PROSPECTUS SEPTEMBER 21, 1999
SHEPHERD VALUES FUNDS
6760 Corporate Drive, Suite 230
Colorado Springs, CO 80919
For Information, Shareholder Services and Requests:
(877) 636-2766
THE SHEPHERD VALUES FUNDS WILL NOT KNOWINGLY INVEST IN BUSINESSES THAT
ARE ENGAGED TO ANY SIGNIFICANT DEGREE, DIRECTLY OR THROUGH
SUBSIDIARIES, IN THE ALCOHOLIC BEVERAGE, TOBACCO, PORNOGRAPHIC AND
GAMBLING INDUSTRIES OR COMPANIES INVOLVED IN THE BUSINESS OF ABORTING
LIFE BEFORE BIRTH. IN ADDITION, EACH FUND'S INVESTMENT ADVISOR RESERVES
THE RIGHT TO EXERCISE ITS BEST JUDGEMENT TO EXCLUDE OWNERSHIP IN OTHER
COMPANIES WHOSE CORPORATE PRACTICES, IN THE ADVISOR'S OPINION, COULD BE
FOUND OFFENSIVE TO TRADITIONAL JUDEO-CHRISTIAN VALUES.
SHEPHERD VALUES GROWTH FUND: The investment objective of the Growth Fund is long
term capital appreciation. The Fund seeks to achieve this objective by investing
primarily in common stocks which the Fund's advisor believes are undervalued by
the market. In searching for investments for the Fund, the advisor employs a
style that focuses on securities with a low current price relative to the
advisor's view regarding long term intrinsic value.
SHEPHERD VALUES SMALL-CAP FUND: The investment objective of the Small-Cap Fund
is long term capital appreciation. The Fund seeks to achieve this objective by
investing, under normal circumstances, at least 65% of its total assets in
equity securities of small capitalization U.S. companies.
SHEPHERD VALUES INTERNATIONAL FUND: The investment objective of the
International Fund is long term capital appreciation. The Fund seeks to achieve
this objective by investing, under normal circumstances, at least 65% of its
total assets in equity securities of foreign companies.
SHEPHERD VALUES VIF EQUITY FUND: The investment objective of the VIF Equity Fund
is to track the performance of the VIF 400 Values Index, which is composed of
approximately 400 of the S&P 500 stocks, screened to satisfy certain traditional
Judeo-Christian values.
SHEPHERD VALUES FIXED INCOME FUND: The investment objective of the Fixed Income
Fund is a high level of income over the long term consistent with the
preservation of capital. The Fund seeks to achieve this objective by investing
primarily in a broad range of investment grade fixed income securities.
SHEPHERD VALUES MARKET NEUTRAL FUND: The investment objective of the Market
Neutral Fund is long term capital appreciation while maintaining minimal
exposure to general equity market risk. The Fund seeks to achieve this objective
by taking long positions in U.S. equity securities that the Fund's advisor has
identified as undervalued, and short positions in stocks that the advisor has
identified as overvalued, based on certain financial characteristics. This
strategy is commonly referred to as "market neutral investing."
Each Fund is one of the mutual funds comprising AmeriPrime Funds, an
open-end management investment company, distributed by AmeriPrime Financial
Securities, Inc. This Prospectus provides the information a prospective investor
ought to know before investing and should be retained for future reference. A
Statement of Additional Information dated September 21, 1999 has been filed with
the Securities and Exchange Commission (the "SEC"), is incorporated herein by
reference, and can be obtained without charge by calling the Fund at the phone
number listed above. The SEC maintains a Web Site (http://www.sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the SEC.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
8732 5/12/99
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SUMMARY OF FUND EXPENSES
The tables below are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
each Fund. The expense information is based on estimated amounts for the current
fiscal year. The expenses are expressed as a percentage of average net assets.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE FUND PERFORMANCE
OR EXPENSES, BOTH OF WHICH MAY VARY.
Shareholders should be aware that the Funds, unlike most other mutual
funds, do not pay directly for transfer agency, pricing, custodial, auditing or
legal services, nor do they pay directly any general administrative expenses.
Each Fund's investment advisor pays all of the expenses of the Fund except
brokerage, taxes, borrowing costs, fees and expenses of non-interested person
trustees and extraordinary expenses.
GROWTH SMALL-CAP INTERNATIONAL
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.50% 3.50% 3.50%
Sales Load Imposed on Reinvested Dividends None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.75% 1.80% 1.95%
12b-1 Charges 0.00% 0.00% 0.00%
Other Expenses1 0.00% 0.00% 0.00%
Total Fund Operating Expenses2 1.75% 1.80% 1.95%
1 EACH FUND ESTIMATES THAT OTHER EXPENSES (FEES AND EXPENSES OF THE TRUSTEES WHO
ARE NOT "INTERESTED PERSONS" AS DEFINED IN THE INVESTMENT COMPANY ACT) WILL BE
LESS THAN .005% OF AVERAGE NET ASSETS FOR THE FIRST FISCAL YEAR.
<TABLE>
<S> <C> <C> <C>
VIF EQUITY FIXED INCOME MARKET NEUTRAL
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.50% 3.50% 3.50%
Sales Load Imposed on Reinvested Dividends None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 1.00% 1.25% 2.25%
12b-1 Charges 0.00% 0.00% 0.00%
Other Expenses1 0.00% 0.00% 0.25%
Total Fund Operating Expenses2 1.00% 1.25% 2.50%
</TABLE>
1 THE FIXED INCOME FUND AND THE VIF EQUITY FUND ESTIMATES THAT OTHER EXPENSES
(FEES AND EXPENSES OF THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS" AS DEFINED
IN THE INVESTMENT COMPANY ACT) WILL BE LESS THAN .005% OF AVERAGE NET ASSETS FOR
THE FIRST FISCAL YEAR. THE OTHER EXPENSES FOR THE MARKET NEUTRAL FUND INCLUDE
ESTIMATED DIVIDENDS PAYABLE ON SECURITIES SOLD SHORT OF 0.25% OF AVERAGE NET
ASSETS FOR THE FIRST FISCAL YEAR.
The tables above are provided to assist an investor in understanding
the direct and indirect expenses that an investor may incur as a shareholder in
a Fund.
<PAGE>
Example As a shareholder in a Fund, you would pay the following expenses on
a $1,000 investment, assuming (1) a 5% annual return and ------- (2) redemption
at the end of each time period:
1 YEAR 3 YEARS
------ -------
Shepherd Values Growth Fund $52 $89
Shepherd Values Small-Cap Fund $53 $90
Shepherd Values International Fund $54 $95
Shepherd Values VIF Equity Fund $45 $66
Shepherd Values Fixed Income Fund $47 $73
Shepherd Values Market Neutral Fund $60 $111
THE FUNDS
The Shepherd Values Market Neutral Fund and Growth Fund were
organized as diversified series of AmeriPrime Funds, an Ohio business trust (the
"Trust") on February 2, 1999. The Shepherd Values VIF Equity Fund, Small-Cap
Fund, International Fund and Fixed Income Fund were organized as series of the
Trust on June 9, 1999. Each is referred to as a "Fund" or collectively as the
"Funds." This prospectus offers shares of each Fund and each share represents an
undivided, proportionate interest in a Fund. The investment advisor to the
Market Neutral Fund and the Growth Fund is Cornerstone Capital Management, Inc.
("Cornerstone"). The investment advisor to the other Funds is Shepherd Advisory
Services, Inc. ("Shepherd"). Shepherd has retained Cornerstone to serve as
sub-advisor to the VIF Equity Fund; Nicholas-Applegate Capital Management, a
California limited partnership ("Nicholas-Applegate"), to serve as sub-advisor
to the Small-Cap Fund; Templeton Portfolio Advisory, a division of
Templeton/Franklin Investment Services, Inc. to serve as sub-advisor to the
International Fund; and Potomac Asset Management Company, Inc. ("Potomac") to
serve as sub-advisor to the Fixed Income Fund.
INVESTMENT OBJECTIVE AND STRATEGIES
THE SHEPHERD VALUES FUNDS: Each advisor uses a "values based" investment
philosophy to select securities for each Fund's portfolio. In addition to
financial characteristics, each security is screened to exclude issuers that, in
the advisor's opinion, are offensive to traditional Judeo-Christian values.
These values, and the screening process, are discussed in more detail below.
SHEPHERD VALUES GROWTH FUND: The investment objective of the Fund is long term
capital appreciation. Cornerstone seeks to achieve this objective by investing
primarily in common stocks which Cornerstone believes are undervalued by the
market based on Cornerstone's proprietary valuation model. The model considers
certain financial characteristics, such as return on equity, cash flow, earnings
consistency and debt load. In searching for investments for the Fund,
Cornerstone employs a style that focuses on securities with a low current price
relative to Cornerstone's view regarding long term future value. The Fund
engages in a "buy and hold" strategy emphasizing long term investment. The Fund
invests primarily in common stocks of large capitalization U.S. companies (those
with market capitalizations above $5 billion).
SHEPHERD VALUES SMALL-CAP FUND: The investment objective of the Fund is long
term capital appreciation. The Fund seeks to achieve this objective by
investing, under normal circumstances, at least 65% of its net assets in equity
securities of small capitalization U.S. companies (as defined by the Russell
2000 Value Index). Nicholas-Applegate selects stocks using a value investment
philosophy by which it attempts to invest in undervalued, fundamentally strong
companies undergoing positive change, based certain financial characteristics.
Nicholas-Applegate looks primarily for stocks with low price-to-earnings and low
price-to-book ratios and high dividend yields. Nicholas-Applegate focuses on
individual companies rather than on specific industries, building the Fund one
stock at a time.
The Fund may invest in "emerging growth companies." These are small
capitalization companies with limited operating histories, but companies that
Nicholas-Applegate believes provide substantial up-side investment opportunity
because of their core business. In addition, the Fund will also include other
small capitalization stocks that would be considered out of favor with the
markets. To the extent the Fund invests in smaller capitalization companies, the
Fund will be subject to the risks associated with such companies. Smaller
capitalization companies may experience higher growth rates and higher failure
rates than do larger capitalization companies. They may have limited product
lines, markets or financial resources and may lack management depth. The trading
volume of securities of smaller capitalization companies is normally less than
that of larger capitalization companies, and, therefore, may disproportionately
affect their market price, tending to make them rise more in response to buying
demand and fall more in response to selling pressure than is the case with
larger capitalization companies.
SHEPHERD VALUES INTERNATIONAL FUND: The investment objective of the Fund is long
term capital appreciation. The Fund seeks to achieve this objective by
investing, under normal circumstances, at least 65% of its total assets in
equity securities of foreign companies. Templeton Portfolio Advisory applies a
bottom-up stock selection approach, looking for the best available bargains on a
global basis, regardless of industry or location. After identifying securities
it believes are undervalued, Templeton Portfolio Advisory focuses on those
factors that may cause earnings and/or assets to increase over the next five
years. Sales growth, margin analysis, new product introductions, new management,
financial restructuring, adjusted net asset values, currency impact, and global
supply and demand for products are some of the many factors considered in the
evaluation of a company. A stock must also be perceived as a real bargain
relative to itself historically, its industry globally, other names in its own
market, and other names in Templeton Portfolio Advisory's research database.
SHEPHERD VALUES VIF EQUITY FUND: The investment objective of the Fund is to
track the performance of the VIF 400 Values Index (the "Values Index"). The Fund
seeks to achieve this objective by investing substantially all of its assets in
the common stocks comprising the Values Index. The Fund is not actively managed
by an investment advisor who buys and sells securities based on research and
analysis. Instead, the Fund is "passively managed" to try and match, as closely
as possible, the performance of the Values Index by holding either all - or a
representative sample - of the securities in the Values Index.
