<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 333-1171
PRE-EFFECTIVE AMENDMENT NO. 1
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-7521
AMENDMENT NO. 1
THE KENWOOD FUNDS
77 West Washington Street
Chicago, Illinois 60602
312-368-1666
Agent for Service:
Sheldon Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
____________________________________
Registrant hereby registers an indefinite number of its shares of
beneficial interest, pursuant to Rule 24f-2(a)(1) under the Investment Company
Act of 1940, as amended
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 2
FORM N-1A
THE KENWOOD FUNDS
REGISTRATION STATEMENT NO. 333-1171 UNDER THE
SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1
AND REGISTRATION STATEMENT NO. 811-7521 UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
CROSS REFERENCE SHEET
N-1A
ITEM NO. Prospectus Caption or Placement
-------- -------------------------------
1 Front Cover
2 Fund Expenses
3 (Not Applicable)
4 Investment Objective and Policies; Organization
of the Fund
5 Investment Objective and Policies; The Adviser;
Services Administrator, Custodian and Transfer
Agent
6 Organization of the Fund; Major Shareholders;
Summary; Dividends and Distributions; Taxes
7 Buying Shares; Distribution of Shares; Net Asset
Value
8 Redeeming Shares
9 (Not Applicable)
PART B CAPTION OR PLACEMENT
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Fundamental Investment Restrictions;
Non-Fundamental Investment Restrictions; Lending
Portfolio Securities; See also Prospectus -
Investment
Objectives and Policies
14 Trustees and Officers
15 See Prospectus-Major Shareholders
16 The Adviser; Custodian and Transfer Agent;
Auditors
17 Portfolio Transactions and Brokerage
18 See Prospectus-The Fund
19 Distribution Plan; See also Prospectus -
Calculation of Net Asset Value
20 Federal Taxes; See also Prospectus-Dividends and
Taxes
21 (Not Applicable)
22 Performance Data
23 Financial Statements
<PAGE> 3
Subject to completion dated March 18, 1996
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed
with the Securities and Exchange Commission but has not yet become
effective. These securities may not be sold nor may offers to buy
be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any State.
THE KENWOOD FUNDS
Kenwood Growth & Income Fund
77 West Washington Street
Suite 1615
Chicago, Illinois 60602
1-800-_________
PROSPECTUS
______________, 1996
The Kenwood Growth & Income Fund (the "Fund") is a series of The Kenwood
Funds, which is organized as a Delaware business trust (the "Trust"). The
Fund's objective is capital appreciation and current income. It invests
primarily in equity securities.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. Please retain it for future reference. A
Statement of Additional Information dated ____________, 1996, has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference. You may obtain a copy of the Statement of Additional
Information free of charge by writing or calling the Fund at the address or
phone number on the cover of this Prospectus.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FUND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . . . . 5
THE ADVISER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MAJOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 8
SERVICES ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT . . . . . . . . 8
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 9
BUYING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
TELEPHONE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 10
EXCHANGING SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
REDEEMING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 11
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FUND PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ORGANIZATION OF THE FUND . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 5
SUMMARY
THE FUND. The Fund is the only series of The Kenwood Funds, an open-end
management investment company (a mutual fund) organized in 1996 as a Delaware
business trust.
INVESTMENT OBJECTIVE. The Fund's objective is capital appreciation and
current income. The Fund invests primarily in equity securities. See
"Investment Objective and Policies."
PURCHASES AND REDEMPTIONS. Shares of the Fund are sold and redeemed at
net asset value without any sales or redemption charge. The minimum initial
investment is $2,000 and subsequent investments are $100 or more. These
minimum investment amounts may be waived or reduced for participants in certain
retirement plans. See "Buying Shares" for more information on how to invest.
Shares are redeemable by mail or by wire to a predesignated bank account. See
"Selling Shares" for details.
THE ADVISER. The Kenwood Group, Inc. serves as the Fund's investment
adviser (the "Adviser"), and receives fees for managing the Fund's investments
and performing certain administrative and management services for the Fund.
See "The Adviser."
THE DISTRIBUTOR. AmeriPrime Financial Securities, Inc. serves as the
Fund's principal underwriter and distributes the Fund's shares (the
"Distributor"). The Fund pays the Distributor Rule 12b-1 distribution fees.
See "Distribution of Shares."
INVESTMENT FACTORS TO CONSIDER. As with any mutual fund investment,
purchasing shares of the Fund involves risks. The securities in which the Fund
invests are subject to the risk of price fluctuations reflecting both market
evaluations of the businesses involved and general changes in the equity
markets. There is no assurance that the investment objective will be achieved.
The Fund's return and net asset value will fluctuate.
SHAREHOLDER INQUIRIES. Call (800) _________ from 8:00 a.m. - 7:00 p.m.
Central Time for prompt service on any questions about your account. During
unusual market conditions, the Fund may experience difficulty in accepting
telephone inquiries. In such circumstances, you should contact the Fund
directly at (312)368-1666 weekdays from 9:00 a.m. - 5:00 p.m. Central Time or
by mail at 77 West Washington Street, Suite 1615, Chicago, IL 60602.
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FUND EXPENSES
The following tables are intended to help you understand the various
expenses that you as an investor will bear.
Shareholder transaction expenses:
Maximum Sales Load Imposed on Purchases None
Redemption Fee None*
Sales Load on Reinvested Dividends None
Exchange Fee None
Deferred Sales Load None
*For each wire redemption, the transfer agent will charge a fee which, as
of the date of this prospectus, is $7.50.
Annual fund operating expenses after expense reimbursements (as a
percentage of average net assets):
<TABLE>
<S> <C>
Management Fees, after fee waiver(1) 0.00%
12b-1 Fees(2) 0.25%
Other Expenses(1)(3) 0.67%
-----
Total Operating Expenses(3) 0.92%
</TABLE>
(1)The Adviser has agreed to waive the management fee and to reimburse
certain other expenses for the Fund's first fiscal year. Without fee waiver,
the Management Fees would be .75%. Without the expense reimbursement, the
Other Expenses would be 2.42% and the Total Operating Expenses would be 3.42%.
(2)The effect of a Rule 12b-1 plan is that long-term shareholders may pay
more than the maximum front-end sales charge permitted under applicable rules
of the National Association of Securities Dealers, Inc.
(3)This information is based on estimated amounts for the Fund's current
fiscal year.
EXAMPLE:
We can illustrate these expenses with the examples below. You would pay
the following expenses on a $1,000 investment (assuming a 5% annual return and
redemption at the end of each period):
One Year $ 9.00
Three Years $29.00
THE 5% RATE USED IN THE EXAMPLE ABOVE IS ONLY FOR ILLUSTRATION AND IS NOT
INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE OF THE FUND, WHICH MAY BE
MORE OR LESS THAN THE ASSUMED RATE. FUTURE EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN.
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE. The Fund's investment objective is capital
appreciation and current income. The Fund invests primarily in U.S. domestic
equity securities and, under normal market conditions, at least 85% of its
total assets will be invested in equity securities. Equity securities include
common stock, preferred stock, and securities convertible into common stock.
Common stock in which the Fund may invest may be either growth- or
income-oriented. The Fund normally may invest up to 15% of its total assets in
other securities, including debt securities. See "Debt Securities."
The Fund will invest primarily in mid-cap stocks. Mid-cap stocks are
defined by the Adviser as securities of companies having a market
capitalization between $200 million and $6.5 billion. In the Adviser's
judgment, this market
4
<PAGE> 7
niche tends to be more liquid than the small-cap market, and thus may
represent lower risks, while offering comparable returns to the small-cap
market and potentially greater returns than the larger-cap market.
The Adviser attempts to select equity securities that will provide a
combination of capital appreciation and income which will result in a high
overall total return while attempting to assume relatively low risks. "Low
risks" means that in the Adviser's judgment the risks of investing in the
securities in the Fund's portfolio present no additional risks than those
inherent in the market. The Adviser makes ongoing portfolio selections, in
light of current and reasonably anticipated future financial conditions. As
these conditions change, the Adviser adjusts the portfolio in order to maintain
a reasonable balance over time between risk and potential return.
