<PAGE> 1
As filed with the Securities and Exchange Commission June 6, 1996
1933 Act Registration No. 33-21489
1940 Act File No. 811-5545
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 35 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 37 /X/
THE SESSIONS GROUP
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(800) 752-1823
CHARLES H. HIRE, ESQ.
Baker & Hostetler
65 East State Street, Suite 2100
Columbus, Ohio 43215
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Immediately, upon effectiveness.
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE> 2
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. On August 30, 1995, the Registrant filed its
Rule 24f-2 Notice with respect to the fiscal year ended June 30, 1995.
<PAGE> 3
CROSS REFERENCE SHEET
1ST SOURCE MONOGRAM U.S. TREASURY OBLIGATIONS MONEY MARKET FUND
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
1ST SOURCE MONOGRAM INCOME EQUITY FUND
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
1ST SOURCE MONOGRAM INCOME FUND
1ST SOURCE MONOGRAM INTERMEDIATE TAX-FREE BOND FUND
Six Funds
of
The Sessions Group
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
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<S> <C>
1. Cover page.................. Cover Page
2. Synopsis.................... Fee Table
3. Condensed Financial
Information............... Performance Information
4. General Description of
Registrant................ Investment Objectives and Policies;
Investment Restrictions; General
Information - Description of the Group
and Its Shares
5. Management of the Fund...... Management of the Group; General
Information - Custodian; General
Information - Transfer Agent
6. Capital Stock and Other
Securities................ How to Purchase and Redeem Shares;
Dividends and Taxes; General Informa-
tion - Description of the Group and Its
Shares; General Information - Miscel-
laneous
7. Purchase of Securities
Being Offered............. Valuation of Shares; How to Purchase
and Redeem Shares; Management of the
Group - Distribution Plan
8. Redemption or Repurchase.... How to Purchase and Redeem Shares
9. Pending Legal Proceedings... Inapplicable
</TABLE>
<PAGE> 4
1ST SOURCE MONOGRAM
FUNDS
- --------------------------------------------------------------------------------
U.S. Treasury Obligations
Money Market Fund
Diversified Equity Fund
Income Equity Fund
Special Equity
Fund
Income Fund
Intermediate Tax-Free
Bond Fund
1ST SOURCE
BANK
South Bend, Indiana
Investment Adviser
- --------------------------------------------------------------------------------
Prospectus dated
August , 1996
Begins on Page One
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<PAGE> 5
1ST SOURCE MONOGRAM U.S. TREASURY OBLIGATIONS MONEY MARKET FUND
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
1ST SOURCE MONOGRAM INCOME EQUITY FUND
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
1ST SOURCE MONOGRAM INCOME FUND
1ST SOURCE MONOGRAM INTERMEDIATE TAX-FREE BOND FUND
3435 Stelzer Road For current yield, purchase, and
Columbus, Ohio 43219 redemption information, call
(800) 766-8938.
The Sessions Group (the "Group") is an open-end management investment
company. The Group includes the 1st Source Monogram U.S. Treasury Obligations
Money Market Fund (the "Money Market Fund"), the 1st Source Monogram Diversified
Equity Fund (the "Diversified Equity Fund"), the 1st Source Monogram Income
Equity Fund (the "Income Equity Fund"), the 1st Source Monogram Special Equity
Fund (the "Special Equity Fund"), the 1st Source Monogram Income Fund (the
"Income Fund") and the 1st Source Monogram Intermediate Tax-Free Bond Fund (the
"Tax-Free Fund"), each of which is a diversified investment fund of the Group
(the Money Market, the Diversified Equity, the Income Equity, the Special
Equity, the Income and the Tax-Free Funds are hereinafter collectively referred
to as the "Funds" and individually as a "Fund"). The Trustees of the Group have
divided each Fund's beneficial ownership into an unlimited number of
transferable units called shares (the "Shares").
1st Source Bank, South Bend, Indiana (the "Adviser"), which is a wholly
owned subsidiary of 1st Source Corporation ("FSC"), acts as the investment
adviser to each of the Funds. In addition, with respect to the Diversified
Equity Fund, the Adviser has retained Miller Anderson & Sherrerd LLP, Loomis
Sayles & Company, Inc. and Columbus Circle Investors to provide sub-investment
advisory services.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE ADVISER, FSC OR ANY OF THEIR AFFILIATES. SUCH
SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY, AND AN INVESTMENT IN
A FUND INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
IN ADDITION, AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THE MONEY MARKET
FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER
<PAGE> 6
SHARE, BUT THERE CAN BE NO ASSURANCE THAT NET ASSET VALUE WILL NOT VARY.
Additional information about the Funds, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the Funds
at their address or by calling the Funds at the telephone number shown above.
The Statement of Additional Information bears the same date as this Prospectus
and is incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Funds
that a prospective investor ought to know before investing. Investors should
read this Prospectus and retain it for future reference.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION") OR
ANY STATE SECURITIES COMMISSION NOR HAS THE 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 August , 1996.
Each of the Diversified Equity Fund's, Income Equity Fund's, Special
Equity Fund's, Income Fund's and Tax-Free Fund's net asset value per share will
fluctuate as the value of its portfolio changes in response to changing market
prices, market rates of interest and/or other factors.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), Columbus, Ohio, acts as the Funds' administrator and distributor.
BISYS Fund Services, Inc., Columbus, Ohio, an affiliate of BISYS, acts as the
Funds' transfer agent (the "Transfer Agent") and performs certain fund
accounting services for each of the Funds.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY....................................................... 1
FEE TABLE................................................................ 5
PERFORMANCE INFORMATION.................................................. 6
INVESTMENT OBJECTIVES AND POLICIES....................................... 8
INVESTMENT RESTRICTIONS.................................................. 24
VALUATION OF SHARES...................................................... 25
HOW TO PURCHASE AND REDEEM SHARES........................................ 27
DIVIDENDS AND TAXES...................................................... 38
MANAGEMENT OF THE GROUP.................................................. 41
GENERAL INFORMATION...................................................... 48
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR, BISYS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
ANY FUND OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
<PAGE> 8
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered.............. Units of beneficial interest
("Shares") of the Money Market Fund,
the Diversified Equity Fund, the
Income Equity Fund, the Special
Equity Fund, the Income Fund and the
Tax-Free Fund, six separate
investment funds (collectively, the
"Funds") of The Sessions Group, an
Ohio business trust (the "Group").
Offering Price.............. The public offering price of the
Money Market Fund is equal to the
net asset value per share which such
Fund will seek to maintain at $1.00
per Share.
The public offering price of each of
the other Funds is equal to the net
asset value per share plus a sales
charge of 5.00% (with respect to the
Diversified Equity, Income Equity and
Special Equity Funds) and 4.00% (with
respect to the Income and Tax- Free
Funds) of the public offering price,
reduced on investments of $50,000 or
more (See "HOW TO PURCHASE AND REDEEM
SHARES -- Sales Charges"). Under
certain circumstances, the sales charge
may be eliminated (See "HOW TO PURCHASE
AND REDEEM SHARES -- Sales Charge
Waivers").
Minimum Purchase............ $1,000 minimum initial investment
with $25 minimum subsequent invest-
ments. Such minimum initial invest-
ment is reduced for investors using
the Auto Invest Plan described
herein and for employees of the
Adviser or one of its affiliates.
Type of Company............. Each Fund is a diversified series of
an open-end, management investment
company.
Investment Objectives........ For the MONEY MARKET FUND, current
income with liquidity and stability
of principal.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
For the DIVERSIFIED EQUITY FUND and
the Special Equity Fund, capital
appreciation.
For the INCOME EQUITY FUND, capital
appreciation with current income as a
secondary objective.
For the INCOME FUND, current income
consistent with preservation of
capital.
For the TAX-FREE FUND, current income
which is exempt from federal income tax
consistent with preservation of
capital.
Investment Policies.......... Under normal market conditions, the
MONEY MARKET FUND will invest as
fully as possible, but in no event
less than 80% of its total assets,
in the U.S. Treasury bills, notes
and bonds, and repurchase agreements
secured by such obligations.
Under normal market conditions, the
Diversified Equity Fund will invest
substantially all, but in no event less
than 65% of its total assets, in common
stocks and securities convertible into
common stocks -- of that amount 25% to
40% will be committed to each of the
following styles, representing the
three different styles of the Sub-
Advisers: (1) investing in companies
believed to have strong value measures
whose stock is traded at a price below
its perceived value, (2) investing in
companies believed to have growth
potential, and (3) investing in
companies believed to be in a position
to take advantage of political,
economic, industrial or secular trends
or developments.
Under normal market conditions, the
INCOME EQUITY FUND will invest
substantially all, but in no event less
than 65% of its total assets, in common
stocks and securities convertible into
common stocks.
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C>
Under normal market conditions, the
SPECIAL EQUITY FUND will invest
substantially all, but in no event less
than 65% of its total assets, in equity
securities issued by companies with
capitalization ranging on average
between $50 million and $1.5 billion
and which are considered to have growth
potential.
Under normal market conditions, the
INCOME FUND will invest substantially
all, but in no event less than 65% of
its total assets, in debt securities of
all types, including high grade corporate
bonds and U.S. Government bonds.
Under normal market conditions, the
TAX-FREE FUND will invest at least 80%
of its net assets in municipal
securities issued by or on behalf of
the various States of the United States
or any county, political subdivision or
municipality thereof, including any
agency, board, authority or commission
of any of the foregoing, and debt
obligations issued by the Government of
Puerto Rico, which generate interest
income which is exempt from federal
income taxes and is not treated as a
preference item for certain
Shareholders for purposes of the
federal alternative minimum tax.
Risk Factors and Special
Considerations...... An investment in any of the Funds is
subject to certain risks, including
market risk and interest rate risk,
as set forth in detail under
"INVESTMENT OBJECTIVES AND POLICIES
-- Risk Factors and Investment
Techniques." As with other mutual
funds, there can be no assurance
that any of the Funds will achieve
its investment objectives. The
Funds, to the extent set forth under
"INVESTMENT OBJECTIVES AND POLI-
CIES," may engage in the following
practices: the use of repurchase
</TABLE>
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<PAGE> 11
<TABLE>
<S> <C>
agreements and reverse repurchase
agreements, entering into option
transactions on securities in which the
Funds may invest directly and the
purchase of securities on a when-issued
or delayed-delivery basis.
Investment Adviser.......... 1st Source Bank (the "Adviser").
Sub-Advisers................ With respect to the Diversified
Equity Fund only, Miller, Anderson &
Sherrerd LLP, Loomis, Sayles &
Company, L.P. and Columbus Circle
Investors (collectively, the "Sub-
Advisers").
Dividends................... For the Money Market Fund, dividends
from net income are declared daily
and generally paid monthly. For
each of the other Funds, other than
the Special Equity Fund, dividends
from net income are declared and
generally paid monthly. For the
Special Equity Fund, dividends from
net income are declared and
generally paid quarterly. Net
realized capital gains are dis-
tributed at least annually.
Distributor.................. BISYS Fund Services Limited
Partnership d/b/a BISYS Fund
Services ("BISYS").
</TABLE>
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<PAGE> 12
FEE TABLE
<TABLE>
<CAPTION>
Money Diversified Income
Shareholder Transaction Expenses Market Fund Equity Fund Equity Fund
- -------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a percentage of
offering price) .0% 5.00% 5.00%
Exchange Fee $ 0 $ 0 $ 0
Estimated Annual Fund Operating Expenses
- ----------------------------------------
(as a percentage of average net assets)
Management Fees .35% 1.10% .80%
12b-1 Fees After Fee Waivers(1) .01 .01 .01
Other Expenses(2) .40 .42 .45
---- ---- ----
Estimated Total Fund Operating Expenses 0.76% 1.53% 1.26%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Special Income Tax-Free
Shareholder Transaction Expenses Equity Fund Fund Fund
- -------------------------------- ----------- ---- ----
<S> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a percentage of
offering price) 5.00% 4.00% 4.00%
Exchange Fee $ 0 $ 0 $ 0
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .80% .55% .55%
12b-1 Fees After Fee Waivers(1) .01 .01 .01
Other Expenses(2) .51 .42 .57
---- ---- ----
Estimated Total Fund Operating Expenses 1.32% 0.98% 1.13%
==== ==== ====
</TABLE>
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Money Market Fund $ 8 $24
Diversified Equity Fund $65 $96
Income Equity Fund $62 $88
Special Equity Fund $63 $90
Income Fund $50 $70
Tax-Free Fund $51 $74
</TABLE>
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<PAGE> 13
The purpose of the above table is to assist a potential purchaser of
Shares of any of the Funds in understanding the various costs and expenses that
an investor in a Fund will bear directly or indirectly. Such expenses do not
include any fees charged by the Adviser or any of its affiliates to its customer
accounts which may have invested in Shares of the Funds. See "MANAGEMENT OF THE
GROUP" and "GENERAL INFORMATION" for a more complete discussion of the
Shareholder transaction expenses and annual operating expenses of each Fund.
Except with respect to the Money Market Fund, as a result of the payment of
sales loads and Rule 12b-1 Fees, long-term Shareholders may pay more than the
maximum front-end sales charge permitted by the Rules of the National
Association of Securities Dealers, Inc. (the "NASD"). THE FOREGOING EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) BISYS has agreed with the Group to waive its Rule 12b-1 Fees until
March 1, 1997, so that such fees will not exceed, on an annual basis,
0.01% of any Fund's average daily net assets. Absent such Fee Waivers,
12b-1 Fees for each of the Funds would be 0.25%.
(2) "Other Expenses" are based upon estimated amounts for the
current fiscal year.
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing the
Funds' average annual total return, aggregate total return, yield, tax
equivalent yield, seven-day yield and/or seven-day effective yield may be
presented in advertisements, sales literature and shareholder reports. SUCH
PERFORMANCE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. Average annual total return will be calculated for
the period since commencement of operations for a Fund (or its respective
predecessor common trust funds) and will reflect the imposition of the maximum
sales charge, if any. Average annual total return is measured by comparing the
value of an investment in such Fund at the beginning of the relevant period to
the redeemable value of the investment at the end of the period (assuming
immediate reinvestment of any dividends or capital gains distributions), which
figure is then annualized. Aggregate total return is calculated similarly to
average annual total return except that the return figure is aggregated over the
relevant period instead of annualized. Yield will be computed by dividing a
Fund's net investment income per share earned during a recent one-month period
by that Fund's per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend)
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<PAGE> 14
on the last day of the period and annualizing the result. Tax equivalent yield
of a Fund demonstrates the taxable yield necessary to produce an after-tax yield
equivalent to the yield of that Fund. Each of the Funds may also present its
average annual total return, aggregate total return, yield, and tax equivalent
yield, as the case may be, excluding the effect of a sales charge, if any.
Each of the Funds, other than the Money Market Fund, has been initially
funded by the transfer of all of the assets of a corresponding common trust fund
managed by the Adviser (the "CTFs"). Because the management of such Funds is
substantially the same as the corresponding CTFs, the quoted performance of the
Funds will include the performance of the CTFs for periods prior to the
effectiveness of the Group's registration statement as it relates to the Funds.
The CTFs were not registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), and therefore were not subject to certain investment
restrictions that are imposed by the 1940 Act. If the CTFs had been so
registered, their performance might have been adversely affected.
The seven-day yield of the Money Market Fund refers to the income
generated by an investment therein over a seven-day period (which period will be
stated 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 Money Market Fund may also present a 30-day yield which is
calculated similarly but instead refers to a 30-day period rather than a
seven-day period. The seven-day effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Money Market Fund is
assumed to be reinvested. The seven-day effective yield is slightly higher than
the seven-day yield because of the compounding effect of this assumed
reinvestment.
In addition, from time to time, the Funds may also present their
distribution rates in supplemental sales literature and in shareholder reports,
both of which must be accompanied or preceded by a prospectus. Distribution
rates will be computed by dividing the distribution per share made by a Fund
over a twelve-month period by the maximum offering price per share at the end of
that period. The calculation of income in the distribution rate includes both
income and capital gain dividends and does not reflect unrealized gains or
losses, although each Fund may also present a distribution rate excluding the
effect of capital gains and/or a sales charge, if any. The distribution rate
differs from the yield because it includes capital gain dividends which are
often non-recurring in nature, whereas yield does not include such items.
Investors may also judge the performance of each Fund by
comparing or referencing it to the performance of other mutual
-7-
<PAGE> 15
funds with comparable investment objectives and policies through various mutual
fund or market indices and to data prepared by various services, which indices
or data may be published by such services or by other services or publications.
In addition to performance information, general information about these Funds
that appears in such publications may be included in advertisements, sales
literature and reports to Shareholders.
Yield and total return are generally functions of market conditions,
interest rates, types of investments held, and operating expenses. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by FSC or by any of its
affiliated or correspondent banks, including the Adviser, to its customer
accounts which may have invested in Shares of a Fund will not be included in
performance calculations; such fees, if charged, will reduce the actual
performance from that quoted. In addition, if the Adviser or BISYS voluntarily
reduces all or part of its fees for a Fund, as discussed below, the yield and
total return for that Fund will be higher than they would otherwise be in the
absence of such voluntary fee reductions.
INVESTMENT OBJECTIVES AND POLICIES
IN GENERAL
The investment objective of the Money Market Fund is current income
with liquidity and stability of principal. The investment objective for each of
the Diversified Equity Fund and the Special Equity Fund is capital appreciation.
The investment objectives for the Income Equity Fund are capital appreciation
with current income as a secondary objective. The investment objectives for the
Income Fund are current income consistent with preservation of capital. The
investment objectives of the Tax-Free Fund are income which is exempt from
federal income tax consistent with preservation of capital.
The investment objectives with respect to a Fund are non- fundamental
policies and as such may be changed by the Group's trustees without a vote of
the holders of a majority of the outstanding Shares of that Fund (as defined
below under "GENERAL INFORMATION -- Miscellaneous"). There can be no assurance
that the investment objectives of any Fund will be achieved.
THE MONEY MARKET FUND
Under normal market conditions, the Money Market Fund invests as fully
as possible, but in no event less than 80% of its total assets, in U.S. Treasury
bills, notes and bonds and repurchase agreements relating to such obligations.
The Money Market Fund will purchase only obligations which have, or are deemed
to have,
-8-
<PAGE> 16
maturities, from the date of purchase, of thirteen months or less. Current
income earned on such securities may not be as great as current income that
could be earned on lower quality securities that have less liquidity and/or a
greater risk of non-payment or securities that have a longer term.
Notwithstanding any of the foregoing, the Money Market Fund, as a money
market fund subject to Rule 2a-7 of the 1940 Act, must invest exclusively in
United States dollar-denominated instruments which the Trustees of the Group and
the Adviser determine present minimal credit risks and which at the time of
acquisition are rated by one or more appropriate nationally recognized
statistical rating organizations ("NRSROs") (e.g. Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations or, if unrated, are deemed to be of comparable
quality. In addition, the dollar-weighted average maturity of the obligations in
the Money Market Fund may not exceed 90 days.
Subject to the foregoing limitations and in order to achieve its
investment objectives, the Money Market Fund expects to invest in the following
types of securities: direct obligations issued by the U.S. Treasury including
bills, notes and bonds which differ from each other only in interest rates,
maturities and times of issuance; U.S. Treasury securities that have been
stripped of their unmatured interest coupons (which typically provide for
interest payments semi-annually); interest coupons that have been stripped from
such U.S. Treasury securities; receipts and certificates for such stripped debt
obligations and stripped coupons (collectively, "Stripped Treasury Securities");
and in repurchase agreements collateralized by such securities. Stripped
Treasury Securities will include (1) coupons that have been stripped from U.S.
Treasury bonds, which may be held through the Federal Reserve Bank's book-entry
system called "Separate Trading of Registered Interest and Principal of
Securities" ("STRIPS") or through a program entitled "Coupon Under Book-Entry
Safekeeping" ("CUBES").
Treasury bills have maturities of one year or less; Treasury notes have
maturities of one to ten years and Treasury bonds generally have maturities of
greater than ten years. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment (representing principal or interest) on the security and
does not receive any rights to periodic interest payments on the security. The
Money Market Fund may engage in other investment techniques described below.
-9-
<PAGE> 17
THE DIVERSIFIED EQUITY FUND
Under normal market conditions, the Diversified Equity Fund will invest
substantially all, but in no event less than 65% of its total assets, in common
stocks and securities convertible into common stocks of companies with market
capitalization of $100 million or greater -- of that amount, 25% to 40% will be
committed to each of the following styles, representing the three different
styles of the Sub-Advisers: (1) investing in companies believed to have strong
value measures whose stock is traded at a price below its perceived value, (2)
investing in companies believed to have growth potential, and (3) investing in
companies believed to be in a position to take advantage of political, economic,
industrial or secular trends or developments. For purposes of the foregoing,
securities convertible into common stocks include convertible bonds, convertible
preferred stock, options and rights.
Miller Anderson & Sherrerd LLP, one of the Sub-Advisers ("Miller
Anderson"), will manage its portion of the Diversified Equity Fund's portfolio
with an emphasis on equity securities of companies it believes have traditional
value characteristics, i.e., high yield, low price to earnings ratios and low
price to book value ratios, which Miller Anderson believes have unrecognized
potential for earnings improvement.
Loomis, Sayles & Company, L.P., another of the Sub-Advisers ("Loomis"),
will manage its portion of the Diversified Equity Fund's portfolio with an
emphasis on equity securities of companies Loomis believes are entering into a
phase of accelerating earnings growth. The criteria used by Loomis to select
such securities are historic and current relative price to earnings ratios, and
the extent to which Loomis believes that the market has recognized the
accelerating growth of such company.
Columbus Circle Investors, the third Sub-Adviser ("Columbus"), will
manage its portion of the Diversified Equity Fund's portfolio based upon
Columbus's identification of companies where political or economic developments,
secular trends, industry or group dynamics and company-specific events present
greater that market expected growth.
Under normal market conditions, the Diversified Equity Fund may also
invest up to 35% of its total assets in sponsored and unsponsored American
Depositary Receipts ("ADRs"), as described more fully below, securities of other
investment companies, units of real estate investment trusts ("REITs"),
warrants, cash and short-term obligations (with maturities of 12 months or less)
(collectively, "Short-Term Obligations") such as commercial paper, bankers'
acceptances, certificates of deposit, Government Obligations, demand and time
deposits of domestic banks and savings and loan associations and repurchase
agreements secured by such Short-Term Obligations. Commercial paper which is
included within
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<PAGE> 18
"Short-Term Obligations" is that which is rated at the time of purchase within
the two highest rating groups assigned by one or more appropriate NRSROs, or, if
unrated, which the Adviser or the Sub-Adviser deems to be of comparable quality.
For a description of the rating symbols of the NRSROs, see the Appendix to the
Statement of Additional Information. The Diversified Equity Fund may also engage
in other investment techniques described below.
THE INCOME EQUITY FUND
Under normal market conditions, the Income Equity Fund will invest
substantially all, but in no event less than, 65% of its total assets in common
stocks and securities convertible into common stocks of companies with market
capitalization of at least $100 million which the Adviser believes pay above
average dividends or interest. For purposes of the foregoing, securities
convertible into common stocks include convertible bonds, convertible preferred
stock, options and rights. The securities purchased by the Income Equity Fund
are those considered by the Adviser to be generally undervalued by the market.
Under normal market conditions, the Income Equity Fund may also invest
up to 35% of its total assets in warrants, ADRs, securities of other investment
companies and REITs, cash and Short-Term Obligations and may engage in other
investment techniques described below.
THE SPECIAL EQUITY FUND
Under normal market conditions, the Special Equity Fund will invest
substantially all, but in no event less than 65% of its total assets in common
stocks and securities convertible into common stocks (i.e., convertible bonds,
convertible preferred stock, options and rights), traded in U.S. markets, and
issued by companies believed by the Adviser to exhibit an attractive outlook for
growth in sales and earnings and with market capitalizations of between $50
million and $1.5 billion.
The Special Equity Fund may also invest up to 35% of its total assets
in warrants, ADRs, securities of other investment companies and REITs, cash and
Short-Term Obligations and may engage in other investment techniques described
below.
THE INCOME FUND
Under normal market conditions, the Income Fund will invest
substantially all, but in no event less than 65% of its total assets, in debt
securities of all types, including variable and floating rate securities (as
described more fully below under "The Tax-Free Fund") although up to 35% of its
total assets may be invested in securities of other investment companies and in
preferred stock and dividend paying common stocks. Debt securities
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include bonds, debentures, notes, mortgage-related securities, [state, municipal
or industrial revenue bonds,] obligations issued or guaranteed as to principal
and interest by the U.S. Government or its agencies or instrumentalities
("Government Obligations") and fixed-income securities convertible into, or
exchangeable for, common stocks. In addition, a portion of the Income Fund may
from time to time be invested in participation certificates in pools of
mortgages issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Under normal market conditions, the Income Fund expects to invest
primarily in Government Obligations and in debt obligations of United States
corporations. The Income Fund also intends that, under normal market conditions,
its portfolio will maintain a dollar-weighted average maturity of no more than
18 years.
The Income Fund expects to invest in a variety of U.S. Treasury
obligations, differing in their interest rates, maturities, and times of
issuance, and other Government Obligations. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others, such as those of the Student
Loan Marketing Association, are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; still others, such as
those of the Federal Farm Credit Banks or the Federal Home Loan Mortgage
Corporation, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government- sponsored agencies or instrumentalities if it is not
obligated to do so by law. The Income Fund will invest in the obligations of
such agencies or instrumentalities only when the Adviser believes that the
credit risk with respect thereto is minimal.
The Income Fund also expects to invest in bonds, notes and debentures
of a wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, in the case of notes and
bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
The Income Fund will invest only in corporate debt securities which are
rated at the time of purchase within the three highest rating groups assigned by
one or more appropriate NRSROs or, if unrated, which the Adviser deems to be of
comparable quality. In the event that a security's rating falls below "A" by an
appropriate NRSRO, the Adviser will reevaluate the security in order to
determine whether to sell. In no event, however, will the
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Income Fund be required to liquidate such security if it would suffer a loss on
the sale of such security or so long as one appropriate NRSRO has rated such
security within its three highest rating groups. For a description of the rating
symbols of the NRSROs see the Appendix to the Statement of Additional
Information.
The Income Fund may hold some Short-Term Obligations and securities of
other investment companies for cash management purposes.
The Income Fund may also invest in U.S. dollar denominated
international bonds for which the primary trading market is in the United States
("Yankee Bonds"), or for which the primary trading market is abroad ("Eurodollar
Bonds"), and in Canadian Bonds and bonds issued by institutions organized for a
specific purpose, such as the World Bank and the European Economic Community, by
two or more sovereign governments ("Supranational Agency Bonds").
The Income Fund may invest in mortgage-related securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
nongovernmental entities which are rated, at the time of purchase, within the
three highest bond rating categories assigned by one or more appropriate NRSROs,
or, if unrated, which the Adviser deems present attractive opportunities and are
of comparable quality. Such mortgage-related securities have mortgage
obligations backing such securities, including among others, conventional thirty
year fixed rate mortgage obligations, graduated payment mortgage obligations,
fifteen year mortgage obligations and adjustable rate mortgage obligations. All
of these mortgage obligations can be used to create pass-through securities. A
pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. In addition, prepayment rates will be used to determine a security's
estimated average life and the Income Fund's average portfolio duration and its
dollar-weighted average portfolio maturity. Accelerated prepayments have an
adverse impact on yields for pass-through securities purchased at a premium
(i.e., a price in excess of principal amount) and may involve additional risk of
loss of
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principal because the premium may not have been fully amortized at the time the
obligations are repaid. The opposite is true for pass-through securities
purchased at a discount. The Income Fund may purchase mortgage-related
securities at a premium or a discount. Reinvestment of principal payments may
occur at higher or lower rates than the original yield on such securities. Due
to the prepayment feature and the need to reinvest payments and prepayments of
principal at current rates, mortgage-related securities can be less effective
than typical bonds of similar maturities at maintaining yields during periods of
declining interest rates.
Certain debt securities such as, but not limited to, mortgage-backed
securities, collateralized mortgage obligations (CMOs), asset backed securities
and securitized loan receivables, as well as securities subject to prepayment of
principal prior to the stated maturity date, are expected to be repaid prior to
their stated maturity dates. As a result, the effective maturity of these
securities is expected to be shorter than the stated maturity. For purposes of
compliance with stated maturity policies and calculation of the Income Fund's
dollar-weighted average maturity, the effective maturity of such securities will
be used.
An increase in interest rates will generally reduce the value of the
investments in the Income Fund, and a decline in interest rates will generally
increase the value of those investments. Depending upon the prevailing market
conditions, the Adviser may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Adviser will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
THE TAX-FREE FUND
Under normal market conditions, at least 80% of the net assets of the
Tax-Free Fund will be invested in a portfolio of obligations consisting of
bonds, notes, commercial paper and certificates of indebtedness, issued by or on
behalf of the various States of the United States, or any county, political
subdivision or municipality thereof (including any agency, board, authority or
commission of any of the foregoing), the interest on which, in the opinion of
bond counsel to the issuer, is exempt from federal income tax and is not treated
as a preference item for individuals for purposes of the federal alternative
minimum tax. The Tax-Free Fund may also invest in debt obligations issued by the
Government of Puerto Rico and such other governmental entities whose debt
obligations, either by law or treaty, generate interest income which is exempt
from federal income taxes and is not treated as a preference item for
individuals for purposes of the federal alternative minimum tax
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(collectively, "Exempt Securities"). The Tax-Free Fund, under normal market
conditions, expects to maintain an average weighted portfolio maturity of four
to eight years.
The two principal classifications of Exempt Securities which may be
held by the Tax-Free Fund are "general obligation" securities and "revenue"
securities. General obligation securities are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by the Tax-Free Fund are in
most cases revenue securities and are not payable from the unrestricted revenues
of the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
The Tax-Free Fund may also invest in "moral obligation" securities,
which are normally issued by special purpose public authorities. If the issuer
of moral obligation securities is unable to meet its debt service obligations
from current revenues, it may draw on a reserve fund, the restoration of which
is a moral commitment but not a legal obligation of the state or municipality
which created the issuer.
The Tax-Free Fund invests in Exempt Securities which are rated at the
time of purchase within the three highest rating groups assigned by one or more
appropriate NRSROs for bonds, notes, tax-exempt commercial paper, or variable
rate demand obligations, as the case may be. The Tax-Free Fund may also purchase
Exempt Securities which are unrated at the time of purchase but are determined
to be of comparable quality by the Adviser. In the event that a security's
rating falls below "A" by an appropriate NRSRO, the Adviser will reevaluate the
security in order to determine whether to sell. In no event, however, will the
Tax-Free Fund be required to liquidate such security if it would suffer a loss
on the sale of such security or so long as one appropriate NRSRO has rated such
security within its three highest rating groups. The applicable Exempt
Securities ratings are described in the Appendix to the Statement of Additional
Information.
The Tax-Free Fund may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of the Adviser,
suitable Exempt Securities are unavailable. There is no percentage limitation on
the amount of assets which may be held uninvested. Uninvested cash reserves will
not earn income. In addition, investments of the Tax-Free Fund may be made in
taxable Short-Term Obligations if, for example, suitable tax-exempt obligations
are unavailable. Under such circumstances and during
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the period of such investment, the Tax-Free Fund may not achieve its stated
investment objectives.
The Tax-Free Fund may also invest up to 20% of its net assets in
municipal securities, the interest income on which is exempt from federal income
tax but may be treated as a preference item for individuals for purposes of the
federal alternative minimum tax. The Tax-Free Fund will not include such
municipal securities in the calculation of compliance with the 80% test
described above as a fundamental policy of the Tax-Free Fund. For further
information relating to the types of municipal securities which will be included
in income subject to alternative minimum tax, see "ADDITIONAL INFORMATION --
Additional Tax Information" in the Statement of Additional Information.
Opinions relating to the validity of Exempt Securities and to the
exemption of interest thereon from federal income taxes are normally rendered by
bond counsel to the respective issuers at the time of issuance. Neither the
Tax-Free Fund nor the Adviser will review the proceedings relating to the
issuance of Exempt Securities or the basis for such opinions.
Exempt Securities purchased by the Tax-Free Fund may include rated and
unrated variable and floating rate notes the interest on which is tax-exempt. A
variable rate note is one whose terms provide for the adjustment of its interest
rate on set dates and which, upon such adjustment, can reasonably be expected to
have a market value that approximates its par value. However, in the event the
interest rate of such a note is established by reference to an index or an
interest rate that may from time to time lag behind other market interest rates,
there is the risk that the market value of such note, on readjustment of its
interest rate, will not approximate its par value.
A floating rate note is one whose terms provide for the adjustment of
its interest rate whenever a specified interest rate changes and which, at any
time, can reasonably be expected to have a market value that approximates its
par value. Such notes are frequently not rated by credit rating agencies;
however, unrated variable and floating rate notes purchased by the Tax-Free Fund
will be determined by the Adviser to be of comparable quality at the time of
purchase to rated instruments eligible for purchase under the Tax-Free Fund's
investment policies. In making such determinations, the Adviser will consider
the earning power, cash flow and other liquidity ratios of the issuers of such
notes (such issuers include financial, merchandising, bank holding and other
companies) and will continuously monitor their financial condition. Although
there may be no active secondary market with respect to a particular variable or
floating rate note purchased by the Tax-Free Fund, the Tax-Free Fund may resell
the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Tax-Free Fund to dispose of a
variable or
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floating rate note in the event the issuer of the note defaulted on its payment
obligations and the Tax-Free Fund could, as a result or for other reasons,
suffer a loss to the extent of the default. Variable or floating rate notes may
be secured by bank letters of credit.
Variable and floating rate notes for which no readily available market
exists will be purchased in an amount which, together with other illiquid
securities, exceeds 15% of the Tax-Free Fund's net assets only if such notes
are subject to a demand feature that will permit the Tax-Free Fund to receive
payment of the principal within seven days after demand by the Tax-Free Fund.
An increase in interest rates will generally reduce the value of the
investments in the Tax-Free Fund, and a decline in interest rates will generally
increase the value of those investments. Depending upon the prevailing market
conditions, the Adviser may purchase debt securities at a discount from face
value, which produces a yield greater than the coupon rate. Conversely, if debt
securities are purchased at a premium over face value, the yield will be lower
than the coupon rate. In making investment decisions, the Adviser will consider
many factors other than current yield, including the preservation of capital,
maturity, and yield to maturity.
IN GENERAL
Each of the Funds, other than the Money Market Fund, may purchase
securities of other investment companies which in the opinion of the Adviser or
Sub-Adviser, as the case may be, will assist such Fund in achieving its
investment objective and/or for cash management purposes, enter into repurchase
and reverse repurchase agreements, and except for the Money Market Fund, the
Tax-Free Fund and the Income Fund, enter into options transactions and write
covered-call options on securities that such Fund could otherwise purchase
directly. In addition, the Income Fund and the Tax-Free Fund may purchase
securities on a when-issued basis. Use by the Tax-Free Fund of one or more of
these investment techniques may cause such Fund to earn income which would be
taxable to its Shareholders.
The securities purchased by the Funds are traded in U.S. markets,
including the New York Stock Exchange, the American Stock Exchange and NASDAQ,
although each of the Diversified Equity Fund, Income Equity Fund, Special Equity
Fund and Income Fund may purchase securities which are restricted as to their
disposition, including those eligible for resale under Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities").
During temporary defensive periods as determined by the Adviser or the
appropriate Sub-Adviser, as the case may be, based upon current or anticipated
market conditions, each Fund may hold
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up to 100% of its total assets in Short-Term Obligations as described above or
in cash. However, to the extent that a Fund is so invested, it may not achieve
its investment objective or objectives.
Each of the Funds, other than the Money Market Fund, may invest in
certain types of securities which are considered to be "derivative" securities,
such as certain variable or floating rate securities, options and futures. A
derivative is generally defined as an instrument whose value is based upon, or
derived from, some underlying index, reference rate (e.g., interest rates),
security, commodity or other asset. No Fund will invest more than 25% of its
total assets in such derivatives at any one time.
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in any of the Funds entails
certain risks. Equity securities such as those in which the Diversified Equity,
Income Equity and Special Equity Funds may invest are more volatile and carry
more risk than some other forms of investment, including investments in high
grade fixed income securities. Therefore, such Funds are subject to stock market
risk, i.e., the possibility that stock prices in general will decline over short
or even extended periods of time.
Since the Income and Tax-Free Funds invest in bonds, investors in such
a Fund, to the extent so invested, are exposed to bond market risk, i.e.,
fluctuations in the market value of bonds. Bond prices are influenced primarily
by changes in the level of interest rates. When interest rates rise, the prices
of bonds generally fall; conversely, when interest rates fall, bond prices
generally rise. While bonds normally fluctuate less in price than stocks, there
have been in the recent past extended periods of cyclical increases in interest
rates that have caused significant declines in bond prices.
The Special Equity Fund is intended for investors who can accept the
higher risks involved in seeking potentially higher capital appreciation through
investments in growth oriented companies. A growth oriented company typically
invests most of its net income in its enterprise and does not pay out much, if
any, in dividends. Accordingly, the Special Equity Fund does not anticipate any
significant distributions to shareholders from net investment income, and
potential investors should be in a financial position to forego current income
from their investment in the Special Equity Fund. The securities of less
seasoned companies may have limited marketability and may be subject to more
abrupt or erratic market movements over time than securities of more seasoned
companies or the market as a whole.
Depending upon the performance of each Funds' investments, the net
asset value per share of a Fund may decrease instead of
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increase, except with respect to the Money Market Fund, the net asset value of
which the Adviser will attempt to maintain at $1.00.
Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities, in exchange for cash from member banks of the Federal
Deposit Insurance Corporation and/or from registered broker-dealers which the
Adviser or Sub-Adviser, as the case may be, deems creditworthy under
guidelines approved by the Group's Board of Trustees. The seller agrees to
repurchase such securities at a mutually agreed date and price. The repurchase
price generally equals the price paid by a Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. Securities subject to repurchase agreements
must be of the same type and quality as those in which such Fund may invest
directly. For further information about repurchase agreements and the related
risks, see "INVESTMENT OBJECTIVES AND POLICIES - Additional Information on
Portfolio Instruments - Repurchase Agreements" in the Statement of Additional
Information.
Reverse Repurchase Agreements. Each Fund may borrow funds by entering
into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually agreed-upon date and price. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or other
liquid high-grade debt securities consistent with such Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will continually monitor the account to ensure that such
equivalent value is maintained at all times. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the price at which the Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by a
Fund under the 1940 Act and therefore a form of leverage. A Fund may experience
a negative impact on its net asset value if interest rates rise during the term
of a reverse repurchase agreement. A Fund generally will invest the proceeds of
such borrowings only when such borrowings will enhance the Fund's liquidity or
when the Fund reasonably expects that the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. For further information about reverse repurchase agreements, see
"INVESTMENT OBJECTIVES AND POLICIES - Additional Information on Portfolio
Instruments - Reverse Repurchase Agreements" in the Statement of Additional
Information.
Except as otherwise disclosed to the Shareholders of the Funds, the
Group will not execute portfolio transactions through,
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acquire portfolio securities issued by, make savings deposits in, or enter into
repurchase or reverse repurchase agreements with the Adviser, any Sub-Adviser,
BISYS, or their affiliates, and will not give preference to the Adviser's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Options. The Diversified Equity Fund, the Income Equity Fund, the
Special Equity Fund and the Income Fund may also each purchase put and call
options for hedging purposes. Such Funds anticipate that options will be
exchange traded options, meaning that such options are generally standardized
and are guaranteed by a clearing agency, which is in contrast to
over-the-counter or OTC traded options. A put option gives the purchaser of the
option the right to sell, and obligates the writer (seller) of the option to
buy, the underlying security at the stated exercise price at any time prior to
the expiration date of the option, regardless of the market price of the
security. A call option gives the purchaser of the option the right to buy, and
obligates the seller of the option to sell, the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Purchasing options is a
specialized investment technique that entails a substantial risk of a complete
loss of the amounts paid as premiums to writers of options.
For hedging purposes, each of such Funds may also engage in writing
call options from time to time as the Adviser or the Sub-Adviser, as the case
may be, deems appropriate. A Fund will write only covered call options (options
on securities owned by that Fund). When a Fund writes a covered call option and
such option is exercised, that Fund will forego the appreciation, if any, on the
underlying security in excess of the exercise price. In order to close out a
call option it has written, a Fund will enter into a "closing purchase
transaction" -- the purchase of a call option on the same security with the same
exercise price and expiration date as the call option which that Fund previously
wrote on any particular securities. When a portfolio security subject to a call
option is sold, the Fund which wrote the call will effect a closing purchase
transaction to close out any existing call option on that security. There is no
assurance of liquidity in the secondary market for purposes of closing out
options positions. If that Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or such Fund delivers the underlying security upon exercise.
Each of those Funds, as part of its option transactions, also may
purchase index put and call options and write index options. As with options on
individual securities, a Fund will write only covered index call options.
Through the writing or purchase of index options a Fund can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
A Fund may lose the expected benefit of options transactions if
interest rates or securities prices move in an unanticipated manner. In
addition, the value of a Fund's options positions may not prove to be perfectly
or even highly correlated with the value of its portfolio securities, limiting
such Fund's ability to hedge effectively against market or interest rate risk.
Because index options are settled in cash, a call writer cannot determine the
amount of its settlement obligations in advance and, unlike call writing on
specific securities, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities. A
Fund may be required to segregate assets or provide an initial margin to cover
index options that would require it to pay cash upon exercise. Under normal
conditions, it is not expected that any such Fund would permit the
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underlying value of its portfolio securities subject to such options to exceed
25% of its net assets.
In addition, the Tax-Free Fund may acquire "puts" with respect to
Exempt Securities held in its portfolio. Under a put, the Tax-Free Fund would
have the right to sell a specified Exempt Security within a specified period of
time at a specified price. A put would be sold, transferred, or assigned only
with the underlying security. The Tax-Free Fund will acquire puts solely to
either facilitate portfolio liquidity, shorten the maturity of the underlying
securities, or permit the investment of its funds at a more favorable rate of
return. The Tax-Free Fund expects that it will generally acquire puts only where
the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tax-Free Fund may pay for
a put either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
Futures Contracts. Each Fund, other than the Money Market Fund, may
also enter into contracts for the future delivery of securities and futures
contracts based on a specific security, class of securities, interest rate or
an index, purchase or sell options on any such futures contracts and engage in
related closing transactions. A futures contract on a securities index or based
on an interest rate is an agreement obligating either party to pay, and
entitling the other party to receive, while the contract is outstanding, cash
payments based on the level of a specified securities index or interest rate,
as the case may be. A Fund may use this investment technique as a substitute
for a comparable market position in the underlying securities or to hedge
against anticipated future changes in market prices or interest rates, which
otherwise might adversely affect either the value of such Fund's securities or
the prices of securities which the Fund intends to purchase at a later date.
Alternatively, a Fund may purchase or sell futures contracts to hedge against
changes in market interest rates which may result in the premature call at par
value of certain securities which the Fund has purchased at a premium.
Each Fund may engage in such futures contracts in an effort to hedge
against market risks. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, a Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market values
are expected to rise, a Fund, through the purchase of such contracts, can
attempt to secure better rates or prices for such Fund than might later be
available in the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period. A Fund may also sell options
on futures contracts as part of closing purchase transactions to terminate its
options positions. No assurance can be given that such closing transactions can
be effected, that there will be a correlation between price movements in the
Fund's portfolio securities which are the subject of the hedge or of liquidity
in the secondary market for purposes of closing out future positions. In
addition, a Fund's purchase of such options will be based upon predictions as
to anticipated interest rate or other market trends, which could provide to be
inaccurate.
In general, the value of futures contracts sold by a Fund to offset
declines in its portfolio securities will not exceed the total market value of
the portfolio securities to be hedged, and futures contracts purchased by a
Fund will be covered by a segregated account consisting of cash or liquid
securities in an amount equal to the total market value of such futures
contracts, less the initial margin deposited therefor.
