PARAGON STRATEGIC ASCENT FUND
PARAGON DYNAMIC FORTRESS FUND
PROSPECTUS DATED JUNE 1, 2000
3651 N 100 E., Suite 275
Provo, UT 84604
(877)-726-4662
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.
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TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY...........................................................
STRATEGIC ASCENT FUND..................................................1
DYNAMIC FORTRESS FUND..................................................2
PAST PERFORMANCE.............................................................3
FEES AND EXPENSES OF INVESTING IN THE FUNDS..................................3
ADDITIONAL INFORMATION ABOUT THE FUNDS' STRATEGIES AND RISKS.................4
HOW TO BUY SHARES............................................................7
HOW TO REDEEM SHARES.........................................................9
DETERMINATION OF NET ASSET VALUE............................................10
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................................11
MANAGEMENT OF THE FUNDS.....................................................11
FOR MORE INFORMATION................................................BACK COVER
<PAGE>
RISK/RETURN SUMMARY
STRATEGIC ASCENT FUND
INVESTMENT OBJECTIVE
The investment objective of the Strategic Ascent Fund is long term growth of
capital.
PRINCIPAL STRATEGIES
The Fund seeks to achieve its objective by following an investment model with
two distinct components.
o The Fund will invest in equity securities of companies that the Fund's
adviser believes offer potential for long term growth. Equity securities in
which the Fund may invest will primarily consist of U.S. common stock and
exchange traded index products such as S & P Depositary Receipts (commonly
referred to as SPDRs).
o The Fund will sell short equity securities that the Fund's adviser believes
are overvalued in an effort to capture gains from a decline in those
securities and as a hedge against adverse market conditions. Short selling
means the Fund sells a security that it does not own, borrows the same
security from a broker or other institution to complete the sale, and buys
the same security at a later date to repay the lender. If the security is
overvalued, and the price declines before the Fund buys the security, the
Fund makes a profit. If the price of the security increases before the Fund
buys the security, the Fund loses money.
The Fund's adviser follows a dynamic model to allocate the Fund's portfolio
between equity securities it holds "long" and equity securities it sells short.
This dynamic allocation is based on the model's assessment of overall market
direction. The percentage of the Fund's portfolio hedged will therefore vary.
Under normal circumstances, at least 40% of the Fund's assets will be hedged by
investing in short positions. The Fund's portfolio could, at times, be fully
hedged.
PRINCIPAL RISKS OF INVESTING IN THE FUND
o MANAGEMENT RISK. The strategy used by the Fund's adviser may fail to achieve
the intended results and may entail more risk than other stock funds.
Although the Fund's adviser has been managing investment portfolios since
1986, the Fund has no investment history, and the adviser has no prior
experience managing the assets of a mutual fund.
o SHORT SALE RISK. 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
speculative and more risky than long positions (purchases). You should be
aware that any strategy that includes selling securities short can suffer
significant losses. Short selling will also result in higher transaction
costs (such as interest and dividends), and may result in higher taxes, which
reduce the Fund's return.
o HIGHER EXPENSES. The Fund will indirectly bear its proportionate share of any
fees and expenses paid by the index products in which it invests in addition
to the fees and expenses payable directly by the Fund. Therefore, the Fund
will incur higher expenses, many of which may be duplicative.
o VOLATILITY RISK. The equity securities in which Fund invests tend to
be more volatile than other investment choices.
o SECTOR RISK. The Fund's portfolio may at times focus on a limited number of
index products and can be subject to substantially more investment risk and
potential for volatility than a fund that is more diversified. For example,
if the Fund is heavily invested in a utility index product or a particular
country, any event that negatively affects the utility sector or that country
could cause the Fund to lose value.
o MARKET RISK. Overall stock market risks may also affect the value of the
Fund. Factors such as domestic economic growth and market conditions,
interest rate levels, and political events affect the securities markets.
o COMPANY RISK. The value of the Fund may decrease in response to the
activities and financial prospects of an individual company in the Fund's
portfolio.
o An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
o The Fund is not a complete investment program.
o As with any mutual fund investment, the Fund's returns will vary and you
could lose money.
<PAGE>
DYNAMIC FORTRESS FUND
The investment objective of the Dynamic Fortress Fund is long term growth of
capital and preservation of capital.
PRINCIPAL STRATEGIES
The Fund seeks to achieve its objective by investing in income producing debt
and equity securities, and selling securities short as a hedge against adverse
market conditions. The Fund's adviser follows a dynamic model that allocates the
Fund's portfolio among debt and equity asset classes and, within each class,
between securities it holds "long" and sells short, based on the model's
assessment of overall market direction.
o In the equity asset class, the Fund will primarily invest in utilities
stocks; real estate investment trusts (commonly referred to as REITs), and
exchange traded index products such as S & P Depositary Receipts (commonly
referred to as SPDRs).
o In the debt asset class, the Fund will primarily invest in bonds, notes,
domestic and foreign corporate and government securities, zero coupon bonds,
short term obligations (such as commercial paper) and closed-end bond funds.
The Fund invests in bonds of all investment grades, including a significant
proportion of its portfolio in high yield, non-investment grade bonds
commonly known as "junk bonds." The adviser anticipates the debt securities
in the Fund's portfolio will have an average duration of five years or less
when the model indicates that interest rates will rise and twenty to thirty
years when the model indicates that interest rates will decline.
Short selling means the Fund sells a security that it does not own, borrows the
same security from a broker or other institution to complete the sale, and buys
the same security at a later date to repay the lender. If the security is
overvalued, and the price declines before the Fund buys the security, the Fund
makes a profit. If the price of the security increases before the Fund buys the
security, the Fund loses money. Under normal circumstances, at least 50% of the
Fund's equity assets will be hedged by investing in short positions.
PRINCIPAL RISKS OF INVESTING IN THE FUND
o MANAGEMENT RISK. The strategy used by the Fund's adviser may fail to achieve
the intended results and may entail more risk than a bond fund. Although the
Fund's adviser has been managing investment portfolios since 1986, the Fund
has no investment history, and the adviser has no prior experience managing
the assets of a mutual fund.
o SHORT SALE RISK. 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
speculative and more risky than long positions (purchases). You should be
aware that any strategy that includes selling securities short can suffer
significant losses. Short selling will also result in higher transaction
costs (such as interest and dividends), and may result in higher taxes, which
reduce the Fund's return.
o HIGHER EXPENSES. The Fund will indirectly bear its proportionate share of any
fees and expenses paid by the index products in which it invests in addition
to the fees and expenses payable directly by the Fund. Therefore, the Fund
will incur higher expenses, many of which may be duplicative.
o INTEREST RATE RISK. The value of your investment may decrease when interest
rates rise. The Fund's exposure to interest rate risk (and the corresponding
effect on the Fund's share price) may be greater if the Fund invests a
significant proportion of its portfolio in lower quality junk bonds.
