technologies, Inc. (a) 51,000 201,450 Legato Systems, Inc. (a) 13,400 83,884 Microsoft Corp. (a) 1,700 86,717 Precise Software Solutions Ltd. (a) 6,800 86,224 Rational Software Corp. (a) 7,100 80,798 Serena Software, Inc. (a) 6,000 84,960 VERITAS Software Corp. (a) 3,300 74,811 ---------------- 1,029,526 ---------------- Special Industry Machinery - 1.5% Cymer, Inc. (a) 1,600 69,168 Novellus Systems, Inc. (a) 1,300 55,224 ---------------- 124,392 ---------------- State Commercial Banks - 1.1% Bank of New York, Inc. 2,500 90,750 ---------------- Telephone & Telegraph Apparatus - 1.1% Inet Technologies, Inc. (a) 500 4,880 Tellabs, Inc. (a) 8,700 84,042 ---------------- 88,922 ---------------- Telephone Communications (No Radio Telephone) - 1.2% Cable & Wireless Plc. (c) 10,400 98,072 ---------------- Transportation Services - 0.8% Expedia, Inc. - Class A (a) 900 64,350 ---------------- Wholesale - Electronic Parts & Equipment - 1.0% Arrow Electronics, Inc. (a) 3,400 85,068 ---------------- TOTAL COMMON STOCKS (Cost $8,382,897) 8,113,572 ---------------- Paragon Fund Schedule of Investments May 31, 2002 Shares Value Money Market Securities - 26.5% Huntington Money Fund - Invest A, 0.81%, (Cost $2,209,475) (b) 2,209,475 $ 2,209,475 ---------------- TOTAL INVESTMENTS (Cost $10,592,372) - 124.0% $ 10,323,047 ---------------- Liabilities in excess of cash and other assets - (24.0%) (1,999,500) ---------------- TOTAL NET ASSETS - 100.0% $ 8,323,547 ================ (a) Non-income producing. (b) Variable rate security; the coupon rate shown represents the rate at May 31, 2002. (c) American Depositary Receipts. See accompanying notes which are an integral part of these financial statements.
Paragon Funds Statement of Assets & Liabilities May 31, 2002 Paragon Dynamic Fortress Paragon Fund Fund ------------- ------------- Assets Investments in securities, at value (cost $12,828,610 and $10,592,372, respectively) $ 12,487,167 $ 10,323,047 Cash 22,143 - Interest receivable 1,291 802 Dividends receivable 4,713 776 Receivable for investments sold 2,903,179 1,052,392 Receivable for fund shares sold 1,150 7,645 Receivable from broker 1,996 10,952 Prepaid assets 2,500 1,799 ------------- ------------- Total assets 15,424,139 11,397,413 ------------- ------------- Liabilities Accrued advisory fees 15,030 14,956 Redemptions payable - 850 Other payables and accrued expenses 18,847 21,606 Payable for investments purchased 5,037,257 3,036,454 ------------- ------------- Total liabilities 5,071,134 3,073,866 ------------- ------------- Net Assets $ 10,353,005 $ 8,323,547 ============= ============= Net Assets consist of: Paid in capital 13,054,805 9,822,049 Distributions in excess of net investment income (195,914) - Accumulated net realized gain (loss) on investments (2,164,443) (1,229,177) Net unrealized appreciation (depreciation) on investments (341,443) (269,325) ------------- ------------- Net Assets, for 1,278,752 and 982,187 shares, respectively $ 10,353,005 $ 8,323,547 ============= ============= Net Asset Value Net Asset Offering price and redemption price per share ($10,353,005 / 1,278,752 and $8,323,547 / 982,187, respectively) $ 8.10 $ 8.47 ============= ============= See accompanying notes which are an integral part of these financial statements.
