SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 333-1171
POST EFFECTIVE AMENDMENT NO. 4
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-7521
AMENDMENT NO. 6
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
111 E. Wacker Drive, Suite 2800
Chicago, Illinois 60601
(312) 602-2014
It is proposed that this filing will become effective:
------ Immediately upon filing pursuant to paragraph (b)
------ on September 1, 1999, pursuant to paragraph (b)
------ 60 days after filing pursuant to paragraph (a)
--X--- on September 1, 1999 pursuant to paragraph (a) of Rule 485
FORM N-1A
THE KENWOOD FUNDS
-----------------
REGISTRATION STATEMENT NO. 333-1171 UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4
AND REGISTRATION STATEMENT NO. 811-7521 UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6
CROSS REFERENCE SHEET
---------------------
N-1A
ITEM NO. PART A- PROSPECTUS: CAPTION OR PLACEMENT
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1 Front Cover, Back Cover
2 The Fund; Goals and Investment Approach, Principal Risks
3 Fees and Expenses
4 More Detail About the Fund; Investment Objective, Strategies
and Policies, Other Risks
5 1999 Annual Report (incorporated by reference)
6 The Adviser
7 Buying Shares, Telephone Transactions, Exchanging Shares,
Redeeming Shares, Dividends and Distributions, Taxes,
Retirement Plans; Distribution of Shares; Net Asset Value
8 Distribution of Shares
9 Financial Highlights of the Fund
PART B- STATEMENT OF ADDITIONAL INFORMATION: CAPTION OR
---------------------------------------------------------
PLACEMENT
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10 Front Cover
11 Organization of the Fund
12 Fundamental Investment Restrictions; Non-Fundamental
Investment Restrictions; Other Investment Matters-Lending
Portfolio Securities; See also Prospectus - The Fund; Goals
and Investment Approach, Principal Risks; More Detail About
the Fund; Investment Objective, Strategies and Policies,
Other Risks
13 Trustees and Officers, Trustees Compensation
14 Certain Shareholders
15 The Adviser; Distribution Plan, Administrator, Transfer
Agent and Custodian; Auditors
16 Portfolio Transactions and Brokerage
17 Organization of the Fund
18 Distribution Plan; See also Prospectus - Net Asset Value,
Buying Shares, Redeeming Shares, Distribution of Shares
19 See Prospectus - Dividends and Distributions, Taxes
20 Distribution Plan; See also Prospectus - Distribution of
Shares
21 Performance Data
22 Financial Statements for the Company for the year ended
April 30, 1999 are incorporated by reference from the 1999
Annual Report to Shareholders
(THE KENWOOD FUNDS LOGO)
THE KENWOOD GROWTH & INCOME FUND
Investing primarily in mid-capitalization value stocks
for capital appreciation and income
PROSPECTUS
September 1, 1999
The Securities and Exchange Commission has not approved or
disapproved these securities or passed on the adequacy or
completeness of this prospectus. It is a criminal offense to
state otherwise.
Contents
THE FUND IN BRIEF
What investors should know Goals and Investment Approach 2
about the fund Principal Risks 3
Past Performance 4
Fees and Expenses 6
MORE DETAIL ABOUT THE FUND
Investment Objectives, Strategies
and Policies 8
The Adviser 10
Financial Highlights 12
YOUR INVESTMENT
Information for managing Administrator, Custodian,
your account Transfer Agent and Fund
Accountant 13
Distribution of Shares 13
Buying Shares 14
Telephone Transactions 15
Exchanging Shares 15
Redeeming Shares 16
Net Asset Value 18
Dividends and Distributions 18
Taxes 19
Retirement Plans 19
Fund Performance 20
Organization 20
The Fund The Kenwood Growth & Income Fund
Ticker Symbol: KNWDX
GOALS AND INVESTMENT APPROACH
The Fund's investment objective is capital appreciation and current income.
The Fund invests in stocks that are considered to be undervalued, primarily mid-
capitalization ("midcap") companies. We define these as companies with total
market value of $200 million to $6.5 billion.
We look for stocks that we believe have little downside risk, rather than
seeking those with extraordinary upside potential. We prefer stocks with a
record of paying dividends, since dividends provide income as well as some
protection in a volatile or weak market. Rather than engaging in market timing,
the Fund takes long-term positions and normally remains fully invested, with at
least 85% of assets in equity securities.