o DURATION RISK. Prices of fixed income securities with longer effective
maturities are more sensitive to interest rate changes than those with
shorter effective maturities. The issuer of the bond may not be able to make
interest and principal payments when due. Generally, the lower the credit
rating of a security, the greater the risk that the issuer will default on
its obligation. To the extent the Fund invests in junk bonds, the Fund is
subject to substantial credit risk.
o JUNK BOND RISK. Because the Fund invests in junk bonds, the Fund may be
subject to greater levels of interest rate, credit and liquidity risk than
funds that do not invest in such securities. If the Fund invests a
significant proportion of its portfolio in lower quality junk bonds, the
Fund's exposure to these risks is greater than some other junk bond funds and
the value of the Fund's shares could be more negatively affected.
o PREPAYMENT RISK: During periods of declining interest rates, prepayment of
bonds usually accelerates. Prepayment may shorten the effective maturities of
these securities and the Fund may have to reinvest at a lower interest rate.
o MARKET RISK. Overall stock market risks may also affect the value of the
Fund. Factors such as domestic economic growth and market conditions,
interest rate levels, and political events affect the securities markets.
o SECTOR RISK. To the extent the Fund is overweighted in the utilities or REIT
sectors, it will be affected by developments affecting that sector. The
utilities sector can be significantly affected by financing difficulties,
supply and demand of services or fuel, and natural resource conservation. The
REIT sector can be significantly affected by changing government regulations,
financing difficulties, changing demographic patterns, changes in real estate
values and fluctuations in rental incomes.
o COMPANY RISK. The value of the Fund may decrease in response to the
activities and financial prospects of an individual company in the Fund's
portfolio.
o VOLATILITY RISK. The equity securities in which Fund invests tend to
be more volatile than other investment choices.
o An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
o The Fund is not a complete investment program.
o As with any mutual fund investment, the Fund's returns will vary and you
could lose money.
PAST PERFORMANCE
Although past performance of a fund is no guarantee of how it will perform in
the future, historical performance may give you some indication of the risk of
investing in the fund because it demonstrates how its returns have varied over
time. The Bar Chart and Performance Table that would otherwise appear in this
prospectus have been omitted because each Fund is recently organized and has
less than one year of operations.
FEES AND EXPENSES OF THE FUNDS
The tables describe the fees and estimated expenses that you may pay if you buy
and hold shares of a Fund.
SHAREHOLDER FEES STRATEGIC DYNAMIC
ASCENT FUND FORTRESS FUND
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases NONE NONE
Maximum Deferred Sales Charge (Load) NONE NONE
Redemption Fee NONE NONE
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fee 2.25% 2.25%
Distribution and/or Service (12b-1) Fees 0.00% 0.00%
Other Expenses1 0.47% 0.81%
Total Annual Fund Operating Expenses 2 2.72% 3.06%
1 "Other Expenses" are based on estimated amounts for the current fiscal year
and include dividends on short sales which the adviser estimates will equal
0.47% (annualized) of the Strategic Ascent fund average net assets and 0.81%
(annualized) of the Dynamic Fortress Fund average net assets.
2 Absent dividends on short sales, Total Annual Fund Operating Expenses for
each Fund will be 2.25%.
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Example:
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated, reinvest dividends
and distributions, and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
STRATEGIC DYNAMIC
ASCENT FUND FORTRESS FUND
1 YEAR $279 $314
3 YEAR $855 $959
ADDITIONAL INFORMATION ABOUT THE FUNDS' STRATEGIES AND RISKS
STRATEGIC ASCENT FUND
The adviser uses its dynamic model to allocate the Fund's portfolio
between equity securities it holds "long" and equity securities it sells short.
The more confident the model is in the upward direction of the market, the lower
the Fund's exposure to short positions. Likewise, the less confident the model
is in the upward direction of the market, the greater the Fund's exposure to
short positions. Under normal circumstances, the percentage of the portfolio
long will vary between twenty and eighty percent, and the percentage short will
vary between twenty and fifty percent. Under normal circumstances, at least 40%
of the Fund's assets will be hedged by investing in short positions. The Fund's
portfolio could, at times, be fully hedged.
The adviser also uses its dynamic model to select the individual
securities for the Fund's portfolio. The adviser focuses its long positions on
countries, industries and companies whose securities are experiencing upward
price momentum (i.e., the stock price is increasing) and other positive
developments such as positive earnings surprises (i.e., announced earnings are
higher than analysts expected) and upward analyst earnings estimate revisions
(i.e., analysts have raised estimates for the company's earnings). The adviser
will focus its short positions on countries, industries and companies whose
securities are experiencing downward price momentum (i.e., the stock price is
declining) and other negative developments such as depressed earnings
expectations (i.e., projected earnings are lower than analysts expected). The
adviser's selection process is dynamic, so that as market conditions change, the
adviser will shift investments to other companies that may be in different
industries or countries. The adviser may also sell a security if the adviser
identifies a stock that it believes offers a better investment opportunity.
The Fund will invest in equity securities of companies that the Fund's
adviser believes offer potential for long term growth. Equity securities in
which the Fund may invest will primarily consist of U.S. common stock and
exchange traded index products such as S & P Depositary Receipts (commonly
referred to as SPDRs). 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. The Fund may
also invest in various sector index products such as the Basic Industries Select
Sector Index, Consumer Services Select Sector Index, Consumer Staples Select
Sector Index, Cyclical / Transportation Select Sector Index, Energy Select
Sector Index, Financial Select Sector Index, Industrial Select Sector Index,
Technology Select Sector Index, Utilities Select Sector Index. Additionally, the
Fund may invest in new exchange traded shares as they become available.
The Fund's portfolio may at times focus on a limited number of index
products and can be subject to substantially more investment risk and potential
for volatility than a fund that is more diversified. For example, if the Fund is
heavily invested in a utility index product or a particular country, any event
that negatively affects the utility sector or that country could cause the Fund
to lose value. It is not possible to predict the countries or sectors in which
the Fund may focus and, therefore, it is not possible to detail the risk factors
of particular countries or sectors that will be applicable to the Fund.
The Fund may invest up to 50% of its assets in foreign companies in the
world's developed and emerging markets by purchasing American Depositary
Receipts ("ADRs") and index products like World Equity Benchmark Shares
("WEBS"). An ADR is a U.S. dollar denominated certificate that evidences
ownership of shares of a foreign company. ADRs are alternatives to the direct
purchase of the underlying foreign stock. WEBS represent a broad portfolio of
publicly traded stocks in a selected country. Each WEBS Index Series seeks to
generate investment results that generally correspond to the market yield
performance of a given Morgan Stanley Capital International ("MSCI") Index. To
the extent the Fund invests in ADRs or foreign index products, the Fund could be
subject to greater risks because the Fund's performance may depend on issues
other than the performance of a particular company. Changes in foreign economies
and political climates are more likely to affect the Fund than a mutual fund
that invests exclusively in U.S. companies. The value of foreign securities is
also affected by the value of the local currency relative to the U.S. dollar.
