We are pleased to present the first annual report of the Dobson Covered Call
Fund (DCCF). The Fund began investing on March 24, 1999 and through July 31,
1999 has returned 7.8% versus 5.1% for the S&P 500 Index. The Fund achieved
these results with a volatility or risk level that was 62.7% of the S&P 500
Index. Volatility was measured using the daily standard deviation of return from
inception of the Fund. A summary of the inception to date statistics follows:
DCCF S&P 500 Index
Second Quarter (Calendar) 5.5% 7.0%
Inception to date 7.8% 5.1%
Standard Deviation
(Risk Level) .69 1.1
Looking at the four complete months of operation (April - July) the S&P 500
Index return ranged from a high of 5.6% to a low of -3.1%. The DCCF ranged from
a high of 3.3% to a low of -1.6%. Selling options on stocks we own not only
reduced our volatility by approximately 37% as shown above but also increased
our total return. For the four-month period the S&P 500 Index returned 3.7%
while the DCCF's return was 3.8%. It should also be noted that the DCCF return
is net of all fees and expenses.
DCCF S&P 500 Index
April 3.0% 3.9%
May -0.8% -2.4%
June 3.3% 5.6%
July -1.6% -3.1%
These past four months are a textbook example of how a covered call strategy
with a risk level of approximately 60% of the S&P 500 Index is expected to
perform. Typically markets don't appreciate one month and then depreciate the
next but markets do go up and they do go down. As a result, and as stated in the
prospectus, the Fund expects to equal or exceed the return of the S&P 500 Index
if the Index appreciates up to 10% (annualized) and do so with less volatility
or risk. The Fund can be expected to under-perform the Index for annualized
advances over 10%. It can also be expected to decline approximately one-half of
the Index in declining markets as seen in May and June. Although results cannot
be predicted with certainty, reasonable expectations can be made particularly
given the nineteen years experience of the portfolio manager.
The Fund's results to date have exceeded these expectations. These results were
achieved by first diversifying within S&P 500 Industry weights. Although we do
not hold or intend to ever hold all of the stocks in the S&P 500 Index, our
stocks are close to S&P 500 Industry weights. Therefore, our underlying stocks
will normally come close to the S&P 500 Index returns but will vary somewhat.
Second, we sell individual call options on our underlying stocks. The premium or
money we receive from selling individual call options is more than can be
received from selling index call options. Third, option premiums tend to be
higher in more volatile markets as have occurred over this period.
The duration and strike price of the options we sell are determined by our
proprietary option analysis, with the overall objective of providing a risk
level that is approximately 60% of the S&P 500 Index.
A reasonable question is why 60%? That level of risk is higher than bonds and
less than the S&P 500 Index. We feel this risk level provides an advantage to
many investors. Two examples: 1. As part of an overall asset allocation. An
investor may want to commit a portion of his/her assets to the volatile
technology sector. To reduce volatility of their overall portfolio another
portion of their assets could be committed to the DCCF. If one were to decide
that 40% of their portfolio should be in bonds, a covered call strategy would be
an alternative for the bond allocation. 2. Other investors may not want the
volatility of the overall market but want a superior return to bonds. There are
other reasons but the above are the two most common.
We trust the preceding helps you understand our results and investment process.
We welcome your calls and comments.
We would also like to acknowledge the work of Dr. Sheen Kassouf from the
University of California, Irvine for his work in the options area. His study
`Long Term Investment Alternatives for Fiduciaries - An Analysis of Returns from
Stocks, Bonds, and Optioned Equities (1950-1974)' is the basis for the
investment strategy used by the DCCF. If you would like a copy of this
pioneering work, please call or write the advisor.
Thank you for investing with us.
