<PAGE> 1
As filed with the Securities and Exchange Commission August 16, 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. 36 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 38 /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
THE KEYPREMIER ESTABLISHED GROWTH FUND
THE KEYPREMIER INTERMEDIATE TERM INCOME FUND
Two Funds
of
The Sessions Group
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<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; Cover Page
5. Management of the Fund...... Management of the Group; General
Information - Custodian; General
Information - Transfer Agency and Fund
Accounting Services
5A. Management Discussion
of Fund Performance....... Inapplicable
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
8. Redemption or Repurchase.... How to Purchase and Redeem Shares
9. Pending Legal Proceedings... Inapplicable
</TABLE>
<PAGE> 4
THE KEYPREMIER ESTABLISHED GROWTH FUND
THE KEYPREMIER INTERMEDIATE TERM INCOME FUND
3435 Stelzer Road For current yield, purchase, and
Columbus, Ohio 43219 redemption information, call
(800) 766-3960.
The Sessions Group (the "Group") is an open-end management investment
company. The Group includes The KeyPremier Established Growth Fund (the "Growth
Fund") and The KeyPremier Intermediate Term Income Fund (the "Income Fund"),
each of which is a diversified portfolio of the Group (the Growth and Income
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").
Martindale Andres & Co., West Conshohocken, Pennsylvania (the
"Adviser"), which is a wholly owned subsidiary of Keystone Financial, Inc.
("Keystone"), acts as the investment adviser to each of the Funds.
THE SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE ADVISER, KEYSTONE OR ANY OF THEIR AFFILIATES.
SUCH SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, 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.
Additional information about the Funds and the Group, 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 Group at its address or by calling the Group 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 and the Group 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.
---------------
<PAGE> 5
The date of this Prospectus is October __, 1996.
Each of the Growth Fund's and the Income 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, the corporate general partner of
BISYS, acts as the Funds' transfer agent (the "Transfer Agent") and performs
certain fund accounting services for each of the Funds.
<PAGE> 6
PROSPECTUS SUMMARY
SHARES OFFERED: Units of beneficial interest ("Shares") of the Growth
Fund and the Income Fund, two separate investment funds of The Sessions Group,
an Ohio business trust (the "Group").
OFFERING PRICE: The public offering price of each of the Funds is equal
to the net asset value per share plus a sales charge of 4.50% of the public
offering price, reduced on investments of $100,000 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 investments. Such minimum initial investment is
reduced for investors using the Auto Invest Plan described herein
and for employees of the Adviser and its affiliates.
TYPE OF COMPANY: Each Fund is a diversified series of an
open-end, management investment company.
INVESTMENT OBJECTIVES: For the GROWTH FUND, growth of capital
with some current income as a secondary objective.
For the INCOME FUND, current income with long-term growth of capital as
a secondary objective.
INVESTMENT POLICIES: Under normal market conditions, the GROWTH 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.
Under normal market conditions, the INCOME FUND will invest
substantially all, but in no event less than 65%, of its total assets in fixed
income securities of all types, including high and medium grade corporate bonds,
U.S. Government bonds and mortgage-backed securities.
RISK FACTORS AND SPECIAL CONSIDERATIONS: An investment in either 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 either of the Funds will achieve its investment objectives. The
Funds, to the extent set forth under "INVESTMENT OBJECTIVES AND POLICIES," may
engage in the following practices: the use of repurchase agreements and reverse
repurchase agreements, entering into options and futures transactions, the
purchase of securities on a when-issued or delayed-delivery basis and the
purchase of foreign securities and derivatives.
INVESTMENT ADVISER: Martindale Andres & Company, Inc. (the
"Adviser").
<PAGE> 7
DIVIDENDS: Dividends from net income are declared and generally paid
monthly with respect to the Income Fund and quarterly with respect to the Growth
Fund. Net realized capital gains, if any, are distributed at least annually.
DISTRIBUTOR: BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services ("BISYS").
-2-
<PAGE> 8
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES GROWTH FUND INCOME FUND
<S> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a percentage of
offering price) 4.50% 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees(1) 0.00% 0.00%
12b-1 Fees None None
Other Expenses(2) 0.27 0.26
----- ----
Estimated Total Fund Operating Expenses 0.27% 0.26%
===== =====
</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>
The Growth Fund $48 $53
The Income Fund $48 $53
</TABLE>
The purpose of the above table is to assist a potential purchaser of
Shares of a Fund in understanding the various costs and expenses that an
investor in the 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 annual
operating expenses of the Funds. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED
A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
1 The Adviser has agreed with the Group to waive all of its investment
advisory fees for both the Growth Fund and Income Fund through December
31, 1996. Absent such voluntary fee waivers, Management Fees and
Estimated Total Fund Operating Expenses for the Growth Fund would be
0.75% and 1.02%, respectively, and for the Income Fund would be 0.60%
and .86%, respectively.
2 "Other Expenses" are estimated for the current fiscal year.
-3-
<PAGE> 9
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing the
Funds' average annual total return, aggregate total return and 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
collective investment fund) 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 a 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) on the last day of the
period and annualizing the result. Each of the Funds may also present its
average annual total return, aggregate total return and yield, as the case may
be, excluding the effect of a sales charge, if any.
Each of the Funds has been initially funded by the transfer of all of
the assets of a corresponding collective investment fund managed by the Adviser
(the "CIFs"). Because the management of the Funds is substantially the same as
the corresponding CIFs, the quoted performance of the Funds will include the
performance of the CIFs for the periods prior to the effectiveness of the
Group's registration statement as it relates to the Funds. The CIFs 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 CIFs had been so registered, their
performance might have been adversely affected.
In addition, from time to time, the Income Fund may also present its
distribution rate 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 the Income
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 the Income 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
-4-
<PAGE> 10
often non-recurring in nature, whereas yield does not include such
items.
Investors may also judge the performance of a Fund by comparing or
referencing it to the performance of other mutual 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 the 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 Keystone or by any of its
affiliates, 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 objectives for the Growth Fund are growth of capital
with some current income as a secondary objective. The investment objectives for
the Income Fund are current income with long-term growth of capital as a
secondary objective. The investment objectives of each Fund are non-fundamental
policies and as such may be changed by the Group's trustees without the vote of
the Shareholders of that Fund. There can be no assurance that the investment
objectives of either Fund will be achieved.
THE GROWTH FUND
Under normal market conditions, the Growth 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
capitalizations of at least $1 billion. However, the Growth Fund intends to
operate with a fully invested philosophy, i.e. the Growth Fund will generally
invest 90% of its assets in common stocks. The Growth Fund's equity investments
will be based on two principles: (1) a solid long-term fundamental business
outlook and (2) an attractively valued stock price. The Growth Fund's
investment decisions are based upon a
-5-
<PAGE> 11
company's expected performance through a business and market cycle which
normally translates into a three to five year investment horizon. In an effort
to mitigate some volatility, the Growth Fund does seek to maintain
representation in all major economic sectors.
Given the Growth Fund's large market capitalization focus, the Growth
Fund's appropriate performance benchmark should be the Standard & Poor 500
Index. As a result of the investment process, the Growth Fund expects to
experience slightly greater volatility than its benchmark. For purposes of the
foregoing, securities convertible into common stocks include convertible bonds,
convertible preferred stock, options and rights. The securities purchased by the
Growth Fund are generally traded over established U.S. markets and exchanges.
Under normal market conditions, the Growth Fund may also invest up to
35% of its total assets in warrants, American Depositary Receipts, securities of
other investment companies and REITs (real estate investment trusts), cash and
Short-Term Obligations, as defined below, and may engage in other investment
techniques described below.
Subject to the limitation described above, the Growth Fund may invest
in foreign securities through the purchase of sponsored and unsponsored American
Depositary Receipts ("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.
"Short-Term Obligations" consist of obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities (including U.S. Treasury
securities stripped of the unmatured interest coupons and such stripped interest
coupons), with maturities of 12 months or less, certificates of deposit,
bankers' acceptances and demand and time deposits of selected banks, securities
of money market mutual funds, and commercial paper rated in one of the two
highest rating categories by appropriate nationally recognized statistical
rating organizations ("NRSROs," e.g., Standard & Poor's Corporation and Moody's
Investors Service) and repurchase agreements collateralized by such obligations.
These obligations are described further in the Statement of Additional
Information. The Growth Fund may also invest up to 100% of its total assets in
Short-Term Obligations and cash when deemed appropriate for temporary defensive
purposes as determined by the Adviser to be warranted due to current or
anticipated market conditions. However, to the extent that the Income Fund is so
invested, it may not achieve its investment objectives.
-6-
<PAGE> 12
THE INCOME FUND
Generally. Under normal market conditions, the Income Fund will invest
substantially all, but in no event less than 65%, of its total assets in fixed
income securities of all types, including variable and floating rate securities
and variable amount master demand notes. A portion of the Income Fund (but no
more than 35% of its total assets) may be invested in securities of other
investment companies, preferred stocks and, for cash management purposes,
Short-Term Obligations, and the Income Fund may engage in other investment
techniques described below. Fixed income securities include bonds, debentures,
notes, mortgage-backed and asset-backed 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, mortgage-backed securities 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 three to ten 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 ("GNMA") 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 ("FNMA"), 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 ("FHLMC"), 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 obliga-
-7-
<PAGE> 13
tions, 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.
Except as noted in the next paragraph, the Income Fund invests only in
debt securities which are rated at the time of purchase within the four highest
rating groups assigned by one or more appropriate NRSROs or, if unrated, which
the 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. For a discussion of debt securities rated within the fourth highest
rating group assigned by an NRSRO, see "Risk Factors and Investment Techniques -
Medium Grade Securities " below.
The Income Fund may also invest up to 20% of the value of its net
assets in debt securities which, in the case of bonds, are rated lower than the
fourth highest rating group by an appropriate NRSRO and as low as "B" by an
appropriate NRSRO. Investments rated Ba or lower by Moody's Investors Services,
Inc. ("Moody's") and BB or lower by Standard & Poor's Corporation ("S&P")
ordinarily provide higher yields but involve greater risk because of their
speculative characteristics. Debt rated B by S&P is regarded, on balance, as
predominately speculative with respect to the capacity to pay interest and repay
principal in accordance with the terms of the obligation.
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 up to 100% of its total assets in Short-Term Obligations and cash
when deemed appropriate for temporary defensive purposes as determined by the
Adviser to be warranted due to current or anticipated market conditions.
However, to the extent that the Income Fund is so invested, it may not achieve
its investment objectives.
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").
Mortgage-Backed Securities. The Income Fund also invests in
mortgage-backed 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 four highest bond rating categories assigned by
one or more appropriate NRSROs, or, if unrated, which the Adviser deems to be of
comparable quality to securities so rated. There are currently three basic
-8-
<PAGE> 14
types of mortgage-backed securities: (1) those issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, such as GNMA, FNMA and
FHLMC; (2) those issued by private issuers that represent an interest in or are
collateralized by mortgage-backed securities issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities; and (3) those issued by
private issuers that represent an interest in or are collateralized by whole
mortgage loans or mortgage-backed securities without a government guarantee but
usually having some form of private credit enhancement.
Such mortgage-backed securities may have mortgage obligations directly
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 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 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.
-9-
<PAGE> 15
Collateralized Mortgage Obligations. The Income Fund may also acquire
collateralized mortgage obligations or "CMOs" and stripped mortgage-backed
securities. CMOs are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. Typically, CMOs are collateralized by GNMA,
FNMA or FHLMC certificates, but also may be collateralized by whole loans or
private mortgage pass-through securities (such collateral collectively referred
to as "Mortgage Assets"). Payments of principal or interest on the Mortgage
Assets, and any reinvestment income thereon, provide the funds to pay debt
service on the CMOs. CMOs may be issued by agencies or instrumentalities of the
U.S. Government or by private originators of, or investors in, mortgage loans.
IOs and POs. Stripped mortgage-backed securities are securities
representing interests in a pool of mortgages the cash flow from which has been
separated into interest and principal components. "IOs" (interest only
securities) receive the interest portion of the cash flow while "POs" (principal
only securities) receive the principal portion. Stripped mortgage-backed
securities may be issued by U.S. Government agencies or by private issuers, such
as mortgage banks, commercial banks, investment banks, savings and loan
associations and special purpose subsidiaries of the foregoing. As interest
rates rise and fall, the value of IOs tends to move in the same direction as
interest rates. The value of other agency mortgage-backed securities described
herein, like other debt instruments, will tend to move in the opposite direction
compared to interest rates. POs perform best when prepayments on the underlying
mortgages rise since this increases the rate at which the investment is returned
and the yield to maturity on the PO. When payments on mortgages underlying a PO
are slow, the life of the PO is lengthened and the yield to maturity is reduced.
The Income Fund may purchase stripped mortgage-backed securities for
hedging purposes to protect the Income Fund against interest rate fluctuations.
For example, since an IO will tend to increase in value as interest rates rise,
it may be utilized to hedge against a decrease in value of other fixed-income
securities in a rising interest rate environment. If the Income Fund purchases a
mortgage-related security at a premium, all or part of the premium 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. Moreover, with respect to stripped mortgage-backed securities, if
the underlying mortgage securities experience greater than anticipated
prepayments of principal, the Income Fund may fail to recoup fully its initial
investment in these securities even if the securities are rated in the highest
rating category by an NRSRO. Stripped mortgage-backed securities may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors. The market value
of the class consisting entirely of principal payments can be
-10-
<PAGE> 16
extremely volatile in response to changes in interest rates. The yields on
stripped mortgage-backed securities that receive all or most of the interest are
generally higher than prevailing market yields on other mortgage-backed
obligations because their cash flow patterns are also volatile and there is a
greater risk that the initial investment will not be fully recouped. No more
than 10% of the Income Fund's assets will be invested in IOs and POs.
Asset-Backed Securities. Asset-backed securities are similar to
mortgage-backed securities except that instead of using mortgages to
collateralize the obligations, a broad range of other assets may be used as
collateral, primarily automobile and credit card receivables and home equity
loans. Such receivables and loans are securitized in pass-through structures
similar to the mortgage pass-through or pay-through structures described above.
Certain debt securities such as, but not limited to, mortgage-backed
securities, CMOs, asset backed securities and securitized loan receivables, as
well as other 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.
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 that provide for periodic adjustments in
the interest rate according to the terms of the instrument. Because master
demand notes are direct lending arrangements between the Income Fund and the
issuer, they are not normally traded. Although there is no secondary market in
the notes, the Income Fund may demand payment of principal and accrued interest
at any time. While the notes are not typically rated by NRSROs, issuers of
variable amount master demand notes (which are normally manufacturing, retail,
financial, and other business concerns) must satisfy the same criteria as set
forth above for commercial paper. 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 dollar-weighted average portfolio maturity, a variable
amount master demand note will be deemed to have a maturity equal to the period
of time remaining until the principal amount can be recovered from the issuer
through demand.
Zero Coupon Securities. The Income Fund may invest in zero
coupon securities which are debt securities issued or sold at a
discount from their face value which do not entitle the holder to
-11-
<PAGE> 17
any periodic payment of interest prior to maturity or a specified redemption
date (or cash payment date). The amount of the discount varies depending on the
time remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and perceived credit quality of the issuer. Zero
coupon securities also may take the form of debt securities that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. The market prices of zero coupon securities generally
are more volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit qualities. For
further information regarding zero coupon securities, see "Additional General
Tax Information" in the Statement of Additional Information.
Variable and Floating Rate Securities. Securities purchased by the
Income Fund may include rated and unrated variable and floating rate
obligations. A variable rate obligation 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 an obligation 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 obligation, on readjustment of its interest rate, will not
approximate its par value.
A floating rate obligation 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
Income 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 Income
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 obligation purchased by the Income Fund, the Income
Fund may resell the obligation at any time to a third party. The absence of an
active secondary market, however, could make it difficult for the Income Fund to
dispose of a variable or floating rate obligation in the event the issuer of the
note defaulted on its payment obligations and the Income Fund could, as a result
or for other reasons, suffer a loss to the extent of the default. Variable or
floating rate obligations may be secured by bank letters of credit.
-12-
<PAGE> 18
Variable and floating rate obligations for which no readily available
market exists and which are not subject to a demand feature that will permit the
Income Fund to receive payment of the principal within seven days after demand
by the Income Fund, will be considered illiquid and therefore, together with
other illiquid securities held by such Fund, will not exceed 15% of the Income
Fund's net assets.
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, although as described above, some
securities bear the risk of early prepayment. 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.
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in either of the Funds
entails certain risks. Equity securities such as those in which the Growth Fund
may invest are more volatile and carry more risk than some other forms of
investment, including investments in high grade fixed income securities.
Therefore, the Growth Fund is 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 Fund invests in bonds, investors in such a Fund 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 although certain types of bonds
are subject to the risks of prepayment as described above when interest rates
fall. 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.
Depending upon the performance of each Funds' investments, the net
asset value per share of a Fund may decrease instead of increase.
Each Fund may invest in any one or more of the following securities:
certain variable or floating rate securities, mortgage-backed securities,
including IOs and POs and, as described below,
-13-
<PAGE> 19
each Fund may invest in put and call options and futures. Such instruments are
considered to be "derivatives." 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 not invest more than 20% of its total assets in any such derivatives
at any one time.
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, in exchange for cash, from member banks of the
Federal Deposit Insurance Corporation and/or from registered broker-dealers
which the Adviser 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
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.
Securities subject to repurchase agreements must be of the same type and quality
as those in which the Fund may invest directly. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act. 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 the 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 such 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
-14-
<PAGE> 20
transaction. For further information about reverse repurchase agreements, see
"INVESTMENT OBJECTIVE 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, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with the 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.
Medium-Grade Securities. As described above, the Income Fund may invest
in debt securities within the fourth highest rating group assigned by an NRSRO
(e.g. BBB or Baa by S&P and Moody's, respectively) and comparable unrated
securities. These types of debt securities are considered by Moody's to have
some speculative characteristics, and while interest payments and principal
security appears adequate for the present, such securities lack certain
protective elements or may be characteristically unreliable over any great
period of time.
Should subsequent events cause the rating of a debt security purchased
by the Income Fund to fall below BBB or Baa, as the case may be, the Adviser
will consider such an event in determining whether the Income Fund should
continue to hold that security. In no event, however, would the Income Fund be
required to liquidate any such portfolio security where the Income Fund would
suffer a loss on the sale of such security.
Foreign Investments. Investments in foreign securities (including
Yankee Bonds, Eurodollar Bonds and Supranational Bonds) 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. The Income Fund will acquire securities issued
by foreign branches of U.S. banks, foreign banks, or other foreign issuers only
when the Adviser
-15-
<PAGE> 21
believes that the risks associated with such instruments are minimal.
Restricted Securities. Securities in which 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 generally are sold to institutional
investors such as the Income Fund 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 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 the Income Fund to purchase securities which
have been privately placed and resell such securities to certain qualified
institutional buyers, such as the Income Fund, without restriction. For purposes
of determining whether a Rule 144A Security is readily saleable, and therefore
liquid, the Adviser 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 Income Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities.
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. Should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest received on such securities. Loans are subject to termination by the
Fund or the borrower at any time. While a Fund does not have the right to vote
-16-
<PAGE> 22
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, a 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 has determined are creditworthy
under guidelines established by the Group's Board of Trustees.
Writing Covered Call and Put Options. Each Fund may write covered call
and covered put options on securities, or futures contracts regarding
securities, in which such Fund may invest, in an effort to realize additional
income. 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 a
Fund will be valued at the last sale price, or in the absence of such a price,
at the mean between bid and asked price. Such options will be listed on national
securities or futures exchanges. Each Fund may write covered call options as a
means of seeking to enhance its income through the receipt of premiums in
instances in which the Adviser determines that the underlying securities or
futures contracts are not likely to increase in value above the exercise price.
