ARISTON FUNDS
ARISTON CONVERTIBLE SECURITIES FUND
ARISTON INTERNET CONVERTIBLE FUND
STATEMENT OF ADDITIONAL INFORMATION
December 8, 2000
This Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the Prospectus of Ariston Funds dated May
1, 2000. This SAI incorporates by reference the Ariston Convertible Securities
Fund's Annual Report to Shareholders for the year ended December 31, 1999. A
free copy of the Prospectus or Annual Report can be obtained by writing the
Transfer Agent at 431 North Pennsylvania Street, Indianapolis, Indiana 46204, or
by calling 1-888-387-2273.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE TRUST AND FUNDS...........................................2
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS..............................................................3
INVESTMENT LIMITATIONS.......................................................7
THE INVESTMENT ADVISOR.......................................................9
DISTRIBUTION PLAN............................................................9
TRUSTEES AND OFFICERS.......................................................11
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................11
DETERMINATION OF SHARE PRICE................................................12
INVESTMENT PERFORMANCE......................................................13
CUSTODIAN...................................................................14
TRANSFER AGENT..............................................................14
ACCOUNTANTS.................................................................15
DISTRIBUTOR.................................................................15
ADMINISTRATOR...............................................................15
FINANCIAL STATEMENTS........................................................15
11391 03/06/2000 9:56 AM
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DESCRIPTION OF THE TRUST AND FUNDS
The Ariston Convertible Securities Fund was organized as a diversified
series of AmeriPrime Funds (the "Trust") on February 24, 1999. On April 30,
1999, the Fund acquired the assets and assumed the liabilities of the Lexington
Convertible Securities Fund in a tax-free reorganization. The Trust is an
open-end investment company established under the laws of Ohio by an Agreement
and Declaration of Trust dated August 8, 1995 (the "Trust Agreement"). The
Ariston Convertible Internet Fund was organized as a diversified series of the
Trust on February 29, 2000. The Trust Agreement permits the Trustees to issue an
unlimited number of shares of beneficial interest of separate series without par
value. Each Fund is one of a series of funds currently authorized by the
Trustees. The Funds' investment advisor is Ariston Capital Management
Corporation (the "Advisor."
The Funds do not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Funds' transfer
agent for the account of the shareholders. Each share of a series represents an
equal proportionate interest in the assets and liabilities belonging to that
series with each other share of that series and is entitled to such dividends
and distributions out of income belonging to the series as are declared by the
Trustees. The shares do not have cumulative voting rights or any preemptive or
conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of
shares of that series so long as the proportionate beneficial interest in the
assets belonging to that series and the rights of shares of any other series are
in no way affected. In case of any liquidation of a series, the holders of
shares of the series being liquidated will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging to that
series. Expenses attributable to any series are borne by that series. Any
general expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. No shareholder
is liable to further calls or to assessment by the Trust without his or her
express consent.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of the Funds have equal voting rights and liquidation rights. The
Declaration of Trust can be amended by the Trustees, except that any amendment
that adversely effects the rights of shareholders must be approved by the
shareholders affected. Each share of the Funds are subject to redemption at any
time if the Board of Trustees determines in its sole discretion that failure to
so redeem may have materially adverse consequences to all or any of the Funds'
shareholders.
As of November 30, 2000, the following persons may be deemed to
beneficially own or hold or record five percent (5%) or more of the Ariston
Convertible Securities Fund: Charles Schwab & Co, Inc., 101 Montgomery St., San
Francisco, CA 94104 - 35.60%; National Investor Services Corp, 55 Water St., New
York, NY 10041 - 14.49%; National Financial Services Corp, 200 Liberty St., New
York, NY 10281 - 7.21%; Joseph B. Mohr, 2157 La Paz Way, Palm Springs, CA 92264
- 7.14%. As of November 30, 2000, the following persons may be deemed to
beneficially own or hold or record five percent (5%) or more of the Ariston
Internet Convertible Fund - Elite: Arison Capital Mgmt Corp, 240 Lake Bellevue
Dr, Bellevue, WA 98005 - 28.28%; Donaldson Lufkin Jenrette, P.O. Box 2052,
Jersey City, NJ 07303 - 19.26%; J and M Trust, 2157 La Paz, Palm Springs, CA
92264 - 14.38%; Richard B. Russell, 9705 NE 13th St., Bellevue, WA 98004 -
8.23%; Julie Walker, 131 N. Citrus Ave, Los Angeles, CA 90036 - 7.06%. As of
November 30, 2000, the following person may be deemed to beneficially own or
hold or record five percent (5%) or more of the Ariston Internet Convertible
Fund - Premier: Investec Ernst & Company, One Battery Park Plaza, New York, NY
10004 - 98.64%.
