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. 7
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-7521
AMENDMENT NO. 8
THE KENWOOD FUNDS
10 S. LaSalle Street
Suite 3610
Chicago, Illinois 60603
312-368-1666
Agent for Service:
Sheldon Stein
D'Ancona & Pflaum, LLC
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)
__X_ on September 1, 2000, pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on September 1, 2000 pursuant to paragraph (a) of Rule 485
[GRAPHIC OMITTED][GRAPHIC OMITTED]
THE KENWOOD GROWTH & INCOME FUND
Investing primarily in mid-capitalization value stocks
for capital appreciation and current income
PROSPECTUS
September 1, 2000
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.
Table of Contents
THE FUND
What investors should know Investment Objective 2
about the Fund
Principal Investment Strategy 2
Other Investment Matters 3
Principal Risks 4
Who Should Invest 4
Past Performance 6
Fees and Expenses 8
The Adviser 10
Historical Results of The Adviser 10
Financial Highlights of the Fund 13
YOUR INVESTMENT
Information for managing your Distribution of Shares 14
account
Buying Shares 15
Telephone Transactions 16
Exchanging Shares 16
Redeeming Shares 17
Net Asset Value 19
Dividends and Distributions 19
Taxes 20
Retirement Plans 20
The Fund The Kenwood Growth & Income Fund
Ticker Symbol: KNWDX
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation and current income.
PRINCIPAL INVESTMENT STRATEGY
The Fund invests primarily in U.S. equity securities of mid capitalization
("midcap") companies that are considered to be undervalued. We define midcap
companies as those with total market value of $400 million to $8 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 midcap market
may provide comparable returns to the large cap market without significantly
greater risks. The equity securities in which the Fund invests are
principally common stocks but may include, among other equity securities,
preferred stocks and securities convertible into common stocks.
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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.
--------------------------------------------------------------------------------
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 look for stocks that we believe have low risk, rather than seeking those
with extraordinary upside potential. By "low risk" we mean that in the
Adviser's judgment the risks of investing in the Fund's portfolio present no
additional risks beyond those inherent in the market. We prefer stocks with
a record of paying dividends, because 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.
Rigorous fundamental analysis is central to the Fund's investment strategy. We
carefully analyze the financial and operational characteristics 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 make ongoing portfolio
selections in light of current and reasonably anticipated future financial
conditions. 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 Index and
the Russell Midcap Value Index. However, we cannot guarantee that we will
achieve this goal.
OTHER INVESTMENT MATTERS
PORTFOLIO TURNOVER. The Fund may realize some short-term gains or losses if the
Adviser believes the potential valuation of a security has been achieved,
considers that other securities have higher relative valuation 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 which
may adversely affect performance. Higher turnover may result in increased
distributions of taxable capital gains.
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.
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.
--------------------------------------------------------------------------------
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 EXPECTED
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.
INVESTING IN MIDCAP STOCKS MAY BE MORE RISKY AND VOLATILE THAN INVESTING IN
LARGE CAP STOCKS.
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.
--------------------------------------------------------------------------------
MARKET RISK Due to the risks of investing in equity markets, the Fund may
experience a sudden, unpredictable decline in value, as well as periods of poor
performance. Because stock values move up and down, the value of your shares may
go up and down.
COMPANY RISK The price of a common stock varies with the performance of its
issuer. As a result, the success of the companies in which the Fund invests
largely determines the Fund's performance.
MANAGEMENT RISK The investment strategy used by the Adviser may fail to produce
the intended results.
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.
PAST PERFORMANCE
The following bar chart and table provide an indication of the risks of
investing in the Fund. The bar chart illustrates the year-to-year changes
in the Fund's performance, while the table compares the Fund's average
annual returns to two broad measures of market performance: the S&P Midcap
400 Index and the Russell Midcap Value Index. 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. You may not invest
directly in an index.
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 VALUE INDEX MEASURES THE PERFORMANCE OF THOSE RUSSELL MIDCAP
INDEX COMPANIES WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH
VALUES. THE RUSSELL MIDCAP VALUE INDEX IS A MARKET CAP WEIGHTED INDEX WHICH
REPRESENTS THE BOTTOM 800 COMPANIES IN THE RUSSELL 1000.
