FAM
VALUE FUND
EQUITY-INCOME FUND
ANNUAL REPORT
DECEMBER 31, 1997
A 100% No-Load
Fund
FAM FUNDS
P.O. Box 399
Cobleskill, NY 12043
(800) 932-3271
<PAGE>
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DEAR SHAREHOLDER:
This year's annual report combines the reporting for the FAM Value Fund and
the FAM Equity-Income Fund. While both funds share a similar value-oriented
philosophy, they differ in their purpose. FAM Value is a fund that concentrates
on investing in businesses that have superior long-term prospects. There is
little concern given to the income or dividend return that may be paid to
shareowners. In FAM Value, dividends from stock holdings are an added plus
rather than a primary consideration. This fund is most suitable for long term,
growth oriented investors.
FAM Equity-Income Fund shares the same value philosophy. However, in this
fund we focus on stocks that pay a dividend. Thus, we are able to provide a
quarterly income distribution to the shareholders of the fund. Over the years we
have observed that stocks with superior investment prospects that also pay a
dividend tend to provide a total return (appreciation plus dividend income)
similar to FAM Value's long term results. FAM Equity-Income Fund is suitable for
those investors who desire a quarterly income return coupled with long term
appreciation. Because dividends are much more dependable than stock price
movements, we anticipate that FAM Equity-Income will be slightly less volatile
than its sister fund.
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FAM VALUE FUND 1997 PERFORMANCE
During another year of exuberant markets, your Fund increased 39.06% during
the twelve months ending December 31, 1997. This compares favorably to the 33.4%
rise of the S&P 500 composite index which is weighted with companies
considerably larger than those in the FAM Value Fund. It also compares favorably
with the 22.2% gain of the Russell 2000 index - a composite of companies with
smaller market capitalizations similar to our holdings. While we view this
year's performance as being extraordinary, we want to reinforce our belief that
one-year results of this magnitude can not be projected. Achieving 39.06% in a
year is an exceptional event, not a normal one, and one that is not likely to be
repeated.
Our long term results are much more representative. The FAM Value's five
and ten year average annual total returns of 14.7% and 18.9%, respectively,
suggest more realistic expectations. As long term investors, we never assign
great significance to the Fund's performance in a single year. Our focus
continues to be on a five to six year time horizon. Due to the nature of our
long term value 'buy and hold' strategy, our stock holdings change very little
from year to year. For taxable shareholders this is a plus, since our net
after-tax return compares very favorably with most funds which typically have
higher turnover rates.
Total Return
10 Years Ended December 31, 1997
--------------------------------
Compounded Final Value of
Annual a $10,000
Growth Rate Initial Investment
-----------------------------------------------------
FAM Value Fund 18.9% $56,302
-----------------------------------------------------
Russell 2000 Index 15.7% $43,134
-----------------------------------------------------
S&P 500 Index 18.0% $52,534
-----------------------------------------------------
A review of 1997 indicates that our disappointments were few. We hope to be
able to repeat this statement in future annual reports, but we doubt it! Our two
worst performers - Hycor Biomedical (-47.9%) and Copley (-39.2%), combined had a
negative impact of less than 1% on performance. Raven (-3.2%), another
disappointment, is a stock that has performed well in the past and we expect it
will in the future. You can be assured that the business prospects for all our
stock holdings are being monitored carefully.
On a positive note, we give a standing ovation to the outstanding
performance of numerous Fund holdings. ESSEF (+102.6%), Vesta Insurance
(+89.9%), and SouthTrust (+86%) are only a few of the securities which added
significantly to your total return. Our gratitude goes out to the management
teams of these companies. It is their ability to increase the enterprise value
of each business that has contributed greatly to their stock's recognition in
the marketplace. We all owe them a great deal of thanks.
Change was also the order of business for 1997. Transworld Bancorp, an
original holding in your Fund, was purchased by Glendale Federal for cash. We
cannot say enough about the superb way Dave Hender, President, and Lou Galen,
Chairman, managed this bank over the years. They ably confronted the
difficulties of the California banking crisis in the early 1990s and built a
strong franchise through good times and bad. This is a good example of our
investment philosophy. While the stock had several years of lackluster
performance, in the end it had a compounded return of 22.4%. We are sorry to say
goodbye to such a worthwhile friend.
Two additional companies in the portfolio were acquired during the year and
remain in your Fund under their new names. Mailboxes, Etc., one of our largest
stock holdings, was merged into U.S. Office Products. Since we felt that we were
getting a favorable price for Mailboxes, we significantly pared our position to
a smaller holding in U.S. Office Products. Salomon, the other company, was
acquired by Travelers. Travelers is an insurance and financial services company.
Over the years we have admired th excellent job that Sandy Weill, CEO, has
accomplished and we welcome our new participation in the growth of this fine
company.
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1998 AND BEYOND
As this is written, we have little idea what is in store for investments in
1998. Our optimism stems from the changing world we live in. As in the past, the
next five to ten years will be a period of dynamic change. In the last decade,
we could have neither predicted the fall of communism, nor anticipated the
positive impact this change continues to have on worldwide economic prosperity
as well as world peace. In the next decade, we are confident opportunities in
every area, and especially for long term investors, will be abundant.
However, as value investors, we must caution you not to replace sound
investment principles with speculation no matter how optimistic the long term
outlook. Benjamin Graham, the father of value investing, stated it another way
in THE INTELLIGENT INVESTOR: "In most periods the investor must recognize the
existence of a speculative factor in his common stock holdings. It is his task
to keep this component within minor limits, and to be prepared financially and
psychologically for adverse results that may be of short or long duration." A
value investment approach dictates discipline, particularly when economic
reality appears to be diverging from market activity. We have stated in the past
that the rate of growth of corporate earnings - especially for large companies -
has been slowing while stock prices continue to move to higher levels. As 1998
unfolds, this divergence may become more evident. What this bodes for the stock
market is unknown, but we would be remiss if we did not point out that stock
prices and market indices will inevitably decline at some future juncture. We
would not be alarmed at such an occurrence. On the contrary, we would welcome
any decline as an opportunity to buy long term investments at bargain prices.