The Adviser takes a long-term position in the market and seeks to identify
securities of companies that are temporarily undervalued but which have
potential for growth and which may provide a good stream of dividend income.
The Adviser evaluates the long-term potential of the stocks it purchases
through examination of each company's strategic plans, corporate history and
industry dynamics.
DEBT SECURITIES. The Fund may invest in fixed income securities for
income or as a defensive strategy when the Adviser believes adverse economic or
market conditions exist. When appropriate, the Fund's assets may be invested
without limitation in cash, short-term obligations issued or guaranteed by the
U.S. Government, its agencies and/or instrumentalities ("U.S. Government
Securities") or high quality money market instruments such as notes,
certificates of deposit or bankers' acceptances. However, the Adviser does not
intend to invest more than 15% of the Fund's assets in securities other than
equities under normal market conditions.
The value of fixed income securities is sensitive to interest rate changes
as well as the financial strength of the issuer. When interest rates go down,
debt securities in the portfolio tend to appreciate in value. Conversely, when
interest rates go up, such securities tend to depreciate in value. Generally,
the debt securities in which the Fund may invest are investment-grade
securities. These are securities rated in the four highest grades assigned by
Moody's Investors Service, Inc. or Standard and Poor's Corporation or that are
unrated but deemed to be of comparable quality by the Adviser. The lowest of
these grades has speculative characteristics; changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments. The Fund will not invest in securities below
investment grade (so called "junk bonds"). In the event of a downgrade of a
debt security held by the Fund to below investment grade, the Fund is not
required to sell the issue, but the Adviser will consider the downgrade in
determining whether to hold the security. However, if such a downgrade would
cause more than 5% of net assets to be invested in debt securities below
investment grade, portfolio sales will be made as soon as practicable to reduce
the proportion of debt below investment grade to 5% of net assets or less.
LENDING PORTFOLIO SECURITIES. For income purposes, the Fund may lend its
portfolio securities. However, the Fund does not currently intend to lend
portfolio securities if it would cause more than 5% of its net assets to be
subject to such loans.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, but
normally will not enter into repurchase agreements maturing in more than seven
days. A repurchase agreement involves a sale of securities (usually U.S.
Government Securities) to the Fund with the concurrent agreement of the seller
(a member bank of the Federal Reserve System or securities dealer which the
Adviser determines to be financially sound at the time of the transaction) to
repurchase the securities at the same price plus an amount equal to accrued
interest at an agreed-upon interest rate, within a specified time, usually less
than one week, but occasionally, at a later time. The repurchase obligation of
the seller is, in effect, secured by the underlying securities. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the
Fund could experience delays in liquidating the underlying securities and
losses, including possible declines in the value of the collateral during the
period in which the Fund seeks to enforce its rights, and the possible loss of
all or a part of the income during such period and expenses of enforcing its
rights.
BORROWING. The Fund may not borrow money except for temporary or
emergency purposes, and then only from banks in an amount not exceeding 33 1/3%
of the value of the Fund's total assets. The Fund will not purchase securities
5
<PAGE> 8
when its borrowings, less amounts receivable on sales of portfolio securities,
exceed 5% of the value of the Fund's total assets.
PORTFOLIO TRANSACTIONS. In seeking the Fund's objective, the Fund may
trade to some degree in securities for the short term if the Adviser believes
that the growth potential of a security no longer exists, considers that other
securities have more growth potential, or otherwise believes that such trading
is advisable. The Fund's portfolio turnover rate will vary but the Adviser
does not expect it to exceed 100%. The higher the turnover rate, the more
brokerage commissions the Fund will pay. In placing portfolio transactions,
the Fund may take into account the sale of shares by the broker and research
services provided to the Adviser.
RESTRICTED AND ILLIQUID SECURITIES. The Fund will not purchase or hold
illiquid securities if more than 15% of the Fund's net assets would then be
illiquid. If at any time more than 15% of the Fund's net assets are illiquid,
sales will be made as soon as practicable to reduce the percentage of illiquid
assets to 15% or less. The Fund may purchase restricted securities which are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act
of 1933 ("Rule 144A Securities"). This Rule permits certain qualified
institutional buyers, such as the Fund, to trade in privately placed
securities. The Fund will not purchase Rule 144A securities that are illiquid.
In addition, the Fund will not purchase liquid Rule 144A Securities if such
purchase would cause more than 5% of the Fund's assets to be invested in such
securities.
DIVERSIFICATION AND INDUSTRY CONCENTRATION. As to 75% of its total
assets, the Fund will not (i) make any investment that would cause more than 5%
of its total assets to be invested in any one issuer; and (ii) purchase the
securities of any company if after such purchase the Fund would then own more
than 10% of such company's voting securities. The remaining 25% of the Fund's
total assets are not so limited which would allow the Adviser to invest up to
25% of the Fund's total assets in a single issuer. In the event that the
Adviser chooses to make such an investment, it may expose the Fund to greater
risk. However, as a matter of operating policy, the Adviser does not intend to
make an investment that would cause more than 15% of the Fund's total assets in
any one issuer. In addition, the Fund will not make any investment which would
cause 25% or more of its total assets to be invested in any one industry. U.S.
Government Securities are not subject to these limitations.
FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES. The investment restrictions set
forth in the Statement of Additional Information as fundamental are fundamental
policies which cannot be changed without a vote of the shareholders. The
investment objective and all other investment policies of the Fund are not
fundamental and may be changed without shareholder approval. In the event the
Fund's investment objective should ever be changed, such change may result in
an objective different from the objective the shareholder considered
appropriate at the time of investment in the Fund. Except for the limitations
on borrowing and investments in illiquid securities, any percentage
restrictions set forth in the Prospectus or in the Statement of Additional
Information apply as of the time of investment without regard to later
increases or decreases in the value of securities or total or net assets.
THE ADVISER
The Kenwood Group, Inc., an Illinois corporation with offices at 77 West
Washington Street, Chicago, Illinois 60602, serves as the Fund's investment
Adviser. The Adviser does not advise other mutual funds, but has, since its
inception in 1989, acted as investment adviser to individuals and institutional
investors. As of December 31, 1995, the Adviser had $1.7 million in assets
under management. Barbara L. Bowles is the controlling shareholder of the
Adviser.
The Adviser manages the investment and reinvestment of the assets of the
Fund. The Adviser furnishes continuous advice concerning the Fund's
investments. In addition, the Adviser provides office space for the Fund and
pays the salaries, fees and expenses for all Fund officers and directors who
are affiliated with the Adviser.
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<PAGE> 9
For such services, the Fund pays the Adviser advisory fees monthly based
upon the Fund's average daily net assets at the following annual rate: 0.75% on
the first $500 million of average net assets, 0.70% on the next $500 million
of average daily net assets, and 0.65% on average daily net assets over $1
billion. The fees paid to the Adviser are higher than the fees paid by many
investment companies but are not necessarily higher than that paid by funds
with a similar objective. The Adviser has agreed to waive the management fee
and to reimburse certain other expenses for the Fund's first fiscal year.
Barbara L. Bowles is the Fund's principal portfolio manager and has served
in such capacity since the Fund's inception. She has served as President and
Chief Investment Officer for the Kenwood Group since its inception in 1989.
She is also the President of the Fund.
HISTORICAL INVESTMENT RESULTS OF THE INVESTMENT ADVISER
Set forth below is certain performance data provided by the Adviser
relating to annual average investment results of a composite of all client
accounts whose portfolios were managed by the Adviser continuously over a
period of five years. These advisory accounts ("Advisory Accounts") had the
same investment objective as the Fund and were managed using substantially
similar, though not necessarily identical, investment strategies and techniques
as those contemplated by the Fund. Because of the similarities in investment
strategies and techniques, the Adviser believes that the Advisory Accounts are
sufficiently comparable to the Fund to make the performance data listed below
relevant to investors in the Fund. The results presented are not intended to
predict or suggest the returns that will be experienced by the Fund or the
return an investor will achieve by investing in the Fund. Different methods of
determining the performance from those described in the footnote to the chart
below may result in different performance figures. An investor should not rely
on the following performance figures as an indication of the future performance
of either the Adviser's separate Advisory Accounts or the Fund.