The Values Index was developed and is currently maintained by Values
Investment Forum, Inc. ("VIF"). To construct the Values Index, VIF begins with
the companies comprising the Standard and Poor's 500 Composite Stock Price Index
(the "S&P 500 Index"). The S&P 500 Index consists of 500 widely traded stocks
and is often used as an overall measure of stock market conditions. VIF then
screens the S&P 500 Index to exclude any companies that are not consistent with
Judeo-Christian values. This screening process is described below in the section
titled "Values Based Investing." The Values Index currently consists of the
stocks of approximately 400 companies. The weighting of each stock is based on
the company's total market capitalization as a percentage of the Values Index's
total capitalization. As a result, the stocks of a relatively few issuers may
dominate the Values Index.
If VIF determines that a company no longer meets the "values based"
criteria, the company will be removed from the Index and the Fund will sell the
company's stock as soon as practical. Cornerstone will periodically adjust the
Fund's portfolio in order to maintain a close correlation between the
composition (and performance) of the Fund and the Values Index. Unlike the
Values Index, the Fund has operating expenses. Therefore, while the Fund is
expected to track the Values Index as closely as possible, it will not be able
to match the performance of the Values Index exactly.
As an alternative to holding all of the securities of the Values Index,
the Fund may select stocks through a "sampling" technique in which the Fund
selects a sampling of stocks that will approximate the Index in terms of
industry, size and other characteristics (such as projected earnings, financial
strength and debt). For example, if 10% of the Index is made up of utility
stocks, the Fund would invest 10% of its assets in utility stocks of the Index
with similar characteristics. Such a sampling technique is expected to be an
effective means of substantially duplicating the performance of the Index,
although use of the sampling technique will make it less likely that the Fund
will be able to match the performance of the Values Index exactly.
SHEPHERD VALUES FIXED INCOME FUND: The investment objective of the Fund is a
high level of income over the long term consistent with the preservation of
capital. The Fund seeks to achieve its objective by investing primarily in a
broad range of investment grade fixed income securities. The Fund may invest in
fixed income securities which are unrated if Potomac determines that they are of
comparable quality to securities rated investment grade. Under normal
circumstances the Fixed Income Fund will invest at least 65% of its total assets
in fixed income securities, including bonds, notes, domestic and foreign
corporate and government securities, mortgage backed securities, municipal
securities, zero coupon bonds and short term obligations (such as commercial
paper).
Potomac selects securities for the Fixed Income Fund using a "top down"
methodology. This methodology involves the review of current economic conditions
and the interest rate environment, and analysis of key factors shaping the
economy and changes in the direction of interest rates. Potomac then reviews its
investment strategy (adjusting duration targets and evaluating sector
allocations) and selects portfolio securities accordingly.
SHEPHERD VALUES MARKET NEUTRAL FUND: The investment objective of the Fund is
long term capital appreciation while maintaining minimal exposure to general
equity market risk. Cornerstone seeks to achieve this objective by taking long
positions in U.S. equity securities that Cornerstone has identified as
undervalued and short positions in stocks that Cornerstone has identified as
overvalued, based on Cornerstone's proprietary valuation model. The model
considers certain financial characteristics, such as return on equity, cash
flow, earnings consistency and debt load. This strategy is commonly referred to
as "market neutral investing".
The term "long position" means the Fund purchases the stock. The term
"short position" means the Fund sells a stock that it does not own, borrows the
same stock from a broker or other institution to complete the sale, and buys the
same stock at a later date to repay the lender. If the stock is overvalued, and
the price declines before the Fund buys the stock, the Fund makes a profit. If
the price of the stock increases before the Fund buys the stock, the Fund loses
money. Cornerstone's strategy of using short positions in overvalued stocks
along with long positions in undervalued stocks is intended to reduce the
effects of general market movements on the Fund's performance, although there is
no assurance that Cornerstone will be able to do so.
The success of the market neutral strategy is dependent on
Cornerstone's ability to correctly identify undervalued and overvalued stocks.
If Cornerstone is not successful, the Fund may experience losses regardless of
the overall performance of the stock markets. In strong "bull" markets, when the
prices of nearly all stocks are rising regardless of the underlying value of the
companies, the Fund is expected to underperform the general markets because the
Fund's short positions will likely lose money.
Cornerstone will determine the size of each long or short position by
analyzing the tradeoff between the attractiveness of each position and its
impact on the risk characteristics of the overall portfolio. The Fund's long
positions will consist primarily of U.S. common stocks of large capitalization
companies (those with market capitalizations above $5 billion). The Fund's short
positions will consist primarily of U.S. common stocks of all capitalization
ranges. The Fund seeks to construct a diversified portfolio that has minimal net
exposure to the U.S. equity market generally and near neutral exposure to
specific industries, specific capitalization ranges and certain other risk
factors.
When selling securities short, the Fund will be required to maintain a
segregated account with its Custodian of cash, U.S. Government securities or
other liquid securities equal to the market value of the securities sold less
any collateral deposited with its broker. It is the intention of Cornerstone
that the Market Neutral Fund not borrow money to provide this collateral. The
Fund will not make a short sale if, after giving effect to such sale, the market
value of all securities sold exceeds 100% of the value of the Fund's net assets.
The Fund engages in short selling activities which are significantly
different from the investment activities commonly associated with conservative
stock funds. Positions in shorted securities are more risky than long positions
(purchases) in stocks because the maximum sustainable loss on a stock purchased
is limited to the amount paid for the stock plus the transactions costs, whereas
there is no maximum attainable price of the shorted stock. Therefore, in theory,
stocks sold short have unlimited risk.
VALUES BASED INVESTING: Each advisors utilizes a set of non-financial screening
criteria to maintain a portfolio of securities consistent with the Shepherd
Values investment philosophy. This specialization requires a substantial amount
of additional primary and secondary research and information resources above and
beyond traditional financial analysis. The advisors primarily utilize the
services of Values Investment Forum, Inc. ("VIF") for this non-financial
screening process.
Each advisor screens potential holdings to exclude issuers that, in the
advisor's opinion, are offensive to traditional Judeo-Christian values. The
Funds will not knowingly invest in businesses that are engaged to any
significant degree, directly or through subsidiaries, in the alcoholic beverage,
tobacco, pornographic and gambling industries or companies involved in the
business of aborting life before birth. This includes companies involved in
either the production or distribution of products or services related to these
activities. In addition, each advisor reserves the right to exercise its best
judgement to exclude ownership in other companies whose corporate practices are,
in the advisor's opinion, offensive to traditional Judeo-Christian values. For
example, the advisors exclude companies which, based on VIF's research, promote
same sex lifestyles.
The values based investment policy does not apply to short positions of
the Shepherd Values Market Neutral Fund whereby the Fund does not own the
relevant security when initiating short sales as a hedging strategy for the
Fund. As a result, the Fund may sell short the securities of businesses whose
corporate practices are in violation of the Fund's values based policy.
GENERAL: For temporary defensive purposes under abnormal market or economic
conditions, each Fund may hold all or a portion of its assets in money market
instruments (including money market funds) or U.S. government repurchase
agreements. Each Fund may also invest in such instruments at any time to
maintain liquidity or pending selection of investments in accordance with its
policies. If a Fund acquires securities of a money market fund, the shareholders
of the Fund will be subject to additional management fees. Each Fund may borrow
from a bank or other persons for liquidity purposes, provided such temporary
borrowings are in an amount not exceeding 5% of the Fund's total assets.
As all investment securities are subject to inherent market risks and
fluctuations in value due to earnings, economic and political conditions and
other factors, neither Fund can give any assurance that its investment objective
will be achieved. In addition, it should be noted that the Shepherd,
Cornerstone, Potomac and Templeton Portfolio Advisory have not previously
managed assets organized as a mutual fund and that the Funds have no operating
history. Rates of total return quoted by a Fund may be higher or lower than past
quotations, and there can be no assurance that any rate of total return will be
maintained. See "Investment Policies and Techniques and Risk Considerations" for
a more detailed discussion of each Fund's investment practices.
HOW TO INVEST IN THE FUNDS
Each Fund is sold on a continuous basis, subject to a minimum initial
investment of $2,500 ($1,000 for qualified retirement accounts) and minimum
subsequent investments of $50. For accounts participating in an automatic
investment program, the minimum initial investment is $500, and the minimum
subsequent investment is $50 per month. To the extent investments of individual
investors are aggregated into an omnibus account established by an investment
advisor, broker or other intermediary, the account minimums apply to the omnibus
account, not to the account of the individual investor.
INITIAL PURCHASE
BY MAIL - You may open an account and make initial investments through
securities dealers having a sales agreement with AmeriPrime Financial
Securities, Inc. (the "Distributor"). You may make a direct initial investment
by completing and signing the investment application form which accompanies this
Prospectus and mailing it, in proper form, together with a check (subject to the
above minimum amounts) made payable to the appropriate Fund, and sent to the
P.O. Box listed below. If you prefer overnight delivery, use the overnight
address listed below.
U.S. Mail: Overnight:
Shepherd Values Funds Shepherd Values Funds
Unified Fund Services, Inc. Unified Fund Services, Inc.
P.O. Box 6110 431 North Pennsylvania Street
Indianapolis, Indiana 46206-6110 Indianapolis, Indiana 46204
BY WIRE - You may also purchase shares of a Fund by wiring federal
funds from your bank, which may charge you a fee for doing so. If money is to be
wired, you must call Unified Fund Services, Inc (the "Transfer Agent") at (877)
636-2766 to set up your account and obtain an account number. You should be
prepared at that time to provide the information on the application. Then, you
should provide your bank with the following information for purposes of wiring
your investment:
Firstar Bank, N.A.
ABA #0420-0001-3
Attn: Shepherd Values Purchase Account
D.D.A.# 821602695
Account Name _________________
(write in shareholder name)
For the Account # ______________
(write in account number)
You are required to mail a signed application to Firstar Bank, N.A.
(the "Custodian") at the above address in order to complete your initial wire
purchase. Wire orders will be accepted only on a day on which the Fund,
Custodian and Transfer Agent are open for business. A wire purchase will not be
considered made until the wired money is received and the purchase is accepted
by the Fund. Any delays which may occur in wiring money, including delays which
may occur in processing by the banks, are not the responsibility of the Fund or
the Transfer Agent. There is presently no fee for the receipt of wired funds,
but the right to charge shareholders for this service is reserved by the Fund.
<PAGE>
Your purchase of shares of a Fund will be effected at the public
offering price. The public offering price is the next determined net asset value
per share plus a sales load as shown in the following table.
<TABLE>
<S> <C> <C>
======================================= --------------------------------- ================================
Sales Load as a % of:
Public Net
Offering Amount Dealer Reallowance as % of
Amount of Investment Price Invested Public Offering Price
======================================= ================================= ================================
Less than $100,000 3.50% 3.63% 3.50%
$100,000 but less than $250,000 2.50% 2.56% 2.50%
$250,000 but less than $500,000 1.50% 1.52% 1.50%
$500,000 but less than $1,000,000 1.00% 1.01% 1.00%
$1,000,000 or more None None None
======================================= ================================== ================================
</TABLE>
Under certain circumstances, the Distributor may change the reallowance to
dealers. Dealers engaged in the sale of shares of the Fund may be deemed to be
underwriters under the Securities Act of 1933. The Distributor retains the
entire sales load on all direct initial investments in the Fund and on all
investments in accounts with no designated dealer of record.
Shares of the Fund are sold on a continuous basis at the public
offering price next determined after receipt of a purchase order by the Trust.
