UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-10201
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The Appleton Funds
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(Exact name of registrant as specified in charter)
45 Milk Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip code)
James I. Ladge, 45 Milk Street, Boston, Massachusetts 02109
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 362-8000
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Date of fiscal year end: 12/31
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Date of reporting period: 6/30/03
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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APPLETON EQUITY GROWTH FUND
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SEMI-ANNUAL REPORT
June 30, 2003
(Unaudited)
Investment Adviser Administrator
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APPLETON PARTNERS, INC. INTEGRATED FUND SERVICES, INC.
45 Milk Street, Eighth Floor 221 East Fourth Street
Boston, MA 02109 Suite 300
Cincinnati, OH 45202
1-877-712-7753
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APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 2003
(Unaudited)
SHARES VALUE
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COMMON STOCKS -- 99.1%
CONSUMER, CYCLICAL -- 15.0%
5,500 Brinker International, Inc.* $ 198,109
3,250 Lowe's Companies, Inc. 139,588
2,000 Mohawk Industries, Inc.* 111,060
2,500 Pulte Homes, Inc. 154,150
2,250 Wal-Mart Stores, Inc. 120,758
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723,665
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CONSUMER, NON-CYCLICAL -- 14.0%
2,500 Apollo Group, Inc.* 154,400
2,500 Avon Products, Inc. 155,500
3,500 Newell Rubbermaid, Inc. 98,000
3,000 PepsiCo, Inc. 133,500
1,500 Procter & Gamble Co. 133,770
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675,170
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ENERGY -- 9.0%
2,000 Apache Corp. 130,120
4,400 Exxon Mobil Corp. 158,004
3,500 Weatherford International Ltd.* 146,650
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434,774
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FINANCIAL SERVICES -- 19.0%
1,500 Bank of America Corp. 118,545
3,500 Citigroup, Inc. 149,799
2,500 Federal Home Loan Mortgage Corporation 126,925
4,500 FleetBoston Financial Corp. 133,695
3,000 Merrill Lynch & Co., Inc. 140,040
3,000 State Street Corp. 118,200
2,500 Wells Fargo & Co. 126,000
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913,204
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APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 2003
(Unaudited)
SHARES VALUE
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HEALTHCARE -- 15.3%
3,000 Forest Laboratories, Inc.* $ 164,250
2,750 Johnson & Johnson 142,175
3,400 Pfizer, Inc. 116,110
6,500 Pharmaceutical Product Development, Inc.* 186,745
2,000 Quest Diagnostics, Inc.* 127,600
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736,880
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INDUSTRIAL -- 8.8%
2,000 Caterpiller, Inc. 111,320
6,500 Flextronics International Ltd.* 67,535
3,000 General Electric Co. 86,040
2,250 United Technologies Corp. 159,368
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424,263
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TECHNOLOGY -- 15.3%
8,000 Applied Materials* 126,880
5,750 Check Point Software Tech* 112,413
4,500 Cisco Systems* 75,105
7,000 Electronic Data Systems Corp. 150,150
1,250 International Business Machines Corp. 103,125
3,000 Microsoft Corp.* 76,830
5,250 Texas Instruments, Inc. 92,400
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736,903
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TELECOMMUNICATIONS -- 2.7%
3,350 Verizon Communications, Inc. 132,158
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TOTAL COMMON STOCKS $ 4,777,017
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MONEY MARKETS -- 1.1%
50,799 First American Treasury Fund $ 50,799
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APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 2003
(Unaudited)
TOTAL INVESTMENT SECURITIES -- 100.2%
(Cost $4,949,714) $ 4,827,816
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%) (10,148)
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NET ASSETS -- 100.0% $ 4,817,668
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* Non-income producing security.
