MANAGEMENT DISCUSSION AND ANALYSIS
October 6, 2000
Dear Shareholder:
Welcome to the first annual report of the Lindbergh Signature Fund! The fund
commenced operations on October 1, 1999, but its fiscal year ends on August 31.
Thus, this report covers the 11 months ending August 31, 2000. During this
period, the fund earned a 13.1% total return. You'll find a graphical display of
the fund's results immediately following this letter.
INVESTMENT REVIEW
More than anything, volatility extremes was the defining characteristic of the
financial markets during the fund's first fiscal year. The stage was set about
one week before the fund became operational. That's when Steve Ballmer,
Microsoft's president, asserted in a high profile speech before a conference of
business editors that, "There's such overvaluation of tech stocks it's absurd."
In a clear slap in the face, shortly after Mr. Ballmer's speech, technology
related stocks exploded on the upside. The parabolic ascent in tech-stock prices
continued until March 25, almost six months to the day following Mr. Ballmer's
warning. At the culmination of this incredible advance, the NASDAQ 100 had
gained 96 percent! While many stock indexes, such as the S&P 500, recorded
impressive returns in last year's fourth quarter, a significant portion of these
gains were due to the huge run up in tech-stock prices.
But as investors were soon to learn, what tech giveth, tech can taketh away. The
first sign of trouble appeared when tech-stock investors began to consume their
own young - the "dot com" internet companies. This rush for the exits by
panicking internet investors began in early March. By the time the dust finally
settled in late May, the Dow Jones Internet Index had lost over 56 percent.
It didn't take long for the crash in internet stocks to spread to other sectors
of the market, particularly larger tech stocks. From its March peak, the NASDAQ
Index declined over 38% before finally stabilizing in mid-May.
I've highlighted these events because the wild price swings in technology stocks
have been the key determin-ant of the Signature Fund's performance relative to
various stock indexes. For example, in the midst of the tech-stock blow off, the
fund's relative performance clearly lagged. Conversely, as technology stocks
sold off in the spring and summer, the fund handily outperformed tech-laden
indexes such as the S&P 500.
What accounts for this disparity? When the fund became operational on October 1,
1999, it immediately adopted a defensive portfolio structure for a couple of
reasons. Most importantly, its primary asset allocation model was recommending a
below-average equity position. Also, the Federal Reserve had instituted a
restricive money policy and that tends to heighten the risk for equity
investors. For these reasons, just 25% of fund assets were allocated to
equities. The fund established this equity position through S&P 500 future
contracts.
Given the fund's well-below-average equity position and the tech-driven rally,
the fund substantially under-performed during the fall 1999 period. Although
this period of underperformance becomes part of the fund's permanent historical
record, it is important to note that these returns did not accrue to any outside
shareholders. That's because throughout 1999, the fund only had one shareholder,
an officer of the fund's adviser, Lindbergh Capital Management, Inc. The fund
became available for outside investors in early 2000 and most of the share
purchases were made during the first few months of 2000. So while fund returns
fell short of major stock market indexes during the fall of 1999, no outside
investors were penalized for this underperformance.
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FOURTH YEAR-TO-DATE FIRST
QUARTER 1999 2000* FISCAL
PERIOD**
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LINDBERGH SIGNATURE FUND 5.1% 7.6% 13.1%
S&P 500 14.9% 4.1% 19.6%
NASDAQ 48.2% 3.4% 53.2%
NYSE COMPOSITE 9.7% 3.7% 13.8%
DOW JONES INDUSTRIALS 11.6% -1.5% 10.0%
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* For period 12/31/99 - 8/31/00
** FOR PERIOD 9/30/99 - 8/31/00
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The fund has outperformed the major stock indexes shown in the table during
calendar year 2000 (through fiscal year end on Aug-ust 31). This, in turn, has
offset some, but not all, of the fund's relative underperformance during last
year's fourth quarter (ref. table). (PLEASE NOTE, THE RETURNS SHOWN FOR THE S&P
500 AND THE DOW INCLUDE DIVIDEND INCOME. NYSE COMPOSITE RETURNS DO NOT INCLUDE
INCOME FROM DIVIDENDS AND THUS UNDERSTATE TOTAL RETURNS BY WHAT I ESTIMATE IS A
LITTLE OVER 1%. THE RETURNS FOR THE NASDAQ DO NOT INCLUDE DIVIDENDS, BUT NASDAQ
STOCKS TEND TO PAY LITTLE OR NO DIVIDENDS.)