As of November 30, 2000, the following persons may be deemed to control
the indicated Funds as a result of beneficial ownership of the Funds.
Ariston Convertible Securities - Charles Schwab & Co, Inc.
Ariston Internet Convertible-Elite - Ariston Capital Mgmt Corp.
Ariston Internet Covertible-Premier - Investec Ernst & Company
As of November 30, 2000, the officers and trustees as a group owned
less than one percent of each Fund.
For information concerning the purchase and redemption of shares of the
Funds, see "How to Buy Shares" and "How to Redeem Shares" in the Funds'
Prospectus. For a description of the methods used to determine the share price
and value of each Fund's assets, see "Determination of Net Asset Value" in the
Funds' Prospectus and this Statement of Additional Information.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
AND RISK CONSIDERATIONS
This section contains a detailed discussion of some of the investments the
Funds may make and some of the techniques it may use.
A. High Yield Debt Securities ("Junk Bonds"). The widespread expansion
of government, consumer and corporate debt within our economy has made the
corporate sector, especially cyclically sensitive industries, more vulnerable to
economic downturns or increased interest rates. An economic downturn could
severely disrupt the market for high yield securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest.
The prices of high yield securities have been found to be more
sensitive to interest rate changes than higher-rated investments, and more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a security owned by the Funds defaulted, the Funds
could incur additional expenses to seek recovery. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices of high yield securities and each Fund's net asset
value. Furthermore, in the case of high yield securities structured as zero
coupon or pay-in-kind securities, their market prices are affected to a greater
extent by interest rate changes and thereby tend to be more volatile than
securities which pay interest periodically and in cash. High yield securities
also present risks based on payment expectations. For example, high yield
securities may contain redemption of call provisions. If an issuer exercises
these provisions in a declining interest rate market, the Funds would have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. Conversely, a high yield securities value will decrease in
a rising interest rate market, as will the value of the Fund's assets. If a Fund
experiences unexpected net redemptions, this may force it to sell its high yield
securities without regard to their investment merits, thereby decreasing the
asset based upon which the Fund's expenses can be spread and possibly reducing
the Fund's rate of return.
In addition, to the extent that there is no established retail
secondary market, there may be thin trading of high yield securities, and this
may have an impact on each Fund's ability to accurately value high yield
securities and the Fund's assets and on the Fund's ability to dispose of the
securities. Adverse publicity and investor perception, whether or not based on
fundamental analysis, may decrease the values and liquidity of high yield
securities especially in a thinly traded market.
New laws and proposed new laws may have an impact on the market for
high yield securities. For example, new legislation requiring federally-insured
savings and loan associations to divest their investments in high yield
securities and pending proposals designed to limit the use, or tax and other
advantages of high yield securities which, if enacted, could have a material
effect on each Fund's net asset value and investment practices.
There are also special tax considerations associated with investing in
high yield securities structured as zero coupon or pay-in-kind securities. For
example, each Fund reports the interest on these securities as income even
though it receives no cash interest until the security's maturity or payment
date. Also, the shareholders are taxed on this interest event if the Funds do
not distribute cash to them. Therefore, in order to pay taxes on this interest,
shareholders may have to redeem some of their shares to pay the tax or the Funds
may sell some of its assets to distribute cash to shareholders. These actions
are likely to reduce each Fund's assets and may thereby increase its expense
ratio and decrease its rate of return.
