<PAGE>
IPS MILLENNIUM FUND
Two Centre Square - 625 South Gay Street - Suite 630 - Knoxville,
Tennessee 37902 - Phone 423/524-1676 - Fax 423/544-0630
Gregory D'Amico Robert Loest, Ph.D., CFA
President & Portfolio Manager Senior Portfolio Manager
Fellow Shareholders:
We are pleased to present our annual report for the one year period
ended November 30, 1996. The Fund has now been in existence for 23
months. It has achieved a total return of 26.75% for the fiscal year, a
cumulative return since inception of 59.6%, and assets have more than
tripled, from $1.65 million at the end of November, 1995, to $5.61
million at the end of November, 1996 ($6.3 million on 1/21/97). We have
also received a ticker symbol from the Nasdaq, IPSMX, under the small
funds category, which should allow reporting services to obtain NAV
information on the Fund more easily.
GRAPHIC APPEARS HERE
$10,000 INVESTMENT AT INCEPTION 1/3/95
Period V.L. Arithmetic Millennium Fund S&P 500
1995 03-Jan $10,000 $10,000 $10,000
28-Feb $10,490 $10,167 $10,665
31-May $11,216 $10,741 $11,743
31-Aug $12,208 $11,754 $12,440
30-Nov $12,488 $12,591 $13,464
31-Dec $12,641 $12,480 $13,720
1996 28-Feb $13,096 $13,150 $14,306
31-May $14,160 $14,707 $15,010
31-Aug $14,131 $13,878 $14,717
30-Nov $15,686 $15,960 $17,086
31-Dec $15,667 $15,537 $16,758
1997 28-Feb
Figure 1. Inception of the IPS Millennium Fund was Jan. 3, 1995. The
data presented herein and below represent past performance and are not a
guarantee of future performance. The value of your shares may fluctuate
and be worth more or less at redemption than their original cost.
<TABLE>
<CAPTION>
LIPPER GROWTH
TOTAL ANNUAL RETURN FOR: IPS MILLENNIUM &INCOME VALUE LINE S&P 500
FUND FUND COMPOSITE ARITHMETIC INDEX COMPOSITE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
One year ended 11/30/96 26.75% 21.87% 22.90% 26.89%
Inception 1/3/95 - 11/30/95 25.91% 29.41% 27.17% 34.64%
</TABLE>
The total returns above include changes in the Fund's share price, plus
reinvestment of any dividends (income) and capital gains (profits from
the sale of a stock). The VALUE LINE ARITHMETIC INDEX and the S&P 500
COMPOSITE have been adjusted to reflect total return with dividends and
capital gains reinvested.
=======================================================================
This past year your Fund received favorable publicity in THE WALL
STREET JOURNAL (a major article and a national ranking), USA TODAY (a
national ranking), a favorable mention on CNN, and Portfolio Manager
Robert Loest was interviewed by William Rukeyser on CNNfn. An article in
the Dec. 9 FORTUNE magazine listed IPS MILLENNIUM FUND as one of only a
few funds that utilized Economic Value Added analysis, and quoted Robert
Loest in the article. As you can see from the graph above, the Fund has
beaten both its benchmark, the VALUE LINE ARITHMETIC INDEX, as well as
the LIPPER GROWTH & INCOME COMPOSITE. As you can also see from the graph
above, the Fund is more volatile than the stock market in general. The
reason is its large high tech component. While this is balanced by a
large position in high dividend companies like the Real Estate Investment
Trust sector, the movement of the NASDAQ stocks has a larger effect on
your fund than the S&P 500 does. Expect this to be a permanent
characteristic of your Fund, and the price of investing for higher growth
than that of the overall market.