Purchase orders received by dealers prior to 4:00 p.m., Eastern time, on any
business day and transmitted to the Distributor by 5:00 p.m., Eastern time, that
day are confirmed at the public offering price determined as of the close of the
regular session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Distributor by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
4:00 p.m., Eastern time, are confirmed at that day's public offering price.
Direct investments received after 4:00 p.m. and others received from dealers
after 5:00 p.m. are confirmed at the public offering price next determined on
the following business day.
ADDITIONAL INVESTMENTS
You may purchase additional shares of any Fund at any time (subject to
minimum investment requirements) by mail, wire, or automatic investment. If your
securities dealer received concessions for selling shares of a Fund to you, such
securities dealer will receive the concessions described above with respect to
additional investments. Each additional mail purchase request must contain your
name, the name of your account(s), your account number(s), and the name of the
Fund. Checks should be made payable to the appropriate fund and should be sent
to the address listed above. A bank wire should be sent as outlined above.
AUTOMATIC INVESTMENT PLAN
You may make regular investments in a Fund with an Automatic Investment
Plan by completing the appropriate section of the account application and
attaching a voided personal check. Investments may be made monthly to allow
dollar-cost averaging by automatically deducting $50 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time.
REDUCED SALES LOAD
You may use the Right of Accumulation to combine the cost or current
net asset value (whichever is higher) of your shares of a Fund with the amount
of your current purchases in order to take advance of the reduced sales load set
forth in the table above. Purchases made pursuant to a Letter of Intent may also
be eligible for the reduced sales loads. The minimum initial investment under a
Letter of Intent is $25,000. Shareholders should contact the Transfer Agent for
information about the Right of Accumulation and Letter of Intent.
PURCHASES AT NET ASSET VALUE
Purchases may be effected at net asset value for the benefit of the
clients of brokers-dealers and registered investment advisors affiliated with a
broker-dealer, if such broker-dealer or investment advisor has entered into an
agreement with the Distributor providing specifically for the purchase of Fund
shares in connection with special investment products, such as wrap accounts or
similar fee based programs.
Trustees, directors, officers and employees of the Trust, the advisors
and service providers to the Trust, including members of the immediate family of
such individuals and employee benefit plans established by such entities, may
also purchase shares of each Fund at net asset value.
ADDITIONAL INFORMATION
For purposes of determining the applicable sales load, a purchaser
includes an individual, his spouse and their children under the age of 21,
purchasing shares for his or their own account; or a trustee or other fiduciary
purchasing shares for a single fiduciary account although more than one
beneficiary is involved; or employees of a common employer, provided that
economies of scale are realized through remittances from a single source and
quarterly confirmation of such purchases; or an organized group, provided that
the purchases are made through a central administration, or a single dealer, or
by other means which result in economy of sales effort or expense.
TAX SHELTERED RETIREMENT PLANS
Since the Funds are oriented to longer term investments, shares of the
Funds may be an appropriate investment medium for tax sheltered retirement
plans, including: individual retirement plans (IRAs); simplified employee
pensions (SEPs); SIMPLE plans; 401(k) plans; qualified corporate pension and
profit sharing plans (for employees); tax deferred investment plans (for
employees of public school systems and certain types of charitable
organizations); and other qualified retirement plans. You should contact the
Transfer Agent for the procedure to open an IRA or SEP plan, as well as more
specific information regarding these retirement plan options. Consultation with
an attorney or tax advisor regarding these plans is advisable. Custodial fees
for an IRA will be paid by the shareholder by redemption of sufficient shares of
the Fund from the IRA unless the fees are paid directly to the IRA custodian.
You can obtain information about the IRA custodial fees from the Transfer Agent.
OTHER PURCHASE INFORMATION
Dividends begin to accrue after you become a shareholder. The Funds do
not issue share certificates. All shares are held in non-certificate form
registered on the books of each of the Funds and the Funds' Transfer Agent for
the account of the shareholder. The rights to limit the amount of purchases and
to refuse to sell to any person are reserved by the Funds. If your check or wire
does not clear, you will be responsible for any loss incurred by the Funds. If
you are already a shareholder, the Funds can redeem shares from any identically
registered account in the Funds as reimbursement for any loss incurred. You may
be prohibited or restricted from making future purchases in the Funds.
EXCHANGE PRIVILEGE
By telephoning the Transfer Agent at (877) 636-2766 or writing the
Transfer Agent at P.O. Box 6110 , Indianapolis, Indiana 46206-6110, you may
exchange, without charge, any or all of your shares in the Funds for the shares
of The Unified Taxable Money Market Fund, a separately managed money market
fund. Exchanges may be made only if the money market fund is registered in your
state of residence. The exchange privilege with the money market fund does not
constitute an offering or recommendation of the money market fund.
It is your responsibility to obtain and read a prospectus of the money
market fund before you make an exchange. By giving exchange instructions, a
shareholder will be deemed to have acknowledged receipt of the prospectus for
the money market fund. You may make up to one exchange out of each Fund during a
calendar month and four exchanges out of each Fund during a calendar year. This
limit helps keep each Fund's net asset base stable and reduces the Fund's
administrative expenses. There currently is no limit on exchanges out of the
money market fund. In times of extreme economic or market conditions, exchanging
Fund or the money market fund shares by telephone may be difficult.
Redemption of shares in connection with exchanges into or out of a Fund
are made at the net asset value per share next determined after the exchange
request is received. To receive a specific day's price, your letter or call must
be received before that day's close of the New York Stock Exchange. A day or
more delay may be experienced prior to the investment of the redemption proceeds
into the money market fund. Each exchange represents the sale of shares from one
fund and the purchase of shares in another, which may produce a gain or loss for
Federal income tax purposes.
All exchanges out of the Fund into the money market fund are subject to
the minimum and subsequent investment requirements of the money market fund.
Exchanges will be accepted only if the registration of the two accounts is
identical. Neither the Fund, the money market fund, nor the Transfer Agent
assume responsibility for the authenticity of exchange instructions communicated
by telephone or in writing which are believed to be genuine.
<PAGE>
HOW TO REDEEM SHARES
All redemptions will be made at the net asset value determined after
the redemption request has been received by the Transfer Agent in proper order.
Shareholders may receive redemption payments in the form of a check or federal
wire transfer. The proceeds of the redemption may be more or less than the
purchase price of your shares, depending on the market value of the Fund's
securities at the time of your redemption. Presently there is no charge for wire
redemptions; however, the Funds reserve the right to charge for this service.
Any charges for wire redemptions will be deducted from the shareholder's Fund
account by redemption of shares. Investors choosing to purchase or redeem their
shares through a broker/dealer or other institution may be charged a fee by that
institution.
BY MAIL - You may redeem any part of your account in a Fund at no charge by
mail. Your request should be addressed to:
Shepherd Values Funds
Unified Fund Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
"Proper order" means your request for a redemption must include your
letter of instruction, including the Fund name, account number, account name(s),
the address and the dollar amount or number of shares you wish to redeem. This
request must be signed by all registered share owner(s) in the exact name(s) and
any special capacity in which they are registered. For all redemptions, the
Funds require that signatures be guaranteed by a bank or member firm of a
national securities exchange. Signature guarantees are for the protection of
shareholders. At the discretion of each of the Funds or Unified Fund Services,
Inc., a shareholder, prior to redemption, may be required to furnish additional
legal documents to insure proper authorization.
BY TELEPHONE - You may redeem any part of your account in a Fund by
calling the Transfer Agent (877) 636-2766. You must first complete the Optional
Telephone Redemption and Exchange section of the investment application to
institute this option. The Fund, the Transfer Agent and the Custodian are not
liable for following redemption or exchange instructions communicated by
telephone that they reasonably believe to be genuine. However, if they do not
employ reasonable procedures to confirm that telephone instructions are genuine,
they may be liable for any losses due to unauthorized or fraudulent
instructions. Procedures employed may include recording telephone instructions
and requiring a form of personal identification from the caller.
The telephone redemption and exchange procedures may be terminated at
any time by the Funds or the Transfer Agent. During periods of extreme market
activity it is possible that shareholders may encounter some difficulty in
telephoning the Funds, although neither the Funds nor the Transfer Agent has
ever experienced difficulties in receiving and in a timely fashion responding to
telephone requests for redemptions or exchanges. If you are unable to reach the
Funds by telephone, you may request a redemption or exchange by mail.
ADDITIONAL INFORMATION - If you are not certain of the requirements for
a redemption please call the Transfer Agent at (877) 636-2766. Redemptions
specifying a certain date or share price cannot be accepted and will be
returned. You will be mailed the proceeds on or before the fifth business day
following the redemption. However, payment for redemption made against shares
purchased by check will be made only after the check has been collected, which
normally may take up to fifteen days. Also, when the New York Stock Exchange is
closed (or when trading is restricted) for any reason other than its customary
weekend or holiday closing or under any emergency circumstances, as determined
by the Securities and Exchange Commission, the Funds may suspend redemptions or
postpone payment dates.
Because the Funds incur certain fixed costs in maintaining shareholder
accounts, each Fund reserves the right to require any shareholder to redeem all
of his or her shares in the Fund on 30 days' written notice if the value of his
or her shares in the Fund is less than $2,500 due to redemption, or such other
minimum amount as the Fund may determine from time to time. An involuntary
redemption constitutes a sale. You should consult your tax advisor concerning
the tax consequences of involuntary redemptions. A shareholder may increase the
value of his or her shares in the Fund to the minimum amount within the 30 day
period. Each share of each Fund is subject to redemption at anytime if the Board
of Trustees determines in its sole discretion that failure to so redeem may have
materially adverse consequences to all or any of the shareholders of the Funds.
<PAGE>
SHARE PRICE CALCULATION
The value of an individual share in each Fund (the net asset value) is
calculated by dividing the total value of the Fund's investments and other
assets (including accrued income), less any liabilities (including estimated
accrued expenses), by the number of shares outstanding,rounded to the nearest
cent. Net asset value per share is determined as of the close of the New York
Stock Exchange (4:00 p.m., Eastern time) on each day that the exchange is open
for business, and on any other day on which there is sufficient trading in the
Fund's securities to materially affect the net asset value. The net asset value
per share of the Fund will fluctuate.
Securities which are traded on any exchange or on the NASDAQ
over-the-counter market are valued at the last quoted sale price. Lacking a last
sale price, a security is valued at its last bid price except when, in the
advisor's (or sub-advisor's, if applicable) 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 or sub-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 (or
sub-advisor, if applicable) subject to review of the Board of Trustees of the
Trust.
Fixed income securities generally are valued by using market
quotations, but may be valued on the basis of prices furnished by a pricing
service when the advisor (or sub-advisor, if applicable) 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 (or sub-advisor, if
applicable), subject to review of the Board of Trustees. Short term investments
in fixed income securities with maturities of less than 60 days when acquired,
or which subsequently are within 60 days of maturity, are valued by using the
amortized cost method of valuation, which the Board has determined will
represent fair value.
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute substantially all of its net investment
income as dividends to its shareholders on an annual basis, and intends to
distribute its net long term capital gains and its net short term capital gains
at least once a year.
Income dividends and capital gain distributions are automatically
reinvested in additional shares at the net asset value per share on the
distribution date. An election to receive a cash payment of dividends and/or
capital gain distributions may be made in the application to purchase shares or
by separate written notice to the Transfer Agent. Shareholders will receive a
confirmation statement reflecting the payment and reinvestment of dividends and
summarizing all other transactions. If cash payment is requested, a check
normally will be mailed within five business days after the payable date. If you
withdraw your entire account, all dividends accrued to the time of withdrawal,
including the day of withdrawal, will be paid at that time. You may elect to
have distributions on shares held in IRAs and 403(b) plans paid in cash only if
you are 59 1/2 years old or permanently and totally disabled or if you otherwise
qualify under the applicable plan.