Finally, there are risks involved in applying credit ratings as method
for evaluating high yield securities. For example, credit ratings evaluate the
safety of principal and interest payments, not market value risk of high yield
securities. Also, since credit rating agencies may fail to timely change the
credit ratings to reflect subsequent events, each Fund (in conjunction with its
investment advisor) will continuously monitor the issuers of high yield
securities to determine if the issuers will have sufficient cash flow and
profits to meet required principal and interest payments, and to assure the
securities liquidity so each Fund can meet redemption requests.
A description of the rating categories is contained in the Appendix.
B. Warrants. Each Fund may invest up to 5% of its total assets at the
time of purchase in warrants (not including those acquired in units or attached
to other securities). A warrant is a right to purchase common stock at a
specific price during a specified period of time. The value of a warrant does
not necessarily change with the value of the underlying security. Warrants do
not represent any rights to the assets of the issuing company. A warrant becomes
worthless unless it is exercised or sold before expiration. Warrants have no
voting rights and pay no dividends.
C. Options Transactions. Each Fund may write (sell) covered call
options and may purchase put and call options on individual securities and
securities indices. A covered call option on a security is an agreement to sell
a particular portfolio security if the option is exercised at a specified price,
or before a set date. Options are sold (written) on securities and market
indices. The purchaser of an option on a security pays the seller (the writer) a
premium for the right granted but is not obligated to buy or sell the underlying
security. The purchaser of an option on a market index pays the seller a premium
for the right granted, and in return the seller of such an option is obligated
to make the payment. A writer of an option may terminate the obligation prior to
the expiration of the option by making an offsetting purchase of an identical
option. Options on securities which each Fund sells (writes) will be covered or
secured, which means that it will own the underlying security (for a call
option) or (for an option on a stock index) will hold a portfolio of securities
substantially replicating the movement of the index (or, to the extent it does
not hold such a portfolio, will maintain a segregated account with the Custodian
of high quality liquid debt obligations equal to the market value of the option,
marked to market daily). When a Fund writes options, it may be required to
maintain a margin account, to pledge the underlying security or to deposit
liquid high quality debt obligations in a separate account with the Custodian.
When a Fund writes an option, the Fund profits from the sale of the option, but
gives up the opportunity to profit from any increase in the price of the stock
above the option price, and may incur a loss if the stock price falls. Risks
associated with writing covered call options include the possible inability to
effect closing transactions at favorable prices and an appreciation limit on the
securities set aside for settlement. When a Fund writes a covered call option,
it will receive a premium, but will assume the risk of loss should the price of
the underlying security fall below the exercise price.
D. Collateralized Short Sales. Each Fund may make short sales of common
stocks, provided they are "against the box," i.e., each Fund owns an equal
amount of such securities or owns securities that are convertible or
exchangeable without payment of further consideration into an equal or greater
amount of such common stock. Each Fund may make a short sale when the Fund
manager believes the price of the stock may decline and for tax or other
reasons, the Fund manager does not want to sell currently the stock or
convertible security it owns. In such case, any decline in the value of the
portfolio would be reduced by a gain in the short sale transaction. Conversely,
any increase in the value of the portfolio would be reduced by a loss in the
short sale transaction. A Fund may not make short sales or maintain a short
position unless at all times when a short position is open, not more than 10% of
its total assets (taken at current value) is held as collateral for such sales
at any one time. Short sales against the box are used to defer recognition of
capital gains and losses, although the short-term or long-term nature of such
gains or losses could be altered by certain provisions of the Internal Revenue
Code.
E. U.S. Government Securities. Each Fund may invest in securities
issued or guaranteed by the U.S. Government, its agencies and instrumentalities
(U.S. Government Securities"). U.S. Government Securities may be backed by the
credit of the government as a whole or only by the issuing agency. U.S. Treasury
bonds, notes, and bills and some agency securities, such as those issued by the
Federal Housing Administration and the Government National Mortgage Association
(GNMA), are backed by the full faith and credit of the U.S. government as to
payment of principal and interest and are the highest quality government
securities. Other securities issued by U.S. government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. government.
