Ameristock Mutual Fund (AMSTX)
Mutual Shareholder Services
1301 East Ninth Street- 36th Floor
Cleveland, OH 44114
(800) 394-5064 http://www.ameristock.com
SEMI-ANNUAL REPORT
December 31, 1998
Welcome, Y2K, The Nifty Fifty Trap
The total return for the Ameristock Mutual Fund was 31.91% for the calendar
year 1998. (Annualized total returns for 3 years was 29.72% and since
inception was 31.31%) This marks the third year in a row Ameristock ended
ahead of over 80% of all the other large-cap funds in our category according
to Morningstar. In addition, Ameristock outperformed the S&P500 by 3.3%
which was up an amazing 28.6% itself.
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 of our Morningstar category will continue.
Welcome
Hello, and welcome to the Ameristock Mutual Fund. Odds are, this is the
first time you have ever received a report from us. You see, we know this
because the last time we sent one out, our assets were about $12 million and we
had around 300 investors. Today we stand at $40 million in assets and over
1,300 investors! A growth rate of over 200% in assets and 300% in investors
in six months!
We would like to thank Money Magazine, Kiplingers, and of course Mutual Funds
Magazine for writing such nice things about Ameristock. They are probably
the reason you invested with us. What they did not tell you about us is that
Ameristock is only successful because we have some of the best people in the
world investing with us... you, and that you realize that by investing you
are assuming some risks and responsibilities.
Risks:
Markets can and do go down. In a 30% bear market our NAV will be about $25.
If you are not prepared to see $25 on your statement OR you think you are
smart enough to recognize when the market is heading down and get out in
time, Ameristock is not for you. Please redeem your shares today.
Responsibilities:
Ameristock invests in the biggest and best blue chip companies for the long
run. Your investment in Ameristock should therefore also be for the long
run (3 to 5 years if not longer). By keeping your money invested at all
times we are able to keep our promise of keeping turnover and capital gains
taxes to a minimum. If you invest today just to withdraw next month because
Ameristock is lagging, then Ameristock is also not for you.
Please redeem your shares today.
Sorry to be so harsh but any mutual fund is really a partnership between the
manager and the shareholders. In large funds the partnership may not seem
like much but is very important in a small fund. It is the reason you can
reach me at anytime (a machine may answer but I will call you back if you
leave a clear phone number). Speaking about calling Ameristock; we have a
new phone system.
When you call the (800) 394-5064 phone number you will be greeted by a machine
that gives you four choices.
#1 Ameristock's Daily Net Asset Value
#2 To request Prospectuses and Applications ONLY. An answering service.
#3 If you have a question about your account, want to establish
automatic investing, or want to redeem shares.
Our transfer agent, Mutual Shareholder Services.
#4 If you have a question about the Fund or have any problems. Me.
Y2K
The year 2000 computer problem and Ameristock's position on it: We have
reviewed our internal computer systems and believe they are in compliance.
We have also asked about our outside vendors systems and have been given
either verbal or written confirmation of compliance. We are not requesting any
special Y2K audits as we believe that this is overkill and would only serve
to push the cost of running the Fund up. In addition, we cannot vouch for,
nor have we requested the readiness of electricity, phones, planes, or any of
the millions of products the companies Ameristock invests in or uses. There
may be a catastrophic event next New Years Day. If you believe this event
may happen, please redeem your shares now before the event. If you are like
us and believe this will turn out to be a non-event, please enjoy the
millenium and save your confirmation statements.
The Nifty Fifty Trap
Back in 1972 the market was being led by fifty of the largest and fastest
growing companies such as Coca-Cola, Xerox, Avon, and Polaroid. It was felt
that because these companies future prospects were so bright that almost any
price could be paid for them because eventually they would grow into the
valuation. Over the next 20 years this theory held true, as we all know.
Unfortunately the bear market of 1973/74 knocked these firms' stock prices
down the hardest and only those people who could afford to wait the full 20
years got any reasonable returns. Now while we are a buy and hold Fund,
even 20 years is a long time.
So that Ameristock does not get caught up in today's nifty fifty stocks (Cisco,
Amazon.com, AOL, Yahoo...). We will be switching from the largest and those
fully valued firms in our universe (companies with a market capitalization of
$15 billion and above) to those smaller and more under appreciated firms still
within our universe. An example of this resolve for 1999 is our selling of
Lucent Technologies (Market Cap- $153 billion, P/E- 158, Div Yield- .2%) and
buying Allstate (Market Cap- $31 billion, P/E- 10, Div Yield- 1.4%).
In the June 1998 Annual Report I recommended that over the course of the
business cycle, your portfolio should be from 20% to 40% in large
capitalization equities like the ones Ameristock invests in and that "Now is
the time to be at 20%". This belief has not changed.
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 and please tell you friends about us.
The Annual Meeting of Shareholders was scheduled for December 12, 1998 for
the purpose of electing Directors. A quorum was not present and therefore
no vote was taken. Consequently, the Directors in office will continue to
serve until their successors are duly elected and qualified.
