[DESCRIPTION] ANNUAL REPORT TO THE SHAREHOLDERS
Dear Shareholders,
The Fund's performance for the fiscal year ended June 30, 1996 ("Fiscal
'96") was disappointing in comparison to the market in general. For Fiscal
'96, the Fund had a total return of 6.30%. Our benchmark, the Russell 2000
Index, returned 23.89% over the same period. The Fund's total return for
each quarter was 10.06%, -7.81%, 0.78%, 3.97% respectively. A closer look at
the performance graph on page 3 reveals that one disastrous quarter severely
hurt the Fund's twelve month performance. Although the Fund's large position
in technology related companies largely contributed to the 10.06% Fiscal 1st
Quarter performance, the technology sell-off at the end of 1995, especially in
small capitalization stocks, wiped out much of the previous quarter's gains.
To be specific, the Fund's portfolio of technology related companies accounted
for a decline of $1.08 in the NAV for the quarter, while the rest of the
portfolio added $0.14.
The previous twelve month period was filled with drastic fluctuations
in the day to day movement of the market. The Fund continued to stay invested
during the downturns and bought more shares of quality stocks while they were
at depressed levels. That strategy paid off in the months ahead when investor
confidence re-entered the market. From January through May, the Fund surged
more than 20%. News then came in June that the economy seemed to be growing at
a much faster rate than previously thought. Good news? Not necessarily. Good
news about the economy is not always good news for stocks. Once again, fears
about inflation and higher interest rates sent the markets and the Fund
reeling. Technology and small-cap stocks took the brunt of the sell-off.
Principle contributors to the Fund's performance during Fiscal '96 were,
as mentioned above, stocks in the technology-related sector. One of the Fund's
favorite stocks, ENCAD (maker of wide-format color printers) was the biggest
contributor to the Fund's performance, and was the Fund's largest stock
position on August 26, 1996. The Fund also saw significant appreciation in
Phoenix Network (provider of telecommunication services) which announced several
strategic alliances which will greatly enhance the presence of the company over
the next several years. Bio-technology and healthcare related companies also
contributed to the performance of the Fund, particularly, PLC Systems, Inc.
(maker of heart lasers) and American Biogenetic Sciences (maker of medical
diagnostic products). PLC Systems, Inc., which is now the Fund's 5th largest
position, is awaiting FDA approval on it's heart laser technology which has
shown extremely positive results. Disappointments to the Fund was STM Wireless,
Inc., one of the Fund's favorite companies over the last couple of years. After
seeing it's stock price double in 1994 and increase more than 30% in 1995, STM
shocked investors when they reported a 4th Quarter loss, which broke a long
string of profitable quarters. Management said it was only a onetime disruption
in operations due to non-recurring events. None the less, investors punished
the stock down over 48%. At the time of the announcement, STM was the Fund's
largest stock position. STM still continues to be one of the Fund's top 20
holdings. The Instant Publisher (maker of digital printing products) was hurt
by manufacturing problems that all but halted sales; the stock dropped 75%.
Ecogen (an agriculture bio-technology company) was hurt by the unfavorable
farming conditions in the U.S. and lost more than 60% of it's value. WRT
Energy was hurt by depressed natural gas prices and a mild winter and lost 86%
of it's value, most of which came over a two day period. Weitzer Homebuilders,
Inc. reported substantially lower sales due to the extensive rains in Florida
last year; the stock fell more than 75%.
Although volatility in the stock market is probably here to stay, I
believe that trying to time the ups and downs is very dangerous. Most investors
end up being invested on the way down, then jumping out and missing the ride
back up. So how does the Fund intend to achieve it's object of long-term
growth of capital? By taking advantage of downturns in quality stocks that
have been oversold during a panic- driven market.
Thank you for your continued confidence. Feel free to call me with any
questions or comments about the Fund.
Jimmy Baker
August 26, 1996 President
To the Shareholders and Board of Directors
of AmTrust Investors, Inc.
I have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of AmTrust Investors, Inc. as of June 30, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets and the financial highlights for each of the two years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements and financial highlights based
on my audit.
I conducted the audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
My procedures included confirmation of securities owned as of June 30, 1996 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
AmTrust Investors, Inc. as of June 30, 1996, the results of operation for the
year then ended, the change in net assets, and the financial highlights for
each of the two years in the period then ended, in conformity with generally
accepted accounting
principles.
