UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
AMENDMENT NO. 1
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-10201
The Appleton Funds
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
45 Milk Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
James I. Ladge, 45 Milk Street, Boston, Massachusetts 02109
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 362-8000
----------------------------
Date of fiscal year end: 12/31
-----------------
Date of reporting period: 12/31/03
-----------------
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.
Annual Report for Appleton Equity Growth Fund.
================================================================================
APPLETON EQUITY GROWTH FUND
---------------------------
ANNUAL REPORT
December 31, 2003
Investment Adviser Administrator
------------------ -------------
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
================================================================================
Dear Fellow Shareholder:
After three consecutive years of losses, U.S. equity investors were finally
rewarded in 2003 as markets posted double digit gains. In both 2001 and 2002,
short-term rallies temporarily raised expectations that the post-bubble bear
market was finally coming to an end. However, in both instances, the economy
proved too fragile, and equity markets quickly reversed course and continued
their downward spiral.
In the second quarter of 2003, investors had to decide if a 15% rally in the S&P
would once again fizzle, or finally be a sign of better days to come. Bearish
investors still doubted the strength of the economy and remained on the
sidelines, while more bullish investors believed that equities had bottomed and
the time had come to take a more aggressive stance. The rally proved to be for
real as low interest rates, tax cuts, increased government spending, a slowdown
in layoffs, a successful campaign in Iraq and a weak dollar provided the
momentum for a more sustainable economic recovery. That recovery was further
validated as GDP growth in the third quarter registered a blistering 8.2% pace.
For the year, the major indices all increased in excess of 20 percent.
For the year ended December 31, 2003, the Fund had a total return of 24.03%,
slightly below the S&P 500 Index's (the Fund's bench mark) total return of
28.69% for the same period. The Fund began 2003 by continuing to emphasize the
more defensive sectors such as consumer staples and healthcare, as the long
awaited economic recovery was still not in sight. Exposure to some of the more
volatile sectors that usually underperform in a weak economy, such as
industrials and technology, was reduced from levels seen in previous years.
However, as the year progressed and the economic data became more encouraging,
we adopted a more bullish stance towards the equity markets. Over the course of
several months, we made a concerted effort to restructure the portfolio so that
it was better positioned to take advantage of surging equity markets. By the end
of the year, our exposure to the more defensive sectors such as consumer staples
and healthcare was reduced from 36% to approximately 24%. At the same time, we
increased our exposure to those sectors that we felt would outperform as the
economy recovered. Exposure to the industrial, financial, consumer cyclical and
technology sectors was increased. While we did increase our exposure to the more
volatile technology sector, we were mindful of the events of just a few years
ago, and kept a technology weighting that was in line with that of the S&P
index. Below is a brief update of each sector for the year 2003.
o The Technology sector soared in 2003 as an improving economy
provided corporations with the financial resources to upgrade their
systems and infrastructures.
o The Consumer Discretion sector rose strongly as homebuilding stocks
took advantage of a record year in housing and high-end retailers
surged as consumers opened their wallets for more expensive items.
o The Financial sector performed well as mortgage lending boomed,
investment banking and asset management fees rebounded and credit
losses declined significantly.
o The Consumer Staples sector, as expected, lagged in a strong market
as investors focused their attention on more volatile sectors.
o The Telecommunications sector remained weak as overcapacity and
severe price competition continued to plague the industry.
o The Healthcare sector lagged the broader markets as pending Medicare
legislation kept investors on the sidelines and pharmaceuticals
struggled to find replacements for several blockbusters coming off
patent protection.
o The Industrial sector had an outstanding year. As the economy
strengthened, industrial activity saw its first signs of life in
several quarters. Construction, defense and conglomerates all took
part in the rally.
o The energy sector endured a volatile year as both oil prices and
reserves saw large swings. As the year progressed, increases in
industrial production, injections to U.S. reserves and bitter cold
weather led to improvements in share prices.
o The Materials sector surged as construction and infrastructure
spending increased and speculation on demand for inputs such as
copper and aluminum drove prices higher throughout the year.
As we embark on 2004, we remain confident that the economic recovery will
continue and that equity markets have further upside potential. While the
economic backdrop remains favorable for equities, it's highly unlikely that 2004
will produce the same staggering gains as did 2003. Investor expectations, lofty
valuations and record corporate earnings last year have set the bar extremely
high for 2004. Instead, we look for GDP and earnings growth to slow from last
year's record pace, and for equities to advance in the high single-digit range.
As always, we'll continue to focus on high quality companies with the potential
for above average earnings growth, and we'll continue to monitor the economic
landscape and make strategic changes to the portfolio as needed.
