FOUNTAINHEAD SPECIAL VALUE FUND
PROSPECTUS December 23, 1996
c/o Jenswold, King & Associates, Inc.
Two Post Oak Central
1980 Post Oak Blvd., Suite 2400
Houston, Texas 77056-3898
For Information, Shareholder Services and Requests:
(800) 868-9535
Fountainhead Special Value Fund ("Fund") is a mutual fund whose
investment objective is to provide long term capital growth. The Fund's Advisor,
Jenswold, King & Associates, Inc., seeks to achieve the objective by investing
primarily in a broad range of equity securities believed by the Advisor to be
selling at attractive prices relative to their intrinsic value.
The Fund is "no-load," which means there are no sales charges or
commissions. In addition, there are no 12b-1 fees, distribution expenses or
deferred sales charges which are borne by the shareholders. 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 has been filed with the Securities and Exchange
Commission ("SEC") dated December 23, 1996, which 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 expense information provided below 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. In addition, the Fund does not
have a 12b-1 Plan.
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 (after reimbursement) . . . . . . . . . . . . . . . . . 0.68%
12b-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NONE
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.32%
Total Fund Operating Expenses (after reimbursement) . . . . . . . . . . 1.00%
* The Advisor has agreed to waive fees and reimburse expenses to limit total net
operating expenses for the Fund to not more than 1.00% of its average daily net
assets. Absent fee waivers and expense reimbursement, management fees would be
1.43% and the Fund estimates that total operating expenses would be 1.75%.
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.
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
$10 $32
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THE FUND
Fountainhead Special Value Fund ("Fund") was organized as a series of
AmeriPrime Funds, an Ohio business trust ("Trust"), on October 20, 1995, and
commenced operations on December 23, 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 Jenswold, King & Associates, Inc.
("Advisor").
INVESTMENT OBJECTIVE AND STRATEGIES
The investment objective of the Fund is to provide long term capital
growth. The Fund seeks to achieve the objective by investing primarily in a
broad range of equity securities which the Advisor believes to be selling at
attractive prices relative to their intrinsic value. It is anticipated that an
emphasis will be placed on domestic mid-cap equity securities (those with a
market capitalization between $500 million and $5 billion).
The Advisor selects portfolio securities on the basis of what the Advisor
considers to be the intrinsic value of each security. In determining whether a
specific security represents investment value, particular emphasis is given to
securities: 1) trading at a discount to the company's estimated private market
value (based on its projected level of cash flows, balance sheet
characteristics, future earnings, and payments made for similar companies in
mergers and acquisitions), 2) trading at the low end of the company's historic
fundamental valuation range (based on current financial ratios such as
price/cash flow, price/earnings and price/book value), or 3) trading at a
discount to the company's earnings growth rate. While it is anticipated that
the Fund will diversify its investments across a range of industries/sectors,
certain industries are likely to be overweighted compared to others because the
Advisor seeks the best investment values regardless of industry. The Advisor
retains the flexibility to invest in securities of various market
capitalizations.
The Advisor generally intends to stay fully invested (subject to
liquidity requirements and defensive purposes) in common stock and common stock
equivalents (such as securities convertible into common stocks) regardless of
the movement of stock prices. However, the Fund may invest in preferred stocks,
bonds, corporate debt and U.S. government obligations when the Advisor believes
that these securities offer opportunities to further the Fund's investment
objective. While the Fund ordinarily will invest in common stocks of U.S.
companies, it may invest in foreign companies through the purchase of American
Depository Receipts.
For temporary defensive purposes under abnormal market or economic
conditions, the Fund may hold all or a portion of its assets in money market
instruments (including money market funds) or U.S. government repurchase
agreements. The Fund may also invest in such instruments at any time to maintain
liquidity or pending selection of investments in accordance with its policies.
If the Fund acquires securities of a money market fund, the shareholders of the
Fund will be subject to duplicative management fees.