BOTH THE S&P MIDCAP 400 AND THE RUSSELL MIDCAP VALUE 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
SINCE THE FUND WAS ESTABLISHED
1997 30.24%
1998 (1.63%)
1999 3.04%
The Fund's year-to-date total return for the six months ended June
30, 2000, was (3.49%).
---------------------------- ------------------------- -----------------
Best Quarter April - June 1999 19.17%
---------------------------- ------------------------- -----------------
Worst Quarter July - September 1998 (21.92%)
---------------------------- ------------------------- -----------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------------ --------------------------------------------------------------
FOR PERIODS ENDED
DECEMBER 31, 1999
------------------------------------------------ ----------------- ---------------- ---------------------------
One Year Three Years Since Inception 5/1/96
------------------------------------------------ ----------------- ---------------- ---------------------------
<S> <C> <C> <C>
Kenwood Growth & Income Fund 3.04% 9.70% 10.18%
------------------------------------------------ ----------------- ---------------- ---------------------------
S&P Midcap 400 Index 14.72% 21.81% 20.29%
------------------------------------------------ ----------------- ---------------- ---------------------------
Russell Midcap Value Index (0.11%) 12.15% 13.53%
------------------------------------------------ ----------------- ---------------- ---------------------------
</TABLE>
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(expenses paid directly from your investment)
------------------------------------------------------------------------------------- ------------------------
<S> <C>
Maximum sales charge (load) imposed on purchases (as a percentage of offering price) None
------------------------------------------------------------------------------------- ------------------------
Maximum deferred sales charge (load) None
------------------------------------------------------------------------------------- ------------------------
Maximum deferred sales charge (load) imposed on reinvested dividends None
------------------------------------------------------------------------------------- ------------------------
Redemption fee* None
------------------------------------------------------------------------------------- ------------------------
Exchange fee** None
------------------------------------------------------------------------------------- ------------------------
Maximum account fee None
------------------------------------------------------------------------------------- ------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(expenses deducted from Fund assets)
for the fiscal year ended April 30, 2000
-------------------------------------------------------- -----------------------
Management fees 0.75%
-------------------------------------------------------- -----------------------
Distribution (12b-1) fees 0.25%
-------------------------------------------------------- -----------------------
Other expenses 4.13%
-------------------------------------------------------- -----------------------
Total annual operating expenses 5.13%
-------------------------------------------------------- -----------------------
Expense Reimbursement 4.13%
-------------------------------------------------------- -----------------------
Net Expenses*** 1.00%
-------------------------------------------------------- -----------------------
* For each wire redemption, the transfer agent will charge a fee
which, as of the date of this prospectus, is $12.00.
** For each telephone exchange, the transfer agent will charge a fee
which, as of the date of this prospectus, is $5.00.
***The Adviser agreed to limit the Fund's annual regular operating
expenses for the fiscal year ended April 30, 2000 to 1.00% and has
agreed to the same limitation for the four fiscal years thereafter.
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.
--------------------------------------------------------------------------------
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.
OTHER EXPENSES INCLUDE THE COSTS OF THE CUSTODIAN AND TRANSFER AGENT,
ACCOUNTANTS, ATTORNEYS AND DIRECTORS.
--------------------------------------------------------------------------------
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$102* $318* $1,033** $4,020**
*Please note that the one and three year costs are based on the Fund's net
expenses resulting from the Adviser's agreement to limit annual regular
operating expenses to one percent for a five year period ending April 30, 2004.
**The five and ten year figures are based upon the Fund's expenses for the next
four years being limited to one percent, plus the expenses in years five through
ten that would be incurred without the expense limitation.
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, 2000, the Adviser had
approximately $400 million in assets under management. Barbara L. Bowles, CFA,
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
of employees, who are Fund officers, and the fees for the directors.
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 Adviser
has agreed to limit the Fund's annual regular operating expenses to one percent
for all fiscal years through April 30, 2004.
Larry Jones became President of The Kenwood Group effective July, 2000. Barbara
L. Bowles assumes the title of Chairman and continues as Chief Executive Officer
and Chief Investment Officer.
