<PAGE> 1
[FAIRPORT GRAPHIC]
Fairport Funds
Charting A Course You Can Trust(SM)
Annual Report to Shareholders
- - Fairport Midwest Growth Fund
- - Fairport Growth and Income Fund
- - Fairport Government Securities Fund
October 31, 1996
Advised by
Roulston & Company, Inc.
<PAGE> 2
FAIRPORT FUNDS ANNUAL REPORT TO SHAREHOLDERS
- --------------------------------------------------------------------------------
November 27, 1996
Dear Shareholder:
We are pleased to issue the financial report on the Fairport Funds for the year
ended October 31, 1996.
The Fairport Midwest Growth Fund gained 16.28% during the period, while the
Fairport Growth and Income Fund gained 17.77%. These returns were earned in a
period when the market, as measured by the Standard & Poor's 500 Stock Index,
gained by 23.98%. The Fairport Government Securities Fund gained 4.58% during
the period while the Lehman Brothers Intermediate Treasury Bond Index increased
by 5.62%.
Economic activity continued at the slower pace set in the preceding year.
Capital spending and export growth remain the driving engines of this expansion,
while consumer and public sector spending remain the restraining elements. Some
price increases among a few commodities were worrisome early in the year, but
this concern evaporated over the summer. Productivity, wage restraint, better
than anticipated agricultural production, and moderate growth kept a tight rein
on inflation.
Continued moderate economic growth approaching 3% with inflation under control
remains a favorable setting for both the bond and stock markets.
In the commentary that follows on each of the Funds, you will note a common
theme that has long been a hallmark of our investment management. Research is
the cornerstone of our investment process. Our research efforts for the Fairport
Funds continue to give us confidence in the future of the economy and the
portfolios we manage on your behalf.
/s/ Scott D. Roulston /s/ Joseph A. Harrison
Scott D. Roulston Joseph A. Harrison
President Director of Investments
<PAGE> 3
FAIRPORT FUNDS INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
FAIRPORT MIDWEST GROWTH FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Midwest Growth Fund with the performance of the Standard & Poor's 500
Stock and Lipper Growth Fund indices.
[Graph inserted here]
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94
------ ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund
Lipper Growth Fund Index
Standard & Poor's 500 Stock Index
<CAPTION>
1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund
Lipper Growth Fund Index
Standard & Poor's 500 Stock Index
<FN>
AVERAGE ANNUAL TOTAL RETURN*
1 Year.............16.28%
Since Inception....17.01%
*For period ending 10/31/96
Past performance is not indicative of future results.
</TABLE>
Fairport Midwest Growth Fund was established to achieve capital appreciation
through the investment in equity securities of companies that are headquartered
in the eight-state area contiguous to the Great Lakes.
While the Fund's objective is capital appreciation, investments are not limited
to growth stocks. We seek opportunities in a broad spectrum of investments from
traditional growth companies to highly cyclical companies.
Investment decisions are driven by intense and continuous fundamental research.
This research focus attempts to uncover a combination of internal and external
change at a company that presents an unusual appreciation potential.
Internal changes that would be significant might include:
- - An internal change in management
- - A strategic decision to change the business focus
of the company or a sector of the company
that could include an acquisition or divestiture
- - The development of an important new product
or service
- - Adoption of new operating methods or systems that
could positively impact profitability and cash flow.
Significant external changes might include:
- - A new CEO or other important manager brought
in from outside the company
- - A structural change such as a consolidation or
bankruptcy in an important customer industry
- - A significant change in the competitive environment
caused by a new entrant into the market,
a new product introduced by a competitor or a dramatic
change in product pricing or costs
- - The development of a new technology that could impact
the industry.
While the above lists are far from exclusive, they provide some examples of the
type of changes our research process attempts to identify and analyze.
Continued steady domestic economic growth and the potential for improving
international economies provide a positive backdrop for the Midwest in the year
ahead. The combination of modest growth and low inflation, while generally
positive, will present operating challenges to many company managements. Our
research-driven stock selection process will continue to focus on each
management's ability to prosper in this environment. To date, this disciplined
approach is still able to identify attractive investments in the Midwest.
<PAGE> 4
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
FAIRPORT GROWTH AND INCOME FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Growth and Income Fund with the performance of the Standard & Poor's
500 Stock and Lipper Growth & Income Fund indices.
[Graph inserted here]
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94
------ ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fairport Growth and Income Fund
Lipper Growth and Income Fund Index
Standard & Poor's 500 Stock Index
<CAPTION>
1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Growth and Income Fund
Lipper Growth and Income Fund Index
Standard & Poor's 500 Stock Index
<FN>
AVERAGE ANNUAL TOTAL RETURN*
1 Year.............17.77%
Since Inception....13.02%
*For period ending 10/31/96
Past performance is not indicative of future results.
</TABLE>
Fairport Growth and Income Fund was established to achieve capital appreciation
and current income primarily through investment in common stocks or securities
convertible into common stocks.
