A R I S T O N
- --------------------------------------------------------------------------------
Ariston Capital Management Corporation
40 Lake Bellevue Drive Suite 220
Bellevue, Washington 98005
Telephone (425) 454-1600
Fax (425) 455-2534
Dear Fellow Shareholder:
Our Fund's investment style and performance has returned to a leadership
position. Listed below are the comparative total return performance measurements
for the periods ended June 30, 1999:
3 Months 6 Months 1 Year
-------- -------- ------
Ariston Convertible Securities Fund(1) +17.40% +18.16% +14.49%
Lipper Convertible Fund Average +8.86% +10.99% +7.98%
Standard & Poor's 500 Stock Index (unmanaged) +7.05% +12.40% +22.78%
Russell 2000 Stock Index (unmanaged) +15.55% +9.28% +1.51%
Lehman Gov./Corp. Bond Index (unmanaged) -1.09% -2.27% +2.71%
Our Fund was the top performing convertible securities fund in the second
quarter according to Lipper Analytical Services, Inc.
Our stock market composite risk-forecasting model turned extremely bullish last
fall indicating that a new cyclical bull market was starting. Currently, it is
in its average risk classification, which is normal in an ongoing bull market.
Investors have become much more focused on the fundamental prospects of
individual companies rather than the blind obsession of buying only a handful of
the largest companies. This trend has helped our fund with its emphasis on
selected convertible securities of well-researched growth companies.
We have and continue to emphasize convertible securities of high quality, niche
growth companies with superior businesses at significant valuation discounts.
These companies are leaders in high growth industries and exhibit solid and
predictable earnings growth that is, on average, about three times faster than
the earnings growth of the stock market overall. These are some of the best
businesses in the world!
We are excited about our Fund's portfolio and its prospects. Due to this, all of
our liquid investment capital and retirement savings is invested in our Fund
along side our fellow shareholders.
We appreciate your continued support and confidence. We always welcome the
opportunity to discuss any questions you may have about your investment.
Sincerely,
Ariston Capital Management Corp.
Richard B. Russell, President
August, 1999
- --------
(1) 14.49%, 12.72%, and 11.49% are the one, five and ten year average annual
standard total returns, respectively, for the period ended June 30, 1999.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than at their
original cost. Total return represents past performance and is not predictive of
future results.
<PAGE>
Comparison of change in value of a $10,000 investment in the
Ariston Convertible Securities Fund,
the unmanaged Russell 2000 Stock Index and
the unmanaged Lehman Brothers Government/Corporate Bond Index
Ariston Lehman Russell
Convertible Gov/Corp 2000
Securities Bond Stock
Fund Index Index
6/89 10,000 10,000 10,000
10,691 10,094 10,674
10,234 10,459 10,146
10,319 10,340 9,921
6/90 10,906 10,711 10,303
9,408 10,776 7,775
9,888 11,324 8,166
11,769 11,629 10,595
6/91 12,144 11,803 10,430
13,084 12,481 11,281
14,343 13,146 11,927
14,145 12,949 12,823
6/92 13,427 13,473 11,948
14,395 14,132 12,290
16,183 14,142 14,125
16,734 14,801 14,726
6/93 15,630 15,246 15,047
16,771 15,753 16,362
17,240 15,707 16,793
16,616 15,212 16,346
6/94 16,299 15,023 15,709
16,993 15,099 16,799
17,466 15,154 16,486
18,070 15,909 17,246
6/95 18,366 16,942 18,862
19,819 17,265 20,726
20,719 18,070 21,176
21,842 17,647 22,256
6/96 21,309 17,730 23,368
22,357 18,042 23,448
21,731 18,594 24,667
20,649 18,434 23,392
6/97 22,766 19,105 27,184
24,712 19,774 31,229
24,591 20,409 30,182
26,662 20,719 33,216
6/98 25,912 21,262 31,665
21,756 22,314 25,287
25,107 22,345 29,412
25,270 22,077 27,815
6/99 29,667 21,837 32,140
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund with a similar investment in the unmanaged Russell 2000
Stock Index and the Lehman Brothers Government/Corporate Bond Index. Results for
the Fund, the Russell 2000 Stock Index and the Lehman Brothers
Government/Corporate Bond Index include the reinvestment of all dividend and
capital gain distributions. Investment returns and principal value of an
investment will fluctuate so that an investor's shares when redeeemed may be
worth more or less than at their original cost. Total return represents past
performance and is not predictive of future results.
