<PAGE> 1
As filed with the Securities and Exchange Commission October 21, 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. 37 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [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)
[x] on October 31, 1996, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 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.
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 28, 1996, the Registrant filed its
Rule 24f-2 Notice with respect to the fiscal year ended June 30, 1996.
<PAGE> 2
CROSS REFERENCE SHEET
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
Six Funds
of
The Sessions Group
<TABLE>
<CAPTION>
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
<S> <C> <C>
1. Cover page.................. Cover Page
2. Synopsis.................... Fee Table
3. Condensed Financial
Information............... Financial Highlights; Performance
Information
4. General Description of
Registrant................ Investment Objectives and Policies;
Investment Restrictions; General
Information - Description of the Group
and Its Shares
5. Management of the Fund...... Management of the Group; General
Information - Custodian; General
Information - Transfer Agent
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 - Distribution Plan
8. Redemption or Repurchase.... How to Purchase and Redeem Shares
9. Pending Legal Proceedings... Inapplicable
</TABLE>
<PAGE> 3
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
3435 Stelzer Road For current yield, purchase, and
Columbus, Ohio 43219 redemption information, call
(800) 874-8376.
The Sessions Group (the "Group") is an open-end management investment
company. The Group includes the Riverside Capital Money Market Fund (the "Money
Market Fund"), the Riverside Capital Value Equity Fund (the "Value Fund"), the
Riverside Capital Fixed Income Fund (the "Fixed Income Fund"), the Riverside
Capital Low Duration Government Securities Fund (the "Government Securities
Fund") and the Riverside Capital Growth Fund (the "Growth Fund"), each of which
is a diversified investment fund of the Group, and the Riverside Capital
Tennessee Municipal Obligations Fund (the "Tennessee Fund"), which is a
non-diversified investment fund of the Group (the Money Market, Value, Fixed
Income, Tennessee, Government Securities, and Growth 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").
National Bank of Commerce, Memphis, Tennessee (the "Adviser"), which is a
wholly owned subsidiary of National Commerce Bancorporation ("NCB"), 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, NCB OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY, AND AN INVESTMENT IN A FUND
INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
IN ADDITION, AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THE MONEY MARKET FUND SEEKS TO MAINTAIN A
CONSTANT NET ASSET VALUE OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT
NET ASSET VALUE WILL NOT VARY.
Additional information about the Funds, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the Funds
at their address or by calling the Funds at the telephone number shown above.
The Statement of Additional Information bears the same date as this Prospectus
and is incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing. Investors should read this
Prospectus and retain it for future reference.
(Continued on next page)
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
The date of this Prospectus is October 31, 1996.
<PAGE> 4
(Continued from previous page)
The MONEY MARKET FUND seeks current income with liquidity and stability of
principal. The Money Market Fund invests in high-quality money market
instruments and other instruments of high quality. All securities or instruments
in which the Money Market Fund invests have remaining maturities of 397 days or
less, although instruments subject to repurchase agreements may bear longer
maturities.
The VALUE FUND seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stock. The Value Fund will invest in securities of companies believed by the
Adviser to exhibit strong financial characteristics and to be selling below
their long-term intrinsic value.
The FIXED INCOME FUND seeks current income and preservation of capital
through investment in high grade fixed income securities.
The TENNESSEE FUND seeks (1) income which is exempt from federal income tax
and Tennessee state income tax, although such income may be subject to the
federal alternative minimum tax when received by certain Shareholders, and (2)
preservation of capital. The Tennessee Fund will invest, under normal market
conditions, at least 80% of its net assets in Exempt Securities (as defined
below).
The GOVERNMENT SECURITIES FUND seeks current income consistent with
preservation of capital. The Government Securities Fund will invest primarily in
obligations issued or guaranteed by the U.S. Government and its agencies and
instrumentalities, and, under normal market conditions, will maintain an average
portfolio duration of approximately one to four years and a dollar-weighted
average portfolio maturity of approximately two to six years.
The GROWTH FUND seeks growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into common
stock. The Growth Fund will invest in securities of companies believed by its
investment adviser to have an attractive outlook for growth in earnings.
Each of the Value Fund's, the Growth Fund's, the Fixed Income Fund's, the
Tennessee Fund's, and the Government Securities 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 Ohio, Inc., Columbus, Ohio, an affiliate of BISYS, acts as
the Funds' transfer agent (the "Transfer Agent") and performs certain fund
accounting services for each of the Funds.
2
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................................................................... 4
Fee Table............................................................................. 6
Financial Highlights.................................................................. 8
Performance Information............................................................... 12
Investment Objectives and Policies.................................................... 13
Investment Restrictions............................................................... 25
Valuation of Shares................................................................... 27
How to Purchase and Redeem Shares..................................................... 28
Dividends and Taxes................................................................... 35
Management of the Group............................................................... 37
General Information................................................................... 41
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS
OR THEIR DISTRIBUTOR BISYS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
ANY FUND OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.
3
<PAGE> 6
PROSPECTUS SUMMARY
Shares Offered............... Units of beneficial interest ("Shares") of the
Money Market Fund, the Value Fund, the Fixed
Income Fund, the Tennessee Fund, the Government
Securities Fund and the Growth Fund, six
separate investment funds (collectively, the
"Funds") of The Sessions Group, an Ohio business
trust (the "Group").
Offering Price............... The public offering price of the Money Market
Fund is equal to the net asset value per share
which such Fund will seek to maintain at $1.00
per Share.
The public offering price of each of the other
Funds is equal to the net asset value per share
plus a sales charge ranging from 4.5% to 2%
(depending upon the Fund) of the public offering
price, reduced on investments of $100,000
($250,000 for the Government Securities Fund) 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 $50
minimum subsequent investments. Such minimum
initial investment is reduced to $100 for
investors using the Auto Invest Plan described
herein, such minimum subsequent investment may
be waived if purchases are made in connection
with an IRA, and both minimums may be waived if
purchases are made pursuant to a payroll
deduction plan.
Type of Company.............. Each Fund is a series of an open-end, management
investment company. The Money Market Fund, the
Value Fund, the Fixed Income Fund, the
Government Securities Fund and the Growth Fund
are each a diversified Fund. The Tennessee Fund
is a non-diversified Fund.
Investment Objectives........ For the MONEY MARKET FUND, current income with
liquidity and stability of principal.
For the VALUE FUND, growth of capital by
investing primarily in a diversified portfolio
of common stocks and securities convertible into
common stocks.
For the FIXED INCOME FUND, current income and
preservation of capital through investment in
high grade fixed income securities.
For the TENNESSEE FUND, (1) income which is
exempt from federal income tax and Tennessee
state income tax, although such income may be
subject to the federal alternative minimum tax
when received by certain Shareholders, and (2)
preservation of capital.
For the GOVERNMENT SECURITIES FUND, current
income consistent with preservation of capital.
For the GROWTH FUND, growth of capital by
investing primarily in a diversified portfolio
of common stocks and securities convertible into
common stock.
Investment Policies.......... The MONEY MARKET FUND invests in high-quality
money market instruments and other instruments
of high quality. All securities or instruments
in which the Money Market Fund invests have
remain-
4
<PAGE> 7
ing maturities of 397 days (13 months) or less,
although instruments subject to repurchase
agreements may bear longer maturities.
Under normal market conditions, the VALUE FUND
will invest at least 80% of its total assets in
common stocks, and securities convertible into
common stocks, of companies believed by the
Adviser to exhibit strong financial
characteristics and to be selling below their
long-term intrinsic value.
Under normal market conditions, the FIXED INCOME
FUND will invest at least 80% of its total
assets in debt securities of all types.
Under normal market conditions, the TENNESSEE
FUND will invest at least 80% of its net assets
in municipal securities issued by or on behalf
of the State of Tennessee or any county,
political subdivision or municipality thereof,
including any agency, board, authority or
commission of any of the foregoing, and debt
obligations issued by the Government of Puerto
Rico, which generate interest income which is
exempt from federal and Tennessee state income
taxes (but may be treated as a preference item
of certain Shareholders for purposes of the
federal alternative minimum tax).
Under normal market conditions, the GOVERNMENT
SECURITIES FUND will invest at least 65% of its
net assets in obligations issued or guaranteed
by the U.S. Government, its agencies or
instrumentalities, and will maintain an average
portfolio duration of approximately one to four
years and a dollar-weighted average portfolio
maturity of approximately two to six years.
Under normal market conditions, the GROWTH FUND
will invest at least 65% of its total assets in
common stocks, and securities convertible into
common stocks, of companies believed by the
Adviser to have an attractive outlook for growth
in earnings.
Risk Factors and
Special Considerations..... An investment in any of the Funds is subject to
certain risks, as set forth in detail under
"INVESTMENT OBJECTIVES AND POLICIES -- Risk
Factors and Investment Techniques." As with
other mutual funds, there can be no assurance
that any of the Funds will achieve its
investment objectives. The Funds, to the extent
set forth under "INVESTMENT OBJECTIVES AND
POLICIES," may engage in one or more of the
following practices: the purchase of securities
from primarily one state, the use of repurchase
agreements and reverse repurchase agreements,
entering into options transactions on securities
in which the Funds may invest, the lending of
portfolio securities and the purchase of
securities on a when-issued or delayed-delivery
basis.
Investment Adviser........... National Bank of Commerce (the "Adviser").
Dividends.................... For the Money Market Fund, dividends from net
income are declared daily and generally paid
monthly. For each of the other Funds, dividends
from net income are declared and generally paid
monthly. Net realized capital gains are
distributed at least annually.
Distributor.................. BISYS Fund Services Limited Partnership d/b/a
BISYS Fund Services ("BISYS").
5
<PAGE> 8
FEE TABLE
<TABLE>
<CAPTION>
MONEY MARKET VALUE FIXED INCOME
FUND FUND FUND
------------ ----- ------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................ 0% 4.50% 3.00%
Maximum Sales Load Imposed on Reinvested Dividends (as a
percentage of offering price).............................. 0% 0% 0%
Deferred Sales Load (as a percentage of original purchase
price or redemption proceeds, as applicable)............... 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if
applicable)................................................ 0% 0% 0%
Exchange Fee................................................ $ 0 $ 0 $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees............................................. .35% .92% .65%
12b-1 Fees After Voluntary Fee Reduction (1)................ .13 .12 .06
Other Expenses After Voluntary Fee Reduction(1)(2).......... .51 .54 .77
--- ----- -----
Total Fund Operating Expenses After Voluntary Fee
Reduction.................................................. .99% 1.58% 1.48%
=========== ==== ==========
</TABLE>
<TABLE>
<CAPTION>
GOVERNMENT
TENNESSEE SECURITIES GROWTH
FUND FUND FUND
--------- ---------- ------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................... 3.00% 2.00% 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................... 0% 0% 0%
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, as applicable)........................ 0% 0% 0%
Redemption Fees (as a percentage of amount redeemed, if
applicable)................................................... 0% 0% 0%
Exchange Fee................................................... $ 0 $ 0 $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (3)............................................ .05% .25% .35%
12b-1 Fees After Voluntary Fee Reduction (1)................... .17 .07 .10
Other Expenses After Voluntary Fee Reduction(1)(2)............. .76 1.12 .69
--------- ----- ------
Total Fund Operating Expenses After Voluntary Fee Reduction.... .98% 1.44% 1.14%
======= ======== =====
</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 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market Fund.................................. $ 10 $32 $ 55 $121
Value Fund......................................... $ 60 $93 $ 127 $224
Fixed Income Fund.................................. $ 45 $75 $ 108 $202
Tennessee Fund..................................... $ 40 $60 $ 83 $147
Government Securities Fund......................... $ 34 $65 $ 97 $189
Growth Fund........................................ $ 56 $80 $ 105 $177
</TABLE>
6
<PAGE> 9
The purpose of the above table is to assist a potential purchaser of Shares
of any of the Funds in understanding the various costs and expenses that an
investor in a Fund will bear directly or indirectly. Such expenses do not
include any fees charged by the Adviser or any of its affiliates to its customer
accounts which may have invested in Shares of the Funds. See "MANAGEMENT OF THE
GROUP" and "GENERAL INFORMATION" for a more complete discussion of the
Shareholder transaction expenses and annual operating expenses of each Fund. As
a result of the payment of sales loads, as applicable, and Rule 12b-1 Fees,
long-term Shareholders may pay more than the maximum front-end sales charge
permitted by the Rules of the National Association of Securities Dealers, Inc.
(the "NASD"). The expense information above reflects current fees. For
information on fees and expenses for the fiscal year ended June 30, 1996, please
see the Funds' annual report or the financial information contained in the
Funds' Statement of Additional Information. THE FOREGOING EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
- ------------------------------
(1) BISYS has agreed with the Group to reduce voluntarily the amount of its
12b-1 fees until on or about October 31, 1997, to the extent necessary to
cause (a) the total of Rule 12b-1 fees and administrative servicing fees to
not exceed .29% of each Fund's respective net assets and (b) the
administration fees for each of the Growth Fund and the Government
Securities Fund not to exceed .15% of such Funds' respective net assets.
Absent such voluntary fee reductions, Rule 12b-1 fees and administrative
services fees would each be .25% for each of the Funds and administration
fees for the Growth Fund and the Government Securities Fund would be .20%.
Absent such voluntary fee reductions and the voluntary advisory fee
reductions described in Note 3 below, Total Fund Operating Expenses would
have been 1.20% for the Money Market Fund, 1.79% for the Value Fund, 1.69%
for the Fixed Income Fund, 1.83% for the Tennessee Fund, 2.20% for the
Government Securities Fund and 1.97% for the Growth Fund.
(2) "Other Expenses" include administration fees and administrative servicing
fees.
(3) The Adviser has agreed with the Group to reduce voluntarily the amount of
its investment advisory fee with respect to the Tennessee Fund, the
Government Securities Fund and the Growth Fund until on or about October 31,
1997. Absent such voluntary fee reductions, Management Fees for the
Tennessee Fund, the Government Securities Fund and the Growth Fund would be
.65%, .50% and 1.00%, respectively.
7
<PAGE> 10
FINANCIAL HIGHLIGHTS
Each Fund is a separate fund of the Group. The table below sets forth
certain information concerning the investment results of each Fund since its
inception. Further financial information is included in the Statement of
Additional Information. The Financial Highlights contained in the following
tables have been audited by KPMG Peat Marwick LLP, independent certified public
accountants for the Group, whose report on the five fiscal years ended June 30,
1996, 1995, 1994, 1993 and 1992, or such shorter period as the Funds may have
been in existence, is included in the Statement of Additional Information and
which may be obtained by Shareholders.
<TABLE>
<CAPTION>
THE MONEY MARKET FUND
-----------------------------------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR YEAR JULY 25,
ENDED ENDED ENDED ENDED ENDED ENDED ENDED 1988 TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1994 1993 1992 1991 1990 1989(A)
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of
period............ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
Income from
investment
operations:
Net investment
income.......... 0.046 0.044 0.026 0.032 0.051 0.071 0.081 0.077
Net gains or
losses on
securities
(both realized
and
unrealized)..... -- (0.004) -- -- 0.003 -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations........ 0.046 0.040 0.026 0.032 0.054 0.071 0.081 0.077
--------- --------- --------- --------- --------- --------- --------- ---------
Less Distributions:
Dividends (from
net investment
income)......... (0.046) (0.044) (0.026) (0.032) (0.051) (0.071) (0.081) (0.077)
Distributions
(from capital
gains).......... -- -- -- -- (0.003) -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Total
Distributions... (0.046) (0.044) (0.026) (0.032) (0.054) (0.071) (0.081) (0.077)
--------- --------- --------- --------- --------- --------- --------- ---------
Capital
Transactions...... -- 0.004 -- -- -- -- -- --
Net asset value,
End of period..... $ 1,000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======= ======= =======
Total Return....... 4.75%+ 4.44%+ 2.65% 3.20% 5.61% 7.29% 8.41% 7.97%(b)
ANNUALIZED
RATIOS/SUPPLEMENTAL
DATA:
Net assets, End
of period (000
omitted)........ $134,146 $157,904 $128,001 $141,840 $162,361 $165,242 $103,809 $85,441
Ratio of expenses
to average net
asset........... 0.99% 0.97% 0.95% 0.85% 0.66% 0.63% 0.59% 0.83%(c)
Ratio of net
investment
income to
average net
assets.......... 4.65% 4.41% 2.62% 3.17% 5.12% 6.95% 8.09% 8.24%(c)
Ratio of expenses
to average net
assets*......... 1.20% 1.18% 1.09% 0.94% 0.91% 0.68% 0.76% 1.05%(c)
Ratio of net
investment
income to
average net
assets*......... 4.44% 4.20% 2.48% 3.08% 4.87% 6.90% 7.92% 8.02%(c)
</TABLE>
- ---------------
+ The capital contribution had no impact on the total return for the years ended
June 30, 1995 and June 30, 1996.