We carefully analyze the fundamentals and management strategies of each company
under consideration before it is added to the Fund's portfolio. We try to
identify securities that are temporarily undervalued but have potential for
growth in earnings and dividends. We believe that there are many such stocks
that have not been fully recognized or widely followed by investors among the
midcap companies that are our main focus.
This investment approach is designed to outperform the S&P Midcap 400 and
Russell Midcap indices. However, we cannot guarantee that we will achieve this
goal.
CONCEPTS TO UNDERSTAND
MARKET CAPITALIZATION, or "market cap" is a gauge of a company's size. It is the
total number of outstanding shares multiplied by the current price of the stock.
UNDERVALUED STOCKS are those that appear to be priced below their intrinsic
worth or business prospects, based on financial measurements such as price-
earnings or price-to-book value ratios.
MARKET TIMING is the practice of moving into and out of the market from time to
time according to what an investor believes is the likely market direction.
PRINCIPAL RISKS
An investment in The Kenwood Growth & Income Fund, like any mutual fund, is not
a bank deposit. It is not insured or guaranteed by any government agency.
Although we strive to achieve the Fund's objective, we cannot offer guaranteed
results. The value of your investment in the Fund may go up or down, which means
that you could lose money. As with any equity investment, you also have the
potential to make money. The risk of a drop in market value is balanced to some
extent by the Fund's practice of investing in stocks that pay dividends.
WHO SHOULD INVEST
You should consider investing in the Fund if you are looking for long-term
growth of your investment with a moderate level of current income, and if you
are comfortable with the associated risks. We are long-term investors, and we
strongly encourage investors in the Fund to plan on holding your investment for
at least three years.
While equities have historically provided higher returns than most bond and
money-market investments, stock prices do fluctuate. Thus you should not invest
in the Fund if you anticipate a near-term need for either the principal or the
gains from your investment. However, since the Fund invests mainly in stocks
that pay dividends, it may be suitable for investors who want to combine the
long-term growth available from equity investments with a modest amount of
current income.
RISK AND RETURN
In investing, RISK is normally defined as the extent to which an investment is
subject to uncertainty. In general, investments with higher long-term returns
have more risk. This means that their returns may vary quite a lot from one time
period to another. Less risky investments generally have returns that are lower
but more predictable.
TOTAL RETURN measures how much the value of an investment changes, assuming all
dividend income and capital gain distributions are reinvested.
If you prefer modest but predictable returns, you should choose low-risk
investments such as government bonds or money market funds. If you are willing
to accept returns that vary and even the possibility of losing your money,
investments with higher expected returns such as stocks and equity funds may be
suitable for you.
PAST PERFORMANCE
The following bar charts and tables can help you evaluate the potential risks
and rewards of investing in the Fund. They show changes in the Fund's
performance from year to year and how the Fund's average annual returns for the
last year and since inception compare with those of the S&P Midcap 400 and
Russell Midcap indices. These are widely recognized unmanaged indices that
measure overall performance of the market segment in which the Fund invests. The
indices measure overall market returns, not actual returns an investor might
experience. They do not take into account the costs of buying or selling
securities or managing a stock portfolio, costs that are deducted from mutual
fund returns.
Past performance is not necessarily an indication of how the fund will perform
in the future.
INDICES USED FOR COMPARISON
The S&P (STANDARD & POOR'S) MIDCAP 400 INDEX is a capitalization-weighted index
that measures the mid-range sector of the U.S. stock market.
The RUSSELL MIDCAP INDEX includes the 800 smallest companies in the Russell 1000
Index. The Russell 1000 Index measures the performance of the 1000 largest U.S.
companies. The Russell Midcap Index represents the universe of medium-sized
securities. It consists of approximately 30% of the total market capitalization
of the Russell 1000 Index.
Both the S&P Midcap 400 and the Russell Midcap indices measure the stock
performance of companies in the size range that The Kenwood Growth & Income Fund
emphasizes.
YEAR-BY-YEAR TOTAL RETURN
For each full calendar year For each fiscal year ending April 30
since the Fund was established since the Fund was established
1997 30.24% 1997 13.52%
1998 -1.63% 1998 35.66%
1999 -4.44%
The Fund's year-to-date total return for the six months ended June 30,
1999, was xx.x%.
