<PAGE>
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 Shareholders:
We are pleased to inform you that you have participated in the best performing
year in Ariston's history. The Ariston Convertible Securities Fund finished the
year as the number one convertible securities fund for both the fourth quarter
and for all of 1999, according to Lipper Analytical Services. Listed below are
the comparative, total return performance measurements for the periods ended
December 31, 1999:
<TABLE>
<CAPTION>
4th Quarter 1 Year
<S> <C> <C> <C>
Ariston Convertible Securities Fund +67.46% +94.61%
Lipper Convertible Fund Average +20.52% +31.14%
Standard & Poor's 500 Stock Index (unmanaged) +14.88% +21.05%
Russell 2000 Stock Index (unmanaged) +18.13% +20.93%
Lehman Gov./Corp. Bond Index (unmanaged) -0.41% -2.16%
3 Years 5 Years 10 Years
Annualized Annualized Annualized
Ariston Convertible Securities Fund +31.00% +22.84% +16.92%
Lipper Convertible Fund Average +17.29% +17.62% +13.12%
Standard & Poor's 500 Stock Index (unmanaged) +27.56% +28.54% +18.20%
Russell 2000 Stock Index (unmanaged) +12.98% +16.62% +13.38%
Lehman Gov./Corp. Bond Index (unmanaged) +5.54% +7.60% +7.65%
Sources: Lipper Analytical Services, Inc. & Wiesenberger, a Thomson Financial Company
</TABLE>
Russell
CNCGov/Corp 2000
-----------------------
1989 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter 10,000 10,000 10,000
1990 1st Quarter 10,083 9,886 9,779
2nd Quarter 10,656 10,241 10,155
3rd Quarter 9,192 10,302 7,663
4th Quarter 9,662 10,827 8,049
1991 1st Quarter 11,500 11,118 10,443
2nd Quarter 11,866 11,285 10,281
3rd Quarter 12,785 11,932 11,120
4th Quarter 14,015 12,568 11,756
1992 1st Quarter 13,821 12,380 12,638
2nd Quarter 13,119 12,881 11,776
3rd Quarter 14,065 13,511 12,113
4th Quarter 15,812 13,521 13,922
1993 1st Quarter 16,351 14,151 14,515
2nd Quarter 15,272 14,577 14,831
3rd Quarter 16,387 15,061 16,128
4th Quarter 16,846 15,017 16,552
1994 1st Quarter 16,236 14,544 16,111
2nd Quarter 15,926 14,364 15,483
3rd Quarter 16,604 14,435 16,558
4th Quarter 17,066 14,489 16,250
1995 1st Quarter 17,656 15,210 16,999
2nd Quarter 17,946 16,198 18,592
3rd Quarter 19,365 16,507 20,428
4th Quarter 20,245 17,276 20,872
1996 1st Quarter 21,342 16,872 21,936
2nd Quarter 20,821 16,951 23,033
3rd Quarter 21,846 17,250 23,111
4th Quarter 21,234 17,777 24,313
1997 1st Quarter 20,176 17,624 23,056
2nd Quarter 22,245 18,266 26,793
3rd Quarter 24,146 18,905 30,780
4th Quarter 24,028 19,512 29,749
1998 1st Quarter 26,051 19,809 32,739
2nd Quarter 25,319 20,328 31,210
3rd Quarter 21,258 21,334 24,924
4th Quarter 24,532 21,364 28,990
1999 1st Quarter 24,691 21,107 27,415
2nd Quarter 28,987 20,877 31,678
3rd Quarter 28,509 20,986 29,676
4th Quarter 47,741 20,900 35,057
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 LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX INCLUDE THE REINVESTMENT OF DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS.
INVESTMENT RETURNS 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.