The investment policy is to invest in a diversified portfolio of dividend-paying
common stocks which have been researched by our own staff and offer reasonable
valuation based on price to earnings, book value and cash flows.
Our investment strategy is to seek out companies that meet the demanding
fundamental analysis of our research staff. Visits with management, suppliers,
customers, distributors and unions are among the sources utilized by our
analysts to form judgments about the outlook for each company. The results of
this analysis are joined with rigorous valuation for each investment in the
portfolio.
Two firms that typify our investment approach are AVX Corp. and Avnet, Inc. Both
companies, one a manufacturer of electronic components and the other a
distributor of components and computer equipment, were adversely affected by an
inventory correction that began one year ago. In mid-summer, both issues were
very attractively valued. Our research contacts at a number of manufacturing and
distribution companies were able to confirm that excess inventories in some
lines had already been eliminated and others had but a short time until they
would be in balance as well. Two fine companies, with prospects for solid
earnings growth ahead confirmed, made excellent additions to the portfolio.
Currently, the fund is diversified among 32 investments representing most
sectors of our economy. Our broad-based research effort is focused on companies
that are taking requisite action to improve profitability. Conversations with a
broad cross-section of managements indicate a favorable outlook for continued
moderate economic growth with low inflation. We will continue to seek out those
companies that present a favorable earnings outlook at prices that offer good
value.
2
<PAGE> 5
INVESTMENT ADVISER'S REPORT
- -------------------------------------------------------------------------------
FAIRPORT GOVERNMENT SECURITIES FUND
The graph below compares the increase in value of a $10,000 investment in
Fairport Government Securities Fund with the performance of the Lehman Brothers
Intermediate Treasury Bond Index.
[Graph inserted here]
<TABLE>
<CAPTION>
FAIRPORT GOVERNMENT SECURITIES FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
7/1/93 7/93 10/93 1/94 4/94 7/94 10/94
------ ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Fairport Government Securities Fund
Lehman Brothers Intermediate Treasury
Bond Index
<CAPTION>
1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96
---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Government Securities Fund
Lehman Brothers Intermediate Treasury
Bond Index
<FN>
AVERAGE ANNUAL TOTAL RETURN*
1 Year.............4.58%
Since Inception....4.19%
*For period ending 10/31/96
Past performance is not indicative of future results.
</TABLE>
In order to meet its objective of current income with preservation of capital,
Fairport Government Securities Fund seeks to minimize credit risk by investment
in securities issued directly by the U.S. Government. Because changes in
interest rates affect the value of the Fund's holdings, investment in issues
maturing in less than ten years are the primary focus of the portfolio.
Since our last report, many of the concerns about commodity prices and wage
increases have been put to rest. Inflation remained in check and interest rates
receded from the interim highs reached in June. Our outlook calls for continued
moderate growth and low inflation which should be a favorable environment for
the bond market.
3
<PAGE> 6
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND October 31, 1996
================================================================================
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 93.08%
CAPITAL GOODS-22.80%
AMP, Inc. .................................. 36,700 $ 1,243,212
GATX Corp. ................................. 41,000 1,957,750
Harnischfeger Industries, Inc. ............. 50,000 2,000,000
Kennametal, Inc. ........................... 50,000 1,700,000
Myers Industries, Inc. ..................... 120,000 1,860,000
Nordson Corp. .............................. 24,700 1,358,500
Park-Ohio Industries, Inc.* ................ 100,509 1,507,635
Trinova Corp. .............................. 43,000 1,413,625
-----------
13,040,722
- --------------------------------------------------------------------------------
COMMUNICATION EQUIPMENT-3.05%
Allen Group, Inc.* ......................... 110,000 1,746,250
- --------------------------------------------------------------------------------
CONSUMER DURABLES-6.84%
Masco Corp. ................................ 65,000 2,039,375
Royal Appliance Manufacturing Co.* ......... 300,000 1,875,000
-----------
3,914,375
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES-21.57%
Consolidated Stores Corp.* ................. 54,700 2,112,788
Patterson Dental Co.* ...................... 75,000 2,100,000
Rite Aid Corp. ............................. 72,000 2,448,000
Stryker Corp. .............................. 100,000 2,975,000
Worthington Foods, Inc. .................... 120,000 2,700,000
-----------
12,335,788
- --------------------------------------------------------------------------------
ENERGY-5.33%
Belden & Blake Corp.* ...................... 115,100 3,050,150
- --------------------------------------------------------------------------------
FINANCE-16.25%
First Bank System, Inc. .................... 33,000 2,178,000
First Empire State Corp. ................... 8,000 2,054,000
Norwest Corp. .............................. 60,000 2,632,500
Star Banc Corp. ............................ 27,000 2,430,000
-----------
9,294,500
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
MATERIALS/SERVICES-17.24%
<S> <C> <C>
Bearings, Inc. ..................................................................... 78,750 $ 2,047,500
Duriron Co., Inc. .................................................................. 55,800 1,492,650
Figgie International, Inc. Class A* ................................................ 180,000 1,912,500
Libbey, Inc. ....................................................................... 70,000 1,680,000
Owens Corning Fiberglass Corp. ..................................................... 29,700 1,150,875
Pioneer Standard Electronics, Inc. ................................................. 150,000 1,575,000
-----------
9,858,525
- ----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS-(COST $43,100,008) ............................................. 53,240,310
- ----------------------------------------------------------------------------------------------------------------
Principal
Amount
- ----------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.47%
United Missouri Bank, U.S. Treasury Note, $2,585,000 par, 5.125% coupon,
due 06/30/98, dated 10/31/96, to be sold on 11/01/96 at $2,555,380
(Cost $2,555,000) $ 2,555,000 2,555,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.55% (COST $45,655,008)** ...................................... 55,795,310
-----------
CASH AND OTHER ASSETS NET OF LIABILITIES-2.45% ..................................... 1,402,607
-----------
NET ASSETS-100.00% ................................................................. $57,197,917
===========
================================================================================================================
<FN>
* Non-income producing security.