Even with all the changes that are occurring around us, we can assure you
that we have made NO CHANGES in our investment philosophy or the way that we
manage your Fund. We continue to focus on achieving long term, conservative
investment returns by utilizing a value approach. We look for good businesses in
industry groups that we can understand and evaluate, ones that are run by able
management teams, and those which are financially strong and selling at a
reasonable price. Together these elements comprise FAM's investment philosophy.
It is an approach that we have found consistently beneficial over long periods
of time and one which we will continue to adhere to in the future as well.
Sincerely,
/s/ Thomas O. Putnam /s/ Diane C. Van Buren
Thomas O. Putnam Diane C. Van Buren
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FAM VALUE FUND
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PERFORMANCE SUMMARY
For the Period Ended December 31, 1997
Annual Total Investment Returns: January 2, 1987 to December 31, 1997
------------------------------------------------------------
FAM VALUE FUND RUSSELL 2000 INDEX S&P 500 INDEX
TOTAL TOTAL TOTAL
FISCAL YEAR RETURN RETURN RETURN
------------------------------------------------------------
1987 -17.2% - 8.8 5.3%
1988 35.5% 24.9% 16.6%
1989 20.3% 16.2% 31.7%
1990 - 5.4% -19.5% - 3.1%
1991 47.3% 46.1% 30.5%
1992 25.1% 18.4% 7.6%
1993 0.2% 18.9% 10.1%
1994 6.8% - 1.8% 1.3%
1995 19.7% 28.4% 37.5%
1996 11.2% 16.6% 22.9%
1997 39.1% 22.2% 33.4%
------------------------------------------------------------
[graph omitted here]
Graph depicts comparison of initial $10,000 investment in FAM Value Fund
versus the S&P 500 Index and the Russell 2000 Index for the years 1987 through
1997.
FAM S&P 500 Russell 2000
Value Fund Index Index
---------- ----- -----
Initial $10,000 $10,000 $10,000
1987 $ 8,282 $10,530 $ 9,120
1988 $11,219 $12,278 $11,391
1989 $13,897 $16,170 $13,236
1990 $12,768 $15,669 $10,655
1991 $18,807 $20,448 $15,567
1992 $23,528 $22,002 $18,432
1993 $23,575 $24,224 $21,915
1994 $25,178 $24,539 $21,521
1995 $30,138 $33,741 $27,632
1996 $33,514 $41,468 $32,192
1997 $46,618 $55,318 $39,338
Past performance is not indicate of future results. Investment return and
principal value fluctuate; the value of your investment upon redemption may be
more or less than the initial amount invested.
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FAM VALUE FUND
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PORTFOLIO PROFILE
As of December 31, 1997
COMPARATIVE VALUATIONS
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FAM Russell S&P
Value 2000* 500
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Number of Stocks 47 1950 499
Median Market Cap $652.7M $500M $6.8B
Price/Earnings Ratio 20.7 20.4 24.3
Price/Book Ratio 3.3 2.8 4.3
Return on Equity 17.3 15.1 15.2
Earnings Growth Rate 13.6 14.5 10.7
Turnover Rate 9.47% N/A N/A
VOLATILITY MEASURES
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FAM Russell S&P
Value 2000 500
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R-Squared 0.39 1.00 1.00
Beta 0.58 1.00 1.00
COMPOSITION OF TOTAL INVESTMENTS
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Life Insurance 15%
Banking 14%
Financial Services 13%
Machinery & Equipment 13%
Property & Casualty Insurance 11%
Other 10%
Diversified Manufacturing 7%
Healthcare 7%
Electrical/Electronics 4%
Short Term Obligations 3%
Printing 3%
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For an explanation of the terms used in the above tables, please see page 10.
* Russell 2000 comparative valuations are as of 9/30/97.
Top Ten Holdings
(% of Total Net Assets)
CONMED Corporation 6.4%
Kaydon Corporation 5.9%
ReliaStar Financial 5.8%
American Express 4.2%
Fund American Ent 4.1%
Allied Group, Inc. 4.1%
ESSEF Corporation 3.3%
Centura Banks 3.0%
Protective Life Corporation 3.0%
SouthTrust Corporation 2.7%
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED DECEMBER 31, 1997
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1 5 10
Year Year Year
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FAM Value Fund 39.1% 14.7% 18.9%
Russell 2000 22.2% 16.4% 15.7%
S&P 500 33.4% 20.3% 18.0%
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See Notes To Financial Statements.
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<PAGE>
FAM EQUITY-INCOME FUND 1997 PERFORMANCE
During 1997, your Fund's per share value increased 26.9%. Our benchmark, the
Russell 2000, was up 22.2%. We attribute this performance to the market
recognizing the fundamental value of the companies in the Fund as well as to
growing earnings and increasing dividends. Larger companies have done well for
the last three years and appear to be fully valued. Investors are now turning to
smaller companies that are selling at more reasonable valuations and which have
better prospects for growth. We invest only in companies where we have a high
degree of confidence in the management teams. Ultimately it is the management
team that is charged with meticulously executing their business strategy. We
constantly monitor to make sure these companies are wisely investing the capital
that we entrust to them - your capital. We have also had great success this year
in finding companies that are undervalued and which have a catalyst for
unlocking that value. This could be a new CEO, a new product, or an attractive
acquisition.
Some of the stellar performers in the Fund include SouthTrust Corp. (+86%) which
continued to build its financial services franchise value by growing its branch
network throughout Florida. The bank acquired several branches and assets from
other competitors. SouthTrust has been very successful in loaning money as well
as keeping its overhead under control. We are reassured by the fact that
insiders have been buying the stock at a continuous pace. Management also
increased the dividend by 13.6% in the first quarter of 1997.
Poe & Brown began the year selling at a deep discount to what we thought the
company was really worth. We like the company because of their aggressive
approach to the insurance brokerage business. The company had doubled earnings
over the previous three years and was expected to increase 1997 earnings by more
than 15%. The stock returned 71.1% for the year. The company also raised the
dividend by just over 7%.
New England Business Services (+61.9%) was a turnaround situation where we put
our faith in the management team. The new CEO, Bob Murray, brought a "back to
basics" approach to the business and was able to achieve positive unit growth in
the core business of catalog business forms. He also made three acquisitions
during the year and is well on the way to doubling the size of the business. The
current dividend yield is 2.5%.