8
<PAGE> 11
<TABLE>
<CAPTION>
THE VALUE FUND
----------------------------------------------------------------------------------
OCTOBER 31, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 JUNE 30, 1992 (A)
-------------- -------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period................... $ 12.63 $12.67 $11.57 $11.04 $10.00
Income from investment operations:
Net investment income................ 0.14 0.14 0.07 0.21 0.17
Net gains or losses on securities
(both realized and unrealized)...... 2.40 0.76 1.28 0.96 1.03
-------- ------ ------ ------ ------
Total from investment operations..... 2.54 0.90 1.35 1.17 1.20
-------- ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)............................. (0.14) (0.13) (0.05) (0.22) (0.16)
Distributions (from capital gains)... (0.49) (0.15) (0.19) (0.42) --
In excess of net realized gains...... -- (0.66) -- -- --
-------- ------ ------ ------ ------
Total Distribution................... (0.63) (0.94) (0.25) (0.64) (0.16)
-------- ------ ------ ------ ------
Net asset value,
End of period......................... $ 14.54 $12.63 $12.67 $11.57 $11.04
======== ====== ====== ====== ======
Total Return (excludes sales
charges).............................. 20.50% 8.03% 11.75% 10.94% 12.04%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets, End of period (000
omitted)............................ $81,055 $80,264 $79,232 $52,629 $25,461
Ratio of expenses to average net
assets.............................. 1.58% 1.58% 1.36% 0.73% 0.67%(c)
Ratio of net investment income to
average net assets.................. 1.01% 1.13% 0.52% 1.84% 2.43%(c)
Ratio of expenses to average net
assets*............................. 1.79% 1.79% 1.74% 1.69% 1.95%(c)
Ratio of net investment income to
average net assets*................. 0.80% 0.92% 0.14% 0.88% 1.15%(c)
Portfolio turnover................... 27.89% 35.64% 62.17% 16.13% 23.07%
Average commission rate paid(d)...... $0.0605 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
THE FIXED INCOME FUND
----------------------------------------------------------------------------------
OCTOBER 31, 1991
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 JUNE 30, 1992 (A)
-------------- -------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
Beginning of period................... $ 9.27 $ 9.43 $10.44 $10.26 $10.00
Income from investment operations:
Net investment income................ 0.59 0.58 0.57 0.68 0.42
Net gains or losses on securities
(both realized and unrealized)...... (0.48) (0.15) (0.76) 0.27 0.22
------ ------ ------ ----- -----
Total from investment operation...... 0.11 0.43 (0.19) 0.95 0.64
------ ------ ------ ----- -----
Less Distributions:
Dividends (from net investment
income)............................. (0.58) (0.58) (0.57) (0.69) (0.38)
Distributions (from capital gains)... -- -- -- (0.08) --
In excess of net realized gains...... (0.03) -- (0.25) -- --
In excess of net investment income... -- (0.01) -- -- --
------ ------ ------ ----- -----
Total Distributions.................. (0.61) (0.59) (0.82) (0.77) (0.38)
------ ------ ------ ----- -----
Net asset value,
End of period......................... $ 8.77 $ 9.27 $ 9.43 $10.44 $10.26
====== ====== ====== ====== ======
Total Return (excludes sales
charges)............................. 1.05% 4.82% (2.20)% 9.64% 6.56%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000
omitted)............................ $28,847 $39,496 $42,309 $35,951 $27,256
Ratio of expenses to average net
assets.............................. 1.48% 1.43% 1.37% 0.74% 0.69%(c)
Ratio of net investment income to
average net assets.................. 6.32% 6.33% 5.61% 6.65% 6.51%(c)
Ratio of expenses to average net
assets*............................. 1.69% 1.64% 1.70% 1.42% 1.63%(c)
Ratio of net investment income to
average net assets*................. 6.11% 6.12% 5.28% 5.97% 5.58%(c)
Portfolio turnover................... 363.84% 223.29% 328.44% 234.71% 40.85%
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
THE TENNESSEE FUND
----------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 4, 1992
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 TO JUNE 30, 1993(A)
------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C>
Net asset value, Beginning of
period.............................. $ 9.84 $ 9.81 $ 10.44 $ 10.00
Income from investment operations:
Net investment income.............. 0.53 0.50 0.48 0.30
Net gains or losses on securities
(both realized and unrealized).... (0.08) 0.03 (0.57) 0.43
------- ------- ------- ------
Total from investment operations..... (0.45) 0.53 (0.09) 0.73
------- ------- ------- ------
Less Distributions:
Dividends (from net investment
income)......................... (0.53) (0.50) (0.48) (0.29)
Distributions (from capital
gains).......................... -- -- -- --
In excess of net realized gains.... -- -- (0.06) --
------- ------- ------- ------
Total Distributions.................. (0.53) (0.50) (0.54) (0.29)
------- ------- ------- ------
Net asset value, End of period....... $ 9.76 $ 9.84 $ 9.81 $ 10.44
======= ======= ======= =======
Total Return (excludes sales
charges)........................... 4.67% 5.61% (1.00)% 7.39%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000
omitted).......................... $19,037 $20,827 $19,965 $17,425
Ratio of expenses to average net
assets............................ 0.98% 1.12% 1.19% 0.82%(c)
Ratio of net investment income to
average net assets................ 5.40% 5.24% 4.67% 4.76%(c)
Ratio of expenses to average net
assets*........................... 1.83% 1.98% 1.99% 1.62%(c)
Ratio of net investment income to
average net assets*............... 4.55% 4.38% 3.87% 3.96%(c)
Portfolio turnover................. 60.76% 62.59% 86.57% 52.52%
</TABLE>
<TABLE>
<CAPTION>
THE GOVERNMENT SECURITIES FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED APRIL 18, 1994
JUNE 30, 1996 JUNE 30, 1995 TO JUNE 30, 1994(A)
------------- ------------- -------------------
<S> <C> <C> <C>
Net asset value, Beginning of period............. $ 10.15 $ 9.93 $ 10.00
Income from investment operations:
Net investment income.......................... 0.53 0.56 0.07
Net gains on losses on securities (both
realized and unrealized)...................... (0.20) 0.21 (0.08)
------- ------- ------
Total from investment operations................. 0.33 0.77 (0.01)
------- ------- ------
Less Distributions:
Dividends (from net investment income)......... (0.53) (0.55) (0.06)
Distributions (from capital gains)............. -- -- --
------- ------- ------
Total Distributions.............................. (0.53) (0.55) (0.06)
------- ------- ------
Net asset value, End of period................... $ 9.95 $ 10.15 $ 9.93
======= ======= =======
Total Return (excludes sales charges)............ 3.31% 8.03% (0.13)%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted)........ $ 7,461 $ 7,653 $ 7,692
Ratios of expenses to average net assets....... 1.44% 1.33% 2.85%(c)
Ratio of net investment income to average net
assets...................................... 5.19% 5.67% 3.63%(c)
Ratio of expenses to average net assets*....... 2.20% 2.10% 3.67%(c)
Ratio of net investment income to average net
assets*..................................... 4.43% 4.89% 2.81%(c)
Portfolio turnover............................. 20.87% 34.47% 21.20%
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
THE GROWTH FUND
-----------------------------------------------------
YEAR ENDED YEAR ENDED APRIL 18, 1994
JUNE 30, 1996 JUNE 30, 1995 TO JUNE 30, 1994(A)
------------- ------------- -------------------
<S> <C> <C> <C>
Net asset value, Beginning of Period............. $ 12.14 $ 9.82 $ 10.00
Income from investment operations:
Net investment income.......................... 0.18 0.16 --
Net gains on losses on securities (both
realized and unrealized)...................... 2.13 2.30 (0.18)
------- ------- -------
Total from investment operations................. 2.31 2.46 (0.18)
------- ------- -------
Less Distributions:
Dividends (from net investment income)......... (0.18) (0.14) --
In excess of net investment income............. (0.01) -- --
Distributions (from capital gains)............. (0.25) -- --
------- ------- -------
Total Distributions.............................. (0.44) (0.14) --
------- ------- -------
Net asset value, End of period................... $ 14.01 $ 12.14 $ 9.82
======= ======= =======
Total Return (excludes sales charges)............ 19.35% 25.27% (1.80)%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted)........ $33.767 $21,485 $6,345
Ratios of expenses to average net assets....... 1.05% 1.24% 2.59%(c)
Ratio of net investment income to average net
assets...................................... 1.37% 1.64% 0.25%(c)
Ratio of expenses to average net assets*....... 1.97% 2.51% 3.90%(c)
Ratio of net investment income to average net
assets*..................................... 0.45% 0.37% (1.07)%(c)
Portfolio turnover............................. 31.22% 29.36% 0.00%
Average commissions rate paid(d)............... $0.0686 -- --
</TABLE>
- ------------------------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
11
<PAGE> 14
PERFORMANCE INFORMATION
From time to time performance information for the Funds showing the Funds'
average annual total return, yield, taxable equivalent yield, seven-day yield
and/or seven-day effective yield may be presented in advertisements, sales
literature and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average
annual total return will be calculated for the period since commencement of
operations for a Fund and will reflect the imposition of the maximum sales
charge, if any. Average annual total return is measured by comparing the value
of an investment in such Fund at the beginning of the relevant period to the
redeemable value of the investment at the end of the period (assuming immediate
reinvestment of any dividends or capital gains distributions), which figure is
then annualized. 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. Taxable equivalent yield of a Fund demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to the yield of that Fund.
Each of the Funds may also present its average annual total return, aggregate
total return, yield and taxable equivalent yield, as the case may be, excluding
the effect of a sales charge, if any.
The seven-day yield of the Money Market Fund refers to the income generated
by an investment therein over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The Money Market Fund may also present a 30-day yield which is calculated
similarly but instead refers to a 30-day period rather than a seven-day period.
The seven-day effective yield is calculated similarly but, when annualized, the
income earned by an investment in the Money Market Fund is assumed to be
reinvested. The seven-day effective yield is slightly higher than the seven-day
yield because of the compounding effect of this assumed reinvestment.
In addition, from time to time, the Funds may present their distribution
rates in supplemental sales literature and in shareholder reports, both of which
must be accompanied or preceded by a prospectus. Distribution rates will be
computed by dividing the distribution per share made by a Fund over a
twelve-month period by the maximum offering price per share at the end of that
period. The calculation of income in the distribution rate includes both income
and capital gain dividends and does not reflect unrealized gains or losses,
although each Fund may also present a distribution rate excluding the effect of
capital gains and/or a sales charge, if any. The distribution rate differs from
the yield, because it includes capital gain dividends which are often
non-recurring in nature, whereas yield does not include such items.
Investors may also judge the performance of each Fund by comparing or
referencing it to the performance of other mutual funds with comparable
investment objectives and policies through various mutual fund or market indices
and to data prepared by various services, which indices or data may be published
by such services or by other services or publications. In addition to
performance information, general information about these Funds that appears in
such publications may be included in advertisements, sales literature and
reports to Shareholders.
Yield and total return are generally functions of market conditions,
interest rates, types of investments held, and operating expenses. Consequently,
current yields and total return will fluctuate and are not necessarily
representative of future results. Any fees charged by NCB or by any of its
affiliated or correspondent banks, including the Adviser, to its customer
accounts which may have invested in Shares of a Fund will not be included in
performance calculations; such fees, if charged, will reduce the actual
performance from that quoted. In addition, if the Adviser or BISYS voluntarily
reduces all or part of its fees for a Fund, as discussed below, the yield and
total return for that Fund will be higher than they would otherwise be in the
absence of such voluntary fee reductions.
Further information about the performance of the Funds is contained in the
Funds' Annual Report to Shareholders which may be obtained without charge by
contacting the Group at (800) 874-8376.
12
<PAGE> 15
INVESTMENT OBJECTIVES AND POLICIES
IN GENERAL
The investment objective of the Money Market Fund is to seek current income
with liquidity and stability of principal. The investment objective of the Value
Fund is to seek growth of capital by investing primarily in a diversified
portfolio of common stocks and securities convertible into common stocks. The
investment objective of the Fixed Income Fund is to seek current income as well
as preservation of capital by investing in high grade fixed income securities.
The investment objectives of the Tennessee Fund are to seek (1) income which is
exempt from federal income tax and Tennessee state income tax, although such
income may be subject to the federal alternative minimum tax when received by
certain Shareholders, and (2) preservation of capital. The investment objective
of the Government Securities Fund is to seek current income consistent with
preservation of capital. The investment objective of the Growth Fund is to seek
growth of capital by investing primarily in a diversified portfolio of common
stocks and securities convertible into common stocks.
The investment objectives with respect to a Fund are fundamental policies
and as such may not be changed without a vote of the holders of a majority of
the outstanding Shares of that Fund (as defined below under "GENERAL
INFORMATION -- Miscellaneous"). There can be no assurance that the investment
objectives of any Fund will be achieved.
THE MONEY MARKET FUND
As a money market fund, the Money Market Fund invests exclusively in United
States dollar-denominated instruments which the Trustees of the Group and the
Adviser determine present minimal credit risks and which at the time of
acquisition are rated by one or more appropriate nationally recognized
statistical rating organizations ("NRSROs") (e.g., Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations or, if unrated, are of comparable quality. The
Money Market Fund also diversifies its investments so that, with minor
exceptions and except for United States Government securities, not more than
five percent of its total assets is invested in the securities of any one
issuer, not more than five percent of its total assets is invested in securities
of issuers rated by the NRSRO at the time of investment in the second highest
rating category for short-term debt obligations or, if unrated, deemed by the
Adviser to be of comparable quality ("Second Tier Securities") and not more than
the greater of one percent of total assets or one million dollars is invested in
the securities of one issuer that are Second Tier Securities. All securities or
instruments in which the Money Market Fund invests have remaining maturities of
397 calendar days or less. The dollar-weighted average maturity of the
securities in the Money Market Fund will not exceed 90 days.
Subject to the foregoing general limitations, the Money Market Fund expects
to invest in the following types of securities.
The Money Market Fund may invest in a variety of U.S. Treasury obligations,
differing in their interest rates, maturities, and times of issuance, and other
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (collectively, "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 Money Market
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 Money Market Fund may also invest in taxable State Securities, as defined
below under "The Government Securities Fund."
13
<PAGE> 16
The Money Market Fund may invest in bankers' acceptances guaranteed by
domestic and foreign banks if at the time of investment the guarantor bank has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements). The Money Market Fund
may also invest in certificates of deposit and time deposits of domestic and
foreign banks and savings and loan associations if (a) at the time of investment
the depositor institution has capital, surplus, and undivided profits in excess
of $100,000,000 (as of the date of their most recently published financial
statements) or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
The Money Market Fund may also invest in Eurodollar Certificates of Deposit
("ECDs") which are U.S. dollar denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States;
Eurodollar Time Deposits ("ETDs") which are U.S. dollar denominated deposits in
a foreign branch of a U.S. bank or a foreign bank; Canadian Time Deposits
("CTDs") which are essentially the same as ETDs except they are issued by
Canadian offices of major Canadian banks; and Yankee Certificates of Deposit
("Yankee CDs") which are certificates of deposit issued by U.S. branch of a
foreign bank denominated in U.S. dollars and held in the United States. Under
normal market conditions, the Money Market Fund will not invest more than 20% of
its total assets in such foreign securities (including CCP and Europaper as
defined below).
The Money Market Fund will not invest in excess of 10% of its total assets
in time deposits with maturities in excess of seven days which are subject to
penalties upon early withdrawal. Such time deposits include ETDs and CTDs but do
not include certificates of deposit.
The Money Market Fund may invest in short-term promissory notes issued by
corporations (including variable amount master demand notes) and in taxable
municipal obligations rated at the time of purchase by one or more appropriate
NRSROs in one of the two highest rating categories for short-term debt
obligations or, if not rated, found by the Adviser to be of comparable quality
to instruments that are so rated. Instruments may be purchased in reliance upon
a rating only when the rating organization is not affiliated with the issuer or
guarantor of the instrument. For a description of the rating symbols of the
NRSROs, see the Appendix to the Statement of Additional Information. The Money
Market Fund may also invest in Canadian Commercial Paper ("CCP"), which is
commercial paper issued by a Canadian corporation or a Canadian subsidiary of a
U.S. corporation, and in Europaper, which is U.S. dollar denominated commercial
paper of a foreign issuer which, in each case, is rated at the time of purchase
by one or more appropriate NRSROs in one of the two highest rating categories
for short-term debt obligations or, if not rated, found by the Adviser to be of
comparable quality to instruments that are rated high quality.
The Money Market Fund may also invest in corporate debt securities with
remaining maturities of 397 days or less although at the time of issuance such
securities had maturities exceeding 397 days. The Money Market Fund may invest
in such securities so long as comparable securities of such issuer have been
rated in the highest rating category for short-term debt obligations by the
appropriate NRSROs or are otherwise deemed to be eligible for purchase by the
Money Market Fund in accordance with the guidelines adopted by the Group's Board
of Trustees.
Variable amount master demand notes in which the Money Market 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 Money Market Fund and the issuer, they are not normally
traded. Although there is no secondary market in the notes, the Money Market
Fund may demand payment of principal and accrued interest at any time. While the
notes are not typically rated by NRSROs, such variable amount master demand
notes must be determined by the Adviser to be of comparable quality to the
commercial paper in which the Fund may invest. 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. The period of time remaining until the principal
amount can be recovered under a variable master demand note shall not exceed
seven days.
14
<PAGE> 17
The Money Market Fund may also acquire variable and floating rate notes
issued by both governmental and nongovernmental issuers, subject to the Money
Market Fund's investment objective, policies and restrictions. A variable rate
note is one whose terms provide for the adjustment of its interest rate on set
dates and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. However, in the event the interest
rate of such a note is established by reference to an index or an interest rate
that may from time to time lag behind other market interest rates, there is the
risk that the market value of such note, on readjustment of its interest rate,
will not approximate its par value which could adversely affect the Money Market
Fund's ability to maintain a stable net asset value. In such an instance, the
Adviser will seek to sell such note to the extent it can do so in an orderly
fashion given current market conditions.
A floating rate note is one whose terms provide for the adjustment of its
interest rate whenever a specified interest rate changes and which, at any time,
can reasonably be expected to have a market value that approximates its par
value. Such notes are frequently not rated by credit rating agencies; however,
unrated variable and floating rate notes purchased by the Money Market Fund will
be determined by the Adviser under guidelines established by the Group's Board
of Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under the Money Market Fund's investment
policies. In making such determinations, the Adviser will consider the earning
power, cash flow and other liquidity ratios of the issuers of such notes (such
issuers include financial, merchandising, bank holding and other companies) and
will continuously monitor their financial condition. Although there may be no
active secondary market with respect to a particular variable or floating rate
note purchased by the Money Market Fund, the Money Market Fund may attempt to
resell the note at any time to a third party. The absence of an active secondary
market, however, could make it difficult for the Money Market Fund to dispose of
a variable or floating rate note in the event the issuer of the note defaulted
on its payment obligations and the Money Market Fund could, as a result or for
other reasons, suffer a loss to the extent of the default. Variable or floating
rate notes may be secured by bank letters of credit.
To the extent that the Money Market Fund holds a note for which the Money
Market Fund is not entitled to receive the principal amount within seven days of
demand and for which no readily available market exists, such a note will be
treated as an illiquid security for purposes of calculation of the 10%
limitation on illiquid securities as set forth below.
THE VALUE FUND
Under normal market conditions, the Value Fund will invest at least 80% of
its total assets in common stocks and securities convertible into common stocks
(i.e., convertible bonds, convertible preferred stock, warrants, options and
rights), traded in U.S. markets, including the New York Stock Exchange, the
American Stock Exchange and NASDAQ, and issued by companies believed by the
Adviser to exhibit strong financial characteristics and to be selling below
their long-term intrinsic value. The Value Fund may also invest up to 20% of its
total assets in preferred stocks, corporate bonds, notes, warrants, and
short-term obligations (with maturities of 12 months or less) such as commercial
paper (including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, Government Obligations (as
described above), and demand and time deposits of domestic and foreign banks and
savings and loan associations. The Value Fund may also invest in equity real
estate investment trusts ("REITs") and may hold securities of other investment
companies, including Shares of the Money Market Fund as described more fully
below under "Risk Factors and Investment Techniques -- Other Investment
Policies." During temporary defensive periods as determined by the Adviser, the
Value Fund may hold up to 100% of its total assets in short-term obligations
including domestic bank certificates of deposit, bankers' acceptances and
repurchase agreements secured by bank instruments. However, to the extent that
the Value Fund is so invested in debt obligations, the Fund may not achieve its
investment objective.
Subject to the foregoing limitations, the Value Fund will invest only in
corporate debt securities which are rated at the time of purchase within the
three highest rating groups assigned by one or more appropriate NRSROs or, if
unrated, which the Adviser deems to be of comparable quality. For a description
of the rating symbols of the NRSROs, see the Appendix to the Statement of
Additional Information.