HISTORICAL RESULTS OF THE INVESTMENT ADVISER
Below is performance data provided by the Adviser relating to annual average
investment results of a composite of all fully discretionary client accounts,
excluding the Fund, whose portfolios were managed by the Adviser. These advisory
accounts had the same investment objective as the Fund and were managed using
substantially similar, though not necessarily identical, investment strategies
and techniques as those used by the Fund. Because of the similarities in
investment strategies and techniques, the Adviser believes that the advisory
accounts are sufficiently comparable to the Fund to make the performance data
listed below relevant to investors in the Fund.
The results presented will not necessarily equate with the returns experienced
by the Fund , due to differences in brokerage commissions, management fees, the
size of positions taken in relation to account size and diversification of
securities, as well as other costs and expenses borne by the Fund but not
incurred by the advisory accounts. Also, private accounts are not subject to
certain investment limitations, diversification requirements and other
restrictions imposed by the Investment Company Act of 1940 and the Internal
Revenue Code, which, if applicable, might adversely affect the performance
results. In addition, the performance of the Fund contained in the Financial
Highlights is calculated as of the end of the Fund's fiscal year while the
Adviser's performance is calculated as of the end of the calendar year.
Different methods of determining the performance from those described in the
footnote to the chart below may result in different performance figures. An
investor should not rely on the following performance figures as an indication
of the future performance of either the Adviser's separate advisory accounts or
the Fund.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED DECEMBER 31
----------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
One Year Three Years Five Years Ten Years Since Inception
of The Kenwood
Funds (5/1/96)
----------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Kenwood Group Composite* 3.13% 10.19% 15.40% 11.31% 10.50%
----------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
S&P MidCap 400 Index 14.72% 21.81% 23.05% N/A 20.29%
----------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
Russell MidCap Value Index (0.11%) 12.15% 18.01% 13.81% 13.53%
----------------------------- ------------------ ------------------ ------------------ ----------------- ------------------
</TABLE>
* This composite includes all of the Adviser's accounts since the beginning of
its operation, excluding The Kenwood Funds. Inclusion of the Fund would have no
material effect on the composite.
<TABLE>
<CAPTION>
KENWOOD GROUP COMPOSITE
HISTORICAL PERFORMANCE**
PERIODS ENDED DECEMBER 31
-------------------------- ------------------------ ------------------------ ------------------- --------------------
Year After Before S&P MidCap Russell Midcap
Investment Expenses*** Investment Expenses 400 Value Index
-------------------------- ------------------------ ------------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
1990 (8.56%) (7.51%) N/A (16.09%)
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1991 18.21% 19.26% N/A 37.92%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1992 17.44% 18.49% 11.91% 21.68%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1993 5.48% 6.41% 13.96% 15.62%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1994 6.49% 7.40% (3.58%) (2.13%)
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1995 30.08% 30.93% 30.95% 34.93%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1996 17.61% 18.46% 19.20% 20.26%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1997 30.19% 31.00% 32.27% 34.37%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1998 (0.35%) 0.46% 19.11% 5.08%
-------------------------- ------------------------ ------------------------ ------------------- --------------------
1999 3.13% 3.94% 14.72% (0.11%)
-------------------------- ------------------------ ------------------------ ------------------- --------------------
</TABLE>
** Performance figures are asset-weighted, average annual investment results
expressed as a percentage return. Performance includes reinvested dividends and
capital gains and losses. Numbers in parentheses denote a loss.
*** After Investment Expenses represent net returns after deducting expenses, in
accordance with performance reporting rules of the Securities and Exchange
Commission. These net return figures deduct advisory fees of clients other than
The Kenwood Funds and deduct the net expenses of The Kenwood Funds. Before
Investment Expenses represent gross returns before deducting expenses and were
prepared in accordance with the Performance Presentation Standards developed by
the Association for Investment Management and Research ("AIMR"). Individual
investors should not anticipate achieving gross returns. Past performance is not
necessarily indicative of future results.
FINANCIAL HIGHLIGHTS OF THE FUND
The Financial Highlights table is intended to help you understand the Fund's
financial performance for the four 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.