When buying futures contracts and when writing put options, a Fund will
be required to segregate in a separate account cash and/or U.S. Government
securities in an amount sufficient to meet its obligations. When writing call
options, a Fund will be required to own the financial instrument or futures
contract underlying the option or segregate cash and/or U.S. Government
securities in an amount sufficient to meet its obligations under written calls.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed five percent of a Fund's total assets,
and the value of securities that are the subject of such futures and options
(both for receipt and delivery) may not exceed one-third of the market value of
a Fund's total assets. Futures transactions will be limited to the extent
necessary to maintain each Fund's qualifications as a regulated investment
company.
A Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities, limiting such Fund's
ability to hedge effectively against interest rate and/or market risk and
giving rise to additional risks. For futures contracts based on indices, the
risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to compensate
for the imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, a Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the futures
contract has been less or greater than that of the securities. Such "over
hedging" or "under hedging" may adversely affect the Fund's net investment
results if the market does not move as anticipated when the hedge is
established.
Foreign Investments. As described above, each of the Diversified
Equity, Income Equity and Special Equity Funds may invest in sponsored and
unsponsored ADRs. Unsponsored ADRs may be less liquid than sponsored ADRs, and
there may be less information available regarding the underlying foreign issuer
for unsponsored ADRs. Investments in foreign securities, including ADRs, may
subject a Fund to investment risks that differ in some respects from those
related to investments in securities of U.S. domestic issuers. Such risks
include future adverse political and economic developments, the possible
imposition of withholding taxes on interest or other investment income, possible
seizure, nationalization, or expropriation of foreign deposits or investments,
the possible establishment of exchange controls or taxation at the source, less
stringent disclosure requirements, less liquid or developed securities markets
or the adoption of other foreign governmental restrictions which might adversely
affect the payment of principal, interest or dividends on such securities or the
purchase or sale thereof. In addition, foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements and to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to domestic branches of U.S. banks. A Fund will acquire
securities issued by foreign branches of U.S. banks, foreign banks, or other
foreign issuers only when the Adviser believes that the risks associated with
such instruments are minimal.
Securities Lending. In order to generate additional income, each Fund
may, from time to time, lend its portfolio securities to broker-dealers, banks,
or institutional borrowers of securities. A Fund must receive 100% collateral in
the form of cash or U.S. Government securities. This collateral will be valued
daily by the Adviser or the Sub-Adviser, as the case may be. Should the market
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<PAGE> 29
value of the loaned securities increase, the borrower must furnish additional
collateral to that Fund. During the time portfolio securities are on loan, the
borrower pays that Fund any dividends or interest received on such securities.
Loans are subject to termination by such Fund or the borrower at any time. While
a Fund does not have the right to vote securities on loan, each Fund intends to
terminate the loan and regain the right to vote if that is considered important
with respect to the investment. In the event the borrower would default in its
obligations, the Fund bears the risk of delay in recovery of the portfolio
securities and the loss of rights in the collateral. A Fund will enter into loan
agreements only with broker-dealers, banks, or other institutions that the
Adviser or the Sub-Adviser, as the case may be, has determined are creditworthy
under guidelines established by the Group's Board of Trustees.
When-Issued and Delayed Delivery Transactions. The Income Fund and the
Tax-Free Fund may purchase securities on a when-issued or delayed-delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The Income Fund and the
Tax-Free Fund will engage in when-issued and delayed-delivery transactions only
for the purpose of acquiring portfolio securities consistent with and in
furtherance of its investment objective and policies, not for investment
leverage, although such transactions represent a form of leveraging. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield and thereby involve a risk that the yield
obtained in the transaction will be less than those available in the market when
delivery takes place. A Fund will generally not pay for such securities or start
earning interest on them until they are received on the settlement date. When a
Fund agrees to purchase such securities, however, its custodian will set aside
cash or liquid securities equal to the amount of the commitment in a separate
account. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, the Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause such Fund to miss a price or yield considered to be advantageous.
Restricted Securities. Securities in which the Diversified Equity Fund,
the Income Equity Fund, the Special Equity Fund and the Income Fund may invest
include securities issued by corporations without registration under the
Securities Act of 1933, as amended (the "1933 Act"), in reliance on the
exemption from such registration afforded by Section 3(a)(3) thereof, and
securities issued in reliance on the so-called "private placement" exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). Section 4(2) securities are restricted as to disposition
under the Federal securities laws, and
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<PAGE> 30
generally are sold to institutional investors such as the Funds who agree that
they are purchasing the securities for investment and not with a view to public
distribution. Any resale must also generally be made in an exempt transaction.
Section 4(2) securities are normally resold to other institutional investors
through or with the assistance of the issuer or investment dealers who make a
market in such Section 4(2) securities, thus providing some liquidity.
Pursuant to procedures adopted by the Board of Trustees of the Group,
the Adviser, or the Sub-Adviser, as the case may be, may determine Section 4(2)
securities to be liquid if such securities are eligible for resale under Rule
144A under the 1933 Act and are readily saleable. Rule 144A permits a Fund to
purchase securities which have been privately placed and resell such securities
to certain qualified institutional buyers, such as the Funds, without
restriction. For purposes of determining whether a Rule 144A Security is readily
saleable, and therefore liquid, the Adviser or the Sub-Adviser, as the case may
be, must consider, among other things, the frequency of trades and quotes for
the security, the number of dealers willing to purchase or sell the security and
the number of potential purchasers, dealer undertakings to make a market in the
security, and the nature of the security and marketplace trades of such
security. However, investing in Rule 144A securities, even if such securities
are initially determined to be liquid, could have the effect of increasing the
level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities.
Investment Company Securities. Each Fund, other than the Money Market
Fund, may also invest in the securities of other investment companies in
accordance with the limitations of the 1940 Act and any exemptions therefrom.
Each Fund intends to invest in the securities of other investment companies
which, in the opinion of the Adviser or the Sub-Adviser, as the case may be,
will assist such Fund in achieving its investment objectives and in money market
mutual funds for purposes of short-term cash management. A Fund will incur
additional expenses due to the duplication of fees and expenses as a result of
investing in mutual funds. Additional restrictions on the Funds' investments in
the securities of other mutual funds are contained in the Statement of
Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The Commission requires
that the calculation exclude all securities whose remaining maturities at the
time of acquisition are one year or less. For the Money Market Fund,
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<PAGE> 31
portfolio turnover rate is expected to be zero percent for regulatory purposes.
The portfolio turnover rate for each of the other Funds may vary greatly from
year to year, as well as within a particular year, and may also be affected by
cash requirements for redemptions of Shares. High portfolio turnover rates will
generally result in higher transaction costs, including brokerage commissions,
to a Fund and may result in additional tax consequences to a Fund's
shareholders. Portfolio turnover will not be a limiting factor in making
investment decisions.
INVESTMENT RESTRICTIONS
Each Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of that Fund (as
defined under "GENERAL INFORMATION -- Miscellaneous" herein).
Each of the Funds will not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements secured by such obligations, if, immediately after such
purchase, more than 5% of such Fund's total assets would be invested in such
issuer, or such Fund would hold more than 10% of outstanding voting securities
of such issuer, except that up to 25% of a Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
or repurchase agreements secured by such obligations.
2. Purchase any securities which would cause more than 25% of such
Fund's total assets at the time of purchase to be invested in securities of one
or more issuers conducting their principal business activities in the same
industry; provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements secured by such obligations; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. (a) Borrow money (not including reverse repurchase agreements or
dollar roll agreements), except that each Fund may borrow from banks for
temporary or emergency purposes and then only in amounts up to one-third of its
total assets at the time of borrowing (and provided that such bank borrowings
and reverse
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<PAGE> 32
repurchase agreements and dollar roll agreements do not exceed in the aggregate
one-third of the Fund's total assets less liabilities other than the obligations
represented by the bank borrowings, reverse repurchase agreements and dollar
roll agreements); (b) enter into reverse repurchase agreements, dollar roll
agreements and other permitted borrowings in amounts exceeding in the aggregate
one-third of the Fund's total assets less liabilities other than the obligations
represented by such reverse repurchase and dollar roll agreements; and (c) issue
senior securities except as permitted by the 1940 Act or any rule, order or
interpretation thereunder.
4. Make loans, except that each Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
The following additional investment restrictions, as to a particular
Fund, may be changed without the vote of a majority of the outstanding Shares of
such Fund:
1. The Money Market Fund will not purchase or otherwise acquire any
security, if, as a result, more than 10% of its net assets would be invested in
securities that are illiquid.
2. Each of the other Funds will not purchase or otherwise acquire any
security, if, as a result, more than 15% of its net assets would be invested in
securities that are illiquid.
For purposes of this investment restriction, illiquid securities
include securities which are not readily marketable and repurchase agreements
with maturities in excess of seven days.
In addition to the above investment restrictions, each Fund is subject
to certain other investment restrictions set forth under "INVESTMENT OBJECTIVES
AND POLICIES - Investment Restrictions" in the Funds' Statement of Additional
Information.
Irrespective of fundamental investment restriction number 1 above, and
pursuant to Rule 2a-7 under the 1940 Act, the Money Market Fund will, with
respect to 100% of its total assets, limit its investment in the securities of
any one issuer in the manner provided by such Rule, which limitations are
referred to above under the caption "INVESTMENT OBJECTIVES AND POLICIES - The
Money Market Fund."
VALUATION OF SHARES
The net asset value of the Money Market Fund is determined and its
Shares are priced as of 12:00 noon (Eastern time) and the close of regular
trading on the New York Stock Exchange (the "Exchange") (generally 4:00 p.m.
Eastern time) on each Business Day of the
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<PAGE> 33
Money Market Fund. The net asset value of each of the other Funds is determined
and their Shares are priced as of the close of regular trading on the Exchange
on each Business Day. The time or times at which the Shares of a Fund are priced
are hereinafter referred to as the "Valuation Time" or "Valuation Times," as the
case may be. A "Business Day" of a Fund is a day on which the Exchange is open
for trading [and any other day (other than a day on which no Shares of that Fund
are tendered for redemption and no order to purchase any Shares of that Fund is
received) during which there is sufficient trading in portfolio instruments such
that such Fund's net asset value per share might be materially affected.] The
Exchange will not be open in observance of the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share for purposes of pricing
purchases and redemptions is calculated by dividing the value of all securities
and other assets belonging to a Fund, less the liabilities charged to that Fund,
by the number of that Fund's outstanding Shares.
The net asset value per share for each of the Funds, other than the
Money Market Fund, will fluctuate as the value of the investment portfolio of a
Fund changes. The Board of Trustees of the Group has set the initial price per
Share for each of the Funds, other than the Money Market Fund, of $10.00.
The assets in the Money Market Fund are valued based upon the amortized
cost method which the Trustees of the Group believe fairly reflects the
market-based net asset value per share. Pursuant to the rules and regulations of
the Commission regarding the use of the amortized cost method, the Money Market
Fund will maintain a dollar-weighted average portfolio maturity of 90 days or
less. Although the Group seeks to maintain the Money Market Fund's net asset
value per share at $1.00, there can be no assurance that net asset value will
not vary.
The portfolio securities in each of the other Funds for which market
quotations are readily available are valued based upon their current available
prices in the principal market in which such securities normally are traded.
Unlisted securities for which market quotations are readily available are valued
at such market values. Other securities, including restricted securities and
other securities for which market quotations are not readily available, and
other assets are valued at fair value by the Adviser under procedures
established by, and under the supervision of the Group's Board of Trustees.
Securities may be valued by an independent pricing service approved by the
Group's Board of Trustees. Investments in debt securities with remaining
maturities of 60 days or less may be valued based upon the amortized cost
method. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
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<PAGE> 34
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are sold on a continuous basis by the Group's
distributor, BISYS (the "Distributor"). The principal office of the Distributor
is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares,
telephone the Group at (800) 766-8938.
PURCHASES OF SHARES
Shares may be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers") by the Adviser or its
correspondent or affiliated banks (collectively, the "Banks"). These procedures
may include instructions under which a Customer's account is "swept"
automatically no less frequently than weekly and amounts in excess of a minimum
amount agreed upon by the Bank and the Customer are invested by the Distributor
in Shares of a particular Fund, depending upon the type of the Customer's
account and/or the instructions of the Customer.
Shares of the Funds sold to the Banks acting in a fiduciary, advisory,
custodial, agency, or other similar capacity on behalf of Customers will
normally be held of record by the Banks. With respect to Shares of the Funds so
sold, it is the responsibility of the particular Bank to transmit purchase or
redemption orders to the Distributor and to deliver federal funds for purchase
on a timely basis. Beneficial ownership of Shares will be recorded by the Banks
and reflected in the account statements provided by the Banks to Customers. A
Bank will exercise voting authority for those Shares for which it is granted
authority by the Customer.
Investors may also purchase Shares of a Fund by completing and signing
an Account Registration Form and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, payable to the appropriate Fund, to the 1st Source Monogram Funds,
Department _____, Columbus, Ohio 43260-____. Subsequent purchases of Shares of
that Fund may be made at any time by mailing a check (or other negotiable bank
draft or money order) payable to the Group, to the above address.
If an Account Registration Form has been previously received by the
Group, investors may also purchase Shares by wiring funds to the Funds'
custodian. Prior to wiring any such funds and in order to ensure that wire
orders are invested promptly, investors must call the Group at (800) 766-8938 to
obtain instructions regarding the bank account number into which the funds
should be wired and other pertinent information.
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<PAGE> 35
Shares of each Fund are purchased at the net asset value per share (see
"VALUATION OF SHARES") next determined after receipt by the Distributor, its
agents or broker-dealers with whom it has an agreement of an order in good form
to purchase Shares plus any applicable sales charge as described below.
Purchases of Shares of a Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") of that Fund.
An order to purchase Shares of the Money Market Fund will be deemed to
have been received by the Distributor only when federal funds with respect
thereto are available to the Money Market Fund's custodian for investment.
Federal funds are monies credited to a bank's account with a Federal Reserve
Bank. Payment for an order to purchase Shares of the Money Market Fund which is
transmitted by federal funds wire will be available the same day for investment
by the Money Market Fund's custodian, if received prior to the last Valuation
Time (see "VALUATION OF SHARES"). Payments transmitted by other means (such as
by check drawn on a member of the Federal Reserve System) will normally be
converted into federal fund within two banking days after receipt. The Group
strongly recommends that investors of substantial amounts use federal funds to
purchase Shares. Shares of the Money Market Fund purchased before 12:00 noon,
Eastern Time, begin earning dividends on the same Business Day. Shares of the
Money Market Fund purchased after 12:00 noon, Eastern Time, begin earning
dividends on the next Business Day. All Shares of the Money Market Fund continue
to earn dividends through the day before their redemption.
For orders for the purchase of Shares of any of the other Funds placed
through a broker-dealer, the applicable public offering price will be the net
asset value as so determined (plus any applicable sales charge), but only if the
broker-dealer receives the order and transmits it to the Distributor prior to
the Valuation Time for that day. The broker-dealer is responsible for
transmitting such orders by the Valuation Time. If the broker-dealer fails to do
so, the investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next day.
MINIMUM INVESTMENT
Except as otherwise discussed below under "Auto Invest Plan," the
minimum investment is $1,000 for the initial purchase of Shares of a Fund by an
investor and $25 for subsequent purchases of Shares of that Fund. The initial
purchase minimum is $250 for employees of the Adviser or any of its affiliates
and is waived for such employees if purchases are made in connection with an
Individual Retirement Account ("IRA").
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<PAGE> 36
Depending upon the terms of a particular Customer's account, the Banks
or their affiliates may charge a Customer account fees for automatic investment
and other cash management services provided in connection with investment in a
Fund. Information concerning these services and any charges will be provided by
the Banks. This Prospectus should be read in conjunction with any such
information received from the Banks or their affiliates.
Each Fund reserves the right to reject any order for the purchase of
its Shares in whole or in part.
Every Shareholder will receive a confirmation of each new transaction
in his or her account, which will also show the total number of Shares owned by
the Shareholder and the number of Shares being held in safekeeping by the
Transfer Agent for the account of the Shareholder. Reports of purchases and
redemptions of Shares by Banks on behalf of their Customers will be sent by the
Banks to their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
1ST SOURCE MONOGRAM INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A 1st Source Monogram IRA enables individuals, even if they participate
in an employer-sponsored retirement plan, to establish their own retirement
program. 1st Source Monogram IRA contributions may be tax-deductible and
earnings are tax deferred. Under the Tax Reform Act of 1986, the tax
deductibility of IRA contributions is restricted or eliminated for individuals
who participate in certain employer pension plans and whose annual income
exceeds certain limits. Existing IRAs and future contributions up to the IRA
maximums, whether deductible or not, still earn income on a tax-deferred basis.
All 1st Source Monogram IRA distribution requests must be made in
writing to the Distributor. Any deposits to a 1st Source Monogram IRA must
distinguish the type and year of the contributions.
For more information on the 1st Source Monogram IRAs call the Group at
(800) 766-8938. Investment in Shares of the Tax-Free Fund or any other
tax-exempt fund would not be appropriate for a 1st Source Monogram IRA.
Shareholders are advised to consult a tax adviser on 1st Source Monogram IRA
contribution and withdrawal requirements and restrictions.
AUTO INVEST PLAN
The 1st Source Monogram Funds Auto Invest Plan enables Shareholders to
make regular monthly or quarterly purchases of Shares of a Fund
through automatic deduction from their bank accounts, provided that
the Shareholder's bank is a member of the Federal Reserve and the
Automated Clearing House (ACH) system. With Shareholder
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<PAGE> 37
authorization the Transfer Agent will deduct the amount specified (subject to
the applicable minimums) from the Shareholder's bank account which will
automatically be invested in Shares of the designated Fund at the public
offering price on the date of such deduction. The required minimum initial
investment when opening an account using the Auto Invest Plan is $25 ($250 if
purchases are in connection with an IRA unless the purchaser is an employee of
the Adviser in which case the minimum in connection with an IRA is $50); the
minimum amount for subsequent investments is $25. To participate in the Auto
Invest Plan, Shareholders should complete the appropriate section of the Account
Registration Form or a supplemental sign-up form which can be acquired by
calling the Group at (800) 766-8938. For a Shareholder to change the Auto Invest
instructions, the request must be made in writing to the Group at: 3435 Stelzer
Road, Columbus, Ohio 43219.
SALES CHARGES
The public offering price of Shares of each of the Funds, other than
the Money Market Fund, equals net asset value plus a sales charge in accordance
with the table below. BISYS receives this sales charge as Distributor and
reallows a portion of it as dealer discounts and brokerage commissions. However,
the Distributor, in its sole discretion may pay certain dealers all or part of
the portion of the sales charge it receives. The broker or dealer who receives a
reallowance in excess of 90% of the sales charge may be deemed to be an
"underwriter" for purposes of the 1933 Act.
There is no sales charge imposed by the Money Market Fund in connection
with the purchase of its Shares.
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<PAGE> 38
Diversified Equity, Income Equity and Special Equity Funds
<TABLE>
<CAPTION>
Dealer Discounts
Amount of and Brokerage
Transaction at Sales Charge as % Sales Charge as % Commissions as %
Public Offering of Net Amount of Public of Public
Price Invested Offering Price Offering Price
- --------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Less than $50,000 5.26% 5.00% 4.50%
$50,000 but less
than $100,000 4.17 4.00 3.60
$100,000 but less
than $250,000 3.09 3.00 2.70
$250,000 but less
than $500,000 2.04 2.00 1.80
$500,000 but less
than $1,000,000 1.52 1.50 1.35
$1,000,000 or
more 0 0 0
</TABLE>
Income and Tax-Free Funds
<TABLE>
<CAPTION>
Dealer Discounts
Amount of and Brokerage
Transaction at Sales Charge as % Sales Charge as % Commissions as %
Public Offering of Net Amount of Public of Public
Price Invested Offering Price Offering Price
- --------------- ----------------- ----------------- ----------------
<S> <C> <C> <C>
Less than $50,000 4.17% 4.00% 3.60%
$50,000 but less
than $100,000 3.63 3.50 3.15
$100,000 but less
than $250,000 3.09 3.00 2.70
$250,000 but less
than $500,000 2.04 2.00 1.80
$500,000 but less
than $1,000,000 1.52 1.50 1.35
$1,000,000 or
more 0 0 0
</TABLE>
From time to time dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers. The
Distributor, at its own expense, will also provide additional compensation to
dealers in connection with sales
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<PAGE> 39
of Shares of any of the Funds. Such compensation will include financial
assistance to dealers in connection with conferences, sales or training programs
for their employees, seminars for the public, advertising campaigns regarding
one of more funds of the Group, and/or other dealer-sponsored special events. In
some instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Compensation will also
include the following types of non-cash compensation offered through sales
contests: (1) vacation trips, including the provision of travel arrangements and
lodging at luxury resorts at an exotic location, (2) tickets for entertainment
events (such as concerts, cruises and sporting events) and (3) merchandise (such
as clothing, trophies, clocks and pens). Dealers may not use sales of a Fund's
Shares to qualify for this compensation to the extent such may be prohibited by
the laws of any state or any self-regulatory agency, such as the NASD. None of
the aforementioned compensation is paid for by any Fund or its Shareholders.
SALES CHARGE WAIVERS
The Distributor may waive sales charges for the purchase of Shares of
a Fund by or on behalf of:
(1) Accounts for which FSC, the Adviser, banks and trust companies
or one of their affiliates acts in a fiduciary, advisory, agency, custodial
(other than for individual retirement accounts), or similar capacity;
(2) Officers, trustees, directors, employees and retired employees
(including spouses and children under the age of 21 of the foregoing) of FSC,
the Adviser, the Group, BISYS and any affiliates thereof;
(3) Purchasers pursuant to the terms of a payroll deduction plan, a
401(k) plan or a 403(b) plan which by its terms permits purchases of Shares of
the Funds;
(4) Purchasers using solely the proceeds from a distribution from
the Adviser or an affiliate trust, fiduciary or agency account (this waiver
only applies to the initial purchase of Shares with such proceeds);
(5) Brokers, dealers and agents for their own account who have a
sales agreement with the Distributor, and their employees (and their spouses
and children under the age of 21);
(6) Orders placed on behalf of other investment companies
distributed by The BISYS Group, Inc. or its affiliated companies, including the
Distributor;
(7) Investment advisers or financial planners regulated by a
federal or state governmental authority who are purchasing Shares for their own
account or for an account for which they are authorized to make investment
decisions (i.e., a discretionary account) and who charge a management,
consulting or other fee for their services, and clients of such investment
advisers or financial planners who place trades for their own accounts if the
accounts are linked to the master account of such investment adviser or
financial planner on the books and records of a broker or agent; and
(8) Investors purchasing Shares with proceeds from a redemption of
shares of another open-end investment company (other than the Group) on which a
sales charge was paid if (i) such redemption occurred with sixty (60) days
prior to the date of the purchase order and (ii) satisfactory evidence of the
purchaser's eligibility is provided to the Distributor at the time of purchase
(e.g., a confirmation of the redemption).
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<PAGE> 40
The Distributor may change or eliminate the foregoing waivers at any
time. The Distributor may also periodically waive all or a portion of the sales
charge for all investors with respect to a Fund.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, investors have the
privilege of combining concurrent purchases of a Fund and one or more of the
other funds of the Group sold with a sales charge and advised by the Adviser
("1st Source Monogram Load Funds"). For example, if a shareholder concurrently
purchases Shares in the Diversified Equity Fund at the total public offering
price of $25,000 and Shares in the Income Fund at the total public offering
price of $30,000, the sales charge would be that applicable to a $55,000
purchase as shown in the table above. This privilege, however, may be modified
or eliminated at any time or from time to time by the Group without notice
thereof.
LETTER OF INTENT
An investor may obtain a reduced sales charge by means of a written
Letter of Intent which expresses the intention of such investor to purchase
Shares of a Fund at a designated total public offering price within a designated
13-month period. Each purchase of Shares under a Letter of Intent will be made
at the net asset value plus the sales charge applicable at the time of such
purchase to a single transaction of the total dollar amount indicated in the
Letter of Intent. A Letter of Intent may include purchases of Shares made not
more than 90 days prior to the date such investor signs a Letter of Intent;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earliest purchase to be included. This program may be
modified or eliminated at any time or from time to time by the Group without
notice. For further information about letters of intent, interested investors
should contact the Group at (800) 874-8376.
A Letter of Intent is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full amount indicated is not purchased, and
such escrowed Shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed Shares, whether paid in cash or
reinvested in additional Shares, are not subject to escrow. The escrowed Shares
will not be available for disposal by the investor until all purchases pursuant
to the Letter of Intent have been made or the higher sales charge has been paid.
When the full amount indicated has been purchased, the escrow will be released.
An adjustment will be made to reflect
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any reduced sales charge applicable to Shares purchased during the 90-day period
prior to the date the Letter of Intent was entered into at the conclusion of the
13-month period and in the form of additional Shares credited to the
Shareholder's account at the then current public offering price applicable to a
single purchase of the total amount of the total purchases. Additionally, if the
total purchases within the 13-month period exceed the amount specified, a
similar adjustment will be made to reflect further reduced sales charges
applicable to such purchases.
RIGHT OF ACCUMULATION
Pursuant to the right of accumulation, investors are permitted to
purchase Shares of a Fund at the pubic offering price applicable to the total of
(a) the total public offering price of the Shares of the 1st Source Monogram
Load Fund then being purchased plus (b) an amount equal to the then current net
asset value of the purchaser's combined holdings of the Shares of all of the 1st
Source Monogram Load Funds. The "purchaser's combined holdings" described in the
preceding sentence shall include the combined holdings of the purchaser, the
purchaser's spouse and children under the age of 21 and the purchaser's
retirement plan accounts. To receive the applicable public offering price
pursuant to the right of accumulation, Shareholders must, at the time of
purchase, give the Transfer Agent sufficient information to permit confirmation
of qualification. This right of accumulation, however, may be modified or
eliminated at any time or from time to time by the Group without notice.
EXCHANGE PRIVILEGE
Shares of a 1st Source Monogram Load Fund may be exchanged for Shares
of any of the other 1st Source Monogram Load Funds at respective net asset
values upon the payment of a sales charge equal to the difference, if any,
between the sales charge payable upon purchase of Shares of such 1st Source
Monogram Load Fund and the sales charge previously paid on the Fund Shares to be
exchanged. When Shares of the Money Market Fund are exchanged for Shares of a
1st Source Monogram Load Fund, the applicable sales load will be assessed,
unless such Shares to be exchanged were acquired through a previous exchange for
Shares on which a sales charge was paid. Under such circumstances, the
Shareholder must notify the Group that a sales charge was originally paid and
provide the Group with sufficient information to permit confirmation of the
Shareholder's right not to pay a sales charge. Provided further, that with
respect to every exchange, the amount to be exchanged must meet the applicable
minimum investment requirements and the exchange is made in states where it is
legally authorized.
An exchange is considered a sale of Shares for federal income tax
purposes. However, a Shareholder may not include any sales charge on Shares of a
1st Source Monogram Load Fund as a part of the cost of
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those Shares for purposes of calculating the gain or loss realized on an
exchange of those Shares within 90 days of their purchase.
The Group may at any time modify or terminate the foregoing exchange
privileges. The Group, however, will give shareholders 60 days' advance written
notice of any such modification.
A Shareholder wishing to exchange his or her Shares may do so by
contacting the Group at (800) 766-8938 or by providing written instructions to
the Group. Any Shareholder who wishes to make an exchange should obtain and
review the current prospectus of the Fund in which he or she wishes to invest
before making the exchange. For a discussion of risks associated with
unauthorized telephone exchanges, see "Redemption by Telephone" below.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, all
or part of a Customer's Shares may be redeemed in accordance with instructions
and limitations pertaining to his or her account at a Bank. For example, if a
Customer has agreed with a Bank to maintain a minimum balance in his or her
account with the Bank, and the balance in that account falls below that minimum,
the Customer may be obliged to redeem, or the Bank may redeem on behalf of the
Customer, all or part of the Customer's Shares of a Fund to the extent necessary
to maintain the required minimum balance.
REDEMPTION BY MAIL
A written request for redemption must be received by the Group, at the
address shown on the front page of this Prospectus, in order to honor the
request. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if the
following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record, and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or mailed or wired to a commercial bank
account previously designated on the Account Registration Form. There is no
charge for having redemption proceeds mailed to a designated bank account. To
change the address to which a redemption check is to be mailed, a written
request therefor must be received by the Transfer Agent. In connection with such
request, the Transfer Agent will require a signature guarantee by an eligible
guarantor institution. For purposes of this policy, the term "eligible guarantor
institution" shall include banks, brokers, dealers, credit unions, securities
exchanges and associations, clearing agencies and savings associations as those
terms are defined in the Securities Exchange Act of 1934. The 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
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institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000.
REDEMPTION BY TELEPHONE
If a Shareholder has so designated on the Account Registration Form, a
Shareholder may request a redemption of his or her Shares by telephoning the
Group and having the payment of redemption requests sent electronically directly
to a domestic commercial bank account previously designated by the Shareholder
on the Account Registration Form or mailed directly to the Shareholder at the
Shareholder's address as recorded by the Transfer Agent. Under most
circumstances, such payments will be transmitted on the next Business Day
following receipt of a valid request for redemption. Such wire redemption
requests may be made by the Shareholder by telephone to the Transfer Agent. The
Group may reduce the amount of a wire redemption payment by the then-current
wire redemption charge of the Funds' custodian. There is currently no charge for
having payment of redemption requests mailed or sent electronically to a
designated bank account. For telephone redemptions, call the Group at (800)
766-8938.
Neither the Funds nor their service providers will be liable for any
loss, damages, expense or cost arising out of any telephone redemption effected
in accordance with a Fund's telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. Each Fund will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, such Fund or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all 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. If, due to temporary adverse
conditions, Shareholders are unable to effect telephone transactions,
Shareholders may also mail the redemption request to the Group at the address
listed above under "HOW TO PURCHASE AND REDEEM SHARES -- Redemption by Mail."
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of a Fund, with an
account balance in such Fund of $5,000 or more, to make regular monthly or
quarterly redemptions of Shares. With Shareholder authorization, the Transfer
Agent will automatically redeem Shares at the net asset value on the dates of
the withdrawal and have a check in the amount specified mailed to the
Shareholder. The required minimum withdrawal is $25 monthly. To participate in
the Auto Withdrawal Plan, Shareholders should call (800) 766-8938 for
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more information. Purchases of additional Shares concurrent with withdrawals may
be disadvantageous to certain Shareholders because of tax liabilities and sales
charges. For a Shareholder to change the Auto Withdrawal instructions, the
request must be made in writing to the Group.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However,
with respect to the Money Market Fund, to the greatest extent possible, such
Fund will attempt to honor requests from Shareholders for same day payments upon
redemption of Shares if the request for redemption is received by the
Distributor before 12:00 noon, Eastern Time, on a Business Day or, if the
request for redemption is received after 12:00 noon, Eastern Time, to honor
requests for payment on the next Business Day. With respect to each of the other
Funds, to the greatest extent possible, such Funds will attempt to honor
requests from Shareholders for next day payments upon redemption of Shares if
the request for redemption is received by the Distributor before the Valuation
Time, on a Business Day or, if the request for redemption is received after the
Valuation Time, to honor requests for payment on the second Business Day. Each
Fund will attempt to so honor redemption requests unless it would be
disadvantageous to that Fund or the Shareholders of that Fund to sell or
liquidate portfolio securities in an amount sufficient to satisfy requests for
payments in that manner.
At various times, the Group may be requested to redeem Shares for which
it has not yet received good payment. In such circumstances, the Group may delay
the forwarding of proceeds for up to 15 days or more until payment has been
collected for the purchase of such Shares. With respect to Shares of the Money
Market Fund, during the period of any such delay, such Shares to be redeemed
would continue to receive daily dividends as declared until execution of the
redemption. The Group intends to pay cash for all Shares redeemed, but under
abnormal conditions which make payment in cash unwise, the Group may make
payment wholly or partly in portfolio securities at their then 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, each
Fund reserves the right to redeem, at net asset value, the Shares of that Fund
of any Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market price of such
Shares, the deduction of any sales charge or the establishment of an account by
an employee of the Adviser or one of its affiliates or by using the Auto Invest
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Plan), the account of such Shareholder has a value of less than $1,000.
Accordingly, an investor purchasing Shares of a Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems some of his or her Shares. Before a Fund exercises its right
to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed not less than 60
days to make an additional investment in an amount which will increase the value
of the account to at least $1,000.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and "NET ASSET
VALUE" in the Statement of Additional Information for examples of when the Group
may suspend the right of redemption or redeem shares involuntarily in light of
the Group's responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
DIVIDENDS
The net income of the Money Market Fund is declared daily and generally
paid monthly on the first Business Day of the following month. However, from
time to time such dividends may be paid on the last Business Day of the
preceding month.
A dividend for each of the other Funds, other than the Special Equity
Fund, is declared monthly at the close of business on the day of declaration and
is generally paid monthly. A dividend for the Special Equity Fund is declared
quarterly at the close of business on the day of declaration and is generally
paid quarterly. Each such dividend consists of an amount of accumulated
undistributed net income of that Fund as determined necessary or appropriate by
the appropriate officers of the Group.
Shareholders will automatically receive all income dividends and
capital gains distributions in additional full and fractional Shares of that
particular Fund at the net asset value as of the date of payment, unless the
Shareholder elects to receive dividends or distributions in cash. Such election,
or any revocation thereof, must be made in writing to the Transfer Agent at 3435
Stelzer Road, Columbus, Ohio 43219, and will become effective with respect to
dividends and distributions having record dates after its receipt by the
Transfer Agent.
Distributable net realized capital gains for each Fund are distributed
at least annually. Dividends are paid in cash not later than seven Business Days
after a Shareholder's complete redemption of his or her Shares in a Fund.
If a Shareholder elects to receive distributions in cash, and checks
(1) are returned and marked as "undeliverable" or (2) remain uncashed for six
months, the Shareholder's cash election will be changed automatically and
future dividend and capital gains distributions will be reinvested in that Fund
at the per share net asset value determined as of the date of payment of the
distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in that Fund at
the per share net asset value determined as of the date of cancellation.
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FEDERAL TAXES
General. Each of the Funds is treated as a separate entity for federal
income tax purposes and intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986 (the "Code") for so long as such
qualification is in the best interest of that Fund's Shareholders. Qualification
as a regulated investment company under the Code requires, among other things,
that the regulated investment company distribute to its shareholders at least
90% of its investment company taxable income. Each Fund contemplates declaring
as dividends all or substantially all of that Fund's investment company taxable
income (before deduction of dividends paid).
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. If
distributions during a calendar year were less than the required amount, that
Fund would be subject to a nondeductible 4% excise tax on the deficiency.
It is expected that each Fund will distribute annually to Shareholders
all or substantially all of that Fund's net ordinary income and net realized
capital gains and that, except as discussed below with respect to the Tax-Free
Fund, such distributed net ordinary income and distributed net realized capital
gains will be taxable income to Shareholders for federal income tax purposes,
even if paid in additional Shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends deduction, if any, received by the Fund
bear to its gross income. Since all of the Money Market Fund's and the Income
Fund's net investment income is expected to be derived from earned interest and
short-term capital gains, it is anticipated that no part of any distribution
from such Fund will be eligible for the dividends received deduction for
corporation. The Money Market Fund also does not expect to realize any long-term
capital gains and, therefore, does not foresee paying any "capital gains
dividends" as described in the Code.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to Shareholders as long-term capital gain
in the year in which it is received, regardless of how long the Shareholder has
held the Shares. Such distributions are not eligible for the dividends-received
deduction.
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If the net asset value of a Share is reduced below the Shareholder's
cost of that Share by the distribution of income or gain realized on the sale of
securities, the distribution, from a practical stand point, is a return of
invested principal, although taxable as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under the heading "ADDITIONAL INFORMATION --
Additional Tax Information." However, the information contained in this
Prospectus and the additional material in the Statement of Additional
Information are only brief summaries of some of the important tax considerations
generally affecting the Funds and their Shareholders. Accordingly, potential
investors are urged to consult their tax advisers concerning the application of
federal, state and local taxes as such laws and regulations affect their own tax
situation.
Shareholders will be advised at least annually as to the federal and
state income tax consequences of distributions made to them during the year.
The Tax-Free Fund. The Tax-Free Fund will distribute substantially all
of its net investment income and net capital gains to its Shareholders.
Dividends derived from interest earned on Exempt Securities constitute
"exempt-interest dividends" when designated as such by the Tax-Free Fund and
will be excludable from gross income for federal income tax purposes and is not
expected to be treated as a preference item for computing the alternative
minimum tax.
Distributions, if any, derived from capital gains will generally be
taxable to Shareholders as capital gains for federal income tax purposes to the
extent so designated by the Tax-Free Fund. Dividends, if any, derived from
sources other than interest excluded from gross income for federal income tax
purposes and capital gains will be taxable to Shareholders as ordinary income
for federal income tax purposes whether or not reinvested in additional Shares.
Shareholders not subject to federal income tax on their income will not, of
course, be required to pay federal income tax on any amounts distributed to
them. The Tax-Free Fund anticipates that substantially all of its dividends will
be excluded from gross income for federal income tax purposes. The
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Tax-Free Fund will notify each Shareholder annually of the tax status of all
distributions.
If a Shareholder receives an exempt-interest dividend with respect to
any Share and such Share is held by the Shareholder for six months or less, any
loss on the sale or exchange of such Share will be disallowed to the extent of
the amount of such exempt- interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a Shareholder.
Interest on indebtedness incurred or continued by a Shareholder to
purchase or carry Shares of the Tax-Free Fund is not deductible for federal
income taxes assuming the Tax-Free Fund distributes exempt-interest dividends
during the Shareholder's taxable year. It is anticipated that distributions from
the Tax- Free Fund will not be eligible for the dividends received deduction for
corporations.
STATE TAXES
Even though a substantial portion of distributions of net income by the
Money Market Fund to its Shareholders will be attributable to interest on U.S.
Treasury obligations, which may be exempt from state or local tax if received
directly by a Shareholder, Shareholders of the Money Market Fund may be subject
to state and local taxes with respect to their ownership of Shares or their
receipt of distributions from the Money Market Fund. In addition, to the extent
Shareholders receive distributions of income attributable to investments in
repurchase agreements by the Money Market Fund, such distributions may also be
subject to state or local taxes.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board
of Trustees. At any given time all Trustees of the Group may not have been
elected by Shareholders of the Group. The Group will be managed by the Trustees
in accordance with the laws of Ohio governing business trusts. The Trustees, in
turn, elect the officers of the Group to supervise its day-to-day operations.
The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of BISYS or BISYS Fund Services Inc., the sole
general partner of BISYS, receives any compensation from the Group for acting as
a Trustee of
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the Group. The officers of the Group receive no compensation directly from the
Group for performing the duties of their offices. BISYS receives fees from the
Group for acting as Administrator and under the Distribution Plan discussed
below, may receive fees under the Administrative Services Plan discussed below,
and may retain all or a portion of any sales load imposed upon purchases of
Shares. BISYS Fund Services, Inc. receives fees from each of the Funds for
acting as Transfer Agent and for providing certain fund accounting services.
INVESTMENT ADVISER
1st Source Bank, 100 North Michigan Street, South Bend, Indiana 46601,
is the investment adviser of each Fund. The Adviser is a wholly owned subsidiary
of 1st Source Corporation, a publicly held bank holding company ("FSC"). The
Adviser was founded in 1936, and while it has not previously served as an
investment adviser to an open-end management investment company, the Adviser and
its affiliates administer and manage, on behalf of their clients, trust assets
which as of March, 1996, totalled approximately $1.2 billion. Of such amount,
approximately $668 million are managed on behalf of personal trust customers and
approximately $500 million are managed on behalf of employee benefit plans. The
Adviser has over 60 years of banking experience and as of December 31, 1995,
had, on a consolidated basis with FSC, over $1.6 billion in assets.
Subject to the general supervision of the Board of Trustees of the
Group and in accordance with the investment objectives and restrictions of the
Funds, the Adviser manages, makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for the Money Market Fund,
the Income Equity Fund, the Special Equity Fund, the Income Fund and the
Tax-Free Fund, and, through the Sub-Advisers, the Diversified Equity Fund.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Group, the Adviser receives a fee from
each of the Funds, computed daily and paid monthly, at the following rates: with
respect to the Money Market Fund, the annual rate of thirty-five one-hundredths
of one percent (0.35%) of such Fund's average daily net assets; with respect to
the Diversified Equity Fund, the annual rate of one hundred ten one-hundredths
of one percent (1.10%) of such Fund's average daily net assets; with respect to
the Income Equity Fund, the annual rate of eighty one-hundredths of one percent
(0.80%) of such Fund's average daily net assets; with respect to the Special
Equity Fund, the annual rate of eighty one-hundredths of one percent (0.80%) of
such Fund's average daily net assets; with respect to the Income Fund, the
annual rate of fifty-five one-hundredths of one percent (0.55%) of such Fund's
average daily net assets; and with respect to the Tax-Free Fund, the annual rate
of fifty-five one-hundredths of one percent (0.55%) of such Fund's average daily
net assets. While the fees of the Adviser with respect to the Diversified
Equity, Special Equity and Income Funds are higher than similar fees paid by
most mutual funds, the Board of Trustees believes such fees to be fair and
reasonable.
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The Adviser may periodically voluntarily reduce all or a portion of its
advisory fee with respect to a Fund to increase the net income of that Fund
available for distribution as dividends. The Adviser may not seek reimbursement
of such voluntarily reduced fees at a later date. The reduction of such fee will
cause the yield and total return of that Fund to be higher than they would
otherwise be in the absence of such a reduction.
Ralph Shive is the portfolio manager of the Income Equity Fund. Mr.
Shive has served as Vice President and an investment officer of the Adviser
since September, 1989. Generally, Mr. Shive has worked as an analyst and
portfolio manager for 20 years after receiving his BBA from Southern Methodist
University. Prior to joining the Adviser, he was employed by a brokerage firm
and a private investment partnership in Dallas, Texas. He is a Chartered
Financial Analyst and manages the Income Equity Fund as well as individual
portfolios with a focus on "value" investing.
J. Gregory Turner is the portfolio manager of the Special Equity Fund.
Mr. Turner has served as an investment officer of the Adviser since 1994.
Prior thereto and since October, 1986 he worked for IAA Trust Company,
Bloomington, Illinois, as a portfolio manager. Generally, Mr. Turner has worked
as an analyst and portfolio manager for 10 years after receiving his BS from
Illinois State University and a masters degree in management from Purdue
University. As a Chartered Financial Analyst, Mr. Turner manages individual
portfolios, the Special Equity Fund, and other growth equity accounts.
Andrew R. Haddock is the portfolio manager of the Income Fund and the
Tax-Free Fund. Mr. Haddock has served as an Assistant Vice President and an
investment officer of the Adviser for more than five years. Mr. Haddock has
worked as an analyst and as a portfolio manager for the past six years. After
earning an undergraduate degree in business at Indiana University, he completed
a masters degree in economics at the University of Washington. Mr. Haddock
manages several fixed income funds, in addition to the Income Fund, and is a
Chartered Financial Analyst.
John S. Seidl is the portfolio manager of the Money Market Fund. Mr.
Seidl has served as Vice President and a Senior Investment Officer of the
Adviser since 1985, and Mr. Seidl heads the Investment Division at the Adviser.
He has worked more than 21 years as an Analyst and Senior Portfolio Manager
after receiving his BBA from the University of Notre Dame. Mr. Seidl is a
Chartered Financial Analyst who focuses his efforts on the fixed income market,
along with being responsible for the overall investment strategy of the
department.
