<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 31, 1996
FILE NO. 2-84920
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 16 /X/
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 17 /X/
SBSF FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
45 Rockefeller Plaza
New York, New York 10111
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, including Area Code: (212) 903-1255
MICHAEL R. PARKER, ESQ.
45 Rockefeller Plaza
New York, New York 10111
(Name and Address of Agent for Service)
COPY TO:
ROBERT M. KURUCZA, ESQ.
Morrison & Foerster LLP
2000 Pennsylvania Ave., NW
Washington, DC 20006
It is proposed that this filing will become effective (check appropriate box)
<TABLE>
<S> <C>
/ / immediately upon filing pursuant to Rule 485(b), / / on (date) pursuant to Rule 485(b),
or or
/X/ 60 days after filing pursuant to Rule 485(a)(1), / / on (date) pursuant to Rule 485(a)(1),
or or
/ / 75 days after filing pursuant to Rule 485(a)(2), / / on (date) pursuant to paragraph (a)(2)
or of Rule 485
</TABLE>
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of the Registrant's Common Stock, par value $.01 per share, has
previously been registered pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The Registrant filed the notice required by Rule 24f-2 on January
29, 1996 for its fiscal year ended November 30, 1995.
<PAGE> 2
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------- -------------------------------------------------
<S> <C> <C>
PART A PART A
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Fund Expenses
Item 3. Condensed Financial Information....... Financial Information Summary; Performance
Item 4. General Description of Registrant..... Description of Common Stock; Investment
Objectives and Policies; Investment Restrictions
(Part B)
Item 5. Management of the Fund................ Management of the Funds; Expenses and
Distribution Plan
Item 5A. Management's Discussion of Fund
Performance......................... Annual Report
Item 6. Capital Stock and Other Securities.... Description of Common Stock; Shareholder Reports;
Dividends and Distributions; Federal Income Taxes
Item 7. Purchase of Securities Being
Offered............................. Expenses and Distribution Plan; Determination of
Net Asset Value; Purchasing Shares; Investing for
Retirement; The Systematic Investment Plan; The
Systematic Withdrawal Plan; Exchanging Shares
Item 8. Redemption or Repurchase.............. Redeeming Shares
Item 9. Pending Legal Proceedings............. Not Applicable
PART B PART B
Item 10. Cover Page............................ Cover Page
Item 11. Table of Contents..................... Table of Contents
Item 12. General Information and
History............................. Not Applicable
Item 13. Investment Objectives and Policies.... Investment Objectives and Policies; Investment
Restrictions; Portfolio Turnover
Item 14. Management of the Fund................ Management of the Funds
Item 15. Control Persons and Principal Holders
of Securities....................... Security Holders
Item 16. Investment Advisory and Other
Services............................ The Investment Adviser and Administrator;
Expenses and Distribution Plan; Custodian,
Transfer Agent and Dividend Disbursing Agent;
Independent Accountants
Item 17. Brokerage Allocation and
Other Practices..................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities.... Not Applicable
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............ Purchase, Redemption and Pricing; Financial
Statements
Item 20. Tax Status............................ Federal Income Taxes
Item 21. Underwriters.......................... Not Applicable
Item 22. Calculation of Performance Data....... Computation of Yields and Total Return
Item 23. Financial Statements.................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE> 3
KEY MUTUAL FUNDS
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10111
PROSPECTUS
[LOGO]
KEYFUND
Key Mutual Funds, formerly known as SBSF Funds, Inc., (the "Company") is a
professionally managed, no-load, open end, series investment company currently
consisting of four different portfolios ("Funds"). Each Fund is a separately
managed diversified portfolio with its own investment objective and policies.
The Funds have no sales charges, redemption fees or exchange fees.
Spears, Benzak, Salomon & Farrell, Inc. (the "Adviser" or "Spears"), an indirect
wholly owned subsidiary of KeyCorp with over $[3.5] billion in assets under its
management as of November 30, 1995, serves as investment adviser to each of the
Funds. The Funds were created to provide informed investors with experienced,
professional investment management and personal service.
The four Funds are:
SBSF FUND - its investment objective is to seek a high total return over the
long term consistent with reasonable risk. In seeking its objective, the SBSF
Fund will invest primarily in common stocks which in the opinion of the Adviser
have the potential for capital appreciation in excess of market averages during
periods of market strength while attempting to preserve capital during periods
of market weakness.
SBSF CONVERTIBLE SECURITIES FUND - its investment objective is to seek a high
level of current income together with long-term capital appreciation. The
Convertible Securities Fund will invest primarily in convertible bonds,
corporate notes, convertible preferred stocks and other securities convertible
into common stock.
SBSF CAPITAL GROWTH FUND - its investment objective is to seek capital
appreciation. The Fund seeks to achieve its objective by investing in equity
securities of companies which the Adviser believes are likely to have rapid
growth in earnings or cash flow. The Capital Growth Fund will invest primarily
in the securities of small to medium capitalization companies.
SBSF MONEY MARKET FUND - its investment objective is to provide high current
income to the extent consistent with preservation of capital. The Money Market
Fund invests in bank certificates of deposit, bankers acceptances, high grade
commercial paper and securities issued or guaranteed by the U.S. Government or
its agencies and instrumentalities.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, SPEARS, ANY KEYCORP BANK, ANY OF THEIR AFFILIATES, OR ANY OTHER
BANK. THE SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. AN
INVESTMENT IN MUTUAL FUND SHARES IS SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. THE SBSF MONEY MARKET FUND IS
NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT OR ANY AGENCY, AND THERE CAN BE
NO ASSURANCE THAT THE SBSF MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Additional information
about the Funds has been filed with the Securities and Exchange Commission in a
Statement of Additional Information dated April 1, 1996, as supplemented from
time to time, which is incorporated herein by reference and is available without
charge upon request by writing or calling the Funds at 1-800-539-3863.
Investors are advised to read and retain this Prospectus for future reference.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The date of this Prospectus is April 1, 1996
<PAGE> 4
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund Expenses.................................... 1
Financial Information Summary.................... 2
Investment Objectives and Policies............... 4
Management of the Funds.......................... 8
Expenses
and Distribution Plan.......................... 10
Determination of Net Asset Value................. 10
Purchasing Shares................................ 11
The Systematic Investment Plan................... 12
The Systematic Withdrawal Plan................... 13
Redeeming Shares................................. 13
Exchanging Shares................................ 15
Investing For Retirement......................... 16
Dividends
and Distributions.............................. 16
Federal Income Taxes............................. 16
Performance...................................... 17
Description of Common Stock...................... 18
Custodian, Transfer Agent
and Dividend Disbursing Agent.................. 18
Shareholder Reports.............................. 18
</TABLE>
<PAGE> 5
- --------------------------------------------------------------------------------
FUND EXPENSES
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE SETS FORTH THE FEES THAT AN INVESTOR IN THE FUNDS MIGHT
PAY AND THE EXPENSES PAID BY EACH OF THE FUNDS DURING THE FISCAL YEAR ENDED
NOVEMBER 30, 1995.
<TABLE>
<CAPTION>
SBSF SBSF SBSF
MONEY CONVERTIBLE CAPITAL
SBSF MARKET SECURITIES GROWTH
FUND FUND FUND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum sales load imposed on purchases...... None None None None
Maximum sales load imposed on reinvested
dividends.................................. None None None None
Deferred sales load.......................... None None None None
Redemption Fees.............................. None None None None
Exchange Fees................................ None None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waiver)............... 0.75% -- * 0.75% 0.75%**
12b-1 Fees................................... 0.00% 0.00% 0.01% 0.01%
Other Expenses............................... 0.51% 0.63% 0.55% 1.28%**
------------- ------------- ------------- -------------
Total Fund Operating Expenses (after waiver)... 1.26% 0.63%* 1.31% 2.04%**
=========== =========== =========== ===========
</TABLE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that an investor in the Funds will bear directly
(shareholder transaction expenses) or indirectly (annual Fund operating
expenses). "Other Expenses" includes such expenses as administration fees,
custodial and transfer agent fees, audit, legal and other business expenses. For
further details, see the Funds' annual report which is available upon request
and without charge by writing to the Funds or by calling the Funds at
1-800-539-3863.
- --------------------------------------------------------------------------------
* During the fiscal year ended November 30, 1995, Spears voluntarily waived the
advisory fee of the SBSF Money Market Fund in the amount of 0.25%. Had there
been no such waiver, the annual operating expense of the SBSF Money Market Fund
would have been 0.88%.
** During the fiscal year ended November 30, 1995, SBSF Capital Growth Fund
incurred advisory and administration fees at the annual rates of 0.75% and
0.25%, respectively. Spears voluntarily waived the entire amount of the
administration fees incurred by SBSF Capital Growth Fund during such year, and
waived the advisory fees incurred by the Fund during the period from December 1,
1994 through September 30, 1995. Spears discontinued its voluntary waiver of the
advisory fee effective October 1, 1995 and of the administration fee effective
January 1, 1996. The table reflects the full amount of advisory and
administration fees for the SBSF Capital Growth Fund. Concord Holding
Corporation succeeded Spears as the administrator of the Funds on ,
1996.
The following example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect to
each of the Funds.
<TABLE>
<CAPTION>
EXAMPLE SBSF SBSF SBSF
You would pay the following expenses on a MONEY CONVERTIBLE CAPITAL
$1,000 investment, assuming (1) 5% annual SBSF MARKET SECURITIES GROWTH
return and (2) redemption at the end of each FUND FUND FUND FUND
time period: ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1 Year....................................... $ 13 $ 6 $ 13 $ 21
3 Years...................................... 40 20 42 64
5 Years...................................... 69 35 72 110
10 Years..................................... 152 79 158 237
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. MOREOVER,
WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN, A FUND'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%. YOU WOULD PAY
THE SAME AMOUNT OF EXPENSES ON THE SAME INVESTMENT ASSUMING NO REDEMPTION AT THE
END OF EACH TIME PERIOD.
1
<PAGE> 6
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION SUMMARY
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (For a share outstanding throughout each period.)
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report on the five years ended November 30, 1995
is contained in the Funds' Annual Report and should be read in conjunction with
the financial statements and notes thereto.
<TABLE>
<CAPTION>
SBSF FUND
--------------------------------------------------------------------------
FISCAL YEAR ENDED
NOVEMBER 30,
--------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.................................. $14.54 $17.59 $15.64 $16.47 $15.57 $16.74 $13.31
Net investment income (loss)......................... 0.15 0.21 0.34 0.42 0.50 0.59 0.47
Net realized and unrealized gain (loss) on
investments........................................ 3.98 (0.94) 3.01 0.91 1.40 (0.67) 3.43
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...................... 4.13 (0.73) 3.35 1.33 1.90 (0.08) 3.90
Less: dividends and distributions:
Dividends from net investment income................. (0.20) (0.20) (0.39) (0.56) (0.59) (0.51) (0.40)
Distributions from net realized
gains on investments............................... (0.89) (2.12) (1.01) (1.60) (0.41) (0.58) (0.07)
-------- -------- -------- -------- -------- -------- --------
Total dividends and distributions..................... (1.09) (2.32) (1.40) (2.16) (1.00) (1.09) (0.47)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........................ $17.58 $14.54 $17.59 $15.64 $16.47 $15.57 $16.74
========== ========== ========== ========== ========== ========== ==========
Total Investment Return............................... 30.37% -4.99% 22.95% 8.56% 12.89% -0.66% 30.10%
Ratios/Supplemental Data:
Net assets end of period (in thousands)............... $113,850 $109,733 $122,555 $105,325 $103,171 $92,464 $97,513
Ratio of expenses to average net assets............... 1.26% 1.23% 1.15% 1.16% 1.15% 1.15% 1.20%
Ratio of net investment income (loss)
to average net assets................................ 0.93% 1.31% 2.05% 2.68% 3.11% 3.66% 3.12%
Decrease reflected in above expense ratios due to
advisory and administration fees waived.............. -- -- -- -- -- -- --
Portfolio Turnover Rate............................... 59% 83% 70% 45% 50% 42% 44%
<CAPTION>
1988 1987 1986
-------- -------- --------
Per Share Operating Performance:
Net asset value,
beginning of period.................................. $11.80 $14.16 $13.53
Net investment income (loss)......................... 0.42 0.39 0.37
Net realized and unrealized gain (loss) on
investments........................................ 1.97 (1.33) 1.13
-------- -------- --------
Total from investment operations...................... 2.39 (0.94) 1.50
Less: dividends and distributions:
Dividends from net investment income................. (0.48) (0.37) (0.32)
Distributions from net realized
gains on investments............................... (0.40) (1.05) (0.55)
-------- -------- --------
Total dividends and distributions..................... (0.88) (1.42) (0.87)
-------- -------- --------
Net asset value, end of period........................ $13.31 $11.80 $14.16
========== ========== ==========
Total Investment Return............................... 21.30% -7.30% 11.55%
Ratios/Supplemental Data:
Net assets end of period (in thousands)............... $81,018 $83,308 $90,058
Ratio of expenses to average net assets............... 1.16% 1.10% 1.17%
Ratio of net investment income (loss)
to average net assets................................ 3.12% 1.67% 1.80%
Decrease reflected in above expense ratios due to
advisory and administration fees waived.............. -- -- --
Portfolio Turnover Rate............................... 47% 66% 65%
<FN>
- ---------------
(1) From March 23, 1988 (commencement of operations) to November 30, 1988.
(2) From April 14, 1988 (commencement of operations) to November 30, 1988.
(3) From November 1, 1993 (commencement of operations) to November 30, 1993.
(4) Not annualized.
(5) Annualized.
(6) Calculated using weighted average shares outstanding.
</TABLE>
2
<PAGE> 7
===============================================================================
The Funds' Annual Report, which is incorporated by reference into the Statement
of Additional Information, includes a discussion of those factors, strategies
and techniques that materially affected their performance during the period of
the report, as well as certain related information. A copy of the Funds' Annual
Report is available without charge upon request. See "Management of The Funds"
for a discussion of the waiver of advisory and administration fees.
<TABLE>
<CAPTION>
SBSF MONEY MARKET FUND SBSF CONVERTIBLE SECURITIES FUND
----------------------------------------------------------------------------- -------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------------------------------------------------------------- -------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(1) 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $11.05 $12.48 $10.98 $10.65
0.051 0.034 0.026 0.034 0.058 0.077 0.086 0.050 0.60 0.61 0.57 0.59
-- -- -- -- -- -- -- -- 1.50 (1.12) 1.79 0.56
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
0.051 0.034 0.026 0.034 0.058 0.077 0.086 0.050 2.10 (0.51) 2.36 1.15
(0.051) (0.034) (0.026) (0.034) (0.058) (0.077) (0.086) (0.050) (0.61) (0.61) (0.57) (0.72)
-- -- -- -- -- -- -- -- (0.38) (0.31) (0.29) (0.10)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(0.051) (0.034) (0.026) (0.034) (0.058) (0.077) (0.086) (0.050) (0.99) (0.92) (0.86) (0.82)
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
$1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $12.16 $11.05 $12.48 $10.98
======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
5.26% 3.37% 2.61% 3.48% 6.00% 8.07% 8.87% 4.76% 20.43% -4.36% 22.42% 11.20%
$21,848 $28,606 $16,222 $12,531 $20,493 $22,424 $21,627 $24,354 $68,212 $58,845 $64,537 $42,442
0.63% 0.59% 0.55% 0.72% 0.59% 0.62% 0.68% 0.49% 1.31% 1.30% 1.24% 1.32%
5.15% 3.35% 3.16% 4.20% 6.38% 8.29% 9.29% 7.80% 5.36% 5.20% 4.75% 6.78%
0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.30% -- -- -- --
-- -- -- -- -- -- -- -- 52% 49% 30% 42%
<CAPTION>
SBSF
CAPITAL GROWTH FUND
----------------------------
FISCAL YEAR ENDED
NOVEMBER 30,
----------------------------
1991 1990 1989 1988(2) 1995 1994 1993(3)
------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.15 $10.65 $ 9.91 $10.00 $ 7.56 $ 7.88 $ 8.00
0.67 0.87 0.84 0.44 (0.02) (0.01)(6) (0.05)
1.63 (1.38) 0.86 (0.30) 2.29 (0.31)(6) (0.07)
------- ------- ------- ------- ------- ------- --------
2.30 (0.51) 1.70 0.14 2.27 (0.32) (0.12)
(0.71) (0.80) (0.96) (0.23) -- -- --
(0.09) (0.19) -- -- -- -- --
------- ------- ------- ------- ------- ------- --------
(0.80) (0.99) (0.96) (0.23) -- -- --
------- ------- ------- ------- ------- ------- --------
$10.65 $ 9.15 $10.65 $ 9.91 $9.83 $7.56 $7.88
======== ======== ======== ======== ======== ======== =========
26.33% -5.18% 17.88% 1.42% 30.03% -4.06% -1.50%(4)
$28,123 $15,200 $12,061 $5,044 $8,426 $4,141 $1,656
1.37% 1.52% 1.15% 0.84% 1.20% 1.22% 2.50%(5)
8.50% 10.64% 9.87% 8.74% -0.22% -0.17% -12.65%(5)
-- -- 0.55% 0.98% 0.84% 1.00% 0.93%
53% 32% 76% 9% 97% 80% 0%
</TABLE>
3
<PAGE> 8
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The investment objective and policies of each of the four Funds is set forth
below.
SBSF FUND
The SBSF Fund's investment objective is to seek a high total return over the
long term consistent with reasonable risk. Total return consists of dividends
and interest income and realized and unrealized appreciation on portfolio
securities. In seeking its objective, the SBSF Fund will invest in securities
which in the opinion of the Adviser have the potential for capital appreciation
in excess of market averages during periods of market strength while attempting
to preserve capital during periods of market weakness. The SBSF Fund will invest
primarily in common stocks, but also may invest in preferred stocks, securities
convertible into common stocks and fixed income securities.
In pursuing its objective, the SBSF Fund may invest in the securities of
companies that possess valuable fixed assets, or are undervalued in the
marketplace in relation to such factors as the issuer's assets, earnings or
growth potential. The SBSF Fund is not restricted to investments in any specific
market sector or industry group, and it may invest in securities traded on
national securities exchanges, the Nasdaq National Market, over the counter and
privately.
Periods of market strength are, with respect to equity securities, those in
which the prices of such securities, as reflected in standard industry indices
(such as the Dow Jones Industrial Average and the Standard & Poor's 500
Composite Stock Price Index), rise and, with respect to fixed income securities,
those in which yields fall (with consequent increases in price). Periods of
market weakness are the converse of periods of market strength. Because periods
of market strength or weakness in equity and fixed income securities do not
necessarily coincide, the Adviser, in seeking a high total return, has the
flexibility to invest in a wide range of equity and fixed income securities.
With respect to fixed income securities, the SBSF Fund will invest primarily
in U.S. Government securities, corporate bonds, securities convertible into
common stock, high grade commercial paper and bankers acceptances.
The value of the common and preferred stocks and convertible securities held
by the SBSF Fund may decline over short or even extended periods. In addition,
the value of the Fund's investments in fixed income securities will tend to
decrease when interest rates rise and increase when interest rates fall. In
general, longer term debt instruments tend to fluctuate in value more than
shorter-term debt instruments in response to interest rate movements. In
addition, debt instruments that are not backed by the U.S. Government are
subject to credit risk, which is the risk that the issuer may not be able to pay
principal and/or interest when due.
SBSF CONVERTIBLE SECURITIES FUND
The investment objective of the SBSF Convertible Securities Fund is to seek a
high level of current income together with long-term capital appreciation. It is
a fundamental policy of the SBSF Convertible Securities Fund that it will invest
at least 65% of its total assets (except when maintaining a temporary defensive
position) in convertible securities. The SBSF Convertible Securities Fund is not
required to sell securities for the purpose of assuring that at least 65% of its
total assets are invested in convertible securities if a market decline should
cause this threshold to be breached. The balance of the SBSF Convertible
Securities Fund's assets may be invested in other securities which, in the
aggregate, are considered to be consistent with the Fund's investment objective.
Such other investments may include preferred stocks, dividend and non-dividend
paying common stocks, U.S. Government securities, corporate bonds, high grade
commercial paper, banker's acceptances and other short-term instruments,
floating rate notes, securities of the foregoing types issued by foreign issuers
and repurchase agreements. A decision to maintain a temporary defensive position
will depend on the Adviser's outlook for interest rates and fixed income and
equity securities, and when such a position is adopted there can be no assurance
that the Fund's investment objective will be achieved.
A convertible security is typically a bond or preferred stock that may be
converted at a stated price within a specified period of time into a specified
number of shares of common stock of the same or a different issuer. Convertible
securities are usually senior to common stock in a corporation's capital
structure, but usually are subordinate to similar non-convertible securities.
While providing a fixed income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in
4
<PAGE> 9
- --------------------------------------------------------------------------------
the capital appreciation of the common stock into which it is convertible.
The SBSF Convertible Securities Fund will purchase convertible securities
which may or may not be rated by a nationally recognized statistical rating
organization ("NRSRO"). When purchasing rated securities, the SBSF Convertible
Securities Fund may make substantial investments in securities rated Baa, Ba, B
or Caa by Moody's Investor Services, Inc. ("Moody's") and BBB, BB, B or CCC by
Standard & Poor's Corporation ("S&P") (see the description of the rating systems
contained in Appendix A to the Statement of Additional Information).
The medium to lower-rated and unrated securities in which the SBSF Convertible
Securities Fund may invest tend to offer higher yields than higher-rated
securities with the same maturities because the financial condition of the
issuers of such securities may not be as strong as that of issuers of
higher-rated securities. Debt obligations rated lower than A by Moody's or S&P
tend to have speculative characteristics or are speculative, and generally
involve more risk of loss of principal and income than higher rated securities.
Also, their yields and market value tend to fluctuate more than higher quality
securities. These risks cannot be eliminated, but may be reduced by diversifying
holdings to minimize the portfolio impact of any single investment. In addition,
fluctuations in market value do not affect the cash income from the securities,
but are reflected in the Fund's net asset value. When interest rates rise, the
net asset value of the Fund tends to decrease. When interest rates decline, the
net asset value of the Fund tends to increase.
The Fund is not restricted from investing in the lower-rated categories of
securities. However, the Fund will not invest in securities rated Ba or lower by
Moody's or BB or lower by S&P or unrated securities, unless the Adviser believes
that positive factors mitigate or reduce the investment risks and that the
investment is expected to provide a return commensurate with such risks.
Positive factors would include operating strengths or improvements which will
enable a company to service its debt with a wider margin of comfort than
anticipated by rating agencies. Such strengths or improvements, such as growing
market share or improved cost structure or margins, result in strong or
improving cash flow. A superior management also can improve the value of assets
within a company. Thus, a company can build financial flexibility, enabling it
to reduce its leverage or otherwise reduce financial risk at will.
In general, the market value of a convertible security is at least the higher
of its "investment value" (i.e., its value as a fixed income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, a convertible security
tends to increase in market value when interest rates decline and tends to
decrease in value when interest rates rise. However, the price of a convertible
security also is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security tends to increase as the
market value of the underlying stock increases, and tends to decrease as the
market value of the underlying stock declines. While no securities investment is
without some risk, investments in convertible securities generally entail less
risk than investments in the common stock of the same issuer.
Securities received upon conversion of convertible securities or upon exercise
of call options or warrants forming elements of synthetic convertibles
(described below) may be retained temporarily to permit orderly disposition or
to defer realization of gain or loss for Federal tax purposes, and will be
included in calculating the amount of the Fund's total assets invested in true
and synthetic convertibles.
The SBSF Convertible Securities Fund also may invest in "synthetic
convertibles". A synthetic convertible is created by combining separate
securities which possess the two principal characteristics of a true convertible
security, i.e., fixed income ("fixed-income component") and the right to acquire
equity securities ("convertibility component"). The fixed-income component is
achieved by investing in non-convertible fixed-income securities such as
non-convertible bonds, preferred stocks and money market instruments. The
convertibility component is achieved by investing in warrants or exchange listed
call options or stock index call options granting the holder the right to
purchase a specified quantity of securities within a specified period of time at
a specified price or to receive cash in the case of stock index options.
The synthetic convertible differs from the true convertible security in
several respects. Unlike a true convertible security, which is a single security
having a unitary market value, a synthetic convertible is comprised of two or
more separate securities, each with its own market value. Therefore, the "market
value" of a synthetic convertible is the sum of the values of its fixed-income
component and its convertibility component. For this reason, the values of a
synthetic convert-
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ible and a true convertible security will respond differently to market
fluctuations.
A holder of a synthetic convertible faces the risk of a decline in the price
of the stock or the level of the index involved in the convertibility component,
causing a decline in the value of the option or warrant. Should the price of the
stock fall below the exercise price and remain there throughout the exercise
period, the entire amount paid for the call option or warrant would be lost.
Since a synthetic convertible includes the fixed-income component as well, the
holder of a synthetic convertible also faces the risk that interest rates will
rise, causing a decline in the value of the fixed-income instrument.
SBSF CAPITAL GROWTH FUND
The SBSF Capital Growth Fund's investment objective is to seek capital
appreciation. The Fund seeks to achieve its objective by investing in equity
securities of companies which the Adviser believes are likely to have rapid
growth in earnings or cash flow. The production of any current income is
incidental to this objective. SBSF Capital Growth Fund invests primarily in
growth oriented common stocks of domestic corporations and, to a limited extent,
foreign corporations listed on any national securities exchange or traded in the
over-the-counter market. Such corporations may or may not pay dividends and such
a factor would not be considered a relevant criteria in selecting an investment.
The Adviser employs a flexible investment program in pursuit of the Fund's
investment objective. The Fund is not restricted to investments in specific
market sectors and may invest in any market sector. The SBSF Capital Growth Fund
will invest in small to medium capitalized companies, i.e., issuers having a
market capitalization of $500 million to $1.5 billion, but may invest in
companies of any size and may take advantage of any investment opportunity with
attractive long-term growth prospects including preferred stocks, convertible
securities and bonds. Bonds might be purchased in situations where the Adviser
believes interest rates will decline or where it is believed that a bond will
provide a greater return than common stocks. This might be the case, for
example, in a weak economic environment where stock prices are performing
poorly. The Adviser takes advantage of its market access and the research
available to it to select investments in promising emerging growth companies
that are involved in new technology, natural resources, foreign markets and
special developments, such as research discoveries, acquisitions,
recapitalizations, liquidations or management changes, and companies whose stock
may be undervalued by the market. These situations are illustrative of the types
of investments the Fund may make. The Fund is free to invest in any common stock
which in the Adviser's judgment provides above average potential for capital
appreciation.
Although the SBSF Capital Growth Fund intends to be fully invested, it may
hold up to 100% of its assets in cash or short-term debt securities for
temporary defensive purposes. The Fund will adopt a temporary defensive position
when, in the opinion of the Adviser, such position is likely to provide
protection against unfavorable market conditions.
The Fund intends to manage its portfolio actively to accomplish its investment
objective. Since the Fund has a long-term investment perspective, it does not
intend to respond to short-term market fluctuations or to acquire securities for
the purpose of short-term trading; however, it may take advantage of short-term
trading opportunities that are consistent with its objective. The SBSF Capital
Growth Fund maintains investments in small capitalization companies. These
investments have historically experienced a greater degree of volatility than
their large capitalization counterparts.
SBSF MONEY MARKET FUND
The investment objective of SBSF Money Market Fund is to provide high current
income to the extent consistent with preservation of capital. The SBSF Money
Market Fund will not purchase securities with maturities greater than 397 days
and will maintain a weighted average maturity of 90 days or less. The SBSF Money
Market Fund seeks to attain its objective by investing in the following types of
money market instruments:
(1) Bank certificates of deposit, bankers' acceptances and other obligations
issued or guaranteed by domestic banks having total assets in excess of one
billion dollars (except as provided below) and subject to regulation by the
United States Government; foreign branches of these banks ("Euros"); and, United
States branches of foreign banks of equivalent size ("Yankees"). The SBSF Money
Market Fund may invest in certificates of deposit and other obligations issued
by smaller domestic banks and savings and loan associations with assets of less
than one billion dollars if the principal amounts of the instruments are fully
insured by the FDIC. In the event the SBSF Money
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Market Fund purchases any certificates of deposit issued by such smaller banks
or savings and loan associations that are not readily marketable, the purchases
will not exceed 10% of the SBSF Money Market Fund's net assets at the time of
purchase.
(2) Commercial paper rated P-1 by Moody's and A-1 by S&P or, if not rated,
issued by corporations having an outstanding unsecured debt issue currently
rated Aa by Moody's or AA by S&P. (For a description of such ratings see
Appendix A to the Statement of Additional Information).
(3) Obligations of, or guaranteed by, the United States Government, its
agencies or instrumentalities, including such obligations subject to repurchase
agreements. These include issues of the United States Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
the latter category of securities are supported by the full faith and credit of
the United States Treasury, others are supported by the right of the issuer to
borrow from the Treasury, and still others are supported only by the credit of
the agency or instrumentality. Examples of each of the three types of securities
described in the preceding sentence are (i) obligations guaranteed by the
Export-Import Bank of the United States, (ii) obligations of the Federal
National Mortgage Association and (iii) obligations of the Student Loan
Marketing Association, respectively.
Such instruments may produce a lower yield than would be available from less
highly rated instruments. There can be, of course, no assurance that the SBSF
Money Market Fund will achieve its investment objective. The SBSF Money Market
Fund may not achieve as high a current level of income as other funds that may
invest in securities of lesser quality and/or longer maturities.
The Money Market Fund reserves the right to concentrate in securities issued
or guaranteed as to principal and interest by the United States Government, its
agencies or instrumentalities or U.S. bank obligations.
INVESTMENT TECHNIQUES
In pursuit of their objectives, the Funds may utilize certain special
investment methods. The SBSF Fund, the SBSF Convertible Securities Fund and the
SBSF Capital Growth Fund may, in certain circumstances, purchase and write call
options that are traded on U.S. securities exchanges. At the time of purchase or
sale, the market value of such options would not exceed 5% of the total assets
of the respective Fund. A call option is a short- term contract (having a
duration of nine months or less) pursuant to which the purchaser of the call
option, in return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option.
The SBSF Fund, the SBSF Convertible Securities Fund and the SBSF Capital
Growth Fund each may invest up to 10% of each Fund's respective total assets in
securities of foreign issuers. Securities of foreign issuers may, in the opinion
of the Adviser, present attractive investment opportunities. Foreign investments
may be affected favorably or unfavorably by changes in exchange rates and
currency control regulations, including currency blockage. There may be less
information available about a foreign company than about a U.S. company, and
foreign companies may not be subject to reporting standards and requirements
comparable to those applicable to U.S. companies. Foreign securities and their
markets may not be as liquid as U.S. securities and their markets. Securities of
some foreign companies may involve greater market risk than securities of U.S.
companies, and foreign brokerage commissions and custody fees are generally
higher than those in the United States. Investments in foreign securities also
may be subject to local economic or political risks, such as political
instability of some foreign governments and the possibility of nationalization
or expropriation of issuers.
The SBSF Fund, the SBSF Convertible Securities Fund and the SBSF Capital
Growth Fund also may invest up to 5% of each Fund's respective net assets in
warrants, excluding attached warrants. None, however, will invest more than 2%
of its net assets in warrants which are not traded on the New York or American
Stock Exchanges.
The SBSF Fund, the SBSF Convertible Securities Fund and the SBSF Capital
Growth Fund each may invest up to 10% of their total assets in illiquid
securities, including securities restricted as to disposition under the federal
securities laws, securities as to which there are no readily available market
quotations and repurchase agreements with a maturity in excess of 7 days.
However, illiquid securities for purposes of this limitation do not include
securities eligible for resale to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "1933 Act"), which
the Company's Board of Directors or the Fund's Adviser has determined are
liquid. Such a determination would take into consideration, among
7
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other factors, valuation, liquidity and availability of information. An
insufficient number of qualified institutional buyers interested in purchasing
Rule 144A securities held by the Funds could adversely affect the liquidity of
such securities. The Funds might be unable to dispose of such securities
promptly or at reasonable prices.
To increase income, the SBSF Fund, the SBSF Convertible Securities Fund and
the SBSF Capital Growth Fund may lend portfolio securities to certain brokers or
dealers, banks or other institutional investors, such as insurance companies and
pension funds. The Adviser has not previously, nor has it any present intention,
to loan portfolio securities. Each of the Funds may invest in repurchase
agreements relating to certain types of securities and member banks of the
Federal Reserve System. A repurchase agreement is an instrument under which the
purchaser (i.e., the Fund) acquires a debt security and the seller agrees, at
the time of the sale, to repurchase the obligation at a mutually agreed upon
time and price, thereby determining the yield during the purchaser's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. From time to time, all of the Funds may trade
in securities for the short term. It is anticipated that the annual portfolio
turnover rates will not exceed 75% for the SBSF Fund and the SBSF Convertible
Securities Fund and may be substantially higher than 100% for the SBSF Capital
Growth Fund. A turnover rate in excess of 100% may increase a Fund's expenses.
Additional information with respect to the special investment methods described
in this paragraph and the conditions under which a Fund may utilize them may be
found under "Investment Objectives and Policies" in the Statement of Additional
Information. The Funds are subject to the usual market risks incident to their
investments and therefore there can be no assurance that the objectives of the
Funds will be attained. In addition, investments in a Fund are not insured
against loss of principal. No single Fund should be considered, by itself, to
provide a complete investment program for any investor.
The investment policies of the Funds set forth above may be changed or altered
by the Board of Directors subject to certain investment restrictions, which set
percentage and other limitations on certain investments and investment
strategies, certain of which constitute fundamental policies. Fundamental
policies, which include the investment objective of each of the Funds, cannot be
changed without the approval of the holders of a majority of the outstanding
voting securities of each of the Funds. The restrictions are set forth under
"Investment Restrictions" in the Statement of Additional Information.
In order to permit the sale of a Fund's shares in certain states the Company
may, on behalf of a Fund, make commitments to a state or states that are more
restrictive than the investment policies and limitations described in the
Prospectus and in the Statement of Additional Information.
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MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
The directors, in addition to reviewing the actions of the Funds' Adviser,
Administrator and Distributor, as set forth below, decide upon matters of
general policy. The Company's officers conduct and supervise the daily business
operations of the Funds. The names, addresses and business affiliations of the
directors and officers of the Company are set forth in the Statement of
Additional Information.
THE INVESTMENT ADVISER
The investment adviser to the Funds is Spears, Benzak, Salomon & Farrell,
Inc., a New York Corporation that is registered as an investment adviser with
the Securities and Exchange Commission. The Adviser is a wholly owned subsidiary
of KeyCorp Asset Management Holdings, Inc. ("KAMHI") and is an indirect wholly
owned subsidiary of Society National Bank, N.A. and KeyCorp, one of the largest
financial services holding companies in the United States. KeyCorp's principal
offices are located at 127 Public Square, Cleveland, Ohio 44114.
The Adviser was, at November 30, 1995, investment adviser for assets
aggregating in excess of $[3.5] billion. In addition to the Funds, the Adviser's
advisory clients include individuals, pension and profit-sharing trusts,
partnerships, endowments and foundations. The Adviser's principal offices are
located at 45 Rockefeller Plaza, New York, New York 10111.
Pursuant to an Investment Advisory Agreement, the Adviser furnishes a
continuous investment program
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for the Funds, makes the day-to-day investment decisions for the Funds, executes
the purchase and sale orders for the portfolio transactions of the Funds and
generally manages the Funds' investments in accordance with the stated policies
of the Funds, subject to the general supervision of the Board of Directors of
the Company.