15
<PAGE> 18
Equity securities such as those in which the Value Fund may invest are more
volatile and carry more risk than some other forms of investment, including
investments in high grade fixed income funds. Depending upon the performance of
the Value Fund's investments, the net asset value per share of the Value Fund
may decrease instead of increase.
Subject to the foregoing limitations, the Equity 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. The Value Fund may also invest in securities issued by
foreign branches of U.S. banks and foreign banks, in CCP, and in Europaper.
Investment in foreign securities is subject to special risks, as more fully
discussed below under "Risk Factors and Investment Techniques--Foreign
Investments."
THE FIXED INCOME FUND
Under normal market conditions, the Fixed Income Fund will invest at least
80% of its total assets in debt securities of all types, although up to 20% of
its total assets may be invested in preferred stocks and other investments. Debt
securities include bonds, debentures, notes, mortgage-related securities, state,
municipal or industrial revenue bonds, Government Obligations, taxable State
Securities (as defined below under "The Government Fund") and fixed-income
securities convertible into, or exchangeable for, common stocks. In addition, a
portion of the Fixed Income Fund may from time to time be invested in first
mortgage loans and participation certificates in pools of mortgages issued or
guaranteed by the U.S. Government or its agencies or instrumentalities and in
securities which are restricted as to their disposition, including those
eligible for resale under Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). Some of the securities in which the Fixed Income Fund invests may
have warrants or options attached.
Under normal market conditions, the Fixed Income Fund expects to invest
primarily in Government Obligations and in debt obligations of United States
corporations. The Fixed Income Fund also intends that, under normal market
conditions, its portfolio will maintain a dollar-weighted average maturity of
approximately seven years. However, the Fixed Income Fund may extend or shorten
the dollar-weighted average maturity of its portfolio depending upon anticipated
changes in interest rates or other relevant market factors.
The Fixed 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 as more fully described above under
"The Money Market Fund." The Fixed Income Fund will invest in the obligations of
such U.S. Government agencies or instrumentalities only when the Adviser
believes that the credit risk with respect thereto is minimal.
The Fixed Income Fund also expects to invest in bonds, notes and debentures
of a wide range of U.S. corporate issuers. Such obligations, in the case of
debentures, will represent unsecured promises to pay, in the case of notes and
bonds, may be secured by mortgages on real property or security interests in
personal property and will in most cases differ in their interest rates,
maturities and times of issuance.
The Fixed Income Fund will invest only in corporate debt securities which
are rated at the time of purchase within the three highest rating groups
assigned by one or more appropriate NRSROs or, if unrated, which the Adviser
deems to be of comparable quality. For a description of the rating symbols of
the NRSROs see the Appendix to the Statement of Additional Information.
The Fixed Income Fund may hold some short-term obligations (with maturities
of 12 months or less) such as domestic and foreign commercial paper (including
variable amount master demand notes), bankers' acceptances, certificates of
deposit and demand and time deposits of domestic and foreign branches of U.S.
banks and foreign banks, and repurchase agreements. The Fixed Income Fund may
also invest in securities of other investment companies, including other
investment companies advised by the Adviser, as described more fully below.
The Fixed 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
16
<PAGE> 19
abroad ("Eurodollar Bonds"), and in Canadian Bonds and bonds issued by
institutions organized for a specific purpose, such as the World Bank and the
European Economic Community, by two or more sovereign governments
("Supranational Agency Bonds").
The Fixed Income Fund may invest in mortgage-related securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
nongovernmental entities which are rated, at the time of purchase, within the
three highest bond rating categories assigned by one or more appropriate NRSROs,
or, if unrated, which the Adviser deems present attractive opportunities and are
of comparable quality. Such mortgage-related securities have mortgage
obligations backing such securities, including among others, conventional thirty
year fixed rate mortgage obligations, graduated payment mortgage obligations,
fifteen year mortgage obligations and adjustable rate mortgage obligations. All
of these mortgage obligations can be used to create pass-through securities. A
pass-through security is created when mortgage obligations are pooled together
and undivided interests in the pool or pools are sold. The cash flow from the
mortgage obligations is passed through to the holders of the securities in the
form of periodic payments of interest, principal and prepayments (net of a
service fee). Prepayments occur when the holder of an individual mortgage
obligation prepays the remaining principal before the mortgage obligation's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgage
obligations vary, it is not possible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayment
rates are important because of their effect on the yield and price of the
securities. In addition, prepayment rates will be used to determine a security's
estimated average life and a Fund's average portfolio duration and its dollar-
weighted average portfolio maturity. Accelerated prepayments have an adverse
impact on yields for pass-through securities purchased at a premium (i.e., a
price in excess of principal amount) and may involve additional risk of loss of
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 Fixed Income Fund may purchase mortgage-related
securities at a premium or a discount. Reinvestment of principal payments may
occur at higher or lower rates than the original yield on such securities. Due
to the prepayment feature and the need to reinvest payments and prepayments of
principal at current rates, mortgage-related securities can be less effective
than typical bonds of similar maturities at maintaining yields during periods of
declining interest rates.
Certain debt securities such as, but not limited to, mortgage-backed
securities, collateralized mortgage obligations (CMOs), asset backed securities
and securitized loan receivables, as well as securities subject to prepayment of
principal prior to the stated maturity date, are expected to be repaid prior to
their stated maturity dates. As a result, the effective maturity of these
securities is expected to be shorter than the stated maturity. For purposes of
compliance with stated maturity policies and calculation of the Fixed Income
Fund's dollar-weighted average maturity, the effective maturity of such
securities will be used. The Fixed Income Fund may invest up to 10% of its net
assets in CMOs. 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.
An increase in interest rates will generally reduce the value of the
investments in the Fixed Income Fund, and a decline in interest rates will
generally increase the value of those investments. Depending upon the prevailing
market conditions, the Adviser may purchase debt securities at a discount from
face value, which produces a yield greater than the coupon rate. Conversely, if
debt securities are purchased at a premium over face value, the yield will be
lower than the coupon rate. In making investment decisions, the Adviser will
consider many factors other than current yield, including the preservation of
capital, maturity, and yield to maturity.
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THE TENNESSEE FUND
Under normal market conditions, at least 80% of the net assets of the
Tennessee Fund will be invested in a portfolio of obligations consisting of
bonds, notes, commercial paper and certificates of indebtedness, issued by or on
behalf of the State of Tennessee, or any county, political subdivision or
municipality thereof (including any agency, board, authority or commission of
any of the foregoing), the interest on which, in the opinion of bond counsel to
the issuer, is exempt from federal income tax and Tennessee income tax (but may
be treated as a preference item for individuals for purposes of the federal
alternative minimum tax) ("Tennessee Exempt Securities") and in debt obligations
issued by the Government of Puerto Rico and such other governmental entities
whose debt obligations, either by law or treaty, generate interest income which
is exempt from federal and Tennessee state income taxes (but may be treated as a
preference item for certain Shareholders for purposes of the federal alternative
minimum tax) (together, with Tennessee Exempt Securities, called "Exempt
Securities"). In addition, under normal market conditions, at least 65% of the
Tennessee Fund's net assets will be invested in Tennessee Exempt Securities. As
a matter of fundamental policy, under normal market conditions, at least 80% of
the net assets of the Tennessee Fund will be invested in securities, the
interest on which is exempt from federal income tax, although such income may be
subject to the federal alternative minimum tax when received by certain
Shareholders.
The two principal classifications of Exempt Securities which may be held by
the Tennessee Fund are "general obligation" securities and "revenue" securities.
General obligation securities are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from proceeds of a special
excise tax or other specific revenue source such as the user of the facility
being financed. Private activity bonds held by the Tennessee Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
The Tennessee Fund may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
The Tennessee Fund invests in Exempt Securities which are rated at the time
of purchase within the three highest rating groups assigned by one or more
appropriate NRSROs for bonds, notes, tax-exempt commercial paper, or variable
rate demand obligations, as the case may be. The Tennessee Fund may also
purchase Exempt Securities which are unrated at the time of purchase but are
determined to be of comparable quality by the Adviser. The applicable Exempt
Securities ratings are described in the Appendix to the Statement of Additional
Information.
The Tennessee Fund may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of the Adviser,
suitable Exempt Securities are unavailable. There is no percentage limitation on
the amount of assets which may be held uninvested. Uninvested cash reserves will
not earn income.
Under normal market conditions, at least 80% of the net assets of the
Tennessee Fund will be invested in Exempt Securities. However, investments of
the Tennessee Fund may be made in taxable obligations if, for example, suitable
tax-exempt obligations are unavailable or if acquisition of U.S. Government or
other taxable securities is deemed appropriate for temporary defensive purposes
as determined by the Adviser to be warranted due to market conditions. Such
taxable obligations consist of Government Obligations, certificates of deposit
and bankers' acceptances of selected banks, securities which are restricted as
to disposition, including Rule 144A Securities, and commercial paper meeting the
Tennessee Fund's quality standards (as described above) for tax-exempt
commercial paper, and such taxable obligations which may be subject to
repurchase agreements. These obligations are described further in the Statement
of Additional Information. The Tennessee Fund may also invest up to 10% of its
total assets in money market mutual funds for purposes of short-term cash
management, including shares of the Money Market Fund, as discussed more fully
below under "Risk Factors and Investment Techniques -- Other Investment
Policies." Under such circumstances
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<PAGE> 21
and during the period of such investment, the Tennessee Fund may not achieve its
stated investment objectives.
Interest income from certain types of Exempt Securities may be subject to
federal alternative minimum tax. The Tennessee Fund will include securities
issued by or on behalf of the State of Tennessee, or any county, political
subdivision or municipality thereof, which are subject to federal alternative
minimum tax in the calculation of compliance with the 80% test described above
as a fundamental policy of the Tennessee Fund. Therefore, to the extent the
Tennessee Fund invests in these securities, individual shareholders, depending
on their own tax status, may be subject to alternative minimum tax on that part
of the Tennessee Fund's distributions derived from these bonds. For further
information relating to the types of municipal securities the interest on which
will be included in income subject to alternative minimum tax, see "ADDITIONAL
INFORMATION -- Additional Tax Information" in the Statement of Additional
Information.
Opinions relating to the validity of Exempt Securities and to the exemption
of interest thereon from federal and Tennessee state income taxes are normally
rendered by bond counsel to the respective issuers at the time of issuance.
Neither the Tennessee Fund nor the Adviser will review the proceedings relating
to the issuance of Exempt Securities or the basis for such opinions.
Exempt Securities purchased by the Tennessee Fund may include rated and
unrated variable and floating rate notes the interest on which is tax-exempt.
Such notes are more fully described above under "The Money Market Fund."
Variable and floating rate notes for which no readily available market exists
will be purchased in an amount which, together with other illiquid securities,
exceeds 15% of the Fund's net assets only if such notes are subject to a demand
feature that will permit the Tennessee Fund to receive payment of the principal
within seven days after demand by the Tennessee Fund.
An increase in interest rates will generally reduce the value of the
investments in the Tennessee Fund, and a decline in interest rates will
generally increase the value of those investments. Depending upon the prevailing
market conditions, the Adviser may purchase debt securities at a discount from
face value, which produces a yield greater than the coupon rate. Conversely, if
debt securities are purchased at a premium over face value, the yield will be
lower than the coupon rate. In making investment decisions, the Adviser will
consider many factors other than current yield, including the preservation of
capital, maturity, and yield to maturity.
The Tennessee Fund may use one or more of the investment techniques
described below. Use of such techniques may cause such Fund to earn income which
would be taxable to its Shareholders.
THE GOVERNMENT SECURITIES FUND
Under normal market conditions, the Government Securities Fund will invest
no less than 65% of its net assets in Government Obligations. The Government
Securities Fund may also invest, under normal market conditions, in the
obligations of States of the United States or their counties, political
subdivisions, municipalities, instrumentalities, agencies or authorities
(collectively "agencies") ("State Securities") and in the other fixed income
instruments described below, in securities of other investment companies and in
repurchase agreements. It may also engage in the options transactions and in
other investment techniques described below. Under current market conditions,
the Government Securities Fund expects to maintain an average portfolio duration
of approximately one to four years and a dollar-weighted average portfolio
maturity of approximately two to six years.
Duration is a measure of the average life of a fixed income security that
was developed as a more precise alternative to the concept of "term to maturity"
as a measure of "volatility" or "risk" associated with changes in interest
rates. Duration incorporates a security's yield, coupon interest payments, final
maturity and call features into one measure. Duration is computed by determining
the expected period of time until each scheduled payment or unscheduled
prepayment of principal or interest and averaging such time periods on a
weighted basis in accordance with the present value of such expected payments. A
reduction in the coupon interest rate would generally increase duration; an
increase in the coupon interest rate would generally reduce duration.
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The Government Securities Fund may, for daily cash management purposes,
invest in high quality money market securities, in securities of other
investment companies, and in repurchase agreements. Such money market securities
consist of commercial paper (including variable amount master demand notes),
bankers' acceptances, certificates of deposit, and demand and time deposits of
domestic and foreign banks and savings and loan associations. The Government
Securities Fund may also invest in securities of other investment companies,
including Shares of the Money Market Fund as described more fully below. The
Government Securities Fund may invest, without limit, in any combination of
Government Obligations, State Securities, money market securities and repurchase
agreements during temporary defensive periods as determined by the Adviser.
The types of Government Obligations invested in by the Government
Securities Fund are those Government Obligations, including mortgage related
securities issued by governmental issuers, in which the Fixed Income Fund may
invest as described above under "The Fixed Income Fund."
In addition, the Government Securities Fund may also purchase (1) U.S.
Treasury securities that have been stripped of their unmatured interest coupons
(which typically provide for interest payments semi-annually), (2) interest
coupons that have been stripped from such U.S. Treasury securities and (3)
receipts and certificates for such stripped debt obligations and stripped
coupons ("Stripped Treasury Securities"). 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.
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"), or (2) U.S. Treasury securities that are
stripped by investment banks and sold under proprietary names. Securities
stripped by investment banks may not be as liquid as STRIPS and CUBES and are
not viewed by the staff of the Commission as U.S. Government securities for
purposes of the Investment Company Act of 1940, as amended (the "1940 Act").
Also included among the Government Obligations that the Government
Securities Fund may purchase are CMOs and real estate mortgage investment
conduits ("REMICs"). CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the Government National Mortgage Association, the Federal Home
Loan Mortgage Corporation or the Federal National Mortgage Association, and
their income streams. Certain CMOs and REMICs are issued by private issuers.
Although they will not be treated as Government Obligations for purposes of the
65% policy stated above, they may be eligible for purchase by the Government
Securities Fund if (1) the issuer has obtained an exemptive order from the
Commission regarding purchases by investment companies of equity interests of
other investment companies or (2) such purchase is within the limitations
imposed by Section 12 of the 1940 Act.
The Government Securities Fund invests in State Securities which are rated
at the time of purchase within the three highest rating groups assigned by one
or more appropriate NRSROs for bonds, notes, commercial paper, or variable rate
demand obligations, as the case may be. The Government Securities Fund may also
purchase State Securities which are unrated at the time of purchase but are
determined to be of comparable quality by the Adviser. The applicable State
Securities ratings are described in the Appendix to the Statement of Additional
Information. The State Securities in which the Government Securities Fund will
invest may be "general obligation," "revenue" or "moral obligations" securities
as described above under "The Tennessee Fund" and are expected to be subject to
federal income tax.
Certain debt securities such as, but not limited to, mortgage related
securities and CMOs described above, as well as securities subject to prepayment
of principal prior to the stated maturity date, are expected to be repaid prior
to their stated maturity dates. As a result, the effective maturity of these
securities is expected to be shorter than the stated maturity. For purposes of
calculating the Government Securities Fund's dollar-weighted average portfolio
maturity, the effective maturity of such securities will be used.
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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 (i.e., convertible bonds, convertible
preferred stock, warrants, options and rights), traded in U.S. markets,
including the New York Stock Exchange, the American Stock Exchange and NASDAQ,
and issued by companies believed by the Adviser to exhibit an attractive outlook
for growth in earnings. The Growth Fund may also invest up to 35% of its total
assets in preferred stocks, corporate bonds, notes, warrants, and short-term
obligations (with maturities of 12 months or less) such as commercial paper
(including variable amount master demand notes), bankers' acceptances,
certificates of deposit, repurchase agreements, Government Obligations, and
demand and time deposits of domestic and foreign banks and savings and loan
associations. The Growth Fund may also invest in equity REITs and securities of
other investment companies, including Shares of the Money Market Fund, as
described more fully below. It may also engage in the options transactions and
in other investment techniques described below. During temporary defensive
periods as determined by the Adviser, the Growth Fund may hold up to 100% of its
total assets in such short-term obligations. However, to the extent that the
Growth Fund is so invested in debt obligations, such Fund may not achieve its
investment objective.
Subject to the foregoing limitations, the Growth Fund will invest only in
corporate debt securities which are rated at the time of purchase within the
three highest rating groups assigned by one or more 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.
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 funds. Depending upon the performance of
the Growth Fund's investments, the net asset value per share of the Growth Fund
may decrease instead of increase.
Subject to the foregoing limitations, 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. The Growth Fund may also invest in securities issued by
foreign branches of U.S. banks and foreign banks, in CCP and in Europaper.
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in any of the Funds entails
certain risks. Equity securities such as those in which the Value Fund and 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 Value and Growth Funds are each 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 Fixed Income Fund, the Government Securities Fund and the
Tennessee Fund each invest in bonds, investors in those Funds 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 and have caused the effective
maturity of securities with prepayment features to be extended, thus effectively
converting short or intermediate term securities (which tend to be less volatile
in price) into longer term securities (which tend to be more volatile in price).
Depending upon the performance of each Fund's investments, the net asset
value per share of a Fund may decrease instead of increase, except with respect
to the Money Market Fund, the net asset value of which the Adviser will attempt
to maintain at $1.00
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Each Fund may invest in one or more of the following securities: certain
variable or floating rate securities, mortgage-backed securities, and as
described below, some of the Funds may invest in put and call options. Such
instruments may be 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 invest more than 15% of its total assets in any such
derivatives, except that with respect to the Money Market Fund, the Fixed Income
Fund, the Government Securities Fund, and the Tennessee Fund, there is no
limitation on the amount of its total assets which may be invested in variable
or floating rate obligations.
Risks of Non-Diversification. Because the Tennessee Fund invests primarily
in securities of the State of Tennessee and its political subdivisions,
municipalities and public authorities, the Tennessee Fund's performance is
closely tied to the general economic conditions within the State as a whole and
to the economic conditions within particular industries and geographic areas
represented or located within the State.
Historically, the economy of Tennessee has been dominated by manufacturing
and agriculture and is sensitive to the effects of recessions. However, since
1969, the retail and wholesale trade and the services industries combined have
accounted for more than 65% of the new jobs created in Tennessee, while
manufacturing accounted for only 21.5% of total employment by 1995, down from
over 34% during the 1960's.