THE SUB-ADVISERS
Pursuant to the terms of its Investment Advisory Agreement with the
Group, the Adviser has entered into Sub-Investment Advisory Agreements with each
of Miller, Anderson,
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One Tower Bridge, Suite 1100, West Conshohocken, Pennsylvania 19428,
Loomis, 3 First National Plaza, Suite 5450, Chicago, Illinois 60600 and
Columbus, One Station Place, Stamford, Connecticut 06902. Pursuant to the terms
of such Sub-Investment Advisory Agreements, each of the Sub-Advisers has been
retained by the Adviser to manage the day-to-day investment and reinvestment of
a designated portion of the assets of the Diversified Equity Fund, each subject
to the direction and control of the Group's Board of Trustees, and the Adviser
is responsible for selecting and monitoring each Sub-Adviser and reporting the
activities of each Sub-Adviser to the Company's Board of Trustees.
Miller, Anderson is wholly owned by Morgan Stanley Group, Inc., 1585
Broadway, New York, New York 10036. Miller, Anderson was founded in 1969 and was
acquired by Morgan Stanley Group, Inc. in 1995. Miller, Anderson provides advice
primarily to institutions, including other investment companies, and currently
has approximately $35 billion in assets under management, of which approximately
$2.4 billion is managed using Miller Anderson's value style as described above.
Robert J. Marcin, CFA, will be primarily responsible for the day-to-day
management of that portion of the Diversified Equity Fund's portfolio managed by
Miller Anderson. Mr. Marcin has been a Partner with Miller Anderson since 1994,
and has had more than 14 years of investment experience.
Loomis is a limited partnership, the sole general partner of which is
Loomis, Sayles & Company, Incorporated, One Financial Center, Boston,
Massachusetts 02111. All of the outstanding shares of Loomis, Sayles & Company,
Incorporated are owned by New England Investment Companies, L.P., a
publicly-traded limited partnership ("NEIC"). NEIC's sole corporate general
partner is owned by the New England Mutual Life Insurance Company, which has
announced its intention to merge with and into Metropolitan Life Insurance
Company ("MET"). MET will, after the merger is effective, be the ultimate
indirect parent of Loomis. Loomis was founded in 1926 and has approximately $45
billion in assets under management. The Chicago office of Loomis was founded in
1952, and has currently approximately 62 clients and $3 billion in assets under
management. Jerry Castellini will be primarily responsible for the day-to-day
management of that portion of the Diversified Equity Fund's portfolio managed by
Loomis. Mr. Castellini has been a Director and Managing Partner of Loomis since
19__, and has had more than 16 years of investment experience.
Columbus, a general partnership formed on September 9, 1994, is
registered as an investment adviser under the Investment Advisers Act of 1940
and acquired the business operated by Columbus' predecessor since 1975. PIMCO
Advisors L.P. ("PIMCO") and Columbus Circle Investors Management Inc. ("CCI"), a
wholly owned subsidiary of PIMCO, are the general partners of Columbus. Columbus
serves as sub-adviser to other mutual funds and also advises and manages
individual accounts, profit sharing and pension funds and institutional
accounts. PIMCO's general partner is a general partnership with two partners:
(i) an indirect wholly owned subsidiary of Pacific Mutual Life Insurance
Company; and (ii) PIMCO Partners, L.L.C., a limited liability company, all of
the interests of which are held directly by the 11 managing directors of Pacific
Investment Management Company, a subsidiary of PIMCO.
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Columbus currently has approximately $13 billion in assets under
management, of which approximately $8 billion is managed using the sector
rotation style of management (known as Positive Momentum & Positive Surprise)
described above. Although Columbus operates on a team style management basis,
Daniel S. Pickett, CFA, will be primarily responsible for the day-to-day
management of that portion of the Diversified Equity Fund's portfolio managed by
Columbus. Mr. Pickett has been with Columbus since June, 1988, and a Managing
Director of Columbus since 1994, and has had more than 11 years of investment
experience.
For its services provided and expenses assumed pursuant to its
Sub-Investment Advisory Agreement with the Adviser, each of Miller, Anderson,
Loomis and Columbus receives from the Adviser a fee (computed daily and paid
monthly as a percentage of that portion of the Diversified Equity Fund's average
daily net assets managed by that Sub-Adviser) at the following annual rates: for
Miller Anderson, 0.625% up to $25,000,000 and 0.375% of the excess over
$25,000,000; for Loomis, 0.65% up to $5,000,000 and 0.50% of the excess over
$5,000,000; and for Columbus, 1.00% up to $10,000,000 and 0.50% of the excess
over $10,000,000.
ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund and also acts as each Fund's
principal underwriter and distributor (the "Administrator" or the "Distributor,"
as the context indicates). BISYS and its affiliated companies, including BISYS
Fund Services, Inc., are wholly owned by The BISYS Group, Inc., a publicly-held
company which is a provider of information processing, loan servicing and 401(k)
administration and recordkeeping services to and through banking and other
financial organizations.
The Administrator generally assists in all aspects of a Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Group, the Administrator receives a fee from each Fund equal to the lesser of a
fee computed daily and paid periodically, calculated at an annual rate of twenty
one-hundredths of one percent (0.20%) of that Fund's average daily net assets or
such other fee as may be agreed upon in writing by the Group and the
Administrator. The Administrator may periodically voluntarily reduce all or a
portion of its administration fee with respect to a Fund to increase the net
income of such Fund available for distribution as dividends. The Administrator
may not seek reimbursement of such reduced fees at a later date. The voluntary
reduction of such fee will cause the yield and total return of that Fund to be
higher than they would otherwise be in the absence of such a fee reduction.
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<PAGE> 53
The Distributor acts as agent for each of the Funds in the distribution
of their Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but receives compensation under the
Distribution and Shareholder Service Plan described below and may retain all or
a portion of any sales charge imposed upon the purchase of Shares. See "HOW TO
PURCHASE AND REDEEM SHARES -- Sales Charges."
EXPENSES
The Adviser and the Administrator each bear all expenses in connection
with the performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Fund. Each Fund will bear the following
expenses relating to its operations: organizational expenses, taxes, interest,
any brokerage fees and commissions, fees and expenses of the Trustees of the
Group, Commission fees, state securities qualification fees, costs of preparing
and printing prospectuses for regulatory purposes and for distribution to the
Fund's current shareholders, outside auditing and legal expenses, advisory fees,
fund accounting fees, fees and out-of-pocket expenses of the custodian and
Transfer Agent, costs for independent pricing services, certain insurance
premiums, costs of maintenance of the Group's existence, costs of shareholders'
reports and meetings, distribution expenses incurred pursuant to the
Distribution and Shareholder Service Plan described below, administrative
services expenses incurred pursuant to the Administrative Services Plan
described below and any extraordinary expenses incurred in the Fund's operation.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay BISYS, as Distributor, a fee in an amount not to exceed on an
annual basis 0.25% of the average daily net asset value of that Fund (the "12b-1
Fee"). Payments of the 12b-1 Fee to BISYS pursuant to the Plan will be used (i)
to compensate Participating Organizations (as defined below) for providing
distribution assistance relating to Shares of a Fund, (ii) for promotional
activities intended to result in the sale of Shares of the Funds such as to pay
for the preparation, printing and distribution of prospectuses to other than
current shareholders, and (iii) to compensate Participating Organizations for
providing shareholder services with respect to their customers who are, from
time to time, beneficial and record holders of Shares of the Fund.
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<PAGE> 54
Participating Organizations include banks, broker-dealers and other
financial institutions (including BISYS, FSC, the Adviser and their affiliates).
Such fee paid to BISYS may exceed the actual costs incurred by BISYS in
providing such services and/or compensating such Participating Organizations. In
addition, from time to time, BISYS may periodically voluntarily reduce all or a
portion of its fee under the Plan with respect to a Fund to increase the net
income of that Fund available for distribution as dividends. BISYS may not seek
reimbursement of such reduced fees after the end of the fiscal year in which the
fees were reduced. The voluntary reduction of such fee will cause the yield and
total return of that Fund to be higher than they would otherwise be in the
absence of such a fee reduction.
BISYS may enter into, from time to time, other Rule 12b-1 Agreements
with selected dealers pursuant to which such dealers will provide certain
services in connection with the distribution of a Fund's Shares such as those
described above.
ADMINISTRATIVE SERVICES PLAN
The Group has adopted an Administrative Services Plan (the "Services
Plan") pursuant to which each Fund is authorized to pay compensation to banks
and other financial institutions (each a "Service Organization"), which may
include the Adviser, its correspondent and affiliated banks, and BISYS, which
agree to provide certain ministerial, record keeping and/or administrative
support services for their customers or account holders (collectively,
"customers") who are the beneficial or record owner of Shares of that Fund. In
consideration for such services, a Service Organization receives a fee from a
Fund, computed daily and paid monthly, at an annual rate of up to .25% of the
average daily net asset value of Shares of that Fund owned beneficially or of
record by such Service Organization's customers for whom the Service
Organization provides such services.
The servicing agreements adopted under the Services Plan (the
"Servicing Agreements") require the Service Organizations receiving such
compensation to perform certain ministerial, record keeping and/or
administrative support services with respect to the beneficial or record owners
of Shares of the Funds, such as processing dividend and distribution payments
from the Fund on behalf of customers, providing periodic statements to customers
showing their positions in the Shares of the Fund, providing sub- accounting
with respect to Shares beneficially owned by such customers and providing
customers with a service that invests the assets of their accounts in Shares of
the Fund pursuant to specific or pre-authorized instructions. As of the date
hereof, no such servicing agreements have been entered into by the Group.
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<PAGE> 55
BANKING LAWS
The Adviser believes that it possesses the legal authority to perform
the investment advisory services for each Fund contemplated by its investment
advisory agreement with the Group, as described in this Prospectus, without
violation of applicable banking laws and regulations, and has so represented in
its investment advisory agreement with the Group. Future changes in Federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which the Adviser could
continue to perform such services for the Funds. See "MANAGEMENT OF THE GROUP -
Glass-Steagall Act" in the Statement of Additional Information for further
discussion of applicable law and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as an Ohio business trust on April 25, 1988.
The Group consists of fourteen funds, each having its own class of shares. In
addition to the Funds, the Group consists of the following funds: Riverside
Capital Money Market Fund, Riverside Capital Value Equity Fund, Riverside
Capital Fixed Income Fund, Riverside Capital Low Duration Government Securities
Fund, Riverside Capital Growth Fund, Riverside Capital Tennessee Municipal
Obligations Fund, The KeyPremier Prime Money Market Fund and The KeyPremier
Pennsylvania Municipal Bond Fund. Each share represents an equal proportionate
interest in a fund with other shares of the same fund, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
that fund as are declared at the discretion of the Trustees (see "Miscellaneous"
below).
Shareholders are entitled to one vote for each dollar of value invested
and a proportionate fractional vote for any fraction of a dollar invested, and
will vote in the aggregate and not by series except as otherwise expressly
required by law. For example, Shareholders of each Fund will vote in the
aggregate with other shareholders of the Group with respect to the election of
trustees and ratification of the selection of independent accountants. However,
Shareholders of a Fund will vote as a fund, and not in the aggregate with other
shareholders of the Group, for purposes of approval of that Fund's investment
advisory agreement and the Plan.
Overall responsibility for the management of the Funds is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP - Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the
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<PAGE> 56
Board of Trustees or shareholders in accordance with the provisions of the
Declaration of Trust and By-Laws of the Group and Ohio law. See "ADDITIONAL
INFORMATION - Miscellaneous" in the Statement of Additional Information for
further information.
An annual or special meeting of shareholders to conduct necessary
business is not required by the Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Declaration of Trust, the investment advisory agreement, the Plan or a Fund's
fundamental policies and to satisfy certain other requirements. To the extent
that such a meeting is not required, the Group does not intend to have an annual
or special meeting.
The Group has represented to the Commission that the Trustees will call
a special meeting of shareholders for purposes of considering the removal of one
or more Trustees upon written request therefor from shareholders holding not
less than 10% of the outstanding votes of the Group. At such a meeting, a quorum
of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
As of the date immediately preceding the initial public offering of the
Funds' Shares, BISYS Fund Services Ohio, Inc. was the sole shareholder of each
of the Funds. It is expected that immediately after the public offering of the
Funds' Shares, BISYS Fund Services Ohio, Inc.'s holding of Shares of the Funds
will be reduced below 5%.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263,
serves as the custodian for each of the Funds.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219-3035, serves as the Funds' transfer agent pursuant to a Transfer Agency
Agreement with the Group and receives a fee for such services. BISYS Fund
Services, Inc. also provides certain accounting services for each Fund pursuant
to a Fund Accounting Agreement and receives a fee for such services equal to the
greater of (a) a fee computed at an annual rate of 0.03% of the Fund's average
daily net assets or (b) $50,000 minus the fee paid by such Fund under its
Management and Administration Agreement with BISYS of the same date. See
"MANAGEMENT OF THE GROUP - Transfer Agency and Fund Accounting Services" in the
Statement of Additional Information for further information.
While BISYS Fund Services, Inc. is a distinct legal entity from BISYS
(the Group's administrator and distributor), BISYS Fund
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<PAGE> 57
Services, Inc. is considered to be an affiliated person of BISYS under the 1940
Act due to, among other things, the fact that BISYS Fund Services, Inc. is the
general partner of BISYS.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual
reports audited by independent accountants.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by
the fund upon the issuance or sale of shares in that fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds, and any general assets of the Group not readily identified as
belonging to a particular fund that are allocated to the fund by the Group's
Board of Trustees. The Board of Trustees may allocate such general assets in any
manner it deems fair and equitable. Determinations by the Board of Trustees of
the Group as to the timing of the allocation of general liabilities and expenses
and as to the timing and allocable portion of any general assets with respect to
a Fund are conclusive.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of a Fund means
the affirmative vote, at a meeting of Shareholders duly called, of the lesser of
(a) 67% or more of the votes of Shareholders of that Fund present at a meeting
at which the holders of more than 50% of the votes attributable to Shareholders
of record of that Fund are represented in person or by proxy, or (b) the holders
of more than 50% of the outstanding votes of Shareholders of that Fund.
Inquiries regarding any of the Funds may be directed in writing to the
Group at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800)
766-8938.
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<PAGE> 58
INVESTMENT ADVISER
1st Source Bank
100 North Michigan Street
South Bend, Indiana 46634
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
AUDITORS
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, Ohio 43215
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<PAGE> 59
1st Source Monogram U.S. Treasury Obligations Money Market Fund
1st Source Monogram Diversified Equity Fund
1st Source Monogram Income Equity Fund
1st Source Monogram Special Equity Fund
1st Source Monogram Income Fund
1st Source Intermediate Monogram Tax-Free Bond Fund
Each an Investment Portfolio of
THE SESSIONS GROUP
Statement of Additional Information
August __, 1996
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus (the "Prospectus") of 1st Source Monogram
U.S. Treasury Obligations Money Market Fund (the "Money Market Fund"), 1st
Source Monogram Diversified Equity Fund (the "Diversified Equity Fund"), 1st
Source Monogram Income Equity Fund (the "Income Equity Fund"), 1st Source
Monogram Special Equity Fund (the "Special Equity Fund"), 1st Source Monogram
Income Fund (the "Income Fund"), and 1st Source Monogram Intermediate Tax-Free
Bond Fund (the "Tax-Free Fund") (the Money Market Fund, the Diversified Equity
Fund, the Income Equity Fund, the Special Equity Fund, the Income Fund and the
Tax-Free Fund are hereinafter collectively referred to as the "Funds" and
individually as a "Fund"), dated the date hereof. The Funds are six funds of The
Sessions Group (the "Group"). This Statement of Additional Information is
incorporated in its entirety into the Prospectus. Copies of the Prospectus may
be obtained by writing the Group at 3435 Stelzer Road, Columbus, Ohio 43219, or
by telephoning toll free (800) 766-8938.
<PAGE> 60
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE SESSIONS GROUP....................................................................... B-1
INVESTMENT OBJECTIVES AND POLICIES...................................................... B-1
Additional Information on Portfolio Instruments................................ B-1
Investment Restrictions........................................................ B-10
Portfolio Turnover............................................................. B-12
NET ASSET VALUE......................................................................... B-12
Valuation of the Money Market Fund............................................. B-13
Valuation of the Other Funds................................................... B-13
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.......................................... B-14
MANAGEMENT OF THE GROUP................................................................. B-14
Trustees and Officers.......................................................... B-14
Investment Adviser............................................................. B-17
Portfolio Transactions......................................................... B-19
Glass-Steagall Act............................................................. B-21
Administrator.................................................................. B-23
Expenses ...................................................................... B-24
Distributor.................................................................... B-24
Administrative Services Plan................................................... B-26
Custodian...................................................................... B-26
Transfer Agency and Fund Accounting Services................................... B-27
Auditors ...................................................................... B-27
Legal Counsel.................................................................. B-28
ADDITIONAL INFORMATION.................................................................. B-28
Description of Shares.......................................................... B-28
Additional Tax Information..................................................... B-29
Seven-Day Yield of the Money Market Fund....................................... B-34
Yields of the Other Funds...................................................... B-35
Calculation of Total Return.................................................... B-35
Distribution Rates............................................................. B-36
Performance Comparisons........................................................ B-36
Miscellaneous.................................................................. B-37
APPENDIX ............................................................................... A-1
</TABLE>
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<PAGE> 61
STATEMENT OF ADDITIONAL INFORMATION
THE SESSIONS GROUP
The Sessions Group (the "Group") is an open-end management investment
company which currently offers 14 separate investment portfolios. This Statement
of Additional Information deals with six of such portfolios, 1st Source Monogram
U.S. Treasury Obligations Money Market Fund (the "Money Market Fund"), 1st
Source Monogram Diversified Equity Fund (the "Diversified Equity Fund"), 1st
Source Monogram Income Equity Fund (the "Income Equity Fund"), 1st Source
Monogram Special Equity Fund (the "Special Equity Fund"), 1st Source Monogram
Income Fund (the "Income Fund") and 1st Source Monogram Intermediate Tax-Free
Bond Fund (the "Tax-Free Fund"), each a diversified portfolio of the Group (the
Money Market Fund, the Diversified Equity Fund, the Income Equity Fund, the
Special Equity Fund, the Income Fund and the Tax-Free Fund are hereinafter
collectively referred to as the "Funds" and individually as a "Fund").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. Capitalized terms
not defined herein are defined in the Prospectus. No investment in Shares of a
Fund should be made without first reading the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objectives and
policies of each Fund as set forth in the Prospectus.
Bank Obligations. Each of the Funds, other than the Money Market Fund,
may invest in bank obligations such as bankers' acceptances, certificates of
deposit, and demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
and demand and time deposits will be those of domestic banks and savings and
loan associations, if (a) at the time of investment the depository institution
has capital, surplus, and undivided profits in excess of $100,000,000
<PAGE> 62
(as of the date of its most recently published financial statements), or (b) the
principal amount of the instrument is insured in full by the Federal Deposit
Insurance Corporation.
Commercial Paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Issues of commercial paper normally have
maturities of less than nine months and fixed rates of return.
The Funds, other than the Money Market Fund, will purchase commercial
paper consisting of issues rated at the time of purchase by one or more
appropriate nationally recognized statistical rating organizations ("NRSRO")
(e.g., Standard & Poor's Corporation and Moody's Investors Service, Inc.) in one
of the two highest rating categories for short-term debt obligations. The
Funds may also invest in commercial paper that is not rated but that is
determined by the Adviser or the applicable Sub-Adviser, as the case may be, to
be of comparable quality to instruments that are so rated by an NRSRO that is
neither controlling, controlled by, or under common control with the issuer of,
or any issuer, guarantor, or provider of credit support for, the instruments.
For a description of the rating symbols of the NRSROs, see the Appendix.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Income Fund may invest, are unsecured demand notes that
permit the indebtedness thereunder to vary and provide for periodic adjustments
in the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between a Fund and the issuer, they
are not normally traded. Although there is no secondary market in the notes, a
Fund may demand payment of principal and accrued interest at any time within 30
days. While such notes are not typically rated by credit rating agencies,
issuers of variable amount master demand notes (which are normally
manufacturing, retail, financial and other business concerns), must satisfy, for
purchase by a Fund, the same criteria as set forth above for commercial paper
for such Fund. The Adviser will consider the earning power, cash flow, and other
liquidity ratios of the issuers of such notes and will continuously monitor
their financial status and ability to meet payment on demand. In determining
average weighted portfolio maturity, a variable amount master demand note will
be deemed to have a maturity equal to the longer of the period of time remaining
until the next interest rate adjustment or the period of time remaining until
the principal amount can be recovered from the issuer through demand.
Foreign Investment. Investments in securities issued by foreign
issuers, including ADRs, may subject the Funds to investment risks that differ
in some respects from those related to investment in obligations of U.S.
domestic issuers or in U.S. securities markets. Such risks include future
adverse political
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<PAGE> 63
and economic developments, possible seizure, nationalization, or expropriation
of foreign investments, less stringent disclosure requirements, the possible
establishment of exchange controls or taxation at the source, or the adoption of
other foreign governmental restrictions. A Fund will acquire such securities
only when the Adviser or the applicable Sub-Adviser, as the case may be,
believes the risks associated with such investments are minimal.
U.S. Government Obligations. Each Fund may invest in obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
Exempt Securities. As stated in the Prospectus, the assets of the
Tax-Free Fund will be primarily invested in Exempt Securities. Under normal
market conditions, at least 80% of the net assets of the Tax-Free Fund will be
invested in Exempt Securities.
Exempt Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities.
Among other types of Exempt Securities, the Tax-Free Fund may purchase
short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes and other forms of short-term tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. In addition,
the Tax-Free Fund may invest in other types of tax-exempt instruments, such as
municipal bonds and pollution control bonds.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government
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<PAGE> 64
will lend the issuer an amount equal to the principal of and interest on the
Project Notes.
As described in the Prospectus, the two principal classifications of
Exempt Securities consist of "general obligation" and "revenue" issues. The
Tax-Free Fund may also acquire "moral obligation" issues, which are normally
issued by special purpose authorities. There are, of course, variations in the
quality of Exempt Securities, both within a particular classification and
between classifications, and the yields on Exempt Securities depend upon a
variety of factors, including the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. Ratings represent the
opinions of an NRSRO as to the quality of Exempt Securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and Exempt Securities with the same maturity, interest rate and rating
may have different yields, while Exempt Securities of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
purchase, an issue of Exempt Securities may cease to be rated or its rating may
be reduced below the minimum rating required for purchase. The Adviser will
consider such an event in determining whether the Tax-Free Fund should continue
to hold the obligation.
An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.
Variable and Floating Rate Notes. The Income and the Tax-Free Funds may
each acquire variable and floating rate notes, subject to such Fund's investment
objectives, policies and restrictions. A variable rate note is one whose terms
provide for the adjustment of its interest rate on set dates and which, upon
such adjustment, can reasonably be expected to have a market value that
approximates its par value. A floating rate note is one whose terms provide for
the adjustment of its interest rate whenever a specified interest rate changes
and which, at any time, can reasonably be expected to have a market value that
approximates its par value. Such notes are frequently not rated by credit rating
agencies; however, unrated variable and floating rate notes purchased by such
Funds will be determined by the Adviser or the applicable Sub-Adviser, as the
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<PAGE> 65
case may be, to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under that particular Fund's investment
policies. In making such determinations, the Adviser or Sub-Adviser, as the case
may be, will consider the earning power, cash flow and other liquidity ratios of
the issuers of such notes (such issuers include financial, merchandising, bank
holding and other companies) and will continuously monitor their financial
condition. Although there may be no active secondary market with respect to a
particular variable or floating rate note purchased by a Fund, the Fund may
resell the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for a Fund to dispose of a variable or
floating rate note in the event the issuer of the note defaulted on its payment
obligations and the Fund could, as a result or for other reasons, suffer a loss
to the extent of the default. To the extent that there exists no readily
available market for such note and a Fund is not entitled to receive the
principal amount of a note within seven days, such a note will be treated as an
illiquid security for purposes of calculation of such Fund's limitation on
investments in illiquid securities, as set forth in the respective Fund's
investment restrictions. Variable or floating rate notes may be secured by bank
letters of credit.
Restricted Securities. Securities in which the Diversified Equity,
Income Equity, Special Equity and Income Funds may invest include securities
issued by corporations without registration under the Securities Act of 1933, as
amended (the "1933 Act"), in reliance on the exemption from such registration
afforded by Section 3(a)(3) thereof, and securities issued in reliance on the
so-called "private placement" exemption from registration which is afforded by
Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2)
securities are restricted as to disposition under the Federal securities laws,
and generally are sold to institutional investors such as the Funds who agree
that they are purchasing the securities for investment and not with a view to
public distribution. Any resale must also generally be made in an exempt
transaction. Section 4(2) securities are normally resold to other institutional
investors through or with the assistance of the issuer or investment dealers who
make a market in such Section 4(2) securities, thus providing liquidity. Any
such restricted securities will be considered to be illiquid for purposes of a
Fund's limitations on investments in illiquid securities unless, pursuant to
procedures adopted by the Board of Trustees of the Group, the Adviser has
determined such securities to be liquid because such securities are eligible for
resale under Rule 144A under the 1933 Act and are readily saleable. Each such
Funds will each limit its investment in Section 4(2) securities to not more than
10% of its net assets.
Options Trading. Each of the Diversified Equity Fund, the Income Equity
Fund, the Special Equity Fund and the Income Fund may purchase put and
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<PAGE> 66
call options. A put option gives the purchaser the right to sell the underlying
security at the stated exercise price at any time prior to the expiration date
of the option, regardless of the market price of the security. A call option
gives the purchaser of the option the right to buy, and a writer has the
obligation to sell, the underlying security at the stated exercise price at any
time prior to the expiration of the option, regardless of the market price of
the security. The premium paid to the writer is consideration for undertaking
the obligations under the option contract. Put and call options purchased by
such Funds will be valued at the last sale price, or in the absence of such a
price, at the mean between bid and asked price.
When a Fund writes a call option, an amount equal to the net premium
(the premium less the commission) received by the Fund is included in the
liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the mean between bid and asked price. If an option expires on the stipulated
expiration date or if the Fund enters into a closing purchase transaction, it
will realize a gain (or a loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option is exercised, the
Fund may deliver the underlying security in the open market. In either event,
the proceeds of the sale will be increased by the net premium originally
received and the Fund will realize a gain or loss.
Each such Fund may also purchase or sell index options. Index options
(or options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Puts. The Tax-Free Fund may also acquire "puts" with respect to Exempt
Securities held in its portfolio. A put is a right to sell a specified security
(or securities) within a specified period of time at a specified exercise price.
The Tax-Free Fund may sell, transfer, or assign a put only in conjunction with
the sale, transfer, or assignment of the underlying security or securities.
The amount payable to the Tax-Free Fund upon its exercise of a "put" is
normally (i) the Tax-Free Fund's acquisition cost of the Exempt Securities
(excluding any accrued interest which the Tax- Free Fund paid on the
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Tax-Free Fund owned the
securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period.
Puts may be acquired by the Tax-Free Fund to facilitate the liquidity
of its portfolio assets. Puts may also be used to facilitate the reinvestment of
the Tax-Free Fund's assets at a rate of return more favorable than that of the
underlying security.
B-6
<PAGE> 67
Puts may, under certain circumstances, also be used to shorten the maturity of
underlying variable rate or floating rate securities for purposes of calculating
the remaining maturity of those securities.
The Tax-Free Fund expects that it will generally acquire puts only
where the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tax-Free Fund may pay for
puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
The Tax-Free Fund intends to enter into puts only with dealers, banks,
and broker-dealers which, in the Adviser's opinion, present minimal credit
risks.
Future Contracts. As discussed in the Prospectus, each of the Funds,
other than the Money Market Fund, may enter into futures contracts. This
investment technique is designed primarily to hedge against anticipated future
changes in market conditions which otherwise might adversely affect the value
of securities which a Fund holds or intends to purchase. For example, when
interest rates are expected to rise or market values of portfolio securities
are expected to fall, a Fund can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, a Fund, through the
purchase of such contracts, can attempt to secure better rates or prices for
the Fund than might later be available in the market when it effects
anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of a Fund's futures positions may not
prove to be perfectly or even highly correlated with the value of its portfolio
securities, limiting the Fund's ability to hedge effectively against interest
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
Regulatory Restrictions. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, a Fund will maintain in a segregated
account cash or liquid high-grade securities equal to the value of such
contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits or futures
contracts held by such Fund plus premiums paid by it for open options on
futures would exceed 5% of such Fund's total assets. A Fund will not engage in
transactions in financial futures contracts or options thereon for speculation,
but only to attempt to hedge against changes in market conditions affecting the
values of securities which such Fund holds or intends to purchase. When
futures contracts or options thereon are purchased to protect against a price
increase on securities intended to be purchased later, it is anticipated that
at least 25% of such intended purchases will be completed. When other futures
contracts or options thereon are purchased, the underlying value of such
contracts will at all times not exceed the sum of: (1) accrued profit on such
contracts held by the broker; (2) cash or high quality money market instruments
set aside in an identifiable manner, and (3) cash proceeds from investments due
in 30 days.
When-Issued Securities. As discussed in the Prospectus, the Income Fund
and the Tax-Free Fund may each purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). When such Fund agrees to purchase securities on a "when-issued" basis,
the Fund's custodian will set aside cash or liquid portfolio securities equal to
the amount of the commitment in a separate account. Normally, the Fund's
custodian will set aside portfolio securities to satisfy the purchase
commitment, and in such a case, such Fund may be required subsequently to place
additional assets in the separate account in order to assure that the value of
the account remains equal to the amount of the Fund's commitment. It may be
expected that a Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase commitments than when it
sets aside cash. In addition, because a Fund will set aside cash or liquid
portfolio securities to satisfy its purchase commitments in the manner described
above, such Fund's liquidity and the ability of the Adviser to manage it might
be affected in the event its commitments to purchase "when-issued" securities
ever exceeded 25% of the value of its total assets. Under normal market
conditions, however, neither the Income Fund's nor the Tax-Free Fund's
commitment to purchase "when-issued" or "delayed-delivery" securities will
exceed 25% of the value of its total assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in
such Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. The Income Fund and the Tax-Free Fund will each
engage in "when-issued" delivery transactions only for the purpose of acquiring
portfolio securities consistent with that Fund's investment objectives and
policies and not for investment leverage.
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<PAGE> 68
Mortgage-Related Securities. The Income Fund may, consistent with its
investment objective and policies, invest in mortgage- related securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
Mortgage-related securities, for purposes of the Prospectus and this
Statement of Additional Information, represent pools of mortgage loans assembled
for sale to investors by various governmental agencies such as the Government
National Mortgage Association and government-related organizations such as the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by nongovernmental issuers such as commercial banks,
savings and loan institutions, mortgage bankers and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If the Income Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment, thereby shortening the
average life of the security and shortening the period of time over which income
at the higher rate is received. Conversely, when interest rates are rising, the
rate of prepayment tends to decrease, thereby lengthening the average life of
the security and lengthening the period of time over which income at the lower
rate is received. For these and other reasons, a mortgage-related security's
average maturity may be shortened or lengthened as a result of interest rate
fluctuations and, therefore, it is not possible to predict accurately the
security's return to the Income Fund. In addition, regular payments received in
respect of mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Income Fund will receive when these
amounts are reinvested.
The Income Fund may invest in mortgage-related securities which are
collateralized mortgage obligations structured on pools of mortgage pass-through
certificates or mortgage loans. Mortgage- related securities will be purchased
only if rated in the three highest bond rating categories assigned by one or
more appropriate NRSROs, or, if unrated, which the Adviser deems to be of
comparable quality.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-
B-8
<PAGE> 69
related securities and among the securities that they issue. Mortgage-related
securities issued by the Government National Mortgage Association ("GNMA")
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")
which are guaranteed as to the timely payment of principal and interest by GNMA
and such guarantee is backed by the full faith and credit of the United States.
GNMA is a wholly-owned U.S. Government corporation within the Department of
Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage- related securities issued by the Federal National
Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the obligations of
the FNMA and are not backed by or entitled to the full faith and credit of the
United States. The FNMA is a government-sponsored organization owned entirely by
private stockholders. Fannie Maes are guaranteed as to timely payment of the
principal and interest by FNMA. Mortgage-related securities issued by the
Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is
a corporate instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie Macs are
not guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Repurchase Agreements. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from member banks of the Federal Deposit Insurance
Corporation and registered broker-dealers which the Adviser or the applicable
Sub-Adviser, as the case may be, deems creditworthy under guidelines approved by
the Group's Board of Trustees, subject to the seller's agreement to repurchase
such securities at a mutually agreed-upon date and price. The repurchase price
would generally equal the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. The seller under a repurchase agreement
will be required to maintain continually the value of collateral held pursuant
to the agreement at not less than the repurchase price (including accrued
interest). This requirement will be continually monitored by the Adviser. If the
seller were
B-9
<PAGE> 70
to default on its repurchase obligation or become insolvent, the Fund holding
such obligation would suffer a loss to the extent that the proceeds from a sale
of the underlying portfolio securities were less than the repurchase price under
the agreement, or to the extent that the disposition of such securities by the
Fund were delayed pending court action. Additionally, there is no controlling
legal precedent confirming that a Fund would be entitled, as against a claim by
such seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although the Board of Trustees of the Group believes that, under the
regular procedures normally in effect for custody of a Fund's securities subject
to repurchase agreements and under federal laws, a court of competent
jurisdiction would rule in favor of the Group if presented with the question.
Securities subject to repurchase agreements will be held by that Fund's
custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectus, each of
the Funds may borrow funds by entering into reverse repurchase agreements in
accordance with that Fund's investment restrictions. Pursuant to such
agreements, a Fund would sell portfolio securities to financial institutions
such as banks and broker-dealers, and agree to repurchase the securities at a
mutually agreed-upon date and price. Each Fund intends to enter into reverse
repurchase agreements only to avoid otherwise selling securities during
unfavorable market conditions to meet redemptions. At the time a Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. Government securities or other liquid, high grade
debt securities consistent with the Fund's investment restrictions having a
value equal to the repurchase price (including accrued interest), and will
subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Investment Restrictions
Each Fund's investment objective is a non-fundamental policy and may be
changed without a vote of the holders of a majority of such Fund's outstanding
Shares. In addition to the fundamental investment policies listed in the
Prospectus, the following investment restrictions may be changed with respect to
a particular Fund only by a vote of the majority of the outstanding Shares of
that Fund (as defined under "ADDITIONAL INFORMATION - Vote of a Majority of the
Outstanding Shares").
B-10
<PAGE> 71
In addition to the investment restrictions set forth in the Prospectus,
each of the Funds may not:
1. Purchase securities on margin, except for use of short- term credit
necessary for clearance of purchases of portfolio securities and except as may
be necessary to make margin payments in connection with derivative securities
transactions;
2. Underwrite the securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities;"
3. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction); and
4. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the
Fund.
The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of a Fund. Each Fund may not:
1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act, or pursuant to any exemptions
therefrom;
2. Engage in any short sales;
3. Purchase or retain the securities of an issuer if the officers or
trustees of the Group, or the officers or directors of the Adviser, who each
owns beneficially more than .5% of the outstanding securities of such issuer,
together own beneficially more than 5% of such securities; and
4. Mortgage or hypothecate the Fund's assets in excess of one-third of
the Fund's total assets.
If any percentage restriction or requirement described above is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction or requirement. However, should a change in net
asset value or other external events cause a Fund's investments in illiquid
securities, repurchase agreements with maturities in excess of seven days and
other instruments in such Fund which are not readily marketable to exceed the
limit set forth in such Fund's Prospectus for its
B-11
<PAGE> 72
investment in illiquid securities, the Fund will act to cause the aggregate
amount of such securities to come within such limit as soon as reasonably
practicable. In such an event, however, such Fund would not be required to
liquidate any portfolio securities where the Fund would suffer a loss on the
sale of such securities.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Because the Money Market Fund intends to invest entirely in securities
with maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover with respect to the Money Market Fund is expected to be zero
percent for regulatory purposes. The portfolio turnover rates for each of the
Diversified Equity Fund, the Income Equity Fund, the Special Equity Fund, the
Income Fund and the Tax-Free Fund for the current fiscal year are estimated to
be less than 100%, 70%, 150%, 80% and 30%, respectively. The portfolio turnover
rate may vary greatly from year to year as well as within a particular year, and
may also be affected by cash requirements for redemptions of Shares. High
portfolio turnover rates will generally result in higher transaction costs,
including brokerage commissions, to a Fund and may result in additional tax
consequences to a Fund's Shareholders. Portfolio turnover will not be a limiting
factor in making investment decisions.
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time or
Times (in the case of the Money Market Fund) on each Business Day of that Fund.
A "Business Day" of a Fund is a day on which the New York Stock Exchange is open
for trading and any other day (other than a day on which no Shares of that Fund
are tendered for redemption and no order to purchase any Shares of that Fund is
received) during which there is sufficient trading in portfolio instruments that
such Fund's net asset value per share might be materially affected. The New York
Stock Exchange will not open in observance of the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
B-12
<PAGE> 73
Valuation of the Money Market Fund
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Money Market Fund would receive if it sold the instrument.
The value of securities in the Money Market Fund can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Money Market
Fund's objective of maintaining a stable net asset value per share, provided
that the Money Market Fund will not purchase any security with a remaining
maturity of more than 397 days (thirteen months) (securities subject to
repurchase agreements may bear longer maturities) nor maintain a dollar-weighted
average portfolio maturity which exceeds 90 days. The Group's Board of Trustees
has also undertaken to establish procedures reasonably designed, taking into
account current market conditions and the investment objective of the Money
Market Fund, to stabilize the net asset value per share of the Money Market Fund
for purposes of sales and redemptions at $1.00. These procedures include review
by the Trustees, at such intervals as they deem appropriate, to determine the
extent, if any, to which the net asset value per share of the Money Market Fund
calculated by using available market quotations deviates from $1.00 per Share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Board of Trustees promptly consider what action, if any, should be
initiated. If the Trustees believe that the extent of any deviation from the
Money Market Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they consider appropriate to eliminate or reduce, to the extent
reasonably practicable, any such dilution or unfair results. These steps may
include selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding or reducing dividends, reducing the number of
the Money Market Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per share determined by using available market
quotations.
Valuation of the Other Funds
Investments in securities for which market quotations are readily
available are valued based upon their current available prices in the principal
market in which such securities are
B-13
<PAGE> 74
normally traded. Unlisted securities for which market quotations are readily
available are valued at such market value. Securities and other assets for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Trustees of the Group. Short-term
securities (i.e., with maturities of 60 days or less) are valued at either
amortized cost or original cost plus accrued interest, which approximates
current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each of the Funds are sold on a continuous basis by BISYS,
and BISYS has agreed to use appropriate efforts to solicit all purchase orders.
In addition to purchasing Shares directly from BISYS, Shares may be purchased
through procedures established by BISYS in connection with the requirements of
accounts at the Adviser or the Adviser's affiliated entities (collectively,
"Entities"). Customers purchasing Shares of the Funds may include officers,
directors, or employees of the Adviser or the Entities.
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension, or
(d) an emergency exists as a result of which (i) disposal by the Group of
securities owned by it is not reasonably practical, or (ii) it is not reasonably
practical for the Group to determine the fair value of its net assets.
MANAGEMENT OF THE GROUP
Trustees and Officers
Overall responsibility for management of the Group rests with its Board
of Trustees, which is elected by the shareholders of the Group's funds. The
Trustees elect the officers of the Group to supervise actively its day-to-day
operations.
The names of the Trustees and officers of the Group, their addresses,
and principal occupations during the past five years are as follows:
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<PAGE> 75
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation
Name and Address With the Group During Past 5 Years
- ---------------- ---------------- --------------------
<S> <C> <C>
Walter B. Grimm* Chairman, From June, 1992 to present,
3435 Stelzer Road President and employee of BISYS Fund
Columbus, Ohio 43219 Trustee Services Limited Partnership
Age: 50 (formerly The Winsbury
Company); from July, 1981 to
June, 1992, President of
Leigh Investments Consulting
(investment firm).
Nancy E. Converse* Trustee and Since 1990, employee of BISYS
3435 Stelzer Road Secretary Fund Services Limited
Columbus, Ohio 43219 Partnership (formerly, The
Age: 46 Winsbury Company) or BISYS
Fund Services Ohio, Inc.
(formerly The Winsbury
Service Corporation).
Maurice G. Stark Trustee Consultant; from 1979 to
7662 Cloister Drive December, 1994, Vice
Columbus, Ohio 43235 President-Finance and Chief
Age: 59 Financial Officer, Battelle
Memorial Institute
(scientific research and
development service
corporation).
James H. Woodward, Ph.D. Trustee Since July 1991, Chancellor
The University of North of The University of North
Carolina at Charlotte Carolina at Charlotte.
Charlotte, NC 28223
Age: 56
Chalmers P. Wylie Trustee From April, 1993 to present,
754 Stonewood Court of Counsel with Emens,
Columbus, Ohio 43235 Kegler, Brown, Hill & Ritter
Age: 74 (law firm); from January,
1993 to present, Adjunct
Professor at The Ohio State
University; from January,
1967 to January, 1993, Member
of the United States House of
Representatives for the 15th
District.
</TABLE>
B-15
<PAGE> 76
<TABLE>
<S> <C> <C>
J. David Huber Vice President Since January 1996, President
3435 Stelzer Road of BISYS Fund Services
Columbus, Ohio 43219 Limited Partnership; from
Age: 49 June, 1987 to December 1995,
employee of BISYS Fund
Services Limited Partnership
(formerly The Winsbury
Company); from September,
1988 to present, Vice
President of BISYS Fund
Services Ohio, Inc. (formerly
The Winsbury Service
Corporation).
William J. Tomko Vice President From April, 1987 to present,
3435 Stelzer Road employee of BISYS Fund
Columbus, Ohio 43219 Services Limited Partnership
Age: 36 (formerly The Winsbury
Company).
Stephen G. Mintos Treasurer From January, 1987 to
3435 Stelzer Road present, employee of BISYS
Columbus, Ohio 43219 Fund Services Limited
Age: 41 Partnership (formerly The
Winsbury Company).
R. Jeffrey Young Assistant From October, 1993 to
3435 Stelzer Road Secretary present, employee of BISYS
Columbus, Ohio 43219 Fund Services Limited
Age: 30 Partnership or BISYS Fund
Services Ohio, Inc.; from
April 1989 to October 1993,
employee of The Heebink
Group.
Alaina V. Metz Assistant From June, 1995 to present,
3435 Stelzer Road Secretary employee of BISYS Fund
Columbus, Ohio 43219 Services Limited Partnership;
Age: 28 prior to June 1995,
Supervisor at Alliance
Capital Management, L.P.
(investment management firm).
</TABLE>
- -------------------
*Mr. Grimm and Ms. Converse are each considered to be an "interested
person" of the Group as defined in the 1940 Act.
As of the date of this Statement of Additional Information, the Group's
officers and trustees, as a group, own less than 1% of any Fund's Shares.
No officer or employee of BISYS or BISYS Fund Services, Inc. receives
any compensation from the Group for acting as trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. BISYS receives fees from the Funds for acting as
Administrator and
B-16
<PAGE> 77
pursuant to the Distribution and Shareholder Service Plan described below, and
may receive fees pursuant to the Administrative Services Plan described below.
BISYS Fund Services, Inc. receives fees from the Funds for acting as transfer
agent and for providing certain fund accounting services. Ms. Converse and Ms.
Metz and Messrs. Grimm, Huber, Mintos, Tomko and Young are employees of BISYS.
The following table sets forth information regarding all compensation
paid by the Group to its Trustees for their services as trustees during the
fiscal year ended June 30, 1995. The Group has no pension or retirement plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position Compensation From the Group
With the Group From the Group and the Fund Complex*
- ----------------- -------------- ---------------------
<S> <C> <C>
Maurice G. Stark $7,871 $7,871
Trustee
Michael M. VanBuskirk(1) $7,871 $7,871
Trustee
Chalmers P. Wylie $7,871 $7,871
Trustee
</TABLE>
- -----------------
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Funds, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
(1) Mr. VanBuskirk resigned his position as trustee of the Group
effective May 3, 1996.
