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ANNUAL REPORT
Contrarian Value Fund
January 31, 2000
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Dear Fellow Shareholders:
For the period February 10, 1999, the Fund's inception date, through the
year ending January 31, 2000, the Fund's shares were down 24.37% verses a gain
of 13.93% for the S&P 500 during the same period.
It was a difficult year overall for the Fund. The Fund's share price peaked
on May 21, 1999 at $11.16 and from there it seemed to be all downhill. Beginning
in June, the Fund's shares experienced eight straight months of decline ending
January 31, 2000 at $7.49. To say we are disappointed with the Fund's results
thus far goes without saying.
[GRAPH]
The market rewarded large-cap high- P/E stocks all year. The larger the
market cap and higher the P/E the better they performed. The dominance of growth
stocks over value stocks held throughout the year. Will this trend continue? I
don't know. However, what I have observed is that the money seems to be
continuing to flow out of value stocks and into growth stocks causing value
stocks to continue to get cheaper with relationship to P/E ratios. For example,
if a stock historically traded at 20x earnings, then starts trading at 15x
earnings, we would consider the stock undervalued. However, we might now find
the stock trading at 12x earnings. So when does it become a good value. There in
lies the value, and challenge of stock selection.
With the prospect of the Federal Reserve increasing interest rates this
year and the increasing volatility we have seen in the markets we approach the
new year with caution while remaining optimistic that over the long term our
strategies may yield more promising results.
As of January 31, 2000 the fund's portfolio consisted of 27 stocks making
up approximately 71% of the fund's $551,018 assets. The remaining 29% of assets
were held either in cash or cash equivalents. A complete list of the fund's
holdings as of January 31, 2000 can be seen on the accompanying Schedule of
Investments.
We appreciate your patience and confidence and want to thank you for your
continued support.
Sincerely,
Mark H. Baumann, CFA, CFP
Chairman
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Contrarian Value Fund
Schedule of Investments
January 31, 2000
Shares/Principal Amount Market Value % of Assets
COMMON STOCKS
Cigarettes
700 Philip Morris Companies Inc. 14,656 2.66%
Department Stores
Dillard Dept. Stores Inc. Cl A 9,594 1.74%
Drug Stores and Proprietary Stores
Rite Aid 21,188 3.85%
Electronic Computers
Compaq Computer Corp. 16,425
Int'l Business Machines Inc. 11,219
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27,644 5.02%
Food Like Products
Archer Daniels-Midland Co. 23,500 4.26%
Frozen Specialties, Nec
Conagra Inc 10,688 1.94%
Funeral Services and Crematories
Service Corp. Int'l. * 13,688 2.48%
Games, Toys, and Children's Vehicles
Mattel Inc. 20,875 3.79%
Hotels and Motels
Hilton Hotels Corp. 25,312 4.59%
Packaging Paper and Plastics Film, Coated and Laminated
Pactiv Corp* 8,325
Tenneco Automotive 15,900
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24,225 4.40%
Petroleum Refining
Ashland Inc. 13,025 2.36%
Travel Trailers and Campers
Fleetwood Enterprises 8,156 1.48%
Pharmaceutical Preparations
ALZA Corp. Cl. A.* 10,706 1.94%
Telephone Communications
American Telephone & Telegraph 26,375 4.79%
Fire, Marine, and Casualty Insurance
Berkshire Hathaway Class B* 24,690 4.48%
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Surgical and Medical Instruments and Apparatus
Boston Scientific Corp.* 8,300 1.50%
Savings Institutions, Federally Chartered
Commercial Federal 14,500 2.63%
Specialty Outpatient Facilities, Nec
HEALTHSOUTH Corp.* 8,250 1.50%
Truck Trailers
Navistar Intl Corp. New* 9,828 1.78%
Stationery Stores
Office Depot Inc.* 10,062 1.83%
Delivery services, Mail
United Parcel Services 10,412 1.89%
Computer Integrated Systems Design
WEBB Interactive * 16,400 2.98%
Motion Picture and Video Tape Production
Time Warner Inc. 11,991 2.18%
Refuse Systems
Waste Management 8,750 1.59%
Total for Common Stock 372,815 67.66%
Unit Investment Trust
S&P 500 Depositary Receipts 20,944 3.80%
Total Investments (cost $473,737) 393,759 71.46%
Other Assets Less Liabilities 157,259 28.54%
Net Assets 551,018 100.00%
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Contrarian Value Fund
Statement of Assets and Liabilities
January 31, 2000
Assets:
Investment Securities at Market Value $ 393,759
(Identified Cost - 473,737)
Cash 158,379
Receivables:
Dividends and Interest 700
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Total Assets 552,838
Liabilities
Accrued Expenses 1,820
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Total Liabilities 1,820
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Net Assets $ 551,018
Net Assets Consist of:
Capital Paid In 744,715
Accumulated Undistributed Net Investment Income 220
Accumulated Realized Gain (Loss) on Investments - Net (113,939)
Unrealized Depreciation in Value
of Investments Based on Identified Cost - Net (79,978)
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Net Assets, for 73,590 Shares Outstanding $ 551,018
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Net Asset Value and Redemption Price
Per Share ($551,018/73,590 shares) 7.49
Offering Price Per Share 7.49