<TABLE>
<CAPTION>
AVERAGE ANNUAL STANDARD
TOTAL RETURNS FOR THE
YEAR ENDED 12/31/99
- -------------------------------------------------------------------------
<S> <C> <C> <C>
FUND/INDEX 1 YEAR 5 YEAR 10 YEAR
- -------------------------------------------------------------------------
ARISTON CONVERTIBLE
SECURITIES FUND 94.61% 22.84% 16.92%
- -------------------------------------------------------------------------
LEHMAN GOV/CORP
BOND INDEX -2.16% 7.60% 7.65%
- -------------------------------------------------------------------------
RUSSELL 2000
STOCK INDEX 20.93% 16.62% 13.38%
- -------------------------------------------------------------------------
</TABLE>
94.61%, 22.84% AND 16.92% ARE THE ONE, FIVE AND TEN YEAR AVERAGE ANNUAL STANDARD
TOTAL RETURNS, RESPECTIVELY, FOR THE PERIOD ENDED DECEMBER 31, 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 ORIGINAL COST. TOTAL
RETURN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF FUTURE RESULTS.
Most of the appreciation in our Fund was from mid-capitalized dynamic technology
companies in ascendant industries with unique growth franchises. At the time of
purchase, these companies' earnings growth rates were far superior to the S&P
500 Index, and their valuations were similar on trailing earnings, and cheaper
on future earnings. As the companies developed their franchises, it became
apparent to the market that some of the franchises are developing into new
industry standards. This became crystal clear to the market in the fourth
quarter as other money managers scrambled to purchase these companies. Positions
in the biotechnology and retail sectors also contributed to portfolio
appreciation.
We continue to seek out companies that are leaders in their industries and which
exhibit solid, predictable earnings growth rates. Through the use of convertible
securities, we can dampen some of the downside volatility associated with growth
stock investing.
We appreciate your confidence, and we will continue to work hard for our Fund's
investment success.
Sincerely,
Richard B. Russell
President
February, 2000
<PAGE>
<TABLE>
<CAPTION>
Ariston Convertible Securities Fund
Schedule of Investments - December 31, 1999
Principal
CONVERTIBLE BONDS - 41.2% Amount Value
<S> <C> <C>
Biotechnology - 6.6%
Chiron (Cetus) Corporation,
5.25%, due 05/21/2002 $ 330,000 $ 453,575
Genzyme General Corporation
5.25%, due 06/01/2005 470,000 601,012
-----------------
-----------------
1,054,587
-----------------
-----------------
Computer Services / Data Processing - 3.5%
Automatic Data Processing Services, Inc.,
0.00%, due 02/20/2012 (b) 400,000 558,000
-----------------
-----------------
Computer Equipment - Storage - 3.9%
EMC (Data General), Corporation
6.00% 5/15/2004 450,000 618,188
-----------------
-----------------
Computer Software / Network - 4.2%
Citrix Systems, Inc.
0.00%, due 03/22/2019 (b) 750,000 664,688
-----------------
-----------------
Computer Services - Enterprise - 6.4%
Veritas Software Corporation
1.856%, due 8/13/2006 380,000 1,024,575
-----------------
-----------------
Electronic Manufacturing Services - 3.3%
Sanmina Corporation
4.25%, due 5/01/2004 400,000 529,000
-----------------
-----------------
Pharmaceuticals - 3.4%
Elan (Athena Neurosciences), PLC
4.75%, due 11/15/2004 535,000 544,362
-----------------
-----------------
Semiconductors - 9.9%
Intel (Level One Communications), Corporation
4.00%, due 09/01/2004 340,000 920,975
Conexant Systems, Inc.,
4.25%, due 5/01/2006 225,000 665,438
-----------------
-----------------
1,586,413
-----------------
-----------------
TOTAL CONVERTIBLE BONDS
(Cost $4,135,533) 6,579,813
-----------------
-----------------
Ariston Convertible Securities Fund
Schedule of Investments - December 31, 1999 - continued
CONVERTIBLE PREFERRED STOCKS - 29.1% Shares Value
Telecommunications Equipment - 25.6%
Loral Space & Communications, Inc. 6.00% 10,300 646,325
Qualcommm, Inc. 5.75% 3,500 3,440,378
-----------------
-----------------
4,086,703
-----------------
-----------------
Telecommunications Services - 3.5%