Table 1: Top 10 Gainers for 1996:
- -------
Company Amount Percent
- ------------------------------------------
1. Intel Corp. $107,568 +65.6%
2. EMC Corp. 100,595 +53.0%
3. Computer Assoc. 75,156 +40.0%
4. Oracle Systems 71,760 +41.4%
5. Andrew Corp. 69,468 +66.7%
6. Applied Materials 67,567 +24.5%
7. Cisco Systems 65,072 +49.4%
8. Equifax 48,814 +58.7%
9. U.S. Robotics 44,138 +86.2%
10. Microsoft 41,850 +90.1%
---------
TOTAL GAIN: $691,988
PERSPECTIVE, PERSPECTIVE, PERSPECTIVE
PERSPECTIVE IS NOT ONLY NECESSARY WHEN THINGS LOOK GLOOMY, IT'S ALSO
ESSENTIAL WHEN THINGS HAVE GONE UNUSUALLY WELL, OR WHEN THINGS ARE GOING
NOWHERE. The tendency after a couple of years like 1995 - 1996 is
sometimes to forget that good years are the normal reward for patience
through hard times and a long term investment horizon. When people feel
they have an unearned windfall, they begin acting like a field mouse
under a full moon with the hawks circling above. Investors tend not only
to become defensive, but to sell everything and bury the cash in the
backyard. Too many funds with good past track records have lost their
perspective over the last year and become defensive, and suffered badly
for it. While staying fully invested makes a fund more volatile, it also
generally results in a higher long term return. According to Napoleon,
the logical end to defensive warfare is surrender. I like to think
Napoleon would have stayed fully invested. Admiral Nelson said, "NEVER
MIND MANEUVERS, JUST GO AT THEM!" I think he would have stayed fully
invested, too.
Table 2: Top 10 Losers for 1996:
_______
Company Amount Percent
1. Mylan Labs $-34,270 -27.9%
2. Polaris Industries -26,835 -31.6%
3. Scientific Games -18,652 -25.2%
4. Shiva -18,190 -28.5
5. Mercury Financial -14,451 -23.7
6. Netmanage -11,498 -47.9
7. Airtouch Comm. -11,310 -12.5
8. Psix -10,835 -32.1
9. AT&T Corp. -10,633 - 9.4
10. Broadband Technol. -10,605 -23.5
---------
TOTAL LOSS: $167,279
It is a mistake for investors to allow good fortune to change their
psychology, because it usually amounts to changing their approach from
investing to gambling. Investing is a lot like war; actual engagement
with the stock market has a way of forcing you to adapt to reality if you
want to do well. The result is some unexpected turns in the companies
and industry sectors we pick, but then, investing wouldn't be any fun
otherwise. We think perspective is the best cure for concerned investors.
TABLE 3 on the next page has some interesting lessons to offer. It is
from a larger study (1996 SBBI YEARBOOK, IBBOTSON - Associates) that
divides the New York Stock Exchange returns into deciles (increments of
10%) by company size. It should - help you see where we stand from an
historical perspective, and maybe what to expect, IN GENERAL TERMS, for
investors with long time horizons.
FIRST, using the lowest return of 9.7% for the largest decile, we
should expect the DOW JONES INDUSTRIALS to hit 10,000 in 2001, and 16,000
in 2006, give or take a year or two. This makes it easier not to worry
about near-term volatility. Don't forget, though, that stocks are by
nature volatile. THE NORMAL TRADING RANGE FOR AN INDIVIDUAL COMPANY OVER
A ONE YEAR PERIOD IS ABOUT 50% BELOW ITS HIGH FOR THE LATEST 12 MONTHS.
If a stock's 52-week high was $80 per share, it could fall to $40 and
still be within its normal annual trading range. Even large blue chips
can fall 35% - 40% from their 12-month highs and still be within their
normal annual trading range.
SECOND, assuming the volatility is acceptable for you, YOU WILL BE
BETTER OFF WITH A PORTFOLIO DIVERSIFIED AMONG LARGE, MEDIUM AND SMALL
COMPANIES. You will have a higher return, and to some extent, bad years
in one size decile will tend to be offset by good years in another size
decile. For example, large cap companies did very well in the decade
ended 1995, which offset the poor performance of small companies.