Best Quarter October - December 1998 15.56%
Worst Quarter July - September 1998 -21.92%
AVERAGE ANNUAL TOTAL RETURN
For periods ended For periods ended
December 31, 1998 April 30, 1999
- --------------------------------------------------------------------------------
One Year Since Inception One Year Since Inception
5/1/96 5/1/96
- --------------------------------------------------------------------------------
Kenwood Growth & Income Fund -1.63% 12.98% -4.94% 13.75%
- --------------------------------------------------------------------------------
S&P Midcap 400 Index 19.11% 22.42% 6.43% 20.13%
- --------------------------------------------------------------------------------
Russell Midcap Index 10.10% 17.84% 5.94% 18.33%
- --------------------------------------------------------------------------------
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund. The Kenwood Growth & Income Fund is a "no-load" fund,
which means that you do not pay a sales charge when you buy or sell shares.
SHAREHOLDER FEES
(expenses paid directly from your investment)
Fees charged by the
Fund as percentage of Other charges you
average daily net may pay
fund assets
- --------------------------------------------------------------------------------
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price) 0.00%
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Maximum deferred sales charge (load) 0.00%
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Maximum deferred sales charge (load)
imposed on reinvested dividends 0.00%
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Redemption fee 0.00% $12.00*<F1>
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Exchange fee 0.00% $5.00**<F2>
- --------------------------------------------------------------------------------
Maximum account fee 0.00%
- --------------------------------------------------------------------------------
*<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
(expenses deducted from Fund assets)
for the fiscal year ended April 30, 1999
Percentage of average daily net fund assets
- --------------------------------------------------------------------------------
Actual cost Amount waived Cost to Fund
before expense after expense
waiver waiver
- --------------------------------------------------------------------------------
Management fees 0.75% 0.75% 0.00%
- --------------------------------------------------------------------------------
Distribution (12b-1) fees 0.25% 0.00% 0.25%
- --------------------------------------------------------------------------------
Other expenses 4.26% 3.51% 0.75%
- --------------------------------------------------------------------------------
Total annual operating expenses 5.26% 4.26% 1.00%
- --------------------------------------------------------------------------------
The Adviser has agreed to waive its fees or absorb Fund expenses at least
through the fiscal year ending April 30, 2000, so that the total expenses of the
Fund will not be more than 1.00% of net assets. Based upon actual Fund expenses
for fiscal year ending April 30, 1999, if the Adviser had not waived its fees,
management fees would have been 0.75% of average net assets, other expenses
would have been 4.26% and total operating expenses would have been 5.26% of
average daily net fund assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same.
Because actual returns and expenses will be different, this example is for
comparison only. It uses the same hypothetical conditions that other funds use
in their prospectuses.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
One year $102
Three years $318
Five years $552
Ten years $1,225
CONCEPTS TO UNDERSTAND
MANAGEMENT FEES cover the costs of overseeing the Fund's investments and the
costs of administration and accounting.
DISTRIBUTION (12B-1) FEES pay for promotion and distribution of Fund shares and
services provided to shareholders. Because these fees are paid from fund assets
on an ongoing basis, they will increase the cost of your investment and may cost
you more than other types of sales charges.
OTHER EXPENSES include the costs of the custodian and transfer agent,
accountants, attorneys and directors.
More Detail about the Fund
INVESTMENT OBJECTIVE, STRATEGIES AND POLICIES
The Fund's investment objective is capital appreciation and current income.
The Fund invests primarily in U.S. equity securities. 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.
As the Adviser, we attempt to select equity securities that will provide a
combination of capital appreciation and income. We believe that this approach
will result in a high overall total return with 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 beyond those
inherent in the market. We make ongoing portfolio selections in light of current
and reasonably anticipated future financial conditions. As these conditions
change, we adjust the portfolio in order to maintain a reasonable balance over
time between risk and potential return.
We manage the fund with an emphasis on value, giving preference to the stocks of
well-managed companies that are priced below their inherent worth. In
determining the value of a stock, we relate the current price to present and
anticipated future earnings and to a company's assets and equity. We invest for
the long term, seeking to identify securities that are undervalued, have
potential for long-term growth, and may provide a reliable stream of dividend
income.
