<PAGE> 1
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, 1998
Advised by
Roulston & Company, Inc.
<PAGE> 2
FAIRPORT FUNDS ANNUAL REPORT TO SHAREHOLDERS
November 30, 1998
Dear Shareholder:
We are pleased to issue our financial report on the Fairport Funds for the year
ended October 31, 1998.
In a difficult year for smaller and medium sized companies, the Fairport Midwest
Growth Fund declined 7.73% and the Fairport Growth and Income Fund declined
1.20%. These returns were earned in a period when the market, as measured by the
Standard & Poor's 500 Stock Index, gained 23.65%. The Fairport Government
Securities Fund gained 10.61% over the same period.
Domestic economic gains moderated as the year progressed. Consumer spending
remained strong supported by increasing real income and a favorable employment
outlook. Capital spending and exports slowed noticeably both as the direct
result of lower Asian demand and indirectly as domestic companies became
cautious with respect to the profit outlook.
During the summer and early fall a financial crisis developed stemming from the
collapse of the Russian economy and the associated losses that were realized
among several large and well-respected financial firms. The resulting flight for
liquidity and quality took a severe toll on equity markets and lower quality
fixed income markets. The principal beneficiary of this crisis was the market
for U.S. Treasury securities.
As the fiscal year came to a close, the Federal Reserve Board took action to
ease monetary conditions and bring stability back to the financial markets. With
a favorable outlook for the U.S. economy and early signs that Asian economies
may be stabilizing, we remain optimistic for both our equity and bond markets.
Our commentary reflects our long-held philosophy that solid and unrelenting
research must form 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 Index and the Growth Funds (Lipper Benchmark).
FAIRPORT MIDWEST GROWTH FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN*
1 Year ..............(7.73)%
5 Years ............. 12.98%
Since Inception ..... 14.32%
*For period ending 10/31/98
Fund inception:7/1/93
<TABLE>
<CAPTION>
7/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund 10,000 10,200 11,090 11,730 11,847 11,796 12,298 12,222 13,327
Growth Funds (Lipper Benchmark)* 10,000 9,988 10,653 11,088 10,479 10,457 10,871 10,587 11,631
Standard & Poor's 500 Stock Index 10,000 9,970 10,480 10,497 10,100 10,482 10,880 10,914 12,019
7/95 10/95 1/96 4/96 7/96 10/96 1/97 4/97 7/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund 14,950 14,532 14,514 16,584 15,785 16,897 18,638 18,404 22,065
Growth Funds (Lipper Benchmark)* 13,127 13,478 14,271 14,989 14,292 16,255 17,301 17,103 20,542
Standard & Poor's 500 Stock Index 13,207 13,750 15,127 15,641 15,385 17,047 19,107 19,563 23,395
10/97 1/98 4/98 7/98 10/98
<S> <C> <C> <C> <C> <C>
Fairport Midwest Growth Fund 22,135 22,374 24,286 22,970 20,425
Growth Funds (Lipper Benchmark)* 20,121 21,154 24,047 23,628 22,409
Standard & Poor's 500 Stock Index 22,528 24,243 27,592 27,911 27,475
</TABLE>
Past Performance is no guarantee of future results. The principal value and
return of a mutual fund investment fluctuates with changes in market conditions.
Shares, when redeemed, may by worth more or less than the original cost. *Growth
Funds tracked by Lipper Analytical Services, Inc. The S&P 500 Index and Lipper
Benchmark are unmanaged indicators of financial performance and as such are not
sold as investments. Unlike our funds, these indices do not reflect any fees or
expenses.
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 include a change in management, a
change in the business focus, an important new product or service, or the
adoption of new operating methods or systems. The type of external changes we
watch for might include a new CEO or other important manager brought in from
outside the company, a significant change in the competitive environment, or the
development of a new technology that could impact the industry.
An excellent example of identifying a management with a well-executed focused
strategy is Cable Design Technologies. The stock of this producer of wire and
cable, primarily for telecommunications and network applications, was severely
depressed as other wire and cable companies involved with the construction
industry had fundamental problems. Cable Design's management has a clear focus
on growth markets and a proven history of integrating acquisitions. In addition,
they have significant equity ownership in the company, so their goals are well
aligned with ours as shareholders.
Another one of our more recent purchases, Brightpoint, is benefiting from the
continued rapid global growth of cellular phones. They are a major distributor
of cellular phones in the U.S. and many important international markets. Growth
is being driven not only by the expanding new user base, but also by the initial
growth of new digital cellular phone technology that is creating a growing
replacement market.