THE KENWOOD GROUP, INC.
KENWOOD GROUP COMPOSITE
HISTORICAL PERFORMANCE
<TABLE>
PERIOD (year ended) BEFORE NET OF ADVISORY
ADVISORY FEES FEES
<S> <C> <C>
1990 (7.33) (8.12)
1991 19.26 18.40
1992 18.49 17.68
1993 6.60 5.86
1994 7.40 6.66
1995 31.02 30.42
</TABLE>
ANNUALIZED PERFORMANCE
PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
BEFORE NET OF
ADVISORY FEES ADVISORY FEES
<S> <C> <C>
1 YEAR 31.02% 30.42%
3 YEARS 14.47% 13.83%
5 YEARS 16.23% 15.51%
Since inception (6 years) 11.91% 11.19%
</TABLE>
NOTES: These numbers were prepared in accordance with the Performance
Presentation Standards developed by the Association for Investment Management
and Research ("AIMR"). Past performance is not necessarily indicative of
future results nor can it be assumed that any recommendations will be
profitable.
7
<PAGE> 10
The following table sets forth as of , 1996,
the name and holdings of each person known by the Fund to be a record holder of
more than 5% of its outstanding shares. As of such date there was one (1)
share outstanding.
<TABLE>
<CAPTION>
% of
Number of Outstanding
Name and Address Shares Owned Shares
- ----------------- ------------ -----------
<S> <C> <C>
Barbara L. Bowles 1 100%
77 West Washington
Chicago, IL 60602
</TABLE>
SERVICES ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
Firstar Trust Company ("Firstar") 615 East Michigan Street, Milwaukee, WI
53202, serves as the Fund's Administrator and, pursuant to an Administration
Services Agreement, receives fees monthly, for its services as described below,
based upon the Fund's average daily net assets at the following annual rate:
.05% on the first $100 million of average net assets, .04% on the next $400
million of average daily net assets, and .03% on average daily net assets over
$500 million. The Administration Agreement provides for payment to the
Administrator of a minimum annual fee of $20,000. Firstar generally provides
for the administration of the Fund, including the coordination and monitoring
of any third parties furnishing services to the Fund, the preparation and
maintenance of financial and accounting records and the provision of the
necessary office space, equipment and personnel to perform administrative and
clerical functions.
Firstar also serves as the Fund's Custodian, Transfer Agent and Fund
Accountant. In its capacity as Transfer Agent, Firstar maintains the records
of each shareholder's account, processes purchases and redemptions of the
Fund's shares, acts as dividend and distribution disbursing agent and performs
other shareholder servicing functions.
DISTRIBUTION OF SHARES
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, serves as the principal underwriter to distribute the
Fund's shares. Pursuant to an Underwriting Agreement with the Fund, the
Distributor will be paid a fee equal to 0.05% of the Fund's net assets with a
minimum fee of $18,000. Pursuant to the Distribution Plan adopted by the Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Plan"),
the Fund is authorized to expend up to 0.25% annually of the Fund's average
daily net assets to cover expenses incurred in connection with the distribution
of the Fund's shares. Rule 12b-1 regulates the manner in which a mutual fund
may assume the costs of distributing and promoting the sale of its shares.
Under the Plan, the Distributor is appointed the Fund's agent to distribute
shares and provides office space and equipment, personnel, literature
distribution and advertising to promote the sale of the Fund's shares.
Payments under the Plan are made to compensate the Distributor for its
services, to reimburse the Distributor for its expenses and for the fees it
pays to dealers and other firms for selling Fund shares, servicing shareholders
and maintaining shareholder accounts. The 12b-1 fee may also be used to
defray the costs of advertising, sales literature and sales meetings. In
addition, the Plan also provides that the Adviser, in its sole discretion, may
utilize its own resources, including profits from its advisory fees, for
distributing and promoting sales of Fund shares.
Shares of the Fund may also be sold through banks or bank-affiliated
brokers. Any determination that such banks or bank-affiliated brokers are
prohibited from selling shares of the Fund under the Glass-Steagall Act would
have no material adverse effects on the Fund. State securities laws may
require such firms to be licensed as securities dealers in order to sell shares
of the Fund.
8
<PAGE> 11
BUYING SHARES
GENERAL. You can purchase shares of the Fund from any dealer or other
person having a sales agreement with the Distributor or you can purchase shares
directly from the Fund. No matter how you purchase your shares, you pay no
sales load. You buy shares at the net asset value computed after receipt of
your investment in proper form as described below. You are deemed to be a
shareholder as of the first business day following the day Firstar receives
payment for your shares. Shares purchased through a Qualified Dealer may be
subject to administrative charges or transaction fees imposed by the Dealer.
The minimum initial investment is $2,000 and subsequent investments are
$100 or more. The minimum initial investment for retirement plans not funded
by a payroll deduction is $250. The Fund reserves the right to waive the
minimum investment requirement for retirement plans funded by payroll deduction
plans.
There are three ways to make an initial investment in the Fund. One way
is to fill out the Application Form included in this Prospectus and mail it to
at the address on the Form. You must enclose a check payable as indicated
on the Form.
Another way to make an initial investment is to have your dealer order and
pay for the shares. In this case, you must pay your dealer. The dealer can
order the shares from the Adviser by telephone or wire. Your dealer may charge
you a fee for this service.
The third way to purchase shares is by wire. Shares may be purchased at
any time by wiring federal funds directly to Firstar Trust Company. Prior to
an initial investment by wire, the shareholder should telephone Firstar to
advise them of the investment and to obtain an account number and instructions.
A completed Application Form should be mailed to Firstar after the initial
wire purchase. To assure proper credit, the wire instructions should be made
as follows:
Firstar Bank
Milwaukee, WI 53201
Federal Routing Number 075000022
Firstar Trust MFS A/C Number 112-952-137
THE KENWOOD FUNDS
KENWOOD GROWTH & INCOME FUND
Shareholder Name,
Shareholder Account Number
After your initial investment, you can make additional investments of at
least $100. Simply mail a check payable to "Firstar Trust Company," c/o The
Kenwood Funds, P.O. Box 701, Milwaukee, WI 53201. You can also send a check
via overnight courier to Firstar Trust Company, 615 E. Michigan Street,
Milwaukee, WI 53202. The check should be accompanied by a form which Firstar
will provide after each purchase. If you do not have a form, you should tell
Firstar that you want to invest the check in shares of the Fund. If you know
your account number, you should also give it to Firstar.
The Fund does not issue certificates for shares in the Fund. Instead,
shares purchased are automatically credited to an account maintained for you on
the books of the Fund by Firstar. You receive a statement showing the details
of the transaction and any other transactions you had during the current year
each time you add to or withdraw from your account.
TELEPHONE TRANSACTIONS
If you have telephone transaction privileges, you may redeem or exchange
shares by telephone. You automatically have telephone privileges unless you
elect otherwise.
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<PAGE> 12
By exercising the telephone privilege to sell or exchange shares, you
agree that the fund shall not be liable for following telephone instructions
reasonably believed to be genuine. Reasonable procedures will be employed to
confirm that such instructions are genuine and, if not employed, the fund may
be liable for unauthorized instructions. Such procedures may include a request
for personal identification (account or social security number) and tape
recording of the instructions. Please note that exchanges by phone may be made
by any person, not just the shareholder of record. You verify the accuracy of
telephone transactions immediately upon receipt of your confirmation statement.
The Fund reserves the right to terminate, suspend or modify telephone
transaction privileges. During unusual conditions, the Fund may have
difficulty accepting telephone transactions, in which case you should mail your
instructions to the Fund c/o Firstar Trust Company at 615 E. Michigan Street,
Milwaukee, WI 53202.