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, you should be aware that the
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Advisor has no prior experience in managing investment companies and that the
Fund has no operating history. 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. See "Investment Policies and
Techniques and Risk Considerations" for a more detailed discussion of the
Fund's investment practices.
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 $5,000 ($2,000 for IRAs) and minimum subsequent investments of $1,000.
There is no minimum, however, for separate employee accounts of corporate
retirement plans.
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 Fountainhead Special Value Fund, and sent by mail or overnight
delivery to:
Fountainhead Special Value Fund
c/o American Data Services, Inc.
24 West 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 800-868-9535 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
Attn: Fountainhead Special Value Fund
D.D.A. # 483885570
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
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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 Fountainhead Special Value 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 plans (IRAs); simplified employee pensions
(SEPs); 401(k) plans; qualified corporate pension and profit sharing plans (for
employees); tax deferred investment plans (for employees of public school
systems and certain types of charitable organizations); and other qualified
retirement plans. You should contact the Transfer Agent for the procedure to
open an IRA or SEP plan, as well as more specific information regarding these
retirement plan options. 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.
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.
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.
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By Mail - You may redeem any part of your account in the Fund at no
charge by mail. Your request should be addressed to:
Fountainhead Special Value 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 (800) 868-9535. 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 (800) 868-9535. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has been collected, which
normally may take up to fifteen 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 $2,000 due to
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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.
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 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 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
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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 ("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 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 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.
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The Fund retains Jenswold, King & Associates, Inc., Two Post Oak Central,
1980 Post Oak Blvd., Suite 2400, Houston, Texas 77056-3898 ("Advisor") to manage
the Fund's investments. The Advisor is a Houston-based independent investment
advisor that provides value-oriented equity and balanced management for both
taxable and tax-exempt clients and currently manages approximately $650 million
in assets. The Advisor is a Texas corporation controlled by Roger E. King, the
Chairman, President and majority shareholder of the Advisor. Mr. King is
primarily responsible for the day-to-day management of the Fund's portfolio. Mr.
King co-founded the firm in 1981 and has served as its president since 1986 and
as chairman since 1993. The Fund is authorized to pay the Advisor a fee equal to
an annual average rate of 1.43% of its average daily net assets. The Advisor
has agreed to waive management fees and reimburse expenses to limit total net
operating expenses for the Fund to not more than 0.75% of its average daily net
assets through March 31, 1997. Thereafter, the Advisor has agreed to waive
management fees and reimburse expenses to limit total net operating expenses
for the Fund to not more than 1.00% of its average daily net assets for at
least its first year of operations (through 1997).
The Fund retains AmeriPrime Financial Services, Inc. ("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). In addition, the Advisor will reimburse the
Administrator for organizational expenses advanced by the Administrator. The
Fund retains American Data Services, Inc., 24 West Carver Street, Huntington,
New York 11743 ("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
("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 consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions. The Adviser (not the Fund) may pay certain financial
institutions (which may include banks, securities dealers and other industry
professionals) a "servicing fee" for performing certain administrative servicing
functions for Fund shareholders to the extent these institutions are allowed to
do so by applicable statute, rule or regulation.
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of
securities and investment techniques that the Fund may purchase or employ.
Equity Securities
Equity securities consist of common stock, preferred stock and common
stock equivalents (such as convertible preferred stock and convertible
debentures, rights and warrants) and investment companies which invest primarily
in the above. Convertible preferred stock is preferred stock that can be
converted into common stock pursuant to its terms. Convertible debentures are
debt instruments that can be converted into common stock pursuant to their
terms.
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The Fund will not invest more that 5% of its net assets at the time of
purchase in either rights or warrants. Equity securities also include common
stocks and common stock equivalents of domestic real estate investment trusts
and other companies which operate as real estate corporations or which have a
significant portion of their assets in real estate. The Fund will not acquire
any direct ownership of real estate.