Very Truly Yours,
/s/ James I. Ladge
- -------------------------------
James I. Ladge, CFA
President
Comparison of the Change in Value of a $10,000 Investment in the
Appleton Equity Growth Fund and the S&P 500 Index
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
12/31/03
--------
Appleton Equity Growth Fund $ 8,832
S&P 500 Index $ 6,400
---------------------------------
Appleton Equity Growth Fund
Average Annual Total Returns*
1 Year Since Inception**
24.03% (13.82%)
---------------------------------
Past performance is not predictive of future performance.
- --------------------------------------------------------------------------------
* The return shown does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund Shares.
** Fund inception was December 31, 2000.
APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 2003
SHARES VALUE
------ -----
COMMON STOCKS -- 99.4%
CONSUMER, CYCLICAL -- 16.9%
5,500 Brinker International, Inc.* $ 182,380
4,000 ComCast Corp.* 131,480
2,250 Kohl's Corp.* 101,115
3,250 Lowe's Companies, Inc. 180,018
2,000 Mohawk Industries, Inc.* 141,080
3,500 Newell Rubbermaid, Inc. 79,695
1,750 NIKE, Inc. 119,805
-----------
935,573
-----------
CONSUMER, NON-CYCLICAL -- 10.4%
2,500 Avon Products, Inc. 168,725
3,000 PepsiCo, Inc. 139,860
1,500 Procter & Gamble Co. 149,820
2,250 Wal-Mart Stores, Inc. 119,363
-----------
577,768
-----------
ENERGY -- 8.5%
2,000 Apache Corp. 162,200
4,400 Exxon Mobil Corp. 180,400
3,500 Weatherford International Ltd.* 126,000
-----------
468,600
-----------
FINANCIAL SERVICES -- 17.8%
3,500 Citigroup, Inc. 169,890
4,500 FleetBoston Financial Corp. 196,424
6,000 Friedman, Billings, Ramsey Group, Inc. 138,480
3,000 Merrill Lynch & Co., Inc. 175,950
4,000 SAFECO Corp. 155,720
2,500 Wells Fargo & Co. 147,225
-----------
983,689
-----------
APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 2003
SHARES VALUE
------ -----
HEALTHCARE -- 15.2%
3,000 Forest Laboratories, Inc. $ 185,400
2,750 Johnson & Johnson 142,065
3,000 Merck & Co., Inc. 138,600
3,400 Pfizer, Inc. 120,122
4,000 Pharmaceutical Product Development, Inc.* 107,880
2,000 Quest Diagnostics, Inc.* 146,220
-----------
840,287
-----------
INDUSTRIAL -- 9.7%
5,000 ARAMARK Corp. 137,100
2,000 Caterpiller, Inc. 166,040
3,000 General Electric Co. 92,940
1,500 United Technologies Corp. 142,155
-----------
538,235
-----------
MATERIALS -- 3.1%
4,500 Praxair, Inc. 171,900
-----------
TECHNOLOGY -- 15.7%
6,000 Applied Materials* 134,700
5,750 Check Point Software Tech* 96,715
4,500 Cisco Systems* 109,305
6,500 Flextronics International Ltd.* 96,460
1,250 International Business Machines Corp. 115,850
6,000 Microsoft Corp. 165,240
5,250 Texas Instruments, Inc. 154,245
-----------
872,515
-----------
TELECOMMUNICATIONS -- 2.1%
3,350 Verizon Communications, Inc. 117,518
-----------
TOTAL COMMON STOCKS $ 5,506,085
-----------
APPLETON EQUITY GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 2003
SHARES VALUE
------ -----
MONEY MARKETS -- 1.2%
68,618 First American Treasury Fund $ 68,618
-----------
TOTAL INVESTMENT SECURITIES-- 100.6%
(Cost $5,228,869) $ 5,574,703
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6%) (30,672)
-----------
NET ASSETS-- 100.0% $ 5,544,031
===========
* Non-income producing security.
