SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 333-1171
POST EFFECTIVE AMENDMENT NO. 3
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-7521
AMENDMENT NO. 5
THE KENWOOD FUNDS
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10 S. LaSalle Street
Suite 3610
Chicago, Illinois 60603
312-368-1666
Agent for Service:
Sheldon Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
( ) Immediately upon filing pursuant to paragraph (b)
( x ) on September 1, 1998, pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)
( ) on _____________, pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of share, under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
The Registrant's Rule 24f-2 Notice for its fiscal year ended April 30, 1998
was filed on or about July 29, 1998.
FORM N-1A
THE KENWOOD FUNDS
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REGISTRATION STATEMENT NO. 333-1171 UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 3
AND REGISTRATION STATEMENT NO. 811-7521 UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5
CROSS REFERENCE SHEET
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N-1A
ITEM NO. PART A- PROSPECTUS: CAPTION OR PLACEMENT
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1 Front Cover
2 Fund Expenses
3 Financial Highlights
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; Certain Shareholders; Summary;
Dividends and Distributions; Taxes
7 Buying Shares; Distribution of Shares; Net Asset Value
8 Redeeming Shares
9 (Not Applicable)
PART B- STATEMENT OF ADDITIONAL INFORMATION: CAPTION OR
-------------------------------------------------------
PLACEMENT
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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 Certain Shareholders
16 The Adviser; Distribution Plan, 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 See Prospectus - Dividends and Taxes
21 Distribution Plan
22 Performance Data
23 Financial Statements for the Company for the year ended April 30,
1998 are incorporated by reference from the 1998 Annual Report to
Shareholders.
(KENWOOD GROWTH & INCOME FUND LOGO)
PROSPECTUS
SEPTEMBER 1, 1998
(KENWOOD GROWTH & INCOME FUND LOGO)
KENWOOD GROWTH & INCOME FUND
10 SOUTH LASALLE STREET
SUITE 3610
CHICAGO, ILLINOIS 60603
1-888-KENFUND
PROSPECTUS
SEPTEMBER 1, 1998
The Kenwood Growth & Income Fund (the "Fund") is the only 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 concisely sets forth information about the Fund that you
should know before investing. Please retain it for future reference. A
Statement of Additional Information dated September 1, 1998 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.
TABLE OF CONTENTS
SUMMARY 2
FUND EXPENSES 3
FINANCIAL HIGHLIGHTS OF THE FUND 4
INVESTMENT OBJECTIVE AND POLICIES 5
THE ADVISER 7
SERVICES ADMINISTRATOR, CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT 8
DISTRIBUTION OF SHARES 9
BUYING SHARES 9
TELEPHONE TRANSACTIONS 10
EXCHANGING SHARES 10
REDEEMING SHARES 11
NET ASSET VALUE 12
DIVIDENDS AND DISTRIBUTIONS 13
TAXES 13
RETIREMENT PLANS 13
FUND PERFORMANCE 14
ORGANIZATION OF THE FUND 14
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. No sales load or redemption fee is charged by the Fund. The
Transfer Agent charges a nominal transaction fee for telephone exchanges and
wire redemptions (See "Exchanging Shares" and "Redeeming Shares"). 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 securities
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 toll-free, 1-888-KENFUND (888-536-3863) 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 10 South LaSalle Street, Suite 3610, Chicago, IL
60603.
FUND EXPENSES
The following tables are intended to help you understand the various expenses
that you as an investor will bear directly or indirectly as a shareholder of the
Fund.
Shareholder transaction expenses:
Maximum Sales Load Imposed on Purchases None
Redemption Fee None*<F1>
Sales Load on Reinvested Dividends None
Exchange Fee None**<F2>
Deferred Sales Load None
*<F1> For each wire redemption, the transfer agent will charge a fee which, as
of the date of this prospectus, is $12.00.
**<F2>For each telephone exchange, the transfer agent will charge a fee which,
as of the date of this prospectus, is $5.00.
Annual fund operating expenses after fee waivers and expense reimbursements
(as a percentage of average net assets):
Management Fees(1)<F3> 0.00%
12b-1 Fees(2)<F4> 0.25%
Other Expenses(1)<F3> 0.75%
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Total Operating Expenses(1)<F3> 1.00%
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(1)<F3> The Adviser has agreed to waive its fees or absorb Fund expenses at
least through the fiscal year ending April 30, 1999 so that the total
expenses of the Fund will not exceed 1.00% for the fiscal year. Based
upon actual Fund expenses for fiscal year ending April 30, 1998, if
the Adviser had not waived its fees, Management Fees would have been
0.75% of average net assets, Other Expenses would have been 6.06% and
Total Operating Expenses would have been 7.06%.