Due to certain regulatory restrictions imposed on banking organizations and
their subsidiaries, employees of the Adviser are not permitted to serve as
officers or directors of the Company. Pursuant to a Sub-Administration Agreement
between Spears and Concord Holding Corporation ("Concord" or, the
"Administrator"), Spears currently provides persons satisfactory to the
Company's Board of Directors to serve as officers of the Company.
The principal portfolio manager of the SBSF Fund, the SBSF Convertible
Securities Fund and the SBSF Money Market Fund is Louis R. Benzak. Mr. Benzak is
a Managing Director and Vice Chairman of the Adviser and has been the principal
portfolio manager of the SBSF Fund, the SBSF Convertible Securities Fund and the
SBSF Money Market Fund since their inception. The principal portfolio manager of
the SBSF Capital Growth Fund is Charles G. Crane. Mr. Crane is a Managing
Director of the Adviser and has been the SBSF Capital Growth Fund's principal
portfolio manager since its inception.
As compensation for the services rendered and related expenses borne by the
Adviser under the Investment Advisory Agreement, the SBSF Fund, the SBSF
Convertible Securities Fund and the SBSF Capital Growth Fund each pay the
Adviser a fee, computed daily and payable monthly, equal to .75% per annum of
each Fund's average daily net assets. This fee is higher than that paid by most
investment companies. The Investment Advisory Agreement further provides that
the Money Market Fund will pay the Adviser a fee, computed daily and payable
monthly, equal to .25% per annum of its average daily net assets. This fee is
lower than that paid by most investment companies. The Adviser is obligated to
reimburse the Fund in the event any Fund's expenses exceed certain prescribed
limits. See "Expenses and Distribution Plan". For the fiscal year ended November
30, 1995, the SBSF Fund and the SBSF Convertible Securities Fund paid the
Adviser fees at the effective annual rate of .75% of each Fund's average daily
net assets. In addition, during the fiscal year ended November 30, 1995, SBSF
Capital Growth Fund incurred advisory fees at the effective annual rate of 0.75%
of the Fund's average daily net assets. Spears voluntarily waived the advisory
fees incurred by the Fund during the period from December 1, 1994 through
September 30, 1995.The Adviser voluntarily waived its advisory fee of .25% due
from SBSF Money Market Fund for the year ended November 30, 1995.
THE ADMINISTRATOR
Concord serves as Administrator to the Funds. In this capacity, Concord
administers certain of the Funds' operations subject to the supervision of the
Board of Directors. Pursuant to an Administration Agreement, in consideration of
its administration fee, Concord performs clerical, accounting and office service
functions for the Funds and provides the Funds with personnel to perform
accounting and related services. Concord also oversees the calculation of net
asset value and yield, prepares reports to and filings with regulatory
authorities, services shareholder accounts and performs such other services as
the Funds may from time to time request. The Administration Agreement provides
that in the absence of willful misfeasance, bad faith or gross negligence on the
part of Concord, or of reckless disregard of its obligations thereunder, Concord
shall not be liable for any action or failure to act in accordance with its
duties thereunder.
As compensation for the administrative services rendered to the Funds and
related expenses borne by Concord, each of the Funds pays Concord an annual fee,
computed daily and payable monthly, equal to .25% of its average daily net
assets up to $50,000,000, plus .15% of such assets greater than $50,000,000. For
the fiscal year ended November 30, 1995, the SBSF Fund, the SBSF Convertible
Securities Fund and the SBSF Money Market Fund each paid Spears, the prior
administrator, fees at the effective annual rate of 0.25% of each Fund's average
daily net assets. Spears voluntarily waived its administration fee for the SBSF
Capital Growth Fund for the same period. Spears and Concord are obligated to
reimburse the Funds in the event the Funds' expenses exceed certain prescribed
limits. See "Expenses and Distribution Plan".
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EXPENSES AND DISTRIBUTION PLAN
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Except as set forth above under "Management of the Funds" and as set forth
below, each of the Funds bears the expenses directly applicable to it and a
portion of the general administrative expenses, applicable to all the Funds,
which may be allocated among the Funds in a manner believed to be fair and
equitable. Expenses that are directly applicable to a Fund include expenses of
portfolio transactions, shareholder servicing costs, expenses of registering the
shares under Federal and state securities laws, pricing costs (including the
daily calculation of net asset value), interest, certain taxes, legal and
auditing expenses directly incurred by the Fund, and charges of Spears, the
Custodian, the Transfer Agent and the Distributor. General expenses which would
be allocated include directors' fees, general corporate legal and auditing
expenses, state franchise taxes, costs of printing proxies, stock certificates,
shareholder reports and prospectuses sent to existing shareholders, trade
association fees, Securities and Exchange Commission fees, and accounting costs.
Concord Financial Group, Inc. ("Concord Financial") serves as independent
underwriter/distributor of the Funds' shares pursuant to a distribution
agreement between the Funds and Concord Financial which provides that Concord
Financial will use its best efforts to sell shares of the Funds. Under the
distribution agreement, Concord Financial may enter into agreements with
selected dealers for the distribution of shares.
Under a plan adopted in accordance with Rule 12b-1 under the Investment
Company Act of 1940 (the "Distribution Plan"), the Company pays the promotional
and advertising expenses relating to the distribution of the Funds' shares and
for the printing of all Fund prospectuses used in connection with the
distribution and sale of the Funds' shares. In addition, under the Distribution
Plan. The Company may compensate Concord Financial, or reimburse expenses
incurred by Concord Financial, for distribution-related and sales support or
shareholder account services. All amounts expended pursuant to the Plan are paid
to Concord Financial, which may pay all or any portion of such payments to
compensate or reimburse brokers, dealers and others which make sales of shares
of a Fund or which service shareholder accounts. Total payments under the
Distribution Plan may not exceed 0.25% of the average daily net asset value of
the shares of a Fund on an annual basis. The Distribution Plan requires that
written reports of the amounts expended and the purposes for which such
expenditures were made be provided to the Board of Directors, at least
quarterly, for its review. See "Management of the Fund" for information
regarding fee arrangements.
The Adviser and Concord have agreed that if in any fiscal year the sum of each
Fund's expenses exceeds the limits set by applicable regulations of state
securities commissions, the amounts payable by the Funds to Spears and Concord
for the advisory fee and the administration fee for that year shall each be
proportionately reduced. For further information see "Expenses and Distribution
Plan" in the Statement of Additional Information.
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DETERMINATION OF NET ASSET VALUE
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The net asset values of the shares of the SBSF Fund, the SBSF Convertible
Securities Fund and the SBSF Capital Growth Fund are determined as of the close
of the New York Stock Exchange, which is ordinarily at 4:00 P.M., New York time,
each Business Day, and the net asset value of the shares of SBSF Money Market
Fund is determined at 12:00 P.M., New York time, each business day (each,
respectively, a "Valuation Time"). [A "Business Day" is a day on which the New
York Stock Exchange is open for trading, and the Federal Reserve Bank of
Cleveland is open, and any other day (other than a day on which no shares of the
Fund are tendered for redemption and no order to purchase any shares is
received) during which there is sufficient trading in its portfolio instruments
that the Fund's net asset value per share might be materially affected. The New
York Stock Exchange or the Federal Reserve Bank of Cleveland will not be open in
observance of the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veteran's Day, Thanksgiving and Christmas.]
The SBSF Money Market Fund will seek to maintain a constant net asset value
per share of $1.00; however there can be no assurance that this will be
attained.
In general, a Fund's net asset value is equal to the value of its securities,
cash and other assets, less liabili-
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ties, divided by the number of shares outstanding. Securities traded on
securities exchanges or the NASDAQ national market are valued at the last sales
price on the exchange where the security is primarily traded or, lacking any
sales, at the mean between the most recent bid and asked quotation. Securities
traded over-the-counter are valued at the mean between the most recent bid and
asked price. Securities for which quotations are not readily available and any
other assets are valued at fair value as determined in good faith by the Board
of Directors. The SBSF Money Market Fund values all its portfolio securities
using the amortized cost method. The SBSF Fund, the SBSF Convertible Securities
Fund and the SBSF Capital Growth Fund value money market instruments at market
value except money market instruments having a maturity of less than 60 days
which are valued at amortized cost.
Generally, trading in foreign securities, as well as corporate bonds, United
States Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset values
of the shares of the SBSF Fund, the SBSF Convertible Securities Fund and the
SBSF Capital Growth Fund are determined as of such times. Foreign currency
exchange rates also are generally determined prior to the close of the New York
Stock Exchange. Occasionally events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Funds' net asset values. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by the Board of
Directors.
The net asset values per share of the SBSF Fund and the SBSF Convertible
Securities Fund appear daily in THE WALL STREET JOURNAL and most major
newspapers. The net asset value per share of the SBSF Capital Growth Fund can be
obtained by calling 1-800-539-3863.
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PURCHASING SHARES
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Shares may be purchased directly or through an Investment Professional.
Investment Professionals are securities brokers or other financial institutions
that have entered into selling or servicing agreements with Key Mutual Funds or
Concord Financial. Shares are also available to clients of bank trust
departments who have qualified trust accounts. The initial minimum investment is
$500 for the initial purchase and $25 thereafter. Accounts set up through a bank
trust department or an Investment Professional may be subject to different
minimums.
Shares of the Funds are sold at the net asset value per share (see
"Determination of Net Asset Value") next determined after receipt and acceptance
by Primary Funds Service Corporation, the Funds' transfer agent (the "Transfer
Agent"), of an order to purchase shares. There are no sales commissions.
Purchases of shares will be effected only on a Business Day (as defined in
"Determination of Net Asset Value") of Key Mutual Funds. An order received prior
to the Valuation Time on any Business Day will be executed at the net asset
value determined as of the next Valuation Time on that Business Day. An order
received after the Valuation Time on any Business Day will be executed at the
net asset value determined as of the next Valuation Time on the next Business
Day of Key Mutual Funds. Generally, shares of the Funds begin accruing income
dividends on the day they are purchased.
INVESTING DIRECTLY
BY MAIL:
You may purchase shares by completing and signing an account application
(initial purchase only) and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum investment
requirement to, Key Mutual Funds, Primary Funds Service Corporation, P.O. Box
9741, Providence, RI 02940-9742. Subsequent purchases may be made in the same
manner.
BY TELEPHONE OR WIRE:
If an account application has been previously received by the Transfer Agent,
you may also purchase shares by wiring funds to: Boston Safe Deposit & Trust
Co., ABA #011001234, For Credit to PFSC DDA Account #05-224-8, For Further
Credit to Key Mutual
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Funds Account #[insert your account number, name and control number assigned by
the Transfer Agent]. The Transfer Agent does not charge a wire fee. PRIOR TO
WIRING ANY FUNDS AND IN ORDER TO ENSURE THAT WIRE ORDERS ARE INVESTED PROMPTLY,
YOU MUST CALL THE TRANSFER AGENT AT 800-539-3863.
INVESTING THROUGH INVESTMENT PROFESSIONALS OR A BANK TRUST DEPARTMENT
Shares may be purchased by investors who designate an Investment Professional
or a bank trust department through procedures established by the Transfer Agent
in connection with requirements of qualified accounts maintained by or on behalf
of certain persons by Investment Professionals and bank trust departments. With
respect to such purchases, it is the responsibility of the Investment
Professional or a bank trust department to transmit purchase orders to the
Transfer Agent and to deliver federal funds for purchase on a timely basis. Your
bank trust department may charge additional fees. Contact your trust
representative for complete information.
The services rendered by your bank trust department, including affiliates of
Spears, in the management of its accounts are not duplicative of any of the
services for which Spears is compensated. The additional fees paid by clients of
bank trust departments, their affiliates, or an Investment Professional should
be considered in calculating the net yield on investment in a Fund, although
such charges do not affect the Fund's dividends or distributions.
ADDITIONAL INVESTMENT REQUIREMENTS
All purchases must be made in U.S. dollars. Checks must be drawn on U.S.
banks. No cash will be accepted. If you make a purchase with more than one
check, each check must have a value of at least $25, and the minimum investment
requirement still applies. Key Mutual Funds reserve the right to limit the
number of checks processed at one time. If your check does not clear, your
purchase may be canceled and you could be liable for any losses and/or fees
incurred. Payment for purchase is expected at the time of the order. If payment
is not received within three business days of the order, the order may be
canceled, and you could be held liable for resulting fees and/or losses.
You may initiate any transaction by telephone through your Investment
Professional, or bank trust department. Subsequent investments by telephone may
be made directly. Note that the Key Mutual Funds and its agents will not be
responsible for any losses resulting from unauthorized transactions if they
follow reasonable procedures designed to verify the identity of the caller.
These procedures may include requesting additional information, or using
personalized security codes. Your Investment Professional or the Transfer Agent
may also record calls, and you should verify the accuracy of your confirmation
statements immediately after you receive them.
Each investment in shares of a Fund, including dividends and capital gains
distributions reinvested, is acknowledged by a statement showing the number of
shares purchased, the net asset value at which the shares were purchased, and
the new balance of Fund shares owned. The Funds do not issue stock certificates
for the shares.
Although the Funds continuously offer their shares for sale, each Fund
reserves the right to reject any purchase request.
[Concord Financial, at its expense, may also provide additional cash
compensation to dealers in connection with sales of shares of the Funds. The
maximum cash compensation payable by Concord Financial is % of the
offering price.]
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THE SYSTEMATIC INVESTMENT PLAN
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Under the Systematic Investment Plan, you may make regular systematic monthly
purchases of shares of a Fund through automatic deductions from your bank
account(s). Upon obtaining your authorization, Key Mutual Funds' Transfer Agent
will deduct the specified amount from your designated bank account, which amount
will then be automatically invested in shares of the relevant Fund at the net
asset value next determined. Bank accounts will be debited on any day from the
1st through the 28th of each month, as selected by the shareholder. You must
first meet a Fund's initial investment requirement of $500 and are subject to a
minimum subsequent investment of $25. For officers, trustees, directors and
employees, including retired directors and employees, of Spears, Key Mutual
Funds, KeyCorp and its affiliates, (and family members of each of the foregoing,
i.e., parents, children and household members) who participate in the
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Systematic Investment Plan, there is no minimum initial investment required.
To participate in the Systematic Investment Plan, complete the appropriate
section of the account application and attach a voided personal check with the
bank's magnetic ink coding number across the front. If the bank account is
jointly owned, all owners must sign. Account applications can be obtained by
calling the Transfer Agent at 800-539-3863. To change or discontinue existing
Systematic Investment Plan instructions, submit a written request to or call the
Transfer Agent at 800-539-3863.
- --------------------------------------------------------------------------------
THE SYSTEMATIC WITHDRAWAL PLAN
- --------------------------------------------------------------------------------
The Systematic Withdrawal Plan enables shareholders to make regular monthly,
quarterly, semi-annual or annual redemptions of shares. With your authorization,
the Transfer Agent will automatically redeem shares at the net asset value on
the date of the withdrawal and have the proceeds transferred according to your
written instructions. Fund accounts will be debited on any day from the 1st
through the 28th of each month.
You can have checks sent from your Fund account directly to you, to your bank
checking account or to a third person. If you opt to have checks sent to your
bank checking account, a voided personal check with the bank's magnetic coding
number across the front must be attached to the account application. If the bank
checking account is jointly owned, all owners must sign the application.
To participate in the Systematic Withdrawal Plan, the required minimum balance
is $5,000 per Fund. The required minimum withdrawal is $25.
To participate in the Systematic Withdrawal Plan, call 800-539-3863 for more
information. Systematic Withdrawal Plan payments are drawn from share
redemptions. If Systematic Withdrawal Plan redemptions exceed income and capital
gain dividend distributions earned on Fund shares, the Fund account may
eventually be exhausted. Purchases of additional shares concurrent with
withdrawals may be disadvantageous to certain shareholders because of tax
liabilities. The Systematic Withdrawal Plan is not necessarily appropriate for
use in conjunction with the Systematic Investment Plan. To change or terminate
Systematic Withdrawal Plan instructions, submit a written request to, or call
the Transfer Agent at 800-539-3863. The systematic Withdrawal Plan may be
modified or terminated at any time without notice.
If the amount of the automatic withdrawal exceeds the income accrued for the
period, the principal balance invested will be reduced and shares will be
redeemed.
- --------------------------------------------------------------------------------
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares may ordinarily be redeemed by mail or telephone. However, all or part
of your shares may be redeemed in accordance with instructions and limitations
pertaining to your account with an Investment Professional. For example, if you
have agreed with an Investment Professional to maintain a minimum balance in
your account with the Investment Professional, and the balance in that account
falls below that minimum, you may be obligated to redeem, or the Investment
Professional may redeem for you and on your behalf, all or part of your shares
to the extent necessary to maintain the required minimum balance.
BY MAIL:
In order to redeem shares by mail, send a written request to the Transfer
Agent. The Transfer Agent may require a signature guarantee by an eligible
guarantor institution. A signature guarantee is designed to protect you, the
Fund, and your and the Fund's agents from fraud. A written redemption request
requires a signature guarantee for redemptions of more than $10,000 worth of
shares; if your Fund account registration has changed within the last 60 days;
if the check is not being mailed to the address on your account; if the check is
not being made out to the account owner; or if the redemption proceeds are being
transferred to another account within Key Mutual Funds with a different
registration. The following institutions should be able to provide you with a
signature guarantee: banks, brokers, dealers, credit unions (if authorized under
state law), securities exchanges and associations, clearing agencies, and
savings associations. A signature guarantee may not be provided by a notary
public. The
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Transfer Agent reserves the right to reject any signature guarantee if (1) it
has reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000.
[To the extent that share certificates have been issued for any shares to be
redeemed, such share certificates, properly endorsed and in proper form for
transfer, should be included in the shareholder's redemption request. In such an
event, all signatures on the share certificates must be guaranteed as described
above.]
BY TELEPHONE:
You may have the payment of redemption requests wired or mailed directly to a
domestic commercial bank account previously designated on your account
application. Such wire redemption requests may be made by telephone to the
Transfer Agent. It is not necessary to confirm telephone redemption requests in
writing. If you did not originally select the telephone redemption privilege,
you must provide written instructions as well as a signature guarantee to the
Transfer Agent to add this feature. Neither Key Mutual Funds nor its service
agents will be liable for any loss, damages, expense or cost arising out of any
telephone redemption effected in accordance with Key Mutual Funds' telephone
redemption procedures and pursuant to instructions reasonably believed to be
genuine. Key Mutual Funds will employ procedures designed to provide reasonable
assurance that instructions by telephone are genuine; if these procedures are
not followed, Key Mutual Funds or their service agents may be liable for any
losses due to unauthorized or fraudulent instructions. These procedures include
recording of phone conversations, sending confirmations to shareholders within
72 hours of the telephone transaction, verification of account name and account
number or tax identification number, and sending redemption proceeds only to the
address of record or to a previously authorized bank account. For telephone
redemptions, call the Transfer Agent at 800-539-3863. If you are unable to reach
the Transfer Agent by telephone (for example, during time of unusual market
activity), consider placing your order by mail directly to the Transfer Agent.
ADDITIONAL REDEMPTION INFORMATION
Redemption orders are effected at the net asset value per share next
determined after the shares are properly tendered for redemption, as described
above. The proceeds paid upon redemption of shares in a Fund may be more or less
than the amount invested. Payment to shareholders for shares redeemed will be
made within three business days after receipt by the Transfer Agent of the
request for redemption.
At various times, Key Mutual Funds may be requested to redeem shares of a Fund
for which good payment has not yet been received. In such circumstances, Key
Mutual Funds may delay the forwarding of proceeds for 15 days or more without
interest to the shareholder until payment has been collected for the purchase of
such shares. Key Mutual Funds intend to pay cash for all shares redeemed, but
under unusual circumstances, Key Mutual Funds may make payment wholly or partly
in portfolio securities at their then-current market value equal to the
redemption price. In such cases, an investor may incur brokerage costs in
converting such securities to cash.
Due to the relatively high cost of handling small investments, Key Mutual
Funds reserves the right to redeem, at net asset value, shares in your account
if, because of redemptions of shares by you or on your behalf, your account with
respect to a Fund has a value of less than $500 (except with respect to
officers, trustees, directors and employees, including retired directors and
employees, of Spears, Key Mutual Funds, KeyCorp and its affiliates, (and family
members of each of the foregoing, i.e., parents, children and household members)
participating in the Systematic Investment Plan, to whom no minimum balance
requirement applies). Before Key Mutual Funds exercises the right to redeem such
shares and to send the proceeds to you, you will be given notice that the value
of the shares in your account is less than the minimum amount and will be
allowed 60 days to make an additional investment in the Fund in an amount which
will increase the value of the account to at least $500, if applicable.
Key Mutual Funds reserves the right to reject any order for the purchase of
its shares in whole or in part. See the Statement of Additional Information
("PURCHASE, REDEMPTION AND PRICING") for examples of when Key Mutual Funds may
suspend the right of redemption or redeem shares involuntarily.
FREE CHECKING
Investors in the SBSF Money Market Fund only may request a supply of checks
from the Transfer Agent. A check may be made payable to the order of anyone in
an amount of $100 or more. These checks may be used
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<PAGE> 19
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as one would use any ordinary commercial bank check except that the checks may
not be certified. The payee of such a check may deposit it. The checks are drawn
on a special account maintained by the SBSF Money Market Fund at Northern Trust
Co. When such a check is presented to Northern Trust Co. for payment, it, as
agent for the shareholder, redeems a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check and returns
the cancelled check to the investor.
A shareholder in the SBSF Money Market Fund who uses a check to make a
redemption receives dividends on the shares to be redeemed up to and including
the Business Day the check clears.
There is no charge to the shareholder for this checking service. Each check
sent to a shareholder has his or her name and SBSF Money Market Fund account
number printed thereon. Shareholders electing the checking option are subject to
the procedures, rules and regulations of Northern Trust Co. governing checking
accounts. Checks drawn on a jointly owned account, at the option of the joint
owners, may require only one signature. Northern Trust Co. will not honor checks
which are in amounts exceeding the value of the shareholder's account at the
time the check is presented for payment. Since the dollar value of the account
changes daily, the total value of the account cannot be determined in advance
and the account cannot be entirely redeemed by check.
An investor wishing to avail himself or herself of this method of redemption
should elect it on the subscription order form. Individuals and joint tenants
are not required to furnish any supporting documentation. However, corporations
and other entities are required to furnish a certified resolution or other
evidence of authorization in accordance with normal banking practices.
Appropriate authorization forms are available from the Transfer Agent. As soon
as such forms are filed in good order with the Transfer Agent, it will provide
the shareholder with a supply of checks.
This checking service may be terminated at any time by the Fund or by the
Transfer Agent.
The Funds have reserved the right to redeem involuntarily the shares of any
shareholder if the net asset value of all remaining shares in the shareholder's
account after a redemption is less than $500. IRA and Keogh accounts are exempt
from this mandatory redemption. Written notice of a proposed mandatory
redemption will be given at least 60 days in advance to any shareholder whose
account is to be redeemed. During the notice period a shareholder may avoid
mandatory redemption by purchasing sufficient shares to increase his or her
total net asset value to at least $500.
The Funds may suspend the right of redemption during any period when (a)
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed, other than
customary weekend and holiday closings; (b) the Securities and Exchange
Commission has by order permitted such suspension or postponement; or (c) an
emergency, as defined by rules of the Securities and Exchange Commission, exists
making disposal of portfolio securities or determination of the value of assets
of the Funds not reasonably practicable. In case of a suspension of the right of
redemption, the shareholder may withdraw his certificate or offer of redemption,
or he will receive payment of the net asset value next determined after the
suspension has been terminated.
- --------------------------------------------------------------------------------
EXCHANGING SHARES
- --------------------------------------------------------------------------------
You may exchange shares of a Fund for shares of any other Fund of Key Mutual
Funds, so long as you maintain the requisite minimum account balance applicable
to each Fund owned immediately after the exchange. The exchange will be made on
the basis of the relative net asset values of the shares exchanged. An exchange
is considered to be a sale of shares for federal income tax purposes on which
you may realize a capital gain or loss. Before an exchange can be effected, you
must receive a current prospectus of the Fund of Key Mutual Funds for which the
shares are exchanged. To request a prospectus for any Fund of Key Mutual Funds,
call the Transfer Agent at 800-539-3863. The exchange privilege may only be
exercised in states where the exchange may legally be made, and Key Mutual Funds
reserves the right to restrict, limit or terminate the terms of this exchange
privilege upon sixty days written notice to shareholders.
See "Redeeming Shares -- By Telephone" for a discussion of certain limitations
on the liability of the Funds and the Transfer Agent in connection with
unauthorized telephone transactions.
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<PAGE> 20
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INVESTING FOR RETIREMENT
- --------------------------------------------------------------------------------
You may wish to invest in Key Mutual Funds in connection with Individual
Retirement Accounts (IRAs) and other retirement plans such as Simple Employee
Pension Plans (SEP/IRA), Salary Reduction simplified Employee Pensions Plans
(SAR-SEP/IRA), 401(k) Plans, and 403(b) Plans. For more information about
investing in Key Mutual Funds through tax-favored accounts, call 800-539-3863.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
Each Fund distributes to shareholders substantially all of its net investment
income and any net realized taxable capital gains resulting from sales of
portfolio securities.
The SBSF Money Market Fund declares daily, and pays monthly on or about the
first business day of the following month, dividends equal to its entire net
investment income. Unless the shareholder instructs otherwise, all dividends and
distributions of the SBSF Money Market Fund are reinvested in additional shares,
at net asset value, on the payment date.
The SBSF Convertible Securities Fund declares dividends, equal to its net
investment income, on or about the last business day of each calendar quarter
and pays such dividends shortly thereafter. Realized capital gains, if any, are
paid annually in December. Dividends from the SBSF Fund and the SBSF Capital
Growth Fund are ordinarily paid semi-annually in June and December and capital
gains distributions, if any, are paid annually in December. Unless the
shareholder instructs otherwise, all dividends and distributions of these Funds
will be reinvested in additional shares, at net asset value as of the close of
the New York Stock Exchange on the date fixed by the Board of Directors when the
dividend or distribution is declared.
Shareholders of any of the Funds may elect to reinvest dividends [or
distributions] in shares of any other Fund at net asset value. This option may
be elected on the subscription order form (application) or by writing or calling
the Funds at 1-800-539-3863. If a shareholder desires to receive any dividend or
distribution in cash, he or she must notify the Transfer Agent or the Funds in
writing prior to the record date for such dividend or distribution. A
shareholder may also request that all future dividends and distributions be paid
in cash. Such request will remain in effect until notification in writing by the
shareholder to the contrary is received by the Transfer Agent. Shareholders are
advised as to the source of each distribution. A notice of each dividend or
distribution reinvestment transaction will be mailed to the shareholder by the
Transfer Agent.
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES
- --------------------------------------------------------------------------------
Each Fund has qualified and intends to continue to qualify under Subchapter M
of the Internal Revenue Code as a regulated investment company so long as it is
in the best interest of its shareholders to do so. This qualification relieves
the Funds (but not their shareholders) from paying Federal income tax on income
which is currently distributed to shareholders, assuming certain distribution
requirements are met; it also permits net capital gains of the Funds (i.e., the
excess of net long-term capital gain over net short-term capital loss) to be
treated as long-term capital gains of the shareholders, regardless of how long
shares in the Funds are held. Under the Tax Reform Act of 1986, a nondeductible
4% excise tax may be imposed on the Funds to the extent the Funds do not meet
certain distribution requirements by the end of each calendar year.
Dividend distributions to shareholders from net investment income or net
short-term capital gains are treated as ordinary income for Federal income tax
purposes whether such distributions are taken in cash or reinvested in
additional shares.
Dividends paid by the SBSF, SBSF Convertible Securities and SBSF Capital
Growth Funds may be eligible for the dividends received deduction for corporate
shareholders to the extent that the Funds' income is derived from certain
dividends received from domestic corporations.
Distributions of net capital gains (i.e., the excess of net long-term capital
gain over net short-term capital loss) of the Funds are taxable to shareholders
as long-term capital gains whether such distributions are taken in cash or
reinvested in additional shares, and regard-
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<PAGE> 21
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less of how long shares of the Funds have been held. Capital gains distributions
are not eligible for the dividends received deduction.
Any gain or loss realized upon a sale or redemption of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year.
Notwithstanding the above, any loss realized by a shareholder upon the sale of
shares in a Fund held six months or less will be treated as long-term capital
loss to the extent of any long-term capital gain distributions received by the
shareholder.
Dividends and distributions are generally subject to state and local taxes.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to Federal, state or local taxes.
- --------------------------------------------------------------------------------
PERFORMANCE
- --------------------------------------------------------------------------------
SBSF MONEY MARKET FUND
From time to time the SBSF Money Market Fund may advertise "yield" and
"effective yield" of the shares of the Fund. Yield and effective yield figures
are based on historical earnings and are not intended to indicate future
performance. The "yield" of shares of the Fund refers to the net income
generated by an investment in the Fund over a seven-day period identified in the
advertisement. This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.
The "yield" of SBSF Money Market Fund for the seven days ended November 30,
1995 was 4.78%. The "effective yield" for the same seven day period was 4.90%.
OTHER FUNDS
From time to time a Fund, other than the SBSF Money Market Fund, may advertise
"yield" and "total return" of its shares. Yield and total return figures are
based on historical earnings and are not intended to indicate future
performance. The yield on shares of a Fund will be calculated by dividing the
net investment income per share during a recent 30-day (or one month) period by
the maximum public offering price per share of the Fund on the last day of that
period. The results are compounded on a bond equivalent (semiannual) basis and
then annualized. The "total return" of shares may be calculated on an average
annual total return basis or an aggregate total return basis. Average annual
total return refers to the average annual compounded rates of return on shares
over one-, five-, and ten-year periods or the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
the stated period to the ending redeemable value of the investment, assuming the
reinvestment of all dividend and capital gains distributions. Aggregate total
return reflects the total percentage change in the value of the investment over
the measuring period, again assuming the reinvestment of all dividends and
capital gains distributions. Total return may also be presented for other
periods.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Fund's portfolio and such Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts and similar investment alternatives which often
provide for an agreed-upon or guaranteed fixed yield for a stated period of
time. Each Fund's annual report contains additional performance information and
is available without charge upon request.
See "Computation of Yields and Total Return" in the Statement of Additional
Information for further information.
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DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Company is an open-end, diversified management investment company,
incorporated under Maryland law on May 26, 1983. Pursuant to the Articles of
Incorporation, the Board of Directors may authorize the creation of additional
series of shares. Pursuant to such authority, the Board of Directors has
authorized the issuance of four series of shares, each representing shares in
one of four separate Funds: SBSF Fund (25 million authorized shares); SBSF
Convertible Securities Fund (25 million authorized shares); SBSF Capital Growth
Fund (25 million authorized shares) and SBSF Money Market Fund (175 million
authorized shares). The par value of the shares of each of the Funds is $.01 per
share. The assets of each Fund are segregated and separately managed and a
shareholder's interest is in the assets and earnings of the Fund in which he or
she holds shares. Each share of a Fund represents an equal proportionate
interest in that portfolio with each other share of the same series. In the
event of the liquidation or dissolution of the Company, shares of a Fund are
entitled to receive the assets belonging to that portfolio that are available
for distribution and a proportionate distribution, based upon the relative net
assets of the respective Funds, of any general assets not belonging to any
particular portfolio that are available for distribution. Shareholders are
entitled to one vote for each share held and will vote in the aggregate and not
by portfolio except as otherwise required by the 1940 Act or Maryland law. It is
anticipated that the Company will not hold annual shareholder meetings except
when required to do so by the 1940 Act or Maryland law.
- --------------------------------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
- --------------------------------------------------------------------------------
Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio 44114, is
the Custodian for the Funds' cash and securities and Primary Funds Service
Corporation is Transfer Agent and Dividend Disbursing Agent for the shares of
the Funds. Key Trust Company of Ohio, N.A. does not assist in any way, and is
not responsible for, investment decisions involving assets of the Funds. Key
Trust Company of Ohio, N.A. is a subsidiary of KeyCorp and an affiliate of the
Adviser and receives compensation from the Fund for the services it performs as
custodian.
- --------------------------------------------------------------------------------
SHAREHOLDER REPORTS
- --------------------------------------------------------------------------------
The Funds will prepare and send to shareholders semi-annual unaudited and
annual audited reports which will include a list of investment securities held
by each of the Funds.
In addition, shareholders of the Funds will receive, monthly, a cumulative
account statement for the calendar year. Shareholders of the SBSF Fund, SBSF
Convertible Securities Fund and SBSF Capital Growth Fund also will receive,
quarterly, information summarizing the Fund's investment performance.
Shareholders of the SBSF Money Market Fund receive monthly statements from the
Transfer Agent detailing all transactions.
Shareholder inquiries should be addressed to the Funds at Primary Funds
Service Corporation, P.O. Box 9742, Providence, RI 02940-9742. Shareholders may
also call the Funds at 1-800-539-3863.
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<PAGE> 23
KEY MUTUAL FUNDS
45 Rockefeller Plaza
New York, New York 10111
INVESTMENT ADVISER & SUB-ADMINISTRATOR
Spears, Benzak, Salomon & Farrell, Inc.
45 Rockefeller Plaza
New York, New York 10111
ADMINISTRATOR
Concord Holding Corporation
125 West 55th Street
New York, New York 10019
COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue, NW
Washington, DC 20006
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
CUSTODIAN
Key Trust Company of Ohio, N.A.
127 Public Square
Cleveland, Ohio 44114
TRANSFER AGENT
Primary Funds Service Corporation
P.O. Box 9742
Providence, RI 02940-9742
DISTRIBUTOR
Concord Financial Group
125 West 55th Street
New York, NY 10019
The date of this Prospectus is April 1, 1996
<PAGE> 24
KEY MUTUAL FUNDS
45 Rockefeller Plaza
New York, New York 10111
STATEMENT OF ADDITIONAL INFORMATION
April 1, 1996
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Key Mutual Funds, dated April 1, 1996, as
supplemented from time to time, a copy of which may be obtained at the address
noted above.
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES....................................................................... 3
Call Options......................................................................................... 3
Foreign Securities................................................................................... 4
Loans of Portfolio Securities........................................................................ 4
Repurchase Agreements................................................................................ 4
INVESTMENT RESTRICTIONS.................................................................................. 5
PORTFOLIO TURNOVER....................................................................................... 6
SBSF Fund, Convertible Securities Fund and Capital Growth Fund....................................... 6
SBSF Money Market Fund............................................................................... 6
MANAGEMENT OF THE FUNDS.................................................................................. 6
Directors and Officers............................................................................... 6
SECURITY HOLDERS......................................................................................... 7
THE INVESTMENT ADVISER AND ADMINISTRATOR................................................................. 8
EXPENSES AND DISTRIBUTION PLAN........................................................................... 10
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING
AGENT................................................................................................ 11
INDEPENDENT ACCOUNTANTS.................................................................................. 11
COMPUTATION OF YIELDS AND TOTAL RETURN................................................................... 11
SBSF Money Market Fund.......................................................................... 11
SBSF Fund, SBSF Convertible Securities Fund and SBSF Capital
Growth Fund..................................................................................... 11
PORTFOLIO TRANSACTIONS AND BROKERAGE..................................................................... 12
PURCHASE, REDEMPTION AND PRICING......................................................................... 13
FEDERAL INCOME TAXES..................................................................................... 14
APPENDIX A............................................................................................... 16
</TABLE>
2
<PAGE> 26
INVESTMENT OBJECTIVES AND POLICIES
Key Mutual Funds, formerly known as SBSF Funds, Inc. (the "Company") is a
professionally managed, no-load, open-end series investment company consisting
of four different portfolios (each a "Fund" and collectively the "Funds"). Each
Fund is a separately managed, diversified mutual fund with its own investment
objective and policies. The Funds have no sales charges, redemption fees or
exchange fees. The four Funds are:
SBSF Fund -- its investment objective is to seek a high total return over the
long term consistent with reasonable risk. In seeking its objective, the SBSF
Fund will invest primarily in common stocks which in the opinion of the Adviser
have the potential for capital appreciation in excess of market averages during
periods of market strength, while attempting to preserve capital during periods
of market weakness.