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
FAIRPORT GROWTH AND INCOME FUND October 31, 1996
================================================================================
Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS -- 91.34%
AEROSPACE DEFENSE-2.89%
<S> <C> <C>
Boeing Co. ................................... 7,000 $ 667,625
- --------------------------------------------------------------------------------
CAPITAL GOODS-18.84%
Emerson Electric Co. ......................... 8,000 712,000
GATX Corp. ................................... 14,000 668,500
General Electric Co. ......................... 7,100 686,925
Harnischfeger Industries, Inc. ............... 20,000 800,000
Johnson Controls, Inc. ....................... 10,000 730,000
Kennametal, Inc. ............................. 22,000 748,000
----------
4,345,425
- --------------------------------------------------------------------------------
CONSUMER DURABLES-9.23%
Leggett & Platt, Inc. ........................ 26,000 776,750
TRW, Inc. .................................... 7,000 633,500
Tupperware Corp. ............................. 14,000 719,250
----------
2,129,500
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES-16.71%
Banta Corp. .................................. 24,000 507,000
Baxter International, Inc. ................... 10,000 416,250
Beckman Instruments, Inc. .................... 20,000 735,000
Dial Corp. ................................... 26,000 357,500
Rite Aid Corp. ............................... 20,000 680,000
Sara Lee Corp. ............................... 22,000 781,000
Viad Corp. ................................... 26,000 377,000
----------
3,853,750
- --------------------------------------------------------------------------------
ENERGY-3.07%
Exxon Corp. .................................. 8,000 709,000
- --------------------------------------------------------------------------------
FINANCE-17.70%
American International Group, Inc. ........... 8,000 869,000
First Empire State Corp. ..................... 3,000 770,250
KeyCorp ...................................... 15,000 699,375
National City Corp. .......................... 20,000 867,500
Norwest Corp. ................................ 20,000 877,500
----------
4,083,625
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
MATERIALS/SERVICES-9.98%
<S> <C> <C>
Avnet, Inc. .................................................................... 13,000 $ 654,875
Cabot Corp. .................................................................... 18,000 434,250
Ferro Corp. .................................................................... 20,000 540,000
Teleflex, Inc. ................................................................. 14,000 673,750
-----------
2,302,875
- ------------------------------------------------------------------------------------------------------------
TECHNOLOGY-9.63%
AVX Corp. ...................................................................... 32,000 592,000
Frontier Corp. ................................................................. 24,000 696,000
Harris Corp. ................................................................... 12,000 751,500
Lucent Technologies, Inc. ...................................................... 3,889 182,783
-----------
2,222,283
- ------------------------------------------------------------------------------------------------------------
UTILITIES-3.29%
GTE Corp. ...................................................................... 18,000 758,250
- ------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS-(COST $16,006,261) ......................................... 21,072,333
- ------------------------------------------------------------------------------------------------------------
Principal
Amount
- ------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.68%
United Missouri Bank, U.S. Treasury Note, $1,792,000 par, 5.125% coupon, due
06/30/98, dated 10/31/96, to be sold on 11/01/96 at $1,771,263
(Cost $1,771,000)............................................................. $ 1,771,000 1,771,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-99.02% (COST $17,777,261)** .................................. 22,843,333
-----------
CASH AND OTHER ASSETS NET OF LIABILITIES-0.98% ................................. 227,520
-----------
NET ASSETS-100.00% ............................................................. $23,070,853
===========
============================================================================================================
<FN>
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
FAIRPORT FUNDS SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
FAIRPORT GOVERNMENT SECURITIES FUND October 31, 1996
================================================================================
Principal
Amount Value
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES -- 96.69%
U.S. TREASURY NOTES
<C> <C> <C>
6.875%, 08/31/99 ................................... $1,000,000 $1,024,720
5.500%, 04/15/00 ................................... 1,000,000 985,480
5.625%, 02/28/01 ................................... 1,000,000 983,690
6.250%, 02/15/03 ................................... 1,000,000 1,003,880
5.875%, 02/15/04 ................................... 1,600,000 1,564,112
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS-96.69% (COST $5,561,814)** ....... 5,561,882
----------
CASH AND OTHER ASSETS NET OF LIABILITIES-3.31% ..... 190,418