F. Repurchase Agreements. Each Fund may invest in repurchase agreements
fully collateralized by U.S. Government obligations. A repurchase agreement is a
short-term investment in which the purchaser (i.e., a Fund) acquires ownership
of a U.S. Government obligation (which may be of any maturity) and the seller
agrees to repurchase the obligation at a future time at a set price, thereby
determining the yield during the purchaser's holding period (usually not more
than seven days from the date of purchase). Any repurchase transaction in which
a Fund engages will require full collateralization of the seller's obligation
during the entire term of the repurchase agreement. In the event of a bankruptcy
or other default of the seller, a Fund could experience both delays in
liquidating the underlying security and losses in value. However, the Funds
intend to enter into repurchase agreements only with Firstar Bank, N.A. (the
Funds' Custodian), other banks with assets of $1 billion or more and registered
securities dealers determined by the Advisor (subject to review by the Board of
Trustees) to be creditworthy. The Advisor monitors the creditworthiness of the
banks and securities dealers with which the Funds engage in repurchase
transactions.
G. Illiquid Securities. The portfolio of each Fund may contain illiquid
securities. Illiquid securities generally include securities which cannot be
disposed of promptly and in the ordinary course of business without taking a
reduced price. Securities may be illiquid due to contractual or legal
restrictions on resale or lack of a ready market. The following securities are
considered to be illiquid: repurchase agreements maturing in more than seven
days, nonpublicly offered securities and certain restricted securities. Neither
Fund will invest more than 10% of its net assets in illiquid securities.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a remaining maturity of longer than seven days. Securities which have not
been registered under the 1933 Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of Fund securities and a mutual fund might
be unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
The Securities and Exchange Commission the (the "SEC") has adopted Rule
144A, which allows a broader institutional trading market for securities
otherwise subject to restriction on their resale to the general public. Rule
144A establishes a "safe harbor" from the registration requirements of the 1933
Act of resales of certain securities to qualified institutional buyers. Rule
144A securities are not considered to be illiquid for purposes of each Fund's
illiquid securities policy, which limits each Fund's investment in illiquid
securities to 10% of its net assets, if such securities are determined to be
liquid by the Adviser in accordance with the requirements established by the
Trust. The Advisor anticipates that the market for certain restricted securities
such as institutional commercial paper will expand further as a result of this
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.
The Advisor will monitor the liquidity of Rule 144A securities in each
Fund's holdings under the supervision of the Fund's Board of Trustees. In
reaching liquidity decisions, the Advisor will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers and other potential purchasers or sellers of the security;
(3) dealer undertakings to make a market in the security and (4) the nature of
the security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).
INVESTMENT LIMITATIONS
Fundamental. The investment limitations described below have been
adopted by the Trust with respect to each Fund and are fundamental
("Fundamental"), i.e., they may not be changed without the affirmative vote of a
majority of the outstanding shares of each Fund. As used in the Prospectus and
this Statement of Additional Information, the term "majority" of the outstanding
shares of a Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
1. Borrowing Money. Neither Fund will borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude a Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. Senior Securities. Neither Fund will issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. Underwriting. Neither Fund will act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), a Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. Neither Fund will purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude a Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. Commodities. Neither Fund will purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude a Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. Loans. Neither Fund will make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. Concentration. Neither Fund will invest 25% or more of its total
assets in a particular industry except that Ariston Internet Convertible Fund
may invest more than 25% of its assets in the internet industry. This limitation
is not applicable to investments in obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities or repurchase agreements with
respect thereto.
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
Non-Fundamental. The following limitations have been adopted by the
Trust with respect to each Fund and are Non-Fundamental (see "Investment
Restrictions" above).
1. Pledging. Neither Fund will mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. Borrowing. Neither Fund will engage in borrowing.
3. Margin Purchases. Neither Fund will purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by a Fund for the clearance of purchases and sales or redemption
of securities, or to arrangements with respect to transactions involving
options, futures contracts, short sales and other permitted investments and
techniques.
4. Short Sales. Neither Fund will effect short sales of securities
except as described in the Prospectus or Statement of Additional Information.
5. Options. Neither Fund will purchase or sell puts, calls, options or
straddles except as described in the Prospectus or Statement of Additional
Information.
6. Illiquid Investments. Neither Fund will invest more than 10% of its
total assets in securities for which there are legal or contractual restrictions
on resale and other illiquid securities.
7. Loans of Portfolio Securities. Neither Fund will make loans of
portfolio securities.