<TABLE>
<CAPTION>
THE KENWOOD GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------- --- --------------------------------------------------------
For Fiscal Years Ended April 30
--------------------------------------------------------------- --- --------------------------------------------------------
2000 1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......................... $12.65 $14.18 $11.20 $10.00
Income from investment operations
Net investment income ............................... 0.17 0.14 0.09 0.14
Net gains or losses on securities
both realized and unrealized..................... (0.93) (0.82) 3.82 1.21
------ ------ ---- ----
Total from investment operations..................... (0.76) (0.68) 3.91 1.35
Less distributions
Dividends from net investment income ................ (0.13) (0.12) (0.10) (0.10)
Distributions from capital gains..................... (0.97) (0.73) (0.83) (0.05)
------ ------ ------ ------
Total distributions.................................. (1.10) (0.85) (0.93) (0.15)
------ ------ ------ ------
Net asset value, end of period................................ $10.79 $12.65 $14.18 $11.20
===== ===== ===== =====
Total Return.................................................. (6.29%) (4.44%) 35.66% 13.52%
Supplemental data and ratios:
Net assets, end of period (in 000's).......................... $3,019 $3,692 $3,106 $1,271
Ratio of expenses to average net assets(1) ................... 1.00% 1.00% 0.99% 0.92%
Ratio of net investment income to average net assets(1)....... 1.41% 1.21% 0.97% 1.85%
Portfolio turnover rate....................................... 88.73% 70.66% 73.27% 31.21%
--------------------------------------------------------------- --------------- --------------- -------------- ---------------
</TABLE>
(1) Without expense reimbursements of $136,664, $129,137, $127,451 and
$113,568, the ratio of expenses to average net assets would have been
5.13%, 5.26%, 7.06% and 26.06% and the ratio of net investment income
to average net assets would have been (2.72%), (3.05%), (5.10%) and
(23.29%), respectively, for the years ended April 30, 2000, 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.
Distribution 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, over time they will increase the cost of your investment and may
cost you more than other types of sales charges that apply to other funds.
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 at least
$100 or more. The minimum initial investment for retirement plans 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 provided and mail it to Firstar
Mutual Fund Services, LLC ("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 Bank Milwaukee, N.A. 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 042000013
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 The Kenwood Funds c/o Firstar Mutual Fund
Services, LLC, 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 Funds 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). 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 practicable 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 Fund values its security holdings on the basis of market 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 the price next computed after the Transfer Agent receives the
purchase order or redemption request. The price per share for purchases or
redemptions made through a dealer is the price next computed after the order is
received by the dealer. 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.
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 advisor regarding the effect
of federal, state and local taxes on an investment in the Fund.
The Fund intends to qualify and remain qualified as a "regulated investment
company" under the Internal Revenue Code (the "Code"). The Fund will distribute
all of its taxable net income and net realized capital gains to shareholders so
that it will not itself have to pay any income taxes.
Distributions of net investment income from the Fund are taxable to shareholders
as ordinary income. A portion of the income dividends received by the Fund from
U.S. corporations may qualify for the "dividends received" deduction available
to corporate shareholders. Distributions from net long-term capital gains are
taxable as long-term capital gains regardless of how long Fund shares are owned.
Distributions from net short-term capital gains are taxable as ordinary income.
Shareholders are informed annually of the amount and nature of any income or
gain. Distributions are taxable whether received in cash or reinvested in
additional shares. If the Fund distributes less than the amount it is required
to distribute during any year, a 4% excise tax will be imposed on the
undistributed amount. The Fund intends to declare and distribute dividends
during each year sufficient to prevent imposition of the excise tax.
A dividend received shortly after the purchase of shares reduces the net asset
value of the shares by the amount of the dividend, and although in effect a
return of capital, such dividend will be taxable to the shareholder. If a
shareholder realizes a loss on the sale or exchange of any shares held for six
months or less and if the shareholder received a capital gain distribution
during such six-month period, then the loss is treated as a long-term capital
loss to the extent of the capital gain distribution.
If for any reason you don't provide the Fund with your correct Social Security
or Tax I.D. number (or certify that you are not subject to backup withholding),
the Fund is required by the Code to withhold 31% of taxable dividends and
proceeds of certain exchanges and redemptions.
RETIREMENT PLANS
The Fund offers a prototype Individual Retirement Account ("IRA"). The Fund's
Custodian, Firstar, acts as the custodian under the IRA plan. For information on
fees and necessary forms, please call toll-free 1-888-KENFUND (888-536-3863) or
write to the Fund. Please do not use the application included with this
prospectus to open your retirement plan account. Instead call 1-888-KENFUND
(888-536-3863) for a retirement plan account application. Please consult your
tax advisor to determine the effect of any of the plans on your financial
situation. In the future, the Fund may offer Simplified Employee Pension ("SEP")
Plans and model 403(b) plans for charitable, educational and governmental
entities. For more information, please call or write to the Fund.