TAXES
Each Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so qualifying,
a Fund will not be subject to federal income taxes to the extent that it
distributes substantially all of its net investment income and any realized
capital gains.
For federal income tax purposes, dividends paid by each Fund from
ordinary income are taxable to shareholders as ordinary income, but may be
eligible in part for the dividends received deduction for corporations. Pursuant
to the Tax Reform Act of 1986 (the "Tax Reform Act"), all distributions of net
short term capital gains to individuals are taxed at the same rate as ordinary
income. All distributions of net capital gains to corporations are taxed at
regular corporate rates. Any distributions designated as being made from net
realized long term capital gains are taxable to shareholders as long term
capital gains regardless of the holding period of the shareholder.
Each Fund will mail to each shareholder after the close of the calendar
year a statement setting forth the federal income tax status of distributions
made during the year. Dividends and capital gains distributions may also be
subject to state and local taxes. Shareholders are urged to consult their own
tax advisors regarding specific questions as to federal, state or local taxes
and the tax effect of distributions and withdrawals from the Fund.
On the application or other appropriate form, each of the Funds will
request the shareholder's certified taxpayer identification number (social
security number for individuals) and a certification that the shareholder is not
subject to backup withholding. Unless the shareholder provides this information,
each Fund will be required to withhold and remit to the U.S. Treasury 31% of the
dividends, distributions and redemption proceeds payable to the shareholder.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, a Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed with respect to a specific account in any year, the applicable
Fund may make a corresponding charge against the account.
OPERATION OF THE FUNDS
Each Fund is a diversified series of AmeriPrime Funds, an open-end
management investment company organized as an Ohio business trust on August 8,
1995. The Board of Trustees supervises the business activities of the Funds.
Like other mutual funds, the Trust retains various organizations to perform
specialized services. The Trust retains Cornerstone Capital Management, Inc.,
6760 Corporate Drive, Suite 230, Colorado Springs, CO 80919 ("Cornerstone") to
manage the assets of the Market Neutral Fund and the Growth Fund. Cornerstone, a
Colorado corporation organized on April 1, 1997, is an independent management
firm specializing in values-based investment management. Cornerstone manages
assets for corporations, endowments, foundations, institutional investors,
individuals and limited partnerships. Darrel Uselton is the controlling
shareholder of National Capital Companies, LLC (Cornerstone's parent company).
With respect to the Market Neutral Fund and the Growth Fund,
Cornerstone determines the securities to be held or sold by each Fund, and the
portion of each Fund's assets to be held uninvested, subject always to the
Fund's investment objectives, policies and restrictions, and subject further to
such policies and instructions as the Board of Trustees may establish. The
investment decisions of the Market Neutral Fund and the Growth Fund are made by
a committee of Cornerstone, which is primarily responsible for the day-to-day
management of each Fund's portfolio.
The Trust retains Shepherd Advisory Services, Inc., 6760 Corporate
Drive, Suite 230, Colorado Springs, CO 80919 ("Shepherd") to manage the assets
of the Small-Cap Fund, the International Fund, the VIF Equity Fund and the Fixed
Income Fund. Shepherd, a recently registered investment advisory firm, was
organized as a Tennessee corporation on July 28, 1998.
With respect to the Small-Cap Fund, the International Fund, the VIF
Equity Fund and the Fixed Income Fund, Shepherd determines the securities to be
held or sold by each Fund, and the portion of each Fund's assets to be held
uninvested, subject always to the Fund's investment objectives, policies and
restrictions, and subject further to such policies and instructions as the Board
of Trustees may establish. Shepherd has engaged a sub-advisor (at Shepherd's
expense) to provide portfolio management services to each of the Funds it
manages.
Each Fund is authorized to pay its advisor a fee equal to an annual
average rate as follows: Market Neutral Fund, 2.25%; Growth Fund, 1.75%; VIF
Equity Fund, 1.00%; Small-Cap Fund, 1.80%; International Fund, 1.95%; Fixed
Income Fund, 1.25%. Each Fund's advisor pays all of the operating expenses of
the Fund except brokerage, taxes, borrowing costs (including any dividend
expense on securities sold short), fees and expenses of non-interested person
trustees and extraordinary expenses. In this regard, it should be noted that
most investment companies pay their own operating expenses directly, while each
Fund's expenses, except those specified above, are paid by its advisor.
Shepherd has entered into a Sub-Advisory Agreement with
Nicholas-Applegate Capital Management, 600 West Broadway, Suite 2900, San Diego,
California("Nicholas-Applegate"), to serve as the Sub-Advisor of the Small-Cap
Fund. Nicholas-Applegate was organized in 1984 as a California limited
partnership. Its general partner Nicholas-Applegate Capital Holdings, L.P., a
California limited partnership controlled by Nicholas-Applegate Capital
Management Holdings, Inc., a California corporation controlled by Arthur E.
Nicholas. As of December 31, 1998, Nicholas-Applegate managed approximately $31
billion in assets for numerous clients, including employee benefit plans of
corporations, public retirement systems and unions, university endowments,
foundations, and other institutional investors and individuals. The investment
decisions of the Small-Cap Fund are made by a team of investment professionals
who are primarily responsible for the day-to-day management of the Fund:
Catherine Somhegyi, partner and Chief Investment Officer of Global Equity
Management, joined the firm in 1987; Larry Speidell, CFA, partner and Director
of Global/Systematic Portfolio Management and Research, joined the Firm in 1994;
John J. Kane, partner and Portfolio Manager , joined the firm in 1994; and Mark
Stuckelman, Portfolio Manager, joined the firm in 1995, prior to that time he
had five years prior investment experience with Wells Fargo Bank Investment
Management Group, Fidelity Management Trust Co., and BARRA. Shepherd has agreed
to pay Nicholas-Applegate a sub-advisory fee equal to an annual average rate of
0.65% of the average daily net assets of the Small-Cap Fund.
Shepherd has entered into a Sub-Advisory Agreement with Templeton
Portfolio Advisory, 500 E. Broward Boulevard, Suite 2100, Fort Lauderdale,
Florida, to serve as the Sub-Advisor of the International Fund. Templeton
Portfolio Advisory is a division of Templeton/Franklin Investment Services,
Inc., which is controlled by Franklin Resources, Inc., a public company. As of
December 31, 1998, Templeton Portfolio Advisory managed over $1.9 billion in
assets for various clients, including corporations, foundations and charitable
endowments, and individuals. The investment decisions of the International Fund
are made by a committee of Templeton Portfolio Advisory , which is primarily
responsible for the day-to-day management of the Fund. Shepherd has agreed to
pay Templeton Portfolio Advisory a sub-advisory fee equal to an annual average
rate of 0.75% of the average daily net assets of the International Fund.
Shepherd has entered into a Sub-Advisory Agreement with Cornerstone to
serve as the Sub-Advisor of the VIF Equity Fund. The investment decisions of the
VIF Equity Fund are made by a committee of Cornerstone , which is primarily
responsible for the day-to-day management of the Fund. Shepherd has agreed to
pay Cornerstone a sub-advisory fee equal to an annual average rate of 0.20% of
the average daily net assets of the VIF Equity Fund.
Shepherd has entered into a Sub-Advisory Agreement with Potomac Asset
Management Company, Inc., 3 Bethesda Metro Center, Suite 530, Bethesda, MD 20814
("Potomac"), to serve as the sub-advisor of the Fixed Income Fund. Potomac is a
Maryland corporation organized in August 1981. As of December 31, 1998, Potomac
managed over $700 million in assets for institutional clients, including pension
plans, non-profits, endowments, foundations and health care organizations, and
high net worth individuals. The investment decisions of the Fixed Income Fund
are made by Roger W. Marshall and Frederic M. Smoak, CFA, who are primarily
responsible for the day-to-day management of the Fund. Roger W. Marshall is the
Managing Director and Senior Fixed Income Portfolio Manager at Potomac Asset
Management, and a member of the firm's Investment Policy Committee. His 21 years
of industry experience includes both fixed income management and capital markets
research. Before joining Potomac in 1998, Mr. Marshall was President of
Wainwright Asset Management for four years; Senior Vice President at A. Webster
Dougherty Asset Management in 1994; and President/Managing Director of
Fixed-income Services at Riggs Investment Management Corporation (RIMCO) from
1988-1994. Frederic M. Smoak, CFA is the Managing Director and Senior Fixed
Income Portfolio Manager at Potomac Asset Management. He is a member of the
firm's Investment Policy Committee and has Senior Portfolio Management
responsibility for the firm's Investment Grade Fixed Income Strategy. Mr. Smoak
has led Potomac's fixed-income effort since joining the firm in 1988 and has 17
years of portfolio management and trading experience. Shepherd has agreed to pay
Potomac a sub-advisory fee equal to an annual average rate of 0.35% of the
average daily net assets of the Fixed Income Fund.
The Funds retain AmeriPrime Financial Services, Inc. (the
"Administrator") to manage the Funds' business affairs and provide each Fund
with administrative services, including all regulatory reporting and necessary
office equipment, personnel and facilities. The Administrator receives a monthly
fee from the applicable advisor equal to an annual average rate of 0.10% of each
Fund's average daily net assets up to fifty million dollars, 0.075% of each
Fund's average daily net assets from fifty to one hundred million dollars and
0.050% of each Fund's average daily net assets over one hundred million dollars
(subject to a minimum annual payment of $20,000). The Funds retain Unified Fund
Services, Inc., 431 North Pennsylvania Street, Indianapolis, Indiana 46204 (the
"Transfer Agent") to serve as transfer agent, dividend paying agent and
shareholder service agent. The Trust retains AmeriPrime Financial Securities,
Inc., 1793 Kingswood Drive, Suite 200, Southlake, Texas 76092 (the
"Distributor") to act as the principal distributor of the Funds' shares. The
services of the Administrator, Transfer Agent and Distributor are operating
expenses paid by the applicable advisor.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the advisors may give consideration to sales of shares of
the Funds as a factor in the selection of brokers and dealers to execute
portfolio transactions. The advisors (not the Fund) may pay certain financial
institutions (which may include banks, brokers, securities dealers and other
industry professionals) a fee for providing distribution related services and/or
for performing certain administrative servicing functions for Fund shareholders
to the extent these institutions are allowed to do so by applicable statute,
rule or regulation.
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of
securities and investment techniques that the Funds may purchase or employ. The
Statement of Additional Information provides more information.
SHORT SALES. The Growth Fund and the Market Neutral Fund may a sell a security
short in anticipation of a decline in the market value of the security. When a
Fund engages in a short sale, it sells a security which it does not own. To
complete the transaction, the Fund must borrow the security in order to deliver
it to the buyer. The Fund must replace the borrowed security by purchasing it at
the market price at the time of replacement, which may be more or less than the
price at which the Fund sold the security. The Fund will incur a loss as a
result of the short sale if the price of the security increases between the date
of the short sale and the date on which the Fund replaces the borrowed security.
The Fund will realize a profit if the security declines in price between those
dates.
In connection with its short sales, each Fund will be required to
maintain a segregated account with the Custodian of cash or high grade liquid
assets equal to the market value of the securities sold less any collateral
deposited with its broker. The Growth Fund will limit its short sales so that no
more than 10% of its net assets (less all its liabilities other than obligations
under the short sales) will be deposited as collateral and allocated to the
segregated account. However, the segregated account and deposits will not
necessarily limit the Fund's potential loss on a short sale, which is unlimited.
Each Fund's use of short sales may result in the Fund realizing more short-term
capital gains (subject to tax at ordinary rates) than it would if it did not
engage in short sales.