/S Michael S. Klingle
Certified Public Accountant
August 30, 1996
Victoria, Texas
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of June 30, 1996
Assets:
Investments at market Value (Cost $ 844,364.67) $ 771,318.95
Cash 68,813.04
----------
Total Assets 840,131.99
Liabilities:
Accounts Payable - Mangement Fees 1,113.22
Accounts Payable - Custodial Fees 12.00
Accounst Payable - Investments Bought 7,375.00
--------
Total Liabilities 8,500.22
Net Assets (equivalent to $10.75 per share,
based on 77,389.622 shares outstanding) $ 831,631.77
==========
Net Asset Value Per Share $ 10.75
======
The accompanying notes are an integral part of these financial statements
Statement of Operations
For the Year Ended June 30, 1996
Investment income:
Interest income $ 1,031.78
Dividend income 3,605.67
--------
Total investment income 4,637.45
Operating expenses:
Management fees (Note 2) 8,771.78
Transaction service charge 926.97
Foreign taxes paid 14.91
--------
Total operating expenses 9,713.66
--------
Net investment income (loss) ( 5,076.21)
Net realized and unrealized gain (loss)
on securities: (Note 5)
Realized gain on sale of securities 183,502.21
Change in unrealized depreciation (136,820.19)
-----------
Net realized and unrealized gain on securities 46,682.02
---------
Net increase in net assets resulting from operations $ 41,605.81
=========
The accompanying notes are an integral part of these financial statements
Statement of Changes in Net Assets
For the Years Ended June 30, 1996 and 1995
Increase in Net Assets:
06/30/96 06/30/95
Operations:
Net investment income (loss) $ (5,076.21) (3,730.13)
Net realized gain on securities 183,502.21 22,422.65
Net change in unrealized appreciation
or (depreciation) in securities (136,820.19) 76,892.86
Net increase in net assets from operations 41,605.81 95,585.38
Distributions to shareholders:
From net investment income .00 .00
From net realized gains (.7378 per share) (51,711.04) .00
Net decrease from Distributions (51,711.04) .00
From Capital Share Transactions: (Note 4)
Proceeds from shares issued 65,861.09 227,806.07
Reinvestment of dividends and
capital gains distributions 51,711.04 .00
Payments for shares redeemed (100,598.94) (48,945.88)
Net From Fund Share Transactions 116,973.19 178,860.19
Total Increase in Assets 106,867.96 274,445.57
Net Assets:
Beginning of Year and period 724,763.81 450,318.24
__________ __________
End of Year 831,631.77 724,763.81
========== ===========
The accompanying notes are an integral part of these financial statements
FINANCIAL HIGHLIGHTS
For the Fiscal Year Ended
6/30/96 6/30/95
Net Asset Value, Beginning of Period $10.84 $9.23
Income From Investment Operations:
Net investment income (loss) (0.07) (0.05)
Net realized & unrealized gains (losses) on securities 0.72 1.66
Total from investment operations 0.65 1.61
Less Distributions:
Distributions from realized gains (0.74) (0.00)
------ ------
Net Asset Value, End of Period $10.75 $10.84
====== ======
Total return for the period 6.30% 17.44%
Ratios/Supplemental Data
Net assets at the end of the period $831,631.77 $724,763.01
Ratio of expenses to average net assets 1.22 1.00
Ratio of net investment income (loss) to avg net assets (0.64) (0.60)
Portfolio turnover rate 87% 79%
Average commission rate paid per share .1035 .1040
Shares outstanding at end of period 77,389.622 66,845.421
The accompanying notes are an integral part of these financial statements
SCHEDULE OF INVESTMENTS AS OF JUNE 30, 1996
Shares Value
------ -------
Auto Parts - 1.23%
2,000 HiLo Automotive 9,500
Banking - 5.35%
1,500 TR Financial 41,250
Biotechnology - 13.76%
2,000 Celgene 23,000
2,000 Biotechnology General 16,625
4,000 Hemagen 11,250
2,000 Ecogen 9,500
15,000 Pharmos Corp 29,532
2,000 Medarex 16,250
106,157
Building & Home Improvements- 0.68%
3,000 Weitzer Homebuilders 5,250
Communications Equipment/Services - 13.78%
3,500 STM Wireless 35,000
10,000 Phoenix Network 48,750
3,000 WARP 10 Technologies 22,500
106,250
Computer Software & Services - 5.02%
4,000 Globalink 29,500
2,000 American Software 9,250
38,750
Consumer Products - 0.55%
4,800 Creative Technologies 4,200
Miscellaneous - 7.52%
4,000 NTN Communications 23,500
2,000 The TOPPS Company 11,250
2,000 Invision Technology 23,250
58,000
Computer Equipment/Products - 10.20%
2,000 Bell Microproducts 15,250
2,000 ENCAD 34,000
4,000 Focus Enhancements 10,750
10,000 The Instant Publisher 8,437
1,000 Metatec 10,250
78,687
Electric/Electronic Components - 13.89%
2,000 Irvine Sensors 9,500
1,000 EXAR Corp 13,000
2,000 Transwitch 26,500
4,000 SEEQ Technology 13,250
1,000 Excel Technology 9,250
4,000 Electrosource 3,375
3,000 Videonics 32,250
107,125
Energy - 3.28%
3,000 Gulfwest Oil 9,750
12,000 WRT Energy 3,000
3,000 Panaco 12,562
25,312
Healthcare - 6.78%
3,000 Medical Control, Inc 16,500
3,255 Retirement Care Assoc,Inc 35,805
52,305
Medical Equipment/Supplies - 17.96%
15,000 U.S. Alcohol Testing 36,563
1,000 PLC Systems 22,375
3,000 I-Flow 15,000
1,500 Physicians Comp Network 17,344
1,000 Isolyser 12,000
5,000 Thermogenesis 21,563
3,000 Plasma-Therm 13,688
138,533
Total Portfolio Investments - 100%
( Cost = $844,365) $771,319
Notes to the Financial Statements
Note 1: Significant Accounting Policies
AmTrust Investors, Inc. (the "Fund") was incorporated under the laws of the
State of Texas as of January 25, 1993 as an open-end diversified management
company under the Investment Company Act of 1940. The Fund's inception date
was August 19, 1993. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statement
and highlights.