Dr. Woodward was not a trustee of the Group during such fiscal year.
Investment Adviser
Investment advisory and management services are provided to the Funds
of the Group by 1st Source Bank (the "Adviser"), pursuant to an Investment
Advisory Agreement dated as of August __, 1996. Under the terms of the
Investment Advisory Agreement, the Adviser has agreed to provide, either
directly or through one or more subadvisers, investment advisory services as
described in the Prospectus of the Funds. For the services provided and expenses
assumed pursuant to the Investment Advisory Agreement, each Fund
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<PAGE> 78
pays the Adviser a fee, computed daily and paid monthly, at the following annual
rates: (1) for the Money Market Fund, thirty-five one-hundredths of one percent
(0.35%) of such Fund's average daily net assets; (2) for the Diversified Equity
Fund, one hundred ten one-hundredths of one percent (1.10%) of such Fund's
average daily net assets; (3) for the Income Equity Fund, eighty one-hundredths
of one percent (0.80%) of such Fund's average daily net assets; (4) for the
Special Equity Fund, eighty one-hundredths of one percent (0.80%) of such Fund's
average daily net assets; (5) for the Income Fund, fifty-five one-hundredths of
one percent (0.55%) of such Fund's average daily net assets; and (6) for the
Tax-Free Fund, fifty-five one-hundredths of one percent (0.55%) of such Fund's
average daily net assets. The Adviser may from time to time voluntarily reduce
all or a portion of its advisory fee with respect to a Fund to increase the net
income of that Fund available for distribution as dividends.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect until August __, 1998, and year to year thereafter for
successive annual periods ending on August __, if, as to each Fund, such
continuance is approved at least annually by the Group's Board of Trustees or by
vote of a majority of the outstanding Shares of the relevant Fund (as defined
under "GENERAL INFORMATION - Miscellaneous" in the Funds' Prospectus), and a
majority of the Trustees who are not parties to the Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Investment Advisory Agreement by votes cast in person at a meeting called for
such purpose. The Investment Advisory Agreement is terminable as to a Fund at
any time on 60 days' written notice without penalty by the Trustees, by vote of
a majority of the outstanding Shares of that Fund, or by the Adviser. The
Investment Advisory Agreement also terminates automatically in the event of any
assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not
be liable for any error of judgment or mistake of law or for any loss suffered
by a Fund in connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of the Adviser in the
performance of its duties, or from reckless disregard by the Adviser of its
duties and obligations thereunder.
The Adviser has licensed the name "1st Source Monogram" to the Funds
on a royalty-free basis, and the Adviser has reserved to itself the right to
grant the non-exclusive right to use the name "1st Source Monogram" to any
other person. At such time as the Investment Advisory Agreement is no longer in
effect, the Adviser may require the Funds to cease using the name "1st Source
Monogram."
Subadvisers
Pursuant to the terms of the Investment Advisory Agreement, the Adviser
has entered into three separate Sub-Investment Advisory Agreements each dated as
of August __, 1996 (collectively, the "Sub-Advisory Agreements"). The first
Sub-Advisory Agreement is
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with Miller Anderson & Sherrerd LLP, One Tower Bridge, Suite 1100, West
Conshohocken, Pennsylvania 19428 ("Miller Anderson"). The second Sub-Advisory
Agreement is with Loomis, Sayles & Company, L.P., 3 First National Plaza, Suite
5450, Chicago, Illinois 60600 ("Loomis"). The third Sub-Advisory Agreement is
with Columbus Circle Investors, One Station Place, Stamford, Connecticut 06902
("Columbus"). Pursuant to the terms of such Sub-Investment Advisory Agreements,
each of Miller Anderson, Loomis and Columbus has been retained by the Adviser to
manage the investment and reinvestment of a portion the assets of the
Diversified Equity Fund, subject to the direction and control of the Adviser and
the Group's Board of Trustees.
Under this arrangement, the Sub-Advisers are responsible for the
day-to-day management of the Diversified Equity Fund's assets, investment
performance, policies and guidelines, and maintaining certain books and records,
and the Adviser is responsible for selecting and monitoring the performance of
each of the Sub- Advisers, and for reporting the activities of the Sub-Advisers
in managing the Diversified Equity Fund to the Group's Board of Trustees.
For their services provided and expenses assumed pursuant to their
respective Sub-Investment Advisory Agreement with the Adviser, the Sub-Advisers
receive from the Adviser a fee (computed daily and paid monthly as a percentage
of the Diversified Equity Fund's average daily net assets managed by that
Sub-Adviser) at the following annual rates: for Miller Anderson, 0.625% up to
$25,000,000 and 0.375% of the excess over $25,000,000; for Loomis, 0.65% up to
$5,000,000 and 0.50% of the excess over $5,000,000; and for Columbus, 1.00% up
to $10,000,000 and 0.50% of the excess over $10,000,000.
Miller Anderson was founded in 1969 and became wholly owned by The
Morgan Stanley Group, Inc. in December, 1995.
Loomis was founded in 1926 and established its Chicago office in 1952.
Loomis' sole general partner is Loomis, Sayles & Company, Incorporated.
Columbus was founded in 1975 and is a sub-partnership of PIMCO Advisors
L.P., a publicly held limited partnership whose general partner is owned by
Pacific Mutual Life Insurance Company and the managing directors of one of the
subpartnerships of PIMCO Advisers L.P.
Unless sooner terminated, each of the Sub-Investment Advisory
Agreements continue in effect as to the Diversified Equity Fund until August __,
1998, and thereafter for successive one-year periods ending August __ of each
year if such continuance is approved at least annually by the Group's Board of
Trustees or by vote of a majority of the outstanding shares of such Fund (as
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defined under "GENERAL INFORMATION - Miscellaneous" in the Funds' Prospectus),
and a majority of the Trustees who are not parties to the Sub-Investment
Advisory Agreements or interested persons (as defined in the 1940 Act) of any
party to the Sub-Investment Advisory Agreements by votes cast in person at a
meeting called for such purpose. Each of the Sub-Investment Advisory Agreements
are terminable as to the Diversified Equity Fund at any time on 60 days' written
notice without penalty by the Fund, by vote of a majority of the outstanding
shares of that Fund, or on 60 days' prior written notice from the Subadviser.
Such Agreements also terminate automatically in the event of any assignment, as
defined in the 1940 Act.
Each of the Sub-Investment Advisory Agreements provide that the
respective Sub-Advisers shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Group in connection with the performance
of their duties, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the
respective Sub-Advisers in the performance of their duties, or from reckless
disregard of their duties and obligations thereunder.
Portfolio Transactions
Pursuant to the Investment Advisory Agreement with respect to each
Fund, other than the Diversified Equity Fund, the Adviser determines, subject to
the general supervision of the Board of Trustees of the Group and in accordance
with each such Fund's investment objective and restrictions, which securities
are to be purchased and sold by a Fund, and which brokers are to be eligible to
execute such Fund's portfolio transactions. Pursuant to the Sub-Investment
Advisory Agreements, the Sub-Advisers determine, subject to the supervision of
the Adviser and the overall general supervision of the Group's Board of Trustees
and in accordance with the Diversified Equity Fund's respective investment
objective and policies, which securities are to be purchases and sold by such
Fund, and which brokers are to be eligible to execute such Fund's portfolio
transactions.
Purchases and sales of portfolio securities with respect to the Income
Fund, the Tax-Free Fund and the Money Market Fund usually are principal
transactions in which portfolio securities are normally purchased directly from
the issuer or from an underwriter or market maker for the securities. Purchases
from underwriters of portfolio securities generally include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
serving as market makers may include the spread between the bid and asked price.
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Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. Transactions in the over-the-counter market are generally
principal transactions with dealers. With respect to the over-the-counter
market, the Group, where possible, will deal directly with dealers who make a
market in the securities involved except in those circumstances where better
price and execution are available elsewhere.
Allocation of transactions, including their frequency, to various
brokers and dealers is determined by the Adviser or the applicable Sub-Adviser,
as the case may be, in its best judgment and in a manner deemed fair and
reasonable to Shareholders. The primary consideration is prompt execution of
orders in an effective manner at the most favorable price. Subject to this
consideration, brokers and dealers who provide supplemental investment research
to the Adviser or the applicable Sub-Adviser, as the case may be, may receive
orders for transactions on behalf of the Funds. The Adviser and each Sub-Adviser
are authorized to pay a broker-dealer who provides such brokerage and research
services a commission for executing each such Fund's brokerage transactions
which is in excess of the amount of commission another broker would have charged
for effecting that transaction if, but only if, the Adviser or Sub-Adviser, as
the case may be, determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of that particular transaction or in terms of all of the
accounts over which it exercises investment discretion. Any such research and
other statistical and factual information provided by brokers to a Fund or to
the Adviser or Sub-Adviser, as the case may be, is considered to be in addition
to and not in lieu of services required to be performed by such Adviser or
Sub-Adviser under its respective agreement regarding management of the Fund. The
cost, value and specific application of such information are indeterminable and
hence are not practicably allocable among the Funds and other clients of the
Adviser or Sub-Adviser, as the case may be, who may indirectly benefit from the
availability of such information. Similarly, the Funds may indirectly benefit
from information made available as a result of transactions effected for such
other clients. Under the Investment Advisory Agreement and Sub-Advisory
Agreements, the Adviser and Sub-Advisers are permitted to pay higher brokerage
commissions for brokerage and research services in accordance with Section 28(e)
of the Securities Exchange Act of 1934. In the event the Adviser and/or the Sub-
Advisers do follow such a practice, they will do so on a basis which is fair and
equitable to the Group and the Funds.
While the Adviser and the Sub-Advisers generally seek competitive
commissions, the Group may not necessarily pay the lowest commission available
on each brokerage transaction, for reasons discussed above.
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Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable laws, rules and regulations, the Group will not, on
behalf of the Funds, execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with the Adviser, the Sub-Advisers, BISYS, or
their affiliates, and will not give preference to the Adviser's correspondents
with respect to such transactions, securities, savings deposits, repurchase
agreements, and reverse repurchase agreements.
Investment decisions for each Fund are made independently from those
for the other Funds, other funds of the Group or any other investment company or
account managed by the Adviser or any of the Sub-Advisers. Any such other fund,
investment company or account may also invest in the same securities as the
Group on behalf of the Funds. When a purchase or sale of the same security is
made at substantially the same time on behalf of a Fund and another fund of the
Group, investment company or account, the transaction will be averaged as to
price and available investments will be allocated as to amount in a manner which
the Adviser or the Sub-Adviser, as the case may be, believes to be equitable to
the Fund and such other fund, investment company or account. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained by a Fund. To the extent permitted by
law, the Adviser and the Sub-Advisers may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for the other Funds or
for other investment companies or accounts in order to obtain best execution. As
provided by the Investment Advisory Agreement and the Sub- Advisory Agreements,
in making investment recommendations for the Funds, neither the Adviser nor any
Sub-Adviser will inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Group is a customer of the
Adviser, any Sub-Adviser, any of their parents or subsidiaries or affiliates
and, in dealing with its customers, the Adviser, the Sub-Advisers, their
respective parents, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of such customers are held by the Funds or any
other fund of the Group.
Glass-Steagall Act
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company
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Act") or any non-bank affiliate thereof from sponsoring, organizing, or
controlling a registered, open-end investment company continuously engaged in
the issuance of its shares, but (b) do not prohibit such a holding company or
affiliate from acting as investment adviser, transfer agent, and custodian to
such an investment company. In 1981, the United States Supreme Court held in
Board of Governors of the Federal Reserve System v. Investment Company Institute
that the Board did not exceed its authority under the Holding Company Act when
it adopted its regulation and interpretation authorizing bank holding companies
and their non-bank affiliates to act as investment advisers to registered
closed-end investment companies. In the Board of Governors case, the Supreme
Court also stated that if a national bank complied with the restrictions imposed
by the Board in its regulation and interpretation authorizing bank holding
companies and their non-bank affiliates to act as investment advisers to
investment companies, a national bank performing investment advisory services
for an investment company would not violate the Glass-Steagall Act.
The Adviser believes that it possesses the legal authority to perform
the services for the Funds contemplated by the Prospectus, this Statement of
Additional Information, the Investment Advisory Agreement and the Servicing
Agreement without violation of applicable statutes and regulations. Liberty
believes that it possesses the legal authority to perform the services for the
Funds as set forth in the Rule 12b-1 Agreement with BISYS, as described below,
without violation of applicable statutes and regulations. Future changes in
either Federal or state statutes and regulations relating to the permissible
activities of banks or bank holding companies and the subsidiaries or affiliates
of those entities, as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations, could prevent or
restrict the Adviser or Liberty from continuing to perform such services for the
Group. In addition, current state securities laws on the issue of the
registration of banks as brokers or dealers may differ from the interpretation
of federal law, and banks and financial institutions may be required to register
as dealers pursuant to the laws of a specific state. Depending upon the nature
of any changes in the services which could be provided by the Adviser or
Liberty, the Board of Trustees of the Group would review the Group's
relationship with the Adviser or Liberty, as the case may be, and consider
taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of the Adviser, Liberty and/or the Adviser's
affiliated and correspondent banks in connection with Customer purchases of
Shares of any of the Funds, those banks might be required to alter materially or
discontinue the services offered by them to Customers. It is not anticipated,
however, that any change in the Group's method of operations would
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affect its net asset value per share or result in financial losses
to any Customer.
Administrator
BISYS serves as administrator (the "Administrator") to the Funds
pursuant to a Management and Administration Agreement dated as of August __,
1996 (the "Administration Agreement"). The Administrator assists in supervising
all operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, by the Sub-Advisers under the Sub-Advisory
Agreements, by The Fifth Third Bank under the Custody Agreement and by BISYS
Fund Services, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement). The Administrator is a broker-dealer registered with the Commission,
and is a member of the National Association of Securities Dealers, Inc. The
Administrator provides financial services to institutional clients.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities; furnish statistical and research data, clerical,
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, assist the Trust or its designee in the preparation
of, and file all of the Funds' federal and state tax returns and required tax
filings other than those required to be made by the Funds' custodian and
Transfer Agent; prepare compliance filings pursuant to state securities laws
with the advice of the Group's counsel; assist to the extent requested by the
Group with the Group's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statement (on Form N-1A or any replacement
therefor); compile data for, prepare and file timely Notices to the Commission
required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain the
financial accounts and records of each Fund, including calculation of daily
expense accruals; periodic review of the amount of the deviation, if any, of the
Money Market Fund's current net asset value per share (calculated using
available market quotations or an appropriate substitute that reflects current
market conditions) from such Fund's amortized cost price per share; and
generally assist in all aspects of the Funds' operations other than those
performed by the Adviser under the Investment Advisory Agreement, by the
Sub-Advisers under the Sub- Investment Advisory Agreements, by The Fifth Third
Bank under the Custody Agreement and by BISYS Fund Services, Inc. under the
Transfer Agency Agreement and Fund Accounting Agreements. Under the
Administration Agreement, the Administrator may delegate all or any part of its
responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
equal to a fee calculated daily and paid
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periodically, at the annual rate equal to twenty one-hundredths of one percent
(.20%) of that Fund's average daily net assets.
Unless sooner terminated as provided therein, the Administration
Agreement has an initial term expiring on August __, 1999. The Administration
Agreement thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on not less than 60 days' notice by the Group's Board of Trustees or by
the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
any Fund in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
Expenses
If total expenses borne by any of the Funds in any fiscal year exceed
expense limitations imposed by applicable state securities regulations, the
Adviser and the Administrator will reimburse that Fund by the amount of such
excess in proportion to their respective fees. As of the date of this Statement
of Additional Information, the most restrictive expense limitation applicable to
the Funds limits each Fund's aggregate annual expenses, including management and
advisory fees but excluding interest, taxes, brokerage commissions and certain
other expenses, to 2 1/2% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million of the Fund's average net assets, and 1/2% of
the Fund's remaining average net assets. Any expense reimbursements will be
estimated daily and reconciled and paid on a monthly basis. Fees imposed upon
customer accounts by the Adviser or its affiliated or correspondent banks for
cash management services would not be included within Fund expenses for purposes
of any such expense limitation.
Distributor
BISYS serves as agent for each of the Funds in the distribution of its
Shares pursuant to a Distribution Agreement dated as of August __, 1996 (the
"Distribution Agreement"). Unless otherwise terminated, the Distribution
Agreement will continue in effect until August __, 1998, and year to year
thereafter for
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successive annual periods ending on August __, if, as to each Fund, such
continuance is approved at least annually by (i) by the Group's Board of
Trustees or by the vote of a majority of the outstanding shares of that Fund,
and (ii) by the vote of a majority of the Trustees of the Group who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.
In its capacity as Distributor, BISYS solicits orders for the sale of
Shares, advertises and pays the costs of advertising, office space and the
personnel involved in such activities. BISYS receives no compensation under the
Distribution Agreement with the Group, but may retain all or a portion of the
sales charge imposed upon sales of Shares of each of the Funds.
As described in the Prospectus, the Group has adopted a Distribution
and Shareholder Service Plan (the "Plan") with respect to the Funds pursuant to
Rule 12b-1 under the 1940 Act under which each Fund is authorized to pay BISYS
in an amount not in excess, on an annual basis, of 0.25% of the average daily
net asset value of the Shares of that Fund (the "12b-1 Fee"). Payments of the
12b-1 Fee to BISYS will be used (i) to compensate Participating Organizations
(as defined below) for providing distribution assistance relating to a Fund's
Shares, (ii) for promotional activities intended to result in the sale of Shares
and distribution of prospectuses to other than current shareholders, and (iii)
to compensate Participating Organizations for providing shareholder services
with respect to their customers who are, from time to time, beneficial and
record holders of Shares. Participating Organizations include banks (including
affiliates of the Adviser), broker-dealers, the Adviser, BISYS and other
institutions. Payments to such Participating Organizations may be made pursuant
to agreements entered into with BISYS.
As required by Rule 12b-1, the Plan was approved by the initial
Shareholder of each of the Funds and by the Board of Trustees, including a
majority of the Trustees who are not interested persons of any of the Funds and
who have no direct or indirect financial interest in the operation of the Plan
(the "Independent Trustees"). The Plan may be terminated as to a Fund by vote of
a majority of the Independent Trustees, or by vote of majority of the
outstanding Shares of that Fund. Any change in the Plan that would materially
increase the distribution cost to a Fund requires Shareholder approval. The
Trustees review quarterly a written report of such costs and the purposes for
which such costs have been incurred. The Plan may be amended by vote of the
Trustees including a majority of the Independent Trustees, cast in person at a
meeting called for that purpose. For so long as the
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Plan is in effect, selection and nomination of those Trustees who are not
interested persons of the Group shall be committed to the discretion of such
disinterested persons. All agreements with any person relating to the
implementation of the Plan may be terminated at any time on 60 days' written
notice without payment of any penalty, by vote of a majority of the Independent
Trustees or by a vote of the majority of the outstanding Shares of the Fund. The
Plan will continue in effect for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Independent Trustees, and (ii) by a vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose. The Board of
Trustees has a duty to request and evaluate such information as may be
reasonably necessary for them to make an informed determination of whether the
Plan should be implemented or continued. In addition the Trustees in approving
the Plan must determine that there is a reasonable likelihood that the Plan will
benefit each Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is in the
best interests of each Fund since it encourages Fund growth and maintenance of
Fund assets. As a Fund grows in size, certain expenses, and therefore total
expenses per Share, may be reduced and overall performance per Share may be
improved.
BISYS may enter into, from time to time, Rule 12b-1 Agreements with
selected dealers pursuant to which such dealers will provide certain services in
connection with the distribution of a Fund's Shares including, but not limited
to, those discussed above.
Administrative Services Plan
As described in the Prospectus, the Group has also adopted an
Administrative Services Plan (the "Services Plan") under which each Fund is
authorized to pay certain financial institutions, including the Adviser, its
correspondent and affiliated banks, and BISYS (a "Service Organization"), to
provide certain ministerial, record keeping, and administrative support services
to their customers who own of record or beneficially Shares in a Fund. Payments
to such Service Organizations are made pursuant to Servicing Agreements between
the Group and the Service Organization. The Services Plan authorizes each Fund
to make payments to Service Organizations in an amount, on an annual basis, of
up to 0.25% of the average daily net asset value of that Fund. The Services Plan
has been approved by the Board of Trustees of the Group, including a majority of
the Trustees who are not interested persons of the Group (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Services Plan or in any Servicing Agreements thereunder (the "Disinterested
Trustees"). The Services Plan may be terminated as to a Fund by a vote of a
majority of the Disinterested Trustees. The Trustees review quarterly a written
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report of the amounts expended pursuant to the Services Plan and the purposes
for which such expenditures were made. The Services Plan may be amended by a
vote of the Trustees, provided that any material amendments also require the
vote of a majority of the Disinterested Trustees. For so long as the Services
Plan is in effect, selection and nomination of those Disinterested Trustees
shall be committed to the discretion of the Group's Disinterested Trustees. All
Servicing Agreements may be terminated at any time without the payment of any
penalty by a vote of a majority of the Disinterested Trustees. The Services Plan
will continue in effect for successive one-year periods, provided that each such
continuance is specifically approved by a majority of the Board of Trustees,
including a majority of the Disinterested Trustees. As of the date hereof, the
Group has not entered into any such servicing agreements.
Custodian
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263
(the "Custodian"), has been selected to serve as the Funds' custodian pursuant
to the Custody Agreement dated as of August __, 1996. The Custodian's
responsibilities include safeguarding and controlling the Funds' cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Funds' investments.
Transfer Agency and Fund Accounting Services
BISYS Fund Services, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for all of the Funds pursuant to the
Transfer Agency Agreement dated as of August __, 1996. Pursuant to such
Agreement, the Transfer Agent, among other things, performs the following
services in connection with each Fund's shareholders of record: maintenance of
shareholder records for each of the Fund's shareholders of record; processing
shareholder purchase and redemption orders; processing transfers and exchanges
of shares of the Funds on the shareholder files and records; processing dividend
payments and reinvestments; and assistance in the mailing of shareholder reports
and proxy solicitation materials. For such services the Transfer Agent receives
a fee based on the number of shareholders of record.
In addition, BISYS Fund Services, Inc. provides certain fund accounting
services to the Funds pursuant to a Fund Accounting Agreement dated as of August
__, 1996. BISYS Fund Services, Inc. receives a fee from each Fund for such
services equal to the greater of (a) a fee computed at an annual rate of three
one- hundredths of one percent (.03%) of that Fund's average daily net assets,
or (b) $50,000 minus the fee paid by such Fund under its Management and
Administration Agreement with BISYS of the same date. Under such Agreement,
BISYS Fund Services, Inc. maintains
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the accounting books and records for each Fund, including journals containing an
itemized daily record of all purchases and sales of portfolio securities, all
receipts and disbursements of cash and all other debits and credits, general and
auxiliary ledgers reflecting all asset, liability, reserve, capital, income and
expense accounts, including interest accrued and interest received, and other
required separate ledger accounts; maintains a monthly trial balance of all
ledger accounts; performs certain accounting services for the Fund, including
calculation of the net asset value per share, calculation of the dividend and
capital gain distributions, if any, and of yield, reconciliation of cash
movements with the Fund's custodian, affirmation to the Fund's custodian of all
portfolio trades and cash settlements, verification and reconciliation with the
Fund's custodian of all daily trade activity; provides certain reports; obtains
dealer quotations, prices from a pricing service or matrix prices on all
portfolio securities in order to mark the portfolio to the market; and prepares
an interim balance sheet, statement of income and expense, and statement of
changes in net assets for each Fund.
Auditors
Coopers & Lybrand L.L.P., 100 East Broad Street, Columbus, Ohio 43215,
has been selected as the independent accountants for the Funds and as such will
audit the financial statements of the Funds.
Legal Counsel
Baker & Hostetler, 65 East State Street, Columbus, Ohio 43215 is
counsel to the Group and will pass upon the legality of the Shares offered
hereby.
ADDITIONAL INFORMATION
Description of Shares
The Group is an Ohio business trust. The Group was organized on April
25, 1988, and the Group's Declaration of Trust was filed with the Secretary of
State of Ohio on April 25, 1988. The Declaration of Trust authorizes the Board
of Trustees to issue an unlimited number of shares, which are shares of
beneficial interest, without par value. The Group presently has 14 series of
shares, one of which represents interests in the Money Market Fund, one of which
represents interests in the Diversified Equity Fund, one of which represents
interests in the Income Equity Fund, one of which represents interests in the
Special Equity Fund, one of which represents interests in the Income Fund and
one of which represents interests in the Tax-Free Fund. The Group's Declaration
of Trust authorizes the Board of Trustees to divide or redivide any unissued
shares of the Group into one or more additional series by setting or changing in
any one or more respects their respective
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preferences, conversion or other rights, voting power, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a fund will be required in
connection with a matter, a fund will be deemed to be affected by a matter
unless it is clear that the interests of each fund in the matter are identical,
or that the matter does not affect any interest of the fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a fund only if approved
by a majority of the outstanding shares of such fund. However, Rule 18f-2 also
provides that the ratification of independent public accountants, the approval
of principal underwriting contracts, and the election of Trustees may be
effectively acted upon by shareholders of the Group voting without regard to
series.
As of the date immediately preceding the public offering of the Fund's
Shares, BISYS Fund Services Ohio, Inc. owned all of the issued and outstanding
Shares of each of the Funds. It is anticipated that upon commencement of the
public offering of the Funds' Shares BISYS Fund Services Ohio, Inc.'s holdings
of Shares of each of the Funds will be reduced below 5%.
Vote of a Majority of the Outstanding Shares
As used in the Prospectus and this Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of that Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record
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of that Fund are represented in person or by proxy, or (b) the holders of more
than 50% of the outstanding votes of Shareholders of that Fund.
Additional Tax Information
Each of the Funds is treated as a separate entity for federal income
tax purposes and intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code") for so long as such
qualification is in the best interest of that Fund's shareholders. In order to
qualify as a regulated investment company, each Fund must, among other things:
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities, or currencies; derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, future contracts or foreign currencies held less than three months; and
diversify its investments within certain prescribed limits. In addition, to
utilize the tax provisions specially applicable to regulated investment
companies, each Fund must distribute to its Shareholders at least 90% of its
investment company taxable income for the year. In general, a Fund's investment
company taxable income will be its taxable income subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a non-deductible excise tax equal to 4% of the deficiency.
Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, a Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year a Fund does not qualify for the special tax treatment afforded
regulated investment companies, all of its taxable income will be subject to
federal tax at regular corporate rates (without any deduction for distributions
to its
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Shareholders). In such event, dividend distributions would be taxable to
Shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
It is expected that each Fund will distribute annually to Shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to Shareholders for federal income
tax purposes, even if paid in additional Shares of the Fund and not in cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to Shareholders as long-term capital gain
in the year in which it is received, regardless of how long the Shareholder has
held the Shares. Such distributions are not eligible for the dividends-received
deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on long-term capital gains
of individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
and deducted in future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
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Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by the
Fund for its taxable year that qualifies for the dividends received deduction.
Because all of the Money Market Fund's and the Income Fund's net investment
income is expected to be derived from earned interest, it is anticipated that no
distributions from those Funds will qualify for the 70% dividends received
deduction.
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
any one Fund's total assets at the end of its fiscal year are expected to be
invested in stocks or securities of foreign corporations, such Fund will not be
entitled under the Code to pass through to its Shareholders their pro rata share
of the foreign taxes paid by the Fund. These taxes will be taken as a deduction
by such Fund.
Each Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any Shareholder, and the proceeds of redemption or the values of any
exchanges of Shares of a Fund, if such Shareholder (1) fails to furnish the Fund
with a correct taxpayer identification number, (2) under-reports dividend or
interest income, or (3) fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security number.
The Tax-Free Fund. The Tax-Free Fund is not intended to constitute a
balanced investment program and is not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tax-Free Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans, and individual retirement accounts,
since such plans and accounts are generally tax-exempt and, therefore, would not
gain any additional benefit from all or a portion of the Tax- Free Fund's
dividends being tax-exempt and such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, the Tax-Free Fund may not
be appropriate investments for entities which are "substantial users," or
"related persons" thereof, of facilities financed by private activity bonds held
by the Tax-Free Fund.
The Code permits a regulated investment company which invests in Exempt
Securities to pay to its Shareholders "exempt-interest dividends," which are
excluded from gross income for federal income tax purposes, if at the close of
each quarter of its taxable year at least 50% of its total assets consist of
Exempt Securities.
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An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by the Tax-Free Fund that is derived from interest
received by the Tax-Free Fund that is excluded from gross income for federal
income tax purposes, net of certain deductions, provided the dividend is
designated as an exempt-interest dividend in a written notice mailed to
Shareholders not later than sixty days after the close of the Tax-Free Fund's
taxable year. The percentage of the total dividends paid by the Tax-Free Fund
during any taxable year that qualifies as exempt- interest dividends will be the
same for all Shareholders of the Tax-Free Fund receiving dividends during such
year. Exempt- interest dividends shall be treated by the Tax-Free Fund's
Shareholders as items of interest excludable from their gross income for Federal
income tax purposes under Section 103(a) of the Code. However, a Shareholder is
advised to consult his tax adviser with respect to whether exempt-interest
dividends retain the exclusion under Section 103(a) of the Code if such
Shareholder is a "substantial user" or a "related person" to such user under
Section 147(a) of the Code with respect to any of the Exempt Securities held by
the Tax-Free Fund. If a Shareholder receives an exempt-interest dividend with
respect to any Share and such Share is held by the Shareholder for six months or
less, any loss on the sale or exchange of such Share shall be disallowed to the
extent of the amount of such exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
Shareholder to purchase or carry Shares is not deductible for federal income tax
purposes if the Tax-Free Fund distributes exempt-interest dividends during the
Shareholder's taxable year. A Shareholder of the Tax-Free Fund that is a
financial institution may not deduct interest expense attributable to
indebtedness incurred or continued to purchase or carry Shares of the Tax-Free
Fund if the Tax-Free Fund distributes exempt-interest dividends during the
Shareholder's taxable year. Certain federal income tax deductions of property
and casualty insurance companies holding Shares of the Tax-Free Fund and
receiving exempt-interest dividends may also be adversely affected. In certain
limited instances, the portion of Social Security benefits received by a
Shareholder which may be subject to federal income tax may be affected by the
amount of tax-exempt interest income, including exempt-interest dividends
received by Shareholders of the Tax-Free Fund.
In the event the Tax-Free Fund realizes long-term capital gains, such
Fund intends to distribute any realized net long-term capital gains annually. If
the Tax-Free Fund distributes such gains, such Fund will have no tax liability
with respect to such gains, and the distributions will be taxable to
Shareholders as long-term capital gains regardless of how long the Shareholders
have held their Shares. Any such distributions will be designated as a capital
gain dividend in a written notice mailed by the Tax- Free Fund to the
Shareholders not later than sixty days after the
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close of the Tax-Free Fund's taxable year. It should be noted, however, that
capital gains are taxed like ordinary income except that net capital gains of
individuals are subject to a maximum federal income tax rate of 28%. Net capital
gains are the excess of net long-term capital gains over net short-term capital
losses. Any net short-term capital gains are taxed at ordinary income tax rates.
If a Shareholder receives a capital gain dividend with respect to any Share and
then sells the Share before he has held it for more than six months, any loss on
the sale of the Share is treated as long-term capital loss to the extent of the
capital gain dividend received.
For taxable years of corporations beginning before 1996 (and pursuant
to legislation proposed, but not yet enacted, thereafter), the Superfund Revenue
Act of 1986 imposes an additional tax (which is deductible for federal income
tax purposes) on a corporation at a rate of 0.12 of one percent on the excess
over $2,000,000 of such corporation's "modified alternative minimum taxable
income", which would include a portion of the exempt-interest dividends
distributed by the Tax-Free Fund to such corporation. In addition,
exempt-interest dividends distributed to certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed
by Section 884 of the Code.
Distributions of exempt-interest dividends by the Tax-Free Fund may be
subject to state and local taxes even though a substantial portion of such
distributions may be derived from interest on obligations which, if received
directly, would be exempt from such taxes. The Tax-Free Fund will report to its
Shareholders annually after the close of its taxable year the percentage and
source, on a state-by-state basis, of interest income earned on municipal
obligations held by the Tax-Free Fund during the preceding year. Shareholders
are advised to consult their tax advisers concerning the application of state
and local taxes.
As indicated in the Prospectus, the Tax-Free Fund may acquire rights
regarding specified portfolio securities under puts. See "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Information on Portfolio Instruments - Puts" in this
Statement of Additional Information. The policy of the Tax-Free Fund is to limit
its acquisition of puts to those under which it will be treated for federal
income tax purposes as the owner of the Exempt Securities acquired subject to
the put and the interest on the Exempt Securities will be tax-exempt to it.
Although the Internal Revenue Service has issued a published ruling that
provides some guidance regarding the tax consequences of the purchase of puts,
there is currently no guidance available from the Internal Revenue Service that
definitively establishes the tax consequences of many of the types of puts that
the Tax-Free Fund could acquire under the 1940 Act. Therefore, although the
Tax-Free Fund will only acquire a put
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after concluding that it will have the tax consequences described above, the
Internal Revenue Service could reach a different conclusion.
Income itself exempt from Federal income taxation may be considered in
addition to taxable income when determining whether Social Security payments
received by a Shareholder are subject to federal income taxation.
Information set forth in the Prospectus and this Statement of
Additional Information which relates to Federal taxation is only a summary of
some of the important Federal tax considerations generally affecting purchasers
of Shares of a Fund. No attempt has been made to present a detailed explanation
of the Federal income tax treatment of a Fund or its Shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation.
In addition, the tax discussion in the Prospectus and this Statement of
Additional Information is based on tax laws and regulations which are in effect
on the date of the Prospectus and this Statement of Additional Information; such
laws and regulations may be changed by legislative or administrative action. As
of the date hereof, several proposals have been introduced by the 104th
Congress, which if enacted, could affect much of the information contained in
this section. However, it is not possible at this time to assess which, if any,
of such proposals will be acted upon and the effect thereof, if any, on this
information.
Information as to the federal income tax status of all distributions
will be mailed annually to each Shareholder.
Seven-Day Yield of the Money Market Fund
The standardized seven-day yield for the Money Market Fund is computed
by determining the net change, exclusive of capital changes, in the value of a
hypothetical preexisting account in the Money Market Fund having a balance of
one Share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7). The net
change in the account value of the Money Market Fund includes the value of
additional Shares purchased with dividends from the original Share, dividends
declared on both the original Share and any such additional Shares, and all
fees, other than nonrecurring account or sales charges, that are charged to all
Shareholder accounts in proportion to the length of the base period and assuming
the Money Market Fund's average account size. The
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capital changes to be excluded from the calculation of the net change in account
value are realized gains and losses from the sale of securities and unrealized
appreciation and depreciation. The 30-day yield is calculated as described above
except that the base period is 30 days rather than seven days.
The effective yield for the Money Market Fund is computed by
compounding the base period return, as calculated above, by adding 1 to the base
period return raising the sum to a power equal to 365 divided by seven and
subtracting 1 from the result.
Yields of the Other Funds
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," yields of the Funds, other than the Money Market Fund, will be
computed by annualizing net investment income per share for a recent 30-day
period and dividing that amount by a Fund Share's maximum offering price
(reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The yield will vary from time to time
depending upon market conditions, the composition of the particular Fund's
portfolio and operating expenses of the Group allocated to each Fund. These
factors and possible differences in the methods used in calculating yield should
be considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's Shares and to the
relative risks associated with the investment objectives and policies of each of
the Funds.
In addition, with respect to the Tax-Free Fund, tax equivalent yields
will be computed by dividing that portion of such Fund's yield (as computed
above) which is tax-exempt by one minus a stated income tax rate and adding that
result to that portion, if any, of the yield of that Fund which is not
tax-exempt.
Calculation of Total Return
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," average annual total return is a measure of the change in value of
an investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of Shares purchased by a hypothetical $1,000
investment in that Fund all additional Shares which would have been purchased if
all dividends and distributions paid or
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distributed during the period had been immediately reinvested; (2) calculating
the value of the hypothetical initial investment of $1,000 as of the end of the
period by multiplying the total number of Shares owned at the end of the period
by the net asset value per share on the last trading day of the period; (3)
assuming redemption at the end of the period; and (4) dividing this account
value for the hypothetical investor by the initial $1,000 investment and
annualizing the result for periods of less than one year. Each Fund, however,
may also advertise aggregate total return in addition to average annual total
return. Aggregate total return is a measure of the change in value of an
investment in a Fund over the relevant period and is calculated similarly to
average annual total return except that the result is not annualized.
Distribution Rates
Each of the Funds, other than the Money Market Fund, may from time to
time advertise current distribution rates which are calculated in accordance
with the method disclosed in the Prospectus.
Performance Comparisons
Investors may judge the performance of the Funds by comparing them to
the performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies through various mutual fund or market indices
such as those prepared by Dow Jones & Co., Inc. and Standard & Poor's
Corporation and to data prepared by Lipper Analytical Services, Inc., a widely
recognized independent service which monitors the performance of mutual funds.
Comparisons may also be made to indices or data published in Money Magazine,
Forbes, Barron's, The Wall Street Journal, Morningstar, Inc., Ibbotson
Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today
and local periodicals. In addition to performance information, general
information about these Funds that appears in a publication such as those
mentioned above may be included in advertisements, sales literature and reports
to shareholders. The Funds may also include in advertisements and reports to
shareholders information discussing the performance of the Adviser in comparison
to other investment advisers and to other banking institutions.
From time to time, the Group may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of dollar
cost averaging); (2) discussions of general economic trends; (3) presentations
of statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for one or more of the Funds within the Group;
(5) descriptions of investment strategies
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for one or more of such Funds; (6) descriptions or comparisons of various
investment products, which may or may not include the Funds; (7) comparisons of
investment products (including the Funds) with relevant market or industry
indices or other appropriate benchmarks; (8) discussions of fund rankings or
ratings by recognized rating organizations; and (9) testimonials describing the
experience of persons that have invested in one or more of the Funds. The Group
may also include calculations, such as hypothetical compounding examples, which
describe hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions and are not
indicative of the performance of any Fund. In addition, the Tax- Free Fund may
include in its advertisements charts comparing various tax-free yields to
taxable yield equivalents at different income levels.
Current yields or total return will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and total
return are functions of a Fund's quality, composition and maturity, as well as
expenses allocated to such Fund. Fees imposed upon Customer accounts by the
Adviser or its affiliated or correspondent banks for cash management services
will reduce a Fund's effective yield and total return to Customers.
Miscellaneous
Individual Trustees are generally elected by the Shareholders and,
subject to removal by the vote of two-thirds of the Board of Trustees, serve for
a term lasting until the next meeting of shareholders at which Trustees are
elected. Such meetings are not required to be held at any specific intervals.
Generally, shareholders owning not less than 20% of the outstanding shares of
the Group entitled to vote may cause the Trustees to call a special meeting.
However, the Group has represented to the Commission that the Trustees will call
a special meeting for the purpose of considering the removal of one or more
Trustees upon written request therefor from shareholders owning not less than
10% of the outstanding votes of the Group entitled to vote. At such a meeting, a
quorum of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
The Group is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of the Group.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration
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Statement filed with the Commission. Copies of such information may be obtained
from the Commission upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
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APPENDIX
Commercial Paper Ratings. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short term in the relevant market. Commercial paper rated A-1
by S&P indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted A-1+. Commercial paper rated A-2 by S&P indicates that capacity for
timely payment on issues is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Commercial paper rated A-3 by S&P
indicates adequate capacity for timely payment. Such paper is, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. Commercial paper rated B by S&P is regarded as
having only speculative capacity for timely payment. Commercial paper rated C by
S&P is regarded as short-term obligations with a doubtful capacity for payment.
Commercial paper rated D by S&P is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
Moody's Investors Service, Inc.'s ("Moody's") commercial paper rating
are opinions of the ability of issuers to repay punctually senior debt
obligations which have an original maturity not exceeding one year. The rating
Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers
rated Prime-1 (or supporting institutions) are considered to have a superior
capacity for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics of Prime-1 rated issuers, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variations. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. The effects of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate
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alternate liquidity is maintained. Issuers rated Not Prime do not
fall within any of the Prime rating categories.
Commercial paper rated F-1+ by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-1 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-1+. Commercial
paper rated F-2 by Fitch is regarded as having a satisfactory degree of
assurance of timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 ratings. Commercial paper rated F-3 by Fitch is
regarded as having characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes could cause these
securities to be rated below investment grade. Commercial paper rated F-S by
Fitch is regarded as having characteristics suggesting a minimal degree of
assurance for timely payment and is vulnerable to near term adverse changes in
financial and economic conditions. Commercial paper rated D by Fitch is in
actual or imminent payment default.
The description of the three highest short-term debt ratings by Duff &
Phelps, Inc. ("Duff") (Duff incorporates gradations of "1+" (one plus) and "1-"
(one minus) to assist investors in recognizing quality differences within the
highest rating category) are as follows. Duff 1+ is regarded as having the
highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
is regarded as having a very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors. Risk factors
are minor. Duff 1- is regarded as having a high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are minor. Duff 2 is regarded as having a good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small. Duff 3 is regarded as having
a satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected. Duff 4 is considered as having
speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access may be
subject to a high degree of variation. Duff 5 indicates that the issuer has
failed to meet scheduled principal and/or interest payments.
Commercial paper rated A1 by IBCA Limited and its affiliate,
IBCA Inc. (collectively "IBCA") is regarded by IBCA as obligations
supported by the highest capacity for timely repayment. Where
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issues possess a particularly strong credit feature, a rating of A1+ is
assigned. Obligations rated A2 are supported by a good capacity for timely
repayment. Obligations rated A3 are supported by a satisfactory capacity for
timely repayment. Obligations rated B are those for which there is an
uncertainty as to the capacity to ensure timely repayment. Obligations rated C
are those for which there is a high risk of default or which are currently in
default.
The following summarizes the description of the three highest
short-term ratings of Thomson BankWatch, Inc. ("Thomson"). TBW-1 is the highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis. TBW-2 is the second highest category indicating that
while the degree of safety regarding timely repayment of principal and interest
is strong, the relative degree of safety is not as high as for issues rated
"TBW-1." TBW-3 is the lowest investment grade category and indicates that while
more susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. TBW-4 is the lowest rating category and
is regarded as non-investment grade and therefore speculative.
The plus (+) sign is used after a rating symbol to designate the
relative position of an issuer within the rating category.
Corporate Debt Ratings. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong capacity to
pay interest and repay principal although it is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories.
The following summarizes the three highest ratings used by Moody's for
corporate debt. Bonds that are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." 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 position of such issues. Bonds
that 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
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somewhat larger than in Aaa securities. Bonds that are rated A by Moody's
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 some time in the future.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through A. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.
The following summarizes the three highest long-term debt ratings by
Duff. Debt rated AAA has the highest credit quality. The risk factors are
negligible being only slightly more than for risk-free U.S. Treasury debt. Debt
rated AA has a high credit quality and protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
Debt rated A has protection factors that are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
To provide more detailed indications of credit quality, the ratings
from AA to A may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
The following summarizes the three highest long-term debt ratings by
Fitch (except for AAA ratings, plus or minus signs are used with a rating symbol
to indicate the relative position of the credit within the rating category).