Paragon Funds Statement of Operations Paragon Dynamic Fortress Paragon Fund (a) Fund (b) --------------- -------------- Investment Income Dividend income $ 224,536 $ 10,427 Interest income 125,203 7,670 --------------- -------------- Total Income 349,739 18,097 --------------- -------------- Expenses Investment advisor fee 261,006 85,970 Custodian expenses 25,720 21,755 Legal expenses 12,477 9,007 Dividend expense for short sales 7,668 - Interest expense for short sales 5,243 8 Auditing expenses 5,000 6,000 Administration expenses 4,684 11,225 Transfer agent expenses 4,208 7,668 Fund accounting expenses 3,747 8,760 Insurance expenses 3,422 994 Printing expenses 2,478 1,559 Pricing expenses 1,970 5,029 Trustee expenses 1,600 758 Miscellaneous expenses 432 770 Registration expenses 9 717 --------------- -------------- Total Expenses 339,664 160,220 Reimbursed expenses (1,619) - --------------- -------------- Total operating expenses 338,045 160,220 --------------- -------------- Net Investment Income (Loss) 11,694 (142,123) --------------- -------------- Realized & Unrealized Gain (Loss) Net realized gain (loss) on investment securities (1,680,700) (1,231,639) Net realized gain (loss) on short sales (45,047) 2,462 Distribution of realized capital gains from other investment companies 46,198 - Change in net unrealized appreciation (depreciation) on investment securities 294,315 (269,325) --------------- -------------- Net realized and unrealized gain (loss) on investment securities (1,385,234) (1,498,502) --------------- -------------- Net increase (decrease) in net assets resulting from operations $ (1,373,540) $(1,640,625) =============== ============== (a) For the year ended May 31, 2002. (b) For the period December 20, 2001 (Commencement of Operations) through May 31, 2002. See accompanying notes which are an integral part of these financial statements.
Paragon Funds Statement of Changes in Net Assets Paragon Dynamic Fortress Fund Year ended Period ended Operations May 31,2002 May 31,2001 (a) --------------- -------------- Net investment income (loss) $ 11,694 $ 782,305 Net realized gain (loss) on investment securities (1,679,549) (167,217) Change in net unrealized appreciation (depreciation) 294,315 (635,758) --------------- -------------- Net increase (decrease) in net assets resulting from operations (1,373,540) (20,670) --------------- -------------- Distributions From net investment income (208,934) (780,979) From net realized gain (317,677) - --------------- -------------- Total distributions (526,611) (780,979) --------------- -------------- Capital Share Transactions Proceeds from shares sold 2,390,403 30,670,461 Reinvestment of distributions 526,611 780,979 Amount paid for shares repurchased (7,317,774) (13,995,875) --------------- -------------- Net increase (decrease) in net assets resulting from share transactions (4,400,760) 17,455,565 --------------- -------------- Total Increase (Decrease) in Net Assets (6,300,911) 16,653,916 --------------- -------------- Net Assets Beginning of period 16,653,916 - --------------- -------------- End of period [including accumulated net investment income (loss) of $(146,186) and $1,326, respectively] $ 10,353,005 $ 16,653,916 =============== ============== Capital Share Transactions Shares sold 275,188 3,061,076 Shares issued in reinvestment of distributions 62,100 77,663 Shares repurchased (817,626) (1,379,649) --------------- -------------- Net increase (decrease) from capital transactions (480,338) 1,759,090 =============== ============== (a) For the period June 8, 2000 (Commencement of Operations) through May 31, 2001. See accompanying notes which are an integral part of these financial statements.
Paragon Funds Statement of Changes in Net Assets Paragon Fund Period ended Increase (Decrease) in Net Assets May 31, 2002 (a) ----------------- Operations Net investment income (loss) $ (142,123) Net realized gain (loss) on investment securities (1,229,177) Change in net unrealized appreciation (depreciation) (269,325) ----------------- Net increase (decrease) in net assets resulting from operations (1,640,625) ----------------- Distributions From net investment income - From net realized gain - ----------------- Total distributions - ----------------- Capital Share Transactions Proceeds from shares sold 11,395,374 Reinvestment of distributions - Amount paid for shares repurchased (1,431,202) ----------------- Net increase (decrease) in net assets resulting from share transactions 9,964,172 ----------------- Total Increase (Decrease) in Net Assets 8,323,547 ----------------- Net Assets Beginning of period - ----------------- End of period $ 8,323,547 ================= Capital Share Transactions Shares sold 1,135,236 Shares issued in reinvestment of distributions - Shares repurchased (153,049) ----------------- Net increase (decrease) from capital transactions 982,187 ================= (a) For the period December 20, 2001 (Commencement of Operations) through May 31, 2002. See accompanying notes which are an integral part of these financial statements.