THIRD, to a significant degree, HIGH LONG-TERM RETURNS ARE DUE TO
RELATIVELY RARE, VERY HIGH-RETURN PERIODS OF SEVERAL YEARS. As you can
see from the chart, this is truer of smaller companies than large ones.
If you restrict your investments to only one narrowly-defined
capitalization group (i.e., index or small cap funds), you risk long-term
underperformance, as you can see. If history is any guide, you may be
able to literally double your chances of encountering an overperforming
decade by diversifying among large, medium and small companies, as we do
with IPS MILLENNIUM FUND.
<PAGE>
COPYRIGHT 1996, IPS ADVISORY, INC. Page 2
Table 3: NYSE Ten-Year Returns by Decile
Year Largest 10% Middle 10% Smallest 10%
- -------------------------------------------------------------------
1925 0% 0% 0%
1935 +55% +52% +221%
1945 +103% +286% +795%
1955 +327% +246% +209%
1965 +180% +213% +268%
1975 +32% +55% +65%
1985 +243% +647% +1,045%
1995 +285% +303% +41%
- -------------------------------------------------------------------
Source: Center for Research in Security Prices, University of
Chicago
Ave. Annual Return 9.7% 12.1%
13.8%
Ave. 10-year Return +175% +257%
+378%
Ave. 10-yr. Return MINUS +150% +192% +134%
Outperforming Decades
FOURTH, there is a strong tendency for poor decades in any group to
be followed by exceptional decades, and vice versa. This implies that
you should take a bigger position in those size deciles that have
underperformed in the previous decade, and a smaller position in the ones
that have outperformed.
Fifth, high returns are not unusual, so long as we have no reason to
expect disasters. For example, the low returns of the decade ended in
1935 resulted from the crash of 1929 and the Great Depression that
followed. The 103% return for large companies in the decade ended 1945
included the second half of the Great Depression and World War II. This
was the worst decade of the 1900s for back-to-back disasters in the worst
size category, and the market still doubled. On the other hand,
unexpected inflation and a prolonged war in Southeast Asia damaged the
economy badly in the decade ended 1975, implying that perhaps
UNEXPECTEDLY HIGH INTEREST RATES AND INFLATION ARE MORE DETRIMENTAL TO
STOCK PRICES THAN WARS AND DEPRESSIONS. In fact, that decade was even
worse than the one ending in 1935, the middle of the Great Depression.
MY CONCLUSION FROM TABLE 3 ABOVE IS THAT WE SHOULD OVERWEIGHT
SMALL COMPANIES, AND STAY FULLY INVESTED. If anything, we are in a period
of deflation, so there seems to be no sign of what happened in the decade
from 1966 to 1975, and such high inflation does not happen without
considerable warning. The civilized part of the world also no longer
depends extensively on land (lebensraum) and natural resources to the
extent that agricultural and early stage industrial civilizations do, so
the prospect of global war for the reasons we've seen in the past seems
remote, although regional ethnic conflicts will probably become worse as
national identities weaken. Economic damage in the future is more likely
to come from internal social stresses, as new fault lines form as a
result of the information revolution, and from severe miscalculations by
national governments as they cling to increasingly faulty economic
models, and the world changes too rapidly for them to adjust.
Nevertheless, expect the decade ending 2005 will be particularly
rewarding for small stocks.
MANAGEMENT'S DISCUSSION & ANALYSIS
The major changes in the Fund's positions during the year were to
reduce the cash position significantly by buying into the market
following the sharp January, 1995 correction; Consumer Durables,
Pharmaceuticals, Banking & Brokerage, Insurance and Software positions
dropped as a proportion of invested assets. Computer & Internet, Medical
Services, Telecommunications, and Real Estate Investment Trust positions
were increased. The Petroleum sector was added through the purchase of
AMOCO.