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
(Unaudited)
ASSETS
Investment securities:
At acquisition cost $ 4,949,714
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At value $ 4,827,816
Dividends receivable 2,938
Receivable from Adviser 17,588
Other Assets 1,834
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TOTAL ASSETS 4,850,176
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LIABILITIES
Payable to affiliates 12,678
Other accrued expenses and liabilities 19,830
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TOTAL LIABILITIES 32,508
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NET ASSETS $ 4,817,668
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NET ASSETS CONSIST OF
Paid-in capital $ 7,325,360
Accumulated net investment loss (6,759)
Accumulated net realized losses from security transactions (2,379,035)
Net unrealized depreciation on investments (121,898)
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NET ASSETS $ 4,817,668
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Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 838,795
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Net asset value, offering price and redemption price per share $ 5.74
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See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2003
(Unaudited)
INVESTMENT INCOME
Dividends $ 25,774
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EXPENSES
Investment advisory fees 21,668
Accounting services fees 15,000
Administration fees 12,000
Transfer agent fees 12,000
Trustees' fees and expenses 9,423
Professional fees 7,812
Distribution expenses 5,417
Custodian fees 3,868
Postage and supplies 2,985
Registration fees 2,422
Insurance expense 1,824
Reports to shareholders 1,785
Pricing costs 695
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TOTAL EXPENSES 96,899
Fees waived and expenses reimbursed by the Adviser (64,366)
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NET EXPENSES 32,533
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NET INVESTMENT LOSS (6,759)
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REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (458,470)
Net change in unrealized appreciation/
depreciation on investments 942,557
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NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 484,087
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 477,328
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See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the
Six Months
Ended For the
June 30, Year Ended
2003 December 31,
(Unaudited) 2002
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FROM OPERATIONS
Net investment loss $ (6,759) $ (26,242)
Net realized losses from security transactions (458,470) (1,536,380)
Net change in unrealized appreciation/
depreciation on investments 942,557 (262,969)
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Net increase (decrease) in net assets from operations 477,328 (1,825,591)
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FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 292,869 1,457,038
Payments for shares redeemed (51,550) (314,340)
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Net increase in net assets from capital share transactions 241,319 1,142,698
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TOTAL INCREASE (DECREASE) IN NET ASSETS 718,647 (682,893)
NET ASSETS
Beginning of period 4,099,021 4,781,914
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End of period $ 4,817,668 $ 4,099,021
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CAPITAL SHARE ACTIVITY
Sold 55,412 218,510
Redeemed (10,353) (57,585)
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Net increase in shares outstanding 45,059 160,925
Shares outstanding, beginning of period 793,736 632,811
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Shares outstanding, end of period 838,795 793,736
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See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a
Share Outstanding Throughout Each Period
For the
Six Months
Ended For the For the
June 30, Year Ended Year Ended
2003 December 31, December 31,
(Unaudited) 2002 2001(a)
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Net asset value at beginning of period $ 5.16 $ 7.56 $ 10.00
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Loss from investment operations:
Net investment loss (0.01) (0.03) (0.03)
Net realized and unrealized gain
(losses) on investments 0.59 (2.37) (2.41)
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Total from investment operations 0.58 (2.40) (2.44)
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Net asset value at end of period $ 5.74 $ 5.16 $ 7.56
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Total return 11.24%(b) (31.75%) (24.40%)
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Net assets at end of period $ 4,817,668 $ 4,099,021 $ 4,781,914
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Ratio of gross expenses to average net assets (c) 4.47%(d) 4.32% 4.66%
Ratio of net expenses to average net assets 1.50%(d) 1.50% 1.50%
Ratio of net investment loss to average net assets (0.31%)(d) (0.56%) (0.47%)
Portfolio turnover rate 47%(d) 56% 34%
(a) The Fund commenced operations on December 31, 2000.
(b) Not annualized.
(c) Represents the ratio of expenses to average net assets absent fee waivers
and/or expense reimbursements by the Adviser.
(d) Annualized.
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The Appleton Funds (the Trust) is registered under the Investment Company Act of
1940, as amended, (the 1940 Act), as a diversified, no-load, open-end management
investment company. The Trust was organized as an Ohio business trust on October
31, 2000. The Trust currently offers one series of shares to investors: the
Appleton Equity Growth Fund (the Fund). The Trust was capitalized on December
29, 2000, when the initial shares of the Fund were purchased at $10 per share.
Except for the initial purchase of shares, the Trust had no operations prior to
the commencement of operations on December 31, 2000.
The Fund seeks long-term growth of capital by investing primarily in common
stocks.
The following is a summary of the Fund's significant accounting policies:
Securities valuation - The Fund's portfolio securities are valued as of the
close of business of the regular session of the New York Stock Exchange
(normally 4:00 p.m., Eastern time). Securities traded on a stock exchange or
quoted by NASDAQ are valued at their last reported sales price on that day on
the principal exchange where the security is traded or, if not traded on a
particular day, at their closing bid price. Securities for which market
quotations are not readily available are valued at their fair value as
determined in good faith in accordance with consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Share valuation - The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The offering and
redemption price per share are equal to the net asset value per share.
Investment income and distributions to shareholders - Interest income is accrued
as earned. Dividend income is recorded on the ex-dividend date. Dividends
arising from net investment income are declared and paid annually. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income dividends and capital gain distributions are determined in
accordance with income tax regulations.
Security transactions - Security transactions are accounted for on trade date.
Securities sold are determined on a specific identification basis.
Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
Federal income tax - It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code applicable to regulated investment
companies. As provided therein, in any fiscal year in which the Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund (but
not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare and pay as
dividends in each calendar year at least 98% of its net investment income
(earned during the calendar year) and 98% of its net realized capital gains
(earned during the twelve months ended October 31) plus undistributed amounts
from prior years.
