-----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, SNujVjappi16XLL+QC0LoJlWsGhf2uwNn1U2+XU+GpG16a5tyUQPDf73EQoTTK6z quaIxeP9tzLyNmPbxC9gvw== 0001144204-04-002714.txt : 20040310 0001144204-04-002714.hdr.sgml : 20040310 20040310100035 ACCESSION NUMBER: 0001144204-04-002714 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040310 EFFECTIVENESS DATE: 20040310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPLETON FUNDS CENTRAL INDEX KEY: 0001127451 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-10201 FILM NUMBER: 04658969 BUSINESS ADDRESS: STREET 1: 45 MILK STREET CITY: BOSTON STATE: MA ZIP: 02109 MAIL ADDRESS: STREET 1: 45 MILK STREET CITY: BOSTON STATE: MA ZIP: 02109 N-CSR 1 v01875_ncsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-10201 The Appleton Funds - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 45 Milk Street, Boston, Massachusetts 02109 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) James I. Ladge, 45 Milk Street, Boston, Massachusetts 02109 - -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (513) 362-8000 ---------------------------- Date of fiscal year end: 12/31 ----------------- Date of reporting period: 12/31/03 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Annual Report for Appleton Equity Growth Fund. ================================================================================ APPLETON EQUITY GROWTH FUND --------------------------- ANNUAL REPORT December 31, 2003 Investment Adviser Administrator ------------------ ------------- APPLETON PARTNERS, INC. INTEGRATED FUND SERVICES, INC. 45 Milk Street, Eighth Floor 221 East Fourth Street Boston, MA 02109 Suite 300 Cincinnati, OH 45202 1-877-712-7753 ================================================================================ Dear Fellow Shareholder: After three consecutive years of losses, U.S. equity investors were finally rewarded in 2003 as markets posted double digit gains. In both 2001 and 2002, short-term rallies temporarily raised expectations that the post-bubble bear market was finally coming to an end. However, in both instances, the economy proved too fragile, and equity markets quickly reversed course and continued their downward spiral. In the second quarter of 2003, investors had to decide if a 15% rally in the S&P would once again fizzle, or finally be a sign of better days to come. Bearish investors still doubted the strength of the economy and remained on the sidelines, while more bullish investors believed that equities had bottomed and the time had come to take a more aggressive stance. The rally proved to be for real as low interest rates, tax cuts, increased government spending, a slowdown in layoffs, a successful campaign in Iraq and a weak dollar provided the momentum for a more sustainable economic recovery. That recovery was further validated as GDP growth in the third quarter registered a blistering 8.2% pace. For the year, the major indices all increased in excess of 20 percent. For the year ended December 31, 2003, the Fund had a total return of 24.03%, slightly below the S&P 500 Index's (the Fund's bench mark) total return of 28.69% for the same period. The Fund began 2003 by continuing to emphasize the more defensive sectors such as consumer staples and healthcare, as the long awaited economic recovery was still not in sight. Exposure to some of the more volatile sectors that usually underperform in a weak economy, such as industrials and technology, was reduced from levels seen in previous years. However, as the year progressed and the economic data became more encouraging, we adopted a more bullish stance towards the equity markets. Over the course of several months, we made a concerted effort to restructure the portfolio so that it was better positioned to take advantage of surging equity markets. By the end of the year, our exposure to the more defensive sectors such as consumer staples and healthcare was reduced from 36% to approximately 24%. At the same time, we increased our exposure to those sectors that we felt would outperform as the economy recovered. Exposure to the industrial, financial, consumer cyclical and technology sectors was increased. While we did increase our exposure to the more volatile technology sector, we were mindful of the events of just a few years ago, and kept a technology weighting that was in line with that of the S&P index. Below is a brief update of each sector for the year 2003. o The Technology sector soared in 2003 as an improving economy provided corporations with the financial resources to upgrade their systems and infrastructures. o The Consumer Discretion sector rose strongly as homebuilding stocks took advantage of a record year in housing and high-end retailers surged as consumers opened their wallets for more expensive items. o The Financial sector performed well as mortgage lending