AIT Vision Fund
Investment Results - For the Fiscal Year Ended October 31, 1997
Dear Fellow Shareholders:
As of the fiscal year ended October 31, 1997, the AIT Vision Fund appreciated by
19.9% and 24.6% over the trailing six months and one year, respectively.
According to Lipper Analytical Services, Inc. the Lipper Growth Fund Index rose
18.3% and 28.4% during the last six months and one year, respectively. The
Fund's investment results are compared to the unmanaged S&P 500 and Russell 3000
indices below.
<TABLE>
<CAPTION>
- ------------------------------------------------- -- ---- ----- ------------------- ------- -----------------
Returns for the Periods Ended 10/31/97
- ------------------------------------------------- -- ---- ----- ------------------- ------- -----------------
<S> <C> <C> <C> <C>
Since Inception Average
Fund/Index 6 Months 1 Year 12/28/95 Annual
- ---------- -------- ------ -------- ------
AIT Vision Fund 19.9% 24.6% 57.3% 27.9%
S&P 500 15.2% 32.1% 54.4% 26.6%
Russell 3000 17.6% 31.6% 52.1% 25.6%
- ----------------------- ----- --------------------- ------------------- --------------------- --- -----------
</TABLE>
Comparison of the Change in Value of a $10,000 Investment in the AIT Vision
Fund, the Unmanaged S&P 500 Index, and the Unmanaged Russell 3000 Index [OBJECT
OMITTED]This chart shows the value of a hypothetical initial investment of
$10,000 in the Fund, the S&P 500 Index, and the Russell 3000 Index on December
28, 1995 and held through October 31, 1997. The S&P 500 Index and the Russell
3000 Index are widely recognized unmanaged indices of common stock prices.
Performance figures include the change in value of the stocks in the indices,
reinvestment of dividends, and are not annualized. The index returns do not
reflect expenses, which have been deducted from the Fund's return. THE FUND'S
RETURN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS.
<PAGE>
Portfolio Overview
While the Fund has provided a solid return of 24.6% over the past year, the last
six months have been particularly strong. For the last six months the Fund has
generated a total return of 19.9% which compares very favorably to the 17.6%
return for the Russell 3000 benchmark. The primary sources of the Fund's
outperformance of the Russell 3000 are superior individual stock selection,
greater exposure to smaller capitalization stocks with strong earnings growth
trends, and an overweighting of the oil service industry. Detailed below are the
economic sector weightings and the largest holdings for the Fund as of October
31, 1997.
- -------------------------------------- ------------ --------------
Economic Sector Weightings
- -------------------------------------- ------------ --------------
Percent of
Net Assets
10/31/97
Basic Materials 3.5%
Consumer Durables 0.0%
Capital Goods 1.8%
Consumer Nondurables 8.0%
Energy 12.0%
Financial Services 23.8%
Health Care 8.8%
Retail Trade 5.5%
Services 8.0%
Technology 16.0%
Telecommunication 4.1%
Transportation 3.6%
Utilities 3.1%
Cash 1.8%
-- ----
Total 100.0%
- ------------------------------------ -------------- --------------
- ------------------------------------ -------------- --------------
Ten Largest Holdings
- ------------------------------------ -------------- --------------
Percent of
Net Assets
10/31/97
Eli Lilly and Co. 3.0%
Warner Lambert Co. 2.9%
Northern Trust Corp. 2.6%
US Bancorp 2.5%
Gap Inc. 2.4%
Helmerich and Payne Inc. 2.3%
CNF Transportation Inc. 2.3%
Robert Half International Inc. 2.3%
Dean Foods Co. 2.2%
ENSCO International Inc. 2.2%
-- ----
Total 24.7%
- ------------------------------------ -------------- --------------
Commentary - Will The Good Times Continue To Roll?
The recent "Goldilocks Phase" of the current economic expansion - where economic
growth has been not "too hot" to cause inflation nor "too cold" to create a
recession - has provided an environment which has been "just right" for the U.S.
equity markets. From January 1995 through October 1997, the S&P 500 has risen
112.0%, or 30.4% annually on average. Will these robust equity returns continue?
Forever?
The equity market can be viewed as a twin-engine vehicle whose engines are
corporate earnings and interest rates running on the fuel of sentiment and
liquidity which propels the market through a landscape of diverse global
influences. Investors have enjoyed a phenomenal ride driven by steady earnings
growth and stable-to-falling interest rates which in turn have been fueled by
complacent sentiment and tremendous demographically derived liquidity. Looking
into the next year, earnings growth still appears favorable and long term
interest rates are fundamentally trending downward with little signs of
significant inflation on the horizon. Baby boom investors should continue to
provide considerable demand for equity investments which in turn tends to
establish a cushioned floor to potential market downturns. Also, the current
sentiment of market strategists is very negative which has historically been a
contrarian indicator of actual future equity potential. Therefore, while 30%
annual returns will not likely persist, the characteristics of the upcoming year
still cause us to be bullish overall on the U.S. equity market. However, given
the prevailing Emerging Markets currency crisis and unsettled Middle Eastern
politics, volatility should remain elevated in the near term and major movements
to the upside subdued.
The quantitative investment discipline employed within the Fund will continue to
emphasize stocks of companies whose earnings trends are superior to other
companies and whose valuations are cheap relative to their industrial peers. Our
selection universe will continue to be broad in order to allow the Fund maximum
flexibility in identifying superior investment opportunities. Furthermore, the
Fund will continue to maintain a near fully invested cash position and avoid the
dubious seductions of broad market timing.
Thank you for your trust and continued confidence.
Respectfully,
Douglas W. Case, CFA
Managing Director
Advanced Investment Technology, Inc.
<TABLE>
<CAPTION>
AIT Vision U.S. Equity Portfolio
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stocks - 98.2% Shares Value
Aerospace & Defense - 1.3%
Lockheed Martin Corp. 700 $ 66,544
-------------------
Apparel - 2.0%
TJX Companies Inc. 3,300 97,763
-------------------
Banks - 10.2%
Citicorp 700 87,544
H.F. Ahmanson & Co. 1,300 76,700
Mellon Bank Corp. 1,800 92,813
Northern Trust Corp. 2,200 128,700
U.S. Bank Corp. Delaware 1,200 122,025
-------------------
507,782
-------------------
Chemicals - 1.8%
Rohm & Hass & Co. 1,100 91,644
-------------------
Communications & Communications Equipment - 6.2%
Aliant Communications 2,100 53,812
Bell South Corp. 1700 80,430
Clear Channel Communications (a) 1,600 105,600
Northern Telecom Ltd. 800 71,750
-------------------
311,592
-------------------
Computers, Periphals & Software- 12.1%
Cisco Systems Inc. (a) 1,200 98,437
Computer Associates International 1,400 104,387
Dell Computer (a) 1,100 88,137
IBM Corp. 900 88,255
Intel Corp. 1,200 92,400
Microsoft Corp. (a) 700 91,000
Texas Instruments Inc. 400 42,675
-------------------
605,291
-------------------
Cosmetics - 1.9%
Alberto-Culver Co. Class B 3,100 93,581
-------------------
Drugs - 5.8%
Lilly Eli & Co. 2,200 147,125
Warner Lambert Co. 1,000 143,188
-------------------
-------------------
290,313
-------------------
AIT Vision U.S. Equity Portfolio - continued
Common Stocks - continued
Electric Utilities - 3.1% Shares Value
Long Island Lighting Co. 2,900 $ 73,044
Oneok Inc. 2,400 82,350
-------------------
-------------------
155,394
-------------------
Electronics - 4.4%
Magnatek Inc. (a) 4,400 89,375
Maxim Integrated Products (a) 800 53,000
Perkin-Elmer Corp. 1,200 75,000
-------------------
217,375
-------------------
Energy - Oil & Gas - 11.8%
Chevron Corp. 1,300 107,819
Ensco International Inc. 2,600 109,363
First American Corp. 2,200 104,500
Noble Drilling Corp. (a) 2,700 96,019
Phillips Petroleum Corp. 2,100 101,588
Texaco Inc. 1,200 68,325
-------------------
587,614
-------------------
Financial Services - 4.3%
Franklin Resources Inc. 500 44,938
Green Tree Financial Corp. 1,800 75,825
MBNA Corp. 3,500 92,094
-------------------
-------------------
212,857
-------------------
Food - 6.1%
Dean Foods Co. 2,300 108,819
Interstate Bakeries 1,600 102,200
Quaker Oats Co. 2,000 95,750
-------------------
306,769
-------------------
Healthcare - 4.2%
Helmerich & Payne 1,400 112,963
Tenet Healthcare (a) 3,200 97,800
-------------------
210,763
-------------------
Holding Companies - 1.2%
Fremont General Corp. 1,300 60,613
-------------------
Insurance - 6.0%
Conseco Inc. 1,500 65,438
Protective Life Corp. 1,500 79,313
Travelers Group 1,300 91,000
Washington Mutual Inc. 900 61,593
-------------------
297,344
-------------------
AIT Vision U.S. Equity Portfolio - continued
Common Stocks - continued
Paper Mills - 1.7% Shares Value
Bowater Inc. 2,000 $ 83,625
-------------------
Newspapers, Publishing & Printing - 3.6%
Belo A.H. Corp. 2,000 94,500
Washington Post Co. 200 86,800
-------------------
181,300
-------------------
Railroads - 2.2%
Consolidated Freightways Co. 2,500 111,562
-------------------
Retail - 3.6%
GAP Inc. 2,200 117,013
Nordstrom Inc. 1,000 61,250
-------------------
178,263
-------------------
Services - 3.3%
HBO & Co. 1,200 52,200
Robert Half International Inc. (a) 2,700 110,530
-------------------
-------------------
162,730
-------------------
Transportation - 1.4%
Yellow Corp. (a) 2,500 68,593
-------------------
TOTAL COMMON STOCKS (Cost $4,399,842) $4,899,312
-------------------
AIT Vision U.S. Equity Portfolio - continued
Money Market Securities - 1.8% Principal Amount
Star Treasury 4.96%, 10/31/97 $88,006 $88,006
-------------------
Total Bonds & Notes (Cost $88,006)
TOTAL INVESTMENTS - 100.0%
(Cost $4,487,848) $4,987,318
-------------------
Other Assets less liabilities - 0.0% 2,026
-------------------
TOTAL NET ASSETS - 100% $4,989,344
<FN>
===================
(a) non-income producing security
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AIT Vision U.S. Equity Portfolio October 31,1997
Statement of Assets and Liabilities
Assets
<S> <C> <C>
Investment in securities, at value (cost $4,487,848) $ 4,987,318
Dividends receivable 3,783
Interest receivable 313
Receivable from advisor for trustees fees 1,336
--------------------
Total assets 4,992,750
Liabilities
Accrued advisory fee $ 3,065
Accrued trustees' fees 341
------------------
Total liabilities 3,406
--------------------
Net Assets 4,989,344
====================
Net Assets consist of:
Paid in capital $ 4,202,071
Accumulated undistributed net investment income 15,530
Accumulated undistributed net realized gain 272,273
Net unrealized appreciation on investments 499,470
--------------------
Net Assets, for 361,850 shares 4,989,344
====================
Net Asset Value
Net Assets
Offering price and redemption price per share ($4,989,344/361,850) $ 13.79
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AIT Vision U.S. Equity Portfolio
Statement of Operations for the year ended October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 34,491
Interest Income 2,630
-------------------
Total Income 37,121
Expenses
Investment advisory fee $ 21,591
Trustee's fees 1,336
-------------------
Total Expenses before reimbursement 22,927
Reimbursed expenses (1,336)
-------------------
Total operating expenses 21,591
-------------------
Net Investment Income 15,530
-------------------
Realized & Unrealized Gain
Net realized gain on investment securities 271,121
Change in net unrealized appreciation of investment securities 465,335
-------------------
Net gain 736,456
-------------------
Net increase in net assets resulting
from operations $ 751,986
===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AIT Vision U.S. Equity Portfolio
Statement of Changes in Net Assets November 6, 1995
For the year (commencement of
ended October 31, operations) to October 31,
<S> <C> <C>
Increase/(Decrease) in Net Assets 1997 1996
Operations
Net investment income (loss) $ 15,530 $ (2,866)
Net realized gain 271,121 82,838
Change in net unrealized appreciation 465,335 34,135
---------------- ----------------
Net Increase in net assets resulting from operations 751,986 114,107
---------------- ----------------
Distributions to shareholders:
From net investment income - 0
From net realized gain (81,686) 0
---------------- ----------------
Total distributions (81,686)
Share Transactions
Net proceeds from sale of shares 3,706,126 536,013
Shares issued in reinvestment of distributions 81,686 0
Shares redeemed (95,927) (47,961)
---------------- ----------------
Net increase in net assets resulting
from share transactions 3,691,885 488,052
---------------- ----------------
Total increase in net assets 4,362,185 602,159
Net Assets
Beginning of period 627,159 25,000
---------------- ----------------
End of period [including undistributed net investment
income(loss) of $15,530 and $(2,866)] $ 4,989,344 $ 627,159
================ ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AIT Vision U.S. Equity Portfolio
Financial Highlights November 6, 1995
For the year (commencement of
Selected Per Share Data ended October 31, operations) to October 31,
1997 1996
<S> <C> <C>
Net asset value,
beginning of period $12.62 $10.00
--------------- ---------------
Income from investment
Operations
Net investment income (loss) 0.06 (0.07)
Net realized and
unrealized gain (loss) 2.71 2.69
--------------- ---------------
Total from investment operations 2.77 2.62
Less Distributions
From net investment income (1.60) 0.00
--------------- ---------------
Net asset value,
end of period $13.79 $12.62
=============== ===============
Total Return 24.65% 26.(a)
Ratios and Supplemental Data
Net assets, end of period (000) $4,989 $627
Ratio of expenses to
average net assets 0.70% 1.87(a)
Ratio of expenses to
average net assets before reimbursement 0.74% 1.87(a)
Ratio of net investment income to
average net assets 0.50% (0.70)(a)
Ratio of net investment income to
average net assets before reimbursement 0.46% -
Portfolio turnover rate 253.52% 238.63(a)
Average commission rate 0.03361 0.0471
<FN>
(a) Annualized
</FN>
</TABLE>
AIT VISION U.S. EQUITY PORTFOLIO
Notes to Financial Statements
October 31, 1997
NOTE 1. ORGANIZATION
The AIT Vision U.S. Equity Portfolio (the "Fund") is organized as a series
of the AmeriPrime Funds, an Ohio business trust (the "Trust). The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified series, open end management investment company whose investment
objective is to provide long term growth of capital. The Trust Agreement permits
the Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value.
NOTE2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Securities Valuations- 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 Adviser'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
Adviser 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 Adviser, in conformity with guidelines
adopted by and 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
Adviser 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 Adviser,
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.
<PAGE>
AIT VISION U.S. EQUITY PORTFOLIO
Notes to Financial Statements
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Advanced Investment Technology, Inc. (the "Adviser") to
manage the Fund's investments. The adviser is controlled by its majority
shareholder, State Street Global Advisers, a division of State Street Bank &
Trust Company. Douglas W. Case, CFA, Chief Investment Officer, Dean S. Barr,
Chairman and Chief Executive Officer and Susan L. Reigel, Portfolio Management,
are primarily responsible for the day to day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
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 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 Adviser of 0.70% of the average daily
net assets of the Fund. It should be noted that most investment companies pay
their own operating expenses directly, while the Fund's expenses, except those
specified above, are paid by the Adviser. For the period from November 1, 1996
through October 31, 1997, the Adviser has received a fee of $21,591 from the
Fund.
AIT VISION U.S. EQUITY PORTFOLIO
Notes to Financial Statements
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $4,202,071.
Transactions in capital stock were as follows:
<PAGE>
<TABLE>
<CAPTION>
For the period For the period
November 6, 1995 from November 6,
(Commencement of 1995 (Commencement
Operations) through of Operations)
For the year ended For the year ended October 31, 1996 through October
October 31, 1997 October 31, 1997 31, 1996
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold 312,107 $3,706,126 51,315 $536,013
Shares issued in
reinvestment of
dividends 7,210 81,686 0 0
Shares redeemed (7,160) (91,927) (4,122) (47,961)
------- -------- ------- --------
312,158 $3,695,885 47,193 $488,052
</TABLE>
<PAGE>
NOTE 5. INVESTMENTS
For the period from November 1, 1996 through October 31, 1997, purchases
and sales of investment securities, other than short-term investments,
aggregated $5,354,480 and $2,256,474 respectively. The gross unrealized
appreciation for all securities totaled $602,868 and the gross unrealized
depreciation for all securities totaled $103,398 for a net unrealized
appreciation of $499,470. The aggregate cost of securities for federal income
tax purposes at October 31, 1997 was $4,487,848.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
AIT VISION U.S. EQUITY PORTFOLIO
Notes to Financial Statements
October 31, 1997
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does not
receive commissions on trades made on behalf of the Funds. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund under Section
2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, LBS
Capital Management Inc., and entities which the Adviser could be deemed to
control or have discretion over owned in aggregate more than 25% of the Fund.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
AIT Vision U.S. Equity Portfolio
We have audited the accompanying statement of assets and liabilities of AIT
Vision U.S. Equity Portfolio (a member of the Ameriprime Fund series), including
the schedule of portfolio investments, as of October 31, 1997, and the related
statement of operations for the year then ended, and the statement of changes in
net assets, and financial highlights for the year then ended and for the period
from November 6, 1995 (commencement of operations) to October 31, 1996 in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of October 31, 1997, by corre- spondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIT
Vision U.S. Equity Portfolio as of October 31, 1997, the results of its
operations for the year then ended, and the changes in its net assets, and the
financial highlights for the year then ended and for the period from November 6,
1995 (commencement of operations) to October 31, 1996 in the period then ended,
in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
On November 10, 1997, a Special Meeting of the Shareholders of AIT Vision:
U.S. Equity Portfolio was held to approve the investment advisory agreement
between the fund and Advanced Investment Technology, Inc. of the 361,849.462
outstanding shares, 299,807.33, all of which voted in favor of the agreement.
November 1997
Dear Shareholders:
Once again, we are pleased to present the investment results for the
Carl Domino Equity Income Fund. Since inception in December 1995, the Fund has
returned an average annual total return of 29.8%, outpacing the S&P 500 while
taking less risk and significantly outperforming many of our competitors. Over
the past year, the Fund has repeatedly appeared among the top performing equity
income funds in the Wall Street Journal=s Mutual Fund Scoreboard.
<TABLE>
<CAPTION>
Comparative Investment YTD*** Last Average**
Returns (As of 10/31/97) 1997 1 Year Annual Return
----------------------------------- -------- --------
-------------------
(Since Inception)
<S> <C> <C> <C>
Carl Domino Equity Income Fund 28.3% 36.6% 29.8%
S&P 500 * 25.4% 32.1% 26.4%
</TABLE>
Past performance is not predictive of future performance. This chart
assumes an initial investment of $10,000 in the Fund and the S&P 500 Index
on December 1, 1995 and held through October 31, 1997. The S&P 500 Index is
a widely recognized unmanaged index of common stock prices. Performance
figures include the change in value of the stocks in the index and
reinvestment of dividends, and are not annualized. **Since inception on
December 1, 1995.
For the period January 1,1997 to October 31, 1997.
Notwithstanding the good fundamentals within the U.S. economy, some
disquieting signs did appear in the past few months. The strong bull market of
the last two and a half years ran into some stiff headwinds. In particular,
several Asian markets stumbled sharply in October following currency
devaluations in many countries in southeast Asia. Worries concerning reduced
international trade and its potentially negative effect on profit growth sent
shivers throughout every major market. Within this environment, virtually all
sectors experienced some difficulty.
With respect to the results of the Fund, investment performance has
been very favorable. Although the S&P 500 posted a negative return of 3.7% in
the most recent three month period, the Fund produced positive results of 1.7%,
thus demonstrating the defensive nature of our conservative equity discipline.
This outperformance is especially pleasing because our investment style has
produced these superior returns while taking less risk than the market.
<PAGE>
Carl Domino Associates, L.P. continues to look for stocks which provide
capital appreciation opportunities with downside protection. In these uncertain
markets, we believe dividends will play a more important role in total returns
than they did in the last two years, and that our larger companies with
above-average yields will provide superior relative investment performance. Be
assured that although we cannot guarantee future results, the investment
professionals at Carl Domino Associates, L.P. will continue to work hard to
avoid disappointments and take advantage of opportunities as they arise.