By judiciously balancing losses and gains, and by prudently
minimizing asset turnover, we were able to keep the capital gains
distribution to just eight cents per share, far below that of most stock
funds. As you know, the effect of taxes can be an important factor in
long term returns, and an objective of your Fund is to minimize taxes as
a significant drag on your returns to the maximum extent consistent with
prudent investment management. We feel we have accomplished this
objective during our first two years. Table 4 below sets forth the
changes in your Fund's positions by industry sector over the 12 month
period ended November 30, 1996.
ANALYSIS OF PERFORMANCE
By far the largest gains in your Fund came from the COMPUTER &
INTERNET, SOFTWARE and SEMI-CONDUCTOR areas (See Table 1).
TELECOMMUNICATIONS was also an important contributor, although not as
large, and our dramatically increased position in REITs has contributed
greatly to returns since the end of our fiscal year.
<PAGE>
COPYRIGHT 1996, IPS ADVISORY, INC. Page 3
Table 4
Industry Sector Position (%) Position (%)
11/30/95 11/30/96
- ---------------------------------------------------------
Cash 15% 2%
Consumer Durables 6% 2%
Computer & Internet 5% 10%
Medical Services 3% 6%
Banking & Brokerage 14% 8%
Insurance 7% 3%
Specialty Chemical 5% 5%
Telecommunications 8% 10%
Software 14% 11%
Petroleum 0% 2%
Pharmaceutical 8% 3%
Real Estate Investment Trusts 3% 9%
Electric Utilities 2% 2%
Miscellaneous Services 6% 5%
Semi-Conductors 10% 11%
During the year we identified three companies that we felt offered
the potential for much greater than normal returns. These three
companies were Applied Materials (AMAT, Nasdaq), Kent Electronics
(KNT, NYSE), and EMC Corp. (EMC, NYSE). We invested the maximum
amount allowed by our prospectus (5%) in all three companies. As of
11/30/96 KENT was up 21% (+45% as of 1/21/97); APPLIED MATERIALS was
up 25% (+58% on 1/21/97); and EMC Corp. was up 53% (+86% on 1/21/97).
All three investments, as well as many others (Cisco Systems, Intel and
the SOFTWARE companies) reflect our underlying belief that our
civilization is headed for a highly connected world much faster than
most people currently realize.
OUTLOOK FOR THE FUTURE
We will continue to be fully invested, but we do not expect
another 20% plus gain in stock prices for 1997. Our current positions
are little changed from the end of our fiscal year, and we will continue
to look toward the COMPUTER, INTERNET, TELECOMMUNICATIONS, and SOFTWARE
sectors, as well as REITs, for the greatest returns over the coming year. In
addition, we expect Telecommunications companies (currently 10% of the
portfolio) to do much better in 1997 than in the past year, as
deregulation takes hold at the state level, current uncertainties about
the sector start becoming resolved, and premiums are awarded the better
companies.
Our discussion of performance is an appropriate place to stress a
point we feel is totally ignored by most of the news media, to the
detriment of investors. INVESTORS' EXPECTATIONS ARE DISTORTED BY THE
EXCLUSIVE AND IGNORANT DEPENDENCE BY THE MEDIA ON CAPITALIZATION (CAP)
WEIGHTED INDEXES LIKE THE S&P 500 COMPOSITE, and the even worse DOW JONES
INDUSTRIALS, which is a price weighted average, not even an index. This
dependence excludes far more appropriate, equally weighted indexes like
the VALUE LINE ARITHMETIC and GEOMETRIC COMPOSITES. Cap weighting is
primarily designed to reflect the performance of the economy, which is
affected more by large companies than by small ones. It is NOT designed
to reflect investment performance. It is instructive to note that the
NASDAQ COMPOSITE, a cap weighted index, which rose 22.71% (without
dividends reinvested) during calendar year 1996, would only have gained
7% if it was equally weighted.