Average Annual Standard
Total Returns for the
Period Ended 6/30/99
- -------------------------------------------------------
Fund/Index Legend 1 Year 5 Year 10 Year
- -------------------------------------------------------
Ariston Convertible
Securities Fund Triangle 14.49% 12.73% 11.49%
- -------------------------------------------------------
Lehman Gov/Corp
Bond Index Square 2.71% 7.77% 8.12%
- -------------------------------------------------------
Russell 2000
Stock Index Circle 1.51% 15.40% 12.38%
- -------------------------------------------------------
14.49%, 12.73% and 11.49% are the one, five and ten year average annual standard
total returns, respectively, for the period ended June 30, 1999. Investment
return and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than at their original cost.
Total return represents past performance and is not predictive of future
results.
<PAGE>
Ariston Convertible Securities Fund
Schedule of Investments - June 30, 1999 (Unaudited)
Principal
CONVERTIBLE BONDS - 44.9% Amount Value
Biotechnology - 8.8%
Chiron (Cetus) Corporation,
5.25%, due 05/21/2002 $330,000 $ 326,700
Genzyme Corporation - General,
5.25%, due 06/01/2005 335,000 471,512
-------------
798,212
-------------
Computer Services / Data Processing - 9.9%
Automatic Data Processing Services, Inc.,
0.00%, due 02/20/2012 (b) 400,000 454,856
National Data Corporation,
5.00%, due 11/01/2003 420,000 440,475
-------------
895,331
-------------
Computer Software / Network - 4.0%
Citrix Systems,
0.00%, due 03/22/2019 (b) 750,000 359,050
-------------
Leisure / Hobby - 4.8%
Action Performance Companies, Inc.,
4.75%, due 04/01/2005 475,000 439,375
-------------
Pharmaceuticals - 3.9%
Elan plc (Athena Neurosciences),
4.75%, due 11/15/2004 335,000 352,588
-------------
Retail Stores / Building Products - 6.2%
Home Depot, Inc.,
3.25%, due 10/01/2001 200,000 559,312
-------------
Semiconductors - 7.3%
Level One Communications, Inc.,
4.00%, due 09/01/2004 340,000 665,975
-------------
TOTAL CONVERTIBLE BONDS
(Cost $3,066,542) 4,069,843
-------------
CONVERTIBLE PREFERRED STOCKS - 23.5% Shares
Consumer Products / Housewares - 4.2%
Newell Rubbermaid 5.25% 6,700 378,550
-------------
Telecommunications Equipment - 19.3%
Loral Space & Communications, Inc. 6.00% 6,500 333,125
Qualcommm / Leap Wireless International 5.75% 7,000 1,419,250
-------------
1,752,375
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $1,215,850) 2,130,925
-------------
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund
Schedule of Investments - June 30, 1999 (Unaudited) - continued
Shares Value
COMMON STOCKS - 30.7%
Computer Software / Electronic Commerce - 6.8%
Sterling Commerce, Inc.(a) 16,852 $ 615,098
-------------
Computer Software / Enterprise - 6.2%
Sterling Software, Inc.(a) 21,164 564,814
-------------
Manufactured Housing - 6.6%
Clayton Homes, Inc. 52,500 600,469
-------------
Semiconductors - 11.1%
Analog Devices Corporation (a) 20,000 1,003,750
-------------
TOTAL COMMON STOCKS
(Cost $821,281) 2,784,131
-------------
TOTAL INVESTMENT - 99.1%
(Cost $5,103,673) 8,984,899
-------------
Other assets less liabilities - 0.9% 80,361
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TOTAL NET ASSETS - 100.0%
(equivalent to $18.15 per share
on 499,396 shares outstanding) $ 9,065,260
=============
(a) Non-income producing
(b) Zero Coupon Bond
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund June 30,1999
Statement of Assets & Liabilities (Unaudited)
Assets
Investment in securities (cost $5,103,673) $ 8,984,899
Receivable for securities sold 635,211
Dividends receivable 960
Interest receivable 20,823
--------------
Total assets 9,641,893
Liabilities
Payable for securities purchased $ 343,125
Payable to custodian bank 202,782
Accrued investment advisory fee payable 15,840
Accrued distribution fee payable 1,535
Other payables and accrued expenses 13,351
----------------
Total liabilities 576,633
--------------
Net Assets $ 9,065,260