For More Information
More information about The Kenwood Growth & Income Fund is available free upon
request, including the following:
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
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 during the
last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. The current SAI and
shareholder reports are on file with the Securities and Exchange Commission
("SEC").
The current SAI and annual report are incorporated by reference, which means
that they are legally considered a part of this prospectus.
TO OBTAIN INFORMATION:
BY TELEPHONE
Call 1-888-KENFUND (888-536-3863) from 8:30 a.m. - 5:00 p.m. Central Standard
Time. During unusual market conditions, the Fund may experience difficulty in
accepting telephone inquiries. In such circumstances, you should contact the
Fund collect at (312) 368-1666 weekdays from 9:00 a.m. - 5:00 p.m. Central
Standard Time.
BY MAIL
Write to:
The Kenwood Growth & Income Fund
10 South LaSalle Street, Suite 3610
Chicago, IL 60603
ON THE INTERNET
Please visit our website at www.kenwoodfund.com.
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, 2000
This Statement provides information concerning The Kenwood 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, 2000, 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, 2000 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.......................................................5
NET ASSET VALUE................................................................6
TRUSTEES AND OFFICERS..........................................................7
TRUSTEE COMPENSATION...........................................................9
CERTAIN SHAREHOLDERS...........................................................9
THE ADVISER...................................................................10
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN...................................11
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 only one series of shares, The
Kenwood Growth & Income Fund. Shares of the Growth & Income Fund 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.
(See Non-Fundamental Restriction (3), below.)
(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 Trustees 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) 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.
(6) MARGIN. The Fund may not purchase securities on margin, except for use of
short-term credit necessary for clearance of purchases of portfolio securities.
(7) 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.
(8) 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.
(9) 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
non-fundamental 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.
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 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.
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.
Certain brokers and certain designated intermediaries on their behalf
may accept purchase and redemption orders. The Distributor will be deemed to
have received such an order when the broker or the designee has accepted the
order. Customer orders are priced at the net asset value next computed after
such acceptance. Such order may be transmitted to the Fund or its agents several
hours after the time of the acceptance and pricing.
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 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, 2000 and principal occupations during the past 5 years, is shown below.
*BARBARA L. BOWLES, CFA, 52 - Trustee and President of the Fund. Ms.
Bowles is the Chairman 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, 68 - Trustee. Mr. Burrus retired in 1998 as Vice Chairman
of First Chicago Capital Markets, a wholly owned subsidiary of First Chicago NBD
Corporation and co-head of the Public Banking Department. 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, 51 - 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.
*REYNALDO P. GLOVER, 57 - Trustee. Mr. Glover is the President of TLC
Beatrice International Holding Company and of counsel to the law firm, Piper
Marbury Rudnick & Wolfe. He also acts as general counsel for the Adviser. 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, 54 - Trustee. Ms. Lowe is Executive Vice President of
Ryder Systems, Inc., a transportation company. She previously served as the
Executive Vice President of Beneficial Management Corporation prior to their
acquisition by Household International Corporation and, subsequently, was a
consultant to Household International. Ms. Lowe also served as the Executive
Vice President for Human Resources and Communications for Heller International,
a commercial finance company, for several years. Her address is 3600 NW 82nd
Ave., Miami, Florida 33166-6623.
ROGER W. SPENCER, CFA, 65 - Trustee. Mr. Spencer is presently a
financial consultant with The P.L. Thomas Group. He was previously a consultant
to PaineWebber, Inc., from which he retired as a First Vice President in 1995.
He joined Mitchell, Hutchins & Co. (which was acquired by PaineWebber in 1977)
in 1958 and later served as a director of the surviving company. Mr. Spencer is
a member of The Investment Analysts Society of Chicago, Inc., The Consumer
Analysts Group of New York, The Association for Investment Management and
Research, and The Lake Forest Investment Society.