Charles L. Dobson
Portfolio Manager
Dobson Covered Call Fund
Schedule of Investments - July 31, 1999
<TABLE>
<S> <C> <C>
Common Stocks - 100.7% Shares Value
BASIC INDUSTRIES - 8.4%
Manufacturers - Diversified - 4.7%
AlliedSignal, Inc. (a) 1,000 $ 64,687
-----------------
Paper & Forest Products - 3.7%
International Paper, Inc. (a) 1,000 51,125
-----------------
TOTAL BASIC INDUSTRIES 115,812
-----------------
DURABLES - 3.5%
Autos & Auto Parts - 3.5%
Ford Motor Co. (a) 1,000 48,625
-----------------
ENERGY - 8.9%
Energy Services - 4.4%
Schlumberger Ltd. (a) 1,000 60,563
-----------------
Oil & Gas - 4.5%
Royal Dutch Petroleum ADR (a) 1,000 61,000
-----------------
TOTAL ENERGY 121,563
-----------------
FINANCE - 12.5%
Banks - 12.5%
Bank of America Corp. (a) 1,000 66,375
Citigroup, Inc. (a) 1,500 66,844
Wells Fargo, Inc. (a) 1,000 39,000
-----------------
172,219
-----------------
HEALTH - 12.1%
Diversified - 8.5%
American Home Products, Inc. (a) 1,000 51,000
Bristol-Myers Squibb, Inc. (a) 1,000 66,500
-----------------
117,500
-----------------
Drugs & Pharmaceuticals - 3.6%
Schering-Plough, Inc. (a) 1,000 49,000
-----------------
TOTAL HEALTH 166,500
-----------------
INDUSTRIAL MACHINERY & EQUIPMENT - 4.3%
Industrial Machinery & Equipment - 4.3%
Caterpillar, Inc. (a) 1,000 58,625
-----------------
MEDIA & LEISURE - 5.0%
Entertainment - 2.0%
Disney (Walt) Co. (a) 1,000 27,625
-----------------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Schedule of Investments - July 31, 1999 - continued
Common Stocks - continued Shares Value
MEDIA & LEISURE - continued
Restaurants - 3.0%
McDonald's Corp. (a) 1,000 $ 41,687
-----------------
TOTAL MEDIA & LEISURE 69,312
-----------------
NON-DURABLES - 7.6%
Beverages - 4.4%
Coca-Cola Co. (a) 1,000 60,312
-----------------
Household Products - 3.2%
Gillette Co. (a) 1,000 43,813
-----------------
TOTAL NON-DURABLES 104,125
-----------------
RETAIL & WHOLESALE - 7.0%
Building Supplies - 7.0%
Home Depot, Inc. (a) 1,500 95,719
-----------------
TECHNOLOGY - 20.3%
Communications Equipment - 4.7%
Lucent Technologies, Inc. (a) 1,000 65,062
-----------------
Computers & Office Equipment - 10.6%
Dell Computer Corp. (a) (b) 1,000 40,875
Hewlett-Packard Co. (a) 1,000 104,688
-----------------
145,563
-----------------
Electronics - 5.0%
Intel Corp. (a) 1,000 69,000
-----------------
TOTAL TECHNOLOGY 279,625
-----------------
UTILITIES - 11.1%
Electric Utility - 3.8%
Duke Energy, Inc. 1,000 52,938
-----------------
Telephone Services - 7.3%
AT&T Corp. (a) 1,000 51,937
BellSouth Corp. (a) 1,000 48,000
-----------------
99,937
-----------------
TOTAL UTILITIES 152,875
-----------------
TOTAL COMMON STOCKS (Cost $1,354,157) 1,385,000
-----------------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Schedule of Investments - July 31, 1999 - continued
Principal
Value Value
Money Market Securities - 4.7%
Federal Prime Obligation, 4.77% (c) (Cost $64,758) $ 64,758 $ 64,758
-----------------
TOTAL INVESTMENTS - 105.4% (Cost $1,418,915) 1,449,758
-----------------
Other assets less liabilities - (5.4%) (74,515)
=================
Total Net Assets - 100.0% $ 1,375,243
=================
</TABLE>
(a) Security is segregated as collateral for options written.
(b) Non-income producing
(c) Variable rate security; the coupon rate shown represents the rate at
July 31, 1999.