Each Fund also may seek to earn additional income through the receipt of
premiums by writing put options. Covered call options give the purchaser the
right, for a stated period, to buy the underlying securities from the Fund at a
stated price, while put options give the purchaser the right, for a stated
period, to sell the underlying securities to the Fund at a stated price. By
writing a call option, a Fund limits its opportunity to profit from any increase
in the market value of the underlying security above the exercise price of the
option; by writing a put option, a Fund assumes the risk that it may be required
to purchase the underlying security at a price in excess of its then current
market value.
Each of the Funds, as part of its option transactions, also may write
index put and call options. Through the writing 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
-17-
<PAGE> 23
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.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by that 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.
Purchasing Options. In addition, each Fund may purchase put and call
options written by third parties covering indices and those types of financial
instruments or securities in which the Fund may invest to attempt to provide
protection against adverse price effects from anticipated changes in prevailing
prices for such instruments. The purchase of a put option is intended to protect
the value of a Fund's holdings in a falling market while the purchase of a call
option is intended to protect the value of a Fund's positions in a rising
market.
In purchasing a call option, a Fund would be in a position to realize a
gain if, during the option period, the price of the underlying security, index
or futures contract increased by an amount in excess of the premium paid for the
call option. It would realize a loss if the price of the underlying security,
index or futures contract declined or remained the same or did not increase
during the period by more than the amount of the premium. By purchasing a put
option, the Fund would be in a position to realize a gain if, during the option
period, the price of the security, index or futures contract declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the security, index or futures contract increased or remained the same or did
not decrease during that period by more than the amount of the premium. If a put
or call option purchased by the Fund were permitted to expire without being sold
or exercised, its premium would represent a realized loss to the Fund.
Futures Contracts. Each Fund may purchase or sell contracts for the
future delivery of the specific financial instruments or securities in which
that Fund may invest, and indices based upon the types of securities in which
that Fund may invest (collectively, "Futures Contracts"). Each Fund may use this
-18-
<PAGE> 24
investment technique as a substitute for a comparable market position in the
underlying securities or to hedge against anticipated future changes in market
interest rates, which otherwise might adversely affect either the value of such
Fund's securities or the prices of securities which such Fund intends to
purchase at a later date. In addition, the Income 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 Income
Fund has purchased at a premium.
To the extent a Fund is engaging in a futures transaction as a hedging
device, because of the risk of an imperfect correlation between securities in
the Fund's portfolio that are the subject of a hedging transaction and the
futures contract used as a hedging device, it is possible that the hedge will
not be fully effective if, for example, losses on the portfolio securities
exceed gains on the futures contract or losses on the futures contract exceed
gains on the portfolio securities. For futures contracts based on indices, the
risk of imperfect correlation increases as the composition of a 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 future contract has
been less or greater than that of the securities. Such "over hedging" or "under
hedging" may adversely affect a Fund's net investment results if the market does
not move as anticipated when the hedge is established.
Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market or
interest rates. For example, if a Fund has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, the Fund will lose part or all of the
benefit of the increased value of securities which it has hedged because it will
have offsetting losses in its futures positions. Furthermore, if in such
circumstances the Fund has insufficient cash, it may have to sell securities to
meet daily variation margin requirements. The Fund may have to sell such
securities at a time when it may be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise period. The
writer of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the
-19-
<PAGE> 25
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Call options sold by a Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which are
expected to move relatively consistently with the instruments underlying, the
futures contract. Put options sold by a Fund with respect to futures contracts
will be covered when, among other things, cash or liquid securities are placed
in a segregated account to fulfill the obligation undertaken.
Each Fund may utilize various index futures to protect against changes
in the market value of the securities in its portfolio or which it intends to
acquire. Securities index futures contracts are based on an index of various
types of securities, e.g., stocks or long-term corporate bonds. The index
assigns relative values to the securities included in an index, and fluctuates
with changes in the market value of such securities. The contract is an
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash based upon the difference between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. The acquisition or sale of an index futures
contract enables a Fund to protect its assets from fluctuations in rates or
prices of certain securities without actually buying or selling such securities.
Interest Rate Futures Contracts and Options on Interest Rate Futures
Contracts. The Income Fund may purchase and sell interest rate futures contracts
and options on interest rate futures contracts as a substitute for a comparable
market position or to hedge against adverse movements in interest rates.
To the extent the Income Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a substitute for a
comparable market position, the Income Fund will be subject to the investment
risks of having purchased the securities underlying the contract.
The Income Fund may purchase call options on interest rate futures
contracts to hedge against a decline in interest rates and may purchase put
options on interest rate futures contracts to hedge its portfolio securities
against the risk of rising interest rates.
-20-
<PAGE> 26
If the Income Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of securities held in the Income
Fund's portfolio and rates decrease instead, the Income Fund will lose part or
all of the benefit of the increased value of the securities which it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if the Income Fund has insufficient cash, it may have to sell
securities to meet daily variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices which reflect the decline in interest rates.
The Income Fund may sell call options on interest rate futures
contracts to partially hedge against declining prices of its portfolio
securities. If the futures price at expiration of the option is below the
exercise price, the Income Fund will retain the full amount of the option
premium which provides a partial hedge against any decline that may have
occurred in the Income Fund's portfolio holdings. The Income Fund may sell put
options on interest rate futures contracts to hedge against increasing prices of
the securities which are deliverable upon exercise of the futures contracts. If
the futures price at expiration of the option is higher than the exercise price,
the Income Fund will retain the full amount of the option premium which provides
a partial hedge against any increase in the price of securities which the Income
Fund intends to purchase. If a put or call option sold by the Income Fund is
exercised, the Income Fund will incur a loss which will be reduced by the amount
of the premium it receives. Depending on the degree of correlation between
changes in the value of its portfolio securities and changes in the value of its
futures positions, the Income Fund's losses from existing options on futures may
to some extent be reduced or increased by changes in the value of its portfolio
securities.
The Income Fund also may sell options on interest rate 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 or that there will be a correlation between price movements in the
options on interest rate futures and price movements in the Income Fund's
portfolio securities which are the subject of the hedge. In addition, the Income
Fund's purchase of such options will be based upon predictions as to anticipated
interest rate trends, which could prove 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.
-21-
<PAGE> 27
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.
When-Issued or Delayed-Delivery Securities. Each 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. Each 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 objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued or delayed-delivery 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 or
dividends 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 or delayed-delivery 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, a Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause that Fund to miss a price or yield
considered to be advantageous.
Investment Company Securities. Each 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 other
investment companies which, in the opinion of the Adviser 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.
-22-
<PAGE> 28
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 Fund will
not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the Fund's total assets would
be invested in such issuer or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that 25% or less of the
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.
2. Purchase any securities which would cause more than 25% of the
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 obligations of the U.S. Government, its
agencies or instrumentalities; (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. Borrow money or issue senior securities except as and to the extent
permitted by the 1940 Act or any rule, order or interpretation thereunder.
4. Make loans, except that the 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 restriction may be changed without
the vote of a majority of the outstanding Shares of a Fund: each Fund may 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.
-23-
<PAGE> 29
VALUATION OF SHARES
The net asset value of each Fund is determined and its Shares are
priced as of 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 that
Fund. The time at which the Shares of the Funds are priced is hereinafter
referred to as the "Valuation Time." 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 the Fund are tendered for redemption and no order to purchase
any Shares of the Fund is received) during which there is sufficient trading in
portfolio instruments such that the 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 Fund will fluctuate as the value
of the investment portfolio of that Fund changes. The Trustees of the Group has
set the initial price of each Fund's Shares at $10 per share.
The portfolio securities 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.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in the Funds 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) 766-3960.
-24-
<PAGE> 30
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, its affiliates
or its correspondent entities (collectively, "Entities").
Shares of the Funds sold to the Entities acting in a fiduciary,
advisory, custodial, agency, or other similar capacity on behalf of Customers
will normally be held of record by the Entities. With respect to Shares of a
Fund so sold, it is the responsibility of the particular Entity 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 Entities and reflected in the account statements provided by the Entities
to Customers.
Investors may also purchase Shares of the Funds 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 applicable Fund, to The KeyPremier Funds, P.O.
Box 182707, Columbus, Ohio 43218-2707. Subsequent purchases of Shares of a 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) 766-3960 to
obtain instructions regarding the bank account number into which the funds
should be wired and other pertinent information.
Shares of the Funds 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.
For an order for the purchase of Shares of a Fund that is 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
-25-
<PAGE> 31
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 Business 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
minimum investment amount is reduced to $250 for employees of the Adviser,
Keystone or any of their affiliates.
Depending upon the terms of a particular Customer's account, the
Entities or their affiliates may charge a Customer account fees for automatic
investment and other cash management services provided in connection with an
investment in a Fund. Information concerning these services and any charges will
be provided by the Entities. This Prospectus should be read in conjunction with
any such information received from the Entities or their affiliates.
Each Fund reserves the right to reject any order for the purchase of
its Shares in whole or in part, including purchases made with foreign checks and
third party checks not originally made payable to the order of the investor.
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 Entities on behalf of their Customers will be sent by
the Entities to their Customers. Shareholders may rely on these statements in
lieu of certificates. Certificates representing Shares will not be issued.
AUTO INVEST PLAN
The KeyPremier Funds Auto Invest Plan enables Shareholders to make
regular monthly or quarterly purchases of Shares of the Funds 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 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 $250;
the minimum amount for subsequent investments is $25. To participate in the Auto
Invest Plan, Shareholders should complete the appropriate section of the
-26-
<PAGE> 32
Account Registration Form or a supplemental sign-up form which can be acquired
by calling the Group at (800) 766-3960. 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 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 Securities Act of 1933.
<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 4.71% 4.50% 4.05%
$100,000
$100,000 but less 3.63 3.50 3.15
than $250,000
$250,000 but less 2.56 2.50 2.25
than $500,000
$500,000 but less 1.52 1.50 1.35
than $1,000,000
$1,000,000 or 0 0 0
more
</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 expense, will also provide additional compensation to
dealers in connection with sales of Shares 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 the Funds, 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
-27-
<PAGE> 33
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 the Funds'
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 National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by any Fund or its Shareholders.
SALES CHARGE WAIVERS
The Distributor will waive sales charges for the purchase of Shares of
a Fund by or on behalf of (1) purchasers for whom Keystone, the Adviser, one of
their affiliates or another financial institution acts in a fiduciary, advisory,
agency, custodial (other than individual retirement accounts), or similar
capacity, (2) officers, trustees, directors, advisory board members, employees
and retired employees (including spouses, children and parents of the foregoing)
of Keystone, the Adviser, the Group, BISYS and any affiliated company thereof,
(3) investors who purchase Shares with the proceeds from a distribution from the
Adviser, Keystone or an affiliate trust or agency account, and (4) brokers,
dealers and agents who have a sales agreement with the Distributor, and their
employees (and their spouses and children under 21). 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.
In addition, the Distributor may waive sales charges for the purchase
of a Fund's Shares with the proceeds from the recent redemption of shares of a
non-money market fund that imposes a sales charge. The purchase must be made
within 60 days of the redemption, and the Distributor must be notified in
writing by the investor, or by his financial institution, at the time the
purchase is made. A copy of the investor's account statement showing such
redemption must accompany such notice.
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
("KeyPremier Load Funds"). For example, if a Shareholder concurrently purchases
Shares in the Growth Fund at the total public offering price of $50,000 and
Shares in the Income Fund at the total public offering price of $50,000, the
sales charge would be that applicable to a $100,000 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.
-28-
<PAGE> 34
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) 766-3960.
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 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, if any.
RIGHT OF ACCUMULATION
Pursuant to the right of accumulation, investors are permitted to
purchase Shares of a Fund at the public offering price applicable to the total
of (a) the total public offering price of the Shares of the KeyPremier 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
KeyPremier Load Funds. The "purchaser's combined holdings" described in the
preceding sentence
-29-
<PAGE> 35
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 Fund may be exchanged for Shares of The KeyPremier Prime
Money Market Fund or any other KeyPremier Load Fund at respective net asset
values if the amount to be exchanged meets the applicable minimum investment
requirements and the exchange is made in states where it is legally authorized.
When shares of The KeyPremier Prime Money Market Fund are exchanged for Shares
of a Fund or other KeyPremier 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.
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
Fund as a part of the cost of 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) 766-3960 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 an Entity. For example, if a
Customer has agreed with an Entity to maintain a minimum balance in his or her
account with the Entity, and the balance in that account falls below that
minimum, the Customer may be obliged to redeem, or the Entity may
-30-
<PAGE> 36
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 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. A shareholder may also have such payment
mailed directly to the Shareholder at the Shareholder's address as recorded by
the Transfer Agent. However, this option may be suspended for a period of 30
days following a telephonic address change. 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
-31-
<PAGE> 37
mailed or sent electronically to a designated bank account. For telephone
redemptions, call the Group at (800) 766-3960.
Neither the Group, 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 the Group's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Group will employ
procedures designed to provide reasonable assurance that instructions by
telephone are genuine; if these procedures are not followed, the Group, the
Funds or their 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
shown on the front page of this Prospectus.
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 $50 monthly. To participate in
the Auto Withdrawal Plan, Shareholders should call (800) 766-3960 for more
information. Purchases of additional Shares, including use of the Auto Invest
Plan described above, 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, to
the greatest extent possible, each Fund 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
-32-
<PAGE> 38
for payment on the second Business Day. Each Fund will attempt to so honor
redemption requests unless it would be disadvantageous to a 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. 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, the
Group reserves the right to redeem, at net asset value, the Shares of a 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
with less than $1,000 using the Auto Invest Plan), the account of such
Shareholder has a value of less than $1,000 ($250 if the Shareholder is an
employee of the Adviser or one of its affiliates). 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 the Group 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 at least 60 days to make an additional investment in an
amount which will increase the value of the account to at least $1,000 ($250 if
the Shareholder is an employee of the Adviser or one of its affiliates).
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement
of Additional Information for examples of when the Group may suspend the right
of redemption.
DIVIDENDS AND TAXES
DIVIDENDS
A dividend for each Fund is declared monthly at the close of business
on the day of declaration consisting of an amount of accumulated undistributed
net income of that Fund as determined necessary or appropriate by the
appropriate officers of the Group. Such dividend is generally paid monthly with
respect to the Income Fund and quarterly with respect to the Growth Fund.
Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of that Fund
-33-
<PAGE> 39
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, if any, for a 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
that 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.
FEDERAL TAXES
Each Fund 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 its 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 having 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, a Fund would be subject to a
nondeductible 4% excise tax on the deficiency.
It is expected that each Fund will distribute annually to its
Shareholders all or substantially all of that 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,
-34-
<PAGE> 40
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 a Fund bear to its gross
income. Since all of 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 the Income Fund will be eligible for the
dividends received deduction for corporations.
Distribution by a Fund of the excess of net long-term capital gain, if
any, 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.
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 General 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 own 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 income
tax consequences of distributions made to them during the year.
-35-
<PAGE> 41
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board
of Trustees. Unless so required by the Group's Declaration of Trust or By-Laws
or by Ohio law, at any given time all of the Trustees may not have been elected
by the 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 Fund Services Inc., the sole general
partner of BISYS, or BISYS receives any compensation from the Group for acting
as a 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 each Fund for acting as Administrator, 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 Fund for acting as Transfer Agent and for providing
certain fund accounting services.
INVESTMENT ADVISER
Martindale Andres & Company, Inc., Four Falls Corporate Center, Suite
200, West Conshohocken, Pennsylvania 19428, is the investment adviser of each
Fund and has served as such since the Funds' inception. The Adviser is a wholly
owned subsidiary of Keystone Financial, Inc., 1 Keystone Plaza, Harrisburg,
Pennsylvania 17101 ("Keystone"). The Adviser was organized in 1989 and was
acquired by Keystone in December 1995. The Adviser has not previously served as
the investment adviser to a registered open-end management investment company.
However, the Adviser has managed since its founding the investment portfolio of
high net worth individuals, endowments, pension and common trust funds. The
Adviser currently has over $1.6 billion under management.
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 each Fund, makes decisions with respect to and places
orders for all purchases and sales of its portfolio securities, and maintains
each Fund's records relating to such purchases and sales.
William C. Martindale, Jr. is primarily responsible for the day-to-day
management of the Growth Fund's portfolio and, with over 25 years of equity
investment experience, provides a rigorous approach to large capitalization
equity analysis and stock selection. Mr. Martindale co-founded the Adviser in
1989 and serves as its Chief Investment Officer. Prior to 1989, Mr. Martindale
served in various investment-related capacities with Dean Witter Reynolds.
-36-
<PAGE> 42
Colleen Marsh is primarily responsible for the day-to-day management of
the Income Fund's portfolio. Ms. Marsh is a senior portfolio manager in the
fixed income division of the Adviser. She has over 12 years of experience
managing fixed income portfolios and funds for clients. She spent the first 10
years of her investment management career with Keystone and has managed the
Intermediate Term Income Fund (the predecessor CIF to the Income Fund) for
Keystone over this time period. She applies an active management approach
emphasizing duration management, yield curve analysis and the identification of
relative value opportunities among the various sectors of the bond market. Ms.
Marsh is currently enrolled as a level II candidate for the Chartered Financial
Analysts designation.
For the services provided and expenses assumed pursuant to its
Investment Advisory Agreement with the Group, the Adviser receives a fee from
the Growth Fund, computed daily and paid monthly, at the annual rate of
seventy-five one-hundredths of one percent (.75%) of such Fund's average daily
net assets. With respect to the Income Fund, the Adviser receives a fee from
such Fund, computed daily and paid monthly, at the annual rate of sixty
one-hundredths of one percent (.60%) of such Fund's average daily net assets.
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 after the end of the fiscal year in which the
fees were reduced. 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.
ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund and also acts as the Funds'
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, computed daily and paid
periodically, calculated at an annual rate of eleven and one-half one-hundredths
of one percent (.115%) of that Fund's average daily net assets. 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 that
Fund available for distribution as dividends. The Administrator 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
-37-
<PAGE> 43
yield and total return of that Fund to be higher than they would otherwise be in
the absence of such a fee reduction.
The Distributor acts as agent for 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 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 the Funds. 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,
fees and out-of-pocket expenses of the custodian, fund accountant 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, expenses incurred under the Administrative Services Plan described
below and any extraordinary expenses incurred in the Fund's operation.
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 each
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
-38-
<PAGE> 44
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 Funds on behalf of customers, providing periodic statements to
customers showing their positions in the Shares of the Funds, 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 a Fund pursuant to specific or pre-authorized instructions. As of the
date hereof, no such servicing agreements have been entered into by the Group
with respect to either Fund.
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 sixteen funds, each having its own class of shares. 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). The other funds of the
Group are The KeyPremier Prime Money Market Fund, The KeyPremier Pennsylvania
Municipal Bond Fund, 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, Riverside Capital
Money Market Fund, Riverside Capital Value Fund, Riverside Capital Fixed Income
Fund, Riverside Capital Growth Fund, Riverside Capital Tennessee Municipal
Obligations Fund and Riverside Capital Low Duration Government Securities Fund.
-39-
<PAGE> 45
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 fund except as otherwise expressly
required by law. For example, Shareholders of a Fund will vote in the aggregate
with other shareholders of the Group with respect to the election of trustees.
However, Shareholders of that Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval or amendment of
the Fund's investment advisory agreement.
Overall responsibility for the management of each Fund 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,
although Trustees may under certain circunstances, fill vacancies, including
vacancies created by expanding the size of the Board. Trustees may be removed
by the 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 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 of shareholders.
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.
