-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhQ4ld1tLG14UPGr1GT+Dp0PRIqIKmeJxb9/j5nkbWWrnOXEVSRzop426Jddp7Tn uBiYL1+xHACNTqbfYZZ/Pw== 0001035449-02-000413.txt : 20021108 0001035449-02-000413.hdr.sgml : 20021108 20021108145920 ACCESSION NUMBER: 0001035449-02-000413 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20021108 EFFECTIVENESS DATE: 20021108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIPRIME FUNDS CENTRAL INDEX KEY: 0001000579 IRS NUMBER: 752616671 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-96826 FILM NUMBER: 02814076 BUSINESS ADDRESS: STREET 1: 1793 KINGSWOOD DR STREET 2: STE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 BUSINESS PHONE: 8174311297 MAIL ADDRESS: STREET 1: 1793 KINGSWOOD DRIVE STREET 2: SUITE 200 CITY: SOUTHLAKE STATE: TX ZIP: 76092 497 1 nov497-02.txt DEF PROSPECTUS AND SAI - IMS, AUXIER, JUMPER IMS CAPITAL VALUE FUND IMS strategic INCOME FUND IMS STRATEGIC ALLOCATION FUND PROSPECTUS November 1, 2002 8995 S.E. Otty Road Portland, Oregon 97266 (800) 934-5550 The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS IMS CAPITAL VALUE FUND........................................................2 RISK/RETURN SUMMARY..................................................2 HOW THE FUND HAS PERFORMED...........................................3 IMS STRATEGIC INCOME FUND.....................................................5 RISK/RETURN SUMMARY..................................................5 HOW THE FUND HAS PERFORMED...........................................6 IMS STRATEGIC ALLOCATION FUND.................................................6 RISK/RETURN SUMMARY..................................................6 HOW THE FUND HAS PERFORMED...........................................8 FEES AND EXPENSES OF INVESTING IN THE FUNDS...................................9 HOW TO BUY SHARES.............................................................10 HOW TO EXCHANGE SHARES .......................................................13 HOW TO REDEEM SHARES..........................................................13 DETERMINATION OF NET ASSET VALUE..............................................15 DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS......................................15 TAX CONSIDERATIONS............................................................15 MANAGEMENT OF THE FUNDS.......................................................16 OTHER INVESTMENT INFORMATION..................................................16 FINANCIAL HIGHLIGHTS..........................................................18 PRIVACY POLICY................................................................19 FOR MORE INFORMATION.......................................................Back Cover IMS CAPITAL VALUE FUND RISK/RETURN SUMMARY Investment Objective Long-term growth from capital appreciation, dividends and interest. Principal Strategies The Fund invests primarily in the common stocks of mid-sized, U.S. companies. The Fund's advisor, IMS Capital Management, Inc., employs a selection process designed to produce a diversified portfolio of companies exhibiting both value and momentum characteristics. Value characteristics include a historically low stock price, as well as historically low fundamental ratios such as price to earnings, price to sales, price to book value and price to cash flow. Momentum characteristics include positive earnings revisions, positive earning surprises, relative price strength and other developments that may favorably affect a company's stock price, such as a new product or change in management. The advisor selects stocks based on value characteristics, however the Fund will not invest in an undervalued stock until it also exhibits momentum characteristics. The advisor seeks to reduce risk through diversification and through the ownership of undervalued companies. Companies selected generally will have total market capitalization of $1 to $15 billion. These well capitalized, often globally diversified U.S. companies generally have the resources to weather negative business conditions successfully. The advisor believes mid-cap companies have the potential to deliver the best characteristics of small and large companies - the flexible, innovative, high-growth aspects of small companies and the proven management, products, liquidity and global diversification of large companies. Each stock in the Fund's portfolio must fall into one of the advisor's seven strategic focus areas: healthcare, technology, financial services, communications, entertainment & leisure, consolidating industries and historically defensive industries. The advisor believes that stocks in these focus areas have the potential to produce superior long-term returns. In addition, the advisor carefully diversifies the Fund's holdings to ensure representation in all major industry sectors as defined by Standard & Poor's, Inc. The advisor employs a patient approach to the stock selection process, believing that most traditional value managers tend to purchase companies too early. The advisor believes that after a stock experiences a significant decline, it will tend to underperform the market during what the advisor terms its seasoning period, usually 18 to 24 months. Once an undervalued company that falls into one of the advisor's strategic focus areas has been researched and deemed attractive, and has seasoned, the advisor further delays the purchase until the company develops several positive momentum characteristics. The Fund will typically sell a security after it has exceeded the advisor's target sell price if the company also demonstrates that it may be losing its positive business momentum. A variety of conditions could result in the sale of a company before it has reached the advisor's target sell price. For example, a major industry-wide change, a significant change in the company's management or direction, or the emergence of a better opportunity within the same industry may result in the sale of a security. Principal Risks of Investing in the Fund The Fund invests primarily in equity securities of U.S. companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. This price volatility is the principal risk of investing in the Fund. In addition to general market volatility, the value of the Fund may decrease in response to the activities and prospects of an individual company in the Fund's portfolio. Because the Fund invests in mid-capitalization companies, it can be riskier than a fund that invests in larger capitalization companies. Mid-cap companies typically have greater earnings fluctuations and greater reliance on a few key customers than larger companies. The Fund invests primarily in "value stocks." The market may not agree with the advisor's determination that a stock is undervalued, and the stock's price may not increase to what the advisor believes is its full value. It may even decrease in value. The strategy used by the advisor may fail to produce the intended results, and you could lose money. As with any mutual fund investment, an investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Is the Fund right for you? The Fund may be a suitable investment for: o Long-term investors seeking a fund with a value investment strategy. o Investors willing to accept price fluctuations in their investment. o Investors who can tolerate the risks associated with common stocks. o Investors seeking long-term growth from capital appreciation, dividends and interest. How the Fund has Performed The bar chart and performance table below show the variability of the IMS Capital Value Fund's returns, which is one indicator of the risks of investing in the Fund. The bar chart shows changes in the IMS Capital Value Fund's returns from year to year since the Fund's inception. Sales loads are not reflected in the Bar Chart, and, if these amounts were reflected, returns would be less than those shown. The performance table shows how the Fund's average annual total returns compare over time to those of a broad-based securities market index. Of course, the Fund's past performance (before and after taxes) is not necessarily an indication of its future performance. [CHART OMITTED] Year-by-Year Total Return* For each full calendar year since the Fund was established 1997 - 6.71%, 1998 - 13.24%, 1999 - 17.78%, 2000 - (4.73%), 2001 - 18.75% The Fund's year-to-date return as of September 30, 2002 was -18.73% During the period shown, the highest return for a quarter was 20.10% (4th quarter, 1998); and the lowest return was -15.31% (3rd quarter 1998). Average Annual Total Returns for the periods ended 12/31/2001: One Year Five Years Since Inception1 -------- ---------- --------------- IMS Capital Value Fund (with sales load)2 Return Before Taxes 11.91% 8.70% 10.19% Return After Taxes on Distributions3 8.62% 6.50% 8.43% Return After Taxes on Distributions and 9.48% 6.35% 7.92% Sale of Fund Shares3 Russell Mid Cap Value Index 2.33% 11.45% 13.27% (reflects no deduction for fees, expenses, or taxes)
1 August 5, 1996 2 Prior to November 1, 2001, the Fund did not have a sales load. Without the sales load, average annual total return was 18.75% for the calendar year ended December 31, 2001, and 11.40% since inception through December 31, 2001. 3 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. IMS STRATEGIC INCOME FUND RISK/RETURN SUMMARY Investment Objective Current income. Principal Strategies The Fund will invest across a broad range of income producing securities in an effort to generate current income, regardless of whether interest rates are rising or falling. The advisor expects the Fund's performance to be less volatile than most bond funds because the Fund invests in fixed income securities that are less interest rate sensitive than the securities held by the typical bond fund. The Fund invests primarily in fixed income securities. The advisor will allocate the Fund's assets among different fixed-income sectors based on its assessment of the relative risks and opportunities. The Fund may concentrate from time to time in different types of fixed-income securities in an effort to obtain the highest available combination of current income and safety of principal. The fixed income securities in which the Fund invests will be primarily investment grade, and may be of any duration and maturity. Because the Fund is non-diversified, the Fund may take larger positions in a small number of companies than a diversified fund. At its discretion, the advisor will adjust the Fund's exposure to various types of securities while seeking to exploit opportunities and avoid risks in the market. In addition to bonds, the Fund may invest in other types of income producing of securities such as dividend-paying common stocks, preferred and convertible preferred stocks, real estate investment trusts (REITs), open-end and closed-end mutual funds and cash equivalents. The advisor will analyze a security's structural features, current pricing, trading opportunities, and the credit quality of its issuer and selects investments that the advisor believes offer attractive yields and are undervalued relative to issues of similar credit quality and interest rate sensitivity. Principal Risks of Investing in the Fund The Fund may fluctuate in value based upon changes in interest rates and market conditions. As interest rates rise, the value of the instruments may decrease. This risk is greater for long-term debt securities than for short-term debt securities. The Fund is also subject to credit risk, which is the possibility that an issuer of a security will default or become unable to meet its obligation. This risk is greater for securities that are rated below investment grade or that are unrated. Preferred stocks share some of the characteristics of both fixed income and equity investments and are generally preferred over common stocks with respect to dividends and in liquidation. To the extent the Fund invests in equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition to general market volatility, the value of the Fund may decrease in response to the activities and prospects of an individual company in the Fund's portfolio. To the extent the Fund invests in companies that invest in real estate, such as REITs, the fund may be subject to risk associated with the real estate market as a whole, such as taxation, regulations and economic and political factors that negatively impact the real estate market, and with direct ownership of real estate such as: decrease in real estate values, overbuilding, environmental liabilities and increases in operating costs, interest rates and/or property taxes. The Fund will invest in other investment companies (including closed end funds, bond funds and money market funds), which are portfolios of other securities. The Fund will indirectly bear its proportionate share of any fees and expenses payable directly by the investment company. Therefore, the Fund will incur higher expenses, many of which may be duplicative. The strategy used by the advisor may fail to produce the intended results, and you could lose money. As with any mutual fund investment, an investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Additionally, a non-diversified fund entails greater price risk than an investment in a diversified fund. As a non-diversified fund, the Fund's portfolio may at times focus on a limited number of companies and will be subject to substantially more investment risk and potential for volatility than a diversified fund. Is the Fund right for you? The Fund may be a suitable investment for: o Investors seeking a fund with current income. o Investors seeking a fund offering the option of monthly dividends paid in cash. o Investors seeking a fund with less sensitivity to interest rate changes than typical bond funds. o Investors willing to accept the price and return fluctuations associated with a non-diversified fund. o Investors seeking to diversify their equity holdings with a portfolio consisting primarily of fixed income securities. How the Fund has Performed The bar chart and performance table that would otherwise appear in this Prospectus with respect to the Strategic Income Fund have been omitted because the Fund is recently organized and has no operating history. IMS STRATEGIC ALLOCATION FUND RISK/RETURN SUMMARY Investment Objective Long-term growth from capital appreciation, dividends and interest. Principal Strategies Based on its assessment of various segments of the market, the advisor will shift the Fund's assets among four broad classes: equities, fixed income, companies that invest in real estate (such as real estate investment trusts (REITs)) and cash equivalents. At its discretion, the advisor will also vary the Fund's exposure to value, growth, small-cap, mid-cap and large-cap stocks. The Fund's assets are allocated among asset classes, investment styles and market capitalizations based on the advisor's assessment of the relative opportunities and risks of each category. The allocation is dynamic and will change as the advisor attempts to exploit opportunities and avoid risks in the markets. The Fund may invest in a broad array of securities in order to achieve its investment objectives: o Equities, such as common stocks, preferred stocks, REITs and other investment companies and exchange traded funds that invest in equity securities o Fixed Income Securities, such as bonds and other debt instruments, including other investment companies that invest in fixed income securities o Cash Equivalents, such as short term fixed income securities and money market mutual funds Under normal circumstances, the Fund's assets will be primarily invested in U.S. equities covering the following seven categories: large-cap value, mid-cap value, small-cap value, large-cap growth, mid-cap growth, small-cap growth and international stocks. The advisor has the discretion to hold up to 50% in fixed income securities, up to 25% in REITs and up to 25% in cash equivalents. The fixed income securities in which the Fund invests will be primarily investment grade, and may be of any duration and maturity. The Fund's advisor, IMS Capital Management, Inc., employs a selection process and an asset allocation model designed to produce a portfolio of securities that has the potential to produce superior long-term returns. Securities are selected based on the advisor's assessment of the capital appreciation, dividend and interest payments expected from the security. Because the Fund is non-diversified, the Fund may take larger positions in a small number of companies than a diversified fund. Principal Risks of Investing in the Fund Risks of the Fund's allocation strategy: The asset allocation strategy involves the risk that the advisor may not correctly predict the right times to shift the Fund's assets from one type of asset class, investment style or market capitalization to another. Risks related to equity investments: The Fund invests primarily in equity securities of U.S. companies. As a result, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. In addition to general market volatility, the value of the Fund may decrease in response to the activities and prospects of an individual company in the Fund's portfolio. Preferred stocks share some of the characteristics of both fixed income and equity investments and are generally preferred over common stocks with respect to dividends and in liquidation. Small-cap companies and mid-cap companies have earnings and prospects that are more volatile than larger companies. These companies may experience higher failure rates than do larger companies. The trading volume of the securities of these companies is normally less than that of larger companies and, therefore, may disproportionately affect their market price, tending to make them fall more in response to selling pressure than is the case with larger companies. To the extent the Fund invests in companies that invest in real estate, such as REITs, the fund may be subject to risk associated with the real estate market as a whole, such as taxation, regulations and economic and political factors that negatively impact the real estate market, and with direct ownership of real estate such as: decrease in real estate values, overbuilding, environmental liabilities and increases in operating costs, interest rates and/or property taxes. Risks related to fixed income investments: The Fund may fluctuate in value based upon changes in interest rates and market conditions. As interest rates rise, the value of the instruments may decrease. This risk is greater for long-term debt securities than for short-term debt securities. The Fund is also subject to credit risk, which is the possibility that an issuer of a security will default or become unable to meet its obligation. Preferred stocks share some of the characteristics of both fixed income and equity investments and are generally preferred over common stocks with respect to dividends and in liquidation. General Risks: The strategy used by the advisor may fail to produce the intended results, and you could lose money. As with any mutual fund investment, an investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or by any other government agency. Additionally, a non-diversified fund entails greater price risk than an investment in a diversified fund. As a non-diversified fund, the Fund's portfolio may at times focus on a limited number of companies and will be subject to substantially more investment risk and potential for volatility than a diversified fund. The Fund will invest in other investment companies (including money market funds) and in exchange traded funds, which are portfolios of other securities. The Fund will indirectly bear its proportionate share of any fees and expenses payable directly by the investment company or exchange traded fund. Therefore, the Fund will incur higher expenses, many of which may be duplicative. Is the Fund right for you? The Fund may be a suitable investment for: o Investors who want exposure to a broad range of asset classes within the convenience of a single fund. o Investors who want to hire a professional to shift their assets between different types of investments as market conditions change. o Investors willing to accept price fluctuations. o Investors who can tolerate the risks associated with equities, REITs and fixed income securities. o Investors seeking long-term growth from capital appreciation, dividends and interest. How the Fund has Performed The bar chart and performance table that would otherwise appear in this Prospectus with respect to the Strategic Allocation Fund have been omitted because the Fund is recently organized and has no operating history. FEES AND EXPENSES OF INVESTING IN THE FUNDS The tables describe the fees and expenses that you may pay if you buy and hold shares of the Funds. Shareholder Fees Capital Strategic Strategic Allocation Value Fund Income Fund Fund (fees paid directly from your investment) Maximum Sales Charge (load) Imposed on Purchases 5.75% NONE NONE Maximum Deferred Sales Charge (load) NONE NONE NONE Redemption Fee1 1.00% 1.00% 1.00% Annual Fund Operating Expenses Capital Strategic Strategic Allocation Value Fund Income Fund Fund (expenses deducted from Fund assets) Management Fees 1.26% 1.26% 1.26% Distribution (12b-1) Fees NONE NONE NONE Other Expenses 0.97% 0.99%2 0.99%2 Total Annual Fund Operating Expenses 2.23% 2.25% 2.25% Fee Waiver and Expense Reimbursement3 0.64% 0.29% 0.29% Net Expenses (after fee waiver and expense 1.59% 1.96% 1.96% reimbursement)
1 If you redeem your shares within 90 days of purchase you will be charged a 1.00% redemption fee. However, if you redeem your shares after the 90-day period there is no redemption fee. Exceptions may be granted to shareholders at the discretion of the investment adviser. A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire transfer. This fee is subject to change. 2 "Other Expenses " are based on estimated amounts for the current fiscal year. 3 The advisor has contractually agreed to reimburse expenses of each Fund to maintain total expenses (excluding brokerage costs, borrowing costs, taxes and extraordinary expenses) at 1.59% of net assets with respect to the Capital Value Fund, and 1.96% with respect to the Strategic Allocation Fund and the Strategic Income Fund through October 31, 2006. With respect to the Strategic Allocation Fund and the Strategic Income Fund, any waiver or reimbursement of organizational or operating expenses by the advisor is subject to repayment by the applicable Fund within the three fiscal years following the year ending June 30, 2003, if the Fund is able to make the payment without exceeding the above-described expense limitations. Example: - ------- The example below is intended to help you compare the cost of investing in the Funds with the cost of investing in other mutual funds. The example uses the same assumptions as other mutual funds prospectuses: a $10,000 initial investment for the time periods indicted, reinvestment of dividends and distributions, 5% annual total return, constant operating expenses (except for reimbursements reflected in the first 5 years), and sale of all shares at the end of each time period. Although your actual expenses may be different, based on these assumptions your costs will be: Capital Value Fund Strategic Income Fund Strategic Allocation Fund 1 Year $ 732 $206 $206 3 Years $1063 $636 $636 5 Years $1488 10 Years $2850
HOW TO BUY SHARES Initial Purchase The minimum initial investment in each Fund is $5,000 ($2,000 for IRAs). The advisor may waive these minimums for accounts participating in an automatic investment program. If your investment is aggregated into an omnibus account established by an investment advisor, broker or other intermediary, the account minimums apply to the omnibus account, not to your individual investment. If you purchase or redeem shares through a broker-dealer or another intermediary, you may be charged a fee by that intermediary. By Mail You may make your initial investment by following these steps: o Complete and sign the investment application form which accompanies this Prospectus; o Draft a check (subject to the minimum amounts) made payable to appropriate Fund; o Mail the application and check to: U.S. Mail: Overnight: IMS FUNDS IMS FUNDS c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 North Pennsylvania Street Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204 By Wire You may also purchase shares of the Funds by wiring federal funds from your bank, which may charge you a fee for doing so. To wire money, you must call Unified Fund Services, Inc., the Funds' transfer agent, at (800) 934-5550 to obtain instructions on how to set up your account and to obtain an account number. Then, provide your bank with the following information for purposes of wiring your investment: U.S. Bank, N.A. ABA #0420-0001-3 Attn: IMS FUNDS D.D.A.# 485777197 Account Name__________________________________(Write in shareholder name) For the Account #___________________________________(Write in account number) You must provide a signed application to Unified Fund Services, Inc. at the above address in order to complete your initial wire purchase. Wire orders will be accepted only on a day on which the Fund, custodian and transfer agent are open for business. A wire purchase will not be considered made until the wired money is received and the purchase is accepted by the Funds. Any delays which may occur in wiring money, including delays which may occur in processing by the banks, are not the responsibility of the Funds or the transfer agent. There is presently no fee for the receipt of wired funds, but the Funds may charge shareholders for this service in the future. Sales Loads (IMS Capital Value Fund only) Shares of the IMS Capital Value Fund are purchased at the public offering price. The public offering price is the next determined NAV plus sales load as shown in the following table. - -------------------------------------- ------------------------------------- -------------------------------- Sales Load as a % of: Dealer Reallowance as % of Public Offering Net Amount Dealer Reallowance as % of Public offering Price - -------------------------------------- -------------------------------- - -------------------------------------- -------------------------------- Price Invested - -------------------------------------- ------------------- ----------------- -------------------------------- - -------------------------------------- ------------------- ----------------- -------------------------------- Less than $ 25,000 5.75% 6.10% 5.00% $ 25,000 but less than $ 50,000 5.25% 5.54% 4.50% $ 50,000 but less than $100,000 4.75% 4.99% 4.00% $100,000 but less than $250,000 3.75% 3.83% 3.00% $250,000 but less than $500,000 2.50% 2.56% 2.00% $500,000 but less than $ 1 million 2.00% 2.04% 1.60% $1 million or more 1.00% 1.02% 0.75% - -------------------------------------- ------------------- ----------------- --------------------------------
Various individuals and organizations that meet the requirements of the IMS Capital Value Fund may buy shares at NAV-- that is, without a sales charge. For a list of those who may qualify for fee waivers, plus a description of the requirements, see the Statement of Additional Information. The Strategic Allocation Fund and the Strategic Income Fund are not subject to a sales load. Right of Accumulation Once you have purchased shares in the IMS Capital Value Fund, you can qualify for a discount on the sales charge. When you purchase additional shares at the public offering price, you will pay the sales charge corresponding to the total of your current purchase plus either the value of shares you already own, or their original cost -- whichever is greater. (Remember that sales charges decrease as the amount of the transaction increases.) To receive this discount, you must notify the IMS Capital Value Fund in writing of your previous purchases when you make your current purchase. For this purpose, you and your husband or wife can combine your purchase. Letter of Intent (LOI) If you expect to purchase $25,000 or more of IMS Capital Value Fund shares over a period of time (up to 13 months), you can get the same reduced sales charge as you would if you bought all the shares at once. You do this by signing a LOI. In the LOI, you fill in the dollar amount of the shares you will buy in the next 13 months, and the sales charge is based on that amount. Some of your shares are held by the transfer agent in escrow. If you do not buy all the shares as indicated in the LOI, and your sales charge should have been higher based on what you actually bought, some of the shares held by the transfer agent will be redeemed to pay the difference in the sales charge. To establish a LOI, complete the appropriate section of the purchase application or, if your account is established, ask us for a LOI application. Additional Investments Minimum subsequent investments are $100. You may purchase additional shares of the Funds, subject to a sales load for the Capital Value Fund, at any time by mail, wire or automatic investment. Each additional mail purchase request must contain: - - your name - the name of your account(s) - - your account number(s) - a check made payable to IMS Funds Checks should be sent to the IMS Funds at the address listed above. Please designate the Fund(s) in which you are investing. A bank wire should be sent as outlined under the heading "Initial Purchase -- By Wire" in this prospectus. Automatic Investment Plan You may make regular investments in the Funds, subject to a sales load for the Capital Value Fund, with an Automatic Investment Plan by completing the appropriate section of the account application and attaching a voided personal check. Investments may be made monthly to allow dollar-cost averaging by automatically deducting $100 or more from your bank checking account. You may change the amount of your monthly purchase at any time. If an Automatic Investment Plan purchase is rejected by your bank, your shareholder account will be charged a fee to defray bank charges. Tax Sheltered Retirement Plans Since the Funds are oriented to longer-term investments, the Funds may be an appropriate investment medium for tax-sheltered retirement plans, including: individual retirement plans ("IRAs"); simplified employee pensions (SEPs); 401(k) plans; qualified corporate pension and profit-sharing plans (for employees); tax deferred investment plans (for employees of public school systems and certain types of charitable organizations); and other qualified retirement plans. You should contact the transfer agent for the procedure to open an IRA or SEP plan, as well as more specific information regarding these retirement plan options. Please consult with an attorney or tax advisor regarding these plans. You must pay custodian fees for your IRA by redemption of sufficient shares of the Funds from the IRA unless you pay the fees directly to the IRA custodian. Call the transfer agent about the IRA custodial fees. Other Purchase Information The Funds may limit the amount of purchases and refuse to sell to any person. If your check or wire does not clear, you will be responsible for any loss incurred by the Funds. If you are already a shareholder, the Funds can redeem shares from any identically registered account in the Funds as reimbursement for any loss incurred. You may be prohibited or restricted from making future purchases in the Funds. Checks must be made payable to the Funds; the Funds do not accept third party checks. HOW TO EXCHANGE SHARES You may exchange your shares of one IMS Fund for shares of another IMS Fund. In general, the same rules and procedures that apply to sales and purchases apply to exchanges, including the charge of a sales load for shares of the IMS Capital Value Fund where applicable. You may call the transfer agent at (800) 934-5550 to exchange shares. An exchange may also be made by written request signed by all registered owners of the account mailed to the address listed above. Requests for exchanges received prior to close of trading on the New York Stock Exchange (4:00 p.m. Eastern time) will be processed based on the next determined net asset value ("NAV") as of the close of business on the same day. An exchange is made by selling shares of one Fund and using the proceeds to buy shares of another Fund, with the NAV or public offering price for the sale and the purchase calculated on the same day. An exchange results in a sale of shares for federal income tax purposes. If you make use of the exchange privilege, you may realize either a long term or short term capital gain or loss on the shares sold. Before making an exchange, you should consider the investment objective of the Fund to be purchased. If your exchange creates a new account, you must satisfy the requirements of the Fund in which shares are being purchased. You may make an exchange to a new account or an existing account; however, the account ownership must be identical. Exchanges may be made only in states where an exchange may legally be made. It is your responsibility to obtain and read the prospectus of the Fund in which shares are being purchased before you make an exchange. The Funds reserve the right to terminate or modify the exchange privilege at any time. HOW TO REDEEM SHARES You may receive redemption payments in the form of a check or federal wire transfer. The proceeds may be more or less than the purchase price of your shares, depending on the market value of the Fund's securities at the time of your redemption. A wire transfer fee of $15 is charged to defray custodian charges for redemptions paid by wire transfer. This fee is subject to change. Any charges for wire redemptions will be deducted from your account by redemption of shares. If you redeem your shares through a broker-dealer or other institution, you may be charged a fee by that institution. By Mail - you may redeem any part of your account in the Funds at no charge by mail. Your request should be addressed to: U.S. Mail: Overnight: IMS FUNDS IMS FUNDS c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 North Pennsylvania Street Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204 Your request for a redemption must include your letter of instruction, including the Fund's name, account number, account name(s), the address, and the dollar amount or numbers of shares you wish to redeem. Requests to sell shares are processed at the net asset value next calculated after we receive your order in proper form. To be in proper form, your request must be signed by all registered share owner(s) in the exact name(s) and any special capacity in which they are registered. The Funds may require that signatures be guaranteed if you request the redemption check be made payable to any person other than the shareholder(s) of record or mailed to an address other than the address of record, or if the mailing address has been changed within 30 days of the redemption request. The Funds may also require that signatures by guaranteed for redemptions of $25,000 or more. Signature guarantees are for the protection of shareholders. You can obtain a signature guarantee from most banks and securities dealers, but not from a notary public. For joint accounts, both signatures must be guaranteed. Please call the transfer agent at (800) 934-5550 if you have questions. At the discretion of the Funds or the Funds' transfer agent, a shareholder, prior to redemption, may be required to furnish additional legal documents to insure proper authorization. By Telephone - you may redeem any part of your account (up to $25,000) in the Funds by calling the transfer agent at (800) 934-5550. You must first complete the Optional Telephone Redemption and Exchange section of the investment application to institute this option. The Funds, the transfer agent and the custodian are not liable for following redemption or exchange instructions communicated by telephone to the extent that they reasonably believe the telephone instructions to be genuine. However, if they do not employ reasonable procedures to confirm that telephone instructions are genuine, they may be liable for any losses due to unauthorized or fraudulent instructions. Procedures employed may include recording telephone instructions and requiring a form of personal identification from the caller. The Funds or the transfer agent may terminate the telephone redemption and exchange procedures at any time. During periods of extreme market activity, it is possible that shareholders may encounter some difficulty in telephoning the Funds, although neither the Funds nor the transfer agent has ever experienced difficulties in receiving and in a timely fashion responding to telephone requests for redemptions or exchanges. If you are unable to reach the Funds by telephone, you may request a redemption or exchange by mail. Additional Information - If you are not certain of the requirements for a redemption please call the transfer agent at (800) 934-5550. Redemption specifying a certain date or share price cannot be accepted and will be returned. You will be mailed the proceeds on or before the fifth business day following the redemption. You may be assessed a fee if the Funds incur bank charges because you request that a Fund re-issue a redemption check. However, payment for redemption made against shares purchased by check will be made only after the check has been collected, which normally may take up to fifteen calendar days. Also, when the New York Stock Exchange is closed (or when trading is restricted) for any reason other than its customary weekend or holiday closing, or under any emergency circumstances (as determined by the Securities and Exchange Commission) the Funds may suspend redemptions or postpone payment dates. Because the Fund incurs certain fixed costs in maintaining shareholder accounts, the Fund may require you to redeem all of your shares in the Fund on 30 days' written notice if the value of your shares in the Fund is less than $5,000 due to redemption, or such other minimum amount as the Fund may determine from time to time. You may increase the value of your shares in the Fund to the minimum amount within the 30-day period. All shares of the Fund are also subject to involuntary redemption if the Board of Trustees determines to liquidate the Fund. An involuntary redemption will create a capital gain or a capital loss which may have tax consequences about which you should consult a tax adviser. DETERMINATION OF NET ASSET VALUE The price you pay for your shares is based on the applicable Fund's net asset value per share ("NAV"). The NAV is calculated at the close of trading (normally 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is open for business (the Stock Exchange is closed on weekends, most Federal holidays and Good Friday). The NAV is calculated by dividing the value of the Fund's total assets (including interest and dividends accrued but not yet received) minus liabilities (including accrued expenses) by the total number of the shares outstanding. Each Fund's assets are generally valued at their market value. If market prices are not available, or if an event occurs after the close of the trading market that materially affects the values, assets may be valued by the advisor at their fair value, according to procedures approved by the Board of Trustees. Requests to purchase and sell shares are processed at the NAV next calculated after we receive your order in proper form. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS The Funds typically distribute substantially all net investment income in the form of dividends to its shareholders at least annually. The Strategic Income Fund will distribute its net investment income monthly. The Funds typically distribute substantially all net realized long term capital gains at least annually. These distributions are automatically reinvested in the applicable Fund unless you request cash distributions on your application or through a written request. The Capital Value Fund and the Strategic Allocation Fund expect that their distributions will consist primarily of capital gains. The Strategic Income Fund expects that its distributions will consist primarily of income. TAX CONSIDERATIONS As with any investment, your investment in a Fund could have tax consequences for you. If you are not investing through a tax-advantaged retirement account, you should consider these tax consequences. In general, selling shares of the Funds and receiving distributions (whether reinvested or taken in cash) are taxable events. Depending on the purchase price and the sale price, you may have a gain or a loss on any shares sold. Any tax liabilities generated by your transactions or by receiving distributions are your responsibility. For federal tax purposes, certain of each Fund's distributions, including dividends and distributions of short-term capital gains, are taxable to you as ordinary income, while certain of each Fund's distributions, including distributions of long-term capital gains, are taxable to you generally as capital gains. Because distributions of long-term capital gains are subject to capital gains taxes, regardless of how long you have owned your shares, you may want to avoid making a substantial investment when a Fund is about to make a long-term capital gains distribution. Early each year, the Funds will mail to you a statement setting forth the federal income tax information for all distributions made during the previous year. If you do not provide your taxpayer identification number, your account will be subject to backup withholding. The tax considerations described in this section do not apply to tax-deferred accounts or other non-taxable entities. Because each investor's tax circumstances are unique, please consult with your tax advisor about your investment. MANAGEMENT OF THE FUNDS IMS Capital Management, Inc., 8995 S.E. Otty Road, Portland, Oregon 97266 serves as investment advisor to the Funds. IMS Capital Management, Inc. is an independent investment advisory firm that has practiced a value-oriented style of management for a select group of clients since 1988. The advisor currently manages accounts for institutional clients, retirement plans, families, trusts and small businesses, both taxable and non-taxable. Carl W. Marker has been primarily responsible for the management of each of the Funds since inception. Mr. Marker has served as the advisor's chairman, president and primary portfolio manager since 1988, and began privately managing individual common stocks in 1981. Mr. Marker, who graduated from the University of Oregon, previously worked for divisions of both General Motors and Mercedes-Benz as a financial system analyst before founding IMS Capital Management, Inc. During the fiscal year ended June 30, 2002, the Capital Value Fund paid the advisor a fee equal to 1.26% of its average daily net assets. With respect to the Strategic Allocation Fund and the Strategic Income Fund, each Fund is authorized to pay the adviser a fee equal to 1.26% of its average daily net assets. The advisor (not the Fund) may pay certain financial institutions (which may include banks, brokers, securities dealers and other industry professionals) a fee for providing distribution related services and/or for performing certain administrative servicing functions for Fund shareholders to the extent these institutions are allowed to do so by applicable statute, rule or regulation. OTHER INVESTMENT INFORMATION General Each Fund may from time to time take temporary defensive positions that are inconsistent with the Fund's principal investment strategies in attempting to respond to adverse market, economic, political, or other conditions. For example, any Fund may hold all or a portion of its assets in money market instruments, securities of no-load mutual funds or repurchase agreements. If a Fund invests in shares of another mutual fund, the shareholders of the Funds generally will be subject to duplicative management fees. As a result of engaging in these temporary measures, the Funds may not achieve their investment objectives. The investment objective and strategies of each Fund may be changed without shareholder approval. Real Estate Investment Trusts A REIT is a corporation or business trust that invests substantially all of its assets in interests in real estate. Equity REITs are those which purchase or lease land and buildings and generate income primarily from rental income. Equity REITs may also realize capital gains (or losses) when selling property that has appreciated (or depreciated) in value. Mortgage REITs are those which invest in real estate mortgages and generate income primarily from interest payments on mortgage loans. Hybrid REITs generally invest in both real property and mortgages. Real estate related equity securities also include those insured by real estate developers, companies with substantial real estate holdings (for investment or as part of their operations), as well as companies whose products and services are directly related to the real estate industry, such as building supply manufacturers, mortgage lenders or mortgage servicing companies. Risks associated with REIT investments include the fact that equity and mortgage REITs are dependent upon specialized management skills and are not fully diversified. These characteristics subject REITs to the risks associated with financing a limited number of projects. They are also subject to heavy cash flow dependency, defaults by borrowers, and self-liquidation. Additionally, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, and mortgage REITs may be affected by the quality of any credit extended. Exchange Traded Funds. The Fund may invest in exchange traded funds including S&P Depositary Receipts ("SPDRs"), S&P Sector SPDRs, iShares, streetTRACKS, HOLDRs and other security baskets. SPDRs are exchange traded shares that represent ownership in the SPDR Trust, an investment company that was established to own the stocks included in the S&P 500 Index. S&P Sector SPDRs are similar investment companies that own the stocks included in various sector indexes. The price and dividend yield of SPDRs and S&P Sector SPDRs track the movement of the appropriate S&P index relatively closely. There are other exchange traded funds, such as iShares and streetTracks, that own the stocks in various sector indexes. HOLDRs are a fixed basket of approximately twenty stocks of companies in a particular industry, sector or other group. These groups include biotech, business-to-business, internet, pharmaceutical, retail and telecommunications HOLDRs, among others. The Fund may also invest in various sector exchange traded funds such as the Basic Industries Select Sector Index, Consumer Services Select Sector Index, Consumer Staples Select Sector Index, Cyclical/Transportation Select Sector Index, Energy Select Sector Index, Financial Select Sector Index, Industrial Select Sector Index, Technology Select Sector Index, Utilities Select Sector Index. Additionally, the Fund may invest in new exchange traded shares as they become available. FINANCIAL HIGHLIGHTS The following table is intended to help you better understand the IMS Capital Value Fund's financial performance. Certain information reflects financial results for a single Fund share. Total return represents the rate you would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. This information has been audited by McCurdy & Associates CPA's, Inc., whose report, along with the Fund's financial statements, are included in the Fund's annual report, which is available upon request. Year Ended Year ended Year ended Period ended Year Ended Year Ended June 30, June 30, June 30, June 30, Oct. 31, Oct. 31, 2002 2001 2000 1999 (c) 1998 1997 ------------ ------------- --------------- --------------- ------------ ------------ Selected Per Share Data Net asset value, beginning of period $ 13.87 $ 13.91 $ 14.56 $ 11.28 $ 12.06 $ 10.76 ------------ ------------- --------------- --------------- ------------ ------------ Income from investment operations Net investment income (loss) 0.04 (0.05) (0.05) 0.00 (0.06) (0.08) Net realized and unrealized gain (loss) (0.19) 0.50 0.88 3.28 0.12 1.38 ------------ --------------- --------------- --------------- ------------ ------------ Total from investment operations (0.15) 0.45 0.83 3.28 0.06 1.30 ------------ ------------- --------------- --------------- ------------ ------------ Less Distributions to shareholders: From net investment income 0.00 0.00 0.00 0.00 (0.03) 0.00 From net realized gain (1.79) (0.49) (1.48) 0.00 (0.81) 0.00 ------------ ------------- --------------- --------------- ------------ ------------ Total distributions (1.79) (0.49) (1.48) 0.00 (0.84) 0.00 ------------ ------------- --------------- --------------- ------------ ------------ Net asset value, end of period $ 11.93 $ 13.87 $ 13.91 $ 14.56 $ 11.28 $ 12.06 ============ ============= =============== =============== ============ ============ Total Return (1.05)% (3.72)% 6.39% 29.08%(b) 2.27% 12.08% Ratios and Supplemental Data Net assets, end of period (000) $ 17,144 $11,488 $11,585 $11,608 $11,524 $9,932 Ratio of expenses to average net assets 1.59% 1.59% 1.59% 1.59%(a) 1.73% 1.97% Ratio of expenses to average net assets before reimbursement 2.23% 2.28% 2.08% 2.50%(a) 2.34% 2.54% Ratio of net investment income to average net assets 0.29% (0.39)% (0.36)% (0.04)%(a) (0.53)% (0.64)% Ratio of net investment income to average net assets before reimbursement (0.35)% (1.09)% (0.84)% (0.95)%(a) (1.14)% (1.20)% Portfolio turnover rate 33.40% 77.87% 75.69% 45.19% 81.74% 34.76% (a) Annualized. (b) For periods of less than a full year, total return is not annualized. (c) For the period November 1, 1998 through June 30, 1999.
PRIVACY POLICY The following is a description of the Funds' policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Funds through a broker-dealer or other financial intermediary, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parities. Categories of Information the Funds Collect The Funds collect the following nonpublic personal information about you: o Information the Funds receive from you on or in applications or other forms, correspondence, or conversations (such as your name, address, phone number, social security number, assets, income and date of birth); and o Information about your transactions with the Funds, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information). Categories of Information the Funds Disclose The Funds do not disclose any nonpublic personal information about its current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Funds are permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Funds' custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you. Confidentiality and Security The Funds restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Funds maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. FOR MORE INFORMATION Several additional sources of information are available to you. The Statement of Additional Information ("SAI"), incorporated into this prospectus by reference, contains detailed information on the Funds' policies and operations. Annual and semi-annual reports contain management's discussion of market conditions and investment strategies that significantly affected the Funds' performance results of the Funds' latest semi-annual or annual fiscal year end. Call the Funds at (800) 934-5550 to request free copies of the SAI and the Funds' annual and semi-annual reports, to request other information about the Funds and to make shareholder inquiries. You may review and copy information about the Funds (including the SAI and other reports) at the Securities and Exchange Commission ("SEC") Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation. You may also obtain reports and other information about the Funds on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section of the SEC, Washington, D.C. 20549-0109. Investment Company Act #811-9096 IMS CAPITAL VALUE FUND IMS STRATEGIC ALLOCATION FUND IMS STRATEGIC INCOME FUND STATEMENT OF ADDITIONAL INFORMATION November 1, 2002 This Statement of Additional Information ("SAI") is not a prospectus. It should be read in conjunction with the Prospectus of the IMS Funds dated November 1, 2002. This SAI incorporates by reference the IMS Capital Value Fund's Annual Report to Shareholders for the fiscal year ended June 30, 2002 ("Annual Report"). A free copy of the Prospectus or Annual Report can be obtained by writing the Transfer Agent at Unified Fund Services, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or by calling (800) 934-5550. TABLE OF CONTENTS PAGE DESCRIPTION OF THE TRUST AND FUNDS.............................................2 ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS.................................................................3 INVESTMENT LIMITATIONS........................................................11 THE INVESTMENT ADVISOR........................................................13 TRUSTEES AND OFFICERS.........................................................15 PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................18 DETERMINATION OF SHARE PRICE..................................................20 SALES AT NET ASSET VALUE......................................................20 INVESTMENT PERFORMANCE........................................................21 CUSTODIAN.....................................................................24 FUND SERVICES.................................................................24 ACCOUNTANTS...................................................................25 DISTRIBUTOR...................................................................25 FINANCIAL STATEMENTS..........................................................25 DESCRIPTION OF THE TRUST AND FUNDS IMS Capital Value Fund (the "Fund") was organized as a diversified series of AmeriPrime Funds (the "Trust") on July 25, 1996 and commenced operations on August 5, 1996. The IMS Strategic Allocation Fund and the IMS Strategic Income Fund were organized as non-diversified series of the Trust on September 30, 2002. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The Trust Agreement permits the 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 Trustees. The Funds' advisor is IMS Capital Management, Inc. (the "Advisor"). The Funds do not issue share certificates. All shares are held in non-certificate form registered on the books of the Funds and the Transfer Agent for the account of the shareholder. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to that series with each other share of that series and is entitled to such dividends and distributions out of income belonging to the series as are declared by the Trustees. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to divide or combine the shares of any series into a greater or lesser number of shares of that series so long as the proportionate beneficial interest in the assets belonging to that series and the rights of shares of any other series are in no way affected. In case of any liquidation of a series, the holders of shares of the series being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that series. Expenses attributable to any series are borne by that series. Any general expenses of the Trust not readily identifiable as belonging to a particular series are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. No shareholder is liable to further calls or to assessment by the Trust without his or her express consent. Any Trustee of the Trust may be removed by vote of the shareholders holding not less than two-thirds of the outstanding shares of the Trust. The Trust does not hold an annual meeting of shareholders. When matters are submitted to shareholders for a vote, each shareholder is entitled to one vote for each whole share he owns and fractional votes for fractional shares he owns. All shares of the Funds have equal voting rights and liquidation rights. The Declaration of Trust can be amended by the Trustees, except that any amendment that adversely affects the rights of shareholders must be approved by the shareholders affected. Each share of the Funds is subject to redemption at any time if the Board of Trustees determines in its sole discretion that failure to so redeem may have materially adverse consequences to all or any of the Fund's shareholders. As of October 15, 2002, the following persons may be deemed to beneficially own five percent (5%) or more of the IMS Capital Value Fund: Marker IRA, 209 SW Oak Street, Portland, OR 97206, 6.06%; National Financial, One World Financial Center, 200 Liberty Street, New York, NY 10281, 15.12%; Merle West Medical Center, 2865 Daggett Street, Klamath Falls, OR 97601, 18.04%. As of October 15, 2002, the officers and trustees as a group own less than 1% of each of the Funds. For information concerning the purchase and redemption of shares of the Funds, see "How to Buy Shares" and "How to Redeem Shares" in the Funds' Prospectus. For a description of the methods used to determine the share price and value of the Funds' assets, see "Price of Shares" in the Funds' Prospectus. ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS This section contains a more detailed discussion of some of the investments the Funds may make and some of the techniques they may use. A. Equity Securities. Equity securities include common stock, American Depositary Receipts (ADRs), preferred stock and common stock equivalents (such as convertible preferred stock, rights and warrants). Convertible preferred stock is preferred stock that can be converted into common stock pursuant to its terms. Warrants are options to purchase equity securities at a specified price valid for a specific time period. Rights are similar to warrants, but normally have a short duration and are distributed by the issuer to its shareholders. The IMS Capital Value Fund may invest up to 5% of its net assets at the time of purchase in convertible preferred stock, convertible debentures, rights or warrants. The IMS Capital Value Fund reserves the right to invest in foreign stocks, through the purchase of American Depository Receipts, provided the companies have substantial operations in the U.S. and do not exceed 5% of the Fund's net assets. The IMS Strategic Allocation Fund may invest between 5% and 10% of its assets in ADRs. Preferred stock has a preference in liquidation (and, generally dividends) over common stock but is subordinated in liquidation to debt. As a general rule the market value of preferred stocks with fixed dividend rates and no conversion rights varies inversely with interest rates and perceived credit risk, with the price determined by the dividend rate. Some preferred stocks are convertible into other securities, (for example, common stock) at a fixed price and ratio or upon the occurrence of certain events. The market price of convertible preferred stocks generally reflects an element of conversion value. Because many preferred stocks lack a fixed maturity date, these securities generally fluctuate substantially in value when interest rates change; such fluctuations often exceed those of long term bonds of the same issuer. Some preferred stocks pay an adjustable dividend that may be based on an index, formula, auction procedure or other dividend rate reset mechanism. In the absence of credit deterioration, adjustable rate preferred stocks tend to have more stable market values than fixed rate preferred stocks. All preferred stocks are also subject to the same types of credit risks of the issuer as corporate bonds. In addition, because preferred stock is junior to debt securities and other obligations of an issuer, deterioration in the credit rating of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar yield characteristics. The Advisor expects that generally the preferred stocks in which the Fund invests will be rated at least BBB by Standard & Poor's Ratings Group ("S&P") or Baa by Moody's Investors Services, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion of the Advisor. Warrants are instruments that entitle the holder to buy underlying equity securities at a specific price for a specific period of time. A warrant tends to be more volatile than its underlying securities and ceases to have value if it is not exercised prior to its expiration date. In addition, changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying securities. Rights are similar to warrants, but normally have shorter durations. Equity securities also include SPDRs (S&P Depositary Receipts, known as "Spiders"), DIAMONDS, QQQs and a number of other exchange traded funds. SPDRs represent ownership in the SPDR Trust, a unit investment trust that holds a portfolio of common stocks that closely tracks the price performance and dividend yield of the S&P 500 Composite Price Index. SPDRs trade on the American Stock Exchange under the symbol SPY. A MidCap SPDR is similar to a SPDR except that it tracks the performance of the S&P MidCap 400 Index and trades on the American Stock Exchange under the symbol MDY. DIAMONDS represent ownership in the DIAMONDS Trust, a unit investment trust that serves as an index to the Dow Jones Industrial Average (the "Dow") in that its holding consists of the 30 component stocks of the Dow. DIAMONDS trade on the American Stock Exchange under the symbol DIA. QQQs (NASDAQ-100 Index Tracking Stock) represent ownership in the NASDAQ-100 Trust, a unit investment trust that attempts to closely track the price and yield performance of the NASDAQ 100 Index by holding shares of all the companies in the Index. QQQs trade on the American Stock Exchange under the symbol QQQ. Exchange traded products also include iShares, HOLDRs, Fidelity Select Portfolios, Select Sector SPDRs, Fortune e-50, Fortune 500, streetTRACKS and VIPERs. To the extent the Fund invests in a sector product, the Fund is subject to the risks associated with that sector. Additionally, the Fund may invest in new exchange traded shares as they become available. B. American Depository Receipts. American Depository Receipts are dollar-denominated receipts that are generally issued in registered form by domestic banks, and represent the deposit with the bank of a security of a foreign issuer. To the extent that the Fund invests in foreign securities, such investments may be subject to special risks. For example, there may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks associated with investments in foreign securities include changes in restrictions on foreign currency transactions and rates of exchanges, changes in the administrations or economic and monetary policies of foreign governments, the imposition of exchange control regulations, the possibility of expropriation decrees and other adverse foreign governmental action, the imposition of foreign taxes, less liquid markets, less government supervision of exchanges, brokers and issuers, difficulty in enforcing contractual obligations, delays in settlement of securities transactions and greater price volatility. In addition, investing in foreign securities will generally result in higher commissions than investing in similar domestic securities. C. Covered Call Options. Each Fund may write (sell) covered call options on common stocks in the Fund's portfolio. A covered call option on a security is an agreement to sell a particular portfolio security if the option is exercised at a specified price, or before a set date. The Fund profits from the sale of the option, but gives up the opportunity to profit from any increase in the price of the stock above the option price, and may incur a loss if the stock price falls. Risks associated with writing covered call options include the possible inability to effect closing transactions at favorable prices and an appreciation limit on the securities set aside for settlement. When a Fund writes a covered call option, it will receive a premium, but it will give up the opportunity to profit from a price increase in the underlying security above the exercise price as long as its obligation as a writer continues, and it will retain the risk of loss should the price of the security decline. The Funds will only engage in exchange-traded options transactions. D. Loans of Portfolio Securities. The Funds may make short and long term loans of portfolio securities. Under the lending policy authorized by the Board of Trustees and implemented by the Advisor in response to requests of broker-dealers or institutional investors which the Advisor deems qualified, the borrower must agree to maintain collateral, in the form of cash or U.S. government obligations, with the Fund on a daily mark-to-market basis in an amount at least equal to 100% of the value of the loaned securities. The Fund will continue to receive dividends or interest on the loaned securities and may terminate such loans at any time or reacquire such securities in time to vote on any matter that the Board of Trustees determines to be serious. With respect to loans of securities, there is the risk that the borrower may fail to return the loaned securities or that the borrower may not be able to provide additional collateral. E. Purchases of Options. Up to 10% of each Fund's net assets may be invested in purchases of put and call options involving individual securities and market indices. An option involves either (a) the right or the obligation to buy or sell a specific instrument at a specific price until the expiration date of the option, or (b) the right to receive payments or the obligation to make payments representing the difference between the closing price of a market index and the exercise price of the option expressed in dollars times a specified multiple until the expiration date of the option. Options are sold (written) on securities and market indices. The purchaser of an option on a security pays the seller (the writer) a premium for the right granted but is not obligated to buy or sell the underlying security. The purchaser of an option on a market index pays the seller a premium for the right granted, and in return the seller of such an option is obligated to make the payment. Options are traded on organized exchanges and in the over-the-counter market. The purchase of options involves certain risks. The purchase of options limits the Fund's potential loss to the amount of the premium paid and can afford the Fund the opportunity to profit from favorable movements in the price of an underlying security to a greater extent than if transactions were effected in the security directly. However, the purchase of an option could result in the Fund losing a greater percentage of its investment than if the transaction were effected directly. F. Repurchase Agreements. The Funds may invest in repurchase agreements fully collateralized by U.S. Government obligations. A repurchase agreement is a short-term investment in which the purchaser (i.e., the Fund) acquires ownership of an obligation issued by the U.S. Government or by an agency of the U.S. Government ("U.S. Government Obligations") (which may be of any maturity) and the seller agrees to repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser's holding period (usually not more than seven days from the date of purchase). Any repurchase transaction in which the Fund engages will require full collateralization of the seller's obligation during the entire term of the repurchase agreement. In the event of a bankruptcy or other default of the seller, the Fund could experience both delays in liquidating the underlying security and losses in value. However, the Funds intend to enter into repurchase agreements only with U.S. Bank, N.A. (the Fund's custodian), other banks with assets of $1 billion or more and registered securities dealers determined by the Advisor to be creditworthy. The Advisor monitors the creditworthiness of the banks and securities dealers with which the Fund engages in repurchase transactions. G. Fixed Income Securities. Although the IMS Capital Value Fund intends to invest primarily in U.S. common stocks, the Advisor reserves the right, during periods of unusually high interest rates or unusual market conditions, to invest in fixed income securities for preservation of capital, total return and capital gain purposes, if the Advisor believes that such a position would best serve the Fund's investment objective. The IMS Strategic Allocation Fund may invest up to 50% of its assets in fixed income securities, and the IMS Strategic Income Fund will invest primarily in fixed income securities. Fixed income securities include corporate debt securities, U.S. government securities and participation interests in such securities. Fixed income securities are generally considered to be interest rate sensitive, which means that their value will generally decrease when interest rates rise and increase when interest rates fall. Securities with shorter maturities, while offering lower yields, generally provide greater price stability than longer term securities and are less affected by changes in interest rates. Corporate Debt Securities - Each Fund may invest in corporate debt securities. These are bonds, notes, debentures and investment certificates issued by corporations and other business organizations, including business trusts, in order to finance their credit needs. Corporate debt securities include commercial paper, which consists of short term (usually from one to two hundred seventy days) unsecured promissory notes issued by corporations in order to finance their current operations. The Adviser (and each adviser) considers corporate debt securities to be of investment grade quality if they are rated BBB or higher by Standard & Poor's Corporation ("S&P") or by Moody's Investors Services, Inc. ("Moody's"), or if unrated, determined by the Fund's adviser to be of comparable quality. Investment grade debt securities generally have adequate to strong protection of principal and interest payments. In the lower end of this category, credit quality may be more susceptible to potential future changes in circumstances and the securities have speculative elements. The Funds will not invest in securities rated below investment grade unless the Fund's adviser determines based on its own credit analysis that the security provides the opportunity of meeting the Fund's objective without presenting excessive risk. Municipal Securities - Each Fund may invest in municipal securities. These are long and short term debt obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities, as well as other qualifying issuers (including the U.S. Virgin Islands, Puerto Rico and Guam), the income from which is exempt from regular federal income tax and exempt from state tax in the state of issuance. Municipal securities are issued to obtain funds to construct, repair or improve various public facilities such as airports, bridges, highways, hospitals, housing, schools, streets and water and sewer works, to pay general operating expenses or to refinance outstanding debts. They also may be issued to finance various private activities, including the lending of funds to public or private institutions for construction of housing, educational or medical facilities or the financing of privately owned or operated facilities. Municipal securities consist of tax exempt bonds, tax exempt notes and tax exempt commercial paper. Municipal notes, which are generally used to provide short term capital needs and have maturities of one year of less, include tax anticipation notes, revenue anticipation notes, bond anticipation notes and construction loan notes. Tax exempt commercial paper typically represents short term, unsecured, negotiable promissory notes. Each Fund may invest in other municipal securities such as variable rate demand instruments. The two principal classifications of municipal securities are "general obligation" and "revenue" bonds. General obligation bonds are backed by the issuer's full credit and taxing power. Revenue bonds are backed by the revenues of a specific project, facility or tax. Industrial development revenue bonds are a specific type of revenue bond backed by the credit of the private issuer of the facility, and therefore investments in these bonds have more potential risk that the issuer will not be able to meet scheduled payments of principal and interest. The Advisor considers municipal securities to be of investment grade quality if they are rated BBB or higher by S&P, Baa or higher by Moody's, or if unrated, determined by the Manager (or the Fund's adviser) to be of comparable quality. Investment grade debt securities generally have adequate to strong protection of principal and interest payments. In the lower end of this category, credit quality may be more susceptible to potential future changes in circumstances and the securities have speculative elements. The Funds may invest in securities rated below investment grade. U.S. Government Securities - Each Fund may invest in U.S. government securities. These securities may be backed by the credit of the government as a whole or only by the issuing agency. U.S. Treasury bonds, notes, and bills and some agency securities, such as those issued by the Federal Housing Administration and the Government National Mortgage Association (GNMA), are backed by the full faith and credit of the U.S. government as to payment of principal and interest and are the highest quality government securities. Other securities issued by U.S. government agencies or instrumentalities, such as securities issued by the Federal Home Loan Banks and the Federal Home Loan Mortgage Corporation, are supported only by the credit of the agency that issued them, and not by the U.S. government. Securities issued by the Federal Farm Credit System, the Federal Land Banks and the Federal National Mortgage Association (FNMA) are supported by the agency's right to borrow money from the U.S. Treasury under certain circumstances, but are not backed by the full faith and credit of the U.S. government. Mortgage-Backed Securities - Each Fund may invest in mortgage-backed securities. These securities represent an interest in a pool of mortgages. These securities, including securities issued by FNMA and GNMA, provide investors with payments consisting of both interest and principal as the mortgages in the underlying mortgage pools are repaid. Unscheduled or early payments on the underlying mortgages may shorten the securities' effective maturities. The average life of securities representing interests in pools of mortgage loans is likely to be substantially less than the original maturity of the mortgage pools as a result of prepayments or foreclosures of such mortgages. Prepayments are passed through to the registered holder with the regular monthly payments of principal and interest, and have the effect of reducing future payments. To the extent the mortgages underlying a security representing an interest in a pool of mortgages are prepaid, the Fund may experience a loss (if the price at which the respective security was acquired by the Fund was at a premium over par, which represents the price at which the security will be sold upon prepayment). In addition, prepayments of such securities held by a Fund will reduce the share price of the Fund to the extent the market value of the securities at the time of prepayment exceeds their par value. Furthermore, the prices of mortgage-backed securities can be significantly affected by changes in interest rates. Prepayments may occur with greater frequency in periods of declining mortgage rates because, among other reasons, it may be possible for mortgagors to refinance their outstanding mortgages at lower interest rates. In such periods, it is likely that any prepayment proceeds would be reinvested by the Fund at lower rates of return. Collateralized Mortgage Obligations (CMOs) - Each Fund may invest in CMOs. CMOs are securities collateralized by mortgages or mortgage-backed securities. CMOs are issued with a variety of classes or series, which have different maturities and are often retired in sequence. CMOs may be issued by governmental or non-governmental entities such as banks and other mortgage lenders. Non-government securities may offer a higher yield but also may be subject to greater price fluctuation than government securities. Investments in CMOs are subject to the same risks as direct investments in the underlying mortgage and mortgage-backed securities. In addition, in the event of a bankruptcy or other default of an entity that issued the CMO held by a Fund, the Fund could experience both delays in liquidating its position and losses. Zero Coupon and Pay in Kind Bonds - Corporate debt securities and municipal obligations include so-called "zero coupon" bonds and "pay-in-kind" bonds. Zero coupon bonds do not make regular interest payments. Instead they are sold at a deep discount from their face value. Each Fund will accrue income on such bonds for tax and accounting purposes, in accordance with applicable law. This income will be distributed to shareholders. Because no cash is received at the time such income is accrued, a Fund may be required to liquidate other portfolio securities to satisfy its distribution obligations. Because a zero coupon bond does not pay current income, its price can be very volatile when interest rates change. In calculating its dividend, the Funds take into account as income a portion of the difference between a zero coupon bond's purchase price and its face value. Certain types of CMOs pay no interest for a period of time and therefore present risks similar to zero coupon bonds. The Federal Reserve creates STRIPS (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. A broker-dealer creates a derivative zero by depositing a Treasury security with a custodian for safekeeping and then selling the coupon payments and principal payment that will be generated by this security separately. Examples are Certificates of Accrual on Treasury Securities (CATs), Treasury Investment Growth Receipts (TIGRs) and generic Treasury Receipts (TRs). These derivative zero coupon obligations are not considered to be government securities unless they are part of the STRIPS program. Original issue zeros are zero coupon securities issued directly by the U.S. government, a government agency or by a corporation. Pay-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. The value of zero coupon bonds and pay-in-kind bonds is subject to greater fluctuation in response to changes in market interest rates than bonds that make regular payments of interest. Both of these types of bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds that make regular payment of interest. Even though zero coupon bonds and pay-in-kind bonds do not pay current interest in cash, the applicable Fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Thus, a Fund could be required at times to liquidate other investments in order to satisfy its dividend requirements. No Fund will invest more than 5% of its net assets in pay-in-kind bonds. Financial Service Industry Obligations - Financial service industry obligations include among others, the following: (1) Certificates of Deposit. Certificates of deposit are negotiable certificates evidencing the indebtedness of a commercial bank or a savings and loan association to repay funds deposited with it for a definite period of time (usually from fourteen days to one year) at a stated or variable interest rate. (2) Time Deposits. Time deposits are non-negotiable deposits maintained in a banking institution or a savings and loan association for a specified period of time at a stated interest rate. Time Deposits are considered to be illiquid prior to their maturity. (3) Bankers' Acceptances. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer, which instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. Asset-Backed and Receivable-Backed Securities - The Fixed Income Fund may invest in asset-backed securities. These securities are undivided fractional interests in pools of consumer loans (unrelated to mortgage loans) held in a trust. Payments of principal and interest are passed through to certificate holders and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guaranty or senior/subordination. The degree of credit enhancement varies, but generally amounts to only a fraction of the asset-backed or receivable-backed security's par value until exhausted. If the credit enhancement is exhausted, certificate holders may experience losses or delays in payment if the required payments of principal and interest are not made to the trust with respect to the underlying loans. The value of these securities also may change because of changes in the market's perception of the creditworthiness of the servicing agent for the loan pool, the originator of the loans or the financial institution providing the credit enhancement. Asset-backed and receivable-backed securities are ultimately dependent upon payment of consumer loans by individuals, and the certificate holder generally has no recourse against the entity that originated the loans. The underlying loans are subject to prepayments that shorten the securities' weighted average life and may lower their return. As prepayments flow through at par, total returns would be affected by the prepayments: if a security were trading at a premium, its total return would be lowered by prepayments, and if a security were trading at a discount, its total return would be increased by prepayments. The Fixed Income Fund will invest more than 5% of its net assets in asset-backed or receivable-backed securities. Illiquid Securities - The IMS Strategic Allocation Fund and the IMS Strategic Income Fund may invest in illiquid securities. Illiquid securities generally include securities that cannot be disposed of promptly and in the ordinary course of business without taking a reduced price. Securities may be illiquid due to contractual or legal restrictions on resale or lack of a ready market. The following securities are considered to be illiquid: repurchase agreements maturing in more than seven days, nonpublicly offered securities, restricted securities, assignments, participations, investment certificates and certain limited partnerships. Neither Fund will invest more than 15% of its net assets in illiquid securities. Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), securities which are otherwise not readily marketable and repurchase agreements having a remaining maturity of longer than seven days. Securities which have not been registered under the 1933 Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of the Fund's portfolio securities and the Fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A Fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities. In recent years, however, a large institutional market has developed for certain securities that are not registered under the 1933 Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale of such investments to the general public or to certain institutions may not be indicative of their liquidity. The SEC has adopted Rule 144A, which allows a broader institutional trading market for securities otherwise subject to restriction on their resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act of resales of certain securities to qualified institutional buyers. Rule 144A securities are not considered to be illiquid for purposes of the Fund's illiquid securities policy, which limits the Fund's investment in illiquid securities to 10% of the net assets, if such securities satisfy the conditions enumerated in Rule 144A and are determined to be liquid by the Advisor in accordance with the requirements established by the Trust. The Advisor anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers, Inc. The Advisor will monitor the liquidity of Rule 144A securities in the Fund's portfolio under the supervision of the Board of Trustees. In reaching liquidity decisions, the Advisor will consider, among other things, the following factors: (1) the frequency of trades and quotes for the security; (2) the number of dealers and other potential purchasers or sellers of the security; (3) dealer undertakings to make a market in the security and (4) the nature of the security and of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). INVESTMENT LIMITATIONS Fundamental. The investment limitations described below have been adopted by the Trust with respect to the Funds and are fundamental ("Fundamental"), i.e., they may not be changed without the affirmative vote of a majority of the outstanding shares of the applicable Fund. As used in the Prospectus and the Statement of Additional Information, the term "majority" of the outstanding shares of a Fund means the lesser of (1) 67% or more of the outstanding shares of the Fund present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented at such meeting; or (2) more than 50% of the outstanding shares of the Fund. Other investment practices which may be changed by the Board of Trustees without the approval of shareholders to the extent permitted by applicable law, regulation or regulatory policy are considered non-fundamental ("Non-Fundamental"). 1. Borrowing Money. Each Fund will not borrow money, except (a) from a bank, provided that immediately after such borrowing there is an asset coverage of 300% for all borrowings of the Fund; or (b) from a bank or other persons for temporary purposes only, provided that such temporary borrowings are in an amount not exceeding 5% of the Fund's total assets at the time when the borrowing is made. This limitation does not preclude a Fund from entering into reverse repurchase transactions, which will not be considered as borrowings provided they are fully collateralized. 2. Senior Securities. Each Fund will not issue senior securities. This limitation is not applicable to activities that may be deemed to involve the issuance or sale of a senior security by a Fund, provided that the Fund's engagement in such activities is (a) consistent with or permitted by the Investment Company Act of 1940, as amended, the rules and regulations promulgated thereunder or interpretations of the Securities and Exchange Commission or its staff and (b) as described in the Prospectus and the Statement of Additional Information. 3. Underwriting. Each Fund will not act as underwriter of securities issued by other persons. This limitation is not applicable to the extent that, in connection with the disposition of portfolio securities (including restricted securities), a Fund may be deemed an underwriter under certain federal securities laws. 4. Real Estate. Each Fund will not purchase or sell real estate. This limitation is not applicable to investments in marketable securities that have a significant portion of their assets in real estate. 5. Commodities. Each Fund will not purchase or sell commodities unless acquired as a result of ownership of securities or other investments. This limitation does not preclude a Fund from purchasing or selling options or futures contracts, from investing in securities or other instruments backed by commodities or from investing in companies that are engaged in a commodities business or have a significant portion of their assets in commodities. 6. Loans. Each Fund will not make loans to other persons, except (a) by loaning portfolio securities, (b) by engaging in repurchase agreements, or (c) by purchasing non-publicly offered debt securities. For purposes of this limitation, the term "loans" shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities. 7. Concentration. Each Fund will not invest 25% or more of its total assets in a particular industry. This limitation is not applicable to investments in obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities or repurchase agreements with respect thereto. 8. Diversification. With respect to the IMS Capital Value Fund, the Fund will not invest in the securities of any issuer if, immediately after such investment, less than 75% of the total assets of the Fund will be invested in cash and cash items (including receivables), Government securities, securities of other investment companies or other securities for the purposes of this calculation limited in respect of any one issuer to an amount (determined immediately after the latest acquisition of securities of the issuer) not greater in value than 5% of the total assets of the Fund and to not more than 10% of the outstanding voting securities of such issuer. With respect to the percentages adopted by the Trust as maximum limitations on its investment policies and limitations, an excess above the fixed percentage will not be a violation of the policy or limitation unless the excess results immediately and directly from the acquisition of any security or the action taken. This paragraph does not apply to the borrowing policy set forth in paragraph 1 above. Notwithstanding any of the foregoing limitations, any investment company, whether organized as a trust, association or corporation, or a personal holding company, may be merged or consolidated with or acquired by the Trust, provided that if such merger, consolidation or acquisition results in an investment in the securities of any issuer prohibited by said paragraphs, the Trust shall, within ninety days after the consummation of such merger, consolidation or acquisition, dispose of all of the securities of such issuer so acquired or such portion thereof as shall bring the total investment therein within the limitations imposed by said paragraphs above as of the date of consummation. Non-Fundamental. The following limitations have been adopted by the Trust with respect to the Funds and are Non-Fundamental (see "Investment Restrictions - - Fundamental" above). 1. Pledging. The Funds will not mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any assets of a Fund except as may be necessary in connection with borrowings described in limitation (1) above. Margin deposits, security interests, liens and collateral arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques are not deemed to be a mortgage, pledge or hypothecation of assets for purposes of this limitation. 2. Borrowing. A Fund will not purchase any security while borrowings representing more than 5% of its total assets are outstanding. The Funds will not invest in reverse repurchase agreements. 3. Margin Purchases. The Funds will not purchase securities or evidences of interest thereon on "margin." This limitation is not applicable to short term credit obtained by a Fund for the clearance of purchases and sales or redemption of securities, or to arrangements with respect to transactions involving options and other permitted investments and techniques. 4. Short Sales. The Funds will not effect short sales. 5. Options. The Funds will not purchase or sell puts, calls, options or straddles, except as described in the Prospectus and the Statement of Additional Information. 6. Illiquid Investments. The IMS Capital Value Fund will not invest in securities for which there are legal or contractual restrictions on resale and other illiquid securities. Neither the IMS Strategic Allocation Fund nor the IMS Strategic Income Fund will invest more than 15% of the Fund's assets in illiquid securities. 7. 80% Investment Policy. Under normal circumstances, at least 80% of the IMS Strategic Income Fund's assets (defined as net assets plus the amount of any borrowing for investment purposes) will be invested in income producing securities including fixed income securities and dividend paying equity securities. The Fund will not change its policy unless the Fund's shareholders are provided with at least 60 days prior written notice. The notice will be provided in a separate written document, containing the following, or similar, statement in bold-face type: "Important Notice Regarding Change in Investment Policy." The statement will also appear on the envelope in which the notice is delivered unless the notice is delivered separate from any other communication to the Fund's shareholders. THE INVESTMENT ADVISOR The Funds' investment advisor is IMS Capital Management, Inc. (the "Advisor"), 8995 S.E. Otty Road, Portland, Oregon 97266. Carl W. Marker may be deemed to be a controlling person of the Advisor due to his ownership of the shares of the corporation. Under the terms of the management agreements (the "Agreements"), the Advisor manages each Fund's investments subject to approval of the Board of Trustees. As compensation for its management services, each Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 1.26% of the average daily net assets of the Fund. The Advisor has contractually agreed to waive all or a portion of its fees and/or reimburse expenses of each Fund, but only to the extent necessary to maintain total operating expenses (excluding brokerage costs, borrowing costs, taxes and extraordinary expenses) at 1.59% of net assets with respect to the IMS Capital Value Fund, and 1.96% of net assets with respect to the IMS Strategic Allocation Fund and the IMS Strategic Income Fund, through October 31, 2006. In the case of the IMS Strategic Income Fund and the IMS Strategic Allocation Fund, the Advisor has also agreed to reimburse organizational expenses. Any waiver or reimbursement of organizational or operating expenses of the Strategic Allocation Fund or the Strategic Income Fund by the Advisor is subject to repayment by the applicable Fund in the first, second and third fiscal years following the fiscal year in which any such reimbursement or waiver occurs, if the Fund is able to make the payment without exceeding the above-described expense limitations. For the fiscal years ended June 30, 2002, 2001 and 2000, the IMS Capital Value Fund paid advisory fees of $170,884, $144,169, and $142,721, respectively. The Board of Trustees renewed the Agreement for the IMS Capital Value Fund at a meeting held on July 22, 2002. The Trustees reviewed the Balance Sheet of the Advisor as of March 1, 2002 and a Profit & Loss Statement for the period January 1, 2002 through March 31, 2002. They reviewed reports comparing the performance and expenses of the Fund to the performance and expenses of several other funds with similar objectives and asset levels. The Board noted that the Fund had outperformed the Russell Midcap Value Index for the year ended March 31, 2002, and that the Fund's performance had been good since inception. Carl Marker, President of the Advisor, then joined the meeting by telephone. In response to questions by the Trustees, Mr. Marker stated that there had been no changes in investment strategy and no material changes in personnel responsible for the management of the Fund's portfolio. He reviewed the Profit & Loss Statement. Mr. Marker also noted that his firm had grown, and currently had approximately $110 million under management. Mr. Marker reported that the firm had no soft dollar arrangements in place, and did not use an affiliated broker. The Board then met separately with legal counsel. When the remaining participants re-joined the meeting, the Trustees discussed the nature and quality of the services provided by the Advisor and, based upon the information provided, it was the Board's consensus that the fee paid to the Advisor pursuant to the Agreement was reasonable. The Trustees determined that the overall arrangement provided under the terms of the Agreement was a reasonable business arrangement, and that the renewal of the Agreement was in the best interests of the Fund's shareholders. The Board of Trustees approved the Agreements for the IMS Strategic Allocation Fund and the IMS Strategic Income Fund at a meeting held on October 21, 2002. Counsel to the Funds reviewed the terms of the proposed Agreements. The Trustees reviewed the Balance Sheet of the Advisor as of December 31, 2001 and a Profit & Loss Statement for the period January 1, 2001 through December 31, 2001. They discussed the proposed fees relative to other equity funds and the Advisor's commitment to cap the new Funds' expenses. They also discussed the Advisor's performance in managing the IMS Capital Value Fund, and reviewed a memorandum provided by the Advisor that addressed various issues related to the Advisor's qualifications including financial condition and changes in personnel. Carl Marker, President of the Advisor, then joined the meeting by telephone. In response to questions by the Trustees, Mr. Marker stated that the same personnel responsible for the management of the IMS Capital Value Fund would be responsible for management of the new Funds. Mr. Marker reported that the firm had no soft dollar arrangements in place, and did not currently use an affiliated broker. He explained that the Advisor was considering the use of an affiliated broker. Mr. Marker certified to the Board that the Advisor had adopted the Trust's Code of Ethics and had procedures in place reasonably designed to prevent and detect violations of the Code. The Board then met separately with legal counsel. When the remaining participants re-joined the meeting, the Trustees discussed the nature and quality of the services that were expected to be provided by the Advisor and, based upon the information provided, it was the Board's consensus that the proposed fees to be paid to the Advisor pursuant to the Agreements were reasonable. The Trustees determined that the overall arrangements provided under the terms of the Agreements were reasonable business arrangements, and that the Agreements were approved. The Advisor retains the right to use the name "IMS" in connection with another investment company or business enterprise with which the Advisor is or may become associated. The Trust's right to use the name "IMS" automatically ceases ninety days after termination of the Agreement and may be withdrawn by the Advisor on ninety days written notice. The Advisor may make payments to banks or other financial institutions that provide shareholder services and administer shareholder accounts. Banks may charge their customers fees for offering these services to the extent permitted by applicable regulatory authorities, and the overall return to those shareholders availing themselves of the bank services will be lower than to those shareholders who do not. The Funds may from time to time purchase securities issued by banks that provide such services; however, in selecting investments for the Funds, no preference will be shown for such securities. TRUSTEES AND OFFICERS The Board of Trustees supervises the business activities of the Trust. Each Trustee serves as a Trustee until the termination of the Trust unless the Trustee dies, resigns, retires or is removed. 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 Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Kenneth D. Trumpfheller2 Trustee Since 1995 29 1725 E. Southlake Blvd. Suite 200 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. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Length of Number of Portfolios in Name, Age and Address Position(s) Held Time Served Fund Complex1 Overseen with Trust by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Timothy Ashburn3 President and Since October 2002 N/A 2424 Harrodsburg Road Secretary Lexington, KY 40503 Year of Birth: 1950 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chairman of Unified Financial Services, Inc. since 1989 and Chief N/A Executive Officer from 1989 to 1992 and 1994 to April 2002; President of Unified Financial Services from November 1997 to April 2000. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Number of Portfolios Position(s) In Length of in Fund Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Thomas G. Napurano Treasurer and Since October 2002 N/A 2424 Harrodsburg Road Chief Financial Lexington, KY 40503 Officer Year of Birth: 1941 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chief Financial Officer and Executive Vice President of Unified N/A Financial Services, Inc., the parent company of the Trust's administrator and principal underwriter; member the board of directors of Unified Financial Services, Inc. from 1989 to March 2002. - ---------------------------------------------------------------------- ----------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. 2 Mr. Trumpfheller may be deemed to be an "interested person" of the Trust because he is a registered principal of the Trust's distributor 3 Mr. Ashburn is an "interested person" of the Trust because he is an officer of the Trust. In addition, he may be deemed to be an "interested person" of the Trust because he is Chairman of Unified Financial Services, Inc., the parent of the principal underwriter for certain of the funds of the Trust. 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 Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Gary E. Hippenstiel Trustee Trustee since 1995 29 600 Jefferson Street Suite 350 Houston, TX 77002 Year of Birth: 1947 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Director, Vice President and Chief Investment Officer of Legacy Trust None Company since 1992. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Mark W. Muller Trustee Trustee since 2002 29 5016 Cedar River Tr. Ft. Worth, TX. 76137 Year of Birth: 1964 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. President of JAMAR None Resources, Inc., a manufacturers representative firm, September 2001 to present. Account Manager for SCI, Inc., a custom manufacturer, from April 2002 to September 2001. Account Manager for Clarion Technologies, a manufacturer of automotive, heavy truck, and consumer goods, from 1996 to April 2000. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Richard J. Wright, Jr. Trustee Trustee since 2002 29 13532 N. Central Expressway MS 3800 Dallas, TX 75243 Year of Birth: 1962 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. Various positions None with Texas Instruments, a technology company, since 1985, including the following: Program Manager for Semi-Conductor Business Opportunity Management System, 1998 to present; Development Manager for we-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. - ----------------------------------------------------------------------- ---------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. The Trust's audit committee consists of Gary Hippenstiel, Mark Muller and Richard Wright. The audit committee is responsible for overseeing the Fund's accounting and financial reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers; overseeing the quality and objectivity of the Fund's financial statements and the independent audit of the financial statements; and acting as a liaison between the Fund's independent auditors and the full Board of Trustees. The audit committee was recently established and held no meetings during the year ended June 30, 2002. The following table provides information regarding shares of the Funds and other portfolios of the AmeriPrime Family of Funds owned by each Trustee as of December 31, 2001. - -------------------------------------- ---------------------------------------- -------------------------------------- Aggregate Dollar Range of Shares of all Funds Overseen by the Trustee Within the AmeriPrime Family of Trustee Dollar Range of Fund Shares Funds1 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Gary E. Hippenstiel None $1-$10,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Mark W. Muller None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Kenneth D. Trumpfheller None $50,001-$100,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Richard J. Wright None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- 1 As of December 31, 2001, the terms "Fund Complex" and "AmeriPrime Family of Funds" refers to AmeriPrime Funds and AmeriPrime Advisors Trust. Trustee fees are Trust expenses, and each series of the Trust pays a portion of the Trustee fees. The compensation paid to the Trustees for the Funds' fiscal year ended June 30, 2002 is set forth in the following table: - ------------------------------------------------ ----------------------------------- --------------------------------- Total Compensation from Trust and AmeriPrime Advisors Trust Name Aggregate Compensation from Trust - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Kenneth D. Trumpfheller $0 $0 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Steve L. Cobb1 $18,729 $18,729 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Gary E. Hippenstiel $19,875 $19,875 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Mark W. Muller2 $1146 $16,771 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Richard J. Wright2 $1146 $16,771 - ------------------------------------------------ ----------------------------------- ---------------------------------
1 Mr. Cobb is no longer a Trustee of the Trust. 2 Elected to the Board on May 29, 2002. PORTFOLIO TRANSACTIONS AND BROKERAGE Subject to policies established by the Board of Trustees of the Trust, the Advisor is responsible for each Fund's portfolio decisions and the placing of each Fund's portfolio transactions. In placing portfolio transactions, the Advisor seeks the best qualitative execution for the Funds, taking into account such factors as price (including the applicable brokerage commission or dealer spread), the execution capability, financial responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Advisor generally seeks favorable prices and commission rates that are reasonable in relation to the benefits received. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to its obligation of seeking best qualitative execution, the Advisor may give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute portfolio transactions. The Advisor is specifically authorized to select brokers or dealers who also provide brokerage and research services to the Funds and/or the other accounts over which the Advisor exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker or dealer would charge if the Advisor determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided. The determination may be viewed in terms of a particular transaction or the Advisor's overall responsibilities with respect to the Trust and to other accounts over which it exercises investment discretion. Research services include supplemental research, securities and economic analyses, statistical services and information with respect to the availability of securities or purchasers or sellers of securities and analyses of reports concerning performance of accounts. The research services and other information furnished by brokers through whom the Funds effects securities transactions may also be used by the Advisor in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Advisor in connection with its services to the Funds. Although research services and other information are useful to the Funds and the Advisor, it is not possible to place a dollar value on the research and other information received. It is the opinion of the Board of Trustees and the Advisor that the review and study of the research and other information will not reduce the overall cost to the Advisor of performing its duties to the Funds under the Agreement. Due to research services provided by brokers, the IMS Capital Value Fund directed to brokers $12,893,146.19 of brokerage transactions (on which commissions were $25,692.54) during the fiscal year ended June 30, 2002. Over-the-counter transactions may be placed with broker-dealers if the Advisor is able to obtain best execution (including commissions and price). Over-the-counter transactions may also be placed directly with principal market makers. Fixed income securities may be purchased through broker-dealers, provided best execution is available. Fixed income securities may be purchased directly from the issuer, an underwriter or a market maker. Purchases may include a concession paid by the issuer to the underwriter and the purchase price paid to a market maker may include the spread between the bid and asked prices. To the extent that the Trust and another of the Advisor's clients seek to acquire the same security at about the same time, the Trust may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the Trust may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if the other client desires to sell the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Trust. In the event that more than one client wants to purchase or sell the same security on a given date, the purchases and sales will normally be made by random client selection. For the fiscal years ended June 30, 2002, 2001 and 2000, the IMS Capital Value Fund paid brokerage commissions of $39,471, $59,407, and $33,268, respectively. The Trust, the Advisor, and each Fund's underwriter have each adopted a Code of Ethics (the "Code") under Rule 17j-1 of the Investment Company Act of 1940. The personnel subject to the Code are permitted to invest in securities, including securities that may be purchased or held by the Fund. You may obtain a copy of the Code from the Securities and Exchange Commission. DETERMINATION OF SHARE PRICE The price (net asset value) of the shares of each Fund is determined at the close of trading (normally 4:00 p.m., Eastern time) on each day the New York Stock Exchange is open for business (the Exchange is closed on weekends, most federal holidays, and Good Friday). For a description of the methods used to determine the net asset value (share price), see "Determination of Net Asset Value" in the Prospectus. 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 Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees of the Trust. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market 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 Advisor decides that a price provided by the pricing service 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 Advisor, subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. SALES AT NET ASSET VALUE All shares of the IMS Strategic Allocation Fund and IMS Strategic Income Fund may be purchased at net asset value. Purchases of the IMS Capital Value Fund's shares may be made at net asset value in the following situations: (a) non-dealer assisted (or assisted only by the Funds' distributor) tax-exempt entities (including pension and profit sharing plans) whose minimum initial investment is $25,000 or more, (b) non-dealer assisted (or assisted only by the Funds' distributor) purchases by a bank or trust company in a single account where such bank or trust company is named as trustee and the minimum initial investment is over $25,000, (c) non-dealer assisted (or assisted only by the Funds' distributor) purchases by banks, insurance companies, insurance company separate accounts and other institutional purchasers, (d) a registered investment advisor purchasing shares on behalf of a client or on his or her own behalf through an intermediary service institution offering a separate and established program for registered investment advisors and notifying the Fund and its distributor of such arrangement, (e) the Advisor, the Funds' distributor, the Funds' administrator, or any affiliated company thereof, (f) any current or retired officer, trustee, director or employee, or any member of the immediate family of such person, of the Funds, the Advisor, the Funds' distributor, the Funds' administrator, or any affiliated company thereof, (g) any employee benefit plan established for employees of the Advisor, the Funds' distributor, the Funds' administrator, or any affiliated company thereof, (h) advisory clients of the Advisor, (i) registered representatives and their spouses and minor children and employees of selected dealers, (j) for-fee clients of investment advisors who have for-fee clients with at least $25,000 of net asset value of shares in the Funds after giving effect to the purchase, and who have directed their for-fee clients to the Fund, (k) shareholders of the Funds, with respect to their reinvestment of dividends and distributions from the Funds, (l) any additional investments made by shareholders of the IMS Capital Value Fund if their account was established prior to the date the Fund was converted from a no-load fund to a load fund, (m) sales to broker-dealers who conduct their business with their customers principally through the Internet and who do not have registered representatives who actively solicit those customers to purchase securities, including shares of the Funds, and (n) sales through a financial services organization (such as a bank, broker-dealer, financial planner, advisor, fund supermarket or other financial intermediary) under an arrangement with the Funds or the Advisor. In the opinion of the Funds' management, these sales will result in less selling effort and expense. In order to qualify for these waivers, sufficient information must be submitted at the time of purchase with the application to determine whether the account is entitled to the waiver of the sales charge. INVESTMENT PERFORMANCE The Funds may periodically advertise "average annual total return," "average annual total return after taxes on distributions," and "average annual total return after taxes on distributions and redemption." "Average annual total return," as defined by the Securities and Exchange Commission ("SEC"), is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1+T)n=ERV Where: P = a hypothetical $1,000 initial investment T = average annual total return n = number of years ERV = ending redeemable value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period. The computation assumes that all dividends and distributions are reinvested at the net asset value on the reinvestment dates and that a complete redemption occurs at the end of the applicable period. "Average annual total return after taxes on distributions," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVD Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions) n = number of years ATVD ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions but not after taxes on redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period. "Average annual total return after taxes on distributions and redemption," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVDR Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions and redemption) n = number of years ATVDR ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions and redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period. The following table provides information regarding the IMS Capital Value Fund's performance (for the periods ended June 30, 2002). - ---------------------------------------------------------------------------------------------------------------------- IMS CAPITAL VALUE FUND - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- 1 Year Since Inception - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return -6.76% 8.45% - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return After Taxes on Distributions -10.22% 6.61% - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return After Taxes on Distributions and -4.35% 6.19% Redemptions - ---------------------------------------------------------------- -------------------------- --------------------------