Best regards,
Carl J. Domino
<TABLE>
<CAPTION>
CARL DOMINO EQUITY INCOME FUND
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stocks Shares Value
Autos, Auto Parts - 3.1%
Chrysler Corp. 1,635 57,634
Tenneco, Inc. 1,300 58,419
------------------
------------------
116,053
------------------
Building Materials - 0.6%
Home Security International Inc. (a) 2,000 22,000
------------------
Chemicals - 1.6%
Witco Corp. 1,400 60,900
------------------
Paper & Forest Products - 2.0%
Union Camp Corp. 1,400 75,863
------------------
Energy
Oil & Gas - 12.4%
Gulf Indonesia Resources Ltd. (a) 100 2,100
Midcoast Energy Resources 4,000 96,250
Mobil Corporation 700 50,969
Sonat Corporation 2,100 96,469
Sun Co., Inc. 1,500 60,094
USX Marathon Group 1,300 46,475
Williams Companies 800 40,750
YPF Sociedad Anonima 2,200 70,400
------------------
463,507
------------------
Publishing - 2.1%
CMP Media (a) 500 9,250
Readers Digest Association 3,020 68,705
------------------
------------------
77,955
------------------
Retail - 5.5%
Intimate Brands 4,100 87,638
May Department Stores 900 48,488
Penney (J.C.) 1,200 70,425
------------------
------------------
206,551
------------------
Lodging, Restaurants, Leisure - 1.3%
Patriot American Hospitality Inc. 1,500 49,500
------------------
CARL DOMINO EQUITY INCOME FUND
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued Shares Value
Non-Durables
Cosmetics - 1.6%
International Flavors & Fragrances 1,200 $ 58,050
------------------
Food - 4.4%
General Mills 800 52,800
Heinz (H.J.) 1,200 55,725
Quaker Oats 1,200 57,450
------------------
165,975
------------------
Household Products - 1.1%
Kimberly-Clark Group 800 41,550
------------------
Tobacco - 1.1%
Philip Morris 1,050 41,606
------------------
Health
Drugs - 7.6%
American Home Products Corp. 1,400 103,775
Bristol-Myers Squibb Co. 540 47,385
Glaxo Wellcome PLC 1,800 77,063
Pharmacia & Upjohn Inc. 1,800 57,150
------------------
285,373
------------------
Diversified Medical - 1.7%
Pall Corporation 3,000 62,063
------------------
Health Care - 2.3%
Baxter International Inc. 1,500 69,375
Capital Senior Living Corp. (a) 1,000 16,750
------------------
------------------
86,125
------------------
Staples/Miscellaneous Services - 1.4%
Deluxe Corporation 1,600 52,400
------------------
Services/Miscellaneous - 7.1%
Avis Rent A Car Inc. (a) 4,300 117,981
Boron Lepour Associates (a) 1,000 24,375
Didax Inc. 4,500 17,859
Sterigenics (a) 500 11,250
Radcom Ltd. (a) 3,300 30,525
Unisource Worldwide 4,000 65,250
------------------
------------------
267,240
------------------
CARL DOMINO EQUITY INCOME FUND
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued Shares Value
Electrical Equipment - 1.6%
Thomas & Betts 1,200 $ 59,700
------------------
Diversified Machinery - 1.9%
Federal Signal Corp. 2,965 71,716
------------------
Airlines, Truckers, & Railroads - 3.9%
Knightsbridge Tankers Ltd. 2,000 60,000
Union Pacific Corp. 1,400 85,750
------------------
------------------
145,750
------------------
Electronics - 0.7%
Galileo International Inc. 1,000 25,125
------------------
Photography/Office Equipment - 2.9%
Eastman Kodak 1,050 62,869
Minnesota Mining & Manufacturing 500 45,750
------------------
------------------
108,619
------------------
Finance
Major Regional & Other Banks - 7.8%
Chase Manahattan Corp. 300 34,613
Corestates Financial Corp. 800 58,200
First Union Corp. 1,500 73,594
Nations Bank Corp. 522 31,255
South Trust Corp. 1,100 52,800
Summitt Bancorp 1,000 42,688
------------------
293,150
------------------
Insurance-multi/ Property, Casualty & Life - 1.4%
Hartford Financial Services 400 32,400
Hartford Life Inc. Class A 500 18,469
------------------
------------------
50,869
------------------
Finance - 1.6%
Ocwen Asset Management 3,000 59,625
------------------
Utilities
Electric Power Companies - 0.9%
Electricidade de Portugal (a) 1,000 34,938
------------------
Natural Gas - 2.7%
Atmos Energy Corp. 1,630 41,158
El Paso Natural Gas Company 1,027 61,555
------------------
------------------
102,713
------------------
CARL DOMINO EQUITY INCOME FUND - continued
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued Shares Value
Telephone Other - 11.0%
AT&T Corp. 1,800 $ 88,087
Amerilink Corp. (a) 2,500 65,625
China Telecomm (a) 2,150 69,605
France Telecom (a) 500 18,937
Frontier Corp. 4,000 86,500
Telefonica de Argentina 3,000 84,375
------------------
413,129
------------------
REITs - 6.0%
CCA Prison Realty Corp. 2,000 69,000
Glimcher Realty Corp. 700 15,530
Mid-America Apartment Communities Inc. 1,000 28,250
SL Green Realty Trust (a) 4,500 112,780
------------------
225,560
------------------
TOTAL COMMON STOCKS - 99.3% (Cost $3,204,108) 3,723,605
------------------
Money Market Securities - 0.8%
Star Treasury 4.96% 10/31/97(Cost $31,184) 31,184
------------------
TOTAL INVESTMENTS - 101.1% (Cost $3,235,292) 3,754,789
Liabilities less other assets (4,411)
------------------
TOTAL NET ASSETS - 100.0% 3,750,378
<FN>
------------------
(a) non-income producing
</FN>
</TABLE>
<TABLE>
<CAPTION>
Carl Domino Equity Income Fund October 31, 1997
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $3,235,292) $ 3,754,789
Receivable for securities sold 37,504
Subscriptions receivable 50,000
Dividends receivable 4,474
Interest receivable 296
Reimbursement receivable 1,335
--------------------
Total assets 3,848,398
Liabilities
Payable for investments purchased 93,180
Accrued investment advisory fee payable 4,501
Other payables and accrued expenses 339
-------------------
Total liabilities 98,020
--------------------
Net Assets 3,750,378
====================
Net Assets consist of:
Paid in capital $ 2,979,645
Accumulated undistributed net investment income 28,588
Accumulated undistributed net realized gain (loss) on investments 222,648
Net unrealized appreciation on investments 519,497
--------------------
Net Assets, for 232,251 shares $ 3,750,378
====================
Net Asset Value
Net Assets
Offering price and redemption price per share ($3,750,378/232,251) $ 16.15
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carl Domino Equity Income Fund
Statement of Operations for the year ended October 31, 1997
<S> <C> <C>
Investment Income
Dividend income $ 59,507
Interest income 2,584
--------------------
Total Investment Income 62,091
Expenses
Investment advisory fee $ 33,503
Trustees' fees 1,335
---------------
Total Expenses before Reimbursement 34,838
Reimbursed expenses (1,335)
---------------
Total Operating Expenses 33,503
--------------------
Net Investment Income (Loss) 28,588
--------------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment transactions 224,774
Change in net unrealized appreciation (depreciation) on investment securities 392,756
---------------
Net gain (loss) on investment securities 617,530
--------------------
Net increase (decrease) in net assets resulting from operations $ 646,118
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carl Domino Equity Income Fund November 6, 1995
Statement of Changes in Net Assets For the year (commencement of
ended October 31, operations)
1997 to October 31, 1996
<S> <C> <C>
Increase/(Decrease) in Net Assets
Operations
Net investment income $ 28,588 11,996
Net realized gain on investment transactions 224,774 8,455
Change in net unrealized appreciation 392,756 126,741
--------------- ---------------
Net Increase in net assets resulting from operations 646,118 147,192
--------------- ---------------
Distributions to shareholders:
From net investment income (11,997) -
---------------
---------------
From net realized gain (10,581) -
--------------- ---------------
--------------- ---------------
Total distributions (22,578) -
--------------- ---------------
Capital Share Transactions
Net proceeds from sale of shares 2,354,635 971,640
Shares issued in reinvestment of distributions 20,953 -
Shares redeemed (371,396) (21,186)
--------------- ---------------
Net increase in net assets resulting
from share transactions 2,004,192 950,454
--------------- ---------------
Total increase in net assets 2,627,732 1,097,646
Net Assets
Beginning of period 1,122,646 25,000
--------------- ---------------
End of period [including undistributed net investment income
of $28,588 and $11,996, respectively.] $ 3,750,378 $ 1,122,646
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carl Domino Equity Income Fund
Financial Highlights November 6,1996
For the year (Commencement of Operations)
ended October 31, to October 31,
Selected Per Share Data 1997 1996
<S> <C> <C>
Net asset value,
begining of period $12.03 $10.00
--------------- ---------------
Income from investment operations
Net investment income 0.19 0.16
Net realized and unrealized gain (loss) 4.15 1.87
--------------- ---------------
Total from investment operations 4.34 2.03
--------------- ---------------
Less Distributions
From net investment income (0.22) 0.00
--------------- ---------------
Net asset value,
end of period $16.15 $12.03
Total Return 36.58% 20.64%(a)
Ratios and Supplemental Data
Net assets, end of period (000) $3,750 $1,122
Ratio of expenses to average
net assets before expense reductions 1.55% 1.73%(a)
Ratio of expenses to
average net assets 1.50% 1.51%(a)
Ratio of net investment income to average
net assets before expense reductions 1.22% 1.35%(a)
Ratio of net investment income to
average net assets 1.28% 1.57%(a)
Portfolio turnover rate 52.49% 62.51%(a)
Average commission rate 0.0137 0.0604
<FN>
(a) Annualized
</FN>
</TABLE>
<PAGE>
CARL DOMINO EQUITY INCOME FUND
Notes to Financial Statements
October 31, 1997
NOTE 1. ORGANIZATION
The Carl Domino Equity Income Fund (the "Fund") was organized as a series
of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on August 8,
1995, and commenced operations on November 6, 1995. The Trust is registered
under the Investment Company Act of 1940, as amended, as a diversified series,
open end management investment company. The investment objective of the fund is
to provide long-term growth of capital together with current income. The Trust
Agreement permits the Trustees to issue an unlimited number of shares of
beneficial interest of separate series without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Securities Valuations- 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 Adviser'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
Adviser 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 Adviser, in conformity with guidelines
adopted by and 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
Adviser 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 Adviser,
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.
CARL DOMINO EQUITY INCOME FUND
Notes to Financial Statements
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Carl Domino Associates, L.P. (the "Adviser") to manage the
Fund's investments. The Adviser is a limited partnership organized in Delaware
and its general partner is Carl Domino, Inc. The controlling shareholder of Carl
Domino, Inc. is Carl Domino. Mr. Domino is primarily responsible for the day to
day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
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 non-interested person trustees, and extraordinary expenses. The
Adviser is voluntarily reimbursing the Fund for trustees fees. There is no
assurance that such reimbursement will continue in the future. As compensation
for its management services and agreement to pay the Fund's expenses, the Fund
is obligated to pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of 1.50% of the average daily net assets of the Fund.
It should be noted that most investment companies pay their own operating
expenses directly, while the Fund's expenses, except those specified above, are
paid by the Adviser. For the period from November 1, 1996 through October 31,
1997, the Adviser has received a fee of $33,503 from the Fund.
CARL DOMINO EQUITY INCOME FUND
Notes to Financial Statements
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $2,979,645.
<TABLE>
<CAPTION>
Transactions in capital stock were as follows:
For the period from For the period
November 6, 1995 from November 6,
(Commencement of 1995 (Commencement
Operations) through of Operations)
For the year ended For the year ended October 31, 1996 through
October 31, 1997 October 31, 1997 October 31, 1996
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold 165,650 $2,354,635 92,689 $971,640
Shares issued in
reinvestment of
dividends 1,664 20,953 0 0
Shares redeemed (28,359) (371,396) (1,893) (21,186)
-------- --------- ------- --------
138,955 2,004,192 90,796 $950,454
</TABLE>
NOTE 5. INVESTMENTS
For the period from November 1, 1996 through October 31, 1997, purchases
and sales of investment securities, other than short-term investments,
aggregated $3,197,807 and $1,158,094, respectively. The gross unrealized
appreciation for all securities totaled $585,990 and the gross unrealized
depreciation for all securities totaled $66,493for a net unrealized appreciation
of $519,497. The aggregate cost of securities for federal income tax purposes at
October 31, 1997 was $3,235,292.
<PAGE>
CARL DOMINO EQUITY INCOME FUND
Notes to Financial Statements
October 31, 1997
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does not
receive commissions on trades made on behalf of the Funds. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund, under Section
2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Carl
Domino Associates, L.P., and entities which the Adviser could be deemed to
control or have discretion over owned in aggregate more than 25% of the Fund.
<PAGE>
November 11, 1997
Dear Shareholder:
As I look out the window on this bright, sunny day in Fort Worth, it is hard to
remember the number of extraordinary events that have occurred in the
marketplace over the four months since the fund's inception. The largest single
day point decline in the history of the NYSE, the collapse of currencies in
Southeast Asia, the narrowing of the budget deficit to its lowest level in a
quarter century, and numerous other events have made this period one of
opportunity, as well as danger. Perhaps the question most on my mind today is
whether the events of this last four months mark a "bump in the road" or the
beginning of a change in market action that will ultimately begin a new market
cycle. While I will perhaps be able to answer that question in my letter next
year, let me give my opinion on how pertinent it is to the management of this
fund. The answer is that all of these things are not important to your
investment in this fund. That is because every day we intend to invest your
dollars into equities that have limited exposure to the macro-economic events
that drive large stocks and influence major markets. Instead, we are building
this fund around the philosophy of investing in firms that are attractive based
on a fundamental process of valuation and characteristics that most investors
would find desirable. That is why I consider our fund to be a cornerstone for
everyone's portfolio. Historically, the value style outperforms the growth style
over time and that small-cap investing outperforms large-cap investing over
time. The idea of having a small-cap value fund means that you are placing your
money in a position were you can capitalize on both of these phenomena.
Therefore, for long-term oriented investors, what we do here is not to be
measured over a one or two year period of time but rather in the context of five
to ten year time periods. To give you a better understanding of how we invest
your funds, I would like to take you through our equity investment process
because I think it will clarify why the fund should be looked upon as a core
holding for your portfolio.
THE VALUE PHILOSOPHY
Modern security analysis was "invented" in 1932 by the father of value
investing, Ben Graham. Professor Graham, using a process based solely on balance
sheet items and a stock's current market price, built a small fortune for
himself but, most importantly, laid the ground work for future analysts in the
value philosophy. One of Graham's greatest disciples, and his most famous, is
Warren Buffet. The "Oracle of Omaha," as Mr. Buffet is called, started his
career by strictly following Graham's techniques. After many years and much
success, Mr. Buffet began to modify his philosophy to encompass a range of other
factors besides balance sheet items and price. Factors such as industry
position, non-tangible items (things like patents and brand names), and pricing
power grew into a concept termed "franchise value." This helps to provide the
definition, along with Graham's work, that we use for value investing here at
Corbin & Company. For us, value investing has the goal of identifying equities
that, either on an ongoing or terminal (liquidation) basis, have an economic
value substantially greater than the market as a whole.
There are a few other investment philosophies besides value available for
consideration: growth, momentum, and market timing are the best known. Numerous
studies have been done showing the folly of market timing as a strategy, with
most serious analysts agreeing that the markets cannot be timed with any
accuracy over the long-term. Momentum investors, who believe that investment
dollars follow earnings that increase at an increasing rate, have done well
during certain "up" market cycles. During "down" market cycles, these managers
have proven nearly lethal to the portfolios they manage. Growth managers look
for companies that have producing earnings per share and sales growth in excess
of the market. This cheery consensus is often paid for, though, in a higher than
market P/E ratio. Over the years this has left growth managers at a significant
disadvantage to value investors, as numerous studies have indicated that the low
P/E stocks value investors purchase outperform the higher P/E stocks that
comprise growth portfolios. This has led to many more studies; the most recent,
published by the Association for Investment Management and Research (AIMR),
indicates that the average value manager outperforms the average growth manager
by 200 basis points (2%) per year. I believe that value has been proven to be
better than other philosophies at generating returns for investors over the
long-term.
From a psychological standpoint, the value philosophy fits exceptionally well
with the people in our firm. Whereas the other philosophies concentrate on
hitting "home runs," value is concerned with "making contact" and not "striking
out." Consistency and safety are the mottoes for value investors which goes very
nicely with our conservative nature. Therefore, it is from this intellectual and
psychological viewpoint that we have chosen value as our investment philosophy.
THE RESEARCH PROCESS
To determine if a stock is a "value" versus the market as a whole, a method is
needed to ascertain exactly how much a security is worth. As in any purchase, we
must determine what we are getting and what we are paying for it. For an equity,
we are expected to receive some increase in earnings (earnings per share growth)
and, potentially, some current cash flow (dividend yield). What we pay for this
combination is best symbolized by the price-earnings ratio based on next year's
estimated earnings per share. Out of these three factors we create what is
called a "value score", which is the numerical economic value for a security.
The estimated EPS growth rate added to the dividend yield gives us a number we
call the "return score". We take this return score and divide it by our "cost
score" (which is the P/E ratio) to give us our value score for a stock.
Therefore, a stock with earnings growth of 10%, a dividend yield of 5%, and a
P/E ratio of 10 produces a value score of 1.5 [(10+5)/10]. Another way to look
at it is that an investor is getting 1.5 points of return for every point of
cost.
Every month we screen over 5000 stocks and develop a value score for each one.
Then we develop a value score for the market as a whole, using the Russell 2000
as a benchmark. From there we narrow our list to all of the stocks that have a
value score 50% greater than the market. At this point, our work has just begun.
We put each security through a rigorous research process that is one of the most
comprehensive in the industry. The first thing we look at is a firm's financial
position. We need to find those firms who are generating free cash flow, whose
long-term debt-to- total capitalization is very conservative, who have ample
short-term liquidity, and who have solid margins for their industry. A solid
financial position gives the firm the ability to enhance shareholder wealth in
numerous ways: share repurchases, increased dividends, acquisitions and taking
advantage of business opportunities. This focuses attention on the next factor
we closely examine, which is a company's management. Management must be active
in enhancing shareholder value and be motivated to do so. We look for those
situations where enhanced shareholder wealth translates into management wealth,
whether it is through bonuses, employee stock ownership, or stock options. We
often own those firms where the person's name is "over the door" because we
believe that they have their "heart and soul" in the business. When our
customers own a share of stock, they own part of a business. It seems insane
that most analysts do not pay much attention to who is running this business for
their customers. No one would privately go into business with someone they do
not know anything about, but it occurs all the time in the public equity market.
The third factor that we analyze is a firm's long-term business prospects. We
need to see that the company is solidly positioned in their industry, that the
industry has a viable future, and most importantly, substantial and sustainable
profitability can be achieved. The next item that we look for is an element of
contrarianism. This means that the stock is either overlooked or out of favor
with Wall Street analysts. Typically, we like to see that five or less analysts
are following a firm or that investors are apathetic towards a firm or industry.
These factors mean that Corbin & Company can add value through its research
process and gain valuable, profitable insights not readily disseminated to the
rest of Wall Street. In many cases this leads us to the smaller to mid-sized
firms, allowing our investors to own stock in companies at the early stages of
major opportunities.
The final element we look for is a business that is fairly easy to understand.
As I often tell people, the chances that I will ever understand recombinant DNA,
ribosome therapy, or genetic encryption is slim. In fact, most of the people who
analyze those situations either do not understand the technology or do not
understand finance. On the other hand, I do understand how bug shields, greeting
cards and hamburgers are made and sold. Therefore, if the business cannot
readily be explained to a customer or my mother, it is probably not a simple
enough business to understand.
Once the value score is deemed high enough and the five other factors examined,
the difficult aspect of our research method begins. First, we have to re-examine
the variables that went into the value score equation based on insights gleaned
thus far. Usually a few stocks will drop out of consideration at this time.
Next, we either go to see the company, recall our notes from past experiences,
or contact someone who is very familiar with the company and industry, along
with being a disinterested source in our decision making process. Here we
utilize a variety of sources: investor conferences, industry specialists, and
sometimes customers, all of which yield a different insight from a company
visit. We try to visit at least 125 firms a year, with most being in the
Midwest, South, and Southwest. Once this is done, we must re-verify all of the
facts, including the value score, then make a decision. The final decision as to
a stock's purchase rests on its own merits with very little "gut" feeling
involved. This is due to the fact that after going through the whole process,
resolving all issues before us, and looking at the facts, I am confident that my
reservations are something I can live with.
THE PORTFOLIO MANAGEMENT PROCESS
After developing a list of stocks, putting them together in a portfolio should
be the easiest part in most people's minds. Nothing could be further from the
truth because numerous risks must be analyzed before the portfolio is finalized.
In most cases, another big decision comes in the timing of purchases. This is
because the value manager is extremely price sensitive, which can sometimes make
the process take longer than expected. Once a portfolio of stocks is assembled
by Corbin & Company, it typically has a number of defining characteristics.
The first is that the portfolio will have anywhere from 20-40 securities in it
and the initial positions will range in size from 1%-5%. Most positions will be
in the 2.5%-4.0% range, which gives us the opportunity to add to those
positions. Typically, no positions will be in excess of 20% of the portfolio.
Secondly, the portfolio will begin with an estimated earnings per share growth
rate and dividend yield in excess of the market and a price/earnings ratio
substantially below the market's. This means that the overall portfolio's value
score is in excess of the market, making the combined group of securities a
greater value than the market.
The role of cash is an important one in our process. At no time do we purchase
securities that are not outstanding bargains. Therefore, if we do not have
enough ideas that meet our criteria, the money will sit in cash. Once we get
"fully invested" (defined as over 90% of the money in stocks), we will stay
fully invested. It is not our policy to try to raise cash if we foresee a
downturn in the market. Instead, we believe that our portfolio's companies can
use a downturn to their advantage to advance their long-term prospects and build
shareholder wealth. Additionally, as mentioned earlier, the ability to time the
market is not one that can be done with any accuracy over the long-term. We are
wiser to stay in stocks and choose the best ones than we are to try to raise
cash at suspected advantageous times.
Equities are sold out of the portfolio for two reasons. First, the fundamentals
around the security begin to dramatically change. Second, when a stock's value
score becomes equal to or less than the market, the security is sold. This
typically means that securities are held for the long-term and portfolio
turnover is relatively low, which has the advantage of lowering overall
portfolio expenses and giving Corbin & Company a rigorous sell process.