Technology stocks now comprise over 30% of the S&P 500 Index. Therefore, the
returns of this index were driven in large part by the off-scale performance of
just one sector - technology. This fact, more than any-thing, explains why the
fund's first fiscal year returns were short of the S&P 500's.
The NYSE Composite, on the other hand, is the dollar-weighted return of all the
common stocks listed on the New York Stock Exchange. Although this index
includes many technology companies, compared to the S&P 500, technology-related
stocks provide a smaller portion of its return.
I've also included the returns of the Dow Jones Industrials. This index includes
many of the 30 largest com-panies in corporate America, but in percentage terms,
it too contains far fewer technology stocks than the S&P 500.
I'm pointing out these differences because the S&P 500 is, for many mutual
funds, the primary benchmark for performance comparison purposes. But as a
result of ongoing changes made in the S&P 500 Index by Standard and Poor's in
recent years, it is gradually transforming into a technology-dominated growth
index. As such, it is becoming less representative of the broader stock market.
INVESTMENT OUTLOOK
From my perspective, two factors will be the driving force for the financial
markets and investor returns over the coming fiscal year: First, can the economy
successfully transition to a period of slower, more sustainable growth with
moderating rates of inflation? Second, can a further and more serious sell off
in technology stocks be averted?
Volatility has subsided in the stock market in recent months because of a
growing consensus among inves-tors that the Federal Reserve will succeed in its
efforts to rein in the economy and reduce inflationary pres-sures. This soft
landing scenario implies that the Fed's task is largely complete and so there's
little need for additional rounds of credit tightening.
The economy, however, has considerable forward momentum and inflation is not yet
under control. For these reasons, as events unfold, many investors may find that
they have embraced prematurely this soft land-ing scenario. I think there is
about a fifty percent chance that the Fed will pull off an economic soft landing
within the time frame expected by the market. But if this assessment is correct,
there is, then, an equal prob-ability that the economy will not soft land any
time soon. If so, the Fed would have to resume its credit squeeze, and this
would create additional selling pressure in both the stock and bond markets.
Regarding technology stocks, the major risk investors face are the increasing
signs that companies may be cutting back on their spending for high-tech capital
equipment. These early signs of slowdown are still telltale and anecdotal, but
they are, nonetheless, beginning to emerge. This, in turn, is generating
consid-erable nervousness and confusion among tech-stock investors. If evidence
of a tech-spending slowdown continues to accumulate, then tech stocks will, most
likely, be subjected to waves of indiscriminate selling.
A deep and sustained bear market in technology stocks must, by definition, wreak
havoc on the returns of such tech-heavy stock indexes as the S&P 500.
What happens, though, if tech spending remains strong? While this scenario would
diminish the risk for tech-stock investors, they are hardly off the hook.
Technology shares remain well-overpriced by any real-istic estimate of future
earnings growth and tech-stock investors are becoming increasingly nervous. In
sum, we are in an environment where selling pressure could continue to build
before finally culminating in a panic sell off.
This, and the other issues I've just described, does not paint an encouraging
picture. They are, however, from my perspective, the major risks investors must
contend with in the year ahead. Despite these concerns, the economy and
financial markets have enjoyed a string of good luck in recent years, and it may
very well continue in the year ahead.
But in some ways this long run of good luck is part of the problem; it has
generated considerable compla-cency, particularly among less experienced
investors. As a result, it has led to a number of excesses such as the runup in
tech-stock prices. At some point these chickens will all come home to roost, but
it's impossible to pinpoint the day of reckoning.
INVESTMENT GAME PLAN
Despite the potential pitfalls I've just described, I learned a long time ago
that forecasting is dangerous to one's investment health. So my role as the
portfolio manager for this fund isn't to predict and act accord-ingly, but to
quantify risk and reward tradeoffs. Our first line of defense in this process is
Lindbergh's Mar-ket Meter(TM), an asset allocation model developed by the fund's
adviser. The models and indicators that make up the Market Meter(TM) are
designed to assess equity market risk by various criteria.
