THE MAXIM CONTRARIAN FUND
PROSPECTUS December 24, 1996
23775 Commerce Park Road
Cleveland, Ohio 44122
For Information, Shareholder Services and Requests:
Call toll free: 888-81-MAXIM
(888-816-2946)
Local: 216-514-5151
The MAXIM Contrarian Fund (the "Fund") is a no-load mutual fund whose
investment objective is to provide maximum long term growth. The Fund seeks to
achieve its objective by aggressively investing world-wide in securities of
growing companies which its Advisor, Newport Investment Advisors, Inc. believes
are attractively priced and offer investment value.
The Fund is "no-load," which means there are no sales charges or
commissions. The Fund is one of the mutual funds comprising AmeriPrime Funds, an
open-end management investment company, and is distributed by AmeriPrime
Financial Securities, Inc.
This Prospectus provides the information a prospective investor ought to
know before investing and should be retained for future reference. A Statement
of Additional Information dated December 24, 1996, which has been filed with
the Securities and Exchange (the "SEC"), is incorporated herein by reference
and can be obtained without charge by calling the Fund at the phone number
listed above. The SEC maintains a Web Site (http://www.sec.gov) that contains
the Statement of Additional Information, material incorporated by reference,
and other information regarding registrants that file electronically with
the SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding the
direct and indirect expenses that an investor may incur as a shareholder in the
Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
The Example should not be considered a representation of future Fund performance
or expenses, both of which may vary.
Shareholders should be aware that the Fund is a no-load fund and,
accordingly, a shareholder does not pay any sales charge or commission upon
purchase or redemption of shares of the Fund. Unlike most other mutual funds,
the Fund does not pay directly for transfer agency, pricing, custodial, auditing
or legal services, nor does it pay directly any general administrative or other
significant operating expenses (except for 12b-1 fees). The Advisor pays all of
the operating expenses of the Fund except 12b-1 fees, brokerage, taxes,
interest, fees and expenses of non- interested person trustees and extraordinary
expenses.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases . . . . . . . . . . . . . . . . . NONE
Sales Load Imposed on Reinvested Dividends. . . . . . . . . . . . NONE
Deferred Sales Load . . . . . . . . . . . . . . . . . . . . . . . NONE
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . 2.50%
12b-1 Fees1 . . . . . . . . . . . . . . . . . . . . . . . . . . .0.25%
Other Expenses2 . . . . . . . . . . . . . . . . . . . . . . . . .0.00%
Total Fund Operating Expenses . . . . . . . . . . . . . . . . . .2.75%
1 The Fund incurs 12b-1 fees of .25% of average net assets. Long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales loads permitted by the National Association of Securities Dealers.
2 The Fund estimates that other expenses (fees and expenses of the trustees who
are not "interested persons" as defined in the Investment Company Act) will be
.00032 of 1% of average net assets for the current fiscal year.
The tables above are provided to assist an investor in understanding the direct
and indirect expenses that an investor may incur as a shareholder in the Fund.
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Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
1 Year 3 Years
$25 $78
THE FUND
The MAXIM Contrarian Fund (the "Fund") was organized as a non-diversified
series of AmeriPrime Funds, an Ohio business trust (the "Trust"), on December
26, 1995, and commenced operations on May 2, 1996. This prospectus offers shares
of the Fund and each share represents an undivided, proportionate interest in
the Fund. The investment advisor to the Fund is Newport Investment Advisors,
Inc. (the "Advisor").
FINANCIAL HIGHLIGHTS
The following condensed supplementary financial information for the period
from May 2, 1996 (commencement of operations) through October 31, 1996, is
derived from the audited financial statements of the Fund. The financial
statements of the Fund have been audited by McCurdy & Associates CPA's, Inc.,
independent public accountants, and are included in the Statement of Additional
Information. The Fund's Annual Report contains additional performance
information and will be made available upon request and without charge.
<TABLE>
<CAPTION>
MAXIM CONTRARIAN FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
from May 2, 1996 (Commencement of Operations)
through October 31, 1996
<S> <C>
Net asset value- beginning of period........................... $10.00
-------
Income from investment operations:
Net investment income/(loss)................................. (.05)
Net gain/(loss) on investments both realized and unrealized.. (.74)
--------
Total from investment operations............................... (.79)
--------
Less distributions:
Dividends from net investment income........................... 0
Dividends from capital gains................................... 0
-------
Net asset value- end of period................................. $ 9.21
=====
Total Return**................................................. (15.80)%
Ratios/Supplemental data:
Net assets, end of period (in 000's)........................... 1,508
Ratio of expenses to average net assets**...................... 2.89%
Ratio of net investment income to average net assets**......... (1.16)%
Portfolio turnover rate........................................ . 92%
Average Commission rate paid.................................... .0497
<FN>
** Annualized
</FN>
</TABLE>
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Fund is to provide maximum long term
growth. The Fund seeks to achieve its objective by aggressively investing
world-wide in securities of growing companies which the Advisor believes are
attractively priced and offer investment value. Unlike many mutual funds with
this investment objective, the Fund will attempt to achieve its investment
objective in declining equity markets as well as in rising equity markets. The
Fund's aggressive investment approach may be appropriate for investors who seek
potentially high long term returns and are willing to accept the risks inherent
in that approach, including potentially significant fluctuations in the Fund's
share price.
The Fund focuses its investments primarily on equity securities of
domestic, multinational and foreign companies whose potential values generally
are not recognized by the investing public. Such companies include viable
businesses that have been overlooked by other investors, or that are unpopular
as a result of actual or anticipated unfavorable developments or other factors
affecting the companies, their industries or markets in general. The Advisor may
choose smaller companies that it believes offer significant investment value,
even if they involve more risk. Dividend and interest income received from
portfolio securities is not a significant consideration.
The Advisor generally intends to stay fully invested (subject to liquidity
requirements and defensive purposes) in equity and debt securities of U.S. and
foreign companies. The Fund may invest in debt securities of all types and
qualities, including lower quality securities with more
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risk. The Fund may also pursue investment opportunities by investing in indexed
securities, options, futures contracts and precious metals, and by using other
aggressive investment techniques involving leverage and other risks. In
selecting securities for inclusion in the Fund's portfolio, the Advisor may
analyze issuers of all sizes, industries, and geographical markets, including
restricted securities of companies issued in private placements.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, the Fund cannot give any assurance that its investment objective
will be achieved. In addition, the aggressive investment techniques of the Fund
may entail risks not encountered by the average mutual fund. See "Investment
Policies, Techniques and Risk Considerations" for a more detailed discussion of
the Fund's investment practices. Investors should also be aware that the Advisor
has no prior experience in acting as an investment adviser to a mutual fund and
that the Fund has no operating history.
HOW TO INVEST IN THE FUND
Shares of the Fund are sold on a continuous basis, and you may invest any
amount you choose, as often as you wish, subject to a minimum initial investment
of $2,500 ($1,000 for IRA retirement accounts) and minimum subsequent
investments of $500 ($100 for IRA retirement accounts).
Initial Purchase
By Mail - You may purchase shares of the Fund by completing and signing the
investment application form which accompanies this Prospectus and mailing it, in
proper form, together with a check (subject to the above minimum amounts) made
payable to The MAXIM Contrarian Fund, and sent by mail or overnight delivery to:
The MAXIM Contrarian Fund
c/o American Data Services, Inc.
24 W. Carver Street, 2nd Floor
Huntington, New York 11743
Your purchase of shares of the Fund will be effected at the next share price
calculated after receipt of your investment.
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. If money is to be
wired, you must call the Transfer Agent at 516-385-9580 to set up your account
and obtain an account number. You should be prepared at that time to provide the
information on the application. Then, you should provide your bank with the
following information for purposes of wiring your investment:
Star Bank, N.A. Cinti/Trust
ABA #0420-0001-3
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Attn: The MAXIM Contrarian Fund Master Account
D.D.A. # 485772974
Account Name _________________ (write in shareholder name)
For the Account # ______________ (write in account number)
You are required to mail a signed application to the Custodian 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 right to charge shareholders for
this service is reserved by the Fund.
Additional Investments
You may purchase additional shares of the Fund at any time (subject to
minimum investment requirements) 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), and the name of the Fund. Checks should be
made payable to The MAXIM Contrarian Fund and should be sent to 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, shares of the Fund
may be an appropriate investment medium for tax sheltered retirement plans,
including: individual retirement accounts (IRAs); simplified employee pensions
(SEPs); 401(k) plans; qualified corporate pension and profit sharing plans (for
employees); 403(b)(7) tax deferred retirement 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. Consultation with an attorney or tax
adviser regarding these plans is advisable. Custodial fees for an IRA will be
paid by the shareholder by redemption of sufficient shares of the Fund from the
IRA unless the fees are paid directly to the IRA custodian. You can obtain
information about the IRA custodial fees from the Transfer Agent.