The Fund may invest in foreign equity securities through the purchase of
American Depository Receipts (ADRs). ADRs are dollar-denominated receipts that
are generally issued in registered form by domestic banks, and represent the
deposit with the bank of a security of a foreign issuer. To the extent that the
Fund does invest in foreign securities, such investments may be subject to
special risks, such as changes in restrictions on foreign currency transactions
and rates of exchange, and changes in the administrations or economic and
monetary policies of foreign governments.
Fixed Income Securities
The Fund may invest in fixed income securities. Fixed income securities
include corporate debt securities, U.S. government securities and participation
interests in such securities. Fixed income securities are generally considered
to be interest rate sensitive, which means that their value will generally
decrease when interest rates rise and increase when interest rates fall.
Securities with shorter maturities, while offering lower yields, generally
provide greater price stability than longer term securities and are less
affected by changes in interest rates.
Corporate Debt Securities - Corporate debt securities are long and
short term debt obligations issued by companies (such as publicly issued and
privately placed bonds, notes and commercial paper). The Advisor considers
corporate debt securities to be of investment grade quality if they are rated
BBB or higher by Standard & Poor's Corporation, or Baa or higher by Moody's
Investors Services, Inc., or if unrated, determined by the Advisor to be of
comparable quality. Investment grade debt securities generally have adequate to
strong protection of principal and interest payments. In the lower end of this
category, credit quality may be more susceptible to potential future changes in
circumstances and the securities have speculative elements. The Fund will not
invest more than 5% of the value of its net assets in securities that are below
investment grade.
U.S. Government Obligations - U.S. government obligations may be
backed by the credit of the government as a whole or only by the issuing agency.
U.S. Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
<PAGE>
Investment Techniques
The Fund may invest up to 5% of its net assets in repurchase agreements
fully collateralized by U.S. Government obligations, as well as reverse
repurchase agreements. The Fund may engage in short sales, but the percentage of
the Fund's net assets that may be used as collateral or segregated for short
sales is limited to 5%.
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 they hold, and
maintain 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. The Fund will not invest more than 25% of its total assets
in forward commitments. 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.
Loans of Portfolio Securities - The Fund may make short and long
term loans of its portfolio securities. Under the lending policy authorized by
the Board of Trustees and implemented by the Advisor in response to requests of
broker-dealers or institutional investors which the Advisor deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the Fund on a daily mark-to-market basis in an
amount at least equal to 102% of the value of the loaned securities. The Fund
will continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on
any matter which the Board of Trustees determines to be serious. With respect to
loans of securities, there is the risk that the borrower may fail to return the
loaned securities or that the borrower may not be able to provide additional
collateral.
General
The Fund may invest in mortgage related securities, invest in foreign
securities other than ADR's, and may buy and write put and call options and
futures on stock indices, provided the Fund's investment in each does not exceed
5% of its net assets.
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.
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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 changes in its price or underlying value, or general
economic or market 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. 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.
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) Mid Cap Index, the Russell 2000 Value Index, or the S&P 500 Index.
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
Jenswold, King and Associates, Inc. AmeriPrime Financial Services, Inc.
Two Post Oak Central 1793 Kingswood Drive, Suite 200
1980 Post Oak Blvd., Suite 2400 Southlake, Texas 76092
Houston, Texas 77056-3898
<PAGE>
Custodian Distributor
Star Bank, N.A. AmeriPrime Financial Securities, Inc.
P.O. Box 641082 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.