We also had a few disappointments during the course of the year. These are
companies that we think will make a meaningful contribution to the fund in the
future, but which need more time to execute their strategies. ADAC Laboratories
(-17.3%) is a leader in the nuclear medicine field. The company has developed
new methods for imaging internal organs that are used for diagnosing cancer and
other tissue disease. These procedures recently received wider reimbursement
approval and a full rollout of the product line will be forthcoming. This
equipment is drastically cheaper than competing alternatives and we feel it will
give the company a competitive edge in the future.
ATRION Corporation (-12.3%) is a medical device company that sold off its
natural gas pipeline business early in the year. Management's strategy is to
focus on higher growth businesses such as medical devices and three acquisitions
in this area have been made over the last two years. The most recent acquisition
was announced in December. The company is currently in the process of growing
its customer base. ATRION has no debt, which gives them further capacity to make
another acquisition this year.
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Stanhome Inc. (+.8%) is another company that is divesting slower growth
businesses. They are concentrating on their core giftware and collectibles
division Enesco. Early in 1997, the company announced that it would seek a buyer
for its direct selling and direct response businesses. The proceeds of the sales
will be used primarily for repurchasing stock and to a lesser extent for smaller
acquisitions. We believe this stock repurchase will drive the price of the stock
higher and earnings will be higher a a concentrated company. The stock currently
yields 4.2%.
FUTURE OUTLOOK
We enter 1998 with a large cash position (25%) that gives us the flexibility to
take advantage of new stock ideas as well as add to existing positions. Overall,
the companies in the Fund are anticipating higher profits in 1998 versus last
year. In addition, companies that made acquisitions last year should see some
increase in earnings this year. Many of the companies are also likely to
increase their dividends as they have so often in the past.
We would be remiss if we did not offer a few words of caution. Despite the
expected earnings growth of the companies in the Fund, we do not believe that
the return achieved in 1997 is indicative of future returns. The environment
over the last twelve months was unusually favorable to investors. There are no
guarantees that this positive environment is going to continue. For example, it
is unknown what effect the turmoil in South East Asian markets will have on US
companies and the US financial markets. If we were to experience a correction in
the market, we do believe that the Fund will be somewhat less volatile than the
overall market because of its high dividend yield. Nonetheless, we would be
affected to some degree.
We will maintain our disciplined approach to investing by concentrating on the
fundamentals of the business and only buying stock in those companies that are
selling at a significant discount to what we feel is the fair value of the
company. We will not put your capital at risk for the sake of reaching for
unrealistic returns. Your confidence is most appreciated.
Sincerely,
/s/Thomas O. Putnam /s/Paul C. Hogan, CFA
Thomas O. Putnam Paul C. Hogan, CFA
-8-
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FAM EQUITY-INCOME FUND
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PERFORMANCE SUMMARY
For the Period Ended December 31, 1997
Annual Total Investment Returns: April 1, 1996 to December 31, 1997
- --------------------------------------------------------------------------------
FAM Equity-Income Russell 2000 Index S&P 500 Index
Fiscal Year Total Return Total Return Total Return
- --------------------------------------------------------------------------------
4/1/96-12/31/96 11.8% 10.3% 15.2%
1997 26.9% 22.2% 33.4%
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[graph omitted here]
Graph depicts comparison of intital $10,000 investment in FAM Equity-Income
Fund versus the S&P 500 INdex and the Russell 2000 Index for the time periods
4/1/96 thorugh 12/31/96 and 1/1/97 through 12/31/97.
4/1/96-12/31/96 12/31/97
--------------- --------
Initial $10,000 $10,000
FAM Equity-Income $11,190 $14,200
S&P 500 Index $11,650 $15,541
Russell 2000 Index $11,030 $13,479
Past performance is not indicative of future results. Investment return and
principal value fluctuate; the value of your investment upon redemption may be
more or less than the initial amount invested.
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<PAGE>
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Fam Equity-Income Fund
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PORTFOLIO PROFILE
As of December 31, 1997
COMPARATIVE VALUATIONS
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FAM Russell S&P
Equity- 2000* 500
Income
- --------------------------------------------------------------------------------
Number of Stocks 20 1950 499
Median Market Cap $463.2M $500M $6.8B
Price/Earnings Ratio 16.3 20.4 24.3
Price/Book Ratio 3.1 2.8 4.3
Return on Equity 18.9 15.1 15.2
Earnings Growth Rate 9.3 14.5 10.7
Turnover Rate 15.63 N/A N/A
COMPOSITION OF TOTAL INVESTMENTS
- --------------------------------------------------------------------------------
Short Term Obligations 23%
Banking 14%
Printing 11%
Diversified Manufacturing 9%
Registered Investment Company 9%
Other 9%
Chemical 8%
Healthcare 8%
Consumer Products 5%
Real Estate
Investment Trusts 5%
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For an explanation of the terms used in the above tables, please see page 10.
*Russell 2000 comparative valuations are as of 9/30/97.
TOP TEN HOLDINGS
(% OF TOTAL NET ASSETS)
Allied Capital Corporation 8.6%
TrustCo Bank NY 5.8%
New England Bus. Services 5.7%
RPM, Inc. 4.9%
New Plan Realty 4.8%
Deluxe Corporation 4.7%
Raven Industries 4.6%
Poe & Brown 4.3%
Home Port Bancorp 4.2%
South Trust Corporation 3.8%
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIOD ENDED DECEMBER 31, 1997
--------------------------------------
Since
1 Inception
Year (4/1/96)
--------------------------------------
FAM Equity-Income 26.9% 22.2%
Russell 2000 22.2% 18.9%
S&P 500 33.4% 28.6%
--------------------------------------
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FAM FUNDS
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DEFINITION OF TERMS
BETA. Beta is a measure of a fund's sensitivity to market movements. It measures
the relationship between a fund's excess return over T-bills and the excess
return of the benchmark index.
EARNINGS GROWTH RATE. The earnings growth rate is the annual average rate of
growth in earnings over the past five years for the stocks currently in a
portfolio.
EXPENSE RATIO. The expense ratio is the percentage of a portfolio's average net
assets used to pay its annual administrative and advisory expenses. These
expenses directly reduce returns to investors.