Domestic economic questions and continued international economic turmoil
contribute to the investment challenges in the year ahead. While there have been
some signs recently that the stock market is starting to recognize the excellent
potential in well managed small and mid- capitalization stocks, the primary
focus of the market has been, and remains, on the very large growth stocks. If
the market does broaden its focus, the Faiport Midwest Growth Fund should be
well positioned to participate.
1
<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 Index and the Growth and Income Funds (Lipper Benchmark).
FAIRPORT GROWTH & INCOME FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN*
1 Year .................. (1.20)%
5 Years ................. 14.32%
Since Inception ......... 14.20%
*For period ending 10/31/98
Fund inception:7/1/93
<TABLE>
<CAPTION>
7/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Growth & Income Fund 10,000 10,030 10,398 10,894 10,682 10,900 10,889 10,940 11,746
Growth & Income Funds (Lipper Benchmark)* 10,000 10,054 10,606 11,051 10,478 10,677 10,941 10,778 11,759
Standard & Poor's 500 Stock Index 10,000 9,970 10,480 10,862 10,241 10,482 10,880 10,914 12,019
7/95 10/95 1/96 4/96 7/96 10/96 1/97 4/97 7/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Growth & Income Fund 12,541 12,780 14,075 14,149 13,749 15,051 16,558 17,167 20,353
Growth & Income Funds (Lipper Benchmark)* 12,799 13,125 14,314 14,980 14,540 17,004 17,590 17,753 20,924
Standard & Poor's 500 Stock Index 13,207 13,750 15,127 15,641 15,305 17,054 19,107 19,563 23,395
10/97 1/98 4/98 7/98 10/98
<S> <C> <C> <C> <C> <C>
Fairport Growth & Income Fund 20,560 20,900 23,227 21,437 20,312
Growth & Income Funds (Lipper Benchmark)* 20,414 21,395 24,032 23,310 22,463
Standard & Poor's 500 Stock Index 22,528 24,243 27,592 27,911 27,475
</TABLE>
Past Performance is no guarantee of future results. The principal value and
return of a mutual fund investment fluctuates with changes in market conditions.
Shares, when redeemed, may by worth more or less than the original cost. *Growth
& Income Funds tracked by Lipper Analytical Services, Inc. The S&P 500 Index and
Lipper Benchmark are unmanaged indicators of financial performance and as such
are not sold as investments. Unlike our funds, these indices do not reflect any
fees or expenses.
Fairport Growth and Income Fund was established to achieve capital appreciation
and current income primarily through the 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 offer good examples of our investment approach are Applied Power,
Inc. and Progressive Corporation. Serving a broad range of industrial markets,
Applied Power manufactures hydraulic tools, electrohydraulic valves, controls,
and enclosures for office and laboratory use as well as a variety of data
processing applications. The company has grown very rapidly both internally and
through acquisitions that fit its ongoing business lines. Growth has been well
over 20% and as its product line broadens to serve wider and faster growing
markets the consistency of its growth has been enhanced. The recent market
uncertainty afforded us the opportunity to build a position in this fine company
at very attractive prices. Progressive Corporation has built a long and enviable
position as the dominant issuer of non-standard auto insurance. A few years ago,
the company entered the much larger standard preferred insurance market, which
is dominated by many large and well-known companies. Executing a superior
business plan, the company has enjoyed excellent growth and success in this new
market, a start up business to 35% total revenue in only four years.
Additionally, the company is able to write this new business at the most
profitable rate in the industry, giving it excellent pricing flexibility.
Currently, the Fund is diversified among 28 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 Merrill Lynch
Intermediate Treasury Bond Index.
FAIRPORT GOVERNMENT SECURITIES FUND: GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN*
1 Year ...............10.61%
5 Years .............. 5.62%
Since Inception ...... 5.85%
*For period ending 10/31/98
Fund inception:7/1/93
<TABLE>
<CAPTION>
7/93 7/93 10/93 1/94 4/94 7/94 10/94 1/95 4/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Government Securities 10,000 10,000 10,304 10,346 9,649 9,748 9,558 9,733 10,170
Merrill Lynch Intermediate Treasury Bond Index 10,000 10,021 10,235 10,328 9,970 10,112 10,064 10,219 10,591
7/95 10/95 1/96 4/96 7/96 10/96 1/97 4/97 7/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairport Government Securities 10,628 10,968 11,350 10,989 11,093 11,471 11,545 11,569 12,046
Merrill Lynch Intermediate Treasury Bond Index 10,973 11,262 11,618 11,396 11,537 11,886 12,012 12,098 12,527
10/97 1/98 4/98 7/98 10/98
<S> <C> <C> <C> <C> <C>
Fairport Government Securities 12,246 12,575 12,588 12,810 13,545
Merrill Lynch Intermediate Treasury Bond Index 12,757 13,069 13,242 13,387 14,008
</TABLE>
Past Performance is no guarantee of future results. The principal value and
return of a mutual fund investment fluctuates with changes in market conditions.