==============
Net Assets consist of:
Paid in capital $ 4,018,466
Accumulated net investment income (loss) (8,953)
Accumulated undistributed net realized gain on investments 1,174,521
Net unrealized appreciation on investments 3,881,226
--------------
Net Assets, for 499,396 shares $ 9,065,260
==============
Net Asset Value
Net Assets
Offering price and redemption price per share
($9,065,260 / 499,396) $ 18.15
==============
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund
Statement of Operations for the six months ended June 30, 1999 (Unaudited)
Investment Income
Dividend income $ 17,533
Interest income 62,454
--------------
Total Income 79,987
Expenses
Investment advisory fee $ 63,345
Registration fees 4,633
Transfer agent fees 4,529
Pricing & bookkeeping fees 4,281
Distribution fees 3,755
Trustees' fees 1,984
Shareholder reports 1,318
Audit fees 1,154
Custodian fees 566
Legal fees 459
Miscellaneous 2,916
----------------
Total operating expenses 88,940
--------------
Net Investment Income (Loss) (8,953)
--------------
Realized & Unrealized Gain (Loss)
Net realized gain on investment securities 1,446,035
Change in net unrealized appreciation (depreciation)
on investment securities 58,904
--------------
Net gain on investment securities 1,504,939
--------------
Net increase in net assets resulting from operations $1,495,986
==============
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund
Statement of Changes in Net Assets
<TABLE>
<S> <C> <C>
Six Months
Ended Year
June 30, Ended
1999 December 31,
(Unaudited) 1998
----------------- -----------------
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (8,953) $ (13,133)
Net realized gain on investment securities 1,446,035 (271,514)
Change in net unrealized appreciation (depreciation) 58,904 358,692
----------------- -----------------
Net increase in net assets resulting from operations 1,495,986 74,045
Distributions to shareholders
From net realized gain -- (21,464)
----------------- -----------------
Share Transactions
Net proceeds from sale of shares 898,025 2,959,165
Shares issued in reinvestment of distributions -- 19,824
Shares redeemed (3,714,057) (2,991,454)
----------------- -----------------
Net decrease in net assets resulting
from share transactions (2,816,032) (12,465)
----------------- -----------------
Total increase (decrease) in net assets (1,320,046) 40,116
Net Assets
Beginning of period 10,385,306 10,345,190
----------------- -----------------
End of period [including accumulated undistributed net
investment income (loss) of $(8,953) and $0] $ 9,065,260 $ 10,385,306
================= =================
</TABLE>
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund Financial Highlights
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Six Months
Ended
June 30,
1999 Years ended December 31,
---------------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ----------
Selected Per Share Data
Net asset value, beginning of period $ 15.36 $ 15.08 $ 13.66 $ 13.66 $ 11.84 $ 14.10
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.02) -- 0.11 0.11 0.15 0.08
Net realized and unrealized gain (loss)
on investments 2.81 0.31 1.68 0.55 2.04 0.10
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 2.79 0.31 1.79 0.66 2.19 0.18
---------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net investment income -- -- (0.11) (0.11) (0.15) (0.07)
Distributions from excess of net investment
income (temporary book-tax difference) -- -- -- -- -- (0.05)
Distributions from net realized gains -- (0.03) (0.26) (0.55) (0.22) (2.32)
---------- ---------- ---------- ---------- ---------- ----------
- -Total distributions -- (0.03) (0.37) (0.66) (0.37) (2.44)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 18.15 $ 15.36 $ 15.08 $ 13.66 $ 13.66 $ 11.84
========== ========== ========== ========== ========== ==========
Total Return (b) 18.16% 2.09% 13.16% 4.89% 18.63% 1.30%
Ratios and Supplemental Data
Net assets, end of period (000) $9,065 $10,385 $10,345 $11,208 $11,641 $8,117