SBSF Capital Growth Fund -- its investment objective is to seek capital
appreciation. The Fund will seek to achieve its objective by investing in equity
securities of companies which the Adviser believes are likely to have rapid
growth in revenue or earnings. The SBSF Capital Growth Fund will invest
primarily in the securities of small to medium capitalized companies.
SBSF Convertible Securities Fund -- its investment objective is to seek a high
level of current income together with long-term capital appreciation. The SBSF
Convertible Securities Fund will invest primarily in bonds, corporate notes,
preferred stocks and other securities convertible into common stock.
SBSF Money Market Fund -- its investment objective is to provide high current
income to the extent consistent with preservation of capital. The SBSF Money
Market Fund invests only in obligations with maturities of one year or less
including bank certificates of deposit, bankers acceptances, high grade
commercial paper and securities issued or guaranteed by the U.S. Government or
its agencies and instrumentalities.
In addition, the Funds may use the investment methods described below.
CALL OPTIONS
The SBSF Fund, SBSF Convertible Securities Fund and SBSF Capital Growth Fund
may purchase and write call options that are traded on U.S. securities
exchanges. Call options are currently traded on the Chicago Board Options
Exchange, the American Stock Exchange, the Philadelphia Stock Exchange and the
Pacific Stock Exchange. A call option is a short-term contract (having a
duration of nine months or less) pursuant to which the purchaser of the call
option, in return for a premium paid, has the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation, upon exercise of the option, to deliver the underlying security
against payment of the exercise price during the option period. Brokerage
commissions on call options transactions are generally higher than those for
exchange transactions in listed common stocks.
A call option is "covered" if the Fund which writes it owns the underlying
security covered by the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund which writes it holds on a share-for-share basis a call on
the same security as the call written where the exercise price of the call held
is equal to or less than the exercise price of the call written or greater than
the exercise price of the call written if the difference is maintained by the
Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its custodian. The premium paid by the purchaser of an
option will reflect, among other things, the relationship of the exercise price
to the market price and volatility of the underlying security, the remaining
term of the option, supply and demand and interest rates.
If the writer of an option wishes to terminate his obligation, he may effect a
"closing purchase transaction". This is accomplished by buying an option of the
same series as the option previously written. The effect of the purchase is that
the writer's position will be canceled by the clearing corporation. However, a
writer may not effect a closing purchase transaction after it has been notified
of the exercise of an option. Likewise, an investor who is the holder of an
option may liquidate his position by effecting a "closing sale transaction".
This is accomplished by selling an option of the same series as the option
previously purchased. There is no guarantee that either a closing purchase or a
closing sale transaction can be effected.
Effecting a closing transaction in the case of a written call option will
permit the Fund which wrote it to write another call option on the underlying
security with either a different exercise price or expiration date or both.
Also, effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
investments. If a Fund desires to sell a particular security from its portfolio
on which it has written a call option it will effect a closing transaction prior
to or concurrent with the sale of the security. If a Fund is unable to effect a
closing purchase transaction and is otherwise unable to keep the option that it
has written
3
<PAGE> 27
covered, as described above, the Fund will be unable to dispose of the
underlying security and engage in the foregoing transactions.
A gain from a closing transaction will be realized if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; a loss will be realized from a
closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.
The SBSF Fund, SBSF Capital Growth Fund and SBSF Convertible Securities Fund
may write call options only if they are covered, and the options must remain
covered so long as the Fund is obligated as a writer. The Funds have undertaken
with certain state securities commissions that, so long as shares of the Funds
are registered in those states, it will not (a) write calls if, after giving
effect to any additional call, more than 25% of any of the Funds' total assets
would be subject to calls; or (b) purchase call options (other than in closing
purchase transactions) if, after such purchase, the aggregate premiums paid for
all such options owned at that time would exceed 20% of the Fund's total net
assets. In addition, the Funds may be limited in engaging in options
transactions by certain provisions of the Internal Revenue Code which limit the
amount of gross income derived from the sale or other disposition of securities
held for less than three months to 30%. See "Federal Income Taxes".
FOREIGN SECURITIES
Securities of foreign issuers may, in the opinion of the Adviser, present
attractive investment opportunities, and the SBSF Fund, SBSF Capital Growth Fund
and SBSF Convertible Securities Fund may invest up to 10% of each Fund's
respective total assets in such securities. Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations, including currency blockage. There may be less information
available about a foreign company than about a U.S. company, and foreign
companies may not be subject to reporting standards and requirements comparable
to those applicable to U.S. companies. Foreign securities and their markets may
not be as liquid as U.S. securities and their markets. Securities of some
foreign companies may involve greater market risk than securities of U.S.
companies, and foreign brokerage commissions and custody fees are generally
higher than those in the United States. Investments in foreign securities may
also be subject to local economic or political risks, such as political
instability of some foreign governments and the possibility of nationalization
or expropriation of issuers.
LOANS OF PORTFOLIO SECURITIES
To increase income, the Funds may lend portfolio securities to brokers or
dealers, banks or other institutional investors, such as insurance companies and
pension funds, selected by the Adviser in accordance with creditworthiness
standards adopted by the Board of Directors of the Company, provided that cash
or equivalent collateral, or a letter of credit drawn in favor of the Funds in
an amount equal to at least 100% of the market value of the securities loaned is
continuously maintained by the borrower with or in favor of the Fund or Funds
making the loan. Securities are borrowed for many purposes, including covering
short sales, avoiding failures to deliver securities and completing arbitrage
operations. By lending its portfolio securities, a Fund may receive income
through the receipt of interest on the loan as well as through the short-term
investment of cash or equivalent collateral. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would inure to the Fund or Funds making the loan.
If necessary, the Funds may pay reasonable negotiated fees to effect such
loans. The Funds do not have the right to vote securities that are on loan, but
would terminate the loan if a material event occurs affecting loaned securities;
the Funds will require the return of the loaned securities in order to regain
the right to vote. The Funds will not engage in securities loans with or through
persons affiliated with the Funds.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements with major dealers in U.S.
Government securities and member banks of the Federal Reserve System which are
selected by the Adviser in accordance with procedures approved by the Board of
Directors. A repurchase agreement is an instrument under which the purchaser
(i.e., the Funds) acquires a debt security and the seller agrees, at the time of
the sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the purchaser's holding period. This
results in a fixed rate of return insulated from market fluctuations during such
period. The underlying securities are ordinarily U.S. Treasury or other
governmental obligations or high quality money market instruments. The Funds'
repurchase agreements require that at all times while the repurchase agreement
is in effect, the value of the collateral must equal or exceed the repurchase
price. While the maturities of the underlying securities in repurchase agreement
transactions may be more than one year, the term of each repurchase agreement
will always be less than one year. The Funds' risk is limited to the ability of
the seller to pay the agreed upon amount on the delivery date. In the
4
<PAGE> 28
opinion of the Adviser, the risk is not material; if the seller defaults, the
underlying security constitutes collateral for the seller's obligation to pay
although the Funds may experience difficulties and incur certain costs in
exercising its rights to the collateral and may lose the interest it expected to
receive in respect of the repurchase agreement. Repurchase agreements usually
are for short periods, such as one week or less, but could be longer. The Funds
will not enter into repurchase agreements of a duration of more than one week
if, taken together with illiquid securities and other securities for which there
are no readily available quotations, more than 10% of their respective total
assets would be so invested. Repurchase agreements are considered to be loans by
the Funds collateralized by the underlying securities.
The investment policies of the Funds set forth above may be changed or altered
by the Board of Directors of the Funds, except to the extent set forth under
"Investment Restrictions".
INVESTMENT RESTRICTIONS
The following investment restrictions are considered to be fundamental
policies of each of the Funds and may only be changed if approved by the holders
of a majority of the outstanding voting securities of the affected Fund. Under
the Investment Company Act of 1940 ("1940 Act") such approval requires the
affirmative vote, at a meeting of shareholders, of either (i) more than 50% of
the Fund's outstanding shares or (ii) at least 67% of the shares present in
person or by proxy, provided that the holders of more than 50% of the Fund's
outstanding shares are present in person or represented by proxy.
Each of the Funds will not:
1. As to 75% of their respective total assets, invest more than 5% in the
securities of any one issuer except securities of the U.S. Government, its
agencies or its instrumentalities.
2. Invest in companies for the purpose of influencing management or
exercising control, and will not purchase more than 10% of the voting
securities of any one issuer. This will not preclude the management of the
Funds from voting proxies in their discretion.
3. Lend any cash except in connection with the acquisition of a portion of an
issue of publicly distributed bonds, debentures, notes or other evidences
of indebtedness or in connection with the purchase of securities subject
to repurchase agreements. The Funds will not lend any other assets except
as a special investment method. See "Investment Objectives and Policies"
herein and "Investment Objectives" in the Prospectus.
4. Ordinarily borrow money, but each Fund reserves the right to borrow from
banks, on a temporary basis, an aggregate amount of not more than 5% of
the total asset value of the respective Fund at the time of borrowing.
None of the Funds has a policy limiting the uses for which borrowed funds
may be used.
5. Purchase securities on margin or sell securities short.
6. Act as an underwriter of securities issued by others.
7. Purchase the securities of other investment companies except in the open
market and at the usual and customary brokerage commissions or except as
part of a merger, consolidation or other acquisition.
8. Purchase or hold any real estate, including real estate limited
partnerships, except that the Funds may invest in securities secured by
real estate or interests therein or issued by persons which deal in real
estate or interests therein. The Funds will not deal in commodities or
commodity contracts.
9. Purchase securities if such purchase would cause more than 25% of any of
the Funds' total assets to be invested in the securities of issuers in any
one industry, provided however that the Money Market Fund reserves the
right to concentrate in securities issued or guaranteed as to principal
and interest by the United States Government, its agencies or
instrumentalities or U.S. bank obligations.
10. Make a loan of its portfolio securities if, immediately thereafter and as
a result thereof, portfolio securities with a market value of 10% or more
of the total assets of any of the Funds would be subject to such loans.
11. Invest more than 10% of any of the Funds' total assets in (i) securities
restricted as to disposition under the Federal securities laws, (ii)
securities as to which there are no readily available market quotations or
(iii) repurchase agreements with a maturity in excess of 7 days.
In addition to the foregoing fundamental investment restrictions which may be
changed only with shareholder approval, each Fund has adopted the following
investment restrictions which may be changed at any time by the Board of
Directors provided that such change does not conflict with any fundamental
policy of the Funds.
Each of the Funds will not:
1. Invest more than 5% of its total assets in the securities of any one issuer
except in securities of the United States Government, its agencies or its
instrumentalities.
5
<PAGE> 29
2. Invest in excess of 5% of its total assets in securities of issuers which,
including predecessors, do not have a record of at least three years'
operation.
3. Invest in interests in oil, gas or other mineral exploration or development
programs, including mineral leases.
4. Pledge or hypothecate any of the Fund's assets. For the purpose of this
limitation, collateral arrangements with respect to stock options are not
deemed to be a pledge of assets.
5. Purchase or retain the securities of any issuer if those officers and
directors of the Funds, or of its Investment Adviser, who own individually
more than 1/2% of the securities of such issuer or together own more than
5% of the securities of such issuer.
6. Invest in excess of 10% of its total assets in the securities of foreign
issuers, excluding from such limitation securities listed on any United
States securities exchange.
7. Invest in excess of 10% of its net assets in other investment companies.
With respect to those investment restrictions involving percentages, if a
percentage restriction is complied with at the time of initial investment, a
subsequent increase or decrease in that percentage resulting from a change in
the value of portfolio securities or total net assets will not constitute a
violation of the investment restriction.
PORTFOLIO TURNOVER
SBSF FUND, SBSF CONVERTIBLE SECURITIES FUND AND SBSF CAPITAL GROWTH FUND
Purchases and sales of securities are made at such times as the Adviser deems
to be in the best interest of the Funds' shareholders without regard to the rate
of portfolio turnover, about which there are no restrictions. From time to time,
the Funds may trade in securities for the short term. It is anticipated that the
annual portfolio turnover rate of the SBSF Fund and the SBSF Convertible
Securities Fund will not exceed 75% but may be substantially higher than 100%
for the SBSF Capital Growth Fund. In any particular year, market conditions
could result in portfolio activity at a greater or lesser rate than anticipated.
Portfolio turnover rate is, generally, the percentage computed by dividing the
lesser of purchases or sales by the average value of the portfolio. High
portfolio turnover involves correspondingly higher brokerage commission expenses
which are borne directly by the Funds. In addition, the effect of engaging in
options transactions may be to increase portfolio turnover.
SBSF MONEY MARKET FUND
The SBSF Money Market Fund's policy of investing only in securities with
maturities of less than one year will result in a higher portfolio turnover than
the SBSF Fund or the SBSF Convertible Securities Fund. Since brokerage
commissions are not normally paid on investments which the SBSF Money Market
Fund makes, turnover resulting from such investments should not adversely affect
the net asset value or net income of the Fund.
MANAGEMENT OF THE FUNDS
DIRECTORS AND OFFICERS
Officers and employees of the Adviser are not permitted to serve as officers
or directors of the Funds due to certain regulatory restrictions imposed on
banking organizations and their subsidiaries. See "The Investment Adviser and
Administrator" below. The persons who have been elected to serve as officers
and directors of the Funds, their position with the Funds and their principal
occupations during the last five years are set forth below:
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS AND ADDRESS POSITION WITH REGISTRANT
- ---------------------------------------------------------------------------------- ------------------------
<S> <C>
EDWARD P. CAMPBELL (45), Director, Executive Vice President and Chief Operating Director
Officer of Nordson Corporation (manufacturer of application equipment) since
28601 Clemens Road, Westlake, Ohio 44145.
EUGENE J. MCDONALD (62), Executive Vice President for Asset Management of Duke Director
University and President of Duke Management Co. since 2200 Main
Street, Suite 1000, Durham, NC 27705.
FRANK A. WEIL (64), Chairman and CEO of Abacus & Associates, Inc. since Non-Executive Chairman
a private investment office, 147 E. 48th Street, New York, New York 10017. and Director
</TABLE>
6
<PAGE> 30
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
DURING PAST FIVE YEARS AND ADDRESS POSITION WITH REGISTRANT
- ---------------------------------------------------------------------------------- ------------------------
<S> <C>
LEIGH A. WILSON (50), Chairman and Chief Executive Officer of Glenleigh President and Director
International Limited (merchant bank), 420 East 54th Street, New York, NY 10012
since from 1993 to present, President of The Victory Funds.
WILLIAM B. BLUNDIN (57), Vice Chairman of Concord Holding Corp., 125 West 55th Vice President
Street, New York, NY 10019.
MARTIN R. DEAN (31), Associate Director of Accounting Services, BISYS Fund Treasurer
Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 (May 1994 to present);
Senior Manager at KPMG Peat Marwick (January 1987 to April 1994).
KAREN A. DOYLE (38), Manager of Client Services, BISYS Fund Services, Inc., 125 Secretary
West 55th Street, New York, NY 10019 (October 1994 to present); Assistant
Treasurer at The Bank of New York (April 1979 to October 1994).
SCOTT A. ENGLEHART (33), Director of Client Services, BISYS Fund Services, Inc., Asst. Secretary
3435 Stelzer Road, Columbus, Ohio 43219 (October 1990 to present).
</TABLE>
Directors who are not "interested persons" of the Funds receive an annual fee
of $7,500 plus $750 per meeting of the Board of Directors attended and
reasonable out-of-pocket expenses incurred in connection with attending such
meetings. Each director who is an "interested person" of the Company does not
receive any compensation from the Company.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION
NAME OF FROM COMPANY FOR THE FISCAL FROM COMPANY
NON-INTERESTED DIRECTOR YEAR ENDED NOVEMBER 30, 1995 AND VICTORY FUNDS
- ------------------------ ---------------------------- ------------------
<S> <C> <C>
Edward P. Campbell $6,000 $ (2)
Ted H. McCourtney $9,375 $9,375(1)(3)
Eugene J. McDonald $9,375 $9,375(3)
Frank A. Weil $9,375 $9,375(3)
Leigh A. Wilson $6,000 (2)
</TABLE>
- ---------------
(1) Mr. McCourtney resigned his position as a Director of the Company effective
December 7, 1995.
(2) Total compensation paid with respect to service on the boards of seven
investment companies.
(3) Total compensation paid with respect to service on the board of the Company
only.
SECURITY HOLDERS
The name, address and percentage of ownership of each person who is known by
the Funds to have owned of record or beneficially 5 percent or more of any of
the Funds' shares as of [February 28, 1995] is:
<TABLE>
<CAPTION>
SHARES OWNED (PERCENT OF CLASS)*
----------------------------------------------------
SBSF SBSF SBSF
MONEY CONVERTIBLE CAPITAL
NAME AND ADDRESS SBSF FUND MARKET SECURITIES GROWTH
- ----------------------------------------- --------- --------- ----------- --------
<S> <C> <C> <C> <C>
Cost & Co. 299,057
c/o Mellon Bank (5.59%)
P.O. Box 320
Pittsburgh, PA 15230
Brookdale Hospital Medical Center 1,200,271
Linden Blvd. at Brookdale Plaza (22.43%)
Brooklyn, NY 11212
William W. McGuire 5,221,009
1270 French Creek Drive (22.95%)
Wayzata, MN 55391
Charles Schwab & Co. / FBO Cust. 413,499
101 Montgomery Street (7.73%)
San Francisco, CA 941
S. Weaver c/o Joel Faden & Co. 6,807,179
P.O. Box 277 FDR Sta. (27.31%)
New York, NY 10150
</TABLE>
7
<PAGE> 31
<TABLE>
<CAPTION>
SHARES OWNED (PERCENT OF CLASS)*
----------------------------------------------------
SBSF SBSF SBSF
MONEY CONVERTIBLE CAPITAL
NAME AND ADDRESS SBSF FUND MARKET SECURITIES GROWTH
- ----------------------------------------- --------- --------- ----------- --------
<S> <C> <C> <C> <C>
The Sally E. Darling Rev. Trust 2,698,531
880 Indian Ridge (10.83%)
Waynesville, NC 28786
J. & C. Paul Foundation 63,776
P.O. Box 20218 (10.23%)
Park West Finance Station
New York, NY
Gretchen Johnson & Gordon 516,489
c/o Danse, Balaam & Frank (6.91%)
5 Independence Way
Princeton, NJ 08540
Frank A. Weil c/o Abacus Associates 280,460
147 East 48th Street (5.24%)
New York, NY 10017
Dani Seigel 848,241
310 Madison Avenue (11.36%)
New York, NY 10017
William G. Spears 48,657
45 Rockefeller Plaza (7.80%)
New York, NY 10111
Richard E. Salomon 2,943,199
45 Rockefeller Plaza (11.81%)
New York, NY 10111
Officers and Directors 416,596 3,195,800 584,399 106,257
as a group (5.58%) (12.82%) (10.92%) (17.04%)
45 Rockefeller Plaza
New York, NY 10111
</TABLE>
- ---------------
* All shares are owned beneficially.
THE INVESTMENT ADVISER AND ADMINISTRATOR
The investment adviser to the Funds is Spears, Benzak, Salomon & Farrell,
Inc., (the "Adviser" or "Spears") a New York Corporation that is registered as
an investment adviser with the Securities and Exchange Commission. The Adviser
is a wholly owned subsidiary of KeyCorp Asset Management Holdings, Inc.
("KAMHI") and is an indirect wholly owned subsidiary of Society National Bank,
N.A. and KeyCorp, one of the largest financial services holding companies in the
United States. KeyCorp's principal offices are located at 127 Public Square,
Cleveland, Ohio 44114.
In addition to the Funds, the Adviser's clients include individuals, pension
and profit-sharing trusts, partnerships, and endowments. The accounts which are
managed or advised by the Adviser for these clients have varying investment
objectives and the Adviser may invest assets for such accounts in investments
substantially similar to, or the same as, those which are expected to constitute
the principal investments of the SBSF Fund. Such accounts are supervised by
officers and employees of the Adviser who may also be acting in similar
capacities for the Funds.
Pursuant to the Investment Advisory Agreement, the Adviser furnishes a
continuous investment program for the Funds' portfolios, makes the day-to-day
investment decisions for the Funds, executes the purchase and sale orders
for the portfolio transactions of the Funds and generally manages the Funds'
investments in accordance with the stated policies of the Funds, subject to the
general supervision of the Board of Directors of the Funds.
Spears, pursuant to a sub-administration agreement with Concord Holding Corp.
("Concord" or the "Administrator"), 125 West 55th Street, New York, New York
10019, is responsible for providing persons satisfactory to the Company's Board
of Directors to serve as officers of the Company.
As compensation for the services rendered and related expenses borne by the
Adviser under the Investment Advisory Agreement, the SBSF Fund, the SBSF
Convertible Securities Fund and the SBSF Capital Growth Fund each pay the
Adviser a fee, computed daily and payable monthly, equal to .75 of l% per annum
of each Fund's average daily net assets. The Investment Advisory Agreement
further provides that the SBSF Money Market Fund will pay the Adviser a fee,
computed daily and payable monthly, equal to .25% per annum of its average daily
net assets. The
8
<PAGE> 32
Adviser is obligated to reimburse the Funds in the event expenses exceed certain
prescribed limits (see "Distribution Plan and Expenses"). The Adviser's
compensation for acting as adviser to the SBSF Fund and the SBSF Convertible
Securities Fund was $868,860 and $441,307, respectively, for fiscal year ended
November 30, 1993; $889,354 and $446,901, respectively, for the fiscal year
ended November 30, 1994, and $815,718 and $455,976, respectively, for fiscal
year ended November 30, 1995. The Adviser waived its fees for advisory services
rendered to the SBSF Money Market Fund totaling $34,146, $42,413 and $65,340 for
the fiscal years ended November 30, 1993, 1994 and 1995 respectively. The
Adviser waived its fee for advisory services rendered to the SBSF Capital Growth
Fund totaling $561 and $26,742 for the period November 1, 1993 through November
30, 1993 and for the fiscal year ended November 30, 1994, respectively.
Commencing October 1, 1995, the Adviser discontinued its voluntary waiver of
such advisory fees for the SBSF Capital Growth Fund, and, for the fiscal year
ended November 30, 1995, earned $10,394 as compensation for acting as adviser to
such Fund.
The Investment Advisory Agreement, dated February 8, 1988, between the Adviser
and the Funds remains in effect for a period of more than one year only if it is
specifically approved at least annually by its Board of Directors including a
majority of the directors who are not parties to the Investment Advisory
Agreement or "interested persons" of the Funds as defined in the 1940 Act cast
in person at a meeting called for the purpose of voting on such approval. The
acquisition of Spears by KeyCorp Asset Management Holdings, Inc. on April 5,
1995 resulted in the assignment of the Investment Advisory Agreement and,
therefore, its termination under the Investment Company Act of 1940. At an
annual meeting of shareholders held on March 29, 1995, the shareholders of the
Funds approved a new Investment Advisory Agreement with Spears which became
effective upon the consummation of the acquisition on April 5, 1995. The
Investment Advisory Agreement so approved is substantially similar to, including
the same fee schedules as, the Funds' previous agreements. See "Management of
the Funds -- Directors and Officers". The Investment Advisory Agreement will
terminate automatically if assigned and is terminable at any time without
penalty by a vote of a majority of the directors who are not "interested
persons" of the Funds and who have no direct or indirect financial interest in
the Investment Advisory Agreement, or by a vote of the holders of a majority of
each Fund's outstanding shares on not less than 60 days' written notice to the
Adviser and by the Adviser on not less than 90 days' written notice to the
Funds.
Concord also serves as the Administrator of the Funds. In this capacity
Concord administers all aspects of the Funds' operations subject to the
supervision of the Board of Directors. Because of the services of Concord as
Administrator and Spears as Adviser, the Funds require no employees other than
its officers, none of whom receive compensation from the Funds and all of whom
are employed by Concord. In connection with its responsibilities as
Administrator and in consideration of its administrative fee, Concord (i)
provides the Funds with the services of persons competent to perform such
supervisory, administrative, and clerical functions as are necessary in order to
provide effective administration of the Funds, including the maintenance of
certain books and records such as journals, ledger accounts and other records
described in Rule 31a-1 under the 1940 Act, transmitting purchase and redemption
orders for shares, initiating all money transfers from the Funds to the
Custodian and from the Funds account to appropriate customer accounts,
notification of available funds for investment, reconciliation of account
information and balances among the Custodian, Transfer Agent, and Adviser, and
processing, investigating, and responding to shareholder inquiries; (ii)
oversees the performance of administrative and professional services to the
Funds by others, including the Funds' Custodian, Transfer Agent and Dividend
Disbursing Agent, as well as accounting, and auditing and other services
performed for the Funds; (iii) provides the Funds with adequate office space and
facilities; and (iv) prepares, but does not pay for, the periodic updating of
the Funds' registration statement and prospectus, and provides for the printing
of such documents for the purpose of filings with the Securities and Exchange
Commission and state securities administrators, and the preparation of the
Funds' tax returns and reports to the Funds' shareholders and the Securities and
Exchange Commission.
For the services rendered to the Funds and related expenses borne by Concord
as Administrator, each Fund pays Concord an annual fee, computed daily and
payable monthly, equal to .25 of 1% of the average daily net assets of each
Fund up to $50,000,000 plus .15 of l% of such assets greater than $50,000,000.
For the fiscal years ended November 30, 1993, 1994 and 1995 Spears, the prior
administrator for the Funds, received the following amounts from the Funds for
administration:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
SBSF Fund.............................................................. $ 207,889 $ 209,164 $ 204,371
SBSF Convertible Securities............................................ 137,870 139,949 $ 141,195
SBSF Money Market...................................................... 34,146 42,413 $ 65,340
</TABLE>
Spears waived its fee for administration services rendered to the SBSF Capital
Growth Fund totaling $187, $8,921 and $16,210 for the period November 1, 1993
through November 30, 1993 and for the fiscal years ended November 30, 1994 and
1995 respectively. As of January 1, 1996, Spears discontinued its voluntary
waiver of such administration fees.
As Administrator, Concord is obligated to reimburse the Funds in the event the
Funds' expenses exceed certain prescribed limits. See "Expenses and Distribution
Plan".
9
<PAGE> 33
The Administration Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of Concord, or of
reckless disregard of its obligations thereunder, Concord shall not be liable
for any action or failure to act in accordance with its duties thereunder.
Spears and Concord have agreed that if in any fiscal year the sum of any of
the Fund's expenses exceeds the limits set by applicable regulations of state
securities commissions, the amounts payable by such Fund to Spears and Concord
for the advisory fee and the administration fee for that year shall each be
proportionately reduced by the amount of such excess. However, if the excess
should be greater than the total amounts payable to Spears and Concord in that
year, Spears and Concord shall pay to such Fund the difference between such
excess and the fees paid to them for that year. For the purpose of this
calculation, expenses shall include the fees payable to Spears and Concord under
the Investment Advisory and Administration Agreements and the amortization of
organization expenses, but shall exclude taxes, interest, brokerage and
extraordinary expenses. The Funds believe that, currently, the most restrictive
expense ratio limitation imposed by any state is 2 % of the first $30 million of
the Funds' net assets, 2% on the next $70 million of the Funds' net assets and
1 1/2% of remaining average net assets.
EXPENSES AND DISTRIBUTION PLAN
Except as set forth above, and as set forth below, the Funds are responsible
for the payment of their expenses. Such expenses include the fees payable to
Spears; any brokerage fees and commissions; taxes; interest; the cost of any
liability insurance or fidelity bonds; costs, expenses, or losses arising out of
any liability of or claim for damages or other relief asserted against the Funds
for violation of any law; legal and auditing fees and expenses; the fees and
certain expenses of the Funds' Custodian, Transfer Agent and Distributor; the
fees of any trade association of which the Funds are a member; the expenses of
printing and mailing reports and notices to the Funds' shareholders; filing fees
for the registration or qualification of Funds shares under Federal or state
securities laws; the fees and expenses involved in registering and maintaining
registration of the Funds and of its shares with the Securities and Exchange
Commission; the costs of registering the Funds as a broker or dealer; the costs
of qualifying its shares under state securities laws; the expenses of servicing
shareholders and shareholder accounts not otherwise incurred by the Adviser or
the Administrator; and any extraordinary expenses incurred by the Funds.
As a result of certain regulatory restrictions imposed on banking
organizations and their subsidiaries, the Company is not permitted to sell
shares of the Funds directly without an independent underwriter. Upon the
acquisition of the Adviser by KeyCorp, the Funds' Board of Directors, including
its independent directors, approved a Distribution Agreement with Concord
Financial Group, Inc. ("Concord Financial") under which Concord Financial was
appointed to serve as independent underwriter/distributor of the Funds' shares.
Under the Distribution Agreement, Concord Financial may enter into agreements
with selected dealers for the distribution of shares of the Funds.
Pursuant to a distribution plan adopted in accordance with Rule 12b-1 under
the 1940 Act (the "Distribution Plan"), the Company is authorized to pay
expenses primarily intended to result in the sale of shares of a Fund of the
Company including, but not limited to, printing of prospectuses and statements
of additional information (and supplements thereto) and reports for other than
existing shareholders; and preparation, printing, and distribution of sales
literature and advertising materials. The Company also may compensate Concord
Financial, or reimburse expenses incurred by Concord Financial for
distribution-related and sales support or shareholder account services. In
addition, all amounts expended pursuant to the Distribution Plan are paid to
Concord Financial which may pay all or any portion of such payments to
compensate or reimburse brokers and dealers or others which make sales of shares
of a Fund or which service shareholder accounts. Total payments under the
Distribution Plan may not exceed .25% of the average daily net asset value of
the shares of a Fund on an annual basis.
Rule 12b-1 requires that the Distribution Plan be approved by a vote of at
least a majority of the outstanding voting securities of the Funds and by a
majority of the Board of Directors, including those directors who are not
"interested persons" of the Funds (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Distribution Plan. The Distribution
Plan must be approved at least annually in the manner described in the foregoing
sentence and may be terminated at any time by a vote of a majority of the
outstanding voting securities of the Funds or a majority of those directors who
are not "interested persons" and who have no direct or indirect financial
interest in the Distribution Plan.
While the Distribution Plan is in effect, the selection and nomination of
directors who are not "interested persons" of the Funds (as defined in the 1940
Act) is committed to the discretion of the directors who are not interested
persons of the Funds.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio 44114 has
been retained as custodian for the Funds' investments. Primary Funds Service
Corporation, P.O. Box 9742 Providence, RI 02940-9742 has been retained as the
Funds' Transfer Agent and Dividend Disbursing Agent. Key Trust Company of Ohio,
N.A. also
10
<PAGE> 34
maintains certain accounting and financial records of the Funds. Key Trust
Company of Ohio, N.A. is a subsidiary of KeyCorp and an affiliate of the Adviser
and receives compensation from the Funds for services it performs as custodian.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of Americas, New York, New York 10036, acts
as independent accountants for the Funds, and in that capacity audits the Funds'
annual financial statements.
COMPUTATION OF YIELDS AND TOTAL RETURN
SBSF MONEY MARKET FUND
The current and effective yields of the Fund may be quoted in reports, sales
literature, and advertisements published by the Fund. Current yield is computed
by determining the net change exclusive of capital changes in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of a seven-day calendar period, dividing the net change in account value by the
value of the account at the beginning of the period, and multiplying the return
over the seven-day period by 365/7. For purposes of the calculation, net change
in account value reflects the value of additional shares purchased with
dividends from the original share and dividends declared on both the original
share and any such additional shares, but does not reflect realized gains or
losses or unrealized appreciation or depreciation. Effective yield is computed
by annualizing the seven-day return with all dividends reinvested in additional
Fund shares. The current yield and effective yield for the Money Market Fund for
the seven day period ended November 30, 1995 were 4.78% and 4.90%, respectively.
SBSF FUND, SBSF CONVERTIBLE SECURITIES FUND AND SBSF CAPITAL GROWTH FUND
TOTAL RETURN. From time to time the SBSF Fund, the SBSF Convertible
Securities Fund or the SBSF Capital Growth Fund may advertise an "average annual
total return" and "total return." "Average annual total return" ("T" in the
formula below) is an average annual compounded rate of return. It is the rate of
return based on factors which include a hypothetical investment of $1,000 ("P"
in the formula below) over a hypothetical number of years ("n") with an Ending
Redeemable Value ("ERV") of that investment, according to the following formula:
P(1+T)n = ERV
The "total return" uses some of the same factors as "average annual total
return," but does not average the rate of return on an annual basis. Total
return measures the cumulative (rather than the average) change in value of a
hypothetical investment over the stated period. Total return is determined as
follows:
ERV-P
---- = Total Return
P
Both formulas assume that all dividends and capital gains distributions during
the period are reinvested at net asset value per share, and that the investment
is redeemed at the end of the period.
Total return information may be useful to investors in reviewing performance.
However, certain factors should be taken into account before using this
information as a basis for comparison with alternative investments. No
adjustment is made for taxes payable on distributions. The total return will
fluctuate over time and the total return for any given past period is not an
indication or representation of future rates of return on its shares.
For the periods ended November 30, 1995, the average annual total returns of
the SBSF Fund, SBSF Convertible Securities Fund and SBSF Capital Growth Fund
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED SINCE
FUND 11/30/95 11/30/95 11/30/95 INCEPTION
- ----------------------------------------- ---------- ------------- -------------- ---------
<S> <C> <C> <C> <C>
SBSF Fund................................ 30.37% 13.29% 11.69% --
SBSF Convertible Securities Fund......... 20.43% 14.65% -- 11.18%(1)
SBSF Capital Growth Fund................. 30.03% -- -- 10.40%(2)
<FN>
- ---------------
(1) SBSF Convertible Securities Fund commenced operations on April 14, 1988
(2) SBSF Capital Growth Fund commenced operations on November 1, 1993
</TABLE>
11
<PAGE> 35
YIELD. Yield quotations for the SBSF Convertible Securities Fund are based on
a 30-day period and are computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last day
of the period, according to the following formula:
<TABLE>
<S> <C> <C>
2[(a-b+1)6-1]
YIELD = ---
cd
</TABLE>
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
For the 30-day period ended November 30, 1995, the SBSF Fund and the SBSF
Convertible Securities Fund had yields of % and %, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions. Purchases and sales of securities on a
securities exchange are effected through brokers who charge a commission for
their services. Brokerage commissions on United States securities exchanges are
subject to negotiation between the Adviser and the broker.
Fixed income securities and securities traded in the over-the-counter market,
are generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. In underwritten offerings, securities
are purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
On occasion, certain money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid.
In placing orders for portfolio securities of the Funds, the Adviser is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Adviser will
consider the research and investment services provided by brokers or dealers who
effect or are parties to portfolio transactions of the Funds or the Adviser's
other clients. Such research and investment services are those which brokerage
houses customarily provide to institutional investors and include statistical
and economic data and research reports on particular companies and industries.
Such services are used by the Adviser in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Funds may be used in managing other investment accounts.