There may also be less government supervision of foreign markets, resulting in
non-uniform accounting practices and less publicly available information.
All of the "foreign risks" described above are heightened to the extent
the Fund invests in WEBS of emerging foreign markets. There may be greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; risk of companies
that may be newly organized and small; and less developed legal systems.
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 speculative and more risky than
long positions (purchases) in securities because the maximum sustainable loss on
a security purchased is limited to the amount paid for the security plus the
transactions costs, whereas there is no maximum attainable price of the shorted
security. Therefore, in theory, securities sold short have unlimited risk.
Depending on market conditions, the Fund may have difficulty purchasing the
security sold short, and could be forced to pay a premium for the security.
There can be no assurance that the Fund will be able to close out the short
position at any particular time or at an acceptable price. You should be aware
of the intrinsic risk involved in the Fund and be cognizant that any strategy
that includes selling securities short can suffer significant losses. Short
selling will also result in higher transaction costs (such as interest and
dividends), and may result in higher taxes, which reduce the Fund's return. The
adviser does not intend to use leverage with respect to its short positions; as
a result, the portfolio under normal circumstances will always include
sufficient cash equivalents (such as money market instruments, money market
funds or repurchase agreements) to cover its obligations to close its short
positions.
DYNAMIC FORTRESS FUND
The Fund's adviser follows a dynamic model that allocates the Fund's
portfolio among debt and equity asset classes and, within each class, between
securities it holds "long" and sells short, based on the model's assessment of
overall market direction. The allocation of the Fund's assets between debt
securities and equity securities will vary. The more confident the model is in
the upward direction of the debt or equity market, the lower the Fund's exposure
to short positions in that market. Likewise, the less confident the model is in
the upward direction of the debt or equity market, the greater the Fund's
exposure to short positions in that market. Under normal circumstances, the Fund
will generally hold both long and short positions in equity asset classes, but
will generally be either long or short in debt asset classes.
The adviser will select securities for long and short positions within
each asset class based on its perception of market conditions. The adviser
focuses its long positions on countries, industries and companies whose
securities are experiencing upward price momentum (i.e., the stock price is
increasing) and other positive developments such as positive earnings surprises
(i.e., announced earnings are higher than analysts expected) and upward analyst
earnings estimate revisions (i.e., analysts have raised estimates for the
company's earnings). The adviser will focus its short positions on countries,
industries and companies whose securities are experiencing downward price
momentum (i.e., the stock price is declining) and other negative developments
such as depressed earnings expectations (i.e., projected earnings are lower than
analysts expected). The adviser's selection process is dynamic, so that as
market conditions change, the adviser will shift investments to other companies
that may be in different industries or countries. The adviser may also sell a
security if the adviser identifies a security that it believes offers a better
investment opportunity.
In the equity asset class, the Fund will primarily invest in utilities
stocks; real estate investment trusts (commonly referred to as REITs), and
exchange traded index products such as S & P Depositary Receipts (commonly
referred to as SPDRs). A REIT is a company that invests substantially all of its
assets in real estate. 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.
The Fund may also invest in various sector index products such as the Basic
Industries Select Sector Index, Consumer Services Select Sector Index, Consumer
Staples Select Sector Index, Cyclical / Transportation Select Sector Index,
Energy Select Sector Index, Financial Select Sector Index, Industrial Select
Sector Index, Technology Select Sector Index, Utilities Select Sector Index.
Additionally, the Fund will invest in new exchange traded shares as they become
available. If the Fund's portfolio is overweighted in a certain industry sector,
any negative development affecting that sector will have a greater impact on the
Fund than a fund that is not overweighted in that sector. To the extent the Fund
is overweighted in the utilities or REIT sectors, it will be affected by
developments affecting that sector. The utilities sector can be significantly
affected by financing difficulties, supply and demand of services or fuel, and
natural resource conservation. The REIT sector can be significantly affected by
changing government regulations, financing difficulties, changing demographic
patterns, changes in real estate values and fluctuations in rental incomes.
The Fund may invest in foreign companies in the world's developed and
emerging markets by purchasing American Depositary Receipts ("ADRs") and index
products like World Equity Benchmark Shares ("WEBS"). An ADR is a U.S. dollar
denominated certificate that evidences ownership of shares of a foreign company.
ADRs are alternatives to the direct purchase of the underlying foreign stock.
WEBS represent a broad portfolio of publicly traded stocks in a selected
country. Each WEBS Index Series seeks to generate investment results that
generally correspond to the market yield performance of a given Morgan Stanley
Capital International ("MSCI") Index. To the extent the Fund invests in ADRs or
foreign index products, the Fund could be subject to greater risks because the
Fund's performance may depend on issues other than the performance of a
particular company. Changes in foreign economies and political climates are more
likely to affect the Fund than a mutual fund that invests exclusively in U.S.
companies. The value of foreign securities is also affected by the value of the
local currency relative to the U.S. dollar. There may also be less government
supervision of foreign markets, resulting in non-uniform accounting practices
and less publicly available information.
All of the "foreign risks" described above are heightened to the extent
the Fund invests in WEBS of emerging foreign markets. There may be greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; risk of companies
that may be newly organized and small; and less developed legal systems.
The Fund invests in bonds of all investment grades, including a
significant proportion of its portfolio in high yield, non-investment grade
bonds commonly known as "junk bonds." The adviser anticipates the debt
securities in the Fund's portfolio will have an average duration of five years
or less when the model indicates that interest rates will rise and twenty to
thirty years when the model indicates that interest rates will decline. Because
the Fund invests in junk bonds, the Fund may be subject to greater levels of
interest rate, credit and liquidity risk than funds that do not invest in such
securities. Junk bonds are considered predominantly speculative with respect to
the issuer's continuing ability to make principal and interest payments. An
economic downturn or period of rising interest rates could adversely affect the
market for junk bonds, reducing the Fund's ability to sell its junk bonds
(liquidity risk) and reducing the Fund's share price. Junk bonds may have call
provisions. If an issuer exercises the call provision in a declining interest
rate market, the Fund would have to replace the security with a lower yielding
security, resulting in a decreased return for the Fund. If the Fund invests a
significant proportion of its portfolio in lower quality junk bonds, the Fund's
exposure to these risks is greater than some other junk bond funds and the value
of the Fund's shares could be more negatively affected.