Immediately prior to the public offering of the Funds' Shares, BISYS
Fund Services Ohio, Inc. was the sole shareholder of each Fund. It is expected
that immediately after the public offering of the Funds' Shares, BISYS Fund
Services Ohio, Inc.'s holding of Shares of each Fund will be reduced below 5%.
CUSTODIAN
The Bank of New York serves as the custodian for each Fund.
-40-
<PAGE> 46
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219,
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 the Funds pursuant to a Fund Accounting
Agreement and receives a fee from each Fund for such services equal to the
greater of (a) a fee computed at an annual rate of 0.03% of that Fund's average
daily net assets or (b) the annual fee of $30,000. See "MANAGEMENT OF THE GROUP
- - Transfer Agency and Fund Accounting Services" in the Statement of Additional
Information for further information.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual
reports audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by a
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 such 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 the Funds 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 such 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 the Funds may be directed in writing to the Group
at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800)
766-3960.
-41-
<PAGE> 47
INVESTMENT ADVISER
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, Pennsylvania 19428
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
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
-42-
<PAGE> 48
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY................................................... 1
FEE TABLE............................................................ 3
PERFORMANCE INFORMATION.............................................. 3
INVESTMENT OBJECTIVES AND POLICIES................................... 5
INVESTMENT RESTRICTIONS.............................................. 22
VALUATION OF SHARES.................................................. 23
HOW TO PURCHASE AND REDEEM SHARES.................................... 24
DIVIDENDS AND TAXES.................................................. 33
MANAGEMENT OF THE GROUP.............................................. 35
GENERAL INFORMATION.................................................. 39
</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
THE FUNDS OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 49
The
KeyPremier
Established
Growth Fund
The
KeyPremier
Intermediate
Term Income Fund
[LOGO]
Martindale, Andres & Company, Inc.
Investment Adviser
---------------------------------
Prospectus dated October __, 1996
---------------------------------
-44-
<PAGE> 50
The KeyPremier Established Growth Fund
The KeyPremier Intermediate Term Income Fund
Two Investment Portfolios of
THE SESSIONS GROUP
Statement of Additional Information
October __, 1996
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus (the "Prospectus") of The KeyPremier
Established Growth Fund (the "Growth Fund") and The KeyPremier Intermediate Term
Income Fund (the "Income Fund"), each dated as of the date hereof. The Growth
Fund and the Income Fund are hereafter collectively referred to as the "Funds"
and individually as a "Fund." The Funds are two of sixteen funds of The Sessions
Group, an Ohio business trust (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) 766-3960.
<PAGE> 51
TABLE OF CONTENTS
Page
THE SESSIONS GROUP......................................................... B-1
INVESTMENT OBJECTIVES AND POLICIES......................................... B-1
Additional Information on Portfolio Instruments................... B-1
Investment Restrictions...........................................B-12
Portfolio Turnover................................................B-14
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................B-14
MANAGEMENT OF THE GROUP....................................................B-15
Trustees and Officers.............................................B-15
Investment Adviser................................................B-17
Portfolio Transactions............................................B-19
Glass-Steagall Act................................................B-21
Administrator.....................................................B-22
Expenses .........................................................B-23
Distributor.......................................................B-24
Administrative Services Plan......................................B-24
Custodian.........................................................B-25
Transfer Agency and Fund Accounting Services......................B-25
Auditors .........................................................B-27
Legal Counsel.....................................................B-27
ADDITIONAL INFORMATION.....................................................B-27
Description of Shares.............................................B-27
Vote of a Majority of the Outstanding Shares......................B-28
Additional General Tax Information................................B-28
30-Day Yield of the Funds.........................................B-32
Calculation of Total Return.......................................B-33
Distribution Rates................................................B-33
Performance Comparisons...........................................B-33
Miscellaneous.....................................................B-34
APPENDIX .................................................................. A-1
- i -
<PAGE> 52
STATEMENT OF ADDITIONAL INFORMATION
THE SESSIONS GROUP
The Sessions Group (the "Group") is an open-end management investment
company which currently offers sixteen separate investment portfolios. This
Statement of Additional Information deals with two of those portfolios, the
Growth Fund and the Income Fund, each of which is considered to be a diversified
portfolio.
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
either 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 the Funds as set forth in the respective Prospectus.
Bank Obligations. Each 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 and foreign 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 (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. Except as noted below
<PAGE> 53
with respect to variable amount master demand notes, issues of commercial paper
normally have maturities of less than nine months and fixed rates of return.
The Funds 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. Each Fund may also invest in commercial paper
that is not rated but that is determined by the Adviser 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 the Income Fund and the issuer,
they are not normally traded. Although there is no secondary market in the
notes, the Income 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 the Income Fund, the same criteria as set forth above
for commercial paper. 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
branches of U.S. banks, foreign banks, or other foreign issuers, including ADRs,
may subject a Fund 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 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.
B-2
<PAGE> 54
The Funds will acquire such securities only when the Adviser 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.
Each Fund may also invest in the following types of U.S. Treasury
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.
Variable and Floating Rate Securities. Each Fund may acquire variable
and floating rate securities, subject to such Fund's investment objectives,
policies and restrictions. A variable rate security 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 security 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
B-3
<PAGE> 55
have a market value that approximates its par value. Such securities are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate securities purchased by a Fund will be determined by the Adviser
to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under that 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 securities (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 security
purchased by a Fund, the Fund may resell the security at any time to a third
party. The absence of an active secondary market, however, could make it
difficult for the Fund to dispose of a variable or floating rate security in the
event the issuer of the security 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
security and the Fund is not entitled to receive the principal amount of a
security within seven days, such a security will be treated as an illiquid
security for purposes of calculation of that Fund's limitation on investments in
illiquid securities, as set forth in its investment restrictions. Variable or
floating rate securities may be secured by bank letters of credit.
Restricted Securities. Securities in which 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 generally are sold to institutional
investors such as the Income Fund 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 the Income 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. The Income Fund will limit its investment in
Section 4(2) securities to not more than 10% of its net assets.
B-4
<PAGE> 56
Mortgage-Backed 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 or by
non-governmental entities.
Mortgage-backed 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-backed securities which are
collateralized mortgage obligations ("CMOs") structured on pools of mortgage
pass-through certificates or mortgage loans. Mortgage-backed securities will be
purchased only if rated in the four highest bond rating categories assigned by
one or more appropriate NRSROs, or, if unrated, which the Adviser deems to be of
comparable quality to securities so rated.
There are a number of important differences among the agencies
and instrumentalities of the U.S. Government that issue mortgage-
B-5
<PAGE> 57
backed 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. Mortgagerelated 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-backed 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.
When-Issued Securities. As discussed in the Prospectus, each Fund may
purchase securities on a "when-issued" basis (i.e., for delivery beyond the
normal settlement date at a stated price and yield). When a Fund agrees to
purchase securities on a "whenissued" 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, a Fund's custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, the 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
that 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
B-6
<PAGE> 58
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 its total assets. Under normal
market conditions, however, each Fund's commitment to purchase "when-issued" or
"delayed-delivery" securities will not exceed 25% 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
that Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. Each Fund will engage in "when-issued" delivery
transactions only for the purpose of acquiring portfolio securities consistent
with such Fund's investment objectives and policies and not for investment
leverage.
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 from banks and registered broker-dealers which the Adviser
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 to default on its
repurchase obligation or become insolvent, the Fund 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 such 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. Securities subject to
repurchase agreements will be held by the Fund's custodian or another qualified
custodian or in the Federal Reserve/Treasury book-entry system.
Reverse Repurchase Agreements. As discussed in the Prospectus, each
Fund may borrow funds by entering into reverse repurchase agreements in
accordance with its 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. At the time a Fund enters into a reverse repurchase agreement,
it will place in a segregated
B-7
<PAGE> 59
custodial account assets such as U.S. Government securities or other liquid,
high grade debt securities consistent with that 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 that 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 leveraging.
Lower Rated Bonds. The Income Fund is permitted to invest in securities
rated Ba and B by Moody's or BB and B by another appropriate NRSRO. Such bonds,
though higher yielding, are characterized by risk. See the Appendix hereto for a
general description of NRSRO ratings of debt obligations. Although ratings may
be useful in evaluating the safety of interest and principal payments, they do
not evaluate the market value risk of these bonds. The Income Fund will rely on
the Adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by S&P and Moody's to be, on
balance, predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and generally
will involve more credit risk than securities in the higher rating categories.
Because there is no established retail secondary market for many of
these securities, the Income Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the extent a
secondary trading market for these bonds does exist, it generally is not as
liquid as the secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on market price and yield and the
Income Fund's ability to dispose of particular issues when necessary to meet its
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Income Fund to obtain accurate market quotations for purposes of valuing the
Income Fund's portfolio and calculating its net asset value. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of these securities. In such cases, judgment
may play a greater role in valuation because less reliable objective data may be
available.
B-8
<PAGE> 60
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could severely disrupt the market for such
securities and may have an adverse impact on the value of such securities. In
addition, it is likely that any such economic downturn could adversely affect
the ability of the issuers of such securities to repay principal and pay
interest thereon and increase the incidence of default of such securities.
The Income Fund may acquire these bonds during an initial offering.
Such securities may involve special risks because they are new issues. The
Income Fund has no arrangement with any persons concerning the acquisition of
such securities, and the Adviser will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon securities in which the Income Fund may invest. Zero
coupon bonds carry an additional risk in that, unlike bonds which pay interest
through the period to maturity, the Income Fund will realize no cash until the
cash payment date unless a portion of such securities are sold and, if the
issuer defaults, the Income Fund may obtain no return at all on its investment.
Hedging Transactions. Hedging transactions, including the use of
options and futures, in which the Funds are authorized to engage as described in
the Prospectus, have risks associated with them including possible default by
the other party to the transaction, illiquidity and, to the extent the Adviser's
view as to certain market movements is incorrect, the risk that the use of such
hedging transactions could result in losses greater than if they had not been
used.
Use of put and call options may result in losses to a Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation a Fund can
realize on its investments or cause a Fund to hold a security it might otherwise
sell. The use of options and futures transactions entails certain other risks.
In particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund create the possibility that losses on the hedging instrument may be greater
than gains in the value of such Fund's position. In addition, futures and
options markets may not be liquid in all circumstances. As a result, in certain
markets, the Funds might not be able to close out a transaction without
incurring substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the
B-9
<PAGE> 61
value of the hedged position, at the same time they tend to limit any potential
gain which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of hedging transactions would reduce net asset value, and possible
income, and such losses can be greater than if the hedging transactions had not
been utilized.
General Characteristics of Options. Put options and call options
typically have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or sold.
Thus, the following general discussion relates to each of the particular types
of options discussed in greater detail below. In addition, many hedging
transactions involving options require segregation of a Fund's assets in special
accounts, as described further below.
With certain exceptions, exchange-listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options are cash settled for the net
amount, if any, by which the option is "in-the-money" (i.e., where the value of
the underlying instrument exceeds, in the case of a call option, or is less
than, in the case of a put option, the exercise price of the option) at the time
the option is exercised. Frequently, rather than taking or making delivery of
the underlying instrument through the process of exercising the option, listed
options are closed by entering into offsetting purchase or sale transactions
that do not result in ownership of the new option. A Fund's ability to close out
its position as a purchaser or seller of a put or call option is dependent in
part, upon the liquidity of the option market. In addition, the hours of trading
for listed options may not coincide with the hours during which the underlying
financial instruments are traded. To the extent that the option markets close
before the markets for the underlying financial instruments, significant price
and rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Exchange-listed options generally have standardized terms and
performance mechanics unlike over-the-counter traded options. The Funds
currently expect to purchase and sell only exchange traded options.
Exchange-traded options generally are guaranteed by the clearing agency which is
the issuer or counterparty to such options. This guarantee usually is supported
by a daily payment system (i.e., variation margin requirements) operated by the
clearing agency in order to reduce overall credit risk. As a result, unless the
clearing agency defaults, there is relatively little counterparty credit risk
associated with options purchased on an exchange.
B-10
<PAGE> 62
All options written by the Funds must be "covered" (i.e., a Fund must
own the securities or futures contract subject to a call option or must meet the
asset segregation requirements) as long as the call is outstanding. Even though
a Fund will receive the option premium to help protect it against loss, a call
option written by a Fund exposes such Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require such Fund to hold a security
or instrument which it might otherwise have sold. With respect to put options
written by the Funds, each Fund will place high quality liquid debt securities
in a segregated account to cover its obligations under such put option and will
monitor the value of the assets in such account and its obligations under the
put option daily.
Futures Contracts. As discussed in the Prospectus, each Fund may enter
into futures contracts. This investment technique is designed primarily to act
as a substitute for a position in the underlying security and to hedge against
anticipated future changes in market conditions or interest rates which
otherwise might adversely affect the value of securities which such 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 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.
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 such 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
B-11
<PAGE> 63
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, each 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 for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of such Fund's total assets after
taking into account unrealized profits and unrealized losses on any contracts
entered into. The Funds will not engage in transactions in 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.
Securities of Other Investment Companies. Each Fund may invest in
securities issued by other investment companies. Each Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by such Fund. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that such Fund bears directly in connection with its own operations.
Investment companies in which the Funds may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by such Fund and, therefore, will be borne directly by shareholders of such
Fund.
B-12
<PAGE> 64
Investment Restrictions
The Funds' investment objectives are non-fundamental policies and may
be changed without a vote of the shareholders of the applicable Fund. In
addition to the fundamental investment policies listed in the Prospectus, the
following investment restrictions may be changed only by a vote of the majority
of the outstanding Shares of a Fund (as defined under "ADDITIONAL INFORMATION -
Vote of a Majority of the Outstanding Shares").
In addition to the investment restrictions set forth in the Prospectus,
each Fund 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 such
Fund.
The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of the Funds. 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 such Fund's total assets.
B-13
<PAGE> 65
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 that Fund's Prospectus for its investment in illiquid
securities, such 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, no Fund would be required to liquidate any portfolio securities where
such Fund would suffer a loss on the sale of such securities.
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 were one year or less.
The portfolio turnover rates for the Growth Fund and the Income Fund
for their first fiscal period ending June 30, 1997, are each estimated to be
less than 100%. The portfolio turnover rate for a Fund 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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares 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 Exchange is
restricted by applicable rules and regulations of the Commission, (b) the
Exchange is closed for other than customary
B-14
<PAGE> 66
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:
<TABLE>
<CAPTION>
Name, Address and Age Position(s) Held Principal Occupation
- --------------------- With the Group During Past 5 Years
----------------- ---------------------
<S> <C> <C>
Walter B. Grimm* Chairman, From June, 1992 to
3435 Stelzer Road President and present, employee of
Columbus, Ohio 43219 Trustee BISYS Fund Services
Age: 50 Limited Partnership
(formerly The Winsbury
Company); from July, 1981
to June, 1992, President
of Leigh Investments
Consulting (investment
firm).
Nancy E. Converse* Trustee and Since June, 1990, employee of
3435 Stelzer Road Secretary BISYS 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
754 Stonewood Court present, of Counsel with
Columbus, Ohio 43235 Emens, Kegler, Brown,
Age: 74 Hill & Ritter (law firm)
from January,
</TABLE>
B-15
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
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.
J. David Huber Vice President Since January, 1996,
3435 Stelzer Road President of BISYS Fund
Columbus, Ohio 43219 Services Limited
Age: 49 Partnership; from 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
Columbus, Ohio 43219 BISYS Fund Services
Age: 30 Limited 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
3435 Stelzer Road Secretary present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 28 Limited Partnership;
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 either 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
B-16
<PAGE> 68
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 each
Fund for acting as Administrator 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. Messrs. Grimm, Huber, Mintos, Tomko and Young, Ms. Converse
and Ms. Metz 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 a 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
by Martindale, Andres & Company, Inc. (the "Adviser"), pursuant to an Investment
Advisory Agreement dated as of July 9, 1996, as amended as of October ___, 1996.
Under the Investment Advisory Agreement, the Adviser has agreed to provide
investment advisory services as described in the Prospectuses. For the services
provided and expenses assumed pursuant to the Investment Advisory Agreement, the
Growth Fund pays the Adviser a fee,
B-17
<PAGE> 69
computed daily and paid monthly, at the annual rate of seventy-five
one-hundredths of one percent (.75%) of the average daily net assets of the
Growth Fund, and the Income Fund pays the Adviser a fee, computed daily and paid
monthly, at the annual rate of sixty one-hundredths of one percent (.60%) of the
average daily net assets of the Growth Bond Fund. Pursuant to such Investment
Advisory Agreement, the Adviser also provides investment advisory and management
services to two other funds of the Group: The KeyPremier Prime Money Market Fund
(the "Money Market Fund") and The KeyPremier Pennsylvania Municipal Bond Fund
the "Pennsylvania Bond Fund"). The Money Market Fund pays the Adviser a fee,
computed daily and paid monthly, at the annual rate of forty one-hundredths of
one percent (.40%) of the average daily net assets of the Money Market Fund, and
the Pennsylvania Bond Fund pays the Adviser a fee, computed daily and paid
monthly, at the annual rate of sixty one-hundredths of one percent (.60%) of the
average daily net assets of the Pennsylvania Bond Fund. 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.
For the year ended June 30, 1996, the Adviser had not received any
compensation under the Advisory Agreement since neither Fund had yet commenced
operations.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect with respect to a Fund until July 9, 1998, and from year to
year thereafter, for successive annual periods ending on July 9th, if, as to
that 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 that Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in such Fund's 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.
B-18
<PAGE> 70
The Adviser has licensed the name "KeyPremier" 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 "KeyPremier" 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 "KeyPremier."
Portfolio Transactions
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Board of Trustees of the Group and in
accordance with the Funds' investment objectives and restrictions, which
securities are to be purchased and sold by each Fund, and which brokers and
dealers are to be eligible to execute the Funds' portfolio transactions.
Purchases and sales of portfolio securities with respect to the Income 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. Purchases and sales of portfolio securities with
respect to the Growth Fund usually are effected on a national securities
exchange or in the over-the-counter market. 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 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 may receive orders for transactions on behalf
of the Funds. The Adviser is 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 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
B-19
<PAGE> 71
Fund or to the Adviser is considered to be in addition to and not in lieu of
services required to be performed by the Adviser under its 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 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, the Adviser is 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 does follow such a practice, it will do so on a basis which is
fair and equitable to the Group and the Funds.
While the Adviser generally seeks competitive commissions, the Group
may not necessarily pay the lowest commission available on each brokerage
transaction, for reasons discussed above. Information so received is in addition
to and not in lieu of services required to be performed by the Adviser and does
not reduce the advisory fees payable to the Adviser by a Fund. Such information
may be useful to the Adviser in serving both the Fund and other clients and,
conversely, supplemental information obtained by the placement of business of
other clients may be useful to the Adviser in carrying out its obligations to a
Fund.
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 a Fund, execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with the Adviser, Keystone, BISYS, or their
affiliates, and will not give preference to the Adviser's or Keystone'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 other funds of the Group or any other investment company or account managed
by the Adviser. Any such other fund, investment company or account may also
invest in the same securities as the Group on behalf of a Fund. 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 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
B-20
<PAGE> 72
permitted by law, the Adviser may aggregate the securities to be sold or
purchased for a Fund with those to be sold or purchased for other funds of the
Group, investment companies or accounts in order to obtain best execution. As
provided by the Investment Advisory Agreement, in making investment
recommendations for the Funds, the Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Group is a customer of the Adviser, its parent or its subsidiaries or
affiliates and, in dealing with its customers, the Adviser, its parent,
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 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 and the Investment Advisory Agreement 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
B-21
<PAGE> 73
or interpretations of present and future statutes and regulations, could prevent
or restrict the Adviser 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, the Board of
Trustees of the Group would review the Group's relationship with the Adviser 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 and/or the Adviser's
affiliated and correspondent banks in connection with Customer purchases of
Shares of a Fund, 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 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 July 9, 1996, as
amended as of October __, 1996 (the "Administration Agreement"). The
Administrator assists in supervising all operations of the Funds (other than
those performed by the Adviser under the Investment Advisory Agreement, by The
Bank of New York 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, prepare for execution by the Funds 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
B-22
<PAGE> 74
financial accounts and records of the Funds, including calculation of daily
expense accruals; and generally assist in all aspects of the Funds' operations
other than those performed by the Adviser under the Investment Advisory
Agreement, by The Bank of New York under the Custody Agreement and by BISYS Fund
Services, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement. 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 periodically, at the annual rate equal
to eleven and one-half one-hundredths of one percent (.115%) of that Fund's
average daily net assets.