----------
NET ASSETS-100.00% ................................. $5,752,300
==========
================================================================================
<FN>
**Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
FAIRPORT FUNDS STATEMENTS OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------------------------------------------
October 31, 1996
===========================================================================================================================
FAIRPORT MIDWEST FAIRPORT GROWTH FAIRPORT GOVERNMENT
GROWTH FUND AND INCOME FUND SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
Investments in securities at value (cost
$45,655,008, $17,777,261 and $5,561,814,
respectively) .................................. $ 55,795,310 $ 22,843,333 $ 5,561,882
Cash .............................................. 754 833 117,328
Receivable for capital stock sold ................. 97,227 5,517 2,678
Receivable for securities sold .................... 1,412,285 685,000 0
Dividends and interest receivable ................. 27,368 17,725 57,646
Reimbursement due from adviser .................... 11,559 7,992 11,248
Deferred organization costs (Note A) .............. 10,868 10,868 10,868
Other assets ...................................... 1,368 627 197
------------ ------------ ------------
Total assets .............................. 57,356,739 23,571,895 5,761,847
------------ ------------ ------------
LIABILITIES
Payable for capital stock redeemed ................ 103,698 54,383 0
Payable for securities purchased .................. 0 421,530 0
Accrued expenses .................................. 55,124 25,129 9,269
Distributions payable ............................. 0 0 278
------------ ------------ ------------
Total liabilities ......................... 158,822 501,042 9,547
------------ ------------ ------------
NET ASSETS
Applicable to 3,689,148, 1,622,062
and 589,863 shares outstanding, respectively ... $ 57,197,917 $ 23,070,853 $ 5,752,300
============ ============ ============
NET ASSETS CONSIST OF
Capital paid-in ................................... $ 42,806,548 $ 16,110,573 $ 5,861,145
Undistributed net investment income (loss) ........ (10,427) 35,717 0
Accumulated net realized gain (loss) on investments 4,261,494 1,858,491 (108,913)
Net unrealized appreciation on investments ........ 10,140,302 5,066,072 68
------------ ------------ ------------
$ 57,197,917 $ 23,070,853 $ 5,752,300
============ ============ ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE ..................... $ 15.50 $ 14.22 $ 9.75
=====================================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 12
<TABLE>
<CAPTION>
FAIRPORT FUNDS STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------
Year Ended October 31, 1996
===========================================================================================================================
FAIRPORT MIDWEST FAIRPORT GROWTH FAIRPORT GOVERNMENT
GROWTH FUND AND INCOME FUND SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
<S> <C> <C> <C>
Dividends .............................................. $ 716,743 $ 551,308 $ 0
Interest ............................................... 134,338 43,022 434,855
----------- ----------- -----------
Total investment income ......................... 851,081 594,330 434,855
----------- ----------- -----------
EXPENSES
Investment advisory fees (Note B) ...................... 417,458 184,723 18,674
Transfer agent fees .................................... 55,050 38,160 27,891
Administration fees .................................... 75,644 33,436 10,062
Distribution expenses (Note B) ......................... 139,214 61,603 18,664
Pricing fees ........................................... 39,023 26,857 25,267
Printing fees .......................................... 30,611 12,105 3,417
Custodian fees ......................................... 28,152 19,365 9,428
Auditing fees .......................................... 24,785 9,944 3,204
Legal fees ............................................. 45,627 18,291 6,445
Insurance fees ......................................... 19,597 9,631 4,164
Amortization of organization costs (Note A) ............ 3,115 3,115 3,115
Registration expenses .................................. 40,663 27,016 19,867
Trustees fees .......................................... 15,381 4,927 1,969
Miscellaneous expenses ................................. 4,093 1,541 777
----------- ----------- -----------
Total expenses .................................. 938,413 450,714 152,944
Expenses reimbursed (Note B) ........................... (169,950) (81,095) (85,718)
----------- ----------- -----------
Net expenses .................................... 768,463 369,619 67,226
----------- ----------- -----------
NET INVESTMENT INCOME .................................. 82,618 224,711 367,629
----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ................ 4,515,778 1,856,970 (97,666)
Net change in unrealized
appreciation (depreciation) on investments ......... 3,805,220 1,863,728 (3,304)
----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments ......................... 8,320,998 3,720,698 (100,970)
----------- ----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS ................. $ 8,403,616 $ 3,945,409 $ 266,659
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 13
<TABLE>
<CAPTION>
FAIRPORT FUNDS STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