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Other Purchase Information
Dividends begin to accrue after you become a shareholder. 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. The rights to limit the amount of purchases and to refuse to sell
to any person are reserved by the Fund. 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.
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HOW TO REDEEM SHARES
All redemptions will be made at the net asset value determined after the
redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption 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. Presently there is no charge for wire
redemptions; however, the Fund reserves the right to charge for this service.
Any charges for wire redemptions will be deducted from the shareholder's Fund
account by redemption of shares.
By Mail - You may redeem any part of your account in the Fund at no charge
by mail. Your request should be addressed to:
The MAXIM Contrarian Fund
c/o American Data Services, Inc.
24 W. Carver Street
Huntington, New York 11743
"Proper order" means 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. For all redemptions, the Fund
requires that signatures be guaranteed by a bank or member firm of a national
securities exchange. Signature guarantees are for the protection of
shareholders. At the discretion of the Fund or American Data Services, Inc., 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 in the Fund by
calling the Transfer Agent at (516) 385-9580. 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 that they reasonably believe 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 telephone redemption and exchange procedures may be terminated at any
time by the Fund or the Transfer Agent. 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 (516) 385-9580. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the
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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 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 reserves the right to require any shareholder to redeem all
of his or her shares in the Fund on 30 days' written notice if the value of his
or her shares in the Fund is less than $1,000 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 adviser concerning
the tax consequences of involuntary redemptions. A shareholder may increase the
value of his or her shares in the Fund to the minimum amount within the 30 day
period. Each share of the Fund 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 shareholders of the Fund.
After the initial three months of the Fund's operations, any account opened
during the initial three month period will be subject to the redemption
provisions described above.
SHARE PRICE CALCULATION
The value of an individual share in the Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding, rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day the Fund is open for business on which there
is sufficient trading in the Fund's securities to materially affect the net
asset value. The net asset value per share of the Fund will fluctuate.
Securities which 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, 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. 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
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within 60 days of maturity, are valued by using the amortized cost method of
valuation, which the Board has determined will represent fair value.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on an annual basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends and/or
capital gain distributions may be made in the application to purchase shares or
by separate written notice to the Transfer Agent. Shareholders will receive a
confirmation statement reflecting the payment and reinvestment of dividends and
summarizing all other transactions. If cash payment is requested, a check
normally will be mailed within five business days after the payable date. If you
withdraw your entire account, all dividends accrued to the time of withdrawal,
including the day of withdrawal, will be paid at that time. You may elect to
have distributions on shares held in IRAs and 403(b) plans paid in cash only if
you are 59 1/2 years old or permanently and totally disabled or if you otherwise
qualify under the applicable plan.
TAXES
The Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended. By so qualifying, the Fund
will not be subject to federal income taxes to the extent that it distributes
substantially all of its net investment income and any realized capital gains.
For federal income tax purposes, dividends paid by the Fund from ordinary
income are taxable to shareholders as ordinary income, but may be eligible in
part for the dividends received deduction for corporations. Pursuant to the Tax
Reform Act of 1986 (the "Tax Reform Act"), all distributions of net short term
capital gains to individuals are taxed at the same rate as ordinary income. All
distributions of net capital gains to corporations are taxed at regular
corporate rates. Any distributions designated as being made from net realized
long term capital gains are taxable to shareholders as long term capital gains
regardless of the holding period of the shareholder.
The Fund will mail to each shareholder after the close of the calendar year
a statement setting forth the federal income tax status of distributions made
during the year. Dividends and capital gains distributions may also be subject
to state and local taxes. Shareholders are urged to consult their own tax
advisers regarding specific questions as to federal, state or local taxes and
the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, the Fund will request the
shareholder's certified taxpayer identification number (social security number
for individuals) and a certification that the shareholder is not subject to
backup withholding. Unless the shareholder provides this information, the Fund
will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Fund may be
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fined $50 annually for each account for which a certified taxpayer
identification number is not provided. In the event that such a fine is imposed
with respect to a specific account in any year, the Fund may make a
corresponding charge against the account.
OPERATION OF THE FUND
The Fund is a non-diversified series of AmeriPrime Funds, an open-end
management investment company organized as an Ohio business trust on August 8,
1995. The Board of Trustees supervises the business activities of the Fund. Like
other mutual funds, the Fund retains various organizations to perform
specialized services.
The Fund retains Newport Investment Advisors, Inc., 23775 Commerce Park
Road, Cleveland, Ohio 44122 (the "Advisor") to manage the Fund's investments.
The Advisor, an Ohio corporation, provides investment management services to
taxable and tax-exempt clients, and currently manages approximately $250
million in assets. Kenneth M. Holeski, controlling shareholder of the Advisor,
has served as the President of the Advisor since its founding in 1989. He is
primarily responsible for the day-to-day management of the portfolio of the
Fund. Prior to 1996, Mr. Holeski was also the Vice President of Newport
Evaluation Services, Inc., a consulting firm that primarily monitors the
performance of money managers on behalf of retirement funds.
The Fund is authorized to pay the Advisor a fee equal to an annual average
rate of 2.50% of its average daily net assets. The Advisor pays all of the
operating expenses of the Fund except 12b-1 fees, brokerage, taxes, interest,
fees and expenses of non-interested person trustees and extraordinary expenses.
It should be noted that most mutual funds pay their own operating expenses
directly, while the Fund's expenses, except those specified above, are paid by
the Advisor. The 12b-1 fees paid by the Fund are described below under
"Distribution Plan."
The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator")
to manage the Fund's business affairs and provide the Fund with administrative
services, including all regulatory reporting and necessary office equipment,
personnel and facilities. The Administrator receives a monthly fee from the
Advisor equal to an annual average rate of 0.10% of the Fund's average daily net
assets up to fifty million dollars, 0.075% of the Fund's average daily net
assets from fifty to one hundred million dollars and 0.050% of the Fund's
average daily net assets over one hundred million dollars (subject to a minimum
annual payment of $30,000). The Fund retains American Data Services, Inc., 24
West Carver Street, Huntington, New York 11743 (the "Transfer Agent") to serve
as transfer agent, dividend paying agent and shareholder service agent. The
Trust retains AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite
200, Southlake, Texas 76092 (the "Distributor") to act as the principal
distributor of the Fund's shares. Kenneth D. Trumpfheller, officer and sole
shareholder of the Administrator and the Distributor, is an officer and trustee
of the Trust. The services of the Administrator, Transfer Agent and Distributor
are operating expenses paid by the Advisor.
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
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consideration to sales of shares of the Fund as a factor in the selection of
brokers and dealers to execute portfolio transactions. WRP Investments, Inc.,
a registered broker dealer of which Mr. Holeski is a registered representative
and branch manager, may receive brokerage commissions from the Fund on a basis
comparable to trades placed with unaffiliated broker dealers. Mr. Holeski does
not receive compensation on these trades.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan") under which the Fund pays the
Advisor an amount which is accrued daily and paid monthly, at an annual rate of
0.25% of the average daily net assets of the Fund. Amounts are paid at that rate
regardless of actual distribution expenses incurred. Amounts paid under the Plan
by the Fund are in addition to the advisory fee described above and are paid to
the Advisor for services it provides and the expenses it bears in the
distribution of the Fund's shares, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to prospective investors; and preparation,
printing and distribution of sales literature and advertising materials. In
addition, payments to the Advisor under the Plan may reimburse the Advisor for
payments it makes to selected dealers and administrators which have entered into
Service Agreements with the Advisor for services provided to shareholders of the
Fund. The services provided by selected dealers pursuant to the Plan are
primarily designed to promote the sale of shares of the Fund and include the
furnishing of office space and equipment, telephone facilities, personnel and
assistance to the Fund in servicing such shareholders. The service provided by
administrators pursuant to the Plan are designed to provide support services to
the Fund and include establishing and maintaining shareholders' accounts and
records, processing purchase and redemption transactions, answering routine
client inquiries regarding the Fund, and providing such other services to the
Fund as the Fund may reasonably request. The Advisor may also compensate such
dealers and administrators out of its own assets.