The Funds may also advertise performance information (a "non-standardized quotation") which is calculated differently from average annual total return. A non-standardized quotation of total return may be a cumulative return which measures the percentage change in the value of an account between the beginning and end of a period, assuming no activity in the account other than reinvestment of dividends and capital gains distributions. A non-standardized quotation may also be an average annual compounded rate of return over a specified period, which may be a period different from those specified for average annual total return. In addition, a non-standardized quotation may be an indication of the value of a $10,000 investment (made on the date of the initial public offering of the Fund's shares) as of the end of a specified period. A non-standardized quotation of total return will always be accompanied by the Fund's average annual total return (before taxes). Each Fund's investment performance will vary depending upon market conditions, the composition of the Fund's portfolio and operating expenses of the Fund. These factors and possible differences in the methods and time periods used in calculating non-standardized investment performance should be considered when comparing the Fund's performance to those of other investment companies or investment vehicles. The risks associated with a Fund's investment objective, policies and techniques should also be considered. At any time in the future, investment performance may be higher or lower than past performance, and there can be no assurance that any performance will continue. From time to time, in advertisements, sales literature and information furnished to present or prospective shareholders, the performance of each Fund may be compared to indices of broad groups of unmanaged securities considered to be representative of or similar to the portfolio holdings of the Funds or considered to be representative of the stock market in general. The Fund may use the S&P 500 Index or the Russell 2000 Index. In addition, the performance of the Funds may be compared to other groups of mutual funds tracked by any widely used independent research firm which ranks mutual funds by overall performance, investment objectives and assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies, limitations and expenses of other mutual funds in a group may not be the same as those of the Funds. Performance rankings and ratings reported periodically in national financial publications such as Barron's and Fortune also may be used. CUSTODIAN U.S. Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is Custodian of each Fund's investments. The Custodian acts as the Fund's depository, safekeeping its portfolio securities, collects all income and other payments with respect thereto, disburses funds at the Fund's request and maintains records in connection with its duties. FUND SERVICES Effective July 1, 2000, Unified Fund Services, Inc., 431 N. Pennsylvania St., Indianapolis, IN 46204 ("Unified"), acts as the Funds' transfer agent. A Trustee and the officers of the Trust are members of management and/or employees of Unified. Unified maintains the records of each shareholder's account, answers shareholders' inquiries concerning their accounts, processes purchases and redemptions of the Fund's shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. For its services as transfer agent, Unified receives a monthly fee from each Fund of $1.20 per shareholder (subject to a minimum monthly fee of $900 per Fund) for these transfer agency services. For the fiscal years ended June 30, 2002 and 2001, Unified received $34,559 and $15,563 from the IMS Capital Value Fund for these transfer agent services. In addition, Unified provides the Funds with fund accounting services, which includes certain monthly reports, record-keeping and other management-related services. For its services as fund accountant, Unified receives an annual fee from the Funds 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 to $100 million). For the fiscal years ended June 30, 2002 and 2001 Unified received $19,200 and $19,445 from the IMS Capital Value Fund for these fund accounting services. Prior to July 1, 2000, American Data Services, Inc. ("ADS"), Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788, acted as the IMS Capital Value Fund's transfer agent and fund accountant. For the fiscal year ended June 30, 2000, ADS received $18,363, $18,128 and $16,878, respectively, from the IMS Capital Value Fund for these services. Unified also provides the Funds with administrative services, including all regulatory reporting and necessary office equipment, personnel and facilities. Unified receives a monthly fee from the Funds equal to an annual rate of 0.10% of each Fund's assets under $50 million, 0.075% of each Fund's assets from $50 million to $100 million, and 0.050% of each Fund's assets over $100 million (subject to a minimum fee of $2,500 per month). For the fiscal years ended June 30, 2002, 2001 and 2000, Unified received $27,133, $15,759, and $23,275, respectively, from the IMS Capital Value Fund for these administrative services (prior to October 12, 2000, these fees were paid to AmeriPrime Financial Services, Inc. which merged with Unified on that date). ACCOUNTANTS The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake, Ohio 44145, has been selected as independent public accountants for the Funds for the fiscal year ending June 30, 2003. McCurdy & Associates performs an annual audit of each Fund's financial statements and provides financial, tax and accounting consulting services as requested. DISTRIBUTOR Each Distributor is obligated to sell the shares of the Funds on a best efforts basis only against purchase orders for the shares. Shares of the Funds are offered to the public on a continuous basis. Capital Research Brokerage Services, LLC, 107 South Fair Oaks Drive, Suite 315, Pasadena, CA 91105 ("Capital Research"), is the exclusive agent for distribution of shares of the IMS Capital Value Fund. During the fiscal year ended June 30, 2002, total underwriting commissions paid by the IMS Capital Value Fund to Capital Research were $32,185. The amount retained by Capital Research was $8,020. No underwriting commissions were paid during prior fiscal years. Unified Financial Securities, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204 ("UFS") is the exclusive agent for distribution of shares of the IMS Strategic Income Fund and the IMS Strategic Allocation Fund. Kenneth Trumpfheller, a Trustee of the Trust, is a registered principal of, and may be deemed to be an affiliate of, UFS. Unified and UFS are controlled by Unified Financial Services, Inc. UFS receives no underwriting commissions from the Funds. FINANCIAL STATEMENTS The financial statements and independent auditors' report required to be included in the Statement of Additional Information are incorporated herein by reference to the IMS Capital Value Fund's Annual Report to Shareholders for the period ended June 30, 2002. The Trust will provide the Annual Report without charge by calling the Fund at (800)-934-5550. AUXIER FOCUS FUND PROSPECTUS November 1, 2002 INVESTMENT OBJECTIVE: Long term capital appreciation 8050 S.W. Warm Springs Street Suite 130 Tualatin, OR 97062 877-3-AUXIER (877-328-9437) The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS PAGE RISK/RETURN SUMMARY............................................................1 FEES AND EXPENSES OF INVESTING IN THE FUND.....................................5 ADDITIONAL INFORMATION ABOUT THE FUND..........................................6 HOW TO BUY SHARES..............................................................7 HOW TO REDEEM SHARES...........................................................9 DETERMINATION OF NET ASSET VALUE..............................................11 DIVIDENDS, DISTRIBUTIONS AND TAXES............................................12 MANAGEMENT OF THE FUND........................................................13 FINANCIAL HIGHLIGHTS..........................................................14 PRIVACY POLICY................................................................16 FOR MORE INFORMATION..................................................BACK COVER RISK/RETURN SUMMARY Investment Objective The investment objective of the Auxier Focus Fund is to provide long term capital appreciation. Principal Strategies The Fund invests primarily in a portfolio of common stocks that the Fund's advisor believes offer growth opportunities at a reasonable price. The advisor's assessment of a stock's growth prospects and price is based on several criteria, including: o price to earnings o price to cash flow o rate of earnings growth o consistency in past operating results o quality of management and present and projected industry position, based on the advisor's research. The advisor's research includes review of public information (such as annual reports), discussions with management, suppliers and competitors, and attending industry conferences. The Fund may invest in foreign equity securities by purchasing American Depositary Receipts ("ADRs"). ADRs are certificates evidencing ownership of shares of a foreign-based issuer held in trust by a bank or similar financial institution. They are alternatives to the direct purchase of the underlying securities in their national markets and currencies. The Fund will not invest more than 20% of its net assets in ADRs. Under normal circumstances, the Fund will invest primarily in the common stock of medium to large U.S. companies (those with market capitalizations above $1 billion). As the Fund is non-diversified, its portfolio may at times focus on a limited number of companies that the advisor believes offer superior prospects for growth. Certain sectors are likely to be overweighted compared to others because the advisor focuses on sectors that it believes demonstrate the best fundamentals for growth and will, in the advisor's opinion, be leaders in the U.S. economy. The sectors in which the Fund may be overweighted will vary at different points in the economic cycle. The Fund may sell a security when the advisor's research indicates that there has been a deterioration in the company's fundamentals, such as changes in the company's competitive position or a lack of management focus. The Fund does not intend to purchase or sell securities for short term trading purposes. However, if the objective of the Fund would be better served, the Fund may engage in active trading of the Fund's portfolio securities. Principal Risks of Investing in the Fund o Management Risk. The advisor's growth-oriented approach may fail to produce the intended results. o Company Risk. The value of the Fund may decrease in response to the activities and financial prospects of an individual company in the Fund's portfolio. The value of an individual company can be more volatile than the market as a whole. o Market Risk. Overall stock market risks may also affect the value of the Fund. Factors such as domestic economic growth and market conditions, interest rate levels and political events affect the securities markets and could cause the Fund's share price to fall. o Volatility Risk. Common stocks tend to be more volatile than other investment choices. The value of an individual company can be more volatile than the market as a whole. This volatility affects the value of the Fund's shares. o Foreign Risk. To the extent the Fund invests in ADRs, the Fund could be subject to greater risks because the Fund's performance may depend on issues other than the performance of a particular company. Changes in foreign economies and political climates are more likely to affect the Fund than a mutual fund that invests exclusively in U.S. companies. The value of foreign securities is also affected by the value of the local currency relative to the U.S. dollar. There may also be less government supervision of foreign markets, resulting in non-uniform accounting practices and less publicly available information. o Sector Risk. If the Fund's portfolio is overweighted in a sector, any negative development affecting that sector will have a greater impact on the Fund than a fund that is not overweighted in that sector. For example: o The health care sector is subject to government regulation and government approval of products and services, which could have a significant effect on price and availability. o Financial services companies are subject to extensive government regulation. Changes or proposed changes in these regulations may adversely impact the industry. For example, regulatory changes may make the industry more competitive and some companies may be negatively affected. The profitability of companies in the financial services industries can be significantly affected by the cost of capital, changes in interest rates and price competition. o Non-Diversification Risk. As a non-diversified fund, the Fund will be subject to substantially more investment risk and potential for volatility than a diversified fund because its portfolio may at times focus on a limited number of companies. These factors can have a negative affect on the value of the Fund's shares. o An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. o The Fund is not a complete investment program. As with any mutual fund investment, the Fund's returns will vary and you could lose money. Is the Fund right for You? The Fund may be suitable for: o Long-term investors seeking a fund with a growth investment strategy o Investors who can tolerate the greater risks associated with common stock investments o Investors who can tolerate the increased risks and price fluctuations associated with a non-diversified fund How the Fund has Performed The bar chart below shows the Fund's total return for calendar years ended December 31. The performance table below shows how the Fund's average annual total returns compare over time to those of a broad-based securities market index. Of course, the Fund's past performance (before and after taxes) is not necessarily an indication of its future performance. [CHART OMITTED] Total Return for the Calendar Year Ended December 31 2000 - 4.05%, 2001 - 12.67% During the period shown, the highest return for a quarter was 8.34% (4th quarter, 2001); and the lowest return was -5.22% (2nd quarter, 2000). *The Fund's year-to-date return as of September 30, 2002 was -11.50%. Average Annual Total Returns for the periods ended 12/31/2001: One Year Since Inception1 The Fund Return Before Taxes 12.67% 20.67% Return After Taxes on Distributions2 12.24% 19.65 % Return After Taxes on Distributions and Sale of Fund Shares2 7.64% 16.13% S&P 500 Index -11.88% -6.62% - -------- 1 July 9, 1999 2 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. FEES AND EXPENSES OF INVESTING IN THE FUND The tables below describe the fees and expenses that you may pay if you buy and hold shares of the Fund. Shareholder Fees (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases ...........................NONE Maximum Deferred Sales Charge (Load)........................................NONE Redemption Fee1............................................................1.00% Exchange Fee................................................................NONE Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Management Fees............................................................1.35% Distribution (12b-1) Fees...................................................NONE Other Expenses ............................................................0.02% Total Annual Fund Operating Expenses ......................................1.37% Expense Reimbursement2.....................................................0.02% Net Fund Operating Expenses ...............................................1.35% Example: This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, reinvest dividends and distributions, and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same (except for expense reimbursement reflected in the first year). Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years ------ ------- ------- -------- If you sold your shares at the end of the period $242 $445 $770 $1691 If you remain in the fund $142 $445 $770 $1691
1If you redeem your shares within one year of purchase you will be charged a 1.00% redemption fee. However, if you redeem your shares after the one year period there is no redemption fee. Exceptions may be granted to shareholders at the discretion of the investment advisor. A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire transfer. This fee is subject to change. 2 The advisor has contractually agreed to reimburse the Fund for the fees and expenses of the disinterested trustees through October 31, 2003. ADDITIONAL INFORMATION ABOUT THE FUND Non-principal Strategies The advisor may sell short equity securities of companies that the advisor believes are overvalued. Under normal circumstances, the percentage of the portfolio in short positions will not exceed 20 percent of total assets. When the 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. Positions in shorted securities are speculative and more risky than "long" positions (purchases). You should be aware that any strategy that includes selling securities short can suffer significant losses. Short selling will also result in higher transaction costs (such as interest and dividends), and may result in higher taxes, which reduce the Fund's return. General The investment objective of the Fund may be changed without shareholder approval. From time to time, the Fund may take temporary defensive positions which are inconsistent with the Fund's principal investment strategies, in attempting to respond to adverse market, economic, political or other conditions. For example, the Fund may hold all or a portion of its assets in money market instruments, securities of other no-load mutual funds or repurchase agreements. If the Fund invests in shares of another mutual fund, the shareholders of the Fund generally will be subject to duplicative management fees. As a result of engaging in these temporary measures, the Fund may not achieve its investment objective. The Fund may also invest in such instruments at any time to maintain liquidity or pending selection of investments in accordance with its policies. HOW TO BUY SHARES The minimum initial investment in the Fund is $2,000. If your investment is aggregated into an omnibus account established by an investment advisor, broker or other intermediary, the account minimums apply to the omnibus account, not to your individual investment. If you purchase or redeem shares through a broker-dealer or another intermediary, you may be charged a fee by that intermediary. Initial Purchase By Mail - To be in proper form, your initial purchase request must include: o a completed and signed investment application form (which accompanies this Prospectus); and o a check (subject to the minimum amounts) made payable to the Fund. Mail the application and check to: U.S. Mail: Overnight: Auxier Focus Fund. Auxier Focus Fund c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 North Pennsylvania Street Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204 By Wire - You may also purchase shares of the Fund by wiring federal funds from your bank, which may charge you a fee for doing so. To wire money, you must call Unified Fund Services, Inc. the Fund's transfer agent at 877-3-AUXIER to obtain instructions on how to set up your account and to obtain an account number. Then, provide your bank with the following information for purposes of wiring your investment: U.S. Bank, N.A. ABA #0420-0001-3 Attn: Auxier Focus Fund Account Name _________________(write in shareholder name) For the Account # _______________(write in account number) D.D.A.#489022988 You must provide a signed application to Unified Fund Services at the above address in order to complete your initial wire purchase. Wire orders will be accepted only on a day on which the Fund, custodian and transfer agent are open for business. A wire purchase will not be considered made until the wired money is received and the purchase is accepted by the Fund. Any delays which may occur in wiring money, including delays which may occur in processing by the banks, are not the responsibility of the Fund or the transfer agent. There is presently no fee for the receipt of wired funds, but the Fund may charge shareholders for this service in the future. Additional Investments Minimum subsequent investments are $100. You may purchase additional shares of the Fund at any time by mail, wire or automatic investment. Each additional mail purchase request must contain: -your name -the name of your account(s) -your account number(s) -a check made payable to the Auxier Focus Fund Checks should be sent to the Auxier Focus Fund at the address listed above. A bank wire should be sent as outlined above. Automatic Investment Plan You may make regular investments in the Fund with an Automatic Investment Plan by completing an application and an Automatic Purchase/Withdrawal Request Form and attaching a voided personal check. Investments may be made monthly to allow dollar-cost averaging by automatically deducting $100 or more from your bank checking account. You may change the amount of your monthly purchase at any time. Tax Sheltered Retirement Plans Since the Fund is oriented to longer term investments, the Fund may be an appropriate investment medium for tax-sheltered retirement plans, including: individual retirement plans ("IRAs"); simplified employee pensions ("SEPs"); 401(k) plans; qualified corporate pension and profit-sharing plans (for employees); tax deferred investment plans (for employees of public school systems and certain types of charitable organizations); and other qualified retirement plans. You should contact the transfer agent for the procedure to open an IRA or SEP plan, as well as more specific information regarding these retirement plan options. Please consult with an attorney or tax advisor regarding these plans. You must pay custodial fees for your IRA by redemption of sufficient shares of the Fund from the IRA unless you pay the fees directly to the IRA custodian. Call the transfer agent about the IRA custodial fees. Other Purchase Information The Fund may limit the amount of purchases and refuse to sell to any person. If your check or wire does not clear, you will be responsible for any loss incurred by the Fund. If you are already a shareholder, the Fund can redeem shares from any identically registered account in the Fund as reimbursement for any loss incurred. You may be prohibited or restricted from making future purchases in the Fund. Checks must be made payable to the Fund; the Fund does not accept third party checks. HOW TO REDEEM SHARES You may receive redemption payments by check or federal wire transfer. The proceeds may be more or less than the purchase price of your shares, depending on the market value of the Fund's securities at the time of your redemption. A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire transfer. This fee is subject to change Wire transfer fees will be deducted from your Fund account by redemption of shares. If you redeem your shares through a broker-dealer or other institution, you may be charged a fee by that institution. By Mail - You may redeem any part of your account in the Fund at no charge by mail. Your request should be addressed to: U.S. Mail: Overnight: Auxier Focus Fund. Auxier Focus Fund c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 North Pennsylvania Street Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204 Requests to sell shares are processed at the net asset value next calculated after we receive your order in proper form. To be in proper form, your request for a redemption must include your letter of instruction, including the Fund name, account number, account name(s), the address, and the dollar amount or number of shares you wish to redeem. This request must be signed by all registered share owner(s) in the exact name(s) and any special capacity in which they are registered. The Fund requires that signatures be guaranteed if you request the redemption check made payable to any person other than the shareholder(s) of record or mailed to an address other than the address of record, or if the mailing address has been changed within 30 days of the redemption request. The Fund may also require that signatures be guaranteed for redemptions of $25,000 or more. Signature guarantees are for the protection of shareholders. You can obtain a signature guarantee from most banks and securities dealers, but not from a notary public. For joint accounts, both signatures must be guaranteed. Please call the transfer agent at 877-3-AUXIER if you have questions. At the discretion of the Fund or Unified Fund Services, Inc., you may be required to furnish additional legal documents to insure proper authorization. By Telephone - You may redeem any part of your account in the Fund by calling the transfer agent at 877-3-AUXIER. You must first complete the Optional Telephone Redemption and Exchange section of the investment application to institute this option. The Fund, the transfer agent and the custodian are not liable for following redemption or exchange instructions communicated by telephone to the extent that they reasonably believe the telephone instructions to be genuine. However, if they do not employ reasonable procedures to confirm that telephone instructions are genuine, they may be liable for any losses due to unauthorized or fraudulent instructions. Procedures employed may include recording telephone instructions and requiring a form of personal identification from the caller. The Fund or the transfer agent may terminate the telephone redemption procedures at any time. During periods of extreme market activity, it is possible that shareholders may encounter some difficulty in telephoning the Fund, although neither the Fund nor the transfer agent has ever experienced difficulties in receiving and in a timely fashion responding to telephone requests for redemptions or exchanges. If you are unable to reach the Fund by telephone, you may request a redemption or exchange by mail. Early Redemption Fee - The Fund charges a redemption fee of 1% of the current net asset value of shares redeemed if the shares are owned one year or less. The fee is charged for the benefit of remaining shareholders to defray the Fund portfolio transaction expenses and facilitate portfolio management. This fee applies to shares being redeemed in the order in which they were purchased. The Fund reserves the right to modify the terms of or terminate the fee at any time. The fee is waived for: o an account registered as either an Individual Retirement Account or a tax-qualified retirement plan on the books of the Fund's transfer agent or on the books of certain other third parties that are authorized agents of the Fund; or o shares purchased with reinvested capital gain or dividend distributions. If you purchase shares through a broker-dealer or other financial intermediary that maintains your individual account on its books and an omnibus account with the Fund's transfer agent, your recordkeeper may not be able to apply the fee waiver in all of the circumstances discussed above. Before purchasing shares, please check with the Fund to determine if the fee waiver is available. Exceptions may be granted to shareholders at the discretion of the investment advisor. Additional Information - If you are not certain of the requirements for a redemption please call the transfer agent at 877-3-AUXIER. Redemptions specifying a certain date or share price cannot be accepted and will be returned. You will be mailed the proceeds on or before the fifth business day following the redemption. However, payment for redemption made against shares purchased by check will be made only after the check has been collected, which normally may take up to fifteen calendar days. Also, when the New York Stock Exchange is closed (or when trading is restricted) for any reason other than its customary weekend or holiday closing, or under any emergency circumstances (as determined by the Securities and Exchange Commission) the Fund may suspend redemptions or postpone payment dates. Because the Fund incurs certain fixed costs in maintaining shareholder accounts, the Fund may require you to redeem all of your shares in the Fund on 30 days' written notice if the value of your shares in the Fund is less than $2,000 due to redemption, or such other minimum amount as the Fund may determine from time to time. An involuntary redemption constitutes a sale. You should consult your tax advisor concerning the tax consequences of involuntary redemptions. You may increase the value of your shares in the Fund to the minimum amount within the 30-day period. Your shares are subject to redemption at any time if the Board of Trustees determines in its sole discretion that failure to so redeem may have materially adverse consequences to all or any of the shareholders of the Fund. DETERMINATION OF NET ASSET VALUE The price you pay for your shares is based on the Fund's net asset value per share ("NAV). The NAV is calculated at the close of trading (normally 4:00 p.m. Eastern time) on each day the New York Stock Exchange is open for business (the Stock Exchange is closed on weekends, most federal holidays and Good Friday). The NAV is calculated by dividing the value of the Fund's total assets (including interest and dividends accrued but not yet received) minus liabilities (including accrued expenses) by the total number of shares outstanding. The Fund's assets are generally valued at their market value. If market prices are not available, or if an event occurs after the close of the trading market that materially affects the values, assets may be valued by the advisor at their fair value, according to procedures approved by the Board of Trustees. The Fund may own securities that are traded primarily on foreign exchanges that trade on weekends or other days the Fund does not price its shares. As a result, the NAV of the Fund may change on days when you will not be able to purchase or redeem your shares of the Fund. Requests to purchase and sell shares are processed at the NAV next calculated after we receive your order in proper form. DIVIDENDS, DISTRIBUTIONS AND TAXES Dividends and Distributions. The Fund typically distributes substantially all of its net investment income in the form of dividends and taxable capital gains to its shareholders. These distributions are automatically reinvested in the Fund unless you request cash distributions on your application or through a written request. The Fund expects that its distributions will consist primarily of capital gains. Taxes. In general, selling shares of the Fund and receiving distributions (whether reinvested or taken in cash) are taxable events. Depending on the purchase price and the sale price, you may have a gain or a loss on any shares sold. Any tax liabilities generated by your transactions or by receiving distributions are your responsibility. You may want to avoid making a substantial investment when a Fund is about to make a taxable distribution because you would be responsible for any taxes on the distribution regardless of how long you have owned your shares. Early each year, the Fund will mail to you a statement setting forth the federal income tax information for all distributions made during the previous year. If you do not provide your taxpayer identification number, your account will be subject to backup withholding. The tax considerations described in this section do not apply to tax-deferred accounts or other non-taxable entities. Because each investor's tax circumstances are unique, please consult with your tax advisor about your investment. MANAGEMENT OF THE FUND Auxier Asset Management, LLC, 8050 S.W. Warm Springs Street, Suite 130, Tualatin, OR 97062, serves as investment advisor to the Fund. As of September 30, 2002, the advisor managed approximately $154 million in assets. J. Jeffrey Auxier is President and Chief Investment Officer of the advisor and is responsible for the day-to-day management of the Fund's portfolio. He is a graduate of the University of Oregon, and began his investment career in 1982. Mr. Auxier has extensive money management experience. As a portfolio manager with Smith Barney, Mr. Auxier managed money for high net worth clients on a discretionary basis from 1988 until he founded the advisor in July 1998. In 1993, Mr. Auxier was designated a Smith Barney Senior Portfolio Management Director, the highest rank in the company's Portfolio Management Program, and was chosen as the top Portfolio Manager from among 50 Portfolio Managers in the Smith Barney Consulting Group. In 1997 and 1998, Money magazine named him as one of the top ten brokers in the country. Mr. Auxier was a Senior Vice President with Smith Barney when he left to found the advisor. For the fiscal year ended June 30, 2002, the Fund paid the advisor a fee equal to 1.35% of its average daily net assets. The advisor (not the Fund) may pay certain financial institutions (which may include banks, brokers, securities dealers and other industry professionals) a fee for providing distribution related services and/or for performing certain administrative servicing functions for Fund shareholders to the extent these institutions are allowed to do so by applicable statute, rule or regulation. FINANCIAL HIGHLIGHTS The following table is intended to help you better understand the Fund's financial performance since its inception. Certain information reflects financial results for a single Fund share. Total return represents the rate you would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. This information has been audited by McCurdy & Associates CPA's, Inc., whose report, along with the Fund's financial statements, are included in the Fund's annual report, which is available upon request. Period Year ended Year ended ended June 30, June 30, June 30, 2002 2001 2000 (c) ------------- ------------- ------------- Selected Per Share Data Net asset value, beginning of period $ 11.43 $ 9.99 $ 10.00 ------------- ------------- ------------- Income from investment operations Net investment income 0.08 0.17 0.18 Net realized and unrealized gain (loss) (0.07) 1.43 (0.16) ------------- ------------- ------------- Total from investment operations 0.01 1.60 0.02 ------------- ------------- ------------- Less distributions: Distributions from net investment income (0.09) (0.13) (0.03) Distributions from net realized gains (0.02) (0.03) 0.00 ------------- ------------- ------------- Total distributions (0.11) (0.16) (0.03) ------------- ------------- ------------- Net asset value, end of period $ 11.33 $ 11.43 $ 9.99 ============= ============= ============= Total Return 0.07% 16.11% 0.23%(a) Ratios and Supplemental Data Net assets, end of period (000) $ 16,638 $ 7,084 $ 1,336 Ratio of expenses to average net assets 1.35% 1.35% 1.35%(b) Ratio of expenses to average net assets before reimbursement 1.37% 1.41% 1.62%(b) Ratio of net investment income to average net assets 0.73% 1.56% 1.84%(b) Ratio of net investment income to average net assets before reimbursement 0.71% 1.50% 1.57%(b) Portfolio turnover rate 55.72% 41.46% 187.85%