Conversely, brokers furnishing such services may be selected for the execution
of transactions of such other accounts, whose aggregate assets are far larger
than the Funds, and the services furnished by such brokers may be used by the
Adviser in providing investment management for the Funds. Commission rates are
established pursuant to negotiations with the broker based on the quality and
quantity of execution services provided by the broker in the light of generally
prevailing rates. In addition, the Adviser is authorized to pay higher
commissions on brokerage transactions for the Funds to brokers in order to
secure research and investment services described above, subject to review by
the Fund's Board of Directors from time to time as to the extent and
continuation of this practice. The allocation of orders among brokers and the
commission rates paid are reviewed periodically by the Funds' Board of
Directors. On behalf of the SBSF Fund, the SBSF Convertible Securities Fund and
the SBSF Capital Growth Fund, the Company, during the fiscal year ended November
30, 1995 directed $87,506,009, $24,822,201 and $7,623,764 respectively, in
brokerage transactions to brokers due to services they provided, and such
brokers received related commissions of $177,210, $54,437 and $22,412,
respectively. Certain of this brokerage might be deemed to be directed in
consideration of research provided to the Company and the Adviser.
As of the close of the Funds' fiscal year on November 30, 1995, the SBSF Fund
held securities of its regular broker-dealers with a market value as follows:
J.P. Morgan Co., Inc. ($3,925,000).
Transactions in options by the SBSF Fund, SBSF Convertible Securities Fund and
SBSF Capital Growth Fund will be subject to limitations established by each of
the exchanges on which options are traded governing the maximum number of
options which may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options are written or held on the
same or different exchanges or are written or held in one or more accounts or
through one or more brokers. Thus, the number of options which the Funds may
write or hold may be affected by options written or held by the Adviser and
other investment advisory clients of the Adviser. An exchange may order the
liquidation of positions found to be in excess of these limits, and it may
impose certain other sanctions.
12
<PAGE> 36
In October of 1993 the Adviser organized Edgewood Services, Inc. ("Edgewood"),
a broker/dealer registered as such with the Securities and Exchange Commission
that commenced its operations in August of 1994. Edgewood is an affiliated
broker of the Adviser because it is under common control with the Adviser.
Edgewood did not receive any commissions from the Funds during the fiscal year
ended November 30, 1994; however, it has received commissions from the Funds for
services rendered to it during the Fund's current fiscal year pursuant to
procedures that comply with a rule under the Act and that have been adopted by
the Fund's Board of Directors, including a majority of is non-interested
directors. For the period December 1, 1994 through February 28, 1995, the
commissions paid by the Funds to Edgewood were as follows: $11,360 from SBSF
Fund, $0 from the SBSF Convertible Securities Fund and $0 from the SBSF Capital
Growth Fund. On March 6, 1995, the shareholders of Edgewood entered into a Stock
Purchase Agreement pursuant to which Edgewood was sold to Federated Services
Company.
PURCHASE, REDEMPTION AND PRICING
Each Fund's shares are sold on a continuous basis, and may be redeemed by any
shareholder, on any day on which the New York Stock Exchange is open for
business. The New York Stock Exchange is scheduled to be closed on New Year's
Day, Presidents Day, Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The methods of purchase and
redemption of shares, and special retirement, withdrawal and exchange plans
offered are fully set forth in the Prospectus. Shares may be redeemed by
submitting a written request to the Funds, by check in the case of the Money
Market Fund, or by telephone, as described in the Prospectus.
The price per share for a purchase or redemption order received prior to the
close of trading on the New York Stock Exchange on any day that the Exchange is
open for trading is the net asset value as next determined after the order is
received. The Funds' net asset values are determined on each day that the
Exchange is open for trading or on any other day in which there is a sufficient
degree of trading in the Funds' investments to affect the net asset values,
except that the net asset values may not be computed on a day in which no orders
to purchase, sell or redeem the shares of the Funds have been received.
The net asset values of the SBSF Fund, Convertible Securities Fund and SBSF
Capital Growth Fund are determined at 4:00 p.m., New York time, each business
day, and each is equal to the value of the securities, cash and other assets
less liabilities divided by the number of shares outstanding. The net asset
value of the SBSF Money Market Fund is determined at 12:00 p.m., New York time,
each business day, in the same manner. Securities traded on securities exchanges
are valued at the last sales price on the exchange where the security is
primarily traded or, lacking any sales, at the mean between the most recent bid
and asked quotation. Securities traded over-the-counter are valued at the mean
between the most recent bid and asked price. Securities for which quotations are
not readily available and any other assets are valued at fair value as
determined in good faith by the Board of Directors. Money market instruments are
valued at amortized cost in accordance with Rule 2a-7 under the 1940 Act. The
amortized cost method values a security initially at its cost and thereafter
assumes a constant amortization of any discount or premium regardless of the
impact of fluctuating interest rates on the market value of the security. This
method does not take into account unrealized gains or losses.
Generally, trading in foreign securities, as well as corporate bonds, United
States Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset values
of the shares of the SBSF Fund, SBSF Convertible Securities Fund and SBSF
Capital Growth Fund are determined as of such times. Foreign currency exchange
rates also are generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange which will not be reflected in the
computation of such Funds' net asset values. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by the Board of
Directors.
FEDERAL INCOME TAXES
Each Fund will be treated as a separate entity for purposes of the Internal
Revenue Code. Qualification as a regulated investment company under the Internal
Revenue Code requires for each Fund, among other things, that (a) at least 90%
of the Fund's annual gross income, without offset for losses from the sale or
other disposition of stock or securities, be derived from interest, payments
with respect to securities loans, dividends and gains from the sale or other
disposition of stock or securities or options thereon; (b) a Fund derive less
than 30% of its gross income from gains (without deduction for losses) from the
sale or other disposition of stock or securities (or options thereon) held less
than three months; and (c) a Fund diversify its holdings so that, at the end of
each quarter of the taxable year, (i) at least 50% of the market value of a
Fund's assets is represented by cash, cash items, U.S. Government securities and
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of a Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the
13
<PAGE> 37
value of a Fund's assets is invested in the securities of any one issuer (other
than U.S. Government securities). In addition, the Funds will not be subject to
Federal Income Tax on their net investment income and gains, if any, that are
distributed to shareholders, provided each Fund distributes to its shareholders
each year at least 90% of its net investment income and short term capital
gains, if any. Further, to avoid a non-deductible 4% excise tax, each Fund must
generally distribute by December 31 of each calendar year the required amount of
capital gain net income and investment company taxable income earned during that
calendar year and any prior year underdistribution.
As of the date of this Statement of Additional Information, the maximum
marginal federal individual stated tax rate applicable to ordinary income is
39.6% (effective rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gains is 28%; and the maximum corporate tax rate
applicable to ordinary income and net capital gains is 35%. However, to
eliminate the benefit of lower marginal corporate income tax rates, corporations
which have taxable income in excess of $100,000 for a taxable year will be
required to pay an additional amount of income tax of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of income tax of up to
$100,000.
In addition, the alternative minimum tax rate for noncorporate taxpayers is
26% on taxable excess (alternative minimum taxable income, less the applicable
exemption amount) up to $175,000. The alternative minimum tax rate on taxable
excess exceeding $175,000 is 28%. The corporate alternative minimum tax rate is
20%.
An investor may be entitled to invest in shares of a Fund through a
tax-deferred retirement plan. Pursuant to the Internal Revenue Code, individuals
who are not active participants (and who do not have a spouse who is an active
participant) in certain types of retirement plans ("qualified retirement plans")
may deduct contributions to an individual retirement account ("IRA"), up to
specified limits. Investment earnings in the IRA will be tax-deferred until
withdrawn, at which time the individual may be in a lower tax bracket.
The maximum annual deductible contribution to an IRA for individuals under age
seventy and a half is 100% of includible compensation up to a maximum of (i)
$2,000 for single individuals; (ii) $4,000 for a married couple when both
spouses earn income; and (iii) $2,250 when one spouse earns, or elects for IRA
purposes to be treated as earning, no income (together the "IRA contribution
limits").
The IRA deduction is also available for single individual taxpayers and
married couples who are active participants in qualified retirement plans but
who have adjusted gross incomes which do not exceed certain specified limits. If
their adjusted gross income exceeds these limits, the amount of the deductible
contribution may be phased down and eventually eliminated.
Any individual who works may make nondeductible contributions to an IRA in
addition to any deductible contributions. Total aggregate deductible and
nondeductible contributions are limited to the IRA contribution limits discussed
above. Nondeductible contributions in excess of the applicable IRA contribution
limit are "nondeductible excess contributions". In addition, contributions made
to an IRA for the year in which an individual attains the age of seventy and a
half, or any year thereafter, are also nondeductible excess contributions.
Nondeductible excess contributions are subject to a 6% excise tax penalty which
is charged each year that the nondeductible excess contribution remains in the
IRA.
An employer also may contribute to an individuals IRA by establishing a
Simplified Employee Pension Plan, known as a SEP-IRA. Participating employers
may make an annual contribution in an amount up to the lesser of 15% of earned
income or $30,000, subject to certain provisions of the Internal Revenue Code.
Investment earnings will be tax-deferred until withdrawn.
The foregoing discussion regarding IRAs is based upon the Internal Revenue
Code and regulations in effect as of the date of this SAI and summarizes only
some of the important Federal tax considerations generally affecting IRA
contributions made by individuals or their employers. It is not intended as a
substitute for careful tax planning. Investors should consult their tax advisors
with respect to their specific tax situations as well as with respect to state
and local taxes.
If, in the opinion of the Company, ownership of its shares has or may become
concentrated to an extent that could cause the Company to be deemed a personal
holding company within the meaning of the Internal Revenue Code, the Company
may require the redemption of shares or reject any order for the purchase of
shares in an effort to prevent such concentration.
Under Treasury Regulations, the Funds are required to withhold and remit to
the U.S. Treasury 31% of dividend and capital gain income on the accounts of
certain shareholders who provide either an incorrect taxpayer identification
number or no number at all.
14
<PAGE> 38
FINANCIAL STATEMENTS
The Annual Report of the fiscal year ended November 30, 1995, and the report
thereon of independent accountants dated January 17, 1996 are incorporated by
reference in this Statement of Additional Information. The Letter to Shareholder
contained in such Annual Report is not incorporated by reference and is not part
of the registration statement or this Statement of Additional Information.
15
<PAGE> 39
APPENDIX A
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
MOODY'S BOND RATINGS
<TABLE>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong positions of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate and municipal bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
</TABLE>
MOODY'S COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2 and Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
STANDARD & POOR'S BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poors does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.
16
<PAGE> 40
<TABLE>
<S> <C>
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal although they are somewhat
more susceptible to the adverse effects of changes in circumstances and economic conditions than
debt in the higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than for debt in higher rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
NR Indicates that no rating has been requested, that there is insufficient information on which to
base a rating or that Standard & Poor's does not rate a particular type of obligation as a matter
of policy.
</TABLE>
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P form other sources it considers reliable. The ratings
may be changed, suspended or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into two group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 or 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
17
<PAGE> 41
KEY MUTUAL FUNDS
SBSF FUND
SBSF CONVERTIBLE SECURITIES FUND
SBSF CAPITAL GROWTH FUND
SBSF MONEY MARKET FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 1995
[LOGO]
<PAGE> 42
[LOGO]
------------------------------------
SHARES OF KEY MUTUAL FUNDS ARE NOT
INSURED BY THE FDIC; ARE NOT
DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY KEYCORP BANK,
SPEARS, BENZAK, SALOMON & FARRELL,
INC. OR THEIR AFFILIATES; AND ARE
SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
Spears, Benzak, Salomon & Farrell,
Inc. ("Spears"), an indirect wholly
owned subsidiary of KeyCorp, is the
investment adviser to Key Mutual
Funds. Spears and Key Trust Company
of Ohio, N.A., the Funds' custodian
and also a subsidiary of KeyCorp,
receive fees from Key Mutual Funds
for their services. Key Mutual Funds
are distributed by Concord Financial
Group, which is not affiliated with
Spears, KeyCorp, any KeyCorp bank or
their affiliates.
------------------------------------
------------------------------------
THIS REPORT IS SUBMITTED FOR THE
GENERAL INFORMATION OF THE
SHAREHOLDERS OF THE FUNDS. IT IS NOT
AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS IN THE FUNDS
UNLESS PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS, WHICH INCLUDES
INFORMATION REGARDING THE FUNDS'
OBJECTIVES AND POLICIES, EXPERIENCE
OF ITS MANAGEMENT, MARKETABILITY OF
SHARES, AND OTHER INFORMATION.
------------------------------------
<PAGE> 43
KEY MUTUAL FUNDS
- --------------------------------------------------------------------------------
Dear Shareholders:
We are pleased to present our first Annual Report under the new banner of Key
Mutual Funds for the year ended November 30, 1995. While SBSF Funds, Inc. is now
operating under a different name, the principals of our adviser, Spears, Benzak,
Salomon & Farrell, Inc., continue to provide active management of each of the
SBSF portfolios. Our commitment to providing you with the highest level of
service also remains the same, as do the names of our four Funds: the SBSF Fund,
the SBSF Convertible Securities Fund, the SBSF Capital Growth Fund and the SBSF
Money Market Fund. You will now find the Funds in your newspapers listed under
the heading "Key Funds."
1995 IN REVIEW
Buoyed by near-perfect conditions, the domestic financial markets enjoyed a
spectacular year in 1995. Defying predictions of modest returns, stocks
registered their strongest annual gain in over three decades, while bonds
recovered from one of their worst years ever to post one of their best advances
since the 1920s. Every significant domestic equity benchmark bulled its way to
all-time highs, including the widely followed Dow Jones Industrial Average,
which smashed through both 4,000 and 5,000 within the span of nine months,
barely pausing to enjoy the accomplishments.
Our equity Funds participated in the market's advance, posting total returns
well above their historical averages. Included herein are charts illustrating
the investment performance of each of our equity Funds, net of expenses and
fees.
SBSF FUND
The SBSF Fund's performance was greatly aided by its heavy concentration in
financial stocks, including banks, insurance companies and financial
intermediaries, which benefited from the decline in interest rates throughout
the year. A number of portfolio companies were the target of takeover bids at
substantial premiums to prevailing market prices, and several more announced
significant restructurings that were warmly greeted by investors. Although the
SBSF Fund's exposure to technology was limited due to valuation considerations,
its major holdings in this rapidly growing industry delivered very strong
performance.
SBSF CONVERTIBLE SECURITIES FUND
The convertible securities market enjoyed a strong year as well, benefiting from
the strong performance of both the stock and the bond markets. The SBSF
Convertible Securities Fund posted better than 20% returns for the third time in
five years, boosted by its investments in certain companies that were the
subject of takeover bids and by its holdings in the financial and health care
industries, including pharmaceuticals. The SBSF Convertible Securities Fund
maintains its philosophy of seeking high-yielding securities, which provide
ample income while offering substantial long-term appreciation potential.
SBSF CAPITAL GROWTH FUND
As hot as technology stocks were throughout much of 1995, biotechnology issues
were even hotter, especially in the fourth quarter. The SBSF Capital Growth Fund
was well-represented in both industries, as well as the telecommunications,
entertainment and financial services industries, all of which contributed to the
Fund's strong performance. We think that investors will favor companies with
superior earnings growth in 1996, and the SBSF Capital Growth Fund is fully
invested in small and mid-capitalization companies that are expected to deliver
such favorable profit gains.
SBSF MONEY MARKET FUND
The Federal Reserve reversed course in 1995. After starting the year with its
seventh consecutive increase in the Federal Funds rate, the Fed adopted a policy
of monetary ease in July when it lowered both the Fed Funds and the discount
rate. As a result, the 7-day effective yield of the SBSF Money Market Fund fell
from a high of 5.59% in April to 4.90% (SEC yield 4.78%) at the end of November,
little changed from its year-earlier level.
THE OUTLOOK FOR 1996
Flush with the wonderful returns of 1995, investors begin 1996 asking, is an
encore in store for this year?
Maybe, maybe not. History suggests that the probability of sustaining such
extraordinary returns for more than one year is low. However, the preponderance
of evidence points to a continuation in 1996 of the slow growth, low inflation
economic environment that is quite favorable for financial assets. Consumers'
debt burdens are high, savings are low, and there appears to be little pent-up
demand for anything despite lower financing costs. The industrial side of the
economy is weak, restrained by tepid final demand and an ongoing inventory
correction. Trade has yet to show any bounce, and government expenditures
promise to be restrained regardless of the final details of any budget
compromise. Even investment spending is expected to decelerate, though it will
likely remain the strongest component of GDP, bolstered by corporations' pursuit
of ever greater efficiency. Assuming that this pursuit proves successful,
earnings could grow even without the benefit of revenue gains, though at a
substantially slower pace than in 1995. Perhaps most important, inflation is
expected to remain in check, as productivity enhancements and modest wage and
benefit increases neutralize any impact of higher commodity costs (e.g., natural
gas, which has soared with the onset of cold weather). Steady inflation of
2.5%-3.0% leaves room for the Federal Reserve to lower short-term interest rates
further, which could provide support for stock and bond prices.
<PAGE> 44
On the other hand, valuation may be a constraint on the market's upside
potential. Despite their reasonable price/earnings ratio, stocks enter the new
year with record high price/sales and price/book value ratios and a record low
dividend yield. Were interest rates to drop, the expected P/E ratio would
expand; however, we are concerned that earnings estimates based on this benign
economic outlook are too high, and question whether the tarnish of
disappointment would overwhelm the favorable influence of lower rates.
The disturbing political circus transpiring in Washington reminds us that all
economic and stock market forecasts are more suspect than usual this year. Not
only are projections being made with incomplete data (the result of the partial
government shutdown), the ultimate course of many significant sectors relies
upon the favor of our elected officials, whose actions are even less predictable
than investors'. With this caveat in mind, we believe there is a growing risk
that the consensus outlook is too optimistic. The likelihood of a recession has
increased as employment trends have deteriorated, threatening income growth,
undermining confidence and dampening consumers' propensity to spend. Should the
economy weaken meaningfully, earnings will almost certainly decline, as we doubt
that costs could be cut fast enough to compensate for revenue shortfalls. In
reaction, we think stocks would suffer a long-overdue correction of at least
10%, the first decline of that magnitude since 1990.
Regardless of which economic scenario plays out, the ingredients for a stalemate
between the bulls and the bears are in place. We think that domestic stocks will
trade within a tighter range in 1996 than last year, with perhaps 15%-20%
separating the high and the low for the year. It is difficult to envision
substantially greater upside potential, given meager earnings prospects at best;
on the other hand, bear markets rarely begin when the Fed is easing.
The challenge facing investors, ourselves included, is identifying those
companies that are best equipped to weather the slow/no growth environment
ahead. In this environment, we believe that the market will distinguish between
secular and cyclical earnings growth, rewarding the former with substantial
valuation premiums and penalizing the latter with unusually wide discounts.
Earliness will be the investor's bane in 1996; those who buy "value" (i.e., low
P/Es) or sell "growth" (high P/Es) too soon will likely lag the averages.
However, we will not sacrifice our value discipline to market fashion. We doubt
that the high fliers of 1995 will continue to lead the way this year, and we
expect to take advantage of opportunities to sell current holdings when
valuations are extended. Concurrently, we will seek to establish new positions
in stocks that we judge to offer outstanding long-term potential, but only when
we believe the price exposes our portfolios to reasonable risk.
Each new year brings new challenges and new opportunities. We look forward to
navigating what promises to be an interesting and sometimes surprising voyage
through the market's murky waters, and we welcome your questions and comments.
Respectfully submitted,
For the Adviser: For the Key Mutual Funds'
Board of Directors:
/s/ Louis R. Benzak /s/ Frank A. Weil
----------------------------------------- --------------------------
Louis R. Benzak Frank A. Weil
Spears, Benzak, Salomon & Farrell, Inc. Non-Executive Chairman
Vice Chairman January 17, 1996
January 17, 1996
- --------------------------------------------------------------------------------
An investment in the SBSF Money Market Fund is neither insured nor guaranteed by
the U.S. Government. Yields will fluctuate and there can be no assurance that
the SBSF Money Market Fund will be able to maintain a stable net asset value of
$1.00 per share. The SBSF Capital Growth Fund maintains investments in small
capitalization companies. These investments have historically experienced a
greater degree of volatility than their large capitalization counterparts.
<PAGE> 45
- --------------------------------------------------------------------------------
TOP 5 EQUITY POSITIONS AT NOVEMBER 30, 1995
<TABLE>
<CAPTION>
SBSF FUND* SBSF CONVERTIBLE SECURITIES FUND*
--------- --------------------------------
% OF % OF
NET NET
COMPANY VALUE ASSETS COMPANY VALUE ASSETS
- ------- ---------- ------ ------- --------- ------
<S> <C> <C> <C> <C> <C>
1. American International Group, Inc. $8,750,625 7.7% 1. Unocal Corp., 7%, $3.50, Conv. Pfd. $3,165,000 4.6%
2. General Electric Co. 5,043,750 4.4 2. AK Steel Holding, 7%, Conv. Pfd. 2,550,000 3.7
3. Cellular Communications Class A 4,787,500 4.2 3. Amax Gold, $3.75, Ser. B, Conv. Pfd. 2,550,000 3.7
4. Avatar Holdings, Inc. 4,356,165 3.8 4. Bankers Trust NY Corp. 2,270,625 3.3
5. J.P. Morgan & Co., Inc. 3,925,000 3.4 5. First Bank System, Inc.,
$3.5625, Conv. Pfd. 2,259,375 3.3
</TABLE>
<TABLE>
SBSF CAPITAL GROWTH FUND*
<CAPTION>
% OF
NET
COMPANY VALUE ASSETS
------- ----------- ------
<S> <C> <C>
1. AT&T Capital Corp. $352,662 4.2%
2. H&R Block, Inc. 315,950 3.7
3. AirTouch Communications, Inc. 291,250 3.5
4. Genetics Institute, Inc. 263,250 3.1
5. PartnerRe Holdings, Ltd., ADR 257,050 3.1
<FN>
* Each Fund's composition is subject
to change as market conditions warrant.
</TABLE>
2
<PAGE> 46
SBSF FUND
PERFORMANCE FOR THE PERIOD FROM
DECEMBER 1, 1985 TO NOVEMBER 30, 1995
SBSF FUND
VS.
S&P 500
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SBSF Fund 11,155 10,323 12,525 16,288 16,181 18,267 19,830 24,381 23,165 30,200
S&P 500 12,768 12,169 14,980 19,572 18,879 22,717 26,938 29,707 30,052 41,174
(Fiscal Years Ending November 30)
</TABLE>
<TABLE>
<CAPTION>
SBSF
FUND
------
<S> <C>
Fiscal 1995 Total Return +30.37%
5 Year Average Annual Total Return +13.29%
10 Year Average Annual Total Return +11.69%
Average Annual Return since inception (October 17, 1983) +12.80%
</TABLE>
- --------------------------------------------------------------------------------
The above presentation is a hypothetical illustration of the results of a
$10,000 investment on December 1, 1985 and the subsequent reinvestment of all
income dividends and capital gains distributions through November 30, 1995.
Investment return and principal value of an investment in the SBSF Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Total return represents past performance and is not
predictive of future results.
The S&P 500 is an index of widely held common stocks which is unmanaged and
therefore not subject to any fees or expenses. The performance figures presented
for the SBSF Fund are net of fees and expenses.
3
<PAGE> 47
SBSF CONVERTIBLE SECURITIES FUND
PERFORMANCE FOR THE PERIOD FROM
APRIL 14, 1988 (INCEPTION) TO NOVEMBER 30, 1995
SBSF CONVERTIBLE SECURITIES FUND
VS.
LIPPER CONVERTIBLE SECURITIES FUND INDEX
VS.
S&P 500
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SBSF Convertible Securities Fund 10,142 11,944 11,326 14,308 15,910 19,477 18,628 22,433
Lipper Convertible Securities Fund Index 10,419 12,224 11,455 13,897 16,461 18,869 18,334 21,622
S&P 500 10,821 14,138 13,638 16,411 19,459 21,460 21,709 29,743
(Fiscal Years Ending November 30)
</TABLE>
<TABLE>
<CAPTION>
SBSF
CONVERTIBLE
SECURITIES FUND
---------------
<S> <C>
Fiscal 1995 Total Return +20.43%
5 Year Average Annual Total Return +14.65%
Average Annual Return since inception (April 14, 1988) +11.18%
</TABLE>
- --------------------------------------------------------------------------------
The above presentation is a hypothetical illustration of the results of a
$10,000 investment on April 14, 1988 (inception) and the subsequent reinvestment
of all income dividends and capital gains distributions through November 30,
1995. Investment return and principal value of an investment in the SBSF
Convertible Securities Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total return
represents past performance and is not predictive of future results.
The Lipper Convertible Securities Fund Index is an equal-weighted index of the
largest mutual funds whose portfolios consist primarily of convertible bonds and
convertible preferred stocks. The S&P 500 is an index of widely held common
stocks which is unmanaged and therefore not subject to any fees or expenses. The
performance figures presented for the SBSF Convertible Securities Fund are net
of fees and expenses.
4
<PAGE> 48
SBSF CAPITAL GROWTH FUND
PERFORMANCE FOR THE PERIOD FROM
NOVEMBER 1, 1993 (INCEPTION) TO NOVEMBER 30, 1995
SBSF CAPITAL GROWTH FUND
VS.
NASDAQ COMPOSITE
VS.
S&P MIDCAP INDEX
<TABLE>
<CAPTION>
11/30/93 5/31/94 11/30/94 5/31/95 11/30/95
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
SBSF Capital Growth Fund 9,850 9,450 9,450 10,475 12,288
Nasdaq Composite 9,625 9,380 9,572 11,057 13,589
S&P MidCap Index 9,749 9,791 9,745 11,118 12,909
</TABLE>
<TABLE>
<CAPTION>
SBSF
CAPITAL
GROWTH
FUND
-------
<S> <C>
Fiscal 1995 Total Return +30.03%
Average Annual Return since inception (November 1, 1993) +10.40%
</TABLE>
- --------------------------------------------------------------------------------
The above presentation is a hypothetical illustration of the results of a
$10,000 investment on November 1, 1993 (inception) and the subsequent
reinvestment of all income dividends and capital gains distributions through
November 30, 1995. Investment return and principal value of an investment in the
SBSF Capital Growth Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total return
represents past performance and is not predictive of future results.
The Nasdaq Composite is an index of stocks listed on The Nasdaq Stock Market,
Inc. The S&P MidCap Index is an index of 400 medium capitalization stocks listed
on major exchanges and traded in the over-the-counter-market. These indices are
unmanaged and therefore not subject to any fees or expenses. The performance
figures represented for the SBSF Capital Growth Fund are net of fees and
expenses.
5
<PAGE> 49
SBSF FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 95.7%
AUTOMOBILE -- 2.5%
100,000 Ford Motor Co.............. $ 2,825,000
------------
BANKS & BANK HOLDING CO. -- 10.4%
30,000 BankAmerica Corp........... 1,908,750
50,000 Deposit Guaranty Corp...... 2,325,000
100,000 ISB Financial Corp......... 1,575,000
50,000 J.P. Morgan & Co., Inc..... 3,925,000
100,000 Poughkeepsie Savings Bank.. 462,500
43,000 Standard Federal Bancorp... 1,650,125
------------
11,846,375
------------
BIOTECHNOLOGY -- 5.0%
44,000 Genentech, Inc. *.......... 2,249,500
78,000 Genetics Institute, Inc.* . 3,422,250
------------
5,671,750
------------
COMMUNICATIONS - 1.3%
181,800 Osborn Communications*..... 1,431,675
------------
CONGLOMERATES - 5.0%
150,000 Hanson, PLC, ADR........... 2,287,500
225,000 Noel Group, Inc. *......... 1,406,250
125,000 U.S. Industries, Inc. *.... 2,031,250
------------
5,725,000
------------
CONSUMER PRODUCTS - 4.4%
75,000 General Electric Co........ 5,043,750
------------
ELECTRONICS - 2.2%
18,000 Lam Research Corp. *....... 985,500
25,000 Intel Corp................. 1,521,875
------------
2,507,375
------------
FINANCE & FINANCIAL SERVICES - 2.5%
37,000 Federal Home Loan Mortgage
Corp..................... 2,849,000
1,300 John Nuveen Co. Class A.... 34,938
------------
2,883,938
------------
HOMEBUILDING - 3.0%
175,000 Beazer Homes USA, Inc. *... 3,368,750
------------
HOSPITAL & HEALTH CARE - 2.5%
30,000 Columbia/HCA Healthcare.... 1,548,750
75,000 Tenet Healthcare Corp. *... 1,340,625
------------
2,889,375
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE - 15.5%
100,000 PartnerRe Holdings, Ltd.,
ADR...................... $ 2,650,000
97,500 American International
Group, Inc............... 8,750,625
250,077 First Central Financial
Corp..................... 1,703,650
12,000 General Re Corp............ 1,795,500
50,000 UNUM Corp.................. 2,706,250
------------
17,606,025
------------
METALS & MINING - 5.8%
111,937 Echo Bay Mines Ltd......... 1,161,346
200,000 Horsham Corp............... 2,725,000
35,202 Newmont Mining Corp........ 1,518,086
100,000 Santa Fe Pacific Gold
Corp..................... 1,200,000
------------
6,604,432
------------
OIL & GAS AND RELATED - 10.8%
355,160 Santa Fe Energy
Resources*............... 3,285,230
50,000 Tosco Corp................. 1,906,250
175,000 USX-Marathon Group......... 3,215,625
50,000 Union Pacific Resources
Group, Inc............... 1,162,500
100,000 Unocal Corp................ 2,687,500
------------
12,257,105
------------
ENTERTAINMENT - 2.3%
65,000 Time Warner, Inc........... 2,600,000
------------
REAL ESTATE - 7.1%
119,347 Avatar Holdings, Inc. *.... 4,356,165
100,000 Cousins Properties, Inc.... 1,837,500
30,000 Milwaukee Land Co.*........ 213,750
100,000 Security Capital Industrial
Trust (REIT)............. 1,662,500
------------
8,069,915
------------
STEEL - 4.5%
100,000 AK Steel Holding Corp ..... 3,462,500
100,000 J & L Specialty Steel,
Inc...................... 1,650,000
------------
5,112,500
------------
TECHNOLOGY - 3.8%
14,600 Banctec, Inc. *............ 281,050
35,000 Cablevision Systems Corp.
Class A *................ 1,942,500
54,000 DSC Communications Corp.*.. 2,139,750
------------
4,363,300
------------
</TABLE>
See accompanying Notes to Financial Statements.
6
<PAGE> 50
SBSF FUND
STATEMENT OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATION - 7.1%
115,000 AirTouch Communications,
Inc.*.................... $ 3,349,375
100,000 Cellular Communications,
Inc. Class A *........... 4,787,500
------------
8,136,875
------------
Total Common Stocks (Cost
$87,110,785)............. 108,943,140
------------
CONVERTIBLE PREFERRED STOCKS &
WARRANTS - 1.8%
INSURANCE - 0.0%
1 First Central Financial
Corp. Series B Warrant*,
Expire 3/19/96 **........ 32,000
------------
STEEL - 1.8%
61,000 AK Steel Holding Corp.
7% Conv. Pfd............. 2,074,000
------------
Total Convertible Preferred
Stocks & Warrants
(Cost $1,767,660)........ 2,106,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS - 0.5%
ENTERTAINMENT - 0.5%
$ 494,450 Time Warner, Inc., Sub.
Deb., 8.75%, 1/10/15..... $ 514,846
------------
Total Convertible Corporate
Bonds
(Cost $518,920).......... 514,846
------------
U.S. GOVERNMENT SECURITIES -- 1.0%
U.S. TREASURY BILLS -- 1.0%++
345,000 5.225%, 5/16/96............ 336,548
145,000 5.260%, 5/30/96............ 141,172
725,000 5.280%, 5/30/96............ 705,860
------------
Total U. S. Government
Securities
(Cost $1,183,557)........ 1,183,580
------------
Total Investments
(Cost $90,580,922)+.......... 99.0% $112,747,566
Other assets, net of other
liabilities.................. 1.0% 1,102,863
----- ------------
Net Assets..................... 100.0% $113,850,429
===== ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO STATEMENT OF INVESTMENTS:
<TABLE>
<C> <S>
* Non-income producing.
** Series B Warrant, exercisable for the purchase of 123,077 shares of common stock, was acquired in April,
1993 at no cost and is restricted. This security (0.03% of net assets at November 30, 1995) is valued as
determined in good faith under the supervision of the Board of Directors.
+ At November 30, 1995, the net unrealized appreciation on investments based on cost for Federal income
tax purposes of $90,580,922, amounted to $22,166,644, which consisted of gross unrealized appreciation
of $23,438,121 and gross unrealized depreciation of $1,271,477.
++ Rate shown represents annualized yield on date of purchase.
ADR American Depository Receipt.
REIT Real Estate Investment Trust.
</TABLE>
See accompanying Notes to Financial Statements.
7
<PAGE> 51
SBSF CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 21.1%
BANKS & BANK HOLDING COMPANIES -- 3.3%
35,000 Bankers Trust NY Corp...... $ 2,270,625
------------
COMMUNICATIONS -- 0.4%
15,000 Comcast Corp. Class A
Special.................. 296,250
------------
CONGLOMERATES -- 1.3%
60,000 Hanson, PLC, ADR........... 915,000
------------
FOOD & RELATED -- 2.1%
35,620 ConAgra, Inc............... 1,420,347
------------
INSURANCE -- 1.0%
5,860 CIGNA Corp................. 644,600
------------
METALS & MINING -- 2.6%
41,214 Newmont Mining Corp........ 1,777,354
------------
OIL & GAS -- 3.0%
9,523 Amoco Corp................. 645,183
75,000 USX-Marathon Group......... 1,378,125
------------
2,023,308
------------
TELECOMMUNICATIONS -- 1.4%
35,000 CommNet Cellular, Inc. *... 949,375
------------
UTILITIES -- 6.0%
15,000 Boston Edison Co........... 418,125
20,000 Houston Industries, Inc.... 915,000
20,000 Unicom Corp................ 640,000
20,000 Union Electric Co.......... 802,500
25,000 Utilicorp United, Inc...... 696,875
30,000 Washington Gas Light Co.... 626,250
------------
4,098,750
------------
Total Common Stocks
(Cost $12,428,118)....... 14,395,609
------------
PREFERRED STOCKS -- 46.9%
CONVERTIBLE PREFERRED STOCKS - 42.3%
BANKS & BANK HOLDING COMPANIES -- 6.4%
25,000 First Bank System, Inc.
$3.5625.................. 2,259,375
30,000 Glendale Federal Bank,
Series E................. 1,267,500
50,000 Independence Bancorp, Inc.
9%, Series A............. 843,750
------------
4,370,625
------------
PAPER & FOREST PRODUCTS -- 1.8%
25,000 James River Corp.,
Series L................. 1,253,125
------------
ELECTRONICS EQUIPMENT -- 2.2%
90,000 Westinghouse Electric,
$1.30, Series C ++....... 1,507,500
------------
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
PREFERRED STOCKS (CONTINUED)
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
HOMEBUILDING -- 2.7%
60,000 Beazer Homes USA, Inc.,
8%....................... $ 1,815,000
------------
INSURANCE -- 4.0%
28,000 Jefferson Pilot Corp.,
7.25%.................... 2,051,000
10,000 PennCorp Financial Group,
Inc., $3.375............. 675,000
------------
2,726,000
------------
LEISURE & ENTERTAINMENT -- 1.2%
20,000 AMC Entertainment, Inc.
$1.75.................... 780,000
------------
METALS & MINING -- 3.7%
50,000 Amax Gold, Inc.
$3.75, Series B.......... 2,550,000
------------
OIL & GAS -- 9.2%
20,000 Diamond Shamrock, Inc.
$2.50++.................. 1,095,000
20,000 Lomak Petroleum, Inc.
7.5%**................... 525,000
58,600 Noble Drilling Corp.,
$1.50.................... 1,465,000
60,000 Unocal Corp., 7%, $3.50.... 3,165,000
------------
6,250,000
------------
REAL ESTATE -- 3.4%
27,000 Catellus Development Corp.