INVESTMENT POLICIES, TECHNIQUES AND RISK CONSIDERATIONS
The Fund may invest in the following portfolio securities, may engage in
the following practices and will be subject to the following risks and
limitations:
Equity Securities. The Fund emphasizes investments in common stocks, which
represent an equity (ownership) interest in a corporation. The Fund also may buy
securities such as convertible debt, preferred stock, warrants, or other
securities exchangeable for shares of common stock, and publicly-traded
partnership interests. In selecting equity investments for the Fund, the Advisor
considers the fundamental value of the issuing company as well as market and
economic factors that affect securities prices.
Debt Securities. The Fund may invest up to 35% of its assets in debt
securities, including lower quality, high yielding debt securities if it
believes that doing so will result in capital appreciation or will earn income
on idle cash. The Fund may buy debt securities of all types and qualities issued
by both domestic and foreign issuers, including government securities, corporate
bonds and debentures, commercial paper, and certificates of deposit.
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
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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.
Foreign Securities. Foreign debt and equity securities, and securities
denominated in or indexed to foreign currencies may be affected by the strength
of those currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. These developments could include restrictions
on foreign currency transactions and rules of exchange, or changes in
administrations or monetary policies of foreign governments. Foreign securities
purchased using foreign currencies may incur currency conversion costs. Foreign
issuers and brokers may not be subject to accounting standards or governmental
supervision comparable to U.S. issuers and brokers, and there may be less public
information about their operations. In addition, foreign markets may be less
liquid or more volatile than U.S. markets, and may offer less protection to
investors.
The Fund may enter into forward contracts (agreements to exchange one
currency for another at a future date) to manage currency risks and to
facilitate transactions in foreign securities. Although currency forward
contracts can be used to protect the Fund from adverse exchange rate changes,
the Fund may incur a loss if the Advisor incorrectly predicts foreign currency
values.
There is no limitation on the amount of the Fund's assets that may be
invested in foreign securities or in any one country or currency, except that no
more than 35% of the Fund's assets may be invested in companies operating
exclusively in one foreign country.
Indexed Securities. The Fund may invest in indexed securities whose value
is linked to currencies, interest rates, commodities, indices, or other
financial indicators (the "reference index"). Most indexed securities are short
to intermediate term fixed-income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be positively or negatively
indexed (i.e., their value may increase or decrease if the underlying instrument
appreciates), and may have return characteristics similar to direct investments
in the underlying instrument or to one or more options on the underlying
instrument. Indexed securities may be more volatile than the underlying
instrument itself. Because their performance is tied to a reference index, a
fund investing in indexed securities bears the risk of changes in the reference
index in addition to being exposed to the credit risk of the issuer of the
security.
Repurchase Agreements. In a repurchase agreement, the Fund buys a security
at one price and simultaneously agrees to sell it back later at a higher price.
The repurchase date is usually within seven days of the original purchase. If
the other party to a repurchase agreement becomes bankrupt or otherwise defaults
on its obligation to repurchase the security, the Fund may experience delays in
recovering its cash. To the extent that the value of the security purchased has
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<PAGE>
decreased in the meantime, the Fund could experience a loss. The Fund's
repurchase agreements are fully collateralized.
When Issued Securities and Forward Commitments. The Fund may buy and sell
securities on a when-issued or delayed delivery basis, with payment and delivery
taking place at a future date. The price and interest rate that will be received
on the securities are each fixed at the time the buyer enters into the
commitment. The Fund may enter into such forward commitments if it holds, and
maintains until the settlement date in a separate account at the Fund's
Custodian, cash or U.S. government securities in an amount sufficient to meet
the purchase price. Forward commitments involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date. Any change
in value could increase fluctuations in the Fund's share price and yield.
Although the Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to the settlement if the Advisor deems it appropriate to do so.
Borrowing and Leverage; Reverse Repurchase Agreements. The Fund may borrow
from banks up to one third of its total assets, and the Fund may pledge assets
in connection with such borrowings. The Fund also may engage in reverse
repurchase agreements in which the Fund sells a security to another party, such
as a bank, broker-dealer or other financial institution, and simultaneously
agrees to buy it back later at a higher price. While a reverse repurchase
agreement is outstanding, the Fund generally will direct its custodian to
segregate cash and appropriate liquid assets to cover its obligations under the
agreement. The Fund will enter into reverse repurchase agreements only with
parties whose creditworthiness has been reviewed and deemed satisfactory by the
Advisor. Except for reverse repurchase agreements that it fully collateralizes,
the Fund aggregates reverse repurchase agreements with its bank borrowings for
purposes of limiting borrowings to one third of its total assets.
If the Fund makes additional investments while borrowings are outstanding,
this may be construed as a form of leverage. The Fund's objective would be to
pursue investment opportunities with yields that exceed the cost of the
borrowings. This leverage may exaggerate changes in the Fund's share value and
the gains and losses on the Fund's investment. Leverage also creates interest
expenses that may exceed the return on investments made with the borrowings.
Lending. The Fund may lend securities to broker-dealers and other
institutions as a means of earning additional income. 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 at least equal to 100% of the
current market 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 when the
Board of Trustees determines voting to be in the Fund's interest. If the
borrower becomes bankrupt or otherwise defaults on its obligations, the Fund
could experience delays in recovering its securities. To the extent that, in the
meantime, the value of securities loaned had increased, the Fund could
experience a loss if the borrower had not maintained sufficient collateral.
Loans, in the aggregate, may not exceed one third of the Fund's total assets.
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<PAGE>
Short Sales. If the Fund anticipates that the price of a security will
decline, it may sell the security short. When the Fund engages in a short sale,
it sells a security it does not own and, to complete the sale, borrows the same
security from a broker or other institution. The Fund must replace the borrowed
security by purchasing it at the market price at the time the Fund chooses to
close the short sale, or at the time it is required to do so by the lender,
whichever is earlier. The Fund may make a profit or loss depending upon whether
the market price of the security decreases or increases between the date of the
short sale and the date on which the Fund must replace the borrowed security.
In connection with its short sales, the Fund will be required to maintain a
segregated account with its custodian of cash or U.S. Government Securities or
other high grade liquid debt securities equal to the market value of the
securities sold less any collateral deposited with its broker. The Fund will
limit its short sales so that no more than 25% of its net assets (less all its
liabilities other than obligations under the short sales) will be deposited as
collateral and allocated to the segregated account. However, the segregated
account and deposits will not necessarily limit the Fund's potential loss on a
short sale, which is unlimited. The Fund limits short sales of any one issuer's
securities to 2% of the Fund's total assets and to 2% of any one class of the
issuer's securities.
Options and Futures Contracts. The Fund may buy and sell options and
futures contracts to manage its exposure to changing interest rates, security
prices, currency exchange rates and precious metal prices. Some options and
futures strategies, including selling futures, buying puts, and writing
calls, hedge the Fund's investment against price fluctuations. Other strategies,
including buying futures, writing puts, and buying calls, tend to increase
market exposure. Options and futures may be combined with each other or with
forward contracts in order to adjust the risk and return characteristics of the
overall strategy. The Fund may invest in options and futures based on any type
of security, index, or currency related to its investments, including options
and futures traded on foreign exchanges and options not traded on exchanges. The
Fund also may invest in precious metals options and futures.
Options and futures can be volatile investments, and involve certain
risks. If the Advisor applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures strategies may lower the
Fund's return. Options and futures traded on foreign exchanges generally are
not regulated by U.S. authorities, and may offer less liquidity and less
protection to the Fund if the other party to the contract defaults. The
Fund also could experience losses if the prices of its options and futures
positions were poorly correlated with its other investments, or if it could not
close out its positions because of an illiquid secondary market. In addition,
losses from certain futures transactions are potentially unlimited.
The Fund will not hedge more than 25% of its total assets by selling
futures or writing calls under normal conditions. In general, the Fund also will
not write put options if its settlement obligations would exceed 25% of its
total assets. In addition, the Fund will not buy futures, put options or call
options for other than hedging purposes with an aggregate value exceeding 5% of
its total assets.
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<PAGE>
Precious Metals. The Fund may invest up to 5% of its total assets in
gold, silver, platinum or other precious metals. Gold and other precious
metals have been subject to substantial price fluctuations over short periods
of time and may be affected by unpredictable international monetary and other
governmental policies, and economic and social conditions. In addition, the
Fund may invest without limitation in securities of companies principally
engaged in exploration, mining or processing of gold or other precious metals
and minerals. These securities involve additional risk because the price
volatility of precious metals has an increased impact on their market value.