OVERALL PORTFOLIO CHARACTERISTICS AND COMMENTARY
As of October 31st, the portfolio contained 37 equities, with 96.6% of the money
in equity securities, and 3.4% in cash. On a weighted-average basis, the
portfolio has an estimated earnings growth rate of 17.27%, a dividend yield of
1.12%, a p/e ratio based on next year's earnings of 11.32X, and a price-to-book
value of 2.14X. The same figures for the Russell 2000 at the end of the quarter
were 19.69%, 1.26%, 18.80X, and 3.91X, respectively. The portfolio has a value
score 46.8% higher than the market (1.63 vs. 1.11 ). Our portfolio continues to
have an economic value substantially in excess of the market, which is still not
recognized in our securities.
Over the last year I have been perplexed by investors' fascination with
liquidity, as opposed to value. While the feeding frenzy that has engulfed the
areas of technology and finance continued unabated until October, clearly it
seems that investors are beginning to refocus on value, particularly small-cap
value. Many analysts are attributing the latest move in the smaller stocks as a
sign of the speculative nature of this market, but I feel that it is instead a
good indicator that most investors are clearly focusing again on economic
fundamentals. While the last few months may have signaled the beginning of the
end in this cycle for the outperformance of the "jumbo" caps, it may also mark
the beginning of a cycle of outperformance in the smaller and secondary stocks.
This should favor managers over indexing and value over growth. I remain
optimistic that small-cap value is situated in the perfect position for the next
few quarters.
I am also hopeful that basic businesses will return to vogue. While this
happened to a certain extent in the last few months, I believe that it should
continue, due to a number of factors. The first is that the technology and
financial stocks have been outperforming for close to three years, which is
approximately the length of their historical performance cycles over the past
twenty years. Since they are also two of the most volatile components of the
index, when they fall out of favor, typically they fall very hard. Additionally,
the continuing strong U.S. economy has boosted earnings for many stocks with
strong cyclical domestic activities. In the past few years, much of the focus in
the stock market has been on U.S. firms that have substantial sales abroad. With
the rout of the Southeast Asian countries' equity and currency markets, much of
the glamour has been removed from those markets in the near-term. While clearly
substantial opportunities exist overseas for many firms, the recent strength of
the U.S. dollar and the myriad of problems faced by many countries have taken
much of the bloom off the international rose. This will lead many investors back
to this country's companies with domestic sales, many of which are not the major
S&P stocks. As you can see from the chart below, we are concentrating our
dollars currently where there is not a large amount of overseas influence.
The sector allocation of the equity portfolio at the end of the quarter was as
follows:
Sector Percentage
Raw Materials 13.0%
Financial Services 0.0%
Transportation 3.9%
Technology 18.5%
Capital Goods 18.4%
Consumer Non-Durables 4.7%
Consumer Durables 10.0%
Consumer Services 3.0%
Conglomerates 0.0%
Shelter 8.5%
Utilities 0.0%
Health Care 0.0%
Retail 11.3%
Business Equipment & Services 6.7%
Energy 2.0%
PERFORMANCE DISCUSSION
The fund generated an annualized return of 30.32% and a cumulative total
return of 10.3% for the time period of June 30th through October 31st. The S&P
600 Small-Cap returned 11.16%, and the Russell 2000 finished at 9.74%. We have
had a number of stocks in our portfolio receive takeover offers since the fund's
inception. Sterling Electronics got an offer from Marshall Industries,
Computational Services agreed to a deal with Emerson Electric, and Oregon
Metallurgical decided to merge with Allegheny Teledyne. I have always said that
a takeover is the ultimate test of value, because obviously someone believes
that the company is worth owning at a substantially higher price. Some other
stocks that had a major positive impact on the portfolio were VTEL,
Successories, Duckwall-Alco, and Outback Steakhouses.
Our portfolio has a number of stocks that I believe have the potential to be
worth five-to-ten fold over the next five years. These would include our
positions in Duckwall-Alco, Durakon, Quanex, Perceptron, Successories, VTEL, and
Wabash National. It is our belief that if just one of these companies works out
according to our expectations, it would be more than enough to carry the
performance of the portfolio ahead of that of the indexes. While we do not have
a "bet the ranch" mentality on any single one of these stocks, collectively they
comprise over 25% of the portfolio. Over the next few quarters, these must be
the key contributors in our outperforming the market.
DISCRIPTION OF INDIVIDUAL SECURITY ISSUES
I would like to very briefly describe the securities now held in the portfolio.
The individual securities, and any interesting characteristics, are:
Alrenco (RNCO) - The company operates a chain of rent-to-own stores that are
primarily based in the Midwest, Southwest, and Southeast. Alrenco is based in
New Albany, Indiana.
Altron, Inc. (ALRN) - Altron manufactures interconnect products, such as
backplanes and circuit boards, for electronic equipment. The firm is located in
Wilmington, Massachusetts.
American Building Company (ABCO) - ABCO is one of the largest makers of
metal buildings in the country. It is located in Eufala, Alabama.
Artic Cat Company (ACAT) - The firm makes snowmobiles, ATVs, and jet skis under
the Artic Cat and Tigershark names. The company is in Thief River Falls,
Minnesota.
Award Software (AWRD) - AWRD, which is based in Mountain View, California,
develops software that provides an interface between a computer's operating
system software and its hardware.
Brooktrout Technology (BRKT) - The company is supplier of software and hardware
products for providers of the electronic messaging market, such as faxes and
modems. BRKT is located in Needham, Massachusetts.
Butler Manufacturing (BTLR) - Butler is the largest maker of metal buildings in
the United States. In addition, it has operations all over the world and is
headquartered in Kansas City, Missouri.
Commercial Intertech (TEC) - Commercial Intertech is a large manufacturer of
industrial pumps and has substantial overseas operations. The company is
headquartered in Youngstown, Ohio.
Computer Language Research (CLRI) - The company has a virtual monopoly on tax
software for trust companies and Fortune 2000 firms. Located in Carrolton,
Texas, the company also has a number of other developing businesses in the
software industry.
Computational Systems Inc. (CSIN) - The firm makes preventive maintenance and
monitoring devices used primarily on electric motors. The company is being
acquired by Emerson Electric. CSIN is located in Knoxville, Tennessee.
Cott Corporation (COTTF) - Based in Toronto, Canada, Cott is a major producer of
private label drinks both in North America and abroad. The company makes
Albertson's A+ Brand drinks, as well as Sam's Choice for WalMart.
Deflecta-Shield (TRUX) - Indianola, Iowa is the home for this truck accessories
firm. The company is best known for its bug shields and air deflectors.
Duckwall-Alco Stores, Inc. (DUCK) - The company is a retailer to small towns in
the Midwest and Southwest. It is based in Abilene, KS and primarily operates in
towns of less than 20,000.
Durakon Industries Inc. (DRKN) - Durakon makes specialized towing vehicles, as
well as, bedliners for pick-up trucks. Its Duraliner product is the dominant
name in the bedliner business. The company is located in Lapeer, Michigan.
Flexsteel Industries (FLXS) - This is the tenth largest furniture company in the
United States. It is located in Dubuque, Iowa.
Glenayre Technology (GEMS) - Glenayre manufactures telecommunications equipment
software, particularly for paging systems, and is located in Charlotte, North
Carolina.
Haggar Corp. (HGGR) - The company makes apparel items such as wrinkle-free
slacks. The firm is located in Dallas, Texas.
Insteel Industries (III) - III is a manufacturer of welded wire reinforcement,
used primarily by the construction, furniture and automotive industry. Insteel
is based in Mount Airy, North Carolina.
Lone Star Steakhouse (STAR) - The company owns three steakhouse concepts: Lone
Star Steakhouse & Saloon, Sullivan's, and Del Frisco's. It is based in Wichita,
Kansas.
Oregon Metallurgical (OREM) - The company processes titanium into products for
heavy industrial uses. Oregon Metallurgical is based in Albany, Oregon.
Outback Steakhouse (OSSI) - The Outback Steakhouse chain caters to middle-market
diners who are looking for a substantial dining experience. It is based in
Tampa, Florida.
Perceptron (PRCP) - The company's products use light in the measurement of
industrial products. Additionally, the company has a rapidly growing business
using its products for the lumber industry. The company is based in Plymouth,
Michigan.
Quanex Corp. (NX). - The company operates steel and aluminum mini-mills
throughout the United States. Its products typically require some level of
engineering and the firm's mills are considered the lowest cost producers in the
world. The firm is based in Houston, Texas.
RMI Titanium (RTI) - RMI is a processor of titanium used in manufactured
products. The company is 25% owned by USX Corp. It is based in Niles, Ohio.
RailTex (RTEX) - RailTex is the nation's sixth largest railroad, with over 4,000
miles of track. RailTex is based in San Antonio, Texas.
Raster Graphics (RGFX) - Raster Graphics is a producer of high-performance color
printing systems and is located in San Jose, California.
Steel of West Virginia Inc. (SWVA) - Steel of West Virginia is located in
Huntington, West Virginia. This operator of a steel mini-mill manufactures its
products for the truck trailer market, as well as manufactured housing.
Sterling Electronics (SEC) - Sterling electronics distributes electrical parts
to companies across the country. It is currently being bought out by Marshall
Industries. It is in Houston, Texas.
Successories Inc. (SCES) - The company is a leader in the motivation and people
recognition business. It sells products through mall-based shops, airline
catalogs, promotional catalogs, and other retailers. It is based in Naperville,
Illinois.
Ultratech Stepper (UTEK) - UTEK manufactures products, known as steppers, which
are used in the fabrication of semiconductors and thin film heads for disk
drives. The company is located in San Jose, California.
VTEL Corporation (VTEL) - VTEL is the second largest competitor in the video
teleconferencing business. Intel has a large interest in the firm, which has a
25% market share. VTEL is based in Austin, Texas.
Wabash National Corp. (WNC) - West Lafayette, Indiana is the home to Wabash
National, the largest truck trailer firm in the nation. In a decade the company
has moved from being new to the marketplace to being the dominant firm, with the
ability to produce 90,000 trailers per year.
Walden Residential Properties (WDN) - Walden is a real estate investment trust
that offers upscale apartment living. The company is located in Dallas, Texas.
Webco Industries (WEB) - The company makes HVAC products and is a dominant
supplier in certain segments of the market. Webco is based in Sand Springs,
Oklahoma.
Wellman Inc. (WLM) - The company recycles plastic bottles into fibers. These
fibers are used to make carpets, along with other uses. The firm is based in
Shrewsburry, New Jersey.
FINAL THOUGHTS
Thank you once again for your support of the fund. Everyone at Corbin & Company
is excited about its long-term potential to increase wealth for the shareholders
and is committed toward that purpose. For myself, I only hold three investments;
shares in this fund and shares in Corbin & Company comprise the largest of those
investments. If there is ever anything we can do in the way of service, please
let me know. Thank you once again for your confidence in us, and we will
continue to work hard to make sure we are deserving of it.
Sincerely,
David A. Corbin, CFA
President and Chief
Investment Officer
<TABLE>
<CAPTION>
Corbin Small-Cap Value Fund
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stocks - 88.2% Shares Value
Apparel - 2.3%
Haggar Corp. 2,010 $ 30,904
-----------------
Auto Parts & Accessories - 4.2%
Deflecta Shield Corp. (a) 5,800 55,825
-----------------
Bottled & Canned Soft Drinks - 1.9%
Cott Corp (Quebec) (a) 2,440 25,315
-----------------
Business Services - 11.3%
Computational Systems Corp. (a) 2,000 57,250
Computer Language Research 2,000 23,500
Vtel Corp. (a) 9,410 69,399
-----------------
-----------------
150,149
-----------------
Catalog & Mail Order Services - 2.2%
Successories Inc. (a) 4,350 29,091
-----------------
Computer Programming Services - 1.5%
Raster Graphics Inc. (a) 3,860 20,265
-----------------
Computer Software - 0.5%
Award Software International, Inc. (a) 570 6,519
-----------------
Construction - 1.1%
American Residential Services, Inc. (a) 1,000 14,625
-----------------
Department Stores - 2.6%
Duckwall Alco Stores (a) 2,360 35,105
-----------------
Electrical Parts & Equipment - 1.6%
Altron Inc. (a) 190 3,016
Glenayre Technologies Inc. (a) 190 2,470
Sterling Electronics Corp. 780 15,892
-----------------
-----------------
21,378
-----------------
Equipment Rental & Leasing - 2.3%
Alrenco Inc. (a) 1810 30,770
-----------------
Fabricated Metal Products - 4.3%
American Buildings Co. (a) 630 17,640
Butler Manufacturing Co. 1180 39,973
-----------------
-----------------
57,613
-----------------
Corbin Small-Cap Value Fund
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued Shares Value
Furniture & Fixtures - 4.4%
Flexsteel Industries, Inc. 5,220 $ 58,725
-----------------
Hydraulic Equipment - 3.0%
Commercial Intertech Corp. 2,490 40,463
-----------------
Measuring & Controlling Devices - 4.3%
Perceptron Inc. (a) 2,050 49,456
Ultratech Stepper Inc. (a) 300 8,175
-----------------
-----------------
57,631
-----------------
Metal Mining - 1.8%
Oregon Metallurgical Corp. (a) 500 11,719
RMI Titanium (a) 500 11,875
-----------------
-----------------
23,594
-----------------
Power Distribution - 2.6%
Reliability Inc. (a) 2,000 35,000
-----------------
Railroads - 3.5%
Rail Tex Inc. (a) 2,900 46,763
-----------------
Real Estate - 3.3%
Walden Residential Properties 1,800 43,875
-----------------
Recreational Vehicles - 7.5%
Arctic Cat Inc. 3,070 36,073
Durakon Industries Inc. (a) 7,080 63,720
-----------------
-----------------
99,793
-----------------
Restaurants - 5.3%
Lone Star Steakhouse & Saloon (a) 2,230 51,569
Outback Steakhouse Inc. (a) 720 19,485
-----------------
-----------------
71,054
-----------------
Textiles - 2.1%
Wellman Inc. 1,350 27,422
-----------------
Trucks/Trailers - 1.7%
Wabash National Corp. 765 22,853
-----------------
Steel Manufacturing - 12.9%
Insteel Industries 5,680 43,310
Quanex Corp. 2,230 61,603
Steel West Virgina Inc. (a) 4,840 51,425
Webco Industries (a) 2,000 15,375
-----------------
-----------------
171,713
-----------------
-----------------
TOTAL COMMON STOCKS (Cost $1,131,754) $ 1,176,445
-----------------
Corbin Small-Cap Value Fund
Schedule of Investments - October 31, 1997 - continued
Money Market Securities - 6.2%
Star Treasury, 4.80%, 10/31/97 (Cost $83,063) 83,063
-----------------
TOTAL INVESTMENTS - 94.4% (Cost $1,214,817) 1,259,508
Other Assets less liabilities - 5.6% 74,923
-----------------
Total Net Assets - 100.0% $ 1,334,431
=================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Corbin Small-Cap Value Fund October 31, 1997
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $1,214,817) $ 1,259,508
Receivable for fund shares sold 100,036
Interest receivable 255
--------------------
Total assets 1,359,799
Liabilities
Payable for investments purchased $ 24,070
Accrued investment advisory fee payable 1,250
Payable for fund shares redeemed 48
-------------------
Total liabilities 25,368
--------------------
Net Assets $ 1,334,431
====================
Net Assets consist of:
Paid in capital $ 1,283,827
Accumulated undistributed net realized gain 5,913
Net unrealized appreciation on investments 44,691
--------------------
Net Assets, for 120,981 shares $ 1,334,431
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Corbin Small-Cap Value Fund
Statement of Operations for the period June 30, 1997 (Commencement of Operations)
to October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 1,812
Interest Income 1,174
-------------------
Total Income 2,986
Expenses
Investment advisory fee $ 2,991
Trustees' fees 0
-------------------
Total Operating Expenses 2,991
-------------------
Net Investment Income (Loss) (5)
-------------------
Realized & Unrealized Gain
Net realized gain on investment securities 5,918
Change in net unrealized appreciation on investment securities 44,691
-------------------
-------------------
Net gain (loss) on investment securities 50,609
-------------------
Net increase in net assets resulting from operations $ 50,604
===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Corbin Small-Cap Value Fund
Statement of Changes in Net Assets
for the period June 30, 1997 (commencement of operations) to October 31, 1997
<S> <C>
Increase/(Decrease) in Net Assets
Operations
Net investment income (loss) $ (5)
Net realized gain 5,918
Change in net unrealized appreciation 44,691
---------------
Net Increase in net assets resulting from operations 50,604
---------------
Distributions to shareholders:
From net investment income -
---------------
Share Transactions
Net proceeds from sale of shares 1,283,875
Shares issued in reinvestment -
Shares redeemed (48)
---------------
Net increase in net assets resulting
from share transactions 1,283,827
---------------
Total increase in net assets 1,334,431
Net Assets
Beginning of period -
---------------
End of period [including undistributed net investment loss of ($5)] $ 1,334,431
===============
</TABLE>
<PAGE>
<PAGE>
Corbin Small-Cap Value Fund
Financial Highlights
for the period June 30, 1997 (Commencement of Operations) to October 31, 1997
Selected Per Share Data
Net asset value,
beginning of period $10.00
------------
Income from investment
Operations
Net investment income 0.00
Net realized and
unrealized gain (loss) 1.03
------------
Total from investment operations 1.03
------------
Less Distributions
From net interest income 0.00
From net realized gain 0.00
------------
Net asset value,
end of period $11.03
============
Total Return 30.(a)
Ratios and Supplemental Data
Net assets, end of period (000) $1,334
Ratio of expenses to
average net assets 1.(a)
Ratio of net investment income to
average net assets 0.(a)
Portfolio turnover rate 20.(a)
Average commissions paid 0.0681
(a) Annualized
<PAGE>
CORBIN SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. ORGANIZATION
The Corbin Small-Cap Value Fund. (the "Fund") was organized as a series of the
AmeriPrime Funds, an Ohio business trust (the "Trust"), on June 10, 1997 and
commenced operations on June 30, 1997. The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company The investment objective of the Fund is to
provide long term capital appreciation to its shareholders. The Trust Agreement
permits the trustees to issue an unlimited number of shares of beneficial
interest of separate series without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation- 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 Adviser'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 Adviser 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 Adviser, in conformity with guidelines adopted by and 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
Adviser believes such prices accurately reflect the fair market values 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 Adviser,
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.
CORBIN SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long-term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Corbin & Company (the "Adviser") to manage the Fund's
investments. David A. Corbin , President of the Adviser, is primarily
responsible for the day to day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees. As
compensation for its management services the Fund is obligated to pay the
Adviser a fee computed and accrued daily and paid monthly at an annual rate of
1.25% of the average daily net assets of the Fund. For the period from June 30,
1997 through October 31, 1997, the Adviser has received a fee of $2,991 from the
Fund.
CORBIN SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $1,283,827.
Transactions in capital stock were as follows:
For the period from
June 30, 1997 (Commencement of
Operations) through October 31, 1997
Shares Amount
--------- ----------
Shares sold 120,985 $1,283,875
Shares issued in reinvestment
of dividends - -
Shares redeemed (4) (48)
----------- --------------
Net increase 120,981 $1,283,827
====== ==========
NOTE 5. INVESTMENTS
For the period from June 30, 1997 (commencement of operations) through October
31, 1997, purchases and sales of investment securities, other than short-term
investments, aggregated $1,175,485 and $49,549, respectively. The gross
unrealized appreciation for all securities totaled $79,685 and the gross
unrealized depreciation for all securities totaled $34,994 for a net unrealized
appreciation of $44,691. The aggregate cost of securities for federal income tax
purposes at October 31, 1997 was $1,214,817.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
CORBIN SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 7. RECLASSIFICATIONS
In accordance with SOP 93-2, the fund has recorded a reclassification in the
capital accounts. As of October 31, 1997 the fund recorded permanent book/tax
differences of ($5) from undistributed net investment income to undistributed
realized gain on investments. This reclassification has no impact on the net
asset value of the fund and is designed generally to present undistributed
income and realized gains on a tax basis which is considered to be more
informative to shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
Corbin Small Cap Value Fund
We have audited the statement of assets and liabilities including the portfolio
of investments, of the Corbin Small Cap Value Fund (a member of the Ameriprime
Fund Series) as of October 31, 1997, and the related statement of operations,
the statement of changes in net assets, and the financial highlights for the
period from June 30, 1997 (commencement of operations) to October 31, 1997.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted audit- ing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Corbin Small Cap Value Fund as of October 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
period from June 30, 1997 (commencement of operations) to October 31, 1997 in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
Florida Street Funds
Letter to Shareholders
October 31, 1997
Dear Fellow Shareholders,
I am pleased to present the first annual report of the Florida Street Funds,
which completed their first fiscal year on October 31, 1997. Since the Florida
Street Bond Fund and the Florida Street Growth Fund commenced operations on
August 4 and August 6,1997, respectively, the period covered by this report is
unusually short. The report includes an investment review by each fund's
portfolio manager, followed by a complete list of securities held and the
financial statements for the period.