While both the Tennessee economy and the national economy did experience a
downturn during the most recent recession, the downward trend began to reverse
itself in the first quarter of 1991. Tennessee's economy in a number of sectors
has continued to improve ever since. Even during the most recent recession,
Tennessee's economy, in terms of growth in nonagricultural jobs, outperformed
the national economy, in the same respect, as it has done during each of the
last five decades. The August 1996 unemployment rate for Tennessee was 4.4%
compared to 5.1% for the nation as a whole. Tennessee is the 17th most populous
state in the nation, with an estimated state-wide population of 5,256,051 as of
July 1995, but it has a relatively small state government in terms of receipts
and expenditures. During 1993 Tennessee ranked 47th in the nation in terms of
both state taxes per capita and government expenditures per capita.
The four largest cities in Tennessee by population are Memphis, Nashville,
Knoxville, and Chattanooga, in order from largest to smallest. Moody's Investor
Services, Inc. has rated long-term bonds for all four cities, with Memphis and
Nashville receiving AA ratings and Knoxville and Chattanooga receiving A1
ratings. Standard and Poor's Corporation has rated Memphis, Knoxville, and
Chattanooga at AA, AA-, and AA-, respectively.
The Tennessee Fund's classification as "non-diversified" investment
companies means that the proportion of that Fund's assets that may be invested
in the securities of a single issuer is not limited by the 1940 Act. However,
the Tennessee Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended, which requires such Fund generally to invest as of the end of
each fiscal quarter, with respect to 50% of its total assets, not more than 5%
of such assets in the obligations of a single issuer; as to the remaining 50% of
its total assets, such Fund is not so restricted. In no event, however, may the
Tennessee Fund invest more than 25% of its total assets in the obligations of
any one issuer as of the end of each fiscal quarter. Since a relatively high
percentage of such Fund's assets may be invested in the obligations of a limited
number of issuers, some of which may be within the same economic sector, the
Tennessee Fund's portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio securities of a
diversified investment company.
Repurchase Agreements. Securities held by each Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities, in exchange for cash from banks and/or 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 a Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying portfolio
securities. Securities subject to repurchase agreements must be of the same type
and quality as those in which such Fund may invest directly. For further
information about repurchase agreements and the related risks, see "INVEST-
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MENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Repurchase Agreements" in the Statement of Additional
Information.
Reverse Repurchase Agreements. Each Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with the
investment restrictions described below. Pursuant to such agreements, a Fund
would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon date and
price. At the time a Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account assets such as U.S. Government
securities or other liquid high-grade debt securities consistent with such
Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
Fund may decline below the price at which the Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
a Fund under the 1940 Act. For further information about reverse repurchase
agreements, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on
Portfolio Instruments -- Reverse Repurchase Agreements" in the Statement of
Additional Information.
Except as otherwise disclosed to the Shareholders of the Funds, the Group
will not execute portfolio transactions through, 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.
Real Estate Investment Trusts, The Value Fund and the Growth Fund may each
invest in equity REITs. REITs pool investors' funds for investment primarily in
commercial real estate properties. Investment in REITs may subject a Fund to
certain risks. REITs may be affected by changes in the value of the underlying
property owned by the trust. REITs are dependent upon specialized management
skill, may not be diversified and are subject to the risks of financing
projects. REITs are also subject to heavy cash flow dependency, defaults by
borrowers, self liquidation and the possibility of failing to qualify for the
beneficial tax treatment available to REITs under the Internal Revenue Code and
to maintain its exemption from the 1940 Act. As a shareholder in a REIT, a Fund
would bear, along with other shareholders, its pro rata portion of the REIT's
operating expenses. These expenses would be in addition to the advisory and
other expenses a Fund bears directly in connection with its own operations.
Restricted Securities. Securities in which the Fixed Income and Tennessee
Funds may invest include securities issued by corporations without registration
under the Securities Act of 1933, as amended (the "1933 Act"), such as
securities issued in reliance on the so-called "private placement" exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). Section 4(2) securities are restricted as to disposition
under the Federal securities laws, and generally are sold to institutional
investors such as the Funds who agree that they are purchasing the securities
for investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in such Section 4(2) securities,
thus providing liquidity. Any such restricted securities will be considered to
be illiquid for purposes of a Fund's limitations on investments in illiquid
securities unless, pursuant to procedures adopted by the Board of Trustees of
the Group, the Adviser has determined such securities to be liquid because such
securities are eligible for resale under Rule 144A under the 1933 Act and are
readily saleable.
Options. The Value Fund, the Fixed Income Fund, the Tennessee Fund, the
Government Securities Fund and the Growth Fund may also each purchase put and
call options for hedging purposes. The Funds anticipate that such options will
be exchange traded options. However, in the future such options may also include
OTC-issued options, meaning that such options are purchased from or sold
directly to the other party, are not standardized and are not guaranteed by a
clearing agency, which is in contrast to exchange traded options. A put option
gives the purchaser of the option the right to sell, and obligates the writer
(seller) of the option to buy, the underlying security at the stated exercise
price at any time prior to the expiration date of the
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<PAGE> 26
option, regardless of the market price of the security. A call option gives the
purchaser of the option the right to buy, and obligates the seller of the option
to sell, the underlying security at the stated exercise price at any time prior
to the expiration date of the option, regardless of the market price of the
security. Purchasing options is a specialized investment technique that entails
a substantial risk of a complete loss of the amounts paid as premiums to writers
of options.
For hedging purposes, each of such Funds may also engage in writing call
options from time to time as the Adviser deems appropriate. A Fund will write
only covered call options (options on securities owned by that Fund). When a
Fund writes a covered call option and such option is exercised, that Fund will
forego the appreciation, if any, on the underlying security in excess of the
exercise price. In order to close out a call option it has written, a Fund will
enter into a "closing purchase transaction" -- the purchase of a call option on
the same security with the same exercise price and expiration date as the call
option which that Fund previously wrote on any particular securities. When a
portfolio security subject to a call option is sold, the Fund which wrote the
call will effect a closing purchase transaction to close out any existing call
option on that security. There is no assurance of liquidity in the secondary
market for purposes of closing out options positions. If that Fund is unable to
effect a closing purchase transaction, it will not be able to sell the
underlying security until the option expires or such Fund delivers the
underlying security upon exercise. A Fund may lose the expected benefit of
options transactions if interest rates or securities prices move in an
unanticipated manner. In addition, the value of a Fund's options positions may
not prove to be perfectly or even highly correlated with the value of its
portfolio securities, limiting such Fund's ability to hedge effectively against
market or interest rate risk. Under normal conditions, it is not expected that
any such Fund would permit the underlying value of its portfolio securities
subject to such options to exceed 25% of its net assets.
In addition, the Tennessee Fund may acquire "puts" with respect to Exempt
Securities held in its portfolio. Under a put, the Tennessee Fund would have the
right to sell a specified Exempt Security within a specified period of time at a
specified price. A put would be sold, transferred, or assigned only with the
underlying security. The Tennessee Fund will acquire puts solely to either
facilitate portfolio liquidity, shorten the maturity of the underlying
securities, or permit the investment of its funds at a more favorable rate of
return. The Tennessee Fund expects that it will generally acquire puts only
where the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tennessee Fund may pay
for a put either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
Guaranteed Investment Contracts. The Money Market Fund and the Fixed
Income Fund may each invest in guaranteed investment contracts ("GICs") issued
by insurance companies. Pursuant to such contracts, the Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the deposit fund on a monthly basis guaranteed
interest which is based on an index. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance company may
assess periodic charges against a GIC for expense and service costs allocable to
it, and the charges will be deducted from the value of the deposit fund. A Fund
will only purchase a GIC when the Adviser has determined that the GIC presents
minimal credit risks to such Fund and is of comparable quality to instruments
that are rated high quality by an appropriate NRSRO. Because a Fund may not
receive the principal amount of a GIC from the insurance company on seven days'
notice or less, the GIC is considered an illiquid investment, and, together with
other instruments in such Fund which are not readily marketable, will not exceed
such Fund's limitation on investments in illiquid securities as set forth below.
In determining average weighted portfolio maturity, a GIC will be deemed to have
a maturity equal to the earlier of the period of time remaining until the next
readjustment of the guaranteed interest rate or the period remaining until the
principal amount can be recovered through demand.
Foreign Investments. Investments in foreign securities (including EDCs,
ETDs, CTDs, Yankee CDs, CCP and Europaper) 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
24
<PAGE> 27
securities markets or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal, interest or dividends on
such securities or the purchase or sale thereof. In addition, foreign branches
of U.S. banks and foreign banks may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and recordkeeping
standards than those applicable to domestic branches of U.S. banks. A Fund will
acquire securities issued by foreign branches of U.S. banks, foreign banks, or
other foreign issuers only when the Adviser believes that the risks associated
with such instruments are minimal.
Other Investment Policies. In order to generate additional income, the
Value Fund, the Fixed Income Fund, the Tennessee Fund, the Government Securities
Fund and the Growth Fund may each, 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 that Fund. During the time portfolio securities are on
loan, the borrower pays that Fund any dividends or interest received on such
securities. Loans are subject to termination by such Fund or the borrower at any
time. While a Fund does not have the right to vote securities on loan, each Fund
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. In the event the borrower would
default in its obligations, the Fund bears the risk of delay in recovery of the
portfolio securities and the loss of rights in the collateral. A Fund will enter
into loan agreements only with broker-dealers, banks, or other institutions that
the Adviser has determined are creditworthy under guidelines established by the
Group's Board of Trustees.
The Value Fund, the Fixed Income, the Tennessee Fund, the Government
Securities Fund and the Growth Fund may each 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. A Fund will engage in when-issued and delayed-delivery transactions
only for the purpose of acquiring portfolio securities consistent with and in
furtherance of its investment objective(s) and policies, not for investment
leverage, although such transactions represent a form of leveraging. When-issued
securities are securities purchased for delivery beyond the normal settlement
date at a stated price and yield and thereby involve a risk that the yield
obtained in the transaction will be less than those available in the market when
delivery takes place. A Fund will generally not pay for such securities or start
earning interest on them until they are received on the settlement date. When a
Fund agrees to purchase such securities, however, its custodian will set aside
cash or liquid securities equal to the amount of the commitment in a separate
account. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, a Fund
relies on the seller to complete the transaction; the seller's failure to do so
may cause such Fund to miss a price or yield considered to be advantageous.
Each of the Value Fund, the Fixed Income Fund, the Government Securities
Fund, the Tennessee Fund and the Growth Fund may also invest in the securities
of other investment companies, including Shares of the Money Market Fund, in
accordance with the limitations of the 1940 Act and any exemptions therefrom.
Each such Fund intends to invest in the securities of other investment companies
which, in the opinion of the Adviser, will assist such Fund in achieving its
investment objectives and/or 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. In
order to avoid the imposition of additional fees as a result of investing in
shares of the Money Market Fund, the Adviser, the Administrator and their
affiliates will reduce their fees charged to a Fund by an amount equal to the
fees charged by such service providers based on a percentage of that Fund's
assets attributable to such Fund's investment in the Money Market Fund.
Additional restrictions on the Funds' investments in the securities of other
mutual funds are contained in the Statement of Additional Information.
PORTFOLIO TURNOVER
The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The
25
<PAGE> 28
Commission requires that the calculation exclude all securities whose remaining
maturities at the time of acquisition are one year or less. For the Money Market
Fund, portfolio turnover rate is expected to be zero percent for regulatory
purposes. The portfolio turnover rate for each of the other Funds may vary
greatly from year to year, as well as within a particular year, and may also be
affected by cash requirements for redemptions of Shares. High portfolio turnover
rates will generally result in higher transaction costs, including brokerage
commissions, to a Fund and may result in additional tax consequences to a Fund's
Shareholders. Portfolio turnover will not be a limiting factor in making
investment decisions. Portfolio turnover information is set forth above under
"FINANCIAL HIGHLIGHTS."
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).
The Money Market 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
value of the Fund's total assets would be invested in such issuer, except
that 25% or less of the value of the Fund's total assets may be invested
without regard to such 5% limitation. 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
value 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, domestic bank certificates of deposit or
bankers' acceptances, and repurchase agreements secured by bank instruments
or 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.
Each of the Value and Fixed Income Funds will not:
1. Purchase securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, if, immediately after such purchase, more than 5% of the
value of such Fund's total assets would be invested in such issuer, or such
Fund would hold more than 10% of any class of securities of the issuer,
except that up to 25% of the value of a Fund's total assets may be invested
without regard to such limitations, or such Fund would hold more than 10%
of the outstanding voting securities of such issuer. 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
value of such Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements secured by
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.
26
<PAGE> 29
In addition, each of the Money Market, Value and Fixed Income Funds will
not:
1. Borrow money or issue senior securities, except that each Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time
of such borrowing; or mortgage, pledge, or hypothecate any assets, except
in connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of such Fund's
total assets at the time of its borrowing. A Fund will not purchase
securities while its borrowings (including reverse repurchase agreements)
exceed 5% of its total assets.
2. Make loans, except that each Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, and may enter into repurchase agreements.
3. Invest more than 5% of total assets in securities of issuers which,
together with any predecessors, have a record of less than three years of
continuous operation.
The Tennessee 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 at the end of each fiscal quarter, (a) more than 5%
of the value of the Fund's total assets (taken at current value) would be
invested in such issuer (except that up to 50% of the value of the Fund's
total assets may be invested without regard to such 5% limitation), and (b)
more than 25% of its total assets (taken at current value) would be
invested in securities of a single issuer. 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. For purposes of this limitation, a security is
considered to be issued by the governmental entity (or entities) whose
assets and revenues back the security, or, with respect to a private
activity bond that is backed only by the assets and revenues of a
non-governmental user, such nongovernmental user.
2. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets (taken at current value) to be invested in
industrial development revenue bonds which are based, directly or
indirectly, on the credit of private issuers in any one industry.
3. Borrow money or issue senior securities, except that the Fund may
borrow from banks or enter into reverse repurchase agreements for temporary
purposes in amounts up to 10% of the value of its total assets at the time
of such borrowing. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) exceed 5% of its total
assets.
4. Make loans, except that the Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objectives and policies, and may enter into repurchase agreements.
Each of the Government Securities Fund and the Growth 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
value of such Fund's total assets would be invested in such issuer, or such
Fund would hold more than 10% of any class of securities of the issuer,
except that up to 25% of the value of a Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the
value of such Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements secured by
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
27
<PAGE> 30
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 that each Fund may
borrow from banks or enter into reverse repurchase agreements or dollar
roll agreements for temporary purposes in amounts up to 10% of the value of
its total assets at the time of such borrowing, and except as permitted
pursuant to appropriate exemptions from the 1940 Act. A Fund will not
purchase securities while its borrowings (including reverse repurchase
agreements and dollar roll agreements) exceed 5% of its total assets.
4. Make loans, except that each Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
The following additional investment restrictions, as to a particular Fund,
may be changed without the vote of a majority of the outstanding Shares of such
Fund. The Money Market Fund may not:
1. Purchase or otherwise acquire any security if, as a result, more
than 10% of its net assets would be invested in securities that are
illiquid.
Each of the Value, Fixed Income, Tennessee, Government Securities and
Growth Funds will not:
1. Purchase or otherwise acquire any security, if, as a result, more
than 15% of its net assets would be invested in securities that are
illiquid.
For purposes of this investment restriction, illiquid securities include
securities which are not readily marketable and repurchase agreements with
maturities in excess of seven days.
In addition to the above investment restrictions, each Fund is subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Funds' Statement of Additional
Information.
Irrespective of fundamental investment restriction number 1 above for the
Money Market Fund, and pursuant to Rule 2a-7 under the 1940 Act, the Money
Market Fund will, with respect to 100% of its total assets, limit its investment
in the securities of any one issuer in the manner provided by such Rule, which
limitations are referred to above under the caption "INVESTMENT OBJECTIVES AND
POLICIES -- The Money Market Fund."
VALUATION OF SHARES
The net asset value of the Money Market Fund is determined and its Shares
are priced as of 12:00 noon (Eastern time) and the close of regular trading on
the New York Stock Exchange (the "Exchange") (generally 4:00 p.m. Eastern time)
on each Business Day of the Money Market Fund. The net asset value of each of
the other Funds is determined and their Shares are priced as of the close of
regular trading on the Exchange on each Business Day. The time or times at which
the Shares of a Fund are priced are hereinafter referred to as the "Valuation
Time" or "Valuation Times," as the case may be. A "Business Day" of a Fund is a
day on which the Exchange is open for trading and any other day (other than a
day on which no Shares of that Fund are tendered for redemption and no order to
purchase any Shares of that Fund is received) during which there is sufficient
trading in portfolio instruments such that such Fund's net asset value per share
might be materially affected. The Exchange will not be open in observance of the
following holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value per
share for purposes of pricing purchases and redemptions is calculated by
dividing the value of all securities and other assets belonging to a Fund, less
the liabilities charged to that Fund, by the number of that Fund's outstanding
Shares.
The net asset value per share for each of the Funds, other than the Money
Market Fund, will fluctuate as the value of the investment portfolio of a Fund
changes.
28
<PAGE> 31
The assets in the Money Market Fund are valued based upon the amortized
cost method which the Trustees of the Group believe fairly reflects the
market-based net asset value per share. Pursuant to the rules and regulations of
the Commission regarding the use of the amortized cost method, the Money Market
Fund will maintain a dollar-weighted average portfolio maturity of 90 days or
less. Although the Group seeks to maintain the Money Market Fund's net asset
value per share at $1.00, there can be no assurance that net asset value will
not vary.
The portfolio securities in each of the other Funds for which market
quotations are readily available are valued based upon their current available
prices in the principal market in which such securities normally are traded.
Unlisted securities for which market quotations are readily available are valued
at such market values. Other securities, including restricted securities and
other securities for which market quotations are not readily available, and
other assets are valued at fair value by the Adviser under procedures
established by, and under the supervision of the Group's Board of Trustees.
Securities may be valued by an independent pricing service approved by the
Group's Board of Trustees. Investments in debt securities with remaining
maturities of 60 days or less may be valued based upon the amortized cost
method. For further information about valuation of investments, see "NET ASSET
VALUE" in the Statement of Additional Information.
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares in each Fund are sold on a continuous basis by the Group's
distributor, BISYS (the "Distributor"). The principal office of the Distributor
is 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares,
telephone the Group at (800) 874-8376.
PURCHASES OF SHARES
Shares may be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by the Adviser or its correspondent or
affiliated banks (collectively, the "Banks"). These procedures may include
instructions under which a Customer's account is "swept" automatically no less
frequently than weekly and amounts in excess of a minimum amount agreed upon by
the Bank and the Customer are invested by the Distributor in Shares of a
particular Fund, depending upon the type of the Customer's account and/or the
instructions of the Customer.