Shares, when redeemed, may by worth more or less than the original cost. The
Merrill Lynch Index is an unmanaged indicator of financial performance and as
such is not sold as an investment. Unlike our funds, this index does not reflect
any fees or expenses.
In order to meet its objective of current income with preservation of capital,
Fairport Government Securities Fund seeks to minimize credit risk by investing
in securities issued directly by the U.S. Government or its agencies or
instrumentalities. Because changes in interest rates affect the value of the
Fund's holdings, investments in issues maturing in less than ten years are the
primary focus of the portfolio.
Lower inflation and a slowing economy, brought on by the serious economic
problems in Southeast Asia, caused lower interest rates in the United States and
resulted in higher bond prices. With continued weakness of economic activity
during 1999 in the United States caused by the Asian turmoil, interest rates
should remain under downward pressure for at least the next year. These events
should be favorable to high quality bond prices.
3
<PAGE> 6
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
FAIRPORT MIDWEST GROWTH FUND OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 93.03%
CAPITAL GOODS - 14.44%
Applied Power, Inc., Class A ...................................... 56,000 $ 1,543,500
GATX Corp. ........................................................ 70,000 2,415,000
Gradall Industries, Inc.* ......................................... 100,000 1,462,500
Littlefuse, Inc.* ................................................. 90,000 1,980,000
Parker-Hannifin Corp. ............................................. 57,000 2,037,750
-----------
9,438,750
- -------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES - 4.37%
OfficeMax, Inc.* .................................................. 180,000 1,642,500
Standard Products Co. ............................................. 77,500 1,215,781
-----------
2,858,281
- -------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 17.01%
Braun's Fashions Corp.* ........................................... 150,000 1,125,000
Jo-Ann Stores, Inc., Class A* ..................................... 55,000 990,000
Kmart Corp.* ...................................................... 125,000 1,765,625
Rite Aid Corp. .................................................... 87,000 3,452,813
Worthington Foods, Inc. ........................................... 213,333 3,786,660
-----------
11,120,098
- -------------------------------------------------------------------------------------------------------------
FINANCE - 28.34%
Boykin Lodging Co. ................................................ 150,000 2,137,500
Firstar Corp. ..................................................... 61,000 3,461,750
Household International, Inc. ..................................... 67,000 2,449,688
M & T Bank Corp. .................................................. 6,500 3,240,250
National City Corp. ............................................... 35,280 2,268,945
Norwest Corp. ..................................................... 55,200 2,052,750
U.S. Bancorp ...................................................... 80,000 2,920,000
-----------
18,530,883
- -------------------------------------------------------------------------------------------------------------
HEALTH CARE - 12.28%
NCS Healthcare, Inc., Class A* .................................... 92,000 1,621,500
Patterson Dental Co.* ............................................. 94,300 3,889,875
Stryker Corp. ..................................................... 60,000 2,516,250
-----------
8,027,625
- -------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (CONT.)
INSURANCE-PROPERTY & CASUALTY - 4.50%
Progressive Corp. ............................................... 20,000 $ 2,945,000
- -------------------------------------------------------------------------------------------------------------
MATERIALS/SERVICES - 9.76%
Armco, Inc.* .................................................... 500,000 2,375,00
Cleveland-Cliffs, Inc. .......................................... 40,000 1,587,500
Stericycle, Inc. * .............................................. 125,000 2,421,875
-----------
6,384,375
- -------------------------------------------------------------------------------------------------------------
TECHNOLOGY - 2.33%
Cable Design Technologies Corp. * ............................... 92,400 1,524,600
- -------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS - (COST $52,011,290) ........................ 60,829,612
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT - 7.11%
UMB Bank, U.S. Treasury Note, $4,555,000
par, 8.875% coupon, due 11/15/98, dated 10/30/98,
to be sold on 11/02/98 at $4,652,946 (Cost $4,651,000) ........... 4,651,000 4,651,000
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.14% - (COST $56,662,290**) ................. 65,480,612
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS - (0.14%) ........... (93,481)
-----------
NET ASSETS - 100.00% ............................................... $65,387,131
===========
=============================================================================================================
</TABLE>
* Non-income producing security.