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 speculative and more risky than
long positions (purchases) in securities because the maximum sustainable loss on
a security purchased is limited to the amount paid for the security plus the
transactions costs, whereas there is no maximum attainable price of the shorted
security. Therefore, in theory, securities sold short have unlimited risk.
Depending on market conditions, the Fund may have difficulty purchasing the
security sold short, and could be forced to pay a premium for the security.
There can be no assurance that the Fund will be able to close out the short
position at any particular time or at an acceptable price. You should be aware
of the intrinsic risk involved in the Fund and be cognizant that any strategy
that includes selling securities short can suffer significant losses. Short
selling will also result in higher transaction costs (such as interest and
dividends), and may result in higher taxes, which reduce the Fund's return.
GENERAL
The investment objective of each Fund may be changed without shareholder
approval.
As non-diversified funds, each Fund will be subject to substantially more
investment risk and potential for volatility than a diversified fund because its
portfolio may at times focus on a limited number of companies.
The adviser anticipates that each Fund's model will result in active trading
of the Fund's portfolio securities and a high portfolio turnover rate. A high
portfolio turnover can result in correspondingly greater brokerage commission
expenses (which would lower the Fund's total return) and may result in the
distribution to shareholders of additional capital gains for tax purposes (which
would lower the Fund's after-tax return).
From time to time, each Fund may take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies, in attempting to
respond to adverse market, economic, political, or other conditions. For
example, each Fund may hold all or a portion of its assets in money market
instruments, money market funds or repurchase agreements. If a Fund invests in
shares of a money market fund or other investment company, the shareholders of
the Fund generally will be subject to duplicative management fees. In addition,
each Fund may temporarily discontinue short selling in extreme market
conditions. As a result of engaging in these temporary measures, each Fund may
not achieve its investment objective. Either Fund may also invest in such
instruments at any time to maintain liquidity or pending selection of
investments in accordance with its policies.
HOW TO BUY SHARES
INITIAL PURCHASE
The minimum initial investment in each Fund is $5,000 ($500 for qualified
retirement accounts and medical savings accounts) and minimum subsequent
investments are $1,000. Investors choosing to purchase or redeem their shares
through a broker/dealer or other institution may be charged a fee by that
institution. To the extent investments of individual investors are aggregated
into an omnibus account established by an investment adviser, broker or other
intermediary, the account minimums apply to the omnibus account, not to the
account of the individual investor.
BY MAIL - To be in proper form, your initial purchase request must include:
o a completed and signed investment application form (which accompanies
this Prospectus);
o a check made payable to the appropriate Fund;
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Mail the application and check to:
U.S. Mail: Overnight:
Paragon Funds Paragon Funds
c/o Unified Fund Services, Inc. c/o 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. To wire money, you must call Unified
Fund Services, Inc., the Funds' transfer agent, at (877)-726-4662 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, provide your bank with the
following information for purposes of wiring your investment:
Firstar Bank, N.A.
ABA #0420-0001-3
Attn: Paragon Funds
D.D.A.# 821662640
Fund Name ____________________ (write in fund name)
Account Name _________________ (write in shareholder name)
For the Account # ______________ (write in account number)
You must mail a signed application to Unified Fund Services, Inc., the
Funds' transfer agent, 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 Fund may charge shareholders for this service in the future.
ADDITIONAL INVESTMENTS
You may purchase additional shares of any Fund (subject to a $1,000
minimum) by mail, wire, or automatic investment. Each additional mail purchase
request must contain:
o your name
o the name of your account(s),
o your account number(s),
o the name of the Fund
o a check made payable to the Fund
Send your purchase request 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 $250 or more from your bank
checking account. You may change the amount of your monthly purchase at any
time.
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. Contact the Transfer agent
for the procedure to open an IRA or SEP plan and more specific information
regarding these retirement plan options. Please consult with your attorney or
tax adviser regarding these plans. You must pay custodial fees for your IRA by
redemption of sufficient shares of the Fund from the IRA unless you pay the fees
directly to the IRA custodian. Call the Transfer agent about the IRA custodial
fees.
HOW TO EXCHANGE SHARES
As a shareholder in any Fund, you may exchange shares valued at $5,000 or
more for shares of any other Paragon Fund. You may call the transfer agent at
(877)-726-4662 to exchange shares. An exchange may also be made by written
request signed by all registered owners of the account mailed to the address
listed above. Requests for exchanges received prior to close of trading on the
New York Stock Exchange (4:00 p.m. Eastern Time) will be processed at the next
determined net asset value (NAV) as of the close of business on the same day.
An exchange is made by selling shares of one Fund and using the proceeds to
buy shares of another Fund, with the NAV for the sale and the purchase
calculated on the same day. An exchange results in a sale of shares for federal
income tax purposes. If you make use of the exchange privilege, you may realize
either a long term or short term capital gain or loss on the shares sold.
Before making an exchange, you should consider the investment objective of
the Fund to be purchased. If your exchange creates a new account, you must
satisfy the requirements of the Fund in which shares are being purchased. You
may make an exchange to a new account or an existing account; however, the
account ownership must be identical. Exchanges may be made only in states where
an exchange may legally be made. The Funds reserve the right to terminate or
modify the exchange privilege at any time.
OTHER PURCHASE INFORMATION
Each Fund may limit the amount of purchases and refuse to sell to any
person. 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.
The Funds have authorized certain broker-dealers and other financial
institutions (including their designated intermediaries) to accept on their
behalf purchase and sell orders. A Fund is deemed to have received an order when
the authorized person or designee accepts the order, and the order is processed
at the net asset value next calculated thereafter. It is the responsibility of
the broker-dealer or other financial institution to transmit orders promptly to
the Funds' transfer agent.
HOW TO REDEEM SHARES
You may receive redemption payments in the form of a check or federal wire
transfer. Presently there is no charge for wire redemptions; however, the Funds
may charge for this service in the future. Any charges for wire redemptions will
be deducted from the shareholder's Fund account by redemption of shares. If you
redeem your shares through a broker/dealer or other institution, you 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:
Paragon Funds
c/o Unified Fund Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
Proper order means your request for a redemption must include: o the Fund
name and account number, o account name(s) and address, o the dollar amount or
number of shares you wish to redeem.
Requests to sell shares are processed at the net asset value next
calculated after we receive your order in proper form. To be in proper order,
your request must be signed by all registered share owner(s) in the exact
name(s) and any special capacity in which they are registered. The Funds may
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 the Funds or Unified Fund Services, Inc., you
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 at (877)-726-4662. 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 Funds may terminate the telephone redemption procedures at any time.
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)-726-4662. 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 calendar 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 may require you to redeem all of your shares in the Fund on
30 days' written notice if the value of your shares in the Fund is less than
$5,000 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 adviser concerning the tax consequences of involuntary
redemptions. You may increase the value of your shares in the Fund to the
minimum amount within the 30 day period. Your shares are subject to redemption
at any time if the Board of Trustees determines in its sole discretion that
failure to so redeem may have materially adverse consequences to all or any of
the shareholders of the Funds.