The Market Meter(TM) spent most of the fund's first year in the SELL mode. But
beginning in mid-July, it began to sense a more favorable environment for equity
investors. In August, the Meter score improved to the point that it was firmly
in the NEUTRAL mode. Finally, in late September, the Meter gave a BUY sig-nal.
This constituted its first BUY signal since it went defensive in July 1999.
The Meter is signaling quite clearly that risk for stock investors is
diminishing. As a result, the percentage of fund assets allocated to equities,
or equity equivalents such as stock index futures, has increased in a series of
steps from 25% to 100%. So as of this date, the fund is fully invested, but I do
not think the Meter's improv-ing score constitutes a major buying opportunity
for a couple of reasons.
First, the Meter's score is at the lower end of the BUY range. Given the status
of the component indicators, it could easily revert back to the NEUTRAL reading
in the days or weeks ahead. Second, with an approach-ing election, the Fed has
loosened its grip on the money supply in recent months. While this has, most
likely, provided some short term support for stock prices, the Fed has little
choice but to reapply the monetary brakes once the election is out of the way.
All things equal, this will create additional selling pressure on stock prices.
Given the current economic and financial markets environment, I believe
flexibility is the watchword. By being fully invested, the fund is now playing
offense, but if, or when, conditions become less favorable, it can be
restructured, as appropriate, to a more defensive position.
In closing, I want to thank you for the confidence you've shown by becoming one
of the first shareholders in the Signature Fund! It has been a special privilege
to serve your financial interests over the past year.
Respectfully yours,
Dewayne Wiggins, President, Lindbergh Funds
<PAGE>
[Graph Omitted]
Lindbergh
Signature Fund S&P 500 Index
10/01/99 $10,000 $10,000
10/31/99 $10,200 $10,633
11/30/99 $10,297 $10,849
12/31/99 $10,511 $11,487
01/31/00 $10,411 $10,910
02/29/00 $10,438 $10,704
03/31/00 $10,725 $11,750
04/30/00 $10,658 $11,397
05/31/00 $10,623 $11,163
06/30/00 $10,755 $11,438
07/31/00 $10,779 $11,259
08/31/00 $11,307 $11,958
This graph shows the value of a hypothetical initial investment
of $10,000 in the Fund and the S & P 500 Index on October 1,
1999 (inception of the Fund) and held through August 31, 2000.
The index is an unmanaged group of stocks whose total return
includes the reinvestment of any dividends and capital gain
distributions, but does not reflect expenses, which have
lowered the Fund's return. THE FUND'S RETURN REPRESENTS PAST
PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS.
<PAGE>
<TABLE>
<CAPTION>
LINDBERGH SIGNATURE FUND
SCHEDULE OF INVESTMENTS - AUGUST 31, 2000
COMMON STOCKS - 38.83%
<S> <C> <C>
NUMBER OF SHARES MARKET VALUE
AUTOMOTIVE & TRANSPORTATION EQUIPMENT - 1.97%
4,730 Harley Davidson, Inc................................... $ 235,613
3,200 Lear Corp.*............................................ 69,000
-------------
304,613
-------------
BANKS - 1.48%
3,920 Citigroup, Inc......................................... 228,830
-------------
COMMUNICATION - .34%
1,430 WorldCom, Inc.*........................................ 52,195
-------------
COMPUTER HARDWARE - 1.73%
2,110 Sun Microsystems, Inc.*................................ 267,838
-------------
COMPUTER SERVICES AND SOFTWARE - 4.90%
3,370 Cisco Systems, Inc.*................................... 231,266
2,420 EMC Corp.*............................................. 237,160
700 Microsoft Corp.*....................................... 48,869
2,650 Oracle Corp.*.......................................... 240,984
-------------
758,279
-------------
CONGLOMERATES - 1.44%
3,800 General Electric Co.................................... 223,013
-------------
DIVERSIFIED CONGLOMERATE - 1.49%
4,050 Tyco International Ltd................................. 230,850
-------------
DIVERSIFIED SERVICES - 1.57%
6,500 DeVry, Inc.*........................................... 242,937
-------------
DRUGS AND HEALTHCARE - 5.71%
2,840 Cardinal Health, Inc................................... 232,348
3,110 Express Scripts, Inc. - Class A*....................... 221,393
2,330 Johnson & Johnson...................................... 214,214
5,370 Schering Plough Corp................................... 215,471
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883,426
-------------
ELECTRONIC EQUIPMENT - .29%
1,230 Motorola, Inc.......................................... 44,357
-------------
ELECTRONICS - SCIENTIFIC & TECHNICAL INSTRUMENTS - 1.08%
2,100 Waters Corp.*.......................................... 167,081
-------------
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
LINDBERGH SIGNATURE FUND
SCHEDULE OF INVESTMENTS - AUGUST 31, 2000
ELECTRONICS - SEMICONDUCTOR - 3.45%
3,050 Intel Corp............................................. $ 228,369