For the fiscal year ended June 30, 1996, the Administrator had not
received any compensation under the Administration Agreement since neither of
the Funds had yet commenced operations.
Unless sooner terminated as provided therein, the Administration
Agreement has an initial term expiring on July 9, 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. The Administration Agreement
is terminable with respect to a Fund upon mutual agreement of the parties to the
Administration Agreement; through a failure to renew at the end of a one-year
term; upon 180 days' written notice by the Group after the initial term but only
in connection with the reorganization of the Funds into another registered
management investment company; 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 a
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 a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the Adviser and
the Administrator will reimburse such 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
B-23
<PAGE> 75
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 Fund in the distribution of its Shares
pursuant to a Distribution Agreement dated July 9, 1996, as amended as of
October __, 1996 (the "Distribution Agreement"). Unless otherwise terminated,
the Distribution Agreement has an initial term expiring on July 9, 1998, and
thereafter shall be renewed automatically for successive annual periods ending
July 9th if approved at least annually (i) by the Group's Board of Trustees or
by the vote of a majority of the outstanding Shares of the Funds, 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 also terminates
automatically 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 retain all or a portion of any sales
charge imposed upon a purchase of the Shares.
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
affiliates and their correspondent 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 the
Funds. 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.
B-24
<PAGE> 76
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 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, there are no
Servicing Agreements in place.
Custodian
The Bank of New York, 48 Wall Street, New York, New York, 10286, serves
as custodian (the "Custodian") to the Funds pursuant to the Custody Agreement
dated as of July 9, 1996, as amended as of October __, 1996. The Custodian's
responsibilities include safeguarding and controlling each Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on each Fund's investments.
Transfer Agency and Fund Accounting Services
BISYS Fund Services, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for the Funds pursuant to the Transfer
Agency Agreement dated July 9, 1996, as amended as of October __, 1996. Pursuant
to such Agreement, the Transfer Agent, among other things, performs the
following services in connection with the Funds' Shareholders of record:
maintenance of shareholder records for each of the Funds' 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. For the fiscal year ended June 30, 1996, the Transfer Agent received
no compensation from the Group for services as transfer
B-25
<PAGE> 77
agent for the Funds since the Funds had not yet commenced operations.
In addition, BISYS Fund Services, Inc. provides certain fund accounting
services to each of the Funds pursuant to a Fund Accounting Agreement dated July
9, 1996, as amended as of October __, 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) the annual fee of $30,000. Under such
Agreement, BISYS Fund Services, Inc. maintains the accounting books and records
for the Funds, 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 Funds, 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
Funds' custodian, affirmation to the Funds' custodian of all portfolio trades
and cash settlements, verification and reconciliation with the Funds' 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 the Funds.
Unless sooner terminated as provided therein, the Fund Accounting
Agreement has an initial term expiring on July 9, 1999, and thereafter shall be
renewed automatically for successive one-year terms, unless written notice not
to renew is given by the nonrenewing party to the other party at least 60 days
prior to the expiration of the then-current term. The Fund Accounting Agreement
is terminable with respect to a Fund upon mutual agreement of the parties to the
Fund Accounting Agreement; upon 180 days' written notice by the Group after the
initial term but only in connection with the reorganization of the Funds into
another registered management investment company; and for cause (as defined in
the Fund Accounting Agreement) by the party alleging cause, on not less than 60
days' notice by the Group's Board of Trustees or by BISYS Fund Services, Inc.
The Fund Accounting Agreement provides that BISYS Fund Services, Inc.
shall not be liable for any error of judgment or mistake of law or any loss
suffered by a Fund in connection with the matters to which the Fund Accounting
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or negligence
B-26
<PAGE> 78
in the performance of its duties, or from the reckless disregard by BISYS Fund
Services, Inc. of its obligations and duties thereunder.
For the fiscal year ended June 30, 1996, BISYS Fund Services, Inc.
earned no fees with respect to its fund accounting services to the Funds since
the Funds had not yet commenced operations.
Auditors
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215, has
been selected as the independent auditors 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 sixteen series
of shares, one of which represents interests in the Growth Fund and one of which
represents interests in the Income Fund. The other fourteen series are 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, Riverside
Capital Growth Fund, the Money Market Fund, the Pennsylvania Bond Fund, 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. 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 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
B-27
<PAGE> 79
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 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 Funds'
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 in each Fund 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 of
such 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 General Tax Information
Each of the sixteen funds of the Group is treated as a separate entity
for federal income tax purposes and intends to qualify as a "regulated
investment company" under the Internal
B-28
<PAGE> 80
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, a 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, a Fund must distribute to its Shareholders at least 90% of its
investment company taxable income for the year. In general, the 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, the
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 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 that 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
B-29
<PAGE> 81
taxable income to Shareholders for federal income tax purposes, even if paid in
additional Shares of that Fund and not in cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss, if any, 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.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Because all of the Funds'
net investment income is expected to be derived from earned interest, it is
anticipated that no distributions from either Fund 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 Fund's total assets at the end of its
B-30
<PAGE> 82
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 that Fund.
These taxes will be taken as a deduction by the Fund.
Under Section 1256 of the Code, gain or loss realized by a Fund from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures and options remaining
unexercised at the end of a Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to such Fund
characterized in the manner described above.
Offsetting positions held by a Fund involving certain futures contracts
or options transactions may be considered, for tax purposes, to constitute
"straddles." Straddles are defined to include "offsetting positions" in actively
traded personal property. The tax treatment of straddles is governed by Sections
1092 and 1258 of the Code, which, in certain circumstances, overrides or
modifies the provisions of Section 1256. As such, all or a portion of any short
or long-term capital gain from certain straddle and/or conversion transactions
may be recharacterized as ordinary income.
If a Fund were treated as entering into straddles by reason of its
engaging in futures or options transactions, such straddles would be
characterized as "mixed straddles" if the futures or options comprising a part
of such straddles were governed by Section 1256 of the Code. A Fund may make one
or more elections with respect to mixed straddles. If no election is made, to
the extent the straddle rules apply to positions established by a Fund, losses
realized by such Fund will be deferred to the extent of unrealized gain in any
offsetting positions. Moreover, as a result of the straddle and conversion
transaction rules, short-term capital losses on straddle positions may be
recharacterized as long-term capital losses and long-term capital gains may be
recharacterized as short-term capital gain or ordinary income.
Investment by the Income Fund in securities issued at a discount or
providing for deferred interest or for payment of interest in the form of
additional obligations could, under special tax rules, affect the amount, timing
and character of distributions to Shareholders. For example, the Income Fund
could be required to take into account annually a portion of the discount (or
deemed discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In that case, the Income Fund may have to dispose of securities which
it might otherwise have continued to
B-31
<PAGE> 83
hold in order to generate cash to satisfy these distribution requirements.
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 the 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.
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 the Funds. No attempt has been made to present a detailed
explanation of the Federal income tax treatment of the Funds or their
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.
30-Day Yield of the Funds
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," the yield of the Funds will be computed by annualizing net
investment income per share for a recent 30-day period and dividing that amount
by the 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 of a
Fund will vary from time to time depending upon market conditions, the
B-32
<PAGE> 84
composition of the Fund's portfolio and operating expenses of the Group
allocated to such 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 that Fund.
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 that 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 a Fund (less the maximum sales charge, if any) all additional
Shares which would have been purchased if all dividends and distributions paid
or 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. A 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
The Income 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
B-33
<PAGE> 85
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 the 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 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 the Funds; (5) descriptions of investment
strategies for the 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 a Fund. 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 a Fund.
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 that Fund. Fees imposed upon Customer accounts by the
Adviser, its affiliates or its affiliated or correspondent banks for cash
management services or other 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
B-34
<PAGE> 86
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 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.
B-35
<PAGE> 87
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.
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.
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.
The description of the two 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
A-1
<PAGE> 88
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.
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 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.
The following summarizes the description of the two 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."
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. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Debt
rated BB and B is regard as having predominantly speculative characteristics
with respect to capacity to pay interest and repay principal. BB indicates the
lease degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
exposures to adverse conditions. Debt rated BB has less near-term vulnerability
to default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to senior
debt that is
A-2
<PAGE> 89
assigned an actual or implied BBB rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
The following summarizes the six 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 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. Bonds that
are rated Baa by Moody's are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds that are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bond which are rated
B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through B. 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 six highest long-term debt ratings by
Duff. Debt rated AAA has the highest credit quality.
A-3
<PAGE> 90
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. Debt rated BBB has below average protection factors but is
still considered sufficient for prudent investment. However, there is
considerable variability in risk during economic cycles. Debt rated BB is below
investment grade but deemed likely to meet obligations when due. Present or
prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within this category. Debt rated B is below investment grade and possesses risk
that obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade.
To provide more detailed indications of credit quality, the ratings AA
to B 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 six 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. Bonds
rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings for these bonds will fall
below investment grade is higher than for bonds with higher ratings. Bonds rated
BB are considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements. Bonds rated B are
considered highly speculative. While bonds in this class are
A-4
<PAGE> 91
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
The following summarizes IBCA's six 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 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. Obligations rated
BBB are those for which there is currently a low expectation of investment risk.
Capacity for timely repayment of principal and interest is adequate, although
adverse changes in business, economic, or financial conditions are more likely
to lead to increased investment risk than for obligations in other categories.
Obligations rated BB are those for which there is a possibility of investment
risk developing. Capacity for timely repayment of principal and interest exists,
but is susceptible over time to adverse changes in business, economic or
financial conditions. Obligations rated B are those for which investment risk
exists. Timely repayment of principal and interest is not sufficiently protected
against adverse changes in business, economic or financial conditions.
The following summarizes Thomson's description of its six 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.
BBB is the lowest investment grade category and indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings. While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations. Issuer rated B show a higher degree of uncertainty and
therefore greater likelihood of default that higher-rated issuers. Adverse
developments could well
A-5
<PAGE> 92
negatively affect the payment of interest and principal on a timely basis.
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.
"SP-3": Speculative capacity to pay principal and
interest.
The following summarizes the six 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
A-6
<PAGE> 93
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.
"Baa": Bonds which are considered as medium grade obligations,
i.e, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
"Ba": Bonds which are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very
moderate, and therefore not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
"B": Bonds which generally lack characteristics of the
desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
The following summarizes the six 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. It differs
from the two higher ratings because:
General Obligations Bonds -- There is some weakness
in the local economic base, in debt burden, in the balance
between revenues and expenditures, or in quality
A-7
<PAGE> 94
of management. Under certain adverse circumstances, any one
such weakness might impair the ability of the issuer to meet
debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but
not exceptional. Stability of the pledged revenues could show
some variations because of increased competition or economic
influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance
appears adequate.
"BBB": Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse
conditions, several of the above factors could contribute to a
lesser capacity for payment of debt service. The difference
between "A" and "BBB" rating is that the latter shows more
than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one
deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair.
Stability of the pledged revenues could show substantial
variations, with the revenue flow possibly being subject to
erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
"BB" and "B": Debt which is regarded as having predominantly
speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of
speculation of the two. While such debt will likely have some
quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse
conditions.
"BB": Debt which has less near-term vulnerability to default
than other speculative grade debt. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payment.
"B": Debt which has a greater vulnerability to default
but presently has the capacity to meet interest payments
and principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
The following summarizes the six highest ratings used by Fitch for
state and municipal bonds. The ratings represent Fitch's assessment of the
issuer's ability to meet the obligations of a
A-8
<PAGE> 95
specific debt issue or class of debt. The ratings take into consideration
special features of the issue, its relationship to other obligations of the
issuer, the current financial condition and operative performance of the issuer
and of any guarantor, as well as the political and economic environment that
might affect the issuer's future financial strength and credit quality.
"AAA": Bonds which 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.
"AA": Bonds which 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
issuers is generally rated F-1+.
"A": Bonds which 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.
"BBB": Bonds which are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
"BB": Bonds which are considered speculative. The
obligor's ability to pay interest and repay principal may
be affected over time by adverse economic changes.
However, business and financial alternatives can be
identified which could assist the obligor in satisfying
its debt service requirements.
"B": Bonds which are considered highly speculative. While
bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic
activity throughout the life of the issue.
A-9
<PAGE> 96
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
"F-1+": Exceptionally Strong Credit Quality. Issues
assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1": Very Strong Credit Quality. Issues assigned this
rating reflect an assurance of timely payment only
slightly less in degrees than issues rated F-1+.
"F-2": Good Credit Quality. Issues carrying this rating
have a satisfactory degree of assurance for timely
payments, but the margin of safety is not as great as the
F-1+ and F-1 categories.
Definitions of Certain Money Market Instruments
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.
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
A-10
<PAGE> 97
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.
A-11
<PAGE> 98
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
C-1
<PAGE> 99
(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
(xv) KeyPremier Established Growth Fund
None
(xvi) KeyPremier Intermediate Term Income 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.
C-2
<PAGE> 100
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.
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
C-3
<PAGE> 101
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.
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.
C-4
<PAGE> 102
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.
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
C-5
<PAGE> 103
To be filed by amendment.
(xv) KeyPremier Established Growth Fund
To be filed by amendment.
(xvi) KeyPremier Intermediate Term Income 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 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,
C-6
<PAGE> 104
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.
(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, is incorporated by reference to
Exhibit (1)(j) of Post-Effective Amendment
No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6,
1996.
(k) Amendment to Article IV, Section 4.2 of
Declaration of Trust as adopted August 15,
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
C-7
<PAGE> 105
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.
(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) Investment Advisory Agreement dated July 9,
1996, as proposed to be amended as of
October __, 1996, between Registrant and
Martindale Andres & Company, Inc. (with
respect to the KeyPremier Funds).
(f) Proposed Investment Advisory Agreement dated
August __, 1996, between Registrant and 1st
Source Bank (with respect to the 1st Source
Monogram Funds) is incorporated by reference
to Exhibit (5)(f) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement (No. 33-21489) filed
on June 6, 1996.
(g) Proposed Sub-Investment Advisory Agreement
dated August __, 1996, between 1st Source
Bank
C-8
<PAGE> 106
and Miller, Anderson and Sherrerd, LLP (with
respect to 1st Source Monogram Diversified
Equity Fund) is incorporated by reference to
Exhibit (5)(g) of Post-Effective Amendment
No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6,
1996.
(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) is incorporated by reference to
Exhibit (5)(h) of Post-Effective Amendment
No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6,
1996.
(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) is incorporated by reference to
Exhibit (5)(i) of Post-Effective Amendment
No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6,
1996.
(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.
(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) Distribution Agreement dated as of July 9,
1996, as proposed to be amended as of
October __, 1996, between Registrant and
BISYS Fund Services Limited Partnership
(relating to the KeyPremier Funds).
(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.
C-9
<PAGE> 107
(e) Proposed Distribution Agreement dated as of
August ___, 1996, between Registrant and
BISYS Fund Services Limited Partnership
(relating to the 1st Source Monogram Funds)
is incorporated by reference to Exhibit
(6)(e) of Post-Effective Amendment No. 35 to
Registrant's Registration Statement
(No. 33-21489) filed on June 6, 1996.
(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) Custody Agreement dated July 9, 1996, as
proposed to be amended as of October __,
1996, between Registrant and The Bank of New
York (with respect to the KeyPremier Funds).
(c) Proposed Custody Agreement dated August __,
1996, between Registrant and The Fifth Third
Bank (with respect to the 1st Source
Monogram Funds) is incorporated by reference
to Exhibit (8)(c) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement (No. 33-21489) filed
on June 6, 1996.
(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 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.
C-10
<PAGE> 108
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
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
C-11
<PAGE> 109
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) Management and Administration Agreement
dated July 9, 1996, as proposed to be
amended as of October __, 1996, between
Registrant and BISYS Fund Services Limited
Partnership (with respect to the KeyPremier
Funds).
(y) Fund Accounting Agreement dated July 9,
1996, as proposed to be amended as of
October __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the KeyPremier Funds).
(z) Transfer Agency Agreement dated July 9,
1996, as proposed to be amended as of
October __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the KeyPremier Funds).
(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) is incorporated by reference
to Exhibit (9)(aa) of Post-Effective
Amendment No. 35 to Registrant's
Registration Statement (No. 33-21489) filed
on June 6, 1996.
(ab) Proposed Fund Accounting Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the 1st Source Monogram Funds) is
incorporated by reference to Exhibit (9)(ab)
of Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No.
33-21489) filed on June 6, 1996.
(ac) Proposed Transfer Agency Agreement dated
August __, 1996, between Registrant and
BISYS Fund Services, Inc. (with respect to
the 1st
C-12
<PAGE> 110
Source Monogram Funds) is incorporated by
reference to Exhibit (9)(ac) of Post-
Effective Amendment No. 35 to Registrant's
Registration Statement (No. 33-21489) filed
on June 6, 1996.
(ad) Form of Servicing Agreement to
Administrative Services Plan is incorporated
by reference to Exhibit (9)(ad) of
Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No.
33-21489) filed on June 6, 1996.
(10) (a) Opinion of Counsel with respect to
shares of KeyPremier Established Growth Fund
and KeyPremier Intermediate Term Income
Fund. 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 is
incorporated by reference to Exhibit (10) of
Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-
21489) filed on June 6, 1996. 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.
C-13
<PAGE> 111
(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. is
incorporated by reference to Exhibit (11)(c)
of Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-
21489) filed on June 6, 1996.
(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.
(c) Rule 12b-1 Plan (with respect to the 1st
Source Monogram Funds) is incorporated by
reference to Exhibit (15)(c) of
Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No.
33-21489) filed on June 6, 1996.
(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 Fund, Riverside Capital
Value Equity Fund,
C-14
<PAGE> 112
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 the Riverside Capital Funds) is
incorporated
C-15
<PAGE> 113
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.
(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
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.
C-16
<PAGE> 114
(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.
(c) Power of Attorney of Nancy E. Converse.
Item 25. Persons Controlled By or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
As of July 31, 1996, the number of record holders of each
series of shares of the Registrant were as follows:
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Riverside Capital Money
Market Fund 28
Riverside Capital
Value Equity Fund 160
Riverside Capital
Fixed Income Fund 34
Riverside Capital Tennessee Municipal
Obligations Fund 20
Riverside Capital Low Duration
Government Securities Fund 7
Riverside Capital Growth Fund 45
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
</TABLE>
C-17
<PAGE> 115
<TABLE>
<CAPTION>
<S> <C>
Bond Fund 0
KeyPremier Established Growth Fund 0
KeyPremier Intermediate Term
Income 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 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
C-18
<PAGE> 116
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 Dura-
tion 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 affili-
ates 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 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)
</TABLE>
C-19
<PAGE> 117
<TABLE>
<CAPTION>
Position
Name with NBC Principal Occupation
---- -------- --------------------
<S> <C> <C>
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)
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
</TABLE>
C-20
<PAGE> 118
<TABLE>
<CAPTION>
Position
Name with NBC Principal Occupation
---- -------- --------------------
<S> <C> <C>
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)
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)
</TABLE>
C-21
<PAGE> 119
<TABLE>
<CAPTION>
Position
Name with NBC Principal Occupation
---- -------- --------------------
<S> <C> <C>
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,
KeyPremier Pennsylvania Municipal Bond Fund, KeyPremier
Established Growth Fund and KeyPremier Intermediate Term
Income 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 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
C-22
<PAGE> 120
December 31, 1995, on a consolidated basis with 1st Source
Corporation, had 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.