Series B, Exch. ++....... 1,039,500
50,000 Oasis Residential, Inc.
$2.25, Series A.......... 1,250,000
------------
2,289,500
------------
STEEL -- 3.7%
75,000 AK Steel Holding Corp.,
7%....................... 2,550,000
------------
TECHNOLOGY -- 4.0%
30,000 Cablevision Systems Corp.
8.50%, Series I.......... 832,500
20,000 General Motors Corp. Series
C........................ 1,435,000
14,500 UNISYS Corp., $3.75
Series A................. 442,250
------------
2,709,750
------------
Total Convertible
Preferred Stocks
(Cost $25,730,093)....... 28,801,500
------------
</TABLE>
See accompanying Notes to Financial Statements.
8
<PAGE> 52
SBSF CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------
<C> <S> <C>
PREFERRED STOCKS (CONTINUED)
NON-CONVERTIBLE PREFERRED STOCKS -- 4.6%
BANKS & BANK HOLDING COMPANIES -- 4.6%
30,000 Chevy Chase Savings Bank
13%, Series A............ $ 915,000
25,000 Fidelity Federal Bank
12%, Series A............ 625,000
59,000 Riggs National Corp.
10.75%, Series B......... 1,622,500
------------
3,162,500
------------
Total Non-Convertible
Preferred Stocks
(Cost $2,972,000)........ 3,162,500
------------
Total Preferred Stocks
(Cost $28,702,093)....... 31,964,000
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<S> <C> <C>
CORPORATE BONDS -- $23.1%
CONVERTIBLE BONDS -- 20.5%
BANKS & BANK HOLDING COMPANIES -- 2.6%
$ 600,000 First Republic Bancorp,
Inc., Sub. Debs., 7.25%,
12/1/02.................. 600,750
400,000 Fort Bend Holding Corp.
Sub. Debs., 8.00%,
12/1/05.................. 402,000
600,000 Midlantic Bank, Inc., Sub.
Debs., 8.25%, 7/1/10..... 738,000
------------
1,740,750
------------
DRUGS & HEALTH CARE -- 0.8%
500,000 Centocor, Inc., Sub. Debs.,
7.25%, 2/1/01............ 443,750
216,000 Medical Imaging Centers of
America, Inc., Sub.
Debs., 6.00%,
4/30/99 **............... 100,440
------------
544,190
------------
INSURANCE -- 2.5%
600,000 American Travellers Corp.
Sub. Debs., 6.50%,
10/1/05.................. 760,500
300,000 First Central Financial
Corp., Sub. Debs., 9.00%,
8/1/00 **................ 300,000
600,000 Trenwick Group, Inc., Sub.
Debs., 6.00%, 12/15/99... 653,250
------------
1,713,750
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
CORPORATE BONDS $(CONTINUED)
CONVERTIBLE BONDS (CONTINUED)
METALS & MINING -- 1.0%
$ 700,000 Homestake Mining Co., Euro,
Sub. Deb., 5.50%
6/23/00++................ $ 689,500
------------
OFFICE EQUIPMENT -- 1.4%
1,000,000 UNISYS Corp., Sub. Note,
8.25%, 8/1/00............ 918,750
------------
OIL & GAS -- 1.3%
700,000 Pennzoil Co., Sub. Debs.,
6.50%, 1/15/03........... 862,750
------------
ENTERTAINMENT -- 2.7%
1,771,600 Time Warner, Inc., Sub.
Debs., 8.75%, 1/10/15.... 1,844,679
------------
RETAIL -- 0.7%
500,000 Price/Costco Inc., Sub.
Debs., 6.75%, 3/01/01.... 506,250
------------
TECHNOLOGY -- 3.4%
500,000 General Signal Corp., Sub.
Debs., 5.75%, 6/1/02..... 520,000
1,461,000 Recognition International,
Sub. Debs., 7.25%,
4/15/11.................. 1,307,595
300,000 3 Com Corp., Sub. Debs.,
10.25%, 11/1/01++........ 486,750
------------
2,314,345
------------
TELECOMMUNICATION -- 0.3%
200,000 International Cabletel,
Inc. Sub. Debs., 7.25%,
4/15/05++................ 226,500
------------
UTILITIES -- 3.8%
2,500,000 Consolidated Natural Gas
Co., Sub. Debs., 7.25%,
12/15/15*................ 2,600,000
------------
Total Convertible Bonds
(Cost $13,179,692)....... 13,961,464
------------
NON-CONVERTIBLE BONDS -- 2.6%
COMMUNICATIONS -- 1.5%
1,000,000 Comcast Corp.
9.375%, 5/15/05.......... 1,037,500
------------
INSURANCE -- 0.8%
500,000 National Re Corp.
8.85%, 1/15/05........... 557,500
------------
</TABLE>
See accompanying Notes to Financial Statements.
9
<PAGE> 53
SBSF CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
CORPORATE BONDS (CONTINUED)
NON-CONVERTIBLE BONDS (CONTINUED)
OIL & GAS -- $0.3%
$ 200,000 Equitable Resources, Inc.,
Sub. Debs., 7.50%,
7/1/99................... $ 210,000
------------
Total Non-Convertible Bonds
(Cost $1,726,237)........ 1,805,000
------------
Total Corporate Bonds
(Cost $14,905,929)....... 15,766,464
------------
U.S. GOVERNMENT SECURITIES -- 14.3%
U.S. TREASURY BILLS -- 12.4%***
20,000 5.240%, 3/14/96............ 19,692
1,000,000 5.250%, 3/14/96............ 984,600
200,000 5.295%, 3/14/96............ 196,920
50,000 5.305%, 3/14/96............ 49,230
110,000 5.380%, 3/14/96............ 108,306
720,000 5.295%, 3/21/96............ 707,328
230,000 5.310%, 3/21/96............ 225,952
200,000 5.305%, 4/18/96............ 195,920
2,000,000 5.310%, 4/18/96............ 1,959,200
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
U.S. GOVERNMENT SECURITIES -- 14.3%
U.S. TREASURY BILLS -- 12.4%***
$ 50,000 5.240%, 4/25/96............ 48,930
70,000 5.270%, 4/25/96............ 68,502
325,000 5.290%, 4/25/96............ 318,045
2,000,000 5.310%, 5/02/96............ 1,955,000
200,000 5.240%, 5/09/96............ 195,300
50,000 5.225%, 5/16/96............ 48,775
300,000 5.210%, 5/30/96............ 292,080
70,000 5.240%, 5/30/96............ 68,152
50,000 5.260%, 5/30/96............ 48,680
1,000,000 5.315%, 5/30/96............ 973,600
------------
Total U.S. Treasury Bills
(Cost $8,465,090)........ 8,464,212
------------
U.S. TREASURY NOTES -- 1.9%
1,290,000 7.250%, 11/30/96
(Cost $1,286,090)........ $ 1,312,173
------------
Total U.S. Government
Securities
(Cost $9,751,180)........ 9,776,385
------------
Total Investments
(Cost $65,787,320)+........ 105.4% 71,902,458
Other liabilities, net of
other assets............... (5.4%) (3,690,713)
------ ------------
Net Assets................... 100.0% $ 68,211,745
===== ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO STATEMENT OF INVESTMENTS:
<TABLE>
<C> <S>
* Non-income producing.
** The following securities are restricted:
</TABLE>
<TABLE>
<CAPTION>
% OF
SECURITY ACQUISITION COST DATE ACQUIRED NET ASSETS
---------------------------------------------------------- ---------------- -------------------- ----------
<C> <S> <C> <C> <C>
First Central Financial Corp., Sub. Deb., 9%, 8/1/00 $296,625 August 1988 0.4
Lomak Petroleum, Inc., 7.5%, Conv. Pfd. $500,000 June 1993 0.8
Medical Imaging Centers of America, Inc., Conv. Sub.
Deb., 6%, 4/30/99 $216,000 May 1989 0.1
</TABLE>
<TABLE>
<C> <S>
The Fund's prospectus permits the acquisition of restricted securities consistent with the Fund's
investment objectives. The Fund has the right to include its shares, upon conversion, in any
registration undertaken by the issuing company. These securities are valued as determined in good
faith under the supervision of the Board of Directors.
*** Rate shown represents annualized yield on date of purchase.
+ At November 30, 1995, the net unrealized appreciation on investments, based on cost for Federal income
tax purposes of $65,787,320, amounted to $6,115,138 which consisted of gross unrealized appreciation
of $7,064,535 and gross unrealized depreciation of $949,397.
++ These securities are restricted to resale to qualified institutional investors only.
ADR American Depository Receipt.
</TABLE>
See accompanying Notes to Financial Statements.
10
<PAGE> 54
SBSF CONVERTIBLE SECURITIES FUND
STATEMENT OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 95.2%
AIR FREIGHT -- 1.7%
5,100 Airborne Freight Corp......... $ 143,437
-----------
AUTOMOTIVE -- 3.6%
5,400 Borg-Warner Automotive, Inc... 159,975
5,000 Lear Seating Corp.*........... 140,000
-----------
299,975
-----------
BIOTECHNOLOGY -- 12.1%
2,400 Amgen, Inc.*.................. 119,100
2,900 Biogen, Inc.*................. 158,050
7,000 CellPro, Inc.*................ 85,750
6,000 Genetics Institute, Inc.*..... 263,250
3,100 Genzyme Corp.*................ 202,275
14,550 Neorx Corp.*.................. 90,028
13,000 SangStat Medical Corp.*....... 101,563
-----------
1,020,016
-----------
BROADCASTING -- 0.6%
6,000 Osborn Communications*........ 47,250
-----------
ELECTRONICS -- 7.9%
2,800 International Rectifier
Corp.*...................... 138,950
4,000 Lam Research Corp.*........... 219,000
17,400 Rexel, Inc.*.................. 234,900
7,100 SubMicron Systems, Inc.*...... 71,000
-----------
663,850
-----------
FINANCE & FINANCIAL SERVICES -- 7.9%
8,900 AT&T Capital Corp............. 352,662
7,100 H&R Block, Inc................ 315,950
-----------
668,612
-----------
FOOD & LODGING -- 4.6%
6,000 Dole Food, Inc................ 225,750
11,800 Servico, Inc.*................ 159,300
-----------
385,050
-----------
HOMEBUILDING -- 3.0%
13,000 Beazer Homes USA, Inc.*....... 250,250
-----------
INSURANCE -- 5.2%
9,700 PartnerRe Holdings, Ltd.,
ADR......................... 257,050
4,350 Orion Capital Corp............ 181,613
-----------
438,663
-----------
LEISURE & ENTERTAINMENT -- 6.3%
7,200 BET Holdings Inc., Class A*... 203,362
5,250 Gaylord Entertainment Co...... 132,563
15,000 Spelling Entertainment Group,
Inc......................... 198,750
-----------
534,675
-----------
<CAPTION>
SHARES VALUE
- --------- -----------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL & GAS -- 6.4%
13,000 DLB Oil & Gas, Inc.*.......... $ 120,250
7,000 Noble Affiliates, Inc......... 189,875
6,000 Tosco Corp.................... 228,750
-----------
538,875
-----------
PACKAGING -- 1.9%
10,000 Brockway Standard Holdings*... 158,750
-----------
RETAIL -- 4.7%
6,200 AutoZone, Inc.*............... 180,575
9,000 Hannaford Brothers Co......... 216,000
-----------
396,575
-----------
STEEL -- 2.9%
7,000 AK Steel Holding Corp......... 242,375
-----------
TECHNOLOGY -- 12.0%
3,200 Cablevision Systems Corp.
Class A*.................... 177,600
6,000 Centigram Communication
Corp.*...................... 129,000
8,300 Cheyenne Software, Inc.*...... 192,975
15,000 Phoenix Technologies Ltd.*.... 185,625
10,500 Planar Systems, Inc.*......... 165,375
4,300 Reynolds & Reynolds Co. Class
A........................... 163,938
-----------
1,014,513
-----------
TELECOMMUNICATION -- 7.2%
10,000 AirTouch
Communications, Inc.*....... 291,250
3,400 Cellular Communications, Inc.
Class A*.................... 162,775
6,800 Mobile Telecommunications
Technologies, Corp.*........ 156,400
-----------
610,425
-----------
MISCELLANEOUS -- 7.2%
7,000 Dimark, Inc.*................. 98,000
18,000 Mail-Well, Inc.*.............. 207,000
10,000 Northwest Pipe Co.*........... 100,000
4,600 Norwood Promotional Products,
Inc.*....................... 80,500
20,000 Strategic Distribution,
Inc.*....................... 125,000
-----------
610,500
-----------
Common Stocks
(Cost $6,686,103)........... 8,023,791
-----------
</TABLE>
See accompanying Notes to Financial Statements.
11
<PAGE> 55
SBSF CAPITAL GROWTH FUND
STATEMENT OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----------
<C> <S> <C>
U.S. GOVERNMENT SECURITIES -- 3.3%
U.S. TREASURY BILLS -- 3.3%++
$ 35,000 5.350%, 2/01/96............... $ 34,675
10,000 5.265%, 3/14/96............... 9,846
100,000 5.380%, 3/14/96............... 98,460
25,000 5.305%, 4/18/96............... 24,490
110,000 5.290%, 5/09/96............... 107,415
-----------
Total U. S. Government
Securities (Cost $274,873).. 274,886
-----------
Total Investments
(Cost $6,960,976)+......... 98.5% 8,298,677
Other assets, net of other
liabilities................ 1.5% 127,777
------ ------------
Net Assets................... 100.0% $ 8,426,454
===== ===========
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 56
SBSF MONEY MARKET FUND
STATEMENT OF INVESTMENTS
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
U.S. GOVERNMENT SECURITIES -- 100.0%
U.S. TREASURY BILLS++ -- 100.0%
$ 900,000 5.350%, 12/07/95........... $ 899,198
185,000 5.400%, 12/07/95........... 184,834
470,000 5.210%, 12/14/95........... 469,116
925,000 5.125%, 12/21/95........... 922,366
400,000 5.235%, 12/21/95........... 398,837
1,300,000 5.445%, 1/04/96............ 1,293,315
1,600,000 5.410%, 1/11/96............ 1,590,141
1,000,000 5.250%, 1/18/96............ 993,000
800,000 5.330%, 1/25/96............ 793,485
1,530,000 5.415%, 2/01/96............ 1,515,731
970,000 5.295%, 2/08/96............ 960,156
200,000 5.355%, 2/08/96............ 197,947
30,000 5.310%, 2/15/96............ 29,664
1,000,000 5.330%, 2/15/96............ 988,748
300,000 5.415%, 2/15/96............ 296,570
525,000 5.290%, 3/07/96............ 517,517
500,000 5.300%, 3/07/96............ 492,860
160,000 5.350%, 3/07/96............ 157,694
300,000 5.360%, 3/07/96............ 295,667
690,000 5.375%, 3/07/96............ 680,006
110,000 5.420%, 3/07/96............ 108,393
280,000 5.450%, 3/07/96............ 275,888
60,000 5.200%, 3/14/96............ 59,099
890,000 5.228%, 3/14/96............ 876,560
80,000 5.230%, 3/14/96............ 78,791
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <S> <C>
U.S. GOVERNMENT SECURITIES (CONTINUED)
U.S. TREASURY BILLS++ (CONTINUED)
$ 485,000 5.235%, 3/14/96............ $ 477,665
30,000 5.295%, 3/14/96............ 29,541
300,000 5.300%, 3/21/96............ 295,097
700,000 5.370%, 3/21/96............ 688,410
85,000 5.270%, 4/18/96............ 83,270
510,000 5.315%, 4/18/96............ 499,534
50,000 5.240%, 5/09/96............ 48,836
850,000 5.255%, 5/09/96............ 830,148
825,000 5.280%, 5/09/96............ 805,640
30,000 5.290%, 5/09/96............ 29,295
1,275,000 5.300%, 5/09/96............ 1,244,967
870,000 5.225%, 5/16/96............ 848,913
85,000 5.190%, 5/30/96............ 82,782
380,000 5.200%, 5/30/96............ 370,065
460,000 5.285%, 5/30/96............ 447,777
------------
Total U.S. Treasury Bills
(Cost $21,857,523)....... 21,857,523
------------
Total Investments
(Cost $21,857,523)+........ 100.0% 21,857,523
Other liabilities, net of
other assets............... 0.0% (9,184)
------ ------------
Net Assets................... 100.0% $ 21,848,339
===== ===========
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO STATEMENTS OF INVESTMENTS:
<TABLE>
<C> <S>
* Non-income producing.
+ At November 30, 1995, the SBSF Capital Growth Fund's net unrealized appreciation on investments based on
cost for Federal income tax purposes of $6,960,976, amounted to $1,337,701, which consisted of gross
unrealized appreciation of $1,441,864 and gross unrealized depreciation of $104,163. The SBSF Money
Market Fund's cost of investments for Federal income tax purposes was the same as the cost for financial
reporting purposes.
++ Rate shown represents annualized yield on date of purchase.
</TABLE>
See accompanying Notes to Financial Statements.
12
<PAGE> 57
KEY MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SBSF SBSF SBSF
CONVERTIBLE CAPITAL MONEY
SBSF SECURITIES GROWTH MARKET
FUND FUND FUND FUND
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities, at value............... $ 112,747,566 $ 71,902,458 $ 8,298,677 $ 21,857,523
Cash............................................. 18,011 23,172 17,617 17,631
Receivable for investment securities sold........ 1,123,151 -- 204,846 --
Receivable for Fund shares sold.................. 23,791 73,153 -- 447
Dividends and interest receivable................ 120,170 463,952 2,615 --
Deferred organizational expenses -- Note 2(e).... -- -- 17,334 --
Prepaid expenses................................. 6,432 3,715 477 9,272
------------- ------------ ----------- ------------
Total Assets.............................. 114,039,121 72,466,450 8,541,566 21,884,873
------------- ------------ ----------- ------------
LIABILITIES:
Payable for investment securities purchased...... -- 4,138,870 90,000 --
Payable for Fund shares redeemed................. -- 5,000 -- 18,000
Due to investment advisor -- Note 3(a)........... 69,009 41,276 5,169 --
Due to administrator -- Note 3(a)................ 16,929 12,364 -- 4,375
Distribution fees payable -- Note 3(c)........... 504 2,002 168 --
Accrued expenses and other liabilities........... 102,250 55,193 19,775 14,159
------------- ------------ ----------- ------------
Total Liabilities......................... 188,692 4,254,705 115,112 36,534
------------- ------------ ----------- ------------
NET ASSETS -- Applicable to 6,476,957, 5,609,335,
856,895 and 21,848,339 shares, respectively, of
common stock outstanding, par value $0.01
(25 million shares authorized for each of the
SBSF Fund, SBSF Convertible Securities Fund and
SBSF Capital Growth Fund and 175 million shares
authorized for SBSF Money Market Fund)........... $ 113,850,429 $ 68,211,745 $ 8,426,454 $ 21,848,339
============= ============ =========== ============
NET ASSET VALUE AND REDEMPTION VALUE PER SHARE..... $17.58 $12.16 $9.83 $1.00
============= ============ =========== ============
IDENTIFIED COST OF INVESTMENT SECURITIES........... $ 90,580,922 $ 65,787,320 $ 6,960,976 $ 21,857,523
============= ============ =========== ============
ANALYSIS OF NET ASSETS:
Paid-in capital.................................. $ 78,850,462 $ 59,849,771 $ 6,845,269 $ 21,848,339
Accumulated net investment income................ 187,461 440,726 -- --
Accumulated net realized gain.................... 12,645,862 1,806,110 243,484 --
Net unrealized appreciation...................... 22,166,644 6,115,138 1,337,701 --
------------- ------------ ----------- ------------
NET ASSETS......................................... $ 113,850,429 $ 68,211,745 $ 8,426,454 $ 21,848,339
============= ============ =========== ============
</TABLE>
See accompanying Notes to Financial Statements.
13
<PAGE> 58
KEY MUTUAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SBSF SBSF SBSF
CONVERTIBLE CAPITAL MONEY
SBSF SECURITIES GROWTH MARKET
FUND FUND FUND FUND
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign tax withheld of $30,686,
$9,355, $0 and $0, respectively)...................... $ 1,710,679 $ 2,308,436 $ 35,992 $ --
Interest................................................ 667,284 1,748,923 27,573 1,508,565
------------ ------------ ----------- -----------
Total Income....................................... 2,377,963 4,057,359 63,565 1,508,565
------------ ------------ ----------- -----------
Expenses:
Investment advisory fees -- Note 3(a)................... 815,718 455,976 48,811 65,340
Administration fees -- Note 3(a)........................ 204,371 141,195 16,210 65,340
Transfer agent fees..................................... 76,560 32,513 17,456 17,856
Professional fees....................................... 71,168 42,697 9,464 11,656
Custodian fees.......................................... 30,241 18,151 6,290 10,040
Directors' fees and expenses............................ 32,707 18,380 2,084 7,291
Federal and state registration fees..................... 30,615 20,562 11,472 15,448
Shareholder reports..................................... 24,256 12,127 5,568 5,296
Proxy expenses.......................................... 18,032 9,958 2,336 4,736
Distribution fees -- Note 3(c).......................... 3,910 8,815 367 --
Amortization of deferred org. expenses -- Note 2(e)..... -- -- 5,928 --
Miscellaneous........................................... 64,110 38,037 6,433 26,458
------------ ------------ ----------- -----------
Total Expenses..................................... 1,371,688 798,411 132,419 229,461
Less advisory and admin. fees waived -- Note 3(a)....... -- -- (54,630) (65,340)
------------ ------------ ----------- -----------
Total Expenses after fees waived................... 1,371,688 798,411 77,789 164,121
------------ ------------ ----------- -----------
NET INVESTMENT INCOME (LOSS)................................ 1,006,275 3,258,948 (14,224) 1,344,444
------------ ------------ ----------- -----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain....................................... 13,315,892 1,851,621 348,226 --
Net change in unrealized appreciation/depreciation...... 14,528,504 6,158,941 1,389,568 --
------------ ------------ ----------- -----------
Net realized and unrealized gain........................ 27,844,396 8,010,562 1,737,794 --
------------ ------------ ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 28,850,671 $ 11,269,510 $ 1,723,570 $ 1,344,444
=========== =========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE> 59
KEY MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED NOVEMBER 30, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SBSF CONVERTIBLE
SBSF FUND SECURITIES FUND
-------------------------------- ----------------------------
1995 1994 1995 1994
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss).................... $ 1,006,275 $ 1,554,471 $ 3,258,948 $ 3,101,305
Net realized gain (loss)........................ 13,315,892 5,764,750 1,851,621 1,961,870
Net change in unrealized
appreciation/depreciation..................... 14,528,504 (12,986,391) 6,158,941 (7,657,201)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations..................... 28,850,671 (5,667,170) 11,269,510 (2,594,026)
------------- ------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................... (1,381,884) (1,435,887) (3,264,148) (3,072,731)
Net realized gains.............................. (6,410,386) (14,351,618) (2,024,717) (1,531,503)
------------- ------------- ------------ ------------
Total dividends and distributions............... (7,792,270) (15,787,505) (5,288,865) (4,604,234)
------------- ------------- ------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of shares................... 9,655,102 13,715,743 10,607,323 15,224,590
Reinvestment of dividends -- Note 2(c).......... 6,965,298 13,966,927 4,584,685 3,979,303
------------- ------------- ------------ ------------
16,620,400 27,682,670 15,192,008 19,203,893
Cost of shares redeemed......................... (33,561,293) (19,050,298) (11,805,600) (17,697,515)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets from
capital stock transactions.................... (16,940,893) 8,632,372 3,386,408 1,506,378
------------- ------------- ------------ ------------
Total increase (decrease) in net assets......... 4,117,508 (12,822,303) 9,367,053 (5,691,882)
NET ASSETS:
Beginning of year............................... 109,732,921 122,555,224 58,844,692 64,536,574
------------- ------------- ------------ ------------
End of year**................................... $ 113,850,429 $ 109,732,921 $ 68,211,745 $ 58,844,692
============= ============= ============ ============
**Includes accumulated
net investment income....................... $ 187,461 $ 563,070 $ 440,726 $ 445,926
============= ============= ============ ============
SHARE TRANSACTIONS:
Shares sold..................................... 635,920 882,810 932,395 1,283,206
Dividends reinvested............................ 495,839 893,280 425,055 337,053
------------- ------------- ------------ ------------
1,131,759 1,776,090 1,357,450 1,620,259
Shares redeemed................................. (2,203,122) (1,197,072) (1,074,238) (1,464,670)
------------- ------------- ------------ ------------
Net increase (decrease)......................... (1,071,363) 579,018 283,212 155,589
============= ============= ============ ============
<CAPTION>
SBSF CAPITAL GROWTH FUND SBSF MONEY MARKET FUND
--------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income (loss).................... $ (14,224) $ (6,119) $ 1,344,444 $ 569,363
Net realized gain (loss)........................ 348,226 (90,508) -- --
Net change in unrealized
appreciation/depreciation..................... 1,389,568 (55,497) -- --
----------- ----------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations..................... 1,723,570 (152,124) 1,344,444 569,363
----------- ----------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................... -- -- (1,344,444) (569,363)
Net realized gains.............................. -- -- -- --
----------- ----------- ------------ ------------
Total dividends and distributions............... -- -- (1,344,444) (569,363)
----------- ----------- ------------ ------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sales of shares................... 2,870,339 3,269,547 43,066,229 56,655,541
Reinvestment of dividends -- Note 2(c).......... -- -- 1,297,266 558,485
----------- ----------- ------------ ------------
2,870,339 3,269,547 44,363,495 57,214,026
Cost of shares redeemed......................... (308,806) (632,263) (51,120,858) (44,830,469)
----------- ----------- ------------ ------------
Net increase (decrease) in net assets from
capital stock transactions.................... 2,561,533 2,637,284 (6,757,363) 12,383,557
----------- ----------- ------------ ------------
Total increase (decrease) in net assets......... 4,285,103 2,485,160 (6,757,363) 12,383,557
NET ASSETS:
Beginning of year............................... 4,141,351 1,656,191 28,605,702 16,222,145
----------- ----------- ------------ ------------
End of year**................................... $ 8,426,454 $ 4,141,351 $ 21,848,339 $ 28,605,702
=========== =========== ============ ============
**Includes accumulated
net investment income....................... $ -- $ -- $ -- $ --
=========== =========== ============ ============
SHARE TRANSACTIONS:
Shares sold..................................... 343,971 419,260 43,066,229 56,655,541
Dividends reinvested............................ -- -- 1,297,266 558,485
----------- ----------- ------------ ------------
343,971 419,260 44,363,495 57,214,026
Shares redeemed................................. (34,601) (81,955) (51,120,858) (44,830,469)
----------- ----------- ------------ ------------
Net increase (decrease)......................... 309,370 337,305 (6,757,363) 12,383,557
=========== =========== ============ ============
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE> 60
KEY MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SBSF FUND
---------------------------------------------------------
FISCAL YEAR ENDED NOVEMBER 30,
---------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $14.54 $17.59 $15.64 $16.47 $15.57
Net investment income (loss)....... 0.15 0.21 0.34 0.42 0.50
Net realized and unrealized gain
(loss)............................. 3.98 (0.94) 3.01 0.91 1.40
-------- -------- -------- -------- --------
Total from investment operations.... 4.13 (0.73) 3.35 1.33 1.90
Less dividends and distributions:
Dividends from net investment
income............................. (0.20) (0.20) (0.39) (0.56) (0.59)
Distributions from net realized
gains.............................. (0.89) (2.12) (1.01) (1.60) (0.41)
-------- -------- -------- -------- --------
Total dividends and distributions... (1.09) (2.32) (1.40) (2.16) (1.00)
-------- -------- -------- -------- --------
Net asset value, end of period...... $17.58 $14.54 $17.59 $15.64 $16.47
======== ======== ======== ======== ========
Total Investment Return............. +30.37% -4.99% +22.95% +8.56% +12.89%
Ratios/Supplemental Data:
Net assets end of period (in
thousands)......................... $113,850 $109,733 $122,555 $105,325 $130,171
Ratio of expenses to average net
assets............................. 1.26% 1.23% 1.15% 1.16% 1.15%
Ratio of net investment income
(loss) to average net assets....... 0.93% 1.31% 2.05% 2.68% 3.11%
Decrease reflected in above expense
ratios due to advisory and
administration fees waived......... -- -- -- -- --
-------- -------- -------- -------- --------
Portfolio Turnover Rate............. 59% 83% 70% 45% 50%
<CAPTION>
SBSF CONVERTIBLE SECURITIES FUND SBSF CAPITAL GROWTH FUND
---------------------------------------------------- -------------------------------
FISCAL YEAR ENDED NOVEMBER 30, NOVEMBER 30,
---------------------------------------------------- -------------------------------
1995 1994 1993 1992 1991 1995 1994 1993(1)
------- ------- -------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $11.05 $12.48 $10.98 $10.65 $9.15 $7.56 $7.88 $8.00
Net investment income (loss)....... 0.60 0.61 0.57 0.59 0.67 (0.02) (0.01)(4) (0.05)
Net realized and unrealized gain
(loss)............................. 1.50 (1.12) 1.79 0.56 1.63 2.29 (0.31)(4) (0.07)
------- ------- ------- ------- ------- ------ ------ -------
Total from investment operations.... 2.10 (0.51) 2.36 1.15 2.30 2.27 (0.32) (0.12)
Less dividends and distributions:
Dividends from net investment
income............................. (0.61) (0.61) (0.57) (0.72) (0.71) -- -- --
Distributions from net realized
gains.............................. (0.38) (0.31) (0.29) (0.10) (0.09) -- -- --
------- ------- ------- ------- ------- ------ ------ -------
Total dividends and distributions... (0.99) (0.92) (0.86) (0.82) (0.80) -- -- --
------- ------- ------- ------- ------- ------ ------ -------
Net asset value, end of period...... $12.16 $11.05 $12.48 $10.98 $10.65 $9.83 $7.56 $7.88
======= ======= ======= ======= ======= ====== ====== =======
Total Investment Return............. +20.43% -4.36% +22.42% +11.20% +26.33% +30.03% -4.06% -1.50%(2)
Ratios/Supplemental Data:
Net assets end of period (in
thousands)......................... $68,212 $58,845 $64,537 $42,442 $28,123 $8,426 $4,141 $1,656
Ratio of expenses to average net
assets............................. 1.31% 1.30% 1.24% 1.32% 1.37% 1.20% 1.22% 2.50%(3)
Ratio of net investment income
(loss) to average net assets....... 5.36% 5.20% 4.75% 6.78% 8.50% -0.22% -0.17% -12.65%(3)
Decrease reflected in above expense
ratios due to advisory and
administration fees waived......... -- -- -- -- -- 0.84% 1.00% 0.93%
------- ------- ------- ------- ------- ------ ------ -------
Portfolio Turnover Rate............. 52% 49% 30% 42% 53% 97% 80% 0%
<CAPTION>
SBSF MONEY MARKET FUND
-----------------------------------------------------
FISCAL YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $1.000 $1.000 $1.000 $1.000 $1.000
Net investment income (loss)....... 0.051 0.034 0.026 0.034 0.058
Net realized and unrealized gain
(loss)............................. -- -- -- -- --
-------- ------- ------- ------- -------
Total from investment operations.... 0.051 0.034 0.026 0.034 0.058
Less dividends and distributions:
Dividends from net investment
income............................. (0.051) (0.034) (0.026) (0.34) (0.058)
Distributions from net realized
gains.............................. -- -- -- -- --
-------- ------- ------- ------- -------
Total dividends and distributions... (0.051) (0.034) (0.026) (0.034) (0.058)
-------- ------- ------- ------- -------
Net asset value, end of period...... $1.000 $1.000 $1.000 $1.000 $1.000
======== ======= ======= ======= =======
Total Investment Return............. +5.26% +3.37% +2.61 +3.48% +6.00%
Ratios/Supplemental Data:
Net assets end of period (in
thousands)......................... $21,848 $28,606 $16,222 $12,531 $20,493
Ratio of expenses to average net
assets............................. 0.63% 0.59% 0.55 0.72% 0.59%
Ratio of net investment income
(loss) to average net assets....... 5.15% 3.35% 3.16 4.20% 6.38%
Decrease reflected in above expense
ratios due to advisory and
administration fees waived......... 0.25% 0.25% 0.25% 0.25% 0.25%
-------- ------- ------- ------- -------
Portfolio Turnover Rate............. -- -- -- -- --
<FN>
(1) From November 1, 1993 (commencement of operations) to November 30, 1993.
(2) Not annualized.
(3) Annualized.
(4) Calculated using weighted average shares outstanding.
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE> 61
KEY MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Key Mutual Funds (the "Company") is registered under the Investment Company Act
of 1940 (the "Act"), as a diversified, open-end management investment company.
The Company, incorporated in Maryland on May 26, 1983 under the name SBSF Funds,
Inc., is currently doing business under the name "Key Mutual Funds." Key Mutual
Funds is a series company currently issuing capital stock of four different
investment portfolios: SBSF Fund, SBSF Convertible Securities Fund, SBSF Capital
Growth Fund and SBSF Money Market Fund (the "Funds"). The Company has 250
million shares of $.01 par value capital stock authorized.
- --------------------------------------------------------------------------------
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles.
(a) INVESTMENT VALUATION: With respect to the SBSF Fund, the SBSF Convertible
Securities Fund and the SBSF Capital Growth Fund, securities traded on a
national securities exchange or the Nasdaq National Market are valued at 4:00
p.m. New York time on each business day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sales price
or, in the absence of sales, at the mean between the most recent bid and asked
price. Listed debt securities and over-the-counter securities are valued at the
mean between the most recent bid and asked price. Securities for which
quotations are not readily available and any other assets are valued as
determined in good faith under the supervision of the Board of Directors. The
SBSF Money Market Fund values its portfolio securities at 12:00 p.m. New York
time on each business day. Short-term investments with maturities of sixty days
or less owned by the SBSF Fund, SBSF Convertible Securities Fund and SBSF
Capital Growth Fund, as well as all investments in the SBSF Money Market Fund,
are valued at amortized cost, which approximates market value.
(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost method. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis. Discounts on debt securities are accreted to interest income over
the life of the security with a corresponding increase in the security's cost
basis.
(c) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded
by the Funds on the ex-dividend date. The SBSF Money Market Fund declares
dividends daily from net investment income; such dividends are paid monthly. The
SBSF Convertible Securities Fund declares and pays dividends from net investment
income quarterly. The SBSF Fund and SBSF Capital Growth Fund declare and pay
dividends from net investment income semi-annually. With respect to each Fund,
dividends from net realized capital gains, offset by loss carryovers, if any,
are declared and paid annually. The amount of dividends and distributions from
net investment income and net realized capital gains are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the capital accounts
based on their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they exceed
net investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in capital.
(d) EXPENSES: Assets, liabilities and operations are accounted for separately
by each Fund. Expenses directly attributable to each Fund are charged to that
Fund's operations; expenses which are applicable to the several Funds are
allocated among them in relation to the net assets of each Fund or on another
reasonable basis.
(e) ORGANIZATIONAL EXPENSES: Costs incurred in connection with the organization
of the SBSF Capital Growth Fund amounted to $29,638. Such amount is being
amortized on a straight-line basis over a period not to exceed sixty months from
the date the Fund commenced operations.
- --------------------------------------------------------------------------------
NOTE 3 -- INVESTMENT ADVISORY AND ADMINISTRATION FEES AND OTHER TRANSACTIONS
WITH AFFILIATES:
(a) INVESTMENT ADVISORY AND ADMINISTRATION FEES
On January 18, 1995, Spears, Benzak, Salomon & Farrell, Inc., the Funds'
investment adviser (the "Adviser") entered into a Share Exchange Agreement and
Plan of Reorganization which provided for the subsequent acquisition of the
Adviser by KeyCorp Asset Management Holdings, Inc. ("KAMHI"), on April 5, 1995.