Ratio of expenses to average net assets 1.93% 2.32% 2.38% 2.39% 2.52% 2.75%
Ratio of expenses to average net assets
before reimbursement 1.93% 2.32% 2.38% 2.39% 2.52% 2.81%
Ratio of net investment income (loss) to
average net assets (0.19)% (0.13)% 0.79% 0.77% 1.24% 0.56%
Ratio of net investment income (loss) to
average net assets before reimbursement (0.19)% (0.13)% 0.79% 0.77% 1.24% 0.50%
Portfolio turnover rate 45.94% 27.79% 30.47% 18.45% 11.23% 38.14%
</TABLE>
(a) Annualized
(b) For periods of less than a full year, total returns are not annualized.
See accompanying notes which are an integral part of the financial statements
<PAGE>
Ariston Convertible Securities Fund
Notes to Financial Statements
June 30, 1999
NOTE 1. ORGANIZATION
Ariston Convertible Securities Fund (the "Fund") was organized as a series
of the AmeriPrime Funds, an Ohio business trust (the "Trust"), on February 24,
1999. On April 30, 1999, the Fund acquired the assets and assumed the
liabilities of Lexington Convertible Securities Fund (the "Predecessor Fund") in
a tax-free reorganization. The Fund is registered under the Investment Company
Act of 1940, as amended, as a diversified open-end management investment
company. The Fund's investment objective is total return. The Declaration of
Trust permits the Trustees to issue an unlimited number of shares of beneficial
interest of separate series without par value.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
Securities Valuations- 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 the mean between the last bid
and ask price except when, in the Advisor's opinion, the last mean price does
not accurately reflect the current value of the security. All other securities
generally are valued at the mean between the last bid and ask price. When market
quotations are not readily available, when the Advisor determines the mean 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
Advisor, in conformity with guidelines adopted by and subject to review of the
Board of Trustees of the Trust (the "Board").
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
Advisor 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 prices. When prices are not readily available from
a pricing service, or when restricted or illiquid securities are being valued,
securities are valued at fair value as determined in good faith by the Advisor,
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.
<PAGE>
Ariston Convertible Securities Fund
Notes to Financial Statements
June 30, 1999 - continued
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - continued
Federal Income Taxes- The Fund intends to qualify each year as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. By so
qualifying, the Fund will not be subject to federal income taxes to the extent
that it distributes substantially all of its net investment income and any
realized capital gains.
Dividends and Distributions- The Fund intends to distribute substantially all of
its net investment income as dividends to its shareholders on a quarterly basis.
The Fund intends to distribute its net long-term capital gains and its net
short-term capital gains at least once a year.
Other- The Fund follows industry practice and records security transactions on
the trade date. The specific identification method is used for determining gains
or losses for financial statements and income tax purposes. Dividend income is
recorded on the ex-dividend date and interest income is recorded on an accrual
basis. Discounts and premiums on securities purchased are amortized over the
life of the respective securities.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Ariston Capital Management Corporation (the "Advisor") to
manage the Fund's investments. The Advisor was founded in 1977. Richard B.
Russell, President and controlling shareholder of the Advisor, is primarily
responsible for the day-to-day management of the Fund's portfolio.