Zero Coupon Debt Securities and Pay-in-Kind Securities. The Fund may invest
in zero coupon securities and pay-in-kind securities. Zero coupon debt
securities do not make interest payments; instead, they are sold at a discount
from face value and are redeemed at face value when they mature. Pay-in-kind
securities pay all or a portion of their interest or dividends in the form of
additional securities. Both these types of bonds allow an issuer to avoid the
need to generate cash to meet current interest payments and, accordingly, may
involve greater credit risks than debt securities that make regular interest
payments. Because these securities do not pay current income, their prices can
be very volatile when interest rates change. In calculating its daily dividend,
the Fund takes into account as income a portion of the difference between the
bond's purchase price and its face value. Although zero coupon bonds and
pay-in-kind bonds pay no interest to holders prior to maturity, interest on
these securities is reported as income to the Fund and included with dividends
paid to the Fund's shareholders, if any. These dividends must be made from the
Fund's cash assets or, if necessary, from the proceeds of sales of portfolio
securities. The Fund will not be able to purchase additional income-producing
securities with cash used to pay such dividends, and its current income
ultimately may be reduced as a result.
Illiquid Investments. Under the supervision of and pursuant to the
guidelines adopted by the Board of Trustees, the Advisor determines which of the
Fund's investments are classified as illiquid. Illiquid securities generally
include securities which 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 absence of a trading market can make it difficult to ascertain a market
value for illiquid investments. Disposing of illiquid investments may involve
time-consuming negotiation and legal expenses, and it may be difficult or
impossible for the Fund to sell them promptly at an acceptable price. The Fund
may not invest more than 15% of its net assets in illiquid investments.
Non-Diversification and Concentration. Diversifying a fund's investment
portfolio can reduce, to some extent, the risks of investing. This may include
limiting the amount of money invested in any one company or, on a broader scale,
limiting the amount invested in any one industry.
To retain investment flexibility, the Fund may be non-diversified to some
extent. To the extent that the Fund invests a significant portion of its assets
in a few issuers' securities, the performance of the Fund could be significantly
affected by the performance of those issuers. However, with respect to 50% of
its assets, the Fund will not invest more than 5% of its total assets in any one
issuer, and may not invest more than 25% of its assets in any one industry.
These limitations do not apply to U.S. Government securities.
Defensive Investments. The Fund may invest temporarily up to 100% of its
assets in cash and investment grade debt securities for defensive purposes.
Investment Risks
The aggressive investment techniques of the Fund may entail risks not
encountered by the average mutual fund. Some techniques, such as short sales,
use of put and call options and futures, investments in foreign securities,
leverage and short term trading, may be considered speculative and could result
in higher operating expenses.
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<PAGE>
GENERAL INFORMATION
Fundamental Policies. The investment limitations set forth in the Statement
of Additional Information as fundamental policies may not be changed without the
affirmative vote of the majority of the outstanding shares of the Fund. The
investment objective of the Fund may be changed without the affirmative vote of
a majority of the outstanding shares of the Fund. Any such change may result in
the Fund having an investment objective different from the objective which the
shareholders considered appropriate at the time of investment in the Fund.
Portfolio Turnover. The Fund does not intend to purchase or sell securities
for short term trading purposes. The Fund will, however, sell any portfolio
security (without regard to the length of time it has been held) when the
Advisor believes that market conditions, creditworthiness factors or general
economic conditions warrant such action. It is anticipated that the Fund will
have a portfolio turnover rate of less than 100%.
Shareholder Rights. 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. However, the
Declaration of Trust contains provisions which authorize the shareholders to
call a meeting under certain circumstances. 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. As of December 2,
1996, Cheryl and Kenneth Holeski may be deemed to control the Fund as a result
of their beneficial ownership of the shares of the Fund.
PERFORMANCE INFORMATION
The Fund may periodically advertise "average annual total return." The
"average annual total return" of the Fund refers to the average annual
compounded rate of return over the stated period that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment. The calculation of "average annual total return"
assumes the reinvestment of all dividends and distributions.
The Fund may also periodically advertise its total return over various
periods in addition to 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 "total return" for the Fund refers to the percentage change in the
value of an account between the beginning and end of the stated period, assuming
no activity in the account other than reinvestment of dividends and capital
gains distributions.
The Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index or the Dow Jones Industrial Average.
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<PAGE>
The advertised performance data of the Fund is based on historical
performance and is not intended to indicate future performance. Rates of total
return quoted by the Fund may be higher or lower than past quotations, and there
can be no assurance that any rate of total return will be maintained. The
principal value of an investment in the Fund will fluctuate so that a
shareholder's shares, when redeemed, may be worth more or less than the
shareholder's original investment.
Investment Advisor Administrator
Newport Investment Advisors, Inc. AmeriPrime Financial Services, Inc.
23775 Commerce Park Road 1793 Kingswood Drive, Suite 200
Cleveland, Ohio 44122 Southlake, Texas 76092
Custodian Distributor
Star Bank, N.A. AmeriPrime Financial Securities, Inc.
P.O. Box 640749 1793 Kingswood Drive, Suite 200
Cincinnati, Ohio 45264 Southlake, Texas 76092
Transfer Agent (all purchase and Auditors
redemption requests) McCurdy & Associates CPA's, Inc.
American Data Services, Inc. 27955 Clemens Road
24 West Carver Street Westlake, Ohio 44145
Huntington, New York 11743
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Fund. This Prospectus does not constitute an offer by the Fund to sell its
shares in any state to any person to whom it is unlawful to make such offer in
such state.
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<PAGE>
TABLE OF CONTENTS
Page #
SUMMARY OF FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . 2
Shareholder Transaction Expenses . . . . . . . . . . . . . . . 2
Annual Fund Operating Expenses . . . . . . . . . . . . . . . . 2
THE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS. . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVE AND STRATEGIES . . . . . . . . . . . . . . . . 3
HOW TO INVEST IN THE FUND . . . . . . . . . . . . . . . . . . . . . 4
Initial Purchase . . . . . . . . . . . . . . . . . . . . . . . 4
By Mail . . . . . . . . . . . . . . . . . . . . . . . . . 4
By Wire . . . . . . . . . . . . . . . . . . . . . . . . . 4
Additional Investments . . . . . . . . . . . . . . . . . . . . 5
Tax Sheltered Retirement Plans . . . . . . . . . . . . . . . . 5
Other Purchase Information . . . . . . . . . . . . . . . . . . 5
HOW TO REDEEM SHARES. . . . . . . . . . . . . . . . . . . . . . . . 7
By Mail. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
By Telephone . . . . . . . . . . . . . . . . . . . . . . . . . 7
Additional Information . . . . . . . . . . . . . . . . . . . . 7
SHARE PRICE CALCULATION . . . . . . . . . . . . . . . . . . . . . . 8
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 9
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
OPERATION OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . 10
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 11
INVESTMENT POLICIES, TECHNIQUES AND RISK CONSIDERATIONS . . . . . . 11
Equity Securities . . . . . . . . . . . . . . . . . . . . 11
Debt Securities . . . . . . . . . . . . . . . . . . . . . 11
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<PAGE>
Foreign Securities. . . . . . . . . . . . . . . . . . . . 12
Indexed Securities. . . . . . . . . . . . . . . . . . . . 12
Repurchase Agreements . . . . . . . . . . . . . . . . . . 12
When Issued Securities and Forward Commitments. . . . . . 13
Borrowing and Leverage; Reverse Repurchase Agreements . . 13
Lending . . . . . . . . . . . . . . . . . . . . . . . . . 13
Short Sales . . . . . . . . . . . . . . . . . . . . . . . 13
Options and Futures Contracts . . . . . . . . . . . . . . 14
Precious Metals . . . . . . . . . . . . . . . . . . . . . 15
Zero Coupon Debt Securities and Pay-in-Kind Securities. . 15
Illiquid Investments. . . . . . . . . . . . . . . . . . . 15
Non-Diversification and Concentration . . . . . . . . . . 15
Defensive Investments . . . . . . . . . . . . . . . . . . 15
Investment Risks . . . . . . . . . . . . . . . . . . . . . . . 15
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 15
Fundamental Policies . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . 16
Shareholder Rights . . . . . . . . . . . . . . . . . . . . . . 16
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . 16
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<PAGE>
THE MAXIM CONTRARIAN FUND
STATEMENT OF ADDITIONAL INFORMATION
December 24, 1996
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of The MAXIM Contrarian Fund dated
December 24, 1996. A copy of the Prospectus can be obtained by writing the
Transfer Agent at 24 W. Carver Street, Huntington, New York 11743, or by calling
toll free 1-888-81-MAXIM (888-816-2946).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . 1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . 14
THE INVESTMENT ADVISOR. . . . . . . . . . . . . . . . . . . . . . . 16
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 17
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 18
PORTFOLIO TRANSACTIONS AND BROKERAGE. . . . . . . . . . . . . . . . 19
DETERMINATION OF SHARE PRICE. . . . . . . . . . . . . . . . . . . . 20
INVESTMENT PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . 20
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 21
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<PAGE>
DESCRIPTION OF THE TRUST
The MAXIM Contrarian Fund (the "Fund") was organized as a series of
AmeriPrime Funds (the "Trust"). 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 several series of funds
currently authorized by the Trustees.