(a) For a period of less than a full year, the total return is not annualized. (b) Annualized. (c) For the period July 9, 1999 (commencement of operations) through June 30, 2000. PRIVACY POLICY The following is a description of the Fund's policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties. Categories of Information the Fund Collects. The Fund collects the following nonpublic personal information about you: o Information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address, phone number, social security number, assets, income and date of birth); and o Information about your transactions with the Fund, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information). Categories of Information the Fund Discloses. The Fund does not disclose any nonpublic personal information about its current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Fund's custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you. Confidentiality and Security. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. FOR MORE INFORMATION Several additional sources of information are available to you. The Statement of Additional Information ("SAI"), incorporated into this Prospectus by reference, contains detailed information on Fund policies and operations. Annual and semi-annual reports contain management's discussion of market conditions and investment strategies that significantly affected the Fund's performance results as of the Fund's latest semi-annual or annual fiscal year end. Call the Funds at 877-3-AUXIER to request free copies of the SAI and the Fund's annual and semi-annual reports, to request other information about the Fund and to make shareholder inquiries. You may review and copy information about the Fund (including the SAI and other reports) at the Securities and Exchange Commission (SEC) Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation. You may also obtain reports and other information about the Fund on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. Investment Company Act #811-9096 AUXIER FOCUS FUND STATEMENT OF ADDITIONAL INFORMATION November 1, 2002 This Statement of Additional Information ("SAI") is not a prospectus. It should be read in conjunction with the Prospectus of the Auxier Focus Fund dated November 1, 2002. A free copy of the Prospectus can be obtained by writing the transfer agent at 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or by calling toll free 1-877-3-AUXIER (877-328-9437). TABLE OF CONTENTS PAGE DESCRIPTION OF THE TRUST AND THE FUND..........................................2 ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS..............................................................3 INVESTMENT LIMITATIONS.........................................................9 THE INVESTMENT ADVISOR........................................................12 TRUSTEES AND OFFICERS.........................................................13 PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................17 DETERMINATION OF SHARE PRICE..................................................18 INVESTMENT PERFORMANCE........................................................19 CUSTODIAN.....................................................................21 FUND SERVICES.................................................................21 ACCOUNTANTS...................................................................22 DISTRIBUTOR...................................................................22 FINANCIAL STATEMENTS..........................................................22 DESCRIPTION OF THE TRUST AND THE FUND The Auxier Focus Fund (the "Fund") was organized as a non-diversified series of AmeriPrime Funds (the "Trust") on February 2, 1999 and commenced operations on July 9, 1999. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The Trust Agreement permits the 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 Trustees. The investment advisor to the Fund is Auxier Asset Management, LLC (the "Advisor"). The Fund does not issue share certificates. All shares are held in non-certificate form registered on the books of the Fund and the transfer agent for the account of the shareholder. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to that series with each other share of that series and is entitled to such dividends and distributions out of income belonging to the series as are declared by the Trustees. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to divide or combine the shares of any series into a greater or lesser number of shares of that series so long as the proportionate beneficial interest in the assets belonging to that series and the rights of shares of any other series are in no way affected. In case of any liquidation of a series, the holders of shares of the series being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that series. Expenses attributable to any series are borne by that series. Any general expenses of the Trust not readily identifiable as belonging to a particular series are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. No shareholder is liable to further calls or to assessment by the Trust without his or her express consent. Any Trustee of the Trust may be removed by vote of the shareholders holding not less than two-thirds of the outstanding shares of the Trust. The Trust does not hold an annual meeting of shareholders. When matters are submitted to shareholders for a vote, each shareholder is entitled to one vote for each whole share he owns and fractional votes for fractional shares he owns. All shares of the Fund have equal voting rights and liquidation rights. The Agreement and Declaration of Trust can be amended by the Trustees, except that any amendment that adversely effects the rights of shareholders must be approved by the shareholders affected. All shares of the Fund are subject to involuntary redemption if the Trustees determine to liquidate the Fund. An involuntary redemption will create a capital gain or a capital loss, which may have tax consequences about which you should consult your tax advisor. As of October 25, 2002, the following persons may be deemed to beneficially own or hold of record five percent (5%) or more of the Fund: Charles Schwab & Co., 9602 E Panarama Cir, Englewood, CO 80112 - 56.67%. As of October 25, 2002, Charles Schwab & Co. may be deemed to control the Fund as a result of its beneficial ownership of the shares of the Fund. As the controlling shareholder, it would control the outcome of any proposal submitted to the shareholders for approval including changes to the Fund's fundamental policies or the terms of the management agreement with the Fund's advisor. As of October 25, 2002, the Trustees and officers as a group owned less than one percent of the Fund. For information concerning the purchase and redemption of shares of the Fund, see "How to Buy Shares" and "How to Redeem Shares" in the Prospectus. For a description of the methods used to determine the share price and value of the Fund's assets, see "Determination of Net Asset Value" in the Prospectus and "Determination of Share Price" in this Statement of Additional Information. ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS This section contains a discussion of some of the investments the Fund may make and some of the techniques it may use. A. Equity Securities. Equity securities consist of common stock, preferred stock, convertible preferred stock, convertible bonds, American Depositary Receipts ("ADRs"), rights and warrants. Common stocks, the most familiar type, represent an equity (ownership) interest in a corporation. Warrants are options to purchase equity securities at a specified price for a specific time period. Rights are similar to warrants, but normally have a short duration and are distributed by the issuer to its shareholders. Although equity securities have a history of long term growth in value, their prices fluctuate based on changes in a company's financial condition and on overall market and economic conditions. The Fund will not invest more than 5% of its net assets in each of the following: preferred stock, convertible preferred stock and convertible bonds. Investments in equity securities are subject to inherent market risks and fluctuations in value due to earnings, economic conditions and other factors beyond the control of the Advisor. As a result, the return and net asset value of the Fund will fluctuate. Securities in the Fund's portfolio may not increase as much as the market as a whole and some undervalued securities may continue to be undervalued for long periods of time. Although profits in some Fund holdings may be realized quickly, it is not expected that most investments will appreciate rapidly. ADRs are subject to risks similar to those associated with direct investment in foreign securities. For example, there may be less information publicly available about a foreign company then about a U.S. company, and foreign companies are not generally subject to accounting, auditing and financial reporting standards and practices comparable to those in the U.S. Other risks associated with investments in foreign securities include changes in restrictions on foreign currency transactions and rates of exchanges, changes in the administrations or economic and monetary policies of foreign governments, the imposition of exchange control regulations, the possibility of expropriation decrees and other adverse foreign governmental action, the imposition of foreign taxes, less liquid markets, less government supervision of exchanges, brokers and issuers, difficulty in enforcing contractual obligations, delays in settlement of securities transactions and greater price volatility. In addition, investing in foreign securities will generally result in higher commissions than investing in similar domestic securities. Equity securities also include SPDRs (S&P Depositary Receipts, known as "Spiders"), DIAMONDS, QQQs and a number of other exchange traded funds. SPDRs represent ownership in the SPDR Trust, a unit investment trust that holds a portfolio of common stocks that closely tracks the price performance and dividend yield of the S&P 500 Composite Price Index. SPDRs trade on the American Stock Exchange under the symbol SPY. A MidCap SPDR is similar to a SPDR except that it tracks the performance of the S&P MidCap 400 Index and trades on the American Stock Exchange under the symbol MDY. DIAMONDS represent ownership in the DIAMONDS Trust, a unit investment trust that serves as an index to the Dow Jones Industrial Average (the "Dow") in that its holding consists of the 30 component stocks of the Dow. DIAMONDS trade on the American Stock Exchange under the symbol DIA. QQQs (NASDAQ-100 Index Tracking Stock) represent ownership in the NASDAQ-100 Trust, a unit investment trust that attempts to closely track the price and yield performance of the NASDAQ 100 Index by holding shares of all the companies in the Index. QQQs trade on the American Stock Exchange under the symbol QQQ. Exchange traded products also include iShares, HOLDRs, Fidelity Select Portfolios, Select Sector SPDRs, Fortune e-50, Fortune 500, streetTRACKS and VIPERs. To the extent the Fund invests in a sector product, the Fund is subject to the risks associated with that sector. Additionally, the Fund may invest in new exchange traded shares as they become available. B. Debt Securities. The Fund may buy debt securities of all types and qualities. Bonds and other debt instruments are used by issuers to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest, and must repay the amount borrowed at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values. Debt securities are generally interest rate sensitive, which means that their volume will generally decrease when interest rates rise and increase when interest rates fall. Debt securities, loans, and other direct debt have varying degrees of quality and varying levels of sensitivity to changes in interest rates. Longer term bonds are generally more sensitive to interest rate changes than short term bonds. Corporate debt securities. Corporate debt securities are bonds or notes issued by corporations and other business organizations, including business trusts, in order to finance their credit needs. Corporate debt securities include commercial paper which consist of short term (usually from one to two hundred seventy days) unsecured promissory notes issued by corporations in order to finance their current operations. Fixed rate corporate debt securities tend to exhibit more price volatility during times of rising or falling interest rates than securities with floating rates of interest. This is because floating rate securities behave like short term instruments in that the rate of interest they pay is subject to periodic adjustments based on a designated interest rate index. Fixed rate securities pay a fixed rate of interest and are more sensitive to fluctuating interest rates. In periods of rising interest rates the value of a fixed rate security is likely to fall. Fixed rate securities with short term characteristics are not subject to the same price volatility as fixed rate securities without such characteristics. Therefore, they behave more like floating rate securities with respect to price volatility. Many corporate debt obligations permit the issuers to call the security and thereby redeem their obligations earlier than the stated maturity dates. Issuers are more likely to call bonds during periods of declining interest rates. In these cases, if the Fund owns a bond which is called, the Fund will receive its return of principal earlier than expected and would likely be required to reinvest the proceeds at lower interest rates, thus reducing income to the Fund. Corporate zero coupon securities are: (i) notes or debentures which do not pay current interest and are issued at substantial discounts from par value; or (ii) notes or debentures that pay no current interest until a stated date one or more years into the future, after which the issuer is obligated to pay interest until maturity, usually at a higher rate than if interest were payable from the date of issuance. Variable rate securities. Variable rate demand notes are long term corporate debt instruments that have variable or floating interest rates and provide the Fund with the right to tender the security for repurchase at its stated principal amount plus accrued interest. Such securities typically bear interest at a rate that is intended to cause the securities to trade at par. The interest rate may float or be adjusted at regular intervals (ranging from daily to annually), and is normally based on an interest index or a stated percentage of a prime rate or another published rate. Many variable rate demand notes allow the Fund to demand the repurchase of the security on not more than 7 days prior notice. Other notes only permit the Fund to tender the security at the time of each interest rate adjustment or at other fixed intervals. Floating rate securities. Floating rate securities are debt securities with interest payments or maturity values that are not fixed, but float inversely to an underlying index or price. These securities may be backed by the U.S. government or corporate issuers, or by collateral such as mortgages. In certain cases, a change in the underlying index or price may have a leveraging effect on the periodic coupon payments, creating larger possible swings in the prices of such securities than would be expected when taking into account their maturities alone. The indices and prices upon which such securities can be based include interest rates, currency rates and commodities prices. Floating rate securities pay interest according to a coupon which is reset periodically. The reset mechanism may be formula based, or reflect the passing through of floating interest payments on an underlying collateral pool. The coupon is usually reset daily, weekly, monthly, quarterly or semi-annually, but other schedules are possible. Floating rate obligations generally exhibit a low price volatility for a given stated maturity or average life because their coupons adjust with changes in interest rates. If their underlying index is not an interest rate, or the reset mechanism lags the movement of rates in the current market, greater price volatility may be experienced. Inverse floating rate securities. Inverse floating rate securities are similar to floating rate securities except that their coupon payments vary inversely with an underlying index by use of a formula. Inverse floating rate securities tend to exhibit greater price volatility than other floating rate securities. Because the changes in the coupon are usually negatively correlated with changes in overall interest rates, interest rate risk and price volatility on inverse floating rate obligations can be high, especially if leverage is used in the formula. Index securities pay a fixed rate of interest, but have a maturity value that varies by formula, so that when the obligation matures, a gain or loss is realized. The risk of index obligations depends on the volatility of the underlying index, the coupon payment and the maturity of the obligation. Lower quality debt securities. Lower quality debt securities (commonly called "junk bonds") often are considered to be speculative and involve greater risk of default or price change due to changes in the issuer's creditworthiness or changes in economic conditions. The market prices of these securities will fluctuate over time, may fluctuate more than higher quality securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates. The market for lower quality securities may be less liquid than the market for securities of higher quality. Furthermore, the liquidity of lower quality securities may be affected by the market's perception of their credit quality. Therefore, judgment may at times play a greater role in valuing these securities than in the case of higher quality securities, and it also may be more difficult during certain adverse market conditions to sell lower quality securities at their fair value to meet redemption requests or to respond to changes in the market. Lower quality securities present risks based on payment expectations. For example, high yield bonds may contain redemption or call provisions. If an issuer exercises the provisions in a declining interest rate market, the Fund would have to replace the security with a lower yielding security, resulting in a decreased return for investors. Conversely, a high yield bond's value will decrease in a rising interest rate market, as will the value of the Fund's assets. If the Fund experiences unexpected net redemptions, this may force it to sell its high yield bonds, without regard to their investment merits, thereby decreasing the asset base upon which the Fund's expenses can be spread and possibly reducing the Fund's rate of return. Since the risk of default is higher for lower quality securities and sometimes increases with the age of these securities, the advisor's research and credit analysis are an integral part of managing any securities of this type held by the Fund. In considering investments for the Fund, the advisor attempts to identify those issuers of high-yielding securities whose financial condition is adequate to meet future obligations, has improved or is expected to improve in the future. The advisor's analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earning prospects, and the experience and managerial strength of the issuer. Municipal Securities. Municipal securities are generally issued to finance public works, such as airports, bridges, highways, housing, hospitals, mass transportation projects, schools, streets, and water and sewer works. They are also issued to repay outstanding obligations, to raise funds for general operating expenses, and to make loans to other public institutions and facilities. The two principal classifications of municipal securities are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. Interest on and principal of revenue bonds, however, are payable only from the revenue generated by the facility financed by the bond or other specified sources of revenue. Revenue bonds do not represent a pledge of credit or create any debt of or charge against the general revenues of a municipality or public authority. Municipal securities may carry fixed or floating rates of interest. Most municipal securities pay interest in arrears on a semi-annual or more frequent basis. However, certain securities, typically known as capital appreciation bonds or zero coupon bonds, do not provide for any interest payments prior to maturity. Such securities are normally sold at a discount from their stated value, or provide for periodic increases in their stated value to reflect a compounded interest rate. The market value of these securities is also more sensitive to changes in market interest rates than securities that provide for current interest payments. Municipal securities in the form of notes generally are used to provide for short term capital needs, in anticipation of an issuer's receipt of other revenues or financing, and typically have maturities of up to three years. Such instruments may include Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes, Tax and Revenue Anticipation Notes and Construction Loan Notes. The obligations of an issuer of municipal notes are generally secured by the anticipated revenues from taxes, grants or bond financing. An investment in such instruments, however, presents a risk that the anticipated revenues will not be received or that such revenues will be insufficient to satisfy the issuer's payment obligations under the notes or that refinancing will be otherwise unavailable. C. Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities generally include securities which cannot be disposed of promptly and in the ordinary course of business without taking a reduced price, and "restricted securities." Securities may be illiquid due to contractual or legal restrictions on resale or lack of a ready market. The following securities are considered to be illiquid: repurchase agreements and reverse repurchase agreements maturing in more than seven days, nonpublicly offered securities and restricted securities. D. Restricted Securities. Restricted securities are securities the resale of which is subject to legal or contractual restrictions. Restricted securities may be sold only in privately negotiated transactions, in a public offering with respect to which a registration statement is in effect under the Securities Act of 1933 or pursuant to Rule 144 or Rule 144A promulgated under such Act. Where registration is required, the Fund may be obligated to pay all or part of the registration expense, and a considerable period may elapse between the time of the decision to sell and the time such security may be sold under an effective registration statement. If during such a period adverse market conditions were to develop, the Fund might obtain a less favorable price than the price it could have obtained when it decided to sell. With respect to Rule 144A securities, these restricted securities are treated as exempt from the 15% limit on illiquid securities, provided that a dealer or an institutional trading market in such securities exists. The Fund will not, however invest more than 5% of its net assets in Rule 144A securities. Under the supervision of the Board of Trustees, the Advisor determines the liquidity of restricted securities and, through reports from the Advisor, the Board of Trustees will monitor trading activity in restricted securities. If institutional trading in restricted securities were to decline, the liquidity of the Fund could be adversely affected. E. Borrowing. The Fund may borrow amounts up to 5% of its net assets to meet redemption requests. Because the Fund's investments will fluctuate in value, whereas the interest obligations on borrowed funds may be fixed, during times of borrowing, the Fund's net asset value may tend to increase more then its investments increase in value, and decrease more when its investments decrease in value. In addition, interest costs on borrowings may fluctuate with changing market interest rates and may partially offset or exceed the return earned on the borrowed funds. Also, during times of borrowing under adverse market conditions, the Fund might have to sell portfolio securities to meet interest or principal payments at a time when fundamental investment considerations would not favor such sales. F. Preferred Stock. Preferred stock has a preference in liquidation (and, generally dividends) over common stock but is subordinated in liquidation to debt. As a general rule the market value of preferred stocks with fixed dividend rates and no conversion rights varies inversely with interest rates and perceived credit risk, with the price determined by the dividend rate. Some preferred stocks are convertible into other securities, (for example, common stock) at a fixed price and ratio or upon the occurrence of certain events. The market price of convertible preferred stocks generally reflects an element of conversion value. Because many preferred stocks lack a fixed maturity date, these securities generally fluctuate substantially in value when interest rates change; such fluctuations often exceed those of long term bonds of the same issuer. Some preferred stocks pay an adjustable dividend that may be based on an index, formula, auction procedure or other dividend rate reset mechanism. In the absence of credit deterioration, adjustable rate preferred stocks tend to have more stable market values than fixed rate preferred stocks. All preferred stocks are also subject to the same types of credit risks of the issuer as corporate bonds. In addition, because preferred stock is junior to debt securities and other obligations of an issuer, deterioration in the credit rating of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar yield characteristics. Preferred stocks may be rated by Standard & Poor's Corporation ("S&P") and Moody's Investors Services, Inc. ("Moody's") although there is no minimum rating which a preferred stock must have (and a preferred stock may not be rated) to be an eligible investment for the Fund. The Advisor expects, however, that generally the preferred stocks in which the Fund invests will be rated at least CCC by S&P or Caa by Moody's or, if unrated, of comparable quality in the opinion of the Advisor. Preferred stocks rated CCC by S&P are regarded as predominantly speculative with respect to the issuer's capacity to pay preferred stock obligations and represent the highest degree of speculation among securities rated between BB and CCC; preferred stocks rated Caa by Moody's are likely to be in arrears on dividend payments. Moody's rating with respect to preferred stocks does not purport to indicate the future status of payments of dividends. G. Convertible Securities. A convertible security is a bond or preferred stock which may be converted at a stated price within a specific period of time into a specified number of shares of common stock of the same or different issuer. Convertible securities are senior to common stock in a corporation's capital structure, but usually are subordinated to non-convertible debt securities. While providing a fixed income stream generally higher in yield than in the income derived from a common stock but lower than that afforded by a non-convertible debt security, convertible security also affords an investor the opportunity, through its conversion feature, to participate in the capital appreciation of common stock into which it is convertible. In general, the market value of a convertible security is the higher of its investment value (its value as a fixed income security) or its conversion value (the value of the underlying shares of common stock if the security is converted). As a fixed income security, the market value of a convertible security generally increases when interest rates decline and generally decreases when interest rates rise; however, the price of a convertible security generally increases as the market value of the underlying stock increases, and generally decreases as the market value of the underlying stock declines. Investments in convertible securities generally entail less risk than investments in the common stock of the same issuer. H. Repurchase Agreements. The Fund may invest in repurchase agreements fully collateralized by obligations issued by the U.S. government or by agencies of the U.S. government (U.S. Government Obligations"). A repurchase agreement is a short term investment in which the purchaser (i.e., the Fund) acquires ownership of a U.S. Government Obligation (which may be of any maturity) and the seller agrees to repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser's holding period (usually not more than 7 days from the date of purchase). Any repurchase transaction in which the Fund engages will require full collateralization of the seller's obligation during the entire term of the repurchase agreement. In the event of a bankruptcy or other default of the seller, the Fund could experience both delays in liquidating the underlying security and losses in value. However, the Fund intends to enter into repurchase agreements only with Firstar Bank, N.A. (the Fund's custodian), other banks with assets of $1 billion or more and registered securities dealers determined by the Advisor to be creditworthy. The Advisor monitors the creditworthiness of the banks and securities dealers with which the Fund engages in repurchase transactions. I. Short Sales. The Fund engages in short selling activities, which are significantly different from the investment activities commonly associated with conservative stock funds. Positions in shorted securities are speculative and more risky than long positions in securities because the maximum sustainable loss on a security purchased is limited to the amount paid for the security plus transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited risk. Depending on market conditions, the Fund may have difficulty purchasing the security sold short, and could be forced to pay a premium for the security. There can be no assurance that the Fund will be able to close out the short position at any particular time or at an acceptable price. Investors should be aware of the intrinsic risk involved in the Fund and be cognizant that any strategy that includes selling securities short can suffer significant losses. In connection with its short sales, the Fund will be required to maintain a segregated account with the Fund's custodian of cash or high grade liquid assets equal to the greater of the current market value of the securities sold short or the market value of such securities at the time they were sold short, less any collateral deposited with its broker (not including the proceeds from the short sales). Depending on arrangements made with the broker or custodian, the Fund may not receive any payments (including interest) on collateral deposited with the broker or custodian. INVESTMENT LIMITATIONS Fundamental. The investment limitations described below have been adopted by the Trust with respect to the Fund and are fundamental ("Fundamental"), i.e., they may not be changed without the affirmative vote of a majority of the outstanding shares of the Fund. As used in the Prospectus and the Statement of Additional Information, the term "majority" of the outstanding shares of the Fund means the lesser of: (1) 67% or more of the outstanding shares of the Fund present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented at such meeting; or (2) more than 50% of the outstanding shares of the Fund. Other investment practices which may be changed by the Board of Trustees without the approval of shareholders to the extent permitted by applicable law, regulation or regulatory policy are considered non-fundamental ("Non-Fundamental"). 1. Borrowing Money. The Fund will not borrow money, except: (a) from a bank, provided that immediately after such borrowing there is an asset coverage of 300% for all borrowings of the Fund; or (b) from a bank or other persons for temporary purposes only, provided that such temporary borrowings are in an amount not exceeding 5% of the Fund's total assets at the time when the borrowing is made. This limitation does not preclude the Fund from entering into reverse repurchase transactions, provided that the Fund has an asset coverage of 300% for all borrowings and repurchase commitments of the Fund pursuant to reverse repurchase transactions. 2. Senior Securities. The Fund will not issue senior securities. This limitation is not applicable to activities that may be deemed to involve the issuance or sale of a senior security by the Fund, provided that the Fund's engagement in such activities is consistent with or permitted by the Investment Company Act of 1940, as amended, the rules and regulations promulgated thereunder or interpretations of the Securities and Exchange Commission or its staff. 3. Underwriting. The Fund will not act as underwriter of securities issued by other persons. This limitation is not applicable to the extent that, in connection with the disposition of portfolio securities (including restricted securities), the Fund may be deemed an underwriter under certain federal securities laws. 4. Real Estate. The Fund will not purchase or sell real estate. This limitation is not applicable to investments in marketable securities which are secured by or represent interests in real estate. This limitation does not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including real estate investment trusts). 5. Commodities. The Fund will not purchase or sell commodities unless acquired as a result of ownership of securities or other investments. This limitation does not preclude the Fund from purchasing or selling options or futures contracts, from investing in securities or other instruments backed by commodities or from investing in companies which are engaged in a commodities business or have a significant portion of their assets in commodities. 6. Loans. The Fund will not make loans to other persons, except: (a) by loaning portfolio securities; (b) by engaging in repurchase agreements; or (c) by purchasing nonpublicly offered debt securities. For purposes of this limitation, the term "loans" shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities. 7. Concentration. The Fund will not invest 25% or more of its total assets in a particular industry. This limitation is not applicable to investments in obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities or repurchase agreements with respect thereto. With respect to the percentages adopted by the Trust as maximum limitations on its investment policies and limitations, an excess above the fixed percentage will not be a violation of the policy or limitation unless the excess results immediately and directly from the acquisition of any security or the action taken. This paragraph does not apply to the borrowing policy set forth in paragraph 1 above. Notwithstanding any of the foregoing limitations, any investment company, whether organized as a trust, association or corporation, or a personal holding company, may be merged or consolidated with or acquired by the Trust, provided that if such merger, consolidation or acquisition results in an investment in the securities of any issuer prohibited by said paragraphs, the Trust shall, within ninety days after the consummation of such merger, consolidation or acquisition, dispose of all of the securities of such issuer so acquired or such portion thereof as shall bring the total investment therein within the limitations imposed by said paragraphs above as of the date of consummation. Non-Fundamental. The following limitations have been adopted by the Trust with respect to the Fund and are Non-Fundamental (see "Investment Limitations - Fundamental" above). 1. Pledging. The Fund will not mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any assets of the Fund except as may be necessary in connection with borrowings described in limitation (1) above. Margin deposits, security interests, liens and collateral arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques are not deemed to be a mortgage, pledge or hypothecation of assets for purposes of this limitation. 2. Borrowing. The Fund will not purchase any security while borrowings (including reverse repurchase agreements) representing more than 5% of its total assets are outstanding. 3. Margin Purchases. The Fund will not purchase securities or evidences of interest thereon on "margin." This limitation is not applicable to short term credit obtained by the Fund for the clearance of purchases and sales or redemption of securities, or to arrangements with respect to transactions involving options, futures contracts, short sales and other permitted investments and techniques. 