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THE INVESTMENT ADVISOR
The Funds' investment advisor is Ariston Capital Management Corporation
(the "Advisor"), 40 Lake Bellevue Drive, Suite 220, Bellevue, Washington 98005.
As sole shareholder of the Advisor, Richard B. Russell, may be deemed to be a
controlling person of the Advisor.
Under the terms of the management agreement (the "Agreement"), the
Advisor manages the Funds' investments subject to approval of the Board of
Trustees. As compensation for its management services, each Fund is obligated to
pay the Advisor a fee computed and accrued daily and paid monthly at an annual
rate of 2.25% of the average daily net assets of the Fund less the amount of the
fees and expenses of the non-interested person trustees, and with respect to the
Ariston Convertible Securities Fund only, less the amount of the Fund's 12b-1
expenses. For the period May 1, 1999 (commencement of operations) through
December 31, 1999, the Ariston Convertible Securities Fund paid advisory fees of
$151,742.
The Advisor retains the right to use the name "Ariston" in connection
with another investment company or business enterprise with which the Advisor is
or may become associated. The Trust's right to use the name "Ariston"
automatically ceases ninety days after termination of the Agreement and may be
withdrawn by the Advisor on ninety days written notice.
The Advisor may make payments to banks or other financial institutions
that provide shareholder services and administer shareholder accounts. If a bank
or other financial institution were prohibited from continuing to perform all or
a part of such services, management of the Funds believes that there would be no
material impact on either Fund or its shareholders. Banks and other financial
institutions may charge their customers fees for offering these services to the
extent permitted by applicable regulatory authorities, and the overall return to
those shareholders availing themselves of the bank services will be lower than
to those shareholders who do not. Each Fund may from time to time purchase
securities issued by banks and other financial institutions which provide such
services; however, in selecting investments for the Funds, no preference will be
shown for such securities.
The Trust and the Advisor have each adopted a Code of Ethics under Rule
17j-1 of the Investment Company Act of 1940. The Code significantly restricts
the personal investing activities of all employees of the Advisor. The Code
requires that all employees of the Advisor preclear any personal securities
investment. The preclearance requirement and associated procedures are designed
to identify any substantive prohibition or limitation applicable to the proposed
investment. In addition, no employee may purchase or sell any security which at
the time is being purchased or sold, or to the knowledge of the employee is
being considered for purchase or sale, by the Fund. The substantive restrictions
also include a ban on acquiring any securities in an initial public offering and
provides for trading "blackout periods" which prohibit trading by portfolio
managers of the Fund within periods of trading by the Fund in the same (or
equivalent) security. The restrictions and prohibitions apply to most securities
transactions by employees of the Advisor, with limited exceptions for some
securities (such as securities which have a market capitalization and average
daily trading volume above certain minimums).
DISTRIBUTION PLAN
Each Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (each, a "Plan"). The Plan for the Ariston Convertible Securities
Fund permits the Fund to pay directly, or reimburse the Advisor or Distributor,
for distribution expenses in an amount not to exceed 0.25% of the average daily
net assets of the Fund. The Plan for the Ariston Internet Convertible Fund,
which relates only to the Premier class of shares, permits the Fund to pay
directly, or reimburse the Advisor or Distributor, for distribution expenses in
an amount not to exceed 0.70% of the average daily net assets of the Premier
class of shares. The Trustees expect that the Plan will significantly enhance
each Fund's ability to distribute its shares.
Under each Plan, the Trust may engage in any activities related to the
distribution of each Fund's shares (with respect to the Ariston Internet
Convertible Fund, only the shares of the Premier class), including without
limitation the following: (a) payments, including incentive compensation, to
securities dealers or other financial intermediaries, financial institutions,
investment advisors and others that are engaged in the sale of shares, or that
may be advising shareholders of the Fund regarding the purchase, sale or
retention of shares, or that hold shares for shareholders in omnibus accounts or
as shareholders of record or provide shareholder support or administrative
services to the Fund and its shareholders; (b) expenses of maintaining personnel
who engage in or support distribution of shares or who render shareholder
support services, including, allocated overhead, office space and equipment,
telephone facilities and expenses, answering routine inquiries regarding the
Fund, processing shareholder transactions, and providing such other shareholder
services as the Trust may reasonably request; (c) costs of preparing, printing
and distributing prospectuses and statements of additional information and
reports of the Fund for recipients other than existing shareholders of the Fund;
(d) costs of formulating and implementing marketing and promotional activities,
including, sales seminars, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (e) costs of preparing,
printing and distributing sales literature; (f) costs of obtaining such
information, analyses and reports with respect to marketing and promotional
activities as the Trust may deem advisable; and (g) costs of implementing and
operating the Plan.