As a result of the acquisition, the Adviser became a wholly owned subsidiary of
KAMHI, and an indirect wholly owned subsidiary of Society National Bank, N.A.
and KeyCorp, a financial services company. This change of control of the
17
<PAGE> 62
Adviser was deemed under the Act to be an assignment of the Investment Advisory
Agreement between the Funds and the Adviser, which, in accordance with the terms
of the Act, resulted in the termination of the Investment Advisory Agreement. At
the Annual Meeting of Shareholders of the Funds held on March 29, 1995, the
shareholders of each of the Funds approved a new Investment Advisory Agreement
with the Adviser, which is substantially similar to, including the same fee
schedules as, the Funds' previous agreements.
Fees incurred by the Funds, pursuant to the provisions of the Investment
Advisory Agreement with the Adviser, are payable monthly and are computed based
on the value of the average daily net assets of each Fund at the following
annual rates:
<TABLE>
<S> <C>
SBSF Fund............................................. .75%
SBSF Convertible Securities Fund...................... .75%
SBSF Capital Growth Fund.............................. .75%
SBSF Money Market Fund................................ .25%
</TABLE>
The Investment Advisory Agreement further provides that if in any fiscal year
the aggregate expenses of any Fund, excluding interest, taxes, brokerage
commissions, and extraordinary expenses, exceed the expense limitation of any
state having jurisdiction over a Fund, the Adviser, in its capacity as Adviser
and Administrator, will reimburse that Fund for the excess expense to the extent
required by such state laws. The Adviser discontinued its voluntary waiver of
advisory fees for the SBSF Capital Growth Fund on October 1, 1995. During the
year ended November 30, 1995, advisory fees incurred by the SBSF Capital Growth
Fund amounted to $48,811, of which $38,420 were waived. During the year ended
November 30, 1995, advisory fees incurred by the SBSF Money Market Fund amounted
to $65,340, which were waived by the Adviser. The Adviser presently intends to
continue to waive the advisory fees for the SBSF Money Market Fund.
Pursuant to an Administration Agreement, in consideration of its administration
fee, the Adviser performs clerical, accounting, regulatory compliance and
shareholder servicing for the Funds. The Adviser also provides the Funds with
personnel to perform these functions, and performs such other services as the
Funds may from time to time request. For the services rendered to the Funds and
related expenses borne by the Adviser as Administrator, each Fund pays the
Adviser a fee, computed daily and payable monthly, based on the average daily
net assets of each Fund at an annual rate of 0.25 of 1% of the first $50
million; 0.15 of 1% of the next $50 million; and 0.05 of 1% of such net assets
in excess of $100 million. The administration fee incurred by the SBSF Capital
Growth Fund amounted to $16,210 for the year ended November 30, 1995 and was
voluntarily waived by the Adviser. On January 1, 1996, the Adviser discontinued
its voluntary waiver of administration fees for the SBSF Capital Growth Fund.
(b) DIRECTORS' FEES: Fees of $7,500 per annum, and $750 per meeting, are paid
to each director.
(c) DISTRIBUTION FEES: Pursuant to a plan adopted under Rule 12b-1 under the
Act, the Funds are permitted to make distribution payments to brokers, dealers
and others ("Participants") of up to 0.25% of the net asset value of shares of
the Funds issued as a result of such Participants' sales efforts.
- --------------------------------------------------------------------------------
NOTE 4 -- SECURITIES TRANSACTIONS
For the year ended November 30, 1995, the cost of purchases and the proceeds
from sales of investment securities, excluding short-term securities, for the
SBSF Fund, the SBSF Convertible Securities Fund and the SBSF Capital Growth
Fund, amounted to:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
SBSF Fund:
Stocks and bonds....................................... $60,592,919 $67,106,084
U.S. Government obligations............................ 3,000,000 8,859,009
SBSF Convertible Securities Fund:
Stocks and bonds....................................... 29,914,140 21,664,001
U.S. Government obligations............................ 5,964,375 9,919,262
SBSF Capital Growth Fund:
Stocks................................................. 8,781,322 6,274,156
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE 5 -- FEDERAL INCOME TAX STATUS
It is the policy of each of the Funds to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of their taxable income to shareholders. Therefore, no Federal
income tax provision is required. Each Fund is treated as a separate entity for
the purpose of determining such compliance.
18
<PAGE> 63
During the year ended November 30, 1995, the SBSF Capital Growth Fund utilized
net capital loss carryovers of $90,518 which were offset against 1995 capital
gain distributions. See Note 7. For the year ended November 30, 1995, the SBSF
Capital Growth Fund reclassified its net investment loss of $14,224 from
accumulated net investment loss to accumulated net realized gain.
- --------------------------------------------------------------------------------
NOTE 6 -- RESULTS OF ANNUAL MEETING OF SHAREHOLDERS (UNAUDITED)
At an Annual Meeting of Shareholders held on March 29, 1995, the shareholders of
the Funds voted "For" three proposals. A description of the proposals, including
the voting results, is presented below:
(1) Approval of a new Investment Advisory Agreement (see Note 3):
<TABLE>
<CAPTION>
SHAREHOLDER VOTES
-----------------------------------
FOR AGAINST ABSTAIN
----------- ------- -------
<S> <C> <C> <C>
SBSF Fund................................ 4,504,795 1,577 1,731
SBSF Convertible Securities Fund......... 3,203,947 83 --
SBSF Capital Growth Fund................. 430,857 -- --
SBSF Money Market Fund................... 19,433,375 -- --
</TABLE>
(2) Election of Directors to hold office until the next annual meeting of
shareholders and until their successors are elected and have qualified:
<TABLE>
<CAPTION>
SHAREHOLDER
VOTES
-----------
<S> <C>
Edward P. Campbell
For.................................. 27,557,326
Withheld............................. 19,039
Ted H. McCourtney, Jr.
For.................................. 27,573,278
Withheld............................. 3,087
Eugene J. McDonald
For.................................. 27,573,278
Withheld............................. 3,087
Frank A. Weil
For.................................. 27,573,278
Withheld............................. 3,087
Leigh A. Wilson
For.................................. 27,557,326
Withheld............................. 19,039
</TABLE>
(3) Ratification of the appointment of Price Waterhouse LLP as independent
accountants to audit the accounts of the Funds for the fiscal year ended
November 30, 1995:
<TABLE>
<CAPTION>
SHAREHOLDER
VOTES
-----------
<S> <C>
For...................................... 27,556,632
Against.................................. 4,968
Abstain.................................. 14,765
</TABLE>
- --------------------------------------------------------------------------------
NOTE 7 -- SUBSEQUENT EVENTS
DIVIDEND AND CAPITAL GAIN DISTRIBUTION:
On December 14, 1995, the Board of Directors declared the following dividends
and distributions per share:
<TABLE>
<CAPTION>
SBSF SBSF
SBSF CONVERTIBLE CAPITAL
FUND SECURITIES FUND GROWTH FUND
------ --------------- -----------
<S> <C> <C> <C>
Net investment income..................... $0.042 $ 0.142 $ --
Short-term capital gains.................. 0.876 0.030 0.298
Long-term capital gains................... 1.064 0.290 --
------ ------- -------
Total Distribution...................... $1.982 $ 0.462 $ 0.298
====== ======= =======
</TABLE>
These dividends were paid on December 21, 1995 to shareholders of record as of
December 19, 1995.
19
<PAGE> 64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Key Mutual Funds (SBSF Funds, Inc.):
In our opinion, the accompanying statements of assets and liabilities, including
the statements of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of SBSF Fund, SBSF Convertible
Securities Fund, SBSF Capital Growth Fund and SBSF Money Market Fund, (Key
Mutual Funds (SBSF Funds, Inc.), hereafter referred to as the "Fund") at
November 30, 1995, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities owned at
November 30, 1995 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
-----------------------------
PRICE WATERHOUSE LLP
New York, New York
January 17, 1996
20
<PAGE> 65
BOARD OF DIRECTORS
EDWARD P. CAMPBELL, DIRECTOR
Director, Executive Vice President
and Chief Operating Officer of
Nordson Corporation
Westlake, Ohio
EUGENE J. MCDONALD, DIRECTOR
Executive Vice President for Asset Management of
Duke University, and President of Duke Management Co.
Durham, North Carolina
FRANK A. WEIL, NON-EXECUTIVE CHAIRMAN
Chairman and Chief Executive Officer of
Abacus Associates, Inc.
New York, New York
LEIGH A. WILSON, PRESIDENT
Chairman and Chief Executive Officer of
Glenleigh International Limited
New York, New York
LOGO
<PAGE> 66
KEY MUTUAL FUNDS
INVESTMENT ADVISER AND ADMINISTRATOR
Spears, Benzak, Salomon & Farrell, Inc.
45 Rockefeller Plaza
New York, New York 10111
COUNSEL
Morrison & Foerster LLP
2000 Pennsylvania Avenue
Washington, DC 20006
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
CUSTODIAN
KeyTrust Company of Ohio, N.A.
127 Public Square
Cleveland, Ohio 44114
TRANSFER AGENT
Primary Funds Service Corporation
P.O. Box 9742
Providence, RI 02940-9742
DISTRIBUTOR
Concord Financial Group
125 West 55th Street
New York, New York 10019
LOGO
<PAGE> 67
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
Included in Part A:
Financial Highlights
Included in Part B:
Audited Financial Statements, including:
Statements of Investments, November 30, 1995
Statements of Assets and Liabilities, November 30, 1995
Statements of Operations, November 30, 1995
Statements of Changes in Net Assets for the years ended November 30,
1995 and 1994
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants dated January 17, 1996
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- ----
<C> <S> <C> <C>
1 -- Articles of Incorporation, as amended and supplemented
2(a) -- By-Laws.*
(b) -- By-Laws, as amended.*
3 -- None.
4 -- None.
5(a) -- Investment Advisory Agreement.*
(b) -- Investment Advisory Agreement, as amended.*
(c) -- Proposed Advisory Agreement.*
6 -- None.
7 -- None.
8(a) (i) -- Form of Custody Agreement.*
(a) (ii) -- Custody Agreement
(b) -- Form of Transfer Agency Agreement.*
9(a) -- Administration Agreement.*
(b) -- Administration Agreement, as amended.*
(c) -- Proposed Administration Agreement.*
10 -- Opinion of Counsel.
11 -- Consent of Independent Accountants.
12 -- None.
13 -- Investment Representation Letter.*
14 -- None.
15(a) -- Distribution Plan pursuant to Rule 12b-1.*
(b) -- Distribution Plan pursuant to Rule 12b-1, as amended.*
(c) -- Distribution Plan pursuant to Rule 12b-1, as amended.
16 -- Not Applicable.
</TABLE>
- ---------------
* Previously filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
No person is controlled by or under common control with Registrant.
C-1
<PAGE> 68
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders as of November 30, 1995: SBSF Fund 1,074 record
holders; SBSF Convertible Securities Fund 454 record holders; SBSF Capital
Growth Fund 273; and SBSF Money Market Fund 257 record holders.
ITEM 27. INDEMNIFICATION.
The Corporation shall indemnify directors, officers, employees and agents of
the Corporation against judgments, fines, settlements and expenses (including
attorney's fees) to the fullest extent authorized, and in the manner permitted,
by applicable federal and state law, except that such indemnification will not
be permitted if, in the opinion of the Board of Directors, such indemnification
would be inconsistent with the position of the staff of the Securities and
Exchange Commission (the "Commission") in its interpretive releases relating to
matters of indemnification, including Investment Company Act Release No. 11330
(September 4, 1980) for so long as such releases remain the position of the
staff of the Commission. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed 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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See information set forth under the caption "Investment Adviser" in the
Prospectus and the Statement of Additional Information.
The information with respect to the directors and officers of Spears, Benzak,
Salomon & Farrell, Inc. is as follows:
<TABLE>
<CAPTION>
(3)
(2) OTHER SUBSTANTIAL
(1) POSITION WITH BUSINESS, PROFESSION,
NAME INVESTMENT ADVISER VOCATION OR EMPLOYMENT
- ------------------------- -------------------------------------------------------------------------------------
<S> <C> <C>
William G. Spears Chairman and Managing Director None
Louis R. Benzak Vice Chairman and Managing Director None
Richard E. Salomon President and Managing Director None
Vincent DeP. Farrell, Jr. Executive Vice President and Managing Director None
Charles G. Crane Sr. Vice President, Director of Research and Managing Director
Richard J. Buoncore Sr. Vice President, Chief Financial Officer and Managing None
Director
Lisa B. Tuckerman Sr. Vice President and Managing Director None
Harold Wright Vice President None
Kathleen McLaughlin Vice President None
John N. Daly Vice President None
Michael R. Parker Vice President, General Counsel and Secretary None
Christopher J. Brown Vice President None
Vicki Jacobs-Jones Vice President None
Christopher C. Grisanti Vice President None
Paul Weinberg Vice President None
Alan J. Puklin Vice President None
Robert L. Bunnen, Jr. Vice President None
Mark D. Fitzpatrick Vice President None
M. John Johnson Vice President None
Meera K. Mayer Vice President None
Anthony Meeker Vice President None
</TABLE>
C-2
<PAGE> 69
<TABLE>
<CAPTION>
(3)
(2) OTHER SUBSTANTIAL
(1) POSITION WITH BUSINESS, PROFESSION,
NAME INVESTMENT ADVISER VOCATION OR EMPLOYMENT
- ------------------------- ------------------------- -----------------------
<S> <C> <C>
Paul D. Neidhardt Vice President
Barbara Bailey Vice President
Michael S. Cobb Vice President
Henry K. Coerdt Vice President
W. David McShane Vice President
David P. Nelson Vice President
Deborah A. Pildner Vice President
Jane A. Thornburgh Vice President
Joanne Hassett Assistant Vice President
Ellen L. Johnson Assistant Vice President
Judith A. Wolsky Assistant Vice President
Stacy L. Bauer Assistant Secretary
James D. Kacic Assistant Treasurer
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS. -- NOT APPLICABLE.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the 1940 Act and the Rules thereunder will be maintained at the offices
of Key Trust Company of Ohio, N.A., 127 Public Square, Cleveland, Ohio, 44114,
Primary Funds Service Corporation, P.O. Box 9742, Providence, Rhode Island,
02940 and the Fund, 45 Rockefeller Plaza, New York, New York 10111.
ITEM 31. MANAGEMENT SERVICES.
Other than as set forth under the captions "Investment Adviser" and
"Administrator" in Parts A and B of the Registration Statement, Registrant is
not a party to any management-related service contract.
ITEM 32. UNDERTAKINGS.
(a) Not applicable.
(b) Not applicable.
(c) Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
when such annual report is issued, containing information called for by Item 5A
of Form N-1A, upon request and without charge.
C-3
<PAGE> 70
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Columbus, and State of
Ohio, on the 31st day of January, 1996.
SBSF FUNDS, INC.
By *
Leigh A. Wilson
President
By /s/ Scott A. Englehart
Scott A. Englehart
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registrant's Registration Statement has been signed
below by the following individuals in the capacities indicated on the date
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- -------------------------------------------- -----------------
<S> <C> <C>
* President and Director January 31, 1996
Leigh A. Wilson (Principal Executive Officer)
* Director January 31, 1996
Eugene J. McDonald
* Non-Executive Chairman and Director January 31, 1996
Frank A. Weil
* Director January 31, 1996
Edward P. Campbell
* Treasurer (Principal Financial January 31, 1996
Martin R. Dean Officer and Principal Accounting Officer)
/s/ Scott A. Englehart
Scott A. Englehart
*Attorney-in-Fact
</TABLE>
C-4
<PAGE> 71
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------------------------------- ------------------------------------------------------------
<S> <C>
EX-27.1 SBSF FUND Financial Data Schedule
EX-27.2 SBSF MM FUND Financial Data Schedule
EX-27.3 SBSF CNVS FD Financial Data Schedule
EX-27.4 SBSF CPGT FD Financial Data Schedule
EX-99.B1 Articles of Incorporation, as amended and supplemented
EX-99.B8(A)(ii) Custody Agreement
EX-99.B10 Opinion of Counsel
EX-99.B11 Consent of Independent Accountants
EX-99.B15(C) Distribution Plan pursuant to Rule 12b-1, as amended
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000722832
<NAME> SBSF FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> SBSF FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 90,580,922
<INVESTMENTS-AT-VALUE> 112,747,566
<RECEIVABLES> 1,267,112
<ASSETS-OTHER> 18,011
<OTHER-ITEMS-ASSETS> 6,432
<TOTAL-ASSETS> 114,039,121
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 188,692
<TOTAL-LIABILITIES> 188,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 78,850,462
<SHARES-COMMON-STOCK> 6,476,957
<SHARES-COMMON-PRIOR> 7,548,320
<ACCUMULATED-NII-CURRENT> 187,461
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,645,862
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 22,166,644
<NET-ASSETS> 113,850,429
<DIVIDEND-INCOME> 1,710,679
<INTEREST-INCOME> 667,284
<OTHER-INCOME> 0
<EXPENSES-NET> 1,371,688
<NET-INVESTMENT-INCOME> 1,006,275
<REALIZED-GAINS-CURRENT> 13,315,892
<APPREC-INCREASE-CURRENT> 14,528,504
<NET-CHANGE-FROM-OPS> 28,850,671
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,381,884
<DISTRIBUTIONS-OF-GAINS> 6,410,386
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 635,920
<NUMBER-OF-SHARES-REDEEMED> 2,203,122
<SHARES-REINVESTED> 495,839
<NET-CHANGE-IN-ASSETS> 4,117,508
<ACCUMULATED-NII-PRIOR> 563,070
<ACCUMULATED-GAINS-PRIOR> 5,740,356
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 815,718
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,371,688
<AVERAGE-NET-ASSETS> 108,765,373
<PER-SHARE-NAV-BEGIN> 14.54
<PER-SHARE-NII> 00.15
<PER-SHARE-GAIN-APPREC> 03.98
<PER-SHARE-DIVIDEND> 00.20
<PER-SHARE-DISTRIBUTIONS> 00.89
<RETURNS-OF-CAPITAL> 00.00
<PER-SHARE-NAV-END> 17.58
<EXPENSE-RATIO> 01.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000722832
<NAME> SBSF FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> SBSF MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 21,857,523
<INVESTMENTS-AT-VALUE> 21,857,523
<RECEIVABLES> 447
<ASSETS-OTHER> 17,631
<OTHER-ITEMS-ASSETS> 9,272
<TOTAL-ASSETS> 21,884,873
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 36,534
<TOTAL-LIABILITIES> 36,534
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,848,339
<SHARES-COMMON-STOCK> 21,848,339
<SHARES-COMMON-PRIOR> 28,604,696
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 21,848,339
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,508,565
<OTHER-INCOME> 0
<EXPENSES-NET> 164,121
<NET-INVESTMENT-INCOME> 1,344,444
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,344,444
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,344,444
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 43,066,229
<NUMBER-OF-SHARES-REDEEMED> 51,120,858
<SHARES-REINVESTED> 1,297,266
<NET-CHANGE-IN-ASSETS> (6,757,363)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,006
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65,340
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 229,461
<AVERAGE-NET-ASSETS> 26,118,608
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.051
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.051
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000722832
<NAME> SBSF FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> SBSF CONV. SEC. FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 65,787,320
<INVESTMENTS-AT-VALUE> 71,902,458
<RECEIVABLES> 537,105
<ASSETS-OTHER> 23,172
<OTHER-ITEMS-ASSETS> 3,715
<TOTAL-ASSETS> 72,466,450
<PAYABLE-FOR-SECURITIES> 4,138,870
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115,835
<TOTAL-LIABILITIES> 4,254,705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,849,771
<SHARES-COMMON-STOCK> 5,609,335
<SHARES-COMMON-PRIOR> 5,326,123
<ACCUMULATED-NII-CURRENT> 440,726
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,806,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,115,138
<NET-ASSETS> 68,211,745
<DIVIDEND-INCOME> 2,308,436
<INTEREST-INCOME> 1,748,923
<OTHER-INCOME> 0
<EXPENSES-NET> 798,411
<NET-INVESTMENT-INCOME> 3,258,948
<REALIZED-GAINS-CURRENT> 1,851,621
<APPREC-INCREASE-CURRENT> 6,158,941
<NET-CHANGE-FROM-OPS> 11,269,510
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,264,148
<DISTRIBUTIONS-OF-GAINS> 2,024,717
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 932,395
<NUMBER-OF-SHARES-REDEEMED> 1,074,238
<SHARES-REINVESTED> 425,055
<NET-CHANGE-IN-ASSETS> 9,367,053
<ACCUMULATED-NII-PRIOR> 445,926
<ACCUMULATED-GAINS-PRIOR> 1,979,206
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 455,976
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 798,411
<AVERAGE-NET-ASSETS> 60,797,875
<PER-SHARE-NAV-BEGIN> 11.05
<PER-SHARE-NII> 00.60
<PER-SHARE-GAIN-APPREC> 01.50
<PER-SHARE-DIVIDEND> .61
<PER-SHARE-DISTRIBUTIONS> .38
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.16
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000722832
<NAME> SBSF FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> SBSF CAP. GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> NOV-30-1995
<INVESTMENTS-AT-COST> 6,960,976
<INVESTMENTS-AT-VALUE> 8,298,677
<RECEIVABLES> 207,461
<ASSETS-OTHER> 17,617
<OTHER-ITEMS-ASSETS> 17,811
<TOTAL-ASSETS> 8,541,566
<PAYABLE-FOR-SECURITIES> 90,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,112
<TOTAL-LIABILITIES> 115,112
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,845,269
<SHARES-COMMON-STOCK> 856,895
<SHARES-COMMON-PRIOR> 547,525
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 243,484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,337,701
<NET-ASSETS> 8,426,454
<DIVIDEND-INCOME> 35,992
<INTEREST-INCOME> 27,573
<OTHER-INCOME> 0
<EXPENSES-NET> 77,789
<NET-INVESTMENT-INCOME> (14,224)
<REALIZED-GAINS-CURRENT> 348,226
<APPREC-INCREASE-CURRENT> 1,389,568
<NET-CHANGE-FROM-OPS> 1,723,570
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 343,971
<NUMBER-OF-SHARES-REDEEMED> 34,601
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,285,103
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (90,518)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 48,811
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 132,419
<AVERAGE-NET-ASSETS> 6,500,640
<PER-SHARE-NAV-BEGIN> 7.56
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> 2.29
<PER-SHARE-DIVIDEND> 0.0
<PER-SHARE-DISTRIBUTIONS> 0.0
<RETURNS-OF-CAPITAL> 0.0
<PER-SHARE-NAV-END> 9.83
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EX-99.B1
ARTICLES OF INCORPORATION
OF SBSF FUND, INC.
ARTICLE I
I, the incorporator, JEFFREY A. SINE, whose post office address
is 250 Park Avenue, New York 10177, being at least eighteen years of age, am,
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporation, forming a corporation.
ARTICLE II
The name of the corporation (hereinafter called the
"Corporation") is SBSF Fund, Inc.
ARTICLE III
Purposes
The purpose for which the Corporation is formed is to act as an
open end investment company of the management type registered as such with the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940 and to exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the General Laws of
the State of Maryland now or hereafter in force.
<PAGE> 2
ARTICLE IV
Address in Maryland
The post office address of the place at which the principal
office of the Corporation in the State of Maryland is located is /o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is The Corporation
Trust Incorporated, and its post office address is 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a corporation of the State of Maryland.
ARTICLE V
Common Stock
Section 1. The total number of shares of stock which the
Corporation has authority to issue is $50,000,000 shares of common stock of the
par value of $.01 each, all of one class, such shares having an aggregate par
value of $500,000.
Section 2. Each share of the common stock of the Corporation
shall be subject to the following provisions:
(a) The net asset value of each share of the
common stock of the Corporation, for the purpose of the issue
of such common stock, shall be determined in accordance with
any applicable provision of the Investment Company Act of 1940,
any applicable rule, regulation or order of the Securities and
Exchange Commission thereunder, or any applicable rule or
regulation made or adopted by any securities association
registered under the Securities Exchange Act of 1934.
2
<PAGE> 3
(b) All shares of the common stock of the Corporation
now or hereafter authorized shall be subject to redemption and
redeemable at the option of the stockholder, in the sense used
in the General Laws of the State of Maryland authorizing the
formation of corporations. Each holder of the common stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates
in proper form for transfer, shall be entitled to require the
Corporation to redeem all or any part of the shares of common
stock standing in the name of such holder on the books of the
Corporation at a redemption price equal to the net asset value
of such share determined as hereinafter set forth.
(c) Notwithstanding Section 2(b) of Article V of these
Articles of Incorporation, the Board of Directors of the
Corporation may suspend the right of the holders of the common
stock of the Corporation to require the Corporation to redeem
shares of such common stock or may suspend any voluntary
purchase of such common stock:
(i) for any period (A) during which the New
York Stock Exchange is closed other than customary
weekend and holiday closings, or (B) during which
trading on the New York Stock Exchange is restricted;
(ii) for any period during which an emergency,
as defined by the rules of the Securities and Exchange
Commission or any successor thereto, exists as a
result of which (A) disposal by the Corporation of
securities owned by it is not reasonably practicable,
or (B) it is not reasonably practicable for the
Corporation fairly to determine the value of its net
assets, or
3
<PAGE> 4
(iii) for such periods as the Securities and
Exchange Commission or any successor thereto may by
order permit for the protection of security holders of
the Corporation.
(d) All shares of the common stock of the Corporation
now or hereafter authorized shall be subject to redemption and
redeemable at the option of the Corporation. The Board of
Directors may by resolution from time to time authorize the
Corporation to require the redemption of all or any part of the
outstanding shares upon the sending of written notice thereof
to each stockholder any of whose shares are so redeemed and
upon such terms and conditions as the Board of Directors shall
deem advisable, out of funds legally available therefor, at net
asset value determined as hereinafter set forth and to take all
other steps deemed necessary or advisable in connection
therewith.
(e) The Board of Directors may by resolution from time
to time authorize the purchase by the Corporation, either
directly or through an agent, of shares of the common stock of
the Corporation upon such terms and conditions and for such
consideration as the Board of Directors shall deem advisable
out of funds legally available therefor at prices not in excess
of their net asset value determined as hereinafter set forth
and to take all other steps as hereinafter set forth and to
take all other steps deemed necessary or advisable in
connection therewith.
(f) The net asset value of each share of common stock
of the Corporation duly surrendered to the Corporation for
redemption or purchased by the Corporation pursuant to the
provisions of Section 2(b), 2(d), or 2(e) of Article V of these
Articles of Incorporation shall be determined on any day on
4
<PAGE> 5
which the New York Stock Exchange is open (i) (A) as of the
close of business next succeeding the receipt of the tender of
such shares for redemption or purchase, as the case may be, by
the Corporation or (B) as of the close of business on the
business day next preceding the date on which the Corporation
sends notice of redemption to stockholders whose shares are
redeemed at the option of the Corporation or (ii) as of such
other time or times as may be established by the Board of
Directors in its absolute discretion.
(g) Except as otherwise permitted by the Investment
Company Act of 1940, payment of the redemption price of shares
of common stock of the Corporation surrendered to it for
redemption pursuant to the provisions of Section 2(b) or 2(d)
or for purchase by the Corporation pursuant to the provisions
of Section 2(e) of Article V or these Articles of Incorporation
shall be made by the Corporation within seven days after
surrender of such shares to the Corporation for such purpose.
Any such payment may be made in whole or in part in portfolio
securities of the Corporation or in cash, as the Board of
Directors shall deem advisable, but no stockholder shall have
the right, other than as determined by the Board of Directors,
to have his shares redeemed in portfolio securities.
(h) In the absence of any specification as to the
purposes for which shares of the common stock of the
Corporation are redeemed or repurchased by it, all shares so
redeemed or repurchased shall be deemed to be acquired for
retirement in the sense contemplated by the laws of the State
of Maryland. Shares retired by repurchase or redemption shall
thereafter have the status of authorized but unissued shares of
common stock of the Corporation.
5
<PAGE> 6
Section 3. The presence in person or by proxy of the holders of
record of one-third of the shares of common stock issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of any
business at all meetings of the stockholders except as otherwise provided by law
or in these Articles of Incorporation.
Section 4. Notwithstanding any provision of law requiring
action to be taken or authorized by the affirmative vote of the holders of a
designated proportion greater than a majority of the shares of common stock,
such action shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of the total number of shares of
common stock outstanding and entitled to vote thereupon pursuant to the
provisions of these Articles of Incorporation.
Section 5. No holder of shares of common stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any shares of the common stock of the corporation of any class
which it may issue or sell (whether out of the number of shares authorized by
the Articles of Incorporation, or out of any shares of the common stock of the
Corporation required by it after the issue thereof, or otherwise).
Section 6. All persons who shall acquire common stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation.
6
<PAGE> 7
ARTICLE VI
Directors
The initial number of directors of the Corporation shall be
three, and the names of those who shall act as such until the first annual
meeting and until their successors are duly elected and qualify are as follows:
William G. Spears
Louis K. Benzak
Vincent Dep. Farrell, Jr.
However, the Bylaws of the Corporation may fix the number of
directors at a number other than three and may authorize the Board of Directors,
by the vote of a majority of the entire Board of Directors, to increase or
decrease the number of directors within a limit specified in the By laws,
provided that in no case shall the number of directors be less than three, and
to fill the vacancies created by any such increase in the number of directors.
Unless otherwise provided by the By laws of the Corporation, the directors of
the Corporation need not be stockholders.
The Bylaws of the Corporation may divide the Directors of the
Corporation into classes and prescribe the tenure of office of the several
classes; but no class shall be elected for a period shorter than that from the
time of the election of such class until the next annual meeting and thereafter
for a period shorter than the interval between annual meetings or for a period
longer than five years, and the term of office of at least one class shall
expire each year.
7
<PAGE> 8
ARTICLE VII
Miscellaneous
The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for
creating, defining, limiting and regulating the powers of the Corporation, the
directors and the stockholders.
Section 1. The Board of Directors shall have the management and
control of the property, business and affairs of the Corporation and is hereby
vested with all the powers possessed by the Corporation itself so far as is not
inconsistent with law or these Articles of Incorporation. In furtherance and
without limitation of the foregoing provisions, it is expressly declared that,
subject to these Articles of Incorporation, the Board of Directors shall have
power:
(a) To make, alter, amend or repeal from time to time the
Bylaws of the Corporation except as such power may otherwise be limited
in the Bylaws.
(b) To issue the shares of common stock of the Corporation.
(c) To authorize the purchase of shares of common stock of the
Corporation in the open market or otherwise, at prices not in excess of
their net asset value, less a charge not to exceed 2% of such net asset
value of and as fixed by a resolution of the Board of Directors of the
Corporation from time to time, provided the Corporation has assets
legally available for such purpose, and to pay for such shares in cash,
securities or other assets then held or owned by the Corporation.
(d) To determine, as provided herein, or if provision is not
made herein, in accordance with generally accepted accounting
principles, what constitutes net income, total assets (as defined
herein) and the net asset value (as defined herein) of the shares of
common stock of the Corporation.
8
<PAGE> 9
(e) To distribute dividends from funds legally available
therefor in such amounts, if any, and in such manner (including
declaration by means of a formula or other similar method of
determination whether or not the amount of the dividend or distribution
so declared can be calculated at the time of such declaration) and to
the stockholders of record as of such rate, as the Board of Directors
may determine.
Section 2. The directors of the Corporation may receive
compensation for their services, subject, however, to such limitations
with respect thereto as may be determined from time to time by the
stockholders.
Section 3. Except as required by law, the have only such right
to inspect the records, documents, accounts and books of the
Corporation, as may be granted by the Board of Directors of the
Corporation.
Section 4. Any vote authorizing liquidation of the Corporation
or proceedings for the dissolution may authorize the Board of Directors
to determine, as provided herein, or if provision is not made herein,
in accordance with generally accepted accounts principles, what
constitute the assets of the Corporation available for distribution to
stockholders and may divide, or authorize the Board of Directors to
divide such assets among the stockholders in such manner that every
stockholder will receive a proportionate amount of the value of such
assets (determined as aforesaid) of the Corporation upon such
liquidation or dissolution.
ARTICLE VIII
Definitions
Section 1. As used in these Articles of Incorporation and in
the Bylaws of the Corporation, the following terms shall have the meanings
indicated:
"Gross Assets" shall mean the total value of the
assets of the Corporation determined as provided in Section 3
below.
9
<PAGE> 10
"Person" shall mean a natural person, corporation,
joint stock company, firm association, partnership, trust,
syndicate, combination, organization, government or agency or
subdivision thereof.
"Securities" shall mean any stock, shares, bonds,
debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the
same or evidencing or representing any other rights or
interests therein, or in any property or assets created or
issued by any Person.
Section 2. Net asset value shall be determined by
dividing:
(a) The total value of the assets of the Corporation
determined as provided in Section 3 below less, to the extent
determined by or pursuant to the direction of the Board of
Directors in accordance with generally accepted accounting
principles, all debts, obligations and liabilities of the
Corporation (which debts, obligations and liabilities shall
include, without limitation of the generality of the foregoing,
any and all debts, obligations, liabilities or claims, of any
and every kind and nature, fixed, accrued or unmatured,
including the estimated accrued expense of investment advisory
and administrative services, and any reserves or charges for
any or all of the foregoing, whether for taxes, expenses,
contingencies, or otherwise, and the price of common stock
redeemed but not paid for) but excluding the Corporation's
liability upon its shares and its surplus, by
(b) The total number of shares of the Corporation
outstanding (shares sold by the Corporation whether or not paid
for being treated as
10
<PAGE> 11
outstanding and shares purchased or redeemed by the
Corporation whether or not paid for and treasury shares being
treated as not outstanding).
Section 3. In determining for the purposes of these Articles of
Incorporation the total value of the assets of the Corporation at any time,
securities shall be taken at their market value or, in the absence of readily
available market quotations, at fair value, both as determined pursuant to
methods approved by the Board of Directors and all other assets at fair value
determined in such manner as may be approved from time to time by or pursuant to
the direction of the Board of Directors.
Section 4. Any determination made in good faith and, so far as
accounting matters are involved, in accordance with generally accepted
accounting principles or with any order, rule, regulation or release of the
Securities Exchange Commission by or pursuant to the direction of the Board of
Directors, shall be final and conclusive, and shall be biding upon the
Corporation and all holders of its shares, past, present and future, and shares
of the Corporation are issued and sold on the condition and undertaking,
evidenced by acceptance of certificates for such shares by, or confirmation of
such shares being held for the account of, any stockholder, that any and all
such determination shall be binding as aforesaid.
Nothing in this Section 4 shall be construed to protect any
director or officer of the Corporation against any liability to the Corporation
or its stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE IX
Amendments
From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment that
changes the terms of
11
<PAGE> 12
any of the outstanding stock by classification, reclassification or otherwise),
and other provisions that may, under the statutes of the State of Maryland at
the time in force, be lawfully contained in articles of incorporation may be
added or inserted, upon the vote of the holders of a majority of the shares of
common stock of the Corporation at the time outstanding and entitled to vote,
and all rights at any time conferred upon the stockholders of the Corporation by
these Articles of Incorporation are subject to the provisions of this Article
IX.
-----------------------------
The term "Articles of Incorporation" as used herein and in the
By Laws of the Corporation shall be deemed to mean these Articles of
Incorporation as from time to time amended and restated.
------------------------------
I acknowledge this document to be my act, and state under the
penalties of perjury that with respect to all matters and facts herein, to the
best of my knowledge, information and belief such matters and facts are true in
all material respects and that this statement is made under the penalties of
perjury.