Paragon Dynamic Fortress Fund Financial Highlights Year ended Period ended May 31,2002 May 31,2001 (c) ------------------ ---------------- Selected Per Share Data Net asset value, beginning of period $ 9.47 $ 10.00 ------------------ ---------------- Income from investment operations Net investment income (loss) 0.01 0.35 Net realized and unrealized gain (loss) (0.95) (0.67) ------------------ ---------------- Total from investment operations (0.94) (0.32) ------------------ ---------------- Less Distributions to shareholders: From net investment income (0.17) (0.21) From net realized gain (0.26) 0.00 ------------------ ---------------- Total distributions (0.43) (0.21) ------------------ ---------------- Net asset value, end of period $ 8.10 $ 9.47 ================== ================ Total Return (10.12)% (1.87)(b) Ratios and Supplemental Data Net assets, end of period (000) $ 10,353 $ 16,654 Ratio of expenses to average net assets before reimbursement excluding dividends and borrowing cost on securities sold short. 2.76% 2.25% (a) Ratio of expenses to average net assets before reimbursement on expenses from dividends on securities sold short. 0.11% 0.05% (a) Total ratio of expenses to average net assets before reimbursement 2.87% 2.30% (a) Ratio of expenses to average net assets after reimbursement excluding dividends and borrowing cost on securities sold short. 2.74% 2.25% (a) Ratio of expenses to average net assets after reimbursement on expenses from dividends on securities sold short. 0.11% 0.05% (a) Total ratio of expenses to average net assets after reimbursement 2.85% 2.30% (a) Ratio of net investment income to average net assets 0.10% 3.45% (a) Ratio of net investment income to average net assets before expense reimbursement 0.09% 3.45% (a) 3210.11% 977.69% (a) Annualized. (b) For periods of less than a full year, total return is not annualized. (c) For the period June 8, 2000 (Commencement of Operations) through May 31, 2001. See accompanying notes which are an integral part of these financial statements.
Paragon Fund Financial Highlights Period ended May 31,2002 (b) ------------------ Selected Per Share Data Net asset value, beginning of period $ 10.00 ------------------ Income from investment operations Net investment income (loss) (0.14) Net realized and unrealized gain (loss) (1.39) ------------------ Total from investment operations (1.53) ------------------ Less Distributions to shareholders: From net investment income 0.00 From net realized gain 0.00 ------------------ Total distributions 0.00 ------------------ Net asset value, end of period $ 8.47 ================== Total Return (15.30)% Ratios and Supplemental Data Net assets, end of period (000) $ 8,324 Ratio of expenses to average net assets 3.63% (a) Ratio of net investment income to average net assets (3.22)% (a) Portfolio turnover rate 2,684.23% (a) Annualized. (b) For the period December 20, 2001 (Commencement of Operations) through May 31, 2002. See accompanying notes which are an integral part of these financial statements.