EQUITY SECURITIES. Equity securities consist of common stock, convertible
preferred stock, convertible bonds, rights and warrants. Common stocks, the most
familiar type, represent an equity (ownership) interest in a corporation.
Warrants are options to purchase equity securities at a specified price for a
specific time period. Rights are similar to warrants, but normally have a short
duration and are distributed by the issuer to its shareholders. Although equity
securities have a history of long term growth in value, their prices fluctuate
based on changes in a company's financial condition and on overall market and
economic conditions. Each Fund's investment in convertible securities will be
limited to those of investment grade.
Equity securities include S&P Depositary Receipts ("SPDRs") and other
similar instruments. SPDRs are shares of a publicly traded unit investment trust
which owns the stocks included in the S&P 500 Index, and changes in the price of
SPDRs track the movement of the Index relatively closely.
Equity securities also include common stocks and common stock
equivalents of domestic real estate investment trusts ("REITs") and other
companies which operate as real estate corporations or which have a significant
portion of their assets in real estate. A Fund will not acquire any direct
ownership of real estate.
Investments in equity securities are subject to inherent market risks
and fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the advisor. As a result, the return and net asset value
of the Fund will fluctuate. Securities in the Fund's portfolios may not increase
as much as the market as a whole and some undervalued securities may continue to
be undervalued for long periods of time. Although profits in some Fund holdings
may be realized quickly, it is not expected that most investments will
appreciate rapidly.
FOREIGN SECURITIES. Each Fund (except the Fixed Income Fund) may invest in
foreign equity securities by purchasing American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs") or Global Depositary Receipts ("GDRs").
These securities are certificates evidencing ownership of shares of a
foreign-based issuer held in trust by a bank or similar financial institution.
They are alternatives to the direct purchase of the underlying securities in
their national markets and currencies. The International Fund may invest
directly in foreign equity securities as well as ADRs. The Fixed Income Fund may
invest up to 25% of its net assets in foreign debt securities.
To the extent a Fund invests in foreign securities, either directly or
through the purchase of depositary receipts, the Fund will be subject to special
risks. Foreign debt and equity securities, and securities denominated in or
indexed to foreign currencies may be affected by the strength of those
currencies relative to the U.S. dollar, or by political or economic developments
in foreign countries. These developments could include restrictions on foreign
currency transactions and rules of exchange, or changes in administrations or
monetary policies of foreign governments. Foreign securities purchased using
foreign currencies may incur currency conversion costs. Foreign issuers and
brokers may not be subject to accounting standards or governmental supervision
comparable to U.S. issuers and brokers, and there may be less public information
about their operations. In addition, foreign markets may be less liquid or more
volatile than U.S. markets, and may offer less protection to investors.
The International Fund and Fixed Income Fund may enter into currency
forward contracts (agreements to exchange one currency for another at a future
date) to manage currency risks and to facilitate transactions in foreign
securities. Although currency forward contracts can be used to protect a Fund
from adverse exchange rate changes, the Fund may incur a loss if the advisor
incorrectly predicts foreign currency values.
With respect to certain countries in which capital markets are either
less developed or not easily accessed (emerging markets), investments by the
International Fund and the Fixed Income Fund may be made through investment in
other registered investment companies that in turn are authorized to invest in
the securities of such countries. Investment in other investment companies will
involve the indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies and will result in a duplication of
fees and expenses.
There is no limitation on the amount of the International Fund's assets
that may be invested in foreign securities, except that no more than 25% of the
Fund's assets may be invested in any one foreign country or companies operating
exclusively in one foreign country.
FIXED INCOME SECURITIES. Fixed income securities are generally considered to be
interest rate sensitive, which means that their value will generally decrease
when interest rates rise and increase when interest rates fall. Securities with
shorter maturities, while offering lower yields, generally provide greater price
stability than longer term securities and are less affected by changes in
interest rates.
The Growth Fund and the Fixed Income Fund may invest in corporate debt
securities. These are long and short-term debt obligations issued by companies
(such as publicly issued and privately placed bonds, notes and commercial
paper). Each advisor considers corporate debt securities to be of investment
grade quality if they are rated BBB or higher by Standard & Poor's Corporation
("S&P"), Baa or higher by Moody's Investors Services, Inc. ("Moody's"), or if
unrated, determined by the Advisor (or in the case of the Fixed Income Fund, by
the sub-advisor) to be of comparable quality. Investment grade debt securities
generally have adequate to strong protection of principal and interest payments.
In the lower end of this category, credit quality may be more susceptible to
potential future changes in circumstances and the securities have speculative
elements. Neither Fund will invest more than 20% of its assets in corporate debt
rated in the lowest investment grade category. If the rating of a security by
S&P or Moody's drops below investment grade, the advisor (or sub-advisor) will
dispose of the security as soon as practicable, (depending on market conditions)
unless the advisor (or sub-advisor) determines based on its own credit analysis
that the security provides the opportunity of meeting the Fund's objective
without presenting excessive risk.
Each Fund may invest in U.S. government obligations. These securities may
be backed by the credit of the government as a whole or only by the issuing
agency. U.S. Treasury bonds, notes, and bills and some agency securities, such
as those issued by the Federal Housing Administration and the Government
National Mortgage Association (GNMA), are backed by the full faith and credit of
the U.S. government as to payment of principal and interest and are the highest
quality government securities. Other securities issued by U.S. government
agencies or instrumentalities, such as securities issued by the Federal Home
Loan Banks and the Federal Home Loan Mortgage Corporation, are supported only by
the credit of the agency that issued them, and not by the U.S. government.
Securities issued by the Federal Farm Credit System, the Federal Land Banks, and
the Federal National Mortgage Association (FNMA) are supported by the agency's
right to borrow money from the U.S. Treasury under certain circumstances, but
are not backed by the full faith and credit of the U.S. government.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Growth Fund and the Fixed
Income Fund may purchase securities on a when-issued or delayed delivery basis.
Delivery of and payment for these securities may take place as long as a month
or more after the date of the purchase commitment. The value of these securities
is subject to market fluctuation during this period and no income accrues to the
Fund until settlement takes place. The Fund maintains with the Custodian a
segregated account containing high grade liquid securities in an amount at least
equal to these commitments.
INVESTMENT IN RELATIVELY NEW ISSUES. Each Fund may invest in securities of
selected new issuers. If a Fund invests in credit instruments of relatively new
issuers, it will only be in those issues where the advisor or sub-advisor (as
the case may be) believes there are strong covenant protections for the holder.
If issuers meet the investment criteria discussed above, the Fund may invest in
securities without respect to the age of the issuer. Investments in relatively
new issuers, i.e., those having continuous operating histories of less than
three years, may carry special risks and may be more speculative because such
companies are relatively unseasoned. Such companies may also lack sufficient
resources, may be unable to generate internally the funds necessary for growth
and may find external financing to be unavailable on favorable terms or even
totally unavailable. Those companies will often be involved in the development
or marketing of a new product with no established market, which could lead to
significant losses.
REPURCHASE AGREEMENTS. Each Fund may invest in repurchase agreements fully
collateralized by U.S. Government obligations. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
the Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, the Fund could experience both delays in
liquidating the underlying security and losses in value. However, each Fund
intends to enter into repurchase agreements only with Firstar Bank, N.A. (the
Fund's Custodian), other banks with assets of $1 billion or more and registered
securities dealers which the advisor (or applicable sub-advisor) has determined
(subject to review by the Board of Trustees) to be creditworthy. The advisor (or
applicable sub-advisor) monitors the creditworthiness of the banks and
securities dealers with which the Fund engages in repurchase transactions.
OPTIONS ON STOCKS OR BONDS. The Growth Fund, the VIF Equity Fund and the Market
Neutral Fund may write covered call options, and purchase put and call options,
on stocks or bonds. A call option gives the purchaser of the option the right to
buy, and obligates the writer to sell, the underlying security at the exercise
price at any time during the option period. Similarly, a put option gives the
purchaser of the option the right to sell, and obligates the writer to buy the
underlying security at the exercise price at any time during the option period.
A covered call option with respect to which a Fund owns the underlying security
sold by the Fund exposes the Fund during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
security or to possible continued holding of a security which might otherwise
have been sold to protect against depreciation in the market price of the
security.
OPTIONS ON STOCK AND BOND INDICES. The Growth Fund, the VIF Equity Fund and
Market Neutral Fund may write covered call options, and purchase put and call
options, on stock or bond indices listed on domestic and foreign stock
exchanges, in lieu of direct investment in the underlying securities or for
hedging purposes. A stock or bond index fluctuates with changes in the market
values of the securities included in the index. Options on securities indices
are generally similar to options on stocks except that the delivery requirements
are different. Instead of giving the right to take or make delivery of
securities at a specified price, an option on a stock or bond index gives the
holders the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of the exercise, multiplied by (b) a fixed
"index multiplier." To cover the potential obligations involved in writing
options, the Fund will either (a) hold a portfolio of stocks substantially
replicating the movement of the index, or (b) the Fund will segregate with the
Custodian high grade liquid debt obligations equal to the market value of the
stock index option, marked to market daily. Successful use by the Fund of
options on security indices will be subject to the Cornerstone's ability to
predict correctly movement in the direction of the security market generally or
of a particular industry. This requires different skills and techniques than
predicting changes in the price of individual securities.
GENERAL. The Fixed Income Fund may invest up to 5% of its net assets in each of
the following: mortgage-backed securities, zero coupon municipal securities,
floating rate bonds, STRIPS (Separate Trading of Registered Interest and
Principal Securities) and financial services industry obligations. Each Fund may
also invest up to 5% of its net assets in securities sold under Rule 144A
(unregistered securities that can be resold to institutions only under SEC Rule
144A). Each Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities generally include securities which cannot be disposed of
promptly and in the ordinary course of business without taking a reduced price.
The Statement of Additional Information provides information about these
securities and the risks involved.
GENERAL INFORMATION
FUNDAMENTAL POLICIES. The investment limitations set forth in the
Statement of Additional Information as fundamental policies may not be changed
without the affirmative vote of the majority of the outstanding shares of the
applicable Fund. The investment objective of each Fund may be changed without
the affirmative vote of a majority of the outstanding shares of the Fund. Any
such change may result in the Fund having an investment objective different from
the objective which the shareholders considered appropriate at the time of
investment in the Fund.
PORTFOLIO TURNOVER. Neither Fund intends to purchase or sell securities
for short term trading purposes. However, if the objectives of a Fund would be
better served, short-term profits or losses may be realized from time to time.
It is anticipated that the portfolio turnover rate of each Fund will not exceed
100% annually.
SHAREHOLDER RIGHTS. Any Trustee of the Trust may be removed by vote of
the shareholders holding not less than two-thirds of the outstanding shares of
the Trust. The Trust does not hold an annual meeting of shareholders. When
matters are submitted to shareholders for a vote, each shareholder is entitled
to one vote for each whole share he owns and fractional votes for fractional
shares he owns. All shares of a Fund have equal voting rights and liquidation
rights. Prior to the public offering of the Funds, Kenneth D. Trumpfheller
purchased for investment all of the outstanding shares of each Fund and may be
deemed to control each Fund. Mr. Trumpfheller is a Trustee and the President of
the Trust and the President of the Administrator and Distributor.
Each Fund acknowledges that it is solely responsible for the
information or any lack of information about it in this joint Prospectus and in
the joint Statement of Additional Information, and no other Fund is responsible
therefor. There is a possibility that one Fund might be deemed liable for
misstatements or omissions regarding another Fund in this Prospectus or in the
joint Statement of Additional Information; however, the Funds deem this
possibility slight.