** Also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
5
<PAGE> 8
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
FAIRPORT GROWTH AND INCOME FUND OCTOBER 31, 1998
===============================================================================
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 93.74%
Capital Goods - 16.18%
Applied Power, Inc., Class A ...................................... 60,000 $ 1,653,750
Emerson Electric Co. .............................................. 14,000 924,000
GATX Corp. ........................................................ 24,000 828,000
Parker-Hannifin Corp. ............................................. 24,000 858,000
Teleflex, Inc. .................................................... 28,000 1,083,250
-----------
5,347,000
- -------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES - 9.76%
Harman International Industries, Inc. ............................. 20,000 808,750
Leggett & Platt, Inc. ............................................. 40,000 935,000
Lowe's Cos., Inc. ................................................. 44,000 1,482,250
------------
3,226,000
- -------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 25.17%
Carnival Corp., Class A ........................................... 32,000 1,036,000
Central Newspapers, Inc., Class A ................................. 16,000 1,053,000
Claire's Stores, Inc. ............................................. 64,000 1,084,000
Food Lion, Inc., Class A .......................................... 110,000 1,210,000
Richfood Holdings, Inc. ........................................... 54,000 958,500
Rite Aid Corp. .................................................... 39,100 1,551,781
Viad Corp. ........................................................ 52,000 1,426,750
------------
8,320,031
- -------------------------------------------------------------------------------------------------------------
FINANCE - 17.74%
Household International, Inc. ..................................... 27,000 987,188
M & T Bank Corp. .................................................. 2,300 1,146,550
National City Corp. ............................................... 14,400 926,100
Norwest Corp. ..................................................... 40,000 1,487,500
U.S. Bancorp ...................................................... 36,000 1,314,000
------------
5,861,338
- -------------------------------------------------------------------------------------------------------------
INSURANCE-PROPERTY & CASUALTY - 5.80%
American International Group, Inc. ................................ 13,500 1,150,875
Progressive Corp. ................................................. 5,200 765,700
-------------
1,916,575
- -------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
SHARES VALUE
<S> <C> <C>
MATERIALS/SERVICES - 11.85%
CABOT CORP ....................................... 30,000 841,875
FERRO CORP ....................................... 50,000 1,275,000
HANNA (M.A.) CO .................................. 60,000 881,250
RAYCHEM CORP ..................................... 30,000 916,875
---------
3,915,000
- --------------------------------------------------------------------------------
TECHNOLOGY - 7.24%
DALLAS SEMICONDUCTOR CORP ........................ 40,000 1,480,000
HARRIS CORP ...................................... 26,000 911,625
---------
2,391,625
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS --( COST $23,744,344 ) ....... 30,977,569
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT - 6.35%
UMB BANK, U.S. TREASURY NOTE,
$2,093,000 PAR, 4.750% COUPON,
DUE 10/31/98, DATED 10/30/98,
TO BE SOLD ON 11/02/98,
AT $2,099,878 (COST $2,099,000) ........................ 2,099,000 2,099,000
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.09% -(COST $25,843,344 ** ) .... 33,076,569
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS - (0.09%). (29,631)
------------
NET ASSETS - 100.00% ................................... $ 33,046,938
============
- ----------------------------------------------------------------------------------------
</TABLE>
** ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 10
FAIRPORT FUNDS SCHEDULE OF INVESTMENTS
- --------------------------------------------------------------------------------
FAIRPORT GOVERNMENT SECURITIES FUND OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
Principal Value
Amount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BONDS - 96.31%
U.S. GOVERNMENT AGENCY 62.11%
Federal Home Loan Bank
6.03%, 05/07/03 1,300,000 $ 1,361,942
5.85%, 04/15/05 1,200,000 1,244,920
6.34%, 10/19/05 500,000 534,137
-----------
3,140,999
- -------------------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES - 34.20%
6.63%, 03/31/02 100,000 106,936
6.25%, 02/15/03 600,000 643,707
7.00%, 07/15/06 850,000 978,636
-----------
1,729,279
- -------------------------------------------------------------------------------------------------------------
TOTAL BONDS - (Cost $4,647,307) 4,870,278
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 96.31% - (COST $4,647,307**) 4,870,278
CASH AND OTHER ASSETS NET OF LIABILITIES - 3.69% 186,478
-----------
NET ASSETS - 100.00% $ 5,056,756
=============================================================================================================