boomed, investment banking and asset management fees rebounded and credit losses declined significantly. o The Consumer Staples sector, as expected, lagged in a strong market as investors focused their attention on more volatile sectors. o The Telecommunications sector remained weak as overcapacity and severe price competition continued to plague the industry. o The Healthcare sector lagged the broader markets as pending Medicare legislation kept investors on the sidelines and pharmaceuticals struggled to find replacements for several blockbusters coming off patent protection. o The Industrial sector had an outstanding year. As the economy strengthened, industrial activity saw its first signs of life in several quarters. Construction, defense and conglomerates all took part in the rally. o The energy sector endured a volatile year as both oil prices and reserves saw large swings. As the year progressed, increases in industrial production, injections to U.S. reserves and bitter cold weather led to improvements in share prices. o The Materials sector surged as construction and infrastructure spending increased and speculation on demand for inputs such as copper and aluminum drove prices higher throughout the year. As we embark on 2004, we remain confident that the economic recovery will continue and that equity markets have further upside potential. While the economic backdrop remains favorable for equities, it's highly unlikely that 2004 will produce the same staggering gains as did 2003. Investor expectations, lofty valuations and record corporate earnings last year have set the bar extremely high for 2004. Instead, we look for GDP and earnings growth to slow from last year's record pace, and for equities to advance in the high single-digit range. As always, we'll continue to focus on high quality companies with the potential for above average earnings growth, and we'll continue to monitor the economic landscape and make strategic changes to the portfolio as needed. Very Truly Yours, /s/ James I. Ladge - ------------------------------- James I. Ladge, CFA President Comparison of the Change in Value of a $10,000 Investment in the Appleton Equity Growth Fund and the S&P 500 Index - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] 12/31/03 -------- Appleton Equity Growth Fund $ 8,832 S&P 500 Index $ 6,400 --------------------------------- Appleton Equity Growth Fund Average Annual Total Returns* 1 Year Since Inception** 24.03% (13.82%) --------------------------------- Past performance is not predictive of future performance. - -------------------------------------------------------------------------------- * The return shown does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund Shares. ** Fund inception was December 31, 2000. APPLETON EQUITY GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2003 SHARES VALUE ------ ----- COMMON STOCKS -- 99.4% CONSUMER, CYCLICAL -- 16.9% 5,500 Brinker International, Inc.* $ 182,380 4,000 ComCast Corp.* 131,480 2,250 Kohl's Corp.* 101,115 3,250 Lowe's Companies, Inc. 180,018 2,000 Mohawk Industries, Inc.* 141,080 3,500 Newell Rubbermaid, Inc. 79,695 1,750 NIKE, Inc. 119,805 ----------- 935,573 ----------- CONSUMER, NON-CYCLICAL -- 10.4% 2,500 Avon Products, Inc. 168,725 3,000 PepsiCo, Inc. 139,860 1,500 Procter & Gamble Co. 149,820 2,250 Wal-Mart Stores, Inc. 119,363 ----------- 577,768 ----------- ENERGY -- 8.5% 2,000 Apache Corp. 162,200 4,400 Exxon Mobil Corp. 180,400 3,500 Weatherford International Ltd.* 126,000 ----------- 468,600 ----------- FINANCIAL SERVICES -- 17.8% 3,500 Citigroup, Inc. 169,890 4,500 FleetBoston Financial Corp. 196,424 6,000 Friedman, Billings, Ramsey Group, Inc. 138,480 3,000 Merrill Lynch & Co., Inc. 175,950 4,000 SAFECO Corp. 155,720 2,500 Wells Fargo & Co. 147,225 ----------- 983,689 ----------- APPLETON EQUITY GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2003 SHARES VALUE ------ ----- HEALTHCARE -- 15.2% 3,000 Forest Laboratories, Inc. $ 185,400 2,750 Johnson & Johnson 142,065 3,000 Merck & Co., Inc. 138,600 3,400 Pfizer, Inc. 120,122 4,000 Pharmaceutical Product Development, Inc.* 107,880 2,000 Quest Diagnostics, Inc.* 146,220 ----------- 840,287 ----------- INDUSTRIAL -- 9.7% 5,000 ARAMARK Corp. 137,100 2,000 Caterpiller, Inc. 166,040 3,000 General Electric Co. 92,940 1,500 United Technologies Corp. 142,155 ----------- 538,235 ----------- MATERIALS -- 3.1% 4,500 Praxair, Inc. 171,900 ----------- TECHNOLOGY -- 15.7% 6,000 Applied Materials* 134,700 5,750 Check Point Software Tech* 96,715 4,500 Cisco Systems* 109,305 6,500 Flextronics International Ltd.* 96,460 1,250 International Business Machines Corp. 115,850 6,000 Microsoft Corp. 165,240 5,250 Texas Instruments, Inc. 154,245 ----------- 872,515 ----------- TELECOMMUNICATIONS -- 2.1% 3,350 Verizon Communications, Inc. 117,518 ----------- TOTAL COMMON STOCKS $ 5,506,085 ----------- APPLETON EQUITY GROWTH FUND PORTFOLIO OF INVESTMENTS December 31, 2003 SHARES VALUE ------ ----- MONEY MARKETS -- 1.2% 68,618 First American Treasury Fund $ 68,618 ----------- TOTAL INVESTMENT SECURITIES-- 100.6% (Cost $5,228,869) $ 5,574,703 LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6%) (30,672) ----------- NET ASSETS-- 100.0% $ 5,544,031 =========== * Non-income producing security. See accompanying notes to financial statements. APPLETON EQUITY GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES December 31, 2003