Call Options Written July 31, 1999
<TABLE>
<S> <C> <C>
Shares
Subject
Common Stocks / Expiration Date @ Exercise Price to Call Value
AlliedSignal, Inc. / September 1999 @ 70 1,000 $ 1,094
American Home Products, Inc. / October 1999 @ 60 1,000 937
AT&T Corp. / August 1999 @ 60 1,000 125
Bank of America Corp. / August 1999 @ 75 1,000 188
BellSouth Corp. / August 1999 @ 45 1,000 3,437
Bristol-Myers Squibb, Inc. / September 1999 @ 70 1,000 2,250
Caterpillar, Inc. / August 1999 @ 60 1,000 1,438
Citigroup, Inc. / September 1999 @ 50 1,500 1,406
Coca-Cola Co. / August 1999 @ 60 1,000 2,000
Dell Computer Corp. / August 1999 @ 40 1,000 2,375
Disney (Walt) Co. / October 1999 @ 30 1,000 812
Ford Motor Co. / September 1999 @ 60 1,000 250
Gillette Co. / September 1999 @ 55 1,000 125
Hewlett-Packard Co. / August 1999 @ 70 1,000 36,125
Home Depot, Inc. / August 1999 @ 65 1,500 2,250
Intel Corp. / October 1999 @ 70 1,000 5,000
International Paper, Inc. / October 1999 @ 55 1,000 1,875
Lucent Technologies, Inc. / October 1999 @ 65 1,000 5,750
McDonald's Corp. / September 1999 @ 45 1,000 813
Royal Dutch Petroleum ADR / August 1999 @ 65 1,000 312
Schering-Plough, Inc. / August 1999 @ 45 1,000 4,500
Schlumberger Ltd. / August 1999 @ 65 1,000 625
Wells Fargo, Inc. / October 1999 @ 45 1,000 438
-----------------
Total (premiums received $71,908) $ 74,125
=================
</TABLE>
See accompanying notes which are an integral part of the financial statements
<PAGE>
<TABLE>
<S> <C> <C>
Dobson Covered Call Fund July 31,1999
Statement of Assets & Liabilities
Assets
Investment in securities (cost $1,418,915) $ 1,449,758
Cash 99
Dividends receivable 1,488
Interest receivable 397
Receivable from investment advisor
for reimbursed expenses 17,642
------------------
Total assets 1,469,384
Liabilities
Accrued investment advisory fee payable $ 986
Accrued distribution fee payable 1,035
Other payables and accrued expenses 17,995
Covered call options written -
premiums received $71,908 74,125
-----------------
Total liabilities 94,141
------------------
Net Assets $ 1,375,243
==================
Net Assets consist of:
Paid in capital 1,340,688
Accumulated undistributed net investment income 1,310
Accumulated undistributed net realized gain on investments 3,690
Accumulated undistributed net realized gain on options transactions 929
Net unrealized appreciation on investments 28,626
------------------
Net Assets, for 127,555 shares $ 1,375,243
==================
Net Asset Value
Net Assets
Offering price and redemption price per share ($1,375,243/127,555) $ 10.78
==================
</TABLE>
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Statement of Operations for the period March 24, 1999
(Commencement of Operations) to July 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividend income $ 4,471
Interest income 3,053
---------------
Total Income 7,524
Expenses
Investment advisory fees $ -
Administration fees 10,625
Legal fees 8,488
Transfer agent fees 6,023
Audit fees 5,500
Pricing & bookkeeping fees 3,896
Custodian fees 2,087
Shareholder reports 1,352
Trustees' fees 1,083
Distribution fees 1,035
Registration fees 256
Miscellaneous 119
------------------
Total expenses before reimbursement 40,464
Reimbursed expenses (34,250)
------------------
Total operating expenses 6,214
---------------
Net Investment Income 1,310
---------------
Realized & Unrealized Gain (Loss)
Net realized gain on investment securities 3,690
Net realized gain on options transactions 929
Change in net unrealized appreciation (depreciation)
on investment securities 28,626
------------------
Net gain on investment securities 33,245
---------------
Net increase in net assets resulting from operations $ 34,555
===============
</TABLE>
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Statement of Changes in Net Assets for the period March 24, 1999
(Commencement of Operations) to July 31, 1999
Increase (Decrease) in Net Assets
Operations
Net investment income $ 1,310
Net realized gain on investment securities 3,690