================================================================================================================================
Fairport Midwest Fairport Growth Fairport Government
Growth Fund and Income Fund Securities Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
10/31/96 10/31/95 10/31/96 10/31/95 10/31/96 10/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net investment income ..................... $ 82,618 $ 116,744 $ 224,711 $ 257,163 $ 367,629 $ 412,546
Net realized gain (loss) on investments ... 4,515,778 1,329,274 1,856,970 280,894 (97,666) (1,571)
Net change in unrealized appreciation
(depreciation) on investments .......... 3,805,220 5,112,366 1,863,728 2,751,712 (3,304) 698,738
------------ ------------ ------------ ------------ ------------ ------------
Increase in net assets .................... 8,403,616 6,558,384 3,945,409 3,289,769 266,659 1,109,713
------------ ------------ ------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................ (91,013) (130,340) (254,673) (207,044) (405,004) (411,089)
From net realized gains ................... (774,801) (2,076,604) (178,762) (167,462) 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total distributions ....................... (865,814) (2,206,944) (433,435) (374,506) (405,004) (411,089)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................. 11,742,064 17,023,299 4,811,561 5,619,642 1,737,076 1,562,174
Reinvestment of dividends ................. 857,142 2,182,580 383,496 309,030 309,367 265,604
Amount paid for repurchase of shares ...... (12,346,785) (3,838,535) (8,718,184) (3,939,188) (4,802,614) (1,493,055)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from capital
transactions ........................... 252,421 15,367,344 (3,523,127) 1,989,484 (2,756,171) 334,723
------------ ------------ ------------ ------------ ------------ ------------
Total increase (decrease) in net assets ... 7,790,223 19,718,784 (11,153) 4,904,747 (2,894,516) 1,033,347
NET ASSETS
Beginning of year ......................... 49,407,694 29,688,910 23,082,006 18,177,259 8,646,816 7,613,469
------------ ------------ ------------ ------------ ------------ ------------
End of year ............................... $ 57,197,917 $ 49,407,694 $ 23,070,853 $ 23,082,006 $ 5,752,300 $ 8,646,816
============ ============ ============ ============ ============ ============
Accumulated undistributed (overdistributed)
net investment income included in
net assets at end of year .............. $ (10,427) $ (2,032) $ 35,717 $ 65,679 $ 0 $ 37,375
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Shares sold ............................... 815,058 1,339,632 361,212 502,408 177,063 166,952
Shares issued on reinvestment
of dividends ........................... 62,134 187,547 28,972 28,130 31,864 28,472
Shares repurchased ........................ (835,517) (299,578) (646,096) (355,019) (498,079) (159,651)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from capital
transactions ........................... 41,675 1,227,601 (255,912) 175,519 (289,152) 35,773
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 14
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
The tables below set forth financial data for a share of beneficial interest
outstanding throughout the periods presented.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
Year Year Year Period
Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................. $ 13.55 $ 12.27 $ 11.07 $ 10.00
-------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................................ 0.02 0.04 0.02 0.01
Net realized and unrealized gain (loss) on investments 2.16 2.04 1.19 1.07
-------- --------- ---------- ---------
Total from investment operations ..................... 2.18 2.08 1.21 1.08
-------- --------- ---------- ---------
LESS DISTRIBUTIONS
From net investment income ........................... (0.03) (0.04) (0.01) (0.01)
From realized capital gains .......................... (0.20) (0.76) 0.00 0.00
-------- --------- ---------- ---------
Total distributions .................................. (0.23) (0.80) (0.01) (0.01)
-------- --------- ---------- ---------
NET ASSET VALUE, END OF PERIOD ....................... $ 15.50 $ 13.55 $ 12.27 $ 11.07
-------- --------- ---------- ---------
TOTAL RETURN ......................................... 16.28% 18.17% 10.89% 10.90%**
======== ========= ========== =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) ...................... $ 57,198 $ 49,408 $ 29,688 $ 9,870
Ratio of expenses to average net assets
before reimbursement of expenses by Adviser .......... 1.69% 1.57% 1.54% 2.89%*
after reimbursement of expenses by Adviser ........... 1.38% 1.41% 1.45% 1.50%*
Ratio of net investment income to average net assets
before reimbursement of expenses by Adviser ....... (0.16%) 0.14% 0.08% (1.11%)*
after reimbursement of expenses by Adviser ........ 0.15% 0.29% 0.17% 0.28%*
Portfolio turnover ................................... 58.01% 46.51% 77.57% 0.00%
Average commission rate paid ......................... $ 0.0600 N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------
<FN>
* Annualized
** Not Annualized
N/A Not applicable; disclosure not required
(1) The Fairport Midwest Growth Fund, Fairport Growth and Income Fund and
Fairport Government Securities Fund commenced operations on July 1, 1993. See
accompanying notes to financial statements.