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Contrarian Value Fund
Statement of Operations
For the period of Feb 10, 1999 (commencement of operations)
through Jan 31, 2000
Investment Income:
Dividends 8,678
Interest 8,524
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Total Investment Income 17,202
Expenses
Management Fees (Note 2) 7,902
Administrative Fees 3,161
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Total Expenses 11,063
Net Investment Income 6,139
Realized and Unrealized Gain (Loss) on Investments:
Realized Gain (Loss) on Investments (113,939)
Unrealized Appreciation (Depreciation) on Investments (79,978)
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Net Realized and Unrealized Gain (Loss) on Investments (193,917)
Net Increase (Decrease) in Net Assets from Operations (187,778)
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Contrarian Value Fund
Statement of Changes in Net Assets
2/10/1999*
to
1/31/00
From Operations:
Net Investment Income 6,139
Net Realized Gain (Loss) on Investments (113,939)
Net Unrealized Appreciation (Depreciation) (79,978)
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Increase (Decrease) in Net Assets from Operations (187,778)
From Distributions to Shareholders
Net Investment Income (5,919)
Net Realized Gain (Loss) from Security Transactions 0
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Net Increase (Decrease) from Distributions (5,919)
From Capital Share Transactions:
Proceeds From Sale of Shares 666,649
Shares Issued on Reinvestment of Dividends 5,919
Cost of Shares Redeemed (27,853)
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Net Increase from Shareholder Activity 644,715
Net Increase in Net Assets 451,018
Net Assets at Beginning of Period 100,000
Net Assets at End of Period (including accumulated undistributed net
investment income of $220) 551,018
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Share Transactions:
Issued 65,871
Reinvested 718
Redeemed (2,999)
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Net increase (decrease) in shares 63,590
Shares outstanding beginning of period 10,000
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Shares outstanding end of period 73,590
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*commencement of operations
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Contrarian Value Fund
Financial Highlights
Selected data for a share outstanding throughout the period: 02/10/1999**
to
1/31/00
Net Asset Value -
Beginning of Period 10.00
Net Investment Income 0.09
Net Gains or Losses on Securities
(realized and unrealized) (2.52)
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Total from Investment Operations (2.43)
Dividends
(from net investment income) (0.08)
Distributions (from capital gains) 0.00
Return of Capital 0.00
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Total Distributions (0.08)
Net Asset Value -
End of Period 7.49
Total Return -24.37%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 551
Ratio of Expenses to Average Net Assets * 1.75%
Ratio of Net Income to Average Net Assets * 0.98%
Portfolio Turnover Rate * 231.49%
* Annualized
** commencement of operations.
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1.)SIGNIFICANT ACCOUNTING POLICIES
Contrarian Value Fund (the "Fund") is a non-diversified series of Firstmark
Partners (the "Trust"), an open-end management investment company. The
Trust was organized in Delaware as a business trust and may offer shares of
beneficial interest in a number of separate series, each series
representing a distinct fund with its own investment objectives and
policies. At present, there is only one series authorized by the Trust,
which series has been designated as the Contrarian Value Fund. The Fund's
primary investment objective is to seek capital appreciation by primarily
investing in a core portfolio of 20-30 common stocks that the Fund's
adviser believes to be undervalued in the marketplace. Receipt of income is
a secondary objective, as some investments may yield dividends, interest or
other income. Significant accounting policies of the Fund are presented
below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments in securities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market System, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price at
the close of each business day. Short-term investments are valued at
amortized cost, which approximates market. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith pursuant to procedures established by the Board of
Directors.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service
when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data
processing techniques based on yield spreads relating to securities with
similar characteristics to determine prices for normal institutional-size
trading units of debt securities without regard to sale or bid prices. When
prices are not readily available from a pricing service, or when restricted
or illiquid securities are being valued, securities are valued at fair
value as determined in good faith by the Adviser, subject to review of the
Board of Trustees. Short term investments in fixed income securities with
maturities of less than 60 days when acquired, or which subsequently are
within 60 days of maturity, are valued by using the amortized cost method
of valuation, which the Board has determined will represent fair value.