Bonds rated AAA are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally
rated "F-1+." Bonds rated as A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
The following summarizes IBCA's three highest long-term debt ratings.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that
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adverse changes in business, economic or financial conditions are unlikely to
increase investment risk significantly. Obligations rated AA are those for which
there is a very low expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk albeit not very
significantly. Obligations rated A are those for which there is a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
The following summarizes Thomson's description of its three highest
long-term debt ratings (Thomson may include a plus (+) or minus (-) designation
to indicate where within the respective category the issue is placed). AAA is
the highest category and indicates that the ability to repay principal and
interest on a timely basis is very high. AA is the second highest category and
indicates a superior ability to repay principal and interest on a timely basis
with limited incremental risk versus issues rated in the highest category. A is
the third highest category and indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
Municipal Obligations Ratings
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or VMIG-1
designations are of the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality
with ample margins of protection although not so large as in the preceding
rating group. Obligations bearing MIG-3 or VMIG-3 denote favorable quality. All
security elements are accounted for but there is lacking the undeniable strength
of the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest
ratings assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and
interest.
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"SP-3": Speculative capacity to pay principal and
interest.
The following summarizes the three highest ratings used by Moody's for
state and municipal bonds:
"Aaa": Bonds 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 position of such issues.
"Aa": Bonds 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 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.
The following summarizes the three highest ratings used by S&P for
state and municipal bonds:
"AAA": Debt which has the highest rating assigned by
S&P. Capacity to pay interest and repay principal is
extremely strong.
"AA": Debt which has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
"A": Debt which has a strong capacity to pay interest
and repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher
rated categories.
Definitions of Certain Money Market Instruments
Commercial Paper
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Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity.
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed
as to payment of principal and interest by the full faith and
credit of the U.S. Government. These obligations may include
Treasury bills, notes and bonds, and issues of agencies and
instrumentalities of the U.S. Government, provided such obligations
are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. Government.
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. Government include Treasury bills, certificates
of indebtedness, notes and bonds, and issues of agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage Association,
the Tennessee Valley Authority, the Farmers Home Administration, the Federal
Home Loan Banks, the Federal Intermediate Credit Banks, the Federal Farm Credit
Banks, the Federal Land Banks, the Federal Housing Administration, the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation, and
the Student Loan Marketing Association. Some of these obligations, such as those
of the Government National Mortgage Association, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Student Loan Marketing Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Federal Farm Credit
Banks, are supported only by the credit of the instrumentality. No assurance can
be given that the U.S. Government would provide financial support to U.S.
Government- sponsored instrumentalities if it is not obligated to do so by law.
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Registration Statement
of
THE SESSIONS GROUP
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
(i) Riverside Capital Money Market Fund
Financial Highlights
(ii) Riverside Capital Value Equity Fund
Financial Highlights
(iii) Riverside Capital Fixed Income Fund
Financial Highlights
(iv) Riverside Capital Tennessee Municipal Obligations
Fund
Financial Highlights
(v) Riverside Capital Low Duration Government Securities
Fund
Financial Highlights
(vi) Riverside Capital Growth Fund
Financial Highlights
(vii) KeyPremier Prime Money Market Fund
None
(viii) KeyPremier Pennsylvania Municipal Bond Fund
None
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(ix) 1st Source Monogram U.S. Treasury Obligations Money
Market Fund
None
(x) 1st Source Monogram Diversified Equity Fund
None
(xi) 1st Source Monogram Income Equity Fund
None
(xii) 1st Source Monogram Special Equity Fund
None
(xiii) 1st Source Monogram Income Fund
None
(xiv) 1st Source Monogram Intermediate Tax-Free Bond Fund
None
Included in Part B:
(i) Riverside Capital Money Market Fund
Independent Auditors' Report dated August 23, 1995.
Statement of Assets and Liabilities dated June 30,
1995.
Statement of Operations for the year ended June 30,
1995.
Statements of Changes in Net Assets for the years
ended June 30, 1995 and 1994.
Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the years ended June 30,
1991, 1992, 1993, 1994 and 1995.
(ii) Riverside Capital Value Equity Fund
Independent Auditors' Report dated August 23, 1995.
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Statement of Assets and Liabilities dated June 30,
1995.
Statement of Operations for the year ended June 30,
1995.
Statement of Changes in Net Assets for the years
ended June 30, 1995 and 1994.
Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the years ended June 30,
1995, 1994 and 1993, and the period from commencement
of operations (October 31, 1991) to June 30, 1992.
(iii) Riverside Capital Fixed Income Fund
Independent Auditors' Report dated August 23, 1995.
Statement of Assets and Liabilities dated June 30,
1995.
Statement of Operations for the year ended June 30,
1995.
Statement of Changes in Net Assets for the years
ended June 30, 1995 and 1994.
Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the years ended June 30,
1995, 1994 and 1993, and the period from commencement
of operations (October 31, 1991) to June 30, 1992.
(iv) Riverside Capital Tennessee Municipal Obligations
Fund
Independent Auditors' Report dated August 23, 1995.
Statement of Assets and Liabilities at June 30, 1995.
Statement of Operations for the year ended June 30,
1995.
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Statement of Changes in Net Assets for the years
ended June 30, 1995 and 1994.
Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the years ended June 30,
1995 and 1994, and for the period from commencement
of operations (November 4, 1992) to June 30, 1993.
(v) Riverside Capital Low Duration Government Securi-
ties Fund
Independent Auditor's Report dated August 23, 1995.
Statement of Assets and Liabilities at June 30, 1995.
Statement of Operations for the year ended June 30,
1995.
Statement of Changes in Net Assets for the year ended
June 30, 1995 and the period from commencement of
operations (April 18, 1994) to June 30, 1994.
Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the year ended June 30,
1995, and for the period from commencement of
operations (April 18, 1994) to June 30, 1994.
(vi) Riverside Capital Growth Fund
Independent Auditor's Report dated August 23, 1995.
Statement of Assets and Liabilities at June 30, 1995.
Statement of Operations for the year ended June 30,
1995.
Statement of Changes in Net Assets for the year ended
June 30, 1995, and for the period from commencement
of operations (April 18, 1994) to June 30, 1994.
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Schedule of Portfolio Investments as of June 30,
1995.
Notes to Financial Statements.
Financial Highlights for the year ended June 30,
1995, and for the period from commencement of
operations (April 18, 1994) to June 30, 1994.
(vii) KeyPremier Prime Money Market Fund
To be filed by amendment.
(viii) KeyPremier Pennsylvania Municipal Bond Fund
To be filed by amendment.
(ix) 1st Source Monogram U.S. Treasury Obligations Money
Market Fund
To be filed by amendment.
(x) 1st Source Monogram Diversified Equity Fund
To be filed by amendment.
(xi) 1st Source Monogram Income Equity Fund
To be filed by amendment.
(xii) 1st Source Monogram Special Equity Fund
To be filed by amendment.
(xiii) 1st Source Monogram Income Fund
To be filed by amendment.
(xiv) 1st Source Monogram Intermediate Tax-Free Bond Fund
To be filed by amendment.
(xv) All required financial statements are included in
Part B hereof. All other financial statements and
schedules are inapplicable.
(b) Exhibits:
(1) (a) Declaration of Trust, dated as of April 25,
1988, is incorporated by reference to Exhibit
(1)(a) of Post-Effective Amendment No. 34 to
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Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(b) Amendment of Article IV, Section 4.2 of
Declaration of Trust adopted August 15,
1989, is incorporated by reference to
Exhibit (1)(b) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(c) Amendment of Article V, Section 5.3 of
Declaration of Trust adopted October 23,
1989, is incorporated by reference to
Exhibit (1)(c) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(d) Amendment of Article IV, Section 4.2 of
Declaration of Trust adopted July 23, 1991,
is incorporated by reference to Exhibit
(1)(d) of Post-Effective Amendment No. 34
to Registrant's Registration Statement (No.
33- 21489) filed on April 25, 1996.
(e) Amendment of Article IV, Section 4.2 of
Declaration of Trust as adopted August 13,
1992, is incorporated by reference to
Exhibit (1)(e) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(f) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted October 28,
1992, is incorporated by reference to
Exhibit (1)(f) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(g) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted February
18, 1994, is incorporated by reference to
Exhibit (1)(g) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(h) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted May 16,
1994, is incorporated by reference to
Exhibit (1)(h) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
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(i) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted April 10,
1996, is incorporated by reference to
Exhibit (1)(i) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April
25, 1996.
(j) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted May 16,
1996.
(2) By-Laws are incorporated by reference to Exhibit (2)
of Post-Effective Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489) filed on April
25, 1996.
(3) None.
(4) Certificates for Shares are not issued. Articles IV,
V, VI and VII of the Declaration of Trust, filed as
Exhibit 1 hereto, define rights of holders of Shares.
(5) (a) Investment Advisory Agreement dated as of
July 19, 1988, between Registrant and
National Bank of Commerce (with respect to
Riverside Capital Money Market Fund) is
incorporated by reference to Exhibit (5)(a)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(b) Investment Advisory Agreement dated as of
September 20, 1991, between Registrant and
National Bank of Commerce (with respect to
Riverside Capital Value Equity Fund and
Riverside Capital Fixed Income Fund) is
incorporated by reference to Exhibit (5)(b)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33- 21489) filed on April 25, 1996.
(c) Investment Advisory Agreement dated as of
October 27, 1992, between Registrant and
National Bank of Commerce (with respect to
Riverside Capital Tennessee Municipal
Obligations Fund) is incorporated by
reference to Exhibit (5)(c) of
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
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(d) Investment Advisory Agreement dated April 5,
1994, as amended June 3, 1994, between
Registrant and National Bank of Commerce
(with respect to Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund) is
incorporated by reference to Exhibit (5)(d)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(e) Proposed Investment Advisory Agreement dated
July __, 1996, between Registrant and
Martindale Andres & Company, Inc. (with
respect to the KeyPremier Funds) is
incorporated by reference to Exhibit (5)(e)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(f) Proposed Investment Advisory Agreement dated
August __, 1996, between Registrant and 1st
Source Bank (with respect to the 1st Source
Monogram Funds).
(g) Proposed Sub-Investment Advisory Agreement
dated August __, 1996, between 1st Source
Bank and Miller, Anderson and Sherrerd, LLP
(with respect to 1st Source Monogram
Diversified Equity Fund).
(h) Proposed Sub-Investment Advisory Agreement
dated August __, 1996, between 1st Source
Bank and Loomis Sayles & Company, L.P. (with
respect to 1st Source Monogram Diversified
Equity Fund).
(i) Proposed Sub-Investment Advisory Agreement
dated August __, 1996, between 1st Source
Bank and Columbus Circle Investors (with
respect to 1st Source Monogram Diversified
Equity Fund).
(6) (a) Distribution Agreement dated October 1,
1993, as amended as of June 3, 1994, between
Registrant and The Winsbury Company Limited
Partnership is incorporated by reference to
Exhibit 6(a) of Post-Effective Amendment
No. 30 to Registrant's Registration
Statement (No. 33-21489) filed on August 24,
1994.
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(b) Form of Selected Dealer Agreement is
incorporated by reference to Exhibit (6)(b)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No. 33-
21489) filed on April 25, 1996.
(c) Proposed Distribution Agreement dated as of
July ___ , 1996, between Registrant and
BISYS Fund Services Limited Partnership
(relating to the KeyPremier Funds) is
incorporated by reference to Exhibit (6)(c)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(d) Form of Shareholder Services Agreement is
incorporated by reference to Exhibit (6)(d)
of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No. 33-
21489) filed on April 25, 1996.
(e) Proposed Distribution Agreement dated as of
August ___, 1996, between Registrant and
BISYS Fund Services Limited Partnership
(relating to the 1st Source Monogram Funds)
(7) None.
(8) (a) Custodial Services Agreement dated as of
March 1, 1995, between Registrant and
National City Bank (with respect to the
Riverside Capital Funds) is incorporated by
reference to Exhibit 8 of Post-Effective
Amendment No. 33 to Registrant's
Registration Statement (No. 33-21489) filed
on October 30, 1995.
(b) Proposed Custody Agreement dated July __,
1996, between Registrant and The Bank of New
York (with respect to the KeyPremier Funds)
is incorporated by reference to Exhibit
(8)(b) of Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No. 33-
21489) filed on April 25, 1996.
(c) Proposed Custody Agreement dated August __,
1996, between Registrant and The Fifth Third
Bank (with respect to the 1st Source
Monogram Funds).
(9) (a) Management and Administration Agreement
dated August 23, 1990, as amended October
27, 1992, between Registrant and The
Winsbury Company Limited Partnership (with
respect to Riverside
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<PAGE> 117
Capital Money Market Fund, Riverside Capital
Value Equity Fund, Riverside Capital Fixed
Income Fund and Riverside Capital Tennessee
Municipal Obligations Fund) is incorporated
by reference to Exhibit 9(a) of
Post-Effective Amendment No. 25 to
Registrant's Registration Statement (No.
33-21489) filed on April 27, 1993.
(g) Transfer Agency Agreement dated as of
September 1, 1992, as amended as of May 1,
1994, between Registrant and BISYS Fund
Services Ohio, Inc. (formerly The Winsbury
Service Corporation) (with respect to the
Riverside Capital Funds) is incorporated by
reference to Exhibit 9(g) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed
on August 24, 1994.
(h) Fund Accounting Agreement dated February 4,
1993, between Registrant and The Winsbury
Service Corporation (with respect to
Riverside Capital Money Market Fund,
Riverside Capital Equity Fund, Riverside
Capital Fixed Income Fund and Riverside
Capital Tennessee Municipal Obligations
Fund) is incorporated by reference to
Exhibit 9(h) of Post-Effective Amendment No.
25 to Registrant's Registration Statement
(No. 33-21489) filed on April 27, 1993.
(r) Administrative Services Plan effective
October 19, 1993 is incorporated by
reference to Exhibit 9(r) of Post-Effective
Amendment No. 28 to Registrant's
Registration Statement (No. 33-21489) filed
on February 4, 1994.
(s) Servicing Agreement to Administrative
Services Plan dated as of October 19, 1993,
between Registrant and National Bank of
Commerce (with respect to Riverside Capital
Money Market Fund, Riverside Capital Equity
Fund, Riverside Capital Fixed Income Fund
and Riverside Capital Tennessee Municipal
Obligations Fund) is incorporated by
reference to Exhibit 9(s) of Post-Effective
Amendment No. 29 to Registrant's
Registration Statement (No. 33- 21489) filed
on April 4, 1994.
(u) Management and Administration Agreement
between Registrant and The Winsbury Company
Limited Partnership dated April 5, 1994, as
amended as of June 3, 1994 (with respect to
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Riverside Capital Low Duration Government
Securities Fund and Riverside Capital Growth
Fund) is incorporated by reference to
Exhibit 9(u) of Post-Effective Amendment No.
30 to Registrant's Registration Statement
(No. 33- 21489) filed on August 24, 1994.
(v) Fund Accounting Agreement dated April 5,
1994, as amended June 3, 1994, between
Registrant and The Winsbury Service
Corporation (with respect to Riverside
Capital Low Duration Government Securities
Fund and Riverside Capital Growth Fund) is
incorporated by reference to Exhibit 9(v) of
Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(w) Servicing Agreement to Administrative
Services Plan dated April 5, 1994, between
Registrant and National Bank of Commerce
(with respect to Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund) is
incorporated by reference to Exhibit 9(w) of
Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No. 33-
21489) filed on August 24, 1994.
(x) Proposed Management and Administration
Agreement dated July __, 1996, between
Registrant and BISYS Fund Services Limited
Partnership (with respect to the KeyPremier
Funds) is incorporated by reference to
Exhibit (9)(x) of Post-Effective Amendment
No. 34 to Registrant's Registration
Statement (No. 33- 21489) filed on April 25,
1996.
(y) Proposed Fund Accounting Agreement dated
July __, 1996, between Registrant and BISYS
Fund Services Ohio, Inc. (with respect to
the KeyPremier Funds) is incorporated by
reference to Exhibit (9)(y) of
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(z) Proposed Transfer Agency Agreement dated
July __, 1996, between Registrant and BISYS
Fund Services Ohio, Inc. (with respect to
the KeyPremier Funds) is incorporated by
reference to Exhibit (9)(z) of
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
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(aa) Proposed Management and Administration
Agreement dated August __, 1996, between
Registrant and BISYS Fund Services Limited
Partnership (with respect to the 1st Source
Monogram Funds).
(ab) Proposed Fund Accounting Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the 1st Source Monogram Funds).
(ac) Proposed Transfer Agency Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the 1st Source Monogram Funds).
(ad) Form of Servicing Agreement to
Administrative Services Plan.
(10) (a) Opinion of Counsel with respect to Shares of
1st Source Monogram U.S. Treasury
Obligations Money Market Fund, 1st Source
Monogram Diversified Equity Fund, 1st Source
Monogram Income Equity Fund, 1st Source
Monogram Special Equity Fund, 1st Source
Monogram Income Fund and 1st Source Monogram
Intermediate Tax-Free Bond Fund. Opinion of
Counsel with respect to Shares of the
KeyPremier Prime Money Market Fund and the
KeyPremier Pennsylvania Municipal Bond Fund
is incorporated by reference to Exhibit
(10)(a) of Post-Effective Amendment No. 34
to Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996. An
Opinion of Counsel with respect to Shares of
Riverside Capital Money Market Fund,
Riverside Capital Value Equity Fund,
Riverside Capital Fixed Income Fund,
Riverside Capital Tennessee Municipal
Obligations Fund, Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund was filed with
Registrant's Notice filed on August 30,
1995, pursuant to Rule 24f-2.
(b) Opinion of Special Counsel with respect to
Riverside Capital Tennessee Municipal
Obligations Fund is incorporated by
reference to Exhibit 10(b) of Post-Effective
Amendment No. 23 to Registrant's
Registration Statement (No. 33-21489) filed
on October 30, 1992.
(11) (a) Consent of KPMG Peat Marwick LLP is
incorporated by reference to Exhibit (11)(a)
of Post-Effective Amendment No. 34 to
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<PAGE> 120
Registrant's Registration Statement (No. 33-
21489) filed on April 25, 1996.
(b) Consent of Burch, Porter & Johnson is
incorporated by reference to Exhibit 11(b)
of Post-Effective Amendment No. 23 to
Registrant's Registration Statement (No. 33-
21489) filed on October 30, 1992.
(c) Consent of Coopers & Lybrand L.L.P.
(12) None.
(13) Purchase Agreement dated as of July 19,
1988, between Registrant and Winsbury Associates is
incorporated by reference to Pre-Effective Amend-
ment No. 2 to Registrant's Registration Statement
(No. 33-21489) filed on July 21, 1988.
(14) None.
(15) (a) Rule 12b-1 Plan (with respect to the
Riverside Capital Funds) is incorporated by
reference to Exhibit 15(a) of Pre-Effective
Amendment No. 2 to Registrant's Registration
Statement (No. 33-21489) filed on July 21,
1988.
(b) Rule 12b-1 Plan (with respect to the Key-
Premier Funds) is incorporated by reference
to Exhibit (15)(b) of Post-Effective
Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489) filed
on April 25, 1996.
(c) Rule 12b-1 Plan (with respect to the 1st
Source Monogram Funds).
(h) Rule 12b-1 Agreement dated October 1, 1993,
between The Winsbury Company Limited
Partnership and National Bank of Commerce
(with respect to Riverside Capital Money
Market Fund, Riverside Capital Equity Fund,
Riverside Capital Fixed Income Fund and
Riverside Capital Tennessee Municipal
Obligations Fund) is incorporated by
reference to Exhibit 15(h) of Post-Effective
Amendment No. 27 to Registrant's
Registration Statement (No. 33- 21489) filed
on October 19, 1993.
(m) Rule 12b-1 Agreement dated October 1, 1993,
between The Winsbury Company Limited
Partnership and Commerce Investment
Corporation (with respect to Riverside
Capital Money Market
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<PAGE> 121
Fund, Riverside Capital Value Equity Fund,
Riverside Capital Fixed Income Fund and
Riverside Capital Tennessee Municipal
Obligations Fund) is incorporated by
reference to Exhibit 15(m) of Post-Effective
Amendment No. 27 to Registrant's
Registration Statement (No. 33- 21489) filed
on October 19, 1993.
(n) Rule 12b-1 Agreement dated October 19, 1993,
between Registrant and The Winsbury Company
Limited Partnership (with respect to
Riverside Capital Money Market Fund,
Riverside Capital Equity Fund, Riverside
Capital Fixed Income Fund and Riverside
Capital Tennessee Municipal Obligations
Fund) is incorporated by reference to
Exhibit 15(n) of Post-Effective Amendment
No. 28 to Registrant's Registration
Statement (No. 33-21489) filed on February
4, 1994.
(o) Rule 12b-1 Agreement dated as of April 5,
1994, between The Winsbury Company Limited
Partnership and Commerce Investment Corpora-
tion (with respect to Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund) is
incorporated by reference to Exhibit 15(o)
of Post- Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(p) Rule 12b-1 Agreement dated as of April 5,
1994, between Registrant and The Winsbury
Company Limited Partnership (with respect to
Riverside Capital Low Duration Government
Securities Fund and Riverside Capital Growth
Fund) is incorporated by reference to
Exhibit 15(p) of Post-Effective Amendment
No. 30 to Registrant's Registration
Statement (No. 33- 21489) filed on August
24, 1994.
(s) Rule 12b-1 Agreement dated as of May 16,
1994, between J.C. Bradford & Co. and The
Winsbury Company Limited Partnership (with
respect to the Riverside Capital Funds) is
incorporated by reference to Exhibit 15(s)
of Post- Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(t) Rule 12b-1 Agreement dated as of May 16,
1994, between Morgan, Keegan & Co. and The
Winsbury Company Limited Partnership (with
respect to
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<PAGE> 122
the Riverside Capital Funds) is incorporated
by reference to Exhibit 15(t) of Post-
Effective Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed
on August 24, 1994.
(u) Rule 12b-1 Agreement dated as of August 1,
1994, between J.J.B. Hilliard, W.L. Lyons,
Inc. and The Winsbury Company Limited
Partnership (with respect to the Riverside
Capital Funds) is incorporated by reference
to Exhibit 15(u) of Post-Effective Amendment
No. 31 to Registrant's Registration
Statement (No. 33-21489) filed on October
14, 1994.
(v) Rule 12b-1 Agreement dated as of August 31,
1994, between TrustMark Investments, Inc.
and The Winsbury Company Limited Partnership
(with respect to the Riverside Capital
Funds) is incorporated by reference to
Exhibit 15(v) of Post-Effective Amendment
No. 31 to Registrant's Registration
Statement (No. 33- 21489) filed on October
14, 1994.
(w) Proposed Shareholder Services Agreement
dated July __, 1996, between BISYS Fund
Services Limited Partnership and Keystone
Brokerage, Inc. (with respect to the
KeyPremier Funds) is incorporated by
reference to Exhibit (15)(w) of
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No. 33-
21489) filed on April 25, 1996.
(x) Proposed Shareholder Services Agreement
dated July __, 1996, between BISYS Fund
Services Limited Partnership and Keystone
Investor Services, Inc. (with respect to the
KeyPremier Funds) is incorporated by
reference to Exhibit (15)(x) of
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(16) (a) Computation of Performance Quotations
for Riverside Capital Money Market Fund is
incorporated by reference to Exhibit 16(a)
of Post-Effective Amendment No. 27 to
Registrant's Registration Statement (No. 33-
21489) filed on October 19, 1993.
(b) Computation of Performance Quotations for
Riverside Capital Value Equity Fund and
Riverside Capital Fixed Income Fund is
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<PAGE> 123
incorporated by reference to Exhibit 16(b)
of Post-Effective Amendment No. 27 to
Registrant's Registration Statement (No. 33-
21489) filed on October 19, 1993.
(f) Computation of Performance Quotations for
Riverside Capital Tennessee Municipal
Obligations Fund is incorporated by
reference to Exhibit 16(f) of Post-Effective
Amendment No. 27 to Registrant's
Registration Statement (No. 33-21489) filed
on October 19, 1993.
(h) Computation of Performance Quotations for
Riverside Capital Low Duration Government
Securities Fund and Riverside Capital Growth
Fund is incorporated by reference to Exhibit
(16)(h) of Post-Effective Amendment No. 33
to Registrant's Registration Statement (No.
33- 21489) filed on October 30, 1995.
(i) Computation of Performance Quotations for
the KeyPremier Funds to be filed by
amendment.
(j) Computation of Performance Quotations for
the 1st Source Monogram Funds to be filed by
amendment.
(17) Financial Data Schedules for the KeyPremier
Funds and the 1st Source Monogram Funds to
be filed by amendment.
(18) None.
(19) (a) Powers of Attorney of Stephen G. Mintos,
Chalmers P. Wylie, Walter B. Grimm and
Maurice G. Stark are incorporated by
reference to Exhibit 17(a) of Post-Effective
Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed
on August 24, 1994.
(b) Consent of Baker & Hostetler.
Item 25. Persons Controlled By or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of March 31, 1996, the number of record holders of each
series of shares of the Registrant were as follows:
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<PAGE> 124
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Riverside Capital Money
Market Fund 28
Riverside Capital
Value Equity Fund 166
Riverside Capital
Fixed Income Fund 34
Riverside Capital Tennessee Municipal
Obligations Fund 21
Riverside Capital Low Duration
Government Securities Fund 6
Riverside Capital Growth Fund 56
KeyPremier Prime
Money Market Fund 0
KeyPremier Pennsylvania
Municipal Bond Fund 0
1st Source Monogram U.S. Treasury
Obligations Money Market Fund 0
1st Source Monogram Diversified
Equity Fund 0
1st Source Monogram Income Equity Fund 0
1st Source Monogram Special Equity Fund 0
1st Source Monogram Income Fund 0
1st Source Monogram Intermediate Tax-Free
Bond Fund 0
</TABLE>
Item 27. Indemnification
Article VI, Section 6.4 of the Registrant's Declaration of
Trust, filed as Exhibit 1 hereto, provides for the
indemnification of Registrant's Trustees and officers.
Indemnification of the Group's principal underwriter,
custodians, investment advisers, manager and administrator,
transfer agent and fund accountant is provided for,
respectively, in Section 1.11 of the Distribution Agreements
filed as Exhibits 6(a), 6(c) and 6(e) hereto, Section 8 of the
Custodial Services Agreement filed as Exhibit 8(a) hereto,
Article XVII, Section 14 of the Custody Agreement filed as
Exhibit 8(b) hereto, Article VIII, Section 8.1 of the Custody
Agreement filed as Exhibit 8(c) hereto, Section 8 of the
Investment Advisory Agreements filed as Exhibits 5(a), 5(b),
5(c), 5(d), 5(e) and 5(f) hereto, Section 4 of the Management
and Administration Agreements filed as Exhibits 9(a), 9(u),
9(x) and 9(aa) hereto, Section 9 of the Transfer Agency
Agreements filed as Exhibits 9(g), 9(z) and 9(ac) hereto, and
Section 6 of the Fund Accounting Agreements filed as Exhibits
9(h), 9(v), 9(y) and 9(ab) hereto. As of the effective date of
this Registration Statement, the Group will have obtained from
a major insurance carrier a trustees' and officers' liability
policy covering certain
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<PAGE> 125
types of errors and omissions. In no event will Registrant
indemnify any of its trustees, officers, employees or agents
against any liability to which such person would otherwise be
subject by reason of his willful misfeasance, bad faith, or
gross negligence in the performance of his duties, or by reason
of his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a
trustee, officer, or controlling person of Registrant in the
successful defense of any action, suit, or proceeding) is
asserted by such trustee, officer, or controlling person in
connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) National Bank of Commerce, Memphis, Tennessee ("NBC"),
is the investment adviser for Riverside Capital Money Market
Fund, Riverside Capital Value Equity Fund, Riverside Capital
Fixed Income Fund, Riverside Capital Tennessee Municipal
Obligations Fund, Riverside Capital Low Duration Government
Securities Fund and Riverside Capital Growth Fund. NBC is a
wholly owned subsidiary of National Commerce Bancorporation. In
addition to serving as investment adviser of such Funds, NBC
and its affiliates hold and manage, on behalf of their
clients, assets which as of September 30, 1995, totalled $3.5
billion, and of which approximately $917 million are managed in
a variety of balanced, equity and fixed income portfolios.
To the knowledge of Registrant, none of the directors or
officers of NBC, except those set forth below, is or has
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<PAGE> 126
been at any time during the past two fiscal years engaged in
any other business, profession, vocation or employment of a
substantial nature, except that certain officers and directors
of NBC also hold positions with NBC's parent, National Commerce
Bancorporation. Set forth below are the names and principal
businesses of the directors of NBC who are engaged in any other
business, profession, vocation, or employment of a substantial
nature.
<TABLE>
<CAPTION>
Position
Name with NBC Principal Occupation
---- -------- --------------------
<S> <C> <C>
Frank G. Barton, Jr. Director Chairman of the Board
Barton Group, Inc.
2620 Thousand Oaks Blvd., Suite 1200
Memphis, Tennessee 38118
(Retail Equipment Sales)
Jack R. Blair Director Smith & Nephew/Richards, Inc.
1450 East Brooks Road
Memphis, Tennessee 38116
(Medical Devices)
R. Grattan Brown, Jr. Director Partner, law firm of
Glankler, Brown, Gilliland, Chase,
Robinson & Raines
One Commerce Square
Memphis, Tennessee 38103
Bruce E. Campbell, Jr. Director Former Chairman
National Bank of Commerce
and National Commerce
Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Christopher W. Canale Director President
D. Canale Beverage, Inc.
45 E.H. Crumps Blvd.
Memphis, Tennessee 38106
(Distribution)
John D. Canale III Director President
D. Canale & Company, Inc.
7 West Georgia
Memphis, Tennessee 38103
(Distribution)
Edmond D. Cicala Director President
Edmond Enterprises, Inc.
1213 Park Place Center
Suite 200
Memphis, Tennessee 38119
(Consulting)
</TABLE>
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<PAGE> 127
<TABLE>
<S> <C> <C>
James K. Dobbs III Director Partner
Dobbs Brothers Management
P.O. Box 241750
Memphis, Tennessee 38124-1750
(Automobile)
John S. Evans Director Former President
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Thomas C. Farnsworth, Jr. Director Farnsworth Investment Co.
2175 Business Center Drive
Suite 11
Memphis, Tennessee 38134-5621
(Real Estate)
Thomas M. Garrett Chairman Chairman of the Board and
Chief Executive Officer
National Bank of Commerce and
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Mackie H. Gober President/ President
Director National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Lewis E. Holland Director Executive Vice President and
Chief Financial Officer
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
prior thereto -
Partner
Ernst & Young
One Commerce Square
Memphis, Tennessee 38103
(Accounting)
R. Lee Jenkins Director Retired
6075 Poplar, Suite 721
Memphis, Tennessee 38119
Michael McDonnell Director President
West Union Corporation
P.O. Box 3177
Memphis, Tennessee 38173-0177
(Distribution)
James E. McGehee, Jr. Director President
McGehee Realty & Development Company
675 Oakleaf Office Lane, Suite 102
Memphis, Tennessee 38117
(Real Estate)
W. Neely Mallory, Jr. Director President
Memphis Compress & Storage Company
P.O. Box 9436
Memphis, Tennessee 38109
(Cotton Warehousing)
</TABLE>
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<PAGE> 128
<TABLE>
<S> <C> <C>
Harry J. Phillips, Sr. Director Chairman of the Executive Committee
Browning-Ferris Industries
2750 One Commerce Square
Memphis, Tennessee 38103
(Waste Disposal Services)
William R. Reed, Jr. Director Executive Vice President
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Rudi E. Scheidt Director Retired
54 South White Station
Memphis, Tennessee 38117
Lucy Y. Shaw Director Retired
1674 South Parkway
East Memphis, Tennessee 38106
prior thereto -
Chief Executive Officer
Regional Medical Center at Memphis
877 Jefferson Avenue
Memphis, Tennessee 38103
(Hospital)
Robert M. Solmson Director President
RFS, Inc.
1213 Park Place Center, Suite 200
Memphis, Tennessee 38119
(Real Estate)
Sidney A. Stewart, Jr. Director Retired
5350 Poplar Avenue
Memphis, Tennessee 38119
R. Lee Taylor Director Private Investor
1755-A Lynnfield Drive
Suite 232
Memphis, Tennessee 38119
</TABLE>
(b) Martindale Andres & Company, Inc., West Conshohocken,
Pennsylvania ("Martindale Andres"), is the investment adviser
for KeyPremier Prime Money Market Fund and KeyPremier
Pennsylvania Municipal Bond Fund. Martindale Andres is a
wholly-owned subsidiary of Keystone Financial, Inc. In
addition to serving as investment adviser of such Funds,
Martindale Andres has managed since its founding the
investment portfolios of high net worth individuals,
endowments and pension and common trust funds. Martindale
Andres currently has over $1.6 billion under management,
including over $400 million of municipal securities.
To the knowledge of Registrant, none of the directors or
officers of Martindale Andres is or has been at any time
during the past two fiscal years engaged in any other
business, profession, vocation or employment of a substantial
nature, except that certain officers and
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<PAGE> 129
directors of Martindale Andres also hold positions with
Martindale Andres' parent, Keystone Financial, Inc.
(c) 1st Source Bank, South Bend, Indiana ("FSB"), is the
investment adviser for 1st Source Monogram U.S. Treasury
Obligations Money Market Fund, 1st Source Monogram Diversified
Equity Fund, 1st Source Monogram Income Equity Fund, 1st
Source Monogram Special Equity Fund, 1st Source Monogram
Income Fund and 1st Source Monogram Intermediate Tax-Free Bond
Fund. FSB is a wholly-owned subsidiary of 1st Source
Corporation. In addition to serving as investment adviser of
such Funds, FSB and its affiliates administer and manage, on
behalf of their clients, trust assets which as of March, 1996,
totalled approximately $1.2 billion. Of such amount,
approximately $668 million are managed on behalf of personal
trust customers and approximately $500 million are managed on
behalf of employee benefit plans. The Adviser has over 60
years of banking experience and as of December 31, 1995, had,
on a consolidated basis with 1st Source Corporation, over $1.6
billion in assets.
To the knowledge of Registrant, none of the directors or
officers of FSB, except those set forth below, is or has been
at any time during the past two fiscal years engaged in any
other business, profession, vocation or employment of a
substantial nature, except that certain officers and directors
of FSB also hold positions with FSB's parent, First Source
Corporation. Set forth below are the names and principal
businesses of the directors of FSB who are engaged in any
other business, profession, vocation, or employment of a
substantial nature.
Position
Name with FSB Principal Occupation
- ---- -------- --------------------
Rev. E. William Beauchamp Director Executive Vice President,
University of Notre Dame,
South Bend, Indiana 46556
Paul R. Bowles Director Former Senior Vice President
Clark Equipment Company
1202 East Jefferson
South Bend, Indiana 46617
(off-highway components and
construction machinery
manufacturing)
Philip J. Faccenda Director President
Bear Financial, Inc.
1222 E. Erskine Manor Hill
South Bend, Indiana 46617
(venture capital)
Vice President and General
Counsel Emeritus
University of Notre Dame
South Bend, Indiana 46556
Daniel B. Fitzpatrick Director Chairman, President, Chief
Executive Officer and Director
Quality Dining, Inc.
P.O. Box 416
South Bend, Indiana 46624
(quick service and casual
dining restaurant operator)
Terry L. Gerber Director President and Chief Executive
Officer
Gerber Manufacturing Company
1417 Olivia Circle
South Bend, Indiana 46614
(manufacturer of police and
emergency outerwear)
Lawrence E. Hiler Director President
Hiler Industries
P.O. Box 639
La Porte, Indiana 46350
Anne M. Hillman Director Civic Leader
3904 Nall Court
South Bend, Indiana 46614
Hollis E. Hughes, Jr. Executive Director
United Way of St. Joseph
County
3517 E. Jefferson
PO Box 6396
South Bend, Indiana 46660
H. Thomas Jackson Director Chairman
Bornemann Coated Fabrics
Bornemann Products
P.O. Box 208
Bremen, Indiana 46506
(vinyl sales)
William P. Johnson Chairman & CEO
Goshen Rubber Co. Inc.
1525 S. 10th Street
Goshen, Indiana 46527
(manufacturer of automotive
rubber parts)
Craig A. Kapson Director President
Jordan Ford, Toyota, Volvo,
Lincoln Mercury
609 E. Jefferson
Mishawaka, Indiana 46545
(automobile sales)
David L. Lerman Director President
Steel Warehouse Company, Inc.
2722 West Tucker Drive
South Bend, Indiana 46624
(warehouse storage)
Richard J. Pfeil Director Chairman and President
Koontz-Wagner Electric Co.
3801 Voorde Drive
South Bend, Indiana 46628
(electrical equipment repair,
construction and installation)
John T. Phair Director Vice President
The Holladay Corporation
220 Colfax, Suite 200
South Bend, Indiana 46601
(property management)
Mark D. Schwabero Executive Vice President
Bosch Braking Systems
401 No. Bendix Dr.
South Bend, Indiana 46634
(manufacturer of automotive
brakes and brake components)
Elmer H. Tepe Director President
E.H. Tepe Co.
c/o 1st Source Corporation
100 North Michigan Street
South Bend, Indiana 46634
(holding company)
(d) Miller Anderson and Sherrerd LLP, West Conshohocken,
Pennsylvania ("Miller Anderson") is a sub-investment adviser
for 1st Source Monogram Diversified Equity Fund. Miller
Anderson is wholly owned by Morgan Stanley Group, Inc., 1585
Broadway, New York, New York 10036. In addition to serving as
sub-investment adviser of such Fund, Miller Anderson provides
advice primarily to institutions, including other investment
companies, and currently has approximately $35 billion in
assets under management, of which approximately $2.4 billion
is managed using Miller Anderson's value style.
To the knowledge of Registrant, none of the directors or
officers of Miller Anderson, except those set forth below, is
or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or
employment of a substantial nature, except that certain
officers and directors of Miller Anderson also hold positions
with Miller Anderson's parent, Morgan Stanley Group, Inc. Set
forth below are the names and
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<PAGE> 130
principal businesses of the directors of Miller Anderson who
are engaged in any other business, profession, vocation, or
employment of a substantial nature.
<TABLE>
<CAPTION>
Partner Name and Address Nature of
of Miller Anderson of Business Connection
- ----------------- ---------------- ----------
<S> <C> <C>
Dean Williams Shanghai Dazhong Taxi Co., Ltd. Director
920 Nanjing Road, 16th Floor
Shanghai, China 200041
Marna C. Whittington Rohm & Haas Company Director
Independence Mall West
Philadelphia, Penn. 19105
Berwind Group Director
1500 Market Street
3000 Centre Square West
Philadelphia, Penn. 19102
Ellen D. Harvey, CFA Owosso Corporation Director
One Tower Bridge, 14th Floor
West Conshohocken, Pennsylvania 19428
</TABLE>
(e) Loomis Sayles & Company, L.P., Chicago, Illinois
("Loomis") is a sub-investment adviser for 1st Source Monogram
Diversified Equity Fund. The sole general partner of Loomis
is Loomis Sayles & Company, Incorporated, One Financial
Center, Boston, Massachusetts 02111. In addition to serving
as sub-investment adviser of such Fund, Loomis provides
investment advice to the nine series of Loomis Sayles
Funds, nine series of the Loomis Sayles Investment Trust,
six series of New England Funds Trust I, one series of New
England Funds Trust III, and three series of New England
Zenith Funds, all of which are registered investment
companies, and to other organizations and individuals.
To the knowledge of Registrant, none of the directors or
officers of Loomis is or has been at any time during the
past two fiscal years engaged in any other business,
profession, vocation or employment of a substantial nature.
(f) Columbus Circle Investors ("CCI") is a general
partnership formed on September 9, 1994, which is registered
as an investment adviser under the Investment Advisers Act of
1940. PIMCO Advisors L.P. and Columbus Circle Investors
Management Inc. ("CCI, Inc."), a wholly-
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<PAGE> 131
owned subsidiary of PIMCO Advisors L.P., are the general
partners of CCI. CCI consists of the personnel of the former
Columbus Circle Investors Division of Thomson Advisory Group
L.P. ("TAGLP") and the investment personnel of the former
Mutual Funds Division of TAGLP. CCI acts as sub-adviser to
other mutual funds and also advises and manages individual
accounts, profit sharing and pension funds and institutional
accounts.
To the knowledge of Registrant, set forth below are the
substantial business engagements during at least the two past
fiscal years of each director or senior executive officer of
CCI:
<TABLE>
<CAPTION>
NAME AND POSITION BUSINESS AND
WITH CCI OTHER CONNECTIONS
- ----------------- -----------------
<S> <C>
Irwin F. Smith Member of Equity and Operating Boards and
Chairman, Managing Operating Committee, PIMCO Advisors L.P.;
Director, Chief Director and Chairman, Columbus Circle
Executive Officer and Investors Management, Inc., Director,
Chief Investment Columbus Circle Trust Company
Officer
Donald A. Chiboucas Member of Operating Board, PIMCO Advisors
President and L.P.; Director and President, Columbus
Managing Director Circle Investors Management, Inc.
Louis P. Celentano Director and Vice President, Columbus
Managing Director Circle Investors Management, Inc.,
Director and Chairman, Columbus Circle
Trust Company
Daniel S. Pickett Member of Operating Board, PIMCO Advisors
Managing Director L.P. (1995); Director, Columbus Circle
Investors Management, Inc.
Amy M. Hogan Member of Operating Board, PIMCO Advisors
Managing Director L.P. (1996); Director, Columbus Circle
Investors Management, Inc.
Robert W. Fehrmann Director, Columbus Circle Investors
Managing Director Management Inc.
</TABLE>
The address of CCI, Columbus Circle Trust Company and Columbus
Circle Investors management Inc. is One Station Place,
Stamford, CT 06902.
PIMCO Advisors L.P. was organized as a limited partnership
under Delaware law in 1987 and is registered as an investment
adviser under the Investment Advisers Act of 1940. In
November 1994, PIMCO Advisors L.P. (then
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<PAGE> 132
known as Thomson Advisory Group, L.P. ("TAGLP")) combined its
investment advisory business with the investment advisory
business of several subsidiaries of Pacific Mutual Life
Insurance Company and changed its name to PIMCO Advisors L.P.
PIMCO Advisors L.P. manages three mutual fund complexes. PIMCO
Advisors L.P. also has various subsidiary partnerships,
including CCI, which advise and manage mutual funds,
individual accounts, profit-sharing and pension funds and
institutional accounts and act as sub-advisers to certain
mutual funds.
PIMCO Partners, G.P. ("PIMCO GP"), PIMCO Advisors L.P.'s
general partner, is a general partnership with two partners:
(i) an indirect wholly-owned subsidiary of Pacific Mutual Life
Insurance Company; and (ii) PIMCO Partners, L.L.C. ("LLC"), a
limited liability company, all of the interests of which are
held directly by the Managing Directors of Pacific Investment
Management Company who are William H. Gross, Dean S. Meiling,
James F. Muzzy, William F. Podlich, III, Frank B. Rabinovitch,
Brent R. Harris, John L. Hague, William S. Thompson, Jr.,
William C. Powers, David H. Edington and Benjamin L. Trosky
(collectively, the "Managing Directors"). PIMCO Partners, G.P.
has substantially delegated its management and control of
PIMCO Advisors L.P. to an Equity Board and an Operating board
of PIMCO Advisors L.P. The activities of PIMCO Advisors L.P.
are controlled by its Operating Board except that certain
non-routine or extraordinary actions may not be effected by
the Operating Board without the approval of PIMCO Advisors
L.P.'s Equity Board. The Operating Board has in turn delegated
the authority to manage day-to-day operations and policies to
an Operating Committee. The Operating Board is composed of
twelve members, of which seven (including the chairman) are
designated by Pacific Investment Management Company, a
subsidiary general partnership of PIMCO Advisors L.P. and a
sub-adviser to several mutual funds. The Equity Board is
composed of twelve members including the chief executive
officer of PIMCO Advisors L.P., three members designated by
Pacific Financial Asset Management Company, the chairman of
the Operating Board, two members designated by LLC, two
members designated by holders of Series B Preferred Stock of
Thomson Advisory Group Inc., the former general partner of
PIMCO Advisors L.P., and three independent members. Because of
the ability to designate a majority of the Members of the
Operating Board, Pacific Investment Management Company and the
Managing Directors could be said to control PIMCO Advisors
L.P., although the Managing Directors disclaim such authority.