(2)<F4> The effect of a Rule 12b-1 plan is that long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales
charge permitted under applicable rules of the National Association of
Securities Dealers, Inc.
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 $ 10.00
Three Years $ 32.00
Five Years $ 55.00
Ten Years $122.00
THE 5% ANNUAL RETURN 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. FOR ADDITIONAL INFORMATION REGARDING FUND EXPENSES, SEE "THE
ADVISER" AND "DISTRIBUTION OF SHARES."
FINANCIAL HIGHLIGHTS OF THE FUND
The following table provides you with information about the history of the
Fund's shares. The table is included as supplementary information to the Fund's
financial statements which are included in the April 30, 1998 Annual Report
which may be obtained by writing or calling the Fund. The Fund's financial
statements have been audited by PricewaterhouseCoopers LLP, the Fund's
independent certified accountants, whose unqualified opinion thereon is
contained in the Annual Report.
KENWOOD GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
FOR THE FOR THE
YEAR ENDED YEAR ENDED
APRIL 30, 1998 APRIL 30, 1997
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Per Share Data:
Net asset value, beginning of year $ 11.20 $ 10.00
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Income from investment operations:
Net investment income 0.09 0.14
Net realized and unrealized
gain on securities 3.82 1.21
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Total from investment operations 3.91 1.35
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Less distributions:
Dividends from net investment income (0.10) (0.10)
Distributions from capital gains (0.83) (0.05)
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Total distributions (0.93) (0.15)
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Net asset value, end of year $ 14.18 $ 11.20
------- -------
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Total Return 35.66% 13.52%
Supplemental data and ratios:
Net assets, end of period (in 000's) $ 3,106 $ 1,271
Ratio of net expenses to
average net assets(1)<F5> 0.99% 0.92%
Ratio of net investment income
to average net assets(1)<F5> 0.97% 1.85%
Portfolio turnover rate 73.27% 31.21%
(1)<F5> Without expense reimbursements of $127,451 and $113,568, the ratio of
expenses to average net assets would have been 7.06% and 26.06%, and
the ratio of net investment income to average net assets would have
been (5.10)% and (23.29)%, respectively, for the years ended April 30,
1998 and April 30, 1997.
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 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. In addition,
the mid-cap market may provide potentially greater returns than the large-cap
market without significantly greater risks.
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.
Rigorous fundamental analysis is central to the Adviser's investment
strategy. An in-depth knowledge of the fundamentals of each company under
consideration is developed before it is added to the Fund's portfolio. A key
element of the selection process is a close examination of each company's
management decisions and future strategies. Performance is closely evaluated
for consistency with stated goals and strategies.
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 debt securities
(including convertible securities) rated 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 331/3% of the
value of the Fund's total assets (including the amount borrowed). The Fund will
not purchase securities 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 is shown in the "Financial
Highlights" section of this prospectus. 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.
Investing in Rule 144A Securities could have the effect of increasing the amount
of investments in illiquid securities if qualified institutional buyers are
unwilling to purchase such securities. However, the Fund will not purchase
illiquid Rule 144A Securities. 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 to be invested 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 10 South
LaSalle Street, Suite 3610, Chicago, Illinois 60603, serves as the Fund's
investment adviser. The Adviser has acted as an investment adviser to
institutional investors since 1990. As of June 30, 1998, the Adviser had $398
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
employees of the Adviser.
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 fiscal year ending April 30, 1999 so that
the total expenses of the Fund will not exceed 1.00%.
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. 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 other
than the Fund whose portfolios were managed by the Adviser. 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 used 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 will not necessarily equate with the returns experienced by the Fund,
due to differences in brokerage commissions, management fees, the size of
positions taken in relation to account size and diversification of securities,
as well as other costs and expenses borne by the Fund but not incurred by the
Advisory Accounts. In addition, the performance of the Fund contained in the
Financial Highlights is calculated as of the end of the Fund's fiscal year while
the Adviser's performance is calculated as of the end of the calendar year.