Shares of the Funds sold to the Banks acting in a fiduciary, advisory,
custodial, agency, or other similar capacity on behalf of Customers will
normally be held of record by the Banks. With respect to Shares of the Funds so
sold, it is the responsibility of the particular Bank to transmit purchase or
redemption orders to the Distributor and to deliver federal funds for purchase
on a timely basis. Beneficial ownership of Shares will be recorded by the Banks
and reflected in the account statements provided by the Banks to Customers. A
Bank will exercise voting authority for those Shares for which it is granted
authority by the Customer.
Investors may also purchase Shares of a Fund by completing and signing an
Account Registration Form and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, payable to the appropriate Fund, to the Riverside Capital Funds,
Department L-1406, Columbus, Ohio 43260-1406. Subsequent purchases of Shares of
that Fund may be made at any time by mailing a check (or other negotiable bank
draft or money order) payable to the Group, to the above address.
If an Account Registration Form has been previously received by the Group,
investors may also purchase Shares by wiring funds to the Fund's 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) 874-8376 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Shares of each Fund are purchased at the net asset value per share (see
"VALUATION OF SHARES") next determined after receipt by the Distributor, its
agents or broker-dealers with whom it has an
29
<PAGE> 32
agreement of an order in good form to purchase Shares plus any applicable sales
charge as described below. Purchases of Shares of a Fund will be effected only
on a Business Day (as defined in "VALUATION OF SHARES") of that Fund.
An order to purchase Shares of the Money Market Fund will be deemed to have
been received by the Distributor only when federal funds with respect thereto
are available to the Money Market Fund's custodian for investment. Federal funds
are monies credited to a bank's account with a Federal Reserve Bank. Payment for
an order to purchase Shares of the Money Market Fund which is transmitted by
federal funds wire will be available the same day for investment by the Money
Market Fund's custodian, if received prior to the last Valuation Time (see
"VALUATION OF SHARES"). Payments transmitted by other means (such as by check
drawn on a member of the Federal Reserve System) will normally be converted into
federal fund within two banking days after receipt. The Group strongly
recommends that investors of substantial amounts use federal funds to purchase
Shares. Shares of the Money Market Fund purchased before 12:00 noon, Eastern
Time, begin earning dividends on the same Business Day. Shares of the Money
Market Fund purchased after 12:00 noon, Eastern Time, begin earning dividends on
the next Business Day. All Shares of the Money Market Fund continue to earn
dividends through the day before their redemption.
In the case of orders for the purchase of Shares of the other Funds placed
through a broker-dealer, the applicable public offering price will be the net
asset value as so determined (plus any applicable sales charge), but only if the
broker-dealer receives the order and transmits it to the Distributor prior to
the Valuation Time for that day. The broker-dealer is responsible for
transmitting such orders by the Valuation Time. If the broker-dealer fails to do
so, the investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next day.
MINIMUM INVESTMENT
Except as otherwise discussed below under "Auto Invest Plan," the minimum
investment is $1,000 for the initial purchase of Shares of a Fund by an investor
and $50 for subsequent purchases of Shares of that Fund. The subsequent purchase
minimum may be waived if purchases are made in connection with an Individual
Retirement Account ("IRA") and both the initial and subsequent minimum
investments may be waived if purchases are made in connection with a payroll
deduction plan.
Depending upon the terms of a particular Customer's account, the Banks or
their affiliates may charge a Customer account fees for automatic investment and
other cash management services provided in connection with investment in a Fund.
Information concerning these services and any charges will be provided by the
Banks. This Prospectus should be read in conjunction with any such information
received from the Banks or their affiliates.
Each Fund reserves the right to reject any order for the purchase of its
Shares in whole or in part, 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 Banks on behalf of their Customers will be sent by the Banks to
their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
RIVERSIDE CAPITAL INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A Riverside Capital IRA enables individuals, even if they participate in an
employer-sponsored retirement plan, to establish their own retirement program.
Riverside Capital IRA contributions may be tax-deductible and earnings are tax
deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted or eliminated for individuals who participate in
certain employer pension plans and
30
<PAGE> 33
whose annual income exceeds certain limits. Existing IRAs and future
contributions up to the IRA maximums, whether deductible or not, still earn
income on a tax-deferred basis.
All Riverside Capital IRA distribution requests must be made in writing to
the Distributor. Any deposits to a Riverside Capital IRA must distinguish the
type and year of the contributions.
For more information on the Riverside Capital IRAs call the Group at (800)
874-8376. Investment in shares of a tax-exempt fund, including the Tennessee
Fund, would not be appropriate for a Riverside Capital IRA. Shareholders are
advised to consult a tax adviser on Riverside Capital IRA contribution and
withdrawal requirements and restrictions and whether an investment in the
Tennessee Fund would be appropriate.
AUTO INVEST PLAN
The Riverside Capital Funds Auto Invest Plan enables Shareholders to make
regular monthly or quarterly purchases of Shares of a Fund through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder 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 $100;
the minimum amount for subsequent investments is $50. To participate in the Auto
Invest Plan, Shareholders should complete the appropriate section of the Account
Registration Form or a supplemental sign-up form which can be acquired by
calling the Group at (800) 874-8376. 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.
The Group may eliminate or change the Auto Invest Plan at any time or from
time to time without notice thereof.
SALES CHARGES
The public offering price of Shares of each of the Funds, other than the
Money Market Fund, equals net asset value plus a sales charge in accordance with
the tables 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.
There is no sales charge imposed by the Money Market Fund in connection
with the purchase of its shares.
VALUE AND GROWTH FUNDS
<TABLE>
<CAPTION>
DEALER
DISCOUNTS AND
BROKERAGE
SALES CHARGE AS SALES CHARGE AS COMMISSIONS AS
AMOUNT OF TRANSACTION AT % OF NET AMOUNT % OF PUBLIC % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED OFFERING PRICE OFFERING PRICE
- ------------------------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
Less than $100,000................... 4.71% 4.50% 4.05%
$100,000 but less than $250,000...... 3.63 3.50 3.15
$250,000 but less than $500,000...... 2.56 2.50 2.25
$500,000 but less than $1,000,000.... 1.52 1.50 1.35
$1,000,000 but less than
$2,000,000......................... 0.50 0.50 0.45
$2,000,000 or more................... 0 0 0*
</TABLE>
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<PAGE> 34
FIXED INCOME AND TENNESSEE FUNDS
<TABLE>
<CAPTION>
DEALER
DISCOUNTS AND
BROKERAGE
SALES CHARGE AS SALES CHARGE AS COMMISSIONS AS
AMOUNT OF TRANSACTION AT % OF NET AMOUNT % OF PUBLIC % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED OFFERING PRICE OFFERING PRICE
- ------------------------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
Less than $100,000................... 3.09% 3.00% 2.70%
$100,000 but less than $250,000...... 2.56 2.50 2.25
$250,000 but less than $500,000...... 2.04 2.00 1.80
$500,000 but less than $1,000,000.... 1.01 1.00 0.90
$1,000,000 but less than
$2,000,000......................... 0.50 0.50 0.45
$2,000,000 or more................... 0 0 0*
</TABLE>
GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
DEALER
DISCOUNTS AND
BROKERAGE
SALES CHARGE AS SALES CHARGE AS COMMISSIONS AS
AMOUNT OF TRANSACTION AT % OF NET AMOUNT % OF PUBLIC % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED OFFERING PRICE OFFERING PRICE
- ------------------------------------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
Less than $250,000................... 2.04% 2.00% 1.80%
$250,000 but less than $500,000...... 1.52 1.50 1.35
$500,000 but less than $1,000,000.... 1.01 1.00 0.90
$1,000,000 but less than
$2,000,000......................... 0.50 0.50 0.45
$2,000,000 or more................... 0 0 0*
</TABLE>
- ------------------------------
* Brokers or dealers will be paid a fee of 0.25% on purchases of $2 million or
more if the assets on which the 0.25% is paid remain in the Funds, other than
the Money Market Fund, for one year. Such fee, however, will not be paid on
purchases that otherwise are entitled to a sales charge waiver as described
below. If all of the assets on which the 0.25% fee is paid do not remain in
one of the Funds, other than the Money Market Fund, for a period of one
uninterrupted year, the broker or dealer will be required to refund this fee
to the Distributor.
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 any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one of more funds of the Group, and/or
other dealer-sponsored special events. In some instances, this compensation will
be made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within or
outside of the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1) vacation trips, including the provision of
travel arrangements and lodging at vacation resorts, (2) tickets for
entertainment events (such as concerts, cruises and sporting events) and (3)
merchandise (such as clothing, trophies, clocks and pens). Dealers may not use
sales of a Fund's Shares to qualify for this compensation to the extent such may
be prohibited by the laws of any state or any self-regulatory agency, such as
the NASD. None of the aforementioned compensation is paid for by any Fund or its
Shareholders.
SALES CHARGE WAIVERS
The Distributor may waive sales charges for the purchase of Shares of a
Fund by or on behalf of (1) purchasers for whom NCB, the Adviser, banks, trust
companies, savings and loan associations and credit unions or one of their
affiliates acts in a fiduciary, advisory, agency, custodial (other than
individual retirement accounts), or similar capacity, (2) employees and retired
employees (including spouses, children and parents of employees and retired
employees) of NCB, the Adviser, BISYS and any affiliates thereof, (3) purchasers
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<PAGE> 35
pursuant to the terms of a payroll deduction plan, (4) Trustees of the Group,
(5) directors of NCB, the Adviser and any affiliates thereof, (6) brokers,
dealers and agents who have a sales agreement with the Distributor, and their
employees (and their spouses and children under the age of 21), and (7) orders
placed on behalf of other investment companies distributed by The BISYS Group,
Inc. or its affiliated companies. The Distributor may change or eliminate the
foregoing waivers at any time. The Distributor may also periodically waive all
or a portion of the sales charge for all investors with respect to a Fund.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, investors have the
privilege of combining concurrent purchases of a Fund and one or more of the
other funds of the Group sold with a sales charge and advised by the Adviser
("Riverside Load Funds"). For example, if a shareholder concurrently purchases
Shares in the Value Fund at the total public offering price of $50,000 and
Shares in the Tennessee 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
appropriate table above. This privilege, however, may be modified or eliminated
at any time or from time to time by the Group without notice thereof.
LETTER OF INTENT
An investor may obtain a reduced sales charge by means of a written Letter
of Intent which expresses the intention of such investor to purchase Shares of a
Fund at a designated total public offering price within a designated 13-month
period. Each purchase of Shares under a Letter of Intent will be made at the net
asset value plus the sales charge applicable at the time of such purchase to a
single transaction of the total dollar amount indicated in the Letter of Intent.
A Letter of Intent may include purchases of Shares made not more than 90 days
prior to the date such investor signs a Letter of Intent; however, the 13-month
period during which the Letter of Intent is in effect will begin on the date of
the earliest purchase to be included. This program may be modified or eliminated
at any time or from time to time by the Group without notice. For further
information about letters of intent, interested investors should contact the
Group at (800) 874-8376.
A Letter of Intent is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
Shares actually purchased if the full amount indicated is not purchased, and
such escrowed Shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed Shares, whether paid in cash or
reinvested in additional Shares, are not subject to escrow. The escrowed Shares
will not be available for disposal by the investor until all purchases pursuant
to the Letter of Intent have been made or the higher sales charge has been paid.
When the full amount indicated has been purchased, the escrow will be released.
An adjustment will be made to reflect any reduced sales charge applicable to
Shares purchased during the 90-day period prior to the date the Letter of Intent
was entered into at the conclusion of the 13-month period and in the form of
additional Shares credited to the Shareholder's account at the then current
public offering price applicable to a single purchase of the total amount of the
total purchases. Additionally, if the total purchases within the 13-month period
exceed the amount specified, a similar adjustment will be made to reflect
further reduced sales charges applicable to such purchases.
RIGHT OF ACCUMULATION
Pursuant to the right of accumulation, investors are permitted to purchase
Shares of a Fund at the public offering price applicable to the total of (a) the
total public offering price of the Shares of the Riverside Load Fund then being
purchased plus (b) an amount equal to the then current net asset value of the
purchaser's combined holdings of the Shares of all of the Riverside Load Funds.
The "purchaser's combined holdings" described in the preceding sentence shall
include the combined holdings of the purchaser, the purchaser's spouse and
children under the age of 21 and the purchaser's retirement plan accounts. To
receive the applicable public offering price pursuant to the right of
accumulation, Shareholders must, at the time of purchase, give the Transfer
Agent sufficient information to permit confirmation of qualification. This right
of
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<PAGE> 36
accumulation, however, may be modified or eliminated at any time or from time to
time by the Group without notice.
EXCHANGE PRIVILEGE
For investors who were Shareholders of the Funds prior to November 1, 1994,
Shares of a Riverside Load Fund may be exchanged without payment of any fees or
sales charge for Shares of any of the other Riverside Load Funds at respective
net asset values. For investors who become Shareholders of the Funds on or after
November 1, 1994, Shares of a Riverside Load Fund may be exchanged for Shares of
any of the other Riverside Load Funds at respective net asset values upon the
payment of a sales charge equal to the difference, if any, between the sales
charge payable upon purchase of Shares of such Riverside Load Fund and the sales
charge previously paid on the Fund Shares to be exchanged. Provided further,
that with respect to every exchange, the amount to be exchanged must meet the
applicable minimum investment requirements and the exchange is made in states
where it is legally authorized. When Shares of the Money Market Fund are
exchanged for Shares of a Riverside 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.
This exchange privilege is not intended to afford Shareholders a way to
speculate on short-term movements in the market. Accordingly, in order to
prevent excessive use of the exchange privilege that may potentially disrupt the
management of the Funds and increase transaction costs, the Group has
established a policy of limiting the number of exchanges by a Shareholder to
four during any one calendar year. 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) 874-8376 or by providing written instructions to the Group.
Any Shareholder who wishes to make an exchange should obtain and review the
current prospectus of the Fund in which he or she wishes to invest before making
the exchange. For a discussion of risks associated with unauthorized telephone
exchanges, see "Redemption by Telephone" below.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, all or
part of a Customer's Shares may be redeemed in accordance with instructions and
limitations pertaining to his or her account at a Bank. For example, if a
Customer has agreed with a Bank to maintain a minimum balance in his or her
account with the Bank, and the balance in that account falls below that minimum,
the Customer may be obliged to redeem, or the Bank may redeem on behalf of the
Customer, all or part of the Customer's Shares of a Fund to the extent necessary
to maintain the required minimum balance.
REDEMPTION BY MAIL
A written request for redemption must be received by the Group, at the
address shown on the front page of this Prospectus, in order to honor the
request. The Transfer Agent will require a signature guarantee by an eligible
guarantor institution. The signature guarantee requirement will be waived if the
following conditions apply: (1) the redemption check is payable to the
Shareholder(s) of record, and (2) the redemption check is mailed to the
Shareholder(s) at the address of record or mailed or wired to a commercial bank
account previously designated on the Account Registration Form. There is no
charge for having redemption proceeds mailed to a designated bank account. To
change the address to which a redemption check is to be mailed, a written
request therefor must be received by the Transfer Agent. In connection with such
request, the Transfer
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<PAGE> 37
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 10
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 mailed or sent electronically to a designated bank account. For
telephone redemptions, call the Group at (800) 874-8376.
Neither the Funds nor their service providers will be liable for any loss,
damages, expense or cost arising out of any telephone redemption effected in
accordance with a Fund's telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. Each Fund will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, such Fund or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, Shareholders are unable to effect telephone transactions,
Shareholders may also mail the redemption request to the Group at the address
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 $100 quarterly. To participate in the Auto
Withdrawal Plan, Shareholders should call (800) 874-8376 for more information.
Purchases of additional Shares, including use of the Auto Invest Plan,
concurrent with withdrawals may be disadvantageous to certain Shareholders
because of tax liabilities and sales charges. For a Shareholder to change the
Auto Withdrawal instructions, the request must be made in writing to the Group.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However,
with respect to the Money Market Fund, to the greatest extent possible, such
Fund will attempt to honor requests from Shareholders for same day payments upon
redemption of Shares if the request for redemption is received by the
Distributor before 12:00 noon, Eastern Time, on a Business Day or, if the
request for redemption is received after 12:00 noon, Eastern Time, to honor
requests for payment on the next Business Day. With respect to each of the other
Funds, to the greatest extent possible, such Funds will attempt to honor
requests
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<PAGE> 38
from Shareholders for next day payments upon redemption of Shares if the request
for redemption is received by the Distributor before the Valuation Time, on a
Business Day or, if the request for redemption is received after the Valuation
Time, to honor requests for payment on the second Business Day. Each Fund will
attempt to so honor redemption requests unless it would be disadvantageous to
that Fund or the Shareholders of that Fund to sell or liquidate portfolio
securities in an amount sufficient to satisfy requests for payments in that
manner.
At various times, the Group may be requested to redeem Shares for which it
has not yet received good payment. In such circumstances, the Group may delay
the forwarding of proceeds for up to 15 days or more until payment has been
collected for the purchase of such Shares. With respect to Shares of the Money
Market Fund, during the period of any such delay, such Shares to be redeemed
would continue to receive daily dividends as declared until execution of the
redemption. The Group intends to pay cash for all Shares redeemed, but under
abnormal conditions which make payment in cash unwise, the Group may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, each Fund
reserves the right to redeem, at net asset value, the Shares of that Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market price of such
Shares, the deduction of any sales charge or the establishment of an account
with less than $1,000 using the Auto Invest Plan or pursuant to a payroll
deduction plan), the account of such Shareholder has a value of less than
$1,000. Accordingly, an investor purchasing Shares of a Fund in only the minimum
investment amount may be subject to such involuntary redemption if he or she
thereafter redeems some of his or her Shares. Before a Fund exercises its right
to redeem such Shares and to send the proceeds to the Shareholder, the
Shareholder will be given notice that the value of the Shares in his or her
account is less than the minimum amount and will be allowed 60 days to make an
additional investment in an amount which will increase the value of the account
to at least $1,000.
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" and "NET ASSET VALUE"
in the Statement of Additional Information for examples of when the Group may
suspend the right of redemption or redeem shares involuntarily in light of the
Group's responsibilities under the 1940 Act.
DIVIDENDS AND TAXES
DIVIDENDS
The net income of the Money Market Fund is declared daily and such
dividends are generally paid monthly. For the Money Market Fund, dividends are
paid periodically in cash, generally on the first Business Day of the month, but
may be paid on the last Business Day of the preceding month.
A dividend for each of the other Funds 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.
Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of that particular Fund
at the net asset value as of the date of payment, unless the Shareholder elects
to receive dividends or distributions in cash. Such election, or any revocation
thereof, must be made in writing to the Transfer Agent at 3435 Stelzer Road,
Columbus, Ohio 43219, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.
Distributable net realized capital gains for each Fund are distributed at
least annually. Dividends are paid in cash not later than seven Business Days
after a Shareholder's complete redemption of his or her Shares in a Fund.