The following information is computed on a tax basis as of December 31, 2002:
Cost of portfolio investments $ 5,189,471
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Gross unrealized appreciation on investments $ 168,663
Gross unrealized depreciation on investments (1,233,118)
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Net unrealized depreciation on investments $ (1,064,455)
Capital loss carryforwards (1,904,577)
Post-October losses (15,988)
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Total accumulated deficit $ (2,985,020)
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The Fund's capital loss carryforwards expire as follows: $254,452 and $1,650,126
on December 31, 2009 and 2010, respectively. The Fund elected to defer until its
subsequent tax year $15,988 of capital losses incurred after October 31, 2002.
These capital loss carryforwards and post-October losses may be utilized in the
current and future years to offset gains, if any, prior to distributing such
gains to shareholders.
2. INVESTMENT TRANSACTIONS
For the six months ended June 30, 2003, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$1,344,326 and $987,398, respectively.
3. TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Trust are also officers of Appleton
Partners, Inc. (the Adviser), Integrated Fund Services, Inc. (IFS), the
administrative services agent, shareholder servicing and transfer agent, and
accounting services agent for the Trust, or of IFS Fund Distributors, Inc. (the
Distributor), the Trust's principal underwriter.
INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement between the Trust and the Adviser,
the Adviser manages the Fund's investments. For these services, the Fund pays
the Adviser an advisory fee, which is computed and accrued daily and paid
monthly, at an annual rate of 1.00% of its average daily net assets.
Pursuant to a written contract between the Adviser and the Fund, the Adviser has
agreed to waive a portion of its advisory fees and/or assume certain expenses of
the Fund, other than brokerage commissions, extraordinary items, interest and
taxes, to the extent annual Fund operating expenses exceed 1.50% of the Fund's
average daily net assets. The Adviser has agreed to maintain these expense
limitations with regard to the Fund through December 31, 2003. For the six
months ended June 30, 2003, the Adviser waived $21,668 of advisory fees and
reimbursed the Fund for $42,698 of other operating expenses.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
Under the terms of an Administration, Accounting and Transfer Agency Agreement
between the Trust and IFS, IFS supplies non-investment related statistical and
research data, internal regulatory compliance services and executive and
administrative services for the Fund. IFS supervises the preparation of tax
returns, reports to shareholders of the Fund, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For these administrative
services, IFS receives a monthly fee based on the Fund's average daily net
assets, subject to a monthly minimum fee.
IFS maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
other shareholder service functions. For these transfer agency and shareholder
services, IFS receives a monthly fee per shareholder account, subject to a
monthly minimum fee. In addition, the Fund pays IFS out-of-pocket expenses
including, but not limited to, postage and supplies.
IFS also calculates the daily net asset value per share and maintains the
financial books and records of the Fund. For these accounting services, IFS
receives a monthly fee, based on current net assets, from the Fund. In addition,
the Fund pays IFS certain out-of-pocket expenses incurred by IFS in obtaining
valuations of the Fund's portfolio securities.
DISTRIBUTION PLAN
The Fund has adopted a plan of distribution (the Plan) pursuant to Rule 12b-1
under the 1940 Act. The Plan permits the Fund to pay for expenses incurred in
the distribution and promotion of the Fund's shares including but not limited
to, the printing of prospectuses, statements of additional information and
reports used for sales purposes, advertisements, expenses of preparation and
printing of sales literature, promotion, marketing and sales expenses and other
distribution-related expenses, including any distribution fees paid to
securities dealers or other firms who have executed a distribution or service
agreement with the Trust.
The Plan limits payment of distribution expenses in any fiscal year to a maximum
of 0.25% of the Fund's average daily net assets. For the six months ended June
30, 2003, the Fund incurred $5,417 of distribution expenses under the Plan.
UNDERWRITING AGREEMENT
The Trust has entered into an Underwriting Agreement on behalf of the Fund with
the Distributor. Pursuant to the Underwriting Agreement, the Distributor acts as
principal underwriter and, as such, is the exclusive agent for distribution of
shares of the Fund. The Distributor receives no compensation for its services
and is an affiliate of IFS.
ITEM 2. CODE OF ETHICS. Not applicable to Semiannual Reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to Semiannual
Reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to Semiannual
Reports.
ITEMS 5-6.RESERVED
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END
MANAGEMENT INVESTMENT COMPANIES. Not Applicable.
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of
a date within 90 days of the filing date of this report.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that have materially affected, or are reasonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) (1) Code of Ethics. Not Applicable
(2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(b) under the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Appleton Funds
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By (Signature and Title)
/s/ James I. Ladge
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James I. Ladge
President
Date: September 5, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
/s/ James I. Ladge
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James I. Ladge
President
Date: September 5, 2003
By (Signature and Title)
/s/ Lisa R. Oliverio
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Lisa R. Oliverio
Treasurer
Date: September 5, 2003
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