2,160 Linear Technology Corp................................. 155,385
1,850 Rambus, Inc.*.......................................... 151,122
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534,876
-------------
ENTERTAINMENT - .14%
1,100 Carnival Corp.......................................... 21,931
-------------
FINANCIAL SERVICES - 5.23%
2,530 Capital One Financial Corp............................. 152,591
1,100 Lehman Brothers Holdings, Inc.......................... 159,500
6,600 MBNA Corp.............................................. 233,062
2,460 Morgan Stanley Dean Witter & Co........................ 264,604
-------------
809,757
-------------
INSURANCE - 1.52%
2,645 American International Group, Inc...................... 235,736
-------------
MEDICAL INSTRUMENTS - 1.71%
6,560 Biomet, Inc............................................ 221,810
1,200 Teleflex, Inc.......................................... 42,750
-------------
264,560
-------------
RETAIL STORES - 2.65%
4,200 Abercrombie & Fitch Co. - Class A*..................... 97,388
1,480 Gap, Inc............................................... 33,207
1,390 Wal-Mart Stores, Inc................................... 65,938
6,510 Walgreen Co............................................ 214,016
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410,549
-------------
UTILITIES - 2.13%
2,570 AES Corp.*............................................. 163,838
1,670 Calpine Corp.*......................................... 165,330
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329,168
-------------
TOTAL COMMON STOCKS (COST $5,622,557) 6,009,996
-------------
PRINCIPAL MARKET VALUE
U.S. GOVERNMENT SECURITIES - 58.60%
9,220,000 U.S. Treasury Bills, 6.20%, due 12/07/00 (Cost $9,072,434)(b) 9,072,434
-------------
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
LINDBERGH SIGNATURE FUND
SCHEDULE OF INVESTMENTS - AUGUST 31, 2000
MONEY MARKET SECURITIES - 1.99%
308,617 UMB Money Market Fiduciary Fund, 4.83% (a) (Cost $308,617) $ 308,617
-------------
TOTAL INVESTMENTS - 99.42% (COST $15,003,607) 15,391,047
-------------
OTHER ASSETS IN EXCESS OF LIABILTIES 90,625
-------------
TOTAL NET ASSETS - 100.00% $ 15,481,672
=============
* Non-Income Producing
(a) Variable rate security; the coupon rate shown represents the rate at August 31, 2000.
(b) Securities segregated as initial margin for open futures contracts are $610,000 of the total
$9,220,000 investment.
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
LINDBERGH SIGNATURE FUND AUGUST 31, 2000
STATEMENT OF ASSETS & LIABILITIES
ASSETS
AMOUNT
Investment in securities (cost $15,003,607)........................ $ 15,391,047
Dividends receivable............................................... 755
Interest receivable................................................ 1,808
Variation margin on futures contracts.............................. 101,229
-------------
TOTAL ASSETS..................................................... 15,494,839
-------------
LIABILITIES
AMOUNT
Other payables and accrued expenses................................ $ 13,167
-------------
TOTAL LIABILITIES................................................ 13,167
-------------
NET ASSETS......................................................... $ 15,481,672
=============
SOURCES OF NET ASSETS
AMOUNT
Net assets consist of:
Paid in capital.................................................... $ 14,252,283
Accumulated undistributed net investment income.................... 328,469
Accumulated undistributed net realized gain on investments......... 185,858
Net unrealized appreciation (depreciation) on:
Investments...................................................... 387,440
Futures contracts................................................ 327,622
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NET ASSETS......................................................... $ 15,481,672
=============
Shares of capital stock outstanding 139,211
(no par value, Unlimited shares authorized)
Net asset value, offering and redemption price per share $ 111.21
($15,481,672/139,211) =============
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LINDBERGH SIGNATURE FUND
STATEMENT OF OPERATIONS FOR THE PERIOD OCTOBER 1, 1999
(COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 2000
<S> <C> <C>
INVESTMENT INCOME
AMOUNT
Dividend income.................................................... $ 3,489
Interest income.................................................... 407,597
-------------
TOTAL INCOME 411,086
EXPENSES
AMOUNT
Investment advisory fee (Note 3)................................... 60,667
Transfer agent fees................................................ 10,500
Administration fees................................................ 13,000
Legal fees......................................................... 29,817
Pricing & bookkeeping fees......................................... 12,750
Custodian fees..................................................... 2,809
Insurance fees..................................................... 1,248