ASSETS Investment securities: At acquisition cost $ 5,228,869 =============== At value $ 5,574,703 Dividends receivable 6,042 Receivable from Adviser 2,801 --------------- TOTAL ASSETS 5,583,546 --------------- LIABILITIES Payable to affiliates 12,997 Other accrued expenses and liabilities 26,518 --------------- TOTAL LIABILITIES 39,515 --------------- NET ASSETS $ 5,544,031 =============== NET ASSETS CONSIST OF Paid-in capital $ 7,469,895 Accumulated net realized losses from security transactions (2,271,698) Net unrealized appreciation on investments 345,834 --------------- NET ASSETS $ 5,544,031 =============== Shares of beneficial interest outstanding (unlimited number of shares authorized, no par value) 865,736 =============== Net asset value and redemption price per share $ 6.40 ===============
See accompanying notes to financial statements. APPLETON EQUITY GROWTH FUND STATEMENT OF OPERATIONS For the Year Ended December 31, 2003
INVESTMENT INCOME Dividends $ 61,520 --------------- EXPENSES Investment advisory fees 48,173 Professional fees 31,600 Accounting services fees 30,000 Administration fees 24,000 Transfer agent fees 24,000 Distribution expenses 12,043 Postage and supplies 8,746 Trustees' fees and expenses 15,442 Custodian fees 5,800 Insurance expense 3,659 Registration fees 2,999 Reports to shareholders 1,000 Pricing expense 900 --------------- TOTAL EXPENSES 208,362 Fees waived and/or expenses reimbursed by Adviser (136,044) --------------- NET EXPENSES 72,318 --------------- NET INVESTMENT LOSS (10,798) --------------- REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS Net realized losses from security transactions (351,133) Net change in unrealized appreciation/depreciation on investments 1,410,289 --------------- NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 1,059,156 --------------- NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,048,358 ===============
See accompanying notes to financial statements. APPLETON EQUITY GROWTH FUND STATEMENTS OF CHANGES IN NET ASSETS
For the For the Year Ended Year Ended December 31, December 31, 2003 2002 ------------- ------------- FROM OPERATIONS Net investment loss $ (10,798) $ (26,242) Net realized losses from security transactions (351,133) (1,536,380) Net change in unrealized appreciation/depreciation on investments 1,410,289 (262,969) ------------- ------------- Net increase (decrease) in net assets from operations 1,048,358 (1,825,591) ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS Proceeds from shares sold 643,881 1,457,038 Payments for shares redeemed (247,229) (314,340) ------------- ------------- Net increase in net assets from capital share transactions 396,652 1,142,698 ------------- ------------- TOTAL INCREASE (DECREASE) IN NET ASSETS 1,445,010 (682,893) NET ASSETS Beginning of year 4,099,021 4,781,914 ------------- ------------- End of year $ 5,544,031 $ 4,099,021 ============= ============= CAPITAL SHARE ACTIVITY Sold 113,318 218,510 Redeemed (41,318) (57,585) ------------- ------------- Net increase in shares outstanding 72,000 160,925 Shares outstanding, beginning of year 793,736 632,811 ------------- ------------- Shares outstanding, end of year 865,736 793,736 ============= =============
See accompanying notes to financial statements. APPLETON EQUITY GROWTH FUND FINANCIAL HIGHLIGHTS Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
For the For the a For the Year Ended Year Ended Year Ended December 31, December 31, December 31, 2003 2002 2001(a) ------------- ------------ ------------ Net asset value at beginning of year $ 5.16 $ 7.56 $ 10.00 ------------- ------------ ------------ Income (loss) from investment operations: Net investment loss (0.01) (0.03) (0.03) Net realized and unrealized gains (losses) on investments 1.25 (2.37) (2.41) ------------- ------------ ------------ Total from investment operations 1.24 (2.40) (2.44) ------------- ------------ ------------ Net asset value at end of year $ 6.40 $ 5.16 $ 7.56 ============= ============ ============ Total return 24.03% (31.75%) (24.40%) ============= ============ ============ Net assets at end of year $5,544,031 $4,099,021 $4,781,914 ============= ============ ============ Ratio of net expenses to average net assets 1.50% 1.50% 1.50% Ratio of net investment loss to average net assets (0.22%) (0.56%) (0.47%) Portfolio turnover rate 58% 56% 34%