<TABLE>
<CAPTION>
Position
Name with FSB Principal Occupation
- ---- -------- --------------------
<S> <C> <C>
Rev. E. William Beauchamp Director Executive Vice President
University of Notre Dame
South Bend, IN 46556
Paul R. Bowles Director Former Senior Vice
President
Clark Equipment Company
1202 East Jefferson
South Bend, IN 46617
(off-highway components
and construction
machinery manufacturing)
Philip J. Faccenda Director President
Bear Financial, Inc.
1222 E. Erskine
Manor Hill
South Bend, IN 46617
(venture capital)
Vice President and
General Counsel Emeritus
University of Notre Dame
South Bend, IN 46556
Daniel B. Fitzpatrick Director Chairman, President,
Chief Executive
Officer and Director
Quality Dining, Inc.
P. O. Box 416
South Band, IN 46624
(quick service and
casual dining
restaurant operator)
</TABLE>
C-23
<PAGE> 121
<TABLE>
<CAPTION>
Position
Name with FSB Principal Occupation
- ---- -------- --------------------
<S> <C> <C>
Terry L. Gerber Director President and Chief
Executive Officer
Gerber Manufacturing
Company
1417 Olivia Circle
South Bend, IN 46614
(manufacturer of police
and emergency outerwear)
Lawrence E. Hiler Director President
Hiler Industries
P.O. Box 639
La Porte, IN 46350
(metal casting)
Anne M. Hillman Director Civic Leader
3904 Nall Court
South Bend, IN 46614
Hollis E. Hughes, Jr. Director Executive Director
United Way of
St. Joseph County
3517 E. Jefferson
P.O. Box 6396
South Bend, IN 46660
H. Thomas Jackson Director Chairman
Bornemann Coated Fabrics
Bornemann Products
P. O. Box 208
Bremen, IN 46506
(vinyl sales)
William P. Johnson Director Chairman & CEO
Goshen Rubber Co., Inc.
1525 S. 10th
Goshen, IN 46527
(manufacturer of
automotive rubber parts)
Craig A. Kapson Director President
Jordan Ford, Toyota, Volvo,
Lincoln Mercury
609 E. Jefferson
Mishawaka, IN 46545
(automobile sales)
David L. Lerman Director President
Steel Warehouse Company,
Inc.
2722 West Tucker Drive
South Bend, IN 46624
</TABLE>
C-24
<PAGE> 122
<TABLE>
<CAPTION>
Position
Name with FSB Principal Occupation
- ---- -------- --------------------
<S> <C> <C>
(warehouse storage)
Richard J. Pfeil Director Chairman and President
Koontz-Wagner Electric Co.
3801 Voorde Drive
South Bend, IN 46628
(electrical equipment
repair, construction and
installation)
John T. Phair Director Vice President
The Holladay Corporation
220 Colfax, Suite 200
South Bend, IN 46601
(property management)
Mark D. Schwabero Director Executive Vice President
Bosch Braking Systems Corp.
401 N. Bendix Drive
South Bend, IN 46634
(manufacturers 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, IN 46634
(holding company)
</TABLE>
(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 principal businesses of the
partners of Miller Anderson
C-25
<PAGE> 123
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 Director
Co., Ltd.
920 Nanjing Road
16th Floor
Shanghai, China 200041
Marna C. Whittington Rohm & Haas Company Director
Independence Mall West
Philadelphia, PA 19105
Berwind Group Director
1500 Market Street
3000 Centre Square West
Philadelphia, PA 19102
Ellen D. Harvey, CFA Owosso Corporation Director
One Tower Bridge
14th Floor
W. Conshohocken, PA 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 the Loomis Sayles Funds, nine series of
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 partners 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-
owned subsidiary of PIMCO Advisors L.P., are the general
C-26
<PAGE> 124
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:
NAME AND POSITION BUSINESS AND
WITH CCI OTHER CONNECTIONS
- ----------------- -----------------
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.
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
known as Thomson Advisory Group, L.P. ("TAGLP")) combined
C-27
<PAGE> 125
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-28
<PAGE> 126
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-29
<PAGE> 127
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
KeyPremier Established Growth Fund and KeyPremier Intermediate
Term Income Fund, which need not be certified, within four to
six months of the commencement
of operations of such Fund.
C-30
<PAGE> 128
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 16th day of August, 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 August 16, 1996
- ------------------------- Officer and Trustee
Walter B. Grimm
/s/*Stephen G. Mintos Principal Financial August 16, 1996
- ------------------------- Officer and Principal
Stephen G. Mintos Accounting Officer
/s/*Nancy E. Converse Trustee August 16, 1996
- -------------------------
Nancy E. Converse
/s/*Maurice G. Stark Trustee August 16, 1996
- -------------------------
Maurice G. Stark
- -------------------------
James H. Woodward
/s/*Chalmers P. Wylie Trustee August 16, 1996
- -------------------------
Chalmers P. Wylie
*By/s/ Walter B. Grimm August 16, 1996
----------------------
Walter B. Grimm
Attorney-In-Fact
</TABLE>
C-31
<PAGE> 129
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
C-32
<PAGE> 130
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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. 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, 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, was filed as Exhibit (1)(j) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6, 1996.
(k) Amendment to Article IV, Section 4.2 of Declaration of Trust as
adopted August 15, 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.
</TABLE>
C-33
<PAGE> 131
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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 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) Investment Advisory Agreement dated July 9, 1996, as proposed to
be amended as of October __, 1996, between Registrant and
Martindale Andres & Company, Inc. (with respect to the KeyPremier
Funds).
(f) Proposed Investment Advisory Agreement dated August __, 1996,
between Registrant and 1st Source Bank (with respect to 1st
Source Monogram Funds) was filed as Exhibit (5)(f) to
Post-Effective Amendment No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6, 1996.
</TABLE>
C-34
<PAGE> 132
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Description Page
(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) was filed
as Exhibit (5)(g) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-21489) filed on June
6, 1996.
(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) was filed
as Exhibit (5)(h) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-21489) filed on June
6, 1996.
(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) was filed
as Exhibit (5)(i) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-21489) filed on June
6, 1996.
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.
</TABLE>
C-35
<PAGE> 133
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(c) Distribution Agreement dated as of July 9, 1996, as proposed to
be amended as of October __, 1996, between Registrant and BISYS
Fund Services Limited Partnership (relating to the KeyPremier
Funds).
(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) was filed as Exhibit
(6)(e) to Post-Effective Amendment No. 35 to Registrant's
Registration Statement (No. 33-21489) filed on June 6, 1996.
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.
(b) Custody Agreement dated July 9, 1996, as proposed to be amended
as of October __, 1996, between Registrant and The Bank of New
York (with respect to the KeyPremier Funds).
(c) Proposed Custody Agreement dated August __, 1996, between
Registrant and The Fifth Third Bank (with respect to the 1st
Source Monogram Funds) was filed as Exhibit (8)(c) to Post-
Effective Amendment No. 35 to Registrant's Registration Statement
(No. 33-21489) filed on June 6, 1996.
</TABLE>
C-36
<PAGE> 134
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
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.
(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.
</TABLE>
C-37
<PAGE> 135
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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.
(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.
</TABLE>
C-38
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(x) Management and Administration Agreement dated July 9, 1996, as
proposed to be amended as of October __, 1996, between Registrant
and BISYS Fund Services Limited Partnership (with respect to the
KeyPremier Funds).
(y) Fund Accounting Agreement dated July 9, 1996, as proposed to be
amended as of October __, 1996, between Registrant and BISYS Fund
Services, Inc. (with respect to the KeyPremier Funds).
(z) Transfer Agency Agreement dated July 9, 1996, as proposed to be
amended as of October __, 1996, between Registrant and BISYS Fund
Services, Inc. (with respect to the KeyPremier Funds).
(aa) Proposed Management and Administration Agreement dated August __,
1996, between Registrant and BISYS Fund Services Limited
Partnership (with respect to the 1st Source Funds) was filed as
Exhibit (9)(aa) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-21489) filed on June
6, 1996.
(ab) Proposed Fund Accounting Agreement dated August __, 1996, between
Registrant and BISYS Fund Services, Inc. (with respect to the 1st
Source Monogram Funds) was filed as Exhibit (9)(ab) to Post-
Effective Amendment No. 35 to Registrant's Registration Statement
(No. 33-21489) filed on June 6, 1996.
(ac) Proposed Transfer Agency Agreement dated August __, 1996, between
Registrant and BISYS Fund Services, Inc. (with respect to the 1st
Source Monogram Funds) was filed as Exhibit (9)(ac) to Post-
Effective Amendment No. 35 to Registrant's Registration Statement
(No. 33-21489) filed on June 6, 1996.
</TABLE>
C-39
<PAGE> 137
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(ad) Form of Servicing Agreement to Administrative Services Plan was
filed as Exhibit (9)(ad) to Post-Effective Amendment No. 35 to
Registrant's Registration Statement (No. 33-21489) filed on June
6, 1996.
10(a) Opinion of Counsel with respect to Shares of KeyPremier
Established Growth Fund and KeyPremier Intermediate Term Income
Fund. 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 was filed as Exhibit (10) to Post-Effective
Amendment No. 35 to Registrant's Registration Statement (No.
33-21489) filed on June 6, 1996. 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 10(b)
to Post-Effective Amendment No. 23 to Registrant's Registration
Statement (No. 33-21489) filed on October 30, 1992.
</TABLE>
C-40
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
11(a) Consent of KPMG Peat Marwick LLP.
(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. was filed as Exhibit (11)(c)
to Post-Effective Amendment No. 35 to Registrant's Registration
Statement (No. 33-21489) filed on June 6, 1996
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.
(c) Rule 12b-1 Plan (with respect to the 1st Source Monogram Funds)
was filed as Exhibit (15)(c) to Post-Effective Amendment No. 35
to Registrant's Registration Statement (No. 33-21489) filed on
June 6, 1996.
(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) 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.
</TABLE>
C-41
<PAGE> 139
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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 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.
</TABLE>
C-42
<PAGE> 140
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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.
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.
</TABLE>
C-43
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
(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 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) Power of Attorney of Nancy E. Converse.
</TABLE>
C-44
<PAGE> 142
As filed with the Securities and Exchange Commission August 16, 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. 36 /x /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /x /
Amendment No. 38 /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)(k)
<PAGE> 2
THE SESSIONS GROUP
AMENDMENT TO DECLARATION OF TRUST
Adopted: August 15, 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 hereby
amended further by deleting such first paragraph of Article IV, Section 4.2 in
its entirety and substituting in place thereof the following new first paragraph
of Article IV, Section 4.2:
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, Series AB, which shall represent interests in
1st Source Monogram Intermediate Tax-Free Bond Fund, Series
AC, which shall represent interests in KeyPremier Established
Growth Fund, and Series AD, which shall represent interests
in KeyPremier Intermediate Term Income 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
<PAGE> 3
AA, Series AB, Series AC, Series AD 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 sub-series at the time
of establishing and designating the same) have the following
relative rights and preferences:
<PAGE> 1
Exhibit (5)(e)
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of July 9, 1996, between THE SESSIONS GROUP,
an Ohio business trust (the "Trust"), and Martindale Andres & Company, Inc., a
Pennsylvania 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 two 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, as amended or restated to the date hereof (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;
<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) all of the Trust's procedures and guidelines and all
resolutions of the Trust's Board relevant to the services to be
provided by the Investment Adviser hereunder;
(f) the Trust's Registration Statement on Form N-1A 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
(g) 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 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 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 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 the services under this Agreement in accordance with each of the Fund's
investment objectives, policies, and restrictions as stated in the Prospectus,
as the same may be amended, supplemented or restated from time to time, and
resolutions of the Trust's Board of Trustees.
In fulfilling its responsibilities hereunder, the Investment Adviser
further agrees that it will:
- 2 -
<PAGE> 4
(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 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 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 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 may, in
its discretion and 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 Funds
and/or other accounts over which the Investment 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 Investment Adviser is 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 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 Investment Adviser
with respect to the accounts as to which it exercises investment
discretion. In placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Investment Adviser may
consider the sale
- 3 -
<PAGE> 5
of shares of the Trust. Except as otherwise 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 or any affiliated person of the Trust, BISYS
Fund Services Limited Partnership or the Investment 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 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 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
Investment Adviser or of its parents, subsidiaries or affiliates. In
dealing with such customers, the Investment Adviser and its 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 hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services to others
so long as its services under this 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 to the Trust any of such records upon the
Trust's request. The Investment Adviser further agrees to preserve for the
periods
- 4 -
<PAGE> 6
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 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 shall waive all such fees until such time as it notifies
the Trust that it has terminated such waiver. Thereafter, the Investment Adviser
may from time to time waive some or all of such fees until such time as it
notifies the Trust that it has terminated such waiver. 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 the Investment Adviser,
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.
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 BISYS Fund Services Limited
Partnership under the Administration Agreement between BISYS Fund Services
Limited Partnership and the Trust and to BISYS Fund Services, Inc. under the
Fund Accounting Agreement between BISYS Fund Services, Inc. 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
- 5 -
<PAGE> 7
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. Notwithstanding anything herein to
the contrary, 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 July 9, 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
July 9 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
"majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meanings as ascribed to such terms in the 1940
Act.)
- 6 -
<PAGE> 8
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
"KeyPremier" 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 "KeyPremier" 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 "KeyPremier" 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 must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
- 7 -
<PAGE> 9
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
MARTINDALE ANDRES & COMPANY,
INC.
By
-----------------------------------
Name
Title
- 8 -
<PAGE> 10
Dated: October __, 1996
Schedule A
to the
Investment Advisory Agreement
between The Sessions Group and
Martindale Andres & Company, Inc.
dated as of July 9, 1996
Name of Fund Compensation* Date
- ------------ ------------- ----
The KeyPremier Prime Annual Rate of forty July 9, 1996
Money Market Fund one-hundredths of
one percent (0.40%)
of such Fund's
average net assets
The KeyPremier Annual rate of sixty July 9, 1996
Pennsylvania one-hundredths of
Municipal Bond Fund one percent (.60%)
of such Fund's
average daily net
assets
The KeyPremier Annual rate of October __, 1996
Established Growth seventy-five one-
Fund hundredths of one
percent (.75%) of
such Fund's average
daily net assets
The KeyPremier Annual rate of sixty October __, 1996
Intermediate Term one-hundredths of
Income Fund one percent (.60%)
of such Fund's
average daily net
assets
THE SESSIONS GROUP
By
----------------------------------
Name Walter B. Grimm
Title President
MARTINDALE ANDRES & COMPANY,
INC.
By
----------------------------------
Name
--------------------------------
Title
--------------------------------
- --------
* *All Fees are computed daily and paid monthly.
A-1
<PAGE> 1
EXHIBIT (6)(c)
<PAGE> 2
DISTRIBUTION AGREEMENT
This Agreement is made this 9th day of July, 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> 3
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> 4
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> 5
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 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> 6
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> 7
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> 8
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. 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 B
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 3 below.
(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.
- 7 -
<PAGE> 9
3. 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.
4. 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.
5. 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 July 9, 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 July 9 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 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
- 8 -
<PAGE> 10
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> 11
Dated: October __, 1996
Schedule A
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
July 9, 1996
Name of Fund Date
The KeyPremier Prime Money July 9, 1996
Market Fund
The KeyPremier Pennsylvania
Municipal Bond Fund July 9, 1996
The KeyPremier Established
Growth Fund October __, 1996
The KeyPremier Intermediate
Term Income Fund October __, 1996
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> 12
Dated: October __, 1996
Schedule B
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
July 9, 1996
Name of Load Fund Date
The KeyPremier Pennsylvania
Municipal Bond Fund July 9, 1996
The KeyPremier Established
Growth Fund October __, 1996
The KeyPremier Intermediate
Term Income Fund October __, 1996
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> 1
Exhibit 8(b)
CUSTODY AGREEMENT
-----------------
Agreement made as of this 9th day of July, 1996, between The Sessions
Group, an Ohio business trust organized and existing under the laws of the State
of Ohio, having its principal office and place of business at 3435 Stelzer Road,
Columbus, Ohio 43219 (hereinafter called the "Fund"), and THE BANK OF NEW YORK,
a New York corporation authorized to do a banking business, having its principal
office and place of business at 48 Wall Street, New York, New York 10286
(hereinafter called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian 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. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
2. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
3. "Certificate" shall mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement to be given to the Custodian
which is actually
<PAGE> 2
received by the Custodian and signed on behalf of the Fund by any two Officers,
and the term Certificate shall also include instructions by the Fund to the
Custodian communicated by a Terminal Link.
4. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
5. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
6. "Covered Call Option" shall mean an exchange traded option entitling the
holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
7. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Trustees specifically approving deposits therein by the
Custodian.
8. "Financial Futures Contract" shall mean the firm commitment to buy or
sell fixed income securities including, without limitation, U.S. Treasury Bills,
U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of deposit,
and Eurodollar certificates of deposit, during a specified month at an agreed
upon price.
9. "Futures Contract" shall mean a Financial Futures Contract and/or Stock
Index Futures Contracts.
10. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
- 2 -
<PAGE> 3
11. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
12. "Money Market Security" shall be deemed to include, without limitation,
certain Reverse Repurchase Agreements, debt obligations issued or guaranteed as
to interest and principal by the government of the United States or agencies or
instrumentalities thereof, any tax, bond or revenue anticipation note issued by
any state or municipal government or public authority, commercial paper,
certificates of deposit and bankers' acceptances, repurchase agreements with
respect to the same and bank time deposits, where the purchase and sale of such
securities normally requires settlement in federal funds on the same day as such
purchase or sale.
13. "O.C.C." shall mean the Options Clearing Corporation, a clearing agency
registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
14. "Officers" shall be deemed to include the President, any Vice
President, the Secretary, the Treasurer, any Assistant Secretary, any Assistant
Treasurer, and any other person or persons, whether or not any such other person
is an officer of the Fund, duly authorized by the Board of Trustees of the Fund
to execute any Certificate, instruction, notice or other instrument on behalf of
the Fund and listed in the Certificate annexed hereto as Appendix A or such
other Certificate as may be received by the Custodian from time to time.
15. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
- 3-
<PAGE> 4
16. "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Officer or from a person reasonably believed by the
Custodian to be an Officer.
17. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
18. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
19. "Security" shall be deemed to include, without limitation, Money Market
Securities, Call Options, Put Options, Stock Index Options, Stock Index Futures
Contracts, Stock Index Futures Contract Options, Financial Futures Contracts,
Financial Futures Contract Options, Reverse Repurchase Agreements, common stocks
and other securities having characteristics similar to common stocks, preferred
stocks, debt obligations issued by state or municipal governments and by public
authorities, (including, without limitation, general obligation bonds, revenue
bonds, industrial bonds and industrial development bonds), bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase, sell or subscribe
for the same, or evidencing or representing any other rights or interest
therein, or any property or assets.
20. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
21. "Series" shall mean the various portfolios, if any, of the Fund as
described from time to time in the current and effective prospectus for the Fund
and listed on Appendix B hereto as amended from time to time.
- 4 -
<PAGE> 5
22. "Shares" shall mean the shares of beneficial interest of the Fund,
each of which is, in the case of a Fund having Series, allocated to a
particular Series.
23. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
24. "Stock Index Option" shall mean an exchange traded option entitling the
holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
25. "Terminal Link" shall mean an electronic data transmission link between
the Fund, an Intermediary (as hereinafter defined), and the Custodian requiring
in connection with each use of the Terminal Link by or on behalf of the Fund use
of an authorization code provided by the Custodian and at least two access codes
established by the Fund. As used herein the term "Intermediary" shall mean a
third party that maintains a transmission line to the Custodian and has been
selected by the Fund to receive electronic data transmissions from the Custodian
or the Fund and forward the same to the Fund or the Custodian, respectively.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
the Securities and moneys at any time owned by a Series during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees to
perform the duties thereof as hereinafter set forth.
- 5-
<PAGE> 6
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all moneys owned by a Series, at any time during the period
of this Agreement, and shall specify with respect to such Securities and money
the Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and moneys not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and moneys are
not finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Trustees of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
specifically allocated and to utilize the Book-Entry System to the extent
possible 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 Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Trustees of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities 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 Securities collateral. Securities and moneys deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect
- 6 -
<PAGE> 7
to Clearing Member confirmations for Options and transactions in Options for a
Series as provided in this Agreement, the Custodian shall have received a
certified resolution of the Fund's Board of Trustees, substantially in the form
of Exhibit C hereto, approving, authorizing and instructing the Custodian on a
continuous and ongoing basis, until instructed to the contrary by a Certificate
actually received by the Custodian, to accept, utilize and act in accordance
with such confirmations as provided in this Agreement with respect to such
Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all moneys received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) As hereinafter provided;
(b) Pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, the Series account from which payment
is to be made and the purpose for which payment is to be made; or
(c) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to such Series.
3. Promptly after the close of business on each day, the Custodian shall
furnish the Fund with confirmations and a summary, on a per Series basis, of all
transfers to or from the account of the Fund for a Series, either hereunder or
with any co-custodian or sub-custodian appointed in accordance with this
Agreement during said day. Where Securities are transferred to the account of
the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book-Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
moneys held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
- 7 -
<PAGE> 8
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to 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 its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall promptly and diligently with
respect to all Securities held for the Fund hereunder in accordance with
preceding paragraph 4:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon such
Securities which are called, but only if either (i) the Custodian receives a
written notice of such call, or (ii) notice of such call appears in one or more
of the publications listed in Appendix C annexed hereto, which may be amended at
any time by the Custodian without the prior notification or consent of the Fund;
(c) Present for payment and collect the amount payable upon all
Securities which mature;
(d) Surrender Securities in temporary form for definitive
Securities;
(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
(f) Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein
- 8 -
<PAGE> 9
deposited, for the account of a Series, all rights and similar securities issued
with respect to any Securities held by the Custodian for such Series hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian, directly
or through the use of the Book-Entry System or the Depository, shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities held by the Custodian
hereunder for the Series specified in such Certificate may be exercised;
(b) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization, refinancing, merger,
consolidation or recapitalization of any corporation, or the exercise of any
conversion privilege and receive and hold hereunder specifically allocated to
such Series any cash or other Securities received in exchange;
(c) Deliver any Securities held by the Custodian hereunder for the Series
specified in such Certificate to any protective committee, reorganization
committee or other person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of any corporation,
and receive and hold hereunder specifically allocated to such Series such
certificates of deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Series
specified in such Certificate, and take such other steps as shall be stated in
such Certificate to be for the purpose of effectuating any duly authorized plan
of liquidation, reorganization, merger, consolidation or recapitalization of the
Fund; and
(e) Present for payment and collect the amount payable upon Securities
not described in preceding paragraph 5(b) of this Article which may be called as
specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the Custodian
shall not be required to obtain possession of any instrument or certificate
representing any Futures Contract, any Option, or any Futures Contract Option
- 9 -
<PAGE> 10
until after it shall have determined, or shall have received a Certificate from
the Fund stating, that any such instruments or certificates are available. The
Fund shall deliver to the Custodian such a Certificate no later than the
business day preceding the availability of any such instrument or certificate.
Prior to such availability, the Custodian shall comply with Section 17(f) of the
Investment Company Act of 1940, as amended, in connection with the purchase,
sale, settlement, closing out or writing of Futures Contracts, Options, or
Futures Contract Options by making payments or deliveries specified in
Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or future commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin Account
and payments with respect to Securities to which a Margin Account relates, shall
be made in accordance with the terms and conditions of the Margin Account
Agreement. Whenever any such instruments or certificates are available, the
Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the
-10-
<PAGE> 11
Custodian (i) with respect to each purchase of Securities which are not Money
Market Securities, a Certificate, and (ii) with respect to each purchase of
Money Market Securities, a Certificate or Oral Instructions, specifying with
respect to each such purchase: (a) the Series to which such Securities are to be
specifically allocated; (b) the name of the issuer and the title of the
Securities; (c) the number of shares or the principal amount purchased and
accrued interest, if any; (d) the date of purchase and settlement; (e) the
purchase price per unit; (f) the total amount payable upon such purchase; (g)
the name of the person from whom or the broker through whom the purchase was
made, and the name of the clearing broker, if any; and (h) the name of the
broker to whom payment is to be made. The Custodian shall, upon receipt of
Securities purchased by or for the Fund, pay to the broker specified in the
Certificate out of the moneys held for the account of such Series the total
amount payable upon such purchase, provided that the same conforms to the total
amount payable as set forth in such Certificate or Oral Instructions.
2. Promptly after each sale of Securities by the Fund, other than a sale of
any Option, Futures Contract, Futures Contract Option, or any Reverse Repurchase
Agreement, the Fund shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a Certificate, and (ii)
with respect to each sale of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such sale: (a) the Series to which
such Securities were specifically allocated; (b) the name of the issuer and the
title of the Security; (c) the number of shares or principal amount sold, and
accrued interest, if any; (d) the date of sale; (e) the sale price per unit; (f)
the total amount payable to the Fund upon such sale; (g) the name of the broker
through whom or the person to whom the sale was made, and the name of the
clearing broker, if any; and (h) the name of the broker to whom the Securities
are to be delivered. The Custodian shall deliver the Securities specifically
allocated to such Series to the broker specified in the Certificate against
payment upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
- 11 -
<PAGE> 12
ARTICLE V
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund shall
deliver to the Custodian a Certificate specifying with respect to each option
purchased: (a) the Series to which such Option is specifically allocated; (b)
the type of Option (put or call); (c) the name of the issuer and the title and
number of shares subject to such Option or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Stock Index
Options purchased; (d) the expiration date; (e) the exercise price; (f) the
dates of purchase and settlement; (g) the total amount payable by the Fund in
connection with such purchase; (h) the name of the Clearing Member through whom
such option was purchased; and (i) the name of the broker to whom payment is to
be made. The Custodian shall pay, upon receipt of a Clearing Member's statement
confirming the purchase of such option held by such Clearing Member for the
account of the Custodian (or any duly appointed and registered nominee of the
Custodian) as custodian for the Fund, out of moneys held for the account of the
Series to which such Option is to be specifically allocated, the total amount
payable upon such purchase to the Clearing Member through whom the purchase was
made, provided that the same conforms to the total amount payable as set forth
in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant to
paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
3. Promptly after the exercise by the Fund of any Call Option purchased by
the Fund pursuant to paragraph 1 hereof,
- 12 -
<PAGE> 13
the Fund shall deliver to the Custodian a Certificate specifying with respect to
such Call Option: (a) the Series to which such Call Option was specifically
allocated; (b) the name of the issuer and the title and number of shares subject
to the Call Option; (c) the expiration date; (d) the date of exercise and
settlement; (e) the exercise price per share; (f) the total amount to be paid by
the Fund upon such exercise; and (g) the name of the Clearing Member through
whom such Call Option was exercised. The Custodian shall, upon receipt of the
Securities underlying the Call Option which was exercised, pay out of the moneys
held for the account of the Series to which such Call Option was specifically
allocated the total amount payable to the Clearing Member through whom the Call
Option was exercised, provided that the same conforms to the total amount
payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the Custodian
a Certificate specifying with respect to such Put Option: (a) the Series to
which such Put Option was specifically allocated; (b) the name of the issuer and
the title and number of shares subject to the Put Option; (c) the expiration
date; (d) the date of exercise and settlement; (e) the exercise price per share;
(f) the total amount to be paid to the Fund upon such exercise; and (g) the name
of the Clearing Member through whom such Put Option was exercised. The Custodian
shall, upon receipt of the amount payable upon the exercise of the Put option,
deliver or direct the Depository to deliver the Securities specifically
allocated to such Series, provided the same conforms to the amount payable to
the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Covered
Call Option: (a) the
- 13 -
<PAGE> 14
Series for which such Covered Call Option was written; (b) the name of the
issuer and the title and number of shares for which the Covered Call Option was
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Covered
Call Option was written; and (g) the name of the Clearing Member through whom
the premium is to be received. The Custodian shall deliver or cause to be
delivered, in exchange for receipt of the premium specified in the Certificate
with respect to such Covered Call Option, such receipts as are required in
accordance with the customs prevailing among Clearing Members dealing in Covered
Call Options and shall impose, or direct the Depository to impose, upon the
underlying Securities specified in the Certificate specifically allocated to
such Series such restrictions as may be required by such receipts.
Notwithstanding the foregoing, the Custodian has the right, upon prior written
notification to the Fund, at any time to refuse to issue any receipts for
Securities in the possession of the Custodian and not deposited with the
Depository underlying a Covered Call Option.
7. Whenever a Covered Call Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to such Put Option: (a)
the Series for which such Put Option was written; (b) the name of the issuer and
the title and number of shares for which the Put Option is written and which
underlie the same; (c) the expiration date; (d) the exercise price; (e) the
premium to be received by the Fund; (f) the date such Put Option is written; (g)
the name of the Clearing Member through whom the premium is to be received and
to whom a Put Option guarantee letter is to be delivered; (h) the amount of
cash, and/or the
- 14 -
<PAGE> 15
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Senior Security Account for such Series; and (i) the amount
of cash and/or the amount and kind of Securities specifically allocated to such
Series to be deposited into the Collateral Account for such Series. The
Custodian shall, after making the deposits into the Collateral Account specified
in the Certificate, issue a Put Option guarantee letter substantially in the
form utilized by the Custodian on the date hereof, and deliver the same to the
Clearing Member specified in the Certificate against receipt of the premium
specified in said Certificate. Notwithstanding the foregoing, the Custodian
shall be under no obligation to issue any Put Option guarantee letter or similar
document if it is unable to make any of the representations contained therein.
9. Whenever a Put Option written by the Fund and described in the preceding
paragraph is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Put Option was written; (b)
the name of the issuer and title and number of shares subject to the Put Option;
(c) the Clearing Member from whom the underlying Securities are to be received;
(d) the total amount payable by the Fund upon such delivery; (e) the amount of
cash and/or the amount and kind of Securities specifically allocated to such
Series to be withdrawn from the Collateral Account for such Series and (f) the
amount of cash and/or the amount and kind of Securities, specifically allocated
to such Series, if any, to be withdrawn from the Senior Security Account. Upon
the return and/or cancellation of any Put Option guarantee letter or similar
document issued by the Custodian in connection with such Put Option, the
Custodian shall pay out of the moneys held for the account of the Series to
which such Put Option was specifically allocated the total amount payable to the
Clearing Member specified in the Certificate as set forth in such Certificate
against delivery of such Securities, and shall make the withdrawals specified in
such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
whether such Stock Index Option is a put or a call; (c) the number of options
written; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the Clearing Member through whom such Option
was written; (h) the premium to be received by the Fund; (i) the amount of cash
and/or the amount and kind of Securities, if any, specifically allocated to such
Series to be deposited in
- 15 -
<PAGE> 16
the Senior Security Account for such Series; (j) the amount of cash and/or the
amount and kind of Securities, if any, specifically allocated to such Series to
be deposited in the Collateral Account for such Series; and (k) the amount of
cash and/or the amount and kind of Securities, if any, specifically allocated to
such Series to be deposited in a Margin Account, and the name in which such
account is to be or has been established. The Custodian shall, upon receipt of
the premium specified in the Certificate, make the deposits, if any, into the
Senior Security Account specified in the Certificate, and either (1) deliver
such receipts, if any, which the Custodian has specifically agreed to issue,
which are in accordance with the customs prevailing among Clearing Members in
Stock Index Options and make the deposits into the Collateral Account specified
in the Certificate, or (2) make the deposits into the Margin Account specified
in the Certificate.
11. Whenever a Stock Index Option written by the Fund and described in the
preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index option is
being exercised; (d) the total amount payable upon such exercise, and whether
such amount is to be paid by or to the Fund; (e) the amount of cash and/or
amount and kind of Securities, if any, to be withdrawn from the Margin Account;
and (f) the amount of cash and/or amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account for such Series; and the amount of
cash and/or the amount and kind of Securities, if any, to be withdrawn from the
Collateral Account for such Series. Upon the return and/or cancellation of the
receipt, if any, delivered pursuant to the preceding paragraph of this Article,
the Custodian shall pay out of the moneys held for the account of the Series to
which such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series
- 16 -
<PAGE> 17
for which the Option was written; (c) the name of the issuer and the title and
number of shares subject to the Option, or, in the case of a Stock Index Option,
the stock index to which such Option relates and the number of Options held; (d)
the exercise price; (e) the premium to be paid by the Fund; (f) the expiration
date; (g) the type of Option (put or call); (h) the date of such purchase; (i)
the name of the Clearing Member to whom the premium is to be paid; and (j) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Collateral Account, a specified Margin Account, or the Senior Security
Account for such Series. Upon the Custodian's payment of the premium and the
return and/or cancellation of any receipt issued pursuant to paragraphs 6, 8 or
10 of this Article with respect to the Option being liquidated through the
Closing Purchase Transaction, the Custodian shall remove, or direct the
Depository to remove, the previously imposed restrictions on the Securities
underlying the Call Option.
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 Article III herein, and
upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund shall
deliver to the Custodian a Certificate specifying with respect to such Futures
Contract, (or with respect to any number of identical Futures Contract(s)): (a)
the Series for which the Futures Contract is being entered; (b) the category of
Futures Contract (the name of the underlying stock index or financial
instrument); (c) the number of identical Futures Contracts entered into; (d) the
delivery or settlement date of the Futures Contract(s); (e) the date the Futures
Contract(s) was (were) entered into and the maturity date; (f) whether the Fund
is buying (going long) or selling (going short) on such Futures Contract(s); (g)
the amount of cash and/or the amount and kind of Securities, if any, to be
deposited in the Senior
- 17 -
<PAGE> 18
Security Account for such Series; (h) the name of the broker, dealer, or futures
commission merchant through whom the Futures Contract was entered into; and (i)
the amount of fee or commission, if any, to be paid and the name of the broker,
dealer, or futures commission merchant to whom such amount is to be paid. The
Custodian shall make the deposits, if any, to the Margin Account in accordance
with the terms and conditions of the Margin Account Agreement. The Custodian
shall make payment out of the moneys specifically allocated to such Series of
the fee or commission, if any, specified in the Certificate and deposit in the
Senior Security Account for such Series the amount of cash and/or the amount and
kind of Securities specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be made
by the Fund to a broker, dealer, or futures commission merchant with respect to
an outstanding Futures Contract, shall be made by the Custodian in accordance
with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a broker, dealer,
or futures commission merchant to the Fund with respect to an outstanding
Futures Contract, shall be received and dealt with by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
3. Whenever a Futures Contract held by the Custodian hereunder is retained
by the Fund until delivery or settlement is made on such Futures Contract, the
Fund shall deliver to the Custodian a Certificate specifying: (a) the Futures
Contract and the Series to which the same relates; (b) with respect to a Stock
Index Futures Contract, the total cash settlement amount to be paid or received,
and with respect to a Financial Futures Contract, the Securities and/or amount
of cash to be delivered or received; (c) the broker, dealer or futures
commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required
- 18 -
<PAGE> 19
in a Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
ARTICLE VII
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the Fund,
the Fund shall promptly deliver to the Custodian a Certificate specifying with
respect to such Futures Contract Option: (a) the Series to which such Option is
specifically allocated; (b) the type of Futures Contract Option (put or call);
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Contract Option
purchased; (d) the expiration date; (e) the exercise price; (f) the dates of
purchase and settlement; (g) the amount of premium to be paid by the Fund upon
such purchase; (h) the name of the broker or futures commission merchant through
whom such option was purchased; and (i) the name of the broker, or futures
commission merchant, to whom payment is to be made. The Custodian shall pay out
of the moneys specifically allocated to such Series, the total amount to be paid
upon such purchase to the broker or futures commissions merchant through whom
the purchase was made, provided that the same conforms to the amount set forth
in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) Series to
which such Futures Contract Option was specifically allocated; (b) the type of
Future Contract Option (put or call); (c) the type of Futures Contract and such
other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h)
- 19 -
<PAGE> 20
the name of the broker of futures commission merchant through whom the sale was
made. The Custodian shall consent to the cancellation of the Futures Contract
Option being closed against payment to the Custodian of the total amount payable
to the Fund, provided the same conforms to the total amount payable as set forth
in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e) the name
of the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the moneys and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the
type of Futures Contract and such other information as may be necessary to
identify the Futures Contract underlying the Futures Contract Option; (d) the
expiration date; (e) the exercise price; (f) the premium to be received by the
Fund; (g) the name of the broker or futures commission merchant through whom the
premium is to be received; and (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the moneys and Securities specifically allocated to
such Series the deposits into the Senior Security Account, if any, as specified
in the Certificate. The deposits, if any, to be made to the Margin Account shall
be made by the Custodian in accordance with the terms and conditions of the
Margin Account Agreement.
- 20 -
<PAGE> 21
5. Whenever a Futures Contract Option written by the Fund which is a call
is exercised, the Fund shall promptly deliver to the Custodian a Certificate
specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type
of Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the moneys and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
7. Whenever the Fund purchases any Futures Contract option identical to a
previously written Futures Contract Option described in this Article in order to
liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being
- 21 -
<PAGE> 22
purchased: (a) the Series to which such Option is specifically allocated; (b)
that the transaction is a closing transaction; (c) the type of Future Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Option Contract; (d) the exercise price; (e) the premium
to be paid by the Fund; (f) the expiration date; (g) the name of the broker or
futures commission merchant to whom the premium is to be paid; and (h) the
amount of cash and/or the amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series. The Custodian shall effect the
withdrawals from the Senior Security Account specified in the Certificate. The
withdrawals, if any, to be made from the Margin Account shall be made by the
Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
8. Upon the expiration, exercise, or consummation of a closing transaction
with respect to, any Futures Contract Option written or purchased by the Fund
and described in this Article, the Custodian shall (a) delete such Futures
Contract Option from the statements delivered to the Fund pursuant to paragraph
3 of Article III herein and, (b) make such withdrawals from and/or in the case
of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
9. Futures Contracts acquired by the Fund through the exercise of a Futures
Contract option described in this Article shall be subject to Article VI hereof.
ARTICLE VIII
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund shall
promptly deliver to the Custodian a Certificate specifying: (a) the Series for
which such short sale was made; (b) the name of the issuer and the title of the
Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has
- 22 -
<PAGE> 23
been or is to be established; (h) the amount of cash and/or the amount and kind
of Securities, if any, to be deposited in a Senior Security Account, and (i) the
name of the broker through whom such short sale was made. The Custodian shall
upon its receipt of a statement from such broker confirming such sale and that
the total amount credited to the Fund upon such sale, if any, as specified in
the Certificate is held by such broker for the account of the Custodian (or any
nominee of the Custodian) as custodian of the Fund, issue a receipt or make the
deposits into the Margin Account and the Senior Security Account specified in
the Certificate.