MEDIAN MARKET CAP. The median market cap is the midpoint of market
capitalization (market price times shares outstanding) of stocks in a portfolio.
NUMBER OF STOCKS. This is an indication of diversification. The more stocks a
portfolio holds, the more diversified, and the more likely it is to perform in
line with the overall stock market.
PRICE/BOOK RATIO. The share price of a stock, divided by its net worth, or book
value, per share. For a portfolio the weighted average price/book ratio of the
stocks it holds.
PRICE/EARNINGS RATIO (P/E). The ratio of a stock's current price to its
per-share earnings over the past year. P/E is an indicator of market
expectations about corporate prospects. Typically, the higher the P/E, the
greater the expectations for a company's future growth. For a portfolio, the
weighted average P/E of the stocks it holds.
RETURN ON EQUITY. The rate of return generated by a company during the past year
for each dollar or shareholder's equity (net income for the year divided by
shareholder's equity). For a portfolio, the weighted average return on equity
for the companies represented in the portfolio.
R-SQUARED. R-Squared reflects the percentage of a fund's movements that are
explained by movements in its benchmark index.
TURNOVER RATE. Indicates the trading activity during the past year. Portfolios
with high turnover rates incur higher transaction costs and are more likely to
realize and distribute capital gains (which are taxable to investors). The
average turnover rates for stock mutual funds is about 80%.
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FAM FUNDS
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STATEMENTS OF INVESTMENTS
AND FINANCIAL STATEMENTS
FAM Value Fund Page 13
FAM Equity-Income Fund Page 22
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders of FAM Value Fund and FAM
Equity-Income Fund:
We have audited the accompanying statements of assets and liabilities, including
the statements of investments, of FAM Value Fund and FAM Equity-Income Fund,
each a series of Fenimore Asset Management Trust, as of December 31, 1997, the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
selected financial information for each of the five years in the period then
ended. These financial statements and selected financial information are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and selected financial information based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and selected financial information
referred to above present fairly, in all material respects, the financial
position of the FAM Value Fund and the FAM Equity-Income Fund, as of December
31, 1997, the results of their operations, the changes in their net assets and
the selected financial information for the periods indicated, in conformity with
generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
January 20, 1998
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FAM VALUE FUND
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STATEMENT OF INVESTMENTS
December 31, 1997
COMMON STOCKS (96.7%) SHARES VALUE
------ -----
BANKING (14.4%)
Bank North Group .................................... 57,715 $ 3,708,189
- - multi-bank holding company in Burlington, VT
Centura Banks ....................................... 146,250 10,091,250
- - bank holding company located in North Carolina
First Empire Corporation ............................ 17,300 8,044,500
- - bank holding company located in Buffalo, NY
One Valley Bancorp .................................. 146,093 5,661,104
- - largest bank holding company in West Virginia
Plumas Bank ......................................... 57,024 1,019,304
- - bank holding company located in
Northern California
SouthTrust Corporation .............................. 142,000 9,008,125
- - bank holding company headquartered in Alabama
TrustCo Bank Corporation NY ......................... 162,398 4,425,346
- - regional bank in the upstate New York area
U.S. Bancorp ........................................ 20,924 2,342,180
- - bank holding company headquartered in -----------
Minneapolis, Minnesota 44,299,998
-----------
BUSINESS SERVICES (1.0%)
*U.S. Office Products ............................... 151,492 2,973,031
-----------
- - supplier of office products and services to
small businesses
CHEMICAL (0.5%)
*WD-40 Company ..................................... 50,800 1,473,200
-----------
- - manufactures and distributes lubricant products
COMPUTER SOFTWARE & SERVICES (1.0%)
Reynolds & Reynolds ............................... 159,500 2,940,781
-----------
- - software for automotive dealers and business forms
CONSUMER SERVICES (1.3%)
*Franklin Covey Company ............................ 184,000 4,048,000
-----------
- - time management products and training seminars
DIVERSIFIED MANUFACTURING (7.1%)
CLARCOR, Inc. ...................................... 182,500 5,406,563
- - manufactures filtration and container products
* Environment One Corporation ...................... 18,000 189,000
- - manufactures low pressure sewer systems and
detection systems
*+ESSEF Corporation ................................ 678,370 10,853,920
- - water treatment and systems, swimming pool, and
spa equipment
+ Raven Industries ................................. 254,441 5,470,482
- - manufactures plastics, electronics, and -----------
sewn products 21,919,965
----------
See Notes to Financial Statements.
-13-
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----------------
FAM VALUE FUND
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STATEMENT OF INVESTMENTS (Cont'd)
December 31, 1997
Shares Value
- --------------------------------------------------------------------------------
ELECTRICAL/ELECTRONICS ( 4.4%)
*C-COR Electronics, Inc. ....................... 420,600 $ 6,466,725
- - electronic equipment for cable and broadband
data transmission systems
+IFR Systems ................................... 424,500 6,579,750
- - communications, test and measurement, avionics,
fiber optic test instruments
Sage Laboratories, Inc. ......................... 45,500 580,125
----------
- - microwave components and systems 13,626,600
----------
FINANCIAL SERVICES (12.8%)
American Express .................................. 154,500 13,789,125
- - financial, travel, and information services firm
* Berkshire Hathaway .............................. 26 1,196,000
- - holding company for various insurance &
industrial companies
Financial Secs Assurance Hldgs. Ltd. .............. 51,800 2,499,350
- - financial guaranty insurer of municipal bonds and
asset-backed securities
Fund American Enterprises Hldgs., Inc. ............ 111,975 13,548,975
- - financial guaranty, personal property and casualty,
and reinsurance
Travelers Group, Inc. ............................. 152,550 8,218,631
----------
- - P & C insurance, life insurance, Smith Barney
& Salomon Brothers 39,252,081
----------
GROCERY STORES (1.5%)
Hannaford Brothers ................................. 105,700 4,591,344
- - operates 143 supermarkets in 8 states from Maine
to South Carolina
HEALTHCARE (7.4%)
*+CONMED Corporation ............................... 807,562 21,198,503
- - advanced electrosurgical and disposable medical
products
* Copley Pharmaceuticals, Inc. ..................... 54,700 307,688
- - generic, prescription, and over-the-counter
pharmaceutical products
*+Hycor Biomedical ................................. 800,000 1,250,000
- - specializes in allergy diagnostic products ----------
22,756,191
----------
PROPERTY AND CASUALTY INSURANCE (10.5%)
Allied Group, Inc. ................................. 473,287 13,547,840
- - regional holding company which writes auto and
homeowners insurance
*Farm Family Holdings .............................. 173,000 5,633,313
- - insurance for members of Farm Bureau
Gainsco, Inc. ...................................... 92,100 782,850
- - commercial auto insurance
+Intercargo Corporation ............................ 429,650 5,692,863
- - specialty marine insurer
Vesta Insurance Group, Inc. ........................ 112,000 6,650,000
----------
- - P & C reinsurance and personal auto insurance 32,306,866
----------
See Notes To Financial Statements.
