<PAGE> 1
KEY MUTUAL FUNDS
SBSF FUND
SBSF CONVERTIBLE SECURITIES FUND
SBSF CAPITAL GROWTH FUND
SBSF MONEY MARKET FUND
- --------------------------------------------------------------------------------
ANNUAL REPORT
NOVEMBER 30, 1995
[LOGO]
<PAGE> 2
[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> 3
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> 4
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> 5
- --------------------------------------------------------------------------------
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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> 15
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> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
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> 26
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