<PAGE>
TABLE OF CONTENTS PAGE
SUMMARY OF FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . 2
Shareholder Transaction Expenses . . . . . . . . . . . . . . . . 2
Annual Fund Operating Expenses . . . . . . . . . . . . . . . . . 2
THE FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . 5
By Mail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
By Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional Information . . . . . . . . . . . . . . . . . . . . . 6
SHARE PRICE CALCULATION . . . . . . . . . . . . . . . . . . . . . . 7
DIVIDENDS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 7
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
OPERATION OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . 8
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS. . . . . . 9
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
Fixed Income Securities . . . . . . . . . . . . . . . . . . . . . 10
Investment Techniques . . . . . . . . . . . . . . . . . . . . . . 11
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 11
Fundamental Policies . . . . . . . . . . . . . . . . . . . . . . 11
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . 12
Shareholder Rights . . . . . . . . . . . . . . . . . . . . . . . 12
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
FOUNTAINHEAD SPECIAL VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
December 23, 1996
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of Fountainhead Special Value Fund
dated December 23, 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 1-800-868-9535.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
DESCRIPTION OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . 1
ADDITIONAL INFORMATION ABOUT FUND
INVESTMENTS AND RISK CONSIDERATIONS . . . . . . . . . . . . . . . . 1
INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . 6
THE INVESTMENT ADVISOR. . . . . . . . . . . . . . . . . . . . . . . 8
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO TRANSACTIONS AND BROKERAGE. . . . . . . . . . . . . . . . 10
DETERMINATION OF SHARE PRICE. . . . . . . . . . . . . . . . . . . . 11
INVESTMENT PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . 11
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE>
DESCRIPTION OF THE TRUST
Fountainhead Special Value 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 four series 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.
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 preferred stock is preferred stock that can be
converted into common stock pursuant to its terms. Warrants are options to
purchase equity securities at a specified price valid for a specific time
period. Rights are similar to warrants, but normally have a short duration and
are distributed by the issuer to its shareholders. The Fund may invest up to 5%
of its net assets at the time of purchase in rights or warrants.
B. Repurchase Agreements. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a U.S.
Government obligation (which may be of any maturity) and the seller agrees to
repurchase the obligation at a future time at a set price, thereby determining
the yield during the purchaser's holding period (usually not more than seven
<PAGE>
days from the date of purchase). Any repurchase transaction in which the Fund
engages will require full collateralization of the seller's obligation during
the entire term of the repurchase agreement. In the event of a bankruptcy or
other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, the Fund
intends to enter into repurchase agreements only with the Custodian, other
banks with assets of $1 billion or more and registered securities dealers
determined by the Advisor (subject to review by the Board of Trustees) to be
creditworthy. The Advisor monitors the creditworthiness of the banks and
securities dealers with which the Fund engages in repurchase transactions, and
the Fund will not invest more than 5% of its net assets in repurchase
agreements.
C. Reverse Repurchase Agreements. Reverse repurchase agreements involve
sales of portfolio securities by the Fund to member banks of the Federal Reserve
System or recognized securities dealers, concurrently with an agreement by the
Fund to repurchase the same securities at a later date at a fixed price, which
is generally equal to the original sales price plus interest. The Fund retains
record ownership and the right to receive interest and principal payments on the
portfolio security involved. The Fund's objective in such a transaction would be
to obtain funds to pursue additional investment opportunities whose yield would
exceed the cost of the reverse repurchase transaction. Generally, the use of
reverse repurchase agreements should reduce portfolio turnover and increase
yield.
In connection with each reverse repurchase agreement, the Fund will
direct its Custodian to place cash or U.S. government obligations in a separate
account in an amount equal to the repurchase price. In the event of bankruptcy
or other default by the purchaser, the Fund could experience both delays in
repurchasing the portfolio securities and losses.
D. Illiquid Securities. The portfolio of the Fund may contain illiquid
securities. Illiquid securities generally include securities which cannot be
disposed of promptly and in the ordinary course of business without taking a
reduced price. Securities may be illiquid due to contractual or legal
restrictions on resale or lack of a ready market. The following securities are
considered to be illiquid: repurchase agreements and reverse repurchase
agreements maturing in more than seven days, nonpublicly offered securities and
restricted securities. The Fund will not invest more than 5% of its net assets
in illiquid securities.
E. Mortgage-Related Securities. Mortgage-related securities include
securities representing interests in a pool of mortgages. These securities,
including securities issued by FNMA, GNMA and the Federal Home Loan Mortgage
Corporation, provide investors with payments consisting of both interest and
principal as the mortgages in the underlying mortgage pools are repaid. The Fund
will only invest in pools of mortgage loans assembled for sale to investors by
agencies or instrumentalities of the U.S. government and will limit its
investment to 5% of its net assets. Unscheduled or early payments on the
underlying mortgages may shorten the securities' effective maturities.