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FAM VALUE FUND
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STATEMENT OF INVESTMENTS (Cont'd)
December 31, 1997
SHARES VALUE
------ -----
INSURANCE AGENCY (1.9%)
Poe & Brown, Inc. ................................... 133,075 $ 5,938,472
-----------
- - one of the largest independent general insurance
agencies in the U.S.
LIFE INSURANCE (14.8%)
+Allied Life ........................................ 369,850 8,090,469
- - specializes in universal and term life insurance,
and annuity products
Protective Life Corporation ......................... 167,200 9,990,200
- - individual and group life/health ins. and
guaranteed investment contracts
ReliaStar Financial ................................. 466,200 19,201,613
- - life insurance, annuities, and mutual funds
UNUM Corporation .................................... 146,760 7,980,075
-----------
- - leading provider of disability insurance in the U.S.
and United Kingdom 45,262,357
-----------
MACHINERY & EQUIPMENT (12.5%)
IDEX Corporation ...................................... 156,600 5,461,425
- - proprietary, highly engineered industrial products
& pumps
Kaydon Corporation .................................... 595,000 19,411,875
- - custom-engineered products including bearings,
filters, and piston rings
+Modern Controls, Inc. ............................... 416,718 4,583,898
- - precision measurement, process sensing, and control
instruments/systems
Regal-Beliot Corporation ............................. 53,300 1,575,681
- - supplier of power transmission equipment and
cutting tools
Tennant Corporation .................................. 201,400 7,325,925
-----------
- - commercial and institutional floor maintenance
equipment and products 38,358,804
-----------
PRINTING (3.4%)
*CSS Industries, Inc. ................................ 241,550 7,697,813
- - giftware, bows, Halloween and Easter novelty products
Deluxe Corporation ................................... 25,300 872,850
- - leading producer of checks and deposit tickets in the
U.S., banking software
New England Business Services ........................ 55,300 1,866,375
-----------
- - leading supplier of business forms/printed products to
small businesses in U.S. 10,437,038
-----------
REGISTERED INVESTMENT COMPANY (2.2%)
+Allied Capital Corporation .......................... 295,591 6,576,900
-----------
- - small business loan and venture capital corporation
TOTAL COMMON STOCKS (Cost $146,230,806) .............. 296,761,628
-----------
SHORT TERM OBLIGATIONS (3.3%) ....................... Principal
---------
U.S. Treasury Note 5%, due 1/31/98
(Cost $9,994,673) ................................ $10,000,000 9,993,745
-----------
TOTAL INVESTMENTS (Cost $156,225,479)(100%) ......... $306,755,373
============
* Non-income producing
+ See Note 5
See Notes to Financial Statements.
-15-
<PAGE>
----------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS
Investment in securities at market value
(Cost $156,225,479) ........................... $306,755,373
Cash at interest .......................................... 25,318,643
Receivable for shares purchased ........................... 1,174,710
Dividends and interest receivable ......................... 597,608
-----------
Total Assets ......................... 333,846,334
-----------
LIABILITIES
Payable for investment securities purchased ............... 163,468
Payable for shares redeemed ............................... 90,279
Accrued management fees ................................... 274,335
Accrued expenses .......................................... 159,558
-----------
Total Liabilities .................... 687,640
-----------
NET ASSETS
Source of Net Assets:
Net capital paid in on shares of
beneficial interest ............ $182,627,659
Undistributed net investment income ..... 201
Accumulated net realized gains .......... 940
Net unrealized appreciation ............. 150,529,894
-----------
Net Assets ........................... $ 333,158,694
=============
Net asset value per share; 9,317,777 shares of
beneficial interest outstanding (Note 3) ...... $35.76
======
See Notes to Financial Statements.
-16-
<PAGE>
--------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
INVESTMENT INCOME
INCOME:
Dividends ............................................ $ 3,218,795
Interest ............................................. 793,780
----------
Total Income ..................................... 4,012,575
----------
EXPENSES:
Investment advisory fee (Note 2) ..................... 2,687,138
Administrative fee (Note 2) .......................... 67,178
Shareholder servicing and related expenses (Note 2) .. 280,411
Printing and mailing ................................. 102,046
Professional fees .................................... 67,988
Registration fees .................................... 32,185
Custodial fees ....................................... 35,121
Trustees ............................................. 12,599
Other ................................................ 52,628
----------
Total Expenses .................................... 3,337,294
----------
Net Investment Income ............................. 675,281
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ............................... 9,525,635
Unrealized appreciation of investments ......................... 79,137,694
----------
Net Gain on Investments ........................... 88,663,329
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $89,338,610
===========
See Notes to Financial Statements.
-17-
<PAGE>
<TABLE>
<CAPTION>
--------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 1997 and 1996
1997 1996
---- ----
CHANGE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income ............................ $ 675,281 $ 1,647,125
Net realized gain on investments ................. 9,525,635 5,833,011
Unrealized appreciation of investments ........... 79,137,694 19,714,649
----------- -----------
Net Increase in Net Asset From Operations 89,338,610 27,194,785
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ............................ (675,363) (1,647,567)
Net realized gain on investments ................. (9,525,314) (5,832,424)
CAPITAL SHARE TRANSACTIONS (Note 3): ......................... 642,392 (33,494,361)
----------- -----------
Total Increase (Decrease) in Net Assets . 79,780,325 (13,779,567)
NET ASSETS:
Beginning of year ................................ 253,378,369 267,157,936
----------- -----------
End of year ...................................... $ 333,158,694 $ 253,378,369
============= =============
</TABLE>
See Notes to Financial Statements.