DETERMINATION OF NET ASSET VALUE
The price you pay for your shares is based on the applicable Fund's net
asset value per share (NAV). The NAV is calculated at the close of trading
(normally 4:00 p.m. Eastern time) on each day the New York Stock Exchange is
open for business (the Stock Exchange is closed on weekends, Federal holidays
and Good Friday). The NAV is calculated by dividing the value of the Fund's
total assets (including interest and dividends accrued but not yet received)
minus liabilities (including accrued expenses) by the total number of shares
outstanding.
The Funds' assets are generally valued at their market value. If market
prices are not available, or if an event occurs after the close of the trading
market that materially affects the values, assets may be valued by the Funds'
adviser at their fair value, according to procedures approved by the Funds'
board of trustees. The Fund may own securities that are traded primarily on
foreign exchanges that trade on weekends or other days the Fund does not price
its shares. As a result, the NAV of the Fund may change on days when you will
not be able to purchase or redeem your shares of the Fund.
Requests to purchase and sell shares are processed at the NAV next
calculated after we receive your order in proper form.
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Each Fund typically distributes substantially all of its net investment
income in the form of dividends and taxable capital gains to its shareholders.
These distributions are automatically reinvested in the applicable Fund unless
you request cash distributions on your application or through a written request
to the Fund. Each Fund expects that its distributions will consist primarily of
short term capital gains.
TAXES
In general, selling or exchanging shares of a Fund and receiving
distributions (whether reinvested or taken in cash) are taxable events.
Depending on the purchase price and the sale price, you may have a gain or a
loss on any shares sold. Any tax liabilities generated by your transactions or
by receiving distributions are your responsibility. You may want to avoid making
a substantial investment when a Fund is about to make a long term capital gains
distribution because you would be responsible for any taxes on the distribution
regardless of how long you have owned your shares.
Early each year, the Funds will mail to you a statement setting forth the
federal income tax information for all distributions made during the previous
year. If you do not provide your taxpayer identification number, your account
will be subject to backup withholding.
The tax considerations described in this section do not apply to
tax-deferred accounts or other non-taxable entities. Because each investor's tax
circumstances are unique, please consult with your tax adviser about your
investment.
MANAGEMENT OF THE FUNDS
Paragon Capital Management, Inc., 3651 N 100 E., Suite 275, Provo, UT
84604, serves as investment adviser to the Funds. Clients of Paragon Capital
Management, Inc. include individual investors, businesses, pension and profit
sharing plans, and non-profit organizations. Each Fund is authorized to pay
the adviser a fee equal to 2.25% of its average daily net assets.
The Fund's co-portfolio managers, David A. Young and Jonathon Ferrell,
have been primarily responsible for the day-to-day management of each Fund's
portfolio since its inception. Mr. Young has been the president of the adviser
since he founded the firm in 1993 and has been managing investment portfolios
using sector rotation techniques since 1986. Mr. Ferrell is the adviser's
Director of Investment Research and has been managing investment portfolios
since December 1997. He was a financial analyst for the firm from December 1997
until March 1999, when he became the Director of Investment Research. Previous
to that time he attended Brigham Young University.
The adviser pays all of the operating expenses of each Fund except
brokerage, taxes, borrowing costs (such as interest and dividend expense of
securities sold short), interest, fees and expenses of non-interested person
trustees and extraordinary expenses and expenses incurred pursuant to Rule 12b-1
under the Investment Company Act of 1940. In this regard, it should be noted
that most investment companies pay their own operating expenses directly, while
the Fund's expenses, except those specified above, are paid by the adviser. The
adviser (not the Funds) 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.
<PAGE>
FOR MORE INFORMATION
Several additional sources of information are available to you. The
Statement of Additional Information (SAI), incorporated into this prospectus by
reference, contains detailed information on Fund policies and operations. Annual
and semi-annual reports contain management's discussion of market conditions,
investment strategies and performance results as of the Funds' latest
semi-annual or annual fiscal year end.
Call the Funds at (877)-726-4662 to request free copies of the SAI and the
Funds' annual and semi-annual reports, to request other information about the
Funds and to make shareholder inquiries.
You may review and copy information about the Funds (including the SAI and
other reports) at the Securities and Exchange Commission (SEC) Public Reference
Room in Washington, D.C. Call the SEC at 1-202-942-8090 for room hours and
operation. You may also obtain reports and other information about the Funds on
the EDGAR Database on the SEC's Internet site at http.//www.sec.gov, and copies
of this information may be obtained, after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected], or by
writing the SEC's Public Reference Section of the SEC, Washington, D.C.
20549-0102.
Investment Company Act #811-09541
<PAGE>
PARAGON STRATEGIC ASCENT FUND
PARAGON DYNAMIC FORTRESS FUND
STATEMENT OF ADDITIONAL INFORMATION
June 1, 2000
This Statement of Additional Information ("SAI") is not a prospectus. It
should be read in conjunction with the Prospectus of Paragon Strategic Ascent
Fund and Paragon Dynamic Fortress Fund dated June 1, 2000. A free 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)-726-4662
.
TABLE OF CONTENTS PAGE
DESCRIPTION OF THE TRUST AND THE FUNDS.........................................2
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS................................................................3
INVESTMENT LIMITATIONS.........................................................8
THE INVESTMENT ADVISER .......................................................10
TRUSTEES AND OFFICERS.........................................................11
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................12
DETERMINATION OF SHARE PRICE..................................................13
INVESTMENT PERFORMANCE........................................................13
CUSTODIAN.....................................................................15
TRANSFER AGENT................................................................15
ACCOUNTANTS...................................................................15
DISTRIBUTOR...................................................................15
ADMINISTRATOR.................................................................15
<PAGE>
DESCRIPTION OF THE TRUST AND THE FUNDS
The Paragon Strategic Ascent Fund and the Paragon Dynamic Fortress Fund
(each a "Fund" or collectively, the "Funds") were organized as non-diversified
series of AmeriPrime Advisors Trust (the "Trust") on April 10, 2000. The Trust
is an open-end investment company established under the laws of Ohio by an
Agreement and Declaration of Trust dated August 3, 1999 (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. The investment adviser
to each Fund is Paragon Capital Management, Inc. (the "Adviser").
The Funds do not issue share certificates. All shares are held in
non-certificate form registered on the books of the Funds and the Funds'
transfer agent for the account of the Shareholder. 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 and 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., 1793 Kingswood Drive, Suite 200, Southlake, Texas 76092, purchased all of
the outstanding shares of the Funds and may be deemed to control the Funds. As
the controlling shareholder, AmeriPrime Financial Securities, Inc. could 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 Adviser. After the public offering commences, it
is anticipated that AmeriPrime Financial Securities, Inc. will no longer control
the Funds.