EXCHANGING SHARES
As a service to our shareholders, the Kenwood Funds have established a
program whereby our shareholders can exchange their shares for shares of the
Portico Money Market Funds. These funds are no-load money market funds managed
by Firstar which offer check-writing privileges. The Portico Funds are
unrelated to the Kenwood Funds.
You may exchange your shares in the Fund for shares of the Portico Money
Market Funds at no additional charge. The Portico Funds consist of the Money
Market Fund (which is a general money market fund), U.S. Treasury Money Market
Fund, U.S. Government Money Market Fund, and Tax-Exempt Money Market Fund.
This exchange privilege is a convenient way to buy shares in a money market
fund in order to respond to changes in your goals or in market conditions.
Before exchanging into any of the Portico Funds, read the applicable
prospectus. To obtain a prospectus for the Portico Funds, call 1-800-______.
Firstar will charge $5.00 for each exchange transaction that is executed over
the phone. There is no charge for exchange transactions which are requested by
mail. See "Other Information About Exchanging Shares" below for information on
the limits imposed on exchanges.
BY MAIL. To exchange your shares of the Fund into any of the Portico
Funds, complete and sign an application and mail it to:
Firstar Trust Company,
P.O. Box 701
Milwaukee, WI 53201
You may also send the application via overnight courier to Firstar Trust
Company at 615 E. Michigan Street, Milwaukee, WI 53202.
BY TELEPHONE. If you have authorized telephone transaction privileges in
your application, you may also make exchanges by calling 1-800-________.
Exchanges made over the phone may be made by any person, not just the
shareholder of record. Certain other limitations and conditions apply to all
telephone transactions. See "Telephone Transactions."
OTHER INFORMATION ABOUT EXCHANGING SHARES. All accounts opened as a
result of using the exchange privilege must be registered in the same name and
taxpayer identification number as your existing account with the Fund. Because
of the time needed to transfer money between the Fund and the Portico Money
Market Funds, you may not exchange into and out of the same fund on the same or
successive days; there must be at least one day between exchange transactions.
You may exchange your shares of the Fund only for shares that have been
registered for sale in your state. Remember that each exchange represents the
sale of shares of one fund and the purchase of shares of. Therefore, you could
realize a taxable gain or loss on the transaction. If your account is subject
to backup withholding, you may not open another account using the exchange
privilege. Because excessive trading can hurt the Fund's performance and
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange privilege of any investor who makes excessive use of the
exchange privilege (e.g. more than five exchanges per calendar year). Your
exchanges
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<PAGE> 13
may be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges with a "market timing" strategy may be
disruptive to the Fund. The Fund reserves the right to terminate or modify the
exchange privilege upon at least 60 days' written notice to shareholders. A
signature guarantee is not required except in cases where shares are also
redeemed for cash at the same time. See "Redeeming Shares -- Signature
Guarantees" for more information.
REDEEMING SHARES
You may redeem your shares through your securities dealer (who may charge
you a fee for this service) or directly by using one of the methods described
below. The price you will receive for any shares you redeem will be the next
net asset value of the shares redeemed computed after we have received your
order to redeem in proper form. See "Net Asset Value" for more information.
Normally, payment by check is made within seven days after the redemption
request is received with all required documents in proper form. However, if
any of the shares redeemed were recently purchased (i.e. within 15 days) and
payment was made by personal check, payment to you for those shares may be
delayed until your purchase check has cleared. These restrictions are not
applicable to shares purchased with a certified or cashier's check or by bank
wire or federal funds.
BY MAIL. You may redeem shares by sending your written request to redeem
your shares to our Transfer Agent at Firstar Trust Company, P.O. Box 701,
Milwaukee, WI 53201. You may also send the request via overnight courier to
Firstar Trust Company at 615 E. Michigan Street, Milwaukee, WI 53202. This
written request must: 1) be signed by all account owners exactly as the account
is registered (both parties must sign in the case of joint accounts), 2) state
the dollar amount or number of shares to be redeemed and 3) specify your
account number. Please remember that you cannot place any conditions on your
request.
BY TELEPHONE. You may redeem shares by calling us at _______________. We
will then send the proceeds to you by mail. However, please keep in mind the
following: the check can only be issued for up to $___________; the check can
only be issued to the registered owner (who must be an individual); the check
can only be sent to the address of record; and your current address of record
must have been on file for 60 days. See "Telephone Transactions."
BY WIRE. You can redeem your shares by wire if you have selected this
option in your application and have named a commercial bank or savings
institution with a Federal Reserve Bank routing number. Once you have applied
for the wire redemption privilege, you or any other person can redeem shares in
your account by calling _________________ and providing your account number.
You may also use your wire privilege by mailing a signed request to the Fund
that includes your account number and THE amount you wish to have wired. The
proceeds will be sent only to the financial institution you have designated on
your application. You may terminate the wire redemption privilege by notifying
us in writing. Changes in your bank account ownership or bank account number
(including the name of the financial institution) may be made by written notice
to us with your signature and those of any new owner guaranteed. See
"Signature Guarantees" below. Additional documents may be required when shares
are held by a corporation, partnership, executor, administrator, trustee or
guardian. You will be charged a fee for this service.
REDEMPTIONS BY THE FUND. The Fund reserves the right to redeem any single
shareholder account that falls below $2,000 due to shareholder exemptions.
Before your account is redeemed, you will be notified in writing and we will
allow you 60 days to make additional share purchases to bring your account
value up to the minimum level.
OTHER LIMITATIONS. The Fund may suspend the right of redemption or delay
payment (a) during any period when the New York Stock Exchange is closed (other
than customary weekend and holiday closings), (b) when trading in the markets
that a Fund normally utilizes is restricted, or an emergency exists as
determined by the Securities and Exchange Commission so that the disposal of
any of a Fund's investments or the determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit for protection of a Fund's
shareholders. In case of suspension of the right of redemption, you may either
withdraw your request for redemption or, if your request is not withdrawn,
receive payment based on the next net asset value computed after termination of
the suspension.
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<PAGE> 14
SIGNATURE GUARANTEES. For our mutual protection, we may require a
signature guarantee on certain transaction requests. A signature guarantee
verifies the authenticity of your signature, and may be obtained from any bank,
trust company, savings and loan association, credit union, broker-dealer firm
or member of a domestic stock exchange. A signature guarantee cannot be
provided by a notary public. If redemption proceeds or amounts exchanged are
$25,000 or less and are to be paid or credited to an individual shareholder of
record at the address of record, a signature guarantee is not required (unless
there has been an address change within 60 days). All other redemption or
exchange requests must have signatures guaranteed. Certain shareholders, such
as corporations, trusts and estates, may be required to submit additional
documents.
NET ASSET VALUE
The net asset value per share is computed by dividing the total value of
the assets of the Fund, minus its liabilities, by the total number of its shares
outstanding. The net asset value is determined on each day the New York Stock
Exchange is open, at the earlier of the close of the Exchange or 4:00 p.m. New
York time. The price per share for purchases or redemptions made directly
through the Transfer Agent is such value next computed after the Transfer Agent
receives the purchase order or redemption request. Note that in the case of
redemptions and repurchases of shares owned by corporations, trusts or estates,
the Transfer Agent may require additional documents to effect the redemption and
the applicable price will be that next determined following the receipt of the
required documentation.
The Fund values its security holdings on the basis of market value.
Certain fixed-income securities may be valued based on market prices provided
by a pricing service. Fixed-income securities maturing within 60 days are
normally valued on the basis of amortized cost. If no market value is readily
available, such securities will be valued at a fair value determined by the
Board of Directors.
DIVIDENDS AND DISTRIBUTIONS
The Fund pays any income and capital gains distributions at least
annually. Distributions from the Fund will automatically be reinvested for you
on the payment date as additional shares of the Fund, unless you request
payment by check on your Application Form or make such a request later by
writing to the Fund. Your request will be effective for the current dividend
or distribution if it is received before the record date. Requests received
after that time will be effective beginning with the next dividend or
distribution.
As a protection, if two of your dividend checks are returned as
undeliverable, those undelivered dividends will be invested in additional
shares at the then current net asset value, and the account will be
redesignated as a dividend reinvestment account.