Registration fees.................................................. 2,695
Audit fees......................................................... 8,959
Trustees' fees..................................................... 5,448
Out of pocket fees................................................. 3,147
Printing fees...................................................... 1,427
Miscellaneous fees................................................. 10,575
-------------
Total expenses before waived & reimbursed expenses................. 163,042
Expenses waived & reimbursed by Adviser (Note 3)................... (102,375)
-------------
Total operating expenses........................................... 60,667
-------------
NET INVESTMENT INCOME.............................................. 350,419
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AMOUNT
Net realized gain (loss) on:
Investment securities............................................ (5,219)
Futures contracts................................................ 191,202
Change in net unrealized appreciation (depreciation) on:
Investment securities............................................ 387,440
Futures contracts................................................ 327,622
-------------
Net gain on investment securities.................................. 901,045
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $ 1,251,464
=============
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LINDBERGH SIGNATURE FUND
STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD OCTOBER 1, 1999
(COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 2000
<S> <C> <C>
INCREASE (DECREASE)IN NET ASSETS
PERIOD ENDED
AUGUST 31, 2000
OPERATIONS:
Net investment income............................................ $ 350,419
Net realized gain on investment securities....................... 185,983
Change in net unrealized appreciation............................ 715,062
-------------
Increase in net assets resulting from operations 1,251,464
-------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income....................................... (21,950)
From net realized gain........................................... (125)
-------------
Total distributions.............................................. (22,075)
-------------
SHARE TRANSACTIONS:
Net proceeds from sale of shares................................. 14,524,854
Shares issued in reinvestment.................................... 22,074
Shares redeemed.................................................. (394,645)
-------------
Net increase in net assets resulting
from share transactions.......................................... 14,152,283
-------------
TOTAL INCREASE IN NET ASSETS..................................... 15,381,672
-------------
NET ASSETS:
Beginning of period.............................................. 100,000
-------------
End of period [including accumulated undistributed net
investment income of $350,419].................................. $ 15,481,672
=============
TRANSACTIONS IN FUND SHARES:
Shares sold...................................................... 141,687
Shares reinvested................................................ 214
Shares redeemed.................................................. (3,690)
-------------
Net increase in number of shares outstanding..................... 138,211
=============
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LINDBERGH SIGNATURE FUND
FINANCIAL HIGHLIGHTS
<S> <C> <C>
PERIOD ENDED
AUG 31, 2000 (A)
SELECTED PER SHARE DATA:
Net asset value, beginning of period............................. $ 100.00
-----------
Income from investment operations
Net investment income......................................... 4.18
Net realized and unrealized gain.............................. 8.75
-----------
Total from investment operations................................. 12.93
-----------
LESS DISTRIBUTIONS:
From net investment income.................................... (1.71)
From net realized gain........................................ (0.01)
-----------
Total distributions.............................................. (1.72)
-----------
Net asset value, end of period................................... $ 111.21
===========
TOTAL RETURN (B)................................................. 13.07%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000).................................. $ 15,482
Ratio of expenses to average net assets.......................... 0.75% (c)
Ratio of expenses to average net assets
before waiver & reimbursement................................. 2.00% (c)
Ratio of net investment income to
average net assets............................................ 4.33% (c)
Ratio of net investment income to
average net assets before waiver & reimbursement.............. 3.08% (c)
Portfolio turnover rate.......................................... 5.38% (c)
(a) For the period October 1, 1999 (commencement of operations) to August 31, 2000.
(b) For periods of less than a full year, total return is not annualized.