Under the terms of the management agreement, (the "Agreement"), the Advisor
manages the Fund's investments subject to approval of the Board of Trustees and
pays all of the expenses of the Fund except brokerage commission, taxes,
interest, fees and expenses of non-interested person trustees, and extraordinary
expenses. As compensation for its management services and agreement to pay the
Fund's expenses, the Fund is obligated to pay the Advisor a fee of 2.25% of the
average daily net assets of the Fund, less the amount of its 12b-1 expenses and
fees and expenses of non-interested person trustees. It should be noted that
most investment companies pay their own operating expenses directly, while the
Fund's expenses, except those specified above, are paid by the Advisor. For the
six months ended June 30, 1999, the Advisor received a fee of $63,345 from the
Fund.
<PAGE>
Ariston Convertible Securities Fund
Notes to Financial Statements
June 30, 1999 - continued
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - continued
The Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act
(the "Distribution Plan"). Under the Distribution Plan, the Fund is authorized
to pay a fee in an amount not to exceed on an annual basis 0.25% of the average
daily net asset value of the Class D Shares. For the six months ended June 30,
1999, the Fund paid distribution fees of $3,755 for expenses related to the sale
of Fund shares.
The Fund retains AmeriPrime Financial Services, Inc. (the "Administrator")
to manage the Fund's business affairs and provide the Fund with administrative
services, including all regulatory reporting and necessary office equipment and
personnel. For the six months ended June 30, 1999, the Administrator received
fees of $5,000 from the Advisor for administrative services provided to the
Fund.
The Fund retains AmeriPrime Financial Securities, Inc. ("the Distributor")
to act as the principal distributor of the Fund's shares. There were no payments
made to the Distributor for the six months ended June 30, 1999. Certain members
of management of the Administrator and the Distributor are also members of
management of the AmeriPrime Trust.
NOTE 4. SHARE TRANSACTIONS
As of June 30, 1999, there was an unlimited number of authorized shares for
the Fund. Paid in capital at June 30, 1999 was $4,018,466.
Transactions in shares were as follows:
Six Months ended Year ended
June 30, 1999 December 31, 1998
Shares Dollars Shares Dollars
Shares sold 56,163 $898,025 191,038 $2,959,165
Shares issued in
reinvestment - - 1,486 19,824
Shares redeemed
(232,940) (3,714,057) (202,476) (2,991,454)
------- --------- ------- ---------
(176,777) $(2,816,032) (9,952) $(12,465)
======= ========= ===== ======
<PAGE>
Ariston Convertible Securities Fund
Notes to Financial Statements
June 30, 1999 - continued
NOTE 5. INVESTMENTS
For the six months ended June 30, 1999, purchases and sales of investment
securities, other than short-term investments, aggregated $343,125 and
$2,798,320, respectively. As of June 30, 1999, the gross unrealized appreciation
for all securities totaled $4,263,732 and the gross unrealized depreciation for
all securities totaled $160,410 for a net unrealized appreciation of $4,103,322.
The aggregate cost of securities for federal income tax purposes at June 30,
1999 was $4,898,094.
NOTE 6. ESTIMATES
Preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 7. MERGER INFORMATION
On April 30, 1999, the Fund acquired the assets and assumed the liabilities
of the Predecessor Fund. The acquisition, which was approved by the shareholders
the Predecessor Fund on April 26, 1999, was accomplished by an exchange of all
of the shares of the Fund for all of the shares of the Predecessor Fund. Based
on the opinion of Fund counsel, the reorganization qualified as a tax-free
reorganization for federal income tax purposes with no gain or loss recognized
to the Fund or its shareholders.
NOTE 8. YEAR 2000 ISSUE
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the Advisor, Administrator or other service providers
to the Fund do not properly process and calculate date-related information and
data from and after January 1, 2000. This is commonly known as the "Year 2000
Issue." The Advisor and Administrator have taken steps that they believe are
reasonably designed to address the Year 2000 Issue with respect to computer
systems that are used and to obtain reasonable assurances that comparable steps
are being taken by each of the Fund's major service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the Fund. In addition, the Advisor cannot make any
assurances that the Year 2000 Issue will not affect the companies in which the
Fund invests or worldwide markets and economies.
