Ameristock Mutual Fund (AMSTX)
Mutual Shareholder Services
1301 East Ninth Street- 36th Floor
Cleveland, OH 44114
(800) 394-5064 http://www.ameristock.com
ANNUAL REPORT
June 30, 1998
A word of warning, a piece of advice, a word of courage
The Ameristock Mutual Fund has increased by 30.61% since last year's
annual report dated June 30, 1997. For the first six months of this
year your fund is up 17.42%, on par with the S&P500 and ahead of over
80% of all other no-load large-cap funds according to Morningstar.
This marks the third consecutive year that Ameristock has been in the
top fifth of funds in its category.
Now while we cannot say that the returns Ameristock has achieved will
continue, we can promise that the consistent philosophy and consistent
investing style that put us in the top fifth will continue.
A word of warning
"The current P/E ratio: Higher than you think". This quote from the
Federal Reserve June 1998 Monetary Trends bulletin caught my eye
because I had already thought that current P/E's (Price to Earnings
ratio, a way to measure the stock market) were high. To have the St.
Louis Federal Reserve say they were higher than I already thought
they were is disconcerting.
The bulletin said that today's P/E of about 27 (unmatched since 1871
by the way) was high because all the other times the ratio got near
this number was during recessions, which makes intuitive sense. After
all, if the price of stocks like the S&P500 is 1,000 and the per share
earnings is $66.67 then the P/E would be 15 (1,000/66.67). If, during
a recession earnings fall by 25% then the S&P500 earning per share
would be 50 (66.67 * (1-.25)). Therefore, the P/E ratio during a
recession would naturally go higher and be 20 (1,000/50). The four
other times the S&P500 P/E was near today's level were 1894, 1921,
1931, 1991. All recession years.
What is different this time, and disconcerting, is that today we are
at these levels without a recession! The economy is good. One can
only imagine what the P/E will shoot up to if a recession hit. Maybe
this is part of the reason some overseas investors think the US market
is entering bubble valuation levels.
A piece of advice
Unfortunately, just because the market is at historically high valuation
levels doesn't mean it can't go higher. Maybe this time, things are
different. Maybe they're not. In either case, you should not have to
worry about the overall direction of the market if you are properly diversified.
Over the course of the business cycle your portfolio should be from 40%
to 20% in large capitalization domestic equities. NOW IS THE TIME TO BE AT 20%.
A word of courage
Do not sell. If you are overweighed in domestic equities put new money in
international equities, bonds, real estate, or stamps but do not sell.
Courage. The market, Ameristock, and your money may go down by 30% at any
time. Such is the nature of the stock market. If you sell, you may save
30% of your money ($3,000 on a $10,000 investment), you may also miss the
next 1,100% move ($101,000 on a $10,000 investment). Which is more
important to you in the long run, $3,000 now or $101,000 later?
Ameristock celebrates its third birthday in August. I celebrate my 36th
the same month. Hopefully, I'll be managing Ameristock until I retire
in 30 years. I expect the Dow to be over 75,000 at that time, a lifetime
return of 1,100%. This projection is premised on two conservative
assumptions, 1) the market goes down 30% from 9,000 to 6,000, 2) once it
hits 6,000 it grows at 9% annually over the next 30 years (over the last
30 years it grew by about 12% annually).
So, chin up, gut in, blinders on, forward ho! Let not the slings and
arrows of "expert" opinions discourage you from your long term goals.
In other news. The past year has seen an increase in assets of 92%!
Ameristock has grown from $6.6 million last year to over $12.7 million
today. This was accomplished with only an 11.9% turnover ratio (down
from 21.5% last year) and an average brokerage commission of one half
cent per share paid vs. 2.9 cents last year. An estimated savings of
over $20,000. What this means is that our goals of keeping total Fund
expenses and realized capital gains to a minimum are being met. Both
of these numbers are well below industry averages.
The new transfer agent (Mutual Shareholder Services) is working out well.