</TABLE>
** Also represents cost for Federal income tax purposes
See accompanying notes to financial statements
8
<PAGE> 11
FAIRPORT FUNDS STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
FAIRPORT FAIRPORT FAIRPORT
MIDWEST GROWTH GROWTH AND GOVERNMENT
FUND INCOME FUND SECURITIES FUND
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at value (cost $56,662,290,
$25,843,344 and $4,647,307, respectively) ...... $ 65,480,612 $ 33,076,569 $4,870,278
Cash ................................................ 609 237 131,786
Receivable for capital stock sold ................... 4,429 6,500 0
Dividends and interest receivable ................... 113,110 14,953 68,708
Reimbursement due from advisor, net ................. 0 0 3,730
Deferred organizational costs (Note A) .............. 4,656 4,656 4,656
Other assets ........................................ 1,504 702 0
------------ ------------ ----------
Total assets ................................... 65,604,920 33,103,617 5,079,158
------------ ------------ ----------
LIABILITIES:
Payable for capital stock redeemed .................. 118,344 45 5,020
Accrued expenses .................................... 63,541 40,786 16,945
Payable to advisor, net ............................. 35,904 15,848 0
Other liabilities ................................... 0 0 437
------------ ------------ ----------
Total liabilities .............................. 217,789 56,679 22,402
------------ ------------ ----------
NET ASSETS
Applicable to 3,975,342, 2,079,854 and
484,955 shares outstanding, respectively ....... $ 65,387,131 $ 33,046,938 $5,056,756
============ ============ ==========
NET ASSETS CONSIST OF:
Capital paid-in ..................................... $ 47,331,083 $ 23,843,685 $4,852,920
Distributions in excess of net investment income .... (193,923) (21,713) (34)
Accumulated net realized gain (loss) on investments . 9,431,649 1,991,741 (19,101)
Net unrealized appreciation on investments .......... 8,818,322 7,233,225 222,971
------------ ------------ ----------
$ 65,387,131 $ 33,046,938 $5,056,756
============ ============ ==========
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE ..................... $ 16.45 $ 15.89 $ 10.43
============ ============ ==========
===================================================================================================
</TABLE>
See accompanying notes to financial statements
9
<PAGE> 12
FAIRPORT FUNDS STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year Ended October 31, 1998
================================================================================
<TABLE>
<CAPTION>
Fairport Midwest Fairport Growth Fairport Government
Growth Fund & Income Fund Securities Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ........................................ $ 885,239 $ 448,810 $ 0
Interest ......................................... 79,572 73,096 274,423
------------ ------------ ------------
Total investment income ....................... 964,811 521,906 274,423
------------ ------------ ------------
EXPENSES:
Investment advisory fees (Note B) ................ 581,223 260,482 11,854
Distribution expenses (Note B) ................... 192,062 86,093 11,760
Administration fees .............................. 91,176 40,204 5,257
Transfer agent fees .............................. 59,668 42,612 26,169
Legal fees ....................................... 17,421 6,177 339
Pricing fees ..................................... 44,080 29,944 24,353
Registration expenses ............................ 290 9,955 7,430
Custodian fees ................................... 21,340 14,365 7,731
Printing fees .................................... 20,678 10,739 1,717
Auditing fees .................................... 17,014 7,110 1,094
Insurance fees ................................... 24,371 9,721 1,349
Trustees fees .................................... 18,575 7,430 713
Amortization of organizational costs (Note A) .... 3,106 3,105 3,106
Miscellaneous expenses ........................... 10,405 4,658 901
------------ ------------ ------------
Total expenses ........................... 1,101,409 532,595 103,773
Expenses reimbursed (Note B) ..................... (34,063) (16,411) (61,098)
------------ ------------ ------------
Net expenses ............................. 1,067,346 516,184 42,675
------------ ------------ ------------
NET INVESTMENT INCOME (LOSS) ........................ (102,535) 5,722 231,748
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN / (LOSS) ON INVESTMENTS:
Net realized gain on investments ................. 9,390,471 1,978,014 85,201
Net change in unrealized
appreciation (depreciation) on investments .... (14,925,981) (2,771,879) 162,209
------------ ------------ ------------
Net realized and unrealized
gain / (loss) on investments ................. (5,535,510) (793,865) 247,410
------------ ------------ ------------
INCREASE / (DECREASE) IN
NET ASSETS FROM OPERATIONS .................... $ (5,638,045) $ (788,143) $ 479,158
============ ============ ============
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 13
FAIRPORT FUNDS STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
================================================================================================================================