Shareholder inquiries should be made by telephone to (877) 636-2766, or
by mail, c/o Unified Fund Services, Inc., to P.O. Box 6110, Indianapolis,
Indiana 46206-6110.
YEAR 2000 ISSUE. Like other mutual funds, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the advisors, the Administrator or
other service providers to the Funds 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 advisors and the 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 the Funds' 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 Funds. In addition,
neither advisor can make any assurances that the Year 2000 Issue will not affect
the companies in which a Fund invests or worldwide markets and economies.
PERFORMANCE INFORMATION
Each Fund may periodically advertise "average annual total return." The
"average annual total return" of a Fund refers to the average annual compounded
rate of return over the stated period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions.
Each Fund may also advertise performance information (a
"non-standardized quotation") which is calculated differently from "average
annual total return." A non-standardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions. A
non-standardized quotation may also be an average annual compounded rate of
return over a specified period, which may be a period different from those
specified for "average annual total return." In addition, a non-standardized
quotation may be an indication of the value of a $10,000 investment (made on the
date of the initial public offering of the Fund's shares) as of the end of a
specified period. A non-standardized quotation will always be accompanied by the
Fund's "average annual total return" as described above.
The Fixed Income Fund may periodically advertise its yield for a thirty
day or one month period. The "yield" of the Fixed Income Fund refers to the
income generated by an investment in the Fund over the period, calculated on a
per share basis (using the net asset value per share on the last day of the
period and the average number of shares outstanding during the period). The
Fund's yield quotation will always be accompanied by the Fund's average annual
total return information described above.
Each Fund may also include in advertisements data comparing performance
with other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index, the NASDAQ Composite Index and the Dow Jones Industrial
Average.
THE ADVERTISED PERFORMANCE DATA OF EACH FUND IS BASED ON HISTORICAL
PERFORMANCE AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE. RATES OF TOTAL
RETURN QUOTED BY A FUND MAY BE HIGHER OR LOWER THAN PAST QUOTATIONS, AND THERE
CAN BE NO ASSURANCE THAT ANY RATE OF TOTAL RETURN WILL BE MAINTAINED. THE
PRINCIPAL VALUE OF AN INVESTMENT IN EACH FUND WILL FLUCTUATE SO THAT A
SHAREHOLDER'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
SHAREHOLDER'S ORIGINAL INVESTMENT.
<PAGE>
<TABLE>
<S> <C>
INVESTMENT ADVISOR TO THE GROWTH FUND INVESTMENT ADVISOR TO THE FIXED INCOME FUND, THE
AND THE MARKET NEUTRAL FUND AND INTERNATIONAL FUND, THE SMALL-CAP FUND AND
SUB-ADVISOR TO THE VIF EQUITY FUND THE VIF EQUITY FUND
Cornerstone Capital Management, Inc. Shepherd Advisory Services, Inc.
6760 Corporate Drive, Suite 230 6760 Corporate Drive, Suite 230
Colorado Springs, CO 80919 Colorado Springs, CO 80919
INVESTMENT SUB-ADVISOR TO SMALL-CAP FUND INVESTMENT SUB-ADVISOR TO FIXED INCOME FUND
Nicholas-Applegate Capital Management Potomac Asset Management Company, Inc.
600 West Broadway, Suite 2900 3 Bethesda Metro Center, Suite 530
San Diego, CA 92101 Bethesda, MD 20814
ADMINISTRATOR INVESTMENT SUB-ADVISOR TO INTERNATIONAL FUND
AmeriPrime Financial Services, Inc. Templeton Portfolio Advisory
1793 Kingswood Drive, Suite 200 500 E. Broward Boulevard, Suite 2100
Southlake, Texas 76092 Fort Lauderdale, FL 33394
CUSTODIAN DISTRIBUTOR
Firstar Bank, N.A. AmeriPrime Financial Securities, Inc.
425 Walnut Street 1793 Kingswood Drive, Suite 200
Cincinnati, Ohio 45202 Southlake, Texas 76092
TRANSFER AGENT (ALL PURCHASES AND INDEPENDENT AUDITORS
ALL REDEMPTION REQUESTS) McCurdy & Associates CPA's, Inc.
Unified Fund Services, Inc. 27955 Clemens Road
431 North Pennsylvania Street Westlake, Ohio 44145
Indianapolis, Indiana 46204
</TABLE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by a
Fund. This Prospectus does not constitute an offer by any of the Funds to sell
its shares in any state to any person to whom it is unlawful to make such offer
in such state.
<PAGE>
TABLE OF CONTENTS PAGE
SUMMARY OF FUND EXPENSES.......................................................2
THE FUNDS......................................................................3
INVESTMENT OBJECTIVE AND STRATEGIES............................................3
HOW TO INVEST IN THE FUNDS.....................................................6
EXCHANGE PRIVILEGE.............................................................8
HOW TO REDEEM SHARES...........................................................9
SHARE PRICE CALCULATION.......................................................10
DIVIDENDS AND DISTRIBUTIONS...................................................10
TAXES.........................................................................10
OPERATION OF THE FUNDS........................................................11
INVESTMENT POLICIES AND TECHNIQUES AND RISK CONSIDERATIONS....................12
GENERAL INFORMATION...........................................................15
PERFORMANCE INFORMATION.......................................................16
SHEPHERD VALUES FUNDS
Shepherd Values Market Neutral Fund
Shepherd Values Growth Fund
Shepherd Values VIF Equity Fund
Shepherd Values Small-Cap Fund
Shepherd Values International Fund
Shepherd Values Fixed Income Fund
STATEMENT OF ADDITIONAL INFORMATION
September 21, 1999
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of Shepherd Values Funds dated
September 21, 1999. A copy of the Prospectus can be obtained by writing the
Transfer Agent at 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or
by calling 1-877-636-2766
TABLE OF CONTENTS PAGE
DESCRIPTION OF THE TRUST.......................................................1
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS.................................................................1
INVESTMENT LIMITATIONS.........................................................5
THE INVESTMENT ADVISORS AND SUB-ADVISORS.......................................8
TRUSTEES AND OFFICERS..........................................................8
PORTFOLIO TRANSACTIONS AND BROKERAGE...........................................9
DETERMINATION OF SHARE PRICE..................................................10
INVESTMENT PERFORMANCE........................................................11
CUSTODIAN.....................................................................12
TRANSFER AGENT................................................................12
ACCOUNTANTS...................................................................12
DISTRIBUTOR...................................................................12
<PAGE>
DESCRIPTION OF THE TRUST
The Shepherd Values Market Neutral Fund, Growth Fund, VIF Equity Fund,
Small-Cap Fund, Fixed Income Fund and International Fund (each a "Fund" or
collectively, the "Funds") were organized as series of AmeriPrime Funds (the
"Trust"). The Trust is an open-end investment company established under the laws
of Ohio by an Agreement and Declaration of Trust dated August 8, 1995 (the
"Trust Agreement"). The Trust Agreement permits the Trustees to issue an
unlimited number of shares of beneficial interest of separate series without par
value. Each Fund is one of a series of funds currently authorized by the
Trustees.
Each share of a series represents an equal proportionate interest in
the assets and liabilities belonging to that series with each other share of
that series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will been titled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
Prior to the public offering of the Funds, AmeriPrime Financial
Securities, Inc. (the Fund's Distributor), 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, purchased all of the outstanding shares of each Fund and
may be deemed to control the Funds. After the public offering commences, it is
anticipated that AmeriPrime Financial Securities, Inc. will no longer control
the Funds. As the controlling shareholder, AmeriPrime Financial Securities, Inc.
would control the outcome of any proposal submitted to the shareholders for
approval, including changes to a Fund's fundamental policies or the terms of the
management agreement with the Fund's adviser.
For information concerning the purchase and redemption of shares of the
Fund, see "How to Invest in the Fund" and "How to Redeem Shares" in the Fund's
Prospectus. For a description of the methods used to determine the share price
and value of the Fund's assets, see "Share Price Calculation" in the Fund's
Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Fund may make and some of the techniques it may use, as
described in the Prospectus (see "Investment Objectives and Strategies" and
"Investment Policies and Techniques and Risk Considerations").
A. American Depository Receipts (ADRs). ADRs are subject to risks
similar to those associated with direct investment in foreign securities. For
example, there may be less information publicly available about a foreign
company then about a U.S. company, and foreign companies are not generally
subject to accounting, auditing and financial reporting standards and practices
comparable to those in the U.S. Other risks associated with investments in
foreign securities include changes in restrictions on foreign currency
transactions and rates of exchanges, changes in the administrations or economic
and monetary policies of foreign governments, the imposition of exchange control
regulations, the possibility of expropriation decrees and other adverse foreign
governmental action, the imposition of foreign taxes, less liquid markets, less
government supervision of exchanges, brokers and issuers, difficulty in
enforcing contractual obligations, delays in settlement of securities
transactions and greater price volatility. In addition, investing in foreign
securities will generally result in higher commissions than investing in similar
domestic securities. The Funds have no present intention to invest in
unsponsored ADRs.
B. Option Transactions. The Funds may engage in option transactions
involving individual stocks as well as stock indexes. An option involves either
(a) the right or the obligation to buy or sell a specific instrument at a
specific price until the expiration date of the option, or (b) the right to
receive payments or the obligation to make payments representing the difference
between the closing price of a market index and the exercise price of the option
expressed in dollars times a specified multiple until the expiration date of the
option. Options are sold (written) on securities and market indexes. The
purchaser of an option on a security pays the seller (the writer) a premium for
the right granted but is not obligated to buy or sell the underlying security.
The purchaser of an option on a market index pays the seller a premium for the
right granted, and in return the seller of such an option is obligated to make
the payment. A writer of an option may terminate the obligation prior to
expiration of the option by making an offsetting purchase of an identical
option. Options are traded on organized exchanges and in the over-the-counter
market. Call options on securities which the Funds sell (write) will be covered
or secured, which means that the Fund will own the underlying security in the
case of a call option. When the Funds write options, they may be required to
maintain a margin account, to pledge the underlying securities or U.S.
government obligations or to deposit assets in escrow with the Custodian. The
Funds may also utilize spreads and straddle strategies. A spread is the
difference in price resulting from a combination of put and call options within
the same class on the same underlying security. A straddle strategy consists of
an equal number of put and call options on the same underlying stock, stock
index, or commodity future at the same strike price and maturity date.
The purchase and writing of options involves certain risks. The
purchase of options limits a Fund's potential loss to the amount of the premium
paid and can afford a Fund the opportunity to profit from favorable movements in
the price of an underlying security to a greater extent than if transactions
were effected in the security directly. However, the purchase of an option could
result in a Fund losing a greater percentage of its investment than if the
transaction were effected directly. When a Fund writes a covered call option, it
will receive a premium, but it will give up the opportunity to profit from a
price increase in the underlying security above the exercise price as long as
its obligation as a writer continues, and it will retain the risk of loss should
the price of the security decline. In addition, there can be no assurance that a
Fund can effect a closing transaction on a particular option it has written.
Further, the total premium paid for any option may be lost if the Fund does not
exercise the option or, in the case of over-the-counter options, the writer does
not perform its obligations.
C. Real Estate Investment Trusts. A real estate investment trust
("REIT") is a corporation or business trust that invests substantially all of
its assets in interests in real estate. Equity REITs are those which purchase or
lease land and buildings and generate income primarily from rental income.
