N-30D 1 0001.txt AMERISTOCK MUTUAL FUND ANNUAL REPORT Ameristock Mutual Fund 1301 East Ninth Street- Suite 1005 Cleveland, OH 44114 (800) 394-5064 http://www.ameristock.com ANNUAL REPORT June 30, 2000 Dervishes, Taxes, Time The total return for the Ameristock Mutual Fund was -1.0% for the first half of 2000. (Annualized total return for 1 year was -8.7%%, 3 years was 14.1%, and since inception was 21.1%). Ameristock under-performed the S&P500 by -0.6%, which was down -0.4% itself so far this year. The reason we lagged the general market in 1999 was because of our under weighing of technology when that group was in favor. Our overweighing in financial service companies in 2000 during a rising interest rate environment was the reason for our lag so far this year. Whirling Dervishes There are many analogies I can give to describe the frantic activity of the stock market these past 6 months. The one that springs immediately to mind is the image of a whirling dervish. A whirling dervish is a person who spins around and around in place during religious observances. They make lots of noise and commotion while never actually going anywhere. Just like the stock market these past 6 months, especially the NASDAQ. It was up 24% and then came crashing down 37% just to end about where it began, down 3%. Lots of noise and commotion without any real progress. Ameristock, on the other hand, did not have dramatic ups or downs. We were pretty steady, although also ending up going nowhere. Ameristock tries to keep total expenses, brokerage commissions and taxes to a minimum. I think we did a very good job this past 6 months in one area especially, taxes. Taxes I assume you do not want to pay taxes. As a registered investment company, Ameristock has to pay out substantially all its income from interest and capital gains. We can minimize the effect of the capital gains taxes in two ways. 1- Not trade to often and therefore not realize capital gains 2- When we do need to trade, because of redemptions or other investment opportunities, to make sure Ameristock uses specific tax lot accounting to match up short-term gains with short-term losses and long-term gains with long-term losses. This matching of gains to losses resulting in lower taxes. For example, if you matched a gain of $2 with a loss of $1 then your net gain would only be $1. Using specific tax lot accounting takes more time and effort than the alternatives but it saves you money and we think that is important. Ameristock did a very good job of utilizing specific tax lot accounting this past 6 months because we had net redemptions from the Fund. This has caused our turnover to be higher than in past years and will eventually translate into a slightly higher dividend payout come December. However, because of our use of specific tax lot accounting, the tax bite will be much less then would be expected given all the buying and selling of stock we had to do. Again, the vision of whirling dervishes comes to mind as most of the stock trades we did were done to raise cash and not to initiate new positions or rebalance the portfolio. Lots of activities, not much progress. I blame Alvin Toffler. Time Alvin Toffler wrote a book called Future Shock in the 1970s that forecast that our daily activities would speed up. He was all too correct especially when the internet phenomena hit and Netscape defined an internet year as the equivalent to a dog year, 7 to 1. Since 1997 (when internet time was defined), over 21 internet years have passed. Looking back, we have seen the exponential rise in time speed translated into the stock market (most noticeably in the NASDAQ). Today, we seem to have bull and bear markets play out in weeks instead of years. There are two ways to cope with this increase in the speed of time. One is to make sure you are even quicker than the trends in order to gain a competitive advantage. All the growth funds and funds with the word "net" in them fall in this category. Pursuing this strategy can be very rewarding, it also tends to burn people out and deprive them of sleep. The other strategy is one Ameristock follows and is more Zen like. We put time on our side. Ameristock knows that over the long run things break, people need food, and that general prosperity levels will increase and therefore so will consumption. By investing with time on your side, you know that every day that passes, the companies you invest in will increase their sales and profits. Ben Graham made the putting time on your side case in 1934 when he made the argument for a diversified group of common stocks purchased at a reasonable price IF Certain basic and long-established elements in this country's economic experience may still be counted upon. These are: (1) that our national wealth and earnings power will increase; (2) that such increase will reflect itself in the increased resources and profits of our important corporations, and (3) that such increases will in the main take place