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.
As of December 2, 1996, the following persons may be deemed to beneficially
own five percent (5%) or more of the Fund: Robert Botti, 955 River Road, Gate
Mills, Ohio - 5.22%; Cheryl and Kenneth Holeski, 12448 Bentbrook Drive,
Chesterland, Ohio - 35.16%; Newport Investment Advisors Profit Sharing Plan,
23775 Commerce Park Road, Cleveland, Ohio - 5.51%; Dale Siegel, 2305 East Aurora
Road, Twinsburg, Ohio - 8.84%.
As of December 2, 1996, Cheryl and Kenneth Holeski may be deemed to control
the Fund as a result of their beneficial ownership of the shares of the Fund. As
of December 2, 1996, the officers and trustees as a group may be deemed to
beneficially own 1.18% of the Fund.
For information concerning the purchase and redemption of shares of the
Fund, see "How to Invest in the Fund" and "How to Redeem Shares" in the Fund's
Prospectus. For a description of the methods used to determine the share price
and value of the Fund's assets, see "Share Price Calculation" in the Fund's
Prospectus.
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, as described in the
Prospectus (see "Investment Objectives and Strategies" and "Investment Policies
and Techniques and Risk Considerations").
A. Equity Securities. Equity securities include common stock, preferred
stock and common stock equivalents (such as convertible preferred stock, rights
and warrants). Convertible
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<PAGE>
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.
B. Lower Quality Debt Securities. The Fund may purchase lower quality debt
securities, or unrated debt securities, that have poor protection of payment of
principal and interest. These securities often are considered to be speculative
and involve greater risk of default of price changes due to changes in the
issuer's creditworthiness. Market prices of these securities may fluctuate more
than higher quality debt securities and may decline significantly in periods of
general economic difficulty which may follow periods of rising rates. While the
market for high yield corporate debt securities has been in existence for many
years and has weathered previous economic downturns, the market in recent years
has experienced a dramatic increase in the large-scale use of such securities to
fund highly leveraged corporate acquisitions and restructurings. Accordingly,
past experience may not provide an accurate indication of future performance of
the high yield bond market, especially during periods of economic recession. The
Fund may invest in securities which are of lower quality or are unrated if the
Advisor determines that the securities provide the opportunity of meeting the
Fund's objective without presenting excessive risk. The Advisor will consider
all factors which it deems appropriate, including ratings, in making investment
decisions for the Fund and will attempt to minimize investment risks through
diversification, investment analysis and monitoring of general economic
conditions and trends. To the extend the Fund invests in lower quality
securities, achievement of its investment objective may be more dependent on the
Advisor's credit analyses than is the case for higher quality bonds. While the
Advisor may refer to ratings, it does not rely exclusively on ratings, but makes
its own independent and ongoing review of credit quality.
The market for lower quality securities may be thinner and less active than
that for higher quality securities, which can adversely affect the prices at
which these securities can be sold. If there is not established retail secondary
market and market quotations are not available, these securities are valued in
accordance with procedures established by the Board of Trustees, including the
use of outside pricing services. Judgment plays a greater role in valuing high
yield corporate debt securities than is the case for securities for which
external sources for quotations and last-sale information are available. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by the Fund to value as portfolio securities, and the
Fund's ability to dispose of these lower quality debt securities.
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
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<PAGE>
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.
The Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise exercise its rights as security holder to seek to
protect the interests of security holders if it determines this to be in the
best interests of the Fund shareholders.
C. Repurchase Agreements. The Fund may enter into repurchase agreements. In
a repurchase agreement, the Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon price on an agreed upon
date within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
incremental amount which is unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement involves the obligation of the seller
to pay the agreed upon price, which obligation is, in effect, secured by the
value (at least equal to the amount of the agreed upon resale price and marked
to market daily) of the underlying security. The Fund may engage in a repurchase
agreement with respect to any security in which it is authorized to invest. Any
repurchase transaction in which the Fund engages will require collateralization
equal to at least 102% of the Seller's obligation during the entire term of the
repurchase agreement. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs to
the Fund in connection with bankruptcy proceedings), it is the Fund's current
policy to limit repurchase agreement transactions to those parties whose
creditworthiness has been reviewed and deemed satisfactory by the Advisor.
D. Securities Lending. The Fund may lend securities to parties such as
broker-dealers, banks, or institutional investors. Securities lending allows the
Fund to retain ownership of the securities loaned and, at the same time, to earn
additional income. Since there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied, should the borrower
fail financially, loans will be made only to parties whose creditworthiness has
been reviewed and deemed satisfactory by the Advisor. Furthermore, they will
only be made if, in the judgment of the Advisor, the consideration to be earned
from such loans would justify the risk.
The Advisor understands that it is the current view of the staff of the
Securities and Exchange Commission ("SEC") that the Fund may engage in loan
transactions only under the following conditions: (1) a Fund must receive 100%
collateral in the form of cash, cash equivalents (e.g., U.S. Treasury bills or
notes) or other high grade liquid debt instruments from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the Fund must be able to terminate the loan
at any time; (4) the Fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and to any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Trustees must
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be able to vote proxies on the securities loaned, either by terminating the
loan or by entering into an alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
E. Foreign Investments. Subject to the limitations described in the
prospectus, the Fund may invest in foreign securities. Foreign investments can
involve significant risks in addition to the risks inherent in U.S. investments.
The value of securities denominated in or indexed to foreign currencies, and of
dividends and interest from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
securities markets generally have less trading volume and less liquidity than
U.S. markets, and prices on some foreign markets can be highly volatile. Many
foreign countries lack uniform accounting and disclosure standards comparable to
those applicable to U.S. companies, and it may be more difficult to obtain
reliable information regarding an issuer's financial condition and operations.
In addition, the costs of foreign investing, including withholding taxes,
brokerage commissions, and custodial costs, generally are higher than for U.S.
investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may invoke increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It also may be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that an Advisor will be able to anticipate
or counter these potential events and their impacts on the Fund's share price.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The Fund may invest in foreign securities that impose restrictions on
transfer within the U.S. or to U.S. persons. Although securities subject to
transfer restrictions may be marketable abroad, they may be less liquid than
foreign securities of the same class that are not subject to such restrictions.
American Depositary Receipts and European Depositary Receipts ("ADRs" and
"EDRs") are certificates evidencing ownership of shares of a foreign-based
issuer held in trust by a bank or similar financial institution. Designed for
use in U.S. and European securities markets,
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respectively, ADRs and EDRs are alternatives to the purchase of the underlying
securities in their national market and currencies.
F. Foreign Currency Transactions. The Fund may hold foreign currency
deposits from time to time, and may convert dollars and foreign currencies in
the foreign exchange markets. Currency conversion involves dealer spreads and
other costs, although commissions usually are not charged. Currencies may be
exchanged on a spot (i.e., cash) basis, or by entering into forward contracts to
purchase or sell foreign currencies at a future date and price. Forward
contracts generally are traded in an interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. The
parties to a forward contract may agree to offset or terminate the contract
before its maturity, or may hold the contract to maturity and complete the
contemplated currency exchange.
The Fund may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Fund.
In connection with purchases and sales of securities denominated in foreign
currencies, the fund may enter into currency forward contracts to fix a definite
price for the purchase or sale in advance of the trade's settlement date. This
technique is sometimes referred to as a "settlement hedge" or "transaction
hedge." The Advisor expects to enter into settlement hedges in the normal course
of managing the Fund's foreign investments. The Fund also could enter into
forward contracts to purchase or sell a foreign currency in anticipation of
future purchases or sales of securities denominated in foreign currency, even if
the specific investments have not yet been selected by the Advisor.