For information concerning the purchase and redemption of shares of the
Funds, see "How to Buy Shares" and "How to Redeem Shares" in the Funds'
Prospectus. For a description of the methods used to determine the share price
and value of each Fund's assets, see "Determination of Net Asset Value" in the
Funds' Prospectus and this Statement of Additional Information.
<PAGE>
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a discussion of some of the investments the Funds may make
and some of the techniques they may use.
A. Equity Securities. In addition to the exchange traded index products
described in the Prospectus, each Fund may invest in equity securities such as
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. The Funds may not
invest more than 5% of its net assets in either convertible preferred stocks or
convertible bonds. The Adviser will limit each Fund's investment in convertible
securities to those rated A or better by Moody's Investors Service, Inc. or
Standard & Poor's Rating Group or, if unrated, of comparable quality in the
opinion of the Adviser.
B. Short Sales. Each Fund may 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 its Custodian of cash or high grade liquid
assets equal to the market value of the securities sold less any collateral
deposited with its broker. Depending on arrangements made with the broker or
Custodian, the Fund may not receive any payments (including interest) on
collateral deposited with the broker or Custodian.
C. Securities Lending. Each Fund Fund may make long and short term loans
of its portfolio securities to parties such as broker-dealers, banks, or
institutional investors. Securities lending allows a Fund to retain ownership of
the securities loaned and, at the same time, to earn additional income. Since
there may be delays in the recovery of loaned securities, or even a loss of
rights in collateral supplied, should the borrower fail financially, loans will
be made only to parties whose creditworthiness has been reviewed and deemed
satisfactory by the Adviser. Furthermore, they will only be made if, in the
judgement of the Adviser, the consideration to be earned from such loans would
justify the risk.
The Adviser understands that it is the current view of the staff of the
Securities and Exchange Commission ("SEC") that a Fund may engage in loan
transactions only under the following conditions: (1) a Fund must receive 100%
collateral in the form of cash, cash equivalents (e.g., U.S. Treasury bills or
notes) or other high grade liquid debt instruments from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the Fund must be able to terminate the loan
at any time; (4) the Fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and to any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Trustees must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in
which the Fund is authorized to invest. Investing this cash subjects that
investment, as well as the security loaned, to market forces (i.e., capital
appreciation or depreciation).
D. Restricted and Illiquid Securities. The portfolio of each Fund may
contain illiquid securities. Illiquid securities generally include securities
which cannot be disposed of promptly and in the ordinary course of business
without taking a reduced price. Securities may be illiquid due to contractual or
legal restrictions on resale or lack of a ready market. The following securities
are considered to be illiquid: repurchase agreements and reverse repurchase
agreements maturing in more than seven days, nonpublicly offered securities and
restricted securities. 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, a Fund might obtain a less favorable price than the price it could
have obtained when it decided to sell. Neither Fund will invest more than 15% of
its net assets in illiquid securities.
With respect to Rule 144A securities, these restricted securities are
treated as exempt from the 15% limit on illiquid securities, provided that a
dealer or institutional trading market in such securities exists. Neither Fund
will, however invest more than 10% of its net assets in Rule 144A securities.
Under the supervision of the Board of Trustees of the Fund, the Adviser
determines the liquidity of restricted securities and, through reports from the
Adviser, the Board will monitor trading activity in restricted securities. If
institutional trading in restricted securities were to decline, the liquidity of
the Fund could be adversely affected.
E. U.S. Government Securities. U.S. Government Securities are high-quality
---------------------------- debt securities issued or guaranteed by the U.S.
Treasury or by an agency or instrumentality of the U.S. government. Not all U.S.
government securities are backed by the full faith and credit of the United
States. For example, securities issued by the Farm Credit Banks or by the
Federal National Mortgage Association are supported by the instrumentality's
right to borrow money from the U.S. Treasury under certain circumstances.
However, securities issued by other agencies or instrumentalities are supported
only by the credit of the entity that issued them.
F. Corporate Debt Securities. Corporate debt securities are long and
short-term debt obligations issued by companies (such as publicly issued and
privately placed bonds, notes and commercial paper). The Adviser considers
corporate debt securities to be of investment grade quality if they are rated
BBB or higher by Standard & Poor's Corporation or Baa or highrer by Moody's
Investors Services, Inc., or if unrated, determined by the Adviser to be of
comparable quality. Investment grade dept securities generally have adequate to
strong protection of principal and interest payments. In the lower end of this
category, adverse economic conditions or changing circumstancesare more likely
to lead to a weakened capacity to pay interest and repay principal than in
higher rated categories.
G. Zero Coupon Securities. The Uncorrelated Fund may invest in zero coupon
securities which 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). Zero
coupon securities involve risks that are similar to those of other debt
securities, although 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. 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.
H. Lower Quality Debt Securities. The Uncorrelated Fund may purchase lower
quality debt securities, or unrated debt securities, that have poor protection
of payment of principal and interest. These securities, commonly referred to as
"junk bonds," often are considered to be speculative and involve greater risk of
default and of price changes due to changes in the issuer's creditworthiness.
Market prices of these securities may fluctuate more than higher quality debt
securities and may decline significantly in periods of general economic
difficulty that may follow periods of rising rates. While the market for junk
bonds has been in existence for many years and has weathered previous economic
downturns, the market in recent years has experienced a dramatic increase in the
large-scale use of such securities to fund highly leveraged corporate
acquisitions and restructurings. Accordingly, past experience may not provide an
accurate indication of future performance of the junk bond market, especially
during periods of economic recession. A Fund may invest in securities which are
of lower quality or are unrated if the Adviser determines that the securities
provide the opportunity of meeting a Fund's objective without presenting
excessive risk. The Adviser will consider all factors which it deems
appropriate, including ratings, in making investment decisions for a Fund and
will attempt to minimize investment risks through diversification, investment
analysis and monitoring of general economic conditions and trends. To the extend
a Fund invests in lower quality securities, achievement of its investment
objective may be more dependent on the Adviser's credit analyses than is the
case for higher quality bonds. While the Adviser may refer to ratings, it does
not rely exclusively on ratings, but makes its own independent and ongoing
review of credit quality.
The market for lower quality securities may be thinner and less active
than that for higher quality securities, which can adversely affect the prices
at which these securities can be sold. If there is not established retail
secondary market and market quotations are not available, these securities are
valued in accordance with procedures established by the Board of Trustees,
including the use of outside pricing services. Judgment plays a greater role in
valuing junk bonds than is the case for securities for which external sources
for quotations and last-sale information are available. Adverse publicity and
changing investor perceptions may affect the ability of outside pricing services
used by a Fund to value as Fund securities, and a Fund's ability to dispose of
these lower quality debt securities.