-18-
<PAGE>
----------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
FAM Value Fund (the "Fund") is a series of Fenimore Asset Management Trust, a
no-load, diversified, open-end management investment company registered under
the Investment Company Act of 1940. The investment objective of the Fund is to
seek a high long term total return, consisting of appreciation and dividend
income from investments in equity related securities. The following is a summary
of significant accounting policies followed in the preparation of its financial
statements.
a) VALUATION OF SECURITIES
Securities traded on a national securities exchange or admitted to trading
on NASDAQ are valued at the last reported sales price. Common stocks for
which no sale was reported, and over-the-counter securities, are valued at
the last reported bid price. Short-term securities are carried at amortized
cost, which approximates market value.
b) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to its shareholders. Therefore, no provision for
federal income tax is required.
c) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results
could differ from those estimates.
d) OTHER
Securities transactions are recorded on the trade date basis. Interest
income is accrued as earned and dividend income is recorded on the
ex-dividend date. Distributions to shareholders, which are determined in
accordance with income tax regulations, are recorded on the ex-dividend
date.
NOTE 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Investment Advisory Contract, the Fund pays an investment
advisory fee to Fenimore Asset Management, Inc. (the "Advisor") equal, on
an annual basis, to 1% of the Fund's average daily net assets. Certain
officers and trustees of the Fund are also officers and directors of the
Advisor. The Advisor is required to reimburse the Fund for its expenses
to the extent that such expenses, including the advisory fee, for any
fiscal year exceed 2% of the average daily net assets. No such
reimbursement was required for the year ended December 31, 1997. FAM
Shareholder Services, Inc. (FSS), a company under common control with the
Advisor, serves as a shareholder servicing agent for which it received a
monthly fee of $1.75 per shareholder account. Additionally, FSS serves as
the fund administrative agent for which it received a fee equal, on an
annual basis, to .025% of the Fund's average daily net assets.
-19-
<PAGE>
------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 3. SHARES OF BENEFICIAL INTEREST
At December 31, 1997, an unlimited number of $.001 par value shares of
beneficial interest were authorized. Transactions were as follows:
<TABLE>
<CAPTION>
Year Ended December 31:
1997 1996
---- ----
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ....................... 1,996,336 $ 66,431,872 1,100,612 $ 27,944,994
Shares issued on reinvestment
of dividends ................... 268,172 9,587,161 272,279 7,209,938
Shares redeemed ................... (2,496,046) (75,376,641) (2,691,657) (68,649,293)
---------- ----------- ---------- -----------
Net increase (decrease) (231,538) $ 642,392 (1,318,766) $(33,494,361)
========== ============ ========== ============
</TABLE>
NOTE 4. INVESTMENT TRANSACTIONS
During the year ended December 31, 1997, purchases and sales of
investment securities, other than short term obligations, were
$24,444,156 and $59,707,799. The cost of securities for federal income
tax purposes is the same as shown in the investment portfolio. Realized
gains and losses are reported on an identified cost basis.
The aggregate gross unrealized appreciation and depreciation of
portfolio securities, based on cost for federal income tax purposes,
was as follows:
Unrealized appreciation .............. $153,960,074
Unrealized depreciation .............. (3,430,180)
------------
Net unrealized appreciation .......... $150,529,894
============
NOTE 5. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
Investments in portfolio companies, 5% or more of whose outstanding
voting securities are held by the Fund, are defined in the Investment
Company Act of 1940 as affiliated companies. Investments in affiliated
companies as of December 31, 1997, amounted to $70,296,785. For the
year ended December 31, 1997, dividend income of $358,263 was received
from affiliated companies, as well as realized gains of $1,236,910 from
the sale of such companies.
-20-
<PAGE>
----------------
FAM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 6. SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PER SHARE INFORMATION YEARS ENDED DECEMBER 31,
(For a share outstanding throughout
the year) ............................... 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 26.53 $ 24.58 $ 21.04 $ 20.40 $ 20.50
-------- ---------- -------- -------- --------
Income from investment operations:
Net investment income ................... 0.08 0.18 0.21 0.12 0.09
Net realized and unrealized gain (loss)
on investments .............. 10.29 2.58 3.94 1.27 (0.05)
-------- ---------- -------- -------- --------
Total from investment operations ........ 10.37 2.76 4.15 1.39 0.04
-------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment income .... (0.08) (0.18) (0.21) (0.12) (0.09)
Distributions from net realized gains ... (1.06) (0.63) (0.40) (0.63) (0.05)
-------- ---------- -------- -------- --------
Total distributions ..................... (1.14) (0.81) (0.61) (0.75) (0.14)
-------- ---------- -------- -------- --------
Change in net asset value for the year .. 9.23 1.95 3.54 0.64 (0.10)
-------- ---------- -------- -------- --------
Net asset value, end of year ............ $ 35.76 $ 26.53 $ 24.58 $ 21.04 $ 20.40
======== ================ ============== ============== ==============
TOTAL RETURN ............................ 39.06% 11.23% 19.71% 6.82% 0.21%
Ratios/supplemental data
Net assets, end of year (000) ........... $ 333,159 $ 253,378 $ 267,158 $ 210,579 $ 220,138
Ratios to average net assets of:
Expenses .................... 1.24% 1.27% 1.25% 1.39% 1.39%
Net investment income ....... 0.25% 0.64% 0.92% 0.58% 0.57%
Portfolio turnover rate ................. 9.47% 12.48% 9.67% 2.15% 4.83%
Average commission rate paid (per share)* $ 0.0409$ 0.0497
<FN>
*For fiscal years beginning on or after September 1, 1995, a fund is required to
disclose its average commission rate paid per share for security trades on which
commissions are charged.