During periods in which large cap stocks outperform small caps, like
the decade ended in 1995, this dependence on large cap indexes as a proxy
for investment portfolio performance leads to an overdependence on index
funds, which tend to be composed of large cap stocks. It should be clear
from Table 3 that large cap index funds may very well underperform for
the next decade. A dependence on large cap indexes leads investors into
the error of comparing the performance of funds and portfolios that are
more or less equally weighted (at least certainly not cap weighted) and
diversified among different size groups, with the performance of indexes
that are neither. The result is that investors (or their funds) either
under- or outperform such unsuitable indexes for prolonged periods.
Investors then think that their fund managers are either worse than they
really are during prolonged periods of large company outperformance ( 85
- - 96); or that managers are better than they really are during extended
periods of small company dominance (late 70s - early 80s). We strongly
recommend you try to find the VALUE LINE COMPOSITE INDEXES (all major
newspapers), and completely ignore the news media's stress on cap
weighted indexes.
We will continue to look for companies that we feel will do well in
a more highly connected world, and that fit our post-capitalist,
ecosystem model of how the economy and our civilization is evolving. We
will also continue to look opportunistically for combinations of extreme
undervaluation combined with high dividend yields, like the REITs that
have done so well recently for the Fund. We hope you are as optimistic
about the future as we are. Thank you again for your continuing
confidence in IPS MILLENNIUM FUND, and if we can be of assistance to you
in any way, please call us.
<PAGE>
COPYRIGHT 1996, IPS ADVISORY, INC. Page 4
FINANCIAL STATEMENTS
(Audited)
IPS MILLENNIUM FUND
Statement of Assets and Liabilities
For the fiscal year months ended November 30, 1996
ASSETS:
Investments in securities, at value -
identified cost $4,656,186 $5,729,619
Accrued income
Dividends 4,606
Interest 1,466
Other assets 10,931
---------
Total assets 5,746,622
LIABILITIES:
Payables - Investment securities
purchased 126,690
Accrued expenses 6,417
---------
Total liabilities 133,107
----------
NET ASSETS ON NOVEMBER 30, 1996
Equivalent to $18.86 per share based on
297,632.620 shares of capital stock
outstanding $5,613,515
==========
Statement of Operations
For the fiscal year ended November 30, 1996
INVESTMENT INCOME:
Income
Dividend income $39,711
Interest 10,040
Miscellaneous 540
---------
Total income 50,291
Expenses:
Management fees 47,950
Expense reimbursement ( 3,528)
Organizational cost 3,261
----------
Total expense 47,683
---------
Net investment income 2,608
---------
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 20,402
Change in unrealized appreciation
of investments for the year 894,048
---------
Net gain (loss) on investments 914,450
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 917,058
=========<PAGE>
FINANCIAL STATEMENTS
(Audited)
IPS MILLENNIUM FUND
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended November 30, 1996
Increase (Decrease) in Net
Assets From Operations: 1996 1995
Investment income-net $ 2,608 $ 7,873
Net realized gain on 20,402 15,391
investments
Change in unrealized
appreciation 894,048 179,385
------- -------
Net increase in net assets 917,058 202,649
resulting from operations
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Investment income-net (5,150) (7,010)
Realized gains (11,105) - - -
------- -------
Net decrease in net assets
due to distributions to
shareholders (16,255) (7,010)
CAPITAL SHARE TRANSACTIONS:
Issued-regular 3,176,461 1,448,251
Issued-in lieu of cash 16,251 7,063
distributions
Redeemed - regular ( 105,600) ( 25,353)
---------- ----------
INCREASE IN NET ASSETS DUE
TO CAPITAL SHARE
TRANSACTIONS 3,087,112 1,429,961
INCREASE IN NET ASSETS 3,987,915 1,625,600
NET ASSETS
Beginning of year 1,625,600 -----
End of year (including
undistributed net investment
income of $2,608 and $863,
realized gains of $20,402
and $15,391, and unrealized $5,613,515 $1,625,600
net appreciation of ========== ==========
$1,073,433 and $179,385 for
1996 & 1995, respectively)
<PAGE>
IPS MILLENNIUM FUND
Notes to Financial Statements
Fiscal Year Ended November 30, 1996
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The company is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The company began
selling shares and making investments on January 3, 1995. The Fund
provides investment management and advisory services for its
shareholders, which include individuals, qualified plans and trust
accounts mostly located in the Southeastern and Great Lakes areas of the
United States.