Each Plan has been approved by the Board of Trustees, including a
majority of the Trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the Plan or any related
agreement, by a vote cast in person. Continuation of a Plan and the related
agreements must be approved by the Trustees annually, in the same manner, and
either Plan or any related agreement may be terminated at any time without
penalty by a majority of such independent Trustees or by a majority of the
outstanding shares of the Fund (with respect to the Ariston Internet Convertible
Fund, only the shares of the Premier class). Any amendment increasing the
maximum percentage payable under a Plan must be approved by a majority of the
outstanding shares of the Fund (with respect to the Ariston Internet Convertible
Fund, only the shares of the Premier class), and all other material amendments
to the Plan or any related agreement must be approved by a majority of the
independent Trustees. As an executive officer of the Funds' Distributor, Kenneth
Trumpfheller, a Trustee of the Trust, may benefit indirectly from payments
received by each Fund's Distributor.
<PAGE>
TRUSTEES AND OFFICERS
The Board of Trustees supervises the business activities of the Trust.
The names of the Trustees and executive officers of the Trust are shown below.
Each Trustee who is an "interested person" of the Trust, as defined in the
Investment Company Act of 1940, is indicated by an asterisk.
<TABLE>
<S> <C> <C>
==================================== ================ ======================================================================
Name, Age and Address Position Principal Occupations During Past 5 Years
------------------------------------ ---------------- ----------------------------------------------------------------------
*Kenneth D. Trumpfheller President, Managing Director of Unified Fund Services, Inc., the Fund's
1793 Kingswood Drive Secretary and transfer agent, fund accountant and administrator, since October
Suite 200 Trustee 2000. President, Treasurer and Secretary of AmeriPrime Financial
Southlake, Texas 76092 Services, Inc., a fund administrator, (which merged with Unified
Year of Birth: 1958 Fund Services, Inc.) from 1994 through October 2000. President,
Treasurer and Secretary of AmeriPrime Financial Securities, Inc., the
Fund's distributor, from 1994 through November 2000; President and
Trustee of AmeriPrime Advisors Trust and AmeriPrime Insurance Trust.
------------------------------------ ---------------- ----------------------------------------------------------------------
*Robert A. Chopyak Treasurer and Assistant Vice-President of Financial Administration of Unified Fund
1793 Kingswood Drive Chief Financial Services, Inc., the Fund's transfer agent, fund accountant and administrator
Suite 200 Officer since August 2000. Manager of AmeriPrime Financial Services, Inc. from
Southlake, Texas 76092 February 2000 to Augsust 2000. Self-employed, performing Y2K testing,
Year of Birth: 1968 January 1999 to January 2000. Vice President of Fund Accounting, American
Data Services, Inc., a mutual fund services company, October 1992 to
December 1998.
------------------------------------ ---------------- ----------------------------------------------------------------------
Steve L. Cobb Trustee President of Chandler Engineering Company, L.L.C., oil and gas
2001 N. Indianwood Avenue services company; various positions with Carbo Ceramics, Inc., oil field
Broken Arrow, OK 74012 manufacturing/supply company, from 1984 to 1997, most recently Vice
Year of Birth: 1957 President of Marketing.
------------------------------------ ---------------- ----------------------------------------------------------------------
Gary E. Hippenstiel Trustee Director, Vice President and Chief Investment Officer of Legacy
600 Jefferson Street Trust Company since 1992; President and Director of Heritage Trust
Suite 350 Company from 1994-1996; Vice President and Manager of Investments of
Houston, TX 77002 Kanaly Trust Company from 1988 to 1992.