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.
KENWOOD GROUP COMPOSITE
HISTORICAL PERFORMANCE
PERIOD ENDED DECEMBER 31
BEFORE AFTER
YEAR ADVISORY FEES ADVISORY FEES
---- ------------- -------------
1990 (7.33)% (8.08)%
1991 19.26 18.51
1992 18.49 17.74
1993 6.60 5.85
1994 7.40 6.65
1995 30.93 30.18
1996 18.46 17.71
1997 31.00 30.25
ANNUALIZED PERFORMANCE
PERIOD ENDED DECEMBER 31, 1997
BEFORE AFTER
YEAR ADVISORY FEES ADVISORY FEES
---- ------------- -------------
1 YEAR 31.00% 30.25%
3 YEARS 26.66 25.91
5 YEARS 18.39 17.64
Since Inception (8 years) 14.94 14.19
NOTES: Performance figures are asset-weighted, average annual investment results
expressed as a percentage return. "After Advisory Fees" performance includes
reinvested dividends, capital gains and losses, and deducts advisory fees of
0.75%, which is the rate the Fund pays to the Adviser. Numbers in parentheses
denote a loss. 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.
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:
0.05% on the first $100 million of average net assets, 0.04% on the next $400
million of average daily net assets, and 0.03% 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.
YEAR 2000 ISSUES. Like all financial service providers, the Adviser,
Services Administrator, Custodian, Transfer Agent, Distributor and other third
parties (jointly the "Service Providers") utilize systems that may be affected
by Year 2000 transition issues. The services provided to the Fund and the
shareholders by the Service Providers depend on the smooth functioning of their
computer systems and those of other parties they deal with. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. Such an event could
have a negative impact on handling securities trades, payments of interest and
dividends, pricing and account services. Although, at this time, there can be
no assurance that there will be no adverse impact on the Fund, the Service
Providers have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the year 2000 and
expect that their systems, and those of other parties they deal with, will be
adapted in time for that event.
DISTRIBUTION OF SHARES
AmeriPrime Financial Securities, Inc. (the "Distributor"), 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 monthly equal to an annual rate of
0.05% of the Fund's average daily net assets, with a minimum annual 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, including the Distributor's fee. 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.
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 your purchase
order is received and accepted as described below. 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
Firstar 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. You may be charged a
fee if you effect transactions through a broker or agent.
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. 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 should 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 you can exchange your Kenwood Fund shares for shares of the
Firstar Money Market Funds. These funds are no-load money market funds managed
by Firstar which offer check-writing privileges. The Firstar Funds are
unrelated to the Kenwood Funds.
You may exchange your shares in the Fund for shares of the Firstar Money
Market Funds at no additional charge. The Firstar 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 Firstar Funds, read the applicable prospectus. To
obtain a prospectus for the Firstar Funds, call toll-free 1-888-KENFUND (888-
536-3863). There is no charge for exchange transactions which are requested by
mail. Firstar will charge a fee for each exchange transaction that is executed
over the phone. This fee is currently $5.00. 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 Firstar 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 toll-free 1-888-KENFUND
(888-536-3863). 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 Firstar 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 another. 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 (more than five exchanges per calendar year). Your exchanges
may be restricted or refused by the Adviser 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. The restriction or termination of the
exchange privilege does not affect the rights of shareholders to redeem shares
as discussed below. 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 toll-free at 1-888-KENFUND
(888-536-3863). 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 $25,000; 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 15 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 can redeem shares in your account by calling, toll-
free, 1-888-KENFUND (888-536-3863) 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. The
Transfer Agent charges a fee for each wire transfer which is currently $12.00.
REDEMPTIONS BY THE FUND. The Fund reserves the right to redeem any single
shareholder account that falls below $2,000 due to shareholder redemptions.
However, 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. Redemptions may be suspended or payment dates postponed
when (i) the New York Stock Exchange is closed (or when trading is restricted)
for any reason other than its customary weekend or holiday closing; (ii) an
emergency exists as a result of which (A) disposal by the Fund of securities
owned by it is not reasonably practical or (B) it is not reasonably practical
for the Fund fairly to determine the value of its net assets; or (iii) under any
emergency circumstances as determined by the Securities and Exchange Commission.
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.
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 15 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. Pending tax legislation could
affect the amount of taxes paid on certain investments. Taxes resulting from
the Fund's past investments are not reflective of taxes which will be due in the
future. 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.