SECURITY TRANSACTION TIMING:
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded as
earned. The Fund uses the identified cost basis in computing gain or loss
on sale of investment securities. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
REPURCHASE AGREEMENTS:
The Fund may enter into repurchase agreements with financial institutions
deemed to be creditworthy by Firstmark, the Fund's investment advisor,
under guidelines approved by the Trust's Board of Trustees, subject to the
seller's agreement to repurchase and the Funds' agreement to resell such
securities at a mutually agreed-upon date and price. Securities purchased
subject to repurchase agreements are deposited with the Funds' custodian
and pursuant to the terms of the repurchase agreement, must have an
aggregate market value greater than or equal to the repurchase price plus
accrued interest at all times. If the seller were to default on its
repurchase obligation or become insolvent, the Fund would suffer a losses
to the extent that the proceeds from a sale of the underlying portfolio
securities were less than the repurchase price under the agreement, or to
the extent that the disposition of such securities by the Fund was delayed
pending court action.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements of
the Internal Revenue Service. This Internal Revenue Service requirement may
cause an excess of distributions over the book year-end accumulated income.
In addition, it is the Fund's policy to distribute annually, after the end
of the fiscal year, any remaining net investment income and net realized
capital gains.
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ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2.)INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration
agreement with Firstock Financial Services, Inc. The Fund is authorized to
pay the Adviser a fee equal to an annual average rate of 1.25% for
investment adviser services and a fee equal to an annual average rate of
0.50% for administrative fees. As a result of the above calculation, for
the period of February 10, 1999 (commencement of operations) through
January 31, 2000, the advisor received management fees totaling $7,902 and
administrative fees totaling $3,161.
3.)RELATED PARTY TRANSACTIONS
The owner of Firstock Financial Services, Inc. is also a trustee of the
Contrarian Value Fund. This individual may receive benefits from any
management fee paid to the Advisor. Waterhouse Securities, Inc. provides
research and quotation services to the Fund at no charge due to an
arrangement with Firstock Financial Services, Inc., the Advisor. The
beneficial ownership either directly or indirectly, of more than 25% of the
voting securities of a Fund creates a presumption of control of the Fund,
under Section 2(a)(9) of the Investment Company Act of 1940. As of January
31, 2000, National Investor Services owned of record in aggregate more than
99% of the Fund.
4.)CAPITAL STOCK AND DISTRIBUTION
At January 31, 2000 an indefinite number of shares of capital stock ($.10
par value) were authorized, and paid-in capital amounted to $744,715.
5.)PURCHASES AND SALES OF SECURITIES
During the year ending January 31, 2000, purchases and sales of investment
securities other than U.S. Government obligations and short-term
investments aggregated $1,506,797 and $919,121 respectively. Purchases and
sales of U.S. Government obligations aggregated $0 and $0 respectively.
6.)SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at January
31, 2000 was the same as identified cost. At January 31, 2000, the
composition of unrealized appreciation (the excess of value over tax cost)
and depreciation (the excess of tax cost over value) was as follows:
Appreciation (Depreciation) Net Appreciation (Depreciation)
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10,519 (90,497) (79,978)
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Board of Trustees
Contrarian Value Fund:
In planning and performing our audit of the financial statements of Contrarian
Value Fund for the year ended January 31, 2000, we considered its internal
control structure, including procedures for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion on
the financial statements and to comply with the requirements of Form N-SAR, not
to provide assurance on the internal control structure.
The management of Contrarian Value Fund is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and transactions
are executed in accordance with management's authorization and recorded properly
to permit preparation of financial statements in conformity with generally
accepted accounting principles.
Because of inherent limitations in any internal control structure, errors or
irregularities may occur and may not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it may
become inadequate because of changes in conditions or that the effectiveness of
the design and operation may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
January 31, 2000.
This report is intended solely for the information and use of management and the
Securities and Exchange Commission.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
February 10, 2000
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Board of Trustees
Mark H. Baumann
Jane A. Baumann
John R. Wingender Jr.
Robin R. Richardson
Gary L. Teel
Investment Adviser
Firstock Financial Services, Inc.
808 south 74th Plaza, Suite #113
Omaha, Nebraska 68114-4666
Dividend Paying Agent,
Shareholders' Servicing Agent,
Transfer Agent
Mutual Shareholder Services
1301 E. 9th St., Suite 1005
Cleveland, Ohio 44114
Custodian
Fifth Third Bank
Mutual Fund Services
38 Fountain Square Plaza
MD 1090E5
Cincinnati, Ohio 45263
Counsel
Anderson, Berkshire, Lauritsen & Brower
8805 Indian Hills Dr., Suite.# 200
Omaha, Nebraska 68114
Independent Auditors
McCurdy & Associates CPA's, Inc.
27955 Clemens Rd
Westlake, Ohio 44145
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