During this fiscal period , the U.S. financial markets were characterized by
a level of volatility not seen in seven years. From August through early
October, both stock and bond prices were on a rising course. On October 17, the
Taiwanese government announced that it would allow its currency to float. This
led to speculation that Hong Kong would do the same, and speculators began
shorting the Hong Kong currency. As officials moved to defend the currency,
interest rates in Hong Kong rose precipitously. Such rates are likely to slow
economic growth there, and U.S. investors worried that this could cause a
slowing in the U.S. economy, particularly in the technology sector. With
valuations at lofty levels investors suddenly saw a reason to sell stocks and
corporate bonds. The safe haven features of U.S. Treasury securities caused
prices in that market to rise.
We view this event as a market correction, not an economic event. Southeast
Asia consumes about 12% of U.S. exports and contributes 7% of U.S. earnings.
Therefore, the turmoil in Southeast Asia should not have a meaningful impact on
domestic economic growth, which continues to be steady. Also, the holdings of
the Florida Street Funds have no conspicuous exposure to Southeast Asia.
We will continue to monitor the markets and the funds' holdings to manage
risk. Our risk management efforts are designed to insure that the holdings
adequately represent numerous sectors of the U.S. economy and that security
selection is an important determinant of investment results. Thank you for
joining us as fellow shareholders of the Florida Street Funds. We will continue
to work to justify your confidence.
Sincerely,
Walter A. Morales
President and Chief Investment Officer
Commonwealth Advisors, Inc.
<PAGE>
Dear Fellow Shareholder,
The Florida Street Bond Fund began operation on August 4, 1997. The Fund
achieved a cumulative total return of 0.70% and an annualized toal return
of 3.69% for the short fiscal year ended October 31, 1997. This result lagged
the return of the Lipper High Current Yield Index which returned 2.34%. We do
not believe that the performance interval since inception is meaningful due to
the short time-span involved. The Fund is being managed according to an
investment process that should allow it to perform well over time versus its
benchmark and the bond market in general.
The investment objective of the Fund is to provide a total return by
pursuing high yield, non-investment grade bond and other income-oriented
securities. As of the end of October, the fund's allocation consisted of 92%
fixed income securities, 3% REITS, and 5% cash equivalents.
The last two weeks of October were characterized by significant volatility
as turmoil in the Asia-Pacific countries caused a sharp change in investor
sentiment and widespread selling of equities in the U.S. and markets around the
world. The sudden aversion to credit risk caused the selling pressure to spill
over to the U.S. corporate bond market as investors sought safety in U.S.
Treasury securities. The decline in the Lipper High Current Yield Index was
approximately 1.5% on October 27th, the day the U.S. stock markets declined
nearly 7 percent.
Events such as this should create opportunities for the fund in our search
for securities offering potentially above-average total return. For example, the
high grade Yankee issue Hutchison Whampoa (Hutch 07) has experienced a widening
of spread versus U.S. Treasury securities of about 100 basis points since
mid-October. This seems to be due mostly to market sentiment than to any
deterioration in credit fundamentals of the issuer. We make decisions concerning
securities such as this one only after considerable research and the application
of sound judgement.
We continue to expect high-yield bonds to generate attractive returns in an
the current economic environment. The operating performance of the underlying
issuers is expected to be favorable, and we will consistently monitor their
progress
Walter A. Morales
Portfolio Manager
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Florida Street Bond Fund
Schedule of Investments October 31, 1997
Common Stock - 2.7% Shares Value
Colonial Properties Trust 700 $ 19,863
Jameson Inns 1,800 20,700
JDN Realty Corp. 700 23,888
JPS Textile Group Inc. 4,997 67,460
Liberty Property Trust 800 22,400
LTC Properties Inc. 1,100 22,275
Walden Residential Properties Inc. 900 21,938
------------------
TOTAL COMMON STOCK (Cost $199,434) 198,524
------------------
Par
Corporate Bonds - 75.7% Value Value
Allied Waste Industries, 0.00%, 6/1/02 150,000 102,000
American Rice Inc., 13%, 7/31/05 260,000 265,200
Argentina Buenas Aires, 8.50%, 12/29/00 150,000 133,125
Bally's Health & Tennis, 13%, 1/19/03 150,000 147,750
Brazos Sportswear, 10.50%, 7/1/07 150,000 148,500
Brauns Fashions, 12.00%, 1/1/05 400,000 394,000
Building Materials Corp, 8.00% 10/15/07 100,000 99,000
Cablevision Systems, 8.125%, 8/15/09 150,000 151,125
Callon Petroleum, 10%, 12/15/01 135,000 135,338
Cleveland Electric Illum, 9.00%, 7/01/23 100,000 107,805
DiGiorgio Corp., 10%, 6/15/07 100,000 98,250
Family Restaurants, 9.75% 2/1/02 100,000 83,000
Farm Fresh, 12.25%, 10/1/00 100,000 89,500
Global Star, 11.25%, 6/15/04 200,000 196,000
HIH Capital Ltd., 7.50%, 9/25/06 250,000 205,000
Hovnanian K Enterprises, 9.75% 6/1/05 100,000 99,500
Homeland Stores, 10% 8/1/03 25,000 23,125
Integrated Health Services, 9.25%, 1/15/08 250,000 256,250
Iron Mountain Inc. 8.75%, 9/30/09 100,000 101,500
Lechters Inc. 5.00%, 9/27/01 150,000 117,750
Maxim Group Inc. 9.25%, 10/15/07 150,000 146,250
McLeod USA Inc. 10.50% 3/1/07 150,000 104,250
Microcell Telecom, 0%, 12/01/11 300,000 201,000
Niagra Mohawk Power Corp., 9.50% 3/1/21 250,000 264,260
Nine West Group Inc. 9%, 8/15/07 150,000 149,625
Ohio Savings Capital Trust I, 9.50%, 6/30/27 250,000 268,990
Pamida Inc. 11.75% 3/15/03 95,000 96,900
Pathmark Stores 0.0%, 11/1/03 250,000 172,500
Phar-Mor Inc. 11.72% 9/11/02 55,000 57,200
Specialty Foods Corp. 11.25%, 8/15/03 100,000 93,500
Specialty Foods 0.00%, 8/15/05 250,000 108,750
Florida Street Bond Fund
Schedule of Investments October 31, 1997 - continued
Par
Corporate Bonds - continued Value Value
Speedy Muffler King 10.875% 10/1/6 100,000 71,000
Triangle Capital Trust 9.375%, 6/1/27 250,000 272,739
Trico Marine Services 8.50, 8/1/05 115,000 116,725
UDC Homes, 12.50%, 5/1/00 135,000 141,075
U.S. Air Inc. 10.00%, 7/1/03 110,000 114,125
United Refining Co. 10.75%, 6/15/07 180,000 186,300
------------------
TOTAL CORPORATE BONDS (Cost $5,537,301) 5,518,906
------------------
U.S. Government Obligations - 16.5%
FHR 1496 PA, 8/15/22 221,859 200,460
FHR 1652 SC 123,698 122,778
Freddie Mac 214,390 188,541
USTN 700,000 687,093
------------------
------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $1,139,508) 1,198,872
------------------
Money Market Securities - 3.5%
Star Treasury 4.482% 10/31/97(Cost $256,928) 256,928 256,928
------------------
TOTAL INVESTMENTS - 98.4% (Cost $7,133,171) 7,173,230
Other Assets less liabilities - 1.6% 115,778
------------------
TOTAL NET ASSETS - 100.0% $ 7,289,008
==================
<FN>
Legend
(a) non-income producing
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Bond Fund October 31, 1997
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $7,133,171) $ 7,173,230
Receivable for securities sold 102,594
Dividends receivable 778
Interest receivable 124,231
--------------------
Total assets 7,400,833
Liabilities
Accrued advisory fee 6,386
Dividends payable 105,439
-------------------
Total liabilities 111,825
--------------------
Net Assets $ 7,289,008
====================
Net Assets consist of:
Paid in capital $ 7,248,914
Accumulated undistributed net investment income 35
Net unrealized appreciation on investments 40,059
--------------------
Net Assets, for 732,724 shares $ 7,289,008
====================
Net Asset Value
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Bond Fund
Statement of Operations
for the period August 4, 1997 (Commencement of Operations) to October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 2,300
Interest Income 117,254
--------------------
Total Income 119,554
Expenses
Management fee $ 14,080
--------------------
Total Expenses 14,080
--------------------
Net Investment Income 105,474
--------------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment securities (97,781)
Change in net unrealized appreciation
(depreciation) on investment securities 40,059
--------------------
Net gain (loss) (57,722)
--------------------
Net increase (decrease) in net assets resulting $ 47,752
====================
from operations
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Bond Fund
Statement of Changes in Net Assets August 4, 1997
(commencement of
operations) to October 31,
<S> <C>
Increase in Net Assets 1997
Operations
Net investment income $ 105,474
Net realized gain (loss) on securities transactions (97,781)
Change in net unrealized appreciation 40,059
---------------
Net Increase in net assets resulting from operations 47,752
---------------
Distributions to shareholders:
From net investment income (7,658)
From net realized gain -
Return of capital (97,781)
---------------
Total distributions (105,439)
Share Transactions
Net proceeds from sale of shares 7,463,588
Shares issued in reinvestment -
Shares redeemed (116,893)
---------------
Net increase in net assets resulting
from share transactions 7,346,695
---------------
Total increase in net assets 7,289,008
Net Assets
Begining of period -
---------------
End of period [including undistributed net investment income of $35] $ 7,289,008
===============
</TABLE>
<PAGE>
Florida Street Bond Fund
Financial Highlights
For the period August 4, 1997 (Commencement of Operations) to October 31, 1997
Selected Per Share Data
Net asset value, $10.00
---------------
beginning of period
Income from investment
Operations
Net investment income 0.21
Net realized and unrealized gain(loss) (0.12)
---------------
Total from investment operations 0.09
---------------
Less Distributions
From net interest income (0.02)
From net realized gain(loss) (0.12)
---------------
---------------
Total distributions (0.14)
---------------
Net asset value,
end of period $9.95
Total Return 3.69%(a)
Ratios and Supplemental Data
Net assets, end of period (000) $7,289
Ratio of expenses to
average net assets 0.53(a)
Ratio of net investment income to
average net assets 3.95(a)
Portfolio turnover rate 60.55(a)
Average commission rate 0.0339
(a) Annualized
<PAGE>
Florida Street Growth Fund
Letter to Shareholders
October 31, 1997
Fellow Shareholders,
During the abbreviated period since the inception of the Florida Street
Growth Fund on August 6, 1997, the Fund achieved a cumulative total return of
1.90%and an annualized total return of 7.97%. This performance masks a great
deal of volatility during the final week of October. The table below indicates
how the fund fared versus comparative indexes. The fund's broad capitalization
range makes it meaningful to compare results with mid-cap and small-cap indexes.
------------------------------------------------------------------
------------------------------------------------------------------
The stock market took investors on a wild ride as October came to a close.
Returns for the market indexes shown above were substantially higher through the
first week of the month. Then the market began to drift lower , culminating in a
drop of over 6 percent on October 27 before recovering a portion of the losses
by month end. This was the first meaningful correction since the fall of 1990.
Typically, corrections of at least ten percent occur, on average, every two
years, so this was long overdue.
Investors, fearing a spill-over of Southeast Asia's economic crisis into the
U.S. economy, dumped stocks, especially those in which substantial unrealized
gains existed. The Fund owns shares in many of these successful companies so the
fund declined along with the market averages, with some cushion provided by a
cash and government bond reserve position totaling 21% of assets. We are pleased
to see that once the market stabilized, prices recovered substantially from the
lows.
We would not be surprised to see additional periods of extreme volatility
given the stellar returns earned during the last fifteen years, and the dearth
of volatility during this decade. Our strategy will continue to be aimed at
finding well-managed companies across all market sectors with above average
prospects and which are undervalued according to one or more important measures
. This process should prove rewarding to shareholders in the market environment
we expect over the next few years. We expect the market to rise , but at a
slower pace and with greater volatility as investors become protective of their
gains when events unfold which shake their confidence in the future. The Fund's
flexibility with regard to company size should allow us to capitalize on
opportunities that will likely arise in an environment of investor
"skiddishness".
Several holdings provided impetus to the Fund's positive return during this
brief period. Most noteworthy were the shares of Superior Energy Services, a
provider of oil and gas plug and abandonment services, which rose 93.8%, and
Sirrom Capital, a company that invests in growing small businesses, whose shares
increased by 41.1%.
Dampening results during the period were the shares of Miller Industries
which declined 42.4%. Miller manufactures towing equipment and provides towing
services. A slowing of revenue growth in the manufacturing segment caused
investors to question the company's growth potential. We believe the slowdown is
temporary and are continuing to hold the stock. Advanced Micro Devices shares
were down 40.9% due to a small earnings shortfall.
We are pleased with the Fund's performance during its initial fiscal period ,
realizing that the time span is too short for a meaningful evaluation. Our
personal and professional success is directly tied to that of the Fund, so you
can be assured that we are working toward a common goal.
Thank you for the trust you have placed in us.
Richard L. Chauvin, Jr.
Portfolio Manager
<TABLE>
<CAPTION>
Florida Street Growth Fund
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stock - 79.6% Shares Value
Banks & Bank Holding Companies - 4.1%
Carolina First Corp. 1,500 $ 32,813
CCB Financial Corp. 300 27,300
Concord EFS (a) 900 26,719
----------------
----------------
86,832
----------------
Buildings/Construction - 2.0%
NCI Buildings Systems (a) 700 25,506
Palm Harbor Homes Inc. (a) 600 16,050
----------------
----------------
41,556
----------------
Business Equipment & Services - 5.2%
Accustaff Inc. (a) 600 17,138
Acxiom Corp. (a) 1,200 19,725
Billing Information Concepts (a) 400 15,700
Corestaff Inc. (a) 700 17,325
Cotelligent Group Inc. 1,000 20,500
PMT Services Inc. 1,200 19,350
----------------
109,738
----------------
Capital Goods - 4.7%
Cincinnati Milacron 600 16,650
Deere & Co. 400 21,050
Illinois Tool Works Inc. 300 14,756
Miller Industrial Inc. (a) 1,200 12,150
Nucor Corp. 500 26,125
Unifab International (a) 300 9,600
----------------
----------------
100,331
----------------
Chemicals - 2.9%
IMC Global Inc. 600 20,213
PPG Industries 300 16,988
SCP Pool Corp. (a) 1,050 25,200
----------------
62,401
----------------
Consumer Durables - 1.1%
Action Performance Cos. (a) 900 23,063
----------------
Consumer Non - Durables - 5.8%
Flowers Industries 1,000 19,000
Kimberly Clark Corp. 400 20,775
Lance Inc. 1,000 21,375
Movado Group Inc. 1,200 25,350
Performance Food Group Co. (a) 900 16,650
Richfood Holdings 800 19,300
----------------
122,450
----------------
Electronics - 3.2%
Kuhlman Corp. 500 17,438
SCI Systems Inc. 700 30,800
TII Industries Inc. 3,000 18,750
----------------
----------------
66,988
----------------
Florida Street Growth Fund
Schedule of Investments -October 31, 1997- continued
Energy Sector - 10.4% Shares Value
Consolidated Natural Gas Co. 350 18,922
Core Labratories (a) 500 20,000
Domain Energy Corp. (a) 1,000 17,250
Mitcham Industries 800 20,900
Mobil Corp. 300 21,844
Nabors Industries (a) 400 16,450
Newpark Resources Inc. (a) 400 16,600
Pride International Inc. (a) 600 19,800
Southern Mineral Inc. 2,800 19,600
Superior Energy Services Inc. (a) 2,500 29,375
Tuboscope Vetco International Corp. (a) 600 19,050
----------------
219,791
----------------
Financial Services - 10.3%
Amresco Inc. (a) 700 21,963
Bear Stearns Cos. Inc. 200 7,938
Fleet Financial Group Inc. 350 22,509
First Data Corp. 800 23,250
Greentree Financial 600 25,275
Interstate/Johnson Lane 550 14,850
Lehman Brothers Holdings Inc. 200 9,413
MBNA Corp. 825 21,708
Raymond James Financial Inc. 300 9,000
Sirrom Capital Corp. 800 40,300
SunAmerica Inc. 600 21,563
----------------
217,769
----------------
Health Care - 2.9%
Diagnostic Health Services (a) 2,000 24,250
Healthcare Compare (a) 300 16,125
Smithkline Beecham PLC ADR 200 9,525
Vencor Inc. (a) 400 10,800
----------------
----------------
60,700
----------------
Hotels/Lodging - 0.9%
HFS Inc. (a) 300 21,150
----------------
Florida Street Growth Fund
Schedule of Investments -October 31, 1997- continued
Insurance - 2.7% Shares Value
Capital RE 350 20,628
Protective Life Corp. 400 21,150
Reliastar Financial Cos. 400 14,950
----------------
----------------
56,728
----------------
Restaurants - 3.0%
Landrys Seafood Restaurants Inc. (a) 1,000 28,000
Piccadilly Cafeteria 1,000 14,875
Rare Hospitality Inc. 2,200 20,625
----------------
63,500
----------------
Retail Stores - 6.0%
Autozone Inc. (a) 700 20,694
Consolidated Stores Corp. (a) 600 23,925
Dollar General Corp. 500 16,531
Heilig Myers Co. 800 10,700
Home Depot Inc. 400 22,250
Just for Feet Inc. (a) 1,300 19,256
Paul Harris Stores Inc. (a) 800 14,700
----------------
----------------
128,056
----------------
Technology Sector - 5.8%
Advanced Micro Devices Inc. (a) 500 11,500
Applied Materials, Inc. (a) 700 23,363
C-Cube Microsystems (a) 400 9,500
Coherent Communication Corp. 700 21,175
Novell Inc. 1,000 8,437
PairGain Technology (a) 400 11,300
Premier Technologies 600 20,400
Tech Data 400 17,800
----------------
123,475
----------------
Telecommunications - 3.3%
Frontier Corp. 800 17,300
GTE Corp. 400 16,974
World Access Inc. (a) 600 15,900
Worldcom Inc. (a) 600 20,174
----------------
70,348
----------------
Transportation/Commercial - 1.8%
Halter Marine Group Inc. (a) 400 20,924
Smithway Motor Express Corp. (a) 1,200 16,200
----------------
----------------
37,124
----------------
Transportation/Travel - 1.9%
ASA Holdings 400 11,150
Carnival Corp. Class A 600 29,100
----------------
----------------
40,250
----------------
U.S. Government Agencies - 1.6%
Federal National Mortgage Assoc. 700 33,905
----------------
Total Common Stock (Cost $1,661,677) 1,686,155
----------------
Florida Street Growth Fund
Schedule of Investments - continued Shares Value
U.S. Treasury Obligations - 11.6%
U.S. Treasury Notes 5.625%, 2/15/06 250,000 $ 245,391
----------------
(Cost $237,541)
Money Market Securities - 9.0%
Star Treasury 4.482% 10/31/97 190,132 $ 190,132
----------------
Total Money Market Securities (Cost $190,132)
TOTAL INVESTMENTS - 100.0% (Cost $2,089,350) $ 2,121,678
================
Other Assets less liabilities - (0.0%) (4,197)
Total Net Assets - 100.0% $ 2,117,481
================
<FN>
(a) non-income producing
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Growth Fund October 31, 1997
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $2,089,350) $ 2,121,678
Dividends receivable 1,697
Interest receivable 3,756
--------------------
Total assets 2,127,131
Liabilities
Payable for investments purchased $ 7,175
Accrued advisory fee payable 2,475
-------------------
Total liabilities 9,650
--------------------
Net Assets 2,117,481
====================
Net Assets consist of:
Paid in capital $ 2,084,419
Accumulated undistributed net investment income 734
Net unrealized appreciation on investments 32,328
--------------------
Net Assets, for 207,706 shares 2,117,481
====================
Net Asset Value
Net Assets
Offering price and redemption price per share ($2,117,481/207,706) $ 10.19
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Growth Fund
Statement of Operations for period August 6, 1997 (commencement of operations)
to October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 2,897
Interest Income 8,591
Other income 197
-------------------
Total Income 11,685
Expenses
Advisory fee $ 6,339
----------------------
Total Expenses 6,339
-------------------
Net Investment Income (Loss) 5,346
-------------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment securities (4,612)
Change in net unrealized appreciation (depreciation) on investment securities 32,328
----------------------
Net gain (loss) on investment securities 27,716
-------------------
Net increase (decrease) in net assets resulting from operations $ 33,062
===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Street Growth Fund
Statement of Changes in Net Assets August 6, 1997
(commencement of operations)
to October 31,1997
<S> <C>
Increase in Net Assets
Operations
Net investment income $ 5,346
Net realized gain(loss) on securities transactions (4,612)
Change in net unrealized appreciation 32,328
---------------
Net Increase in net assets resulting from operations 33,062
---------------
Distributions to shareholders:
From net investment income -
From net realized gain -
---------------
Total Distributions -
Share Transactions
Net proceeds from sale of shares 2,127,711
Shares issued in reinvestment -
Shares redeemed (43,292)
---------------
Net increase in net assets resulting
from share transactions 2,084,419
---------------
Total increase in net assets 2,117,481
Net Assets
Begining of period -
---------------
End of period [including undistributed net investment
income of $5,346]. $ 2,117,481
===============
</TABLE>
<PAGE>
Florida Street Growth Fund
Financial Highlights
For the period August 4, 1997 (Commencement of Operations) to October 31, 1997
Selected Per Share Data
Net asset value,
beginning of period $10.00
------------
Income from investment
Operations
Net investment income 0.03
Net realized and
unrealized gain (loss) 0.16
------------
Total from investment operations 0.19
------------
Less Distributions
From net interest income -
------------
Net asset value,
end of period $10.19
============
Total Return 7.97(a)
Ratios and Supplemental Data
Net assets, end of period (000) $2,117
Ratio of expenses to
average net assets 1.35(a)
Ratio of net investment income to
average net assets 1.14(a)
Portfolio turnover rate 0.87(a)
Average commissions paid 0.0973
(a) Annualized
<PAGE>
FLORIDA STREET FUNDS
Notes to Financial Statements
October 31, 1997
NOTE 1. ORGANIZATION
The Florida Bond Fund (the "Bond Fund") and the Florida Street Growth Fund (the
"Growth Fund") were organized as series of the AmeriPrime Funds, an Ohio
business trust (the "Trust"), on June 15, 1997, and commenced operations on
August 4 and August 6, 1997, respectively. The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified series, open end
management investment company. The investment objective of the Bond Fund is to
provide total return to shareholders over the long term. The investment
objective of the Florida Street Growth Fund is to provide total return to its
shareholders over the long term. The Trust Agreement permits the Trustees to
issue an unlimited number of shares of beneficial interest of separate series
without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuations- 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 Adviser'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
Adviser 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 Adviser, in conformity with guidelines
adopted by and 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
Adviser 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 Adviser,
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.