If a Shareholder elects to receive distributions in cash, and checks (1)
are returned and marked as "undeliverable" or (2) remain uncashed for six
months, the Shareholder's cash election will be changed automatically and future
dividend and capital gains distributions will be reinvested in that Fund at the
per
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<PAGE> 39
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
General. Each of the Funds is treated as a separate entity for federal
income tax purposes and intends to qualify as a "regulated investment company"
under the Code for so long as such qualification is in the best interest of that
Fund's Shareholders. Qualification as a regulated investment company under the
Code requires, among other things, that the regulated investment company
distribute to its shareholders at least 90% of its investment company taxable
income. Each Fund contemplates declaring as dividends all or substantially all
of that Fund's investment company taxable income (before deduction of dividends
paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. If
distributions during a calendar year were less than the required amount, that
Fund would be subject to a nondeductible 4% excise tax on the deficiency.
It is expected that each Fund will distribute annually to Shareholders all
or substantially all of that Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to Shareholders for federal income tax
purposes, even if paid in additional Shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends deduction, if any, received by the Fund
bear to its gross income. Since all of the Money Market Fund's and the Fixed
Income Fund's net investment income is expected to be derived from earned
interest and capital gains, it is anticipated that no part of any distribution
from such Funds will be eligible for the dividends received deduction for
corporation. The Money Market Fund also does not expect to realize any long-term
capital gains and, therefore, does not foresee paying any "capital gains
dividends" as described in the Code.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to Shareholders as long-term capital gain in
the year in which it is received, regardless of how long the Shareholder has
held the Shares. Such distributions are not eligible for the dividends-received
deduction.
If the net asset value of a Share is reduced below the Shareholder's cost
of that Share by the distribution of income or gain realized on the sale of
securities, the distribution, from a practical stand point, is a return of
invested principal, although taxable as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
Additional information regarding federal taxes is contained in the
Statement of Additional Information under the heading "ADDITIONAL
INFORMATION -- Additional Tax Information." However, the information contained
in this Prospectus and the additional material in the Statement of Additional
Information are only brief summaries of some of the important tax considerations
generally affecting the Funds and their Shareholders. Accordingly, potential
investors are urged to consult their tax advisers concerning the application of
federal, state and local taxes as such laws and regulations affect their own tax
situation.
Shareholders will be advised at least annually as to the federal and state
income tax consequences of distributions made to them during the year.
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The Tennessee Fund. The Tennessee Fund will distribute substantially all
of its net investment income and net capital gains to its Shareholders.
Dividends derived from interest earned on Exempt Securities constitute
"exempt-interest dividends" when designated as such by the Tennessee Fund and
will be excludable from gross income for federal income tax purposes. However,
exempt-interest dividends attributable to certain municipal obligations issued
on or after August 8, 1986, to finance certain private activities will be
treated as a tax preference item in computing the alternative minimum tax. Also,
a portion of all other interest excluded from gross income for federal income
tax purposes earned by a corporation may be subject to the alternative minimum
tax as a result of the inclusion in alternative minimum taxable income of 75% of
the excess of adjusted current earnings over alternative minimum taxable income.
Distributions, if any, derived from capital gains will generally be taxable
to Shareholders as capital gains for federal income tax purposes to the extent
so designated by the Tennessee Fund. Dividends, if any, derived from sources
other than interest excluded from gross income for federal income tax purposes
and capital gains will be taxable to Shareholders as ordinary income for federal
income tax purposes whether or not reinvested in additional Shares. Shareholders
not subject to federal income tax on their income will not, of course, be
required to pay federal income tax on any amounts distributed to them. The
Tennessee Fund anticipates that substantially all of its dividends will be
excluded from gross income for federal income tax purposes. The Tennessee Fund
will notify each Shareholder annually of the tax status of all distributions.
If a Shareholder receives an exempt-interest dividend with respect to any
Share and such Share is held by the Shareholder for six months or less, any loss
on the sale or exchange of such Share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a Shareholder.
Interest on indebtedness incurred or continued by a Shareholder to purchase
or carry Shares of the Tennessee Fund is not deductible for federal income taxes
assuming the Tennessee Fund distributes exempt-interest dividends during the
Shareholder's taxable year. It is anticipated that distributions from the
Tennessee Fund will not be eligible for the dividends received deduction for
corporations.
STATE TAXES -- THE TENNESSEE FUND
Tennessee imposes a limited income tax, known as the "Hall Income Tax," on
certain interest and dividend income. The Hall Income Tax statutes, amended
effective for dividends received after January 1, 1992, provide that, as set
forth below, no tax will be levied on dividends from a regulated investment
company qualified as such under the Code, provided a part of such investment
company's portfolio is invested in bonds or securities of the United States
government or any agency or instrumentality thereof or in bonds of the State of
Tennessee or any county, municipality or political subdivision thereof
(including any agency, board, authority or commission of any of the foregoing).
In the opinion of Messrs. Burch, Porter and Johnson, Tennessee tax counsel to
the Tennessee Fund, so long as the Tennessee Fund qualifies as a "regulated
investment company" under the Code, dividends, whether paid as distributions of
cash, other property or additional Shares, by the Tennessee Fund to a resident
of Tennessee, will be exempt from the Hall Income Tax, as amended, in proportion
to the income received by the Tennessee Fund attributable to interest on
Tennessee Exempt Securities. The balance of the dividends, including any
dividends attributable to capital gains, will be subject to the Hall Income Tax.
In addition, in a letter dated August 14, 1992, from the Commissioner of
the Tennessee Department of Revenue, the Commissioner stated his position that
mutual fund distributions attributable to fund investments in Puerto Rican bonds
are exempt from the Hall Income Tax.
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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 Fund Services Ohio, Inc. 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 the Group for acting as Administrator
and under the Distribution Plan discussed below, may receive fees under the
Administrative Services Plan discussed below, and may retain all or a portion of
any sales load imposed upon purchases of Shares. BISYS Fund Services Ohio, Inc.
receives fees from each of the Funds for acting as Transfer Agent and for
providing certain fund accounting services.
INVESTMENT ADVISER
National Bank of Commerce, One Commerce Square, Memphis, Tennessee 38150,
is the investment adviser of each Fund and has served as such since each Fund's
inception. The Adviser is a wholly owned subsidiary of National Commerce
Bancorporation ("NCB"). The Adviser and its affiliates also administer, on
behalf of their clients, assets which as of September 30, 1996, totalled $3.9
billion, and of which approximately $989 million are managed in a variety of
balanced, equity and fixed income portfolios. The Adviser has over 120 years of
banking experience and as of June 30, 1996, had over $3.9 billion in assets.
Subject to the general supervision of the Board of Trustees of the Group
and in accordance with the investment objectives and restrictions of the Funds,
the Adviser manages 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.
Alfred H. Jordan has been primarily responsible for the day-to-day
management of the Fixed Income Fund's, the Tennessee Fund's and the Government
Securities Fund's portfolios since the commencement of such Funds' operations.
As of February 15, 1995, Alan Catmur assumed primary responsibility for the
day-to-day management of the Value Fund's portfolio. Since the commencement of
the Growth Fund's operations, Jay Brooks has been responsible for the day-to-day
management of such Fund's portfolio.
Mr. Jordan has been an employee of the Adviser and a fixed income portfolio
manager for Commerce Capital Management, Inc., an affiliate of the Adviser
("CCMI"), since 1987, and is currently President of CCMI.
Since 1991, Mr. Catmur has been an equity analyst and portfolio manager of
the Adviser and has served as a member of its Equity Investment Committee. Prior
to 1991, Mr. Catmur serviced retail and institutional accounts at Robinson
Humphrey Company, Inc., an Atlanta investment banking firm.
Mr. Brooks has been an employee of the Adviser since February, 1994, and
has been President of Brooks, Montague & Associates, an investment advisory firm
and an affiliate of the Adviser, since 1986.
For the services provided and expenses assumed pursuant to its investment
advisory agreements with the Group, the Adviser receives a fee from each of the
Funds, computed daily and paid monthly, at the following rates: with respect to
the Money Market Fund, the annual rate of thirty-five one-hundredths of one
percent (.35%) of such Fund's average daily net assets; with respect to the
Value Fund, the annual rate equal to the lesser of (a) a fee computed at the
annual rate of one percent (1.00%) of the first $50 million of such Fund's
average daily net assets and seventy-five one-hundredths of one percent (0.75%)
of such Fund's remaining
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average daily net assets or (b) such other fee as may be agreed upon in writing
by the Group and the Adviser; with respect to each of the Fixed Income Fund and
the Tennessee Fund, an annual rate equal to the lesser of a fee at the annual
rate of sixty-five one-hundredths of one percent (0.65%) of such Fund's average
daily net assets, or such other fee as may be agreed upon in writing by the
Group and the Adviser; with respect to the Government Securities Fund, the
annual rate of fifty one-hundredths of one percent (0.50%) of such Fund's
average daily net assets; and with respect to the Growth Fund, the annual rate
of one percent (1.00%) of the first $50 million of such Fund's average daily net
assets and seventy-five one-hundredths of one percent (0.75%) of such Fund's
remaining 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 at a later date. The reduction of such fee will
cause the yield and total return of that Fund to be higher than they would
otherwise be in the absence of such a reduction.
ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for each Fund and also acts as each Fund's
principal underwriter and distributor (the "Administrator" or the "Distributor,"
as the context indicates). BISYS and its affiliated companies, including BISYS
Fund Services Ohio, Inc., are wholly owned by The BISYS Group, Inc., a
publicly-held company which is a provider of information processing, loan
servicing and 401(k) administration and recordkeeping services to and through
banking and other financial organizations.
The Administrator generally assists in all aspects of a Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Group, the Administrator receives a fee from each Fund equal to the lesser of a
fee computed daily and paid periodically, calculated at an annual rate of twenty
one-hundredths of one percent (.20%) of that Fund's average daily net assets or
such other fee as may be agreed upon in writing by the Group and the
Administrator. The Administrator may periodically voluntarily reduce all or a
portion of its administration fee with respect to a Fund to increase the net
income of such Fund available for distribution as dividends. The Administrator
may not seek reimbursement of such reduced fees at a later date. The voluntary
reduction of such fee will cause the yield and total return of that Fund to be
higher than they would otherwise be in the absence of such a fee reduction.
While the combined fees of the Adviser and the Administrator with respect
to the Value, Fixed Income, Tennessee and Growth Funds are higher than similar
fees paid by most mutual funds, the Board of Trustees believes such fees to be
fair and reasonable and to be comparable to the fees paid by many funds having
similar investment objectives and policies.
The Distributor acts as agent for each of the Funds in the distribution of
their Shares and, in such capacity, solicits orders for the sale of Shares,
advertises, and pays the costs of advertising, office space and its personnel
involved in such activities. The Distributor receives no compensation under its
Distribution Agreement with the Group, but receives compensation under the
Distribution and Shareholder Service Plan described below and may retain all or
a portion of any sales charge imposed upon the purchase of Shares. See "HOW TO
PURCHASE AND REDEEM SHARES -- Sales Charges."
EXPENSES
The Adviser and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Fund.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which each Fund is
authorized to pay or reimburse BISYS, as Distributor, a periodic amount
calculated at an annual rate not to exceed twenty-five one-hundredths of one
percent (.25%)
40
<PAGE> 43
of the average daily net asset value of that Fund. Such amount may be used by
BISYS to pay banks (including the Adviser), broker-dealers, and other
institutions (a "Participating Organization") for distribution and/or
shareholder service assistance pursuant to an agreement between BISYS and the
Participating Organization. Under the Plan, a Participating Organization may
include BISYS, its subsidiaries, and its affiliates.
As authorized by the Plan, BISYS has entered into Rule 12b-1 Agreements
with Commerce Investment Corporation, a wholly owned subsidiary of the Adviser
("C.I.C."), to provide certain distribution and shareholder services in
connection with the distribution of the Shares of each of the Funds including,
but not limited to, maintaining Shareholder relations, answering questions about
the Funds and distributing prospectuses to persons other than Shareholders of
the Funds. In consideration of such services BISYS has agreed to pay C.I.C. a
monthly fee, computed at the annual rate of .25% of the average aggregate net
asset value of Shares held during the period in accounts for which C.I.C.
provided services under such Agreement. BISYS will be compensated by each Fund
in an amount equal to its payments to C.I.C. under the Rule 12b-1 Agreement with
respect to that Fund. Such fee may exceed the actual costs incurred by C.I.C. in
providing such services.
The Group has also entered into Rule 12b-1 Agreements with BISYS pursuant
to which BISYS has agreed to provide certain distribution and shareholder
support services to the Funds and their Shareholders, including, but not limited
to, maintaining Shareholder relations, advertising and marketing the Shares of
the Funds, answering questions about the Funds, distributing prospectuses to
persons other than Shareholders of the Funds, and providing such other services
as a Fund may reasonably request. In consideration of such services, the Group
has agreed to pay BISYS a monthly fee, computed at the annual rate of .25% of
the average aggregate net asset value of Shares held during the period in client
accounts for which BISYS has provided services under this Rule 12b-1 Agreement.
Such fee may exceed the actual costs incurred by BISYS in providing such
services.
In addition, BISYS may enter into, from time to time, other Rule 12b-1
Agreements with selected dealers pursuant to which such dealers will provide
certain services in connection with the distribution of a Fund's Shares such as
those described above.
ADMINISTRATIVE SERVICES PLAN
The Group has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which each Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Adviser, its correspondent and affiliated banks, and BISYS, which agree to
provide certain ministerial, record keeping and/or administrative support
services for their customers or account holders (collectively, "customers") who
are the beneficial or record owner of Shares of that Fund. In consideration for
such services, a Service Organization receives a fee from a Fund, computed daily
and paid monthly, at an annual rate of up to .25% of the average daily net asset
value of Shares of that Fund owned beneficially or of record by such Service
Organization's customers for whom the Service Organization provides such
services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Funds,
such as processing dividend and distribution payments from the Fund on behalf of
customers, providing periodic statements to customers showing their positions in
the Shares of the Fund, providing sub-accounting with respect to Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Shares of the Fund pursuant to specific
or pre-authorized instructions.
As authorized by the Services Plan, the Group has entered into Servicing
Agreements with the Adviser pursuant to which the Adviser has agreed to provide
certain administrative support services in connection with Shares of the Funds
owned of record or beneficially by its customers. Such administrative support
services may include, but are not limited to, (i) processing dividend and
distribution payments from a Fund on behalf of customers; (ii) providing
periodic statements to its customers showing their positions in the Shares;
41
<PAGE> 44
(iii) arranging for bank wires; (iv) responding to routine customer inquiries
relating to services performed by the Adviser; (v) providing sub-accounting with
respect to the Shares beneficially owned by the Adviser's customers or the
information necessary for sub-accounting; (vi) if required by law, forwarding
shareholder communications from a Fund (such as proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to its customers; (vii) aggregating and processing purchase, exchange,
and redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Shares pursuant to specific or
pre-authorized instructions. In consideration of such services, the Group, on
behalf of each Fund, has agreed to pay the Adviser a monthly fee, computed at
the annual rate of twenty-five one-hundredths of one percent (.25%) of the
average aggregate net asset value of Shares of that Fund held during the period
by customers for whom the Adviser has provided services under the Servicing
Agreement.
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 and administrative support services
contemplated by the servicing agreements 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 and its servicing
agreements with the Group. C.I.C. believes that it possesses the legal authority
to perform its distribution services as set forth in the Rule 12b-1 Agreements
with BISYS, as described above, without violation of applicable banking laws and
regulations, and has so represented in such Rule 12b-1 Agreements. 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 and C.I.C. 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, The KeyPremier Established Growth Fund, The KeyPremier Intermediate Term
Income 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.
Shareholders are entitled to one vote for each dollar of value invested and
a proportionate fractional vote for any fraction of a dollar invested, and will
vote in the aggregate and not by series except as otherwise expressly required
by law. For example, Shareholders of each Fund will vote in the aggregate with
other shareholders of the Group with respect to the election of trustees.
However, Shareholders of a Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of that Fund's
investment advisory agreement and the Plan.
Overall responsibility for the management of the Funds is vested in the
Board of Trustees of the Group. See "MANAGEMENT OF THE GROUP -- Trustees of the
Group." Individual Trustees are elected by the shareholders of the Group and may
be removed by the 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.
42
<PAGE> 45
An annual or special meeting of shareholders to conduct necessary business
is not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, amend the Declaration of
Trust, the investment advisory agreement, the Plan or a Fund's fundamental
policies and to satisfy certain other requirements. To the extent that such a
meeting is not required, the Group does not intend to have an annual or special
meeting.
The Group has represented to the Commission that the Trustees will call a
special meeting of shareholders for purposes of considering the removal of one
or more Trustees upon written request therefor from shareholders holding not
less than 10% of the outstanding votes of the Group. At such a meeting, a quorum
of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
As of October 4, 1996, the Adviser possessed, on behalf of its underlying
accounts, voting or investment power with respect to more than 25% of the
outstanding Shares of each of the Funds and therefore may be presumed to control
each of the Funds within the meaning of the 1940 Act.
CUSTODIAN
National City Bank serves as the custodian for each of the Funds.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services Ohio, 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 Ohio, Inc.
also provides certain accounting services for each Fund pursuant to a Fund
Accounting Agreement and receives a fee for such services equal to the greater
of (a) a fee computed at an annual rate of 0.03% of that Fund's average daily
net assets on (b) the annual fee of $30,000 ($40,000 with respect to the
Tennessee Fund). See "MANAGEMENT OF THE GROUP -- Transfer Agency and Fund
Accounting Services" in the Statement of Additional Information for further
information.
While BISYS Fund Services Ohio, Inc. is a distinct legal entity from BISYS
(the Group's administrator and distributor), BISYS Fund Services Ohio, Inc. is
considered to be an affiliated person of BISYS under the 1940 Act due to, among
other things, the fact that BISYS Fund Services Ohio, Inc. is owned by the same
entity that owns BISYS.
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 the fund upon
the issuance or sale of shares in that fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Group not readily identified as belonging to a particular fund
that are allocated to the fund by the Group's Board of Trustees. The Board of
Trustees may allocate such general assets in any manner it deems fair and
equitable. Determinations by the Board of Trustees of the Group as to the timing
of the allocation of general liabilities and expenses and as to the timing and
allocable portion of any general assets with respect to a Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of a Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of that Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of Shareholders of that Fund.
Inquiries regarding any of the Funds may be directed in writing to the
Group at 3435 Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800)
874-8376.
43
<PAGE> 46
INVESTMENT ADVISER
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
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
<PAGE> 47
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
Each an Investment Portfolio of
THE SESSIONS GROUP
Statement of Additional Information
October 31, 1996
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus (the "Prospectus") of Riverside Capital Money
Market Fund (the "Money Market Fund"), Riverside Capital Value Equity Fund (the
"Value Fund"), Riverside Capital Fixed Income Fund (the "Fixed Income Fund"),
Riverside Capital Tennessee Municipal Obligations Fund (the "Tennessee Fund"),
Riverside Capital Low Duration Government Securities Fund (the "Government
Securities Fund") and Riverside Capital Growth Fund (the "Growth Fund") (the
Money Market Fund, the Value Fund, the Fixed Income Fund, the Tennessee Fund,
the Government Securities Fund and the Growth Fund are hereinafter collectively
referred to as the "Funds" and individually as a "Fund"), dated the date hereof.