4. Short Sales. The Fund will not effect short sales of securities except as described in the Prospectus or the Statement of Additional Information. 5. Options. The Fund will not purchase or sell puts, calls, options or straddles except as described in the Prospectus or the Statement of Additional Information. 6. Illiquid Investments. The Fund will not invest more than 5% of its net assets in securities for which there are legal or contractual restrictions on resale and other illiquid securities. 7. Loans of Portfolio Securities. The Fund will not make loans of portfolio securities. THE INVESTMENT ADVISOR The Fund's investment advisor is Auxier Asset Management, LLC (the "Advisor "), 8050 S.W. Warm Springs Street, Suite 130, Tualatin, OR 97062. J. Jeffrey Auxier may be deemed to be a controlling person of the Advisor due to his ownership of a majority of its shares. Under the terms of the management agreement (the "Agreement"), the Advisor manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage fees and commissions, taxes, borrowing costs (such as (a) interest and (b) dividends on securities sold short), fees and expenses of the non-interested person Trustees, extraordinary expenses (including organizational expenses) and Rule 12b-1 expenses, if any. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 1.35% of the average daily net assets of the Fund. The Advisor has contractually agreed to reimburse the Fund for the fees and expenses of the non-interested person Trustees through October 31, 2003. For the fiscal years ended June 30, 2002 and 2001, and for the period from July 9, 1999 (commencement of operations) through June 30, 2000, the Fund paid advisory fees of $147,525, $44,484, and $10,346, respectively. The Board of Trustees renewed the Agreement for the Auxier Focus Fund at a meeting held on February 13, 2002. Previously, at a meeting held on February 7, 2002, Jeff Auxier of the Advisor had met with the Trustees (by telephone) to discuss the Agreement. He reviewed with the Trustees information regarding his firm and its personnel, noting that there had been no change in the personnel managing the Fund. He also discussed the performance of the Fund, noting that it had substantially outperformed it's index, the S&P 500, for calendar year 2001. The Trustees reviewed the firm's balance sheets dated December 31, 2000 and December 31, 1999. They also reviewed reports comparing the performance and expenses of the Fund to that of several others with similar objectives and asset levels. At the February 13, 2002 meeting, the Trustees discussed the nature and quality of the services provided by the Advisor and, based upon the information provided, it was the Board's consensus that the fee paid to the Advisor pursuant to the Agreement was reasonable. The Trustees determined that the overall arrangement provided under the terms of the Agreement was a reasonable business arrangement, and that the renewal of the Agreement was in the best interests of the Fund's shareholders. The Advisor retains the right to use the name "Auxier" in connection with another investment company or business enterprise with which the Advisor is or may become associated. The Trust's right to use the name "Auxier" automatically ceases ninety days after termination of the Agreement and may be withdrawn by the Advisor on ninety days written notice. The Advisor may make payments to banks or other financial institutions that provide shareholder services and administer shareholder accounts. If a bank or other financial institution were prohibited from continuing to perform all or a part of such services, management of the Fund believes that there would be no material impact on the Fund or its shareholders. Banks and other financial institutions may charge their customers fees for offering these services to the extent permitted by applicable regulatory authorities, and the overall return to those shareholders availing themselves of the bank services will be lower than to those shareholders who do not. The Fund may from time to time purchase securities issued by banks and other financial institutions which provide such services; however, in selecting investments for the Fund, no preference will be shown for such securities. TRUSTEES AND OFFICERS The Board of Trustees supervises the business activities of the Trust. Each Trustee serves as a Trustee until the termination of the Trust unless the Trustee dies, resigns, retires or is removed. 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 Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Kenneth D. Trumpfheller2 Trustee Since 1995 29 1725 E. Southlake Blvd. Suite 200 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. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Length of Number of Portfolios in Name, Age and Address Position(s) Held Time Served Fund Complex1 Overseen with Trust by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Timothy Ashburn3 President and Since October 2002 N/A 2424 Harrodsburg Road Secretary Lexington, KY 40503 Year of Birth: 1950 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chairman of Unified Financial Services, Inc. since 1989 and Chief N/A Executive Officer from 1989 to 1992 and 1994 to April 2002; President of Unified Financial Services from November 1997 to April 2000. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Number of Portfolios Position(s) In Length of in Fund Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Thomas G. Napurano Treasurer and Since October 2002 N/A 2424 Harrodsburg Road Chief Financial Lexington, KY 40503 Officer Year of Birth: 1941 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chief Financial Officer and Executive Vice President of Unified N/A Financial Services, Inc., the parent company of the Trust's administrator and principal underwriter; member the board of directors of Unified Financial Services, Inc. from 1989 to March 2002. - ---------------------------------------------------------------------- ----------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. 2 Mr. Trumpfheller may be deemed to be an "interested person" of the Trust because he is a registered principal of the Trust's distributor 3 Mr. Ashburn is an "interested person" of the Trust because he is an officer of the Trust. In addition, he may be deemed to be an "interested person" of the Trust because he is Chairman of Unified Financial Services, Inc., the parent of the principal underwriter for the Funds. 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 Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Gary E. Hippenstiel Trustee Trustee since 1995 29 600 Jefferson Street Suite 350 Houston, TX 77002 Year of Birth: 1947 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Director, Vice President and Chief Investment Officer of Legacy Trust None Company since 1992. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Mark W. Muller Trustee Trustee since 2002 29 5016 Cedar River Tr. Ft. Worth, TX. 76137 Year of Birth: 1964 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. President of JAMAR None Resources, Inc., a manufacturers representative firm, September 2001 to present. Account Manager for SCI, Inc., a custom manufacturer, from April 2002 to September 2001. Account Manager for Clarion Technologies, a manufacturer of automotive, heavy truck, and consumer goods, from 1996 to April 2000. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Richard J. Wright, Jr. Trustee Trustee since 2002 29 13532 N. Central Expressway MS 3800 Dallas, TX 75243 Year of Birth: 1962 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. Various positions None with Texas Instruments, a technology company, since 1985, including the following: Program Manager for Semi-Conductor Business Opportunity Management System, 1998 to present; Development Manager for we-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. - ----------------------------------------------------------------------- ---------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. The Trust's audit committee consists of Gary Hippenstiel, Mark Muller and Richard Wright. The audit committee is responsible for overseeing the Fund's accounting and financial reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers; overseeing the quality and objectivity of the Fund's financial statements and the independent audit of the financial statements; and acting as a liaison between the Fund's independent auditors and the full Board of Trustees. The audit committee was recently established and held no meetings during the year ended June 30, 2002. The following table provides information regarding shares of the Funds and other portfolios of the AmeriPrime Family of Funds owned by each Trustee as of December 31, 2001. - -------------------------------------- ---------------------------------------- -------------------------------------- Aggregate Dollar Range of Shares of all Funds Overseen by the Trustee Within the AmeriPrime Family of Trustee Dollar Range of Fund Shares Funds1 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Gary E. Hippenstiel None $1-$10,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Mark W. Muller None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Kenneth D. Trumpfheller None $50,001-$100,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Richard J. Wright None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- 1 As of December 31, 2001, the terms "Fund Complex" and "AmeriPrime Family of Funds" refers to AmeriPrime Funds and AmeriPrime Advisors Trust. The compensation paid to the Trustees for the fiscal year ended June 30, 2002 is set forth in the following table. Trustee fees are Trust expenses and each series of the Trust pays a portion of the Trustee fees. - ------------------------------------------------ ----------------------------------- --------------------------------- Total Compensation from Trust and AmeriPrime Advisors Trust Name Aggregate Compensation from Trust - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Kenneth D. Trumpfheller $0 $0 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Steve L. Cobb1 $18,729 $18,729 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Gary E. Hippenstiel $19,875 $19,875 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Mark W. Muller2 $1,146 $16,771 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Richard J. Wright2 $1,146 $16,771 - ------------------------------------------------ ----------------------------------- ---------------------------------
1 Mr. Cobb is no longer a Trustee of the Trust. 2 Elected to the Board on May 29, 2002. PORTFOLIO TRANSACTIONS AND BROKERAGE Subject to policies established by the Board of Trustees, the Advisor is responsible for the Fund's portfolio decisions and the placing of the Fund's portfolio transactions. In placing portfolio transactions, the Advisor seeks the best qualitative execution for the Fund, taking into account such factors as price (including the applicable brokerage commission or dealer spread), the execution capability, financial responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Advisor generally seeks favorable prices and commission rates that are reasonable in relation to the benefits received. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to its obligation of seeking best qualitative execution, the Advisor may give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute portfolio transactions. The Advisor is specifically authorized to select brokers or dealers who also provide brokerage and research services to the Fund and/or the other accounts over which the Advisor exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker or dealer would charge if the Advisor determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided. The determination may be viewed in terms of a particular transaction or the Advisor's overall responsibilities with respect to the Trust and to other accounts over which it exercises investment discretion. Research services include supplemental research, securities and economic analyses, statistical services and information with respect to the availability of securities or purchasers or sellers of securities and analyses of reports concerning performance of accounts. The research services and other information furnished by brokers through whom the Fund effects securities transactions may also be used by the Advisor in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Advisor in connection with its services to the Fund. Although research services and other information are useful to the Fund and the Advisor, it is not possible to place a dollar value on the research and other information received. It is the opinion of the Board of Trustees and the Advisor that the review and study of the research and other information will not reduce the overall cost to the Advisor of performing its duties to the Fund under the Agreement. Due to research services provided by brokers, the Fund directed to brokers $11,249,964.91 of brokerage transactions (on which commissions were $30,407.42) during the fiscal year ended June 30, 2002. Over-the-counter transactions will be placed either directly with principal market makers or with broker-dealers, if the same or a better price, including commissions and executions, is available. Fixed income securities are normally purchased directly from the issuer, an underwriter or a market maker. Purchases include a concession paid by the issuer to the underwriter and the purchase price paid to a market maker may include the spread between the bid and asked prices. To the extent that the Trust and another of the Advisor's clients seek to acquire the same security at about the same time, the Trust may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the Trust may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if the other client desires to sell the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Trust. In the event that more than one client wants to purchase or sell the same security on a given date, the purchases and sales will normally be made by random client selection. For the fiscal year ended June 30, 2002, 2001, and for the period from July 9, 1999 (commencement of operations) through June 30, 2000, the Fund paid brokerage commissions of $38,273, $8227.05, and $2833.42, respectively. The Trust, Advisor and Fund's distributor have each adopted a Code of Ethics (the "Code") under Rule 17j-1 of the Investment Company Act of 1940. The personnel subject to the Code are permitted to invest in securities, including securities that may be purchased or held by the Fund. You may obtain a copy of the Code from the Securities and Exchange Commission. DETERMINATION OF SHARE PRICE The price (net asset value) of the shares of the Fund is determined as of 4:00 p.m., Eastern time on each day the Trust is open for business and on any other day on which there is sufficient trading in the Fund's securities to materially affect the net asset value. The Trust is open for business on every day except Saturdays, Sundays and the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. 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 Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Advisor decides that a price provided by the pricing service 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 Advisor, 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. INVESTMENT PERFORMANCE The Fund may periodically advertise "average annual total return." "Average annual total return," as defined by the Securities and Exchange Commission, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1+T)n=ERV Where: P = a hypothetical $1,000 initial investment T = average annual total return n = number of years ERV = ending redeemable value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period. The computation assumes that all dividends and distributions are reinvested at the net asset value on the reinvestment dates and that a complete redemption occurs at the end of the applicable period. "Average annual total return after taxes on distributions," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVD Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions) n = number of years ATVD ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions but not after taxes on redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period. "Average annual total return after taxes on distributions and redemption," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVDR Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions and redemption) n = number of years ATVDR ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions and redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period. In addition to providing average annual total return, the Fund may also provide non-standardized quotations of total return for differing periods and may provide the value of a $10,000 investment (made on the date of the initial public offering of the Fund's shares) as of the end of a specified period. The following table provides information regarding the Auxier Focus Fund's performance (for the periods ended June 30, 2002). - ---------------------------------------------------------------------------------------------------------------------- AUXIER FOCUS FUND - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- 1 Year Since Inception1 ------ ---------------- - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return .07% 5.24% - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return After Taxes on Distributions -0.22% 4.92% - ---------------------------------------------------------------- -------------------------- -------------------------- - ---------------------------------------------------------------- -------------------------- -------------------------- Average Annual Total Return After Taxes on Distributions and 0.05% 3.77% Redemptions - ---------------------------------------------------------------- -------------------------- --------------------------
- -------- 1 July 9, 1999 The Fund's investment performance will vary depending upon market conditions, the composition of the Fund's portfolio and operating expenses of the Fund. These factors and possible differences in the methods and time periods used in calculating non-standardized investment performance should be considered when comparing the Fund's performance to those of other investment companies or investment vehicles. The risks associated with the Fund's investment objective, policies and techniques should also be considered. At any time in the future, investment performance may be higher or lower than past performance, and there can be no assurance that any performance will continue. From time to time, in advertisements, sales literature and information furnished to present or prospective shareholders, the performance of the Fund may be compared to indices of broad groups of unmanaged securities considered to be representative of or similar to the portfolio holdings of the Fund or considered to be representative of the stock market in general. The Fund may use the S&P 500 Stock Index or the Dow Jones Industrial Average. In addition, the performance of the Fund may be compared to other groups of mutual funds tracked by any widely used independent research firm which ranks mutual funds by overall performance, investment objectives and assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies, limitations and expenses of other mutual funds in a group may not be the same as those of the Fund. Performance rankings and ratings reported periodically in national financial publications such as Barron's and Fortune also may be used. CUSTODIAN U.S. Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is custodian of the Fund's investments. The custodian acts as the Fund's depository, safekeeps its portfolio securities, collects all income and other payments with respect thereto, disburses funds at the Fund's request and maintains records in connection with its duties. FUND SERVICES Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street, Indianapolis, Indiana 46204, acts as the Fund's transfer agent. A Trustee and the officers of the Trust are members of management and/or employees of Unified. Unified maintains the records of each shareholder's account, answers shareholders' inquiries concerning their accounts, processes purchases and redemptions of the Fund's shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. Unified receives a monthly fee from the Advisor of $1.20 per shareholder (subject to a minimum monthly fee of $900) for these transfer agency services. In addition, Unified provides the Fund with fund accounting services, which includes certain monthly reports, record-keeping and other management-related services. For its services as fund accountant, Unified receives an annual fee from the Advisor 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 to $100 million). For the fiscal years ended June 30, 2002, 2001, and for the period from July 9, 1999 (commencement of operations) through June 30, 2000, Unified received $25,408, 15,382 and $8,300, respectively, from the Advisor (not the Fund) for these fund accounting services. Unified also provides the Fund with administrative services, including all regulatory reporting and necessary office equipment, personnel and facilities. Unified receives a monthly fee from the Advisor equal to an annual rate of 0.10% of the Fund's assets under $50 million, 0.075% of the Fund's assets from $50 million to $100 million, and 0.050% of the Fund's assets over $100 million (subject to a minimum fee of $2,500 per month). For the fiscal year ended June 30, 2002, 2001, and for the period from July 9, 1999 (commencement of operations) through June 30, 2000, Unified received $30,000, 20,943 and $20,625, respectively, from the Advisor on behalf of the Fund for these administrative services (prior to October 12, 2000, these fees were paid to AmeriPrime Financial Services, Inc. which merged with Unified on that date). ACCOUNTANTS The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, Ohio 44145, has been selected as independent public accountants for the Fund for the fiscal year ending June 30, 2003. McCurdy & Associates performs an annual audit of the Fund's financial statements and provides financial, tax and accounting consulting services as requested. DISTRIBUTOR Unified Financial Securities, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204 (the "Distributor"), is the exclusive agent for distribution of shares of the Fund. Kenneth D. Trumpfheller, a Trustee of the Trust, is a registered principal of, and may be deemed to be an affiliate of, the Distributor. Timothy Ashburn and Thomas Napurano, officers of the Trust are officers of Unified Financial Services, Inc. The Distributor is obligated to sell the shares of the Fund on a best efforts basis only against purchase orders for the shares. Shares of the Fund are offered to the public on a continuous basis. The Distributor and Unified are controlled by Unified Financial Services, Inc. FINANCIAL STATEMENTS The financial statements and independent auditors' report required to be included in the Statement of Additional Information are incorporated herein by reference to the Fund's annual report to shareholders for the fiscal year ended June 30, 2002. The Trust will provide the annual report without charge by calling the Fund toll free 1-877-3-AUXIER (877-328-9437). APPENDIX A DESCRIPTION OF CORPORATE BOND RATINGS STANDARD & POOR'S RATINGS SERVICES The ratings are based on current information furnished by the issuer or obtained by Standard & Poor's from other sources it considers reliable. Standard & Poor's does not perform any audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information or for other circumstances. The ratings are based, in varying degrees, on the following considerations: I. Likelihood of default-capacity and willingness of the obliger as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation. II. Nature and provisions of the obligation. III. Protection afforded by, and relative position of the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. AAA - Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA - Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A - Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC, C - Debt rated "BB," "B," "CCC," "CC," and "C" is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "C" the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. BB - Debt rate "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB" rating. B - Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB-" rating. CCC - Debt rated "CCC" has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "B" or "B-" rating. CC - The rating "CC" is typically applied to debt subordinated to senior debt that is assigned an actual or implied "CCC" rating. C - The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. C1 - The rating "C1" is reserved for income bonds on which no interest is being paid. D - Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major categories. MOODY'S INVESTORS SERVICE, INC. Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa - Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities, fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long term risk appear somewhat greater than the Aaa securities. A - Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa - Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba - Bonds which are rated Ba are judged to have speculative elements: their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B - Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa - Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca - Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C - Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies numerical modifiers: 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category, the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. JUMPER STRATEGIC ADVANTAGE FUND PROSPECTUS November 1, 2002 One Union Square Suite 505 Chattanooga, TN 37402 (888) 879-5723 The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. TABLE OF CONTENTS PAGE RISK/RETURN SUMMARY............................................................1 FEES AND EXPENSES OF INVESTING IN THE FUND.....................................4 HOW TO BUY SHARES..............................................................5 HOW TO REDEEM SHARES...........................................................7 DETERMINATION OF NET ASSET VALUE...............................................9 DIVIDENDS, DISTRIBUTIONS AND TAXES.............................................9 MANAGEMENT OF THE FUND........................................................10 FINANCIAL HIGHLIGHTS..........................................................11 PRIVACY POLICY................................................................13 FOR MORE INFORMATION..................................................BACK COVER RISK/RETURN SUMMARY Investment Objective The investment objective of the Jumper Strategic Advantage Fund is to provide current income with a low amount of share price fluctuation. Principal Strategies The Fund invests primarily in a broad range of investment grade fixed income securities, including bonds, notes, convertible securities, mortgage-backed and asset-backed securities, domestic and foreign corporate and government securities, municipal securities, zero coupon bonds and short term obligations, such as commercial paper and repurchase agreements. The Fund's advisor typically selects fixed income securities with maturities of 3 years or less. To help limit changes in share price, the Fund's average duration is usually one year or less. The Fund will normally invest at least 75% of its assets in investment grade fixed income securities. The Fund may invest no more than 25% of its assets in fixed income securities rated below investment grade. Principal Risks of Investing in the Fund o Interest rate risk. The value of your investment may decrease when interest rates rise. Fixed income securities with longer maturities are subject to greater interest rate risk than those with shorter maturities. o Credit risk. The issuer of the fixed income security may not be able to make interest and principal payments when due. If that happens, the Fund's share price would fall and its income distributions would decrease. o Prepayment risk. During periods of declining interest rates, prepayment of loans underlying mortgage-backed and asset-backed securities usually accelerates. Prepayment may shorten the effective maturities of these securities and the Fund may have to reinvest at a lower interest rate. o High yield bonds. To the extent the Fund invests in lower quality bonds, including high yield bonds (commonly referred to as junk bonds), the Fund will be subject to greater interest rate risk, liquidity risk and credit risk. o Liquidity risk. An economic downturn or period of rising interest rates could adversely affect the high yield bond market and reduce the Fund's ability to sell its high yield bonds. This could cause the Fund's share price to fall. o Portfolio turnover risk. The Fund does not intend to purchase or sell securities for short term trading purposes. However, if the objectives of the Fund would be better served, short term profits or losses may be realized from time to time. To the extent the Fund has high portfolio turnover, it will generally incur additional costs due to dealer spreads built-in to the cost of the securities than those incurred by a fund with a lower portfolio turnover rate. The higher turnover rate may result in the realization for federal tax purposes of additional net capital gains, which may result in substantial ordinary income to shareholders. These factors may negatively affect the Fund's performance. o The Fund is not a money market fund. As with any mutual fund investment, the Fund's returns will vary and you could lose money. o An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. o The Fund is not a complete investment program. General The investment objective of the Fund may be changed without shareholder approval. From time to time, the Fund may invest in money market instruments, securities of other no-load mutual funds or repurchase agreements to maintain liquidity or pending selection of investments in accordance with its policies. If the Fund invests in shares of another mutual fund, the shareholders of the Fund will indirectly pay additional management fees. Is the Fund Right for You? The Fund may be suitable for: o investors seeking a yield exceeding that earned by money market funds o investors seeking to diversify their holdings with bonds and other fixed income securities o investors willing to accept price fluctuations greater than money market funds How the Fund has Performed The Bar Chart and Performance Table below show the variability of the returns of the Institutional Class, which is one indicator of the risks of investing in the Fund. The Bar Chart shows changes in the returns of the Institutional Class for each full calendar year since inception. The Performance Table shows how the average annual total returns of each class compare over time to those of a broad-based securities market index. Of course, past performance (before and after taxes) is not necessarily an indication of future performance [CHART OMITTED] Annual Total Returns as of December 31* 1999 - 2.93%, 2000 - 2.43%, 2001 - 6.47% *The Institutional Class year-to-date return as of September 30, 2002 was 0.39%. During the period shown, the highest return for a quarter was 3.67% (First quarter, 2001); and the lowest return was -1.21% (Second quarter, 2001). Average Annual Total Returns for the periods ended 12/31/01: One Year Since Inception Institutional Class1 Return Before Taxes 6.47% 13.27% Return After Taxes on Distributions2 4.32% 6.18% Return After Taxes on Distributions and 3.91% 7.01% Sale of Fund Shares2 Investor Class3 Return Before Taxes 5.59% 8.89% Return After Taxes on Distributions2 3.58% 3.82% Return After Taxes on Distributions and 3.38% 4.54% Sale of Fund Shares2 Merrill Lynch 1 Year Government Index4 5.31% 5.42% - -------- 1 Inception date of October 26, 1998 2 After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 3 Inception date of November 2, 1999 4 Based on the inception date of the Institutional Class FEES AND EXPENSES OF INVESTING IN THE FUND The tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund. Investor Institutional Class Class ----- ----- Shareholder Fees.. (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases NONE NONE Maximum Deferred Sales Charge (Load) NONE NONE Redemption Fee1... NONE NONE Annual Fund Operating Expenses (expenses that are deducted from Fund assets) Management Fee 0.75% 0.75% Distribution and/or Service (12b-1) Fees 0.25% NONE Other Expenses 0.04% 0.04% Total Annual Fund Operating Expenses 1.04% 0.79% Expense Reimbursement2 0.04% 0.04% Net Expenses 1.00% 0.75% Example: This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated, reinvest dividends and distributions, and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same (except for expense reimbursement reflected in the first year). Although your actual costs may be higher or lower, based on these assumptions your costs would be: 1 year 3 years 5 years 10 years ------ -------- --------- -------- Investor Class $105 $336 $586 $1302 Institutional Class $79 $255 $447 $1,000