FLORIDA STREET FUNDS
Notes to Financial Statements
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Funds retain Commonwealth Advisors, Inc. (the "Adviser") to manage the
Fund's investments. The Adviser is a Louisiana corporation. Walter A. Morales,
the adviser's president and chief investment manager is responsible for the day
to day management of the bond fund, Richard L. Chauvin, Senior Vice-President
and Fund Manager of the adviser is responsible for the day to day management of
the Growth Fund.
Under the terms of the management agreement, (the "Agreement"), the Adviser
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 non-interested person trustees, and extraordinary expenses. As
compensation for its management services and agreement to pay the Funds
expenses, the Funds are obligated to pay the Adviser a fee computed and accrued
daily and paid monthly at an annual rate of 1.10% and 1.35% of the average daily
net assets of the Bond Fund and the Growth Fund, respectively. It should be
noted that most investment companies pay their own operating expenses directly,
while the Funds expenses, except those specified above, are paid by the Adviser.
For the period from August 4, 1997 through October 31, 1997, the Adviser has
received a fee of $14,080 from the Bond Fund. For the period from August 6, 1997
through October 31, 1997, the Adviser has received a fee of $6,339 from the
Growth Fund.
FLORIDA STREET FUNDS
Notes to Financial Statements
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
Florida Street Bond Fund. As of October 31, 1997 there was an unlimited number
of no par value shares of capital stock authorized for the Fund. Paid in capital
at October 31, 1997 was $7,248,914.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
For the period For the period from
from August 4, 1997
August 4, 1997 (Commencement of
(Commencement of Operations) through
Operations) October 31, 1996
through
October 31, 1997
Shares Dollars
<S> <C> <C>
Shares sold 744,446 $7,463,588
Shares issued in reinvestment of dividends 0 0
Shares redeemed (11,722) (116,893)
-------- ---------
732,724 $7,346,695
</TABLE>
<TABLE>
<CAPTION>
Florida Street Growth Fund. As of October 31, 1997 there was an unlimited number
of no par value shares of capital stock authorized for the Fund. Paid in capital
at October 31, 1997 was $2,084,419.
Transactions in capital stock were as follows:
For the period For the period from
from August 6, 1997
August 6, 1997 (Commencement of
(Commencement of Operations) through
Operations) through October 31, 1997
October 31, 1997
Shares Dollars
<S> <C> <C>
Shares sold 211,885 $2,127,711
Shares redeemed (4,179) (43,292)
------- --------
207,706 $2,084,419
</TABLE>
FLORIDA STREET FUNDS
Notes to Financial Statements
October 31, 1997
NOTE 5. INVESTMENTS
Florida Street Bond Fund. For the period from August 4, 1997 through October
31, 1997, purchases and sales of investment securities, other than short-term
investments, aggregated $9,352,754 and $1,607,791, respectively. The gross
unrealized appreciation for all securities totaled $120,593 and the gross
unrealized depreciation for all securities totaled $80,534 for a net unrealized
appreciation of $40,059. The aggregate cost of securities for federal income tax
purposes at October 31, 1997 was $7,133,171.
Florida Street Growth Fund. For the period from August 6, 1997 through October
31, 1997, purchases and sales of investment securities, other than short-term
investments, aggregated $1,708,252 and $41,963, respectively. The gross
unrealized appreciation for all securities totaled $127,420 and the gross
unrealized depreciation for all securities totaled $95,092 for a net unrealized
appreciation of $32,328. The aggregate cost of securities for federal income tax
purposes at October 31, 1997 was $2,089,350.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does not
receive commissions on trades made on behalf of the Funds. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund, under Section
2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Charles
Schwab & Co. owned in aggregate more than 25% of the Funds.
FLORIDA STREET FUNDS
Notes to Financial Statements
October 31, 1997
NOTE 9. RECLASSIFICATIONS
In accordance with SOP 93-2, the funds have recorded a reclassification in the
capital accounts. As of October 31, 1997 the bond fund recorded permanent
book/tax differences of ($97,781) from undistributed net investment income to
undistributed realized gain on investments. As of October 31, 1997 the growth
fund recorded permanent book/tax differences of ($4,612) from undistributed net
realized gain(loss) to undistributed net investment income. This
reclassification has no impact on the net asset value of the fund and is
designed generally to present undistributed income and realized gains on a tax
basis which is considered to be more informative to shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
Florida Street Bond Fund and Florida Street Growth Fund
We have audited the statement of assets and liabilities including the portfolio
of investments, of the Florida Street Bond Fund and Florida Street Growth Fund
(members of the Ameriprime Fund Series) as of October 31, 1997, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for each of the periods indicated. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted audit- ing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting prin ciples used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Florida Street Bond Fund and Florida Street Growth Fund as of October 31, 1997,
the results of its operations, the changes in its net assets, and the financial
highlights for each of the periods indicated in conformity with generally
accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
Dear Fellow Shareholders:
Investment Results - Fiscal Year Ended October 1997
The GLOBALT Growth Fund (the "Fund") ended its second October fiscal year
with a 27.15% total return for the year. The fund has returned 58.68% (net of
fees) since inception December 1, 1995, surpassing a 57.05% gain for the S&P 500
Index during the same time period. The Fund will declare a dividend on December
26, 1997. Error! Not a valid link.
Investment results since inception have been as follows:
Comparative
Investment Returns (a) (b)
GLOBALT
Growth Fund
S&P 500
Index (c)Quarter Ending:
3/31/96
7.3%
5.4%6/30/96
3.0%
4.5%9/30/96
4.2%
3.1%12/31/96
4.1%
8.3%3/31/97
-1.1%
2.7%6/30/97
18.9%
17.5%9/30/97
9.1%
7.5%Since Inception (d)
58.7%
57.1%
Past performance is not predictive of future performance.
<PAGE>
The GLOBALT Growth Fund's historical results are net of all expenses,
versus the gross market benchmark (the S&P 500 Index). Investors are reminded
that when trying to achieve benchmark returns, investment management fees,
transaction costs and execution costs will be incurred. -------------------
- ------ The S&P 500 Index is an unmanaged index of 500 selected common stocks,
most of which are listed on the New York Stock Exchange. The Index is adjusted
for dividends and weighted toward stocks with large market capitalizations. (d)
From December 1, 1995.
From a standing start on December 1, 1995, the Fund ended October 1997 with
$8,002,674 in net assets and more than 65 shareholders. We welcome our new
shareholders and look forward to furthering the investment objectives of all our
shareholders. We believe it is important to note that GLOBALT principals are
also investors in the Fund. Investment Approach To review, our approach to
managing the GLOBALT Growth Fund is to achieve long-term growth of capital by
investing in U.S. companies which we believe offer superior growth potential
through exposure to rapidly growing foreign markets. The Fund only invests in
stocks of U.S. companies that are expected to derive at least 20% of their
revenues outside the U.S. Once we construct portfolios, the connection you have
to the global marketplace, by being an investor in the GLOBALT Growth Fund, is
much greater: the portfolio derives at least 50% of revenues from outside the
U.S. Fund Performance Relative to the S&P 500 Index The Fund has underperformed
versus the S&P 500 Index for the fiscal year, but has beaten the S&P 500 Index
since inception. The Fund's underperformance was concentrated in the first half
of the fiscal year and can be attributed to the narrow leadership of the market
(the Fund's diversified nature actually hurt performance) as well as core
companies in the Fund's portfolio coming under selling pressure in the market.
This selling pressure was due in part to unfounded fears of lower profits for
globally- competitive U.S. companies arising from a strengthening dollar. Also,
value stocks performed better than growth stocks in late 1996 and early 1997.
The second half of the fiscal year was another story altogether. The fears of
lower profits due to a stronger dollar were put to rest as U.S. exports surged
to a new high in June. Growth stocks staged a comeback versus value stocks and
the globally-competitive companies held in the Fund's portfolio were at the
vanguard. All of this was good news as the Fund outperformed the S&P 500 Index
by more than 200 basis points in the last six months of the fiscal year.
Commentary and Outlook 1997 has been an exciting year for investors and stock
market returns have again been well above average. The economic framework for
investing continues to be very positive. In fact, interest rates could fall
further since the Federal Funds interest rate minus the core inflation rate is
still 3.25%. This is high for the 1990s, much higher than at most points in
history, and means that bonds are attractive investments.
However, we also reported to you at the end of September that equities may
finally "rest" because at no time in the last 80 years have there been 3
consecutive years of 20%+ gains. As the market reaches each new level, the
question of valuation becomes more relevant. Risk/reward over the near term, by
definition, looks less favorable. We believe, however, that for the long term
the "New Era" economy will lead to a higher, more sustainable earnings stream
for companies that is substantially more valuable than in previous, more
cyclical, inflation-prone times. In addition, continued demand for U.S. stocks
and bonds from both U.S. "baby boomers" and foreign investors, coupled with the
steady shrinking of the supply of stocks due to cash acquisitions and stock
buy-backs from record corporate cash flows, will limit corrections. We continue
to think short-term risks are outweighed by intermediate and long-term
opportunities.
The short-term risks subsequently heightened because of the chaos in the
smaller Southeast Asia currencies and economies that originated in Thailand and
rippled outward quickly, leveling the capital markets in that region. We
addressed some of the problems in Southeast Asia and how globally positioned
U.S. companies would be affected in our 3rd Quarter Review to clients and have
further updated our observations:
If U.S companies are truly global, they can provide "natural hedges" by growing
in other regions whenever particular world regions suffer a downturn.
U.S. companies with substantial business in Southeast Asia will catch a
slight cold for the next few quarters, but they will not catch pneumonia.
Rather, they can be among the healthiest of companies by the imminent turn of
the century. The recent sell-off in U.S. stocks appeared to be an overreaction:
1) Investors now have even more reason to expect very low global inflation; 2)
resultant lower interest rates should boost U.S. stock prices; 3) the moderating
effect this crisis should have on the U.S. economy can further elongate the
current expansion; and 4) the "norm" for the past 200+ years of U.S. market
history has been close to zero inflation and, when coupled with moderate
economic growth, the stock market has performed very well Many of these things
are being recognized by: 1) investors who have redirected funds from emerging
country markets and into U.S. stocks and 2) foreign investors who began
investing in the U.S. stock market again last year and have stepped up the pace
in the midst of this crisis. Taken together, we are witnessing a true "flight to
quality" and safety because U.S. markets are liquid and regulated. Foreign
investors, in particular, are longer term oriented and are attracted to
well-known, globally experienced U.S. multinationals that have global brand
recognition. The only way to benefit from the pricing opportunities that have
been created is the difficult, old-fashioned way - case-by-case evaluation. We
continuously review our portfolios to ensure that each U.S./global growth
company that we own has good geographical balance, dominates its markets, and
has every reason to continue to deliver consistent earnings growth - "global
growers" that can compete on the new competitive landscape longer term. Prior to
"Gray Monday," October 27, 1997, we had already reduced the volatility in our
portfolios somewhat and we currently hold about 8% cash, which is on the higher
end of the scale for us. We expect unusual stock market volatility to continue
for weeks, if not months. No one can predict how the problems in Southeast Asia
will unfold over the short term. Our task is identifying the "global growers,"
companies which can compete on the new competitive landscape over the longer
term. Certainly our recent trip to China (including Hong Kong) and other
emerging Asian countries confirmed our belief that many U.S. companies can and
are doing this successfully.
Sincerely,
Angela Z. Allen
President and Chief Executive Officer
AZA/gl
Fund Investment .
Shares of the Fund are sold on a continuous basis.
Through the Fund's transfer agent, American Data Services, you may invest
any amount you choose as often as you wish, subject to a minimum initial
investment of $25,000 and minimum subsequent investments of $5,000 ($2,000 for
IRA accounts). Shares may also be purchased through a broker dealer or other
financial institution authorized by the Fund's distributor (investors may be
charged a fee for this service). Purchases can be made by mail or by bank wire
(please see prospectus for more information). The Fund is also available through
Fidelity's FUNDSNetwork with a minimum investment of $25,000. It is listed as
the AmeriPrime Funds - GLOBALT Growth Fund (symbol: AVGGF). Fidelity can be
reached at 1-800-544-9697. We are pleased to announce that the Fund has recently
become available through the Schwab Mutual Fund OneSource service at
1-800-435-4000 or on the Internet at www.schwab.com. The minimum investment in
the Fund through this service is $2,500. The GLOBALT Growth Fund's mutual fund
symbol at Schwab is GGW1Z. This enables the GLOBALT Growth Fund to be included
as an investment option in 401(k) plans.
<PAGE>
<TABLE>
<CAPTION>
GLOBALT Growth Fund October 31, 1997
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $7,477,758) $ 8,310,562
Receivable for securities sold 106,426
Subscriptions receivable 2,500
Dividends receivable 6,025
Interest receivable 1,979
Reimbursement receivable from advisor 1,335
--------------------
Total assets 8,428,827
Liabilities
Payable for investments purchased $ 418,353
Accrued management fee payable 7,465
Other payable and accrued expenses 335
-------------------
Total liabilities 426,153
--------------------
Net Assets 8,002,674
====================
Net Assets consist of:
Paid in capital $ 6,507,953
Accumulated undistributed net investment income 3,398
Accumulated undistributed net realized gain 658,519
Net unrealized appreciation on investments 832,804
--------------------
Net Assets, for 510,876 shares 8,002,674
====================
Net Asset Value
</TABLE>
<TABLE>
<CAPTION>
GLOBALT Growth Fund
Statement of Operations for the year ended October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 56,832
Interest Income 9,489
-------------------
Total Income 66,321
Expenses
Management fee $ 62,923
Trustees' fees 1,335
-------------------
Total Expenses before reimbursement 64,258
Reimbursed expenses (1,335)
-------------------
Total Expenses 62,923
-------------------
Net Investment Income (Loss) 3,398
-------------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment securities 659,135
Change in net unrealized appreciation (depreciation) on investment securities 524,623
-------------------
Net gain (loss) on investment securities 1,183,758
-------------------
Net increase (decrease) in net assets resulting $ 1,187,156
===================
from operations
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBALT Growth Fund December 1, 1995
Statement of Changes in Net Assets (commencement of
For the year ended operations) to October 31,
October 31,1997 1996
Increase in Net Assets
<S> <C> <C>
Operations
Net investment income $ 3,398 2,033
Net realized gain 659,135 51,568
Change in net unrealized appreciation 524,623 308,181
--------------- ------------------
Net Increase in net assets resulting from operations 1,187,156 361,782
--------------- ------------------
Distributions to shareholders:
From net investment income (2,033) -
From net realized gain (52,184) -
--------------- ------------------
Total Distributions (54,217)
Share Transactions
Net proceeds from sale of shares 3,528,668 3,056,354
Shares issued in reinvestment 54,217 -
Shares redeemed (156,226) (60)
--------------- ------------------
Net increase in net assets resulting
from share transactions 3,426,659 3,056,294
--------------- ------------------
Total increase in net assets 4,559,598 3,418,076
Net Assets
Beginning of period 3,443,076 25,000
--------------- ------------------
End of period [including undistributed net investment
income of $3,398 and $2,033, respectively] $ 8,002,674 $ 3,443,076
=============== ==================
</TABLE>
<TABLE>
<CAPTION>
GLOBALT Growth Fund December 1, 1995
Statement of Changes in Net Assets (commencement of
For the year ended operations) to October 31,
October 31,1997 1996
Increase in Net Assets
<S> <C> <C>
Operations
Net investment income $ 3,398 2,033
Net realized gain 659,135 51,568
Change in net unrealized appreciation 524,623 308,181
--------------- ------------------
Net Increase in net assets resulting from operations 1,187,156 361,782
--------------- ------------------
Distributions to shareholders:
From net investment income (2,033) -
From net realized gain (52,184) -
--------------- ------------------
Total Distributions (54,217)
Share Transactions
Net proceeds from sale of shares 3,528,668 3,056,354
Shares issued in reinvestment 54,217 -
Shares redeemed (156,226) (60)
--------------- ------------------
Net increase in net assets resulting
from share transactions 3,426,659 3,056,294
--------------- ------------------
Total increase in net assets 4,559,598 3,418,076
Net Assets
Beginning of period 3,443,076 25,000
--------------- ------------------
End of period [including undistributed net investment
income of $3,398 and $2,033, respectively] $ 8,002,674 $ 3,443,076
=============== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBALT Growth Fund December 1, 1995
Financial Highlights For the year ended (commencement of operations)
October 31, 1997 to October 31, 1996
Selected Per Share Data
<S> <C> <C>
Net asset value,
beginning of period $12.48 $10.00
--------------- ---------------
Income from investment
Operations
Net investment income 0.01 0.01
Net realized and
unrealized gain (loss) 3.34 2.47
--------------- ---------------
Total from investment operations 3.35 2.48
--------------- ---------------
Less Distributions
From net investment income (0.17) 0.00
--------------- ---------------
Net asset value,
end of period $15.66 $12.48
Total Return 27.15% 27.(a)
Ratios and Supplemental Data
Net assets, end of period (000) $8,003 $3,443
Ratio of expenses to
average net assets 1.17% 1.16%(a)
Ratio of expenses to average net assets
before reimbursement 1.19% 1.25%(a)
Ratio of net investment income to
average net assets 0.06% 0.11%(a)
Ratio of net investment income to average
net assets before reimbursement 0.04% 0.02%(a)
Portfolio turnover rate 110.01% 66.42%(a)
Average commission rate 0.06147 0.0740
</TABLE>
<PAGE>
GLOBALT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. ORGANIZATION
The GLOBALT Growth Fund Inc. (the "Fund") is organized as a series of the
AmeriPrime Funds, an Ohio business trust (the "Trust"). The Trust is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company whose objective is to provide long term capital
growth. The Trust Agreement permits the trustees to issue an unlimited number of
shares of beneficial interest of separate series without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation- 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 Adviser'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 Adviser 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 Adviser, in conformity with guidelines adopted by and 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
Adviser believes such prices accurately reflect the fair market values 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 instiutional-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 Adviser,
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.
GLOBALT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains GLOBALT , Inc. (the "Adviser") to manage the Fund's
investments. The Adviser was organized as a Georgia Corporation in 1990. Angela
Allen, President of the Adviser, and Samuel Allen, Chairman of the Adviser, are
the controlling shareholders of GLOBALT, Inc. The investment decisions for the
Fund are made by a committee of the Adviser, which is primarily responsible for
the day to day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
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 non-interested person trustees and extraordinary expenses. The
Adviser is voluntarily reimbursing the Fund for trustees fees. There is no
assurance that such reimbursement will continue in the future. As compensation
for its management services and agreement to pay the Fund's expenses, the Fund
is obligated to pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of 1.17% of the average daily net assets of the Fund.
It should be noted that most investment companies pay their own operating
expenses directly, while the Fund's expenses, except those specified above, are
paid by the Adviser. For the period from November 1, 1996 through October 31,
1997, the Adviser has received a fee of $62,923 from the Fund.
GLOBALT GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $6,507,953.
<TABLE>
<CAPTION>
Transactions in capital stock were as follows:
For the period from For the period
December 1, 1995 from December 1,
(Commencement of 1995 (Commencement
Operations) through of Operations)
For the year ended For the year ended October 31, 1996 through
October 31, 1997 October 31, 1997 October 31, 1996
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold 241,426 $3,528,668 273,421 $3,056,354
Shares issued in
reinvestment of
dividends 4,216 54,217 0 0
Shares redeemed (10,682) (156,226) (5) (60)
-------- --------- --- ----
234,960 $3,426,659 273,416 $3,056,294
</TABLE>
NOTE 5. INVESTMENTS
For the period from November 1, 1996 through October 31, 1997, purchases and
sales of investment securities, other than short-term investments, aggregated
$7,641,469 and $5,877,038, respectively. The gross unrealized appreciation for
all securities totaled $941,950 and the gross unrealized depreciation for all
securities totaled $109,146 for a net unrealized appreciation of $832,804. The
aggregate cost of securities for federal income tax purposes at October 31, 1997
was $7,477,758. .
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
Globalt Growth Fund
We have audited the accompanying statement of assets and liabili ties of Globalt
Growth Fund (a member of the Ameriprime Fund series), including the schedule of
portfolio investments, as of October 31, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and financial highlights for the year then ended and for the period from
December 1, 1995 (commencement of operations) to October 31, 1996 in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of October 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Globalt Growth Fund as of October 31, 1997, the results of its operations for
the year then ended, and the changes in its net assets, and the financial
highlights for the year then ended and for the period from December 1, 1995 (com
mencement of operations) to October 31, 1996 in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
Dear Fellow Shareholders:
Summary
The recent stock market correction has left many investors wondering if this
historic bull market is coming to an end. Our feelings on the market have not
changed. We remain very optimistic about stocks over the long term. However, as
October demonstrated, the stock market is not without risk. Our convictions have
never been stronger that a large-company, value-oriented approach is both
prudent and timely.