</FN>
</TABLE>
-21-
<PAGE>
FAM EQUITY-INCOME FUND
STATEMENT OF INVESTMENTS
December 31, 1997
COMMON STOCKS (76.9%) SHARES VALUE
BANKING (14.0%) ------ -----
Home Port Bank ...................................... 8,000 $183,000
- - single bank holding company for Nantucket
Saving Bank
SouthTrust Corporation .............................. 2,600 164,938
- - bank holding company headquartered in Alabama
TrustCo Bank Corporation NY ......................... 9,361 255,087
- - regional bank in the upstate New York area -------
603,025
-------
CHEMICAL (7.7%)
WD-40 Company ........................................ 4,000 116,000
- - manufactures and distributes lubricant products
RPM, Inc. ............................................ 14,125 215,406
- - specialized chemical protective coatings, fabrics, -------
and wall coverings 331,406
-------
CONSUMER PRODUCTS (4.6%)
Jostens, Inc. ........................................ 4,300 99,169
- - school related products including class rings,
yearbooks,diplomas, etc.
Stanhome ............................................. 3,900 100,181
- - worldwide marketing firm specializing in quality -------
giftware and collectibles 199,350
-------
DIVERSIFIED MANUFACTURING (9.0%)
CLARCOR, INC. ........................................ 4,200 124,425
- - manufactures industrial filtration and
container products
Gorman-Rupp .......................................... 2,900 61,263
- - manufactures high volume pumps
Raven Industries ..................................... 9,400 202,100
- - manufactures plastics, electronics, and sewn products -------
387,788
-------
HEALTHCARE (8.0%)
*ADAC Laboratories ................................... 3,500 69,125
- - leader in nuclear medicine imaging equipment
Atrion Corporation ................................... 9,900 137,363
- - specialty medical devices
Landauer, Inc. ....................................... 4,900 137,200
- - leader in radiation testing and personal dosimeters -------
343,688
-------
INSURANCE AGENCY (4.4%)
Poe & Brown, Inc. .................................... 4,200 187,425
- - one of the largest independent general insurance -------
agencies in the U.S.
LIFE INSURANCE (3.1%)
ReliaStar Financial .................................. 3,200 131,800
- - life insurance, annuities, and mutual funds -------
See Notes to Financial Statements.
-22-
<PAGE>
----------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (Cont'd)
December 31, 1997
SHARES VALUE
------ -----
PROPERTY & CASUALTY INSURANCE (1.8%)
PXRE Corporation .................................... 2,400 $ 79,650
- - reinsurance company --------
PRINTING (10.6%)
Deluxe Corporation .................................. 6,000 207,000
- - leading producer of checks and deposit tickets
in the U.S., banking software
New England Business Services ....................... 7,400 249,750
- - leading supplier of business forms/printed products --------
to small businesses in U.S. 456,750
-------
REAL ESTATE INVESTMENT TRUSTS (4.9%)
New Plan Realty ..................................... 8,300 211,650
- - oldest REIT specializing in apartments, strip --------
shopping centers, factory outlets
REGISTERED INVESTMENT COMPANY (8.8%)
Allied Capital Corporation .......................... 17,016 378,605
- - venture capital corporation for --------
entrepreneurs and management
TOTAL COMMON STOCKS (cost $2,500,418) ............... 3,311,137
----------
SHORT TERM OBLIGATIONS (23.1%)
U.S. Treasury Bills, 5.1% with maturities to ........ Principal
2/12/98 (cost $996,590) ................. $1,000,000 996,590
----------
TOTAL INVESTMENTS (Cost $3,497,008)(100%) ........... $4,307,727
==========
* Non-income producing
See Notes to Financial Statements.
-23-
<PAGE>
-----------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS
Investment in securities at market value
(Cost $3,497,008) ................................ $ 4,307,727
Cash at interest ............................................. 95,606
Dividends and interest receivable ............................ 10,842
Deferred organization costs .................................. 9,644
-----------
Total Assets ........................................... 4,423,819
-----------
LIABILITIES
Payable to investment advisor ................................ 21,930
Accrued expenses ............................................. 16,107
-----------
Total Liabilities ....................................... 38,037
-----------
NET ASSETS
Source of Net Assets:
Net capital paid in on shares of
beneficial interest ............. $ 3,575,093
Undistributed net investment income ...... 20
Accumulated net realized gain/loss ....... (50)
Net unrealized appreciation .............. 810,719
-----------
Net Assets ....................................... $ 4,385,782
===========
Net asset value per share; 332,174 shares of
beneficial interest outstanding (Note 3) ......... $ 13.20
=====
See Notes to Financial Statements.
-24-
<PAGE>
-----------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
INVESTMENT INCOME
INCOME:
Dividends ............................................ $ 87,298
Interest ............................................. 39,453
---------
Total Income ...................................... 126,751
---------
EXPENSES:
Investment advisory fee (Note 2) ..................... 33,560
Administrative fee (Note 2) .......................... 839
Custodian fee ........................................ 2,615
Organization costs ................................... 2,967
Shareholder servicing and related expenses (Note 2) .. 3,112
Registration fees .................................... 12,199
Professional fees .................................... 17,017
Trustees ............................................. 10,623
Printing and mailing ................................. 710
Other ................................................ 557
---------
Total Expenses ................................... 84,199
---------
Less:Investment advisory fee and other expenses
waived or assumed by advisor (Note 2) ............ (33,859)
---------
Net Expenses ..................................... 50,340
---------
Net Investment Income ............................ 76,411
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments ............................. 139,414
Unrealized appreciation of investments ....................... 617,264
---------
Net Gain on Investments ................................ 756,678
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $ 833,089
=========
See Notes to Financial Statements.
-25-
<PAGE>
---------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
April 1, 1996
Year Ended (inception) to
December 31, December 31,
1997 1996
---- ----
CHANGE IN NET ASSETS FROM OPERATIONS:
Net investment income .......................... $ 76,411 $ 37,223
Net realized gain (loss) on investments ........ 139,414 (79)
Unrealized appreciation of investments ......... 617,264 193,454
--------- -------
Net Increase in Net Assets From Operations .. 833,089 230,598
--------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income .......................... (76,381) (37,233)
Net realized gain on investments ............... (139,385) --
CAPITAL SHARE TRANSACTIONS (Note 3): ............. 1,229,936 2,245,158
--------- -------
Total Increase in Net Assets ................ 1,847,259 2,438,523
NET ASSETS:
Beginning of year .............................. 2,538,523 100,000
--------- -------
End of year .................................... $ 4,385,782 $ 2,538,523
=========== ===========
See Notes to Financial Statements.