Security valuation - Investments in securities traded on a national
- ------------------
securities exchange (or reported on the NASDAQ national market) are
stated at the last reported sales price on the day of valuation; other
securities traded in the over-the-counter market and listed securities
for which no sale was reported on that date are stated at the last quoted
bid price. Short-term notes are stated at amortized cost, which is
equivalent to 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 its taxable income
to its shareholders. Therefore, no federal income tax provision is
required.
As of November 30, 1996, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $1,073,433. The cost of
portfolio securities for book and federal income tax purposes was
$4,656,186.
Distributions to shareholders - Dividends to shareholders are recorded on
- -----------------------------
the ex-dividend date.
Other - The Fund follows industry practice and records security
- -----
transactions on the trade date for performance calculations and the trade
date plus one for fund accounting. Dividend income is recognized on the
ex-dividend date, and interest income is recognized on an accrual basis.
Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
Use of estimates in the preparation of financial statements - The
- -----------------------------------------------------------
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
NOTE 2 - DISTRIBUTIONS TO SHAREHOLDERS
Distributions were paid as follows for F.Y. 1996: December 28, 1995 was
the record date for an income distribution on December 29 of $0.0218 per
share, aggregating $2,981.32, and for a short term capital gains
distribution of $0.0812 per share on December 29 aggregating $11,104.73;
February 28 was the record date for an income distribution of $0.013 per
share on February 29, aggregating $2,169.50. This income will be taxable
to shareholders as ordinary income.
NOTE 3 - ORGANIZATIONAL EXPENSES
The Fund has incurred organizational expenses in the amount of $16,218.
Organizational expenses are being amortized monthly over a period of 60
months, beginning on January 3, 1995. The balance outstanding on
November 30, 1996 is $9,862.
NOTE 4 - CAPITAL SHARE TRANSACTIONS
As of November 30, 1996, there were an unlimited number of shares of no
par value capital stock authorized and capital paid in aggregated
$4,517,073.
Transactions in capital stock for the period 11/30/96 through 11/30/96
were as follows:
<TABLE>
<CAPTION>
Shares Amount
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Shares sold 194,666.353 109,910.579 $3,176,461 $1,448,251
Shares issued in reinvestment
of dividends 1,093.636 512.742 16,251 7,063
----------- ----------- --------- ---------
Total 195,759.989 110,423.321 3,192,712 1,455,314
Shares redeemed 6,472.272 2,078.418 105,600 25,353
----------- ----------- --------- ---------
Net increase 189,287.717 108,344.903 $3,087,112 $1,429,961
=========== =========== ========== ==========
</TABLE>
NOTE 5 - INVESTMENT TRANSACTIONS
The Fund made purchases and sales of investment securities (excluding
short-term securities) of $4,785,773 and $1,768,403, respectively, during
the period December 1, 1995 through November 30, 1996; there were no
investment transactions involving U.S. Government obligations nor a net
loss on investments for the period.
As of November 30, 1996, the unrealized appreciation of securities was
$1,073,433; accumulated undistributed net realized gains on investment
transactions totaled $20,402.
<PAGE>
Notes to Financial Statements(continued)
Year Ended November 30, 1996
NOTE 6 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund pays advisory fees for investment management and advisory
services under a management agreement with IPS Advisory, Inc.(the
Advisor). Under the agreement, the Advisor will pay all of the Fund's
operating expenses, excluding brokerage fees and commissions, taxes,
interest and extraordinary expenses. The Fund is obligated to pay the
Advisor a fee computed and accrued daily and paid monthly at an annual
rate of 1.40% of its average daily net assets to and including
$100,000,000, 1.15% of such assets from $100,000,000 to and including
$250,000,000, and 0.90% of such assets in excess of $250,000,000.