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003
ASSETS
Investment securities:
At acquisition cost $ 5,228,869
===============
At value $ 5,574,703
Dividends receivable 6,042
Receivable from Adviser 2,801
---------------
TOTAL ASSETS 5,583,546
---------------
LIABILITIES
Payable to affiliates 12,997
Other accrued expenses and liabilities 26,518
---------------
TOTAL LIABILITIES 39,515
---------------
NET ASSETS $ 5,544,031
===============
NET ASSETS CONSIST OF
Paid-in capital $ 7,469,895
Accumulated net realized losses from security transactions (2,271,698)
Net unrealized appreciation on investments 345,834
---------------
NET ASSETS $ 5,544,031
===============
Shares of beneficial interest outstanding (unlimited number of shares
authorized, no par value) 865,736
===============
Net asset value and redemption price per share $ 6.40
===============
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003
INVESTMENT INCOME
Dividends $ 61,520
---------------
EXPENSES
Investment advisory fees 48,173
Professional fees 31,600
Accounting services fees 30,000
Administration fees 24,000
Transfer agent fees 24,000
Distribution expenses 12,043
Postage and supplies 8,746
Trustees' fees and expenses 15,442
Custodian fees 5,800
Insurance expense 3,659
Registration fees 2,999
Reports to shareholders 1,000
Pricing expense 900
---------------
TOTAL EXPENSES 208,362
Fees waived and/or expenses reimbursed by Adviser (136,044)
---------------
NET EXPENSES 72,318
---------------
NET INVESTMENT LOSS (10,798)
---------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions (351,133)
Net change in unrealized appreciation/depreciation on investments 1,410,289
---------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 1,059,156
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,048,358
===============
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the For the
Year Ended Year Ended
December 31, December 31,
2003 2002
------------- -------------
FROM OPERATIONS
Net investment loss $ (10,798) $ (26,242)
Net realized losses from security transactions (351,133) (1,536,380)
Net change in unrealized appreciation/depreciation on investments 1,410,289 (262,969)
------------- -------------
Net increase (decrease) in net assets from operations 1,048,358 (1,825,591)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 643,881 1,457,038
Payments for shares redeemed (247,229) (314,340)
------------- -------------
Net increase in net assets from capital share transactions 396,652 1,142,698
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,445,010 (682,893)
NET ASSETS
Beginning of year 4,099,021 4,781,914
------------- -------------
End of year $ 5,544,031 $ 4,099,021
============= =============
CAPITAL SHARE ACTIVITY
Sold 113,318 218,510
Redeemed (41,318) (57,585)
------------- -------------
Net increase in shares outstanding 72,000 160,925
Shares outstanding, beginning of year 793,736 632,811
------------- -------------
Shares outstanding, end of year 865,736 793,736
============= =============
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected Per Share Data and Ratios for a Share Outstanding Throughout Each Year
For the For the a For the
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
2003 2002 2001(a)
------------- ------------ ------------
Net asset value at beginning of year $ 5.16 $ 7.56 $ 10.00
------------- ------------ ------------
Income (loss) from investment operations:
Net investment loss (0.01) (0.03) (0.03)
Net realized and unrealized gains (losses) on investments 1.25 (2.37) (2.41)
------------- ------------ ------------
Total from investment operations 1.24 (2.40) (2.44)
------------- ------------ ------------
Net asset value at end of year $ 6.40 $ 5.16 $ 7.56
============= ============ ============
Total return 24.03% (31.75%) (24.40%)
============= ============ ============
Net assets at end of year $5,544,031 $4,099,021 $4,781,914
============= ============ ============
Ratio of net expenses to average net assets 1.50% 1.50% 1.50%
Ratio of net investment loss to average net assets (0.22%) (0.56%) (0.47%)
Portfolio turnover rate 58% 56% 34%
(a) The Fund commenced operations on December 31, 2000.
See accompanying notes to financial statements.
APPLETON EQUITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
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 quoted by NASDAQ are valued at
the NASDAQ Official Closing 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, 2003:
Cost of portfolio investments $ 5,228,869
================
Gross unrealized appreciation on investments $ 717,957
Gross unrealized depreciation on investments (372,123)
----------------
Net unrealized appreciation on investments $ 345,834
Capital loss carryforwards (2,271,698)
----------------
Total accumulated deficit $ (1,925,864)
================
The Fund's capital loss carryforwards in the above table expire as follows:
Amount December 31,
------------------ ---------------------
$254,452 2009
$1,650,125 2010
$367,121 2011
------------------
$2,271,698
==================
These capital loss carryforwards may be utilized in future years to offset
gains, if any, prior to distributing such gains to shareholders.
As of December 31, 2003, the Fund reclassified $10,798 of net investment loss to
paid-in capital on the Statement of Assets and Liabilities. Such
reclassification has no affect on the Fund's net assets or net asset value per
share.
The Fund has not made any taxable distributions to shareholders since its
inception (December 31, 2000).
2. INVESTMENT TRANSACTIONS
For the year ended December 31, 2003, the cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$3,217,781 and $2,706,853, 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, 2004. For the year
ended December 31, 2003, the Adviser waived $48,173 of advisory fees and
reimbursed the Fund for $87,871 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 year ended December 31,
2003, the Fund accrued and the Adviser subsequently reimbursed $12,043 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.
- --------------------------------------------------------------------------------
Proxy Voting Policies and Procedures (unaudited)
A description of the policies and procedures that the Portfolio uses to
determine how to vote proxies relating to its portfolio securities is available
without charge upon request by calling 1-617-338-0700.