</TABLE>
<PAGE> 15
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND FAIRPORT GOVERNMENT SECURITIES FUND
- ----------------------------------------------------------------------------------------------------------------------
Year Year Year Period Year Year Year Period
Ended Ended Ended Ended Ended Ended Ended Ended
10/31/96 10/31/95 10/31/94 10/31/93(1) 10/31/96 10/31/95 10/31/94 10/31/93(1)
- ----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 12.29 $ 10.68 $ 10.36 $ 10.00 $ 9.84 $ 9.03 $ 10.20 $ 10.00
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
0.13 0.15 0.14 0.04 0.49 0.49 0.43 0.15
2.04 1.68 0.35 0.36 (0.05) 0.81 (1.17) 0.16
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
2.17 1.83 0.49 0.40 0.44 1.30 (0.74) 0.31
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(0.14) (0.12) (0.14) (0.04) (0.53) (0.49) (0.42) (0.11)
(0.10) (0.10) (0.03) 0.00 0.00 0.00 (0.01) 0.00
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(0.24) (0.22) (0.17) (0.04) (0.53) (0.49) (0.43) (0.11)
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 14.22 $ 12.29 $ 10.68 $ 10.36 $ 9.75 $ 9.84 $ 9.03 $ 10.20
- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
17.77% 17.36% 4.72% 3.98%** 4.58% 14.76% (7.24%) 3.04%**
============ ============ ============ ============ ============ ============ ============ ============
$ 23,071 $ 23,082 $ 18,177 $ 8,716 $ 5,752 $ 8,647 $ 7,614 $ 5,829
1.83% 1.79% 1.72% 2.79%* 2.05% 2.16% 1.80% 2.78%*
1.50% 1.50% 1.50% 1.50%* 0.90% 0.90% 0.90% 0.90%*
0.58% 0.98% 1.20% 0.10%* 3.78% 3.89% 3.88% 2.29%*
0.91% 1.26% 1.42% 1.39%* 4.93% 5.16% 4.78% 4.17%*
34.02% 13.36% 35.16% 4.18% 21.23% 1.28% 24.14% 24.53%
$ 0.0591 N/A N/A N/A N/A N/A N/A N/A
======================================================================================================================
</TABLE>
13
<PAGE> 16
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
October 31, 1996
NOTE (A) SIGNIFICANT ACCOUNTING POLICIES:
Fairport Funds (the "Trust"), formerly known as Roulston Family of Funds, is an
open-end management investment company and is organized under Ohio law as a
business trust under a Declaration of Trust dated September 16, 1994. On March
1, 1996, the Trust changed its name from The Roulston Family of Funds to
Fairport Funds. The Trust currently consists of three Funds (the "Funds"):
Fairport Midwest Growth Fund (the "Midwest Growth Fund"), Fairport Growth and
Income Fund (the "Growth and Income Fund") and Fairport Government Securities
Fund (the "Government Fund"). The Trust is registered under the Investment
Company Act of 1940, as amended (the "Act"). On April 29, 1995, pursuant to an
Agreement and Plan of Reorganization and Liquidation, the Midwest Growth Fund,
the Growth and Income Fund and the Government Fund of the Trust acquired in a
tax free reorganization, all of the assets of each of the Roulston Midwest
Growth Fund, the Roulston Growth and Income Fund and the Roulston Government
Securities Fund (collectively, the "Acquired Funds") of the Advisors' Inner
Circle Fund, a Massachusetts business trust, respectively, in exchange for the
assumption of such Acquired Fund's liabilities and a number of full and
fractional shares of the corresponding Fund of the Trust having an aggregate net
asset value equal to such Acquired Fund's net assets (the "Reorganization"). The
Reorganization was approved by the shareholders of the Acquired Funds on March
24, 1995. For accounting purposes, the Reorganization was accounted for in a
manner similar to a pooling of interest and the financial highlights have been
presented since the Funds' inception, July 1, 1993.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Trust.
(1) SECURITY VALUATION: Equity securities which are listed or admitted to
trading on a national securities exchange or in the over-the-counter market will
be valued at the last sale price on the exchange on which the security is
principally traded. Equity securities for which there is no sale on that day
will be valued at their closing bid prices obtained from one or more dealers
making markets for such securities or, if market quotations are not readily
available, at their fair values as determined in good faith by the Board of
Trustees.
Valuations of fixed and variable income securities ("debt securities") are
supplied by independent pricing services used by FPS Services, Inc., as
administrator, which have been approved by the Trustees of the Trust. Valuations
are based upon a consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications as to value from recognized
dealers, and general market conditions. Debt securities for which market
quotations are readily available are valued based upon these quotations. The
Trustees may deviate from the valuation provided by the pricing service
whenever, in their judgment, such valuation is not indicative of the fair value
of the debt security. Short-term investments with a maturity of 60 days or less
are valued at amortized cost, which approximates market value.