TAXES
This section is not intended to be a full discussion of all the aspects of
tax law and its effects on the Fund and its shareholders. Shareholders may be
subject to state and local taxes on distributions. Each investor should
consult a tax advisor regarding the effect of federal, state and local taxes on
an investment in the Fund.
The Fund intends to qualify and remain qualified as a "regulated
investment company" under the Internal Revenue Code (the "Code"). The Fund
will distribute all of its taxable net income and net realized capital gains to
shareholders so that it will not itself have to pay any income taxes.
During its initial operations, the Fund may be a personal holding company
("PHC") under the Code due to substantial ownership of the Fund's shares by a
few shareholders. In that event, the Fund intends to distribute all its PHC
income so that there is no PHC tax imposed on the Fund.
Distributions of net investment income from the Fund are taxable to
shareholders as ordinary income. A portion of the income dividends received by
the Fund from U.S. corporations may qualify for the "dividends received"
deduction available to corporate shareholders. Distributions from net
long-term capital gains are taxable as long-term capital gains
12
<PAGE> 15
regardless of how long Fund shares are owned. Distributions from net
short-term capital gains are taxable as ordinary income. Shareholders are
informed annually of the amount and nature of any income or gain.
Distributions are taxable whether received in cash or reinvested in additional
shares. If the Fund distributes than the amount it is required to distribute
during any year, a 4% excise tax will be imposed on the undistributed amount.
The Fund intends to declare and distribute dividends during each year
sufficient to prevent imposition of the excise tax.
A dividend received shortly after the purchase of shares reduces the net
asset value of the shares by the amount of the dividend, and although in effect
a return of capital, such dividend will be taxable to the shareholder. If a
shareholder realizes a loss on the sale or exchange of any shares held for six
months or less and if the shareholder received a capital gain distribution
during such six-month period, then the loss is treated as a long-term capital
loss to the extent of the capital gain distribution.
If for any reason you don't provide the Fund with your correct Social
Security or Tax I.D. number (or certify that you are not subject to backup
withholding), the Fund is required by the Code to withhold 31% of taxable
dividends and proceeds of certain exchanges and redemptions.
RETIREMENT PLANS
The Fund offers prototype retirement plans including IRAs, Simplified
Employee Pension ("SEP") Plans and model 403(b) plans for charitable,
educational and governmental entities. The Fund's Custodian, Firstar, acts as
the custodian under the IRA, SEP and 403(b) plans and may act as trustee or
custodian under the other plans. For information on fees and necessary forms,
please call _____________ or write to the Fund. Please do not use the
application included with this prospectus to open your retirement plan account.
Instead call ______________ for a retirement plan account application. Please
consult your tax advisor to determine the effect of any of the plans on your
financial situation.
FUND PERFORMANCE
In reports or other communications to shareholders and in advertising
material, the Fund may compare its performance to recognized unmanaged indexes
or stock market averages such as the Standard & Poor's 500 Index, Dow Jones
Industrial Average and New York Stock Exchange Composite Index. Also, the Fund
may compare its performance with that of other mutual funds of comparable size
and objectives as listed in the rankings prepared by Lipper Analytical
Services, Inc., or similar independent services which monitor the performance
of mutual funds or other industry or financial publications. The Fund may also
include evaluations published by nationally recognized ranking services and by
financial publications such as Business Week, Forbes, Kiplinger's,
Institutional Investor and Money Magazine. The Fund's past performance should
not be considered representative of future performance of the Fund.
The Fund's average annual total return is computed by determining the
average annual compounded rate of return for a specified period that, if
applied to a hypothetical $1,000 initial investment, would produce the
redeemable value of the investment at the end of the period, assuming
reinvestment of all dividends and distributions and with recognition of all
recurring charges. The Fund may also utilize a total return for differing
periods computed in the same manner but without annualizing the total return.
The Fund's performance is a function of conditions in the securities
markets, portfolio management and operating expenses, and past results are not
necessarily indicative of future results. Performance information supplied by
the Fund may not provide a basis for comparison with other investments using
differing reinvestment assumptions or time periods.
ORGANIZATION OF THE FUND
The Kenwood Funds (the "Trust") is a Delaware business trust organized
pursuant to a Trust Instrument dated January 9, 1996. The Trust is registered
as a diversified, open-end management investment company. The Trust currently
issues one series of shares, the Kenwood Growth & Income Fund. Shares of the
Trust are fully paid, non-assessable, and freely transferable when issued, have
equal noncumulative voting rights and equal rights with respect to
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<PAGE> 16
dividends, assets and liquidation. The Board of Trustees may in the
future create additional series of shares, each of which would represent an
interest in a separate portfolio with its own investment objective and
policies.
The Trust does not hold annual shareholder meetings, but does hold special
shareholder meetings when the Board of Trustees believes it is necessary or
when required by law. The Trust will hold a special meeting when requested in
writing by the holders of at least 10% of the shares eligible to vote at a
meeting. In addition, subject to certain conditions, shareholders of the Fund
may apply to the Fund to communicate with other shareholders to request a
shareholders' meeting to vote upon the removal of a Trustee or Trustees.
CERTAIN PROVISIONS OF THE TRUST INSTRUMENT. Under Delaware law, the
shareholders of the Fund are not personally liable for the obligations of the
Fund; a shareholder is entitled to the same limitation of personal liability
extended to shareholders of corporations.
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<PAGE> 17
THE KENWOOD FUNDS
77 West Washington Street
Suite 1615
Chicago, Illinois 60602
1-800-________
STATEMENT OF ADDITIONAL INFORMATION
___________, 1996
This Statement provides information concerning the Growth & Income Fund
(the "Fund") which is a series of the Kenwood Funds. This Statement is not a
Prospectus and should be read in conjunction with the Fund's Prospectus dated
_________________, 1996, which may be obtained from the Fund. This Statement
is accompanied by the Fund's audited balance sheet as of __________, 1996 which
is incorporated herein by reference.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
TOPIC PAGE
<S> <C>
FUNDAMENTAL INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . 3
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . 4
LENDING PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . 5
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . 6
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . 6
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FEDERAL TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CUSTODIAN AND TRANSFER AGENT. . . . . . . . . . . . . . . . . . . . 8
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 9
PORTFOLIO TRANSACTIONS AND BROKERAGE. . . . . . . . . . . . . . . . 9
SHAREHOLDER MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . 10
PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 18
FUNDAMENTAL INVESTMENT RESTRICTIONS
The investment restrictions enumerated below are fundamental and may not
be changed without the approval of the holders of the lesser of (i) 67% of the
eligible votes, if the holders of more than 50% of the eligible votes are
present in person or by proxy or (ii) more than 50% of the eligible votes.
(1) COMMODITIES. The Fund may not purchase or sell commodities or
commodity contracts except in respect to financial futures or
currencies.
(2) REAL ESTATE. The Fund may not purchase real estate.
(3) DIVERSIFICATION OF FUND INVESTMENTS.
(a) Fund Assets. With respect to 75% of the value of its total assets,
the Fund may not buy the securities of any issuer if more than 5% of the
value of the Fund's total assets would then be invested in that issuer.
Securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities and repurchase agreements involving such securities
("U.S. Government Securities"), are not subject to this limitation.
(b) Securities of Issuers. With respect to 75% of the value of its
total assets, the Fund may not purchase the securities of any issuer if
after such purchase the Fund would then own more than 10% of such
issuer's voting securities. U.S. Government Securities are not subject
to this limitation.
(4) INDUSTRY CONCENTRATION. The Fund may not purchase the securities of
companies in any one industry if 25% or more of the value of the Fund's
total assets would then be invested in companies having their principal
business activity in the same industry. U.S. Government Securities are
not subject to this limitation.
(5) SENIOR SECURITIES; BORROWING. The Fund may not issue senior securities
except as permitted under the Act. The Fund may not pledge or
hypothecate any of its assets, except in connection with permitted
borrowing. Transfers of assets in connection with currency transactions
are not subject to these limitations if appropriately covered.