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
of the Appleton Funds
We have audited the accompanying statement of assets and liabilities of the
Appleton Equity Growth Fund (the "Fund"), a series of the Appleton Funds,
including the schedule of investments, as of December 31, 2003, and the related
statement of operations for the year then ended and the statements of changes in
net assets and financial highlights for each of the two years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights presented herein for the year ended December
31, 2001 were audited by other auditors whose report dated February 20, 2002,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2003, 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 the
Appleton Equity Growth Fund at December 31, 2003, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for each of the two years in the period then ended in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Cincinnati, Ohio
January 15, 2004
APPLETON EQUITY GROWTH FUND
MANAGEMENT OF THE TRUST (UNAUDITED)
December 31, 2003
Listed in the charts below is basic information regarding the Trustees and
Officers of the Trust.
NUMBER OF OTHER
PORTFOLIOS IN DIRECTORSHIPS
FUND COMPLEX HELD BY TRUSTEE
CURRENT POSITION WITH TRUST PRINCIPAL OCCUPATION(S) OVERSEEN BY OUTSIDE THE FUND
NAME/ADDRESS/AGE AND LENGTH OF TIME SERVED DURING LAST 5 YRS TRUSTEE COMPLEX
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES*:
JAMES I. LADGE President, Trustee Vice President, Appleton 1 N/A
45 Milk Street, 8th Floor (December 2000 - Present) Partners, Inc. (1993 - Present)
Boston, MA 02109 Treasurer
Age: 34 (December 2003 - Present)
DOUGLAS C. CHAMBERLAIN Trustee President, Appleton Partners, Inc. 1 N/A
45 Milk Street, 8th Floor (December 2000 - Present) (1998 - Present)
Boston, MA 02109
Age: 55
DISINTERESTED TRUSTEES:
JACK W. ABER Trustee Professor, Boston University 1 Director, Manager
Boston University School of (December 2000 - Present) (1972- Present) Funds
Management Director, Third
595 Commonwealth Avenue Avenue Funds
Boston, MA 02215
Age: 65
JOHN M. CORNISH, ESQ. Trustee Partner, Choate, Hall & Stewart 1 Director, Thompson
Choate Hall & Stewart (December 2000 - Present) (1985 - Present) Steel Company
53 State Street
Boston, MA 02109
Age: 55
GRADY B. HEDGESPETH Trustee Trustee, Chief Investment 1 N/A
ICA Group (December 2000 - Present) Officer, New Markets Equity Fund
One Harvard Street, Suite 200 (March 2000 - Present);
Brookline, MA 02445 President, Fleet
Age: 47 Development Ventures
(April 1996 - January 2000)
OFFICERS:
Jay S. Fitton Secretary Counsel, Integrated N/A. N/A
221 East Fourth Street, Suite 300 (December 2000 - Present) Fund Services,
Cincinnati, OH 45202 (May 2000 - Present)
Age: 33
* All Interested Trustees are such because of their interest in the investment
adviser, as defined in the Investment Company Act of 1940.
The Statement of Additional Information contains additional information about
the Trustees and is available without charge upon request by calling
1-877-71-Apple.
ITEM 2. CODE OF ETHICS.
At the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to its principal executive officer and principal
financial officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Trustees has determined that the registrant does not
have an audit committee financial expert. The Trustees determined that no member
of the Audit Committee was qualified to be considered an audit committee
financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. Audit fees totaled approximately $12,500 for the December 31,
2003 fiscal year and approximately $11,600 for the December 31, 2002 fiscal
year.
(b) Audit-Related Fees. Audit-Related fees totaled approximately $0 for the
December 31, 2003 fiscal year. Audit-Related fees totaled approximately $0
for the December 31, 2002 fiscal year.
(c) Tax Fees. Tax fees totaled approximately $1,500 for the December 31, 2003
fiscal year and approximately $1,400 for the December 31, 2002 fiscal year
and consisted of fees for tax return preparation services during both
years.
(d) All Other Fees. There were no other fees for the December 31, 2003 or
December 31, 2002 fiscal years.
(e) Not Applicable
(f) Not Applicable
(g) Not Applicable
(h) Not Applicable
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 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.
-2-
ITEM 10. EXHIBITS.
(a) (1) Code of Ethics for Senior Financial Officers is filed herewith.
(2) Certifications required by Item 10(a)(2) of Form N-CSR are filed
herewith.
(b) Certification required by Item 10(b) of Form N-CSR is filed herewith.
-3-
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
-------------------------------------------------------------------
By (Signature and Title)
/s/ James I. Ladge
- --------------------------
James I. Ladge
President and Treasurer
Date: June 23, 2004
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
- --------------------------
James I. Ladge
President and Treasurer
Date: June 23, 2004
-4-