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 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 less 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 a prototype Individual Retirement Account (IRA). The Fund's
Custodian, Firstar, acts as the custodian under the IRA plan. For information
on fees and necessary forms, please call toll-free 1-888-KENFUND (888-536-3863)
or write to the Fund. Please do not use the application included with this
prospectus to open your retirement plan account. Instead call 1-888-KENFUND
(888-536-3863) for a retirement plan account application. Please consult your
tax advisor to determine the effect of any of the plans on your financial
situation. In the future, the Fund may offer Simplified Employee Pension
("SEP") Plans and model 403(b) plans for charitable, educational and
governmental entities. For more information, please call or write to the Fund.
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, Standard & Poor's 400 Mid-Cap Index 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 in
January, 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 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.
TO OPEN AN ACCOUNT OR REQUEST INFORMATION
PLEASE CALL TOLL-FREE 1-888-KENFUND
INVESTMENT ADVISER
The Kenwood Group, Inc.
10 South LaSalle Street, Suite 3610
Chicago, IL 60603
(312) 368-1666
ADMINISTRATOR, TRANSFER AGENT, SHAREHOLDER
SERVICING AGENT & CUSTODIAN
Firstar Trust Company
Mutual Fund Services
P.O. Box 701
Milwaukee, WI 53201-0701
(888) 536-3863
DISTRIBUTOR
AmeriPrime Financial Securities, Inc.
1793 Kingswood Drive, Suite 200
Southlake, TX 76092
TRUSTEES
Barbara L. Bowles
Clark Burrus
Patty Litton Delony
Lester J. Dugas, Jr.
Reynaldo P. Glover
Challis M. Lowe
COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street, Suite 2900
Chicago, IL 60602
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
411 East Wsconsin Avenue
Milwaukee, WI 53202
THE KENWOOD FUNDS
10 South LaSalle Street
Suite 3610
Chicago, Illinois 60603
1-888-KENFUND
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1998
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
September 1, 1998, which may be obtained from the Fund.
The Trust's audited financial statements included in the Report to
Shareholders for the Fund dated April 30, 1998 are expressly incorporated herein
by reference and made a part of this Statement of Additional Information.
Copies of the Annual Report may be obtained free of charge from the Fund.
TABLE OF CONTENTS
TOPIC PAGE
FUNDAMENTAL INVESTMENT RESTRICTIONS 2
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS 2
LENDING PORTFOLIO SECURITIES 3
NET ASSET VALUE 4
TRUSTEES AND OFFICERS 4
TRUSTEE COMPENSATION 5
CERTAIN SHAREHOLDERS 6
THE ADVISER 6
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTING AGENT 7
AUDITORS 7
DISTRIBUTION PLAN 7
PORTFOLIO TRANSACTIONS AND BROKERAGE 8
SHAREHOLDER MEETINGS 8
PERFORMANCE DATA 9
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 Investment Company Act of 1940. 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) ILLIQUID AND RESTRICTED SECURITIES. 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.
(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) 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.
(8) OPTIONS AND FUTURES CONTRACTS. The Fund may not engage in
transactions in futures or options. This does not prohibit the Fund
from engaging in transactions in warrants.
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, Martin Luther King Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. On each day
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, or under the direction of, the
Board of Trustees.
TRUSTEES AND OFFICERS
Information about the trustees and officers, including age as of June 30,
1998 and principal occupations during the past 5 years, is shown below.
*<F6>BARBARA L. BOWLES, CFA, 50 - Trustee and President of the Fund. Ms.
Bowles is the President of The Kenwood Group, Inc., the Adviser to the Fund.
Ms. Bowles is a board member of Black & Decker Corporation, the Fort James
Corporation, the Hyde Park Bank and Trust Company, the Chicago Urban League, the
Children's Memorial Hospital of Chicago, and a lifetime member of the NAACP.
Prior to founding The Kenwood Group in 1989, Ms. Bowles was Corporate Vice
President of Kraft, Inc. and was previously employed by Beatrice Companies and
First National Bank of Chicago. Her address is 10 South LaSalle Street,
Chicago, Illinois 60603.
CLARK BURRUS, 66 - Trustee. Mr. Burrus is the immediate past Vice Chairman
of First Chicago Capital Markets, a wholly owned subsidiary of First Chicago NBD
Corporation and co-head of the Public Banking Department. He recently retired.