Year of Birth: 1947
==================================== ================ ======================================================================
</TABLE>
The compensation paid to the Trustees of the Trust for each Fund's
fiscal year ended December 31, 1999 is set forth in the following table. Trustee
fees are Trust expenses and each series of the Trust pays a portion of the
Trustee fees.
<TABLE>
<S> <C> <C>
====================================== ========================== =======================================
Name Aggregate Total Compensation
Compensation from Trust (the Trust is
from Trust not in a Fund Complex)
-------------------------------------- -------------------------- ---------------------------------------
Kenneth D. Trumpfheller 0 0
-------------------------------------- -------------------------- ---------------------------------------
Steve L. Cobb $18,862.50 $18,862.50
-------------------------------------- -------------------------- ---------------------------------------
Gary E. Hippenstiel $18,862.50 $18,862.50
====================================== ========================== =======================================
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
the Advisor is responsible for each Fund's portfolio decisions and the placing
of each Fund's portfolio transactions. In placing portfolio transactions, the
Advisor seeks the best qualitative execution for each Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The Advisor generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received. Consistent with
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and subject to its obligation of seeking best qualitative execution, each
Fund's advisor may give consideration to sales of shares of the Trust as a
factor in the selection of brokers and dealers to execute portfolio
transactions.
The Advisor is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Funds and/or the other
accounts over which the Advisor exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Advisor determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Advisor's overall responsibilities with respect to the Funds and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Funds effect securities
transactions may also be used by the Advisor in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Advisor in connection with its services to the
Funds. Although research services and other information are useful to the Funds
and the Advisor, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Advisor that the review and study of the research and other information will not
reduce the overall cost to the Advisor of performing its duties to the Fund
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
When a Fund and another of the Advisor's clients seek to purchase or
sell the same security at or about the same time, the Advisor may execute the
transaction on a combined ("blocked") basis. Blocked transactions can produce
better execution for a Fund because of the increased volume of the transaction.
If the entire blocked order is not filled, the Fund may not be able to acquire
as large a position in such security as it desires or it may have to pay a
higher price for the security. Similarly, the Fund may not be able to obtain as
large an execution of an order to sell or as high a price for any particular
portfolio security if the other client desires to sell the same portfolio
security at the same time. In the event that the entire blocked order is not
filled, the purchase or sale will normally be allocated on a pro rata basis. The
allocation may be adjusted by the Advisor, taking into account such factors as
the size of the individual orders and transaction costs, when the Advisor
believes adjustment is reasonable. For the period May 1, 1999 (commencement of
operations) through December 31, 1999, the Ariston Convertible Securities Fund
paid brokerage fees of $1,163.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of each Fund is determined as
of 4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in each Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Determination of Net
Asset Value" in the Prospectus.
Common stocks which are traded on any exchange 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
mean price does not accurately reflect the current value of the security. 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, subject to review and oversight of the Board of Trustees
of the Trust.
All other securities generally are valued at the mean between the last
bid and ask price, 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. Convertible securities are valued at the
greater of the value determined as described in the preceding sentence and the
value of the shares of common stock into which the securities are convertible
(determined as described in the preceding paragraph). If the Advisor decides
that a price provided by the pricing service does not accurately reflect the
fair market value of the securities, when market quotations are not readily
available, 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 and
oversight of the Board of Trustees. 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.
INVESTMENT PERFORMANCE
The Funds may periodically advertise "average annual total returns".
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
for the period indicated that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of
the applicable period of the
hypothetical $1,000 investment made at the beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
In addition to providing average annual total return, the Funds may
also provide non-standardized quotations of total return for differing periods
and may provide the value of a $10,000 investment (made on the date of the
initial public offering of each Fund's shares) as of the end of a specified
period.
<PAGE>
Each Fund's investment performance will vary depending upon market
conditions, the composition of that Fund's portfolio and operating expenses of
each Fund. These factors and possible differences in the methods and time
periods used in calculating non-standardized investment performance should be
considered when comparing each Fund's performance to those of other investment
companies or investment vehicles. The risks associated with each Fund's
investment objective, policies and techniques should also be considered. At any
time in the future, investment performance may be higher or lower than past
performance, and there can be no assurance that any performance will continue.