C-25
<PAGE> 133
Item 29. Principal Underwriter
(a) BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services ("BISYS") acts as distributor and administrator for
Registrant. BISYS also distributes the securities of The
Victory Portfolios, The HighMark Group, The Parkstone Group of
Funds, the AmSouth Mutual Funds, the American Performance
Funds, The Coventry Group, the BB&T Mutual Funds Group, The
ARCH Fund, Inc., The M.S.D.& T. Funds, Inc., the Pacific
Capital Funds, the MMA Praxis Mutual Funds, The Riverfront
Funds, Inc., the Summit Investment Trust, the Qualivest Funds
and the Marketwatch Funds, each of which is a management
investment company.
(b) To the best of Registrant's knowledge, the partners
of BISYS are as follows:
<TABLE>
<CAPTION>
Positions and Offices Positions and
Name and Principal with The Winsbury Offices with
Business Address Company Registrant
------------------ --------------------- -------------
<S> <C> <C>
BISYS Fund Services, Sole General Partner None
Inc.
150 Clove Road
Little Falls, NJ 07424
WC Subsidiary Limited Partner None
Corporation
3435 Stelzer Rd.
Columbus, Ohio 43229
</TABLE>
Item 30. Location of Accounts and Records
(1) National Bank of Commerce, One Commerce Square, Memphis,
Tennessee 38150 (records relating to its functions as
investment adviser for the Riverside Capital Funds).
(2) Martindale Andres & Company, Inc., 200 Four Falls Corporate
Center, West Conshohocken, Pennsylvania 19428 (records
relating to its functions as investment adviser for the
KeyPremier Funds).
(3) 1st Source Bank, 100 North Michigan Street, South Bend,
Indiana 46634 (records relating to its functions as investment
adviser for the 1st Source Monogram Funds).
(4) Miller Anderson and Sherrerd LLP, One Tower Bridge, Suite
1100, West Conshohocken, Pennsylvania 19428 (records relating
to its functions as sub- investment adviser for 1st Source
Monogram Diversified Equity Fund).
(5) Loomis Sayles & Company, L.P., 3 First National Plaza, Suite
5450, Chicago, Illinois 60600 (records relating to
C-26
<PAGE> 134
its functions as sub-investment adviser for 1st Source
Monogram Diversified Equity Fund).
(6) Columbus Circle Investors, #1 Metro Place, Stamford,
Connecticut 06902 (records relating to its functions as
sub-investment adviser for 1st Source Monogram Diversified
Equity Fund).
(7) BISYS Fund Services Limited Partnership, 3435 Stelzer Road,
Columbus, Ohio 43219 (records relating to its functions as
manager, administrator and distributor).
(8) BISYS Fund Services Ohio, Inc. and BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as transfer agent and as
fund accountant).
(9) Baker & Hostetler, 65 East State Street, Columbus,
Ohio 43215 (Declaration of Trust, By-Laws, and Minute Books).
(10) National City Bank, 1900 East 9th Street, Cleveland, Ohio
44114 (records relating to its function as custodian for the
Riverside Capital Funds).
(11) The Bank of New York, 48 Wall Street, New York, New York 10286
(records relating to its function as custodian for the
KeyPremier Funds).
(12) The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati,
Ohio 45263 (records relating to its function as custodian for
the 1st Source Monogram Funds).
Item 31. Management Services
None
Item 32. Undertakings
Registrant undertakes to file a post-effective amendment,
using reasonably current financial statements of each of 1st
Source Monogram U.S. Treasury Obligations Money Market Fund,
1st Source Monogram Diversified Equity Fund, 1st Source
Monogram Income Equity Fund, 1st Source Monogram Special
Equity Fund, 1st Source Monogram Income Fund and 1st Source
Monogram Intermediate Tax-Free Bond Fund, which need not be
certified, within four to six months of the commencement of
operations of such Fund.
C-27
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbus, Ohio, on the 5th day of June, 1996.
THE SESSIONS GROUP
Registrant
/s/ Walter B. Grimm
-------------------------
Walter B. Grimm, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
-------- ----- ----
<S> <C> <C>
/s/ Walter B. Grimm Principal Executive June 5, 1996
- -------------------------- Officer and Trustee
Walter B. Grimm
/s/*Stephen G. Mintos Principal Financial June 5, 1996
- -------------------------- Officer and Principal
Stephen G. Mintos Accounting Officer
/s/*Maurice G. Stark Trustee June 5, 1996
- --------------------------
Maurice G. Stark
/s/*Chalmers P. Wylie Trustee June 5, 1996
- --------------------------
Chalmers P. Wylie
*By/s/ Walter B. Grimm June 5, 1996
- --------------------------
Walter B. Grimm
Attorney-In-Fact
</TABLE>
C-28
<PAGE> 136
EXHIBIT INDEX
Exhibit
No. Description Page
------- ----------- ----
1(a) Declaration of Trust dated as of
April 25, 1988, was filed as Exhibit
(1)(a) to Post-Effective Amendment No.
34 to Registrant's Registration
Statement (No. 33-21489) filed on
April 25, 1996.
(b) Amendment of Article IV, Section 4.2 of
Declaration of Trust adopted August 15,
1989, was filed as Exhibit (1)(b) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(c) Amendment of Article V, Section 5.3 of
Declaration of Trust adopted October 23,
1989, was filed as Exhibit (1)(c) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(d) Amendment of Article IV, Section 4.2 of
Declaration of Trust adopted July 23,
1991, was filed as Exhibit (1)(d) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(e) Amendment of Article IV, Section 4.2
of Declaration of Trust adopted
August 13, 1992, was filed as Exhibit
(1)(e) to Post-Effective Amendment No.
34 to Registrant's Registration
Statement (No. 33-21489) filed on
April 25, 1996.
(f) Amendment of Article IV, Section 4.2 of
Declaration of Trust as adopted
October 28, 1992, was filed as Exhibit
(1)(f) to Post-Effective Amendment No.
34 to Registrant's Registration
Statement (No. 33-21489) filed on
April 25, 1996.
(g) Amendment of Article IV, Section 4.2 of
Declaration of Trust as adopted
February 18, 1994, was filed as Exhibit
(1)(g) to Post-Effective Amendment No.
C-29
<PAGE> 137
EXHIBIT INDEX
Exhibit
No. Description Page
------- ----------- ----
34 to Registrant's Registration
Statement (No. 33-21489) filed on
April 25, 1996.
(h) Amendment of Article IV, Section 4.2 of
Declaration of Trust as adopted May 16,
1994, was filed as Exhibit (1)(h) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(i) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted
April 10, 10, 1996, was filed as
Exhibit (1)(i) to Post-Effective
Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489)
filed on April 25, 1996.
(j) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted May 16,
1996.
2 By-Laws were filed as Exhibit (2) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
5(a) Investment Advisory Agreement dated as
of July 19, 1988, between Registrant and
National Bank of Commerce (with respect
to Riverside Capital Money Market Fund)
was filed as Exhibit (5)(a) to Post-
Effective Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489)
filed on April 25, 1996.
(b) Investment Advisory Agreement dated as
of September 20, 1991, between Registrant and
National Bank of Commerce
(with respect to Riverside Capital Value
Equity Fund and Riverside Capital Fixed
Income Fund) was filed as Exhibit (5)(b)
to Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(c) Investment Advisory Agreement dated as
C-30
<PAGE> 138
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
of October 27, 1992, between Registrant
and National Bank of Commerce (with
respect to Riverside Capital Tennessee
Municipal Obligations Fund) was filed as
Exhibit (5)(c) to Post-Effective
Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489)
filed on April 25, 1996.
(d) Investment Advisory Agreement dated
April 5, 1994, as amended June 3, 1994,
between Registrant and National Bank of
Commerce (with respect to Riverside
Capital Low Duration Government Securities
Fund and Riverside Capital Growth
Fund) was filed as Exhibit (5)(d) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(e) Proposed Investment Advisory Agreement
dated July __, 1996, between Registrant
and Martindale Andres & Company, Inc.
(with respect to the KeyPremier Funds)
was filed as Exhibit (5)(e) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(f) Proposed Investment Advisory Agreement
dated August __, 1996, between
Registrant and 1st Source Bank (with
respect to 1st Source Monogram Funds).
(g) Proposed Sub-Investment Advisory
Agreement dated August __, 1996, between
1st Source Bank and Miller Anderson &
Sherrerd LLP (with respect to 1st Source
Monogram Diversified Equity Fund).
(h) Proposed Sub-Investment Advisory
Agreement dated August __, 1996, between
1st Source Bank and Loomis Sayles &
Company, L.P. (with respect to 1st
Source Monogram Diversified Equity Fund).
(i) Proposed Sub-Investment Advisory
Agreement dated August __, 1996, between
C-31
<PAGE> 139
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
1st Source Bank and Columbus Circle
Investors (with respect to 1st Source
Monogram Diversified Equity Fund).
6(a) Distribution Agreement dated October 1,
1993, as amended as of June 3, 1994,
between Registrant and The Winsbury
Company Limited Partnership was filed as
Exhibit 6(a) to Post-Effective Amendment
No. 30 to Registrant's Registration
Statement (No. 33-21489) filed on
August 24, 1994.
(b) Form of Selected Dealer Agreement was
filed as Exhibit (6)(b) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(c) Proposed Distribution Agreement dated as
of July __, 1996, between Registrant and
BISYS Fund Services Limited Partnership
(relating to the KeyPremier Funds) was
filed as Exhibit (6)(c) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(d) Form of Shareholder Services Agreement
was filed as Exhibit (6)(d) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(e) Proposed Distribution Agreement dated as
of August __, 1996, between Registrant and
BISYS Fund Services Limited
Partnership (relating to the 1st Source
Monogram Funds).
8(a) Custodial Services Agreement dated as of
March 1, 1995, between Registrant and
National City Bank (with respect to the
Riverside Capital Funds) was filed as
Exhibit 8 of Post-Effective Amendment
No. 33 to Registrant's Registration
Statement (No. 33-21489) filed on
October 30, 1995.
C-32
<PAGE> 140
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
(b) Proposed Custody Agreement dated
July __, 1996, between Registrant and
The Bank of New York (with respect to
the KeyPremier Funds) was filed as
Exhibit (8)(b) to Post-Effective
Amendment No. 34 to Registrant's
Registration Statement (No.33-21489)
filed on April 25, 1996.
(c) Proposed Custody Agreement dated
August __, 1996, between Registrant and
The Fifth Third Bank (with respect
to the 1st Source Monogram Funds).
9(a) Management and Administration Agreement
dated August 23, 1990, as amended
October 27, 1992, between Registrant and
The Winsbury Company Limited Partnership
(with respect to Riverside Capital Money
Market Fund, Riverside Capital Equity
Fund, Riverside Capital Fixed Income
Fund and Riverside Capital Tennessee
Municipal Obligations Fund) was filed as
Exhibit 9(a) to Post-Effective Amendment
No. 25 to Registrant's Registration
Statement (No.33-21489) filed on
April 27, 1993.
(g) Transfer Agency Agreement dated as of
September 1, 1992, as amended as of May
1, 1994, between Registrant and BISYS
Fund Services Ohio, Inc. (formerly The
Winsbury Service Corporation) (with
respect to the Riverside Capital Funds)
was filed as Exhibit 9(g) to Post-
Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
C-33
<PAGE> 141
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
(h) Fund Accounting Agreement dated February
4, 1993, between Registrant and The
Winsbury Service Corporation (with
respect to Riverside Capital Money
Market Fund, Riverside Capital Equity
Fund, Riverside Capital Fixed Income
Fund and Riverside Capital Municipal
Obligations Fund) was filed as Exhibit
9(h) to Post-Effective Amendment No. 25
to Registrant's Registration Statement
(No. 33-21489) filed on April 27, 1993.
(r) Administrative Services Plan of
Registrant effective October 19, 1993
was filed as Exhibit 9(r) to Post-
Effective Amendment No. 28 to
Registrant's Registration Statement (No.
33-21489) filed on February 4, 1994.
(s) Servicing Agreement to Administrative
Services Plan dated as of October 19,
1993, between Registrant and National
Bank of Commerce (with respect to
Riverside Capital Money Market Fund,
Riverside Capital Equity Fund, Riverside
Capital Fixed Income Fund and Riverside
Capital Tennessee Municipal Obligations
Fund) was filed as Exhibit 9(s) to Post-
Effective Amendment No. 29 to
Registrant's Registration Statement (No.
33-21489) filed on April 4, 1994.
(u) Management and Administration Agreement
dated April 5, 1994, as amended as of
June 3, 1994, between Registrant and The
Winsbury Company Limited Partnership
(with respect to Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund) was filed
as Exhibit 9(u) to Post-Effective
Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489)
filed on August 24, 1994.
C-34
<PAGE> 142
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
(v) Fund Accounting Agreement dated April 5,
1994, as amended June 3, 1994, between
Registrant and The Winsbury Service
Corporation (with respect to Riverside
Capital Low Duration Government
Securities Fund and Riverside Capital
Growth Fund) was filed as Exhibit 9(v)
to Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(w) Servicing Agreement to Administrative
Services Plan dated April 5, 1994,
between Registrant and National Bank of
Commerce (with respect to Riverside
Capital Low Duration Government
Securities Fund and Riverside Capital
Growth Fund) was filed as Exhibit 9(w)
to Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(x) Proposed Management and Administration
Agreement dated July __, 1996, between
Registrant and BISYS Fund Services
Limited Partnership (with respect to the
KeyPremier Funds) was filed as Exhibit
(9)(x) to Post-Effective Amendment No.
34 to Registrant's Registration
Statement (No. 33-21489) filed on April
25, 1996.
(y) Proposed Fund Accounting Agreement dated
July __, 1996, between Registrant and
BISYS Fund Services Ohio, Inc. (with
respect to the KeyPremier Funds) was
filed as Exhibit (9)(y) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(z) Proposed Transfer Agency Agreement dated
July __, 1996, between Registrant and
BISYS Fund Services Ohio, Inc. (with
respect to the KeyPremier Funds) was
filed as Exhibit (9)(z) to Post-
Effective Amendment No. 34 to
C-35
<PAGE> 143
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(aa) Proposed Management and Administration
Agreement dated August __, 1996, between
Registrant and BISYS Fund Services
Limited Partnership (with respect to the
1st Source Monogram Funds).
(ab) Proposed Fund Accounting Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect
to the 1st Source Monogram Funds).
(ac) Proposed Transfer Agency Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect
to the 1st Source Monogram Funds).
(ad) Form of Servicing Agreement to
Administrative Services Plan.
10(a) Opinion of Counsel with respect to
Shares of 1st Source Monogram U.S.
Treasury Obligations Money Market Fund,
1st Source Monogram Diversified Equity Fund,
1st Source Monogram Income Equity Fund,
1st Source Monogram Special Equity Fund,
1st Source Monogram Income Fund and
1st Source Monogram Intermediate Tax-
Free Bond Fund. Opinion of Counsel with
respect to Shares of the KeyPremier
Prime Money Market Fund and the
KeyPremier Pennsylvania Municipal Bond
Fund was filed as Exhibit (10)(a) to
Post-Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996. An
Opinion of Counsel was filed by Notice
on August 30, 1995, pursuant to Rule
24f-2 (with respect to Riverside Capital
Money Market Fund, Riverside Capital
Value Equity Fund, Riverside Capital
Fixed Income Fund, Riverside Capital
Tennessee Municipal Obligations Fund,
Riverside Capital Low Duration
Government Securities Fund and Riverside
Capital Growth Fund).
(b) Opinion of Special Counsel with respect
to Riverside Capital Tennessee Municipal
Obligations Fund was filed as Exhibit
C-36
<PAGE> 144
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
10(b) to Post-Effective Amendment No. 23
to Registrant's Registration Statement
(No. 33-21489) filed on October 30,
1992.
11(a) Consent of KPMG Peat Marwick LLP was
filed as Exhibit (11)(a) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(b) Consent of Burch, Porter & Johnson was
filed as Exhibit 11(b) to Post-Effective
Amendment No. 23 to Registrant's
Registration Statement (No. 33-21489)
filed on October 30, 1992.
(c) Consent of Coopers & Lybrand L.L.P.
13 Purchase Agreement dated as of July 19,
1988, between Registrant and Winsbury
Associates was filed as Exhibit 13 to
Pre-Effective Amendment No. 2 to
Registrant's Registration Statement (No.
33-21489) filed on July 21, 1988.
15(a) Rule 12b-1 Plan (with respect to the
Riverside Capital Funds) was filed
as Exhibit 15(a) to Pre-Effective
Amendment No. 2 to Registrant's
Registration Statement (No. 33-21489)
filed on July 21, 1988.
(b) Rule 12b-1 Plan (with respect to the
KeyPremier Funds) was filed as Exhibit
(15)(b) to Post-Effective Amendment No.
34 to Registrant's Registration
Statement (No. 33-21489) filed on April
25, 1996.
(c) Rule 12b-1 Plan (with respect to the 1st
Source Monogram Funds).
(h) Rule 12b-1 Agreement dated October 1,
1993, between The Winsbury Company
Limited Partnership and National Bank of
Commerce (with respect to Riverside
Capital Money Market Fund, Riverside
C-37
<PAGE> 145
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
Capital Equity Fund, Riverside Capital
Fixed Income Fund and Riverside Capital
Tennessee Municipal Obligations Fund)
was filed as Exhibit 15(h) to Post-
Effective Amendment No. 27 to
Registrant's Registration Statement (No.
33-21489) filed on October 19, 1993.
(m) Rule 12b-1 Agreement dated October 1,
1993, between The Winsbury Company
Limited Partnership and Commerce
Investment Corporation (with respect to
Riverside Capital Money Market Fund,
Riverside Capital Value Equity Fund,
Riverside Capital Fixed Income Fund and
Riverside Capital Tennessee Municipal
Obligations Fund) was filed as Exhibit
15(m) to Post-Effective Amendment No. 27
to Registrant's Registration Statement
(No. 33-21489) filed on October 19,
1993.
(n) Rule 12b-1 Agreement dated October 19,
1993, between Registrant and The
Winsbury Company Limited Partnership
(with respect to Riverside Capital Money
Market Fund, Riverside Capital Value
Equity Fund, Riverside Capital Fixed
Income Fund and Riverside Capital
Tennessee Municipal Obligations Fund)
was filed as Exhibit 15(n) to Post-
Effective Amendment No. 28 to
Registrant's Registration Statement (No.
33-21489) filed on February 4, 1994.
(o) Rule 12b-1 Agreement dated as of April
5, 1994, between The Winsbury Company
Limited Partnership and Commerce
Investment Corporation (with respect to
Riverside Capital Low Duration
Government Securities Fund and Riverside
Capital Growth Fund) was filed as
Exhibit 15(o) to Post-Effective
Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489)
filed on August 24, 1994.
(p) Rule 12b-1 Agreement dated as of
C-38
<PAGE> 146
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
April 5, 1994, between Registrant and The
Winsbury Company Limited Partnership
(with respect to Riverside Capital Low
Duration Government Securities Fund and
Riverside Capital Growth Fund) was filed
as Exhibit 15(p) to Post-Effective
Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489)
filed on August 24, 1994.
(s) Rule 12b-1 Agreement dated as of May 16,
1994, between J.C. Bradford & Co. and
The Winsbury Company Limited Partnership
(with respect to The Riverside Capital
Funds) was filed as Exhibit 15(s) to
Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(t) Rule 12b-1 Agreement dated as of May 16,
1994, between Morgan, Keegan & Co. and
The Winsbury Company Limited Partnership
(with respect to The Riverside Capital
Funds) was filed as Exhibit 15(t) to
Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(u) Rule 12b-1 Agreement dated as of August
1, 1994, between J.J.B. Hilliard, W.L.
Lyons, Inc. and The Winsbury Company
Limited Partnership (with respect to the
Riverside Capital Funds) was filed as
Exhibit 15(u) to Post- Effective
Amendment No. 31 to Registrant's
Registration Statement (No. 33-21489)
filed on October 14, 1994.
(v) Rule 12b-1 Agreement dated as of August
31, 1994, between TrustMark Investments,
Inc. and The Winsbury Company Limited
Partnership Agreement (with respect to
the Riverside Capital Funds) was filed
as Exhibit 15(v) to Post-Effective
Amendment No. 31 to Registrant's
Registration Statement (No. 33-21489)
filed on October 14, 1994.
C-39
<PAGE> 147
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
(w) Proposed Shareholder Services Agreement
dated July __, 1996, between BISYS Fund
Services Limited Partnership and
Keystone Brokerage, Inc. (with respect
to the KeyPremier Funds) was filed as
Exhibit (15)(w) to Post-Effective
Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489)
filed on April 25, 1996.
(x) Proposed Shareholder Services Agreement
dated July __, 1996, between BISYS Fund
Services Limited Partnership and
Keystone Investor Services, Inc. (with
respect to the KeyPremier Funds) was
filed as Exhibit (15)(x) to Post-
Effective Amendment No. 34 to
Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
16(a) Computation of Performance Quotations
for Riverside Capital Money Market
Fund was filed as Exhibit 16(a) to Post-
Effective Amendment No. 27 to
Registrant's Registration Statement (No.
33-21489) filed on October 19, 1993.
(b) Computation of Performance Quotations
for Riverside Capital Value Equity Fund
and Riverside Capital Fixed Income Fund
was filed as Exhibit 16(b) to Post-
Effective Amendment No. 27 to
Registrant's Registration Statement (No.
33-21489) filed on October 19, 1993.
(f) Computation of Performance Quotations
for Riverside Capital Tennessee
Municipal Obligations Fund was filed as
Exhibit 16(f) to Post-Effective
Amendment No. 27 to Registrant's
Registration Statement (No. 33-21489)
filed on October 19, 1993.
(h) Computation of Performance Quotations
for Riverside Capital Low Duration
Government Securities Fund and Riverside
Capital Growth Fund was filed as Exhibit
16(h) to Post-Effective Amendment No. 33
C-40
<PAGE> 148
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
to Registrant's Registration Statement
(No. 33-21489) filed on October 30,
1995.
(i) Computation of Performance Quotations
for the KeyPremier Funds to be filed by
amendment.
(j) Computation of Performance Quotations
for the 1st Source Monogram Funds to be
filed by amendment.
17 Financial Data Schedules for the
KeyPremier Funds and the 1st Source
Monogram Funds to be filed by amendment.
18 None.
19(a) Powers of Attorney of Stephen G. Mintos,
Maurice G. Stark and Chalmers P. Wylie,
Walter B. Grimm were filed as Exhibit
17(a) to Post-Effective Amendment No. 30
to Registrant's Registration Statement
(No. 33-21489) filed on August 24, 1994.
(b) Consent of Baker & Hostetler
C-41
<PAGE> 149
As filed with the Securities and Exchange Commission June 6, 1996
1933 Act Registration No. 33-21489
1940 Act File No. 811-5545
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 \x\
Post-Effective Amendment No. 35 \x\
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 \x\
Amendment No. 37 \x\
The Sessions Group
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(800) 752-1823
<PAGE> 1
EXHIBIT (1)(j)
<PAGE> 2
THE SESSIONS GROUP
AMENDMENT TO DECLARATION OF TRUST
Amended: May 16, 1996
The first paragraph of ARTICLE IV, Section 4.2 of the Group's
Declaration of Trust dated as of April 25, 1988, as amended to date, is amended
further by deleting such first paragraph of ARTICLE IV, Section 4.2 in
its entirety and by substituting in place thereof the following new first
paragraph of ARTICLE IV, Section 4.2:
"Section 4.2. Establishment and Designation of Series
Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further series, there is hereby established and
designated an initial series of shares designated Series A, which shall
represent interests in Riverside Capital Money Market Fund, and there is further
established and designated additional series of shares designated Series D,
which shall represent interests in Riverside Capital Value Equity Fund, Series
E, which shall represent interests in Riverside Capital Fixed Income Fund,
Series M, which shall represent interests in Riverside Capital Tennessee
Municipal Obligations Fund, Series Q, which shall represent interests in
Riverside Capital Low Duration Government Securities Fund, Series S, which shall
represent interests in Riverside Capital Growth Fund, Series U, which shall
represent interests in KeyPremier Prime Money Market Fund, Series V, which shall
represent interests in KeyPremier Pennsylvania Municipal Bond Fund, Series W,
which shall represent interests in 1st Source Monogram U.S. Treasury Obligations
Money Market Fund, Series X, which shall represent interests in 1st Source
Monogram Diversified Equity Fund, Series Y, which shall represent interests in
1st Source Monogram Income Equity Fund, Series Z, which shall represent
interests in 1st Source Monogram Special Equity Fund, Series AA, which shall
represent interests in 1st Source Monogram Income Fund, and Series AB, which
shall represent interests in 1st Source Monogram Intermediate Tax-Free Bond
Fund. Shares of Series A, Series D, Series E, Series M, Series Q, Series S,
Series U, Series V, Series W, Series X, Series Y, Series Z, Series AA, Series AB
and of any further series that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further series or subseries at the time of establishing and
designating the same) have the following relative rights and preferences:"
<PAGE> 1
Exhibit (5)(f)
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of August __, 1996, between THE SESSIONS
GROUP, an Ohio business trust (the "Trust"), and 1st Source Bank, an Indiana
banking corporation (the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to provide,
or to arrange for the provision of, investment advisory services to six newly
created investment portfolios of the Trust and may retain the Investment Adviser
to serve in such capacity to certain additional investment portfolios of the
Trust, all as now or hereafter may be identified in Schedule A hereto (such new
investment portfolios and any such additional investment portfolios together
called the "Funds") and the Investment Adviser represents that it is willing and
possesses legal authority to so furnish such services without violation of
applicable laws (including the Glass- Steagall Act) and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
Section 1. Appointment. The Trust hereby appoints the Investment
Adviser to act as investment adviser to the Funds for the period and on the
terms set forth in this Agreement. The Investment Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. Additional investment portfolios may from time to
time be added to those covered by this Agreement by the parties executing a new
Schedule A which shall become effective upon its execution and shall supersede
any Schedule A having an earlier date.
Section 2. Delivery of Documents. The Trust has furnished the
Investment Adviser with copies properly certified or authenticated of each of
the following:
(a) the Trust's Declaration of Trust, executed as of April
25, 1988, and as filed with the Secretary of State of Ohio on April 25,
1988, and any and all amendments thereto or restatements thereof (such
Declaration, as presently in effect and as it shall from time to time
be amended or restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
- 1 -
<PAGE> 3
(c) resolutions of the Trust's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission
on April 27, 1988 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-lA under
the Securities Act of 1933, as amended ("1933 Act"), (File No.
33-21489), and under the 1940 Act as filed with the Securities and
Exchange Commission and the most recent amendment thereto; and
(f) the most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and Statement of
Additional Information, as presently in effect, and all amendments and
supplements thereto, are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to
time with copies of all amendments of or supplements to the foregoing.
Section 3. Management. Subject to the supervision of the Trust's Board
of Trustees, the Investment Adviser will provide, or arrange for the provision
of, a continuous investment program for each of the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. The Investment Adviser will determine, or arrange for
others to determine, from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds and
will implement, or arrange for others to implement, such determinations through
the placement, in the name of the Funds, of orders for the execution of
portfolio transactions with or through such brokers or dealers as it may select.
The Investment Adviser will provide, or arrange for the provision of, the
services under this Agreement in accordance with each of the Fund's investment
objectives, policies, and restrictions as stated in the Prospectus and
resolutions of the Trust's Board of Trustees.
Subject to the provisions of this Agreement, the Declaration of Trust
and the 1940 Act, the Investment Adviser directly and indirectly may select and
enter into contracts with one or more qualified investment advisers
("Sub-Advisers") to provide to the Trust some or all of the services required by
this Agreement. With respect to any such appointment by the Investment Adviser
of any of the Sub-Advisers, the Investment Adviser will, as appropriate:
- 2 -
<PAGE> 4
(a) advise the Sub-Advisers with respect to economic
conditions and trends;
(b) assist Sub-Advisers with the placement of orders for the
purchase and sale of securities;
(c) assist and consult with the Sub-Advisers in connection
with the Funds' continuous investment programs; and
(d) periodically review, evaluate and report to the Trust's
Board of Trustees with respect to the performance of the
Sub-Advisers.
In fulfilling its responsibilities hereunder, the Investment Adviser
further agrees that it will, or, with respect to services provided to the Trust
by any of the Sub-Advisers appointed by the Investment Adviser, that it will
require that each of the Sub- Advisers:
(a) use the same skill and care in providing such services as it
uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its
activities under this Agreement (or any applicable sub-investment
advisory agreement) in accordance with any applicable regulations of
any governmental authority pertaining to the investment advisory
activities of the Investment Adviser;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to its investment determinations for
the Funds either directly with the issuer or with any broker or dealer.
In placing orders with brokers and dealers, the Investment Adviser will
attempt to obtain, or require that each of the Sub-Advisers obtain,
prompt execution of orders in an effective manner at the most favorable
price. In assessing the best execution available for any transaction,
the Investment Adviser or any of the Sub-Advisers shall consider all
factors it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and
execution capability of the broker-dealer and the reasonableness of the
commission, if any (for the specific transaction and on a continuing
basis). Consistent with this obligation, the Investment Adviser and any
of the Sub-Advisers may, in its discretion and to the extent permitted
by law, purchase and sell portfolio
- 3 -
<PAGE> 5
securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of the Funds
and/or other accounts over which the Investment Adviser or any of the
Sub-Advisers exercises investment discretion. Subject to the review of
the Trust's Board of Trustees from time to time with respect to the
extent and continuation of the policy, the Investment Adviser and any
of the Sub-Advisers are authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
effecting a securities transaction for any of the Funds which is in
excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, the Investment
Adviser or Sub-Advisers determine in good faith that such commission
was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the
Investment Adviser or Sub-Advisers with respect to the accounts as to
which it exercises investment discretion. Except as otherwise disclosed
to the shareholders of the Funds and as permitted by applicable laws,
rules and regulations, in no instance will portfolio securities be
purchased from or sold to BISYS Fund Services Limited Partnership, the
Investment Adviser, any Sub-Adviser, or any affiliated person of the
Trust, BISYS Fund Services Limited Partnership, the Investment Adviser
or any Sub-Adviser;
(e) will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the Trust's Board
of Trustees such periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information
of the Trust all records and other information relative to the Trust
and the Funds and prior, present, or potential shareholders, and will
not 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 Trust, which
approval shall not be unreasonably withheld and may not be withheld
where the Investment Adviser or any Sub-Adviser 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 Trust; and
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations
for the Funds, the Investment Adviser's or Sub-Advisers' personnel will
not inquire or take into consideration whether the issuers of
securities proposed for
- 4 -
<PAGE> 6
purchase or sale for the Trust's account are customers of the
Investment Adviser or any Sub-Adviser or of their respective parents,
subsidiaries or affiliates. In dealing with such customers, the
Investment Adviser or any Sub-Adviser and their respective parents,
subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust.
Section 4. Services Not Exclusive. The investment management services
furnished by the Investment Adviser and any Sub-Adviser hereunder are not to be
deemed exclusive, and the Investment Adviser and any Sub-Adviser shall be free
to furnish similar services to others so long as its services under this
Agreement or any sub-advisory agreement are not impaired thereby.
Section 5. Books and Records. In compliance with the requirements of
Rule 31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Funds are the property of the Trust and
further agrees to surrender promptly, and to require each of the Sub-Advisers to
surrender promptly, to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve, and to require each of the
Sub- Advisers to preserve, for the periods prescribed by Rule 31a-2 under the
1940 Act, the records required to be maintained by Rule 31a-1 under the 1940
Act.
Section 6. Expenses. During the term of this Agreement, the Investment
Adviser will pay all expenses, including as applicable, the compensation of any
Sub-Advisers appointed by it, incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
Section 7. Compensation. For the services provided and the expenses
assumed pursuant to this Agreement, each of the Funds will pay the Investment
Adviser and the Investment Adviser will accept as full compensation therefor a
fee as set forth on Schedule A hereto. The obligations of the Funds to pay the
above-described fee to the Investment Adviser will begin as of the respective
dates of the initial public sale of shares in the Funds; provided, however, that
the Investment Adviser, upon five days' notice, may from time to time waive some
or all of such fees.
If in any fiscal year the aggregate expenses of any of the
Funds (as defined under the securities regulations of any state having
jurisdiction over the Trust) exceed the expense limitations of any such state,
the Investment Adviser will reimburse the Fund for a portion of such excess
expenses equal to such excess times the ratio of the fees otherwise payable by
the Fund to the Investment Adviser hereunder to the aggregate fees otherwise
payable by the Fund to the Investment Adviser hereunder and to
- 5 -
<PAGE> 7
BISYS Fund Services Limited Partnership under the Administration Agreement
between BISYS Fund Services Limited Partnership and the Trust. The obligation of
the Investment Adviser to reimburse the Funds hereunder is limited in any fiscal
year to the amount of its fee hereunder for such fiscal year, provided, however,
that notwithstanding the foregoing, the Investment Adviser shall reimburse the
Funds for such proportion of such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the securities
regulations of any state having jurisdiction over the Trust so require. Such
expense reimbursement, if any, will be estimated daily and reconciled and paid
on a monthly basis.
Section 8. Limitation of Liability. The Investment Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
Section 9. Duration and Termination. This Agreement will become
effective as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date a registration statement relating to that
Fund becomes effective with the Securities and Exchange Commission and Schedule
A hereto is amended to add such Fund), provided that it shall have been approved
by vote of a majority of the outstanding voting securities of such Fund, in
accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until August __, 1998.
Thereafter, if not terminated, this Agreement shall continue
in effect as to a particular Fund for successive periods of twelve months each
ending on August ___ of each year, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Trust's Board of Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding Shares of such Fund. Notwithstanding the foregoing, this
Agreement may be terminated as to a particular Fund at any time on sixty days'
written notice, without the payment of any penalty, by the Trust (by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund) or by the Investment Adviser. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms
- 6 -
<PAGE> 8
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meanings as ascribed to such terms in the 1940
Act.)
Section 10. Investment Adviser's Representations. The Investment
Adviser hereby represents that it is willing and possesses all requisite legal
authority to provide the services contemplated by this Agreement without
violation of applicable laws and regulations, including but not limited to the
Glass-Steagall Act and the regulations promulgated thereunder.
Section 11. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
Section 12. Name. The Trust hereby acknowledges that the name "1st
Source Monogram" is a property right of the Investment Adviser. The Investment
Adviser agrees that the Trust and the Funds may, so long as this Agreement
remains in effect, use "1st Source" as part of its name. The Investment Adviser
may permit other persons, firms or corporations, including other investment
companies, to use such name and may, upon termination of this Agreement, require
the Trust and the Funds to refrain from using the name "1st Source" in any form
or combination in its name or in its business or in the name of any of its
Funds, and the Trust shall, as soon as practicable following its receipt of any
such request from the Investment Adviser, so refrain from using such name.
Section 13. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. 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 be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the State of Ohio.
The Sessions Group is a business trust organized under
Chapter 1746, Ohio Revised Code and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of Ohio as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Sessions Group"
entered into in the name or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, officers, employees, agents or
shareholders of the Trust personally, but bind only the assets of the Trust, as
set forth in Section 1746.13(A), Ohio Revised Code, and all persons dealing with
any of the Funds of the Trust
- 7 -
<PAGE> 9
must look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE SESSIONS GROUP
By
----------------------------------
Name Walter B. Grimm
--------------------------------
Title President
-------------------------------
1ST SOURCE BANK
By
----------------------------------
Name
--------------------------------
Title
-------------------------------
- 8 -
<PAGE> 10
Dated: August __, 1996
Schedule A
to the
Investment Advisory Agreement
between The Sessions Group and
1st Source Bank
dated as of August __, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------ ----
<S> <C> <C>
1st Source Monogram U.S. Annual Rate of August __, 1996
Treasury Obligations thirty-five one-
Money Market Fund hundredths of one
percent (0.35%) of
such Fund's average
net assets
1st Source Monogram Annual rate of one August __, 1996
Diversified Equity hundred ten one-
Fund hundredths of one
percent (1.10%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August __, 1996
Income Equity Fund eighty one-
hundredths of one
percent (0.80%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August __, 1996
Special Equity Fund eighty one-
hundredths of one
percent (0.80%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August __ , 1996
Income Fund fifty-five one-
hundredths of one
percent (0.55%) of
such Fund's average
daily net assets
</TABLE>
- ------------------------
*All Fees are computed daily and paid monthly.
A-1
<PAGE> 11
<TABLE>
<CAPTION>
<S> <C> <C>
1st Source Monogram Annual Rate of August __, 1996
Intermediate Tax- fifty-five one-
Free Bond Fund hundredths of one
percent (0.55%) of
such Fund's average
daily net assets
</TABLE>
THE SESSIONS GROUP
By
----------------------------------
Name Walter B. Grimm
--------------------------------
Title President
-------------------------------
1ST SOURCE BANK
By
----------------------------------
Name
--------------------------------
Title
-------------------------------
A-2
<PAGE> 1
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the ____ day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Miller Andersen & Sherrend LLP, a __________ limited
liability partnership (the "Sub- Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund
(the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August __, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "MAS Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the MAS Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time
<PAGE> 2
to time, be supplemented or amended and in resolutions of the Trust's Board of
Trustees. The Adviser agrees to furnish the Sub- Adviser from time to time
copies of all amendments of or supplements to such Prospectus and Statement of
Additional Information. The Sub-Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Adviser, the Fund or the Trust in any way.
2. Sub-Advisory Services. Subject to such instructions and supervision
as the Adviser may from time to time furnish, the continuous investment program
of the MAS Portfolio provided by the Sub-Adviser shall include, among other
things, investment research and management with respect to all securities,
investments and cash equivalents in the MAS Portfolio. The Sub-Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund for the MAS Portfolio, the appropriate
portion of the MAS Portfolio's assets to be invested in particular countries or
geographic regions, the use of foreign exchange contracts and other foreign
currency matters, and the manner in which voting rights, rights to consent to
corporate action and other rights pertaining to the MAS Portfolio's investments
should be exercised. The Sub-Adviser will implement such determinations through
the placement, in the name of the Fund for the MAS Portfolio, of orders for the
execution of portfolio transactions with it through such brokers or dealers as
it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it uses
in providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United
States Securities and Exchange Commission ("SEC") and in addition
will conduct its activities under this Agreement in accordance
with any applicable regulations of any government authority
pertaining to the investment advisory activities of the
Sub-Adviser and shall furnish such written reports or other
documents substantiating such compliance as the Adviser reasonably
may from time to time request;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the MAS
Portfolio either directly with the issuer or with
2
<PAGE> 3
an underwriter, market maker or broker or dealer. In placing
orders with brokers and dealers, the Sub-Adviser will use its
reasonable best efforts to obtain prompt execution of orders in an
effective manner at the most favorable price. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers and
dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934)
to or for the benefit of the Fund and/or other accounts over which
the Sub-Adviser exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with
respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged
for effecting that transaction if the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In no instance will portfolio securities be purchased
from or sold to the Trust, BISYS Fund Services Limited
Partnership, the Adviser, any other sub-investment adviser for the
Trust ("other sub-advisers"), or the Sub-Adviser or any affiliate
of the foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the MAS Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the Adviser
and the Trust all records and other information relative to the
Adviser and the Trust and prior, present, or potential
shareholders, and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge such
information to duly constituted authorities, or when so requested
by the Adviser and the Trust, provided, however, that nothing
contained herein shall prohibit the
3
<PAGE> 4
Sub-Adviser from advertising or soliciting the public generally
with respect to other products or services, regardless of whether
such advertisement or solicitation may include prior, present or
potential shareholders of the Fund;
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for
the Trust, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed for
purchase or sale for the Trust's account are customers of the
Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing with
such customers, the Sub-Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities of
the MAS Portfolio.
3. Expenses. During the term of this Agreement, the Sub-
Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities
(including brokerage commissions, if any) purchased for the MAS
Portfolio.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the MAS Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the MAS Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser, upon
five days' notice, may from time to time waive some or all of such fees. Such
fee shall be accrued daily and paid monthly as soon as practicable after the end
of each month. If the Sub-Adviser shall serve for less than the whole of any
month, the foregoing compensation shall be prorated. For the purpose of
determining fees payable to the Sub-Adviser, the value of the MAS Portfolio's
net assets shall be computed at the times and in the manner specified in the
Trust's
4
<PAGE> 5
Registration Statement. If the Adviser is required to reduce its fee or to
reimburse the Trust because the expenses of the Fund exceed applicable state
securities regulations or are in excess of any voluntary expense limitations set
forth in the Trust's current Registration Statement, the Sub-Adviser's fee
hereunder shall be reduced by an amount equal to such excess expense multiplied
by the ratio that the Sub-Adviser's fee hereunder bears to the sum of the fees
paid to and retained by the Adviser and paid to BISYS Fund Services Limited
Partnership (under the Trust's Administration Agreement with BISYS Fund Services
Limited Partnership) by the Trust with respect to the MAS Portfolio.
Notwithstanding anything contained herein to the contrary, the Sub-Adviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of the MAS Portfolio or any portion thereof except as may be
authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the Sub- Adviser under this Agreement may differ from the advice given
or the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Adviser shall not use the name of the Sub-Adviser
in any prospectus, sales literature or other material relating to the Trust in
any manner not approved prior thereto by the Sub-Adviser; provided, however,
that the Sub-Adviser shall approve all uses of its name which merely refer in
accurate terms to its appointment hereunder or which are required by the SEC or
a state securities commission; and, provided further, that in no event shall
such approval be unreasonably withheld. The Sub- Adviser shall not use the name
of the Trust, the Fund or the Adviser in any material relating to the
Sub-Adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Adviser shall approve all uses of its and the Fund's or the
Trust's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
8. Liability of the Sub-Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Sub-Adviser, or loss resulting from breach of fiduciary duty
with respect to the receipt of compensation for services, the Sub-Adviser shall
not be liable for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
5
<PAGE> 6
9. Limitation of Trust's Liability. The Sub-Adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's and the
Fund's liability set forth in its Declaration of Trust and under Ohio law. The
Sub-Adviser agrees that any of the Trust's obligations shall be limited to the
assets of the Fund and that the Sub-Adviser shall not seek satisfaction of any
such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
10. Duration, Renewal, Termination and Amendment. This Agreement will
become effective as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of the
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until August __, 1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August ___ of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and immediately upon
termination of the Adviser Agreement. This Agreement shall terminate
automatically and immediately in the event of its
6
<PAGE> 7
assignment. No assignment of this Agreement shall be made by the Sub-Adviser
without the consent of the Adviser and the Board of Trustees of the Trust. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Adviser and the Sub-Adviser, subject to
approval by the Trust's Board of Trustees and, if required by the 1940 Act and
applicable SEC rules and regulations, a vote of a majority of the Fund's
outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
12. Severability. 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.
13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
MILLER ANDERSEN & SHERREND LLP
By
------------------------------------------
Title
---------------------------------------
7
<PAGE> 8
Dated: August __, 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Miller Andersen & Sherrend LLP
<TABLE>
<CAPTION>
Name of Fund COMPENSATION* DATE
- ------------ ------------ ----
<C> <C> <C>
1st Source Monogram Annual Rate of .625% of the August __, 1996
Diversified Equity Fund average daily net assets of
the MAS Portfolio up to
$25,000,000 and .375% of
the average daily net assets
of the MAS Portfolio in
excess of $25,000,000.
</TABLE>
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
MILLER ANDERSEN & SHERREND LLP
By
------------------------------------------
Title
---------------------------------------
- ------------------------
*All fees are computed daily and paid monthly.