Mr. Burrus serves on several boards and commissions including the Cook County
Deferred Compensation Committee, Chairman of the Chicago Council on Urban
Affairs - Advisory Board, and Co-Chairman of the Health Care Sub-Committee of
the Cook County Citizens Budget Review Committee. His address is 9118 S.
Bennett Avenue, Chicago, IL 60617.
PATTY LITTON DELONY, CFA, 49 - 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., 73 - 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.
*<F6>REYNALDO P. GLOVER, 55 - 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, 52 - Trustee. Ms. Lowe is a consultant to Beneficial
Corporation. She previously served as the Executive Vice President prior to
their acquisition by Household Finance Corporation. Ms. Lowe also served as the
Executive Vice President for Human Resources and Communications for Heller
International Corporation for several years. Her home address is 8 Beacon Hill
Road, Chester, New Jersey 07930.
SHARON MORROW, 44 - 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 for 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. Ms.
Morrow has passed the Series 6 and 63 examinations. Her address is 10 South
LaSalle Street, Chicago, Illinois 60603.
CYNTHIA HARDY, 31 - 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 10 South LaSalle Street, Chicago, Illinois 60603.
JOSEPH NEUBERGER, 36 - Assistant Secretary. Mr. Neuberger has been a Vice
President at Firstar Trust Company since 1994. Prior to joining Firstar, he was
a Manager with Arthur Andersen & Company LLP. His address is 615 E. Michigan
Street, Milwaukee, Wisconsin 53202.
MICHAEL T. KARBOUSKI, 33 - Assistant Secretary. Mr. Karbouski is a Trust
Officer at Firstar Trust Company in the Mutual Fund Services Group. From 1992
until 1995, he was a Business Development Representative with Firstar Funds.
His address is 615 E. Michigan Street, Milwaukee, WI 53202.
SHELDON R. STEIN, 69 - 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.
- ----------------------------------------
*<F6>Barbara Bowles is considered to be an "interested person" of the Fund, as
defined in the Investment Company Act of 1940 due to her relationship with the
Adviser. Reynaldo Glover is considered to be an "interested person" of the Fund
solely because of his role as attorney for the Adviser. The Fund does not pay
any direct compensation to employees of the Adviser.
TRUSTEE COMPENSATION
The compensation paid to the Trustees of the Trust, for the fiscal year
ended April 30, 1998 is set forth in the following table:
<TABLE>
Pension or
Retirement
Benefits Estimated Total Compensation
Aggregate Accrued As Part Annual Benefits From the Trust (the
Compensation of Trust Upon Trust is not in a
Name From the Trust Expenses Retirement Fund Complex)
------ -------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Patty Litton Delony $1,500 0 0 $1,500
Lester J. Dugas $1,500 0 0 $1,500
Reynaldo P. Glover $ 750 0 0 $ 750
Challis M. Lowe $1,500 0 0 $1,500
</TABLE>
CERTAIN SHAREHOLDERS
The following table sets forth as of July 31, 1998, the name and holdings of
each person known by the Fund to be a record or beneficial holder of more than
5% of its outstanding shares. As of such date there were 222,920 shares
outstanding.
% of
Number of Outstanding
Name and Address Shares Owned Shares
----------------- ------------- ------------
Metropolitan Pier and Exposition 44,439 19.9%
Authority Retirement Plan
2301 S. Prairie Ave.
Chicago, IL 60616
Reynaldo Glover 25,130 11.3%
C/O Rudnick & Wolfe
203 North La Salle Street
Chicago, IL 60601
Charles Schwab & Co. Inc. 18,484 8.3%
Special Custody Account for
the Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Barbara L. Bowles*<F7> 19,004 8.5%
C/O The Kenwood Group
10 S. LaSalle St. Ste. 3610
Chicago, IL 60603-1002
*<F7>Barbara L. Bowles is also record owner of 5,402 shares as Trustee of The
Kenwood Group Inc. 401(k) Trust.
The officers and directors of the Fund beneficially own in the aggregate
22.6% of the outstanding shares of the Fund.