Other types of securities representing interests in a pool of mortgage
loans are known as collateralized mortgage obligations (CMOs) and real estate
mortgage investment conduits (REMICs) and multi-class pass-throughs. CMOs and
REMICs are debt instruments collateralized by pools of mortgage loans or other
mortgage-backed securities. Multi-class pass-through securities are equity
interests in a trust composed of mortgage loans or other mortgage-backed
securities.
<PAGE>
Payments of principal and interest on underlying collateral provides the funds
to pay debt service on the CMO or REMIC or make scheduled
distributions on the multi-class pass-through securities. The Fund will only
invest in CMOs, REMICs and multi-class pass-through securities (collectively
"CMOs" unless the context indicates otherwise) issued by agencies or
instrumentalities of the U.S. government (such as the Federal Home Loan Mortgage
Corporation). Neither Fund will invest in "stripped" CMOs, which represent only
the income portion or the principal portion of the CMO.
CMOs are issued with a variety of classes or "tranches," which have
different maturities and are often retired in sequence. One or more tranches of
a CMO may have coupon rates which reset periodically at a specified increment
over an index such as the London Interbank Offered Rate ("LIBOR"). These
"floating rate CMOs," typically are issued with lifetime "caps" on their coupon
rate, which means that there is a ceiling beyond which the coupon rate may not
be increased. The yield of some floating rate CMOs varies in excess of the
change in the index, which would cause the value of such CMOs to fluctuate
significantly once rates reach the cap.
REMICs, which have elected to be treated as such under the Internal
Revenue Code, are private entities formed for the purpose of holding a fixed
pool of mortgages secured by an interest in real property. REMICs are similar to
CMOs in that they issue multiple classes of securities. As with other CMOs, the
mortgages which collateralize the REMICs in which a Fund may invest include
mortgages backed by GNMA certificates or other mortgage pass-throughs issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
The average life of securities representing interests in pools of
mortgage loans is likely to be substantially less than the original maturity of
the mortgage pools as a result of prepayments or foreclosures of such mortgages.
Prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest, and have the effect of reducing future
payments. To the extent the mortgages underlying a security representing an
interest in a pool of mortgages are prepaid, the Fund may experience a loss (if
the price at which the respective security was acquired by the Fund was at a
premium over par, which represents the price at which the security will be
redeemed upon prepayment). In addition, prepayments of such securities held by
the Fund will reduce the share price of the Fund to the extent the market value
of the securities at the time of prepayment exceeds their par value.
Furthermore, the prices of mortgage-related securities can be significantly
affected by changes in interest rates. Prepayments may occur with greater
frequency in periods of declining mortgage rates because, among other reasons,
it may be possible for mortgagors to refinance their outstanding mortgages at
lower interest rates. In such periods, it is likely that any prepayment proceeds
would be reinvested by the Fund at lower rates of return.
F. Foreign Securities. The Fund may invest up to 5% of its net assets at
the time of purchase in foreign equity securities including common stock,
preferred stock and common stock equivalents issued by foreign companies, and
foreign fixed income securities. Foreign fixed income securities include
corporate debt obligations issued by foreign companies and debt obligations of
foreign governments or international organizations. This category may include
floating rate obligations, variable rate obligations, Yankee dollar obligations
(U.S. dollar denominated obligations issued by foreign companies and traded on
U.S. markets) and Eurodollar obligations (U.S. dollar denominated obligations
issued by foreign companies and traded on foreign markets).
<PAGE>
Foreign government obligations generally consist of debt securities
supported by national, state or provincial governments or similar political
units or governmental agencies. Such obligations may or may not be backed by the
national government's full faith and credit and general taxing powers.