Equity REITs may also realize capital gains (or losses) when selling property
that has appreciated (or depreciated) in value. Mortgage REITs are those which
invest in real estate mortgages and generate income primarily from interest
payments on mortgage loans. Hydrid REITs generally invest in both real property
and mortgages. In addition, REITs are generally subject to risks associated with
direct ownership of real estate, such as decreases in real estate values or
fluctuations in rental income caused by a variety of factors, including
increases in interest rates, increases in property taxes and other operating
costs, casualty or condemnation losses, possible environmental liabilities and
changes in supply and demand for properties. Risks associated with REIT
investments include the fact that equity and mortgage REITs are dependent upon
specialized management skills and are not fully diversified. These
characteristics subject REITs to the risks associated with financing a limited
number of projects. They are also subject to heavy cash flow dependency,
defaults by borrowers, and self-liquidation. Additionally, equity REITs may be
affected by any changes in the value of the underlying property owned by the
trusts, and mortgage REITs may be affected by the quality of any credit
extended.
D. Foreign Securities. Foreign government obligations generally consist
of debt securities supported by national, state or provincial governments or
similar political units or governmental agencies. Such obligations may or may
not be backed by the national government's full faith and credit and general
taxing powers. Investments in foreign securities also include obligations issued
by international organizations. International organizations include entities
designated or supported by governmental entities to promote economic
reconstruction or development as well as international banking institutions and
related government agencies. Examples are the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank. In
addition, investments in foreign securities may include debt securities
denominated in multinational currency units of an issuer (including
international issuers). An example of a multinational currency unit is the
European Currency Unit. A European Currency Unit represents specified amounts of
the currencies of certain member states of the European Economic Community, more
commonly known as the Common Market.
Purchases of foreign securities are usually made in foreign currencies
and, as a result, a Fund may incur currency conversion costs and may be affected
favorably or unfavorably by changes in the value of foreign currencies against
the U.S. dollar. In addition, there may be less information publicly available
about a foreign company then about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Other risks associated with
investments in foreign securities include changes in restrictions on foreign
currency transactions and rates of exchanges, changes in the administrations or
economic and monetary policies of foreign governments, the imposition of
exchange control regulations, the possibility of expropriation decrees and other
adverse foreign governmental action, the imposition of foreign taxes, less
liquid markets, less government supervision of exchanges, brokers and issuers,
difficulty in enforcing contractual obligations, delays in settlement of
securities transactions and greater price volatility. In addition, investing in
foreign securities will generally result in higher commissions than investing in
similar domestic securities.
E. Financial Services Industry Obligations.
(1) Certificate of Deposit. Certificates of deposit are
negotiable certificates evidencing the indebtedness of a commercial
bank or a savings and loan association to repay funds deposited with it
for a definite period of time (usually from fourteen days to one year)
at a stated or variable interest rate.
(2) Time Deposits. Time deposits are non-negotiable deposits
maintained in a banking institution or a savings and loan association
for a specified period of time at a stated interest rate.
(3) Bankers' Acceptances. Bankers' acceptances are credit
instruments evidencing the obligation of a bank to pay a draft which
has been drawn on it by a customer, which instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of
the instrument upon maturity.
F. Zero Coupon Securities Zero coupon securities are debt securities
issued or sold at a discount from their face value which do not entitle the
holder to any periodic payment of interest prior to maturity or a specified
redemption date (or cash payment date). These involve risks that are similar to
those of other debt securities, although they may be more volatile, and certain
zero coupon securities move in the same direction as interest rates. The amount
of the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and perceived
credit quality of the issuer. Zero coupon securities also may take the form of
debt securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interests in such
stripped debt obligations and coupons. The market prices of zero coupon
securities generally are more volatile than the market prices of
interest-bearing securities and are likely to respond to a greater degree to
changes in interest rates than interest-bearing securities having similar
maturities and credit qualities.
G. Strips The Federal Reserve creates STRIPS (Separate Trading of
Registered Interest and Principal of Securities) by separating the coupon
payments and the principal payment from an outstanding Treasury security and
selling them as individual securities. To the extent a Fund purchases the
principal portion of the STRIP, the Fund will not receive regular interest
payments. Instead they are sold at a deep discount from their face value. A Fund
will accrue income on such STRIPS for tax and accounting purposes, in accordance
with applicable law, which income is distributable to shareholders. Because no
cash is received at the time such income is accrued, a Fund may be required to
liquidate other Fund securities to satisfy its distribution obligations. Because
the principal portion of the STRIP does not pay current income, its price can be
very volatile when interest rates change. In calculating its dividend, a Fund
takes into account as income a portion of the difference between the principal
portion of the STRIP's purchase price and its face value.
H. Floating Rate, Inverse Floating Rate, and Index Obligations. The
Fixed Income Fund and the Growth Fund may invest in debt securities with
interest payments or maturity values that are not fixed, but float in
conjunction with (or inversely to) an underlying index or price. These
securities may be backed by U.S. Government or corporate issuers, or by
collateral such as mortgages. The indices and prices upon which such securities
can be based include interest rates, currency rates and commodities prices.
However, the Funds will not invest in any instrument whose value is computed
based on a multiple of the change in price or value of an asset or an index of
or relating to assets in which the Fund cannot or will not invest.
Floating rate securities pay interest according to a coupon which is
reset periodically. The reset mechanism may be formula based, or reflect the
passing through of floating interest payments on an underlying collateral pool.
The coupon is usually reset daily, weekly, monthly, quarterly or semi-annually,
but other schedules are possible. Floating rate obligations generally exhibit a
low price volatility for a given stated maturity or average life because their
coupons adjust with changes in interest rates. If their underlying index is not
an interest rate, or the reset mechanism lags the movement of rates in the
current market, greater price volatility may be experienced.
Inverse floating rate securities are similar to floating rate
securities except that their coupon payments vary inversely with an underlying
index by use of a formula. Inverse floating rate securities tend to exhibit
greater price volatility than other floating rate securities. Because the
changes in the coupon are usually negatively correlated with changes in overall
interest rates, interest rate risk and price volatility on inverse floating rate
obligations can be high, especially if leverage is used in the formula. Index
securities pay a fixed rate of interest, but have a maturity value that varies
by formula, so that when the obligation matures, a gain or loss is realized. The
risk of index obligations depends on the volatility of the underlying index, the
coupon payment and the maturity of the obligation.
I. Mortgage-Backed Securities. Mortgage-backed securities represent
participation interests in pools of one-to-four family residential mortgage
loans originated by private mortgage originators. Traditionally, residential
mortgage-backed securities have been issued by governmental agencies such as
Fannie Mae, Freddie Mac and Ginnie Mae. The Fund intends to invest only in those
securities guaranteed by governmental agencies. The Fund does not intend to
invest in commercial mortgage-backed securities. Non-governmental entities that
have issued or sponsored residential mortgage-backed securities offerings
include savings and loan associations, mortgage banks, insurance companies,
investment banks and special purpose subsidiaries of the foregoing.
While residential loans do not typically have prepayment penalties or
restrictions, they are often structured so that subordinated classes may be
locked out of prepayments for a period of time. However, in a period of
extremely rapid prepayments, during which senior classes may be retired faster
than expected, the subordinated classes may receive unscheduled payments of
principal and would have average lives that, while longer than the average lives
of the senior classes, would be shorter than originally expected. The types of
residential mortgage-backed securities which the Fund may invest in may include
the following:
J. Repurchase Agreements. A repurchase agreement is a short-term
investment in which the purchaser (i.e., a Fund) acquires ownership of a U.S.
Government obligation (which may be of any maturity) and the seller agrees to
repurchase the obligation at a future time at a set price, thereby determining
the yield during the purchaser's holding period (usually not more than seven
days from the date of purchase). Any repurchase transaction in which a Fund
engages will require full collateralization of the seller's obligation during
the entire term of the repurchase agreement. In the event of a bankruptcy or
other default of the seller, a Fund could experience both delays in liquidating
the underlying security and losses in value. However, each Fund intends to enter
into repurchase agreements only with the Custodian, other banks with assets of
$1 billion or more and registered securities dealers determined by the Fund's
advisor to be creditworthy. The Fund's advisor monitors the creditworthiness of
the banks and securities dealers with which a Fund engages in repurchase
transactions.
K. Illiquid Securities. Illiquid securities generally include
securities which cannot be disposed of promptly and in the ordinary course of
business without taking a reduced price. Securities may be illiquid due to
contractual or legal restrictions on resale or lack of a ready market. The
following securities are considered to be illiquid: repurchase agreements
maturing in more than seven days, nonpublicly offered securities and restricted
securities. Restricted securities are securities the resale of which is subject
to legal or contractual restrictions. Restricted securities may be sold only in
privately negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933 or pursuant
to Rule 144 or Rule 144A promulgated under such Act. Where registration is
required, the Fund may be obligated to pay all or part of the registration
expense, and a considerable period may elapse between the time of the decision
to sell and the time such security may be sold under an effective registration
statement. If during such a period adverse market conditions were to develop,
the Fund might obtain a less favorable price than the price it could have
obtained when it decided to sell. None of the Funds will invest more than 15% of
its net assets in illiquid securities.
L. Borrowing. Each Fund may borrow amounts up to 5% of its net assets
to meet redemption requests. Because each Fund's investments will fluctuate in
value, whereas the interest obligations on borrowed funds may be fixed, during
times of borrowing, a Fund's net asset value may tend to increase more then its
investments increase in value, and decrease more when its investments decrease
in value. In addition, interest costs on borrowings may fluctuate with changing
market interest rates and may partially offset or exceed the return earned on
the borrowed funds. Also, during times of borrowing under adverse market
conditions, a Fund might have to sell portfolio securities to meet interest or
principal payments at a time when fundamental investment considerations would
not favor such sales.
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to each Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of each Fund. As used in the Prospectus and
the Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. The Funds will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. The Funds will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. The Funds will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. The Funds will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. No Fund will invest 25% or more of its total assets
in a particular industry. This limitation is not applicable to investments in
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities or repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the Trust
with respect to the Fund and are Non-Fundamental (see "Investment Restrictions"
above).
1. Pledging. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. Neither Fund will purchase any security while borrowings
(including reverse repurchase agreements) representing more than one third of
its total assets are outstanding.
3. Margin Purchases. Neither Fund will purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by a Fund for the clearance of purchases and sales or redemption
of securities, or to arrangements with respect to transactions involving
options, futures contracts, short sales and other permitted investments and
techniques.
4. Options. Neither Fund will purchase or sell puts, calls, options or
straddles except as described in the Funds' Prospectus and Statement of
Additional Information.
5. Illiquid Investments. Neither Fund will invest more than 15% of its
net assets in securities for which there are legal or contractual restrictions
on resale and other illiquid securities.
6. Loans of Portfolio Securities. Neither Fund will make loans of
portfolio securities.
THE INVESTMENT ADVISORS AND SUB-ADVISORS
The Advisors. The investment advisor to the Shepherd Values Growth Fund
and Shepherd Values Market Neutral Fund is Cornerstone Capital Management,
Inc,102 South Tajon, Suite 430, Colorado Springs, CO 80903 ("Cornerstone").
Under the terms of the management agreements (the "Agreement"),
Cornerstone manages each Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of each Fund except brokerage, taxes,
borrowing costs (such as (a) interest and (b) dividend expenses on securities
sold short), fees and expenses of the non-interested person trustees and
extraordinary expenses. As compensation for its management services and
agreement to pay the Fund's expenses, each Fund is obligated to pay Cornerstone
a fee (based on average daily net assets) computed and accrued daily and paid
monthly at the following annual rates: Market Neutral Fund, 2.25%; Growth Fund,
1.75%.
The investment advisor to the Shepherd Values VIF Equity Fund,
Small-Cap Fund, International Fund and Fixed Income Fund is Shepherd Advisory
Services, Inc., 102 South Tajon, Suite 430,Colorado Springs, CO 80903
("Shepherd").