THE ADVISER
The Kenwood Group, Inc., an Illinois corporation located at 10 South
LaSalle Street, Chicago, Illinois 60603, serves as the Fund's Adviser. Barbara
L. Bowles is the controlling shareholder of the Adviser. The Advisery fee is a
monthly fee 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 Adviser waived its entire fee in fiscal years 1997
and 1998. If the Adviser had not waived its fee, its total fee would have been
$3,380 for fiscal year 1997 and $15,753 for fiscal year 1998. The Adviser may
waive all or a part of its fee, at any time, and at its sole discretion, but
such action shall not obligate the Adviser to waive any fees in the future. The
Adviser has agreed to waive its fee and to absorb Fund expenses at least through
the fiscal year ending April 30, 1999 so that total Fund expenses do not exceed
1.00%.
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, except to the extent that the Adviser pays or
reimburses such expenses.
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 of, 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.
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 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 PricewaterhouseCoopers LLP, 411 E. Wisconsin Ave.,
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 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. For fiscal year ended April 30, 1998, the Fund paid
AmeriPrime Financial Securities, Inc. $5,251 to distribute the Fund's shares.
The Distribution Plan continues annually so long as it is approved in the
manner provided by Rule 12b-1 or unless earlier terminated by vote of the
majority of the Fund's Independent Trustees or a majority of the Fund's
outstanding shares. The Adviser is required to furnish quarterly written
reports to the Board of Trustees detailing the amounts expended under the
Distribution Plan. The Distribution Plan may be amended provided that all such
amendments comply with the applicable requirements then in effect under Rule
12b-1. Presently, Rule 12b-1 requires, among other procedures, that it be
continued only if a majority of the Independent Trustees approve continuation at
least annually and that amendments materially increasing the amount to be spent
for distribution be approved by the Independent Trustees and the shareholders.
As long as the Distribution Plan is in effect, the Fund must commit the
selection and nomination of candidates for new Independent Trustees to the sole
discretion of the existing Independent Trustees.
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 professional 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 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.
For the fiscal year ended April 30, 1998 the Fund paid brokerage
commissions of $ 7,742.
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:
P(1 + T)n = 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.
The Fund's average annual total return for the fiscal year ended April 30,
1998 was 35.66%. The Fund's average annual total return since inception (May 1,
1996) was 24.10%.
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, subtracting 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 multiplying by 100.
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A
Financial Highlights
Included in Part B by incorporation by reference
Schedule of Investments at April 30, 1998
Statement of Assets and Liabilities at April 30, 1998
Statement of Operations for the year ended April 30, 1998
Statement of Changes in Net Assets for the year ended
April 30, 1998
Notes to Financial Statements.
Report of PricewaterhouseCoopers LLP, Independent Auditors.
(b) Exhibits
1. Declaration of Trust, incorporated by reference to
Registrant's Registration Statement on Form N-lA,
File No. 333-1171.
2. By-Laws, incorporated by reference to Registrant's
Registration Statement on Form N-lA, File No. 333-1171.
3. Not Applicable.
4. Not Applicable.
5. Investment Advisory Agreement, incorporated by
reference to Pre-Effective Amendment No. 2 on Form N-1A,
File No. 333-1171.
6. Underwriting Agreement, as amended, incorporated by reference to
Pre-Effective Amendment No.2 on Form N-1A, File No. 333-1171.
7. Not Applicable.
8a. Custodian Agreement, incorporated by reference to
Registrant's Registration Statement on Form N-lA,
File No. 333-1171.
8b. Transfer Agency Contract, incorporated by reference to
Registrant's Registration Statement on Form N-lA,
File No. 333-1171.
9. Not Applicable.
10. Consent and Opinion of Counsel as to Legality of Shares
Being Registered.
11. Consent of Independent Auditors to Use of Report.
12. Not Applicable.
13. Financial Statements, included in Statement of
Additional Information.
14. Retirement Plans, incorporated by reference to Pre-
Effective Amendment No. 2 on Form N-1A, File No. 333-1171.
15. Rule 12b-1 Distribution Plan, incorporated by reference
to Registrant's Registration Statement on Form N-1A,
File No. 333-1171.
16. Schedule for Computation of Performance Quotation, incorporated
by reference to Pre-Effective Amendment No. 2 on Form N1-A,
File No. 333-1171.
17. Not Applicable.
18. Power of Attorney for Clark Burrus, Trustee. Powers of
Attorney, incorporated by reference to Registrant's Registration
Statement on Form N-lA, File No. 333-1171.
27. Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of June 30, 1998 there were 107 holders 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 to Registrant's Registration Statement File No.
333-1171 which provides the following:
No Trustee or officer of the Trust, when acting in such capacity, shall be
personally liable to any person other than the Trust or a beneficial owner for
any act, omission or obligation of the Trust or any Trustee. No Trustee or
officer shall be liable for any act or omission in his or her capacity as
Trustee or officer, or for any act or omission of any officer or employee of the
Trust or of any other person or party, provided that nothing contained herein or
in the Delaware Business Trust Act shall protect any Trustee or officer against
any liability to the Trust or to Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or as an officer.
The Trust indemnifies each of its Trustees against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in compromise, as
fines and penalties, and as counsel fees) reasonably incurred in connection with
the defense or disposition of any action, suit or other proceeding, whether
civil or criminal in which said Trustee may be involved or with which said
Trustee may be threatened, while as a Trustee or thereafter by reason of being
or having been such a Trustee except with respect to any matter as to which said
Trustee shall have been adjudicated to have acted in bad faith or with willful
misfeasance, gross negligence or reckless disregard of the duties of office;
provided that as to any matter disposed of by a compromise payment by such
- --------
person, pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless the Trust shall
have received a written opinion from independent legal counsel approved by the
Trustees to the effect that if either the matter of willful misfeasance, gross
negligence or reckless disregard of duty, or the matter of bad faith had been
adjudicated, it would in the opinion of such counsel had been adjudicated in
favor of such person. The rights accruing to any person under these provisions
shall not exclude any other right to which such person may be lawfully entitled;
provided that no person may satisfy any right of indemnity or reimbursement
- --------
hereunder except out of the property of the Trust. The Trustees may make
advance payments in connection with the indemnification under this Section 8.2;
provided that the indemnified person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that such person
is not entitled to such indemnification.
The Trust indemnifies the officers and has the power to indemnify
representatives and employees of the Trust, to the same extent that Trustees are
entitled to indemnification pursuant to this Section 8.2.
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 except as follows: Larry Jones - Executive Vice
President, Senior Portfolio Manager and Market Strategist joined the Kenwood
Group in May 1997. Prior to joining The Kenwood Group he served as the Chief
Investment Officer and Portfolio Manager for W.R. Lazard & Company. Prior to
that Mr. Jones spent 12 years as Managing Director, Portfolio Manager and
Director of Investment Research at Equitable Capital Management, now Alliance
Capital Management.
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, 10 S. LaSalle Street, Suite 3610, Chicago, IL 60603.
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 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.
THE KENWOOD FUNDS
SIGNATURES
-----------
Registrant certifies that this Amendment meets all of the requirements for
effectiveness pursuant to Rule 485 (b).
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
26th day of August, 1998.
THE KENWOOD FUNDS
By: /s/ Sheldon R. Stein
---------------------
Sheldon R. Stein,
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.
Signature Title Date
--------- ----- ----
/s/ Barbara L. Bowles*<F10> Chief Executive and August 26, 1998
------------------------- Principal Financial Officer
Barbara L. Bowles and Trustee
*<F10>Sheldon R. Stein 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/ Sheldon R. Stein
-----------------------
Sheldon R. Stein,
Attorney-in-Fact
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*<F11> Trustee August 26, 1998
- ----------------------------
Patty Litton Delony
Lester J. Dugas, Jr.*<F11> Trustee August 26, 1998
- -----------------------------
Lester J. Dugas, Jr.
Reynaldo P. Glover*<F11> Trustee August 26, 1998
- -----------------------------
Reynaldo P. Glover
Challis M. Lowe*<F11> Trustee August 26, 1998
- -----------------------------
Challis M. Lowe
Clark Burrus*<F11> Trustee August 26, 1998
- -----------------------------
Clark Burrus
*<F11>Sheldon R. Stein 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/ Sheldon R. Stein
-----------------------
Sheldon R. Stein,
Attorney-in-Fact
Exhibit 10
August 26, 1998
Board of Directors
The Kenwood Funds
10 South LaSalle Street
Suite 3610
Chicago, Illinois 60603
Re: Registration of Shares of Beneficial Interest under
Securities Act of 1933 and Investment
Company Act of 1940
Dear Ladies and Gentlemen:
We have acted as counsel to The Kenwood Funds, a Delaware business
trust (the "Trust"), in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement on Form N-1A (the "Registration Statement") under the Securities
Act of 1933 and the Investment Company Act of 1940, relating to the
registration, pursuant to Commission Rule 24f-2(a)(1), of an indefinite
number of shares of the Trust's Shares of Beneficial Interest (the "Shares").