Paragon Funds Notes to Financial Statements May 31, 2002 NOTE 1. ORGANIZATION The Paragon Dynamic Fortress Fund (the "Dynamic Fortress Fund") and the Paragon Fund (the "Paragon Fund") (each a "Fund" or collectively as the "Funds") were organized as non-diversified series of the AmeriPrime Advisors Trust (the "Trust") on April 10, 2000 and July 19, 2001, respectively, and commenced operations on June 8, 2000 and December 20, 2001, respectively. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated August 3, 1999 (the "Trust Agreement"). The Trust Agreement permits the Board of Trustees to issue an unlimited number of shares of beneficial interest of separate series without par value. Each Fund is one of a series of Funds currently authorized by the Board of Trustees. The investment objective of the Dynamic Fortress Fund is long-term growth of capital and preservation of capital. The investment objective of the Paragon Fund is long-term growth of capital. The investment adviser to the Funds is Paragon Capital Management, Inc. (the "Adviser"). NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies followed by each Fund in the preparation of its financial statements. Securities Valuation - Securities that 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 Funds' Adviser, 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 Fund's Adviser, in conformity with guidelines adopted by the and subject to review of the Board of Trustees. 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. If the Adviser decides that a price provided by the pricing services does not accurately reflect the fair market value of the securities, 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, in conformity with guidelines adopted by and subject to the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board of Trustees has determined will represent fair value. Short Sales - Each Fund may sell a security short in anticipation of a decline in the market value of the security. When a Fund engages in a short sale, it sells a security, which it does not own. To complete the transaction, the Fund must borrow the security in order to deliver it to the buyer. The Fund must replace the borrowed security by purchasing it at the market price at the time of replacement, which may be more or less than the price at which the Fund sold the security. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a profit if the security declines in price between those dates. Any potential gain is limited to the price at which the Fund sold the security short, and any potential loss is unlimited in size. Paragon Funds Notes to Financial Statements May 31, 2002 - continued NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued Federal Income Taxes - Each Fund intends to qualify each year as a "regulated investment company" under the Internal Revenue Code of 1986, as amended. By so qualifying, each Fund will not be subject to federal income taxes to the extent that it distributes substantially all of its net investment income and any realized capital gains. Dividends and Distributions - Each 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 - Each Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Generally accepted accounting principles require that permanent financial reporting tax differences relating to shareholder distributions be reclassified to paid-in-capital for the Paragon Fund. NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Paragon Capital Management, Inc., serves as the Adviser. Together, David Allen Young and Catherine B. Young own 100% of, and may be deemed to control, Paragon Capital Management, Inc. Under the terms of the management agreements (the "Agreements"), the Adviser manages each Fund's investments subject to approval of the Board of Trustees. On March 21, 2002, the shareholders of the Dynamic Fortress Fund approved a new management agreement with the Adviser. The new management agreement is substantially similar to the old agreement except that (i) the Adviser reduced its fees for the Dynamic Fortress Fund and (ii) the Adviser is no longer responsible for paying all of the Dynamic Fortress Fund's operating expenses. As compensation for its management services and agreement to pay each Fund's expenses, each Fund is obligated to pay the Adviser a fee computed and accrued daily and paid monthly at an annual rate of 1.95% of the average daily net assets of the Fund. Prior to March 21, 2002, the Adviser earned a fee of 2.25% of the average daily net assets for the Dynamic Fortress Fund, and was responsible for paying all of the operating expenses of the Fund except brokerage fees and commissions, taxes, borrowing costs, fees and expenses of non-interested person trustees, extraordinary expenses and expenses incurred pursuant to Rule 12b-1 under the Investment Company Act of 1940. For the year ended May 31, 2002, the Adviser earned a fee of $261,006 for the Dynamic Fortress Fund and for the period December 20, 2001 (commencement of operations) to May 31, 2002, the Adviser earned a fee of $85,970 for the Paragon Fund. The Adviser may waive all or part of its fee, at any time, and at its sole discretion, but such action shall not obligate the Adviser to waive any fees in the future. The Adviser voluntarily agreed to reimburse the Dynamic Fortress Fund for fees and expenses of non-interested person Trustees incurred by the Fund for the period June 1, 2001 to March 20, 2002. For the year ended