Global Crossing Ltd. 6.375% 4,500 $ 563,625
-----------------
-----------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $1,372,973) 4,650,328
-----------------
-----------------
COMMON STOCKS - 26.6%
Computer Software / Electronic Commerce - 2.1%
Sterling Commerce, Inc. (a) 10,000 $ 340,000
-----------------
-----------------
Computer Software / Enterprise - 4.2%
Sterling Software, Inc. (a) 21,164 666,666
-----------------
-----------------
Manufactured Housing - 3.0%
Clayton Homes, Inc. 52,500 482,344
-----------------
-----------------
Retail Stores / Building Products - 5.6%
Home Depot, Inc. 13,018 894,987
-----------------
-----------------
Semiconductors - 11.7%
Analog Devices Corporation (a) 20,000 1,860,000
-----------------
-----------------
TOTAL COMMON STOCKS
(Cost $944,985) 4,243,997
-----------------
-----------------
Principal
Amount Value
-------------- -----------------
-------------- -----------------
Money Market Securities - 3.6%
Firstar Treasury Fund, 4.06% (c) (Cost $564,924) $ 564,924 564,924
-----------------
-----------------
TOTAL INVESTMENT - 100.5%
(Cost $7,018,415) 16,039,062
-----------------
-----------------
Other assets less liabilities - (0.5)% (79,142)
-----------------
-----------------
TOTAL NET ASSETS - 100.0%
(equivalent to $25 per share
on shares outstanding) $ 15,959,920
=================
=================
(a) Non-income producing
(b) Zero Coupon Bond
(c) Variable rate security; the coupon rate shown represents the rate
at December 31, 1999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ariston Convertible Securities Fund December 31,1999
Statement of Assets & Liabilities
<S> <C> <C>
Assets
Investment in securities (cost $7,018,415) $ 16,039,062
Dividends receivable 4,613
Interest receivable 35,896
Receivable for fund shares sold 514
------------------
Total assets 16,080,085
Liabilities
Payable to custodian bank 91,950
Accrued investment advisory fee payable 27,330
Other payables and accrued expenses 885
-----------------
Total liabilities 120,165
------------------
Net Assets $ 15,959,920
==================
Net Assets consist of:
Paid in capital 7,071,928
Accumulated undistributed net realized gain (loss) on investments (132,655)
Net unrealized appreciation on investments 9,020,647
------------------
Net Assets, for 638,522 shares $ 15,959,920
==================
Net Asset Value
Net Assets
Offering price and redemption price per share ($15,959,920 / 638,522) $ 25.00
==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ariston Convertible Securities Fund
Statement of Operations for the year ended December 31, 1999
<S> <C> <C>
Investment Income
Dividend income $ 57,707
Interest income 93,407
---------------
Total Income 151,114
Expenses
Investment advisory fee $ 182,533
Registration fees 4,633
Transfer agent fees 4,529
Pricing & bookkeeping fees 4,281
Distribution fees 4,402
Trustee Fees 3,317
Shareholder reports 1,318
Audit fees 1,154
Custodian fees 566
Legal fees 459
Miscellaneous 2,721
------------------
Total expenses before reimbursement 209,913
Reimbursed expenses (200)
------------------
Total operating expenses 209,713
---------------
Net Investment Income (Loss) (58,599)
---------------
Realized & Unrealized Gain (Loss)
Net realized gain on investment securities 2,712,344
Change in net unrealized appreciation (depreciation)
on investment securities 5,198,325
------------------
Net gain on investment securities 7,910,669
---------------
---------------
Net increase in net assets resulting from operations $ 7,852,070
===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ariston Convertible Securities Fund
Statement of Changes in Net Assets
Year Year
Ended Ended
December 31, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (58,599) $ (13,133)
Net realized gain (loss) on investment securities 2,712,344 (271,514)
Change in net unrealized appreciation (depreciation) 5,198,325 358,692
----------------- -----------------
Net increase in net assets resulting from operations 7,852,070 74,045
Distributions to shareholders
From net realized gain (2,573,485) (21,464)