(a) The Fund commenced operations on December 31, 2000. See accompanying notes to financial statements. APPLETON EQUITY GROWTH FUND NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. SIGNIFICANT ACCOUNTING POLICIES The Appleton Funds (the Trust) is registered under the Investment Company Act of 1940, as amended, (the 1940 Act), as a diversified, no-load, open-end management investment company. The Trust was organized as an Ohio business trust on October 31, 2000. The Trust currently offers one series of shares to investors: the Appleton Equity Growth Fund (the Fund). The Trust was capitalized on December 29, 2000, when the initial shares of the Fund were purchased at $10 per share. Except for the initial purchase of shares, the Trust had no operations prior to the commencement of operations on December 31, 2000. The Fund seeks long-term growth of capital by investing primarily in common stocks. The following is a summary of the Fund's significant accounting policies: Securities valuation - The Fund's portfolio securities are valued as of the close of business of the regular session of the New York Stock Exchange (normally 4:00 p.m., Eastern time). Securities quoted by NASDAQ are valued at the NASDAQ Official Closing Price. Securities for which market quotations are not readily available are valued at their fair value as determined in good faith in accordance with consistently applied procedures established by and under the general supervision of the Board of Trustees. Share valuation - The net asset value per share of the Fund is calculated daily by dividing the total value of the Fund's assets, less liabilities, by the number of shares outstanding, rounded to the nearest cent. The offering and redemption price per share are equal to the net asset value per share. Investment income and distributions to shareholders - Interest income is accrued as earned. Dividend income is recorded on the ex-dividend date. Dividends arising from net investment income are declared and paid annually. Net realized short-term capital gains, if any, may be distributed throughout the year and net realized long-term capital gains, if any, are distributed at least once each year. Income dividends and capital gain distributions are determined in accordance with income tax regulations. Security transactions - Security transactions are accounted for on trade date. Securities sold are determined on a specific identification basis. Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Federal income tax - It is the Fund's policy to comply with the special provisions of the Internal Revenue Code applicable to regulated investment companies. As provided therein, in any fiscal year in which the Fund so qualifies and distributes at least 90% of its taxable net income, the Fund (but not the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made. In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund's intention to declare and pay as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts from prior years. The following information is computed on a tax basis as of December 31, 2003: Cost of portfolio investments $ 5,228,869 ================ Gross unrealized appreciation on investments $ 717,957 Gross unrealized depreciation on investments (372,123) ---------------- Net unrealized appreciation on investments $ 345,834 Capital loss carryforwards (2,271,698) ---------------- Total accumulated deficit $ (1,925,864) ================ The Fund's capital loss carryforwards in the above table expire as follows: Amount December 31, ------------------ --------------------- $254,452 2009 $1,650,125 2010 $367,121 2011 ------------------ $2,271,698 ================== These capital loss carryforwards may be utilized in future years to offset gains, if any, prior to distributing such gains to shareholders. As of December 31, 2003, the Fund reclassified $10,798 of net investment loss to paid-in capital on the Statement of Assets and Liabilities. Such reclassification has no affect on the Fund's net assets or net asset value per share. The Fund has not made any taxable distributions to shareholders since its inception (December 31, 2000). 2. INVESTMENT TRANSACTIONS For the year ended December 31, 2003, the cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, amounted to $3,217,781 and $2,706,853, respectively. 