Rigorous fundamental analysis is central to the Fund's investment strategy. This
means that we study and analyze the financial and operational characteristics
of each potential investment, paying close attention to historical performance,
strategic plans and industry dynamics. We develop an in-depth knowledge of the
business and performance of each company under consideration before purchasing
the securities for the Fund's portfolio. A key element of the selection process
is a close examination of each company's management decisions and future
strategies. We carefully evaluate past and projected performance for consistency
with stated goals and strategies.
FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES. The fundamental investment
restrictions set forth in the Statement of Additional Information 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.
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. Higher turnover may result in increased
distributions of taxable capital gains. In placing portfolio transactions, the
Fund may take into account the sale of shares by the broker and research
services provided to the Adviser.
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.
OTHER RISKS
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.
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, 1999, the Adviser had $
million in assets under management. Barbara L. Bowles, C.F.A., 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 monthly fees 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, 2000 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 ADVISER
The following performance data relates to annual average investment results of a
composite of all client accounts managed by the Adviser other than the Fund.
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 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. Different methods of determining the performance from those
described in the footnote to the chart below may result in different performance
figures. An investor should not rely on the following performance figures as an
indication of the future performance of either the Adviser's separate Advisory
Accounts or the Fund.
THE KENWOOD GROUP COMPOSITE
HISTORICAL PERFORMANCE
Periods ended December 31
YEAR BEFORE AFTER
ADVISORY FEESADVISORY 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
1998 xx.xx xx.xx
ANNUALIZED PERFORMANCE
Period ended December 31, 1998
BEFORE AFTER
ADVISORY FEESADVISORY FEES
One Year xx.xx xx.xx
Five Years xx.xx xx.xx
Since Inception
(nine years) xx.xx xx.xx
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"). The composite does not include the Kenwood Growth & Income
Fund. Past performance is not necessarily indicative of future results
nor can it be assumed that any recommendations will be profitable.
FINANCIAL HIGHLIGHTS OF THE FUND
The Financial Highlights table is intended to help you understand the Funds'
financial performance for the three years since its inception. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned, or
lost, on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP
whose report along with the Fund's financial statements are included in the
Annual Report, which is available upon request.
THE KENWOOD GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
For Fiscal Years Ended April 30
- -----------------------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
Per Share Data:
Net asset value, beginning of year $14.18 $11.20 $10.00
Income from investment operations:
Net investment income 0.14 0.09 0.14
Net realized and unrealized gain on securities (0.82) 3.82 1.21
------ ------ ------
Total from investment operations (0.68) 3.91 1.35
Less distributions:
Dividends from net investment income (0.12) (0.10) (0.10)
Distributions from capital gains (0.73) (0.83) (0.05)
------ ------ ------
Total distributions (0.85) (0.93) (0.15)
------ ------ ------
Net asset value, end of year $12.65 $14.18 $11.20
------ ------ ------
------ ------ ------
Total Return (4.44%) 35.66% 13.52%
Supplemental data and ratios:
Net assets, end of period (in 000's) $3,692 $3,106 $1,271
Ratio of net expenses to average net assets(1)<F3> 1.00% 0.99% 0.92%
Ratio of net investment income to average net assets(1)<F3> 1.21% 0.97% 1.85%
Portfolio turnover rate 70.66% 73.27% 31.21%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1)<F3>Without expense reimbursements of $129,137, $127,451 and $113,568,
the ratio of expenses to average net assets would have been 5.26%,
7.06% and 26.06% and the ratio of net investment income to average
net assets would have been (3.05)%, (5.10)% and (23.29)%,
respectively, for the years ended April 30, 1999, April 30, 1998,
and April 30, 1997.
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:
1. BY MAIL. 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.
2. THROUGH YOUR BROKER/DEALER. Have your broker/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.
3. 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, N.A.