----------------- -----------------
Share Transactions
Net proceeds from sale of shares 3,785,062 2,959,165
Shares issued in reinvestment of distributions 2,474,563 19,824
Shares redeemed (5,963,596) (2,991,454)
----------------- -----------------
Net increase (decrease) in net assets resulting
from share transactions 296,029 (12,465)
----------------- -----------------
Total increase (decrease) in net assets 5,574,614 40,116
Net Assets
Beginning of period 10,385,306 10,345,190
----------------- -----------------
End of period [including accumulated undistributed net
investment income (loss) of $0 and $0, respectively] $ 15,959,920 $ 10,385,306
================= =================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Ariston Convertible Securities Fund Financial Highlights
Years ended December 31,
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Selected Per Share Data
Net asset value, beginning of period $ 15.36 $ 15.08 $ 13.66 $ 13.66 $ 11.84
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.11) -- 0.11 0.11 0.15
Net realized and unrealized gain (loss)
on investments 14.49 0.31 1.68 0.55 2.04
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total from investment operations 14.38 0.31 1.79 0.66 2.19
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Less distributions:
Distributions from net investment income -- -- (0.11) (0.11) (0.15)
Distributions from net realized gains (4.74) (0.03) (0.26) (0.55) (0.22)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total distributions (4.74) (0.03) (0.37) (0.66) (0.37)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net asset value, end of period $ 25.00 $ 15.36 $ 15.08 $ 13.66 $ 13.66
=========================================================================
=========================================================================
Total Return 94.61% 2.09% 13.16% 4.89% 18.63%
Ratios and Supplemental Data
Net assets, end of period (000) $15,960 $10,385 $10,345 $11,208 $11,641
Ratio of expenses to average net assets 2.10% 2.32% 2.38% 2.39% 2.52%
Ratio of expenses to average net assets
before reimbursement 2.10% 2.32% 2.38% 2.39% 2.52%
Ratio of net investment income to
average net assets (0.59)% (0.13)% 0.79% 0.77% 1.24%
Ratio of net investment income to
average net assets before reimbursement (0.59)% (0.13)% 0.79% 0.77% 1.24%
Portfolio turnover rate 32.89% 27.79% 30.47% 18.45% 11.23%
</TABLE>
<PAGE>
ARISTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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.
The financial statements for the year ended December 31, 1999, represent
activities for the year of the Predecessor Fund and the Fund.
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
ARISTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 - CONTINUED
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
using the amortized cost method of valuation, which the Board has determined
will represent fair value.
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. Generally accepted accounting principles
require that permanent financial reporting and tax differences relating to
shareholder distributions be reclassified to paid in capital.
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Predecessor Fund retained Lexington Management Corporation ("LMC") to
provide investment advice and in general conduct the management and investment
program of the Fund under the supervision and control of the trustees of the
Predecessor Fund before May 1, 1999. The Predecessor Fund paid an investment
advisory fee to LMC at an annual rate of 1.00% of the Fund's average daily net
assets. LMC also acted as administrator to the Predecessor Fund, performing
certain administrative and internal accounting services. The Predecessor Fund
reimbursed LMC for its actual cost in providing such services, facilities and
expenses. Lexington Funds Distributor, Inc. was the Predecessor Fund's
distributor. For the period of January 1, 1999 through April 30, 1999, the
Predecessor Fund was responsible for all operating expenses.