May 31, 2002, the Adviser reimbursed expenses of $1,619 for the Dynamic Fortress Fund. There is no guarantee that the Adviser will continue to reimburse such fees and expenses in the future. Each Fund has retained Unified Fund Services, Inc. ("Unified"), a wholly owned subsidiary of Unified Financial Services, Inc., to manage each Fund's business affairs and provide each Fund with administrative services, including all regulatory reporting and necessary office equipment and personnel. For the period June 1, 2001 to March 20, 2002, the Adviser paid all administrative fees on behalf of the Dynamic Fortress Fund per the Agreement. Effective March 21, 2002 the Fund is responsible for these expenses. Paragon Funds Notes to Financial Statements May 31, 2002 - continued NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued From March 21, 2002 for the Dynamic Fortress Fund and December 20, 2001 (commencement of operations) for the Paragon Fund, Unified received a monthly fee from each Fund equal to an annual rate of 0.10% of each Fund's average daily net assets up to $50 million, 0.075% of each Fund's average daily net assets from $50 million to $100 million, and 0.050% of each Fund's average daily net assets over $100 million (subject to a minimum fee of $2,100 per month). For the period of March 21, 2002 to May 31, 2002, Unified earned fees of $4,684 from the Dynamic Fortress Fund for administrative services provided. For the period of December 20, 2001 to May 31, 2002, Unified earned fees of $11,225 from the Paragon Fund for administrative services provided. A Trustee and the officers of the Trust are members of management and/or employees of Unified. The Funds also retains Unified to act as each Fund's transfer agent and fund accountant. For its services as transfer agent, Unified earned a monthly fee from the Funds of $1.20 per shareholder (subject to a minimum monthly fee of $900). For the periods March 21, 2002 to May 31, 2002 and December 20, 2001 to May 31, 2002, respectively, Unified earned fees of $4,208 and $7,668 for the Dynamic Fund and the Paragon Fund, respectively, for transfer agent services provided to the Funds. For its services as fund accountant, Unified receives an annual fee from each Fund equal to 0.0275% of each Fund's assets up to $100 million, 0.0250% of each Fund's assets from $100 million to $300 million, and 0.0200% of each Fund's assets over $300 million (subject to various monthly minimum fees, the maximum being $2,100 per month for assets of $20 million to $100 million). For the periods March 21, 2002 to May 31, 2002 and December 20, 2001 to May 31, 2002, Unified earned fees of $3,747 and $8,760 for the Dynamic Fund and the Paragon Fund, respectively, for fund accounting services provided to the Funds. The Funds retain Unified Financial Securities, Inc., a wholly owned subsidiary of Unified Financial Services, Inc., to act as the principal distributor of their shares. There were no payments made to the distributor during the year ended May 31, 2002. A Trustee and officer of the Trust may be deemed to be an affiliate of Unified Financial Securities, Inc. David Allen Young, owner of the Adviser, is a registered representative for the brokerage firm, Delta Equities. The Funds execute portfolio transactions through Delta Equities. For the year ended May 31, 2002, Delta Equities received $107,347 in commissions from the Paragon Dynamic Fortress Fund. For the period of December 20, 2001 (commencement of operations), through May 31, 2002, Delta Equities received $182,871 in commissions from the Paragon Fund. NOTE 4. INVESTMENTS Dynamic Fortress Fund. For the year ended May 31, 2002, purchases and sales of investment securities, other than short-term investments, aggregated $295,999,012 and $298,293,783, respectively. As of May 31, 2002, the gross unrealized appreciation for all securities totaled $358,426 and the gross unrealized depreciation for all securities totaled $699,869 for a net unrealized depreciation of $341,443. The aggregate cost of securities for federal income tax purposes at May 31, 2002 was $13,334,578. The difference between book cost and tax cost consists of wash sales in the amount of $505,968. Paragon Fund. For the five months ended May 31, 2002, purchases and sales of investment securities, other than short-term investments, aggregated $170,866,144 and $161,254,070, respectively. As of May 31, 2002, the gross unrealized appreciation for all securities totaled $109,022 and the gross unrealized depreciation for all securities totaled $378,347 for a net unrealized depreciation of $269,325. The aggregate cost of securities for federal income tax purposes at May 31, 2002 was $11,462,627. The difference between book cost and tax cost consists of wash sales in the amount of $870,255. Paragon Funds Notes to Financial Statements May 31, 2002 - continued NOTE 5. 