May 25, 1983
/s/ Jeffrey A. Sine
-----------------------
Jeffrey A. Sine
12
<PAGE> 13
SBSF FUND, INC.
Articles of Amendment
THIS IS TO CERTIFY:
FIRST: That the Articles of Incorporation of SBSF Fund, Inc., a
Maryland corporation having its principal office at 10 Rockefeller Plaza, New
York, New York 10020 (hereinafter called the "Corporation"), is hereby amended
as follows:
Article V of the Articles of Incorporation be amended by deleting it in
its entirety and inserting in its place the following:
ARTICLE V
Common Stock
(1) The total number of shares of stock which the
corporation has authority to issue is 50,000,000 all of which
are a par value of $.01 each, and are designated Common Stock.
References in the following provisions of these Articles of
Incorporation to "Shares" mean the shares of Common Stock of
the Corporation.
(2) The aggregate par value of all the authorized
Shares of stock is $500,000.
(3) The Board of Directors of the Corporation is
authorized, from time to time, to fix the price or the minimum
price or the consideration or minimum consideration for Shares,
and to issue Shares up to the total number of Shares which the
Corporation is authorized to issue.
(4) The Board of Directors shall have the authority
from time to time to create from the Shares one or more
separate Classes of Shares (hereinafter referred to as
"Series"), as they deem necessary or desirable, to establish
and designate such Series and to specify the number of Shares
thereof. Except as aforesaid, as otherwise provided herein, or
as provided in an instrument properly establishing
1
<PAGE> 14
and designating a Series, all Shares of the different Series
shall be identical.
(5) The Board of Directors may increase or decrease
the number of Shares of any Series, provided that the number of
Shares of any Series shall not be decreased below the number
then outstanding. The Board of Directors may classify as Shares
of any Series any unissued Shares which have not theretofore
been designated as Shares of a Series, or may reclassify any
unissued Shares of any Series or any Shares previously issued
and reacquired of any Series. At any time that there are no
Shares outstanding of any particular Series previously
established and designated, the Board of Directors may by an
instrument adopted by it abolish that Series and the
establishment and designation thereof.
(6) The establishment and designation of any Series of
Shares shall be effective upon the adoption by the Board of
Directors of an instrument setting forth such establishment and
designation or when otherwise provided in such instrument. Any
Shares of any Series that may from time to time be established
and designated by the Board of Directors shall have the
relative rights and preferences provided in these Articles of
Incorporation.
(7) All consideration received by the Corporation for
the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably belong to that Series for all
purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds, in whatever
form the same may be, are herein referred to as "assets
belonging to" that Series.
2
<PAGE> 15
(8) The assets belonging to each particular Series
shall be charged with the liabilities of the Corporation in
respect of that Series and all expenses, costs, charges and
reserves attributable to that Series and with all payments of
consideration made incident to the redemption or reacquisition
of any Shares of that Series. The Board of Directors shall
cause any general liabilities, expenses, costs, charges or
reserves of the Corporation which are not readily identifiable
as belonging to any particular Series to be allocated and
charged to and among the Series in proportion to their relative
asset values. The liabilities, expenses, costs, charges and
reserves allocated and charged to a Series are herein referred
to as "liabilities belonging to" that Series. Each allocation
of liabilities, expenses, costs, charges and reserves shall be
conclusive and biding upon the holders of all Series for all
purposes.
(9) Income belonging to a Series includes all income,
earnings and profits derived from assets belonging to that
Series, less any expenses, costs, charges or reserves belonging
to that Series, for the relevant time period, all determined in
accordance with generally accepted accounting principles.
(10) Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the Board
of Directors may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Board of Directors may
determine, to the holders of Shares of that Series, from such
of the income and capital gains, accrued or realized, from the
assets belonging to that Series, after providing for actual and
accrued liabilities belonging to that Series. Except as
hereinafter provided, all dividends on Shares of a particular
Series shall be paid only out of the income belonging to that
Series and capital gains distributions on Shares of a
particular Series shall be paid only out of the capital gains
belonging to that Series.
The Corporation intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1954, as
amended, or any successor or comparable statute thereto, and
regulations promulgated thereunder. Inasmuch as the computation
of net income and gains for federal income tax purposes may
vary from the computation thereof
3
<PAGE> 16
on the books of the Corporation, the Board of Directors shall
have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in
whole or in part as capital gains distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable
the Corporation to qualify as a regulated investment company
and to avoid liability of the Corporation for federal income
tax in respect of that year. However, nothing in the foregoing
shall limit the authority of the Board of Directors to make
distributions greater than or less than the amount necessary to
qualify as a regulated investment company and to avoid
liability of the Corporation for such tax.
Dividends and distributions may be made in cash or
Shares or a combination thereof as determined by the Board of
Directors or pursuant to any program that the Board of
Directors may have in effect at the time for the election by
each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with paragraph 18 of this
Article V.
(11) In the event of the liquidation or dissolution of
the Corporation, the Shareholders of each Series shall be
entitled to receive, as a Series, when and as declared by the
Board of Directors, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The
liquidation of any particular Series with Shares then
outstanding may be authorized by the Board of Directors,
subject to the approval of a majority of the outstanding voting
securities of that Series, as defined in the Act.
(12) On each matter submitted to a vote of the
Shareholders, each holder of a Share shall be entitled to one
vote for each Share standing in his name on the books of the
Corporation on the date fixed in accordance with the by-laws
for determination of shareholders entitled to vote at such
meeting, irrespective of the Series thereof and all Shares of
all Series shall vote as a single class; provided, however,
that (i) as to any matter with respect to which a separate vote
of any Series is required by the 1940 Act or would be required
under the Maryland General Corporation law, such requirements
as to a separate vote by that Series shall apply in lieu of
single class voting as described above;
4
<PAGE> 17
(ii) in the event that the separate vote requirements
referred to in (i) above apply with respect to one or more
Series, then, subject to (iii) below, the Shares of all other
Series shall vote as a single class; and (iv) as to any matter
which does not affect the interest of a particular Series, only
the holders of Shares of the one or more affected Series shall
be entitled to vote. Notwithstanding any provision of the
General Corporation Law of the State of Maryland requiring a
greater portion than a majority of the votes entitled to be
cast in order to take or authorize any action, any such action
may be taken or authorized upon the concurrence of a majority
of the aggregate number of votes entitled to be cast thereon.
(13) Each shareholder upon request to the Corporation,
accompanied by surrender of any outstanding certificate or
certificates therefor in proper form for transfer, shall be
entitled to require the Corporation to redeem all or any part
of the Shares of any Series standing in his name on the books
of the Corporation, at the then current net asset value of the
Shares of such Series. The method of computing such current net
asset value, and the time within which the Corporation shall
make payment therefor shall be determined as hereinafter
provided. Notwithstanding the foregoing, the Corporation may
suspend the right of the shareholders to require the
Corporation to redeem Shares:
(a) for any period (i) during which the New York
Stock Exchange is closed other than the customary weekend
and holding closings, or (ii) during which trading on the
New York Stock Exchange is restricted;
(b) for any period during which an emergency, as
determined by the Securities and Exchange Commission or
any successor thereto, exists as a result of which (i)
disposal by it is not reasonably practicable, or (ii) it
is not reasonably practicable for the Corporation fairly
to determine the value of its net assets; or
(c) for such other periods as the Securities and
Exchange Commission or any successor thereto
5
<PAGE> 18
may by order permit for the protection of security holders
of the Corporation.
(14) The Corporation may at any time and from time to
time, at the sole discretion of the Board of Directors, upon
not less than 30 days' written notice, redeem at the then
current net asset value of such Shares, all the Shares of any
Series of any shareholder the aggregate current net asset value
of whose Shares of that Series is less than $500.
(15) Payment of the redemption or repurchase price for
Shares of any Series redeemed or repurchased by the Corporation
may be made either in cash or in securities or other assets at
the time owned by the Corporation and belonging to that Series
or partly in cash and partly in securities or other assets at
the time owned by the Corporation and belonging to that Series
as the Board of Directors may, in its sole discretion,
determine. In the case of redemption, the value of any part of
such payment to be made in securities or other assets of the
Corporation shall be the value employed in determining the
redemption price, and payment of the redemption price shall be
made on or before the seventh day following the day on which
the Shares are properly presented for redemption except that
delivery of any securities included in any such payment shall
be made as promptly as any necessary transfers on the books of
the issuers whose securities are to be delivered may be made,
and, except as postponement of the date of payment may be
permissible under the 1940 Act and the rules and regulations
thereunder.
(16) In the case of shares of stock of the Corporation
issued in whole or in part in exchange for securities, there
may, at the discretion of the Board of Directors of the
Corporation, be included in the value of such securities, for
the purpose of determining the number of shares of capital
stock of the Corporation issuable in exchange therefor, the
amount, if any, of brokerage commissions (not exceeding an
amount equal to the rates payable in connection with the
purchase of comparable securities on the New York Stock
Exchange) or other similar costs of acquisition of such
securities held by the holder of said securities in acquiring
the same.
6
<PAGE> 19
(17) Shares of any Series redeemed or repurchased by
the Corporation shall be retired and restored to the status of
authorized and unissued Shares of the same Series (subject to
the power of the Board of Directors to reclassify such Shares
as provided in paragraph (5) of this Article V), and the
capital of the Corporation correspondingly reduced, without any
further action by the Corporation, to the extent permitted by
the laws of the State of Maryland.
(18) The net asset value per Share of any Series shall
be the quotient obtained by dividing the value of the net
assets of that Series (being the value of the assets belonging
to that Series less the liabilities belonging to that Series)
by the total number of Shares of that Series outstanding. The
net asset value of the Shares shall be determined at least once
on each day that the New York Stock Exchange is open for
trading as of the close of trading ("current net asset value").
The current net asset value shall be determined in good faith
pursuant to the direction of the Board of Directors in a manner
not inconsistent with the provisions of the 1940 Act or any
rule or regulation thereunder.
(19) The Corporation may issue Shares in fractional
denominations to the same extent as its whole Shares, and
Shares in fractional denominations shall have proportionately
to the respective fractions represented thereby all the rights
of the whole Shares of the same Series, including, without
limitation, the right to vote, the right to receive dividends
and distributions, rights of redemption and the right to
participate upon liquidation of the Corporation.
(20) No holder of any Shares shall be entitled as of
right to subscribe for, purchase, or otherwise acquire any
Shares which the Corporation proposes to issue for any rights
or options which the Corporation proposes to grant for the
purchase of Shares or for the purchase of any bonds,
securities, or obligations of the Corporation which are
convertible into or exchangeable for, or which carry any rights
to subscribe for, purchase, or otherwise acquire Shares; and
any and all of such Shares, bonds, securities or obligations of
the Corporation, whether now or hereafter authorized or created
may be issued, or may be reissued or transferred if the same
have been reacquired and have
7
<PAGE> 20
treasury status, and any and all of such rights and options may
be granted by the Board of Directors to such persons, firms,
corporations and associations, and for such lawful
consideration, and on such terms, as the Board of Directors in
its discretion may determine, without first offering the same,
or any thereof, to any such holder.
SECOND: That the Board of Directors of the Corporation at a meeting
duly convened and held on January 9, 1987, duly advised the amendment to the
Articles of Incorporation of the Corporation hereinabove set forth and adopted a
resolution directing that it be submitted for action thereon at the next annual
meeting of the stockholders of the Corporation.
THIRD: That said annual meeting of stockholders of the Corporation,
pursuant to notice given in the manner provided by law, was held at 10
Rockefeller Plaza, New York, New York 10020, on Tuesday, March 24, 1987; and
that at said meeting of stockholders, by the affirmative vote of the majority of
all of the shares of capital stock of the Corporation issued and outstanding and
entitled to vote thereon, the amendment of the Articles of Incorporation
hereinabove set forth was duly approved and adopted.
IN WITNESS WHEREOF, SBSF Fund, Inc. has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Secretary, this 25th day of March, 1987.
SBSF FUND, INC.
By: /s/ Joseph E.Breslin
-------------------------
Joseph E. Breslin, President
8
<PAGE> 21
ATTEST:
/s/ Susan M. Brennan
- -------------------------------------
Susan M. Brennan, Assistant Secretary
I acknowledge this document to be the act of the Corporation, and state
that, to the best of my knowledge, information and belief, all matters and facts
herein are true in all material respects and that this statement is made under
the penalties for perjury.
/s/ Joseph E.Breslin
----------------------
Joseph E. Breslin
9
<PAGE> 22
SBSF FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
ARTICLES OF INCORPORATION
THIS IS TO CERTIFY that SBSF FUND, INC., a Maryland corporation having
its principal office in the State of Maryland in Baltimore City (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation at a meeting duly
convened and held on September 30, 1987, adopted a resolution (a) classifying
its 50,000,000 authorized shares of the par value of $.01 each ("Common Stock")
as follows: 30,000,000 unissued shares of Common Stock shall be classified as
"SBSF Money Market Fund Class," 5,000,000 unissued shares of Common Stock shall
be classified as "SBSF Convertible Securities Fund Class" and the remaining
15,000,000 shares of Common Stock (including the shares of Common Stock issued
and outstanding at the effective time and date of these Articles Supplementary)
shall be designated as the "SBSF Growth Fund Class" (such designation being
solely for the purpose of identification and not for the purpose of defining or
altering the existing rights and preferences of the SBSF Growth Fund Class); and
(b) reserving the authority to further classify or reclassify any unissued
shares of the SBSF Money Market Fund Class, the SBSF Convertible Securities Fund
Class and the SBSF Growth Fund Class.
SECOND: The shares so classified shall have the relative rights and
preferences specified for each class of shares of the Corporation's Common Stock
as set forth in Article V of the Corporation's Articles of Incorporation.
1
<PAGE> 23
THIRD: The Board of Directors of the Corporation, also at its meeting
held on September 30, 1987, adopted a resolution pursuant to Section 1-301 of
the Maryland General Corporation Law authorizing any of the Assistant Secretary
and the Treasurer to attest to the signature of the officer signing and
acknowledging these Articles Supplementary.
FOURTH: The Common Stock has been duly classified by the Board of
Directors pursuant to authority and power contained in the Corporation's
Articles of Incorporation.
IN WITNESS WHEREOF, SBSF FUND, INC. has caused these presents to be
signed in its name and on its behalf by its President and attested by its
Treasurer on January 14, 1988.
SBSF FUND, INC.
By: /s/ Joseph E. Breslin
-------------------------
Joseph E. Breslin, President
ATTEST:
/s/
- -------------------------------
, Treasurer
2
<PAGE> 24
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
The undersigned, President of SBSF FUND, INC., who executed on behalf
of said corporation the foregoing Articles Supplementary to the Articles of
Incorporation of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles of
Supplementary to the Articles of Incorporation to be the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Joseph E. Breslin
----------------------------
Joseph E. Breslin
Sworn to before me on this
14th day of January, 1988
/s/ Judith A. Wolsky
- ----------------------------
Notary Public
JUDITH A. WOLSKY
Notary Public, State of New York
No. 30-4735072
Qualified in Queens County
Commission Expires June 30, 1988
1
<PAGE> 25
SBSF FUND, INC.
ARTICLES OF AMENDMENT
SBSF Fund, Inc., a Maryland Corporation having its principal
office in the State of Maryland in Baltimore City, (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The charter of the Corporation is hereby amended as
follows:
1. by striking out Article II of the Articles of
Incorporation, as heretofore amended, and inserting in lieu thereof the
following new Article II:
"The name of the corporation (hereinafter called the
"Corporation") is SBSF Funds, Inc.
2. by striking out Sections (1), (2) and (18) of Article
V and inserting the following new Sections (1), (2) and (18) of said
Article:
"(1) The total number of shares of stock which the
Corporation has authority to issue is 250,000,000 all of which
are a par value of $.01 each, and are designated Common Stock.
References in the following provisions of these Articles of
Incorporation to "Shares" mean the shares of Common Stock of
the Corporation."
"(2) The aggregate par value of all the authorized
Shares of stock is $2,500,000."
"(18) The net asset value per Share of any Series
shall be determined in good faith pursuant to the direction of
the Board of Directors in a manner not inconsistent with the
Investment Company Act of 1940 or any rule, regulation or order
thereunder as of such specific time or times as the Board of
Directors shall determine."
3. by striking out the definition of "Gross Assets" in
Section 1 of Article VIII.
<PAGE> 26
4. by striking out Sections 2 and 3 of Article VIII and
renumbering Section 4 of said Article as new Section 2 of Article VIII to read
in its entirety as follows:
"Section 2. Any determination made in good faith and,
so far as accounting matters are involved, in accordance with
generally accepted accounting principles or with any order,
rule, regulation or release of the Securities and Exchange
Commission by or pursuant to the direction of the Board of
Directors, shall be final and conclusive, and shall be binding
upon the Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are issued
and sold on the condition and undertaking, evidenced by
acceptance of certificates for such shares by, or confirmation
of such shares being held for the account of, any stockholder,
that any and all such determinations shall be binding as
aforesaid.
"Nothing in this Section 2 shall be construed to
protect any director or officer of the Corporation against any
liability to the Corporation or its stockholders to which he
would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of this office."
SECOND: The Board of Directors of the Corporation on February
8, 1988 duly adopted resolutions in which were set forth the foregoing
amendments to the charter, declaring that said amendments of the charter as
proposed were advisable and directing that they be submitted for action thereon
by the stockholders of the Corporation at an annual meeting to be held on March
29, 1988.
THIRD: Notice setting forth said amendments of the charter and
stating that a purpose of the meeting of the stockholders would be to take
action thereon was
2
<PAGE> 27
given, as required by law, to all stockholders entitled to vote thereon. The
amendments of the charter of the Corporation as hereinabove set forth were
approved by the stockholders of the Corporation at said meeting by the
affirmative vote of 52.2% of all the votes entitled to be cast thereon.
FOURTH: The amendments of the charter of the Corporation as
hereinabove set forth have been duly advised by the Board of Directors and
approved by the stockholders of the Corporation.
FIFTH: (a) The total number of shares of all classes of Common
Stock that the Corporation was heretofore authorized to issue is fifty million
(50,000,000) shares, of the par value of one cent ($.01) each and of the
aggregate par value of five hundred thousand dollars ($500,000), divided into
thirty million (30,000,000) shares of Common Stock of the SBSF Money Market Fund
Class, five million (5,000,000) shares of Common Stock of the SBSF Convertible
Securities Fund Class, and fifteen million (15,000,000) shares of Common Stock
of the SBSF Growth Fund Class.
(b) The total number of shares of all classes of Common Stock
is increased by these amendments to two hundred fifty million (250,000,000)
shares, of the par value of one cent ($.01) each and of the aggregate par value
of two million five hundred thousand dollars ($2,500,000). Pursuant to Sections
(4) and (5) of Article V of the Articles of Incorporation, the Board of
Directors of the Corporation may from time to time classify in the future these
additional two hundred million (200,000,000) unclassified shares that are being
authorized by these amendments.
3
<PAGE> 28
(c) The information required by subsection (b)(2)(i) of Section
2-607 was not changed by these amendments.
IN WITNESS WHEREOF, SBSF Fund, Inc. has caused these presents
to be signed in its name and on its behalf by its President
and attested by its Assistant Secretary on April 5, 1988.
SBSF FUND, INC.
By /s/ Joseph E. Breslin
------------------------------
Joseph E. Breslin, President
Attest:
/s/ Susan M. Brennan
- -------------------------------------
Susan M. Brennan, Assistant Secretary
THE UNDERSIGNED, President of SBSF Fund, Inc., who executed on behalf
of the Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
the Corporation, the foregoing Articles of Amendment to be the corporate act of
the Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Joseph E. Breslin
------------------------------
Joseph E. Breslin
4
<PAGE> 29
SBSF FUNDS, INC
ARTICLES SUPPLEMENTARY TO THE
ARTICLES OF INCORPORATION
THIS IS TO CERTIFY that SBSF FUNDS, INC., a Maryland
corporation having its principal office in the State of Maryland in Baltimore
City (the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation at a meeting
duly convened and held on May 17, 1988, adopted a resolution (a) classifying its
heretofore unclassified and unissued 200,000,000 shares of its total 250,000,000
authorized shares of the par value of $.01 each ("Common Stock") as follows:
170,000,000 shares of Common Stock shall be classified as "SBSF Money Market
Fund Class," 20,000,000 shares of Common Stock shall be classified as "SBSF
Convertible Securities Fund Class" and the remaining 10,000,000 shares of Common
Stock shall be designated as the "SBSF Growth Fund Class"; and (b) reserving the
authority to further classify or reclassify any unissued shares of the SBSF
Money Market Fund Class, the SBSF Convertible Securities Fund Class and the SBSF
Growth Fund Class.
SECOND: The shares so classified shall have the relative rights
and preferences specified for each class of shares of the Corporation's Common
Stock as set forth in Article V of the Corporation's Articles of Incorporation.
THIRD: The Common Stock has been duly classified by the Board
of Directors pursuant to authority and power contained in the Corporation's
Articles of Incorporation.
<PAGE> 30
IN WITNESS WHEREOF, SBSF FUNDS, INC. Has caused these presents
to be signed in its name and on its behalf by its President and attested by its
Assistant Secretary on September 13, 1988.
SBSF FUNDS, INC.
By /s/ Joseph E. Breslin
----------------------------
Joseph E. Breslin, President
Attest:
/s/ Marianne Francis
- -------------------------------------
Marianne Francis, Assistant Secretary
2
<PAGE> 31
STATE OF NEW YORK )
: ss:
COUNTY OF NEW YORK )
The undersigned, President of SBSF FUNDS, INC., who executed on behalf
of said corporation the foregoing Articles Supplementary to the Articles of
Incorporation of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said corporation, the foregoing Articles Supplementary
to the Articles of Incorporation to be the corporate act of said corporation and
further certifies that, to the best of his knowledge, information and belief,
the matters and facts set forth therein with respect to the approval thereof are
true in all material respects, under the penalties of perjury.
/s/ Joseph E. Breslin
-----------------------
Joseph E. Breslin
Sworn to before me on this 13th day of September 1988.
/s/ Judith A. Wolsky
- ---------------------------
Notary Public
JUDITH A. WOLSKY
Notary Public, State of New York
No. 41-4765078
Qualified in Queens County
Commission Expires June 30, 1990
3
<PAGE> 32
SBSF FUNDS, INC.
ARTICLES SUPPLEMENTARY OF THE
ARTICLES OF INCORPORATION
THIS IS TO CERTIFY that SBSF FUNDS, INC., a Maryland
corporation having its principal office in the State of Maryland in Baltimore
City (the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation at a meeting
duly convened and held on September 22, 1993, adopted resolutions (a)
classifying 25,000,000 shares of its heretofore unclassified and unissued
50,000,000 shares of its total 250,000,000 authorized shares of the par value of
$.01 each ("Common Stock") as shares of the "SBSF Capital Growth Fund Class";
(b) reclassifying and redesignating the unissued shares of the "SBSF Growth Fund
Class" as unissued shares of the "SBSF Fund Class"; and (c) reserving the
authority to further classify or reclassify any unissued shares of the SBSF
Money Market Fund Class, the SBSF Convertible Securities Fund Class, the SBSF
Fund Class and the SBSF Capital Growth Fund Class.
SECOND: The shares so classified shall have the relative rights
and preferences specified for each class of shares of the Corporation's Common
Stock as set forth in Article V of the Corporation's Articles of Incorporation.
All shares with the designation "SBSF Fund Class" and "SBSF Growth Fund Class"
shall for all purposes be treated as a single class of the capital stock of the
Corporation, and each such share however designated shall have the identical
relative preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms
<PAGE> 33
and conditions of redemption, and the identical ownership interest in the
investment portfolio and any other assets belonging to the class, as each other
share; for convenience of references each outstanding share of the "SBSF Growth
Fund Class" may be referred to in prospectuses, financial statements, periodic
reports, and other publications of the Corporation with the designation "SBSF
Fund Class." For all purposes, the shares of the "SBSF Fund Class" and "SBSF
Growth Fund Class" shall vote together as a single class whenever a single class
vote is required under the Corporation's charter.
THIRD: The Common Stock has been duly classified by the Board
of Directors pursuant to authority and power contained in the Corporation's
Articles of Incorporation.
IN WITNESS WHEREOF, SBSF FUNDS, INC. has caused these presents
to be signed in its name and on its behalf by its President and attested by its
Assistant Secretary on September 22, 1993.
SBSF FUNDS, INC.
By: /s/ Joseph E. Breslin
--------------------------
Joseph E. Breslin, President
Attest:
/s/
- -------------------------------------
Marianne Francis, Assistant Secretary
2
<PAGE> 34
The undersigned, President of SBSF FUNDS, INC., who executed on
behalf of said corporation the foregoing Articles Supplementary to the Articles
of Incorporation of which this certificate is made a part, hereby acknowledges,
in the name and on behalf of said corporation, the foregoing Articles
Supplementary to the Articles of Incorporation to be the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Joseph E. Breslin
------------------------
Joseph E. Breslin
3
<PAGE> 35
SBSF FUNDS, INC.
ARTICLES SUPPLEMENTARY
SBSF FUNDS, INC., a Maryland corporation having its principal
office in the State of Maryland in Baltimore City (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board
of Directors of the Corporation by Article II, Section 11 of the Bylaws of the
Corporation, the Board of Directors by Unanimous Written Consent dated January
26, 1996, adopted resolutions: (a) reclassifying and redesignating 25,000,000
shares of the common stock par value $.01 per share of the Corporation
designated as shares of the "SBSF Money Market Fund" as shares of SBSF Capital
Growth Fund; (b) authorizing the appropriate Officers of the Corporation to
prepare, execute and file Articles Supplementary to the Corporation's Articles
of Incorporation to reclassify the authorized shares of the Corporation in
accordance with the foregoing resolution; and (c) authorizing and directing the
Officers of the Corporation to pay all expenses and perform all acts which such
Officer, with advice of counsel, deems necessary or appropriate to carry out the
purposes and intent of the foregoing resolutions.
SECOND: After giving effect to the reclassification set forth
in ARTICLE FIRST, the 250,000,000 shares of common stock, par value $.01 per
share, of the Corporation are divided and classified as follow:
<TABLE>
<CAPTION>
Name of Class Number of Shares
------------- ----------------
<S> <C>
SBSF Money Market Fund 175,000,000
SBSF Convertible Securities Fund 25,000,000
SBSF Growth Fund 25,000,000
SBSF Capital Growth Fund 25,000,000
</TABLE>
THIRD: The shares so classified shall have the relative rights
and preferences specified for each class of shares of the Corporation's Common
Stock as set forth in Article V of the Corporation's Articles of Incorporation.
FOURTH: These Articles Supplementary do not increase the
aggregate authorized capital stock of the Corporation.
<PAGE> 36
IN WITNESS WHEREOF, SBSF FUNDS, INC. has caused these presents
to be signed in its name and on its behalf by its Vice President and attested by
its Secretary on January 26, 1996.
SBSF FUNDS, INC.
By: /s/ Scott A. Englehart
Scott A. Englehart, Vice President
Attest:
/s/ Karen A. Doyle
Karen A. Doyle, Secretary
THE UNDERSIGNED, Vice President of SBSF Funds, Inc., who
executed on behalf of the Corporation the Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters set forth herein with
respect to the authorization and approval thereof are true in all material
respects under the penalties of perjury.
/s/ Scott A. Englehart
Scott A. Englehart, Vice President
<PAGE> 1
EX-99.B8(A)(ii)
MUTUAL FUND CUSTODY AGREEMENT
THIS AGREEMENT is made as of November 3, 1995 by and between
SBSF Funds, Inc., a Maryland corporation (the "Company"), which may issue one or
more series of shares of common stock, and Key Trust Company of Ohio, N.A., a
bank chartered under the laws of the United States, having its principal office
at 127 Public Square, Cleveland, Ohio 44114-1306 (the "Custodian").
W I T N E S S E T H:
WHEREAS, the Company is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Company desires to retain the Custodian to serve
as the Company's custodian and the Custodian is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company, on behalf of each fund (each a "Fund")
listed on Attachment A hereto, as it may be amended from time to time,
separately and not jointly, hereby appoints the Custodian to act as custodian of
the securities, cash and other property of each Fund on the terms set forth in
this Agreement. The Custodian accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in
Paragraph 27 of this Agreement.
<PAGE> 2
2. Delivery of Documents. The Company has furnished the Custodian with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of the Custodian as custodian of the securities, cash and other
property of each Fund of the Company and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing
the signatures of the Company's officers and/or the persons authorized to sign
Proper Instructions, as hereinafter defined, on behalf of the Company;
(c) The Company's Articles of Incorporation filed with the Secretary of
the State of Maryland and all amendments thereto (such Articles of
Incorporation, as currently in effect and as they shall from time to time be
amended, are herein called the "Articles");
(d) The Company's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) Resolutions of the Company's Board of Directors and/or the
Company's shareholders approving the Investment Advisory Agreement between the
Company on behalf of various Funds and Spears, Benzak, Salomon & Farrell, Inc.
dated as of April 5, 1995;
(f) The Administration Agreement between the Company and Spears,
Benzak, Salomon & Farrell, Inc. dated as of April 5, 1995;
2
<PAGE> 3
(g) The Distribution Agreement between the Company and Concord
Financial Group, Inc. dated as of April 5, 1995;
(h) The Company's current Registration Statement on Form N-1A under the
1940 Act and the Securities Act of 1933, as amended (the "1933 Act") as filed
with the Securities and Exchange Commission ("SEC"); and
(i) The Company's most recent prospectus including all amendments and
supplements thereto (the "Prospectus").
The Company will furnish the Custodian from time to time with copies of
all amendments of or supplements to the foregoing, if any. The Company will also
furnish the Custodian with a copy of the opinion of counsel for the Company with
respect to the validity of the shares issued by the Company ("Shares") and the
status of such Shares under the 1933 Act filed with the SEC, and any other
applicable federal law or regulation.
3. Definitions.
(a) "Authorized Person." As used in this Agreement, the term
"Authorized Person" means the Company's President, Vice-President, Treasurer and
any other person, whether or not any such person is an officer or employee of
the Company, duly authorized by Directors of the Company to give Proper
Instructions on behalf of the Company and the Funds listed on Attachment A which
may be amended from time to time.
(b) "Book-Entry System." As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve/Treasury book-entry system for
United
3
<PAGE> 4
States and federal agency securities, its successor or successors and its
nominee or nominees.
(c) "Investment Adviser" means each investment adviser to the Funds of
the Company.
(d) "Property." The term "Property", as used in this Agreement, means:
(i) any and all securities, cash, and other property of the
Company which the Company may from time to time deposit, of cause to be
deposited, with the Custodian or which the Custodian may from time to
time hold for the Company;
(ii) all income, dividends, or distributions of any kind in
respect of any other such securities or other property;
(iii) all proceeds of the sales, repurchase, redemptions (or
otherwise) of any of such securities or other property; and
(iv) all proceeds of the sale of securities issued by the
Company, which are received by the Custodian from time to time from or
on behalf of the Company.
(e) "Securities Depository." As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the SEC or its successor or successors and its
nominee or nominees; and shall also mean any other registered clearing agency,
its successor or successors specifically identified in a certified copy of a
resolution of the Company's
4
<PAGE> 5
Board of Directors delivered to the Custodian and specifically approving
deposits by the Custodian therein.
(f) "Proper Instructions." Means instructions
(i) delivered by mail; telegram; cable; telex; facsimile
sending device; DTC "ID" or "IID" system or any similar system; and any
Trade Order Entry System acceptable to the parties; and received by the
Mutual Funds Custody Division of the Custodian, signed by two
Authorized Persons or by persons reasonably believed by the Custodian
to be Authorized Persons; or
(ii) transmitted electronically through the Custodian Asset
Management System or any similar electronic instruction system
acceptable to the Custodian; or
(iii) previously agreed to in writing by the Company and the
Custodian or provided orally by the Company in form satisfactory to the
Custodian and promptly followed by written instructions signed by an
Authorized Person.
4. Warranties and Representations.
(a) The Company warrants and represents that:
(i) It is a corporation organized under the laws of the State
of Maryland;
(ii) It is registered as an investment company under the
Investment Company Act of 1940, as amended;
and
(iii) It is duly authorized to enter into this Agreement and
the Agreement is a valid and binding obligation of the Company.
5
<PAGE> 6
(b) The Custodian warrants and represents that:
(i) It is a national bank duly organized under the laws of the
United States;
(ii) It is duly authorized to enter into this Agreement and
the Agreement is a valid and binding obligation of the Bank; and
(iii) It is not subject to any legal, regulatory or
contractual restriction that would materially affect its ability to
carry out its obligations under this Agreement.
5. Delivery and Registration of the Property. (a) The Company will
deliver or cause to be delivered to the Custodian all Property owned by it, at
any time during the period of this Agreement, except for securities and monies
to be delivered to any Subcustodian appointed pursuant to Paragraph 12 hereof.
The Custodian will not be responsible for such securities and such monies until
actually received by it. All securities delivered to the Custodian or to any
such subcustodian (other than in bearer form) shall be registered in the name of
the Company or in the name of a nominee of the Company or in the name of the
Custodian or any nominee of the Custodian (with or without indication of
fiduciary status) or in the name of any subcustodian or any nominee of such
subcustodian appointed pursuant to Paragraph 12 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Custodian.
(b) The Custodian shall at all times hold securities of the
Company either: (i) by physical possession of the share certificates or other
instruments representing such securities in registered or bearer form; or (ii)
in the Book-Entry System;
6
<PAGE> 7
or (iii) in a Securities Depository; or (iv) by a sub-custodian of the Custodian
appointed in accordance with Paragraph 12 of this Agreement.
(c) The Custodian shall at all times hold securities of the
Company in the name of the Custodian, the Company or any nominee of either of
them, unless otherwise directed by Proper Instructions; provided that, in any
event, all securities and other assets of the Company shall be held in an
account of the Custodian containing only the securities and assets of the
Company, or only securities and assets held by the Custodian as a fiduciary or
custodian for customers, and provided further, that the records of the Custodian
shall indicate at all times the Company or other customer for which such
securities and other assets are held in such account and the respective
interests therein.
6. Voting Rights. It is the Custodian's responsibility to deliver to
the Company or the Investment Adviser, via overnight mail if necessary, all
forms of proxies, all notices of meetings, and any other notices or
announcements materially affecting or relating to securities owned by the
Company that are received by the Custodian, any Subcustodian (as hereinafter
defined), or any nominee of either of them, and upon receipt of Proper
Instructions, the Custodian shall execute and deliver, or use its best efforts
to cause such Subcustodian or nominee to execute and deliver, such proxies or
other authorizations as may be required. Where warrants, options, tenders or
other securities have fixed expiration dates, the Company understands that in
order for the Custodian to act, the Custodian must receive the instructions of
the Company or the Investment Adviser, addressed as the Custodian may from time
to time request, by no later than noon (Eastern time) at least one business day
prior to the last scheduled date to act with respect
7
<PAGE> 8
thereto (or such earlier date or time as the Custodian may reasonably notify the
Company). Absent the Custodian's timely receipt of such instructions, such
instruments will expire without liability to the Custodian.
7. Exercise of Rights; Tender Offers. Upon receipt of Proper
Instructions, the Custodian shall: (a) deliver warrants, puts, calls, rights or
similar securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale; and (b) deposit
securities upon invitations for tenders thereof, provided that the consideration
for such securities is to be paid or delivered to the Custodian, or the tendered
securities included in the Proper Instructions that are received in exchange for
the tendered securities are to be returned to the Custodian. Notwithstanding any
provision of this Agreement to the contrary, the Custodian shall take all action
as directed in Proper Instructions to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall promptly notify the Company or the Investment Adviser of
such action in writing by facsimile transmission or in such manner as the
Company may designate in writing.