(6) UNDERWRITING. The Fund does not engage in the underwriting of
securities. (This does not preclude it from selling restricted
securities in its portfolio.)
(7) LENDING MONEY OR SECURITIES. The Fund may not lend money, except that
it may buy debt securities publicly distributed or traded or privately
placed and may enter into repurchase agreements. The Fund may lend its
portfolio securities subject to having 100% collateral in cash or U.S.
Government Securities. The Fund will not lend securities if such a loan
would cause more than 20% of the value of its total assets to then be
subject to such loans.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS
In addition to the Fund's investment objective set forth in the
Prospectus, the Fund has adopted the following non-fundamental policies which
may be changed by the Board of Directors without shareholder approval.
(1) BORROWING. The Fund may not purchase securities when money borrowed
exceeds 5% of its total assets.
2
<PAGE> 19
(2) ILLIQUID AND RESTRICTED SECURITIES.
(a) The Fund may not purchase or hold illiquid securities if, as a
result, more than 15% of its net assets would be invested in such
securities.
(b) The Fund may not purchase restricted securities which are not
eligible for resale under Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). In addition, the Fund may not purchase
illiquid Rule 144A Securities and may not purchase liquid Rule 144A
Securities if such purchase would cause more than 5% of the Fund's total
assets to be invested in restricted securities.
(3) INVESTMENT COMPANIES. The Fund may not purchase securities of open-end
or closed-end investment companies except in compliance with the
Investment Company Act of 1940 and then only if no more than 5% of the
Fund's net assets would be so invested.
(4) LENDING PORTFOLIO SECURITIES. The Fund will not lend portfolio
securities if it causes more than 5% of its net assets to be subject to
such loans.
(5) MARGIN. The Fund may not purchase securities on margin, except for
use of short-term credit necessary for clearance of purchases of
portfolio securities.
(6) MORTGAGING. The Fund may not mortgage, pledge, hypothecate or, in
any manner, transfer any security owned by the Fund as security for
indebtedness except as may be necessary in connection with permissible
borrowings and other permissible investments or investments for currency
transactions and then such mortgaging, pledging or hypothecating may not
exceed 33 1/3% of the Fund's total assets at the time of borrowing or
investment.
(7) OIL AND GAS PROGRAMS. The Fund may not purchase participations or
other direct investments or enter into leases with respect to oil, gas,
or other mineral exploration or development programs.
(8) OWNERSHIP OF PORTFOLIO SECURITIES BY OFFICERS AND DIRECTORS. The
Fund may not purchase or retain the securities of any issuer if, to the
knowledge of the Fund's management, those officers and directors of the
Fund, and of the Adviser, who each own beneficially more than 0.5% of
the outstanding securities of such issuer, together own beneficially
more than 5% of such securities.
(9) SHORT SALES. The Fund may not effect short sales of securities
unless it owns or has the right to obtain securities equivalent in kind
and amount to the securities sold short. This restriction does not
apply to financial futures or currency transactions.
(10) UNSEASONED ISSUERS. The Fund may not purchase the securities
(other than U.S. Government Securities) of any issuers which at the time
of purchase had been in operation for less than three years (for this
purpose, the period of operation of any issuer shall include the period
of operation of any predecessor or unconditional guarantor of such
issuer).
(11) WARRANTS. The Fund may not invest in warrants if, as a result
thereof, more than 2% of the value of the total assets of the Fund would
be invested in warrants which are not listed on the New York Stock
Exchange, the American Stock Exchange, or a recognized foreign exchange,
or more than 5% of the value of the total assets of the Fund would be
invested in warrants whether or not so listed. For purposes of these
percentages limitations, the warrants will be valued at the lower of
cost or market and warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.
3
<PAGE> 20
(12) OPTIONS AND FUTURES CONTRACTS. The Fund may not engage in
transactions in futures or options except that this does not
prohibit the Fund from engaging in transactions in warrants as
described above.
Except for limitations on borrowing and investment in illiquid
securities, any percentage restrictions contained in any fundamental or
nonfundamental restrictions apply as of the time of investment without
regard to later increases or decreases in the values of securities or
total or net assets.
LENDING PORTFOLIO SECURITIES
Securities of the Fund may be lent to member firms of the New York Stock
Exchange and commercial banks with assets. Any such loans must be secured
continuously in the form of cash or cash equivalents, such as U.S. Treasury
bills. The amount of the collateral must, on a current basis, equal or exceed
the market value of the loaned securities and must be terminable upon notice,
at any time. The Fund will exercise its right to terminate a securities loan
in order to preserve its right to vote upon matters of importance affecting
holders of the securities. The fundamental investment restrictions state that
the Fund may not loan securities if the value of the securities loaned from the
Fund exceed 20% of the value of the Fund's total assets. However, as a matter
of non-fundamental policy, the Fund may not loan portfolio securities if it
would cause more than 5% of the Fund's net assets to be subject to such loans.
The advantage of such loans would be that the Fund continues to receive
the equivalent of the interest earned or dividends paid by the issuer on the
loaned securities while at the same time earning interest on the cash or
equivalent collateral.
Securities loans would be made to broker dealers and other financial
institutions to facilitate their deliveries of such securities. As with any
extension of credit there may be risks of delay in recovery and possibly loss
of rights in the loaned securities should the borrower of the loaned securities
fail financially. However, loans will be made only to those firms that the
Adviser deems creditworthy and only on such terms as the Adviser believes
should compensate for such risk. On termination of the loan the borrower is
obligated to return the securities to the Fund; any gain or loss in the market
value of the security during the loan period will inure to the Fund. Custodial
fees may be paid in connection with the loan.
NET ASSET VALUE
Net asset value per share is determined by calculating the total value of
the Fund's assets, deducting total liabilities, and dividing the result by the
number of shares outstanding. The Fund does not price its shares or accept
orders for purchases or redemptions on days when the New York Stock Exchange
(the "Exchange") is closed. Such days are the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. On each day the New York Stock Exchange
(the "Exchange") is open for trading, the net asset value is determined as of
the earlier of 4:00 p.m. New York time or the close of the Exchange.
Portfolio securities traded on a securities exchange (including options
on indexes so traded) or securities listed on the NASDAQ National Market are
valued at the last sale price on the exchange or market where primarily traded
or listed or, if there is no recent sale price available, at the last current
bid quotation. Securities not so traded or listed are valued at the last
current bid quotation if market quotations are available. Money market
instruments maturing in 60 days or less are normally valued at amortized cost.
Money market securities having maturities over 60 days or for which amortized
cost is not deemed to reflect fair value, may be priced by independent pricing
services that use prices provided by market makers or estimates of market
values obtained from yield data relating to instruments or securities with
similar characteristics. Other securities, including restricted securities,
and other assets are valued at fair value as determined in good faith by the
Board of Trustees.
4
<PAGE> 21
TRUSTEES AND OFFICERS
Information about the trustees and officers, including age as of March 18,
1996 and principal occupations during the past 5 years, is shown below.
*BARBARA L. BOWLES, 48 - Trustee and President of the Fund. Ms. Bowles
is the President and founder of The Kenwood Group, the Adviser to the Fund.
Her address is 77 West Washington Street, Chicago, Illinois 60602.
PATTY LITTON DELONY, CFA, 47 - Trustee. Ms. Delony is a Principal of
Delony Associates Inc., a business consulting firm established in 1988,
specializing in research, analysis and writing. Formerly, she was a vice
president of Sara Lee Corporation. Her address is 20 E. Cedar Street, Chicago,
Illinois 60611.
LESTER J. DUGAS, JR., 71 - Trustee. Mr. Dugas is presently a Senior
Consultant to Summit Consulting Group, consultants in health care, finance and
education. He is a consultant to MORLES Enterprises, Ltd., marketers of
generating equipment, and a Senior Direct Distributor for NSA, Inc.,
manufacturers of water purification equipment, air filters and juicer products.