Net realized gain on options transactions 929
Change in net unrealized appreciation (depreciation) 28,626
--------------
Net increase in net assets resulting from operations 34,555
--------------
Share Transactions
Net proceeds from sale of shares 1,340,688
--------------
Net increase in net assets resulting
from share transactions 1,340,688
--------------
Total increase in net assets 1,375,243
--------------
Net Assets
Beginning of period -
--------------
End of period [including accumulated undistributed net
investment income of $1,310] $ 1,375,243
==============
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Financial Highlights for the period March 24, 1999
(Commencement of Operations) to July 31, 1999
Selected Per Share Data
Net asset value, beginning of period $ 10.00
--------------
Income from investment operations
Net investment income 0.01
Net realized and unrealized gain 0.77
--------------
Total from investment operations 0.78
--------------
Net asset value, end of period $ 10.78
==============
Total Return (b) 7.80%
Ratios and Supplemental Data
Net assets, end of period (000) $1,375
Ratio of expenses to average net assets 1.50% (a)
Ratio of expenses to average net assets
before reimbursement 9.77% (a)
Ratio of net investment income to
average net assets 0.32% (a)
Ratio of net investment income to
average net assets before reimbursement (7.95)% (a)
Portfolio turnover rate 47.01% (a)
(a) Annualized
(b) For periods of less than a full year, total returns are not annualized.
See accompanying notes which are an integral part of the financial statements
<PAGE>
Dobson Covered Call Fund
Notes to Financial Statements
July 31, 1999
NOTE 1. ORGANIZATION
Dobson Covered Call Fund (the "Fund") was organized as a series of the
AmeriPrime Funds, an Ohio business trust (the "Trust"), on March 22, 1999 and
commenced operations on March 24, 1999. The Fund is registered under the
Investment Company Act of 1940, as amended, as a diversified open-end management
investment company. The Fund's investment objective is to achieve above average
return consistent with lower risk than the S&P 500 Index. The Declaration of
Trust 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 Advisor's opinion, the last bid price does not accurately reflect the
current value of the security. All other securities for which over-the-counter
market quotations are readily available are valued at their last bid price. When
market quotations are not readily available, when the Advisor determines the
last bid price does not accurately reflect the current value or when restricted
securities are being valued, such securities are valued as determined in good
faith by the Advisor, in conformity with guidelines adopted by and subject to
review of the Board of Trustees of the Trust (the "Board").
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service when the
Advisor believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by the Advisor,
subject to review of the Board. 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.
Option writing- When the Fund writes an option, an amount equal to the premium
received by the Fund is recorded as a liability and is subsequently adjusted to
the current fair value of the option written. Premiums received from writing
options that expire unexercised are treated by the Fund on the expiration date
as realized gains from
<PAGE>
Dobson Covered Call Fund
Notes to Financial Statements
July 31, 1999 - continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued
investments. The difference between the premium and the amount paid on effecting
a closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transaction, as a realized loss. If a call option is exercised,
the premium is added to the proceeds from the sale of the underlying security or
currency in determining whether the Fund has realized a gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the fund. The Fund as writer of an option bears the market risk of
an unfavorable change in the price of the security underlying the written
option.