In this regard, we have examined originals or copies of (i) the
Declaration of Trust and Bylaws of the Trust, and (ii) resolutions of the
Board of Trustees and such other documents and Trust records as we have
deemed appropriate for purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that (i) the Shares
have been duly authorized, and (ii) the Shares, when issued by the Trust in
the manner set forth in the Registration Statement, will be legally issued,
fully paid, and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the references to our name in the prospectus and statement
of additional information included in the Registration Statement.
Very truly yours,
D'ANCONA & PFLAUM
By: /s/ Arthur Don
-----------------------
Arthur Don, Partner
AD:sls
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of The Kenwood Funds - The Kenwood Growth & Income Fund
We consent to the incorporation by reference in Post-Effective Amendment No. 3
to the Registration Statement of The Kenwood Funds on Form N-1A of our report
dated May 15, 1998 on our audit of financial statements and financial highlights
of The Kenwood Growth & Income Fund, which report is included in the Annual
Report to Shareholders for the year ended April 30, 1998, which is incorporated
by reference in the Registration Statement. We also consent to the reference to
our Firm under the captions "Financial Highlights of the Fund" in the Prospectus
and "Auditors" in the Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
August 26, 1998
Exhibit 18
THE KENWOOD FUNDS
POWER OF ATTORNEY
-----------------
Know All People by These presents, that the undersigned constitutes and
appoints Barbara L. Bowles, Sharon Morrow, Sheldon R. Stein and Arthur Don, and
each of them, his attorneys-in-fact, each with power of substitution, for it in
any and all capacities, to sign any registration statement of The Kenwood Funds
on Form N-1A under the Securities Act of 1933 and/or the Investment Company Act
of 1940, and all amendments thereto, and to file the same, including exhibits
and other documents in connection therewith, with the Securities and Exchange
Commission, and all applicable state or federal regulatory authorities. The
undersigned hereby ratifies and confirms all that each of said attorneys-in-
fact, or his or her substitute or substitutes, may do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 12th day of August, 1998.
/s/ Clark Burrus
- -----------------
Clark Burrus
Trustee
[ARTICLE] 6
[CIK] 0001006416
[NAME] THE KENWOOD FUNDS
[MULTIPLIER] 100
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-START] MAY-01-1997
[PERIOD-END] APR-30-1998
[INVESTMENTS-AT-COST] 2,937,133
[INVESTMENTS-AT-VALUE] 3,316,333
[RECEIVABLES] 87,650
[ASSETS-OTHER] 6,262
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,412,211
[PAYABLE-FOR-SECURITIES] 265,344
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 41,120
[TOTAL-LIABILITIES] 306,464
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,639,915
[SHARES-COMMON-STOCK] 219,065
[SHARES-COMMON-PRIOR] 113,482
[ACCUMULATED-NII-CURRENT] 5,744
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 80,888
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 379,200
[NET-ASSETS] 3,104,747
[DIVIDEND-INCOME] 32,146
[INTEREST-INCOME] 9,114
[OTHER-INCOME] 0
[EXPENSES-NET] 20,863
[NET-INVESTMENT-INCOME] 20,397
[REALIZED-GAINS-CURRENT] 221,113
[APPREC-INCREASE-CURRENT] 355,978
[NET-CHANGE-FROM-OPS] 597,488
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 18,982
[DISTRIBUTIONS-OF-GAINS] 155,240
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 104,639
[NUMBER-OF-SHARES-REDEEMED] 12,443
[SHARES-REINVESTED] 13,387
[NET-CHANGE-IN-ASSETS] 1,835,145
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 15,753
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 148,314
[AVERAGE-NET-ASSETS] 2,100,483
[PER-SHARE-NAV-BEGIN] 11.20
[PER-SHARE-NII] 0.09
[PER-SHARE-GAIN-APPREC] 3.82
[PER-SHARE-DIVIDEND] 0.10
[PER-SHARE-DISTRIBUTIONS] 0.83
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 14.18
[EXPENSE-RATIO] 0.99
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