The Fund also may use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example, if
the Fund owned securities denominated in Deutschemarks, it could enter into a
forward contract to sell Deutschemarks in return for U.S. dollars to hedge
against possible declines in the Deutschemark's value. Such a hedge (sometimes
referred to as a "position hedge") would tend to offset both positive and
negative currency fluctuations, but would not offset changes in security values
caused by other factors. The fund also could hedge the position by selling
another currency expected to perform similarly to the Deutschemark -- for
example, by entering into a forward contract to sell Deutschemarks or European
Currency Units in return for U.S. dollars. This type of hedge, sometimes
referred to as a "proxy hedge," could offer advantages in terms of cost, yield,
or efficiency, but generally will not hedge currency exposure as effectively as
a simple hedge into U.S. dollars. Proxy hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which the
hedge securities are denominated.
Under certain conditions, SEC guidelines require mutual funds to segregate
cash and appropriate liquid assets to cover currency forward contracts. As
required by SEC guidelines, the Fund will segregate cash or U.S. Government
securities or other high-grade liquid debt securities to cover currency forward
contracts, if any, whose purpose is essentially speculative. The Fund will not
segregate assets to cover forward contracts entered into for hedging purposes,
including settlement hedges, position hedges, and proxy hedges. In segregating
assets, the Fund's custodian
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or a designated subcustodian either places such assets in a segregated account
or separately identifies such assets and renders them unavailable for investment
by the Fund.
Successful use of forward currency contracts will depend on the Advisor's
skill in analyzing and predicting currency values. Forward contracts may change
the Fund's currency exchange rates substantially, and could result in losses to
the Fund if currencies do not perform as the Advisor anticipates. For example,
if a currency's value rose at a time when the Advisor had hedged the Fund by
selling currency in exchange for dollars, the Fund would be unable to
participate in the currency's appreciation. If the Advisor hedges currency
exposure through proxy hedges, the Fund could realize currency losses from the
hedge and the security position at the same time if the two currencies do not
move in tandem. Similarly, if the Advisor increases the Fund's exposure to a
foreign currency, and that currency's value declines, the Fund will realize a
loss. There is no assurance that the Advisor's use of forward currency contracts
will be advantageous to the Fund or that the Advisor will hedge at an
appropriate time.
G. Short Sales. The Fund may seek to hedge investments or realize
additional gains through short sales. The Fund may make short sales, which are
transactions in which the Fund sells a security it does not own, in anticipation
of a decline in the market value of that security. To complete such a
transaction, the Fund must borrow the security to make delivery to the buyer.
The Fund than is obligated to replace the security borrowed by purchasing it at
the market price at or prior to the time of replacement. The price at such time
may be more or less than the price at which the security was sold by the Fund.
Until the security is replaced, the Fund is required to repay the lender any
dividends or interest that accrue during the period of the loan. To borrow the
security, the Fund also may be required to pay a premium, which would increase
the cost of the security sold. The net proceeds of the short sale will be
retained by the broker, to the extent necessary to meet margin requirements,
until the short position is closed out. The Fund also will incur transaction
costs in effecting short sales.
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 gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased by the amount of the premium,
dividends, interest, or expenses the Fund may be required to pay in connection
with a short sale.
No securities will be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of the Fund's total assets. The Fund similarly will limit its short
sales of the securities of any single issuer if the market value of the
securities that have been sold short by the Fund would exceed two percent (2%)
of the value of the Fund's net equity or if such securities would constitute
more than two percent (2%) of any class of the issuer's securities.
Whenever the Fund engages in short sales, its custodian will segregate an
amount of cash or U.S. Government securities or other high-grade liquid debt
securities equal to the difference between (a) the market value of the
securities sold short at the time they were sold short and (b) any cash or U.S.
Government securities required to be deposited with the broker in connection
with the short sale (not including the proceeds from the short sale). The
segregated assets are marked to
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market daily, provided that at no time will the amount deposited in it plus the
amount deposited with the broker be less than the market value of the securities
at the time they were sold short.
In addition, the Fund may make short sales "against the box," i.e., when a
security identical to one owned by the Fund is borrowed and sold short. If the
Fund enters into a short sale against the box, it is required to segregate
securities equivalent in kind and amount of the securities sold short (or
securities convertible or exchangeable into such securities) and is required to
hold such securities while the short sale is outstanding. The Fund will incur
transaction costs in connection with opening, maintaining and closing short
sales against the box.
H. Indexed Securities. The Fund may purchase securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically provide
for a maturity value that depends on the price of gold, resulting in a security
whose price tends to rise and fall together with gold prices. Currency-indexed
securities typically are short-term to intermediate-term debt securities whose
maturity values or interest rates are determined by reference to the values of
one or more specified foreign currencies, and may offer higher yield than U.S.
dollar-denominated securities of equivalent issuers. Currency-indexed securities
may be positively or negatively indexed; that is, their maturity value may
increase when the specified currency value increases, resulting in a security
whose price characteristics are similar to a put on the underlying currency.
Currency-indexed securities also may have prices that depend on the values of a
number of different foreign currencies relative to each other.
The performance of indexed securities depends to a great extent on the
performance of the security, currency, commodity or other instrument to which
they are indexed, and also may be influenced by interest rate changes in the
U.S. and abroad. At the same time, indexed securities are subject to the credit
risks associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
Government agencies.
I. Forward Commitments and Reverse Repurchase Agreements. The Fund will
direct its Custodian to place cash or U.S. government obligations in a separate
account of the Trust in an amount equal to the commitments of the Fund to
purchase or repurchase securities as a result of its forward commitment or
reverse repurchase agreement obligations. With respect to forward commitments to
sell securities, the Trust will direct its Custodian to place the securities in
a separate account. The Fund will direct its Custodian to segregate such assets
for when, as and if issued commitments only when it determines that issuance of
the security is probable. When a separate account is maintained, the securities
deposited in the separate account will be valued daily at market for the purpose
of determining the adequacy of the securities in the account. To the extent
funds are in a separate account, they will not be available for new investment
or to meet redemptions.
Commitments to purchase securities on a when, as and if issued basis will
not be recognized in the portfolio of the Fund until the Advisor determines that
issuance of the security is probable. At such time, the Fund will record the
transaction and, in determining its net asset value, will reflect the value of
the security daily.
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Securities purchased on a forward commitment basis and subject to reverse
repurchase agreements are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates decline and depreciation when interest rates
rise). Therefore, if in order to achieve a higher level of income, the Fund
remains substantially fully invested at the same time that it has purchased on a
forward commitment basis or entered into reverse repurchase transactions, there
will be a possibility that the market value of the Fund's assets will have
greater fluctuation.
J. Leveraging. Leveraging the Fund creates an opportunity for increased net
income but, at the same time, creates special risk considerations. For example,
leveraging may exaggerate changes in the net asset value of Fund shares and in
the yield on the Fund's portfolio. Although the principal of such borrowings
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. Leveraging will create interest expenses for the Fund
which can exceed the income from the assets retained. To the extent the income
derived from securities purchased with borrowed funds exceeds the interest the
Fund will have to pay, the Fund's net income will be greater than if leveraging
were not used. Conversely, if the income from the assets retained with borrowed
funds is not sufficient to cover the cost of leveraging, the net income of the
Fund will be less than if leveraging were not used, and therefore the amount
available for distribution to shareholders will be reduced.
K. Futures Contracts. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument or precious metal at a specified
future date. When the Fund sells a futures contract, it agrees to sell the
underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the Fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities or precious metal prices, such as the Standard & Poor's 500
Composite Stock Price Index ("S&P 500") or gold. Futures can be held until their
delivery dates, or can be closed out before then if a liquid secondary market is
available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument or precious metal. Therefore,
purchasing futures contracts will tends to increase a Fund's exposure to
positive and negative price fluctuations in the underlying instrument or
precious metal, much as if it had purchased the underlying instrument or
precious metal directly. When a Fund sells a futures contract, by contrast, the
value of its futures position will tend to move in a direction contrary to the
market. Selling futures contracts, therefore, will tend to offset both positive
and negative market price changes, much as if the underlying instrument or
precious metal had been sold.
Futures Margin Payments. The purchaser or seller of a futures contract
is not required to deliver or pay for the underlying instrument or precious
metal unless the contact is held until the delivery date. However, both the
purchaser and seller are required to deposit "initial margin" with futures
broker, known as a futures commission merchant ("FCM"), when the contract is
entered into. Initial margin deposits are typically equal to a percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments to settle the
change in value on a daily basis. The party that has a gain may be
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entitled to receive all or a portion of this amount. Initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of the Fund's investment limitations. In the event of the bankruptcy of the
FCM that holds margin on behalf of a Fund, the Fund may be entitled to return
of margin owed to it only in proportion to the amount received by the FCM's
other customers, potentially resulting in losses to the Fund.