3. TRANSACTIONS WITH AFFILIATES Certain trustees and officers of the Trust are also officers of Appleton Partners, Inc. (the Adviser), Integrated Fund Services, Inc. (IFS), the administrative services agent, shareholder servicing and transfer agent, and accounting services agent for the Trust, or of IFS Fund Distributors, Inc. (the Distributor), the Trust's principal underwriter. INVESTMENT ADVISORY AGREEMENT Pursuant to an Investment Advisory Agreement between the Trust and the Adviser, the Adviser manages the Fund's investments. For these services, the Fund pays the Adviser an advisory fee, which is computed and accrued daily and paid monthly, at an annual rate of 1.00% of its average daily net assets. Pursuant to a written contract between the Adviser and the Fund, the Adviser has agreed to waive a portion of its advisory fees and/or assume certain expenses of the Fund, other than brokerage commissions, extraordinary items, interest and taxes, to the extent annual Fund operating expenses exceed 1.50% of the Fund's average daily net assets. The Adviser has agreed to maintain these expense limitations with regard to the Fund through December 31, 2004. For the year ended December 31, 2003, the Adviser waived $48,173 of advisory fees and reimbursed the Fund for $87,871 of other operating expenses. ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT Under the terms of an Administration, Accounting and Transfer Agency Agreement between the Trust and IFS, IFS supplies non-investment related statistical and research data, internal regulatory compliance services and executive and administrative services for the Fund. IFS supervises the preparation of tax returns, reports to shareholders of the Fund, reports to and filings with the Securities and Exchange Commission and state securities commissions, and materials for meetings of the Board of Trustees. For these administrative services, IFS receives a monthly fee based on the Fund's average daily net assets, subject to a monthly minimum fee. IFS 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 shareholder service functions. For these transfer agency and shareholder services, IFS receives a monthly fee per shareholder account, subject to a monthly minimum fee. In addition, the Fund pays IFS out-of-pocket expenses including, but not limited to, postage and supplies. IFS also calculates the daily net asset value per share and maintains the financial books and records of the Fund. For these accounting services, IFS receives a monthly fee, based on current net assets, from the Fund. In addition, the Fund pays IFS certain out-of-pocket expenses incurred by IFS in obtaining valuations of the Fund's portfolio securities. DISTRIBUTION PLAN The Fund has adopted a plan of distribution (the Plan) pursuant to Rule 12b-1 under the 1940 Act. The Plan permits the Fund to pay for expenses incurred in the distribution and promotion of the Fund's shares including but not limited to, the printing of prospectuses, statements of additional information and reports used for sales purposes, advertisements, expenses of preparation and printing of sales literature, promotion, marketing and sales expenses and other distribution-related expenses, including any distribution fees paid to securities dealers or other firms who have executed a distribution or service agreement with the Trust. The Plan limits payment of distribution expenses in any fiscal year to a maximum of 0.25% of the Fund's average daily net assets. For the year ended December 31, 2003, the Fund accrued and the Adviser subsequently reimbursed $12,043 of distribution expenses under the Plan. UNDERWRITING AGREEMENT The Trust has entered into an Underwriting Agreement on behalf of the Fund with the Distributor. Pursuant to the Underwriting Agreement, the Distributor acts as principal underwriter and, as such, is the exclusive agent for distribution of shares of the Fund. The Distributor receives no compensation for its services and is an affiliate of IFS. - -------------------------------------------------------------------------------- Proxy Voting Policies and Procedures (unaudited) A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to its portfolio securities is available without charge upon request by calling 1-617-338-0700. REPORT OF INDEPENDENT AUDITORS To the Board of Trustees and Shareholders of the Appleton Funds We have audited the accompanying statement of assets and liabilities of the Appleton Equity Growth Fund (the "Fund"), a series of the Appleton Funds, including the schedule of investments, as of December 31, 2003, and the related statement of operations for the year then ended and the statements of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights presented herein for the year ended December 31, 2001 were audited by other auditors whose report dated February 20, 2002, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Appleton Equity Growth Fund at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the two years in the period then ended in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Cincinnati, Ohio January 15, 2004 APPLETON EQUITY GROWTH FUND MANAGEMENT OF THE TRUST (UNAUDITED) December 31, 2003 Listed in the charts below is basic information regarding the Trustees and Officers of the Trust.