SECURITY VALUATION: Securities listed on a stock exchange for which market
quotations are readily available are valued at the closing prices on the date
of valuation, or, if no such closing price is available, at the last bid price
quoted on such day. The value of securities and other assets for which no
market quotations are readily available are determined in good faith at fair
value using estimation methods approved by the Board of Directors. Short-term
securities that mature in sixty (60) days or less are valued at amortized cost,
which approximates market value, unless this method does not represent fair
value.
FEDERAL INCOME TAXES: The Fund's policy is to comply with the requirements
of the Internal Revenue Code that are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund intends to distribute
to shareholders at least annually substantially all of its net income from
dividends and interest payments and substantially all of its net realized
capital gains, if any. Dividends to shareholders are recorded on the
ex-dividend date.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: The Fund follows industry
practice and records security transactions on the trade date. Dividend income
is recognized on an accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
Note 2: Investment Advisory Services
The Fund has entered into an Investment Advisory Agreement with AmTrust Capital
Resources, Inc. for investment management that provides for the payment of a
monthly fee, calculated daily, at the current annual rate of one and one-half
percent (1.5%) of the previous thirty-day moving average of the daily net
assets of the Fund. The Current rate will remain in effect until the Fund's
thirty-day moving average exceeds two million dollars, at which time the rate
will drop by .05%. The rate will continue to drop by .05% for each two million
dollar incremental increase in the Fund's thirty-day moving average until it's
greater than ten million dollars, at which time the rate will be fixed at 1.25%
of the Fund's thirty-day moving average. Certain officers and directors of the
Fund are also officers, directors and shareholders of the Investment Advisor.
The Investment Advisor was paid $8,771.78 in management fees for the period
ended June 30, 1996.
Note 3: Distributions to Shareholders
On December 29, 1995, a distribution of $.7378 per share aggregating
$51,711.04 was declared from net realized gains from investment transactions
(including $.3134 per share applicable to short-term gains that are taxable to
shareholders as ordinary income dividends) accumulating through October 31,
1995. The dividend was paid on December 29, 1995, to shareholders of record on
December 29, 1995.
Note 4: Capital Share Transactions
As of June 30, 1996, there were 10,000,000 shares of $.001 par value capital
stock authorized. Transactions in capital stock for the years ended June 30,
1996 and 1995 were as follows:
Year Ended Period Ended
June 30, 1996 June 30, 1995
Total Shares Dollar Amount Total Shares Dollar Amount
Shares Issued 14,494.920 165,861.09 22,857.462 $227,806.07
Shares Issued from reinvestment
of dividends 5,040.057 51,711.04 .000 .00
Shares Redeemed ( 8,990.776) (100,598.94) ( 4,800.730) ( 48,945.88)
Net Increase 10,544.201 116,973.19 18,056.732 $178,860.19
=========== =========== =========== ===========
Note 5: Investment Transactions
Purchases and sales of investment securities were $665,827.37 and $662,466.44,
respectively, for common stocks. Net realized gains on the sale of investments
(cost basis) for the period ended June 30, 1996, was $183,502.21. The net gain
on investments for the year ended June 30, 1996, was $46,682.02. This amount
represents the net increase in value of investments held during the year. The
net realized gain on investments was entirely from long transactions. As of
June 30, 1996, the gross unrealized appreciation of securities was $113,018.26,
the gross unrealized depreciation was $186,063.98 and the net unrealized
depreciation was $73,045.72. There are $114,670.93 in undistributed net
realized gains on investment transactions as of June 30, 1996.