8. Options. Upon receipt of Proper Instructions, the Custodian shall:
(a) receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option on a security or securities index by the
Company; (b) deposit and maintain in a segregated account, securities (either
physically or by book entry in a Securities Depository), cash or other assets;
and/or (c) pay, release and/or transfer such securities, cash, or other assets
in accordance with notices or other communications evidencing the expiration,
termination or exercise of such options furnished by the Options
8
<PAGE> 9
Clearing Corporation, the securities or options exchange on which such options
are traded or such other organization as may be responsible for handling such
option transactions. The Company and the broker-dealer shall be responsible for
the sufficiency of assets held in any segregated account established in
compliance with applicable margin maintenance requirements and the performance
of other terms of any option contract, and shall promptly upon notice from the
Custodian bring such accounts into compliance with such terms or requirements.
9. Futures Contracts. Upon receipt of Proper Instructions, the
Custodian shall: (a) receive and retain confirmation, if any, evidencing the
purchase or sale of a futures contract or an option on a futures contract by a
Fund; (b) deposit and maintain in a segregated account, cash, securities and
other assets designed as initial, maintenance or variation "margin" deposits
intended to secure the Company's performance of its obligations under any
futures contracts purchased or sold or any options on futures contracts written
by the Company, regarding such margin deposits; and (c) release assets from
and/or transfer assets into such margin accounts only in accordance with any
such Proper Instructions. The Company shall be responsible for the sufficiency
of assets held in the segregated account in compliance with applicable margin
maintenance requirements and the performance of any futures contract or option
on a futures contract in accordance with its terms, and shall promptly upon
notice act to bring such accounts into compliance with such terms or
requirements.
9
<PAGE> 10
10. Receipt and Disbursement of Money.
(a) The Custodian shall open and maintain a custody account for the
Company, and shall hold in such account, subject to the provisions hereof, all
cash received by it from or for the Company. The Custodian shall make payments
of cash to, or for the account of, the Company from such cash only (i) for the
purchase of securities for the Company as provided in Paragraph 16 hereof; (ii)
upon receipt of Proper Instructions, for the payment of dividends or for the
payment of interest, taxes, administration, distribution or advisory fees or
expenses which are to be borne by the Company under the terms of this Agreement,
any advisory agreement, any distribution agreement, or any administration
agreement; (iii) upon receipt of Proper Instructions for payments in connection
with the conversion, exchange or surrender of securities owned or subscribed to
by the Company and held by or to be delivered to the Custodian; (iv) to a
subcustodian pursuant to Paragraph 12 hereof; or (v) upon receipt of Proper
Instructions for other corporate purposes.
(b) The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the Company.
11. Receipt of Securities.
(a) Except as provided by Paragraph 12 hereof, the Custodian shall hold
all securities and non-cash Property received by it for the Company. All such
securities and non-cash Property are to be held or disposed of by the Custodian
for the Company pursuant to the terms of this Agreement. In the absence of
Proper Instructions,
10
<PAGE> 11
the Custodian shall have no power or authority to withdraw, deliver, assign,
hypothecate, pledge or otherwise dispose of any such securities and non-cash
Property, except in accordance with the express terms provided for in this
Agreement. In no case may any trustee, officer, employee or agent of the
Company, acting as individuals, withdraw any securities or non-cash Property.
12. Subcustodian Agreements. In connection with its duties under this
Agreement, the Custodian may, at its own expense, enter into subcustodian
agreements with other banks or trust companies for the receipt of certain
securities and cash to be held by the Custodian for the account of the Company
pursuant to this Agreement; provided that each such bank or trust company has an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less then twenty million dollars ($20,000,000) and that such bank
or trust company agrees with the Custodian to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder. The
Custodian will be liable for acts or omissions of any such subcustodian.
(a) Promptly after the close of business on each day the Custodian
shall furnish the Company with system access to review a summary of all
transfers to or from the account of the Company during said day. Where
securities are transferred to the account of the Company established at a
Securities Depository or the Book Entry System pursuant to Paragraph 13 hereof,
the Custodian shall use the Securities Depository or Book Entry System to
identity as belonging to the Company the securities in a commingled group of
securities registered in the name of the Custodian (or its nominee) or shown in
the Custodian's account on the books of a Securities Depository or the
Book-
11
<PAGE> 12
Entry System. At least monthly and from time to time, the Custodian shall
furnish the Company with a detailed statement of the Property held for the
Company under this Agreement.
(b) Notwithstanding any other provision of this Agreement, no provision
of this Paragraph 12, and no provision of this agreement relating to
subcustodians, shall apply to any agreement entered into by the Custodian for
the purpose of facilitating repurchase transactions by the Company ("Tri-Party
Agreements"), except that (i) the indemnification obligations owed to the
Custodian by the Company and set forth in Paragraph 28 shall apply to such
Tri-Party Agreements without qualification; and (ii) the Company's rights
contained in Paragraph 30 of this Agreement shall apply to such Tri-Party
Agreements. All actions taken by the Custodian in connection with such Tri-Party
Agreements shall be taken solely for the purpose of providing and accepting
instructions at the Company's request and on the Company's behalf.
13. Use of Securities Depository or the Book-Entry System. The Company
shall deliver to the Custodian a certified resolution of the Board of Directors
of the Company approving, authorizing and instructing the Custodian on a
continuous and ongoing basis until instructed to the contrary by Proper
Instructions actually received by the Custodian (i) to deposit in a Securities
Depository or the Book-Entry System all securities of the Company eligible for
deposit and (ii) to utilize a Securities Depository or the Book-Entry System to
the extent possible in connection with the performance of its duties hereunder,
including without limitation settlements of purchases and sales of securities by
the Company, and deliveries and returns of securities collateral in connection
12
<PAGE> 13
with borrowings. Without limiting the generality of such use, it is agreed that
the following provisions shall apply thereto:
(a) Securities and any cash of the Company deposited in a Securities
Depository or the Book-Entry System will at all times be segregated from any
assets and cash controlled by the Custodian in other than a fiduciary or
custodial capacity but may be commingled with other assets held in such
capacities. The Custodian will effect payment for securities, in the place where
the transaction is settled, unless the Company has given the Custodian Proper
Instructions to the contrary.
(b) All Books and records maintained by the Custodian which relate to
the Company's participation in a Securities Depository or the Book-Entry System
will at all times during the Custodian's regular business hours be open to the
inspection of the Company's duly authorized employees or agents, and the Company
will be furnished with all information in respect of the services rendered to it
as it may require.
14. Instructions Consistent with the Articles, etc.
The Custodian shall act only upon Proper Instructions. The Custodian
may assume that any Proper Instructions received hereunder are not in any way
inconsistent with any provision of the Articles or By-Laws of the Company or any
vote or resolution of the Company's Board of Directors, or any committee
thereof. The Custodian shall be entitled to rely upon any Proper Instructions
actually received by the Custodian pursuant to this Agreement. The Company
agrees that the Custodian shall incur no liability in acting upon Proper
Instructions given to the Custodian. In accordance with instructions from the
Company, advances of cash or other Property made by the Custodian, arising
13
<PAGE> 14
from the purchase, sale, redemption, transfer or other disposition of Property
of the Company, or in connection with the disbursement of trusts to any party,
or in payment of fees, expenses, claims or liabilities owed to the Custodian by
the Company, or to any other party which has secured judgment in a court of law
against the Company which creates an overdraft in the accounts or over-delivery
of Property shall be deemed a loan by the Custodian to the Company, to the
extent permitted under applicable law. Such loans shall be payable on demand,
bearing interest at such rate customarily charged by the Custodian for similar
loans or such other rate agreed to by the parties. The Company agrees that test
arrangements, authentication methods or other security devices to be used with
respect to instructions which the Company may give by telephone, telex, TWX,
facsimile transmission, bank wire or through an electronic instruction system,
shall be processed in accordance with terms and conditions for the use of such
arrangements, methods or devices as the Custodian may put in effect and modify
from time to time. The Company shall safeguard any test keys, identification
codes or other security devices which the Custodian makes available to the
Company and agrees that the Company shall be responsible for any loss, liability
or damage incurred by the Custodian or by the Company as a result of the
Custodian's acting in accordance with instructions from any unauthorized person
using the proper security device unless such loss, liability or damage was
incurred as a result of the Custodian's negligence or willful misconduct. The
Custodian may electronically record, but not be obligated to so record, any
instructions given by telephone and any other telephone discussions with respect
to the Account. In the event that the Company uses the Custodian's Asset
Management System, the Company agrees
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<PAGE> 15
that the Custodian is not responsible for the consequences of the failure of
that system to perform for any reason, beyond the reasonable control of the
Custodian, or the failure of any communications carrier, utility, or
communications network. In the event that system is inoperable, the Company
agrees that it will accept the communication of transaction instructions by
telephone, facsimile transmission on equipment compatible to the Custodian's
facsimile receiving equipment or by letter, at no additional charge to the
Company.
15. Transaction Not Requiring Instructions. The Custodian is authorized
to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. The Custodian shall:
(i) collect and receive for the account of the Company, all
income and other payments and distributions, including (without
limitation) stock dividends, rights, warrants and similar items,
included or to be included in the Property of the Company, and promptly
advise the Company of such receipt and shall credit such income, as
collected, to the Company. From time to time, the Custodian may elect
to credit, but shall not be so obligated, the account with interest,
dividends or principal payments on payable or contractual settlement
date, in anticipation of receiving same from a payor, central
depository, broker or other agent employed by the Company or the
Custodian. Any such crediting and posting shall be at the Company's
sole risk, and the Custodian shall be authorized to reverse any such
advance posting after making every reasonable attempt to collect,
15
<PAGE> 16
in the event it does not receive good funds from any such
payor, central depository, broker or agent of the Customer.
(ii) with respect to securities of foreign issue, effect
collection of dividends, interest and other income, and to notify the
Company of any call for redemption, offer of exchange, right of
subscription, reorganization, or other proceedings materially affecting
such securities, or any default in payments due thereon. It is
understood, however, that the Custodian shall be under no
responsibility for any failure or dealing in effecting such collections
or giving such notice with respect to securities of foreign issue,
regardless of whether or not the relevant information is published in
any financial service available to it unless such failure or delay is
due to its negligence or willful misconduct; however, this
sub-paragraph (ii) shall not be construed as creating any such
responsibility with respect to securities of non-foreign issue.
Collections of income in foreign currency are, to the extent possible,
to be converted into United States dollars unless otherwise instructed
by Proper Instructions, and in effecting such conversion the Custodian
may use such methods or agencies as it may see fit. All risk and
expenses incident to such collection and conversion is for the account
of the Company and the Custodian shall have no responsibility for
fluctuations in exchange rates affecting any such conversion.
(iii) endorse and deposit for collection in the name of the
Company, checks, drafts, or other orders for the payment of money on
the same day as received;
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<PAGE> 17
(iv) receive and hold for the account of the Company all
securities received by the Company as a result of a stock dividend,
share split-up or reorganization, recapitalization, readjustment or
other rearrangement or distribution of rights or similar securities
issued with respect to any portfolio securities of the Company held by
the Custodian hereunder;
(v) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(vi) take any action which in the opinion of the
Custodian may be necessary and proper in connection with the collection
and receipt of such income and other payments and the endorsements for
collection of checks, drafts and other negotiable instruments;
(vii) with respect to domestic securities, to exchange
securities in temporary form for securities in definitive form, to
effect an exchange of the shares where the par value of stock is
changed, and to surrender securities at maturity or when advised of
earlier call for redemption, against payment therefor in accordance
with accepted industry practice. The Company understands that the
Custodian subscribes to one or more nationally recognized services that
provide information with respect to calls for redemption of bonds or
other corporate actions. The Custodian shall not be liable for failure
to redeem any called bond or take other action if notice of such call
or action was not provided by any service to which it subscribes
provided that the Custodian shall have acted in good faith
17
<PAGE> 18
without negligence or willful misconduct. The Custodian shall
have no duty to notify the Company of any rights, duties, limitations,
conditions or other information set forth in any security (including
mandatory or optional put, call and similar provisions), but the
Custodian shall forward to the Company or the Investment Adviser any
notices or other documents subsequently received in regard to any such
security. When fractional shares of stock of a declaring corporation
are received as a stock distribution, unless specifically instructed to
the contrary in writing, the Custodian is authorized to sell the
fraction received and credit the Company's account. Unless specifically
instructed to the contrary in writing, the Custodian is authorized to
exchange securities in bearer form for securities in registered form.
If any Property registered in the name of a nominee of the Custodian is
called for partial redemption by the issue of such Property, the
Custodian is authorized to allot the called portion to the respective
beneficial holders of the Property in such manner deemed to be fair and
equitable by the Custodian in its sole discretion.
(b) Deposits of Proceeds of Issuance of Shares. The
Custodian shall collect and receive for the account of the Fund all payments
received in payment for shares of such Fund issued by the Company.
(c) Redemptions. Upon receipt of notice by the Fund's
transfer agent stating that such transfer agent is required to redeem shares and
specifying the number and class of shares which such transfer agent is required
to redeem and the date and time the request or requests for redemption were
received by the Fund's distributor, the Custodian
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<PAGE> 19
shall either (i) pay to such transfer agent, for distribution to the redeeming
shareholder, the amount payable to such shareholder upon the redemption of such
shares as determined in the manner described in the then current Prospectus, or
(ii) arrange for the direct payment of such redemption proceeds by the Custodian
to the redeeming shareholder in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Custodian, the
Company and the Company's transfer agent.
(d) Miscellaneous Transactions. The Custodian is authorized to deliver
or cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Company;
(ii) for the exchange of interim receipts or temporary
securities for definitive securities;
(iii) for transfer or securities into the name of the Company
or the Custodian or a nominee of either, or for exchange of securities
for a different number of bonds, certificates, or other evidence,
representing the same aggregate face amount or number of units bearing
the same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be delivered
to the Custodian.
19
<PAGE> 20
16. Transactions Requiring Instructions. Upon receipt of Proper
Instructions and not otherwise, the Custodian, directly or through the use of a
Securities Depository or the Book-Entry System, shall:
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Company as owner of any securities may
be exercised;
(b) Deliver any securities held for the Company against receipt of
other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) Deliver any securities held for the Company to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization of sale of
assets of any corporation, against receipt of such certificates or deposit,
interim receipts or other instruments or documents as may be issued to it to
evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Company and
take such other steps as shall be stated in said instructions to be for the
purpose of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Company;
(e) Release securities belonging to the Company to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the
20
<PAGE> 21
Company; and pay such loan upon redelivery to it of the securities pledged or
hypothecated therefore and upon surrender of the note or notes evidencing the
loan;
(f) Deliver any securities held for the Company upon the exercise of a
covered call option written by the Company on such securities;
(g) Deliver securities held for the Company pursuant to separate
security lending agreements; and
(h) Regarding dividends and distributions, the Company shall furnish
the Custodian with appropriate evidence of action by the Company's Board of
Directors declaring and authorizing the payment of any dividends and
distributions to the shareholders of the particular Fund. Upon receipt by the
Custodian of Proper Instructions with respect to dividends and distributions
declared by the Company's Board of Directors and payable to the shareholders of
the Fund who have elected in the proper manner to receive their distributions
and/or dividends in cash, and in conformance with procedures mutually agreed
upon by the Custodian, the Company, and the Company's transfer agent, the
Custodian shall pay to the Company's transfer agent, as agent for the
shareholders, an amount equal to the amount indicated in said Proper
Instructions as payable by the Company to such shareholders for distribution in
cash by the transfer agent to such shareholders. In lieu of paying the Company's
transfer agent cash dividends and distributions, the Custodian may arrange for
the direct payment of cash dividends and distributions to shareholders by the
Custodian in accordance with such procedures and controls as are mutually agreed
upon from time to time by and among the Company, the Custodian and the Company's
transfer agent.
21
<PAGE> 22
17. Purchase of Securities. Promptly after each purchase of securities,
the Company or the appropriate Investment Adviser shall deliver to the Custodian
(as Custodian) Proper Instructions specifying with respect to each such
purchase: (a) the name of the issuer and the title of the securities, (b) the
number of shares of the principal amount purchased and accrued interest, if any,
(c) the dates of purchase and settlement, (d) the purchase price per unit, (e)
the total amount payable upon such purchase, (f) the name of the person from
whom or the broker through whom the purchase was made and (g) the Fund for which
the purchase was made. The Custodian shall upon receipt of securities purchased
by or for the Company pay out of the moneys held for the account of Company the
total amount payable to the person from whom or the broker through whom the
purchase was made, if and only if the same conforms to the total amount payable
as set forth in such Proper Instructions.
18. Sale of Securities. Promptly after each sale of securities, the
Company or the appropriate Investment Adviser shall deliver to the Custodian
Proper Instructions, specifying with respect to each such sale: (a) the name of
the issuer and the title of the security, (b) the number of shares or principal
amount sold, and accrued interest, if any, (c) the date of sale, (d) the sale
price per unit, (e) the total amount payable to the Company upon such sale, (f)
the name of the broker through whom or the person to whom the sale was made and
(g) the Fund for which the sale was made. The Custodian shall deliver the
securities upon receipt of the total amount payable to the Company upon such
sale, if and only if the same conforms to the total amount payable as set forth
in such Proper Instructions.
22
<PAGE> 23
19. Records. The books and records pertaining to the Company which are
in the possession of the Custodian shall be the property of the Company. Such
books and records shall be prepared and maintained as required by the 1940 Act;
other applicable federal and state securities laws and rules and regulations;
and, any state or federal regulatory body having appropriate jurisdiction. The
Company, or the Company's authorized representative, shall have access to such
books and records at all times during the Custodian's normal business hours, and
such books and records shall be surrendered to the Company promptly upon
request. Upon reasonable request of the Company, copies of any such books and
records shall be provided by the Custodian to the Company or the Company's
authorized representative.
20. Reports. The Custodian shall furnish the Company the following
reports:
(a) such periodic and special reports as the Directors may reasonably
request;
(b) a monthly statement summarizing all transactions and entries for
the account of each Fund;
(c) a monthly report of portfolio securities belonging to each Fund
showing the adjusted amortized cost of the issues and the market value at the
end of the month;
(d) a monthly report of the cash account of each Fund showing
disbursement; and
23
<PAGE> 24
(e) such other information as may be agreed upon from time to time
between the Directors and the Custodian.
21. Compliance with Rule 17f-2. The Custodian shall comply with the
requirements of Rule 17f-2 under the 1940 Act and will permit access to the
Company's securities only in compliance with the requirements of Rule 17f-2.
22. Cooperation with Accountants. The Custodian shall cooperate with
the Company's independent certified public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such accountants for
the expression of their unqualified opinion, including but not limited to the
opinion included in the Company's semiannual report on the Company's Form N-SAR.
23. Confidentiality. The Custodian agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Company all records and other information relative to the Company and its prior,
present or potential Shareholders and relative to the advisers and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Company, which
approval shall not be unreasonably withheld and may not be withheld where the
Custodian may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Company. Nothing contained herein,
however, shall prohibit the Custodian from advertising or soliciting the public
generally
24
<PAGE> 25
with respect to other products or services, regardless of whether such
advertisement or solicitation may include prior, present or potential
shareholders of the Company provided that, in no event, will any information
obtained as custodian be used in any such solicitation or advertisement.
24. Equipment Failures. In the event of the failure of certain equipment
including but not limited to data processing equipment, telecommunications
equipment, or power generators located at the Custodian, at a designated
subcustodian or nominee, or at a third party contracted to for certain
securities processing services, the Custodian shall, at no additional expense to
the Company, take reasonable steps to minimize service interruptions but shall
not have liability with respect thereto. The Custodian shall enter into and
shall maintain in effect with appropriate parties one or more agreements making
reasonable provision for backup emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
25. Right to Receive Advice.
(a) Advice of Company. If the Custodian shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall promptly receive,
clarification or advice from the Company.
(b) Advice of Counsel. If the Custodian shall be in doubt as to any
question of law involved in any action to be taken or omitted by the Custodian,
it may request advice at its own cost from counsel of its own choosing (who may
be counsel for the Company or the Custodian, at the option of the Custodian).
25
<PAGE> 26
(c) Conflicting Advice. In case of conflict between directions or
advice received by the Custodian pursuant to subparagraph (a) of this paragraph
and advice received by the Custodian pursuant to subparagraph (b) of this
paragraph, the Custodian shall be entitled to rely on and follow the advice
received pursuant to the latter provision alone.
(d) Protection of the Custodian. The Custodian shall be protected in
any action or inaction which it takes or omits to take in reliance on any
directions or advice received pursuant to subparagraph (a) of this section.
However, nothing in this paragraph shall be construed as imposing upon the
Custodian any obligation (i) to seek directions or advice, or (ii) to act in
accordance with such directions or advice when received. Nothing in this
subparagraph shall excuse the Custodian when an action or omission on the part
of the Custodian constitutes willful misfeasance or negligence by the Custodian
or reckless disregard of its duties under this Agreement.
26. Compliance with Governmental Rules and Regulations. The Company
assumes full responsibility for insuring that the contents of each Prospectus of
the Company complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
27. Compensation. As compensation for the services described within
this agreement and rendered by the Custodian during the term of this Agreement,
the Company shall pay to Custodian the fees provided on Attachment B hereto, as
it may be amended from time to time. In addition, the Company agrees to
reimburse the Custodian
26
<PAGE> 27
for any out-of-pocket expenses described in Attachment B to this Agreement,
incurred in providing the services contained within this Agreement.
28. Indemnification. The Company, on behalf of each Fund individually
and not jointly, as sole owner of the Property, agrees, to the extent permitted
by applicable law, to indemnify and hold harmless the Custodian and its nominees
from all taxes, charges, expenses, assessments, claims, and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the
Securities Exchange Act of 1934, the 1940 Act, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including (without limitation) reasonable attorney's fees and
disbursements, arising directly or indirectly: (a) from the fact that securities
included in the Property are registered in the name of any such nominee; or (b)
without limiting the generality of the foregoing clause (a), from any action or
thing which the Custodian takes or does or omits to take or do (i) at the
request or on the direction of or in reliance on the advice of the Company given
in accordance with the terms of this Agreement, or (ii) upon Proper
Instructions; provided, that neither the Custodian nor any of its nominees or
subcustodian shall be indemnified against any liability to the Company or to its
Shareholders (or any expenses incident to such liability): (x) arising out of
the Custodian's or such nominee's or subcustodian's own willful misfeasance or
negligence or reckless disregard of its duties under this Agreement or any
material breach of any agreement between the Custodian and any nominee or
subcustodian, or (y) constituting any incidental or consequential damages. In
the event of any advance of cash for any purpose made by the Custodian resulting
from Proper Instructions of the Company, or in
27
<PAGE> 28
the event that the Custodian or its nominee or subcustodian shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's or subcustodian's own negligence or willful misfeasance,
the Company shall promptly reimburse the Custodian for such advance of cash or
such taxes, charges, expenses, assessments, claims or liabilities.
29. Notice of Litigation, Right to Prosecute. The Custodian shall
promptly inform the Company in writing of the commencement of any litigation or
proceeding in respect of which indemnity may be sought under the above Paragraph
28. The Company shall be entitled to participate in any such litigation or
proceeding and, after written notice from the Company to the Custodian, the
Company may assume the defense of such litigation or proceeding with counsel of
its choice at its own expense. The Custodian shall not consent to the entry of
any judgment or enter into any settlement in any such litigation or proceeding
without providing the Company with adequate notice of any such settlement or
judgment. The Custodian shall submit written evidence to the Company with
respect to any cost or expense for which it is seeking indemnification in such
form and detail as the Company may reasonably request.
30. Company's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Company shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's rights
against any subcustodian or Securities Depository for loss, damage or expense
caused the Custodian or the Company by such
28
<PAGE> 29
subcustodian or Securities Depository and shall be entitled to enforce the
rights of the Custodian with respect to any claim against such subcustodian or
Securities Depository which the Custodian may have as a consequence of such
loss, damage or expense, if and to the extent that the Company has not been made
whole for any such loss or damage. The Custodian agrees to cooperate with the
Company and take all actions reasonably requested by the Company in connection
with the Company's enforcement of any rights of the Custodian. The Company
agrees to reimburse the Custodian for all reasonable out-of-pocket expenses
incurred by the Custodian in connection with the fulfillment of its obligations
as long as the Custodian has not otherwise breached the terms of this Agreement.
31. Responsibility of the Custodian. The Custodian shall not be
required to take any action except as specifically set forth herein. The
Custodian shall be responsible for its own negligent failure or that of any
subcustodian it shall appoint to perform its duties under this Agreement.
Without limiting the generality of the foregoing or of any other provision of
this Agreement, the Custodian in connection with its duties under this
Agreement shall not be under any duty or obligation to inquire into and shall
not be liable for or in respect of (a) the validity or invalidity or authority
or lack thereof of any advice, direction, notice or other instrument which
conforms to the applicable requirements of this Agreement, if any, and which
the Custodian believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Company, the legality of the purchase or
sale thereof or the propriety of the amount paid or received therefore, (c) the
legality of the issue or sale of any shares, or the sufficiency of the
29
<PAGE> 30
amount to be received therefor, (d) the legality of the redemption of any
shares, or the propriety of the amount to be paid therefore, (e) the legality of
the declaration or payment of any dividend or distribution on shares, or (f)
delays or errors or loss of data occurring by reason of circumstances beyond the
Custodian's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown (except as provided
in Paragraph 24), flood or catastrophe, acts of God, insurrection, war, riots,
or failure of the mail, transportation, communication or power supply. In no
event will the Custodian be liable for special, indirect or consequential
damages or lost profits or loss of business, which may be suffered by the Trust
or any third party, even if previously informed of the possibility of such
damages.
32. Collection. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping thereof
upon receipt by the Custodian) shall be at the sole risk of the Company. In any
case in which the Custodian does not receive any payment due the Company within
a reasonable time after the Custodian has made proper demands for the same, it
shall so notify the Company in writing, including copies of all demand letters,
any written responses thereto, and memoranda of all oral responses thereto, and
to telephonic demands, and await instructions from the Company. The Custodian
shall not be obliged to take legal action for collection unless and until
reasonably indemnified to its satisfaction. The Custodian shall also notify the
Company as soon as reasonably practicable whenever income due on securities is
not collected in due course.
30
<PAGE> 31
33. Duration and Termination. This Agreement shall be effective as of
the date hereof and shall continue until termination by the Company or by the
Custodian on 60 days' written notice. Upon any termination of this Agreement,
pending appointment of a successor to the Custodian or a vote of the
shareholders of the Company to dissolve or to function without a custodian of
its cash, securities or other property, the Custodian shall not deliver cash,
securities or other property of the Company to the Company, but may deliver them
to a bank or trust company designated by the Company or, failing that, to a bank
or trust company of the Custodian's selection, having aggregate capital, surplus
and undivided profits, as shown by its last published report of not less than
twenty million dollars ($20,000,000) as a successor custodian for the Company to
be held under terms similar to those of this Agreement, provided however, that
the Custodian shall not be required to make any such delivery or payment until
full payment shall have been made by the Company of all liabilities constituting
a charge on or against the properties then held by the Custodian or on or
against the Custodian and until full payment shall have been made to the
Custodian of all of its fee, compensation, costs and expenses, subject to the
provisions of Paragraph 26 of this Agreement. The termination by the Company of
a particular series or Fund within the Company that does not result in the
closure of the Company does not constitute termination of this Agreement.
34. Notices. Notices shall be addressed,
If to the Company: Karen A. Doyle, Secretary
SBSF Funds, Inc.
c/o Bisys Investment Services Group
1900 East Dublin-Grantville Road
Columbus, Ohio 43229
31
<PAGE> 32
Copies to:
Kathleen A. Dennis
Senior Vice President
KeyCorp Mutual Funds Group
127 Public Square, 13th Floor
Cleveland, Ohio 44114-1306
Michael R. Parker
Vice President and General Counsel
Spears, Benzak, Salomon & Farrell, Inc.
45 Rockefeller Plaza
New York, NY 10011
If to the Custodian: Key Trust Company of Ohio, N.A.
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Division Head
Master Trust Division
or, if the address is to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice and the address of the
addressee thereof are, at the time of sending, more than 100 miles apart, the
Notice may be sent by first-class mail, in which case it shall be deemed to have
been given three days after it is sent, or if sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been
given immediately, and, if the location of the sender of a Notice and the
address of the addressee thereof are, at the time of sending, not more than 100
miles apart, the Notice may be sent by first-class mail, in which case it shall
be deemed to have been given two days after it is sent, or if sent by messenger,
it shall be deemed to have been given on the day it is delivered, or if sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. All postage, cable, telegram, telex and
facsimile sending device charges arising from the sending of a Notice hereunder
shall be paid by the sender.
32
<PAGE> 33
35. Application of Agreement to Funds Individually, not Jointly. The
Company has entered into this Agreement on behalf of each Fund listed on
Attachment A individually, and not jointly. The rights and obligations of the
Company described in this Agreement apply to each individual Fund. No Fund shall
have any liability for any costs or expenses incurred by any other Fund. In
seeking to enforce a claim against any Fund, the Custodian shall look to the
assets only of that Fund and not to the assets of any other Fund.
36. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
37. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
38. Miscellaneous. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the parties hereto. The captions in this
Agreement are included for convenience of reference only and in no way to define
or delimit any of the provisions hereof or otherwise affect their construction
or effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall not be
assigned by either party without the prior written consent of the other party,
but shall be
33
<PAGE> 34
binding upon and shall inure to the benefit of the parties hereto and their
respective successors.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below as of the day and
year first above written.
KEY TRUST COMPANY OF OHIO, N.A.
Attest: /s/ J.A. Randazzo By: /s/ Kathryn R. Kaesberg
Name: J.A. RANDAZZO Name: KATHRYN R. KAESBERG
Title: Vice President Title: Vice President
By: /s/ Meg. H. Halloran
Name: MEG H. HALLORAN
Title: Trust Officer
SBSF FUNDS, INC., on behalf
each Fund listed on Attachment A,
individually and not jointly
Attest: ______________________ By: /s/ Leigh A. Wilson
Name: Name: LEIGH A. WILSON
Title: Title: President
35
<PAGE> 36
ATTACHMENT A
NAME OF FUND
1. SBSF Fund
2. Convertible Securities Fund
3. Capital Growth Fund
4. Money Market Fund
36
<PAGE> 37
ATTACHMENT B
CUSTODY SERVICE FEES
For the services as described in this Agreement, each Fund of the Company listed
on Attachment A hereto shall pay a custody safekeeping fee and custody
transaction fees as follows:
DOMESTIC CUSTODY SAFEKEEPING FEES
.018% (1.8 Basis Points) on the assets of the Funds
DOMESTIC CUSTODY TRANSACTION FEES
$15.00 per DTC or Fed Book Entry transaction
$25.00 per physical transaction
$40.00 per future or option wire
$15.00 per Government Paydown
$ 8.00 per wire transfer
37
<PAGE> 1
EX-99.B10
[MORRISON & FOERSTER LLP LETTERHEAD]
January 29, 1996
SBSF Funds, Inc.
45 Rockefeller Plaza
New York, NY 10111
Re: Post-Effective Amendment No. 16 to
SBSF Funds, Inc. Registration Statement on Form N-1A
Gentlemen:
We refer to Post-Effective Amendment No. 16 and Amendment No. 17 to the
Registration Statement on Form N-1A (SEC File Nos. 2-84920) (the "Registration
Statement") of SBSF Funds, Inc., a Maryland corporation (the "Company"),
relating to the registration of an indefinite number of shares of common stock
of the Company's four portfolios, namely SBSF Fund, SBSF Convertible Securities
Fund, SBSF Capital Growth Fund and SBSF Money Market Fund (collectively, the
"Shares").
We have been requested by the Company to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined documents relating to the organization of the Company
and the authorization and issuance of shares of the Funds. We have also made
such inquiries of the Company and examined such questions of law as we have
deemed necessary for the purpose of rendering the opinion set forth herein. We
have assumed the genuineness of all signatures and the authenticity of all items
submitted to us as originals and the conformity with originals of all items
submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares have been duly and validly
authorized by all appropriate corporate action and, assuming delivery by sale or
in accord with the Company's dividend reinvestment plan in accordance with the
Company's then-current Registration Statement under the Securities Act of 1933,
the Shares will be validly issued, fully paid and nonassessable.
<PAGE> 2
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we consent to the use of our name and to the reference to
our firm under the heading "Counsel" in the Prospectus, which is included as
part of the Registration Statement.
Very truly yours,
/S/ Morrison & Foerster LLP
MORRISON & FOERSTER LLP
<PAGE> 1
EX-99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No.
16 to the registration statement on Form N-1A (the "Registration Statement") of
our report dated January 17, 1996, relating to the financial statements and
financial highlights appearing in the November 30, 1995 Annual Report to
Shareholders of SBSF Fund, SBSF Convertible Securities Fund, SBSF Capital Growth
Fund, and SBSF Money Market Fund (four of the portfolios constituting the Key
Mutual Funds (SBSF Funds, Inc.), hereafter referred to as the "Funds"), which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the Statement of
Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
January 26, 1996
<PAGE> 1
EX-99.B15C
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
SBSF FUNDS, INC.
WHEREAS, SBSF Funds, Inc. (the "Company") is an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Company desires to adopt a Plan of Distribution pursuant
to Rule 12b-1 under the Act, and the Board of Directors has determined that
there is a reasonable likelihood that adoption of this Plan of Distribution will
benefit the Company and its shareholders;
NOW, THEREFORE, the Company hereby adopts this Plan of Distribution
(the "Plan") in accordance with Rule 12b-1 under the Act on the following terms
and conditions:
1. The Company is authorized to pay expenses primarily intended to
result in the sale of the shares of a fund of the Company (a "Fund"), including,
but not limited to, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders; and preparation, printing and distribution of sales literature and
advertising materials. The Company also may compensate the distributor of the
Company's shares (the "Distributor"), or reimburse expenses incurred by the
Distributor for distribution-related and sales support or shareholder account
services. All amounts expended pursuant to this Plan shall be paid to the
Distributor, but the Distributor may use all or any portion of such payments to
compensate or reimburse brokers and dealers or others which make sales of shares
of a Fund or which service shareholder accounts. Total payments under this Plan
may not exceed .25% of the average daily net asset value of the shares of a Fund
on an annual basis.
2. This Plan shall not take effect until it has been approved by a vote
of at least a majority (as defined in the Act) of the outstanding voting
securities of the Company.
3. This Plan shall not take effect until it has been approved, together
with any related agreements, by votes of a majority of both (a) the Board of
Directors of the Company and (b) those Directors of the Company who are not
"interested persons" of the Company (as defined in the Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. This Plan shall continue in effect until the next
annual meeting of stockholders. If approved at such meeting by a vote of a
majority of the outstanding voting securities,
<PAGE> 2
the Plan shall continue in full force and effect thereafter for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in paragraph 3.
5. The Distributor shall provide to the Board of Directors of the
Company and the Board of Directors shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such expenditures
were made.
6. This Plan may be terminated with respect to a Fund at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority of
the outstanding voting securities of the Fund.
7. This Plan may not be amended to increase materially the amount to be
spent for distribution unless such amendment is approved in the manner provided
for initial approval in paragraph 2 hereof, and no material amendment to the
Plan shall be made unless approved in the manner provided for approval and
annual renewal in paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Company
shall be committed to the discretion of the Directors who are not interested
persons.
9. The Company shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof for a period of
not less than five years from the date of this Plan, or the agreements or such
report as the case may be, in an easily accessible place.
Dated: Adopted February 8, 1988
Amended and Restated February 21, 1995
Amended and Restated September 20, 1995