Milwaukee, WI 53201
Federal Routing Number 075000022
Firstar Mutual Fund Services, LLC A/C Number 112-952-137
THE KENWOOD FUNDS
THE 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 Mutual Fund Services, LLC c/o The
Kenwood Funds, P.O. Box 701, Milwaukee, WI 53201. You can also send a check via
overnight courier to Firstar Mutual Fund Services, LLC, 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 Mutual Fund Services, LLC 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 Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201
You may also send the application via overnight courier to Firstar Mutual Fund
Services, LLC 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 Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, WI 53201. You may also send the request via overnight courier to
Firstar Mutual Fund Services, LLC 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 be issued only for up to $25,000; the
check can be issued only to the registered owner (who must be an individual);
the check can be sent only 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
(1) the New York Stock Exchange is closed (or when trading is restricted) for
any reason other than its customary weekend or holiday closing; (2) 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 (3) 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 net
asset value at that time, 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. As a shareholder, you 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 adviser 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 with recognized unmanaged indexes or stock
market averages such as the Standard & Poor's 500 Index, Dow Jones Industrial
Average, Standard & Poor's Midcap 400 Index, Russell Midcap 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.
For More Information
More information about The Kenwood Growth & Income Fund is
available free upon request, including the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the fund's performance, lists portfolio holdings,
and contains a letter from the fund's manager discussing
market conditions and investment strategies that
significantly affected the fund's recent performance.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. A
current SAI is on file with the Securities and Exchange
Commission ("SEC"). This document is incorporated by
reference, which means that it is legally considered a part
of this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-888-KENFUND (888-536-3863) from 8:00 a.m. - 7:00 p.m.
Central Time. 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.
BY MAIL
Write to:
The Kenwood Growth & Income Fund
10 South LaSalle Street, Suite 3610
Chicago, IL 60603
ON THE INTERNET
Text-only versions of fund documents can be viewed or
downloaded from the SEC site at http://www.sec.gov.
You can also obtain copies by visiting the SEC's Public
Reference Room in Washington, DC (phone 1-800-SEC-0330) or by
sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009.
Investment Company Act File no. 811-7521
THE KENWOOD FUNDS
10 South LaSalle Street
Suite 3610
Chicago, Illinois 60603
1-888-KENFUND
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1999
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, 1999, 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, 1999 are 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
ORGANIZATION OF THE FUND.....................................................2
FUNDAMENTAL INVESTMENT RESTRICTIONS..........................................2
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS......................................3
OTHER INVESTMENT MATTERS.....................................................6
NET ASSET VALUE..............................................................6
TRUSTEES AND OFFICERS........................................................7
TRUSTEE COMPENSATION.........................................................9
CERTAIN SHAREHOLDERS.........................................................9
THE ADVISER.................................................................10
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN.................................10
AUDITORS....................................................................11
DISTRIBUTION PLAN...........................................................11
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................12
SHAREHOLDER MEETINGS........................................................13
PERFORMANCE DATA............................................................13
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.
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) 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.
(2) 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.
(3) BORROWING. The Fund may not borrow money except for temporary or
emergency purposes, and then only from banks in an amount not
exceeding 33 1/3% of the value of the Fund's total assets (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.
(4) 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.
(5) 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.
(6) 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.
(7) MARGIN. The Fund may not purchase securities on margin, except for
use of short-term credit necessary for clearance of purchases of
portfolio securities.
(8) 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.
(9) SHORT SALES. The Fund may not effect short sales of securities
unless it owns or has the right to obtain securities equivalent in
kind and amount to the securities sold short. This restriction does
not apply to financial futures or currency transactions.
(10) 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.
OTHER INVESTMENT MATTERS
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
The Board of Trustees is responsible for the supervision of the Fund. The
Adviser who manages the day-to-day operations and directs the investments of the
Fund reports and is responsible to the Board of Trustees.
Information about the trustees and officers, including age as of June 30,
1999 and principal occupations during the past 5 years, is shown below.
*<F5>BARBARA L. BOWLES, CFA, 51 - 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, Wisconsin Energy Corporation, 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, 67 - 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, 50 - 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., 74 - 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.
*<F5>REYNALDO P. GLOVER, 56 - 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, 53 - 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, 45 - 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, 32 - 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, 37 - Assistant Secretary. Mr. Neuberger is a Senior Vice
President at Firstar Mutual Fund Services, LLC. 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, 34 - Assistant Secretary. Mr. Karbouski is an
Assistant Vice President of Firstar Mutual Fund Services, LLC. 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, 70 - Assistant Secretary. Mr. Stein is a partner at the
firm of D'Ancona & Pflaum, legal counsel to the Fund. His address is 111 E.
Wacker Drive, Suite 2800, Chicago, Illinois 60601-4205.