YVETTE LeGRAND, 49 - Vice President and Secretary. Ms. LeGrand is the
Vice President of Mutual Fund Marketing for The Kenwood Group. Prior to joining
The Kenwood Group in 1999, Ms. LeGrand was Resource Development Director for
Community Investment Corporation, a multi-bank loan consortium. Ms. LeGrand was
previously employed by The United Way of Chicago and The First National Bank of
Chicago. Ms. LeGrand has passed the Series 6 and 63 examinations. Her address is
10 South LaSalle Street, Chicago, Illinois 60603.
CYNTHIA HARDY, 33 - 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, 38 - Assistant Secretary. Mr. Neuberger is 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.
SHELDON R. STEIN, 71 - Assistant Secretary. Mr. Stein is a member of
the law firm, D'Ancona & Pflaum LLC, legal counsel to the Fund. His address is
111 East Wacker Drive, Suite 2800, Chicago, Illinois 60601.
ARTHUR DON, 46 - Assistant Secretary. Mr. Don is a member of the law
firm, D'Ancona & Pflaum LLC, legal counsel to the Fund. His address is 111 East
Wacker Drive, Suite 2800, Chicago, Illinois 60601.
*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, 2000 is set forth in the following table:
<TABLE>
<CAPTION>
---------------------------------------- ------------------------------------ ---------------------------------
Name Aggregate Total Compensation From the
Compensation Trust
From the Trust
---------------------------------------- ------------------------------------ ---------------------------------
<S> <C> <C>
Patty Litton Delony $2,000 $2,000
---------------------------------------- ------------------------------------ ---------------------------------
Lester J. Dugas* $1,000 $1,000
---------------------------------------- ------------------------------------ ---------------------------------
Reynaldo P. Glover $1,750 $1,750
---------------------------------------- ------------------------------------ ---------------------------------
Challis M. Lowe $2,000 $2,000
---------------------------------------- ------------------------------------ ---------------------------------
Clark Burrus $2,000 $2,000
---------------------------------------- ------------------------------------ ---------------------------------
</TABLE>
* Mr. Dugas died in September 1999.
CERTAIN SHAREHOLDERS
The following table sets forth as of July 31, 2000, 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 274,984
shares outstanding.
% OF
OUTSTANDING HOW
NAME AND ADDRESS SHARES OWNED SHARES HELD
Charles Schwab & Co., Inc.* 53,789 19.56% Record
Special Custody Account for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Barbara L. Bowles ** 38,530 14.01% 9.85%
c/o The Kenwood Group Record
10 S. LaSalle Street, Suite 3610 4.16%
Chicago, IL 60603-1002 Beneficial
Reynaldo Glover 27,880 10.14% Record
c/o Piper Marbury
Rudnick & Wolfe
203 North LaSalle Street
Chicago, IL 60601
M. Leanne Lachman 15,209 5.53% Record
879 United Nations Plz Apt 19E
New York, NY 10017-1819
* Included in the Charles Schwab Special Custody Account are 16,207
shares for the benefit of Larry Jones, constituting 5.89% of outstanding shares.
** Barbara L. Bowles is also record owner of 11,830 shares as Trustee
of The Kenwood Group Inc. 401(k) Trust.
The officers and trustees of the Fund beneficially own in the aggregate
31.2% 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
through 2000. 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, $22,704 for
fiscal year 1999, and $24,876 for fiscal year 2000. 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 limit the Fund's annual regular operating expenses to one percent for
all fiscal years through April 30, 2004.
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, Firstar 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 $30,000). 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.
For the fiscal year ended April 30, 2000, Firstar Mutual Fund Services
agreed to cap its fees, including custodial fees, at $80,000.
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
reading 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, 2000, the Fund paid
AmeriPrime Financial Securities, Inc. $8,292 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 2000,
1999, 1998 and 1997 were $13,050, $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, 2000 was (6.29%). The Fund's average annual total return from inception (May
1, 1996) through April 30, 2000, was 8.36%.
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.
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.
PART C. OTHER INFORMATION
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS
(a) Declaration of Trust, incorporated by reference to
Registrant's Registration Statement on Form N-lA, File No.
333-1171.
(b) By-Laws, incorporated by reference to Registrant's
Registration Statement on Form N-lA, File No. 333-1171.
(c) Not Applicable.
(d) Investment Advisory Agreement, incorporated by reference to
Pre-Effective Amendment No. 2 on Form N-1A, File No. 333-1171.