2. in connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the moneys held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters a Reverse Repurchase Agreement with
respect to Securities and money held by the Custodian hereunder, the Fund shall
deliver to the Custodian a Certificate, or in the event such Reverse Repurchase
Agreement is a Money Market Security, a Certificate or Oral Instructions
specifying: (a) the Series for which the Reverse Repurchase Agreement is
entered; (b) the total amount payable
- 23 -
<PAGE> 24
to the Fund in connection with such Reverse Repurchase Agreement and
specifically allocated to such Series; (c) the broker or dealer through or with
whom the Reverse Repurchase Agreement is entered; (d) the amount and kind of
Securities to be delivered by the Fund to such broker or dealer; (e) the date of
such Reverse Repurchase Agreement; and (f) the amount of cash and/or the amount
and kind of Securities, if any, specifically allocated to such Series to be
deposited in a Senior Security Account for such Series in connection with such
Reverse Repurchase Agreement. The Custodian shall, upon receipt of the total
amount payable to the Fund specified in the Certificate or Oral Instructions
make the delivery to the broker or dealer, and the deposits, if any, to the
Senior Security Account, specified in such Certificate or Oral Instructions.
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically allocated
to a Series held by the Custodian hereunder, the Fund shall deliver or cause to
be delivered to the Custodian a Certificate specifying with respect to each such
loan: (a) the Series to which the loaned Securities are specifically allocated;
(b) the name of the issuer and the title of the Securities, (c) the number of
shares or the
- 24 -
<PAGE> 25
principal amount loaned, (d) the date of loan and delivery, (e) the total amount
to be delivered to the Custodian against the loan of the Securities, including
the amount of cash collateral and the premium, if any, separately identified,
and (f) the name of the broker, dealer, or financial institution to which the
loan was made. The Custodian shall deliver the Securities thus designated to the
broker, dealer or financial institution to which the loan was made upon receipt
of the total amount designated as to be delivered against the loan of
Securities. The Custodian may accept payment in connection with a delivery
otherwise than through the Book-Entry System or Depository only in the form of a
certified or bank cashier's check payable to the order of the Fund or the
Custodian drawn on New York Clearing House funds and may deliver Securities in
accordance with the customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of Securities:
(a) the Series to which the loaned Securities are specifically allocated; (b)
the name of the issuer and the title of the Securities to be returned, (c) the
number of shares or the principal amount to be returned, (d) the date of
termination, (e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE XI
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn
- 25 -
<PAGE> 26
from, such Senior Security Account for such Series. In the event that the Fund
fails to specify in a Certificate the Series, the name of the issuer, the title
and the number of shares or the principal amount of any particular Securities to
be deposited by the Custodian into, or withdrawn from, a Senior Securities
Account, the Custodian shall be under no obligation to make any such deposit or
withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin Account to
the broker, dealer, futures commission merchant or Clearing Member in whose
name, or for whose benefit, the account was established as specified in the
Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in and
to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
Repayment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which cash
and/or Securities are maintained in a Collateral Account for any Series, the
Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the
- 26 -
<PAGE> 27
amount and kind of Securities held therein. No later than the close of business
next succeeding the delivery to the Fund of such statement, the Fund shall
furnish to the Custodian a Certificate specifying the then market value of the
Securities described in such statement. In the event such then market value is
indicated to be less than the Custodian's obligation with respect to any
outstanding Put Option guarantee letter or similar document, the Fund shall
promptly specify in a Certificate the additional cash and/or Securities to be
deposited in such Collateral Account to eliminate such deficiency.
ARTICLE XII
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of the
Board of Trustees of the Fund, certified by the Secretary, the Clerk, any
Assistant Secretary or any Assistant Clerk, either (i) setting forth with
respect to the Series specified therein the date of the declaration of a
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent and any sub-dividend agent or
co-dividend agent of the Fund on the payment date, or (ii) authorizing with
respect to the Series specified therein the declaration of dividends and
distributions on a daily basis and authorizing the Custodian to rely on Oral
Instructions or a Certificate setting forth the date of the declaration of such
dividend or distribution, the date of payment thereof, the record date as of
which shareholders entitled to payment shall be determined, the amount payable
per Share of such Series to the shareholders of record as of that date and the
total amount payable to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Oral Instructions or
Certificate, as the case may be, the Custodian shall pay out of the moneys held
for the account of each Series the total amount payable to the Dividend Agent
and any sub-dividend agent or co-dividend agent of the Fund with respect to such
Series.
- 27 -
<PAGE> 28
ARTICLE XIII
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) The Series, the number of Shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale of
such Shares and specifically allocated to the separate account in the name of
such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the separate account in the name of the Series for which
such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the Custodian
to make payment out of the money held by the Custodian hereunder in connection
with a redemption of any Shares, it shall furnish to the Custodian a Certificate
specifying:
(a) The number and Series of Shares redeemed; and
(b) The amount to be paid for such Shares.
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the moneys held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the
- 28 -
<PAGE> 29
redemption is in good form for redemption in accordance with the check
redemption procedure, honor the check presented as part of such check redemption
privilege out of the moneys held in the separate account of the Series of the
Shares being redeemed.
ARTICLE XIV
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on behalf
of any Series which results in an overdraft because the moneys held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is indebted to The Bank of New York under the Fund's Cash
Management and Related Services Agreement, (except a borrowing for investment or
for temporary or emergency purposes using Securities as collateral pursuant to a
separate agreement and subject to the provisions of paragraph 2 of this
Article), such overdraft or indebtedness shall be deemed to be a loan made by
the Custodian to the Fund for such Series payable on demand and shall bear
interest from the date incurred at a rate per annum (based on a 360-day year for
the actual number of days involved) equal to 1/2% over Custodian's prime
commercial lending rate in effect from time to time, such rate to be adjusted on
the effective date of any change in such prime commercial lending rate but in no
event to be less than 6% per annum. In addition, the Fund hereby agrees that the
Custodian shall have a continuing lien and security interest enforceable to the
extent of such overdraft or indebtedness in and to any property specifically
allocated to such Series at any time held by it for the benefit of such Series
or in which the Fund may have an interest which is then in the Custodian's
possession or control or in possession or control of any third party acting in
the Custodian's behalf. The Fund authorizes the Custodian, in its sole
discretion, at any time to charge any such overdraft or indebtedness together
with interest due thereon against any balance of account standing to such
Series' credit on the Custodian's books. In addition, the Fund hereby covenants
that on each Business Day on which either it intends to enter a Reverse
Repurchase Agreement and/or otherwise borrow from a third party, or which next
succeeds a Business Day on which at the close of business the Fund had
outstanding a Reverse
- 29 -
<PAGE> 30
Repurchase Agreement or such a borrowing, it shall prior to 9 a.m., New York
City time, advise the Custodian, in writing, of each such borrowing, shall
specify the Series to which the same relates, and shall not incur any
indebtedness not so specified other than from the Custodian.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement, (d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any
- 30 -
<PAGE> 31
particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
ARTICLE XV
TERMINAL LINK
1. At no time and under no circumstances shall the Fund be obligated to
have or utilize the Terminal Link, and the provisions of this Article shall
apply if, but only if, the Fund in its sole and absolute discretion elects to
utilize the Terminal Link to transmit Certificates to the Custodian.
2. The Terminal Link shall be utilized by the Fund only for the purpose of
the Fund providing Certificates to the Custodian with respect to transactions
involving Securities or for the transfer of money to be applied to the payment
of dividends, distributions or redemptions of Fund Shares, and shall be utilized
by the Custodian only for the purpose of providing notices to the Fund. Such use
shall commence only after the Fund shall have delivered to the Custodian a
Certificate substantially in the form of Exhibit D and shall have established
access codes and safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes and shall have reviewed
the safekeeping procedures established by the Intermediary to assure that
transmissions inputted by the Fund, and only such transmissions, are forwarded
by the Intermediary to the Custodian without any alteration or omission. Each
use of the Terminal Link by the Fund shall constitute a representation and
warranty that the Terminal Link is being used only for the purposes permitted
hereby, that at least two officers have each utilized an access code, that such
safekeeping procedures have been established by the Fund, that the Intermediary
has safekeeping procedures reviewed by the Fund to assure that all transmissions
inputted by the Fund, and only such transmissions, are forwarded by the
Intermediary to the Custodian without any alteration or omission by the
Intermediary, and that such use does not contravene the Investment Company Act
of 1940, as amended, or the rules or regulations thereunder.
3. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including, but not
- 31 -
<PAGE> 32
limited to communications services, necessary for it to utilize the Terminal
Link, and the Custodian shall not be responsible for the reliability or
availability of any such equipment or services.
4. The Fund acknowledges that any data bases made, available as part of, or
through the Terminal Link and any proprietary data, software, processes,
information and documentation (other than any such which are or become part of
the public domain or are legally required to be made available to the public)
(collectively, the "Information"), are the exclusive and confidential property
of the Custodian. The Fund shall, and shall cause others to which it discloses
the Information, including, without limitation the Intermediary, to keep the
Information confidential by using the same care and discretion it uses with
respect to its own confidential property and trade secrets, and shall neither
make nor permit any disclosure without the express prior written consent of the
Custodian.
5. Upon termination of this Agreement for any reason, the Fund shall return
to the Custodian any and all copies of the Information which are in the Fund's
possession or under its control, or which the Fund distributed to third parties,
including, without limitation, the Intermediary. The provisions of this
Article shall not affect the copyright status of any of the Information which
may be copyrighted and shall apply to all Information whether or not
copyrighted.
6. The Custodian reserves the right to modify the Terminal Link from time
to time without notice to the Fund or the Intermediary except that the Custodian
shall give the Fund notice not less than 75 days in advance of any modification
which would materially adversely affect the Fund's operation, and the Fund
agrees that neither the Fund nor the Intermediary shall not modify or attempt to
modify the Terminal Link without the Custodian's prior written consent. The Fund
acknowledges that any software or procedures provided the Fund or the
Intermediary as part of the Terminal Link are the property of the Custodian and,
accordingly, the Fund agrees that any modifications to the Terminal Link,
whether by the Fund, the Intermediary or by the Custodian and whether with or
without the Custodian's consent, shall become the property of the Custodian.
7. Neither the Custodian nor any manufacturers and suppliers it utilizes or
the Fund or the Intermediary utilizes in connection with the Terminal Link
makes any warranties or representations, express or implied, in fact or in
- 32 -
<PAGE> 33
law, including but not limited to warranties of merchantability and fitness
for a particular purpose.
8. The Fund will cause its Officers and employees to treat the
authorization codes and the access codes applicable to Terminal Link with
extreme care, and irrevocably authorizes the Custodian to act in accordance with
and rely on Certificates received by it through the Terminal Link. The Fund
acknowledges that it is its responsibility to assure that only its Officers and
authorized persons of the Intermediary use the Terminal Link on its behalf, and
that a Custodian shall not be responsible nor liable for use of the Terminal
Link on the Fund's behalf by persons other than such persons or officers, or by
only a single officer, nor for any alteration, omission, or failure to promptly
forward by the Intermediary.
9. The Custodian shall have no liability for any losses, damages, injuries,
claims, costs or expenses, arising out of or in connection with any hardware or
software failure or malfunction of the Terminal Link, unless, first, such
failure or malfunction is the direct result of the negligence of the Custodian,
and, second, the Fund has both (a) complied with the provisions of Section 11 of
this Article, and (b) mitigated its damages by using either Certificates
delivered otherwise than through the Terminal Link or, where appropriate, Oral
Instructions. If the Custodian is liable for any such failure or malfunction
incident, its liability shall be limited to direct money damages not exceeding
$25,000.
10. Without limiting the generality of the foregoing, in no event shall the
Custodian or any manufacturer or supplier of its computer equipment, software or
services relating to the Terminal Link be responsible for any special, indirect,
incidental or consequential damages which the Fund or the Intermediary may incur
or experience by reason of its use of the Terminal Link even if the Custodian or
any manufacturer or supplier has been advised of the possibility of such
damages, nor with respect to the use of the Terminal Link shall the Custodian or
any such manufacturer or supplier be liable for acts of God, or with respect to
the following to the extent beyond such person's reasonable control: machine or
computer breakdown or malfunction, interruption or malfunction of communication
facilities, labor difficulties or any other similar or dissimilar cause.
11. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, the Terminal Link as promptly
as practicable, and in any
- 33 -
<PAGE> 34
event within 24 hours after the earliest of (i) discovery thereof (ii) the
Business Day on which discovery should have occurred through the exercise of
reasonable care and (iii) in the case of any error, the date of actual receipt
of the earliest notice which reflects such error, it being agreed that discovery
and receipt of notice may only occur on a business day. The Custodian shall
promptly advise the Fund or the Intermediary whenever the Custodian learns of
any errors, omissions or interruption in, or delay or unavailability of, the
Terminal Link.
12. The Custodian shall acknowledge to the Fund or to the Intermediary, by
use of the Terminal Link, receipt of each Certificate the Custodian receives
through the Terminal Link, and in the absence of such acknowledgment, the
Custodian shall not be liable for any failure to act in accordance with such
Certificate and the Fund may not claim that such Certificate was received by the
Custodian. Such verification, which may occur after the Custodian has acted upon
such Certificate, shall be accomplished on the same day on which such
Certificate is received.
ARTICLE XVI
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as sub-custodian
for each Series' Foreign Securities (as such term is defined in paragraph (c)(1)
of Rule 17f-5 under the Investment Company Act of 1940, as amended) and other
assets, the foreign banking institutions and foreign securities depositories and
clearing agencies designated on Schedule I hereto ("Foreign Sub-Custodians") to
carry out their respective responsibilities in accordance with the terms of the
sub-custodian agreement between each such Foreign Sub-Custodian and the
Custodian, copies of which have been previously delivered to the Fund and
receipt of which is hereby acknowledged (each such agreement, a "Foreign
Sub-Custodian Agreement"). Upon receipt of a Certificate, together with a
certified resolution substantially in the form attached as Exhibit E of the
Fund's Board of Trustees, the Fund may designate any additional foreign
sub-custodian with which the Custodian has an agreement for such entity to act
as the Custodian's agent, as its sub-custodian and any such additional foreign
sub-custodian shall be deemed added to Schedule I. Upon receipt of a Certificate
from the Fund, the Custodian shall cease the employment of any one or more
Foreign Sub-Custodians for maintaining custody of the Fund's
- 34 -
<PAGE> 35
assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the form
previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each Series of
the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
4. Upon request of the Fund, the Custodian will, consistent with the terms
of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to
arrange for the independent accountants of the Fund to be afforded access to the
books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series, Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall furnish annually to the Fund, as mutually agreed
upon, information concerning the Foreign Sub-Custodians employed by the
Custodian. Such information shall be similar in kind and scope to that furnished
to the Fund in connection with the Fund's initial approval of such Foreign
Sub-Custodians and, in any event, shall include information pertaining to (i)
the Foreign Custodians' financial strength, general reputation and standing in
the countries in which they are located and their ability to provide the
custodial services required, and (ii) whether the Foreign Sub-Custodians would
provide a level of safeguards
- 35 -
<PAGE> 36
for safekeeping and custody of securities not materially different form those
prevailing in the United States. The Custodian shall monitor the general
operating performance of each Foreign Sub-Custodian. The Custodian agrees that
it will use reasonable care in monitoring compliance by each Foreign
Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and
that if it learns of any breach of such Foreign Sub-Custodian Agreement believed
by the Custodian to have a material adverse effect on the Fund or any Series it
will promptly notify the Fund of such breach. The Custodian also agrees to use
reasonable and diligent efforts to enforce its rights under the relevant Foreign
Sub-Custodian Agreement.
7. The Custodian shall transmit promptly to the Fund all notices, reports
or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
8. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
9. Notwithstanding any other provision in this Agreement to the contrary,
with respect to any losses or damages arising out of or relating to any actions
or omissions of any Foreign Sub-Custodian the sole responsibility and liability
of the Custodian shall be to take appropriate action at the Fund's expense to
recover such loss or damage from the Foreign Sub-Custodian. It is expressly
understood and agreed that the Custodian's sole responsibility and liability
shall be limited to amounts so recovered from the Foreign Sub-Custodian.
- 36 -
<PAGE> 37
ARTICLE XVII
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI neither
the Custodian nor its nominee shall be liable for any loss or damage, including
counsel fees, resulting from its action or omission to act or otherwise, either
hereunder or under any Margin Account Agreement, except for any such loss or
damage arising out of its own negligence or willful misconduct. In no event
shall the Custodian be liable to the Fund or any third party for special,
indirect or consequential damages or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed of the
possibility of such damages and regardless of the form of action. The Custodian
may, with respect to questions of law arising hereunder or under any Margin
Account Agreement, apply for and obtain the advice and opinion of counsel to the
Fund or of its own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss oy damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased, sold, or
written by or for the Fund, the legality of the purchase, sale or writing
thereof, or the propriety of the amount paid or received therefor;
(b) The legality of the sale or redemption of any Shares, or the
propriety of the amount to be received or paid therefor;
(c) The legality of the declaration or payment of any dividend by the
Fund;
(d) The legality of any borrowing by the Fund using Securities as
collateral;
(e) The legality of any loan of portfolio Securities, nor shall the
Custodian be under any duty or obligation to see to it that any cash collateral
delivered to it by a
- 37 -
<PAGE> 38
broker, dealer, or financial institution or held by it at any time as a result
of such loan of portfolio Securities of the Fund is adequate collateral for the
Fund against any loss it might sustain as a result of such loan. The Custodian
specifically, but not by way of limitation, shall not be under any duty or
obligation periodically to check or notify the Fund that the amount of such cash
collateral held by it for the Fund is sufficient collateral for the Fund, but
such duty or obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio Securities of the
Fund are lent pursuant to Article XIV of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in the event that
such dividends or interest are not paid and received when due; or
(f) The sufficiency or value of any amounts of money and/or Securities
held in any Margin Account, Senior Security Account or Collateral Account in
connection with transactions by the Fund. In addition, the Custodian shall be
under no duty or obligation to see that any broker, dealer, futures commission
merchant or Clearing Member makes payment to the Fund of any variation margin
payment or similar payment which the Fund may be entitled to receive from such
broker, dealer, futures commission merchant or Clearing Member, to see that any
payment received by the Custodian from any broker, dealer, futures commission
merchant or Clearing Member is the amount the Fund is entitled to receive, or to
notify the Fund of the Custodian's receipt or non-receipt of any such payment.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable for
ascertaining or acting upon any calls, conversions, exchange offers, tenders,
interest rate changes or similar matters relating to Securities held in the
Depository, unless the Custodian shall have actually received timely notice from
the Depository. In no event shall the
- 38 -
<PAGE> 39
Custodian have any responsibility or liability for the failure of the Depository
to collect, or for the late collection or late crediting by the Depository of
any amount payable upon Securities deposited in the Depository which may mature
or be redeemed, retired, called or otherwise become payable. However, upon
receipt of a Certificate from the Fund of an overdue amount on Securities held
in the Depository the Custodian shall make a claim against the Depository on
behalf of the Fund, except that the Custodian shall not be under any obligation
to appear in, prosecute or defend any action suit or proceeding in respect to
any Securities held by the Depository which in its opinion may involve it in
expense or liability, unless indemnity satisfactory to it against all expense
and liability be furnished as often as may be required.
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty ox obligation to take action
to effect collection of any amount if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand ox
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub-Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and moneys at any time
owned by a Series, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to ascertain
whether any Securities at any time delivered to, or held by it or by any Foreign
Sub-Custodian, for the account of the Fund and specifically allocated to a
Series are such as properly may be held by the Fund or such Series under the
provisions of its then current
- 39 -
<PAGE> 40
prospectus, or (b) to ascertain whether any transactions by the Fund, whether or
not involving the Custodian, are such transactions as may properly be engaged in
by the Fund.