In our approach, we seek to participate in rising markets and provide our
shareholders protection during market downturns. We expect our style to
occasionally lag during powerful, momentum-driven "up" markets, knowing that we
are providing excellent downside protection and superior risk-adjusted returns
over the long term. Though we are diversified in over twenty industries, we are
concentrated in the stocks of about thirty companies. Because of our
concentrated style, we don't expect to mirror the performance of the market. We
expect to have periods of both under-performance and out-performance. Our goal
is to provide superior risk-adjusted returns to our shareholders over three and
five-year periods, regardless of what the market is doing.
The IMS Capital Value Fund was one of only 11 funds selected by SmartMoney
magazine as a finalist for their "Best New Mutual Funds" story (273 funds were
eligible, August 1997 issue). We missed the final cut of 6 funds because our
historical performance was not available on the particular database they chose
to use. However, they did make a point to mention that one of the reasons they
were so intrigued with our fund was its excellent performance during the 8.5%
market correction in the first quarter of this year. In fact, since its
inception, on the days when the Dow dropped by 100 points or more, our fund has
held up better than the market by a 3-to-2 ratio (as measured by the S & P 500).
As of October 31, 1997, the IMS Capital Value had returned 20.6% since its
inception (August 5, 1997) and 12.1% over the 12 months. Although we would
usually consider these to be excellent returns, they pale by comparison to the
returns of the S&P 500 index, 41.4% and 32.1%, respectively. Even though we
happen to be looking at a very short period of time and a nearly unprecedented
"go-go" market, we can't help but be disappointed that we didn't compare more
favorably on the short term. Nothing about our investment approach, which has
been very successful in the past, has changed. Some of the fund's largest
holdings have simply not participated in the market's huge upswing. Rubbermaid,
Waste Management, Fruit of the Loom and RJR Nabisco are all significant holdings
in the fund which have made little or no contribution to the fund's performance.
These quality, undervalued companies will eventually have their day in the sun,
and therefore we view this as a buying opportunity and feel the fund's best
relative performance lies in the months and years ahead.
The Technology Revolution
As value managers, finding an undervalued technology company in today's stock
market is not easy. Our challenge is not only to find technology companies that
are cheap relative to both historical valuations and their industry, but
companies that are also undervalued due to short-term circumstances. Unlike most
of the companies in which we invest where there is little doubt about demand for
a quality product (i.e. Rubbermaid or Fruit of the Loom) technology companies
often see demand for their products drop off overnight due to new products and
innovations. We seek to identify undervalued technology companies that will be
beneficiaries of change, not victims. Electronic Data Systems (EDS, $37, Yld
1.6%) is the fund's second largest position and an example of a company that
exemplifies the above criteria. EDS is a 15-billion-dollar-a-year, international
computer consulting firm that stands to win regardless of technology's
direction. In fact, the more things change, the more EDS will benefit. EDS
recently signed a 10-year, $3 billion deal with one of Australia's largest banks
that highlights the types of services they can provide. The Commonwealth Bank of
Australia hired EDS to take over its entire information technology department.
As was the case with most of EDS's clients, the bank was finding it nearly
impossible to keep pace with changing technology. The bank expects the deal to
increase its productivity and decrease the risk of falling behind the technology
curve. The bank also hopes to hand over responsibility for resolving its Year
2000 conversion issues. It's also noteworthy that the Commonwealth Bank of
Australia was so impressed with EDS's future that it invested $175 million to
acquire a 35% stake in EDS's Australian subsidiary.
Amid all of this opportunity, EDS's stock has fallen from a high of $63 in 1996
to $37 today. The company has disappointed investors lately with lower than
expected profits. Profit margins are being squeezed by tough competition. EDS
also experienced a drought in 1996 when it failed to win any billion-dollar
contracts. The stock is trading near 10-year lows by virtually any valuation
measure: price versus sales, cash flow, earnings, and book value. Throw in an
unusually high yield for a technology company and the fact that 75% of the
analysts following it are negative and what you have is a stock that has been
left for dead. We see the current situation quite differently. We see an
opportunity to buy the world's largest, globally-diversified computer consulting
company at a significant discount. Although the impact has just started to be
felt on the bottom line, EDS has taken several steps to turn things around.
Management has announced a restructuring plan that will trim up to 9,000 jobs
from its 100,000 person work force and is aggressively looking to cut costs in
other areas. They are expected to win a minimum of $15 billion in new business
in 1997 and turn their focus to more profitable areas such as internet-related
projects, work involving the Year 2000 problem and electronic commerce. Keep in
mind EDS has historically been a well-run company - management is respected and
has a long-term track record of increasing sales, earnings and dividends. We
believe that EDS is less risky than the typical technology stock and will reward
patient investors over time.
Everyone at IMS Capital Management is a shareholder in the fund and a strong
believer in the principles of long-term value investing. We thank you for
joining us as shareholders as we continue working towards our goal of making the
IMS Capital Value Fund one of the most respected and successful value funds in
the industry.
Carl Marker Doug Johanson
Carl W. Marker Douglas E. Johanson, CFA
Portfolio Manager Research Analyst
<PAGE>
IMS Capital Value Fund
Portfolio Profile
Data as of October 31, 1997
Comparative Valuations
<TABLE>
<CAPTION>
IMS Capital S&P 500 Discount to
Value Fund Index S&P 500 Index
<S> <C> <C> <C>
Price/Sales Ratio 1.1X 1.5X 27%
Price/Book Ratio 2.7X 3.7X 27%
Price/Earnings Ratio 17.5X 19.6X 11%
Price/Cashflow Ratio 10.2X 11.4X 11%
Note: The average stock in the Fund is trading 43% below its all-time high vs. the S&P 500 Index which is trading
only 7% below its all-time high.
<FN>
*Sources: Donaldson, Lufkin & Jenrette and Bloomberg. Earnings and Cashflow are based on 1997 estimates.
</FN>
</TABLE>
Fund Facts
Growth of $10,000
since inception (8/5/96) .......... $12,060
Average Market Cap. ............... $8.7 bil.
Number of Holdings ......................... 30
Net Assets ........................... $9,931,949
Share Price ................................... 12.06
Performance Summary
(insert graph here)
Since Inception
Average Annual Returns 12 months 8/5/96
IMS Capital Value Fund 12.1% 16.3%
S&P 500 Index 32.1% 32.2%
This graph shows the value of a hypothetical initial investment of $10,000 in
the Fund and the S&P 500 Index on August 5, 1996, and held through October 31,
1997. The S&P 500 Index is a widely recognized, unmanaged index of common
stocks. Performance figures include the change in value of the stocks in the S&P
500 Index and the reinvestment of dividends. The S&P 500 Index returns do not
reflect expenses, which have been deducted from the Fund's return. The fund's
return represents past performance and is not a guarantee of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Top Ten Holdings
Rubbermaid 7.5%
Electronic Data Systems 6.2
Fruit of the Loom 5.0
Chiquita Brands 4.7
American Power Conversion 4.7
Waste Management 4.5
RJR Nabisco 4.5
U.S. West Media Group 4.2
Paging Network 3.7
Olsten 3.7
Top Ten Industries
Household Products 10.7%
Retail 9.9
Communications 7.9
Computers & Peripherals 7.1
Computer Services 6.2
Healthcare Products 5.6
Apparel 5.0
Food 4.7
Environmental 4.5
Food & Tobacco 4.4
<PAGE>
Below is a brief description of each of the holdings in your mutual fund.
American Power Conversion
world's leading maker of surge protection & uninterruptible power supply systems
for computers Bausch & Lomb leading maker of contact lenses, solutions,
sunglasses, hearing aids, etc. Chiquita Brands global leader in the marketing
and distribution of bananas and other fruits Circus Circus largest gaming and
lodging company in the U.S. - owns six major properties in Nevada Cooper Tire
manufactures auto and truck tires under several names - produces various rubber
products Electronic Data Systems provides information technology services to
companies worldwide Fleming largest U.S. wholesale food distributor (delivers
food to grocery stores) Fruit of the Loom largest U.S. producer of cotton
T-shirts and underwear H & R Block world's largest tax preparation firm - owns
80% of Compuserve (on-line service) Hewlett-Packard leading worldwide producer
of printers, fax machines, calculators, PC's , etc. IVAX largest generic drug
maker Louisiana-Pacific building materials company - strongest balance sheet in
the industry Marvel comic books, trading cards, toys, character licensing
(including Incredible Hulk and Spider-Man) NextLevel leading maker of high-end
cable, satellite, and telephone equipment Nike makes and designs high quality
footwear and apparel Office Depot largest office supply superstore chain in
North America Olsten largest U.S. provider of home health-care and third largest
temporary help service PacifiCare one of the nation's largest Health Maintenance
Organizations (HMO's) Paging Network (a.k.a. PageNet) world's largest provider
of paging and wireless messaging services PETsMART world's largest operator of
superstores specializing in pet supplies and services RJR Nabisco second largest
food and tobacco company in the world - owns 80% of Nabisco Foods. Rubbermaid
leading maker of household plastic and rubber products - owns Little Tykes and
Graco Sensormatic leading manufacturer of security surveillance systems, tags
and sensor labels Shaw Industries largest U.S. carpet manufacturer Singer
world's largest manufacturer of sewing machines - focus on emerging markets
Sunbeam makes and markets brand name consumer products (housewares, personal
care, etc.) Toys "R" Us worldwide retailer of children's products U.S. West
Media Group provides cable and wireless communications, and directory and
information services Wal-Mart the largest and most profitable discount retailer
in the world Waste Management world's largest solid waste collection and
disposal company
<PAGE>
<TABLE>
<CAPTION>
IMS Capital Value Fund
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stocks - 99.4% Shares Value
Hotels & Gaming - 2.9%
Circus Circus Enterprises Inc. (a) 13,000 289,250
--------------------
Apparel - 5.0%
Fruit of the Loom (a) 19,000 495,188
--------------------
Communications - 7.9%
Paging Network Inc. (a) 30,000 371,250
U.S. West Media Group (a) 16,500 416,625
--------------------
--------------------
787,875
--------------------
Computer Services - 6.2%
Electronic Data Systems 16,000 619,000
--------------------
Computers & Peripherals - 7.1%
American Power Conversion (a) 17,000 463,250
Hewlett Packard Co. 4,000 246,750
--------------------
710,000
--------------------
Electronics - 2.6%
Sensormatic Electronics Corp. 17,000 253,938
--------------------
Environmental - 4.5%
Waste Management Inc. 19,000 444,125
--------------------
Financial Services - 2.3%
H & R Block 6,100 225,700
--------------------
Food - 4.7%
Chiquita Brands International Inc. 28,000 470,750
--------------------
Food & Tobacco - 4.4%
RJR Nabisco Holdings Corp. 14,000 443,625
--------------------
Food Distribution - 2.7%
Fleming Companies 16,055 270,928
--------------------
Forest Products - 2.1%
Lousiana Pacific Corp. 9,800 205,800
--------------------
Staffing Services - 3.7%
Olsten Corp. 24,000 366,000
--------------------
IMS Capital Value Fund
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued
Healthcare Products - 5.6% Shares Value
Bausch & Lomb 8,250 323,813
IVAX Corp. (a) 30,000 226,875
--------------------
550,688
Home Furnishings - 2.8%
Shaw Industries, Inc. 23,000 278,875
--------------------
Hospital & Healthcare - 3.5%
PacifiCare Health Systems, Inc. (Class A) (a) 5,500 349,938
--------------------
Household Products - 10.7%
Sunbeam Corp. 7,000 317,188
Rubbermaid Inc. 31,000 745,938
--------------------
--------------------
1,063,126
--------------------
Manufacturing - 2.2%
Singer Co. 16,300 221,068
--------------------
Publishing - 1.8%
Marvel Entertainment (a) 100,000 181,250
--------------------
Retail - 9.9%
PETsMART, Inc. (a) 28,000 213,500
Office Depot Inc. (a) 15,000 309,374
Toys R Us (a) 7,000 238,437
Wal-Mart Stores (a) 6,220 218,477
--------------------
--------------------
979,788
--------------------
Communications Equipment- 1.8%
Nextlevel Systems Inc. (a) 13,000 175,500
--------------------
Shoes - 3.1%
Nike Inc. (Class B) 6,500 305,500
--------------------
Tire & Rubber - 1.9%
Cooper Tire & Rubber Corp. 8,650 183,272
--------------------
TOTAL COMMON STOCKS (Cost $9,671,641) 9,871,184
Money Market Securities - 1.3% Principal Amount
Star Treasury 4.61%, 10/31/97 $129,478 $129,478
--------------------
Total Bonds & Notes (Cost $129,478)
TOTAL INVESTMENTS - 100.7% (Cost $9,801,119) $10,000,662
--------------------
Other liabilities less assets - 0.7% ($68,713)
--------------------
====================
TOTAL NET ASSETS - 100% 9,931,949
====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMS Capital Value Fund
Statement of Assets & Liabilities
October 31, 1997
Assets
<S> <C> <C>
Investment in securities, at value (cost $9,801,119) $ 10,000,662
Subscriptions receivable 91,880
Interest receivable 449
Deferred Organizational Costs 22,552
----------------------
Total assets 10,115,543
Liabilities
Redemptions payable 88,663
Payable for investments purchased 77,105
Accrued advisory fee payable 14,338
Other payables and accrued expenses 3,488
-------------------
Total liabilities 183,594
----------------------
Net Assets $ 9,931,949
======================
Net Assets consist of:
Paid in capital $ 9,121,740
Accumulated undistributed net realized gain 610,666
Net unrealized appreciation on investments 199,543
----------------------
Net Assets, for 823,766 shares $ 9,931,949
======================
Net Asset Value
Net Assets
Offering price and redemption price per share ($9931,949/823,766) $ 12.06
======================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMS Capital Value Fund
Statement of Operations for the year ended October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 92,735
Interest Income 9,514
---------------------
Total Income 102,249
Expenses
Investment advisory fee $ 108,433
Administration fee 30,000
Transfer agent fee 12,708
Fund accounting fee 11,700
Custodian fee 7,688
Audit fees 7,574
Legal fees 5,188
Registration fees 7,387
Shareholder reports 355
Trustees fees 150
Miscellaneous 3,332
---------------------
Total operating expenses before reimbursement 194,515
Reimbursed expenses (43,422)
---------------------
Total operating expenses 151,093
---------------------
Net Investment Income (Loss) (48,844)
---------------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment securities 672,917
Change in net unrealized appreciation (depreciation) on
on investment securities (44,863)
---------------------
Net gain (loss) on investment securities 628,054
---------------------
Net increase (decrease) in net assets resulting
from operations $ 579,210
=====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMS Capital Value Fund August 5, 1996
Financial Highlights For the year (commencement of
ended October 31, operations) to October 31,
Selected Per Share Data 1997 1996
<S> <C> <C>
Net asset value,
begining of period $10.76 $10.00
----------------- ----------------
Income from investment operations
Net investment income (0.08) (0.01)
Net realized and unrealized gain (loss) 1.38 0.77
----------------- ----------------
Total from investment operations 1.30 0.76
================= ================
Less Distributions
From net interest income 0.00 0.00
----------------- ----------------
Net asset value,
end of period $12.06 $10.76
================= ================
Total Return 12.08% 30.23%(a)
Ratios and Supplemental Data
Net assets, end of period (000) $9,932 $4,741
Ratio of expenses to
average net assets 2.54% 1.84%(a)
Ratio of expenses to average net
assets before reimbursement 1.97% 3.92%(a)
Ratio of net investment income to
average net assets (0.64%) (0.25)%(a)
Ratio of net investment income to average
net assets before reimbursement 1.20% (2.32)%(a)
Portfolio turnover rate 34.76% 3.56%
Average commission rate 0.0439 0.0416
<FN>
(a) Annualized
</FN>
</TABLE>
IMS CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. ORGANIZATION
The IMS Capital Value Fund. (the "Fund") was organized as a series of the
AmeriPrime Funds, an Ohio business trust (the "Trust"), on July 30, 1996 and
commenced operations on August 5, 1996. The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The investment objective of the fund is to
provide long-term growth to its shareholders a value oriented contrarian
philosophy by investing in large high quality dividend paying U.S. companies.
The Trust Agreement permits the trustees to issue an unlimited number of shares
of beneficial interest of separate series without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation- 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 Adviser'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 Adviser 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 Adviser, in conformity with guidelines adopted by and 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
Adviser believes such prices accurately reflect the fair market values 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 Adviser,
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.
IMS CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis.Discounts and premiums on securities purchased are amortized over the life
of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains IMS Capital Management, Inc. (the "Adviser") to manage the
Fund's investments. Carl W. Marker, Chairman and President of the Adviser, is
primarily responsible for the day to day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees. As
compensation for its management services the Fund is obligated to pay the
Adviser a fee computed and accrued daily and paid monthly at an annual rate of
1.59% of the average daily net assets of the Fund. For the period from November
1, 1996 through October 31, 1997, the Adviser has received a fee of $108,433
from the Fund. The Adviser is voluntarily reimbursing certain Fund expenses.
There is no assurance that such reimbursement will continue in the future.
IMS CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $9,121,740.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
For the period from For the period
August 1, 1996 from August 1,
(Commencement of 1996 (Commencement
Operations) through of Operations)
For the six month For the six month October 31, 1996 through
period ended period ended October 31, 1996
October 31, 1997 October 31, 1997
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold 426,253 $5,141,834 441,933 $4,524,858
Shares issued in
reinvestment of
dividends 0 0 0 0
Shares redeemed (43,144) (529,761) (1,276) (13,500)
-------- --------- ------- --------
383,109 $5,612,073 440,657 $4,511,358
</TABLE>
NOTE 5. INVESTMENTS
For the period from November 1, 1996 through October 31, 1997, purchases and
sales of investment securities, other than short-term investments, aggregated
$7,446,766 and $2,669,357, respectively. The gross unrealized appreciation for
all securities totaled $1,021,809 and the gross unrealized depreciation for all
securities totaled $822,266 for a net unrealized appreciation of $199,543. The
aggregate cost of securities for federal income tax purposes at October 31, 1997
was $9,801,119.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE>
IMS CAPITAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 7. RECLASSIFICATIONS
In accordance with SOP 93-2, the fund has recorded a reclassification in the
capital accounts. As of October 31, 1997 the fund recorded permanent book/tax
differences of ($48,844) from undistributed net investment income to
undistributed realized gain on investments. This reclassification has no impact
on the net asset value of the fund and is designed generally to present
undistributed income and realized gains on a tax basis which is considered to be
more informative to shareholders.
Dear Fellow Shareholders:
Summary
The recent stock market correction has left many investors wondering if this
historic bull market is coming to an end. Our feelings on the market have not
changed. We remain very optimistic about stocks over the long term. However, as
October demonstrated, the stock market is not without risk. Our convictions have
never been stronger that a large-company, value-oriented approach is both
prudent and timely.
In our approach, we seek to participate in rising markets and provide our
shareholders protection during market downturns. We expect our style to
occasionally lag during powerful, momentum-driven "up" markets, knowing that we
are providing excellent downside protection and superior risk-adjusted returns
over the long term. Though we are diversified in over twenty industries, we are
concentrated in the stocks of about thirty companies. Because of our
concentrated style, we don't expect to mirror the performance of the market. We
expect to have periods of both under-performance and out-performance. Our goal
is to provide superior risk-adjusted returns to our shareholders over three and
five-year periods, regardless of what the market is doing.
The IMS Capital Value Fund was one of only 11 funds selected by SmartMoney
magazine as a finalist for their "Best New Mutual Funds" story (273 funds were
eligible, August 1997 issue). We missed the final cut of 6 funds because our
historical performance was not available on the particular database they chose
to use. However, they did make a point to mention that one of the reasons they
were so intrigued with our fund was its excellent performance during the 8.5%
market correction in the first quarter of this year. In fact, since its
inception, on the days when the Dow dropped by 100 points or more, our fund has
held up better than the market by a 3-to-2 ratio (as measured by the S & P 500).
As of October 31, 1997, the IMS Capital Value had returned 20.6% since its
inception (August 5, 1997) and 12.1% over the 12 months. Although we would
usually consider these to be excellent returns, they pale by comparison to the
returns of the S&P 500 index, 41.4% and 32.1%, respectively. Even though we
happen to be looking at a very short period of time and a nearly unprecedented
"go-go" market, we can't help but be disappointed that we didn't compare more
favorably on the short term. Nothing about our investment approach, which has
been very successful in the past, has changed. Some of the fund's largest
holdings have simply not participated in the market's huge upswing. Rubbermaid,
Waste Management, Fruit of the Loom and RJR Nabisco are all significant holdings
in the fund which have made little or no contribution to the fund's performance.
These quality, undervalued companies will eventually have their day in the sun,
and therefore we view this as a buying opportunity and feel the fund's best
relative performance lies in the months and years ahead.