Please call if you have any questions or comments about them.
The next distribution is scheduled for about December 20th. Please
send back your vote for Directors for the coming year.
Ameristock is a no-load, value based, domestic, equity-income fund
that invests in large capitalization companies. Thank you for investing
in the Ameristock Mutual Fund, please tell you friends about us. Have
a great rest of 1998.
Nicholas D. Gerber (July 2, 1998)
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Ameristock Mutual Fund
Schedule of Investments
June 30, 1998
Market
Industry Company Shares Value
Automotive 10.49% Chrysler 8,000 $451,000
Ford Motor Co. 6,410 $378,190
General Motors Corp. 7,620 $509,111
Broadcasting &
Entertainment 0.32% Disney Co. (Walt) 390 $41,145
Capital Goods 6.61% Boeing Co. 5,960 $265,593
Caterpillar 8,500 $449,703
General Electric 1,400 $127,225
Chemicals & Fertilizer 6.34%
Du Pont de Nemours 5,700 $425,719
Dow Chemical 3,960 $382,883
Consumer Staples 8.53% Eastman Kodak Co. 10 $731
Coca- Cola Co. 2,280 $194,940
McDonalds Corp. 2,900 $200,100
Philip Morris 12,110 $476,831
Pepsico 2,360 $97,203
Proctor & Gamble Co. 1,300 $118,381
Diversified 3.20% Minn. Mining & Mfg. 4,960 $407,650
Electronics 10.36% Hewlett Packard Co. 4,400 $263,450
IBM 3,600 $413,325
Intel Corp. 6,640 $492,190
Lucent 1,826 $152,015
Financial Services 8.65% Assoc First Capital 1,679 $129,178
Am Intl Group 740 $108,040
Bankamerica Corp. 1,740 $150,510
Citicorp. 1,050 $156,713
Fannie May 5,970 $367,155
Travelers Group 3,150 $190,969
Healthcare (Products) 10.64%
Abbott Labs 10,760 $441,160
Am Home Products 4,000 $207,000
Bristol Myers Squibb 1,620 $186,199
Johnson & Johnson 2,440 $180,560
Merck & Co. 2,020 $270,175
Pfizer Inc. 660 $71,610
Oil & Gas 7.02% Amoco Corp. 4,100 $171,175
Chevron 2,100 $175,875
Exxon 2,500 $178,438
Texaco 6,200 $370,063
Retailing 2.93% Home Depot Inc. 1,315 $109,227
Sears Roebuck & Co. 2,500 $152,656
Wal-Mart Stores 1,850 $112,041
Software 0.88% Microsoft Corp.* 1,040 $112,710
Telecommunications 12.23%Ameritech Corp. 7,220 $323,998
Bell Atlantic Corp. 8,040 $366,825
Bellsouth Corp. 2,950 $198,019
GTE Corp. 6,470 $359,894
AT& T Corp. 5,450 $311,326
Total Common Stocks: 88.20% (Cost $8,125,528) $11,248,901
Total Investments $11,248,901
Other Assets Less Liabilities 11.80% $1,504,402
Net Assets: 100% Equivalent to $31.48 per share on 405,054
Shares of Capital Stock Outstanding $12,753,303
* Non-Income Producing
The accompanying notes are an integral part of the financial statements
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Ameristock Mutual Fund
Statement of Assets and Liabilities
June 30, 1998
Assets:
Investment Securities at Market Value
(Identified Cost- $8,125,528) $11,248,901
Cash $2,031,197
Accounts Receivables
Dividends $16,005
Interest $286
Other $157
Fund Shares Sold $136,843
Total Assets: $13,433,389
Liabilities:
Accounts Payable
Fund Shares Redeemed $670,848
Accrued Management Fee $9,238
Total Liabilities: $680,086
Net Assets $12,753,303
Net Assets Consist of:
Capital Paid In $9,379,713
Undistributed Net Investment Income $69,472
Undistributed Net Capital Gain $180,745
Unrealized Appreciation in Value of
Investments Based on Identified
Cost- Net $3,123,373
