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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 811-10529
-----------------------------------------
The GKM Funds
-----------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
11150 Santa Monica Boulevard, Suite 850 Los Angeles, California 90025
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(Address of principal executive offices) (Zip code)
Timothy J. Wahl
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(Name and address of agent for service)
Registrant's telephone number, including area code: (310) 268-2605
----------------
Date of fiscal year end: July 31, 2003
---------------------------
Date of reporting period: January 31, 2003
---------------------------
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.
================================================================================
GKM FUNDS
GKM GROWTH FUND
SEMI-ANNUAL REPORT
January 31, 2003
(Unaudited)
INVESTMENT ADVISER ADMINISTRATOR
------------------ -------------
GKM ADVISERS, INC. ULTIMUS FUND SOLUTIONS, LLC
11150 Santa Monica Boulevard P.O. Box 46707
Suite 850 Cincinnati, Ohio 45246-0707
Los Angeles, California 90025 1.888.GKM.9518
================================================================================
GKM FUNDS
GKM GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2003 (UNAUDITED)
================================================================================
ASSETS
Investments in securities:
At acquisition cost $ 10,596,644
===========
At value (Note 1) $ 9,938,773
Dividends receivable 4,207
Receivable for capital shares sold 2,599
Other assets 140
-----------
Total Assets 9,945,719
-----------
LIABILITIES
Accrued investment advisory fees (Note 3) 19,618
Accrued trustees' fees 701
-----------
Total Liabilities 20,319
-----------
NET ASSETS $ 9,925,400
===========
Net assets consist of:
Paid-in capital $10,616,227
Accumulated net investment loss (20,399)
Accumulated net realized losses from
security transactions (12,557)
Net unrealized depreciation on investments (657,871)
-----------
Net assets $ 9,925,400
===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) 1,165,908
===========
Net asset value, redemption price and offering price
price per share (Note 1) $ 8.51
===========
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2003 (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends $ 43,932
-----------
EXPENSES
Investment advisory fees (Note 3) 62,756
Trustees' fees 1,575
-----------
TOTAL EXPENSES 64,331
-----------
NET INVESTMENT LOSS (20,399)
-----------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses from security transactions (9,961)
Net change in unrealized appreciation/
depreciation on investments (49,059)
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS (59,020)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (79,419)
===========
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
SIX MONTHS
ENDED PERIOD
JANUARY 31, ENDED
2003 JULY 31,
(UNAUDITED) 2002(a)
------------------------------
FROM OPERATIONS
Net investment loss $ (20,399) $ (10,904)
Net realized losses from security transactions (9,961) (2,596)
Net change in unrealized appreciation/
depreciation on investments (49,059) (608,812)
--------- ---------
Net decrease in net assets resulting from operations (79,419) (622,312)
--------- ---------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 2,998,828 8,268,092
Payments for shares redeemed (234,633) (505,156)
--------- ---------
Net increase in net assets from capital
share transactions 2,764,195 7,762,936
--------- ---------
TOTAL INCREASE IN NET ASSETS 2,684,776 7,140,624
NET ASSETS
Beginning of period 7,240,624 100,000
--------- ---------
End of period $9,925,400 $7,240,624
========= =========
ACCUMULATED NET INVESTMENT LOSS $ (20,399) $ --
========= =========
CAPITAL SHARE ACTIVITY
Sold 348,262 898,575
Redeemed (28,104) (62,825)
--------- ---------
Net increase in shares outstanding 320,158 835,750
Shares outstanding, beginning of period 845,750 10,000
--------- ---------
Shares outstanding, end of period 1,165,908 845,750
========= =========
(a) Represents the period from the commencement of operations (December 28,
2001) through July 31, 2002.
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
================================================================================
SIX MONTHS
ENDED PERIOD
JANUARY 31, ENDED
2003 JULY 31,
(UNAUDITED) 2002(a)
------------------------------
Net asset value at beginning of period $ 8.56 $ 10.00
--------- ---------
Loss from investment operations:
Net investment loss (0.02) (0.01)
Net realized and unrealized losses
on investments (0.03) (1.43)
--------- ---------
Total from investment operations (0.05) (1.44)
--------- ---------
Net asset value at end of period $ 8.51 $ 8.56
========= =========
Total return (not annualized) (0.58)% (14.40)%
========= =========
Net assets at end of period $9,925,400 $7,240,624
========= =========
Ratio of expenses to average net assets 1.43% (b) 1.46% (b)
Ratio of net investment loss to average
net assets (0.45)%(b) (0.72)%(b)
Portfolio turnover rate 1%(b) 1%(b)
(a) Represents the period from the commencement of operations (December 28,
2001) through July 31, 2002.