Investments in foreign securities also include obligations issued by
international organizations. International organizations include entities
designated or supported by governmental entities to promote economic
reconstruction or development as well as international banking institutions and
related government agencies. Examples are the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank. In
addition, investments in foreign securities may include debt securities
denominated in multinational currency units of an issuer (including
international issuers). An example of a multinational currency unit is the
European Currency Unit. A European Currency Unit represents specified amounts of
the currencies of certain member states of the European Economic Community, more
commonly known as the Common Market.
Purchases of foreign securities are usually made in foreign currencies
and, as a result, the Fund may incur currency conversion costs and may be
affected favorably or unfavorably by changes in the value of foreign currencies
against the U.S. dollar. In addition, there may be less information publicly
available about a foreign company then about a U.S. company, and foreign
companies are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. Other risks
associated with investments in foreign securities include changes in
restrictions on foreign currency transactions and rates of exchanges, changes in
the administrations or economic and monetary policies of foreign governments,
the imposition of exchange control regulations, the possibility of expropriation
decrees and other adverse foreign governmental action, the imposition of foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
G. Option Transactions. Up to 5% of the Fund's net assets may be invested
in option transactions involving individual securities and market indices. An
option involves either (a) the right or the obligation to buy or sell a specific
instrument at a specific price until the expiration date of the option, or (b)
the right to receive payments or the obligation to make payments representing
the difference between the closing price of a market index and the exercise
price of the option expressed in dollars times a specified multiple until the
expiration date of the option. Options are sold (written) on securities and
market indices. The purchaser of an option on a security pays the seller (the
writer) a premium for the right granted but is not obligated to buy or sell the
underlying security. The purchaser of an option on a market index pays the
seller a premium for the right granted, and in return the seller of such an
option is obligated to make the payment. A writer of an option may terminate the
obligation prior to expiration of the option by making an offsetting purchase of
an identical option. Options are traded on organized exchanges and in the
over-the-counter market. Options on securities which the Fund sells (writes)
will be covered or secured, which means that it will own the underlying security
(for a call option); will segregate with the Custodian high quality liquid debt
obligations equal to the option exercise price (for a put option); or (for an
option on a stock index) will hold a portfolio of securities substantially
replicating the movement of the index (or, to the extent it does not hold such a
portfolio, will
<PAGE>
maintain a segregated account with the Custodian of high quality liquid debt
obligations equal to the market value of the option, marked to market
daily). When the Fund writes options, it may be required to maintain a
margin account, to pledge the underlying securities or U.S. government
obligations or to deposit liquid high quality debt obligations in a separate
account with the Custodian.
The purchase and writing of options involves certain risks; for example,
the possible inability to effect closing transactions at favorable prices and an
appreciation limit on the securities set aside for settlement, as well as (in
the case of options on a stock index) exposure to an indeterminate liability.
The purchase of options limits the Fund's potential loss to the amount of the
premium paid and can afford the Fund the opportunity to profit from favorable
movements in the price of an underlying security to a greater extent than if
transactions were effected in the security directly. However, the purchase of an
option could result in the Fund losing a greater percentage of its investment
than if the transaction were effected directly. When the Fund writes a covered
call option, it will receive a premium, but it will give up the opportunity to
profit from a price increase in the underlying security above the exercise price
as long as its obligation as a writer continues, and it will retain the risk of
loss should the price of the security decline. When the Fund writes a covered
put option, it will receive a premium, but it will assume the risk of loss
should the price of the underlying security fall below the exercise price. When
the Fund writes a covered put option on a stock index, it will assume the risk
that the price of the index will fall below the exercise price, in which case
the Fund may be required to enter into a closing transaction at a loss. An
analogous risk would apply if the Fund writes a call option on a stock index and
the price of the index rises above the exercise price.
H. Hedging Transactions. The Fund may hedge all or a portion of its
portfolio investments through the use of options and futures contracts. The
objective of the hedging program is to protect a profit or offset a loss in a
portfolio security from future price erosion or to assure a definite price for a
security by acquiring the right or option to purchase or to sell a fixed amount
of the security at a future date. For example, in order to hedge against the
risk that the value of the Fund's portfolio securities may decline, the fund
might sell futures contracts on stock indices. When hedging of this character is
successful, any depreciation in the value of the hedged portfolio securities
will be substantially offset by an increase in the Fund's equity in the stock
index futures position.