NET ASSETS FOR 405,054 SHARES
OUSTANDING $12,753,303
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE ($12,753,303/ 405,054) $31.48
The accompanying notes are an integral part of the financial statements
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Ameristock Mutual Fund
Statement of Operations
Year Ended June 30, 1998
Investment Income:
Dividends $154,697
Interest $40,788
Other $727
Total Investment Income $196,212
Expenses:
Management Fee $78,373
Less Waiver of Management Fee $(4,209)
Total Expenses $74,164
Net Investment Income $122,048
Realized and Unrealized Gain on Investments
Net Realized Gain (Loss) on Investments $194,468
Net Change in Unrealized Appreciation
(Depreciation) on Investments $1,871,395
Net Realized and Unrealized Gain (Loss)
on Investments $2,065,863
Net Increase (Decrease) in Net Assets
Resulting from Operations $2,187,911
The accompanying notes are an integral part of the financial statements
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Ameristock Mutual Fund
Statement of Changes in Net Assets
July 1, 1997 to July 1, 1996 to
June 30, 1998 June 30, 1997
From Operations:
Net Investment Income $122,048 $103,474
Net Realized Gain (Loss) $194,468 $206,443
Net Change in Unrealized Appreciation
(Depreciation) on Investments $1,871,395 $1,084,082
$2,187,911 $1,393,999
Distributions to Shareholders:
Net Investment Income $(115,734) $(64,943)
Capital Gains $(220,489) $(4,632)
$(336,224) $(69,575)
From Capital Share Transactions:
Proceeds from 337,361 Shares Issued $9,665,215 $7,303,484
Net Asset Value of 9,726 Shares Issued
from Reinvestment of Dividends $246,962 $59,550
Cost of 207,045 Shares Redeemed $(5,654,316) $(4,270,981)
$4,257,861 $3,092,053
Net Increase in Net Assets $6,109,548 $4,416,477
Net Assets at Beginning of Period $6,643,755 $2,227,278
Net Assets at End of Period (including
Undistributed Net Investment Income
of $69,472 and $63,158 respectively)$12,753,303 $6,643,755
The accompanying notes are an integral part of the financial statements
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Ameristock Mutual Fund
Financial Highlights
Selected Data for a Share of Common Stock Outstanding Throughtout the Period
July 1/97 to July 1/96 to August 31/95 to
June 30/98 June 30/97 June 30/96 (1)
Net Asset Value at
Beginning of Period $25.06 $19.03 $15.00
Net Investment Income $0.41 $0.52 $0.43
Net Gains (Losses) on Securities- Realized
and Unrealized $7.26 $5.94 $3.78
Total From Investment Operations $32.73 $25.49 $19.21
Dividend Distribution
Net Investment Income $(0.42) $(0.39) $(0.18)
Capital Gains $(0.83) $(0.04) $ -
Total Distributions $(1.25) $(0.43) $(0.18)
Net Asset Value at End of Period $31.48 $25.06 $19.03
Total Return 30.61% 33.95% 33.70%*
Ratios/ Supplemental Data
Net Assets End of Period (mill) $12.75 $6.64 $2.23
Ratio of Expenses to Average Net Assets
Prior to Reimbursement 0.95% 1.06% 0.90%
After Reimbursement 0.90% 0.56% 0.00%
Ratio of Net Income to Average Net Assets
Prior to Reimbursement 1.43% 1.89% 1.47%
After Reimbursement 1.48% 2.39% 2.90%
Portfolio Turnover Rate 11.85% 21.48% 7.43%
Average Commission Rate (2) $0.0051 $0.0293
* Annualized
(1) From Inception of Investment Activity (8/31/95)
(2) Required by regulations issued in 1995.