He is also on the Board of Directors of several charities. His address is
5000 S. Woodlawn Avenue, Chicago, Illinois 60615.
*REYNALDO P. GLOVER, __ - Trustee. Mr. Glover is the Executive Vice
President-General Counsel of TLC Beatrice International Holding Company and of
counsel to the law firm, Rudnick & Wolfe. He also acts as general counsel for
the Adviser. From 1991 until 1994, Mr. Glover was a partner with the law firm
of Miller, Shakman, Hamilton, Kurtzon & Schlifke. From 1987 until 1991, Mr.
Glover was a partner with the law firm of Jenner & Block. From August, 1988
until September 1991, Mr. Glover also served as Chairman of the Board of
Trustees of the City Colleges of Chicago. In addition, he is active in many
civic, professional and social organizations. His address is 203 N. LaSalle
Street, Chicago, Illinois 60601.
CHALLIS M. LOWE, 50 - Trustee. Ms. Lowe is Executive Vice President,
responsible for Human Resources and Communications for Heller International
Corporation, a financial services company. She has been with Heller since
1993. Formerly, she was a Senior Vice President-Chief Administrative Officer
for Sanwa Business Credit Corporation. Her address is 500 W. Monroe Street,
Chicago, Illinois 60661.
SHARON MORROW, 41 - Vice President and Secretary. Ms. Morrow is the Vice
President of Marketing/Client Services for The Kenwood Group. Prior to joining
The Kenwood Group in 1995, Ms. Morrow was Vice President of Marketing from
Pierce & Company L.P./M.O.S.A.I.C. Investment Advisers. Formerly, Ms. Morrow
was the Director of the District of Columbia Department of Finance and Revenue.
Her address is 77 West Washington Street, Chicago, Illinois 60602.
CYNTHIA HARDY, 29 - Assistant Secretary. Ms. Hardy has been the Director
of Administration at The Kenwood Group since 1991. Prior to joining The
Kenwood Group, she was an accounting intern at Carr & Associates, a public
accounting and management consulting firm. Ms. Hardy has passed the Series 6
and 63 examinations. Her address is 77 West Washington Street, Chicago,
Illinois 60602.
SHELDON R. STEIN, 67 - Assistant Secretary. Mr. Stein is a partner at the
firm of D'Ancona & Pflaum, legal counsel to the Fund. His address is 30 North
LaSalle Street, Chicago, Illinois 60602.
- ----------------
*The asterisk following the names of Barbara Bowles and Reynaldo Glover
indicates that each of them is considered to be an "interested person" of the
Fund, as defined in the Investment Company Act of 1940.
The Fund does not pay any direct remuneration to any officer or trustee
who is an "interested person." Trustees of the Fund who are not "interested
persons" are paid a fee of $750 per meeting attended and a fee of $250 for each
telephone conference meeting, plus expenses.
5
<PAGE> 22
THE ADVISER
The Kenwood Group Inc., an Illinois corporation located at 77 West
Washington Street, Chicago, Illinois 60602, serves as the Fund's Adviser.
Barbara L. Bowles is the controlling shareholder of the Adviser. The Adviser
receives advisory fees monthly based upon the Fund's average daily net assets
at the following annual rate: 0.75% on the first $500 million of average net
assets, 0.70% on the next $500 million of average daily net assets, and 0.65%
on average daily net assets over $1 billion.
In addition to the services described in the Fund's prospectus, the
Adviser will compensate all personnel, officers and trustees of the Fund if
such persons are employees of the Adviser.
The Fund pays all other Fund expenses including its organizational
expenses. If the total expenses of the Fund (as determined under applicable
statutes or regulations) exceed any applicable expense limitation prescribed by
any statute or regulatory authority of a jurisdiction in which the Fund's
shares are qualified for offer and sale, the Adviser will reimburse the Fund in
the amount of such excess to the extent required by such securities law or
regulation. California and South Dakota are currently the only states which
have such limitations. California's limitation is 2.5% of the first $30
million of average net assets, 2.0% of the next $70 million of average net
assets and 1.5% of the remaining average net assets. South Dakota's limitation
is 2.5% of average net assets. The Adviser has agreed to waive the management
fee and to reimburse certain other expenses for the Fund's first fiscal year.
Under the Advisory Agreement between the Fund and the Adviser, in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties, the Adviser will not be liable for any act or omission
in the cause or, or connected with, rendering service under the Advisory
Agreement or for any losses that may be sustained in the purchase, holding or
sale of any security.
The Adviser has adopted a Code of Ethics which regulates the personal
securities transactions of the Adviser's investment personnel and other
employees and affiliates with access to information regarding securities
transactions of the Fund. The Code of Ethics requires investment personnel to
disclose personal securities holdings upon commencement of employment and all
subsequent trading activity to the Adviser's Compliance Officer. Investment
personnel are prohibited from engaging in any securities transactions,
including the purchase of securities in a private offering, without the prior
consent of the Compliance Officer. Additionally, such personnel are prohibited
from purchasing securities in an initial public offering and are prohibited
from trading in any securities (i) for which the Fund has a pending buy or sell
order, (ii) which the Fund is considering buying or selling, or (iii) which the
Fund purchased or sold within seven calendar days.
FEDERAL TAXES
Dividends and distributions of any realized short-term capital gains are
included in the income of shareholders as ordinary income and distributions of
net long-term capital gains are included in the income of shareholders as
long-term capital gains irrespective of the length of time they have held their
shares in the Fund. The dividends-received deduction for corporate
shareholders of the Fund may be applicable to a portion of the Fund's
distributions of net ordinary income. The amount of distributions eligible for
the dividends received deduction is limited to the amount of dividends received
by the Fund during the fiscal year from United States corporations. A
corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of the Fund is financed with indebtedness. Capital gains
distributions by the Fund are not eligible for this deduction.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING AGENT
Firstar Trust Company ("Firstar"), 615 East Michigan Street, Milwaukee, WI
53202, serves as the Fund's custodian, transfer, fund accounting, shareholder
servicing and dividend-paying agent. The custodian has custody of all
securities and cash of the Fund. The custodian attends to the collection of
principal and income and the payment for, and
6
<PAGE> 23
the collection of proceeds of, securities bought and sold by the Fund.
Firstar also acts as the Fund's Administrator pursuant to an Administration
Agreement with the Fund as described in the prospectus.
AUDITORS
The Fund's auditors are Coopers & Lybrand L.L.P., The 411 E. Wisconsin
Building , Milwaukee, WI 53202. The services of the auditors include an audit
of annual financial statements included in the annual reports to shareholders,
a review of amendments to the registration statement filed with the Securities
and Exchange Commission, consultation on financial accounting and reporting
matters, and meeting with the Audit Committee of the Board of Trustees. In
addition, the auditors may provide assistance in preparation of the federal and
state income tax returns and related forms.
DISTRIBUTION PLAN
AmeriPrime Financial Securities, Inc., 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, serves as the principal underwriter to distribute the
Fund's shares. Pursuant to the Distribution Plan adopted by the Fund pursuant
to Rule 12b-1 under the Investment Company Act of 1940, the Fund is authorized
to expend up to 0.25% annually of the Fund's average daily net assets to pay
distribution fees and to cover certain expenses incurred in connection with the
distribution of the Fund's shares. Rule 12b-1 permits an investment company to
finance, directly or indirectly, any activity which is primarily intended to
result in the sale of its shares only if it does so in accordance with the
provisions of the Rule. The Board of Trustees has determined that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Fund's securities trading and brokerage policies and procedures are
reviewed by and subject to the supervision of the Board of Trustees. The
Fund's policy is to seek to place portfolio transactions with those brokers or
dealers who will execute transactions as efficiently as possible and at
favorable prices. Many of these transactions involve the payment of brokerage
commissions by the Fund. In some cases, transactions are with firms that act
as principal for their own account. In effecting transactions in
over-the-counter securities, the Fund deals with market makers unless it
appears that better prices and execution are available elsewhere.