Fairport Midwest Fairport Growth Fairport Government
Growth Fund and Income Fund Securities Fund
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97 10/31/98 10/31/97
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ............... $ (102,535) $ (36,274) $ 5,722 $ 80,229 $ 231,748 $ 235,639
Net realized gain on investments ........... 9,390,471 4,609,662 1,978,014 3,283,752 85,201 4,611
Net change in unrealized appreciation
(depreciation) on investments ............ (14,925,981) 13,604,001 (2,771,879) 4,939,032 162,209 60,694
----------- ----------- ----------- ----------- ----------- -----------
Increase / Decrease in net assets ......... 5,638,045) 18,177,389 (788,143) 8,303,013 479,158 300,944
----------- ----------- ----------- ----------- ----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. 0 (44,687) 0 (143,381) (231,782) (235,639)
From net realized gains .................... (4,536,145) (4,293,833) (3,271,584) (1,856,932) 0 0
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ........................ (4,536,145) (4,338,520) (3,271,584) (2,000,313) (231,782) (235,639)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold .................. 14,584,017 10,636,821 12,962,111 4,238,113 2,498,395 1,409,959
Reinvestment of dividends .................. 4,489,221 4,310,469 3,167,253 1,970,599 225,548 231,250
Amount paid for repurchase of shares ....... (20,529,323) (8,966,670) (9,863,545) (4,741,419) (2,325,367) (3,048,010)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
from capital transactions .................. (1,456,085) 5,980,620 6,265,819 1,467,293 398,576 (1,406,801)
----------- ----------- ----------- ----------- ----------- -----------
Total increase (decrease) in net assets .... (11,630,275) 19,819,489 2,206,092 7,769,993 645,952 (1,341,496)
NET ASSETS:
Beginning of period ........................ 77,017,406 57,197,917 30,840,846 23,070,853 4,410,804 5,752,300
----------- ----------- ----------- ----------- ----------- -----------
End of period .............................. $65,387,131 $77,017,406 $33,046,938 $30,840,846 $ 5,056,756 $ 4,410,804
=========== =========== =========== =========== =========== ===========
Accumulated undistributed (distributions in
excess of) net investment income included
in net assets at end of period ........... $ (193,923) $ (91,388) $ (21,713) $ (27,435) $ (34) $ 0
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold ................................ 784,282 639,390 753,991 263,198 247,860 144,935
Shares issued on reinvestment of dividends . 241,486 279,447 191,490 138,855 22,410 23,788
Shares repurchased ......................... (1,129,115) (529,296) (591,000) (298,742) (230,820) (313,081)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
from capital transactions ................ (103,347) 389,541 354,481 103,311 39,450 (144,358)
=========== =========== =========== =========== =========== ===========
================================================================================================================================
</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 each period presented.
<TABLE>
<CAPTION>
FAIRPORT MIDWEST GROWTH FUND
- -------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................. $ 18.88 $ 15.50 $ 13.55 $ 12.27 $ 11.07
----------- ----------- ----------- ----------- -----------
Income from Investment Operations:
Net investment income (loss) ......................... (0.03) (0.01) 0.02 0.04 0.02
Net realized and unrealized gain (loss) on investments (1.30) 4.55 2.16 2.04 1.19
----------- ----------- ----------- ----------- -----------
Total from investment operations ..................... (1.33) 4.54 2.18 2.08 1.21
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment income ........................... 0.00 (0.01) (0.03) (0.04) (0.01)
From realized capital gains .......................... (1.10) (1.15) (0.20) (0.76) 0.00
----------- ----------- ----------- ----------- -----------
Total distributions ................................ (1.10) (1.16) (0.23) (0.80) (0.01)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD ....................... $ 16.45 $ 18.88 $ 15.50 $ 13.55 $ 12.27
=========== =========== =========== =========== ===========
TOTAL RETURN ......................................... (7.73%) (31.00%) (16.28%) (18.17%) (10.89%)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) ...................... $ 65,387 $ 77,017 $ 57,198 $ 49,408 $ 29,688
Ratio of expenses to average net assets
before reimbursement of expenses by Adviser ....... 1.43% 1.58% 1.69% 1.57% 1.54%
after reimbursement of expenses by Adviser ........ 1.38% 1.38% 1.38% 1.41% 1.45%
Ratio of net investment income to average net assets
before reimbursement of expenses by Adviser ....... (0.18%) (0.25%) (0.16%) (0.14%) (0.08%)
after reimbursement of expenses by Adviser ........ (0.13%) (0.05%) (0.15%) (0.29%) (0.17%)
Portfolio turnover ................................... 52.23% 41.16% 58.01% 46.51% 77.57%
Average commission rate paid ......................... N/A $0.0499 $ 0.0600 N/A N/A
=========================================================================================================================
</TABLE>
N/A Not applicable; disclosure not required
See accompanying notes to financial statements.