The Funds are six funds of The Sessions Group (the "Group"). This Statement of
Additional Information is incorporated in its entirety into the Prospectus.
Copies of the Prospectus may be obtained by writing the Group at 3435 Stelzer
Road, Columbus, Ohio 43219, or by telephoning toll free (800) 874-8376.
<PAGE> 48
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-3
Portfolio Turnover ........................................... B-8
NET ASSET VALUE .................................................... B-18
Valuation of the Money Market Fund ........................... B-19
Valuation of the Other Funds ................................. B-20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION ..................... B-20
MANAGEMENT OF THE GROUP ............................................ B-20
Trustees and Officers ........................................ B-20
Investment Adviser ........................................... B-23
Portfolio Transactions ....................................... B-25
Glass-Steagall Act ........................................... B-27
Administrator ................................................ B-28
Expenses ..................................................... B-31
Distributor .................................................. B-31
Administrative Services Plan ................................. B-34
Custodian .................................................... B-35
Transfer Agency and Fund Accounting Services ................. B-35
Auditors ..................................................... B-37
Legal Counsel ................................................ B-37
ADDITIONAL INFORMATION ............................................. B-37
Description of Shares ........................................ B-37
Vote of a Majority of the Outstanding Shares ................. B-39
Additional Tax Information ................................... B-39
Seven-Day Yield of the Money Market Fund ..................... B-45
Yields of the Other Funds .................................... B-46
Tax-Free vs. Taxable Income .................................. B-47
Calculation of Total Return .................................. B-48
Distribution Rates ........................................... B-49
Performance Comparisons ...................................... B-49
Miscellaneous ................................................ B-50
FINANCIAL STATEMENTS ............................................... B-53
APPENDIX ........................................................... A-1
- i -
<PAGE> 49
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, six of
which are described in this Statement of Additional Information. Five of the
portfolios described herein are diversified portfolios and the one other is a
non-diversified portfolio. The five diversified portfolios are Riverside Capital
Money Market Fund (the "Money Market Fund"), Riverside Capital Value Equity Fund
(the "Value Fund"), Riverside Capital Fixed Income Fund (the "Fixed Income
Fund"), Riverside Capital Low Duration Government Securities Fund (the
"Government Securities Fund") and Riverside Capital Growth Fund (the "Growth
Fund"), and the one non-diversified portfolio is Riverside Capital Tennessee
Municipal Obligations Fund (the "Tennessee Fund") (the Money Market Fund, the
Value Fund, the Fixed Income Fund, the Government Securities Fund, the Growth
Fund and the Tennessee Fund are hereinafter collectively referred to as the
"Funds" and individually as a "Fund").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are defined in such Prospectus. No
investment in Shares of a Fund should be made without first reading the
Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
The following policies supplement the investment objective and policies of
each Fund as set forth in the Prospectus for such Fund.
Bank Obligations. Each of Funds 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
<PAGE> 50
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.
The Money Market Fund, the Value Fund, the Fixed Income Fund, the
Government Securities Fund and the Growth Fund may each also invest in
Eurodollar Certificates of Deposit, which are U.S. dollar denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Yankee Certificates of Deposit, which are
certificates of deposit issued by a U.S. branch of a foreign bank denominated in
U.S. dollars and held in the United States; Eurodollar Time Deposits ("ETDs"),
which are U.S. dollar denominated deposits in a foreign branch of a U.S. bank or
a foreign bank; and Canadian Time Deposits, which are basically the same as ETDs
except they are issued by Canadian offices of major Canadian banks.
Commercial Paper. Commercial paper consists of unsecured promissory notes
issued by corporations. Except as noted below 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 Money Market Fund will purchase commercial paper consisting of issues
rated at the time of purchase by one or more appropriate nationally recognized
statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations. The Money Market Fund may also invest in
commercial paper that is not rated but that is determined by the Adviser, under
guidelines established by the Group's Board of Trustees, to be of comparable
quality to instruments that are rated high quality 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. The Money
Market Fund may also invest, subject to the foregoing quality criteria, in
Canadian Commercial Paper, which is commercial paper issued by a Canadian
corporation or a Canadian counterpart of a U.S. corporation ("CCP"), and in
Europaper, which is U.S. dollar denominated commercial paper of a foreign
issuer.
The Value Fund, the Fixed Income Fund and the Tennessee Fund may invest in
commercial paper which need not be rated by any NRSRO or, if rated, may be rated
in any rating category. The Government
B-2
<PAGE> 51
Securities Fund and the Growth Fund may invest in commercial paper which need
not be rated by an NRSRO or, if rated, is rated in any of the highest three
rating categories assigned by NRSROs. In general, investment in lower-rated
instruments is more risky than investment in instruments in higher-rated
categories. The Value Fund, the Fixed Income Fund, the Tennessee Fund and the
Growth Fund may also invest in CCP and in Europaper, subject to their respective
quality criteria for commercial paper as described above.
Variable Amount Master Demand Notes. Variable amount master demand notes,
in which the Money Market Fund, the Value Fund, the Fixed Income Fund, the
Government Securities Fund and the Growth Fund may invest, are unsecured demand
notes that permit the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate according to the terms of the instrument.
Because master demand notes are direct lending arrangements between a Fund and
the issuer, they are not normally traded. Although there is no secondary market
in the notes, a Fund may demand payment of principal and accrued interest at any
time within 30 days. While such notes are not typically rated by credit rating
agencies, variable amount master demand notes (the issuers of which are normally
manufacturing, retail, financial and other business concerns) must be determined
by the Adviser to be of comparable quality to commercial paper in which such
Fund may invest. 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 earlier 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 and
securities purchased on foreign securities exchanges, may subject the Funds to
investment risks that differ in some respects from those related to investment
in obligations of U.S. domestic issuers or in U.S. securities markets. Such
risks include future adverse political and economic developments, possible
seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. A Fund will acquire such securities only when the
Adviser believes the risks associated with such investments are minimal.
B-3
<PAGE> 52
U.S. Government Obligations. Each Fund may invest in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. Treasury; others are
supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored agencies or
instrumentalities if it is not obligated to do so by law.
Exempt Securities. As stated in the Prospectus, the assets of the
Tennessee Fund will be primarily invested in Exempt Securities. Under normal
market conditions, at least 80% of the net assets of the Tennessee Fund will be
invested in Exempt Securities and 65% of such Fund's net assets will be invested
in Tennessee Exempt Securities.
Exempt Securities include debt obligations issued by governmental entities
to obtain funds for various public purposes, such as the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Exempt Securities if the interest paid thereon is
exempt from both Tennessee income taxes and federal taxes, although such
interest may be treated as a preference item for purposes of the federal
alternative minimum tax.
Among other types of Exempt Securities, the Tennessee Fund may purchase
short-term General Obligation Notes, Tax Anticipation Notes, Bond Anticipation
Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt Commercial Paper,
Construction Loan Notes and other forms of short-term tax-exempt loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements or other revenues. In addition,
the Tennessee Fund may invest in other types of tax-exempt instruments, such as
municipal bonds, private activity bonds, and pollution control bonds.
Project Notes are issued by a state or local housing agency and are sold
by the Department of Housing and Urban Development. While the issuing agency has
the primary obligation with respect to its Project Notes, they are also secured
by the full faith and credit of the United States through agreements with the
issuing authority which provide that, if required, the federal government
B-4
<PAGE> 53
will lend the issuer an amount equal to the principal of and interest on the
Project Notes.
As described in the Prospectus, the two principal classifications of
Exempt Securities consist of "general obligation" and "revenue" issues. The
Tennessee Fund may also acquire "moral obligation" issues, which are normally
issued by special purpose authorities. There are, of course, variations in the
quality of Exempt Securities, both within a particular classification and
between classifications, and the yields on Exempt Securities depend upon a
variety of factors, including the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation and the rating of the issue. Ratings represent the
opinions of an NRSRO as to the quality of Exempt Securities. It should be
emphasized, however, that ratings are general and are not absolute standards of
quality, and Exempt Securities with the same maturity, interest rate and rating
may have different yields, while Exempt Securities of the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
purchase, an issue of Exempt Securities may cease to be rated or its rating may
be reduced below the minimum rating required for purchase. The Adviser will
consider such an event in determining whether the Tennessee Fund should continue
to hold the obligation.
An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.
Variable and Floating Rate Notes. The Money Market Fund, the Tennessee
Fund, the Government Securities Fund and the Growth Fund may acquire variable
and floating rate notes, subject to such Fund's investment objectives, policies
and restrictions. A variable rate note is one whose terms provide for the
adjustment of its interest rate on set dates and which, upon such adjustment,
can reasonably be expected to have a market value that approximates its par
value. A floating rate note is one whose terms provide for the adjustment of its
interest rate whenever a specified interest rate changes and which, at any time,
can reasonably be expected to have a market value that approximates its par
value. Such notes are frequently not rated by credit rating agencies; however,
unrated variable and floating rate notes purchased by such Funds will be
B-5
<PAGE> 54
determined by the Adviser under guidelines established by the Group's Board of
Trustees to be of comparable quality at the time of purchase to rated
instruments eligible for purchase under that particular Fund's investment
policies. In making such determinations, the Adviser will consider the earning
power, cash flow and other liquidity ratios of the issuers of such notes (such
issuers include financial, merchandising, bank holding and other companies) and
will continuously monitor their financial condition. Although there may be no
active secondary market with respect to a particular variable or floating rate
note purchased by a Fund, the Fund may attempt to resell the note at any time to
a third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of a variable or floating rate note in the event
the issuer of the note defaulted on its payment obligations and the Fund could,
as a result or for other reasons, suffer a loss to the extent of the default. To
the extent that there exists no readily available market for such note and a
Fund is not entitled to receive the principal amount of a note within seven
days, such a note will be treated as an illiquid security for purposes of
calculation of such Fund's limitation on investments in illiquid securities, as
set forth in the respective Fund's investment restrictions. Variable or floating
rate notes may be secured by bank letters of credit.
Variable or floating rate notes invested in by the Money Market Fund may
have maturities of more than 397 days, as follows:
1. An instrument that is issued or guaranteed as to principal or interest
by the United States Government or any instrumentality thereof which has a
variable rate of interest readjusted no less frequently than every 762 days will
be deemed by the Money Market Fund to have a maturity equal to the period
remaining until the next readjustment of the interest rate.
2. A variable rate note, the principal amount of which is scheduled in
accordance with the terms of the instrument to be paid unconditionally in 397
calendar days or less, will be deemed by the Money Market Fund to have a
maturity equal to the period remaining until the next readjustment of the
interest rate.
3. A variable rate note that is subject to a demand feature will be deemed
by the Money Market Fund to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.
4. A floating rate note that is subject to a demand feature will be deemed
by the Money Market Fund to have a maturity equal to the period remaining until
the principal amount can be recovered through demand.
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As used above, a note is "subject to a demand feature" where the Money
Market Fund is entitled to receive the principal amount of the note either at
any time on no more than thirty days' notice or at specific intervals not
exceeding 397 days and upon no more than 30 days' notice.
Restricted Securities. Securities in which the Fixed Income and Tennessee
Funds may invest include securities issued by corporations without registration
under the Securities Act of 1933, as amended (the "1933 Act"), such as
securities issued in reliance on the so-called "private placement" exemption
from registration which is afforded by Section 4(2) of the 1933 Act ("Section
4(2) securities"). Section 4(2) securities are restricted as to disposition
under the Federal securities laws, and generally are sold to institutional
investors such as the Funds who agree that they are purchasing the securities
for investment and not with a view to public distribution. Any resale must also
generally be made in an exempt transaction. Section 4(2) securities are normally
resold to other institutional investors through or with the assistance of the
issuer or investment dealers who make a market in such Section 4(2) securities,
thus providing liquidity. Any such restricted securities will be considered to
be illiquid for purposes of a Fund's limitations on investments in illiquid
securities unless, pursuant to procedures adopted by the Board of Trustees of
the Group, the Adviser has determined such securities to be liquid because such
securities are eligible for resale under Rule 144A under the 1933 Act and are
readily saleable. The Fixed Income Fund and the Tennessee Fund will each limit
its investment in Section 4(2) securities to not more than 5% of its net assets.
Compliance with such limitation will be measured as of the time of purchase.
Options Trading. Each of the Funds, other than the Money Market Fund, may
purchase put and call options. A put option gives the purchaser the right to
sell the underlying security at the stated exercise price at any time prior to
the expiration date of the option, regardless of the market price of the
security. A call option gives the purchaser of the option the right to buy, and
a writer has the obligation to sell, the underlying security at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is
consideration for undertaking the obligations under the option contract. Put and
call options purchased by the Funds will be valued at the last sale price, or in
the absence of such a price, at the mean between bid and asked price.
When a Fund writes a call option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred
B-7
<PAGE> 56
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.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreements with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium guarantees and security, are set by negotiation of the parties.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, such Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. A Fund will engage in OTC option transactions only with
Counterparties that the Adviser considers to present minimal credit risks under
guidelines to be established by the Group's Board of Trustees. To the extent
that there is no readily available market for any such OTC options, such options
and portfolio securities "covering" the amount of such Fund's obligation
pursuant to an OTC option sold by it (the cost of the sell-back plus the
in-the-money amount, if any) are deemed to be illiquid, and are subject to such
Fund's limitation on investing in illiquid securities.
Puts. The Tennessee Fund may also acquire "puts" with respect to Exempt
Securities held in its portfolio. A put is a right to sell a specified security
(or securities) within a specified period of time at a specified exercise price.
The Tennessee Fund may sell, transfer, or assign a put only in conjunction with
the sale, transfer, or assignment of the underlying security or securities.
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The amount payable to the Tennessee Fund upon its exercise of a "put" is
normally (i) the Tennessee Fund's acquisition cost of the Exempt Securities
(excluding any accrued interest which the Tennessee Fund paid on the
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Tennessee Fund owned the
securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period.
Puts may be acquired by the Tennessee Fund to facilitate the liquidity of
its portfolio assets. Puts may also be used to facilitate the reinvestment of
the Tennessee Fund's assets at a rate of return more favorable than that of the
underlying security. Puts may, under certain circumstances, also be used to
shorten the maturity of underlying variable rate or floating rate securities for
purposes of calculating the remaining maturity of those securities.
The Tennessee Fund expects that it will generally acquire puts only where
the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Tennessee Fund may pay
for puts either separately in cash or by paying a higher price for portfolio
securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
The Tennessee Fund intends to enter into puts only with dealers, banks,
and broker-dealers which, in the Adviser's opinion, present minimal credit
risks.
When-Issued Securities. As discussed in the Prospectus, each of the Funds,
other than the Money Market 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 such a Fund agrees to purchase securities on a "when-issued"
basis, the Fund's custodian will set aside cash or liquid portfolio securities
equal to the amount of the commitment in a separate account. Normally, the
Fund's custodian will set aside portfolio securities to satisfy the purchase
commitment, and in such a case, 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 the Fund's commitment. It may be
expected that the Fund's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase commitments than when it
sets aside cash. In addition, because a Fund will set aside cash or liquid
portfolio securities to satisfy its purchase commitments in the manner described
above, such Fund's liquidity and the ability of the Adviser to manage it might
be affected in the event its commitments to purchase "when- issued" securities
ever exceeded 25% of the value of its total assets. Under normal market
conditions, however, a Fund's
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commitment to purchase "when-issued" or "delayed-delivery" securities will not
exceed 25% of the value of its total assets.
When a Fund engages in "when-issued" transactions, it relies on the seller
to consummate the trade. Failure of the seller to do so may result in such
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous. Such Funds will engage in "when-issued" or "delayed
delivery" transactions only for the purpose of acquiring portfolio securities
consistent with the Funds' investment objectives and policies and not for
investment leverage. If the Tennessee Fund sells a "when- issued" or
"delayed-delivery" security before delivery, any gain would not be tax-exempt.
Mortgage-Related Securities. Each of the Value Fund, the Fixed Income
Fund, the Government Securities Fund and the Growth Fund may, consistent with
its investment objective and policies, invest in mortgage-related securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Mortgage-related securities, for purposes of the Prospectus and this
Statement of Additional Information, represent pools of mortgage loans assembled
for sale to investors by various governmental agencies such as the Government
National Mortgage Association and government-related organizations such as the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by nongovernmental issuers such as commercial banks,
savings and loan institutions, mortgage bankers and private mortgage insurance
companies. Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If a 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 such Funds. In addition, regular payments received in
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respect of mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Funds will receive when these
amounts are reinvested.
The Fixed Income Fund may invest up to 10% of its net assets in
mortgage-related securities which are collateralized mortgage obligations
structured on pools of mortgage pass-through certificates or mortgage loans.
Mortgage-related securities will be purchased only if rated in the three highest
bond rating categories assigned by one or more appropriate NRSROs, or, if
unrated, which the Adviser deems to be of comparable quality.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Mortgage- related securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates (also known
as "Fannie Maes") which are solely the obligations of the FNMA and are not
backed by or entitled to the full faith and credit of the United States. The
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). The FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying mortgage loans. When
the FHLMC does not guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable.
Repurchase Agreements. Securities held by each of the Funds may be subject
to repurchase agreements. Under the terms of a
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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 holding such obligation would suffer a loss to the extent that the proceeds
from a sale of the underlying portfolio securities were less than the repurchase
price under the agreement, or to the extent that the disposition of such
securities by the Fund were delayed pending court action. Additionally, there is
no controlling legal precedent confirming that a Fund would be entitled, as
against a claim by such seller or its receiver or trustee in bankruptcy, to
retain the underlying securities, although the Group believes that, under the
regular procedures normally in effect for custody of a Fund's securities subject
to repurchase agreements and under federal laws, a court of competent
jurisdiction would rule in favor of the Group if presented with the question.
Securities subject to repurchase agreements will be held by that Fund's
custodian or another qualified custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectus, each of the
Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with that Fund's investment restrictions.