L. Put and Call Options. The Fund may purchase put and call options.
Purchasing Options. By purchasing a put option, the Fund obtains the
right (but not the obligation) to sell the option's underlying instrument at a
fixed "strike" price. In return for this right, the Fund pays the current market
price for the option (known as the option premium). Options have various types
of underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The Fund may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option. If
the option is allowed to expire, the Fund will lose the entire premium it paid.
If the Fund exercises the option, it completes the sale of the underlying
instrument at the "strike" price. The Fund also may terminate a put option
position by closing it out in the secondary market at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's "strike"
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to suffer
a loss if the underlying prices do not rise sufficiently to offset the cost of
the option.
Writing Options. When the Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the "strike"
price for the option's underlying instrument if the other party to the option
chooses to exercise it. When writing an option on a futures contract the Fund
will be required to make margin payments to the FCM described above for futures
contracts. The fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for a put option the Fund has
written, however, the Fund must continue to be prepared to pay the "strike"
price while the option is outstanding, regardless of price changes, and must
continue to segregate assets to cover its position.
If the underlying prices rise, a put writer would generally expect to
profit. Although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, the writer also may
profit, because it should be able to close out the option at a lower price. If
the underlying prices fall, the put writer would expect to suffer a loss. This
loss should be less
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than the loss from purchasing the underlying instrument directly, however,
because the premium received for writing the option should mitigate the effects
of the decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument, in return for the "strike" price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy if the underlying prices remain the same or fall. Through receipt of
the option premium, a call writer mitigates the effects of a price decline. At
the same time, because a call writer must be prepared to deliver the underlying
instrument in return for the "strike" price, even if its current value is
greater, a call writer gives up some ability to participate in the underlying
price increases.
Combined Positions. A Fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one "strike" price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
M. Correlation of Price Changes. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund's current or anticipated
investments exactly. The Fund may invest in options and futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests.
Options and futures prices also can diverge from the prices of their
underlying instruments or precious metals, even if the underlying instruments or
precious metals match the Fund's investment well. Options and futures prices are
affected by such factors as current and anticipated short-term interest rates,
changes in volatility of the underlying instrument or precious metal, and the
time remaining until expiration of the contract, which may not affect the
security or the precious metal prices the same way. Imperfect correlation also
may result from: differing levels of demand in the options and futures markets
and the securities or precious metal markets, structural differences in how
options and futures and securities or precious metal are traded, or imposition
of daily price fluctuation limits or trading halts. The Fund may purchase or
sell options and futures contracts with a greater or lesser value than the
securities or precious metal it wishes to hedge or intends to purchase in order
to attempt to compensate for differences in volatility between the contract and
the securities or precious metals, although this may not be successful in all
cases. If price changes in the Fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
N. Liquidity of Options and Futures Contracts. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading volume
and liquidity if their "strike" prices are not close to the underlying
instrument or precious metal's current price. In addition, exchanges may
establish daily
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price fluctuation limits for options and futures contracts, and may halt
trading if a contract's price moves upward or downward more than the limit in a
given day. On volatile trading days when the price fluctuation limit is reached
or a trading halt is imposed, it may be impossible for the Fund to enter into
new positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions also could be impaired.
In addition, one of the requirements for qualification as a regulated investment
company for tax purposes in that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in effecting
closing transactions within three months after entering into an option or
futures contract.
O. OTC Options. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
"strike" price, the terms of over-the-counter options i.e., options not traded
on exchanges ("OTC options"), generally are established through negotiation with
the other party to the option contract. While this type of arrangement allows
the Fund greater flexibility to tailor an option to its needs, OTC options
generally involve greater credit risk than exchange-traded options, which are
guaranteed by the clearing organization of the exchanges where they are traded.
The risk of illiquidity also is greater with OTC options, since these options
generally can be closed out only by negotiation with the other party to the
option.
P. Options and Futures Relating to Foreign Currencies. Currency futures
contracts are similar to forward currency exchange contracts, except that they
are traded on exchanges (and have margin requirements) and are standardized as
to contract size and delivery date. Most currency futures contracts call for
payment or delivery in U.S. dollars. The underlying instrument of a currency
option may be a foreign currency, which generally is purchased or delivered in
exchange for U.S. dollars, or may be a futures contract. The purchaser or a
currency call obtains the right to purchase the underlying currency, and the
purchaser of a currency put obtains the right to sell the underlying currency.
The uses and risks of currency options and futures are similar to options
and futures relating to securities or indices, as discussed above. The Fund may
purchase and sell currency futures and may purchase and write currency options
to increase or decrease its exposure to different foreign currencies. The fund
also may purchase and write currency options in conjunction with each other or
with currency futures or forward contracts. Currency futures and options values
can be expected to correlate with exchange rates, but may not reflect other
factors that affect the value of the Fund's investments. A currency hedge, for
example, should protect a Yen-denominated security from a decline in the Yen,
but will not protect a Fund against a price decline resulting from deterioration
in the issuer's creditworthiness. Because the value of the Fund's
foreign-denominated investments change in response to many factors other than
exchange rates, it may not be possible to match the amount of currency options
and futures to the value of the Fund's investments exactly over time.
Q. Asset Coverage for Futures and Options Positions. The Fund will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures by mutual funds, and if the
guidelines so require will segregate cash or U.S.
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Government securities or other high-grade liquid debt securities in the amount
prescribed. Segregated securities cannot be sold while the futures or option
strategy is outstanding, unless they are replaced with other suitable assets.
As a result, there is a possibility that segregation of a large percentage of
the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
R. Limitations on Futures and Options Transactions. The Fund will file a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the Commodity Futures Trading Commission ("CFTC") and the
National Futures Association, which regulate trading in the futures markets
before the Fund engages in any purchases or sales of futures contracts, options
on futures contracts, or gold, silver, platinum or other precious metals futures
contracts or options thereon. The Fund intends to comply with Section 4.5 of the
regulations under the Commodity Exchange Act, which limits the extent to which
the Fund can commit assets to initial margin deposits and options premiums.
In addition, the Fund will not: (a) sell futures contracts (including
futures contracts for precious metals) or write call options (including options
on futures) if, as a result, more than 25% of the Fund's total assets would be
hedged with such futures or options; or (b) write put options (including options
on futures) if, as a result, the Fund's total obligations upon settlement of
written put options would exceed 25% of its total assets; or (c) purchase
futures contracts or put or call options (including options on futures) for
other than hedging purposes if, as a result, the aggregate value of margin for
futures contracts and option premiums for options purchased by the Fund would
exceed 5% of the Fund's total assets, except that aggregate value of initial
margin deposits for futures and options premiums for options on futures may not
exceed 5% of the Fund's total assets (after taking into account unrealized
profits and unrealized losses on any such positions) and that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount may
be excluded from such 5%; or (d) purchase futures, put or call options
(including options on futures) for hedging purposes if the aggregate value of
the initial margin deposits for futures contracts purchased would exceed 5% of a
Fund's total assets and initial option premiums for options purchased would
exceed 20% of the Fund's net assets. These limitations do not apply to options
attached to or acquired or traded together with their underlying securities, and
do not apply to securities that incorporate features similar to options.
The Fund currently intends to treat the value of any over-the-counter
option purchased as illiquid for the purposes of investment limits. Similarly,
for any over-the-counter option the Fund writes, the Fund will treat as illiquid
the value of the option's underlying instrument; however, if the Fund has a
guaranteed right to close out the option with a primary U.S. Government
securities dealer, only the maximum price of the closing transaction minus the
amount the option is in-the-money will be considered illiquid.
S. Precious Metals. In addition to its investments in securities, the Fund
may invest a portion of its assets in precious metals, such as gold, silver,
platinum, and palladium, and precious metal options and futures. The prices of
precious metals are affected by broad economic and political conditions, but are
less subject to local and company-specific factors than securities of individual
companies. As a result, precious metals and precious metal options and futures
may be more or less volatile in price than securities of companies engaged in
precious metals-related businesses. The Fund may purchase precious metals in any
form, including bullion and coins,
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provided that the Advisor intends to purchase only those forms of precious
metals that are readily marketable and that can be stored in accordance with
custody regulations applicable to mutual funds. The Fund may incur higher
custody and transaction costs for precious metals than for securities. Also,
precious metals investments do not pay income.
The value of the Fund's investments may be affected by changes in the price
of gold and other precious metals. Gold has been subject to substantial price
fluctuations over short periods of time and may be affected by unpredictable
international monetary and other governmental policies, such as currency
devaluations or revaluations; economic and social conditions within a country;
trade imbalances; or trade or currency restrictions between countries. Since
much of the world's known gold reserves are located in South Africa, political
and social conditions there may pose certain risks to the Fund's investments.