There is no assurance that the objective of the hedging program will
be achieved, since the success of the program will depend on the Advisor's
ability to predict the future direction of the relevant security or stock index,
and incorrect predictions by the Advisor may have an adverse effect on the Fund.
In this regard, skills and techniques necessary to arrive at such predictions
are different from those needed to predict price changes in individual stocks.
A stock index futures contract is a binding contractual commitment
which involves the payment or receipt of payments representing, respectively,
the loss or gain of a specified market index. Ordinarily, the Fund would enter
into stock index futures contracts to hedge its investments in common stocks.
Futures contracts are traded on exchanges licensed and regulated by the
Commodity Futures Trading Commission. The Fund will be subject to any
limitations imposed by the exchanges with respect to futures contracts trading
and positions. A clearing corporation associated with the particular exchange
assumes responsibility for all purchases and sales and guarantees delivery and
payment on the contracts. Although most futures contracts call for actual
<PAGE>
delivery or acceptance of the underlying securities or currency, in most cases
the contracts are closed out before settlement date without the making or taking
of delivery. Closing out is accomplished by entering into an offsetting
transaction, which may result in a profit or a loss. There is no assurance that
the Fund will be able to close out a particular futures contract.
A hedging strategy involving options and futures contracts entails
some risks. For example, the total premium paid for an option may be lost if the
Fund does not exercise the option or futures contract, or the writer does not
perform his obligations. It is also possible that the futures contracts selected
by the Fund will not follow the price movement of the underlying stock index. If
this occurs, the hedging strategy may not be successful. Further, if the Fund
sells a stock index futures contract and is required to pay an amount measured
by any increase in the market index, it will be exposed to an indeterminate
liability. In addition, a liquid secondary market may not exist for any
particular option or futures contract at any specific time.
The Fund will incur transactional costs in connection with the hedging
program. When the Fund purchases or sells a futures contract, an amount of cash
and liquid assets will be deposited in a segregated account with the Trust's
Custodian to guarantee performance of the futures contract. The amount of such
deposits will depend upon the requirements of each exchange and broker and will
vary with each futures contract. Because open futures contract positions are
marked to market and gains and losses are settled on a daily basis, the Fund may
be required to deposit additional funds in such a segregated account if it has
incurred a net loss on its open futures contract positions on any day.
The Trust has filed a supplemental notice of eligibility with the
Commodity Futures Trading Commission ("CFTC") to claim relief from regulation as
a commodity "pool" within the meaning of the CFTC's regulations. In its filing,
the Trust has represented that the Fund's transactions in futures contracts will
constitute bona fide hedging transactions within the meaning of such regulations
and that the Fund will enter into commitments which require as deposits for
initial margin for futures contracts no more than 5% of the fair market value of
its assets.
I. Short Sales. The Fund may sell a security short in anticipation of a
decline in the market value of the security. When the Fund engages in a short
sale, it sells a security which it does not own. To complete the transaction,
the Fund must borrow the security in order to deliver it to the buyer. The Fund
must replace the borrowed security by purchasing it at the market price at the
time of replacement, which may be more or less than the price at which the Fund
sold the security. The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund will realize a
profit if the security declines in price between those dates.
In connection with its short sales, the Fund will be required to
maintain a segregated account with its Custodian of cash or high grade liquid
assets 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 5% 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's policy
with respect to short sales is fundamental, although the particular practices
followed with respect to short sales, such as the percentage of the Fund's
assets
<PAGE>
which may be deposited as collateral or allocated to the segregated
account, are not deemed fundamental and may be changed by the Board of Trustees
without the vote of the Fund's shareholders.
J. Corporate Debt Securities. Corporate debt securities are bonds or notes
issued by corporations and other business organizations, including business
trusts, in order to finance their credit needs. Corporate debt securities
include commercial paper which consist of short term (usually from one to two
hundred seventy days) unsecured promissory notes issued by corporations in order
to finance their current operations.