Certain officers and trustees of the Fund are also officers and directors
of the investment advisor.
Securities Service Network, Inc.(SSNI), the Fund's underwriter, has
received no income from sales commissions earned on sales of the Fund
shares, since it is a no-load fund. Mr. D'Amico and Mr. Loest are
registered representatives of SSNI.
All securities trades for the Fund have been made through SSNI. Mr.
D'Amico and Mr. Loest, as registered representatives of SSNI, received
benefits from securities trading commissions paid by the Fund to SSNI.
==========================================================================
IPS MILLENNIUM FUND
Financial Highlights, Selected Per Share Data and Ratios
<TABLE>
<CAPTION>
For the 12 months For the 11 months
ended Nov. 30, 1996 ended Nov. 30, 1995
------------------- -------------------
<S> <C> <C> <C> <C>
Per share data: Per share data:
NET ASSET VALUE:
Beginning of year $14.996 $12.000
Income from investment operations
Net Investment income 0.021 0.121
Net realized and unrealized gain
(loss) on investments 3.959 2.982
------- -------
Total income (loss) from
investment operations 3.980 3.103
LESS DISTRIBUTIONS:
Dividends from net investment income (0.035) 0.107
Dividends from net realized gains on
investments (0.081) 0.000
------- -------
Total distributions $(0.116) $(0.107)
NET ASSET VALUE:
End of year $18.860 $14.996
======= =======
Total return (annualized) 26.754% 28.831%
RATIOS:
Net assets, end of period (thousands) $5,613.515 $1,625.600
Ratio of expenses to average net assets 1.40% 1.40%
Ratio of net income to average net assets 0.76% 1.00%
Portfolio turnover rate 55.17% 26.7%
Average commissions per share $0.05705 $0.10056
See notes to financial statements.
</TABLE>
<PAGE>
IPS Millennium Fund:
Investment Portfolio November 30, 1996
<TABLE>
<CAPTION>
Shares or Market Percent of Sector
EQUITY SECURITIES: Principal Amount Value Net Assets Weighting
<S> <C> <C> <C> <C>
Consumer Durables 2.0%
- ----------------- ----
Sturm Ruger & Co Inc. 6,400 $114,400 2.0%
Consumer Retail 7.7%
- --------------- ----
Kent Electronics 9,000 $235,125 4.1%
Nature's Sunshine 4,000 $ 81,000 1.4%
Viking Office Products 4,000 $125,250 2.2%
Computer & Internet Hardware 10.5%
- ---------------------------- -----
Cabletron Systems 2,000 $ 80,750 1.4%
Cascade Communications 1,200 $ 82,950 1.5%
Cisco 2,100 $142,538 2.5%
EMC Corp 9,000 $290,250 5.1%
Semi-Conductors 11.4%
- --------------- -----
Applied Materials 9,000 $343,125 6.0%
Intel, Inc. 1,500 $190,312 3.3%
Linear Technology 2,500 $117,812 2.1%
Property/Casualty Insurance 3.1%
- --------------------------- -----
American International Group 400 $ 46,000 0.8%
Frontier Insurance Group 3,520 $134,640 2.3%
Banking & Brokerage 8.1%
- ------------------- -----
Banker's Trust 1,200 $104,400 1.8%
Charles Schwab 2,000 $ 60,250 1.1%
CyberCash 1,000 $ 25,250 0.4%
KeyCorp 800 $ 41,900 0.7%
MBNA Corporation 1,000 $ 40,375 0.7%
Nat'l Commerce Bankcorp 1,966 $ 71,759 1.3%
U.S. Bancorp 800 $ 34,200 0.6%
Wells Fargo Bankcorp 300 $ 85,388 1.5%
Specialty Chemical 4.8%
- ------------------ -----
Ionics, Inc. 1,420 $ 68,515 1.2%
Learonal 2,000 $ 46,500 0.8%
Sigma-Aldrich 1,464 $ 91,500 1.6%
Thermo Instruments 2,000 $ 67,500 1.2%
Communications 10.1%
- ------------- -----
Andrew Corporation 3,000 173,625 3.0%
Brooks Fiber Properties 3,000 $ 94,125 1.6%
Lucent Technologies 1,583 $ 81,129 1.4%
MFS Communications 3,000 $144,750 2.5%