In connection with providing investment advisory services, LMC had entered
into a sub-advisory contract with the Ariston Capital Management Corporation
("Ariston"), under which Ariston provided the Fund with investment management
services. Pursuant to the terms of the sub-advisory contract between LMC and
Ariston, LMC paid Ariston a
ARISTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 - CONTINUED
NOTE 3. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
monthly sub-advisory fee at the annual rate of 0.75% of the Fund's average daily
net assets up to $7 million and 0.5% of the Fund's average daily assets in
excess of $7 million.
Effective May 1, 1999, the Fund now 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
year ended December 31, 1999, LMC and the Advisor received fees totaling
$182,533 from the Predecessor Fund and the Fund. For the year ended December 31,
1999, the Advisor reimbursed expenses of $200.
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 year ended December 31,
1999, the Predecessor Fund and the Fund paid distribution fees of $4,402 for
expenses related to the sale of Predecessor Fund and 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 period May 1, 1999 to December 31, 1999, the Administrator
received fees of $20,000 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 year ended December 31, 1999. Certain members of
management of the Administrator and the Distributor are also members of
management of the AmeriPrime Trust.
ARISTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 - CONTINUED
NOTE 4. SHARE TRANSACTIONS
As of December 31, 1999, there was an unlimited number of authorized shares
for the Fund. Paid in capital at December 31, 1999 was $7,071,928.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
SHARES DOLLARS SHARES DOLLARS
<S> <C> <C> <C> <C>
Shares sold 192,879 $3,785,062 191,038 $2,959,165
Shares issued in
reinvestment 102,086 $2,474,563 1,486 19,824
Shares Redeemed (37,651) $296,029 (9,952) $(12,465)
======== ======== ======= =========
</TABLE>
<PAGE>
NOTE 5. INVESTMENTS
For the year ended December 31, 1999, purchases and sales of investment
securities, other than short-term investments, aggregated $3,244,524 and
$5,581,996 respectively. As of December 31, 1999, the gross unrealized
appreciation for all securities totaled $9,058,186 and the gross unrealized
depreciation for all securities totaled $37,539 for a net unrealized
appreciation of $9,020,647. The aggregate cost of securities for federal income
tax purposes at December 31, 1999 was $7,018,415.
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.
ARISTON CONVERTIBLE SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 - CONTINUED
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
of 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. CHANGE OF INDEPENDENT ACCOUNTANTS
Effective April 26, 1999, the Fund selected the accounting firm McCurdy &
Associates CPA's Inc. to serve as the Fund's independent certified public
accountants for the fiscal year ended December 31, 1999 to fill a vacancy
resulting from the Board of Trustees' decision not to retain KPMG LLP. (KPMG).
KPMG had served as the Predecessor Fund' s independent certified public
accountants for the Predecessor Fund's fiscal year ended December 31, 1998.
KPMG's report on the financial statements of the Predecessor Fund for the fiscal
year ended December 31, 1998 did not contain an adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. There were no disagreements with KPMG on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope of procedure during the fiscal year ended December 31, 1998 through the
date of their resignation.
The Fund represents that it had not consulted with McCurdy & Associates CPA's
Inc. at any time prior to their engagement, with respect to the application of
accounting principles to a specified transaction, either completed or proposed;
of the type of audit opinion that might be rendered on the Fund's financial
statements.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Shareholders and
Board of Trustees
Ariston Convertible Securities Fund:
We have audited the accompanying statement of assets and liabilities of Ariston
Convertible Securities Fund, including the schedule of portfolio investments, as
of December 31, 1999, and the related statement of operations, the statement of
changes in net assets, and financial highlights for the year 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 statement
of changes in net assets for Ariston Convertible Securities for the period ended
December 31, 1998 and the financial highlights for the four years then ended,
were audited by other auditors whose report dated February 19, 1999, expressed
an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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. Our procedures included confirmation of investments and cash held by
the custodian as of December 31, 1999, by correspondence with the custodian and
brokers. An audit also included 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
Ariston Convertible Securities Fund as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
year then ended, in conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio
January 20, 2000