through the normal process of investment of new capital and reinvestment of undistributed earnings. In 1934, after the 1929 crash and in the middle of the Great Depression, this argument was very bold. Today, with 66 additional years' history, we can see that investing by putting time on your side works. In Summary In the last Semi-Annual Report I recommended that over the course of the business cycle, your portfolio should be from 20% to 40% in large capitalization equities like the ones Ameristock invests in and that "Now is the time to be at 20%". This belief has not changed. When you call the (800) 394-5064 phone number, a machine that gives you four choices will greet you: #1 Ameristock's Daily Net Asset Value. (A recording). #2 To request Prospectuses and Applications ONLY. (An answering service). #3 If you have a question about your account, want to establish automatic investing, or want to redeem shares. Our transfer agent, Mutual Shareholder Services). #4 If you have a question about the Fund or have any problems. (The investment management company). Ameristock is a no-load, value based, domestic, equity-income fund that invests in large capitalization companies. Thank you for investing in the Ameristock Mutual Fund and please tell your friends about us. Nicholas D. Gerber (July 15, 2000) (graph) Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. All returns reflect reinvested dividends. The Fund's portfolio may differ significantly from the securities in the Index. The Index is unmanaged and therefore does not reflect the cost of portfolio management or trading. Average Annual Total Returns Period Ended June 30, 2000 1 Year Since Inception Ameristock Mutual Fund -8.7% 21.3% S&P500 Index 7.2 % 22.8% To The Shareholders and Board of Directors Ameristock Mutual Fund: We have audited the accompanying statement of assets and liabilities of Ameristock Mutual Fund, including the schedule of portfolio investments, as of June 30, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for the two years then ended, and financial highlights for each of the four years then ended and the period from August 1, 1995 (commencement of operations) to June 30, 1996 in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments and cash held by the custodian as of June 30, 2000 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Ameristock Mutual Fund as of June 30, 2000, the results of its operations for the year then ended, the changes in its net assets for the two years then ended, and the financial highlights for the four years then ended and for the period from August 1, 1995 (commencement of operations) to June 30, 1996 in the period then ended, in conformity with generally accepted accounting principles. McCurdy & Associates CPA's, Inc. Westlake, Ohio July 21, 2000 Ameristock Mutual Fund Schedule of Investments June 30, 2000 Market Industry Company Symbol Shares Value Automotive 5.90% Ford Motor Co. F 68,610 $2,950,230 General Motors Corp. GM 37,220 $2,161,104 Banking 19.18% Bank of America BAC 69,177 $2,974,611 CitiGroup C 43,362 $2,612,560 First Union FTU 115,000 $2,853,495 PNC Financial Services PNC 87,700 $4,110,937 Washington Mutual Inc. WMT 141,000 $4,071,375 Entertainment 0.32% Disney Co. (Walt) DIS 7,070 $274,407 Capital Goods 2.82% Boeing Co. BA 12,860 $537,715 Caterpillar CAT 36,900 $1,249,987 General Electric GE 12,300 $651,900 Chemicals & 3.55% Du Pont de Nemours & Co. DD 35,600 $1,557,500 Fertilizer Dow Chemical DOW 50,280 $1,517,852 Consumer 12.58% Coca- Cola Co. KO 8,380 $481,330 Staples McDonalds Corp. MCD 48,600 $1,600,786 Philip Morris MO 95,910 $2,547,657 Pepsico PEP 50,960 $2,264,560 Proctor & Gamble Co. PG 4,600 $263,350 Sara Lee Corp. SLE 193,800 $3,742,859 Diversified 1.77% Minnesota Mining & Mfg. MMM 18,560 $1,531,200 Electronics 5.09% Visteon* VC 8,983 $108,421 Agilent* A 1,029 $75,888 Hewlett Packard Co. HWP 2,700 $337,162 International Business Machines IBM 31,600 $3,462,190 Intel Corp. INTC 3,180 $425,127 Financial- 8.78% Associates First Other Capital Corp. AFS 147,658 $3,294,692 Fannie Mae FNM 67,170 $3,505,467 Merrill Lynch MER 7,000 $805,000 Healthcare 10.04% Abbott Labs ABT 53,560 $2,386,794 (Products) American Home Products AHP 30,000 $1,762,500 Bristol Myers Squibb BMY 27,440 $1,598,380 Johnson & Johnson JNJ 6,340 $645,887 Merck & Co. MRK 20,940 $1,604,527 Pfizer Inc. PFE 14,680 $704,640 Insurance 5.65% Allstate Corp. ALL 150,000 $3,337,500 American International Group AIG 13,302 $1,562,985 Oil & Gas 5.92% BPAmoco (ADR's) BPA 8,408 $475,581 Chevron CHV 24,500 $2,077,918 ExxonMobil XOM 7,600 $596,600 Texaco TX 37,200 $1,980,900 Retailing 5.57% Home Depot Inc. HD 11,595 $579,031 Sears Roebuck & Co. S 112,000 $3,654,000 Wal-Mart Stores WMT 10,300 $593,537 Software 0.35% Microsoft Corp.* MSFT 3,780 $302,400 Telecom- munications 9.20% Bell Atlantic Corp. BEL 27,140 $1,379,064 Bellsouth Corp. BLS 22,900 $976,112 GTE Corp. GTE 47,270 $2,942,557 SBC Commuications SBC 56,143 $2,428,284 AT& T Corp. T 7,475 $236,318 ----------- Total Common Stocks: 96.69% (Cost $89,204,296) $83,794,877 ----------- Total Investments $83,794,877 Other Assets Less Liabilities 3.31% $2,865,024 Net Assets: 100% Equivalent to $34.76 per share on 2,492,812 Shares of Capital Stock Outstanding $86,659,901 * Non-Income Producing =========== The accompanying notes are an integral part of the financial statements