(b) Annualized.
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 2003 (UNAUDITED)
================================================================================
SHARES VALUE
--------- -------
COMMON STOCKS - 98.5%
AIR FREIGHT AND COURIERS - 3.4%
2,485 FedEx Corporation $ 130,711
3,500 United Parcel Service, Inc. - Class B 211,155
----------
341,866
----------
AUTO COMPONENTS - 0.5%
3,150 ArvinMeritor, Inc. 53,518
----------
BANKS - 1.3%
2,800 Wells Fargo & Company 132,636
----------
BEVERAGES - 1.2%
2,475 Anheuser-Busch Companies, Inc. 117,488
----------
BIOTECHNOLOGY - 3.0%
4,000 Amgen, Inc.* 203,840
2,500 Biogen, Inc.* 95,625
----------
299,465
----------
BUILDING PRODUCTS - 0.5%
2,850 Masco Corporation 51,842
----------
CHEMICALS - 6.1%
5,000 Engelhard Corporation 103,550
5,000 International Flavors and Fragrances, Inc. 158,850
4,450 Scotts Company (The) - Class A* 228,018
2,550 Sigma-Aldrich Corporation 114,418
----------
604,836
----------
COMMERCIAL SERVICES AND SUPPLIES - 10.0%
3,100 Automatic Data Processing, Inc. 107,477
3,600 Avery Dennison Corporation 214,524
5,000 Deluxe Corporation 201,200
3,500 Graco, Inc. 93,170
5,000 Pitney Bowes, Inc. 162,700
9,100 Waste Management, Inc. 209,209
----------
988,280
----------
COMMUNICATIONS EQUIPMENT - 2.7%
6,500 QUALCOMM, Inc. 244,790
3,410 Tellabs, Inc.* 26,564
----------
271,354
----------
COMPUTERS AND PERIPHERALS - 3.7%
2,510 International Business Machines Corporation 196,357
2,870 Lexmark International, Inc.* 173,750
----------
370,107
----------
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JANUARY 31, 2003 (UNAUDITED)
================================================================================
SHARES VALUE
-------- -------
COMMON STOCKS - 98.5% (Continued)
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 1.4%
2,000 AT&T Corporation $ 38,960
7,300 Cisco Systems, Inc.* 97,601
----------
136,561
----------
ELECTRONIC EQUIPMENT AND INSTRUMENTS - 7.3%
5,000 Diebold, Inc. 175,050
4,800 Garmin Ltd.* 141,072
4,000 Harman International Industries, Inc. 246,000
3,485 Optimal Robotics Corporation - Class A* 21,154
16,580 Symbol Technologies, Inc. 139,769
----------
723,045
----------
FOOD AND DRUG RETAILING - 3.5%
3,000 Safeway, Inc.* 71,100
4,300 Sysco Corporation 126,291
3,000 Whole Foods Market, Inc.* 152,460
----------
349,851
----------
FOOD PRODUCTS - 1.3%
2,000 Hershey Foods Corporation 129,000
----------
HEALTH CARE EQUIPMENT AND SUPPLIES - 5.3%
3,500 Baxter International, Inc. 98,630
4,600 Medtronic, Inc. 206,632
3,600 Stryker Corporation 216,864
----------
522,126
----------
HEALTH CARE PROVIDERS AND SERVICES - 3.6%
2,900 Cardinal Health, Inc. 169,157
2,100 UnitedHealth Group, Inc. 184,590
----------
353,747
----------
HOTELS, RESTAURANTS & LEISURE - 1.1%
3,000 Harrah's Entertainment, Inc.* 108,840
----------
INDUSTRIAL CONGLOMERATES - 1.7%
1,330 3M Company 165,652
----------
INFORMATION TECHNOLOGY CONSULTING AND SERVICES - 2.3%
4,200 Affiliated Computer Services, Inc.* 227,724
----------
INTERNET SOFTWARE AND SERVICES - 0.3%
30,000 Interland, Inc.* 30,600
----------
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JANUARY 31, 2003 (UNAUDITED)
================================================================================
SHARES VALUE
-------- -------
COMMON STOCKS - 98.5% (Continued)
LEISURE EQUIPMENT & PRODUCTS - 0.4%
1,200 Eastman Kodak Company $ 36,360
----------
MACHINERY - 1.4%
1,300 Caterpillar, Inc. 57,174
2,000 Ingersoll-Rand Company - Class A 78,520
----------
135,694
----------
MARINE - 0.4%
9,200 Grupo TMM - S.A. de C.V. - Class A* 38,640
----------
MEDIA - 4.9%
3,235 Comcast Corporation - Class A* 86,148
4,080 New York Times Company (The) - Class A 199,267
5,000 Sony Corporation - ADR 199,750
----------
485,165
----------
METALS AND MINING - 1.0%
2,500 Nucor Corporation 99,775
----------
MULTILINE RETAIL - 1.5%
5,050 Family Dollar Stores, Inc. 152,106
----------
PERSONAL PRODUCTS - 1.7%
3,500 Alberto-Culver Company - Class A 172,165
----------
PHARMACEUTICALS - 8.9%
2,940 Abbott Laboratories 112,073
2,000 ICOS Corporation* 49,100
2,990 Johnson & Johnson 160,294
2,540 Merck & Company, Inc. 140,691
6,325 Pfizer, Inc. 192,027
5,990 Teva Pharmaceutical Industries Ltd. - ADR 230,016
----------
884,201
----------
REAL ESTATE INVESTMENT TRUST - 0.1%
500 Urstadt Biddle Properties 6,180
----------