For instance, social upheaval and related economic difficulties in South Africa
could cause a decrease in the share values of South African issues.
The fund is authorized to invest up to 5% of its total assets in precious
metals. As a further limit on precious metals investment, under current federal
tax law, gains from selling precious metals may not exceed 10% of the Fund's
annual gross income. This tax requirement could cause the fund to hold or sell
precious metals, securities, options or futures when it would not otherwise do
so.
T. Illiquid Investments. Illiquid investments are investments that cannot
be sold or disposed of in the ordinary course of business at approximately the
prices at which they are valued. Under the supervision of the Board of Trustees,
the Advisor determines the liquidity of the Fund's investments and, through
reports from the Advisor, the Board monitors trading activity in illiquid
investments. In determining the liquidity of the Fund's investments, the Advisor
may consider various factors, including (i) the frequency of trades and
quotations, (ii) the number of dealers and prospective purchasers in the
marketplace, (iii) dealer undertakings to make a market, (iv) the nature of the
security (including any demand or tender features), and (v) the nature of the
marketplace for trades (including the ability to assign or offset the Fund's
rights and obligations relating to the investment). Investments currently
considered by the Trust to be illiquid include repurchase agreements not
entitling the holder to payments of principal and interest within seven days,
over-the-counter options, and restricted securities. However, with respect to
OTC options which the Fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement the Fund may have to close out
the option before expiration. In the absence of market quotations, illiquid
investments are priced at fair value as determined in good faith by the Advisor,
subject to review of the Board of Trustees. If, through a change in values, net
assets or other circumstances, the Fund were in a position where more than 15%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
U. Restricted Securities. Restricted securities generally can be sold in
privately negotiated transactions, pursuant to an exemption from registration
under the Securities Act of 1933, or in a registered public offering. Where the
registration is required, the Fund holding restricted securities may be
obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
the Fund may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market
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<PAGE>
conditions were to develop, the Fund might obtain a less favorable price than
prevailed when it decided to seek registration of the security.
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 this 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 which the Fund has not fully collateralized as
described in the Prospectus.
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 (a) consistent with or permitted by the
Investment Company Act of 1940, as amended (the "1940 Act"), 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 this
Statement of Additional Information.
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. Except for gold, silver, platinum, palladium or other
precious metals (and then not with respect to more than 5% of its net assets),
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 forward contracts, options or
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<PAGE>
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 Restrictions"
above).
i. 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.
ii. Borrowing. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements which the Fund has not fully
collateralized as described in the Prospectus) representing more than one third
of its total assets are outstanding.
iii. 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
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<PAGE>
transactions involving options, futures contracts, short sales and other
permitted investments and techniques.
iv. Illiquid Investments. The Fund will not invest more than 15% of its
net assets in securities for which there are legal or contractual restrictions
on resale and other illiquid securities.
THE INVESTMENT ADVISOR
The Fund's investment advisor is Newport Investment Advisors, Inc., 23775
Commerce Park Road, Cleveland, Ohio 44122. Kenneth M. Holeski may be deemed to
control the Advisor due to his ownership of its shares and his positions as an
officer and director of the Advisor.
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 operating expenses of the Fund except brokerage, taxes,
interest, fees and expenses of the non-interested person trustees and
extraordinary expenses. 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 2.50% of
the average daily net assets of the Fund. The Advisor may waive all or part of
its fee, at any time, and at its sole discretion, but such action shall not
obligate the Advisor to waive any fees in the future. The Fund is responsible
for the payment of all expenses incurred in connection with the organization and
initial registration of shares of the Fund. For the period May 2, 1996
(commencement of operations) through October 31, 1996, the Fund paid advisory
fees of $11,261.
The Advisor retains the right to use the name "MAXIM Contrarian" 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 "MAXIM
Contrarian" 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. The
Glass-Steagall Act prohibits banks from engaging in the business of
underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue
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<PAGE>
may differ from the interpretations of federal law expressed herein and banks
and financial institutions may be required to register as dealers pursuant to
state law. If a bank 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 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.
DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act (the "Plan") under which the Fund pays the Advisor an amount at an
annual rate of 0.25% of the average daily net assets of the Fund. For a
description of the Plan, see "Distribution Plan" in the Fund's Prospectus.
For the period May 2, 1996 (commencement of operations) through October 31,
1996, the Fund accrued $1,127 under the Distribition Plan. Kenneth M. Holeski,
as controlling shareholder of the Advisor, and other employees of the Advisor
may indirectly benefit from any payments made pursuant to the Plan.
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<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<S> <C> <C>
Name, Age and Address Position Principal Occupations During Past 5 Years
* Kenneth D. Trumpfheller President and Trustee President, Treasurer and Secretary of AmeriPrime Services, Inc.,
Age: 38 the Fund's administrator, and AmeriPrime Financial Securities, Inc.,
1793 Kingswood Drive the Fund's distributor. Prior to December , 1994, a senior
Suite 200 executive with SEI Financial Services.
Southlake, Texas 76092
Kelli D. Shomaker, C.P.A. Secretary, Treasurer Manager of Compliance of AmeriPrime Financial Services, Inc.;
Age: 34 Vice President, Chief Accounting Officer, Treasurer and
1793 Kingswood Drive Controller of United Services Advisors, Inc. and United
Suite 200 Services Insurance Funds from 1994 to 1995; Vice President,
Southlake, Texas 76092 Chief Accounting Officer, Treasurer, and Controller
of Accolade Funds and Pauze/Swanson United Services Funds
from 1993 to 1995; Controller from 1987 to 1995 and Vice President,
Chief Accounting Officer and Treasurer from 1990 to
1995 of United Services Funds; Director of Security
Trust & Financial Company from 1993 to 1995.
Steve L. Cobb Trustee President of Clare Energy, Inc., oil and gas
Age: 39 exploration company; International Marketing Manager
140 Mockingbird Lane of Carbo Ceramics Inc., oil field manufacturing/supply
Coppell, Texas 76019 company.
Gary E. Hippenstiel Trustee Vice President and Chief Investment Officer of Legacy
Age: 49 Trust Company; President and Director of Heritage
600 Jefferson Street Trust Company from 1994 to 1996; Vice President and Manager
Houston, Texas 70002 of Investments of Kanaly Trust Company from 1988 to 1992.
</TABLE>
The compensation paid to the Trustees of the Trust for the fiscal year
ended October 31, 1996 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.
<TABLE>
<S> <C> <C>
Name Aggregate Total Compensation
Compensation from Trust (the Trust is
from Trust not in a Fund Complex
Kenneth D. Trumpfheller 0 0
Steve L. Cobb $4,000 $4,000
Gary E. Hippenstiel $4,000 $4,000
</TABLE>
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, 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.
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 period May 2, 1996 (commencement of operations) through October 31,
1996, the Fund paid total brokerage commissions of $14,358. The Fund paid
$312 to WRP Investments, Inc., an affiliate of the Advisor. This amount
represents 2.17% of the total brokerage commissions paid, for effecting 3.26%
of all brokerage transactions.
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<PAGE>
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,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. For a description of the methods used to determine
the net asset value (share price), see "Share Price Calculation" in the
Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
(over the one and five year periods and the period from initial public offering
through the end of the Fund's most recent fiscal year) that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
n
P(1+T) = 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.
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. For the period May 2,
1996 (commencement of operations) through October 31, 1996, the Fund's
average annual total return was -15.80%, annualized.
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 Standard & Poor's 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
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<PAGE>
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
Star 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.
TRANSFER AGENT
American Data Services, Inc., ("ADS"), 24 W. Carver Street, Huntington,
New York 11743, acts as the Fund's transfer agent and, in such capacity,
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 accounting and shareholder service functions. In addition, ADS
provides the Fund with certain monthly reports, record-keeping and other
management-related services. For the period May 2, 1996 (commencement of
operations) through October 31, 1996, ADS received $9,600 from the Adviser
(not the Fund) for these services.
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake, Ohio
44145, has been selected as independent public accountants for the Trust for the
fiscal year ending October 31, 1997. McCurdy & Associates performs an annual
audit of the Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, is the exclusive agent for distribution of shares of the
Fund. 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.
FINANCIAL STATEMENTS
The financial statements and independent auditor's report required to be
included in this Statement of Additional Information are incorporated herein
by reference to the Trust's Annual Report to Shareholders for the period
May 2, 1996 (commencement of operations) through October 31, 1996. The Trust
will provide the Annual Report without charge by calling the Fund at
1-888-81-MAXIM.
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