Ameristock Mutual Fund Statement of Assets and Liabilities June 30, 2000 Assets: Investment Securities at Market Value (Identified Cost- $89,204,296) $83,794,877 Cash $2,566,547 Accounts Receivables Dividends $170,449 Fund Shares Sold $309,326 ----------- Total Assets: $86,841,199 Liabilities: Accounts Payable Fund Shares Redeemed $177,985 Accrued Management Fee $3,313 ----------- Total Liabilities: $181,298 Net Assets $86,659,901 Net Assets Consist of: Capital Paid In $87,173,291 Accumulated Undistributed Net Investment Income $767,353 Accumulated Undistributed Net Capital Gain $4,128,676 Accumulated Unrealized Appreciation in Value of Investments Based on Identified Cost- Net $(5,409,419) ----------- NET ASSETS FOR 2,492,812 SHARES OUTSTANDING $86,659,901 NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE ($86,659,901/ 2,492,812) $34.76 The accompanying notes are an integral part of the financial statements Ameristock Mutual Fund Statement of Operations Year Ending June 30, 2000 Investment Income: Dividends $2,250,089 Interest $252,568 Other $3,020 ------------- Total Investment Income $2,505,677 Expenses: Management Fee $991,317 Total Expenses $991,317 Net Investment Income $1,514,360 Realized and Unrealized Gain on Investments Net Realized Gain (Loss) on Investments $4,021,324 Net Change in Unrealized Appreciation (Depreciation) on Investments $(17,951,640) ------------- Net Realized and Unrealized Gain (Loss) on Investments $(13,930,316) Net Increase (Decrease) in Net Assets ------------- Resulting from Operations $(12,415,956) The accompanying notes are an integral part of the financial statements Ameristock Mutual Fund Statement of Changes in Net Assets July 1, 1999 to July 1, 1998 to 30-Jun-00 June 30, 1999 From Operations: Net Investment Income $1,514,360 $593,492 Net Realized Gain (Loss) $4,021,324 $1,089,201 Net Change in Unrealized Appreciation (Depreciation) on Investments $(17,951,640) $9,418,848 ------------- ----------- $(12,415,956) $11,101,541 Distributions to Shareholders: Ordinary Income $(1,171,494) $(238,477) Capital Gains $(947,523) $(215,071) ------------- ----------- $(2,119,017) $(453,548) From Capital Share Transactions: Proceeds from 2,591,686 Shares Issued $94,364,171 $124,983,101 Net Asset Value of 41,627 Shares Issued from Reinvestment of Dividends $1,466,911 $306,145 Cost of 3,075,221 Shares Redeemed $(108,781,081) $(34,545,669) ------------- ----------- $(12,949,999) $90,743,577 Net Increase/Decrease in Net Assets $(27,484,972) $101,391,570 Net Assets at Beginning of Period $114,144,873 $12,753,303 ------------- ----------- Net Assets at End of Period (including Undistributed Net Investment Income of $767,553 and $424,487 respectively) $86,659,901 $114,144,873
The accompanying notes are an integral part of the financial statements Ameristock Mutual Fund Financial Highlights Selected Data for a Share of Common Stock Jul 1, 99 to Jul 1, 98 to Jul 1, 97 to Jul 1, 96 to Aug 31, 95 to Outstanding Throughout the Period 30-Jun-00 30-Jun-99 30-Jun-98 30-Jun-97 30-Jun- 96 (1) Net Asset Value at Beginning of Period $38.89 $31.48 $25.06 $19.03 $15.00 Net Investment Income $0.55 $0.44 $0.41 $0.52 $0.43 Net Gains (Losses) on Securities- Realized and Unrealized $(3.92) $7.41 $7.26 $5.94 $3.78 ------- ------- ------- ------- ------- Total From Investment Operations $35.52 $39.33 $32.73 $25.40 $19.21 Dividend Distribution Net Investment Income $(0.42) $(0.22) $(0.42) $(0.39) $(0.18) Capital Gains $(0.34) $(0.22) $(0.83) $(0.04) $- ------- ------- ------- ------- ------- Total Distributions $(0.76) $(0.44) $(1.25) $(0.43) $(0.18) Net Asset Value at End of Period $34.76 $38.89 $31.48 $25.06 $19.03 Total Return -8.67% 24.94% 30.61% 33.95% 33.70%* Ratios/ Supplemental Data Net Assets End of Period (millions) $86.66 $114.14 $12.75 $6.64 $2.23 Ratio of Expenses to Average Net Assets Prior to Reimbursement 0.99% 0.96% 0.95% 1.06% 0.90%(1)* After Reimbursement 0.99% 0.94% 0.90% 0.56% 0.00% * Ratio of Net Income to Average Net Assets Prior to Reimbursement 1.51% 1.20% 1.43% 1.89% 1.47% * After Reimbursement 1.51% 1.22% 1.48% 2.39% 2.90%(1)* Portfolio Turnover Rate 31.13% 9.22% 11.85% 21.48% 7.43% (1) From Inception of Investment Activity (8/31/95) * Annualized