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.
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 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
<PAGE>
investing in companies engaged in the real estate business or have a
significant portion of their assets in real estate (including real estate
investment trusts).
5. Commodities. The Fund will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. The Fund will not invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum limitations
on its investment policies and limitations, an excess above the fixed percentage
will not be a violation of the policy or limitation unless the excess results
immediately and directly from the acquisition of any security or the action
taken. This paragraph does not apply to the borrowing policy set forth in
paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment company,
whether organized as a trust, association or corporation, or a personal holding
company, may be merged or consolidated with or acquired by the Trust, provided
that if such merger, consolidation or acquisition results in an investment in
the securities of any issuer prohibited by said paragraphs, the Trust shall,
within ninety days after the consummation of such merger, consolidation or
acquisition, dispose of all of the securities of such issuer so acquired or such
portion thereof as shall bring the total investment therein within the
limitations imposed by said paragraphs above as of the date of consummation.
Non-Fundamental. The following limitations have been adopted by the Trust
with respect to the Fund and are Non-Fundamental (see "Investment 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) representing more than 5% of its
total assets are outstanding. The Fund will not invest more than 5% of its net
assets in reverse repurchase agreements.
<PAGE>
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 transactions
involving options, futures contracts, short sales and other permitted
investments and techniques.
iv. Short Sales. The Fund will not effect short sales of securities
unless it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short.
v. Options. The Fund will not purchase or sell puts, calls, options or
straddles, except as described in the Prospectus and this Statement of
Additional Information.
vi. Repurchase Agreements. The Fund will not invest more than 5% of its
net assets in repurchase agreements.
vii. Illiquid Investments. The Fund will not invest more than 5% of its
net assets in securities for which there are legal or contractual restrictions
on resale and other illiquid securities.
THE INVESTMENT ADVISOR
The Fund's investment advisor is Jenswold, King & Associates, Inc., Two
Post Oak Central, 1980 Post Oak Boulevard, Suite 2400, Houston, Texas
77056-3898. Roger E. King may be deemed to be a controlling person of the
Advisor due to his ownership of a majority of its shares.
Under the terms of the management agreement (the "Agreement"), the Advisor
manages the Fund's investments subject to approval of the Board of Trustees and
pays all of the expenses of the Fund except brokerage, 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 1.75% 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 Advisor retains the right to use the name "Fountainhead" 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 "Fountainhead"
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 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
<PAGE>
fees for offering these services to the extent permitted by applicable
regulatory authorities, and the overall return to those shareholders
availing themselves of the bank services will be lower than to those
shareholders who do not. The Fund may from time to time purchase securities
issued by banks which provide such services; however, in selecting investments
for the Fund, no preference will be shown for such securities.
TRUSTEES AND OFFICERS
The 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
Age: 38 Financial Services, Inc., the Fund's administrator,
1793 Kingswood Drive and AmeriPrime Financial Securities, Inc.,
Suite 200 the Fund's distributor. Prior to December, 1994,
Southlake, Texas 76092 a senior client executive with SEI Financial Service.
Kelli D. Shomaker, C.P.A. Secretary, Treasurer Manager of Compliance of AmeriPrime Financial Services, Inc.;
Age: 34 Vice President, Chief Accounting Officer,
1793 Kingswood Drive Treasurer and Controller of United Services Advisors, Inc.
Suite 200 and United Services Insurance Funds from 1994 to 1995;
Southlake, Texas 76092 Vice President, 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/
Coppell, Texas 76019 supply 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
Houston, Texas 70002 Chief Investment Officer of Legacy Trust Company;
Vice President and Manager 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.
<PAGE>
<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>
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.
<PAGE>
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.
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:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at the
beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
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.
<PAGE>
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 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., 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, American Data
Services, Inc. provides the Fund with certain monthly reports, record-keeping
and other management-related 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.