(c) Annualized
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
LINDBERGH SIGNATURE FUND
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2000
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NOTE 1 - GENERAL
The Lindbergh Signature Fund (the "Fund") is organized as a
non-diversified series of Lindbergh Funds, a Massachusetts business
trust, pursuant to a trust agreement dated June 16, 1999. The Lindbergh
Signature Fund's primary objective is to increase the value of your
investment over the long-term through capital appreciation and earned
income. Capital preservation is an important but secondary objective.
The Fund seeks to achieve this objective by investing in common stocks,
bonds and money market instruments in proportions consistent with their
expected returns and risk as assessed by the Fund's adviser, Lindbergh
Capital Management, Inc. (the "Adviser"). In evaluating potential risk
and return tradeoffs, the Adviser reviews general macro-economic
conditions, Federal Reserve policy and employs various analytical
models.
When, in the Adviser's judgment, conditions are favorable for stock
investments, the fund will normally be fully invested in commons
stocks. If however, in the Adviser's view, stock market conditions are
less favorable for investors, all or a portion of the fund assets will
be shifted out of stocks and into such fixed income investments as
bonds and cash. The Fund is permitted to be 100% invested in any one
of the three asset classes - stocks, bonds, or cash. The trust
agreement permits the Board of Trustees (the "Board") to issue and
unlimited number of shares of beneficial interest of separate series
without par value. The Fund is currently the only series of funds
currently authorized by the Board.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A) PORTFOLIO VALUATIONS
Securities, which are traded on any exchange or on the NASDAQ
over-the-counter market, are valued at the last quoted sale price.
Lacking a last sale price, a security is valued at its last bid price
except when, in the 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. Securities are valued as
determined in good faith under the general supervision of the Board of
Trustees when: market quotations are not readily available; the
Adviser determines that the last bid price does not accurately reflect
the current value; or restricted securities are being valued.
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 advisor believes such prices accurately
reflect the fair market value of such services. 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 under the general supervision 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.
LINDBERGH SIGNATURE FUND
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2000 (CONTINUED)
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
B) FUTURES CONTRACTS
The Fund uses index futures contracts, when appropriate, with the
objectives of maintaining full exposure to the stock market, enhancing
returns, maintaining liquidity, and minimizing transaction costs. The
Fund may purchase futures contracts to immediately invest incoming cash
in the market, or sell futures in response to cash outflows, thereby
simulating a fully invested position in the underlying index while
maintaining a cash balance for liquidity. The Fund may seek to enhance
returns by using futures contracts instead of the underlying securities
when futures are believed to be priced more attractively than the
underlying securities. The Fund will not effect a futures or options
transaction if the aggregate value of the Fund's securities subject to
outstanding futures and options would exceed 100% of the Fund's total
assets. The primary risks associated with the use of futures contracts
are imperfect correlation between changes in market values of stocks
held by the Fund and the prices of futures contracts, the possibility
of an illiquid market, or that the counterparty will fail to perform
its obligation.
Futures contracts are valued at their quoted daily settlement prices.
The aggregate principal amounts of the contracts are not recorded in
the financial statements. Fluctuations in the value of the contracts
are recorded in the Statement of Assets and Liabilities as an asset
(liability) and in the Statement of Operations as unrealized
appreciation (depreciation) until the contracts are closed, when they
are recorded as realized gains (losses) on futures contracts.
C) PORTFOLIO TRANSACTIONS AND RELATED INCOME
Investment transactions are recorded on a trade date basis. Realized
gains and losses from investment transactions are recorded on the
identified cost basis. Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date. Discounts and
premiums on securities purchased are amortized over the life of the
respective securities. Generally accepted accounting principles require
that permanent financial reporting tax differences relating to
shareholder distributions be reclassified to net realized gains and
paid-in-capital.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to comply with federal tax rules regarding the
distribution of substantially all of its net investment income as
dividends to its shareholders on an annual basis, and to distribute its
net long-term capital gains and its short-term capital gains at least
once a year. However, to the extent that net realized gains of the Fund
could be reduced by any capital loss carryovers, such gains will not be
distributed.
E) FEDERAL INCOME TAXES
The Fund intends to qualify each year as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, the Fund will not be subject to federal income taxes to the
extent that it distributes substantially all of its net investment
income and any realized capital gains.