12
<PAGE> 15
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FAIRPORT GROWTH AND INCOME FUND FAIRPORT GOVERNMENT SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 17.87 $ 14.22 $ 12.29 $ 10.68 $ 10.36 $ 9.90 $ 9.75 $ 9.84 $ 9.03 $ 10.20
- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.01 0.05 0.13 0.15 0.14 0.49 0.49 0.49 0.49 0.43
(0.15) 4.83 2.04 1.68 0.35 0.53 0.15 (0.05) 0.81 (1.17)
- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.14) 4.88 2.17 1.83 0.49 1.02 0.64 0.44 1.30 (0.74)
- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.00 (0.09) (0.14) (0.12) (0.14) (0.49) (0.49) (0.53) (0.49) (0.42)
(1.84) (1.14) (0.10) (0.03) (0.03) 0.00 0.00 0.00 0.00 (0.01)
- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(1.84) (1.23) (0.24) (0.22) (0.17) (0.49) (0.49) (0.53) (O.49) (4.43)
- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$ 15.89 $ 17.87 $ 14.22 $ 12.29 $ 10.68 $ 10.43 $ 9.90 $ 9.75 $ 9.84 $ 9.03
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
(1.20%) 36.61% 17.77% 17.36% 4.72% 10.61% 6.76% 4.58% 14.76% (7.24%)
$33,047 $30,841 $23,071 $23,082 $18,177 $ 5,057 $ 4,411 $ 5,752 $ 8,647 $ 7,614
1.53% 1.76% 1.83% 1.79% 1.72% 2,19% 2,70% 2.05% 2.16% 1.80%
1.49% 1.50% 1.50% 1.50% 1.50% 0.90% 0.90% 0.90% 0.90% 0.90%
(0.02%) 0.03% 0.58% 0.98% 1.20% 3.60% 3.23% 3.78% 3.89% 3.88%
0.02% 0.29% 0.91% 1.26% 1.42% 4.89% 5.03% 4.93% 5.16% 4.78%
40.43% 42.45% 34.02% 13.36% 35.16% 89.89% 21.01% 21.23% 1.28% 24.14%
N/A $0.0599 $0.0591 N/A N/A N/A N/A N/A N/A N/A
====================================================================================================================
</TABLE>
13
<PAGE> 16
FAIRPORT FUNDS
- --------------------------------------------------------------------------------
October 31, 1998
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.
Effective October 27, 1998, the Trust selected the accounting firm of McCurdy &
Associates CPA's, Inc. to serve as the Funds' independent certified public
accountants for the fiscal year ended October 31, 1998 to fill a vacancy
resulting from Ernst & Young's resignation on October 9, 1998. Ernst & Young
LLP had served as the Funds' independent certified public accountants for the
Funds' fiscal year ended October 31, 1995, October 31, 1996, and October 31,
1997. Ernst & Young's report on the financial statements of the Funds for the
fiscal year ended October 31, 1997 did not contain an adverse opinion or
disclaimer of opinion or was not qualified or modified as to uncertainty, audit
scope or accounting principles. There were no disagreements with Ernst & Young
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure during the fiscal year ended October
31, 1997 or for the interim period from November 1, 1997 through the date of
their resignation.
The Trust represents that it had not consulted with McCurdy & Associates CPA's,
Inc. at any time prior to their engagement with respect to the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Funds' financial
statements.
The following is a summary of significant accounting policies consistently
followed by the Trust.
(1) SECURITY VALUATION: The portfolio securities of each Fund will be valued at
market value. Each Fund uses one or more pricing services to provide market
quotations for equity, fixed income and variable income securities. If market
quotations are not available, securities will be valued by a method which the
Board of Trustees believes accurately reflects fair value. Equity securities
which are listed or admitted to trading on a national securities exchange or
other
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
market trading system which reports actual transaction prices on a
contemporaneous basis will be valued at the last sales price on the exchange or
other market system on which the security is principally traded. For fixed and
variable income securities, the pricing service may use a matrix system of
valuation which considers factors such as securities prices, yield features,
call features, ratings and developments related to a specific security. 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 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 creditworthy 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 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 will be distributed annually.