ROAD AND RAIL- 3.2%
3,000 Canadian National Railway Company 122,850
3,500 Union Pacific Corporation 199,710
----------
322,560
----------
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
JANUARY 31, 2003 (UNAUDITED)
================================================================================
SHARES VALUE
-------- -------
COMMON STOCKS - 98.5% (Continued)
SEMICONDUCTOR EQUIPMENT AND PRODUCTS - 2.7%
2,660 Intel Corporation $ 41,656
7,000 Intersil Corporation - Class A* 101,500
2,810 National Semiconductor Corporation* 37,092
5,500 Texas Instruments, Inc. 87,450
----------
267,698
----------
SOFTWARE - 6.2%
5,540 Adobe Systems, Inc. 146,367
20,050 Citrix Systems, Inc.* 276,690
4,060 Microsoft Corporation 192,687
----------
615,744
----------
SPECIALTY RETAIL - 1.5%
3,500 Barnes & Noble, Inc.* 60,900
3,000 Costco Wholesale Corporation* 86,610
----------
147,510
----------
TEXTILES AND APPAREL - 2.5%
3,500 Nike, Inc. - Class B 155,890
9,000 Oakley, Inc.* 90,720
----------
246,610
----------
TRADING COMPANIES AND DISTRIBUTORS - 1.9%
4,000 Grainger (W.W.), Inc. 189,200
----------
TOTAL COMMON STOCKS (Cost $10,436,017) $ 9,778,146
----------
MONEY MARKETS - 1.6%
First American Treasury Obligation Fund - Class S
160,627 (Cost $160,627) $ 160,627
----------
TOTAL INVESTMENTS AT VALUE - 100.1 %
(Cost $10,596,644) $ 9,938,773
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.1%) (13,373)
----------
NET ASSETS - 100.0% $ 9,925,400
==========
* Non-income producing security
ADR - American Depository Receipt
See accompanying notes to financial statements.
GKM FUNDS
GKM GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2003 (UNAUDITED)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The GKM Growth Fund (the "Fund") was organized as a diversified series of
The GKM Funds (the "Trust") on October 2, 2001. The Trust is an open-end
investment company established under the laws of Ohio by an Agreement and
Declaration of Trust dated October 2, 2001. On December 14, 2001, 10,000
shares of the Fund were issued for cash, at $10.00 per share, to three
individuals affiliated with GKM Advisers, Inc. (the "Adviser"). The public
offering of shares of the Fund commenced on December 28, 2001. The Fund had
no operations prior to the public offering of shares except for the initial
issuance of shares.
The investment objective of the Fund is long-term capital appreciation.
SECURITIES VALUATION - Securities which are traded on any exchange or on
the NASDAQ over-the-counter market are valued at the last quoted sale
price. Lacking a last sale price, a security is valued at its last bid
price except when, in the Adviser's opinion, the last bid price does not
accurately reflect the current value of the security. All other securities
for which over-the-counter market quotations are readily available are
valued at their last bid price. When market quotations are not readily
available, when the Adviser determines the last bid price does not
accurately reflect the current value or when restricted securities are
being valued, such securities are valued as determined in good faith by the
Adviser, in conformity with guidelines adopted by and subject to review of
the Board of Trustees of the Trust.
Fixed income securities generally are valued by using market quotations,
but may be valued on the basis of prices furnished by a pricing service
when the Adviser believes such prices accurately reflect the fair market
value of such securities. A pricing service utilizes electronic data
processing techniques based on yield spreads relating to securities with
similar characteristics to determine prices for normal institutional-size
trading units of debt securities without regard to sale or bid price. If
the Adviser decides that a price provided by the pricing service does not
accurately reflect the fair market value of the securities, when prices are
not readily available from a pricing service or when restricted or illiquid
securities are valued, securities are valued at fair value as determined in
good faith by the Adviser, in conformity with guidelines adopted by and
subject to review of the Board. Short term investments in fixed income
securities with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued by using the
amortized cost method of valuation, which the Board has determined will
represent fair value.