9. The Custodian shall be entitled to receive and the Fund agrees to pay to
the Custodian all out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund. The Custodian may
charge such compensation and any expenses with respect to a Series incurred by
the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions actually received by the Custodian hereinabove provided
for. The Fund agrees to forward to the Custodian a Certificate or facsimile
thereof confirming such Oral Instructions in such manner so that such
Certificate or facsimile thereof is received by the Custodian, whether by hand
delivery, telecopier or other similar device, or otherwise, by the close of
business of the same day that such Oral Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming instructions are not
received, or that contrary instructions are received, by the Custodian shall in
no way affect the validity of the transactions or enforceability of the
transactions hereby authorized by the Fund. The Fund agrees that the Custodian
shall incur no liability to the Fund in acting upon Oral Instructions given to
the Custodian hereunder concerning such transactions provided such instructions
reasonably appear to have been received from an Officer.
- 40 -
<PAGE> 41
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by the
Custodian on the system of internal accounting control of the Book-Entry System,
the Depository or O.C.C., and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
- 41 -
<PAGE> 42
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI the Custodian may deliver and
receive Securities, and receipts with respect to such Securities, and arrange
for payments to be made and received by the Custodian in accordance with the
customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XVIII
TERMINATION
1. Either of the parties 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 giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Trustees of the Fund, certified by the
Secretary, the Clerk, any Assistant Secretary or any Assistant Clerk, electing
to terminate this Agreement and designating a successor custodian or custodians,
each of which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. In the event such notice is
given by the Custodian, the Fund shall, on or before the termination date,
deliver to the Custodian a copy of a resolution of the Board of Trustees of the
Fund, certified by the Secretary, the Clerk, any Assistant Secretary or any
Assistant Clerk, designating a successor custodian or custodians. In the absence
of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon
- 42 -
<PAGE> 43
receipt of a notice of acceptance by the successor custodian on that date
deliver directly to the successor custodian all Securities and moneys then owned
by the Series and held by it as Custodian, after deducting all fees, expenses
and other amounts for the payment or reimbursement of which it shall then be
entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon the delivery
by the Custodian of all Securities (other than Securities held in the Book-Entry
System which cannot be delivered to the Fund) and moneys then owned by the
Series be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
ARTICLE XIX
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present officers of the Fund. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event that any
such present officer ceases to be an Officer of the Fund, or in the event that
other or additional Officers are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present officers as set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and
- 43 -
<PAGE> 44
mailed or delivered to it at its office at the address for the Fund first above
written, or at such other place as the Fund may from time to time designate in
writing.
4. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Trustees of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Trustees.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
7. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
8. 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 Fund
personally, but bind only the assets of the Fund, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Series of
the Fund must look solely to the assets of the Fund belonging to such Series for
the enforcement of any claims against the Fund.
- 44 -
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
The Sessions Group
By:
----------------------------------
[SEAL]
Attest:
- -------------------------
THE BANK OF NEW YORK
By:
----------------------------------
Name:
Title:
[SEAL]
Attest:
- -------------------------
- 45 -
<PAGE> 46
APPENDIX A
I, , President and I, , of The Sessions
Group, an Ohio business trust (the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund
and each has been duly elected or appointed by the Board of Trustees of the Fund
to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures:
Name Position Signature
- ------------------------ ------------------------- ----------------------
<PAGE> 47
APPENDIX B
SERIES
The KeyPremier Money Market Fund
The KeyPremier Pennsylvania Bond Fund
<PAGE> 48
APPENDIX C
I, , a Vice President with THE BANK OF NEW YORK do hereby
designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE> 49
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or
she is the duly elected and acting of The Sessions Group, an Ohio
business trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at a meeting duly
held on , 199 , at which a quorum was at all times present and that
such resolution has not been modified or rescinded and is in full force and
effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis to deposit in the Book-Entry System, as
defined in the Custody Agreement, all securities eligible for deposit
therein, regardless of the Series to which the same are specifically
allocated, and to utilize the Book-Entry System to the extent possible in
connection with its performance thereunder, including, without limitation,
in connection with settlements of purchases and sales of securities, loans
of securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Sessions Group, as of the day of , 1996.
-------------------
[SEAL]
<PAGE> 50
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Sessions Group, an Ohio
business trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at a meeting duly
held on , 199 , at which a quorum was at all times present and that such
resolution has not been modified or rescinded and is in full force and effect
as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Depository, as defined in the Custody Agreement, all securities eligible
for deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilice the Depository to the extent
possible in connection with its performance thereunder, including, without
limitation, in connection with settlements of purchases and sales of
securities, loans of securities, and deliveries and returns of securities
collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Sessions Group, as of the day of , 1996.
-----------------
[SEAL]
<PAGE> 51
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of The Sessions Group, an Ohio business
trust (the "Fund"), and further certifies that the following resolution was
adopted by the Board of Trustees of the Fund at a meeting duly held on ,
199 , at which a quorum was at all times present and that such resolution has
not been modified or rescinded and is in full force and effect as of the date
hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 (the "Custody Agreement") is authorized and instructed on a
continuous and ongoing basis until such time as it receives a Certificate,
as defined in the Custody Agreement, to the contrary to deposit in the
Participants Trust Company as Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of the
Series to which the same are specifically allocated, and to utilize the
Participants Trust Company to the extent possible in connection with its
performance thereunder, including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Sessions Group, as of the day of , 1996.
----------------------
[SEAL)
<PAGE> 52
EXHIBIT C
CERTIFICATION
The undersigned, ,hereby certifies that he
or she is the duly elected and acting of The Sessions Group, an
Ohio business trust (the "Fund"), and further certifies that the following
resolution was adopted by the Board of Trustees of the Fund at a meeting
duly held on , 199 , at which a quorum was at all times present and
that such resolution has not been modified or rescinded and is in full force
and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to a
Custody Agreement between The Bank of New York and the Fund dated as of
, 199 , (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis until such time as it receives a
Certificate, as defined in the Custody Agreement, to the contrary, to
accept, utilize and act with respect to Clearing Member confirmations for
options and transaction in Options, regardless of the Series to which the
same are specifically allocated, as such terms are defined in the Custody
Agreement, as provided in the Custody Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Sessions Group, as of the day of , 1996.
------------------------
[SEAL]
<PAGE> 53
EXHIBIT D
The undersigned, , hereby certifies that
he or she is the duly elected and acting of The
Sessions Group, an Ohio business trust (the "Fund"), further certifies that the
following resolutions were adopted by the Board of Trustees of the Fund at a
meeting duly held on , 199 , at which a quorum was at all times
present and that such resolutions have not been modified or rescinded and are
in full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to the Custody
Agreement between The Bank of New York and the Fund dated as of
, 199 (the "Custody Agreement") is authorized and instructed
on a continuous and ongoing basis to act in accordance with, and to rely on
Certificates (as defined in the Custody Agreement) given by the Fund to the
Custodian by a Terminal Link (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant use of such
access codes only to Officers of the Fund as defined in the Custody Agreement,
shall establish internal safekeeping procedures to safeguard and protect the
confidentiality and availability of such access codes, shall limit its use of
the Terminal Link to those purposes permitted by the Custody Agreement, shall
require at least two such officers to utilize their respective access codes in
connection with each such Certificate, shall review the safekeeping procedures
of the Intermediary to assure that all transmissions inputted by the Fund, and
only such transmissions, are forwarded by the omission by the Intermediary, and
shall use the Terminal Link only in a manner that does not contravene the
Investment Company Act of 1940, as amended, or the rules and regulations
thereunder.
RESOLVED, that officers of the Fund shall, following the establishment of
such access codes and such internal safekeeping procedures, advise the Custodian
that the same have been established by delivering a Certificate, as defined in
the Custody Agreement, and the Custodian shall be entitled to rely upon such
advice.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The
Sessions Group, as of the day of , 1996.
-------------------
[SEAL]
<PAGE> 54
EXHIBIT E
The undersigned, , hereby certifies that he or she
is the duly elected and acting of The Sessions Group, an Ohio business
trust (the "Fund"), further certifies that the following resolutions were
adopted by the Board of Trustees of the Fund at a meeting duly held on
, 199 , at which a quorum was at all times present and that such
resolutions have not been modified or rescinded and are in full force and
effect as of the date hereof.
RESOLVED, that the maintenance of the Fund's assets in each country listed
in Schedule I hereto be, and hereby is, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, that the maintenance of the Fund's assets with the foreign
branches of The Bank of New York (the "Bank") listed in Schedule I located in
the countries specified therein, and with the foreign sub-custodians and
depositories listed in Schedule I located in the countries specified therein be,
and hereby is, approved by the Board of Trustees as consistent with the best
interest of the Fund and its shareholders; and further
RESOLVED, that the Sub-Custodian Agreements presented to this meeting
between the Bank and each of the foreign sub-custodians and depositories listed
in Schedule I providing for the maintenance of the Fund's assets with the
applicable entity, be and hereby are, approved by the Board of Trustees as
consistent with the best interests of the Fund and its shareholders; and further
RESOLVED, thar the appropriate officers of the Fund are hereby authorized
to place assets of the Fund with the aforementioned foreign branches and foreign
sub-custodians and depositories as hereinabove provided; and further
RESOLVED, that the appropriate officers of the Fund, or any of them, are
authorized to do any and all other acts, in the name of the Fund and on its
behalf, as they, or any of them, may determine to be necessary or desirable and
proper in connection with or in furtherance of the foregoing resolutions.
IN WITNESS WHEREOF, I hereunto set my hand and the seal of The Sessions
Group, as of the day of , 1996.
-----------------
[SEAL]
<PAGE> 1
EXHIBIT (9)(x)
<PAGE> 2
MANAGEMENT AND ADMINISTRATION AGREEMENT
This Agreement is made this 9th day of July, 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, to Martindale Andres & Company, Inc. under
the Investment Advisory Agreement between Martindale Andres & Company, Inc. and
the Trust and to BISYS Fund Services, Inc. under the Fund Accounting Agreement
between BISYS Fund Services, Inc. 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
- 3 -
<PAGE> 5
where Administrator 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.
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 July 9,
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. Such review shall include the
review of acts of negligence, if any, by Administrator, and if such acts of
negligence are determined to be material by the Trustees, such acts shall be an
event of "cause" as used below. 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; upon 180 days' written notice by the
Trust after the initial term hereof but only in connection with the
reorganization of the Funds into another registered management investment
company; or for "cause" (as defined below) by the party alleging "cause," 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, acts of negligence by Administrator
determined by the Trustees to be material, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a
- 4 -
<PAGE> 6
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
recapitaliza- tion 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 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: October __, 1996
Schedule A to the
Management and Administration Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
dated July 9, 1996
Name of Fund Compensation* Date
The KeyPremier Annual rate of eleven July 9, 1996
Prime Money and one-half
Market Fund one-hundredths of
one percent (.115%)
of such Fund's average
daily net assets
The KeyPremier Annual rate of eleven July 9, 1996
Pennsylvania and one-half
Municipal Bond one-hundredths of
Fund one percent (.115%)
of such Fund's average
daily net assets
The KeyPremier Annual rate of eleven October __, 1996
Established and one-half
Growth Fund one-hundredths of
one percent (.115%)
of such Fund's average
daily net assets
The KeyPremier Annual rate of eleven October __, 1996
Intermediate and one-half
Term Income Fund one-hundredths of
one percent (.115%)
of such Fund's average
daily net assets
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc. By
General Partner -----------------------------------
Walter B. Grimm, President
By
--------------------------------
(name) (title)
- --------
*All fees are computed daily and paid periodically.
A-1
<PAGE> 1
EXHIBIT (9)(y)
<PAGE> 2
FUND ACCOUNTING AGREEMENT
This Agreement is made as of July 9, 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 The KeyPremier Prime Money Market Fund and The KeyPremier
Pennsylvania Municipal 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:
Section 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 above, BISYS shall
perform the following accounting services daily for each Fund:
<PAGE> 3
(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.
Section 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.
Section 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.
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, BISYS 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 BISYS
hereunder to the aggregate fees respecting such Fund otherwise payable to BISYS
hereunder, to Martindale Andres & Company, Inc. under the Investment Advisory
Agreement between Martindale Andres & Company, Inc. and the Trust and to BISYS
Fund Services Limited Partnership under the Management and Administration
Agreement between BISYS Fund Services Limited Partnership and the Trust. The
expense reimbursement obligation of BISYS is limited to the amount of its fees
hereunder for such fiscal year, provided, however, that notwithstanding the
foregoing, BISYS 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.
Section 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:
-4-
<PAGE> 6
(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 by the Trust's
Board of Trustees; and
(6) Any additional out-of-pocket expenses reasonably incurred by BISYS
in the performance of its duties and obligations under this
Agreement.
Section 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").
Section 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 9, 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'
reasonable 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. To the extent
-5-
<PAGE> 7
that BISYS may retain in its possession copies of any Trust documents or records
subsequent to such termination, which copies had not been requested by or on
behalf of the Trust in connection with the termination process described above,
for a reasonable fee, BISYS will provide the Trust with reasonable access to
such copies. The performance of BISYS under this Agreement shall be reviewed at
least annually by the Trust's Board of Trustees. Such review shall include the
review of acts of negligence, if any, by BISYS, and if such acts of negligence
are determined to be material by the Trustees, such acts shall be an event of
"cause" as used below. This Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties hereto; upon 180 days' written
notice by the Trust after the initial term hereof but only in connection with
the reorganization of the Funds into another registered management investment
company; or for "cause" (as defined below) by the party alleging "cause," 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, acts of negligence by BISYS as
determined by the Trustees to be material 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 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.
Section 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
-6-
<PAGE> 8
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.
Section 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.
Section 9. 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.
Section 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
-7-
<PAGE> 9
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.
Section 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.
Section 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; provided, however, that to the extent needed by
BISYS in the performance of its services or for its legal protection, BISYS may
retain copies of such files, records and documents at BISYS' own expense. 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.
Section 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, subject
to bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
Section 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.
-8-
<PAGE> 10
Section 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.
Section 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.
(d) Two copies of the Prospectus and Statement of Additional
Information for each Fund.
Section 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.
-9-
<PAGE> 11
Section 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.
Section 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.
Section 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 .
Section 21. Headings. Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
Section 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.
Section 23. Governing Law. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the
State of Ohio.
Section 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
-10-
<PAGE> 12
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)
-11-
<PAGE> 13
Dated: October __, 1996
SCHEDULE A
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
JULY 9, 1996
Name of Fund Compensation* Date
The KeyPremier Prime The greater of (i) the July 9, 1996
Money Market Fund annual rate of .03% of
and The KeyPremier such Fund's average
Pennsylvania daily net assets or (ii)
Municipal Bond Fund the applicable annual
minimum fee of $30,000
per fund ($35,000 for a
municipal or tax-exempt fund).
The KeyPremier The greater of (i) the October __, 1996
Established Equity annual rate of .03% of
Fund and The such Fund's average
KeyPremier daily net assets or (ii)
Intermediate Term the applicable annual
Income Fund minimum fee of $30,000
per fund ($35,000 for a
municipal or tax-exempt
fund).
THE SESSIONS GROUP
By
--------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By
--------------------------------------
(name) (title)
* All fees are computed daily and paid periodically.
<PAGE> 1
EXHIBIT (9)(z)
<PAGE> 2
TRANSFER AGENCY AGREEMENT
This Agreement is made as of July 9, 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:
Section 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.
Section 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.
Section 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 by the Trust's
Board of Trustees.
Section 4. EFFECTIVE DATE. This Agreement shall become effective as of
the date first written above (the "Effective Date").
Section 5. TERM. This Agreement shall continue in effect, unless
earlier terminated by either party hereto as provided hereunder, until July 9,
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. 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 fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' reasonable cash disbursements 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 termination which copies
had not been requested by or on behalf of the Trust in connection
- 3 -
<PAGE> 4
with the termination process described above, BISYS, for a reasonable fee, will
provide the Trust with reasonable access to such copies. The performance of
BISYS under this Agreement shall be reviewed at least annually by the Trust's
Board of Trustees. Such review shall include the review of acts of negligence,
if any, by BISYS, and if such acts of negligence are determined to be material
by the Trustees, such acts shall be an event of "cause" as used below. Further,
this Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto; upon 180 days' written notice by the Trust
after the initial term hereof but only in connection with the reorganization of
the Funds into another registered management investment company; or for "cause"
(as defined below) by the party alleging "cause," 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, acts of negligence by BISYS determined
by the Trustees to be material, 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.
Section 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.
Section 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, negligence or reckless disregard with respect to BISYS'
responsibilities and duties hereunder and BISYS shall in no event be liable to
the Trust
- 4 -
<PAGE> 5
or any Fund or any shareholder or beneficial owner of the Trust for any action
reasonably taken pursuant to such advice.
Section 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 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.
Section 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.
- 5 -
<PAGE> 6
Section 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 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.
Section 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 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 9 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.
Section 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.
Section 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
- 6 -
<PAGE> 7
and cease to retain BISYS' files, records and documents created and maintained
by BISYS pursuant to this Agreement; provided, however, that to the extent
needed by BISYS in the performance of its services or for its legal protection,
BISYS may retain copies of such files, records and documents at BISYS' own
expense. 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.
Section 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.
Section 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.
Section 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.
Section 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
- 7 -
<PAGE> 8
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.
Section 18. 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:
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.
- 8 -
<PAGE> 9
Section 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.
(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.
Section 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.
Section 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.
Section 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
- 9 -
<PAGE> 10
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 1933 Act and the 1940
Act has been declared or becomes effective.
Section 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 .
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.
Section 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.
Section 26. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the State of Ohio.
Section 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: October __, 1996
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
JULY 9, 1996
Name of Fund Date
The KeyPremier Prime Money Market Fund July 9, 1996
and The KeyPremier Pennsylvania Municipal
Bond Fund
The KeyPremier Established Growth Fund October __, 1996
and The KeyPremier Intermediate Term
Income Fund
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.
- 12 -
<PAGE> 13
4. Dealer/Load Processing (if applicable)
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
SCHEDULE C
Date: July 9, 1996
Fees
Transfer Agent:
Annual fees per fund:
Daily dividend fund base fee $ 25 per shareholder
Variable NAV fund fee $ 23 per shareholder
Annual Minimums per fund: $20,000
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
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
August 16, 1996
The Sessions Group
3435 Stelzer Road
Columbus, Ohio 43219
Subject: The Sessions Group -- Post-Effective Amendment No. 36
to Registration Statement on Form N-1A, File No.
33-21489, filed under the Securities Act of 1933, as
amended, and Amendment No. 38 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 The KeyPremier Established Growth Fund and The KeyPremier
Intermediate Term Income Fund, two 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)(A)
<PAGE> 2
AUDITORS' CONSENT
The Board of Trustees
The Sessions Group -- The Key Premier Funds:
We consent to the reference to our firm under the heading "Auditors" in the
Statement of Additional Information.
KPMG PEAT MARWICK LLP
Columbus, Ohio
August 15, 1996
<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" included 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
August 16, 1996
<PAGE> 1
EXHIBIT (19)(c)
<PAGE> 2
POWER OF ATTORNEY
-----------------
Nancy E. Converse, whose signature appears below, does hereby
constitute and appoint J. David Huber, Stephen G. Mintos and Walter B. Grimm,
each individually, her true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The Sessions
Group (the "Group") to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Group's
Registration Statement on Form N-1A pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as trustee
and/or officer of the Group such Registration Statement and any and all such
amendments filed with the Securities and Exchange Commission under any Acts and
any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Dated: August 15, 1996 /s/ Nancy E. Converse
---------------------------------------
Nancy E. Converse