(e) Underwriting Agreement, as amended, incorporated by reference
to Pre-Effective Amendment No. 2 on Form N-1A, File No.
333-1171.
(f) Not Applicable.
(g) Custodian Agreement, incorporated by reference to Registrant's
Registration Statement on Form N-lA, File No. 333-1171.
(h) Transfer Agency Contract, incorporated by reference to
Registrant's Registration Statement on Form N-lA, File No.
333-1171.
Retirement Plans, incorporated by reference to Pre-Effective
Amendment No. 2 on Form N-1A, File No. 333-1171.
(i) Opinion and Consent of Counsel.
(j) Consent of Independent Accountants to Use of Report.
(k) Financial Statements, incorporated by reference to the
following portions of the Registrant's 2000 Annual Report; a
copy of the report was filed with the Commission on June 21,
2000 and is not included in this amendment.
(1) Statement of Assets and Liabilities at April 30, 2000
(2) Report of Independent Accountants
(3) Statement of Assets and Liabilities
(4) Statement of Operations for the year ended April 30,
2000
(5) Schedule of Investments at April 30, 2000
(6) Statement of Changes in Net Assets for the years
ended April 30, 2000 and April 30, 1999
(7) Notes to Financial Statements.
(l) Not applicable.
(m) Rule 12b-1 Distribution Plan, incorporated by reference to
Registrant's Registration Statement on Form N-1A, File No.
333-1171.
(n) Schedule for Computation of Performance Quotation,
incorporated by reference to Pre-Effective Amendment No. 2 on
Form N1-A, File No. 333-1171.
(o) Not Applicable.
(p) Powers of Attorney, incorporated by reference to Registrant's
Registration Statement on Form N-lA, File No. 333-1171.
Power of Attorney for Roger W. Spencer, incorporated by
reference to Registrant's Post-Effective Amendment No. 6 on
Form N1-A, File No. 333-1171.
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.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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: Yvette LeGrand - Vice President, Mutual
Fund Marketing joined The Kenwood Group in October, 1999. Prior to joining The
Kenwood Group she served as Resource Development Director for Community
Investment Corporation, a large multi-bank loan consortium. Prior to that, Ms.
LeGrand was employed by The United Way of Chicago and The First National Bank of
Chicago.
ITEM 27. PRINCIPAL UNDERWRITERS
(a) AmeriPrime Financial Securities, Inc. is the principal
underwriter or distributor of the Funds and is also the
principal underwriter for AmeriPrime Funds, Rockland Funds
Trust, AmeriPrime Insurance Trust, TANAKA Funds, Inc., and
AmeriPrime Advisors Trust.
Kenneth D. Trumpfheller, 1793 Kingswood Drive, Suite 200,
Southlake, Texas 76092, is the President, Secretary and
Treasurer of the AmeriPrime Financial Securities, Inc.
(b) Information with respect to each director and officer of
AmeriPrime Financial Securities, Inc. is incorporated by
reference to Schedule A of Form BD filed by it under the
Securities Exchange Act of 1934 (File No. 8-48143).
(c) AmeriPrime Financial Securities, Inc. received $18,000 in
other compensation during the fiscal year ended April 30,
2000.
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 Trust Company,
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(b).
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois on the
30th day of August, 2000.
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* President, Chief Executive August 30, 2000
--------------------------- Officer and Trustee
Barbara L. Bowles
*Sheldon R. Stein signs this document on behalf of the Registrant and Barbara L.
Bowles pursuant to the Powers of Attorney filed as Exhibit (p) 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 * Trustee August 30, 2000
---------------------------
Patty Litton Delony
/S/ REYNALDO P. GLOVER * Trustee August 30, 2000
---------------------------
Reynaldo P. Glover
/S/ CHALLIS M. LOWE * Trustee August 30, 2000
----------------------------
Challis M. Lowe
/S/ CLARK BURRUS * Trustee August 30, 2000
---------------------------
Clark Burrus
/S/ ROGER W. SPENCER * Trustee August 30, 2000
---------------------------
Roger W. Spencer
*Sheldon R. Stein signs this document on behalf of each of the foregoing persons
pursuant to the Powers of Attorney filed as Exhibit (p) to Registrant's
Registration Statement on Form N1-A.
/S/ SHELDON R. STEIN
-------------------------
Sheldon R. Stein,
Attorney-in-fact