-26-
<PAGE>
----------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
FAM Equity-Income Fund (the "Fund") is a series of Fenimore Asset
Management Trust, a no- load, diversified, open-end management
investment company registered under the Investment Company Act of
1940. The investment objective of the Fund is to provide current
income and long term capital appreciation from investing primarily in
income-producing equity securities. The following is a summary of
significant accounting policies followed in the preparation of its
financial statements.
a) VALUATION OF SECURITIES
Securities traded on a national securities exchange or admitted to
trading on NASDAQ are valued at the last reported sales price.
Common stocks for which no sale was reported, and over-the-counter
securities, are valued at the last reported bid price. Short-term
securities are carried at amortized cost, which approximates market
value.
b) FEDERAL INCOME TAXES
It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders.
Therefore, no provision for federal income tax is required.
c) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
d) OTHER
Securities transactions are recorded on the trade date basis.
Interest income is accrued as earned and dividend income is
recorded on the ex-dividend date. Distributions to shareholders,
which are determined in accordance with income tax regulations, are
recorded on the ex-dividend date.
NOTE 2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Investment Advisory Contract, the Fund pays an investment
advisory fee to Fenimore Asset Management, Inc. (the "Advisor") equal,
on an annual basis, to 1% of the Fund's average daily net assets.
Certain officers and trustees of the Fund are also officers and
directors of the Advisor. The Advisor is required to reimburse the Fund
for its expenses to the extent that such expenses, including the
advisory fee, for any fiscal year exceed 2% of the average daily net
assets. Although not required to d so, the Advisor further waived fees
and assumed expenses, aggregating $33,859, so as to reduce the Fund's
expense ratio to 1.5% of average daily net assets. FAM Shareholder
Services, Inc. (FSS), a company under common control with the Advisor,
serves as a shareholder servicing agent for which it received a monthly
fee of $1.75 per shareholder account. Additionally, FSS serves as the
fund administrative agent for which it received a fee equal, on an
annual basis, to .025% of the Fund's average daily net assets.
-27-
<PAGE>
-----------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 3. SHARES OF BENEFICIAL INTEREST
At December 31, 1997, an unlimited number of $.001 par value shares of
beneficial interest were authorized. Transactions were as follows:
<TABLE>
<CAPTION>
April 1, 1996
Year Ended (inception) to
December 31, 1997 December 31, 1996
----------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................. 140,533 $ 1,699,500 224,909 $ 2,284,587
Shares issued on reinvestment
of dividends ............ 15,428 197,459 3,189 33,792
Shares redeemed ............. (54,820) (667,024) (7,065) (73,221)
------- -------- ------ -------
Net increase ............ 101,141 $ 1,229,935 221,033 $ 2,245,158
======= =========== ======= ===========
</TABLE>
NOTE 4. INVESTMENT TRANSACTIONS
During the year ended December 31, 1997, purchases and sales of
investment securities, other than short term obligations, were
$1,166,622 and $396,177. The cost of securities for federal income tax
purposes is the same as shown in the investment portfolio. Realized
gains and losses are reported on an identified cost basis.
The aggregate gross unrealized appreciation and depreciation of
portfolio securities, based on cost for federal income tax purposes,
was as follows:
Unrealized appreciation .............. $ 838,300
Unrealized depreciation .............. (27,581)
----------
Net unrealized appreciation .......... $ 810,719
=========
-28-
<PAGE>
--------------------
FAM EQUITY-INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 5. SELECTED FINANCIAL INFORMATION
April 1, 1996
Per share information Year Ended (inception) to
(For a share outstanding December 31, December 31,
throughout the period) 1997 1996
---- ----
Net asset value, beginning of period ......... $ 10.99 $ 10.00
-------- --------
Income from investment operations:
Net investment income ........................ 0.27 0.19
Net realized and unrealized gain (loss)
on investments ............................ 2.72 0.99
-------- --------
Total from investment operations ............. 2.99 1.18
Less distributions:
Dividends from net investment income ......... (0.27) (0.19)
Distributions from net realized gains ........ (0.51) --
-------- --------
Total distributions .......................... (0.78) (0.19)
-------- --------
Change in net asset value for the period ..... 2.21 0.99
-------- --------
Net asset value, end of period ............... $ 13.20 $ 10.99
======== ========
Total Return** ............................... 26.90% 15.90%
Ratios/supplemental data
Net assets, end of period (000) .............. $ 4,386 $ 2,539
Ratios to average net assets of:**
Expenses, total ........................... 2.50% 5.04%
Expenses, net of fees waived and
expenses assumed by advisor ............ 1.50% 1.50%
Net investment income ..................... 2.27% 3.05%
Portfolio turnover rate ...................... 15.63% 0.00%
Average commission rate paid (per share)* .... $ 0.0535 $ 0.0460
* For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate paid per share for security trades on
which commissions are charged.
** Annualized for period less than one year.
-29-
<PAGE>
INVESTMENT ADVISOR
- ------------------
Fenimore Asset Management, Inc.
Cobleskill, NY
CUSTODIAN
- ---------
Chase Manhattan Bank, N.A.
New York, NY
independent auditors
- --------------------
McGladrey & Pullen, LLP
New York, NY
TRUSTEES
- --------
Joseph J. Bulmer, PhD
Roger A. Hannay
John W. Krueger, CLU
Thomas O. Putnam
Diane C. Van Buren
Bernard H. Zais, CLU
LEGAL COUNSEL
- -------------
Dechert Price & Rhoads
Washington, DC
SHAREHOLDER SERVICING AGENT
- ---------------------------
FAM Shareholder Services, Inc.
Cobleskill, NY
FAM FUNDS
111 North Grand Street
P.O. Box 399
Cobleskill, NY 12043
(800) 932-3271
FAM
VALUE FUND
EQUITY-INCOME FUND
ANNUAL REPORT
December 31, 1997
A
100%
No-Load
Fund
FAM FUNDS
P.O. BOX 399
COBLESKILL, NY 12043
(800) 932-3271