QUESTIONS ABOUT THE FUND:
Q. Why does the Fund's daily NAV (Net Asset Value per share) on some days move
in opposite direction with the stock market in general?
A. The Fund doesn't try to emulate the market but does try to beat the market
over a long period of time by concentrating it's assets in only a few
companies. As of June 30, 1996 the Fund held only 42 stocks in it's
portfolio. The top 10 stocks (listed below) comprised almost 42% of the
Fund's net assets. The top 20 stocks comprised over 66% of the Fund's net
assets. Due to the fact that the Fund's assets are not spread out over
hundreds of stocks, the Fund's daily NAV is dependent on the movement of a
smaller number of stocks.
Top Ten as of June 30, 1996
1. Phoenix Networ 5.86% 6. ENCAD 4.08%
2. TR Financial 4.96% 7. Videonics 3.87%
3. US Alcohol Testg 4.39% 8. Pharmos Corp 3.55%
4. Retirement Care 4.30% 9. Globalink 3.54%
5. STM Wireless 4.20% 10. Transwitch 3.18%
Q. Why doesn't the Fund invest in more stocks to spread out the risk and smooth
out the daily volatility of the Fund's NAV?
A. The Fund's investment strategy is to invest in quality companies for
long-term growth. The Fund searches for a few small companies that have
products or technology that can make them become a dominate company in that
area in the next several years. Sometimes that growth takes longer than
expected. The Fund only looks at companies whose stock can conceivably double
or triple over the next two or three years. The Fund then invests a large
percentage of the Fund's assets in that company's stock in order to
maximize the effect on the Fund's NAV. When a substantial upside (or
downside) move takes place in one of the Fund's holdings, it will more
greatly impact the Fund's net asset value.
Q. Why has this strategy not provided the Fund with better-than-market
performance?
A. Until recently, most of the stocks in the Fund's portfolio had not received
much following by Wall Street analyst or brokerage houses. During 1995,
when the Fund lagged the rest of the market, the Fund's largest positions
didn't make any substantial moves and thus the Fund was not able to keep
up with the broad market. The strong earnings during 1995 has since
helped those stocks gain exposure from the investing community. The Fund
surged more than 20% in the first five months of 1996 compared to a less
than 15% rise in the Russell 2000 Index (price change in the index for the
first five months). This was a direct result of a move in the stocks in
the top 20. Unfortunately, when the market began correcting in the first
week of June, those stocks plunged like the rest of the market. Since the
decline was not due to deteriorating fundamentals of the individual
companies, the Fund was buying more shares of these companies at the
depressed levels in June & July and has good reason to believe that they
will once again attain their prior levels.
Q. What causes the market to swing so drastically from day to day?
A. Two things drive the market: Greed and Fear!
PERFORMANCE DATA *
Total Return Avg Annual
12 Months Ended Return Since
6/30/96 Inception(d)
AmTrust Value Fund.(a)......... 6.30% 5.78%
Russell 2000 Small Cap Index(b) 23.89% 14.33%
S&P 500 Index(c)............... 26.00% 16.89%
(a) The Fund began on August 19, 1993. Performance figures are from August 19,
1993 (inception) through June 30, 1996 and includes any applicable dividends.
(b) The Russell 2000 is an unmanaged index of approximately 2000 small cap
stocks, ranging in value of shares, from $50 million to $600 million. Since the
Fund is a "small cap fund", management of the Fund feels that Fund performance
should more appropriately be compared to the Russell 2000 (Return is the price
percentage change of the index during the period, including any applicable
dividends).
(c) The S&P 500 Index is an unmanaged group of stocks considered to be
representative of the stock market in general(Return includes any applicable
dividends).
(d) Average Annual Return from August 19, 1993 until June 30, 1996.
Corporate Headquarters:
109-A Teakwood
Victoria, Texas 77901
(512) 578-7778
(800) 532-1146
Board of Directors:
Jimmy Baker, President
Paul M. Erdelt
Jesse Baker, Jr., Secretary
Paul Teinert
Mickey Pachta
Investment Advisor:
AmTrust Capital Resources, Inc.
109-A Teakwood
Victoria, Texas 77901
Transfer & Dividend Paying Agent:
AmTrust Capital Resources, Inc.
Independent Auditor:
Michael S. Klingle
119 Amhurst
Victoria, Texas 77904
Legal Counsel:
Mickey Pachta
210 Brocton
Victoria, Texas 77904
Retirement Account Trustee:
Sterling Trust Company
PO Box 2526
Waco, Texas 76702