8
<PAGE> 1
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the ____ day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Loomis Sayles & Company, Inc., a __________ corporation
(the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund
(the "Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August __, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "LSC Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the LSC Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time
<PAGE> 2
to time, be supplemented or amended and in resolutions of the Trust's Board of
Trustees. The Adviser agrees to furnish the Sub- Adviser from time to time
copies of all amendments of or supplements to such Prospectus and Statement of
Additional Information. The Sub-Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Adviser, the Fund or the Trust in any way.
2. Sub-Advisory Services. Subject to such instructions and supervision
as the Adviser may from time to time furnish, the continuous investment program
of the LSC Portfolio provided by the Sub-Adviser shall include, among other
things, investment research and management with respect to all securities,
investments and cash equivalents in the LSC Portfolio. The Sub-Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund for the LSC Portfolio, the appropriate
portion of the LSC Portfolio's assets to be invested in particular countries or
geographic regions, the use of foreign exchange contracts and other foreign
currency matters, and the manner in which voting rights, rights to consent to
corporate action and other rights pertaining to the LSC Portfolio's investments
should be exercised. The Sub-Adviser will implement such determinations through
the placement, in the name of the Fund for the LSC Portfolio, of orders for the
execution of portfolio transactions with it through such brokers or dealers as
it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it uses
in providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United
States Securities and Exchange Commission ("SEC") and in addition
will conduct its activities under this Agreement in accordance
with any applicable regulations of any government authority
pertaining to the investment advisory activities of the
Sub-Adviser and shall furnish such written reports or other
documents substantiating such compliance as the Adviser reasonably
may from time to time request;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the LSC
Portfolio either directly with the issuer or with
2
<PAGE> 3
an underwriter, market maker or broker or dealer. In placing
orders with brokers and dealers, the Sub-Adviser will use its
reasonable best efforts to obtain prompt execution of orders in an
effective manner at the most favorable price. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers and
dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934)
to or for the benefit of the Fund and/or other accounts over which
the Sub-Adviser exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with
respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged
for effecting that transaction if the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In no instance will portfolio securities be purchased
from or sold to the Trust, BISYS Fund Services Limited
Partnership, the Adviser, any other sub-investment adviser for the
Trust ("other sub-advisers"), or the Sub-Adviser or any affiliate
of the foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the LSC Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the Adviser
and the Trust all records and other information relative to the
Adviser and the Trust and prior, present, or potential
shareholders, and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge such
information to duly constituted authorities, or when so requested
by the Adviser and the Trust, provided, however, that nothing
contained herein shall prohibit the
3
<PAGE> 4
Sub-Adviser from advertising or soliciting the public generally
with respect to other products or services, regardless of whether
such advertisement or solicitation may include prior, present or
potential shareholders of the Fund;
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for
the Trust, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed for
purchase or sale for the Trust's account are customers of the
Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing with
such customers, the Sub-Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities of
the LSC Portfolio.
3. Expenses. During the term of this Agreement, the Sub-Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the LSC Portfolio.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the LSC Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the LSC Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser, upon
five days' notice, may from time to time waive some or all of such fees. Such
fee shall be accrued daily and paid monthly as soon as practicable after the end
of each month. If the Sub-Adviser shall serve for less than the whole of any
month, the foregoing compensation shall be prorated. For the purpose of
determining fees payable to the Sub-Adviser, the value of the LSC Portfolio's
net assets shall be computed at the times and in the manner specified in the
Trust's
4
<PAGE> 5
Registration Statement. If the Adviser is required to reduce its fee or to
reimburse the Trust because the expenses of the Fund exceed applicable state
securities regulations or are in excess of any voluntary expense limitations set
forth in the Trust's current Registration Statement, the Sub-Adviser's fee
hereunder shall be reduced by an amount equal to such excess expense multiplied
by the ratio that the Sub-Adviser's fee hereunder bears to the sum of the fees
paid to and retained by the Adviser and paid to BISYS Fund Services Limited
Partnership (under the Trust's Administration Agreement with BISYS Fund Services
Limited Partnership) by the Trust with respect to the LSC Portfolio.
Notwithstanding anything contained herein to the contrary, the Sub-Adviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of the LSC Portfolio or any portion thereof except as may be
authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the Sub- Adviser under this Agreement may differ from the advice given
or the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Adviser shall not use the name of the Sub-Adviser
in any prospectus, sales literature or other material relating to the Trust in
any manner not approved prior thereto by the Sub-Adviser; provided, however,
that the Sub-Adviser shall approve all uses of its name which merely refer in
accurate terms to its appointment hereunder or which are required by the SEC or
a state securities commission; and, provided further, that in no event shall
such approval be unreasonably withheld. The Sub- Adviser shall not use the name
of the Trust, the Fund or the Adviser in any material relating to the
Sub-Adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Adviser shall approve all uses of its and the Fund's or the
Trust's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
8. Liability of the Sub-Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Sub-Adviser, or loss resulting from breach of fiduciary duty
with respect to the receipt of compensation for services, the Sub-Adviser shall
not be liable for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
5
<PAGE> 6
9. Limitation of Trust's Liability. The Sub-Adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's and the
Fund's liability set forth in its Declaration of Trust and under Ohio law. The
Sub-Adviser agrees that any of the Trust's obligations shall be limited to the
assets of the Fund and that the Sub-Adviser shall not seek satisfaction of any
such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
10. Duration, Renewal, Termination and Amendment. This Agreement will
become effective as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of the
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until August __, 1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August ___ of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and immediately upon
termination of the Adviser Agreement. This Agreement shall terminate
automatically and immediately in the event of its
6
<PAGE> 7
assignment. No assignment of this Agreement shall be made by the Sub-Adviser
without the consent of the Adviser and the Board of Trustees of the Trust. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Adviser and the Sub-Adviser, subject to
approval by the Trust's Board of Trustees and, if required by the 1940 Act and
applicable SEC rules and regulations, a vote of a majority of the Fund's
outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
12. Severability. 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.
13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
LOOMIS SAYLES & COMPANY, INC.
By
------------------------------------------
Title
---------------------------------------
7
<PAGE> 8
Dated: August , 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Loomis Sayles & Company, Inc.
<TABLE>
<CAPTION>
Name of Fund COMPENSATION* DATE
- ------------ ------------ ----
<S> <C> <C>
1st Source Monogram Annual Rate of .65% of the August , 1996
Diversified Equity Fund average daily net assets of
the LSC Portfolio up to
$5,000,000 and .50% of the
average daily net assets of
the LSC Portfolio in excess
of $5,000,000.
</TABLE>
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
LOOMIS SAYLES & COMPANY, INC.
By
------------------------------------------
Title
---------------------------------------
- ------------------------
*All fees are computed daily and paid monthly.
8
<PAGE> 1
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the ____ day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Columbus Circle Investors, a __________ __________
(the "Sub- Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund (the
"Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August __, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "CCI Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the CCI Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time
<PAGE> 2
to time, be supplemented or amended and in resolutions of the Trust's Board of
Trustees. The Adviser agrees to furnish the Sub- Adviser from time to time
copies of all amendments of or supplements to such Prospectus and Statement of
Additional Information. The Sub-Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Adviser, the Fund or the Trust in any way.
2. Sub-Advisory Services. Subject to such instructions and supervision
as the Adviser may from time to time furnish, the continuous investment program
of the CCI Portfolio provided by the Sub-Adviser shall include, among other
things, investment research and management with respect to all securities,
investments and cash equivalents in the CCI Portfolio. The Sub-Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the Fund for the CCI Portfolio, the appropriate
portion of the CCI Portfolio's assets to be invested in particular countries or
geographic regions, the use of foreign exchange contracts and other foreign
currency matters, and the manner in which voting rights, rights to consent to
corporate action and other rights pertaining to the CCI Portfolio's investments
should be exercised. The Sub-Adviser will implement such determinations through
the placement, in the name of the Fund for the CCI Portfolio, of orders for the
execution of portfolio transactions with it through such brokers or dealers as
it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it uses
in providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United
States Securities and Exchange Commission ("SEC") and in addition
will conduct its activities under this Agreement in accordance
with any applicable regulations of any government authority
pertaining to the investment advisory activities of the
Sub-Adviser and shall furnish such written reports or other
documents substantiating such compliance as the Adviser reasonably
may from time to time request;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to investment determinations for the CCI
Portfolio either directly with the issuer or with
2
<PAGE> 3
an underwriter, market maker or broker or dealer. In placing
orders with brokers and dealers, the Sub-Adviser will use its
reasonable best efforts to obtain prompt execution of orders in an
effective manner at the most favorable price. Consistent with this
obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers and
dealers who provide brokerage and research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934)
to or for the benefit of the Fund and/or other accounts over which
the Sub-Adviser exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with
respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged
for effecting that transaction if the Sub-Adviser determines in
good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In no instance will portfolio securities be purchased
from or sold to the Trust, BISYS Fund Services Limited
Partnership, the Adviser, any other sub-investment adviser for the
Trust ("other sub-advisers"), or the Sub-Adviser or any affiliate
of the foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the CCI Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the Adviser
and the Trust all records and other information relative to the
Adviser and the Trust and prior, present, or potential
shareholders, and will not use such records and information for
any purpose other than performance of its responsibilities and
duties hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge such
information to duly constituted authorities, or when so requested
by the Adviser and the Trust, provided, however, that nothing
contained herein shall prohibit the
3
<PAGE> 4
Sub-Adviser from advertising or soliciting the public generally
with respect to other products or services, regardless of whether
such advertisement or solicitation may include prior, present or
potential shareholders of the Fund;
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for
the Trust, the Sub-Adviser's personnel will not inquire or take
into consideration whether the issuers of securities proposed for
purchase or sale for the Trust's account are customers of the
Adviser, other sub-advisers, the Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing with
such customers, the Sub-Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust; and
(h) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities of
the CCI Portfolio.
3. Expenses. During the term of this Agreement, the Sub-
Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities
(including brokerage commissions, if any) purchased for the CCI
Portfolio.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the CCI Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the CCI Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser, upon
five days' notice, may from time to time waive some or all of such fees. Such
fee shall be accrued daily and paid monthly as soon as practicable after the end
of each month. If the Sub-Adviser shall serve for less than the whole of any
month, the foregoing compensation shall be prorated. For the purpose of
determining fees payable to the Sub-Adviser, the value of the CCI Portfolio's
net assets shall be computed at the times and in the manner specified in the
Trust's
4
<PAGE> 5
Registration Statement. If the Adviser is required to reduce its fee or to
reimburse the Trust because the expenses of the Fund exceed applicable state
securities regulations or are in excess of any voluntary expense limitations set
forth in the Trust's current Registration Statement, the Sub-Adviser's fee
hereunder shall be reduced by an amount equal to such excess expense multiplied
by the ratio that the Sub-Adviser's fee hereunder bears to the sum of the fees
paid to and retained by the Adviser and paid to BISYS Fund Services Limited
Partnership (under the Trust's Administration Agreement with BISYS Fund Services
Limited Partnership) by the Trust with respect to the CCI Portfolio.
Notwithstanding anything contained herein to the contrary, the Sub-Adviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of the CCI Portfolio or any portion thereof except as may be
authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the Sub- Adviser under this Agreement may differ from the advice given
or the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Adviser shall not use the name of the Sub-Adviser
in any prospectus, sales literature or other material relating to the Trust in
any manner not approved prior thereto by the Sub-Adviser; provided, however,
that the Sub-Adviser shall approve all uses of its name which merely refer in
accurate terms to its appointment hereunder or which are required by the SEC or
a state securities commission; and, provided further, that in no event shall
such approval be unreasonably withheld. The Sub- Adviser shall not use the name
of the Trust, the Fund or the Adviser in any material relating to the
Sub-Adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Adviser shall approve all uses of its and the Fund's or the
Trust's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
8. Liability of the Sub-Adviser. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Sub-Adviser, or loss resulting from breach of fiduciary duty
with respect to the receipt of compensation for services, the Sub-Adviser shall
not be liable for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
5
<PAGE> 6
9. Limitation of Trust's Liability. The Sub-Adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's and the
Fund's liability set forth in its Declaration of Trust and under Ohio law. The
Sub-Adviser agrees that any of the Trust's obligations shall be limited to the
assets of the Fund and that the Sub-Adviser shall not seek satisfaction of any
such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
10. Duration, Renewal, Termination and Amendment. This Agreement will
become effective as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of the
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until August __, 1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August ___ of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and immediately upon
termination of the Adviser Agreement. This Agreement shall terminate
automatically and immediately in the event of its
6
<PAGE> 7
assignment. No assignment of this Agreement shall be made by the Sub-Adviser
without the consent of the Adviser and the Board of Trustees of the Trust. The
terms "assignment" and "vote of a majority of the outstanding voting securities"
shall have the meaning set forth for such terms in the 1940 Act. This Agreement
may be amended at any time by the Adviser and the Sub-Adviser, subject to
approval by the Trust's Board of Trustees and, if required by the 1940 Act and
applicable SEC rules and regulations, a vote of a majority of the Fund's
outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
12. Severability. 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.
13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
COLUMBUS CIRCLE INVESTORS
By
------------------------------------------
Title
---------------------------------------
7
<PAGE> 8
Dated: August , 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Columbus Circle Investors
<TABLE>
<CAPTION>
Name of Fund COMPENSATION* DATE
- ------------ ------------ ----
<S> <C> <C>
1st Source Monogram Annual Rate of 1.00% of the August , 1996
Diversified Equity Fund average daily net assets of
the CCI Portfolio up to
$10,000,000 and .50% of the
average daily net assets of
the CCI Portfolio in excess
of $10,000,000.
</TABLE>
1ST SOURCE BANK
By
------------------------------------------
Title
---------------------------------------
COLUMBUS CIRCLE INVESTORS
By
------------------------------------------
Title
---------------------------------------
- ------------------------
*All fees are computed daily and paid monthly.
8
<PAGE> 1
DISTRIBUTION AGREEMENT
This Agreement is made this ____ day of August, 1996, between The
Sessions Group, an Ohio business trust (the "Trust"), 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services, an Ohio limited partnership ("Distributor"), 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as an Ohio business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust identified on Schedule A hereto as such Schedule may be amended from
time to time (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended ("1933 Act"). As used in this
Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and, in the future, may be the distributor
of the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Trust.
The Trust further understands that investors and potential investors in the
Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
<PAGE> 2
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly
- 2 -
<PAGE> 3
balance sheets as soon as practicable after the end of each month, and (d) from
time to time such additional information regarding the financial condition of
the Funds as Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the 1933 Act have been carefully prepared in conformity with
the requirements of said Act and rules and regulations of the Commission
thereunder and all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective. Furthermore, neither any registration statement nor
any prospectus when such registration statement becomes effective includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
to a purchaser of the Shares. The Trust may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Trust's counsel, be necessary
or advisable. If the Trust shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Trust of a
written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement. The Trust shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any prospectus
in the form furnished from time to time in connection with the sale of the
Shares. The Trust agrees to indemnify, defend and hold Distributor, its several
partners and employees, and any person who controls Distributor within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its partners and
employees, or any such controlling person, may incur under the 1933 Act or under
common law or otherwise, arising out of or based upon any untrue statement, or
alleged untrue statement, of a material fact contained in any registration
statement or any prospectus or arising out of or based upon any omission, or
alleged omission, to state a material fact
- 3 -
<PAGE> 4
required to be stated in either any registration statement or any prospectus or
necessary to make the statements in either thereof not misleading; provided,
however, that the Trust's agreement to indemnify Distributor, its partners or
employees, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations as are contained in any prospectus and in such financial and
other statements as are furnished in writing to the Trust by Distributor and
used in the answers to the registration statement or in the corresponding
statements made in the prospectus, or arising out of or based upon any omission
or alleged omission to state a material fact in connection with the giving of
such information required to be stated in such answers or necessary to make the
answers not misleading; and further provided that the Trust's agreement to
indemnify Distributor and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Trust or its Shareholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of Distributor's reckless disregard
of its obligations and duties under this Agreement. The Trust's agreement to
indemnify Distributor, its partners and employees, and any such controlling
person, as aforesaid, is expressly conditioned upon the Trust's being notified
of any action brought against Distributor, its partners or employees, or any
such controlling person, such notification to be given by letter or by telegram
addressed to the Trust at its principal office in Columbus, Ohio and sent to the
Trust by the person against whom such action is brought, within 10 days after
the summons or other first legal process shall have been served. The failure to
so notify the Trust of any such action shall not relieve the Trust from any
liability which the Trust may have to the person against whom such action is
brought by reason of any such untrue, or allegedly untrue, statement or
omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the Trust and approved by Distributor, which approval shall
not be unreasonably withheld. In the event the Trust elects to assume the
defense of any such suit and retain counsel of good standing approved by
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in case the
Trust does not elect to assume the defense of any such suit, or in case
Distributor reasonably does not approve of counsel chosen by the Trust, the
Trust will reimburse Distributor, its partners and employees, or the controlling
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor or them.
- 4 -
<PAGE> 5
The Trust's indemnification agreement contained in this paragraph 1.11 and the
Trust's representations and warranties in this Agreement shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling person,
and shall survive the delivery of any Shares.
This agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act free and harmless from and against any and
all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or Trustees
or any such controlling person, may incur under the 1933 Act or under common law
or otherwise, but only to the extent that such liability or expense incurred by
the Trust, its officers or Trustees or such controlling person resulting from
such claims or demands, shall arise out of or be based upon any untrue, or
alleged untrue, statement of a material fact contained in information furnished
in writing by Distributor to the Trust and used in the answers to any of the
items of the registration statement or in the corresponding statements made in
the prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Distributor's being notified of any
action brought against the Trust, its officers or Trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Trustees or such controlling
person shall each have the right to participate in the defense or preparation of
the defense
- 5 -
<PAGE> 6
of any such action. The failure to so notify Distributor of any such action
shall not relieve Distributor from any liability which Distributor may have to
the Trust, its officers or Trustees, or to such controlling person by reason of
any such untrue or alleged untrue statement, or omission or alleged omission,
otherwise than on account of Distributor's indemnity agreement contained in this
paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10(a) of
said Act is not on file with the Commission; provided, however, that nothing
contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Declaration of Trust, or By-Laws.
1.14 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for additional
information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or
prospectus then in effect or the initiation by service of process on
the Trust of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement or prospectus
then in effect or which requires the making of a change in such
registration statement or prospectus in order to make the statements
therein not misleading; and
(d) of all action of the Commission with respect to any amendment
to any registration statement or prospectus which may from time to time
be filed with the Commission.
- 6 -
<PAGE> 7
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, 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 Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor 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 Trust.
1.16 This Agreement shall be governed by the laws of the State of Ohio.
2. Fee.
Distributor shall receive from the Funds identified on Schedule B
hereto (the "Distribution Plan Funds") a 12b-1 fee at the rate and upon the
terms and conditions set forth in the Distribution and Shareholder Service Plan
attached as Schedule C hereto, and as amended from time to time. The 12b-1 fee
shall be accrued daily and shall be paid on the first business day of each
month, or at such time(s) as Distributor shall reasonably request.
3. Sale and Payment.
Under this Agreement, the following provisions shall apply with respect
to the sale of and payment of Shares of a Fund sold at an offering price which
includes a sales load (collectively, the "Load Shares;" individually, a "Load
Share") as described in the prospectuses of any Funds identified on Schedule D
hereto (collectively, the "Load Funds"; individually, a "Load Fund"):
(a) Distributor shall have the right, as principal, to purchase
Load Shares at their net asset value and to sell such Load Shares to
the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. Distributor shall also have the
right, as principal, to sell Load Shares to dealers against orders
therefor at the public offering price less a concession determined by
Distributor, which concession shall not exceed the amount of the sales
charge or underwriting discount, if any, referred to in Section 4
below.
- 7 -
<PAGE> 8
(b) Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or
cause to be paid to the Load Fund or to its order an amount in Boston
or New York clearing house funds equal to the applicable net asset
value of such Shares. Distributor may retain so much of any sales
charge or underwriting discount as is not allowed by Distributor as a
concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset value
of such Load Shares, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Declaration of Trust and
By-Laws of the Trust and the then current prospectus of the Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then current prospectus of the Load Fund; and (e) otherwise in accordance
with any then current prospectus of the Load Fund.
6. Term, Duration and Matters Relating to the Trust as an
Ohio Business Trust.
This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date first set forth above (or, if a particular
Fund is not in existence on such date, on the date an amendment to Schedule A to
this Agreement relating to that Fund is executed), and, unless sooner terminated
as provided herein, shall continue in effect until August __, 1998. Thereafter,
if not terminated as provided herein, this Agreement shall continue with respect
to a particular Fund in effect automatically for successive one-year periods
ending on August __ of each year with respect to each of the Funds, provided
such continuance is specifically approved at least annually by (a) the Trust's
Board of Trustees or (b) by "vote of a majority of the
- 8 -
<PAGE> 9
outstanding voting securities" (as defined below) of the Trust, provided,
however, that in either event the continuance is also approved by a majority of
the Trust's Trustees who are not parties to the Agreement or interested persons
(as defined in the 1940 Act) of any such party, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable without penalty, on not less than sixty days' prior written notice,
by the Trust's Board of Trustees, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Trust or by Distributor.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
BISYS FUND SERVICES THE SESSIONS GROUP
LIMITED PARTNERSHIP
By BISYS Fund Services, Inc., By
General Partner ----------------------------------
Name Walter B. Grimm
-------------------------------
By Title President
-------------------------- ------------------------------
Name
------------------------
Title
-----------------------
- 9 -
<PAGE> 10
Dated: August __, 1996
Schedule A
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August __, 1996
<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<C> <C>
1st Source Monogram U.S. Treasury Obligations August __, 1996
Money Market Fund
1st Source Monogram Diversified Equity Fund August __, 1996
1st Source Monogram income Equity Fund August __, 1996
1st Source Monogram Special Equity Fund August __, 1996
1st Source Monogram Income Fund August __, 1996
1st Source Monogram Intermediate Tax-Free August __, 1996
Bond Fund
</TABLE>
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By By
----------------------------- -----------------------------
Name Name Walter B. Grimm
--------------------------- ---------------------------
Title Title President
-------------------------- --------------------------
A-1
<PAGE> 11
Dated: August __, 1996
Schedule B
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August __, 1996
<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<C> <C>
1st Source Monogram u.s. Treasury Obligations August __, 1996
Money Market Fund
1st Source Monogram Diversified Equity Fund August __, 1996
1st Source Monogram income Equity Fund August __, 1996
1st Source Monogram Special Equity Fund August __, 1996
1st Source Monogram Income Fund August __, 1996
1st Source Monogram Intermediate Tax-Free August __, 1996
Bond Fund
</TABLE>
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By By
----------------------------- -----------------------------
Name Name Walter B. Grimm
--------------------------- ---------------------------
Title Title President
-------------------------- --------------------------
B-1
<PAGE> 12
Schedule C
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August __, 1996
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes the distribution and shareholder
service plan of The Sessions Group, an Ohio business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to those investment portfolios ("Funds")
identified on Schedule B to the Trust's Distribution Agreement dated as of
August __, 1996, and as amended from time to time (the "Distribution Plan
Funds").
Section 1. Each Distribution Plan Fund shall pay to BISYS Fund Services
Limited Partnership, the distributor (the "Distributor") of the Funds' shares of
beneficial interest (the "Shares") a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of such Fund (the "12b-1 Fee")
for: (i) (a) efforts of the Distributor expended in respect of or in furtherance
of sales of Shares, and (b) to enable the Distributor to make payments to banks
and other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization; (ii) reimbursement of expenses (a) incurred by the Distributor,
and (b) incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance including, but not limited to, the
reimbursement of expenses relating to printing and distributing prospectuses to
persons other than Shareholders of such Distribution Plan Fund, printing and
distributing advertising and sales literature and reports to Shareholders for
use in connection with the sales of Shares, processing purchase, exchange and
redemption request from customers and placing orders with the Distributor or the
Distribution Plan Fund's transfer agent, and personnel and communication
equipment used in servicing Shareholder accounts and prospective shareholder
inquiries; (iii) (a) efforts of the Distributor expended in servicing
shareholders holding Shares, and (b) to enable the Distributor to make payments
to a Participating Organization for shareholder services pursuant to an
agreement with the Participating Organization; and (iv) reimbursement of
expenses (a) incurred by the Distributor, and (b) incurred by a Participating
Organization pursuant to an agreement in connection with shareholder service
including, but not limited to, personal, continuing services to investors in the
Shares of such Distribution Plan Fund, and providing office space, equipment,
telephone facilities and various personnel including clerical, supervisory
C-1
<PAGE> 13
and computer, as is necessary or beneficial in connection therewith.
For purposes of the Plan, a Participating Organization may
include the Distributor or any of its affiliates or subsidiaries.
Section 2. The 12b-1 Fee shall be paid by the Distribution Plan Funds
to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to a
Distribution Plan Fund until it has been approved by a vote of the initial
shareholder of such Fund.
Section 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust cast in person at a
meeting called for the purpose of voting on the Plan or such agreement.
Section 5. The Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Distribution Plan Funds pursuant to the Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time as to a Distribution
Plan Fund by vote of a majority of the Independent Trustees, or by vote of a
majority of a Distribution Plan Fund's outstanding voting securities.
Section 8. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities
of the Distribution Plan Fund, on not more than 60 days' written notice
to any other party to the agreement; and
C-2
<PAGE> 14
(b) That such agreement shall terminate automatically in the
event of its assignment.
Section 9. The Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to the Plan shall be approved in the manner provided for approval of the Plan in
Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
C-3
<PAGE> 15
Schedule D Dated: August __, 1996
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August __, 1996
<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<C> <C>
1st Source Monogram Diversified Equity Fund August __, 1996
1st Source Monogram Income Equity Fund August __, 1996
1st Source Monogram Special Equity Fund August __, 1996
1st Source Monogram Income Fund August __, 1996
1st Source Monogram Intermediate Tax-Free August __, 1996
Bond Fund
</TABLE>
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By By
----------------------------- -----------------------------
Name Name Walter B. Grimm
--------------------------- ---------------------------
Title Title President
-------------------------- --------------------------
D-1
<PAGE> 1
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of August __, 1996, by and between The
Sessions Group, a business trust organized under the laws of the State of Ohio
(the "Trust"), and THE FIFTH THIRD BANK, a banking company organized under the
laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios and any additional portfolios of the Trust, as each are or
will be identified in Exhibit A hereto (such current investment portfolios and
any additional portfolios individually referred to herein as a "Fund" and
collectively as the "Funds"), be held and administered by the Custodian pursuant
to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Trust and named in Exhibit B hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time
serving under the Trust's Declaration of Trust, dated April 25, 1988, as from
time to time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part
<PAGE> 2
350, or in such book-entry regulations of federal agencies as are substantially
in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "Officer" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Trust of such variance but such Oral Instructions will govern unless
the Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company
or The Depository Trust Company and (provided that Custodian shall have received
a copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Trust) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of
-2-
<PAGE> 3
deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust.
1.13 "Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized, or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
-3-
<PAGE> 4
3.3 Appointment of Agents. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as sub-custodian to hold Securities and cash of the Funds
and to carry out such other provisions of this Agreement as it may determine,
and may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian and subject
only to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause
to be delivered, to the Custodian all of each Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book- Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities Depository or Book-Entry System, the Fund shall
deliver to the Custodian a resolution of the Board of
Trustees, certified by an Officer, authorizing and instructing
the Custodian on an on-going basis to deposit in such
Securities Depository or Book-Entry System all Securities
eligible for deposit therein and to make use of such
Securities Depository or Book- Entry System to the extent
possible and practical in connection with its performance
hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of
Securities, and deliveries and returns of collateral
consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed
for the deposit of Securities of the Funds, the Trust shall
annually re-adopt such resolution and deliver a copy thereof,
certified by an Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
-4-
<PAGE> 5
(c) The records of the Custodian and the Custodian's account on
the books of the Book-Entry System and Securities Depository
as the case may be, with respect to Securities of a Fund
maintained in a Book-Entry System or Securities Depository
shall, by book-entry, or otherwise identify such Securities as
belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that payment
for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies
of any report (obtained by the Custodian from a Book-Entry
System or Securities Depository in which Securities of the
Fund are kept) on the internal accounting controls and
procedures for safeguarding Securities deposited in such
Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Trust for any loss or
damage to the Trust resulting (i) from the use of a Book-Entry
System or Securities Depository by reason of any negligence or
willful misconduct on the part of Custodian or any
sub-custodian appointed pursuant to Section 3.3 above or any
of its or their employees, or (ii) from failure of Custodian
or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities
Depository. At its election, the Trust shall be subrogated to
the rights of the Custodian with respect to any claim against
a Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from the
use of such Book-Entry System or Securities Depository, if and
to the extent that the Trust has been made whole for any such
loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
-5-
<PAGE> 6
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or any sub- custodian appointed
pursuant to Section 3.3 above) of such Securities registered
as provided in Section 3.9 below in proper form for transfer,
or if the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in accordance with
the conditions set forth in Section 3.5 above; (ii) in the
case of options on Securities, against delivery to the
Custodian (or such sub-custodian) of such receipts as are
required by the customs prevailing among dealers in such
options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
sub-custodian) of evidence of title thereto in favor of the
Trust or any nominee referred to in Section 3.9 below; and
(iv) in the case of repurchase or reverse repurchase
agreements entered into between the Trust and a bank which is
a member of the Federal Reserve System or between the Trust
and a primary dealer in U.S. Government securities, against
delivery of the purchased Securities either in certificate
form or through an entry crediting the Custodian's account at
a Book-Entry System or Securities Depository for the account
of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.7(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Trust, including but not limited to the following payments for
the account of a Fund: interest; taxes; administration,
investment management, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal fees;
and other operating expenses of a Fund; in all cases, whether
or not such expenses are to be in whole or in part capitalized
or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with rules of The Options Clearing
Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding
-6-
<PAGE> 7
escrow or other arrangements in connection with transactions
by the Trust;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of
Section 3.5 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of a Fund; provided that,
in any such case, the cash or other consideration is to be
delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the
name of the Trust, the Custodian or any sub-custodian
appointed pursuant to Section 3.3 above, or of any nominee or
nominees of any of the foregoing, or (ii) for exchange for a
different number of certificates or other evidence
representing the same aggregate face amount or number of
units; provided that, in any such case, the new Securities are
to be delivered to the Custodian;
-7-
<PAGE> 8
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the issuer of such Securities, or pursuant to
provisions for conversion contained in such Securities, or
pursuant to any deposit agreement, including surrender or
receipt of underlying Securities in connection with the
issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any,
are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of a
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by
the Trust on behalf of a Fund requiring a pledge of assets by
such Fund, but only against receipt by the Custodian of the
amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Trust or a Fund;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions
by the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the Custodian,
and a futures commission merchant registered under the
Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
-8-
<PAGE> 9
regarding account deposits in connection with transactions by
the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an Officer,
specifying the Securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the
person or persons to whom delivery of such Securities shall be
made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities held
for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Trust is entitled
either by law or pursuant to custom in the securities
business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Trust, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS") and to the Trust at such
time, in such manner and containing such information as is
prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
-9-
<PAGE> 10
3.9 Registration and Transfer of Securities. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Trust on behalf of a Fund, if eligible
therefor. All other Securities held for a Fund may be registered in the name of
the Trust on behalf of such Fund, the Custodian, or any sub-custodian appointed
pursuant to Section 3.3 above, or in the name of any nominee of any of them, or
in the name of a Book-Entry System, Securities Depository or any nominee of
either thereof; provided, however, that such Securities are held specifically
for the account of the Trust on behalf of a Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Trust
with a daily activity statement by Fund and a summary of all transfers to or
from the Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held for the Trust under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal
-10-
<PAGE> 11
accounting controls and procedures for safeguarding Securities, which are
employed by the Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
if any, relating to Securities which are not registered in the name of a Fund,
to be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, and promptly deliver to the Trust
such proxies, all proxy soliciting materials, which should include all other
proxy materials, if any, and all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify
the Trust of corporate actions, limited to those Securities registered in
nominee name and to those Securities held at a Depository or sub-Custodian
acting as agent for Custodian. Custodian will be responsible only if the notice
of such corporate actions is published by the Financial Daily Card Service, J.J.
Kenny Called Bond Service, DTC, or received by first class mail from the agent.
For market announcements not yet received and distributed by Custodian's
services, the Trust will inform its custody representative with appropriate
instructions. Custodian will, upon receipt of the Trust's response within the
required deadline, affect such action for receipt or payment for the Trust. For
those responses received after the deadline, Custodian will affect such action
for receipt or payment, subject to the limitations of the agent(s) affecting
such actions. Custodian will promptly notify the Trust for put options only if
the notice is received by first class mail from the agent. The Trust will
provide or cause to be provided to the Custodian with all relevant information
contained in the prospectus for any security which has unique put/option
provisions and provide the Custodian with specific tender instructions at least
ten business days prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for the Trust, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover
-11-
<PAGE> 12
the cost of a purchase of Securities for a Fund, if in the relevant Custody
Account there is insufficient cash available to the Fund for which such purchase
was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt for the account of the
Fund of the Securities purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable to the Fund for
such Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the relevant Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Trust, and
(iii) income from cash, Securities or other assets of the Trust. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit the Trust to use funds
so credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
-12-
<PAGE> 13
4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Trust transactions on behalf of a Fund in its Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
5.1 Transfer of Funds. From such funds as may be available for the
purpose in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under the
1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange
(or the Commodity Futures Trading commission or any registered
contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by a Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by a Fund,
-13-
<PAGE> 14
(c) which constitute collateral for loans of Securities made by a
Fund,
(d) for purposes of compliance by the Trust with requirements
under the 1940 Act for the maintenance of segregated accounts
by registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. The Custodian shall be entitled to rely on and
may act upon advice of counsel on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice. The
Custodian shall promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not be under any
obligation at any time to ascertain whether the Trust is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's charter
documents or by-laws, or its investment objectives and policies as then in
effect.
7.2 Actual Collection Required. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Trust or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable
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<PAGE> 15
with respect to Securities held for the Trust if such Securities are in default
or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply
necessary information, by the Trust, to the entity or entities appointed by the
Trust to keep the books of account of the Trust and/or compute the value of the
assets of the Trust. The Custodian shall take all such reasonable actions as the
Trust may from time to time request to enable the Trust to obtain, from year to
year, favorable opinions from the Trust's independent accountants with respect
to the Custodian's activities hereunder in connection with (a) the preparation
of the Trust's report on Form N-1A and Form N-SAR and any other reports required
by the Securities and Exchange Commission, and (b) the fulfillment by the Trust
of any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim
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<PAGE> 16
arising from the Custodian's or such sub-custodian's negligence, bad faith or
willful misconduct.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Trust and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian,
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<PAGE> 17
provided that the Trust shall have paid to the Custodian all fees, expenses and
other amounts to the payment or reimbursement of which it shall then be
entitled. Upon such delivery and transfer, the Custodian shall be relieved of
all obligations under this Agreement. The Trust may at any time immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Custodian by regulatory authorities in the State of Ohio or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Trust on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Trust at such bank or trust company all Securities of the
Trust held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian shall be relieved of all obligations under this
Agreement. If, after reasonable inquiry, the Custodian cannot find a successor
custodian as contemplated in this Section 10.3, then the Custodian shall have
the right to deliver to the Trust all Securities and cash then owned by the
Trust and to transfer any Securities held in a Book-Entry System or Securities
Depository to an account of or for the Trust. Thereafter, the Trust shall be
deemed to be its own custodian with respect to the Trust and the Custodian shall
be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Trust and the Custodian. The fees and other charges in
effect on the date hereof and applicable to the Funds are set forth in Exhibit B
attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Trust is a business trust organized under the laws of the State of
Ohio and under a Declaration of Trust, to which reference is hereby made a copy
of which is on file at the office of the Secretary of State of Ohio as required
by law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of the Trust entered into in the name of the Trust or on behalf
thereof by any of the Trustees,
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<PAGE> 18
officers, employees or agents are made not individually, but in such capacities,
and are not binding upon any of the Trustees, officers, employees, agents or
shareholders of the Trust or the Funds personally, but bind only the assets of
the Trust, and all persons dealing with any of the Funds of the Trust must look
solely to the assets of the Trust belonging to such Fund for the enforcement of
any claims against the Trust.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the party at the address set forth after its name herein
below:
To the Trust:
The Sessions Group
3435 Stelzer Road
Columbus, Ohio 43219
Attn: President
Telephone: (614) 470-8000
Facsimile: (614)
To the Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
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<PAGE> 19
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit printed matter requiring approval to Custodian
in draft form, allowing sufficient time for review by Custodian and its counsel
prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
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<PAGE> 20
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: THE SESSIONS GROUP
By:
- --------------------------------------- -----------------------------------
Its:
----------------------------------
ATTEST: THE FIFTH THIRD BANK
By:
- --------------------------------------- -----------------------------------
Tracie Hoffman
Assistant Vice President
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<PAGE> 21
Dated: August __, 1996
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST __, 1996
<TABLE>
<CAPTION>
Name of Fund Date
------------ ----
<S> <C>
1st Source Monogram Treasury Obligations August __, 1996
Money Market Fund
1st Source Monogram Diversified Equity Fund August __, 1996
1st Source Monogram Income Equity Fund August __, 1996
1st Source Monogram Special Equity Fund August __, 1996
1st Source Monogram Income Fund August __, 1996
1st Source Monogram Intermediate Tax-Free
Bond Fund August __, 1996
</TABLE>
THE SESSIONS GROUP
By:
-----------------------------------
Walter B. Grimm
President
THE FIFTH THIRD BANK
By:
-----------------------------------
Tracie Hoffman
Assistant Vice President
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<PAGE> 22
Dated: August __, 1996
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST __, 1996
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer each Custody Account.
1ST SOURCE MONOGRAM U.S. TREASURY OBLIGATIONS MONEY MARKET FUND
Name Signature
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY FUND
Name Signature
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
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<PAGE> 23
1ST SOURCE MONOGRAM INCOME EQUITY FUND
NAME SIGNATURE
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
NAME SIGNATURE
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
1ST SOURCE MONOGRAM INCOME FUND
NAME SIGNATURE
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
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<PAGE> 24
1ST SOURCE MONOGRAM INTERMEDIATE TAX-FREE BOND FUND
NAME SIGNATURE
---- ---------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of THE SESSIONS GROUP and any of
them, namely the Chairman, President, Vice President, Secretary and Treasurer,
are hereby authorized as signers for the conduct of business for and on behalf
of the Funds with THE FIFTH THIRD BANK:
CHAIRMAN
- -------------------------- ----------------------------------
PRESIDENT
- -------------------------- ----------------------------------
VICE PRESIDENT
- -------------------------- ----------------------------------
VICE PRESIDENT
- -------------------------- ----------------------------------
VICE PRESIDENT
- -------------------------- ----------------------------------
VICE PRESIDENT
- -------------------------- ----------------------------------
TREASURER
- -------------------------- ----------------------------------
SECRETARY
- -------------------------- ----------------------------------
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
ASSISTANT
- -------------------------- TREASURER ----------------------------------
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<PAGE> 25
The undersigned officers of THE SESSIONS GROUP hereby certify that the foregoing
is within the parameters of a Resolution adopted by Trustees of the Trust in a
meeting held May 16, 1996, directing and authorizing preparation of documents
and to do everything necessary to effect the Custody Agreement between THE
SESSIONS GROUP and THE FIFTH THIRD BANK.
By:
---------------------------------------
Walter B. Grimm, President
By:
---------------------------------------
Its:
---------------------------------------
-25-
<PAGE> 26
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST __, 1996
MUTUAL FUND CUSTODY FEE SCHEDULE
<TABLE>
<S> <C>
I. MONTHLY BASIC PER ACCOUNT FEE
Annual Asset Based Fees
Under $25 Million 1 bp
$25 - $100 Million .75 bp
Over $100 Million .5 bp
Minimum $2,400.00
II. SECURITY TRANSACTION FEES
DTC & FED Eligible $ 9.00
Physical 25.00
Amortized Securities 25.00
Amortized Principal & Income Payments 5.00
Options 25.00
Mutual Funds 11.00
Repos/Money Markets (non 5/3) 11.00
Foreign - Euroclear & Cedel 50.00
Foreign - Other TBD
Other TBD
Turnaround Trade 50.00
Pair - off Trade 25.00
III. SYSTEMS
Automated Securities Workstation $ 150.00
$200.00 Initial Setup
Mainframe - To - Mainframe 150.00
$200.00 Initial Setup
ACCESS - Single Account 50.00
- Multiple Accounts 100.00
</TABLE>
-26-
<PAGE> 27
<TABLE>
<S> <C>
IV. MISCELLANEOUS FEES
Per additional issue for repo collateral $ 5.00
Corporate Actions 25.00
Wire Transfers (In/Out) 7.00
Check Requests 6.00
Deposit Reject 25.00
Registration Fee 30.00
Automated Asset Reconciliation 25.00
Escrow Receipt 5.00
Special Services - per hr. fee 75.00
Overnight Packages 8.00
</TABLE>
*FIFTH THIRD IS WILLING TO REDUCE THE TOTAL ACCOUNT FEE 50% FOR THE FIRST THREE
MONTHS AND 25% FOR THE SECOND THREE MONTHS OF THE LIVES OF THE FUND.
THE SESSIONS GROUP
By:
--------------------------------
Walter B. Grimm
President
THE FIFTH THIRD BANK
By:
--------------------------------
Tracie Hoffman
Assistant Vice President
-27-
<PAGE> 1
EXHIBIT (9)(aa)
<PAGE> 2
MANAGEMENT AND ADMINISTRATION AGREEMENT
This Agreement is made this ____ day of August, 1996, between The
Sessions Group, an Ohio business trust (the "Trust"), 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership dba BISYS Fund
Services, an Ohio limited partnership ("Administrator"), 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as an Ohio business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain Administrator to furnish
management and administration services to certain investment portfolios of the
Trust and may retain Administrator to serve in such capacity with respect to
additional investment portfolios of the Trust, all as now or hereafter may be
identified in Schedule A hereto as such Schedule may be amended from time to
time (individually referred to herein as a "Fund" and collectively referred to
herein as the "Funds"); and
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Manager and Administrator
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreement, the custodian for the Funds under its Custody
Agreement, the transfer agent for the Funds under its Transfer Agency Agreement
and the fund accountant for the Funds under its Fund Accounting Agreement.
Administrator will maintain office facilities (which may be in the
offices of Administrator or an affiliate but shall be in such location as the
Trust shall reasonably determine); furnish statistical and research data,
clerical, certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Commission on Form N-SAR or any replacement
forms therefor; compile data for, assist the Trust or its designee in the
preparation of, and file, all the Funds' federal and state tax returns and
required tax filings other than those required to be made by the Funds'
custodian and transfer agent; prepare compliance filings pursuant to state
securities laws with the advice of the Trust's counsel; assist to the extent
requested by the Trust with the Trust's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statements (on Form
N-1A or any replacement therefor); compile data for, prepare and file timely
Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act;
keep and maintain the financial accounts and records of the Funds, including
calculation of daily expense accruals; in the case of money market funds,
periodic review of the amount of the
<PAGE> 3
deviation, if any, of the current net asset value per share (calculated using
available market quotations or an appropriate substitute that reflects current
market conditions) from each money market fund's amortized cost price per share;
and generally assist in all aspects of the operations of the Funds. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Administrator
hereby agrees that all records which it maintains for the Trust are the property
of the Trust and further agrees to surrender promptly to the Trust any of such
records upon the Trust's request. Administrator further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some
or all of its responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such acts
were its own.
2. Fees; Expenses; Expense Reimbursement
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay Administrator on the first business
day of each month, or at such time(s) as Administrator shall request and the
parties hereto shall agree, a fee computed daily and paid as specified below
calculated at the applicable annual rate set forth on Schedule A hereto. The fee
for the period from the day of the month this Agreement is entered into until
the end of that month shall be prorated according to the proportion which such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the value
of the net assets of a particular Fund shall be computed in the manner described
in the Trust's Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Fund as from time to time is in effect
for the computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such Fund.
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust.