(2) REPURCHASE AGREEMENTS: All Funds may enter into repurchase agreements with
financial institutions deemed to be credit worthy by Roulston & Company, Inc.
("Roulston"), the Funds' investment adviser, under guidelines approved by the
Trust's Board of Trustees, subject to the seller's agreement to repurchase and
the Funds' agreement to resell such securities at a mutually agreed-upon date
and price. Securities purchased subject to repurchase agreements are deposited
with the Funds' custodian and, pursuant to the terms of the repurchase
agreement, must have an aggregate market value greater than
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
or equal to the repurchase price plus accrued interest at all times. If the
seller were to default on its repurchase obligation or become insolvent, the
Fund would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
was delayed pending court action.
(3) FEDERAL INCOME TAXES: The Funds intend to be treated as "regulated
investment companies" under Sub-chapter M of the Internal Revenue Code and to
distribute substantially all of their net taxable income. Accordingly, no
provisions for Federal income taxes have been made in the accompanying financial
statements.
(4) INVESTMENT INCOME AND SECURITIES TRANSACTIONS: Dividend income is recorded
on the ex-dividend date. Interest income is accrued daily. Security transactions
are accounted for on the date securities are purchased or sold. Security gains
and losses are determined on the identified cost basis.
(5) DIVIDENDS AND DISTRIBUTIONS: Substantially all of the net investment income
(exclusive of capital gains) of the Midwest Growth Fund and the Growth and
Income Fund is distributed in the form of semi-annual dividends. Net investment
income (exclusive of capital gains) of the Government Fund is declared daily and
distributed in the form of monthly dividends. Substantially all of the capital
gains realized by the Funds will be distributed annually.
(6) DEFERRED ORGANIZATION COSTS: Organizational costs are being amortized on a
straight-line basis over five years commencing April 29, 1995.
NOTE (B) RELATED PARTY TRANSACTIONS:
The Trust and Roulston have entered into an Investment Advisory Agreement (the
"Agreement") dated as of January 20, 1995. Under terms of the Agreement,
Roulston makes the investment decisions for the assets of the Funds and
continuously reviews, supervises, and administers the investment program of the
Funds. For its services as investment adviser, Roulston receives a fee, at an
annual rate of 0.75% of the average daily net assets of each of the Midwest
Growth Fund and the Growth and Income Fund up to $100 million of such assets,
and 0.50% of each such Fund's assets of $100 million or more. With respect to
the Government Fund, Roulston receives a fee at an annual rate of 0.25% of the
average daily net assets of the Government Fund up to $100 million of such
assets, and 0.125% of such assets of $100 million or more. Such fees will be
calculated daily and paid monthly.
Prior to the effective date of the Reorganization, Roulston served as the
investment adviser to each of the Acquired Funds. For such services, Roulston
received an advisory fee from the Acquired Funds at the following annual rates:
1.00% of the value of each of the Midwest Growth Fund's and the Growth and
Income Fund's average daily net assets up to $100 million, 0.75% of each such
Fund's assets over $100 million; and 0.50% of the value of the Government Fund's
average daily net assets up to $100 million, 0.375% of the average daily net
assets from $100 million to $200 million, and 0.25% of the average daily net
assets of such Fund over $200 million.
Pursuant to Rule 12b-1 under the Act, the Trust has adopted a Distribution
Agreement and Shareholder Service Plan dated January 20, 1995 (the "Plan"),
under which each Fund is authorized to pay or reimburse Roulston Research Corp.
(the "Distributor"), ultimately a wholly-owned subsidiary of Roulston, a
periodic amount calculated at an annual rate not to exceed .25% of the average
daily net assets value of such Fund. Such an amount may be used by the
Distributor to pay broker-dealers, banks and other institutions (a
"Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between the Distributor and the
Participating Organization or for distribution assistance and/or shareholder
service provided by
15
<PAGE> 18
FAIRPORT FUNDS NOTES TO FINANCIAL STATEMENTS CONT.
- --------------------------------------------------------------------------------
October 31, 1996
the Distributor. Under the Plan, a Participating Organization may include the
Distributor's affiliates.
In addition, the Board of Trustees of the Trust adopted certain procedures in
accordance with Section 17(e)(2) and Rule 17e-1 under the Act pursuant to which
the Distributor was permitted to execute certain portfolio transactions as
broker on behalf of the Funds. In connection with such brokerage transactions,
Roulston as the investment adviser, could determine to use the Distributor if
such use would likely result in commissions, fees or other remuneration and
prices for and execution of securities transactions at least as favorable to
such Fund as those likely to be derived from other qualified brokers. Such
procedures were in place and used during the year ended October 31, 1996 until
February 12, 1996, and have not been used since that date.