Under the terms of the management agreements (the "Agreement"),
Shepherd manages each Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of each Fund except brokerage, taxes,
borrowing costs (such as (a) interest and (b) dividend expenses on securities
sold short), fees and expenses of the non-interested person trustees and
extraordinary expenses. As compensation for its management services and
agreement to pay the Fund's expenses, each Fund is obligated to pay Shepherd a
fee (based on average daily net assets) computed and accrued daily and paid
monthly at the following annual rates: 1.75%; VIF Equity Fund, 1.00%; Small-Cap
Fund, 1.80%; Fixed Income Fund, 1.35%; International Fund, 1.95%.
The Shepherd retains the right to use the name "Shepherd Values" in
connection with another investment company or business enterprise with which
Shepherd is or may become associated. The Trust's right to use the name
"Shepherd Values" automatically ceases ninety days after termination of the
Agreement and may be withdrawn by Shepherd on ninety days written notice.
Each Fund's advisor may make payments to banks or other financial
institutions that provide shareholder services and administer shareholder
accounts. The Glass-Steagall Act prohibits banks from engaging in the business
of underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Fund believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Fund believes that there would be no material impact on the Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. The Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Fund, no preference will be shown for such
securities.
The Sub-Advisors. Templeton Portfolio Advisory, a division of
Templeton/Franklin Investment Services, Inc. ("TFIS"), is the sub-advisor to the
International Fund. Under the terms of the sub-advisory agreement, Templeton
Portfolio Advisory receives a fee from the Fund's advisor computed and accrued
daily and paid monthly at an annual rate of 0.75% of the average daily net
assets of the International Fund.
Nicholas-Applegate Capital Management ("Nicholas-Applegate") is the
sub-advisor to the Small-Cap Fund. Under the sub-advisory agreement,
Nicholas-Applegate receives a fee from the Fund's advisor computed and accrued
daily and paid monthly at an annual rate of 0.65% of the average daily net
assets of the Small-Cap Fund.
Potomac Asset Management Company, Inc. ("Potomac") is the sub-advisor to
the Fixed Income Fund. Under the terms of the sub-advisory agreement, Potomac
receives a fee from the Fund's advisor computed and accrued daily and paid
monthly at an annual rate of 0.35% of the average daily net assets of the Fixed
Income Fund
Subject always to the control of the Board of Trustees, each
sub-advisor, at its expense, furnishes continuously an investment program for
the Fund. or Funds for which it acts as sub-advisor Each sub-advisor must use
its best judgement to make investment decisions, place all orders for the
purchase and sale of portfolio securities and execute all agreements related
thereto. Each sub-advisor makes its officers and employees available to the
Fund's advisor from time to time at reasonable times to review investment
policies and to consult with the Advisor regarding the investment affairs of the
applicable Fund. Each sub-advisor maintains books and records with respect to
the securities transactions and renders to the Fund's advisor such periodic and
special reports as the advisor or the Trustees may request. Each sub-advisor
pays all expenses incurred by it in connection with its activities under the
sub-advisory agreement other than the cost (including taxes and brokerage
commissions, if any) of securities and investments purchased for a Fund.
<PAGE>
TRUSTEES AND OFFICERS
The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<S> <C> <C>
==================================== ---------------- ======================================================================
NAME, AGE AND ADDRESS POSITION PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
==================================== ---------------- ======================================================================
*Kenneth D. Trumpfheller President and President, Treasurer and Secretary of AmeriPrime Financial Services,
Age: 40 Trustee Inc., the Fund's administrator, and AmeriPrime Financial Securities,
1793 Kingswood Drive Inc., the Fund's distributor, since 1994. President and Trustee of
Suite 200 AmeriPrime Advisors Trust and AmeriPrime Insurance Trust; Prior to
Southlake, Texas 76092 December, 1994, a senior client executive with SEI Financial
Services.
==================================== ---------------- ======================================================================
Paul S. Bellany Secretary, Secretary, Treasurer and Chief Financial Officer of AmeriPrime
Age: 39 Treasurer Financial Services, Inc. and AmeriPrime Financial Securities, Inc.;
1793 Kingswood Drive Secretary and Treasurer of AmeriPrime Advisors Trust and AmeriPrime
Suite 200 Insurance Trust; various positions with Fidelity Investments from
Southlake, Texas 76092 1987 to 1998; most recently Fund Reporting Unit Manager.
==================================== ---------------- ======================================================================
Steve L. Cobb Trustee President of Chandler Engineering Company, L.L.C., oil and gas
Age: 41 services company; various positions with Carbo Ceramics, Inc., oil
2001 N. Indianwood Ave. field manufacturing/supply company, from 1984 to 1997, most recently
Broken Arrow, OK 74012 Vice President of Marketing.
==================================== ================ ======================================================================
Gary E. Hippenstiel Trustee Director, Vice President and Chief Investment Officer of Legacy
Age: 51 Trust Company since 1992; President and Director of Heritage Trust
600 Jefferson Street Company from 1994-1996; Vice President and Manager of Investments of
Suite 350 Kanaly Trust Company from 1988 to 1992.
Houston, TX 77063
==================================== ================ ======================================================================
</TABLE>
<PAGE>
The compensation paid to the Trustees of the Trust for the fiscal year
ended October 31, 1998 is set forth in the following table. Trustee fees are
Trust expenses and each series of the Trust pays a portion of the Trustee fees.
<TABLE>
<S> <C> <C>
==================================== ----------------------- ==================================
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST (THE TRUST IS
NAME FROM TRUST NOT IN A FUND COMPLEX)
==================================== ----------------------- ==================================
Kenneth D. Trumpfheller 0 0
==================================== ----------------------- ==================================
Steve L. Cobb $4,000 $4,000
==================================== ======================= ==================================
Gary E. Hippenstiel $4,000 $4,000
==================================== ======================= ==================================
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
each Fund's advisor is responsible for each Fund's portfolio decisions and the
placing of each Fund's portfolio transactions. In placing portfolio
transactions, each Fund's advisor seeks the best qualitative execution for each
Fund, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), the execution capability, financial
responsibility and responsiveness of the broker or dealer and the brokerage and
research services provided by the broker or dealer. The Fund's advisor generally
seeks favorable prices and commission rates that are reasonable in relation to
the benefits received.
Each Fund's advisor is specifically authorized to select brokers or
dealers who also provide brokerage and research services to the Funds and/or the
other accounts over which the Fund's advisor exercises investment discretion and
to pay such brokers or dealers a commission in excess of the commission another
broker or dealer would charge if the Fund's advisor determines in good faith
that the commission is reasonable in relation to the value of the brokerage and
research services provided. The determination may be viewed in terms of a
particular transaction or the Fund's advisor's overall responsibilities with
respect to the Trust and to other accounts over which it exercises investment
discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Funds effect securities
transactions may also be used by the Fund's advisor in servicing all of its
accounts. Similarly, research and information provided by brokers or dealers
serving other clients may be useful to the Fund's advisor in connection with its
services to the Funds. Although research services and other information are
useful to the Funds and the Fund's advisor, it is not possible to place a dollar
value on the research and other information received. It is the opinion of the
Board of Trustees and the Fund's advisor that the review and study of the
research and other information will not reduce the overall cost to the Fund's
advisor of performing its duties to the Funds under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
When a Portfolio and another of the advisor's clients seek to purchase
or sell the same security at or about the same time, the advisor may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for the Portfolios because of the increased volume of the
transaction. If the entire blocked order is not filled, the Portfolio may not be
able to acquire as large a position in such security as it desires or it may
have to pay a higher price for the security. Similarly, the Portfolio may not be
able to obtain as large an execution of an order to sell or as high a price for
any particular portfolio security if the other client desires to sell the same
portfolio security at the same time. In the event that the entire blocked order
is not filled, the purchase or sale will normally be allocated on a pro rata
basis. The allocation may be adjusted by the Fund's advisor, taking into account
such factors as the size of the individual orders and transaction costs, when
the Fund's advisor believes an adjustment is reasonable.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of each Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Share Price
Calculation" in the Prospectus.
INVESTMENT PERFORMANCE
"Average annual total return," as defined by the Securities and
Exchange Commission, is computed by finding the average annual compounded rates
of return for the period indicated that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
applicable period of the hypothetical $1,000
investment made at the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
A Fund's "yield" is determined in accordance with the method defined by
the Securities and Exchange Commission. A yield quotation is based on a 30 day
(or one month) period and is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
Yield = 2[(a-b/cd+1)6-1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
Solely for the purpose of computing yield, dividend income recognized by
accruing 1/360 of the stated dividend rate of the security each day that the
Fund owns the security. Generally, interest earned (for the purpose of "a"
above) on debt obligations is computed by reference to the yield to maturity of
each obligation held based on the market value of the obligation (including
actual accrued interest) at the close of business on the last business day prior
to the start of the 30-day (or one month) period for which yield is being
calculated, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest). With respect to the treatment of
discount and premium on mortgage or other receivable-backed obligations which
are expected to be subject to monthly paydowns of principal and interest, gain
or loss attributable to actual monthly paydowns is accounted for as an increase
or decrease to interest income during the period and discount or premium on the
remaining security is not amortized.
Each Fund may also advertise performance information (a
"non-standardized quotation") which is calculated differently from average
annual total return. A non-standardized quotation of total return may be a
cumulative return which measures the percentage change in the value of an
account between the beginning and end of a period, assuming no activity in the
account other than reinvestment of dividends and capital gains distributions. A
non-standardized quotation may also be an average annual compounded rate of
return over a specified period, which may be a period different from those
specified for average annual total return. In addition, a non-standardized
quotation may be an indication of the value of a $10,000 investment (made on the
date of the initial public offering of the Fund's shares) as of the end of a
specified period. These non-standardized quotations do not include the effect of
the applicable sales load which, if included, would reduce the quoted
performance. A non-standardized quotation of total return will always be
accompanied by the Fund's average annual total return as described above.
Each Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with each Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of any of the
Funds may be compared to indices of broad groups of unmanaged securities
considered to be representative of or similar to the portfolio holdings of the
Funds or considered to be representative of the stock market in general. The
Funds may use the Standard & Poor's 500 Stock Index, the NASDAQ Composite Index,
the VIF 400 Values Index or the Dow Jones Industrial Average.
In addition, the performance of any of the Funds may be compared to
other groups of mutual funds tracked by any widely used independent research
firm which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of any of the Funds. Performance rankings and
ratings reported periodically in national financial publications such as
Barron's and Fortune also may be used.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
Custodian of the Funds' investments. The Custodian acts as the Funds'
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Funds' request and
maintains records in connection with its duties.
TRANSFER AGENT
Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as the Funds' transfer agent and, in such
capacity, maintains the records of each shareholder's account, answers
shareholders' Inquiries concerning their accounts, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and performs other accounting and shareholder service functions. In
addition, Unified provides the Funds with fund accounting services, which
includes certain monthly reports, record-keeping and other management-related
services. For its services as fund accountant, Unified receives an annual fee
from the Fund's advisor equal to 0.0275% of the Funds' assets up to $100 million
(subject to various monthly minimum fees, the maximum being $2,000 per month for
assets of $20 to $100 million).
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road, Westlake,
Ohio 44145, has been selected as independent public accountants for the Trust
for the fiscal year ending October 31, 1999. McCurdy & Associates performs an
annual audit of the Funds' financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, is the exclusive agent for distribution of shares of the
Funds. Kenneth D. Trumpfheller, a Trustee and officer of the Trust, is an
affiliate of the Distributor. The Distributor is obligated to sell the shares of
the Funds on a best efforts basis only against purchase orders for the shares.
Shares of the Funds are offered to the public on a continuous basis.