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 Dobson Capital Management, Inc., (the "Advisor") to manage
the Fund's investments. The Advisor is a California corporation established in
September 1998. Charles L. Dobson is the president, Director and sole
shareholder of the advisor, and is primarily responsible for the day-to-day
management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Advisor
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
Advisor a fee computed and accrued daily and paid monthly at an annual rate of
0.80% of the average daily net assets of the Fund, less the amount total
operating expenses, including management fees, exceed 1.50% of the average value
of its daily net assets, to the extent the management fee equals zero. The
remaining portion of expenses will be reimbursed by the Advisor. For the period
March 24, 1999 (commencement of operations) to
<PAGE>
Dobson Covered Call Fund
Notes to Financial Statements
July 31, 1999 - continued
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued
July 31, 1999, the Advisor received fees of $0 from the Fund. For the period
March 24, 1999 (commencement of operations) to July 31, 1999, the Advisor
reimbursed expenses of $34,250. Certain officers and directors of the Advisor
are also officers and directors of the Trust.
The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator")
to manage the Fund's business affairs and provide the Fund with administrative
services, including all regulatory reporting and necessary office equipment and
personnel. For the period from March 24, 1999 (commencement of operations) to
July 31, 1999, the Administrator received fees of $10,625 from the Advisor for
administrative services provided to the Fund.
The Fund retains AmeriPrime Financial Securities, Inc. ("the Distributor")
to act as the principal distributor of the Fund's shares. The Fund has adopted a
plan, pursuant to Rule 12b-1 under the Investment Company Act of 1940, which
permits the Fund to pay directly, or reimburse the Fund's Advisor and
Distributor, for certain distribution and promotion expenses related to
marketing its shares, in an amount not to exceed 0.25% of the average daily net
assets of the Fund. There were no payments made to the Distributor from March
24, 1999 (commencement of operations) to July 31, 1999. Certain members of
management of the Administrator and the Distributor are also members of
management of the AmeriPrime Trust.
NOTE 4. SHARE TRANSACTIONS
As of July 31, 1999, there were an unlimited number of authorized shares
for the Fund. Paid in capital at July 31, 1999 was $1,340,688.
Transactions in shares were as follows:
For the period March 24, 1999 (Commencement
of Operations) to July 31, 1999
Shares Dollars
Shares sold 127,555 $1,340,688
Shares redeemed - -
------- ----------
127,555 $1,340,688
======= ==========
<PAGE>
Dobson Covered Call Fund
Notes to Financial Statements
July 31, 1999 - continued
NOTE 5. INVESTMENTS
For the period from March 24, 1999 (commencement of operations) through
July 31, 1999, purchases and sales of investment securities, other than
short-term investments, aggregated $1,495,403 and $144,935, respectively. As of
July 31, 1999, the gross unrealized appreciation for all securities totaled
$134,179 and the gross unrealized depreciation for all securities totaled
$105,553 for a net unrealized appreciation of $28,626. The aggregate cost of
securities for federal income tax purposes at July 31, 1999 was $1,418,915.
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 Advisor is not a registered broker-dealer of securities and thus does
not receive commissions on trades made on behalf of the Fund. 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 July 31, 1999, Charles L.
Dobson, President of the Advisor, beneficially owned in aggregate more than 78%
of the Fund.
NOTE 8. CALL OPTIONS WRITTEN
As of July 31, 1999, portfolio securities valued at $1,332,062 were held in
escrow by the custodian as cover for call options written by the Fund.
Transactions in options written during the period March 24, 1999
(commencement of operations) to July 31, 1999 were as follows:
Number of Premiums
Contracts Received
Options written 420 $113,590
Options terminated in closing purchase transactions (90) (21,122)
Options expired (70) (12,380)
Options exercised (20) (8,180)
--------- --------
Options outstanding at July 31, 1999 240 $ 71,908
========= ========
<PAGE>
Dobson Covered Call Fund
Notes to Financial Statements
July 31, 1999 - continued
NOTE 9. YEAR 2000 ISSUE
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Advisor, Administrator or other service providers
to the Fund do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Issue." The Advisor and Administrator have taken steps that they believe are
reasonably designed to address the Year 2000 Issue with respect to computer
systems that are used and to obtain reasonable assurances that comparable steps
are being taken by each of the Fund's major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund. In addition, the Advisor cannot make any
assurances that the Year 2000 Issue will not affect the companies in which the
Fund invests or worldwide markets and economies.