The Technology Revolution
As value managers, finding an undervalued technology company in today's stock
market is not easy. Our challenge is not only to find technology companies that
are cheap relative to both historical valuations and their industry, but
companies that are also undervalued due to short-term circumstances. Unlike most
of the companies in which we invest where there is little doubt about demand for
a quality product (i.e. Rubbermaid or Fruit of the Loom) technology companies
often see demand for their products drop off overnight due to new products and
innovations. We seek to identify undervalued technology companies that will be
beneficiaries of change, not victims. Electronic Data Systems (EDS, $37, Yld
1.6%) is the fund's second largest position and an example of a company that
exemplifies the above criteria. EDS is a 15-billion-dollar-a-year, international
computer consulting firm that stands to win regardless of technology's
direction. In fact, the more things change, the more EDS will benefit. EDS
recently signed a 10-year, $3 billion deal with one of Australia's largest banks
that highlights the types of services they can provide. The Commonwealth Bank of
Australia hired EDS to take over its entire information technology department.
As was the case with most of EDS's clients, the bank was finding it nearly
impossible to keep pace with changing technology. The bank expects the deal to
increase its productivity and decrease the risk of falling behind the technology
curve. The bank also hopes to hand over responsibility for resolving its Year
2000 conversion issues. It's also noteworthy that the Commonwealth Bank of
Australia was so impressed with EDS's future that it invested $175 million to
acquire a 35% stake in EDS's Australian subsidiary.
Amid all of this opportunity, EDS's stock has fallen from a high of $63 in 1996
to $37 today. The company has disappointed investors lately with lower than
expected profits. Profit margins are being squeezed by tough competition. EDS
also experienced a drought in 1996 when it failed to win any billion-dollar
contracts. The stock is trading near 10-year lows by virtually any valuation
measure: price versus sales, cash flow, earnings, and book value. Throw in an
unusually high yield for a technology company and the fact that 75% of the
analysts following it are negative and what you have is a stock that has been
left for dead. We see the current situation quite differently. We see an
opportunity to buy the world's largest, globally-diversified computer consulting
company at a significant discount. Although the impact has just started to be
felt on the bottom line, EDS has taken several steps to turn things around.
Management has announced a restructuring plan that will trim up to 9,000 jobs
from its 100,000 person work force and is aggressively looking to cut costs in
other areas. They are expected to win a minimum of $15 billion in new business
in 1997 and turn their focus to more profitable areas such as internet-related
projects, work involving the Year 2000 problem and electronic commerce. Keep in
mind EDS has historically been a well-run company - management is respected and
has a long-term track record of increasing sales, earnings and dividends. We
believe that EDS is less risky than the typical technology stock and will reward
patient investors over time.
Everyone at IMS Capital Management is a shareholder in the fund and a strong
believer in the principles of long-term value investing. We thank you for
joining us as shareholders as we continue working towards our goal of making the
IMS Capital Value Fund one of the most respected and successful value funds in
the industry.
Carl Marker Doug Johanson
Carl W. Marker Douglas E. Johanson, CFA
Portfolio Manager Research Analyst
<PAGE>
IMS Capital Value Fund
Portfolio Profile
Data as of October 31, 1997
Comparative Valuations
<TABLE>
<CAPTION>
IMS Capital S&P 500 Discount to
Value Fund Index S&P 500 Index
<S> <C> <C> <C>
Price/Sales Ratio 1.1X 1.5X 27%
Price/Book Ratio 2.7X 3.7X 27%
Price/Earnings Ratio 17.5X 19.6X 11%
Price/Cashflow Ratio 10.2X 11.4X 11%
Note: The average stock in the Fund is trading 43% below its all-time high vs. the S&P 500 Index which is trading
only 7% below its all-time high.
<FN>
*Sources: Donaldson, Lufkin & Jenrette and Bloomberg. Earnings and Cashflow are based on 1997 estimates.
</FN>
</TABLE>
Fund Facts
Growth of $10,000
since inception (8/5/96) .......... $12,060
Average Market Cap. ............... $8.7 bil.
Number of Holdings ......................... 30
Net Assets ........................... $9,931,949
Share Price ................................... 12.06
Performance Summary
(insert graph here)
Since Inception
Average Annual Returns 12 months 8/5/96
IMS Capital Value Fund 12.1% 16.3%
S&P 500 Index 32.1% 32.2%
This graph shows the value of a hypothetical initial investment of $10,000 in
the Fund and the S&P 500 Index on August 5, 1996, and held through October 31,
1997. The S&P 500 Index is a widely recognized, unmanaged index of common
stocks. Performance figures include the change in value of the stocks in the S&P
500 Index and the reinvestment of dividends. The S&P 500 Index returns do not
reflect expenses, which have been deducted from the Fund's return. The fund's
return represents past performance and is not a guarantee of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Top Ten Holdings
Rubbermaid 7.5%
Electronic Data Systems 6.2
Fruit of the Loom 5.0
Chiquita Brands 4.7
American Power Conversion 4.7
Waste Management 4.5
RJR Nabisco 4.5
U.S. West Media Group 4.2
Paging Network 3.7
Olsten 3.7
Top Ten Industries
Household Products 10.7%
Retail 9.9
Communications 7.9
Computers & Peripherals 7.1
Computer Services 6.2
Healthcare Products 5.6
Apparel 5.0
Food 4.7
Environmental 4.5
Food & Tobacco 4.4
<PAGE>
Below is a brief description of each of the holdings in your mutual fund.
American Power Conversion
world's leading maker of surge protection & uninterruptible power supply systems
for computers Bausch & Lomb leading maker of contact lenses, solutions,
sunglasses, hearing aids, etc. Chiquita Brands global leader in the marketing
and distribution of bananas and other fruits Circus Circus largest gaming and
lodging company in the U.S. - owns six major properties in Nevada Cooper Tire
manufactures auto and truck tires under several names - produces various rubber
products Electronic Data Systems provides information technology services to
companies worldwide Fleming largest U.S. wholesale food distributor (delivers
food to grocery stores) Fruit of the Loom largest U.S. producer of cotton
T-shirts and underwear H & R Block world's largest tax preparation firm - owns
80% of Compuserve (on-line service) Hewlett-Packard leading worldwide producer
of printers, fax machines, calculators, PC's , etc. IVAX largest generic drug
maker Louisiana-Pacific building materials company - strongest balance sheet in
the industry Marvel comic books, trading cards, toys, character licensing
(including Incredible Hulk and Spider-Man) NextLevel leading maker of high-end
cable, satellite, and telephone equipment Nike makes and designs high quality
footwear and apparel Office Depot largest office supply superstore chain in
North America Olsten largest U.S. provider of home health-care and third largest
temporary help service PacifiCare one of the nation's largest Health Maintenance
Organizations (HMO's) Paging Network (a.k.a. PageNet) world's largest provider
of paging and wireless messaging services PETsMART world's largest operator of
superstores specializing in pet supplies and services RJR Nabisco second largest
food and tobacco company in the world - owns 80% of Nabisco Foods. Rubbermaid
leading maker of household plastic and rubber products - owns Little Tykes and
Graco Sensormatic leading manufacturer of security surveillance systems, tags
and sensor labels Shaw Industries largest U.S. carpet manufacturer Singer
world's largest manufacturer of sewing machines - focus on emerging markets
Sunbeam makes and markets brand name consumer products (housewares, personal
care, etc.) Toys "R" Us worldwide retailer of children's products U.S. West
Media Group provides cable and wireless communications, and directory and
information services Wal-Mart the largest and most profitable discount retailer
in the world Waste Management world's largest solid waste collection and
disposal company
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
IMS Capital Value Fund
We have audited the accompanying statement of assets and liabili ties of IMS
Capital Value Fund (a member of the Ameriprime Fund series), including the
schedule of portfolio investments, as of October 31, 1997, and the related
statement of operations for the year then ended, and the statement of changes in
net assets, and financial highlights for the year then ended and for the period
from August 5, 1995 (commencement of operations) to October 31, 1996 in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of October 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of IMS
Capital Value Fund as of October 31, 1997, the results of its operations for the
year then ended, and the changes in its net assets, and the financial highlights
for the year then ended and for the period from August 5, 1995 (com mencement of
operations) to October 31, 1996 in the period then ended, in conformity with
generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
Dear Fellow Shareholders:
The Fountainhead Special Value Fund ended its first fiscal year with outstanding
results. We are pleased to say that the Fund returned a cumulative return of
33.7%and an annualized return of 40.09% between December 31, 1996 and October
31, 1997. This compares quite favorably to the S&P 500, the S&P 400 MidCap, and
the Russell 2000, which returned 25.3%, 25.4%, and 20.9% respectively over the
same time period.
Chart
The Fund encountered much market turbulence over its first ten months of
operation. However, as the chart demonstrates, we weathered the storms quite
well. Our outstanding performance was driven primarily by our financial holdings
(TR Financial, 88%; Eaton Vance, 65%; First Palm Beach Bancorp, 60%; American
National Bancorp, 55%; Dime Bancorp, 42%; and Coast Savings Financial, 38%) and
healthcare stocks (Healthsource, 72%; Watson Pharmaceutical, 69%; Sun Healthcare
Group, 68%; Mariner Health Group, 65%; DVI, 51%; TheraTx, 49%; and Horizon/CMS
Healthcare, 35%). In addition, many special-situation stocks (Mitcham
Industries, 237%; AirTouch Communications, 54%; General Nutrition Companies,
52%; Rainforest Cafe, 46%; Policy Management Systems, 41%; and Intuit, 41%)
significantly aided results. Overall, seventeen of the Fund's stocks appreciated
more than forty percent over the ten-month period.
After strong outperformance for the last four years, there is evidence that the
tide is turning from large-cap leadership. When leadership changes occur, cycles
of underperformance or outperformance tend to last for prolonged periods. If
indeed mid- and small-cap stocks are taking the lead, we believe we are well
positioned to capitalize on this cycle.
JKA's investment style
We are a bottom-up value manager which adheres to what we call the Business
Valuation Approach. This highly-disciplined approach seeks to identify
attractive investment opportunities using a broad definition of value,
uncovering securities often overlooked by other investors. We believe value can
be found in different types of securities at different points in the economic
cycle. This approach has served our clients well for many years in many
different economic environments. Our buy criteria consist of three elements.
Essentially, we will buy a stock that trades at a discount to its five-year
projected earnings growth rate, its seven-year historical valuation based on its
price-to-earnings, price/book, price/cash flow, or price/sales ratios, or its
private-market value.
Growth at a reduced price
Unlike many typical value managers who practice only a Graham and Dodd approach
(buying only low P/E or price/book stocks), our buy criteria does allow us to
purchase growth stocks, but at a reasonable price. Earnings growth is certainly
a positive attribute of a company, but an attribute for which investors often
pay too much. However, if purchased at a value price, a growth stock can be an
excellent investment. One criterion we examine when purchasing a stock is
whether it is trading at a discount to its growth rate of earnings or cash flow.
For example, in April we purchased Watson Pharmaceutical, a specialty
generic-drug company trading at 14x 1997 earnings estimates, yet growing its
earnings at 25% annually. The company, which operates in a unique market niche,
has a solid balance sheet (no long-term debt and ample cash), a high percentage
of insider ownership, and a stable drug pipeline. Through the end of October,
the stock had appreciated 69% for our shareholders.
A second example is Mitcham Industries, our biggest winner in our first fiscal
year, appreciating 237% since March. When we met with Mitcham's management in
early 1997, the stock was relatively unknown to Wall Street. The company, the
largest lessor of seismic equipment to the oil and gas industry, appears
perfectly positioned to take advantage of the developing boom in oilfield
services. During the first six months of 1997, revenues rose 279% while net
income rose 234%. As a result, the stock price rose from our purchase price of
$7.50 to $26.13 on October 31.
Historical valuation
Another criterion when purchasing a stock is whether it trades at a discount to
its historical valuation on either a price-to-earnings, cash flow, book, or
sales basis--a measurement rarely applied today because of the run-up in
financial assets over the last several years. Today, even when most stocks
decline in price, they rarely trade at a discount to their historical valuation
parameters. One exception, however, is Sun Healthcare Group. Sun, a long-term
healthcare provider which furnishes ancillary services for the healthcare
industry in the United States and the United Kingdom, was one of the first
stocks we bought for the Fund. When purchased, the stock traded at 9x 1997
earnings estimates. On a historical basis, Sun had an average low
price-to-earnings ratio of 21.3x and an average high price-to-earnings ratio of
44.2x. If Sun, whose fundamentals were improving, approached the lower level of
its average P/E range, it would trade at $30 per share. As of October 31, the
stock was $21.63 and had appreciated 68% from our purchase price.
Private-market value
Finally, what makes us (if not unique) certainly one of a distinctive minority
is our emphasis on private-market value. Essentially, a company's private-market
value is the amount an individual or institution would be willing to pay for an
entire publicly traded company. The target price takes into account
characteristics such as a company's cash flow, assets, management team, and
goodwill, plus the assumption of debt (if any). In addition, a premium is
usually paid to take sole control of a company.
Our focus on this type of analysis over the past seventeen years has
successfully identified undervalued companies for our managed accounts, and now
we are exploiting its strengths for the benefit of the Fountainhead Special
Value Fund, as evidenced by the five takeovers from inception through the end of
October. We buy a stock when its perceived value (the price at which the market
values it) is at a significant discount to its private-market value; the wider
the gap, the better. Quite simply, we try to buy $1.00 for fifty cents. This
spread can be closed through price appreciation arising from many factors,
including a takeover, a restructuring, a spin-off to shareholders, or other
catalysts. Often the Board of Directors will seek to "create or enhance
shareholder value" because they recognize that the public-market price does not
reflect the company's private-market value, and they may be motivated by the
fact that if they do not enhance shareholder value, someone else will.
Even Wall Street may eventually recognize a company's hidden value vis-a-vis its
stock price, but the Street (which gravitates toward the safe and comfortable
and which has very short-term time horizons) displays a general unwillingness to
dedicate significant resources to private-market value. By exploiting
inefficient segments of the market--what we often refer to as the "unwanted and
unloved"--we can buy low and sell high most of the time.
As mentioned, Fountainhead had five takeovers during its first fiscal year;
Healthsource, a small HMO, was purchased in February and bought by Cigna later
that month. Over the two-month holding period, we realized a 72% return. Coast
Savings Financial, a California thrift, entered into a definitive agreement to
be acquired by H. F. Ahmanson in September. Over our six-month holding period,
we experienced a 38% return. TheraTx was purchased by Vencor, producing a 30%
return; Horizon Health, bought by Healthsouth, generated a 24% return; and
finally, American National Bancorp was acquired by Crestar Financial,
appreciating 55% for the fund.
One of the salutary benefits of focusing on the value of a business (as opposed
to trying to outguess Wall Street) arises from the inevitable swings in stock
prices which create opportunity. Far from dreading volatility, the Business
Valuation Approach welcomes it. If someone in a state of panic and fear is
willing to part with some stock at a bargain price, we will gladly oblige, and
if we have the conviction to wait until the market price catches up to the
private-market value, we can better resist the temptation to sell. Further, when
someone is willing to pay a fair (or premium) price, we will be happy to sell.
We have often said that our clients own pieces of businesses, not "the market."
In today's environment, in which stocks and bonds have become commoditized and
are used as vehicles for speculation in the short run, it is easy to fall prey
to the urge to "do something." We think it is impossible to time the market; we
know of no one who has made a fortune doing so consistently. On the other hand,
the patient investor can do quite well over long periods of time by buying a
piece of a business at an opportunistic price.
Outlook
Our long-term outlook for financial assets remains cautiously optimistic against
a background of favorable long-term economic and demographic developments. On
occasion we will experience setbacks, such as the sell-off in late October and
early November. The financial turmoil in Asia and Latin America and the
political and military tension in the Middle East have accentuated market
volatility. Future periods will give rise to other sources of investor angst or
joy accompanied by emotional selling and buying. In such periods, value-based,
selective stock purchases and sales should serve the Fund well. However, it is
important to remember that stocks have had a tremendous run over the last two
years, and that above-average returns such as we have seen over the past couple
of years cannot be sustained. General market returns should eventually revert to
the long-term mean (around 10%). We, of course, will strive to beat the average.
We appreciate the confidence and trust of our shareholders, and we welcome
inquiries from prospective investors. We look forward to many rewarding years
with you as a shareholder.
Sincerely,
Roger E. King
Chairman and President
<TABLE>
<CAPTION>
Fountainhead Special Value Fund
Schedule of Investments - October 31, 1997
<S> <C> <C>
Common Stocks - 98.6% Shares Value
Banks and Bank Holding Companies - 6.0%
Banc One Corp. 800 41,700
Riggs National Corp. 5,100 117,300
------------------
159,000
------------------
Communications - 11.4%
360 Communications (a) 5,600 118,300
AirTouch Communications (a) 1,200 46,350
Clearnet Communications Inc. (a) 4,100 65,088
Southern New England Telecommunications Corp. 1,600 68,600
------------------
298,338
------------------
Computer Services & Software - 3.7%
Intuit Inc. (a) 1,500 48,938
Policy Management Systems Corp. (a) 800 49,000
------------------
97,938
------------------
Drugs - 2.9%
Watson Phamaceuticals (a) 2,400 76,200
------------------
Financial Services - 6.4%
Eaton Vance Corp. 1,200 43,350
Lehman Brothers Holdings 1,300 61,181
United Companies Financial 2,500 63,281
------------------
167,812
------------------
Healthcare & Healthcare Services - 18.3%
Capital Senior Living Corp. (a) 16,500 276,375
Living Centers of America (a) 1,600 64,500
Mid-Atlantic Medical Services Inc. (a) 4,000 58,250
St. Jude Medical Inc. (a) 2,700 81,844
------------------
------------------
480,969
------------------
Insurance - 3.1%
Amerin Corp. (a) 3,500 80,063
------------------
Media & Leisure - 9.8%
Comcast United Kingdom Cable/ADR (a) 11,000 125,125
Lynch Corp. (a) 600 52,200
Media General Class A 300 12,225
US WEST Media Group, Inc. 1,600 40,400
Young Broadcasting Inc. (a) 800 29,000
------------------
258,950
------------------
Fountainhead Special Value Fund - continued
Schedule of Investments - October 31, 1997 - continued
Common Stocks - continued
Oil & Gas Services- 4.2% Shares Value
Mitcham Industries (a) 1,500 $ 39,187
-
Seitel Inc. (a) 1,000 47,125
Transcoastal Marine (a) 1,000 24,875
------------------
------------------
111,187
------------------
REIT - 6.3%
Imperial Credit Commercial Mortgage Investment Corp. 10,000 165,000
------------------
Restaurants - 2.2%
Rainforest Cafe (a) 1,700 58,012
------------------
Retail - 2.6%
Pep Boys - Manny Moe & Jack 2,800 70,525
------------------
Thrifts, Savings & Loans - 21.7%
Bank United Financial (a) 13,000 170,625
Coast Savings Financial Inc. (a) 1,300 76,293
Dime Bancorp 1,900 45,600
First Palm Beach Bank Corp. 900 34,650
ITLA Capital Corp. (a) 1,600 32,000
Long Island Bancorp 2,400 106,800
St. Paul Bancorp 3,500 84,000
T R Financial Corp. 600 19,650
------------------
------------------
569,618
------------------
TOTAL COMMON STOCKS (Cost $2,228,623) 2,593,612
------------------
Money Market Securities - 5.7%
Star Treasury, 5.37%, 10/31/97 (Cost $150,144) 150,144
------------------
TOTAL INVESTMENTS - 104.3% (Cost $2,378,767) 2,743,756
Liabilities less other assets (0.3%) (114,555)
------------------
Total Net Assets $ 2,629,201
==================
<FN>
Legend
(a) non-income producing
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fountainhead Special Value Fund October 31, 1997
Statement of Assets & Liabilities
Assets
<S> <C> <C>
Investment in securities, at value (cost $2,378,767) $ 2,743,756
Receivable for securities sold 228,335
Subscriptions receivable 25,410
Dividends receivable 369
Interest receivable 618
--------------------
Total assets 2,998,488
Liabilities
Payable for investments purchased 366,125
Accrued investment advisory fee payable 1,285
Other payables and accrued expenses $ 1,877
-------------------
Total liabilities 369,287
--------------------
Net Assets $ 2,629,201
====================
Net Assets consist of:
Paid in capital $ 2,246,487
Accumulated undistributed net realized gain 17,725
Net unrealized appreciation on investments 364,989
--------------------
Net Assets, for 196,962 shares $ 2,629,201
====================
Net Asset Value
</TABLE>
<TABLE>
<CAPTION>
Fountainhead Special Value Fund
Statement of Operations for the period December 31, 1996 (Commencement of Operations)
to October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 4,637
Interest Income 3,015
-------------------
Total Income 7,652
Expenses
Investment advisory fee $ 6,173
Administration fees 27,500
Transfer agent fees 11,898
Pricing & bookkeeping fees 8,800
Legal fees 7,919
Custodian fees 4,846
Audit fees 4,570
Registration fees 2,795
Shareholder reports 2,141
Trustees' fees 170
Miscellaneous 1,651
-------------------
Tota operating expenses before reimbursement 78,463
Reimbursed expenses (69,267)
-------------------
Total operating expenses 9,196
-------------------
Net Investment Income (1,544)
-------------------
Realized & Unrealized Gain (Loss)
Net realized gain on investment securities 19,269
Change in net unrealized appreciation on investment securities 364,989
-------------------
Net gain (loss) on investment transactions 384,258
-------------------
Net increase in net assets resulting from operations $ 382,714
===================
</TABLE>
<TABLE>
<CAPTION>
Fountainhead Special Value Fund
Statement of Changes in Net Assets
For the period December 31, 1996 (Commencement of Operations) to October 31, 1997
<S> <C>
Increase/(Decrease) in Net Assets
Operations
Net investment (loss) $ (1,544)
Net realized gain 19,269
Change in net unrealized appreciation 364,989
---------------
Net Increase in net assets resulting from operations 382,714
---------------
Distributions to shareholders:
From net investment income -
---------------
Share Transactions
Net proceeds from sale of shares 2,274,079
Shares issued in reinvestment -
Shares redeemed (27,592)
---------------
Net increase in net assets resulting
from share transactions 2,246,487
---------------
Total increase in net assets 2,629,201
Net Assets
Beginning of period -
---------------
End of period [including undistributed net investment loss of ($1,544)] $ 2,629,201
===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fountainhead Special Value Fund
Financial Highlights for the period December 31, 1996 (Commencement of
Operations) to October 31, 1997
Selected Per Share Data
<S> <C>
Net asset value,
beginning of period $10.00
------------
Income from investment
Operations
Net investment income (0.02)
Net realized and
unrealized gain (loss) 3.37
------------
Total from investment operations 3.35
------------
Less Distributions
From net interest income -
------------
Net asset value,
end of period $13.35
============
Total Return 40.09%(a)
Ratios and Supplemental Data
Net assets, end of period (000) $2,629
Ratio of expenses to average net assets 0.97(a)
Ratio of expenses to average net assets
before reimbursement 8.25%(a)
Ratio of net investment income to
average net assets (0.16)(a)%
Ratio of net investment income to average
net assets before reimbursement (7.45)(a)%
Portfolio turnover rate 130.63(a)
Average commissions paid 0.0637
(a) Annualized
</TABLE>
<PAGE>
FOUNTAINHEAD SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. ORGANIZATION
The Fountainhead Special Value Fund. (the "Fund") was organized as a series of
the AmeriPrime Funds, an Ohio business trust (the "Trust"), on October 20, 1995
and commenced operations on December 31, 1996. The Trust is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Funds investment objective is to provide long
term capital growth. The Trust Agreement permits the trustees to issue an
unlimited number of shares of beneficial interest of separate series without par
value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation- 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 Adviser'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 Adviser 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 Adviser, in conformity with guidelines adopted by and 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
Adviser believes such prices accurately reflect the fair market values 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 Adviser,
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.