Lower quality securities present risks based on payment expectations. For
example, junk bonds may contain redemption or call provisions. If an issuer
exercises the provisions in a declining interest rate market, a Fund would have
to replace the security with a lower yielding security, resulting in a decreased
return for investors. Conversely, a junk bond's value will decrease in a rising
interest rate market, as will the value of a Fund's assets. If a Fund
experiences unexpected net redemptions, this may force it to sell its junk
bonds, without regard to their investment merits, thereby decreasing the asset
base upon which the Fund's expenses can be spread and possibly reducing the
Fund's rate of return.
Since the risk of default is higher for lower quality securities and
sometimes increases with the age of these securities, the Adviser's research and
credit analysis are an integral part of managing any securities of this type
held by a Fund. In considering investments for a Fund, the Adviser attempts to
identify those issuers of high-yielding securities whose financial condition is
adequate to meet future obligations, has improved or is expected to improve in
the future. The Adviser's analysis focuses on relative values based on such
factors as interest or dividend coverage, asset coverage, earning prospects, and
the experience and managerial strength of the issuer.
I. Financial Services Industry Obligations. Each Fund may invest in each
-------------------------------------------
of the following obligations of the financial services industry:
(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.
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 Adviser
(subject to review by the Board of Trustees) to be creditworthy. The Adviser
monitors the creditworthiness of the banks and securities dealers with which a
Fund engages in repurchase transactions.
K. Foreign Securities. In addition to the foreign equity securities
-------------------- described in the Prospectus, the Uncorrelated Fund may
invest in foreign fixed income securities. Foreign fixed income securities
include corporate debt obligations issued by foreign companies and debt
obligations of foreign governments or international organizations. This category
may include floating rate obligations, variable rate obligations, Yankee dollar
obligations (U.S. dollar denominated obligations issued by foreign companies and
traded on U.S. markets) and Eurodollar obligations (U.S. dollar denominated
obligations issued by foreign companies and traded on foreign markets).
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 equity and debt securities entail certain risks. 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 world's industrialized markets generally include but are not limited
to the following: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, Luxembourg, the Netherlands, New
Zealand, Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and
the United States. The world's emerging markets generally include but are not
limited to the following: Argentina, Bolivia, Brazil, Bulgaria, Chile, China,
Colombia, Costa Rica, the Czech Republic, Ecuador, Egypt, Greece, Hungary,
India, Indonesia, Israel, the Ivory Coast, Jordan, Malaysia, Mexico, Morocco,
Nicaragua, Nigeria, Pakistan, Peru, the Philippines, Poland, Portugal, Romania,
Russia, Slovakia, Slovenia, South Africa, South Korea, Sri Lanka, Taiwan,
Thailand, Turkey, Uruguay, Venezuela, Vietnam and Zimbabwe.
Investment in securities of issuers based in underdeveloped emerging
markets entails all of the risks of investing in securities of foreign issuers
outlined in this section to a heightened degree. These heightened risks include:
(i) greater risks of expropriation, confiscatory taxation, nationalization, and
less social, political and economic stability; (ii) the smaller size of the
market for such securities and a low or nonexistent volume of trading, resulting
in lack of liquidity and in price volatility; (iii) certain national policies
which may restrict a Fund's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) in the case of Eastern Europe and in China and other Asian
countries, the absence of developed capital markets and legal structures
governing private or foreign investment and private property and the possibility
that recent favorable economic and political developments could be slowed or
reversed by unanticipated events. So long as the Communist Party continues to
exercise a significant or, in some countries, dominant role in Eastern European
countries or in China and other Asian countries, investments in such countries
will involve risks of nationalization, expropriation and confiscatory taxation.
The Communist governments of a number of Eastern European countries expropriated
large amounts of private property in the past, in many cases without adequate
compensation. There may be no assurance that such expropriation will not occur
in the future in either the Eastern European countries or other countries. In
the event of such expropriation, a Fund could lose a substantial portion of any
investments it has made in the affected countries. Further, no accounting
standards exist in Eastern European countries. Finally, even though certain
Eastern European currencies may be convertible into U.S. dollars, the conversion
rates may be artificial to the actual market values and may be adverse to Fund
shareholders.
In addition to brokerage commissions, custodial services and other costs
relating to investment in emerging markets are generally more expensive than in
the United States. Such markets have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of a Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a security due to settlement problems could result
either in losses to the Fund due to subsequent declines in the value of the
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.
L. Borrowing. Each Fund is permitted to borrow money up to one-third of
the value of its total assets for the purpose of investment as well as for
temporary or emergency purposes. Borrowing for the purpose of investment is a
speculative technique that increases both investment opportunity and a Fund's
ability to achieve greater diversification. However, it also increases
investment risk. Because each Fund's investments will fluctuate in value,
whereas the interest obligations on borrowed funds may be fixed, during times of
borrowing, the Fund's net asset value may tend to increase more when 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 Funds; 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 each Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Funds from entering
into reverse repurchase transactions, provided that the Funds have an asset
coverage of 300% for all borrowings and repurchase commitments of the Funds
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 Funds 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 Funds 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. Neither Fund will invest 25% or more of its total assets
in a particular industry, although the Strategic Ascent Fund will invest more
than 25% of its assets in investment companies. Neither Fund will invest 25% or
more of its total assets in any investment company that concentrates. 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 each 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 Funds 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. No 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. No 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. The Funds will not purchase or sell puts, calls, options or
straddles.
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.
THE INVESTMENT ADVISER
The Funds' investment adviser is Paragon Capital Management, Inc., 3651 N.
100 E., Provo, UT 84604. Together, David Allen Young and Catherine B. Young own
100% of, and may be deemed to control, Paragon Capital Management Inc.
Under the terms of the management agreements (the "Agreements"), the
Adviser manages each Fund's investments subject to approval of the Board of
Trustees and pays all of the expenses of each Fund except Rule 12b-1 expenses,
brokerage, taxes, borrowing costs (such as interest and dividend expense of
securities sold short), fees and expenses of non-interested person trustees and
extraordinary expenses. As compensation for its management services and
agreement to pay each Fund's expenses, each Fund is obligated to pay the Adviser
a fee computed and accrued daily and paid monthly at an annual rate of 2.25% of
the average daily net assets of the Fund. The adviser may waive all or part of
its fee, at any time, and at its sole discretion, but such action shall not
obligate the adviser to waive any fees in the future.
The adviser retains the right to use the name "Paragon" in connection with
another investment company or business enterprise with which the adviser is or
may become associated. The Trust's right to use the name "Paragon" automatically
ceases ninety days after termination of the Agreement and may be withdrawn by
the adviser on ninety days written notice.