LINDBERGH SIGNATURE FUND
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2000 (CONTINUED)
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NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
F) ESTIMATES
Preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Lindbergh Capital Management, Inc., (the "Adviser") to
manage the Fund's investments. The Adviser will be paid an advisory fee
equal to 0.75% of the average annual net assets of the Fund. Actual
total expenses, including advisory fees, will not exceed 0.75% because
the Adviser's contract with the Fund requires it to reimburse fund
expenses to maintain total annual fund operating expenses at 0.75%
through August 31, 2000, and to inform the Fund prior to that date, if
the commitment is to continue. As of August 31, 2000 the Adviser has
agreed to maintain total annual fund operating expenses at 0.75%
through August 31, 2001. For the period ended August 31, 2000, the
Adviser earned fees of $60,667, and waived all fees earned and
reimbursed expenses to the Fund of $41,708.
The Fund retains Unified Fund Services, Inc., (the "Administrator")
to manage the Fund's business affairs and provide the Fund with
administrative services, including all regulatory review and reporting
and necessary office equipment, personnel and facilities. The Fund
also retains Unified Fund Services, Inc. (the "Transfer Agent") to
serve as transfer agent, dividend paying agent and shareholder service
agent. The Fund also retains Unified Fund Services, Inc. (the "Mutual
Fund Accountant") to provide mutual fund accounting services to the
Fund. For the period ended August 31, 2000 the Administrator, Transfer
Agent and Mutual Fund Accountant received fees of $13,000, $10,500 and
$12,750 respectively, for services provided to the fund.
The Fund retains Unified Management Corporation, (the "Distributor") to
act as the principal distributor of the Fund's shares. The Fund has
adopted a plan, pursuant to Rule 12b-1 under the Investment Company Act
of 1940, which permits the Fund to pay directly, or reimburse the
Fund's Adviser and Distributor, for certain distribution and promotion
expenses related to marketing its shares, in an amount not to exceed
0.25% of the average daily net assets of the Fund. As of August 31,
2000 the distribution plan has not been activated. Certain members of
management of the Administrator and Distributor are also members of
management of the trust.
NOTE 4 - SECURITIES TRANSACTIONS
For the period ended August 31, 2000, purchases and sales proceeds from
investment securities, excluding short-term investments were as
follows:
Purchases Sales
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Lindbergh Signature Fund $ 5,689,401 $65,279
LINDBERGH SIGNATURE FUND
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2000 (CONTINUED)
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NOTE 5 - UNREALIZED APPRECIATION (DEPRECIATION)
At August 31, 2000, the cost for federal income tax purposes is
$15,003,607 and the composition of gross unrealized appreciation
(depreciation) of investment securities is as follows:
APPRECIATION DEPRECIATION NET APPRECIATION
Lindbergh Signature Fund $505,651 ($118,211) $387,440
At August 31, 2000, the aggregate settlement value of open futures
contracts expiring in September 2000 and the related unrealized
appreciation were:
Futures Contracts Number of Long Aggregate Unrealized
Contracts Settlement Value Appreciation
NASDAQ 100 Index 6 $2,268,049 $188,351
S&P 400 Midcap Index 16 4,206,729 139,271
NOTE 6 - RELATED PARTY TRANSACTIONS
The Adviser is not a registered broker-dealer of securities and thus
does not receive commissions on trades made on behalf of the Fund. The
beneficial ownership, either directly or indirectly, of more than 25%
of the voting securities of a Fund creates a presumption of control of
the Fund, under Section 2(a)(9) of the Investment Company Act of 1940.
As of August 31, 2000 Charles Schwab & Co. holds 90.32% of outstanding
Fund shares in an omnibus account for the benefit of others.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
Lindbergh Signature Fund:
We have audited the accompanying statement of assets and liabilities of the
Lindbergh Signature Fund, including the schedule of portfolio investments, as of
August 31, 2000, and the related statement of operations, statement of changes
in net assets and financial highlights for the period from October 1, 1999
(commencement of operations) to August 31, 2000 in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights 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 financial
highlights 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 investments and cash held as
of August 31, 2000 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 financial highlights referred to
above present fairly, in all material respects, the financial position of the
Lindbergh Signature Fund as of August 31,2000, the results of its operations,
the changes in its net assets, and the financial highlights for the period from
October 1, 1999 (commencement of operations) to August 31, 2000 in the period
then ended, in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
September 13, 2000