- 2 -
<PAGE> 4
The compensation of such person or persons shall be paid by Administrator and no
obligation may be incurred on behalf of the Funds in such respect. Other
expenses to be incurred in the operation of the Funds including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not partners,
officers, directors, shareholders or employees of Administrator or the
investment adviser or distributor for the Funds, Commission fees and state Blue
Sky qualification and renewal fees and expenses, advisory fees, pricing service
fees, custodian fees, transfer and dividend disbursing agents' fees, fund
accounting fees, certain insurance premiums, outside and, to the extent
authorized by the Trust, inside auditing and legal fees and expenses, costs of
maintenance of the Trust's existence, type-setting and printing prospectuses for
regulatory purposes and for distribution to current shareholders of the Funds,
costs of shareholders' and Trustees' reports and meetings, fees incurred under
the Trust's Distribution and Shareholder Service Plan and Administrative
Services Plan and any extraordinary expenses will be borne by the Funds.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, Administrator will
reimburse such Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees respecting such Fund otherwise payable to
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to 1st Source Bank under the Investment
Advisory Agreement between 1st Source Bank and the Trust. The expense
reimbursement obligation of Administrator is limited to the amount of its fees
hereunder for such fiscal year, provided, however, that notwithstanding the
foregoing, Administrator shall reimburse a particular Fund for such proportion
of such excess expenses regardless of the amount of fees paid to it during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the Trust so require. Such expense reimbursement, if any, will
be estimated daily and reconciled and paid on a monthly basis.
3. Proprietary and Confidential Information
Administrator agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential
shareholders, 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 Trust, which approval shall
not be unreasonably withheld and may not be withheld where Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such
- 3 -
<PAGE> 5
information by duly constituted authorities, or when so requested by the Trust.
4. Limitation of Liability
Administrator shall not be liable for any loss suffered by the Funds in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also a partner,
employee, or agent of Administrator, who may be or become an officer, Trustee,
employee, or agent of the Trust or the Funds shall be deemed, when rendering
services to the Trust or the Funds, or acting on any business of that party, to
be rendering such services to or acting solely for that party and not as a
partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
5. Term
This Agreement shall become effective as of the date first written
above (or, if a particular Fund is not in existence on that date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed)
and, unless sooner terminated as provided herein, shall continue until August
__, 1999, and thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term; provided that the performance of Administrator is specifically reviewed at
least annually by the Trust's Board of Trustees. This Agreement is terminable
with respect to a particular Fund through a failure to renew at the end of a
one-year term; upon mutual agreement of the parties hereto; or for "cause" (as
defined below) by the party alleging "cause," in any case on not less than 60
days' notice by the Trust's Board of Trustees or by Administrator. Written
notice not to renew may be given for any reason, with or without "cause."
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) the dissolution or
liquidation of either party or other cessation of business other than a
reorganization or recapitalization of such party as an ongoing business; (d)
financial difficulties on the part of the party to be terminated which is
evidenced by the authorization or commencement of, or involvement by way of
pleading, answer, consent, or acquiescence in, a voluntary or
- 4 -
<PAGE> 6
involuntary case under Title 11 of the United States Code, as from time to time
in effect, or any applicable law, other than said Title 11, of any jurisdiction
relating to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors; or (e) any circumstance which
substantially impairs the performance of the obligations and duties of the party
to be terminated, or the ability to perform those obligations and duties as
contemplated herein. Notwithstanding the foregoing, the absence of an annual
review of this Agreement by the Board of Trustees shall not, in and of itself,
constitute "cause" as used herein.
6. Governing Law and Matters Relating to the Trust as an
Ohio Business Trust
This Agreement shall be governed by the law of the State of Ohio. The
Sessions Group is a business trust organized under Chapter 1746, Ohio Revised
Code and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner By
-----------------------------
Walter B. Grimm, President
By
---------------------------
(name) (title)
- 5 -
<PAGE> 7
Dated: August __, 1996
Schedule A to the
Management and Administration Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
dated August __, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram U.S. Annual rate of twenty August __, 1996
Treasury Obligations one-hundredths of
Money Market Fund one percent (.20%)
of such Fund's average
daily net assets
1st Source Monogram Annual rate of twenty August __, 1996
Diversified Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Monogram Annual rate of twenty August __, 1996
Income Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Monogram Annual rate of twenty August __, 1996
Special Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Monogram Annual rate of twenty August __, 1996
Income Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
</TABLE>
- ---------------------
*All fees are computed daily and paid periodically.
A-1
<PAGE> 8
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram Annual rate of twenty August __, 1996
Intermediate Tax-Free one-hundredths of one
Bond Fund percent (.20%) of the
such Fund's average
daily net assets
</TABLE>
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc. By
General Partner -----------------------------------
Walter B. Grimm, President
By
----------------------------
(name) (title)
A-2
<PAGE> 1
EXHIBIT (9)(ab)
<PAGE> 2
FUND ACCOUNTING AGREEMENT
This Agreement is made as of August __, 1996 between The Sessions Group
(the "Trust"), an Ohio business trust having its principal place of business at
3435 Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services, Inc.
("BISYS"), a Delaware corporation having its principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain fund accounting
services for each of 1st Source Monogram U.S. Treasury Obligations Money Market
Fund, 1st Source Monogram Diversified Equity Fund, 1st Source Monogram Income
Equity Fund, 1st Source Monogram Special Equity Fund, 1st Source Monogram Income
Fund and 1st Source Monogram Intermediate Tax-Free Bond Fund and such other
investment portfolios of the Trust identified on Schedule A hereto, as such
Schedule may be amended from time to time (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Fund Accountant.
(a) Maintenance of Books and Records. BISYS will keep and
maintain the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in
detail of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts,
including interest accrued and interest received, as required
by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts
(except shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) Performance of Daily Accounting Services. In addition to
the maintenance of the books and records specified
<PAGE> 3
above, BISYS shall perform the following accounting services daily for
each Fund:
(i) Calculate the net asset value per share utilizing
prices obtained from the sources described in subsection
1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then obtain such
prices from each Fund's investment adviser or its designee, as
approved by the Trust's Board of Trustees;
(iii) Verify and reconcile with the Funds' custodian all
daily trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors, 7-day
yields, 7-day effective yields, 30-day yields, and weighted
average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release to
shareholders, check and confirm the net asset values and
dividend factors for reasonableness and deviations, and
distribute net asset values and yields to NASDAQ;
(vi) Report to the Trust the daily market pricing of
securities in any money market Funds, with the comparison to
the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii) Amortize premiums and accrete discounts on
securities purchased at a price other than face value, if
requested by the Trust;
(ix) Update fund accounting system to reflect rate
changes, as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to
instructions received from the Trust's Administrator;
(xii) Determine the outstanding receivables and payables
for all (1) security trades, (2) Fund share transactions and
(3) income and expense accounts;
-2-
<PAGE> 4
(xiii) Provide accounting reports in connection with the
Trust's regular annual audit and other audits and examinations
by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall
agree upon, as set forth in a separate schedule.
(c) Special Reports and Services
(i) BISYS may provide additional special reports upon the
request of the Trust or a Fund's investment adviser, which may
result in an additional charge, the amount of which shall be
agreed upon between the parties.
(ii) BISYS may provide such other similar services with
respect to a Fund as may be reasonably requested by the Trust,
which may result in an additional charge, the amount of which
shall be agreed upon between the parties.
(d) Additional Accounting Services. BISYS shall also
perform the following additional accounting services for each
Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request of the
Trust. The download will include the following items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and
federal excise tax returns;
(B) the Trust's semi-annual reports with the
Securities and Exchange Commission ("SEC") on Form
N-SAR;
(C) the Trust's annual, semi-annual and
quarterly (if any) shareholder reports;
(D) registration statements on Form-N1A and
other filings relating to the registration of shares;
(E) the Administrator's monitoring of the
Trust's status as a regulated investment company
-3-
<PAGE> 5
under Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Trust's auditors;
and
(G) examinations performed by the SEC.
2. Subcontracting.
BISYS may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder; provided,
however, that BISYS shall not be relieved of any of its obligations under this
Agreement by the appointment of such subcontractor and provided further, that
BISYS shall be responsible, to the extent provided in Section 7 hereof, for all
acts of such subcontractor as if such acts were its own.
3. Compensation.
The Trust shall pay BISYS for the services to be provided by BISYS
under this Agreement in accordance with, and in the manner set forth in,
Schedule A hereto, as such Schedule may be amended from time to time.
4. Reimbursement of Expenses.
In addition to paying BISYS the fees described in Section 3 hereof, the
Trust agrees to reimburse BISYS for BISYS's out-of-pocket expenses in providing
services hereunder, including without limitation the following:
(1) All freight and other delivery and bonding charges incur-
red by BISYS in delivering materials to and from the
Trust;
(2) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser
or custodian, dealers or others as required for BISYS to
perform the services to be provided hereunder;
(3) The cost of obtaining security market quotes pursuant to
Section 1(b)(ii) above;
(4) The cost of microfilm or microfiche of records or other
materials;
(5) Any expenses BISYS shall incur at the written direction
of an officer of the Trust thereunto duly authorized; and
-4-
<PAGE> 6
(6) Any additional out-of-pocket expenses reasonably incurred
by BISYS in the performance of its duties and obligations
under this Agreement.
5. Effective Date. This Agreement shall become effective with respect
to a Fund as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed) (the "Effective Date").
6. Term. This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until July __, 1999, and thereafter shall be renewed automatically for
successive one-year terms unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term; provided, however, that after such termination, for so
long as BISYS, with the written consent of the Trust, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Compensation due BISYS and unpaid by the Trust upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Trust, in addition to
the compensation described under Section 3 hereof, the amount of all of BISYS'
cash disbursements for services in connection with BISYS' activities in
effecting such termination, including without limitation, the delivery to the
Trust and/or its designees of the Trust's property, records, instruments and
documents, or any copies thereof. Subsequent to such termination, for a
reasonable fee, BISYS will provide the Trust with reasonable access to any Trust
documents or records remaining in its possession. This Agreement is terminable
with respect to a particular Fund only upon mutual agreement of the parties
hereto or for "cause" (as defined below) by the party alleging "cause," in
either case on not less than 60 days' notice by the Trust's Board of Trustees or
by BISYS.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
either party with respect to its obligations and duties set forth herein; (b) a
final, unappealable judicial, regulatory or administrative ruling or order in
which either party has been found guilty of criminal or unethical behavior in
the conduct of its business; (c) the dissolution or liquidation of either party
or other cessation of business other than a reorganization or recapitalization
of such party as an ongoing business; (d) financial difficulties on the part of
either party which is evidenced by the authorization or commencement of, or
involvement by way of pleading, answer, consent, or acquiescence in, a voluntary
or involuntary case under Title 11 of the United States Code, as from
-5-
<PAGE> 7
time to time is in effect, or any applicable law, other than said Title 11, of
any jurisdiction relating to the liquidation or reorganization of debtors or to
the modification or alteration of the rights of creditors; or (e) any
circumstance which substantially impairs the performance of either party's
obligations and duties as contemplated herein.
7. Standard of Care; Reliance on Records and Instructions;
Indemnification. BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement with respect to such Fund or based,
if applicable, upon reasonable reliance on information, records, instructions or
requests with respect to such Fund given or made to BISYS by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it which
may be the subject of this indemnification, BISYS shall give the Trust written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of BISYS.
8. Record Retention and Confidentiality. BISYS shall keep and maintain
on behalf of the Trust all books and records which the Trust or BISYS is, or may
be, required to keep and maintain pursuant to any applicable statutes, rules and
regulations, including without limitation Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended (the "1940 Act") relating to the
maintenance of books and records in connection with the services to be provided
hereunder. BISYS further agrees that all such books and records shall be the
property of the Trust and to make such books and records available for
inspection by the Trust or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Trust and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
9. Uncontrollable Events. BISYS assumes no responsibility
hereunder, and shall not be liable, for any damage, loss of data,
-6-
<PAGE> 8
delay or any other loss whatsoever caused by events beyond its reasonable
control.
10. Reports. BISYS will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by BISYS,
or as subsequently agreed upon by the parties pursuant to an amendment hereto.
The Trust agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein no later than three
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within ten days after conducting a
diligent examination, are not so reported within the aforesaid period of time, a
report will for all purposes be accepted by and binding upon the Trust and any
other recipient, and except as provided in Section 7 hereof, BISYS shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
11. Rights of Ownership. All computer programs and procedures developed
to perform services required to be provided by BISYS under this Agreement are
the property of BISYS. All records and other data except such computer programs
and procedures are the exclusive property of the Trust and all such other
records and data will be furnished to the Trust in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. Return of Records. BISYS may at its option at any time, and shall
promptly upon the Trust's demand, turn over to the Trust and cease to retain
BISYS' files, records and documents created and maintained by BISYS pursuant to
this Agreement which are no longer needed by BISYS in the performance of its
services or for its legal protection. If not so turned over to the Trust, such
documents and records will be retained by BISYS for six years from the year of
creation. At the end of such six-year period, such records and documents will be
turned over to the Trust unless the Trust authorizes in writing the destruction
of such records and documents.
13. Representations of the Trust. The Trust certifies to BISYS that:
(1) as of the close of business on the Effective Date, each Fund which is in
existence as of the Effective Date has authorized unlimited shares, and (2) this
Agreement has been duly authorized by the Trust and, when executed and delivered
by the Trust, will constitute a legal, valid and binding obligation of the
Trust, enforceable against the Trust in accordance with its terms,
-7-
<PAGE> 9
subject to bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and secured
parties.
14. Representations of BISYS. BISYS represents and warrants that: (1)
the various procedures and systems which BISYS has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
of the blank checks, records, and other data of the Trust and BISYS' records,
data, equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by BISYS and, when
executed and delivered by BISYS, will constitute a legal, valid and binding
obligation of BISYS, enforceable against BISYS in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and secured
parties.
15. Insurance. BISYS shall notify the Trust should any of its insurance
coverage be cancelled or reduced. Such notification shall include the date of
change and the reasons therefor. BISYS shall notify the Trust of any material
claims against it with respect to services performed under this Agreement,
whether or not they may be covered by insurance, and shall notify the Trust from
time to time as may be appropriate of the total outstanding claims made by BISYS
under its insurance coverage.
16. Information to be Furnished by the Trust and Funds. The
Trust has furnished to BISYS the following:
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed.
(b) Copies of the following documents:
(i) The Trust's By-Laws and any amendments thereto; and
(ii) Certified copies of resolutions of the Board of
Trustees covering the approval of this Agreement,
authorization of a specified officer of the Trust to
execute and deliver this Agreement and authorization
for specified officers of the Trust to instruct BISYS
thereunder.
(c) A list of all the officers of the Trust, together with
specimen signatures of those officers who are authorized
to instruct BISYS in all matters.
-8-
<PAGE> 10
(d) Two copies of the Prospectus and Statement of Additional
Information for each Fund.
17. Information Furnished by BISYS.
(a) BISYS has furnished to the Trust the following:
(i) BISYS's Articles of Incorporation; and
(ii) BISYS's Bylaws and any amendments thereto.
(b) BISYS shall, upon request, furnish certified copies of
actions of BISYS covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement; and
(ii) Authorization of BISYS to act as fund accountant
for the Trust and to provide accounting services
for the Trust.
18. Amendments to Documents. The Trust shall furnish BISYS written
copies of any amendments to, or changes in, any of the items referred to in
Section 16 hereof forthwith upon such amendments or changes becoming effective.
In addition, the Trust agrees that no amendments will be made to the
Prospectuses or Statements of Additional Information of the Trust which might
have the effect of changing the procedures employed by BISYS in providing the
services agreed to hereunder or which amendment might affect the duties of BISYS
hereunder unless the Trust first obtains BISYS' approval of such amendments or
changes.
19. Compliance with Law. Except for the obligations of BISYS set forth
in Section 8 hereof, the Trust assumes full responsibility for the preparation,
contents and distribution of each prospectus of the Trust as to compliance with
all applicable requirements of the Securities Act of 1933, as amended, the 1940
Act and any other laws, rules and regulations of governmental authorities having
jurisdiction. BISYS shall have no obligation to take cognizance of any laws
relating to the sale of the Trust's shares. The Trust represents and warrants
that no shares of the Trust will be offered to the public until the Trust's
registration statement under the Securities Act of 1933 and the 1940 Act has
been declared or becomes effective.
20. Notices. Any notice provided hereunder shall be sufficiently given
when sent by registered or certified mail to the party required to be served
with such notice, at the following address: 3435 Stelzer Road, Columbus, Ohio
43219, or at such other address as such party may from time to time specify in
writing to the other party pursuant to this Section.
-9-
<PAGE> 11
21. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
22. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable with respect to a Fund by either of the parties hereto
except by the specific written consent of the other party.
23. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of the State of Ohio.
24. Limitation of Liability of the Trustees and Shareholders. The
Sessions Group is a business trust organized under Chapter 1746, Ohio Revised
Code and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE SESSIONS GROUP
By
--------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By
--------------------------------------
(name) (title)
-10-
<PAGE> 12
Dated: August __, 1996
SCHEDULE A
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
AUGUST __, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram U.S. The greater of (i) the August __, 1996
Treasury Obligations Money annual rate of .03% of
Market Fund, 1st Source such Fund's average
Monogram Diversified Equity daily net assets or (ii)
Fund, 1st Source Monogram $50,000 minus the
Income Equity Fund, 1st fee paid by such Fund
Source Monogram Special under its Management
Equity Fund, 1st Source and Administration
Monogram Income Fund and Agreement with BISYS
1st Source Monogram Inter- Fund Services dated as
mediate Tax-Free Fund of the date hereof.
</TABLE>
THE SESSIONS GROUP
By
-----------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By
-----------------------------------------
(name) (title)
- -----------------------------
* All fees are computed daily and paid periodically.
-11-
<PAGE> 1
EXHIBIT (9)(ac)
<PAGE> 2
TRANSFER AGENCY AGREEMENT
This Agreement is made as of August __, 1996, between The Sessions
Group (the "Trust"), an Ohio business trust having its principal place of
business at 3435 Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services,
Inc. ("BISYS"), a Delaware corporation having its principal place of business at
3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain services for
those series of the Trust set forth in the Schedule A attached hereto, as such
Schedule may be amended from time to time (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES. BISYS shall perform for the Trust the transfer agent
services set forth in Schedule B hereto.
BISYS also agrees to perform for the Trust such special
services incidental to the performance of the services enumerated herein as
agreed to by the parties from time to time. BISYS shall perform such additional
services as are provided on an amendment to Schedule B hereof, in consideration
of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing other parties
qualified to perform transfer agency services reasonably acceptable to the Trust
(individually, a "Subtransfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
Trust or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES. The Trust shall pay BISYS for the services to be
provided by BISYS under this Agreement in accordance with, and in the manner set
forth in, Schedule C hereto. Fees for any additional services to be provided by
BISYS pursuant to an amendment to Schedule B hereto shall be subject to mutual
agreement at the time such amendment to Schedule C is proposed.
3. REIMBURSEMENT OF EXPENSES. In addition to paying BISYS the
fees described in Section 2 hereof, the Trust agrees to reimburse BISYS for
BISYS' out-of-pocket expenses in providing services hereunder, including without
limitation the following:
<PAGE> 3
A. All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
B. All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser
or custodian, dealers, shareholders or others as required for
BISYS to perform the services to be provided hereunder;
C. Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other form of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
D. The cost of microfilm or microfiche of records or other
materials; and
E. Any expenses BISYS shall incur at the written direction
of an officer of the Trust thereunto duly authorized.
4. EFFECTIVE DATE. This Agreement shall become effective as of
the date first written above (the "Effective Date").
5. TERM. This Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, until August __, 1999.
Thereafter, this Agreement shall be renewed automatically for successive
one-year terms unless written notice not to renew is given by the non-renewing
party to the other party at least 60 days prior to the expiration of the
then-current term; provided, however, that after such termination, for so long
as BISYS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement or any Schedule
or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid
by the Trust upon such termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect from the
Trust, in addition to the fees and disbursements provided by Sections 2 and 3
hereof, the amount of all of BISYS' cash disbursements and a reasonable fee
(which fee shall be not less than one hundred two percent (102%) of the sum of
the actual costs incurred by BISYS in performing such service) for services in
connection with BISYS' activities in effecting such termination, including
without limitation, the delivery to the Trust and/or its distributor or
investment advisers and/or other parties, of the Trust's property, records,
instruments and documents, or any copies thereof. To the extent that BISYS may
retain in its possession copies of any Trust documents or records subsequent to
such
- 3 -
<PAGE> 4
termination which copies had not been requested by or on behalf of the Trust in
connection with the termination process described above, BISYS, for a reasonable
fee, will provide the Trust with reasonable access to such copies. Further, this
Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto or for "cause" (as defined below) by the party
alleging "cause," in either case on not less than 60 days' notice by the Trust's
Board of Trustees or by BISYS.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which are evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstance which substantially impairs the
performance of the obligations and duties as contemplated herein of the party to
be terminated.
6. UNCONTROLLABLE EVENTS. BISYS assumes no responsibility
hereunder, and shall not be liable, for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable control.
7. LEGAL ADVICE. BISYS shall notify the Trust at any time BISYS
believes that it is in need of the advice of counsel (other than counsel in the
regular employ of BISYS or any affiliated companies) with regard to BISYS'
responsibilities and duties pursuant to this Agreement; and after so notifying
the Trust, BISYS, at its discretion, shall be entitled to seek, receive and act
upon advice of legal counsel of its choosing, such advice to be at the expense
of the Trust or Funds unless relating to a matter involving BISYS' willful
misfeasance, bad faith, gross negligence or reckless disregard with respect to
BISYS' responsibilities and duties hereunder and BISYS shall in no event be
liable to the Trust or any Fund or any shareholder or beneficial owner of the
Trust for any action reasonably taken pursuant to such advice.
8. INSTRUCTIONS. Whenever BISYS is requested or authorized to
take action hereunder pursuant to instructions from a shareholder or a properly
authorized agent of a shareholder ("shareholder's agent"), concerning an account
in a Fund, BISYS shall be entitled to rely upon any certificate, letter or other
instrument or communication, whether in writing, by electronic or
- 4 -
<PAGE> 5
telephone transmission, believed by BISYS to be genuine and to have been
properly made, signed or authorized by an officer or other authorized agent of
the Trust or by the shareholder or shareholder's agent, as the case may be, and
shall be entitled to receive as conclusive proof of any fact or matter required
to be ascertained by it hereunder a certificate signed by an officer of the
Trust or any other person authorized by the Trust's Board of Trustees or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statements of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Trust agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Trust, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Trust written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. RECORD RETENTION AND CONFIDENTIALITY. BISYS shall keep and
maintain on behalf of the Trust all books and records which the Trust or BISYS
is, or may be, required to keep and maintain pursuant to any applicable
statutes, rules and regulations, including without limitation Rules 31a-1 and
31a-2 under the Investment Company Act of 1940, as amended (the "1940 Act"),
relating to the maintenance of books and records in connection with the services
to be provided hereunder. BISYS further agrees that all such books and records
shall be the property of the Trust and
- 5 -
<PAGE> 6
to make such books and records available for inspection by the Trust or by the
Securities and Exchange Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other information
relative to the Trust and its shareholders; except when requested to divulge
such information by duly-constituted authorities or court process, or requested
by a shareholder, or shareholder's agent, with respect to information concerning
an account as to which such shareholder has either a legal or beneficial
interest or when requested by the Trust, the shareholder, or shareholder's
agent, or the dealer of record as to such account.
11. REPORTS. BISYS will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports at such times as are prescribed in Schedule D attached
hereto, or as subsequently agreed upon by the parties pursuant to an amendment
to Schedule D. The Trust agrees to examine each such report or copy promptly and
will report or cause to be reported any errors or discrepancies therein no later
than three business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within three days after conducting a
diligent examination, are not so reported within the aforesaid period of time, a
report will for all purposes be accepted by and binding upon the Trust and any
other recipient, and BISYS shall have no liability for errors or discrepancies
therein and shall have no further responsibility with respect to such report
except to perform reasonable corrections of such errors and discrepancies within
a reasonable time after requested to do so by the Trust.
12. RIGHTS OF OWNERSHIP. All computer programs and procedures
developed to perform services required to be provided by BISYS under this
Agreement are the property of BISYS. All records and other data except such
computer programs and procedures are the exclusive property of the Trust and all
such other records and data will be furnished to the Trust in appropriate form
as soon as practicable after termination of this Agreement for any reason.
13. RETURN OF RECORDS. BISYS may at its option at any time, and
shall promptly upon the Trust's demand, turn over to the Trust and cease to
retain BISYS' files, records and documents created and maintained by BISYS
pursuant to this Agreement which are no longer needed by BISYS in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by BISYS for six years
from the year of creation. At the end of such six-year period, such records and
documents will be turned over to the Trust unless the Trust authorizes in
writing the destruction of such records and documents.
- 6 -
<PAGE> 7
14. BANK ACCOUNTS. The Trust and the Funds shall establish and
maintain such bank accounts with such bank or banks as are selected by the
Trust, as are necessary in order that BISYS may perform the services required to
be performed hereunder. To the extent that the performance of such services
shall require BISYS directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the Trust and Funds shall provide such
bank or banks with all instructions and authorizations necessary for BISYS to
effect such disbursements.
15. REPRESENTATIONS OF THE TRUST. The Trust certifies to BISYS
that: (a) as of the close of business on the Effective Date, each Fund which is
in existence as of the Effective Date has authorized unlimited shares, and (b)
by virtue of its Declaration of Trust, shares of each Fund which are redeemed by
the Trust may be sold by the Trust from its treasury, and (c) this Agreement has
been duly authorized by the Trust and, when executed and delivered by the Trust,
will constitute a legal, valid and binding obligation of the Trust, enforceable
against the Trust in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting the rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF BISYS. BISYS represents and warrants that:
(a) BISYS has been in, and shall continue to be in, substantial compliance with
all provisions of law, including Section 17A(c) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), required in connection with the
performance of its duties under this Agreement; and (b) the various procedures
and systems which BISYS has implemented with regard to safekeeping from loss or
damage attributable to fire, theft, or any other cause of the blank checks,
records, and other data of the Trust and BISYS' records, data, equipment,
facilities and other property used in the performance of its obligations
hereunder are adequate and that it will make such changes therein from time to
time as are required for the secure performance of its obligations hereunder.
17. INSURANCE. BISYS shall notify the Trust should its insurance
coverage with respect to professional liability or errors and omissions coverage
be cancelled or reduced. Such notification shall include the date of change and
the reasons therefor. BISYS shall notify the Trust of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the Trust from time to
time as may be appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
18. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS. The
Trust has furnished to BISYS the following:
- 7 -
<PAGE> 8
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Trustees covering the following matters:
a. Approval of this Agreement and authorization
of a specified officer of the Trust to
execute and deliver this Agreement and
authorization of specified officers of the
Trust to instruct BISYS hereunder; and
b. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statements of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent
(or as of the date on which BISYS' services are
commenced, whichever is the later date) and as to receipt
of full consideration by the Trust for all shares
outstanding, such statement to be certified by the
Treasurer of the Trust.
19. INFORMATION FURNISHED BY BISYS. BISYS has furnished to the
Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
- 8 -
<PAGE> 9
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 of the Exchange Act.
20. AMENDMENTS TO DOCUMENTS. The Trust shall furnish BISYS written
copies of any amendments to, or changes in, any of the items referred to in
Section 18 hereof forthwith upon such amendments or changes becoming effective.
In addition, the Trust agrees that no amendments will be made to the
Prospectuses or Statement of Additional Information of the Trust which might
have the effect of changing the procedures employed by BISYS in providing the
services agreed to hereunder or which amendment might affect the duties of BISYS
hereunder unless the Trust first obtains BISYS' approval of such amendments or
changes.
21. RELIANCE ON AMENDMENTS. BISYS may rely on any amendments to or
changes in any of the documents and other items to be provided by the Trust
pursuant to Sections 18 and 20 of this Agreement and the Trust hereby
indemnifies and holds harmless BISYS from and against any and all claims,
demands, actions, suits, judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character which may
result from actions or omissions on the part of BISYS in reasonable reliance
upon such amendments and/or changes. Although BISYS is authorized to rely on the
above-mentioned amendments to and changes in the documents and other items to be
provided pursuant to Sections 18 and 20 hereof, BISYS shall be under no duty to
comply with or take any action as a result of any of such amendments or changes
unless the Trust first obtains BISYS' written consent to and approval of such
amendments or changes.
22. COMPLIANCE WITH LAW. Except for the obligations of BISYS set
forth in Section 10 hereof, the Trust assumes full responsibility for the
preparation, contents and distribution of each prospectus of the Trust as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the 1940 Act and any other laws, rules and regulations
of governmental authorities having jurisdiction. BISYS shall have no obligation
to take cognizance of any laws relating to the sale of the Trust's shares. The
Trust represents and warrants that no shares of the Trust will be offered to the
public until the Trust's
- 9 -
<PAGE> 10
registration statement under the 1933 Act and the 1940 Act has been declared or
becomes effective.
23. NOTICES. Any notice provided hereunder shall be sufficiently
given when sent by registered or certified mail to the party required to be
served with such notice, at the following address: 3435 Stelzer Road, Columbus,
Ohio 43219, or at such other address as such party may from time to time specify
in writing to the other party pursuant to this Section.
24. HEADINGS. Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
25. ASSIGNMENT. This Agreement and the rights and duties hereunder
shall not be assignable by either of the parties hereto except by the specific
written consent of the other party. This Section 25 shall not limit or in any
way affect BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1
hereof.
26. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the State of Ohio.
27. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. The
Sessions Group is a business trust organized under Chapter 1746, Ohio Revised
Code and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the Office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
BISYS FUND SERVICES, INC. THE SESSIONS GROUP
By By
---------------------------- ----------------------------------
(name) (title) Walter B. Grimm, President
- 10 -
<PAGE> 11
Dated: August __, 1996
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
AUGUST __, 1996
<TABLE>
<CAPTION>
Name of Fund Date
------------ ----
<S> <C>
1st Source Monogram U.S. Treasury Obligations August __, 1996
Money Market Fund, 1st Source Monogram
Diversified Equity Fund, 1st Source
Monogram Income Equity Fund, 1st Source
Monogram Special Equity Fund, 1st Source
Monogram Income Fund and 1st Source
Monogram Intermediate Tax-Free Bond
Fund
</TABLE>
THE SESSIONS GROUP
By
--------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By
--------------------------------------
(name) (title)
- 11 -
<PAGE> 12
SCHEDULE B
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identifications numbers and wire
instructions.
c. Issue confirmations in compliance with Rule 10 under the
Exchange Act.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new
shares through dividend reinvestment.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through
duplicate or special order statements upon request.
c. Provide mailing labels for distribution of financial
reports, prospectuses, proxy statements, or marketing
material to current shareholders.
3. Compliance Reporting
a. Provide reports to the Securities and Exchange
Commission, the National Association of Securities
Dealers and the States in which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue
Service forms for corresponding Fund and shareholder
income and capital gains.
c. Issue tax withholding reports to the Internal Revenue
Service.
4. Dealer/Load Processing (if applicable)
- 12 -
<PAGE> 13
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and
provide for payment of commissions on direct shareholder
purchases in a load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the
Trust.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each
shareholder.
- 13 -
<PAGE> 14
Date: August __, 1996
SCHEDULE C
Fees
Transfer Agent:
Annual fees per fund:
<TABLE>
<S> <C>
Daily dividend fund base fee $ 25 per shareholder
Variable NAV fund fee $ 23 per shareholder
Annual Minimums per fund: $20,000
</TABLE>
Multiple classes of shares:
Classes of shares which have different net asset values or pay different daily
dividends will be treated as separate classes, and the fee schedule above,
including the appropriate minimums, will be charged for each separate class.
Additional services:
Additional services such as IRA processing are subject to additional fees which
will be quoted upon request. Programming costs or data base management fees for
special reports or specialized processing will be quoted upon request.
Out of pocket charges:
Out-of-pocket costs, including postage, Tymnet charges, statement/confirm paper
and forms, and microfiche, will be added to the transfer agent fees.
THE SESSIONS GROUP
By
--------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By
--------------------------------------
(name) (title)
- 14 -
<PAGE> 15
SCHEDULE D
REPORTS
I. Daily Shareholder Activity Journal
II. Daily Fund Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be filed with
the Securities and Exchange Commission pursuant to Rule 17Ad-13 of the
Exchange Act.
- 15 -
<PAGE> 1
THE SESSIONS GROUP
(the "Group")
3435 Stelzer Road
Columbus, Ohio 43219
SERVICING AGREEMENT
to
ADMINISTRATIVE SERVICES PLAN
Ladies and Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers who may from time
to time be the record or beneficial owners of shares (such shares referred to
herein as the "Shares") of one or more of the Group's investment portfolios
(individually, a "Fund" and collectively, the "Funds"), which are listed on
Appendix A.
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide administrative support services to your
customers who may from time to time own of record or beneficially a Fund's
Shares. Services provided may include some or all of the following: (i)
processing dividend and distribution payments from a Fund on behalf of
customers; (ii) providing periodic statements to your customers showing their
positions in the Shares; (iii) arranging for bank wires; (iv) responding to
routine customer inquiries relating to services performed by you; (v) providing
sub-accounting with respect to the Shares beneficially owned by your customers
or the information necessary for sub-accounting; (vi) if required by law,
forwarding shareholder communications from a Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend, distribution
and tax notices) to your customers; (vii) forwarding to customers proxy
statements and proxies containing any proposals regarding this Agreement or the
Administrative Services Plan related hereto; (viii) aggregating and processing
purchase, exchange, and redemption requests from customers and placing net
purchase, exchange, and redemption orders for your customers; (ix) providing
customers with a service that invests the assets of their accounts in the Shares
pursuant to specific or pre-authorized instructions; (x) establishing and
maintaining accounts and records relating to transactions in the Shares; (xi)
assisting customers in changing dividend or distribution options, account
designations and addresses; or (xii) other similar services if requested by the
Group.
<PAGE> 2
Section 2. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide the aforementioned
services to customers.
Section 3. Neither you nor any of your officers, employees or agents
are authorized to make any representations concerning the Group, a Fund or its
Shares except those contained in our then current prospectus for such shares,
copies of which will be supplied by BISYS Fund Services Limited Partnership dba
BISYS Fund Services ("BISYS"), the Group's distributor and administrator, to
you, or in such supplemental literature or advertising as may be authorized by
the Group in writing.
Section 4. For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent for the
Group in any matter or in any respect. By your written acceptance of this
Agreement, you agree to and do release, indemnify and hold us harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the purchase,
redemption, transfer or registration of the Shares by or on behalf of customers.
You and your employees will, upon request, be available during normal business
hours to consult with the Group or its designees concerning the performance of
your responsibilities under this Agreement.
Section 5. In consideration for the services and facilities provided by
you hereunder, the Group will pay to you, and you will accept as full payment
therefore, a fee at the annual rate of up to .25% of the average daily net
assets of a Fund's Shares owned of record or beneficially by your customers from
time to time for which you provide services hereunder, which fee will be
computed daily and payable monthly. The fee rate stated above may be
prospectively increased or decreased by the Group, in its sole discretion, at
any time upon notice to you. Further, the Group may, in its discretion and
without notice, suspend or withdraw the sale of such Shares, including the sale
of such Shares to you for the account of any customer(s).
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Group pursuant to this Agreement will provide to the
Group's Board of Trustees, and the Trustees will review, at least quarterly, a
written report of the amounts so expended and the entities to whom such
expenditures were made. In addition, you will furnish the Group or its designees
with such information as the Group or its designees may reasonably request
2
<PAGE> 3
(including, without limitation, periodic certifications confirming the provision
to customers of some or all of the services described herein), and will
otherwise cooperate with the Group and its designees (including, without
limitation, any auditors designated by the Group), in connection with the
preparation of reports to the Group's Board of Trustees concerning this
Agreement and the monies paid or payable by the Group pursuant hereto, as well
as any other reports or filings that may be required by law.
Section 7. We may enter into other similar Servicing Agreements with
any other person or persons without your consent.
Section 8. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any shares issued by
the Group; (ii) the compensation payable to you hereunder, together with any
other compensation you receive from customers for services contemplated by this
Agreement, will be fully disclosed to your customers, and will not be excessive
or unreasonable under the laws and instruments governing your relationships with
your customers; and (iii) if you are subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by federally chartered and supervised banks and other affiliated
banking organizations, you will perform only those activities which are
consistent with your statutory and regulatory obligations and will act solely as
agent for, upon the order of, and for the account of, your customers.
Section 9. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Group or its designee. This
Agreement may be terminated at any time, without the payment of any penalty with
respect to a Fund by the vote of a majority of the members of the Board of
Trustees of the Group and who have no direct or indirect financial interest in
the operation of the Administrative Servicing Plan or in any related agreements
to the Administrative Servicing Plan ("Disinterested Trustees") or by a majority
of the outstanding voting securities of that Fund on not more than sixty (60)
days written notice to the parties to this Agreement.
Section 10. All notices and other communications to either you or the
Group will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address shown given in this
Agreement.
Section 11. This Agreement will be construed in accordance with the
laws of the State of Ohio and is non-assignable by the parties hereto.
3
<PAGE> 4
Section 12. This Agreement, or form thereof, has been approved by vote
of a majority of (i) the Group's Board of Trustees and (ii) the Disinterested
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
Section 13. The Sessions Group is a business trust organized under
Chapter 1746, Ohio Revised Code and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of State of Ohio as required by law, and to any and all amendments
thereto so filed or hereafter filed. The obligations of "The Sessions Group"
entered into in the name or on behalf thereof by any of the Trustees, officers,
employees or agents are made not individually, but in such capacities, and are
not binding upon any of the Trustees, officers, employees, agents or shareholder
of the Group personally, but bind only the assets of the Group, as set forth in
Section 1746.13(A), Ohio Revised Code, and all persons dealing with any of the
Funds of the Group must look solely to the assets of the Group belonging to such
Fund for the enforcement of any claims against the Group.
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to the Group's designee, BISYS Fund Services Limited Partnership dba BISYS Fund
Services, c/o _________________ at 3435 Stelzer Road, Columbus, Ohio 43219.
BISYS Fund Services, as The Group's designee, will notify the
_______________ of ___________________ concerning any future operational changes
pertaining to this Agreement.
Very truly yours,
THE SESSIONS GROUP
By:
---------------------------------------
Authorized Officer
Date:
Accepted and Agreed to:
- ---------------------------
By:
---------------------------------------
Authorized Officer, Title
Date:
- -------------------------------------------
Taxpayer Identification Number
4
<PAGE> 5
APPENDIX A
TO SERVICING AGREEMENT FOR ADMINISTRATIVE SERVICING PLAN
FOR THE SESSIONS GROUP
Signed:
--------------------------------
(Title)
Dated:
5
<PAGE> 1
EXHIBIT (10)(a)
<PAGE> 2
-----------------
BAKER
&
HOSTETLER
Counsellors at Law
- --------------------------------------------------------------------------------
Capitol Square, Suite 2100 - 65 East State Street - Columbus, Ohio 43215-4260
(614) 228-1541
June 5, 1996
The Sessions Group
3435 Stelzer Road
Columbus, Ohio 43219
Subject: The Sessions Group -- Post-Effective Amendment No.
35 to Registration Statement on Form N-1A, File No.
33-21489, filed under the Securities Act of 1933,
as amended, and Amendment No. 37 to Registration
Statement on Form N-1A, File No. 811-5545, filed
under the Investment Company Act of 1940, as
amended (the "Amendment")
Ladies and Gentlemen:
In connection with the filing of the Amendment, it is our opinion that,
upon the effectiveness of the Amendment, the indefinite number of units of
beneficial interest of 1st Source Monogram U.S. Treasury Obligations Money
Market Fund, 1st Source Monogram Diversified Equity Fund, 1st Source Monogram
Income Equity Fund, 1st Source Monogram Special Equity Fund, 1st Source Monogram
Income Fund and 1st Source Monogram Intermediate Tax-Free Bond Fund, six
separate investment portfolios of The Sessions Group, when issued for the
consideration described in the Amendment, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
BAKER & HOSTETLER
<PAGE> 1
EXHIBIT (11)(c)
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our Firm under the caption "Auditors" in the
Prospectus and Statement of Additional Information relating to the 1st Source
Monogram Funds (comprising, respectively, the U.S. Treasury Obligations Money
Market Fund, Diversified Equity Fund, Income Equity Fund, Special Equity Fund,
Income Fund, and Intermediate Tax-Free Bond Fund) in this Post-Effective
Amendment No. 35 to the Registration Statement on Form N-1A (File No. 33-21489)
of The Sessions Group.
COOPERS & LYBRAND L.L.P.
Columbus, Ohio
June 5, 1996
<PAGE> 1
Schedule C
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August __, 1996
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes the distribution and shareholder
service plan of The Sessions Group, an Ohio business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to those investment portfolios ("Funds")
identified on Schedule B to the Trust's Distribution Agreement dated as of
August __, 1996, and as amended from time to time (the "Distribution Plan
Funds").
Section 1. Each Distribution Plan Fund shall pay to BISYS Fund Services
Limited Partnership, the distributor (the "Distributor") of the Funds' shares of
beneficial interest (the "Shares") a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of such Fund (the "12b- 1 Fee")
for: (i) (a) efforts of the Distributor expended in respect of or in furtherance
of sales of Shares, and (b) to enable the Distributor to make payments to banks
and other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization; (ii) reimbursement of expenses (a) incurred by the Distributor,
and (b) incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance including, but not limited to, the
reimbursement of expenses relating to printing and distributing prospectuses to
persons other than Shareholders of such Distribution Plan Fund, printing and
distributing advertising and sales literature and reports to Shareholders for
use in connection with the sales of Shares, processing purchase, exchange and
redemption request from customers and placing orders with the Distributor or the
Distribution Plan Fund's transfer agent, and personnel and communication
equipment used in servicing Shareholder accounts and prospective shareholder
inquiries; (iii) (a) efforts of the Distributor expended in servicing
shareholders holding Shares, and (b) to enable the Distributor to make payments
to a Participating Organization for shareholder services pursuant to an
agreement with the Participating Organization; and (iv) reimbursement of
expenses (a) incurred by the Distributor, and (b) incurred by a Participating
Organization pursuant to an agreement in connection with shareholder service
including, but not limited to, personal, continuing services to investors in the
Shares of such
C-1
<PAGE> 2
Distribution Plan Fund, and providing office space, equipment, telephone
facilities and various personnel including clerical, supervisory and computer,
as is necessary or beneficial in connection therewith.
For purposes of the Plan, a Participating Organization may
include the Distributor or any of its affiliates or subsidiaries.
Section 2. The 12b-1 Fee shall be paid by the Distribution Plan Funds
to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
Section 3. The Plan shall not take effect with respect to a
Distribution Plan Fund until it has been approved by a vote of the initial
shareholder of such Fund.
Section 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust cast in person at a
meeting called for the purpose of voting on the Plan or such agreement.
Section 5. The Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
Section 6. Any person authorized to direct the disposition of monies
paid or payable by the Distribution Plan Funds pursuant to the Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
Section 7. The Plan may be terminated at any time as to a Distribution
Plan Fund by vote of a majority of the Independent Trustees, or by vote of a
majority of a Distribution Plan Fund's outstanding voting securities.
Section 8. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities
of the Distribution Plan Fund, on
C-2
<PAGE> 3
not more than 60 days' written notice to any other party to the
agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
Section 9. The Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to the Plan shall be approved in the manner provided for approval of the Plan in
Section 4.
Section 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
C-3
<PAGE> 1
EXHIBIT (19)(b)
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption of "Legal Counsel" including in or made a part of the
Registration Statement on Form N-1A, File No. 33-21489, filed under the
Securities Act of 1933, as amended, of The Sessions Group.
BAKER & HOSTETLER
Columbus, Ohio
June 5, 1996