Nicholas D. Gerber (January 8, 1999)
CHART SHOWING AMERISTOCK VS. S&P500 w/ Divs.
<PAGE>
Ameristock Mutual Fund
Schedule of Investments
December 31, 1998
Unaudited
Market
Industry Company Symbol Shares Value
Automotive 8.32% Ford Motor Co. F 27,310 $1,602,756
General Motors Corp. GM 19,120 $1,368,275
Broadcasting & Entertainment 0.59%
Disney Co. (Walt) DIS 7,070 $212,100
Capital Goods 6.27%
Boeing Co. BA 12,860 $419,558
Caterpillar CAT 30,400 $1,398,400
General Electric GE 4,100 $418,456
Chemicals & Fertilizer 4.79%
Du Pont de Nemours DD 5,700 $302,456
Dow Chemical DOW 15,460 $1,405,894
Consumer Staples 8.73%
Coca- Cola Co. KO 5,280 $353,100
McDonalds Corp. MCD 2,900 $222,213
Philip Morris MO 27,610 $1,477,135
Pepsico PEP 16,860 $690,206
Proctor & Gamble Co. PG 4,100 $374,381
Diversified 3.74% Minnesota Min & Mfg. MMM 18,760 $1,334,305
Electronics 9.29% Hewlett Packard Co. HWP 9,700 $662,631
Intl Bus Machines IBM 9,400 $1,736,650
Intel Corp. INTC 7,740 $917,674
Financial Services 16.60%
Assoc First Cap Corp AFS 16,958 $718,595
Am Intl Group AIG 3,510 $339,154
Bankamerica Corp. BAC 24,577 $1,477,693
CitiGroup C 26,775 $1,325,363
Fannie Mae FNM 21,570 $1,596,180
Merrill Lynch MER 7,000 $467,250
Healthcare (Products) 8.53%
Abbott Labs ABT 15,760 $772,240
American Home Prods AHP 4,000 $225,250
Bristol Myers Squibb BMY 6,620 $885,839
Johnson & Johnson JNJ 2,440 $204,655
Merck & Co. MRK 4,220 $623,241
Pfizer Inc. PFE 2,660 $333,664
Oil & Gas 7.42% Amoco Corp. AN 12,400 $748,650
Chevron CHV 7,300 $605,444
Exxon XON 10,600 $775,125
Texaco TX 9,800 $518,175
Retailing 4.08% Home Depot Inc. HD 7,730 $472,979
Sears Roebuck & Co. S 13,300 $565,250
Wal-Mart Stores WMT 5,150 $419,403
Software 1.30% Microsoft Corp.* MSFT 3,340 $463,216
Telecommunications 13.02%
Ameritech Corp. AIT 17,020 $1,078,643
Bell Atlantic Corp. BEL 13,340 $757,879
Bellsouth Corp. BLS 14,900 $743,138
GTE Corp. GTE 10,070 $679,096
AT& T Corp. T 18,450 $1,388,363
Total Common Stocks: 92.68% (Cost $27,592,083) $33,080,675
Other Assets Less Liabilities 7.32% $2,611,456
Net Assets: 100% Equivalent to $34.91 per share on 1,022,321
Shares of Capital Stock Outstanding $35,692,131
* Non-Income Producing
The accompanying notes are an integral part of the financial statements
<PAGE>
Ameristock Mutual Fund
Statement of Assets and Liabilities
December 31, 1998
Unaudited
Assets:
Investment Securities at Market Value
(Identified Cost- $27,592,083) $33,080,675
Cash $2,589,905
Accounts Receivables
Dividends $54,175
Interest $-
Other $411
Fund Shares Sold $-
Total Assets: $35,725,166
Liabilities:
Accounts Payable
Fund Shares Redeemed $-
Accrued Management Fee $33,035
Total Liabilities: $33,035
Net Assets $35,692,131
Net Assets Consist of:
Capital Paid In $29,174,429
Undistributed Net Investment Income $72,275
Undistributed Net Capital Gain $956,835
Unrealized Appreciation in Value of Investments
Based on Identified Cost- Net $5,488,592
NET ASSETS FOR 1,022,231 SHARES OUSTANDING$35,692,131
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING
PRICE PER SHARE ($35,692,131/ 1,022,321) $34.91
The accompanying notes are an integral
part of the financial statements
<PAGE>
Ameristock Mutual Fund
Statement of Operations
Six Months Ending December 31, 1998
Unaudited
Investment Income:
Dividends $242,307
Interest $11,717
Other $-
Total Investment Income $254,024
Expenses:
Management Fee $111,177
Less Waiver of Management Fee $(411)
Total Expenses $110,766
Net Investment Income $143,258
Realized and Unrealized Gain on Investments
Net Realized Gain (Loss) on Investments $1,089,339
Net Change in Unrealized Appreciation
(Depreciation) on Investments $2,365,072
Net Realized and Unrealized Gain (Loss)
on Investments $3,454,411
Net Increase (Decrease) in Net Assets
Resulting from Operations $3,597,669
The accompanying notes are an integral
part of the financial statements
<PAGE>
Ameristock Mutual Fund
Statement of Changes in Net Assets
Unaudited
July 1, 1998 to July 1, 1997 to
December 31, 1998 June 30, 1998
From Operations:
Net Investment Income $143,258 $122,048
Net Realized Gain (Loss) $1,089,339 $194,468
Net Change in Unrealized Appreciation
(Depreciation) on Investments $2,365,072 $1,871,395
$3,597,669 $2,187,911
Distributions to Shareholders:
Ordinary Income $(140,308) $(115,734)
Capital Gains $(313,250) $(220,489)
$(453,558) $(336,224)
From Capital Share Transactions:
Proceeds from 1,113,328 Shares Issued $36,119,311 $9,665,215
Net Asset Value of 9,036 Shares Issued
from Reinvestment of Dividends $306,145 $246,962
Cost of 505,097 Shares Redeemed $(16,630,739) $(5,654,317)
$19,794,717 $4,257,860
Net Increase in Net Assets $22,938,828 $6,109,548
Net Assets at Beginning of Period $12,753,303 $6,643,755
Net Assets at End of Period (including
Undistributed Net Investment Income
of $145,667 and $69,472 respectively)$35,692,131 $12,753,303
The accompanying notes are an integral
part of the financial statements
<PAGE>
Ameristock Mutual Fund
Financial Highlights
Unaudited
Selected Data for a Share of Common Stock Outstanding Throught the Period
Jul 1/98 to Jul 1/97 to Jul 1/96 to Aug 31/95 to
31-Dec-98 30-Jun-98 30-Jun-97 30-Jun- 96 (1)
Net Asset Value at Begining of Period
$31.48 $25.06 $19.03 $15.00
Net Investment Income $0.21 $0.41 $0.52 $0.43
Net Gains (Losses) on Securities- Realized
and Unrealized $3.66 $7.26 $5.94 $3.78
Total From Investment Ops $35.35 $32.73 $25.49 $19.21
Dividend Distribution
Net Investment Income $(0.22) $(0.42) $(0.39) $(0.18)
Capital Gains $(0.22) $(0.83) $(0.04) $-
Total Distributions $(0.44) $(1.25) $(0.43) $(0.18)
Net Asset Value at End of Period
$34.91 $31.48 $25.06 $19.03
Total Return 24.60%* 30.61% 33.95% 33.70%*
Ratios/ Supplemental Data
Net Assets End of Period (millions)
$35.69 $12.75 $6.64 $2.23
Ratio of Expenses to Average Net Assets
Prior to Reimbursement 1.00%* 0.95% 1.06% 0.90%(1)*
After Reimbursement 0.98%* 0.90% 0.56% 0.00% *
Ratio of Net Income to Average Net Assets
Prior to Reimbursement 1.28%* 1.43% 1.89% 1.47% *
After Reimbursement 1.30%* 1.48% 2.39% 2.90% (1)*
Portfolio Turnover Rate 20.57% 11.85% 21.48% 7.43%
* Annualized
(1) From Inception of Investment Activity (8/31/95)
The accompanying notes are an integral
part of the financial statements
<PAGE>
AMERISTOCK MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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, 1995. 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 $111,177
during the six months ending December 31, 1998. During the Fund's initial
year, the Advisor had paid all Fund expenses.
3.) RELATED PARTY TRANSACTIONS
Certain owners of Ameristock Corporation are also owners and/or directors of
Ameristock Mutual Fund. These individuals may receive benefits from any
management fees paid to the Advisor. 34% of the Fund's stock is controlled
by FTC & Company. 32% of the Fund's stock is controlled by DLJ-Pershing.
21% of the Fund's stock is controlled by National Financial Services Corp.
All of the preceding companies are unrelated to the Fund or Ameristock Corp.
The preceding companies can be deemed as controlling persons.
<PAGE>
AMERISTOCK MUTUAL FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1998
4.) CAPITAL STOCK AND DISTRIBUTION
At December 31, 1998, 100 million shares of capital stock ($.005 par value)
were authorized, and paid-in capital amounted to $29,174,430. Transactions
in common stock were as follows:
Shares sold.............................1,113,328
Shares issued to shareholders in
reinvestment of dividends.................9,036
1,122,364
Shares redeemed..........................(505,097)
Net increase..............................617,267
Shares Outstanding:
Beginning of period.....................405,054
End of period.........................1,022,321
5.) PURCHASES AND SALES OF SECURITIES
During the six months ended December 31, 1998, purchases and sales of investment
securities other than U.S. Government obligations and short-term investments
aggregated $22,259028 and $3,881,251 respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments which have any off-balance sheet
risk as of December 31, 1998.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at
December 31, 1998 was the same as identified cost.
At December 31, 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)
$ 6,029,549 $ (540,957) $ 5,488,592
8 ) DISTRIBUTIONS
During the six months ended December 31, 1998, distributions of $140,308 were
paid from net investment income and $313,250 were paid from realized short
and long term capital gains.