FOUNTAINHEAD SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
Federal Income 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.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Jenswold, King & Associates Inc. (the "Adviser") to manage
the Fund's investments. Roger King, President of the Adviser, is primarily
responsible for the day to day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees. As
compensation for its management services the Fund is obligated to pay the
Adviser a fee computed and accrued daily and paid monthly at an annual rate of
0.68%from December 31, 1996 to March 31, 1997 and 0.75% from April 1, 1997 to
October 31, 1997 of the average daily net assets of the Fund. For the period
from December 31, 1996 through October 31, 1997, the Adviser has received a fee
of $6,173 from the Fund. The Adviser is voluntarily reimbursing certain Fund
expenses. There is no assurance that such reimbursement will continue in the
future.
FOUNTAINHEAD SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $2,246,487.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
For the period from
December 31, 1996 (Commencement of
Operations) through October 31, 1997
Shares Amount
--------- ----------
<S> <C> <C>
Shares sold 199,337 $2,274,079
Shares issued in reinvestment
of dividends
0 0
Shares redeemed (2,375) (27,592)
----------- --------------
Net increase 196,962 $2,246,487
====== ========
</TABLE>
FOUNTAINHEAD SPECIAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 5. INVESTMENTS
For the period from December 31, 1996 (commencement of operations) through
October 31, 1997, purchases and sales of investment securities, other than
short-term investments, aggregated $3,472,399 and $1,263,025, respectively. The
gross unrealized appreciation for all securities totaled $373,561 and the gross
unrealized depreciation for all securities totaled $8,572 for a net unrealized
appreciation of $364,989. The aggregate cost of securities for federal income
tax purposes at October 31, 1997 was $2,378,767.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does not
receive commissions on trades made on behalf of the Funds. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund, under Section
2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Roger E.
King (President of the Advisor) owns more than 25% of the fund.
NOTE 8. RECLASSIFICATIONS
In accordance with SOP 93-2, the fund has recorded a reclassification in the
capital accounts. As of October 31, 1997 the fund recorded permanent book/tax
differences of ($1,544) from undistributed net investment income to
undistributed realized gain on investments. This reclassification has no impact
on the net asset value of the fund and is designed generally to present
undistributed income and realized gains on a tax basis which is considered to be
more informative to shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
Fountainhead Special Value Fund
We have audited the statement of assets and liabilities including the portfolio
of investments, of the Fountainhead Special Value Fund (a member of the
Ameriprime Fund Series) as of October 31, 1997, and the related statement of
operations, the statement of changes in net assets, and the financial highlights
for the period from December 31, 1996 (commencement of operations) to October
31, 1997. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted audit- ing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting prin ciples used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fountainhead Special Value Fund as of October 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
period from December 31, 1996 (commencement of operations) to October 31, 1997
in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
PORTFOLIO
MANAGER'S LETTER
December 10, 1997
Dear Fellow Shareholder:
The past twelve months have been difficult for the sectors of the investment
marketplace in which your Fund invests. For the twelve months ended October 31,
1997, the value of an investment in the Fund has fallen by (4.9%). This compares
to a comparative benchmark index return of 6.5% (60% Standard &: Poor's Midcap
400 and 40% Philadelphia Gold and Silver Index). Past performance is not
predictive of future success. A significant portion of the Fund is allocated to
stocks of companies involved in natural resources and precious metals. As you
have probably read and heard recently gold bullion prices have fallen to levels
not seen for more than fifteen years. Not surprisingly, the share prices of
precious metals companies have fallen substantially in response. While we are
disappointed in the short term with these results on an absolute basis, the
Fund's losses were much less than those reported by many other funds investing
similarly. One achievement for the Fund this year occurred in August, when it
ranked as the best performing stock fund in the United States and your portfolio
manager appeared on CNBC television to discuss those results. We are hopeful
that that brief success may be repeated on a much more meaningful time frame in
the future. Listed below are the top holdings of the Fund.
Crystallex International 14.5%
Nevsun Resources 11.5%
Banro Resource Corp. 6.5%
SunAmerica, Inc. 5.3%
Kaydon Corp. 5.0%
As you can see, Crystallex International is the largest holding of the Fund. A
world class gold and copper deposit which is also the largest in Venezuela is
located on land titled to Crystallex. The property is the subject of a title
dispute with Placer Dome Gold. The dispute is currently before the Supreme Court
of Venezuela, and a decision is expected in early 1998. We believe that the
decision will be rendered in Crystallex's favor. The property holds between 11.8
million and 24 million ozs. of gold and substantial quantities of other metals.
Should the decision favor Crystallex, we expect to see a substantial rise in its
share price. Our only reservation at this time is with respect to the very
unfavorable sentiment toward gold bullion currently. We believe that an
investment today in precious metals stocks will be richly rewarded in the
future. The only question is how far in the future. We would not be surprised to
see gold bullion prices fall to $250.00 per oz. before an eventual rise. At
these prices, gold is not mined profitably by most companies and, therefore,
mines are being shut down until more favorable pricing is realized. According to
the CEO of Homestake Mining, demand for gold has outstripped supply for the past
three years with the shortfall being made up by central bank selling of
reserves. Eventually, such selling by central banks will cease, and the normal
effects of supply and demand will prevail again.
In addition, small and middle size companies - two areas that we favor with the
Fund, have been under-performing the larger blue chip companies. We continue to
invest in companies which we believe are undervalued and have strong prospects
for the future. More and more lately, though, companies are beginning to report
earnings disappointments. The currency woes of Asia are beginning to filter into
U.S. companies earnings reports. We expect these challenges to continue for the
next six to twelve months.
The last twelve months have been challenging. We remain committed to focusing on
fundamentals and pledge to strive for results in the future with which you may
be proud. Your Fund invests aggressively and accordingly has the opportunity to
quickly participate in a market more favorable to the areas in which it invests.
We look forward to reporting better success for you next year at this time.
Sincerely,
Kenneth M. Holeski
Portfolio Manager
Comparison of the Change in Value of $10,000 Investment in NewCap Contrarian
Fund, the Unmanaged S&P 400 Midcap Index, the Philadelphia Gold & Silver Index
and a composite of 70% S&P 400 Midcap Index and 30% Philadelphia Gold & Silver
[OBJECT OMITTED]
<TABLE>
<CAPTION>
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund)
Schedule of Investments October 31, 1997
<S> <C> <C>
Common Stock - 99.7% Shares Value
Apparel - 2.7%
Cutter & Buck Inc.(a) 1,000 $ 17,875
Tommy Hilfiger Corp. (a) 700 27,694
------------------
------------------
45,569
------------------
Chemicals - 2.1%
Balchem Corp. 2,000 35,625
------------------
Computer Services & Software - 2.9%
3Com* (a) 500 20,719
Software Spectrum Inc. (a) 2,000 28,000
------------------
48,719
------------------
Computers & Peripherals - 2.7%
Jabil Circuit Inc.(a) 1,000 45,375
------------------
Electrical Equipment - 1.4%
Applied Magnetics Corp. (a) 1000 23,000
------------------
Financial Services - 2.5%
Greentree Financial Corp. 1000 42,125
------------------
Industrial Machinery & Equipment - 3.6%
Gardner Denver Machinery Inc. (a) 1000 35,875
Met Pro Corp. 1500 25,125
------------------
61,000
------------------
Industrial Services - 4.8%
Kaydon Corp. 2,800 85,050
------------------
Insurance - 7.7%
CorVel Corp. (a) 1,000 39,500
Sun America Inc. 2,500 89,844
------------------
129,344
------------------
Medical Services - 5.4%
Dionex Corp. (a) 500 24,938
Gulf South Medical Supply, Inc. (a) 2,000 66,000
------------------
90,938
------------------
Non-Precious Metals Mining - Exploration 2.6%
Adrian Resources Ltd. (Panama) (a) 10,000 10,000
Consolidated Magna Ventures Ltd. (Canada) (a) 45,500 13,562
Farrallon Resources Ltd. (a) 6,000 20,226
------------------
43,788
------------------
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Schedule of
Investments - October 31, 1997 - continued
Common Stock - continued Shares Value
Pharmaceuticals - 1.5%
AMGEN Inc. 500 24,625
------------------
Photofininshing Labs - 2.4%
Seattle Filmworks, Inc. (a) 4,000 40,000
------------------
Precious Metals Mining - Exploration - 17.4%
Brandon Gold Corp. (a) (b) 38,800 47,584
Manhattan Minerals Corp. 12,500 47,018
Nevsun Resources (Ghana, Mali) (a) 55,400 192,655
Oliver Gold Corp. (Mali, Zimbabwe) (a) 18,600 5,412
------------------
292,669
------------------
Precious Metals Mining - Producing - 21.7%
Bema Gold Corp. (Chile) (a) 3,000 9,563
Banro Resource Corp. (Zaire) (a) 16,000 109,293
Crystallex International Corp. (a) 55,000 244,063
------------------
------------------
362,919
------------------
Oil & Oilfield Services - 6.9%
Arakis Energy Corp. (a) 10,000 33,125
Noble Drilling Corp. (a) 1,000 35,562
World Fuel Services Corp. 2,000 48,000
------------------
------------------
116,687
------------------
Retail - 11.4%
Paul Harris Stores (a) 3,000 55,125
Pier One Imports Inc. 4,500 82,125
Ross Stores 1,100 41,113
Stride Rite Corp. 1,000 11,750
------------------
190,113
------------------
TOTAL COMMON STOCKS (Cost $1,906,819) 1,677,546
------------------
Money Market Securities - 3.4% Principal
Star Treasury 4.96% 10/31/97 (Cost $56,556) 56,556 56,556
------------------
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Schedule of
Investments - October 31, 1997 - continued
OPTIONS - 4.4%
Short Options - (0.2%)
Description Strike Price Expiration Contracts
3 Com $ 55 Jan. 1998 5 $ (594)
AMGEN Inc. 60 Jan. 1998 5 (343)
Applied Magnetics Corp. 40 Jan. 1998 10 (500)
Jabil Circuit Inc. 70 Jan. 1998 10 (1,938)
Paul Harris Stores Inc. 30 Apr. 1998 10 (500)
------------------
------------------
(3875)
------------------
Long Options - 4.6%
DR Horten Inc. 15 Nov. 1997 40 3250
S&P Index 100 860 Nov. 1997 20 74,000
------------------
77,250
------------------
TOTAL OPTIONS (Cost $69,057) 73,375
------------------
TOTAL INVESTMENTS - 107.5% (Cost $2,032,432) $ 1,807,477
Other Assets less liabilities (7.5%) (125,379)
------------------
TOTAL NET ASSETS - 100.0% $ 1,682,098
==================
<FN>
Legend
(a) non-income producing
(b) private placement
</FN>
</TABLE>
<TABLE>
<CAPTION>
New Cap Contrarian Fund October 31, 1997
(formerly the MAXIM Contrarian Fund)
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities, at value (cost $2,032,432) $ 1,807,477
Receivable for investments sold 32,916
Dividends receivable 21
Interest receivable 83
---------------------
Total assets 1,840,497
Liabilities
Payable to custodian bank 86,911
Payable for investments purchased 66,252
Accrued advisory fee 3,924
Accrued trustees' fees 498
Accrued distribution fees 799
Other payables and accrued expenses 15
------------------
Total liabilities 158,399
---------------------
Net Assets $ 1,682,098
=====================
Net Assets consist of:
Paid in capital $ 1,879,057
Accumulated undistributed net realized gain 27,996
Net unrealized (depreciation) on investments (224,955)
---------------------
Net Assets, for 192,025 shares $ 1,682,098
=====================
Net Asset Value
Net Assets
Offering price and redemption price per share ($1,682,098/192,025) $ 8.76
=====================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund) Statement of
Operations for the year ended October 31, 1997
<S> <C> <C>
Investment Income
Dividend Income $ 3,535
Interest Income 1,178
-----------------
Total Income 4,713
Expenses
Management fee $ 43,568
12-B1 fees 4,357
Trustees' fees 1,337
-----------------
Total Expenses 49,262
-----------------
Net Investment Income (Loss) (44,549)
-----------------
Realized & Unrealized Gain (Loss)
Net realized gain (loss) on investment securities 171,581
Net realized gain (loss) on options transactions (75,762)
Change in net unrealized appreciation (depreciation) on investment securities (177,571)
-----------------
Net gain (loss) (81,752)
-----------------
Net increase (decrease) in net assets resulting from operations $ (126,301)
=================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund)
Statement of Changes in Net Assets May 2, 1996
For the year (commencement of
ended October 31, operations) to October 31,
<S> <C> <C>
Increase/(Decrease) in Net Assets 1997 1996
Operations
Net investment income (loss) $ (44,549) $ (5,245)
Net realized gain (loss) on securities transactions 171,581 (3,375)
Net realized gain (loss) on options transactions (75,762) (19,899)
Change in net unrealized appreciation (depreciation) (177,571) (47,384)
--------------- ------------------
Net Increase (decrease) in net assets resulting from operations (126,301) (75,903)
--------------- ------------------
Distributions to shareholders:
From net investment income - -
From net capital gains - -
--------------- ------------------
Total distributions - -
--------------- ------------------
Share Transactions
Net proceeds from sale of shares 762,466 1,583,605
Shares issued in reinvestment - -
Shares redeemed (461,769) -
--------------- ------------------
Net increase (decrease) in net assets resulting
from share transactions 300,697 1,583,605
--------------- ------------------
Total increase (decrease) in net assets 174,396 1,507,702
Net Assets
Beginning of period 1,507,702 -
--------------- ------------------
End of period [including net investment income (loss) of
of $(44,549) and $(5,245), respectively] $ 1,682,098 $ 1,507,702
=============== ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New Cap Contrarian Fund (formerly the MAXIM Contrarian Fund)
Financial Highlights May 2, 1996
For the year ended (commencement of
Selected Per Share Data October 31, operations) to October 31,
1997 1996
<S> <C> <C>
Net asset value, $9.21 $10.00
--------------- -------------
begining of period
Income from investment operations
Net investment income (0.22) (0.05)
Net realized and unrealized gain (loss) (0.23) (0.74)
--------------- -------------
Total from investment operations (0.45) (0.79)
--------------- -------------
Less Distributions
From net interest income - -
From net capital gain - -
--------------- -------------
Total distributions - -
--------------- -------------
Net asset value,
end of period $8.76 $9.21
Total Return (4.89)% (15.80)%(a)
Ratios and Supplemental Data
Net assets, end of period (000) $1,682 $1,508
Ratio of expenses to
average net assets 2.83% 2.89(a)
Ratio of net investment income to
average net assets -2.56% -1.16(a)
Portfolio turnover rate 146% 92%(a)
Average commission rate 0.0375 0.0497
<FN>
(a) annualized
</FN>
</TABLE>
<PAGE>
NEW CAP CONTRARIAN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
1. ORGANIZATION
On September 26, 1997, the Board of Trustess voted to change the name of the
Maxim Contrarian to the New Cap Contrarian Fund, effective October 15, 1997. The
New Cap Contrarian Fund (the "Fund") was organized as a series of the AmeriPrime
Funds, an Ohio business trust (the "Trust"), on December 26, 1995 and commenced
operations on May 2, 1996. The Trust is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, open-end management investment
company. The investment objective of the fund is provide maximum long term
growth. The Trust Agreement permits the trustees to issue an unlimited number of
shares of beneficial interest of separate series without par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Securities Valuation- 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 Adviser'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 Adviser 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 Adviser, in conformity with guidelines adopted by and 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
Adviser believes such prices accurately reflect the fair market values 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 Adviser,
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.
NEW CAP CONTRARIAN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
Federal Income 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. However, for the taxable year ended October 31, 1996 the
Fund did not qualify to be taxed as a "regulated investment company" for federal
income tax purposes. The Fund intends to qualify as a "regulated investment
company" in subsequent years. This non-qualification had no effect on net asset
value or tax owed by the Fund.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on an annual basis.
The Fund intends to distribute its net long term capital gains and its net short
term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Newport Investment Advisors, Inc. (the "Adviser") to
manage the Fund's investments. Kenneth M. Holeski, president and controlling
shareholder of the Adviser, is primarily responsible for the day to day
management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Adviser
manages the Fund's investments subject to approval of the Board of Trustees and
pays all of the expenses of the Fund except 12b-1 fees, brokerage, taxes,
interest, fees and expenses of 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 Adviser 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. It should be noted that most investment companies pay
their own operating expenses directly, while the Fund's expenses, except those
specified above, are paid by the Adviser. For the period from November 1, 1996
through October 31, 1997, the Adviser has received a fee of $43,568 from the
Fund.
NEW CAP CONTRARIAN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 4. CAPITAL SHARE TRANSACTIONS
As of October 31, 1997 there was an unlimited number of no par value shares
of capital stock authorized for the Fund. Paid in capital at October 31, 1997
was $1,879,057.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
For the period from For the period
May 2, 1996 from May 2, 1996
(Commencement of (Commencement of
Operations) through Operations)
For the year ended For the year ended October 31, 1996 through
October 31, 1997 October 31, 1997 October 31, 1996
Shares Dollars Shares Dollars
<S> <C> <C> <C> <C>
Shares sold 82,953 $762,466 163,713 $1,583,605
Shares issued in
reinvestment of
dividends 0 0 0 0
Shares redeemed (54,641) (461,769) (0) (0)
-------- --------- --- ---
28,312 $300,697 163,713 $1,583,605
</TABLE>
NOTE 5. INVESTMENTS
For the period from November 1, 1997 (commencement of operations) through
October 31, 1997, purchases and sales of investment securities, other than
short-term investments, aggregated $2,873,545 and $2,518,712, respectively. The
gross unrealized appreciation for all securities totaled $189,426 and the gross
unrealized depreciation for all securities totaled $414,381 for a net unrealized
depreciation of $224,955. The aggregate cost of securities for federal income
tax purposes at October 31, 1997 was $2,032,432. As of October 31, 1997 the Fund
has invested 43.5% of its net assets in foreign securities.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
<PAGE>
NEW CAP CONTRARIAN FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 7. RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus does not
receive commissions on trades made on behalf of the Funds. The beneficial
ownership, either directly or indirectly, of more than 25% of the voting
securities of a Fund creates a presumption of control of the Fund, under Section
2(a)(9) of the Investment Company Act of 1940. As of October 31, 1997, Cheryl
Holeski (wife of the President and controlling shareholder of Newport Investment
Advisor) owns more than 25% of the fund.
NOTE 8. RECLASSIFICATIONS
In accordance with SOP 93-2, the fund has recorded a reclassification in the
capital accounts. As of October 31, 1997 the fund recorded permanent book/tax
differences of ($44,459) from undistributed net investment income to
undistributed realized gain on investments. This reclassification has no impact
on the net asset value of the fund and is designed generally to present
undistributed income and realized gains on a tax basis which is considered to be
more informative to shareholders.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and Board of Trustees
New Cap Contrarian Fund
We have audited the accompanying statement of assets and liabili ties of New Cap
Contrarian Fund (a member of the Ameriprime Fund series), including the schedule
of portfolio investments, as of October 31, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and financial highlights for the year then ended and for the period from May 2,
1995 (commencement of operations) to October 31, 1996 in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of October 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of New
Cap Contrarian Fund as of October 31, 1997, the results of its operations for
the year then ended, and the changes in its net assets, and the financial
highlights for the year then ended and for the period from May 2, 1995
(commencement of operations) to October 31, 1996 in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
November 17, 1997
<PAGE>