Subject to the policy of seeking favorable price and execution for the
transaction size and risk involved, in selecting brokers or dealers or
negotiating the commissions to be paid, the Adviser considers the firm's
financial responsibility and reputation, range and quality of services made
available to the Fund, and the services provided, including execution,
clearance procedures, wire service quotations, and ability to provide
supplemental performance, statistical and other research information for
consideration, analysis and evaluation by the staff of the Adviser. In
accordance with this policy, the Fund does not execute brokerage transactions
solely on the basis of the lowest commission rate available for a particular
transaction. Subject to the requirements of favorable price and efficient
execution, placement of orders by securities firms for the purchase of shares
of the Fund may be taken into account as a factor in the allocation of
portfolio transactions.
In addition, there may be times when an investment decision may be made to
purchase or sell the same security for the Fund and one or more clients of the
Adviser. If the Fund and the Adviser on behalf of other clients simultaneously
engage in the purchase or sale of the same security, the transactions will be
allocated as to amount and price in a manner considered equitable to each. In
some instances, this procedure could adversely affect the Fund but the Fund
deems that any disadvantage in the procedure would be outweighed by the
increased selection and the increased opportunity to engage in volume
transactions.
Research services furnished by brokers used by the Fund for portfolio
transactions may be utilized by the Adviser in connection with its investment
services for other accounts and, likewise, research services provided by
brokers used for transactions of other accounts may be utilized by the Adviser
in performing its services for the Fund. The Adviser determines the
reasonableness of the commissions paid in relation to its view of the value of
the brokerage and
7
<PAGE> 24
research services provided by brokers used for transactions of other accounts
may be utilized by the Adviser in performing its services for the Fund. The
Adviser determines the reasonableness of the commissions paid in relation to
its view of the value of the brokerage and research services provided,
considered in terms of the particular transaction and its overall
responsibilities with respect to all accounts as to which it exercises
investment discretion. As any particular research obtained by the Adviser may
be useful to the Fund, the Board of Trustees, in considering the reasonableness
of the commissions paid by the Fund, will not attempt to allocate, or require
the Adviser to allocate, the relative costs or benefits of research.
SHAREHOLDER MEETINGS
The Fund does not hold annual shareholder meetings, but does hold
special shareholder meetings when the Board of Trustees believes it is
necessary or when required by law. The Fund will hold a special meeting when
requested in writing by the holders of at least 10% of the shares eligible to
vote at a meeting.
Trustees may be removed from office by a vote of the holders of a
majority of the outstanding shares at a meeting called for that purpose, which
meeting shall be held upon the written request of the holders of not less than
10% of the outstanding shares. Upon the written request of ten or more
shareholders who have been such for at least six months and who hold shares
constituting the lesser of $25,000 or 1% of the outstanding shares of the Fund
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a trustee, the Fund has undertaken to disseminate
appropriate materials at the expense of the requesting shareholders.
PERFORMANCE DATA
Average annual total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Fund's investment portfolio.
The Fund's average annual total return figures are computed in accordance with
the standardized method prescribed by the Securities and Exchange Commission by
determining the average annual compounded rates of return over the periods
indicated, that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of
a hypothetical $1,000 payment made at the beginning
of such period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as
described in the Prospectus, and (ii) deducts all recurring fees, such as
advisory fees, charged as expenses to all shareholder accounts.
Total return is the cumulative rate of investment growth which assumes
that income dividends and capital gains are reinvested. It is determined by
assuming a hypothetical investment at the net asset value at the beginning of
the period, adding in the reinvestment of all income dividends and capital
gains, calculating the ending value of the investment at the net asset value as
of the end of the specified time period, substracting the amount of the
original investment, and dividing this amount by the amount of the original
investment. This calculated amount is then expressed as a percentage by
multplying by 100.
8
<PAGE> 25
FINANCIAL STATEMENTS
9
<PAGE> 26
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
*Included in Part B:
Statement of Assets and Liabilities.
Notes to Financial Statements.
Report of Coopers & Lybrand, L.L.P., Independent Auditors.
(b) Exhibits:
1. Declaration of Trust, incorporated by reference to
Registrant's Registration Statement on Form N-1A.
2. By-Laws, incorporated by reference to Registrant's Registration
Statement on Form N-1A.
3. Not Applicable.
4. Not Applicable.
5. Investment Advisory Agreement, incorporated by reference to
Registrant's Registration Statement on Form N-1A.
6. Form of Distribution Agreement, incorporated by reference to
Registrant's Registration Statement on Form N-1A.
7. Not Applicable.
8a. Custodian Agreement, incorporated by reference to Registrant's
Registration Statement on Form N-1A.
8b. Transfer Agency Contract, incorporated by reference to
Registrant's Registration Statement on Form N-1A.
9. Not Applicable.
10. Opinion and Consent of Counsel as to Legality of Shares Being
Registered, incorporated by reference to Registrant's Registration
Statement on Form N-1A.
*11. Consent of Independent Auditors to Use of Report.
12. Not Applicable.
*13. Financial Statement included in Statement of Additional
Information.
*14. Retirement Plans.
15. Rule 12b-1 Distribution Plan, incorporated by reference to
Registrant's Registration Statement on Form N-1A.
*16. Schedule for Computation of Performance Quotation.
<PAGE> 27
17. Not Applicable.
18. Powers of Attorney, incorporated by reference to Registrant's
Registration Statement on Form N-1A.
- ----------------
*To be provided in a pre-effective amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 1, 1996 there was one holder of record of Registrant's shares.
ITEM 27. INDEMNIFICATION
Reference is made to Article VIII of the Declaration of Trust of the
Registrant, filed as Exhibit 1 hereto.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The Kenwood Group, Inc., the Registrant's investment adviser, renders
investment advisory services to individual, institutional and pension and
profit-sharing plan accounts. None of the officers or directors of the Adviser
have been engaged in other professions and/or employment capacities during the
past two fiscal years.
ITEM 29. PRINCIPAL UNDERWRITERS
Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All documents and records related to portfolio transactions are
located at The Kenwood Funds, 77 W. Washington Street, Suite 1615, Chicago, IL
60602
All other documents and records are located at Firstar Trust
Company, 615 East Michigan Street, Milwaukee, WI 53202.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Registrant undertakes to file a post-effective amendment with
financial statements, which need not be certified, within four to
six months from the effective date of Registrant's Registration
Statement under the Securities Act of 1933.
Commencing with Registrant's annual report to shareholders for
the year ending April 30, 1996, Registrant undertakes to furnish
to each person to whom a Prospectus is delivered, a copy of the
Registrant's latest Annual Report to Shareholders, upon request and
Without charge.
<PAGE> 28
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE> 29
THE KENWOOD FUNDS
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chicago and State of
Illinois on the 18th day of March, 1996.
THE KENWOOD FUNDS
By: /s/Jessica R. Droeger
-------------------------
Jessica R. Droeger,
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by Barbara L. Bowles in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------------------- --------------------------- --------------
<S> <C> <C>
/s/Barbara L. Bowles* Chief Executive and March 18, 1996
---------------------
Barbara L. Bowles (Principal Financial Officer
and Trustee)
</TABLE>
*Jessica R. Droeger signs this document on behalf of the Registrant and Barbara
L. Bowles pursuant to the Powers of Attorney filed as Exhibit 18 to
Registrant's Registration Statement on Form N-1A.
/s/Jessica R. Droeger
---------------------
Jessica R. Droeger,
Attorney-in-Fact
<PAGE> 30
THE KENWOOD FUNDS
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- -------- ----
Patty Litton Delony* Trustee March 18, 1996
- ---------------------
Patty Litton Delony
Lester J. Dugas, Jr.* Trustee March 18, 1996
- ---------------------
Lester J. Dugas, Jr.
Reynado P. Glover* Trustee March 18, 1996
- ---------------------
Reynaldo P. Glover
Challis M. Lowe* Trustee March 18, 1996
- ---------------------
Challis M. Lowe
*Jessica R. Droeger signs this document on behalf of each of the foregoing
persons pursuant to the Powers of Attorney filed as Exhibit 18 to Registrant's
Registration Statement on Form N1-A.
/s/Jessica R. Droeger
---------------------
Jessica R. Droeger,
Attorney-in-Fact