1 A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire transfer. This fee is subject to change. 2 The Fund's advisor has contractually agreed to reimburse the Fund for the fees and expenses of the disinterested trustees incurred by the Fund through October 31, 2003, but only to the extent necessary to maintain the Investor Class total annual operating expenses at 1.00% of its average daily net assets and the Institutional Class total annual operating expenses at 0.75% of its average daily net assets. HOW TO BUY SHARES The minimum initial investment for Investor Class shares is $5,000 ($2,000 for IRAs and other retirement plans). The minimum initial investment for Institutional Class shares is $5 million. If your investment is aggregated into an omnibus account established by an investment advisor, broker or other intermediary, the account minimums apply to the omnibus account, not to your individual investment. If you purchase or redeem shares through a broker-dealer or another intermediary, you may be charged a fee by that intermediary. Initial Purchase By Mail - To be in proper form, your initial purchase request must include: o a completed and signed investment application form (which accompanies this Prospectus); and o a check (subject to the minimum amounts) made payable to the Fund. Mail application and check to: U.S. Mail: Overnight: Jumper Strategic Advantage Fund Jumper Strategic Advantage Fund c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 N. Pennsylvania St. Indianapolis, IN 46206-6110 Indianapolis, IN 46204 By Wire - You may also purchase shares of the Fund by wiring federal funds from your bank, which may charge you a fee for doing so. To wire money, you must call Unified Fund Services, Inc. the Fund's transfer agent at (888) 879-5723 to obtain instructions on how to set up your account and to obtain an account number. Then, provide your bank with the following information for purposes of wiring your investment: U.S. Bank, N.A. ABA #0420-0001-3 Attn: Jumper Strategic Advantage Fund D.D.A.# 488920992 Account Name _________________(write in shareholder name) For the Account # ______________(write in account number) You must mail a signed application to Unified Fund Services, Inc. at the above address in order to complete your initial wire purchase. Wire orders will be accepted only on a day on which the Fund, custodian and transfer agent are open for business. A wire purchase will not be considered made until the wired money is received and the purchase is accepted by the Fund. Any delays which may occur in wiring money, including delays which may occur in processing by the banks, are not the responsibility of the Fund or the transfer agent. There is presently no fee for the receipt of wired funds, but the Fund may charge shareholders for this service in the future. Description of Classes The Fund currently offers two classes of shares: "Institutional Class" shares and "Investor Class" shares. The classes differ as follows: 1) Investor Class shares pay 12b-1 expenses of 0.25%; and 2) each class may bear differing amounts of certain class specific expenses. When purchasing shares, specify which class you are purchasing. All purchase orders that fail to specify a class will automatically be invested in Investor Class shares. The differing expenses applicable to the different classes of the Fund's shares may affect the performance of those classes. Broker-dealers and others entitled to receive compensation for selling or servicing Fund shares may receive more with respect to one class than another. Distribution Plan The Investor Class has adopted a plan under Rule 12b-1 that allows the Fund to pay for certain distribution and promotion expenses related to marketing Investor Class shares. The expenses paid by the Fund pursuant to the Plan shall be determined by the Board of Trustees, but in no event may such expenditures exceed in any fiscal year 0.25% of the average daily net asset value of the Investor Class shares. Payments for distribution activities may be made directly by the Fund, or the advisor and the Fund's distributor may pay such expenses and obtain reimbursement from the Fund. Because these fees are paid out of the Fund's assets on an on going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. Additional Investments The minimum subsequent investment for either Class is $100. You may purchase additional shares of the Fund at any time by mail, wire or automatic investment. Each additional mail purchase request must contain: -your name -the name of your account(s) -your account number(s) -a check made payable to the Jumper Strategic Advantage Fund Checks should be sent to the Jumper Strategic Advantage Fund at the address listed above. A bank wire should be sent as outlined above. Tax Sheltered Retirement Plans Since the Fund is oriented to longer term investments, the Fund may be an appropriate investment medium for tax-sheltered retirement plans, including: individual retirement plans ("IRAs"); simplified employee pensions ("SEPs"); 401(k) plans; qualified corporate pension and profit-sharing plans (for employees); tax deferred investment plans (for employees of public school systems and certain types of charitable organizations); and other qualified retirement plans. You should contact the transfer agent for the procedure to open an IRA or SEP plan, as well as more specific information regarding these retirement plan options. Please consult with an attorney or tax advisor regarding these plans. You must pay custodial fees for your IRA by redemption of sufficient shares of the Fund from the IRA unless you pay the fees directly to the IRA custodian. Call the transfer agent about the IRA custodial fees. Other Purchase Information The Fund may limit the amount of purchases and refuse to sell to any person. If your check or wire does not clear, you will be responsible for any loss incurred by the Fund. If you are already a shareholder, the Fund can redeem shares from any identically registered account in the Fund as reimbursement for any loss incurred. You may be prohibited or restricted from making future purchases in the Fund. Checks must be made payable to the Fund; the Fund does not accept third party checks. The adviser may waive the minimum initial investment amount. The minimum initial investment amount for Institutional Class shares will be waived for the following investors: o Banks, bank or broker-affiliated trust departments and savings and loan associations, in their fiduciary capacity or for their own accounts. To the extent permitted by regulatory authorities, a bank trust department may charge fees to clients for whose account it purchases shares. o Federal and state credit unions. o Investors purchasing through a broker-dealer or other financial institution authorized by the distributor to hold shares in an omnibus account. Investors may be charged a fee by the broker-dealer or other financial institution for this service. o Investors purchasing through certain broker-dealer wrap fee investment programs. o Broker-dealers who have a sales agreement with the distributor, and their registered personnel and employees, including members of the immediate families of such registered personnel and employees. o Trustees, directors, officers and employees of the Trust, the advisor and service providers to the Trust, including members of the immediate family of such individuals and employee benefit plans established by such entities. o Clients of the advisor, including members of the immediate family of such individuals. HOW TO REDEEM SHARES You may receive redemption payments by check or federal wire transfer. The proceeds may be more or less than the purchase price of your shares, depending on the market value of the Fund's securities at the time of your redemption. A wire transfer fee of $15 is charged to defray custodial charges for redemptions paid by wire tranfer. This fee is subject to change. Wire transfer fees will be deducted from your Fund account by redemption of shares. If you redeem your shares through a broker-dealer or other institution, you may be charged a fee by that institution. By Mail - You may redeem any part of your account in the Fund at no charge by mail. Your request should be addressed to: U.S. Mail: Overnight: Jumper Strategic Advantage Fund Jumper Strategic Advantage Fund c/o Unified Fund Services, Inc. c/o Unified Fund Services, Inc. P.O. Box 6110 431 N. Pennsylvania St. Indianapolis, IN 46206-6110 Indianapolis, IN 46204 Requests to sell shares are processed at the net asset value next calculated after we receive your order in proper form. To be in proper form, your request for a redemption must include your letter of instruction, including the Fund name, account number, account name(s), the address, and the dollar amount or number of shares you wish to redeem. The Fund requires that signatures be guaranteed if you request the redemption check made payable to any person other than the shareholder(s) of record or mailed to an address other than the address of record, or if the mailing address has been changed within 30 days of the redemption request. The Fund may also require that signatures be guaranteed for redemptions of $25,000 or more. Signature guarantees are for the protection of shareholders. You can obtain a signature guarantee from most banks and securities dealers, but not from a notary public. For joint accounts, both signatures must be guaranteed. Please call the transfer agent at (888) 879-5723 if you have questions. At the discretion of the Fund or Unified Fund Services, Inc., you may be required to furnish additional legal documents to insure proper authorization. By Telephone - You may redeem any part of your account in the Fund by calling the transfer agent at (888) 879-5723. You must first complete the Optional Telephone Redemption and Exchange section of the investment application to institute this option. The Fund, the transfer agent and the custodian are not liable for following redemption or exchange instructions communicated by telephone to the extent that they reasonably believe the telephone instructions to be genuine. However, if they do not employ reasonable procedures to confirm that telephone instructions are genuine, they may be liable for any losses due to unauthorized or fraudulent instructions. Procedures employed may include recording telephone instructions and requiring a form of personal identification from the caller. The Fund or the transfer agent may terminate the telephone redemption procedures at any time. During periods of extreme market activity, it is possible that shareholders may encounter some difficulty in telephoning the Fund, although neither the Fund nor the transfer agent has ever experienced difficulties in receiving and in a timely fashion responding to telephone requests for redemptions or exchanges. If you are unable to reach the Fund by telephone, you may request a redemption or exchange by mail. Additional Information - If you are not certain of the requirements for a redemption please call the transfer agent at (888) 879-5723. Redemptions specifying a certain date or share price cannot be accepted and will be returned. You will be mailed the proceeds on or before the fifth business day following the redemption. However, payment for redemption made against shares purchased by check will be made only after the check has been collected, which normally may take up to fifteen calendar days. Also, when the New York Stock Exchange is closed (or when trading is restricted) for any reason other than its customary weekend or holiday closing, or under any emergency circumstances (as determined by the Securities and Exchange Commission) the Fund may suspend redemptions or postpone payment dates. Because the Fund incurs certain fixed costs in maintaining shareholder accounts, the Fund may require you to redeem all of your shares in the Fund on 30 days' written notice if the value of your shares in the Fund is less than $5,000 due to redemption, or such other minimum amount as the Fund may determine from time to time. You may increase the value of your shares in the Fund to the minimum amount within the 30 day period. All shares of the Fund are also subject to involuntary redemption if the Board of Trustees determines to liquidate the Fund. An involuntary redemption will create a capital gain or a capital loss, which may have tax consequences about which you should consult your tax adviser. DETERMINATION OF NET ASSET VALUE The price you pay for your shares is based on the Fund's net asset value per share ("NAV"). The NAV is calculated at the close of trading (normally 4:00 p.m. Eastern time) on each day the New York Stock Exchange is open for business (the Stock Exchange is closed on weekends, most Federal holidays and Good Friday). The NAV is calculated by dividing the value of the Fund's total assets (including interest and dividends accrued but not yet received) minus liabilities (including accrued expenses) by the total number of shares outstanding. The Fund's assets are valued primarily on market quotations, where available. Securities for which current market quotations are not readily available, including the current market value of underlying funds, are valued at fair value as determined in good faith by procedures approved by the Board of Trustees. Short term investments maturing in sixty days or less are valued at amortized cost, which approximates fair market value. Requests to purchase and sell shares are processed at the NAV next calculated after we receive your order in proper form. DIVIDENDS, DISTRIBUTIONS AND TAXES Dividends and Distributions. The Fund typically declares substantially all of its net investment income as dividends to its shareholders on a daily basis and pays such dividends monthly. The Fund typically distributes its net long term capital gains and its net short term capital gains at least once a year. These distributions are automatically reinvested in the Fund unless you request cash distributions on your application or through a written request. The Fund expects that its distributions will consist primarily of dividends. Taxes. In general, selling shares of the Fund and receiving distributions (whether reinvested or taken in cash) are taxable events. Depending on the purchase price and the sale price, you may have a gain or a loss on any shares sold. Any tax liabilities generated by your transactions or by receiving distributions are your responsibility. Because distributions of long term capital gains are subject to capital gains taxes, regardless of how long you have owned your shares, you may want to avoid making a substantial investment when a Fund is about to make a taxable distribution. Early each year, the Fund will mail to you a statement setting forth the federal income tax information for all distributions made during the previous year. If you do not provide your taxpayer identification number, your account will be subject to backup withholding. The tax considerations described in this section do not apply to tax-deferred accounts or other non-taxable entities. Because each investor's tax circumstances are unique, please consult with your tax advisor about your investment. MANAGEMENT OF THE FUND The Jumper Group, Inc., One Union Square, Suite 505, Chattanooga, TN 37402 serves as investment advisor to the Fund. The advisor provides fixed income management for both taxable and tax-exempt clients, and as of September 30, 2002, managed approximately $70 million in assets. Jay Colton Jumper has been primarily responsible for the day-to-day management of the Fund's portfolio since its inception in 1998. Mr. Jumper has served as Chairman and President of the advisor since 1994. Mr. Jumper served with SunTrust Banks from 1988 to 1994 as Senior Trust Investment Officer. For the fiscal year ended June 30, 2002, the Fund paid the adviser a management fee equal to 0.75% of its average daily net assets. FINANCIAL HIGHLIGHTS The following table is intended to help you better understand the Fund's financial performance since its inception. Certain information reflects financial results for a single Fund share. Total return represents the rate you would have earned (or lost) on an investment in the Fund, assuming reinvestment of all dividends and distributions. This information has been audited by McCurdy & Associates CPA's, Inc., whose report, along with the Fund's financial statements, are included in the Fund's annual report, which is available upon request. Investor Class For the For the For the year ended year ended period ended June 30, June 30, June 30, 2002 2001 2000 (a) -------------- -------------- --------------- Selected Per Share Data Net asset value, beginning of period $ 1.88 $ 1.95 $ 1.98 -------------- -------------- --------------- Income from investment operations Net investment income (loss) 0.07 0.12 0.08 Net realized and unrealized gain (loss) 0.02 (0.08) (0.03) -------------- -------------- --------------- Total from investment operations 0.09 0.04 0.05 -------------- -------------- --------------- Less Distributions to shareholders: From net investment income (0.07) (0.11) (0.08) From net realized gain 0.00 0.00 0.00 -------------- -------------- --------------- Total distributions (0.07) (0.11) (0.08) -------------- -------------- --------------- Net asset value, end of period $ 1.90 $ 1.88 $ 1.95 ============== ============== =============== Total Return 4.77% 2.31% 2.49%(b) Ratios and Supplemental Data Net assets, end of period (000) $ 1,045 $ 2,256 $ 1,734 Ratio of expenses to average net assets 1.00% 1.00% 1.00%(c) Ratio of expenses to average net assets before reimbursement 1.04% 1.03% 1.04%(c) Ratio of net investment income to average net assets 3.85% 6.11% 5.87%(c) Ratio of net investment income to average net assets before reimbursement 3.82% 6.08% 5.82%(c) Portfolio turnover rate 48.77% 24.07% 187.73%(c) (a) For the Period November 2, 1999 (commencement of operations) to June 30, 2000. (b) For periods of less than a full year, total return is not annualized. (c) Annualized. Institutional Class For the For the For the For the year ended year ended year ended period ended June 30, June 30, June 30, June 30, 2002 2001 2000 1999 (a) ------------- -------------- ------------- --------------- Selected Per Share Data Net asset value, beginning of period $ 1.89 $ 1.95 $ 1.96 $ 2.00 ------------- -------------- ------------- --------------- Income from investment operations Net investment income (loss) 0.07 0.12 0.11 0.05 Net realized and unrealized gain (loss) 0.01 (0.06) (0.01) (0.04) ------------- -------------- ------------- --------------- Total from investment operations 0.08 0.06 0.10 0.01 ------------- -------------- ------------- --------------- Less Distributions to shareholders: From net investment income (0.07) (0.12) (0.10) (0.05) From net realized gain 0.00 0.00 (0.01) 0.00 ------------- -------------- ------------- --------------- Total distributions (0.07) (0.12) (0.11) (0.05) ------------- -------------- ------------- --------------- Net asset value, end of period $ 1.90 $ 1.89 $ 1.95 $ 1.96 ============= ============== ============= =============== Total Return 4.47% 3.17% 5.17% 0.51%(b) Ratios and Supplemental Data Net assets, end of period (000) $ 5,040 $ 4,749 $ 4,399 $ 2,429 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75%(c) Ratio of expenses to average net assets before reimbursement 0.79% 0.78% 0.82% 0.85%(c) Ratio of net investment income to average net assets 3.83% 6.36% 5.65% 3.89%(c) Ratio of net investment income to average net assets before reimbursement 3.80% 6.33% 5.58% 3.79%(c) Portfolio turnover rate 48.77% 24.07% 187.73% 255.18%(c) (a) For the Period October 26, 1998 (commencement of operations) to June 30, 1999. (b) For periods of less than a full year, total return is not annualized. (c) Annualized.
PRIVACY POLICY The following is a description of the Fund's policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties. Categories of Information the Fund Collects. The Fund collects the following nonpublic personal information about you: o Information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address, phone number, social security number, assets, income and date of birth); and o Information about your transactions with the Fund, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information). Categories of Information the Fund Discloses. The Fund does not disclose any nonpublic personal information about its current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Fund's custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you. Confidentiality and Security. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. FOR MORE INFORMATION Several additional sources of information are available to you. The Statement of Additional Information ("SAI"), incorporated into this Prospectus by reference, contains detailed information on Fund policies and operations. Annual and semi-annual reports contain management's discussion of market conditions and investment strategies that significantly affected the Fund's performance results as of the Fund's latest semi-annual or annual fiscal year end. Call the Fund at (888) 879-5723 to request free copies of the SAI and the Fund's annual and semi-annual reports, to request other information about the Fund and to make shareholder inquiries. You may review and copy information about the Fund (including the SAI and other reports) at the Securities and Exchange Commission ("SEC") Public Reference Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and operation. You may also obtain reports and other information about the Fund on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. Investment Company Act #811-9096 JUMPER STRATEGIC ADVANTAGE FUND STATEMENT OF ADDITIONAL INFORMATION November 1, 2002 This Statement of Additional Information ("SAI") is not a prospectus. It should be read in conjunction with the Prospectus of the Jumper Strategic Advantage Fund dated November 1, 2002. This SAI incorporates by reference the Fund's annual report to shareholders for the fiscal year ended June 30, 2002. A free copy of the Prospectus or annual report can be obtained by writing the transfer agent at Unified Fund Services, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or by calling (888) 879-5723. TABLE OF CONTENTS PAGE Description Of The Trust And The Fund..........................................2 Additional Information About Fund Investments And Risk Considerations..........3 Investment Limitations ........................................................8 The Investment Advisor .......................................................10 Trustees And Officers.........................................................11 Portfolio Transactions And Brokerage..........................................12 Determination Of Share Price..................................................13 Investment Performance........................................................14 Custodian.....................................................................15 Fund Services.................................................................15 Accountants...................................................................16 Distributor ..................................................................16 Financial Statements..........................................................16 DESCRIPTION OF THE TRUST AND THE FUND The Jumper Strategic Advantage Fund (the "Fund") was organized as a diversified series of AmeriPrime Funds (the "Trust") on February 26, 1998 and commenced operations on October 26, 1998. The Trust is an open-end investment company established under the laws of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The 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 Trustees. The Trustees have authorized two classes of shares: Investor Class shares and Institutional Class shares. Each class is subject to different expenses and a different sales charge structure. The investment advisor to the Fund is The Jumper Group, Inc. (the "Advisor"). The Fund does not issue share certificates. All shares are held in non-certificate form registered on the books of the Fund and the Fund's transfer agent for the account of the shareholder. Each share of a series represents an equal proportionate interest in the assets and liabilities belonging to that series with each other share of that series and is entitled to such dividends and distributions out of income belonging to the series as are declared by the Trustees. The shares do not have cumulative voting rights or any preemptive or conversion rights, and the Trustees have the authority from time to time to divide or combine the shares of any series into a greater or lesser number of shares of that series so long as the proportionate beneficial interest in the assets belonging to that series and the rights of shares of any other series are in no way affected. In case of any liquidation of a series, the holders of shares of the series being liquidated will be entitled to receive as a class a distribution out of the assets, net of the liabilities, belonging to that series. Expenses attributable to any series are borne by that series. Any general expenses of the Trust not readily identifiable as belonging to a particular series are allocated by or under the direction of the Trustees in such manner as the Trustees determine to be fair and equitable. No shareholder is liable to further calls or to assessment by the Trust without his or her express consent. Any Trustee of the Trust may be removed by vote of the shareholders holding not less than two-thirds of the outstanding shares of the Trust. The Trust does not hold an annual meeting of shareholders. When matters are submitted to shareholders for a vote, each shareholder is entitled to one vote for each whole share he owns and fractional votes for fractional shares he owns. All shares of the Fund have equal voting rights and liquidation rights. The Trust Agreement can be amended by the Trustees, except that any amendment that adversely effects the rights of shareholders must be approved by the shareholders affected. All shares of the Fund are subject to involuntary redemption if the Trustees determine to liquidate the Fund. An involuntary redemption will create a capital gain or a capital loss, which may have tax consequences about which you should consult your tax advisor. The Trustees do not anticipate that there will be any conflicts among the interests of the holders of the different classes of Fund shares. On an ongoing basis, the Trustees will consider whether any such conflict exists and, if so, take appropriate action. As of October 31, 2002 the following persons may be deemed to beneficially own 5% or more of the Investor Class: First Clearing Corporation, 214 Lynwood Trace, Nashville, TN 37205 86.74%; Donaldson Lufkin Jenrette, One Pershing Plaza, Jersey City, NJ 07399 10.41%. As of October 31, 2002 the following persons may be deemed to beneficially own 5% or more of the Institutional Class: Dawn K. Bullard, 407 East Fifth Street, Chattanooga, Tennessee 37402 58.80%; Spencer Wright Industries Inc. Attn: Gary Hostetter, 1731 Kimberly Park Drive, Dalton, Georgia 30720 21.82%; Joe K Stricklin Estate Bruce Bishop Executor, 6065 Roswell Road, Suite 800, Atlanta, GA 30328 - 6.11%; and Zee Company, Inc., 407 East Fifth Street, Chattanooga, TN 37403 - 5.55%. As of October 31, 2002, Dawn K. Bullard may be deemed to control the Fund as a result of her beneficial ownership of the shares of the Fund. As the controlling shareholder, she would control the outcome of any proposal submitted to the shareholders for approval including changes to the Fund's fundamental policies or the terms of the management agreement with the Advisor. As of October 31, 2002, the Trustees and officers as a group owned less than 1% of the Fund. Upon sixty days prior written notice to shareholders, the Fund may make redemption payments in whole or in part in securities or other property if the Trustees determine that existing conditions make cash payments undesirable. For other information concerning the purchase and redemption of shares of the Fund, see "How to Buy Shares" and "How to Redeem Shares" in the Prospectus. For a description of the methods used to determine the share price and value of the Fund's assets, see "Determination of Net Asset Value" in the Prospectus and "Determination of Share Price" in this Statement of Additional Information. ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS This section contains a more detailed discussion of some of the investments the Fund may make and some of the techniques it may use. A. Illiquid Securities. The Fund will not invest more than 15% of its net assets in illiquid securities. Securities may be illiquid because they are unlisted, subject to legal restrictions on resale or due to other factors which, in the Advisor's opinion, raise a question concerning the Fund's ability to liquidate the securities in a timely and orderly way without substantial loss. Repurchase agreements maturing in more than 7 days are considered to illiquid. Illiquid securities may also present difficult valuation issues. B. Corporate Debt Securities. Corporate debt securities are bonds or notes issued by corporations and other business organizations, including business trusts, in order to finance their credit needs. Corporate debt securities include commercial paper which consists of short term (usually from one to two hundred seventy days) unsecured promissory notes issued by corporations in order to finance their current operations. The Advisor considers corporate debt securities to be of investment grade quality if they are rated BBB or higher by Standard & Poor's Corporation ("S&P"), Baa or higher by Moody's Investors Services, Inc. ("Moody's"), or if unrated, determined by the Advisor to be of comparable quality. Investment grade debt securities generally have adequate to strong protection of principal and interest payments. In the lower end of this category, credit quality may be more susceptible to potential future changes in circumstances and the securities have speculative elements. The Fund will not invest more than 25% of the value of its net assets in securities that are below investment grade. If, as a result of a downgrade, the Fund holds more than 25% of the value of its net assets in securities rated below investment grade, the Fund will take action to reduce the value of such securities below 25%. C. Fixed Income Securities. Fixed income securities include corporate debt securities, U.S. government securities, mortgage-backed securities, zero coupon bonds, asset-backed and receivable-backed securities and participation interests in such securities. Preferred stock and certain common stock equivalents may also be considered to be fixed income securities. Fixed income securities are generally considered to be interest rate sensitive, which means that their value will generally decrease when interest rates rise and increase when interest rates fall. Securities with shorter maturities, while offering lower yields, generally provide greater price stability than longer term securities and are less affected by changes in interest rates. D. Municipal Securities. Municipal securities are long and short term debt obligations issued by or on behalf of states, territories and possessions of the United States, the District of Columbia and their political subdivisions, agencies, instrumentalities and authorities, as well as other qualifying issuers (including the U.S. Virgin Islands, Puerto Rico and Guam), the income from which is exempt from regular federal income tax and exempt from state tax in the state of issuance. Municipal securities are issued to obtain funds to construct, repair or improve various public facilities such as airports, bridges, highways, hospitals, housing, schools, streets and water and sewer works, to pay general operating expenses or to refinance outstanding debts. They also may be issued to finance various private activities, including the lending of funds to public or private institutions for construction of housing, educational or medical facilities or the financing of privately owned or operated facilities. Municipal securities consist of tax exempt bonds, tax exempt notes and tax exempt commercial paper. Municipal notes, which are generally used to provide short term capital needs and have maturities of one year of less, include tax anticipation notes, revenue anticipation notes, bond anticipation notes and construction loan notes. Tax exempt commercial paper typically represents short term, unsecured, negotiable promissory notes. The Fund may invest in other municipal securities such as variable rate demand instruments. The two principal classifications of municipal securities are "general obligations" and "revenue" bonds. General obligation bonds are backed by the issuer's full credit and taxing power. Revenue bonds are backed by the revenues of a specific project, facility or tax. Industrial development revenue bonds are a specific type of revenue bond backed by the credit of the private issuer of the facility, and therefore investments in these bonds have more potential risk that the issuer will not be able to meet scheduled payments of principal and interest. The Advisor considers municipal securities to be of investment grade quality if they are rated BBB or higher by S&P, Baa or higher by Moody's, or if unrated, determined by the Advisor to be of comparable quality. Investment grade debt securities generally have adequate to strong protection of principal and interest payments. In the lower end of this category, credit quality may be more susceptible to potential future changes in circumstances and the securities have speculative elements. The Fund will not invest more than 5% of the value of its net assets in securities that are below investment grade. If, as a result of a downgrade, the Fund holds more than 25% of the value of its net assets in securities rated below investment grade, the Fund will take action to reduce the value of such securities below 25%. E. U.S. Government Securities. U.S. government securities may be backed by the credit of the government as a whole or only by the issuing agency. U.S. Treasury bonds, notes, and bills and some agency securities, such as those issued by the Federal Housing Administration and the Government National Mortgage Association ("GNMA"), are backed by the full faith and credit of the U.S. government as to payment of principal and interest and are the highest quality government securities. Other securities issued by U.S. government agencies or instrumentalities, such as securities issued by the Federal Home Loan Banks and the Federal Home Loan Mortgage Corporation, are supported only by the credit of the agency that issued them, and not by the U.S. government. Securities issued by the Federal Farm Credit System, the Federal Land Banks, and the Federal National Mortgage Association ("FNMA") are supported by the agency's right to borrow money from the U.S. Treasury under certain circumstances, but are not backed by the full faith and credit of the U.S. government. F. Mortgage-Backed Securities. Mortgage-backed securities represent an interest in a pool of mortgages. These securities, including securities issued by FNMA and GNMA, provide investors with payments consisting of both interest and principal as the mortgages in the underlying mortgage pools are repaid. Unscheduled or early payments on the underlying mortgages may shorten the securities' effective maturities. The average life of securities representing interests in pools of mortgage loans is likely to be substantially less than the original maturity of the mortgage pools as a result of prepayments or foreclosures of such mortgages. Prepayments are passed through to the registered holder with the regular monthly payments of principal and interest, and have the effect of reducing future payments. To the extent the mortgages underlying a security representing an interest in a pool of mortgages are prepaid, a Fund may experience a loss (if the price at which the respective security was acquired by the Fund was at a premium over par, which represents the price at which the security will be sold upon prepayment). In addition, prepayments of such securities held by a Fund will reduce the share price of the Fund to the extent the market value of the securities at the time of prepayment exceeds their par value. Furthermore, the prices of mortgage-backed securities can be significantly affected by changes in interest rates. Prepayments may occur with greater frequency in periods of declining mortgage rates because, among other reasons, it may be possible for mortgagors to refinance their outstanding mortgages at lower interest rates. In such periods, it is likely that any prepayment proceeds would be reinvested by a Fund at lower rates of return. G. Collateralized Mortgage Obligations. Collateralized mortgage obligations ("CMOs") are securities collateralized by mortgages or mortgage-backed securities. CMOs are issued with a variety of classes or series, which have different maturities and are often retired in sequence. CMOs may be issued by governmental or non-governmental entities such as banks and other mortgage lenders. Non-government securities may offer a higher yield but also may be subject to greater price fluctuation than government securities. Investments in CMOs are subject to the same risks as direct investments in the underlying mortgage and mortgage-backed securities. In addition, in the event of a bankruptcy or other default of an entity who issued the CMO held by the Fund, the Fund could experience both delays in liquidating its position and losses. H. Zero Coupon and Pay-in-Kind Bonds. Corporate debt securities and municipal obligations include so-called "zero coupon" bonds and "pay-in-kind" bonds. Zero coupon bonds do not make regular interest payments. Instead they are sold at a deep discount from their face value. The Fund will accrue income on such bonds for tax and accounting purposes, in accordance with applicable law. This income will be distributed to shareholders. Because no cash is received at the time such income is accrued, the Fund may be required to liquidate other portfolio securities to satisfy its distribution obligations. Because a zero coupon bond does not pay current income, its price can be very volatile when interest rates change. In calculating its dividend, the Fund takes into account as income a portion of the difference between a zero coupon bond's purchase price and its face value. Certain types of CMOs pay no interest for a period of time and therefore present risks similar to zero coupon bonds. The Federal Reserve creates "STRIPS" (Separate Trading of Registered Interest and Principal of Securities) by separating the coupon payments and the principal payment from an outstanding Treasury security and selling them as individual securities. A broker-dealer creates a derivative zero by depositing a Treasury security with a custodian for safekeeping and then selling the coupon payments and principal payment that will be generated by this security separately. Examples are Certificates of Accrual on Treasury Securities (CATs), Treasury Investment Growth Receipts (TIGRs) and generic Treasury Receipts (TRs). These derivative zero coupon obligations are not considered to be government securities unless they are part of the STRIPS program. Original issue zeros are zero coupon securities issued directly by the U.S. government, a government agency, or by a corporation. Pay-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. The value of zero coupon bonds and pay-in-kind bonds is subject to greater fluctuation in response to changes in market interest rates than bonds which make regular payments of interest. Both of these types of bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds which make regular payment of interest. Even though zero coupon bonds and pay-in-kind bonds do not pay current interest in cash, the Fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Thus, the Fund could be required at times to liquidate other investments in order to satisfy its dividend requirements. The Fund will not invest more than 5% of its net assets in pay-in-kind bonds. I. Financial Service Industry Obligations. Financial service industry obligations include among others, the following: (1) Certificates of Deposit. Certificates of deposit are negotiable certificates evidencing the indebtedness of a commercial bank or a savings and loan association to repay funds deposited with it for a definite period of time (usually from fourteen days to one year) at a stated or variable interest rate. (2) Time Deposits. Time deposits are non-negotiable deposits maintained in a banking institution or a savings and loan association for a specified period of time at a stated interest rate. Time Deposits are considered to be illiquid prior to their maturity. (3) Bankers' Acceptances. Bankers' acceptances are credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer, which instruments reflect the obligation both of the bank and of the drawer to pay the face amount of the instrument upon maturity. J. Asset-Backed and Receivable-Backed Securities. Asset-backed and receivable-backed securities are undivided fractional interests in pools of consumer loans (unrelated to mortgage loans) held in a trust. Payments of principal and interest are passed through to certificate holders and are typically supported by some form of credit enhancement, such as a letter of credit, surety bond, limited guaranty, or senior/subordination. The degree of credit enhancement varies, but generally amounts to only a fraction of the asset-backed or receivable-backed security's par value until exhausted. If the credit enhancement is exhausted, certificate holders may experience losses or delays in payment if the required payments of principal and interest are not made to the trust with respect to the underlying loans. The value of these securities also may change because of changes in the market's perception of the creditworthiness of the servicing agent for the loan pool, the originator of the loans or the financial institution providing the credit enhancement. Asset-backed and receivable-backed securities are ultimately dependent upon payment of consumer loans by individuals, and the certificate holder generally has no recourse against the entity that originated the loans. The underlying loans are subject to prepayments which shorten the securities' weighted average life and may lower their return. As prepayments flow through at par, total returns would be affected by the prepayments: if a security were trading at a premium, its total return would be lowered by prepayments, and if a security were trading at a discount, its total return would be increased by prepayments. The Fund will not invest more than 5% of its net assets in asset-backed or receivable-backed securities. K. Repurchase Agreements. The Fund may invest in repurchase agreements fully collateralized by obligations issued by the U.S. government or by agencies of the U.S. government ("U.S. Government Obligation"). A repurchase agreement is a short term investment in which the purchaser (i.e., the Fund) acquires ownership of a U.S. Government Obligation (which may be of any maturity) and the seller agrees to repurchase the obligation at a future time at a set price, thereby determining the yield during the purchaser's holding period (usually not more than 7 days from the date of purchase). Any repurchase transaction in which the Fund engages will require full collateralization of the seller's obligation during the entire term of the repurchase agreement. In the event of a bankruptcy or other default of the seller, the Fund could experience both delays in liquidating the underlying security and losses in value. However, the Fund intends to enter into repurchase agreements only with the Fund's custodian, other banks with assets of $1 billion or more and registered securities dealers determined by the Advisor to be creditworthy. The Advisor monitors the creditworthiness of the banks and securities dealers with which the Fund engages in repurchase transactions. L. Convertible Securities. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest generally paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Convertible securities have several unique investment characteristics, such as: (a) higher yields than common stocks, but lower yields than comparable nonconvertible securities; (b) a lesser degree of fluctuation in value than the underlying stock since they have fixed income characteristics; and (c) the potential for capital appreciation if the market price of the underlying common stock increases. A convertible security might be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. If a convertible security held by the Fund is called for redemption, the Fund may be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. INVESTMENT LIMITATIONS Fundamental. The investment limitations described below have been adopted by the Trust with respect to the Fund and are fundamental ("Fundamental"), i.e., they may not be changed without the affirmative vote of a majority of the outstanding shares of the Fund. As used in the Prospectus and the Statement of Additional Information, the term "majority" of the outstanding shares of the Fund means the lesser of: (1) 67% or more of the outstanding shares of the Fund present at a meeting, if the holders of more than 50% of the outstanding shares of the Fund are present or represented at such meeting; or (2) more than 50% of the outstanding shares of the Fund. Other investment practices which may be changed by the Board of Trustees without the approval of shareholders to the extent permitted by applicable law, regulation or regulatory policy are considered non-fundamental ("Non-Fundamental"). 1. Borrowing Money. The Fund will not borrow money, except: (a) from a bank, provided that immediately after such borrowing there is an asset coverage of 300% for all borrowings of the Fund; or (b) from a bank or other persons for temporary purposes only, provided that such temporary borrowings are in an amount not exceeding 5% of the Fund's total assets at the time when the borrowing is made. This limitation does not preclude the Fund from entering into reverse repurchase transactions, provided that the Fund has an asset coverage of 300% for all borrowings and repurchase commitments of the Fund pursuant to reverse repurchase transactions. 2. Senior Securities. The Fund will not issue senior securities. This limitation is not applicable to activities that may be deemed to involve the issuance or sale of a senior security by the Fund, provided that the Fund's engagement in such activities is consistent with or permitted by the Investment Company Act of 1940, as amended, the rules and regulations promulgated thereunder or interpretations of the Securities and Exchange Commission or its staff. 3. Underwriting. The Fund will not act as underwriter of securities issued by other persons. This limitation is not applicable to the extent that, in connection with the disposition of portfolio securities (including restricted securities), the Fund may be deemed an underwriter under certain federal securities laws. 4. Real Estate. The Fund will not purchase or sell real estate. This limitation is not applicable to investments in marketable securities which are secured by or represent interests in real estate. This limitation does not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including real estate investment trusts). 5. Commodities. The Fund will not purchase or sell commodities unless acquired as a result of ownership of securities or other investments. This limitation does not preclude the Fund from purchasing or selling options or futures contracts, from investing in securities or other instruments backed by commodities or from investing in companies which are engaged in a commodities business or have a significant portion of their assets in commodities. 6. Loans. The Fund will not make loans to other persons, except: (a) by loaning portfolio securities; (b) by engaging in repurchase agreements; or (c) by purchasing nonpublicly offered debt securities. For purposes of this limitation, the term "loans" shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities. 7. Concentration. The Fund will not invest 25% or more of its total assets in a particular industry. This limitation is not applicable to investments in obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities or repurchase agreements with respect thereto. 8. Diversification. The Fund will not invest in the securities of any issuer if, immediately after such investment, less than 75% of the total assets of the Fund will be invested in cash and cash items (including receivables), Government securities, securities of other investment companies or other securities for the purposes of this calculation limited in respect of any one issuer to an amount (determined immediately after the latest acquisition of securities of the issuer) not greater in value than 5% of the total assets of the Fund and to not more than 10% of the outstanding voting securities of such issuer. With respect to the percentages adopted by the Trust as maximum limitations on its investment policies and limitations, an excess above the fixed percentage will not be a violation of the policy or limitation unless the excess results immediately and directly from the acquisition of any security or the action taken. This paragraph does not apply to the borrowing policy set forth in paragraph 1 above. Notwithstanding any of the foregoing limitations, any investment company, whether organized as a trust, association or corporation, or a personal holding company, may be merged or consolidated with or acquired by the Trust, provided that if such merger, consolidation or acquisition results in an investment in the securities of any issuer prohibited by said paragraphs, the Trust shall, within ninety days after the consummation of such merger, consolidation or acquisition, dispose of all of the securities of such issuer so acquired or such portion thereof as shall bring the total investment therein within the limitations imposed by said paragraphs above as of the date of consummation. THE INVESTMENT ADVISOR The Fund's investment advisor is The Jumper Group, Inc., (the "Advisor"), One Union Square, Suite 505, Chattanooga, TN 37402. Jay C. Jumper may be deemed to be a controlling person of The Jumper Group due to his ownership of the shares of the corporation. Under the terms of the management agreement (the "Agreement"), the Advisor manages the Fund's investments subject to approval of the Board of Trustees and pays all of the expenses of the Fund except brokerage fees and commissions, taxes, interest, fees and expenses of the non-interested person Trustees, extraordinary expenses and Rule 12b-1 expenses which the Fund is authorized to pay pursuant to the Distribution Plan. As compensation for its management services and agreement to pay the Fund's expenses, the Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 0.75% of the average daily net assets of the Fund. The Advisor may waive all or part of its fees, at any time, and at its sole discretion, but such action shall not obligate the Advisor to waive any fees in the future. The Advisor has contractually agreed to reimburse the Fund for the fees and expenses of the non-interested person Trustees incurred by the Fund through October 31, 2003, but only to the extent necessary to maintain the Investor Class total annual operating expenses at 1.00% of its average daily net assets and the Institutional Class total annual operating expenses at 0.75% of its average daily net assets. For the fiscal years ended June 30, 2002, 2001 and 2000, the Fund paid advisory fees of $48,667, $52,489, and $23,043 respectively. The Board of Trustees discussed the renewal of the Agreement at a telephone meeting held on August 30, 2002. The Trustees reviewed the Balance Sheet of the Adviser as of December 31, 2001, and an Income Statement for the twelve months ended December 31, 2001. They reviewed reports comparing the performance and expenses of the Fund to the performance and expenses of several other funds with similar objectives and asset levels. Jay Jumper, President of the Adviser, then joined the meeting by telephone. In response to questions by the Trustees, Mr. Jumper stated that there had been no changes in investment strategy and no material changes in personnel responsible for the management of the Fund's portfolio. Mr. Jumper reported that the firm's assets under management had remained fairly steady at approximately $80 million. He reported that the firm had no soft dollar arrangements in place, and did not use an affiliated broker. The Trustees discussed the nature and quality of the services provided by the Adviser and, based upon the information provided, it was the Board's consensus that the fee paid to the Adviser pursuant to the Agreement was reasonable. The Trustees determined that the overall arrangement provided under the terms of the Agreement was a reasonable business arrangement, and that the renewal of the Agreement was in the best interests of the Fund's shareholders. At a subsequent in-person meeting of the Board held on October 21, 2002, the Trustees again discussed the renewal of the Agreement. They reviewed updated performance and expense comparisons, and again discussed the information they had reviewed during the previous telephone meeting. Based on the information provided, the Trustees reaffirmed their previous determinations that the overall arrangement was a reasonable business arrangement and that the renewal of the Agreement was in the best interests of the Fund's shareholders. The Advisor retains the right to use the name "Jumper" in connection with another investment company or business enterprise with which the Advisor may become associated. The Trust's right to use the name "Jumper" automatically ceases ninety days after termination of the Agreement and may be withdrawn by the Advisor on ninety days written notice. The Advisor may make payments to banks or other financial institutions that provide shareholder services and administer shareholder accounts. Banks may charge their customers fees for offering these services to the extent permitted by applicable regulatory authorities, and the overall return to those shareholders availing themselves of the bank services will be lower than to those shareholders who do not. The Fund may from time to time purchase securities issued by banks which provide such services; however, in selecting investments for the Fund, no preference will be shown for such securities. TRUSTEES AND OFFICERS The Board of Trustees supervises the business activities of the Trust. Each Trustee serves as a Trustee until the termination of the Trust unless the Trustee dies, resigns, retires, or is removed. 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 Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Kenneth D. Trumpfheller2 Trustee Since 1995 29 1725 E. Southlake Blvd. Suite 200 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. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Length of Number of Portfolios in Name, Age and Address Position(s) Held Time Served Fund Complex1 Overseen with Trust by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Timothy Ashburn3 President and Since October 2002 N/A 2424 Harrodsburg Road Secretary Lexington, KY 40503 Year of Birth: 1950 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chairman of Unified Financial Services, Inc. since 1989 and Chief N/A Executive Officer from 1989 to 1992 and 1994 to April 2002; President of Unified Financial Services from November 1997 to April 2000. - ---------------------------------------------------------------------- ----------------------------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Number of Portfolios Position(s) In Length of in Fund Complex1 Name, Age and Address Fund Complex Time Served Overseen by Trustee - --------------------------------------------------- ------------------ --------------------- ------------------------- - --------------------------------------------------- ------------------ --------------------- ------------------------- Thomas G. Napurano Treasurer and Since October 2002 N/A 2424 Harrodsburg Road Chief Financial Lexington, KY 40503 Officer Year of Birth: 1941 - --------------------------------------------------- ------------------ --------------------- ------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ---------------------------------------------------------------------- ----------------------------------------------- - ---------------------------------------------------------------------- ----------------------------------------------- Chief Financial Officer and Executive Vice President of Unified N/A Financial Services, Inc., the parent company of the Trust's administrator and principal underwriter; member the board of directors of Unified Financial Services, Inc. from 1989 to March 2002. - ---------------------------------------------------------------------- ----------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. 2 Mr. Trumpfheller may be deemed to be an "interested person" of the Trust because he is a registered principal of the Trust's distributor 3 Mr. Ashburn is an "interested person" of the Trust because he is an officer of the Trust. In addition, he may be deemed to be an "interested person" of the Trust because he is Chairman of Unified Financial Services, Inc., the parent of the principal underwriter for the Funds. 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 Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Gary E. Hippenstiel Trustee Trustee since 1995 29 600 Jefferson Street Suite 350 Houston, TX 77002 Year of Birth: 1947 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Director, Vice President and Chief Investment Officer of Legacy Trust None Company since 1992. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Mark W. Muller Trustee Trustee since 2002 29 5016 Cedar River Tr. Ft. Worth, TX. 76137 Year of Birth: 1964 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. President of JAMAR None Resources, Inc., a manufacturers representative firm, September 2001 to present. Account Manager for SCI, Inc., a custom manufacturer, from April 2002 to September 2001. Account Manager for Clarion Technologies, a manufacturer of automotive, heavy truck, and consumer goods, from 1996 to April 2000. - ----------------------------------------------------------------------- ---------------------------------------------- - --------------------------------------------------- ------------------- --------------------- ------------------------ Number of Portfolios Position(s) Held Length of in Fund Complex1 Name, Age and Address with Trust Time Served Overseen by Trustee - --------------------------------------------------- ------------------- --------------------- ------------------------ - --------------------------------------------------- ------------------- --------------------- ------------------------ Richard J. Wright, Jr. Trustee Trustee since 2002 29 13532 N. Central Expressway MS 3800 Dallas, TX 75243 Year of Birth: 1962 - --------------------------------------------------- ------------------- --------------------- ------------------------ - ----------------------------------------------------------------------- ---------------------------------------------- Principal Occupations During Past 5 Years Other Directorships Held by Trustee - ----------------------------------------------------------------------- ---------------------------------------------- - ----------------------------------------------------------------------- ---------------------------------------------- Trustee of AmeriPrime Advisors Trust since 1999. Various positions None with Texas Instruments, a technology company, since 1985, including the following: Program Manager for Semi-Conductor Business Opportunity Management System, 1998 to present; Development Manager for we-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. - ----------------------------------------------------------------------- ---------------------------------------------- 1 The term "fund complex" refers to the AmeriPrime Funds and the AmeriPrime Advisors Trust. The Trust's audit committee consists of Gary Hippenstiel, Mark Muller and Richard Wright. The audit committee is responsible for overseeing the Fund's accounting and financial reporting policies and practices, its internal controls and, as appropriate, the internal controls of certain service providers; overseeing the quality and objectivity of the Fund's financial statements and the independent audit of the financial statements; and acting as a liaison between the Fund's independent auditors and the full Board of Trustees. The audit committee was recently established and held no meetings during the year ended June 30, 2002. The following table provides information regarding shares of the Funds and other portfolios of the AmeriPrime Family of Funds owned by each Trustee as of December 31, 2001. - -------------------------------------- ---------------------------------------- -------------------------------------- Aggregate Dollar Range of Shares of all Funds Overseen by the Trustee Within the AmeriPrime Family of Trustee Dollar Range of Fund Shares Funds* - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Gary E. Hippenstiel None $1-$10,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Mark W. Muller None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Kenneth D. Trumpfheller None $50,001-$100,000 - -------------------------------------- ---------------------------------------- -------------------------------------- - -------------------------------------- ---------------------------------------- -------------------------------------- Richard J. Wright None $10,001-$50,000 - -------------------------------------- ---------------------------------------- -------------------------------------- * As of December 31, 2001, the terms "Fund Complex" and "AmeriPrime Family of Funds" refers to AmeriPrime Funds and AmeriPrime Advisors Trust. The compensation paid to the Trustees of the Trust for the Fund's fiscal year ended June 30, 2002 is set forth in the following table. Trustee fees are Trust expenses and each series of the Trust pays a portion of the Trustee fees. - ------------------------------------------------ ----------------------------------- --------------------------------- Total Compensation from Trust and AmeriPrime Advisors Trust Name Aggregate Compensation from Trust - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Kenneth D. Trumpfheller $0 $0 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Steve L. Cobb1 $18,729 $18,729 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Gary E. Hippenstiel $19,875 $19,875 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Mark W. Muller2 $1,146 $16,771 - ------------------------------------------------ ----------------------------------- --------------------------------- - ------------------------------------------------ ----------------------------------- --------------------------------- Richard J. Wright2 $1,146 $16,771 - ------------------------------------------------ ----------------------------------- ---------------------------------
1 Mr. Cobb is no longer a Trustee of the Trust. 2 Elected to the Board on May 29, 2002. PORTFOLIO TRANSACTIONS AND BROKERAGE Subject to policies established by the Board of Trustees, the Advisor is responsible for the Fund's portfolio decisions and the placing of the Fund's portfolio transactions. In placing portfolio transactions, the Advisor seeks the best qualitative execution for the Fund, taking into account such factors as price (including the applicable brokerage commission or dealer spread), the execution capability, financial responsibility and responsiveness of the broker or dealer and the brokerage and research services provided by the broker or dealer. The Advisor generally seeks favorable prices and commission rates that are reasonable in relation to the benefits received. Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to its obligation of seeking best qualitative execution, the Advisor may give consideration to sales of shares of the Trust as a factor in the selection of brokers and dealers to execute portfolio transactions. The Advisor is specifically authorized to select brokers or dealers who also provide brokerage and research services to the Fund and/or the other accounts over which the Advisor exercises investment discretion and to pay such brokers or dealers a commission in excess of the commission another broker or dealer would charge if the Advisor determines in good faith that the commission is reasonable in relation to the value of the brokerage and research services provided. The determination may be viewed in terms of a particular transaction or the Advisor's overall responsibilities with respect to the Trust and to other accounts over which it exercises investment discretion. Research services include supplemental research, securities and economic analyses, statistical services and information with respect to the availability of securities or purchasers or sellers of securities and analyses of reports concerning performance of accounts. The research services and other information furnished by brokers through whom the Fund effects securities transactions may also be used by the Advisor in servicing all of its accounts. Similarly, research and information provided by brokers or dealers serving other clients may be useful to the Advisor in connection with its services to the Fund. Although research services and other information are useful to the Fund and the Advisor, it is not possible to place a dollar value on the research and other information received. It is the opinion of the Board of Trustees and the Advisor that the review and study of the research and other information will not reduce the overall cost to the Advisor of performing its duties to the Fund under the Agreement. Over-the-counter transactions will be placed either directly with principal market makers or with broker-dealers, if the same or a better price, including commissions and executions, is available. Fixed income securities are normally purchased directly from the issuer, an underwriter or a market maker. Purchases include a concession paid by the issuer to the underwriter and the purchase price paid to a market maker may include the spread between the bid and asked prices. To the extent that the Trust and another of the Advisor's clients seek to acquire the same security at about the same time, the Trust may not be able to acquire as large a position in such security as it desires or it may have to pay a higher price for the security. Similarly, the Trust may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if the other client desires to sell the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Trust. In the event that more than one client wants to purchase or sell the same security on a given date, the purchases and sales will normally be made by random client selection. For the fiscal years ended June 30, 2002, 2001 and 2000, there were no brokerage commissions paid. The Trust, the Advisor and the Fund's distributor have each adopted a Code of Ethics (the "Code") under Rule 17j-1 of the Investment Company Act of 1940. The personnel subject to the Code are permitted to invest in securities, including securities that may be purchased or held by the Fund. You may obtain a copy of the Code from the Securities and Exchange Commission. DETERMINATION OF SHARE PRICE The price (net asset value) of the shares of the Fund is determined as of 4:00 p.m., Eastern time on each day the Trust is open for business and on any other day on which there is sufficient trading in the Fund's securities to materially affect the net asset value. The Trust is open for business on every day except Saturdays, Sundays and the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. 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 Advisor's opinion, the last bid price does not accurately reflect the current value of the security. All other securities for which over-the-counter market quotations are readily available are valued at their last bid price. When market quotations are not readily available, when the Advisor determines the last bid price does not accurately reflect the current value or when restricted securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees. Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Advisor decides that a price provided by the pricing service 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 Advisor, 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. INVESTMENT PERFORMANCE The Fund may periodically advertise "average annual total return." "Average annual total return," as defined by the Securities and Exchange Commission, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending redeemable value, according to the following formula: P(1+T)n=ERV Where: P = a hypothetical $1,000 initial investment T = average annual total return n = number of years ERV = ending redeemable value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period. The computation assumes that all dividends and distributions are reinvested at the net asset value on the reinvestment dates and that a complete redemption occurs at the end of the applicable period. If the Fund has been in existence less than one, five, or ten years, the time period since the date of the initial public offering of shares will be substituted for the periods stated. "Average annual total return after taxes on distributions," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVD Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions) n = number of years ATVD ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions but not after taxes on redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period. "Average annual total return after taxes on distributions and redemption," as defined by the SEC, is computed by finding the average annual compounded rates of return for the period indicated that would equate the initial amount invested to the ending value, according to the following formula: P(1+T)n=ATVDR Where: P = a hypothetical $1,000 initial investment T = average annual total return (after taxes on distributions and redemption) n = number of years ATVDR ending value at the end of the applicable period of the hypothetical $1,000 investment made at the beginning of the applicable period, after taxes on fund distributions and redemption. The computation assumes that dividends and distributions, less the taxes due on such distributions, are reinvested at the price stated in the prospectus (including any applicable sales load) on the reinvestment dates during the period.The Fund may also advertise performance information (a "non-standardized quotation") which is calculated differently from average annual total return. A non-standardized quotation of total return may be a cumulative return which measures the percentage change in the value of an account between the beginning and end of a period, assuming no activity in the account other than reinvestment of dividends and capital gains distributions. A non-standardized quotation may also be an average annual compounded rate of return over a specified period, which may be a period different from those specified for average annual total return. In addition, a non-standardized quotation may be an indication of the value of a $10,000 investment (made on the date of the initial public offering of the Fund's shares) as of the end of a specified period. A non-standardized quotation of total return will always be accompanied by the Fund's average annual total return as described above. The following table provides information regarding the Jumper Strategic Advantage Fund's performance (for the periods ended June 30, 2002). - ------------------------------------------------------------------------------------------------------------- JUMPER STRATEGIC ADVANTAGE FUND - ------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Institutional Shares 1 Year Since Inception ------ ---------------- (10/26/98) - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return 4.47% 3.60% - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return After Taxes on Distributions 3.24% 2.00% - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return After Taxes on Distributions 3.08% 2.41% and Redemptions - ----------------------------------------------------------- ----------------------- ------------------------- - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Investor Shares 1 Year Since Inception ------ ---------------- (11/02/99) - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return 4.77% 3.59% - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return After Taxes on Distributions 3.61% 1.98% - ----------------------------------------------------------- ----------------------- ------------------------- - ----------------------------------------------------------- ----------------------- ------------------------- Average Annual Total Return After Taxes on Distributions 3.28% 2.45% and Redemptions - ----------------------------------------------------------- ----------------------- -------------------------
The Fund's investment performance will vary depending upon market conditions, the composition of the Fund's portfolio and operating expenses of the Fund. These factors and possible differences in the methods and time periods used in calculating non-standardized investment performance should be considered when comparing the Fund's performance to those of other investment companies or investment vehicles. The risks associated with the Fund's investment objective, policies and techniques should also be considered. At any time in the future, investment performance may be higher or lower than past performance, and there can be no assurance that any performance will continue. From time to time, in advertisements, sales literature and information furnished to present or prospective shareholders, the performance of the Fund may be compared to indices of broad groups of unmanaged securities considered to be representative of or similar to the portfolio holdings of the Fund or considered to be representative of the cash equivalent market in general. For example, the Fund may use the Donahue Money Market Index, 90 day treasury bills, or other money market index published by an independent third party. In addition, the performance of the Fund may be compared to other groups of mutual funds tracked by any widely used independent research firm which ranks mutual funds by overall performance, investment objectives and assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies, limitations and expenses of other mutual funds in a group may not be the same as those of the Fund. Performance rankings and ratings reported periodically in national financial publications such as Barron's and Fortune also may be used. CUSTODIAN U.S. Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is custodian of the Fund's investments. The custodian acts as the Fund's depository, safekeeping its portfolio securities, collects all income and other payments with respect thereto, disburses funds at the Fund's request and maintains records in connection with its duties. FUND SERVICES Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street, Indianapolis, Indiana 46204, acts as the Fund's transfer agent. A Trustee and the officers of the Trust are members of management and/or employees of Unified. Unified maintains the records of each shareholder's account, answers shareholders' inquiries concerning their accounts, processes purchases and redemptions of the Funds' shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. Unified receives a monthly fee from the Advisor of $1.20 per shareholder (subject to a minimum monthly fee of $900) for these transfer agency services. In addition, Unified provides the Fund with fund accounting services, which includes certain monthly reports, record-keeping and other management-related services. For its services as fund accountant, Unified receives an annual fee from the Advisor equal to 0.0275% of the Fund's assets up to $100 million, 0.0250% of the Fund's assets from $100 million to $300 million, and 0.0200% of the Fund's assets over $300 million (subject to various monthly minimum fees, the maximum being $2,000 per month for assets of $20 to $100 million). For the fiscal years ended June 30, 2002, 2001 and 2000, the Advisor paid fees of $21,210, $20,339, and $11,192 on behalf of the Fund to Unified for these fund accounting services. Unified also provides the Fund with administrative services, including all regulatory reporting and necessary office equipment, personnel and facilities. Unified receives a monthly fee from the Advisor equal to an annual rate of 0.10% of the Fund's assets under $50 million, 0.075% of the Fund's assets from $50 million to $100 million, and 0.050% of the Fund's assets over $100 million (subject to a minimum fee of $2,500 per month). For the fiscal year ended June 30, 2002, 2001 and 2000, the Administrator received $30,000, $20,098, and $30,000 from the Advisor (not the Fund) for these services. ACCOUNTANTS The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, Ohio 44145, has been selected as independent public accountants for the Fund for the fiscal year ending June 30, 2003. McCurdy & Associates performs an annual audit of the Fund's financial statements and provides financial, tax and accounting consulting services as requested. DISTRIBUTOR Unified Financial Securities, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204 (the "Distributor"), is the exclusive agent for distribution of shares of the Fund. Kenneth D. Trumpfheller, a Trustee of the Trust, is a registered principal of, and may be deemed to be an affiliate of, the Distributor. Timothy Ashburn and Thomas Napurano, officers of the Trust, are officers of Unified Financial Services Inc. The Distributor is obligated to sell the shares of the Fund on a best efforts basis only against purchase orders for the shares. Shares of the Fund are offered to the public on a continuous basis. The Distributor and Unified are controlled by Unified Financial Services, Inc. FINANCIAL STATEMENTS The financial statements and independent auditors' report required to be included in this Statement of Additional Information are incorporated herein by reference to the Fund's annual report to the shareholders for the period ended June 30, 2002. The Trust will provide the annual report without charge by calling the Fund at (888) 879-5723. -----END PRIVACY-ENHANCED MESSAGE-----