SHARE VALUATION - The net asset value of the Fund's shares is calculated at
the close of trading on the New York Stock Exchange (normally 4:00 p.m.,
Eastern time) on each day that the Exchange is open for business. The net
asset value is calculated by dividing the value of the Fund's total assets,
minus liabilities, by the total number of shares outstanding. The offering
price and redemption price per share is equal to the net asset value per
share.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Security transactions are
accounted for on trade date. Cost of securities sold is determined on a
specific identification basis. Dividend income is recorded on the
ex-dividend date. Interest income is accrued as earned.
GKM FUNDS
GKM GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2003 (UNAUDITED)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS - Dividends arising from net investment
income and net capital gains, if any, are declared and paid annually in
December. The amount of distributions from net investment income and net
realized gains are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. There were no distributions for the periods ended
January 31, 2003 and July 31, 2002.
ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of 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 provisions for income taxes have 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 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 Fund had net realized capital losses of $2,596 during the period ended
July 31, 2002, which are treated for federal income tax purposes as arising
during the Fund's tax year ending July 31, 2003. These losses may be
utilized in the current and future years to offset net realized capital
gains prior to distributing such gains to shareholders.
The tax character of distributable earnings at January 31, 2003 was as
follows:
Accumulated net investment loss $ (20,399)
Unrealized depreciation (657,871)
Other losses (12,557)
---------
Total distributable earnings $(690,827)
=========
GKM FUNDS
GKM GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2003 (UNAUDITED)
================================================================================
For federal income tax purposes, the cost of portfolio investments amounted
to $10,596,644 at January 31, 2003. The composition of unrealized
appreciation (the excess of value over tax cost) and unrealized
depreciation (the excess of tax cost over value) was as follows:
Gross unrealized appreciation $ 522,538
Gross unrealized depreciation (1,180,409)
---------
Net unrealized depreciation $(657,871)
=========
2. INVESTMENT TRANSACTIONS
During the six months ended January 31 2003, cost of purchases and proceeds
from sales of investment securities, other than short-term investments,
amounted to $2,846,343 and $32,670, respectively.
3. TRANSACTIONS WITH AFFILIATES
Certain Trustees and officers of the Trust are affiliated with the Adviser
or Ultimus Fund Solutions, LLC ("Ultimus"), the Fund's administrator,
transfer agent and fund accounting agent.
Under the terms of an Advisory Agreement between the Trust and the Adviser,
the Adviser serves as the investment adviser to the Fund. For its services,
the Fund pays the Adviser an investment advisory fee at the annual rate of
1.40% of the Fund's average daily net assets. The Adviser pays all of the
operating expenses of the Fund except brokerage, taxes, borrowing costs,
fees and expenses of non-interested trustees, extraordinary expenses and
distribution and/or service related expenses incurred pursuant to Rule
12b-1 under the Investment Company Act of 1940 (if any).
The Trust has entered into mutual fund services agreements with Ultimus,
pursuant to which Ultimus provides day-to-day operational services to the
Fund including, but not limited to, accounting, administrative, transfer
agent, dividend disbursing, and recordkeeping services. The fees payable to
Ultimus are paid by the Adviser (not the Fund).
The Trust has entered into a Distribution Agreement with Ultimus Fund
Distributors, LLC (the "Distributor"), pursuant to which the Distributor
provides distribution services to the Fund and serves as principal
underwriter to the Fund. The Distributor is a wholly-owned subsidiary of
Ultimus. The fees payable to the Distributor are paid by the Adviser (not
the Fund).
A portion of the Fund's portfolio transactions are executed through Gerard
Klauer Mattison & Co., Inc. ("GKM"), the parent company of the Adviser.
During the six months ended January 31, 2003, brokerage commissions of $550
were paid by the Fund to GKM.
ITEM 2. CODE OF ETHICS.
Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable
ITEMS 4-8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded that the registrant's disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act (17 CFR 270.30a-2(c)))
are effective based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2): Attached hereto
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 GKM Funds
-------------------------------------------
By (Signature and Title)* /s/ Timothy J. Wahl
----------------------------
Timothy J. Wahl, President
Date March 25, 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/ Timothy J. Wahl
----------------------------
Timothy J. Wahl, President
Date March 25, 2003
--------------------------------------------------
By (Signature and Title)* /s/ Mark J. Seger
----------------------------
Mark J. Seger, Treasurer
Date March 25, 2003
--------------------------------------------------
* Print the name and title of each signing officer under his or her signature.