The accompanying notes are an integral part of the financial statements AMERISTOCK MUTUAL FUND NOTES TO FINANCIAL STATEMENTS June 30, 2000 1.) SIGNIFICANT ACCOUNTING POLICIES The Fund is a diversified, open-end management investment company, organized as a corporation under the laws of the State of Maryland on June 15, 1995. The Fund's investment objective is to seek total return through capital appreciation and current income by investing (under normal market conditions) at least 80% of the value of its total assets in equity securities consisting of common stocks. The authorized capital stock of the Fund consists of 100 million shares of common stock, par value $.005 per share. Significant accounting policies of the Fund are presented below: SECURITY VALUATION: Investments in securities are carried at market value. The market quotation used for common stocks, including those listed on the NASDAQ National Market System, is the last sale price on the date on which the valuation is made or, in the absence of sales, at the closing bid price. Over-the-counter securities will be valued on the basis of the bid price at the close of each business day. Short-term investments are valued at amortized cost, which approximates market. The cost of securities sold is determined on the identified cost basis. Securities for which market quotations are not readily available will be valued at fair value as determined in good faith pursuant to procedures established by the Board of Directors. Security transactions are recorded on the dates transactions are entered into (the trade dates). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded as earned. The Fund uses the identified cost basis in computing gain or loss on sale of investment securities. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INCOME TAXES: It is the Fund's policy to distribute annually, prior to the end of the calendar year, dividends sufficient to satisfy excise tax requirements of the Internal Revenue Service. This Internal Revenue Service requirement may cause an excess of distributions over the book year-end accumulated income. In addition, it is the Fund's policy to distribute annually, after the end of the fiscal year, any remaining net investment income and net realized capital gains. ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2.) INVESTMENT ADVISORY AGREEMENT The Fund has entered into an investment advisory and administration agreement with Ameristock Corporation. The Investment Advisor receives from the Fund as compensation for its services to the Fund an annual fee of 1% of the Fund's net assets for the first $100 million of net assets and .75% of net assets thereafter. The Investment Advisor pays all operating expenses of the Fund except for taxes, interest, brokerage commissions and extraordinary litigation expenses. The advisor received management fees of $991,317 during the 12 months ending June 30, 2000. During the Fund's initial year, the Advisor had paid all Fund expenses. 3.) RELATED PARTY TRANSACTIONS Certain owners of Ameristock Corporation are also owners and/or directors of Ameristock Mutual Fund. These individuals may receive benefits from any management fees paid to the Advisor. 24% of the Fund's stock is controlled by National Financial Services Corp. 11% of the Fund's stock is controlled by Trust Company of America. 10% of the Fund's stock is controlled by Charles Schwab & Co. 9% of the Fund is controlled by National Investors Services Corp. 6% of the Fund's stock is controlled by FTC & Company. All of the preceding companies are unrelated to the Fund or Ameristock Corp. The preceding companies may be deemed as controlling persons. AMERISTOCK MUTUAL FUND NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 2000 4.) CAPITAL STOCK AND DISTRIBUTION At June 30, 2000, 100 million shares of capital stock ($.005 par value) were authorized, and paid-in capital amounted to $87,173,291. Transactions in common stock were as follows: Shares sold............................. 2,591686 Shares issued to shareholders in reinvestment of dividends 41,627 2,633,313 Shares redeemed.......................(3,075,221) Net increase............................(441,908) Shares Outstanding: Beginning of period...................2,934,721 End of period.........................2,492,812 5.) PURCHASES AND SALES OF SECURITIES During the twelve months ended June 30, 2000, purchases and sales of investment securities other than U.S. Government obligations and short-term investments aggregated $29,354,873 and $34,076,018 respectively. 6.) FINANCIAL INSTRUMENTS DISCLOSURE There are no reportable financial instruments that have any off-balance sheet risk as of June 30, 2000. 7.) SECURITY TRANSACTIONS For Federal income tax purposes, the cost of investments owned at June 30, 2000was the same as identified cost. At June 30, 2000, the composition of unrealized appreciation (the excess of value over tax cost) and depreciation (the excess of tax cost over value) was as follows: Net Appreciation Appreciation (Depreciation) (Depreciation) $8,265,216 $(13,674,635) $(5,409,419) 8 ) DISTRIBUTIONS During the 12 months ended June 30, 2000, distributions of $1,171,494 were paid from net investment income and $947,523 were paid from realized short and long term capital gains.