For the one, five and ten year periods ended December 31, 1999, the Ariston
Convertible Securities Fund's average annual total returns were 94.61%, 22.84%
and 16.92%, respectively.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of each Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Fund or
considered to be representative of the stock market in general. The Funds may
use indices such as the Standard & Poor's 500 Stock Index or the Dow Jones
Industrial Average.
In addition, the performance of the Funds may be compared to other
groups of mutual funds tracked by any widely used independent research firm
which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of the Funds. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
custodian of the Funds' investments. The custodian acts as the Funds'
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Funds' request and
maintains records in connection with its duties.
TRANSFER AGENT
Unified Fund Services, Inc. ("Unified"), 431 North Pennsylvania Street,
Indianapolis, Indiana 46204, acts as the Funds' transfer agent and, in such
capacity, maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Funds' shares, acts as dividend and distribution disbursing
agent and performs other transfer agency and shareholder service functions. For
its services as transfer agent, Unified receives a monthly fee from the Advisor
of $1.20 per shareholder (subject to a minimum monthly fee of $750). In
addition, Unified provides the Funds with fund accounting services, which
includes certain monthly reports, record-keeping and other management-related
services. For its services as fund accountant, Unified receives an annual fee
from the Advisor equal to 0.0275% of the Fund's assets up to $100 million, and
0.0250% of the Fund's assets from $100 million to $300 million, and 0.0200% of
the Fund's assets over $300 million (subject to various monthly minimum fees,
the maximum being $2,000 per month for assets of $20 to $100 million). For the
period May 1, 1999 (commencement of operations) through December 31, 1999,
Unified received $9,400 from the Advisor (not the Ariston Convertible Securities
Fund) for these fund accounting services.
<PAGE>
ACCOUNTANTS
The firm of McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145, has been selected as independent public accountants for
the Funds for the fiscal year ending December 31, 2000. McCurdy & Associates
performs an annual audit of each Fund's financial statements and provides
financial, tax and accounting consulting services as requested.
DISTRIBUTOR
AmeriPrime Financial Securities, Inc. (the "Distributor"), 1793
Kingswood Drive, Suite 200, Southlake, Texas 76092, is the exclusive agent for
distribution of shares of the Funds. Kenneth D. Trumpfheller, a Trustee and
officer of the Trust, is an affiliate of the Distributor. The Distributor is
obligated to sell the shares of the Funds on a best efforts basis only against
purchase orders for the shares. Shares of the Funds are offered to the public on
a continuous basis.
ADMINISTRATOR
The Fund retain AmeriPrime Financial Services, Inc., 1793 Kingswood
Drive, Suite 200, Southlake, TX 76092, (the "Administrator") to manage the
Funds' business affairs and provide the Funds with administrative services,
including all regulatory reporting and necessary office equipment, personnel and
facilities. The Administrator receives a monthly fee from the Advisor equal to
an annual rate of 0.10% of the Fund's assets under $50 million, 0.075% of the
Fund's assets from $50 million to $100 million, and 0.050% of the Fund's assets
over $100 million (subject to a minimum fee of $2,500 per month). For the period
May 1, 1999 (commencement of operations) through December 31, 1999, the
Administrator received $20,000 from the Advisor (not the Ariston Convertible
Securities Fund) for these services. The Administrator, the Distributor, and
Unified (the Funds' transfer agent) are controlled by Unified Financial
Services, Inc.
FINANCIAL STATEMENTS
The financial statements required to be included in the Statement of
Additional Information will be incorporated herein by subsequent amendment.
<PAGE>
APPENDIX
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S RATINGS SERVICES
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. Standard
& Poor's does not perform any audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended or withdrawn as a result of changes in, or unavailability of, such
information or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obliger as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
II. Nature and provisions of the obligation.
III. Protection afforded by, and relative position of the obligation in
the event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated "BB", "B", "CCC", "CC", and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rate "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB" rating.
B - Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC - Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CC - The rating "CC" is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
C - The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating "C1" is reserved for income bonds on which no interest
is being paid.
D - Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risk appear somewhat greater than the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements:
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers: 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category, the modifier 2 indicates a mid-range ranking, and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
