Dear Shareholder:
The KeyFunds(R) Prospectuses are being revised. We are pleased to announce the
addition of Lawrence G. Babin as co-portfolio manager of the SBSF Fund. Mr.
Babin brings with him an extensive background of management of
large-capitalization equity funds. This supplement also provides additional
information related to the Funds' securities lending policy. The following
information is important and should be kept with a copy of your Prospectus.
- --------------------------------------------------------------------------------
KeyFunds(R)
SBSF Fund
SBSF Convertible Securities Fund
SBSF Capital Growth Fund
Supplement Dated September 1, 1997
to the Prospectus Dated April 1, 1997
The Prospectus of the above Funds is supplemented as follows:
On page 9 under the topic, "Investment Techniques," the following information
replaces the first 2 sentences in paragraph 5:
To increase income, each Fund may lend up to 10% of its total assets to certain
brokers or dealers, banks or other institutional investors, such as insurance
companies and pension funds. The Fund only will enter into loan arrangements
with entities that the Adviser has determined to be creditworthy under
guidelines established by the Board. Subject to the receipt of an SEC exemptive
order, Key Trust Company of Ohio, N.A., the lending agent, may earn a fee based
on the amount of income earned on the investment of collateral.
On page 10 under "Management of the Funds" and the subtopic, "The Investment
Adviser," the fourth paragraph is replaced with the following:
Christopher C. Grisanti and Lawrence G. Babin are co-portfolio managers of the
SBSF Fund. Mr. Grisanti, a Managing Director, Analyst and Portfolio Manager of
KAM, has been associated with KAM (including its predecessors) since 1994. Prior
to that time, Mr. Grisanti was a corporate finance attorney with Simpson Thacher
& Bartlett. Mr. Grisanti has served as a portfolio manager of the SBSF Fund
since April, 1996. Mr. Babin, a Managing Director and Senior Portfolio Manager
of KAM, has been associated with KAM (and its predecessors) since 1982. Mr.
Babin joined Mr. Grisanti as co-portfolio manager of the SBSF Fund in September,
1997.
Please insert this Supplement in the front of your Prospectus. Investors wishing
to obtain more information should call the Funds at 800-KEY-FUND(R).
2KF-SBSF-SUP1
<PAGE>
Dear Shareholder:
The KeyFunds(R) Prospectuses are being revised. This supplement provides
additional information related to the Key Stock Index Fund's securities lending
policy. The following information is important and should be kept with a copy of
your Prospectus.
- --------------------------------------------------------------------------------
KeyFunds(R)
Key Stock Index Fund
Supplement Dated September 1, 1997
to the Prospectus Dated April 1, 1997
The Prospectus of the Key Stock Index Fund is supplemented as follows:
On page 7 under the topic, "Investment Objective and Policies," and the
subtopic, "Permissible Investments and Associated Risks," the following sentence
should be added to the end of the paragraph titled "Securities Lending."
Subject to the receipt of an SEC exemptive order, Key Trust Company of Ohio,
N.A., the lending agent, may earn a fee based on the amount of income earned on
the investment of collateral.
Please insert this Supplement in the front of your Prospectus. Investors wishing
to obtain more information should call the Fund at 800-KEY-FUND(R).
2KF-IND-SUP1
<PAGE>
KeyFunds(R)
SBSF Fund
SBSF Convertible Securities Fund
SBSF Capital Growth Fund
Key Money Market Mutual Fund
Supplement Dated September 1, 1997
to the Statement of Additional Information
Dated April 1, 1997, As Supplemented on July 30, 1997
The SAI of the above Funds is supplemented as follows:
The following information replaces the section on page 5 titled
"Loans of Portfolio Securities."
"SECURITIES LENDING. The Funds (except the Key Money Market Mutual
Fund) may from time to time lend securities from their portfolios to
broker-dealers, banks, financial institutions and institutional borrowers of
securities.
Key Trust Company of Ohio, N.A. ("Key Trust"), an affiliate of the
Adviser, serves as the lending agent for the Funds pursuant to a Securities
Lending Agency Agreement (the "Lending Agreement").
Under the guidelines established by the Board of Directors (which may
be changed from time to time), Key Trust must maintain the loan collateral at
all times in an amount equal to at least 100% of the current market value of the
loaned securities. A Fund will not lend portfolio securities in excess of the
amounts specified in its prospectus. The aggregate of all outstanding loans of a
Fund may not exceed 10% of the value of its total assets. The Funds will not
lend their portfolio securities to any officer, director, employee or affiliate
of the Funds, the KeyFunds, KAM or the Distributor.