WorldCom, Inc. 4,000 $ 92,500 1.6%
<PAGE>
Miscellaneous Services 5.0%
- ---------------------- -----
CUC International 4,500 $118,688 2.1%
Equifax, Inc. 4,000 $131,000 2.3%
Sysco Corp. 1,000 $ 34,125 0.6%
(continued on next page)
<PAGE>
Shares or Market Percent of Sector
EQUITY SECURITIES: Principal Amount Value Net Assets Weighting
==============================================================================================================
Consumer Durables 2.0%
- ----------------- ----
Sturm Ruger & Co Inc. 6,400 $114,400 2.0%
Medical & Information Technology 7.8%
- -------------------------------- -----
Express Scripts 1,000 $ 35,625 0.6%
HBO & Company 2,600 $147,875 2.6%
Medic Computer Systems 1,000 $ 33,750 0.6%
Physicians Computer Network 1,600 $ 13,200 0.2%
Quintiles Transnational 600 $ 36,300 0.6%
Rural/Metro, Inc. 1,885 $ 65,975 1.2%
Software 11.4%
- -------- -----
Computer Associates, Inc. 4,000 $263,000 4.6%
Microsoft Corp. 600 $ 94,125 1.6%
Oracle Systems 5,000 $245,000 4.3%
Security Dynamics Technologies 1,200 $ 49,350 0.9%
Drugs 2.8%
- ----- -----
Abbott Laboratories, Inc. 1,195 $ 66,621 1.2%
Becton, Dickinson 600 $ 25,200 0.4%
Pfizer, Inc. 600 $ 53,775 0.9%
Vical 1,000 $ 18,500 0.3%
Real Estate Investment Trust 9.8%
- ---------------------------- -----
BRE Properties 3,000 $ 66,375 1.2%
Cali Realty 4,000 $113,000 2.0%
Homestead Village 251 $ 3,828 0.1%
Homestead Village Warrants 168 $ 1,008 0.0%
Kimco 4,000 $116,500 2.0%
New Plan Realty Trust 3,905 $ 89,815 1.6%
Security Capital Pacific 3,000 $ 61,500 1.1%
Washington REIT 2,800 $ 46,200 0.8%
Electric Utilities 2.1%
- ------------------ -----
Duke Power 2,000 $ 92,750 1.6%
Wisconsin Energy 1,100 $ 29,425 0.5%
Energy 2.0%
- ------ -----
Amoco Corp. 1,500 $116,437 2.0%
Money Market Funds 4.4%
- ------------------ -----
Dreyfus Treasury Prime Money
Fund 100,834 $100,834 1.8%
Provident Insured Money Fund 671 $ 671 0.0%
Riverfront U.S. Govt Securities
Fund 151,349 $151,349 2.6%
===============================================================================================================
TOTAL INVESTED ASSETS: $5,729,619 100.0%
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and the Board of Trustees
IPS Funds
IPS Millennium Fund
Knoxville, Tennessee
We have audited the accompanying statement of assets and liabilities of
IPS Millennium Fund, including the schedule for investments in
securities, as of November 30, 1996, and the related statement of
operations for the year then ended, the statement of changes in net
assets and the selected per share data and ratios for each of the two
years in the period then ended. These financial statements and per share
data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
per share data and ratios 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
per share data and ratios 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 November 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. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the
financial position of IPS Millennium Fund as of November 30, 1996, the
results of its operations for the year then ended, the changes in its net
assets and the selected per share data and ratios for each of the two
years in the period then ended, in conformity with generally accepted
accounting principles.
Cherry, Bekaert & Holland LLP
Knoxville, Tennessee
January 10, 1997
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