The accompanying notes are an integral part of the financial statements
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AMERISTOCK MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
1.) SIGNIFICANT ACCOUNTING POLICIES
The Fund is a diversified, open-end management investment company,
organized as a corporation under the laws of the State of Maryland
on June 15, 1996. The Fund's investment objective is to seek total
return through capital appreciation and current income by investing
(under normal market conditions) at least 80% of the value of its
total assets in equity securities consisting of common stocks. The
authorized capital stock of the Fund consists of 100 million shares
of common stock, par value $.005 per share. Significant accounting
policies of the Fund are presented below:
SECURITY VALUATION:
Investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which
the valuation is made or, in the absence of sales, at the closing bid
price. Over-the-counter securities will be valued on the basis of the
bid price at the close of each business day. Short-term investments are
valued at amortized cost, which approximates market. The cost of
securities sold is determined on the identified cost basis. Securities
for which market quotations are not readily available will be valued at
fair value as determined in good faith pursuant to procedures established
by the Board of Directors. Security transactions are recorded on the
dates transactions are entered into (the trade dates). Dividend income
and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded as earned. The Fund uses the identified
cost basis in computing gain or loss on sale of investment securities.
Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements
of the Internal Revenue Service. This Internal Revenue Service requirement
may cause an excess of distributions over the book year-end accumulated
income. In addition, it is the Fund's policy to distribute annually,
after the end of the fiscal year, any remaining net investment income
and net realized capital gains.
ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities
at the date of financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2.) INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration
agreement with Ameristock Corporation. The Investment Advisor receives
from the Fund as compensation for its services to the Fund an annual fee of
1% of the Fund's net assets. The Investment Advisor has obligated itself
to reimburse the Fund to the extent the Fund's total annual expenses excluding
taxes, interest, brokerage commissions and extraordinary litigation expenses
exceed 1% of its average daily net asset value. The advisor received
management fees of $65,600 during the fiscal year ending June 30, 1998.
During the Fund's initial year, the Advisor had payed all Fund expenses.
3.) RELATED PARTY TRANSACTIONS
Certain owners of Ameristock Corporation are also owners and/or directors
of Ameristock Mutual Fund. These individuals may receive benefits from any
management fees paid to the Advisor. 45% of the Fund's stock is controlled
by FTC & Company. 24% of the Fund's stock is controlled by DLJ-Pershing.
14% of the Fund's stock is controlled by National Financial Services Corp.
All of the preceding companies are unrelated to the Fund or Ameristock Corp.
The preceding companies can be deemed as controlling persons.
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AMERISTOCK MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
JUNE 30, 1998
4.) CAPITAL STOCK AND DISTRIBUTION
At June 30, 1998, 100 million shares of capital stock ($.005 par value)
were authorized, and paid-in capital amounted to $9,379,713. Transactions
in common stock were as follows:
Shares sold............................. 337,361
Shares issued to shareholders in
reinvestment of dividends............. 9,726
347,087
Shares redeemed........................ (207,045)
Net increase........................... 140,042
Shares Outstanding:
Beginning of period.................. 265,012
End of period........................ 405,054
5.) PURCHASES AND SALES OF SECURITIES
During the year ended June 30, 1998, purchases and sales of investment
securities other than U.S. Government obligations and short-term
investments aggregated $4,135,504 and $879,625 respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance
sheet risk as of June 30, 1998.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at
June 30, 1998 was the same as identified cost.
At June 30, 1998, the composition of unrealized appreciation (the excess
of value over tax cost) and depreciation (the excess of tax cost over value)
was as follows:
Net Appreciation
Appreciation (Depreciation) (Depreciation)
$ 3,211,396 $(88,023) $ 3,123,373
8 ) DISTRIBUTIONS
During the fiscal year ended June 30, 1998, distributions of $0.42
aggregating $115,734 were declared from net investment income; $0.48
aggregating $126,781 were declared from short term capital gains; and
$0.35 aggregating $93,708 were declared from long term capital gains.
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