- ---------------------
*<F5>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, 1999 is set forth in the following table:
<TABLE>
- -----------------------------------------------------------------------------------------------------------
Name Aggregate Pension or Estimated Total
Compensation Retirement Annual Compensation
From the Trust Benefits Benefits Upon From the Trust
Accrued As Retirement (the Trust is
Part of Trust not in a
Expenses 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 $1,500 0 0 $1,500
Challis M. Lowe $1,500 0 0 $1,500
Clark Burrus $ 750 0 0 $ 750
- -----------------------------------------------------------------------------------------------------------
</TABLE>
CERTAIN SHAREHOLDERS
The following table sets forth as of August --, 1999, 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 ----- shares
outstanding.
% of
Number of
Outstanding
Name and Address Shares Owned Shares
---------------- ------------ -------
*<F6>Barbara L. Bowles is also record owner of -------- shares as Trustee
of The Kenwood Group Inc. 401(k) Trust.
The officers and directors of the Fund beneficially own in the aggregate
- -----% 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 Advisory 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,
1998 and 1999. If the Adviser had not waived its fee, its total fee would have
been $3,380 for fiscal year 1997, $15,753 for fiscal year 1998 and $22,704 for
fiscal year 1999. 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, 2000 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.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
Firstar Mutual Fund Services, LLC ("Firstar") 615 East Michigan Street,
Milwaukee, WI 53202, serves as the Fund's Administrator and Transfer Agent.
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: 0.06% on the first $200 million of average net
assets, 0.04% on the next $200 million of average daily net assets, and 0.03% on
average daily net assets over $400 million. The Administration Agreement
provides for payment to the Administrator of a minimum annual fee (currently
$25,000). 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. 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.
Firstar Bank Milwaukee, N.A. serves as the Fund's custodian ("Custodian")
pursuant to a custodian agreement. 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.
AUDITORS
The Fund's auditors are PricewaterhouseCoopers LLP, 100 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, 1999, the Fund paid
AmeriPrime Financial Securities, Inc. $7,568 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.
The brokerage commissions paid by the Fund for the fiscal years 1999, 1998
and 1997 were $10,112, $7,742 and $2,435, respectively.
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,
1999 was (4.44%). The Fund's average annual total return since inception (May
1, 1996) was 13.75%.
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 (NEED TO BE REVISED)
ITEM 23. 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, 1999
Statement of Assets and Liabilities at April 30, 1999
Statement of Operations for the year ended April 30, 1999
Statement of Changes in Net Assets for the year ended
April 30, 1999
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. *<F7> Consent and Opinion of Counsel as to Legality of Shares
Being Registered.
11.*<F7> 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. Powers of Attorney, incorporated by reference to
Registrant's Registration Statement on Form N-lA, File No. 333-1171.
27. Financial Data Schedule.
*<F7> To be filed by amendment
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 25. 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 26. 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 27. PRINCIPAL UNDERWRITERS
AmeriPrime Financial Securities, Inc. is the principal underwriter or
distributor of the Funds and is also the principal underwriter for AmeriPrime
Funds, Rockland Funds, AmeriPrime Insurance Trust and Tanaka Funds.
AmeriPrime Financial Securities, Inc. received $18,000 in other
compensation during the fiscal year ended April 30, 1999.
ITEM 28. 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 Mutual Fund
Services, LLC, 615 East Michigan Street, Milwaukee, WI 53202.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
Registrant undertakes to file amendments to its registration statement and
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 (a).
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
14th day of June, 1999.
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 *<F8> Chief Executive and June 14, 1999
- ---------------------------
Barbara L. Bowles Principal Financial
Officer and Trustee
*<F8>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
--------- ----- ----
/s/Patty Litton Delony*<F9> Trustee June 14, 1999
- ----------------------------
Patty Litton Delony
/s/Lester J. Dugas, Jr.*<F9> Trustee June 14, 1999
- ----------------------------
Lester J. Dugas, Jr.
/s/Reynaldo P. Glover*<F9> Trustee June 14, 1999
- ----------------------------
Reynaldo P. Glover
/s/Challis M. Lowe*<F9> Trustee June 14, 1999
- ----------------------------
Challis M. Lowe
/s/Clark Burrus Trustee June 14, 1999
- ----------------------------
Clark Burrus
*<F9>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