NUMBER OF OTHER PORTFOLIOS IN DIRECTORSHIPS FUND COMPLEX HELD BY TRUSTEE CURRENT POSITION WITH TRUST PRINCIPAL OCCUPATION(S) OVERSEEN BY OUTSIDE THE FUND NAME/ADDRESS/AGE AND LENGTH OF TIME SERVED DURING LAST 5 YRS TRUSTEE COMPLEX - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES*: JAMES I. LADGE President, Trustee Vice President, Appleton 1 N/A 45 Milk Street, 8th Floor (December 2000 - Present) Partners, Inc. (1993 - Present) Boston, MA 02109 Treasurer Age: 34 (December 2003 - Present) DOUGLAS C. CHAMBERLAIN Trustee President, Appleton Partners, Inc. 1 N/A 45 Milk Street, 8th Floor (December 2000 - Present) (1998 - Present) Boston, MA 02109 Age: 55 DISINTERESTED TRUSTEES: JACK W. ABER Trustee Professor, Boston University 1 Director, Manager Boston University School of (December 2000 - Present) (1972- Present) Funds Management Director, Third 595 Commonwealth Avenue Avenue Funds Boston, MA 02215 Age: 65 JOHN M. CORNISH, ESQ. Trustee Partner, Choate, Hall & Stewart 1 Director, Thompson Choate Hall & Stewart (December 2000 - Present) (1985 - Present) Steel Company 53 State Street Boston, MA 02109 Age: 55 GRADY B. HEDGESPETH Trustee Trustee, Chief Investment 1 N/A ICA Group (December 2000 - Present) Officer, New Markets Equity Fund One Harvard Street, Suite 200 (March 2000 - Present); Brookline, MA 02445 President, Fleet Age: 47 Development Ventures (April 1996 - January 2000) OFFICERS: Jay S. Fitton Secretary Counsel, Integrated N/A. N/A 221 East Fourth Street, Suite 300 (December 2000 - Present) Fund Services, Cincinnati, OH 45202 (May 2000 - Present) Age: 33
* All Interested Trustees are such because of their interest in the investment adviser, as defined in the Investment Company Act of 1940. The Statement of Additional Information contains additional information about the Trustees and is available without charge upon request by calling 1-877-71-Apple. ITEM 2. CODE OF ETHICS. At the end of the period covered by this report, the registrant has adopted a code of ethics that applies to its principal executive officer and principal financial officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The registrant's Board of Trustees has determined that the registrant does not have an audit committee financial expert. The Trustees determined that no member of the Audit Committee was qualified to be considered an audit committee financial expert. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 12-31-2003 12-31-02 ---------- -------- Audit Fees $12,500 $11,600 Audit-Related Fees 0 0 Tax Fees 1,500 1,400 All Other Fees 0 0 ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable ITEM 6. RESERVED ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. RESERVED ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. -2- ITEM 10. EXHIBITS. (a) (1) Code of Ethics for Senior Financial Officers is filed herewith. (2) Certifications required by Item 10(a)(2) of Form N-CSR are filed herewith. (b) Certification required by Item 10(b) of Form N-CSR is filed herewith. -3- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) The Appleton Funds ------------------------------------------------------------------- By (Signature and Title) /s/ James I. Ladge - -------------------------- James I. Ladge President and Treasurer Date: March 5, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ James I. Ladge - -------------------------- James I. Ladge President and Treasurer Date: March 5, 2004 -4- EX-99.CODE ETH 3 v01875_code.txt EXHIBIT 99. CODE.ETH THE APPLETON FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND FINANCIAL OFFICERS I. INTRODUCTION The Board of Trustees of The Appleton Funds (the "Trust") has adopted this code of ethics (the "Code") applicable to the Trust's Principal Executive Officers and Principal Financial Officers (the "Covered Officers") to deter wrongdoing and to promote: o honest and ethical conduct, including the ethical handling of conflicts of interest; o full, fair, accurate, timely and understandable disclosure; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting to an appropriate person or persons identified in the Code of violations of the Code; and o accountability for adherence to the Code. II. COVERED OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Covered Officer owes a duty to the Trust to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Covered Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Trust's policies; o observe both the form and spirit of laws and governmental rules and regulations, accounting standards and the Trust's policies; o adhere to a high standard of business ethics; and o place the interests of the Trust before the Covered Officer's own personal interests. All activities of Covered Officers should be guided by and adhere to these fiduciary standards. III. COVERED OFFICERS SHOULD HANDLE ACTUAL AND APPARENT CONFLICTS OF INTEREST ETHICALLY GUIDING PRINCIPLES. A "conflict of interest" occurs when an individual's private interest interferes with the interests of the Trust. A conflict of interest can arise when a Covered Officer takes actions or has interests that may make it difficult to perform the Trust's work objectively and effectively. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Trust. In addition, Covered Officers should be sensitive to situations that create apparent, not actual, conflicts of interest. Service to the Trust should never be subordinated to personal gain and advantage. Certain conflicts of interest covered by this Code arise out of the relationships between Covered Officers and the Trust that already are subject to conflict of interest provisions in the Investment Company Act of 1940 and the Investment Advisers Act of 1940. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trust because of their status as "affiliated persons" of the Trust. Therefore, as to the existing statutory and regulatory prohibitions on individual behavior they will be deemed to be incorporated into this Code and therefore any violations of such prohibitions will also be deemed a violation of the Code. Covered Officers must in all cases comply with applicable statutes and regulations. As to conflicts arising from, or as a result of the contract relationship between, the Trust and Appleton Partners, Inc. (the "Adviser"), the Trust's investment adviser, of which the Covered Officers are also officers or employees, it is recognized by the Board that, subject to the Adviser's fiduciary duties to the Trust, the Covered Officers will in the normal course of their duties (whether formally for the Trust or for the Adviser, or for both) be involved in establishing policies and implementing decisions which will have different effects on the Adviser and the Trusts. The Board recognizes that the participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trust and the Adviser and is consistent with the expectation of the Board of the performance by the Covered Officers of their duties as officers of the Trust. Each Covered Officer must: o avoid conflicts of interest wherever possible; o handle any actual or apparent conflict of interest ethically; o not use his or her personal influence or personal relationships to influence investment decisions or financial reporting by the Trust whereby the Covered Officer would benefit personally to the detriment of the Trust; o not cause the Trust to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trust; o not use knowledge of portfolio transactions made or contemplated for the Trust to profit or cause others to profit, by the market effect of such transactions; o as described in more detail below, discuss any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest with the Trust's Compliance Officer prior to engaging in such transaction or relationship; o report at least annually any affiliations or other relationships related to conflicts of interest that the Trust's Directors and Officers Questionnaire covers; Some conflict of interest situations that should always, be discussed with the Compliance Officer, if material, include the following; o any outside business activity; o service as a director on the board of any public or private company; o the receipt of any gifts in excess of $100; o the receipt of any entertainment from any company with which the Trust has current or prospective business dealings unless such entertainment is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member; o any ownership interest in, or any consulting or employment relationship with, any of the Trust's service providers, other than the Adviser; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trust for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. DISCLOSURE Each Covered Officer is required to be familiar, and comply, with the Trust's disclosure controls and procedures so that the Trust's subject reports and documents filed with the Securities and Exchange Commission (the "SEC") comply in all material respects with the applicable federal securities laws and SEC rules. In addition, each Covered Officer having direct or supervisory authority regarding these SEC filings or the Trust's other public communications should, to the extent appropriate within his or her area of responsibility, consult with other Trust officers and employees and take other appropriate steps regarding these disclosures with the goal of making full, fair, accurate, timely and understandable disclosure. Each Covered Officer must: o familiarize himself or herself with the disclosure requirements applicable to the Trust as well as the business and financial operations of the Trust; and o not knowingly misrepresent, or cause others to misrepresent, facts about the Trust to others, whether within or outside the Trust, including to the Trust's internal auditors, independent directors, independent auditors, and to governmental regulators and self-regulatory organizations. V. COMPLIANCE It is the Trust's policy to comply with all applicable laws and governmental rules and regulations. It is the personal responsibility of each Covered Officer to adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to affiliated transactions, accounting and auditing matters. VI. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon receipt of the Code, sign and submit to the Compliance Officer an acknowledgement stating that he or she has received, read, and understands the Code. o annually thereafter submit a form to the Compliance Officer confirming that he or she has received, read and understands the Code and has complied with the requirements of the Code. o not retaliate against any employee or Covered Officer for reports of potential violations that are made in good faith. o notify the Compliance Officer promptly if he or she becomes aware of any existing or potential violation of this Code. Failure to do so is itself a violation of this Code. Except as described otherwise below, the Compliance Officer is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. The Compliance Officer shall take all action he or she considers appropriate to investigate any actual or potential violations reported to him or her. The Compliance Officer is authorized to consult, as appropriate, with the Audit Committee (the "Committee"), the Independent Trustees, the Board of Trustees and counsel to the Trust and is encouraged to do so. The Committee is responsible for granting waivers and determining sanctions, as appropriate. In addition, approvals, interpretations, or waivers sought by the Covered Officers will be considered by the Committee. The Trust will follow these procedures in investigating and enforcing this Code, and in reporting on the Code: o the Compliance Officer will take all appropriate action to investigate any violations reported to him or her; o violations and potential violations will be reported to the Committee after such investigation; o if the Committee determines that a violation has occurred, it will inform the Board of Trustees who will take all appropriate disciplinary or preventive action; o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities; o the Board will be responsible for granting waivers, as appropriate, to the extent such matters are referred to it by the Committee; and o any changes to or waivers of this Code will, to the extent required, be disclosed on Form N-CSR as provided by SEC rules. VII. OTHER POLICIES AND PROCEDURES The Trust's and the Adviser's codes of ethics under Rule 17j-1 of the Investment Company Act of 1940 are separate requirements applying to Covered Officers and others, and are not part of this Code. VIII. AMENDMENTS This Code may not be amended except in written form, which is specifically approved by a majority vote of the Trust's Board of Trustees, including a majority of Independent Trustees. IX. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the members of the Board of Trustees. X. INTERNAL USE The Code is intended solely for the internal use by the Trust and does not constitute an admission, by or on behalf of the Trust, as to any fact, circumstance, or legal conclusion. Date: June 13, 2003 EXHIBIT A Persons Covered by this Code of Ethics James I. Ladge - President and Treasurer EX-99.CERT 4 v01875_ex99cert.txt EXHIBIT 99.CERT CERTIFICATIONS I, James I. Ladge, certify that: 1. I have reviewed this report on Form N-CSR of The Appleton Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 5, 2004 /s/ James I. Ladge ------------------------------ James I. Ladge, President EXHIBIT 99.CERT CERTIFICATIONS I, James I. Ladge, certify that: 1. I have reviewed this report on Form N-CSR of The Appleton Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 5, 2004 /s/ James I. Ladge ----------------------------- James I. Ladge, Treasurer EX-99.906CERT 5 v01875_ex99906cert.txt EXHIBIT 99.906 CERT CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 James I. Ladge, President, Chief Executive Officer, Treasurer and Chief Financial Officer of the The Appleton Funds (the "Registrant"), certifies to the best of his knowledge that: 1. The Registrant's periodic report on Form N-CSR for the period ended December 31, 2003 (the "Form N-CSR") fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chief Executive Officer Chief Financial Officer The Appleton Funds The Appleton Funds /s/ James I. Ladge /s/ James I. Ladge - --------------------------- ------------------------------ James I. Ladge James I. Ladge Date: March 5, 2004 Date: March 5, 2004 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----