A Fund must receive initially a minimum of 102% collateral in the form
of cash or U.S. Government obligations, to secure the return of the loaned
securities. Key Trust, at the direction of the Adviser, may invest the
collateral in short-term debt instruments that the Adviser has determined
present minimal credit risks. There is a risk of delay in receiving collateral
or in receiving the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. Each Fund remains the
owner of the securities loaned during the term of the loan.
When portfolio securities are the subject of a loan, the borrower will
pay the Fund any dividends or interest paid on the loaned securities plus any
interest negotiated between the borrower and the seller. Key Trust, on behalf of
the Funds, may terminate a particular loan at any time. While the Fund will not
have the right to vote securities on loan, the Adviser intends to direct Key
Trust to terminate the loan and regain the right to vote if the issue to be
voted on is considered important with respect to the investment. Each Fund will
only enter into loan arrangements with broker-dealers, banks or other
institutions which KAM has determined are creditworthy under the guidelines
established by the Board of Directors, and when, in KAM's judgment, the
potential returns justify the attendant risks.
For the services provided under the Lending Agreement, Key Trust receives a
transaction-based fee. The Company and certain affiliates have applied to the
Securities and Exchange Commission for an order that would exempt them from
various provisions of the 1940 Act and that, among other things, would enable
Key Trust to: (a) receive compensation based on a percentage of the income
earned on the investment of the collateral received for each loan and (b) invest
the collateral in a joint account for the administrative convenience and
economic benefit of the Funds and other affiliated investment companies."
Please insert this Supplement in the front of your SAI. Investors wishing to
obtain more information should call the Funds at 800-KEY-FUND(R).
2KF-SAI-SUP2
<PAGE>
KeyFunds(R)
Key Stock Index Fund
Key International Index Fund
Supplement Dated September 1, 1997
to the Statement of Additional Information
Dated April 1, 1997
The SAI of the above Funds is supplemented as follows:
The following information replaces the section on page 5 titled
"Loans of Portfolio Securities."
"Securities Lending. The Key Stock Index Fund may from time to time
lend securities from its portfolio to broker-dealers, banks, financial
institutions and institutional borrowers of securities.
Key Trust Company of Ohio, N.A. ("Key Trust"), an affiliate of the
Adviser, serves as the lending agent for the Funds pursuant to a Securities
Lending Agency Agreement (the "Lending Agreement").
Under the guidelines established by the Board of Directors (which may
be changed from time to time), Key Trust must maintain the loan collateral at
all times in an amount equal to at least 100% of the current market value of the
loaned securities. A Fund will not lend portfolio securities in excess of the
amounts specified in its prospectus. The aggregate of all outstanding loans of a
Fund may not exceed 33 1/3% of the value of its total assets. The Funds will not
lend their portfolio securities to any officer, director, employee or affiliate
of the Funds, the KeyFunds, KAM or the Distributor.
A Fund must receive initially a minimum of 102% collateral in the form
of cash or U.S. Government obligations, to secure the return of the loaned
securities. Key Trust, at the direction of the Adviser, may invest the
collateral in short-term debt instruments that the Adviser has determined
present minimal credit risks. There is a risk of delay in receiving collateral
or in receiving the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. Each Fund remains the
owner of the securities loaned during the term of the loan.
When portfolio securities are the subject of a loan, the borrower will
pay the Fund any dividends or interest paid on the loaned securities plus any
interest negotiated between the borrower and the seller. Key Trust, on behalf of
the Funds, may terminate a particular loan at any time. While the Fund will not
have the right to vote securities on loan, the Adviser intends to direct Key
Trust to terminate the loan and regain the right to vote if the issue to be
voted on is considered important with respect to the investment. Each Fund will
only enter into loan arrangements with broker-dealers, banks or other
institutions which KAM has determined are creditworthy under the guidelines
established by the Board of Directors, and when, in KAM's judgment, the
potential returns justify the attendant risks.
For the services provided under the Lending Agreement, Key Trust
receives a transaction-based fee. The Company and certain affiliates have
applied to the Securities and Exchange Commission for an order that would exempt
them from various provisions of the 1940 Act and that, among other things, would
enable Key Trust to: (a) receive compensation based on a percentage of the
income earned on the investment of the collateral received for each loan and (b)
invest the collateral in a joint account for the administrative convenience and
economic benefit of the Funds and other affiliated investment companies."
Please insert this Supplement in the front of your SAI. Investors wishing to
obtain more information should call the Funds at 800-KEY-FUND(R).
2KI-SAI-SUP2