The adviser may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. If a bank
or other financial institution were prohibited from continuing to perform all or
a part of such services, management of the Funds 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. Each Fund may from time to time purchase securities issued by banks which
provide such services; however, in selecting investments for the Funds, no
preference will be shown for such securities.
The Trust and the Adviser have each adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act of 1940. The Code significantly restricts
the personal investing activities of all employees of the Adviser. The Code
requires that all employees of the Adviser preclear any personal securities
investment. The preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable to the proposed
investment. In addition, no employee may purchase or sell any security which at
the time is being purchased or sold, or to the knowledge of the employee is
being considered for purchase or sale, by the Fund. The substantive restrictions
also include a ban on acquiring any securities in an initial public offering and
provides for trading "blackout periods" which prohibit trading by portfolio
managers of the Fund within periods of trading by the Fund in the same (or
equivalent) security. The restrictions and prohibitions apply to most securities
transactions by employees of the Adviser, with limited exceptions for some
securities (such as securities which have a market capitalization and average
daily trading volume above certain minimums).
TRUSTEES AND OFFICERS
The Board of Trustees supervises the business activities of the Trust. 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>
<CAPTION>
Name, Age and Address Position Principal Occupation During Past 5 Years
--------------------------------------------------------------------------------------
<S> <C> <C>
Kenneth D. Trumpfheller President, President, Treasurer , and Secretary of AmeriPrime
1793 Kingswood Drive Secretary, Financial Services, Inc., the Fund's administrator, and
Suite 200 Treasurer, AmeriPrime Financial Securities, Inc., the Fund's
Southlake, TX 76092 and Trustee distributor, since 1994. President, Secretary, Treasurer and
Trustee of AmeriPrime Funds and AmeriPrime Insurance
Trust. Prior to December, 1994 a senior client executive
Year of Birth: 1958 with SEI Financial Services.
--------------------------------------------------------------------------------------
Mark W. Muller Trustee Account Manager for Clarion Technologies, a manufacturer
175 Westwood Drive of automotive, heavy truck, and consumer goods, from 1996
Suite 300 to present. From 1986 to 1996, an engineer for Sicor, a
Southlake, TX 76092 telecommunication hardware company.
Year of Birth: 1964
--------------------------------------------------------------------------------------
Richard J. Wright, Jr. Trustee Various positions with Texas Instruments, a technology
8505 Forest Lane company, since 1995, including the following : Program
MS 8672 Manager for Semi-Conductor Business Opportunity
Dallas, TX 75243 Management System, 1998 to present; Development Manager
for web-based interface, 1999 to present; Systems Manager for
Semi-Conductor Business Opportunity Management System,
1997 to 1998; Development Manager of Acquisition Manager,
1996-1997; Operations Manager for Procurement Systems,
Year of Birth: 1962 1994-1997.
--------------------------------------------------------------------------------------
</TABLE>
The following table estimates the Trustees' compensation for the first
full fiscal year. Trustee fees are Trust expenses and each series of the Trust
pays a portion of the Trustee fees.
=================================================================
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM TRUST (THE TRUST
NAME FROM TRUST IS
NOT IN A FUND COMPLEX)
-----------------------------------------------------------------
Kenneth D. Trumpfheller 0 0
-----------------------------------------------------------------
Mark W. Muller $6,000 $6,000
-----------------------------------------------------------------
Richard J. Wright $6,000 $6,000
=================================================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for each Fund's portfolio decisions and the placing of
each Fund's portfolio transactions. In placing portfolio transactions, the
Adviser 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 Adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received. 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
Adviser may give consideration to sales of shares of the Trust as a factor in
the selection of brokers and dealers to execute portfolio transactions.
The Adviser 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 Adviser 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 Adviser 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 Adviser'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 Advisr in servicing all of its accounts. Similarly, research
and information provided by brokers or dealers serving other clients may be
useful to the Adviser in connection with its services to the Funds. Although
research services and other information are useful to the Funds and the , 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 Adviser that the
review and study of the research and other information will not reduce the
overall cost to the Adviser 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 Fund 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 Funds because of the increased volume of the
transaction. If the entire blocked order is not filled, the Fund 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 Fund 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 Advisor, taking into account such
factors as the size of the individual orders and transaction costs, when the
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 each 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 "Determination of Net
Asset Value" in the Prospectus.
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
Fund's adviser's opinion, the last bid price does not accurately reflect the
current value of the security. All other securities for which over-the-counter
market quotations are readily available are valued at their last bid price. When
market quotations are not readily available, when the Fund's adviser determines
the last bid price does not accurately reflect the current value or when
restricted securities are being valued, such securities are valued as determined
in good faith by the Fund's adviser, 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
Fund's 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 Fund's 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.
INVESTMENT PERFORMANCE
Each Fund may periodically advertise "average annual total return."
"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. If each Fund has been in existence
less than one, five or ten years, the time period since the date of the initial
public offering of shares will be substituted for the periods stated.
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 that Fund's portfolio and operating expenses of
that Fund. These factors and possible differences in the methods and time
periods used in calculating non-standardized investment performance should be
considered when comparing each 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. These
may include the Standard & Poor's 500 Stock Index, the NASDAQ Composite 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 M.L 6118, Cincinnati, Ohio 45202, is
custodian of each Fund's investments. The custodian acts as each Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Fund's request and
maintains records in connection with its duties.
TRANSFER AGENT
Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as each Fund's transfer agent and, in such
capacity, maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of each Fund's shares, acts as dividend and distribution disbursing
agent and performs other transfer agency and shareholder service functions. For
its services as transfer agent, Unified receives a monthly fee from the Advisor
of $1.20 per shareholder (subject to a minimum monthly fee of $900). In
addition, Unified provides each Fund with fund accounting services, which
include certain monthly reports, record-keeping and other management-related
services. For its services as fund accountant, Unified receives an annual fee
from the Adviser equal to 0.0275% of each Fund's assets up to $100 million,
0.0250% of each Fund's assets from $100 million to $300 million, and 0.0200% of
each Fund's assets over $300 million (subject to various monthly minimum fees,
the maximum being $2,100 per month for assets of $20 to $100 million).
ACCOUNTANTS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145, has been selected as independent public accountants for
the Funds for the first fiscal year. McCurdy & Associates performs an annual
audit of each Fund's financial statements and provides financial, tax and
accounting consulting services as requested.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, is the exclusive agent for distribution of shares of the
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.
ADMINISTRATOR
The Funds retain AmeriPrime Financial Services, Inc., 1793 Kingswood
Drive, Suite 200, Southlake, TX 76092, (the "Administrator") to manage the
Funds' business affairs and provide the Funds with administrative services,
including all regulatory reporting and necessary office equipment, personnel and
facilities. The Administrator receives a monthly fee from the Adviser 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. The Administrator, the Distributor and
Unified (the Funds' transfer agent) are controlled by Unified Financial
Services, Inc.