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 6. RELATED PARTY TRANSACTIONS 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 May 31, 2002, Charles Schwab & Co. held 99.78% of the Dynamic Fortress Fund in an omnibus account for the benefit of others. As of May 31, 2002, Charles Schwab & Co. held 93.06% of the Paragon Fund in an omnibus account for the benefit of others. NOTE 7. CAPITAL LOSS CARRYFORWARD At May 31, 2002, the Paragon Dynamic Fortress Fund had available for federal tax purposes an unused capital loss carryforward of $1,657,707, which expires in 2010. At May 31, 2002, the Paragon Fund had available for federal tax purposes an unused capital loss carryforward of $358,922 which expires in 2010. Capital loss carryforwards are available to offset future realized capital gains. To the extent that these carryforwards are used to offset future capital gains, it is probable that the amount, which is offset, will not be distributed to shareholders. Information Regarding Trustees and Officers The following table provides information regarding each Trustee who is not an "interested person" of the Trust, as defined in the Investment Company Act of 1940. --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex Name, Age and Address with Trust Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Mark W. Muller Trustee Trustee since 1999 18 5016 Cedar River Tr. Ft. Worth, Texas 76137 Year of Birth: 1964 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- President of JAMAR Resources, Inc., a manufacturers representative None firm, September 2001 to present. Account Manager for SCI, Inc., a custom manufacturer, from April 2000 to September 2001. Account Manager for Clarion Technologies, a manufacturer of automotive, heavy truck, and consumer goods, from 1996 to April 2000. From 1986 to 1996, an engineer for Sicor, a telecommunication hardware company. ----------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex Name, Age and Address with Trust Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Richard J. Wright, Jr. Trustee Trustee since 1999 18 13532 N. Central Expressway MS 3800 Dallas, Texas 75243 Year of Birth: 1962 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- Various positions with Texas Instruments, a technology company, since None 1985, including the following: Program Manager for Semi-Conductor Business Opportunity Management System, 1998 to present; Development Manager for web-based interface, 1999 to present; Systems Manager for Semi-Conductor Business Opportunity Management System, 1997 to 1998; Development Manager for Acquisition Manager, 1996-1997; Operations Manager for Procurement Systems, 1994-1997. ----------------------------------------------------------------------- ----------------------------------------------
The following table provides information regarding each Trustee who is an "interested person" of the Trust, as defined in the Investment Company Act of 1940, and each officer of the Trust. --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) In Length of in Fund Complex Name, Age and Address Fund Complex Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Kenneth D. Trumpfheller* President, Trustee and 34 1725 E. Southlake Blvd. Secretary and President since 1999 Suite 200 Trustee Secretary since 2000 Southlake, Texas 76092 Year of Birth: 1958 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- President and Managing Director of Unified Fund Services, Inc., the None Fund's transfer agent, fund accountant and administrator, since October 2000. President, Treasurer and Secretary of AmeriPrime Financial Services, Inc., a fund administrator, (which merged with Unified Fund Services, Inc.) from 1994 through October 2000. President, Treasurer and Secretary of AmeriPrime Financial Securities, Inc., the Trust's distributor through December 2000, from 1994 through December 2000. ----------------------------------------------------------------------- ---------------------------------------------- --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) in Length of in Fund Complex Name, Age and Address Fund Complex Time Served Overseen by Trustee --------------------------------------------------- ------------------- --------------------- ------------------------ --------------------------------------------------- ------------------- --------------------- ------------------------ Robert A. Chopyak Treasurer and Treasurer and CFO N/A 1725 E. Southlake Blvd. Chief Financial since 2000 Suite 200 Officer Southlake, Texas 76092 Year of Birth: 1968 --------------------------------------------------- ------------------- --------------------- ------------------------ ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee ----------------------------------------------------------------------- ---------------------------------------------- ----------------------------------------------------------------------- ---------------------------------------------- Assistant Vice-President of Financial Administration of Unified Fund None Services, Inc., the Fund's transfer agent, fund accountant and administrator, since August 2000. Manager of AmeriPrime Financial Services, Inc. from February 2000 to August 2000. Self-employed, performing Y2K testing, January 1999 to January 2000. Vice President of Fund Accounting, American Data Services, Inc., a mutual fund services company, October 1992 to December 1998. ----------------------------------------------------------------------- ---------------------------------------------- * Mr. Trumpfheller in an "interested person" of the Trust because he is an officer of the Trust. In addition, he may be deemed to be and "interested person" of the Trust because he is a registered principal of the Trust's distributor. Results of Paragon Dynamic Fortress Fund Shareholder Meeting Held Wednesday, March 21, 2002 Approval of a new Management Agreement between the Trust, on behalf of the Fund, and Paragon Capital Management, Inc. Shares for: 855,924.000 Shares against: 0.000 Shares abstain: 0.000