Roulston has agreed with the Trust to waive its investment advisory fee and to
reimburse certain other expenses of the Funds from the effective date of the
Reorganization (April 29, 1995) and such waivers and reimbursements shall
continue at least through April 30, 1997, to the extent necessary to cause total
operating expenses as a percentage of net assets of the Midwest Growth Fund, the
Growth and Income Fund and the Government Fund not to exceed 1.38%, 1.50% and
.90%, respectively.
Information regarding these transactions is as follows for the year ended
October 31, 1996:
<TABLE>
<CAPTION>
MIDWEST GROWTH AND
GROWTH INCOME GOVERNMENT
FUND FUND FUND
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Fees before fee waiver ... $417,458 $184,723 $ 18,674
Fees waived .............. 169,950 81,095 18,674
RULE 12B-1 FEES:
Fees before fee waiver ... 139,214 61,603 18,664
Fees waived .............. 0 0 0
Other expenses
reimbursed ............. 0 0 67,044
Brokerage fees paid to the
distributor on portfolio
transactions ........... 37,716 4,600 0
- ----------------------------------------------------------------------------
</TABLE>
Certain of the officers and trustees of the Trust are also officers, directors
and/or employees of Roulston and the Distributor. The officers and such
interested trustees served without direct compensation from the Trust during the
year.
NOTE (C) INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities (excluding short-term securities)
for the year ended October 31, 1996 were:
<TABLE>
<CAPTION>
PROCEEDS
PURCHASES FROM SALES
(000) (000)
- ------------------------------------------------------
<S> <C> <C>
Midwest Growth Fund ...... $30,566 $32,074
Growth and Income Fund ... 8,032 13,272
Government Fund .......... 1,542 4,367
- ------------------------------------------------------
</TABLE>
NOTE (D) UNREALIZED APPRECIATION AND DEPRECIATION:
At October 31, 1996, the gross unrealized appreciation and depreciation of
securities for book and Federal income tax purposes consisted of the following:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION (DEPRECIATION) (DEPRECIATION)
(000) (000) (000)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Midwest Growth Fund ..... $10,775 $ (635) $10,140
Growth and Income Fund .. 5,159 (93) 5,066
Government Fund ......... 43 (43) 0
- ----------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
FAIRPORT FUNDS REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
Fairport Midwest Growth Fund,
Fairport Growth and Income Fund
and Fairport Government Securities Fund
of Fairport Funds:
We have audited the accompanying statement of assets and liabilities of Fairport
Midwest Growth Fund, Fairport Growth and Income Fund and Fairport Government
Securities Fund (the three funds constituting the Fairport Funds, formerly The
Roulston Family of Funds), including the schedule of investments, as of October
31, 1996, and the related statements of operations for the year then ended,
changes in net assets and financial highlights for each of the two years in the
period then ended. These financial statements and financial highlights are the
responsibility of Fairport Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the period from July 1, 1993 (commencement
of operations) to October 31, 1993 and for the year ended October 31, 1994 were
audited by other auditors whose report dated December 14, 1994 expressed an
unqualified opinion on the financial statements (not presented herein) and
related financial highlights.
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
October 31, 1996, 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 1996 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Fairport Midwest Growth Fund, Fairport Growth and Income Fund and Fairport
Government Securities Fund of the Fairport Funds at October 31, 1996, the
results of their operations for the year then ended and the changes in their net
assets and financial highlights for each of the two years in the period then
ended in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
November 27, 1996
Cleveland, Ohio
<PAGE> 20
[FAIRPORT FUNDS LOGO]
4000 Chester Avenue
Cleveland, Ohio 44103
1-800-332-6459
DIRECTORS:
Thomas V. Chema
David H. Gunning
Scott D. Roulston
Ivan Winfield
OFFICERS:
Scott D. Roulston, President
Michele R. Fogarty, Secretary and Treasurer
ADVISER:
Roulston & Company, Inc.
4000 Chester Avenue
Cleveland, Ohio 44103
DISTRIBUTOR:
Roulston Research Corp.
4000 Chester Avenue
Cleveland, Ohio 44103
ADMINISTRATOR & TRANSFER AGENT:
FPS Services, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
LEGAL COUNSEL:
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
INDEPENDENT PUBLIC ACCOUNTANTS:
Ernst & Young, LLP
1300 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1405
For information call 1-800-332-6459
Fairport Funds take their name from the historic Fairport Harbor Lighthouse,
located on Lake Erie at the Grand River, just east of the Funds' headquarters
in Cleveland, Ohio. Originally built in 1825, the Fairport Harbor Lighthouse
guided ships safely in and out of the harbor for 100 years. In its early years
the lighthouse was considered the gateway to the Western Reserve and the vast
frontiers of the Northwest Territories and beyond. Later the lighthouse served
as a beacon and supply stop for pioneers and travelers on their way to western
Great Lakes ports and beyond. The original brick structure was rebuilt in 1871
of sandstone blocks, as it remains today.
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in a Fund
unless preceded or accompanied by an effective Prospectus which includes details
regarding the Fund's objectives, policies, expenses and other information.