(6) DEFERRED ORGANIZATIONAL 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.
15
<PAGE> 18
FAIRPORT FUNDS NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1998
Pursuant to Rule 12b-1 under the Act, the Trust has adopted a Distribution and
Shareholder Service Plan dated January 20, 1995 as amended as of March 1, 1996
(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 0.25% of
the average daily net asset 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 the Distributor. Under the Plan, a Participating
Organization may include the Distributor's affiliates.
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 until further written notice 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
0.90%, respectively.
Information regarding these transactions is as follows for the year ended
October 31, 1998:
<TABLE>
<CAPTION>
Midwest Growth
Growth and Income Government
Fund Fund Fund
- ------------------------------------------------------------------
INVESTMENT ADVISORY FEES:
<S> <C> <C> <C>
Fees before fee waiver .. $ 581,223 $ 260,482 $ 11,854
Fees waived ............. (34,063) (16,411) (11,854)
RULE 12b-1 FEES:
Fees .................... 192,062 86,093 11,760
Other expenses
reimbursed ........... 0 0 (49,244)
--------- --------- ---------
Net fees and expenses ... $ 739,222 $ 330,164 $ (37,484)
--------- --------- ---------
- ------------------------------------------------------------------
</TABLE>
Certain officers and trustees of the Trust are also officers, directors and/or
employees of Roulston and the Distributor. The officers and such interested
trustees serve without direct compensation from the Trust.
NOTE (C) INVESTMENT TRANSACTIONS:
Purchases and sales of investment securities (excluding short-term securities)
for the year ended October 31, 1998 were:
<TABLE>
<CAPTION>
Proceeds
Purchases from Sales
(000) (000)
- ---------------------------------------------------
<S> <C> <C>
Midwest Growth Fund .. $ 41,327 $ 50,476
Growth and Income Fund 16,164 14,276
Government Fund ...... 4,453 4,095
- ---------------------------------------------------
</TABLE>
Note (D) Unrealized Appreciation and Depreciation:
At October 31, 1998, the gross unrealized appreciation and depreciation of
securities for book and Federal income tax purposes consisted of the following:
<TABLE>
<CAPTION>
Gross Gross Net
Unrealized Unrealized Unrealized
Appreciation (Depreciation) App/(Dep)
(000) (000) (000)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Midwest Growth Fund .. $ 14,875 ($ 6,057) $ 8,818
Growth and Income Fund 8,566 (1,333) 7,233
Government Fund ...... 223 0 223
- ----------------------------------------------------------------
</TABLE>
16
<PAGE> 19
FAIRPORT FUNDS REPORT OF INDPENDENT AUDITORS
To The Shareholders and
Trustees of Fairport Funds:
We have audited the accompanying statements of assets and liabilities of
Fairport Funds (comprising, respectively, the Fairport Midwest Growth Fund, the
Fairport Growth and Income Fund and the Fairport Government Securities Fund)
including the schedules of portfolio investments, as of October 31, 1998, and
the related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments and cash held by
the custodian as of October 31, 1998, by correspondence with the custodian. An
audit also included assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Fairport Funds as of October 31,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
November 20, 1998
<PAGE> 20
[LOGO]
FAIRPORT FUNDS
CHARTING A COURSE YOU CAN TRUST
4000 Chester Avenue
Cleveland, Ohio 44103
1-800-332-6459
Trustees:
Thomas V. Chema
David B. Gale
Scott D. Roulston
Officers:
Scott D. Roulston, President
Kevin M. Crotty, Treasurer
Charles A. Kiraly, Secretary
Adviser:
Roulston & Company, Inc.
4000 Chester Avenue
Cleveland, Ohio 44103
Distributor:
Roulston Research Corp.
4000 Chester Avenue
Cleveland, Ohio 44103
Administrator & Transfer Agent:
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
Legal Counsel:
Baker & Hostetler LLP
65 E. State Street
Columbus, Ohio 43215
Independent Public Accountants:
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
For information, call 1-800-332-6459
or visit us online at www.fairport.com
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 proceeded or accompanied by an effective Prospectus which includes
details regarding the Fund's objectives, policies, expenses and other
information.