Pursuant to such agreements, a Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase the
securities at a mutually agreed-upon date and price. Each Fund intends to enter
into reverse repurchase agreements only to avoid otherwise selling securities
during unfavorable market conditions to meet redemptions. At the time a Fund
enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. Government securities or other liquid,
high grade debt securities consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is
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obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
Guaranteed Investment Contracts. The Money Market Fund and the Fixed
Income Fund may each invest in guaranteed investment contracts ("GICs") issued
by insurance companies. Pursuant to such contracts, a Fund makes cash
contributions to a deposit fund of the insurance company's general account. The
insurance company then credits to the deposit fund on a monthly basis guaranteed
interest which is based on an index. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. The insurance company may
assess periodic charges against a GIC for expense and service costs allocable to
it, and the charges will be deducted from the value of the deposit fund. The
Money Market Fund and the Fixed Income Fund will only purchase a GIC when the
Adviser has determined that the GIC presents minimal credit risks to that Fund
and is of comparable quality to instruments that are rated high quality by a
nationally recognized statistical rating organization having the characteristics
described above. Because such Funds may not receive the principal amount of a
GIC from the insurance company on seven days' notice or less, the GIC is
considered an illiquid investment, and, together with other instruments in the
Fund which are not readily marketable, will not exceed such Fund's limitation on
its investments in illiquid securities. The Money Market Fund will not purchase
a GIC with a term of more than one year. In determining average weighted
portfolio maturity, a GIC will be deemed to have a maturity equal to the earlier
of the period of time remaining until the next readjustment of the guaranteed
interest rate or the period of time before the Fund can receive the principal
upon demand.
Investment Restrictions
Each Fund's investment objective is a fundamental policy and may not be
changed without a vote of the holders of a majority of such Fund's outstanding
Shares. In addition, the following investment restrictions may be changed with
respect to a particular Fund only by a vote of the majority of the outstanding
Shares of that Fund (as defined under "ADDITIONAL INFORMATION - Vote of a
Majority of the Outstanding Shares").
In addition to the investment restrictions set forth in the Prospectus,
each of the Money Market Fund, the Value Fund, the Fixed Income Fund and the
Tennessee Fund may not:
1. Purchase securities on margin, except, with respect to the Value Fund,
the Fixed Income Fund and the Tennessee Fund, for use of short-term credit
necessary for clearance of purchases of portfolio securities;
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2. Engage in any short sales;
3. Underwrite the securities issued by other persons, except to the extent
that a Fund may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities" acquired in accordance with such
Fund's investment objectives and policies; and
4. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities are not prohibited by this
restriction).
In addition, the Money Market Fund may not:
1. Purchase or sell commodities, commodity contracts (including futures
contracts), or oil, gas or mineral exploration or development programs (although
investments in marketable securities of companies engaged in such activities are
not prohibited by this restriction);
2. Write or purchase put or call options;
3. Invest in any issuer for purposes of exercising control or management;
4. Purchase or retain securities of any issuer if the officers or Trustees
of the Group or the officers or directors of its investment adviser owning
beneficially more than one-half of 1% of the securities of such issuer together
own beneficially more than 5% of such securities;
5. Invest more than 10% of total assets in the securities of issuers which
together with any predecessors have a record of less than three years of
continuous operation.
Each of the Value Fund and the Fixed Income Fund may not:
1. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the Funds;
2. Purchase participations or direct interests in oil, gas or other
mineral exploration or development programs (although investments by such Funds
in marketable securities of companies engaged in such activities are not
prohibited in this restriction);
3. Purchase or retain the securities of an issuer if, to the knowledge of
the Fund's management, the officers or trustees of the Group, and the officers
or directors of the investment adviser, who each owns beneficially more than .5%
of the outstanding securities
B-14
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of such issuer, together own beneficially more than 5% of such securities;
4. Invest more than 5% of total assets in puts, calls, straddles, spreads
or any combination thereof; and
5. Invest more than 5% of net assets in warrants valued at the lower of
cost or market; provided that included within that amount, but not to exceed 2%
of net assets, may be warrants which are not listed on the New York or American
Stock Exchange. For the purposes of this restriction, warrants acquired in units
or attached to securities are deemed to be without value.
The Tennessee Fund may not:
1. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of such Fund.
Each of the Government Securities Fund and the Growth 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 a Fund may be deemed to be an underwriter under certain securities laws in
the disposition of "restricted securities";
3. Purchase or sell commodities or commodity contracts, except to the
extent disclosed in the current Prospectus of the Fund; and
4. 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).
The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of a Fund.
The Money Market Fund may not:
1. Invest in securities of other investment companies, except as such
securities may be acquired as part of a merger, consolidation, reorganization,
or acquisition of assets; and
2. Buy common stocks or voting securities.
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Each of the Equity Fund and the Fixed Income Fund may not:
1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
such Fund may invest in other investment companies, including other funds for
which the investment adviser acts as adviser, as specified in their respective
prospectuses, if, at the time of purchase (i) the acquiring Fund will own no
more than 3% of the shares of the investment company selling such shares, (ii)
the value of the investment company shares acquired, when aggregated with the
value of other shares of such investment company held by the acquiring Fund,
does not exceed 5% of the total assets of the acquiring Fund, and (iii) the
value of the investment company shares acquired, when aggregated with the value
of any other shares of investment companies held by the acquiring Fund, does not
exceed 10% of the total assets of the acquiring Fund.
The Tennessee Fund, the Government Securities Fund and the Growth Fund may
not:
1. Purchase participations or direct interests in oil, gas or other
mineral exploration or development programs (although investments by such Fund
in marketable securities of companies engaged in such activities are not
prohibited in this restriction);
2. 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; and
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.
Finally, each of the Government Securities Fund and the Growth Fund may
not:
1. Engage in any short sales;
2. Invest more than 10% of total assets in the securities of the issuers,
which together with any predecessors, have a record of less than three years of
continuous operation; and
3. Mortgage or hypothecate the Fund's assets in excess of one third of the
Fund's total assets.
The Group, on behalf of each of the Government Securities Fund and the
Growth Fund, has represented to the Arkansas Securities Department that each
such Fund will: (1) limit its investments to
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no more than 10% of the Fund's total assets in the securities of issuers which
are restricted as to disposition, other than restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933; (2) limit its
investments to no more than 5% of the Fund's total assets (other than
obligations issued or guaranteed by the U.S Government or any foreign
government, their agencies or instrumentalities) in securities of issuers which
at the time of purchase had been in operation for less than three years (for
this purpose, the period of operation of any issuer shall include the period of
operation of any predecessor or unconditional guarantor of such issuer); (3)
limit its investments to no more than 5% of the Fund's total assets in initial
margin deposits and premiums on options (including without limitation puts,
calls, straddles, spreads or any combination thereof); and (4) with respect to
the Equity-Municipal Fund only, not currently invest in commodities or commodity
futures contracts.
In addition, the Group, on behalf of each of the Government Securities
Fund and the Growth Fund, has represented to the Texas State Securities Board
that each such Fund will not invest more than 5% of its net assets in warrants
valued at the lower of cost or market, provided, that included within that
amount, but not to exceed 2% of net assets, may be warrants which are not listed
on the New York or American Stock Exchanges. For purposes of this restriction,
warrants acquired in units or attached to securities are deemed to be without
value.
In addition, the Group has represented to the Texas State Securities Board
on behalf of each of the Money Market Fund, the Government Securities Fund and
the Growth Fund that such Funds will not invest in oil, gas or mineral leases or
purchase or sell real property (including limited partnership interests, but
excluding readily marketable securities of companies which invest in real
estate). The Group intends to comply with these representations with respect to
a Fund for so long as such representations are required by the State of Texas.
If any percentage restriction or requirement described above is satisfied
at the time of investment, a later increase or decrease in such percentage
resulting from a change in asset value will not constitute a violation of such
restriction or requirement. However, should a change in net asset value or other
external events cause a Fund's investments in illiquid securities, repurchase
agreements with maturities in excess of seven days and other instruments in such
Fund which are not readily marketable to exceed the limit set forth in such
Fund's Prospectus for its investment in illiquid securities, the Fund will act
to cause the aggregate amount of such securities to come within such limit as
soon as reasonably practicable. In such an event, however, such
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Fund would not be required to liquidate any portfolio securities where the Fund
would suffer a loss on the sale of such securities.
Portfolio Turnover
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Because the Money Market Fund intends to invest entirely in securities
with maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover with respect to the Money Market Fund is expected to be zero
percent for regulatory purposes. The portfolio turnover rates for each of the
other Funds for the fiscal years ended June 30, 1996 and 1995, were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Value Fund 27.89% 35.64%
Fixed Income Fund 363.84 223.29
Tennessee Fund 60.76 62.59
Government Securities
Fund 20.87 34.47
Growth Fund 31.22 29.36
</TABLE>
The portfolio turnover rate may vary greatly from year to year as well as
within a particular year, and may also be affected by cash requirements for
redemptions of Shares. High portfolio turnover rates will generally result in
higher transaction costs, including brokerage commissions, to a Fund and may
result in additional tax consequences to a Fund's Shareholders. Portfolio
turnover will not be a limiting factor in making investment decisions.
The portfolio turnover rate for the Fixed Income Fund increased during the
fiscal year ended June 30, 1996, from the prior fiscal year due to the
Adviser's change of focus towards more U.S. Government agency securities and a
change in the Fixed Income Fund's average duration.
NET ASSET VALUE
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As indicated in the Prospectus, the net asset value of each Fund is
determined and the Shares of each Fund are priced as of the Valuation Time or
Times (in the case of the Money Market Fund) on each Business Day of that Fund.
A "Business Day" of a Fund is a day on which the New York Stock Exchange is open
for trading and any other day (other than a day on which no Shares of that Fund
are tendered for redemption and no order to purchase any Shares of that Fund is
received) during which there is sufficient trading in portfolio instruments that
such Fund's net asset value per share might be materially affected. The New York
Stock Exchange will not open in observance of the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
Valuation of the Money Market Fund
The Money Market Fund has elected to use the amortized cost method of
valuation pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. This method may result in
periods during which value, as determined by amortized cost, is higher or lower
than the price the Money Market Fund would receive if it sold the instrument.
The value of securities in the Money Market Fund can be expected to vary
inversely with changes in prevailing interest rates.
Pursuant to Rule 2a-7, the Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to the Money Market
Fund's objective of maintaining a stable net asset value per share, provided
that the Money Market Fund will not purchase any security with a remaining
maturity of more than 397 days (thirteen months) (securities subject to
repurchase agreements may bear longer maturities) nor maintain a dollar-weighted
average portfolio maturity which exceeds 90 days. The Group's Board of Trustees
has also undertaken to establish procedures reasonably designed, taking into
account current market conditions and the investment objective of the Money
Market Fund, to stabilize the net asset value per share of the Money Market Fund
for purposes of sales and redemptions at $1.00. These procedures include review
by the Trustees, at such intervals as they deem appropriate, to determine the
extent, if any, to which the net asset value per share of the Money Market Fund
calculated by using available market quotations deviates from $1.00 per Share.
In the event such deviation exceeds one-half of one percent, Rule 2a-7 requires
that the Board of Trustees promptly consider what action, if any, should be
initiated. If the Trustees believe that the extent of any deviation from the
Money Market Fund's $1.00 amortized cost price per Share may result in material
dilution or other unfair results to new or existing investors, they will take
such steps as they
B-19
<PAGE> 68
consider appropriate to eliminate or reduce, to the extent reasonably
practicable, any such dilution or unfair results. These steps may include
selling portfolio instruments prior to maturity, shortening the average
portfolio maturity, withholding or reducing dividends, reducing the number of
the Money Market Fund's outstanding Shares without monetary consideration, or
utilizing a net asset value per share determined by using available market
quotations.
Valuation of the Other Funds
Investments in securities for which market quotations are readily
available are valued based upon their current available prices in the principal
market in which such securities are normally traded. Unlisted securities for
which market quotations are readily available are valued at such market value.
Securities and other assets for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the
Trustees of the Group. Short-term securities (i.e., with maturities of 60 days
or less) are valued at either amortized cost or original cost plus accrued
interest, which approximates current value.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each of the Funds are sold on a continuous basis by BISYS, and
BISYS has agreed to use appropriate efforts to solicit all purchase orders. In
addition to purchasing Shares directly from BISYS, Shares may be purchased
through procedures established by BISYS in connection with the requirements of
accounts at the Adviser or the Adviser's affiliated entities (collectively,
"Entities"). Customers purchasing Shares of the Funds may include officers,
directors, or employees of the Adviser or the Entities.
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension, or
(d) an emergency exists as a result of which (i) disposal by the Group of
securities owned by it is not reasonably practical, or (ii) it is not reasonably
practical for the Group to determine the fair value of its net assets.
B-20
<PAGE> 69
MANAGEMENT OF THE GROUP
Trustees and Officers
Overall responsibility for management of the Group rests with its Board of
Trustees. 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:
Position(s) Held Principal Occupation
Name and Address With the Group During Past 5 Years
- ---------------- ---------------- --------------------
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 July, 1990,
3435 Stelzer Road Secretary employee of BISYS Fund
Columbus, Ohio 43219 Services Limited
Age: 46 Partnership (formerly The
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
Age: 59 Chief Financial Officer,
Battelle Memorial
Institute (scientific
research and development
service corporation).
James H. Woodward, Ph.D. Trustee Since July 1991,
The University of North Chancellor of The
Carolina at Charlotte
Charlotte, NC 28223
B-21
<PAGE> 70
Age: 56 University of North
Carolina at Charlotte.
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, 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
3435 Stelzer Road present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 36 Limited Partnership
(formerly The Winsbury
Company).
Stephen G. Mintos Treasurer From January, 1987 to
3435 Stelzer Road present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 41 Limited 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).
B-22
<PAGE> 71
- -------------------
*Mr. Grimm and Ms. Converse are each considered to be an "interested
person" of the Group as defined in the 1940 Act.
As of the date of this Statement of Additional Information, the Group's
officers and trustees, as a group, own less than 1% of any Fund's Shares.
No officer or employee of BISYS or BISYS Fund Services Ohio, Inc. receives
any compensation from the Group for acting as trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. BISYS receives fees from the Funds for acting as
Administrator and pursuant to the Distribution and Shareholder Service Plan
described below, may receive fees pursuant to the Administrative Services Plan
described below, and may retain all or a portion of any sales charge imposed
upon the purchase of Shares of the Riverside Load Funds. BISYS Fund Services
Ohio, 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, 1996. 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>
Walter B. Grimm $ 0 $ 0
Trustee
Maurice G. Stark $7,772.17 $7,772.17
Trustee
Michael M. VanBuskirk(1) $7,772.17 $7,772.17
Trustee
Chalmers P. Wylie $7,772.17 $7,772.17
Trustee
</TABLE>
B-23
<PAGE> 72
- ---------------
*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.
Ms. Converse and Dr. Woodward were not trustees of the Group during such
fiscal year.
Investment Adviser
Investment advisory and management services are provided to the Funds of
the Group by National Bank of Commerce (the "Adviser"), pursuant to an
Investment Advisory Agreement dated as of July 19, 1988 (with respect to the
Money Market Fund), an Investment Advisory Agreement dated as of September 20,
1991 (with respect to the Equity Fund and the Fixed Income Fund), an Investment
Advisory Agreement dated as of October 27, 1992 (with respect to the Tennessee
Fund), and an Investment Advisory Agreement dated as of April 5, 1994, as
amended as of June 3, 1994 (with respect to the Government Securities Fund and
the Growth Fund) (collectively, the "Investment Advisory Agreement").
Under the Investment Advisory Agreement, the Adviser has agreed to provide
investment advisory services as described in the Prospectus of the Funds. For
the services provided and expenses assumed pursuant to the Investment Advisory
Agreement, (1) the Money Market Fund pays the Adviser a fee computed daily and
paid monthly, at the annual rate of thirty-five one-hundredths of one percent
(.35%) of the average daily net assets of the Money Market Fund; (2) the Value
Fund pays the Adviser a fee equal to the lesser of (a) a fee computed daily and
paid monthly, at an annual rate of one percent (1.00%) of the first $50 million
of the Value Fund's average daily net assets and seventy-five one-hundredths of
one percent (.75%) of the Value Fund's remaining average daily net assets or (b)
such other fee as may be agreed upon in writing by the Adviser and the Group;
(3) each of the Fixed Income Fund and the Tennessee Fund pays the Adviser a fee
equal to the lesser of (a) a fee computed daily and paid monthly, at an annual
rate, calculated as a percentage of the average daily net-assets of that Fund of
sixty-five one-hundredths of one percent (.65%) or (b) such other fee as may be
agreed upon in writing by the Adviser and the Group; (4) the Government
Securities Fund pays the Adviser a fee, computed daily and paid monthly, at the
annual rate of fifty one-hundredths of one percent (.50%) of the average daily
net assets of the Government Securities Fund; and (5) the Growth Fund pays the
Adviser a fee, computed daily and paid monthly, at an annual rate of one percent
(1.00%) of the first $50 million of the Growth Fund's average daily net assets
and seventy-five
B-24
<PAGE> 73
one-hundredths of one percent (.75%) of the Growth Fund's remaining average
daily net assets. The Adviser has in the past and may in the future 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.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Adviser
earned and voluntarily waived the amounts indicated below with respect to its
investment advisory services to the indicated Funds pursuant to the Investment
Advisory Agreement:
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
1996 1995 1994
---- ---- ----
Fees Fees Fees Fees Fees Fees
Earned Waived Earned Waived Earned Waived
-------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund $524,476 -- $549,669 -- $450,877 --
Value Fund 747,594 -- 719,870 -- 689,179 $180,464
Fixed Income
Fund 223,976 -- 268,630 -- 280,642 82,013
Tennessee Fund 129,939 $127,577 127,967 $127,967 139,026 139,026
Government Securities
Fund(1) 38,565 38,565 41,005 41,005 7,280 7,280
Growth Fund(1) 284,790 188,588 118,392 118,392 11,389 11,389
</TABLE>
- ---------------
(1) Commenced operations April 18, 1994.
Unless sooner terminated, the Investment Advisory Agreement continues in
effect from year to year, for successive annual periods ending on March 31, if,
as to each Fund, such continuance is approved at least annually by the Group's
Board of Trustees or by vote of a majority of the outstanding Shares of the
relevant Fund (as defined under "GENERAL INFORMATION - Miscellaneous" in the
Funds' Prospectus), and a majority of the Trustees who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940 Act)
of any party to the Investment Advisory Agreement by votes cast in person at a
meeting called for such purpose. The Investment Advisory Agreement is terminable
as to a Fund at any time on 60 days' written notice without penalty by the
Trustees, by vote of a majority of the outstanding Shares of that Fund, or by
the Adviser. The Investment Advisory Agreement also terminates
B-25
<PAGE> 74
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.
To offset capital losses incurred by the Money Market Fund during the
fiscal year ended June 30, 1995, during the fiscal year ended June 30, 1996, the
Adviser voluntarily contributed $124,984 of its investment advisory fees to the
Money Market Fund. In addition, during the fiscal year ended June 30, 1995, the
Adviser contributed $628,737 to the Money Market Fund. Such contribution
consisted of $97,370 of investment advisory fees and $531,367 representing the
difference between the carrying value and the market value of certain securities
purchased by the Adviser from the Money Market Fund.
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 each Fund's investment objective and restrictions, which
securities are to be purchased and sold by a Fund, and which brokers are to be
eligible to execute such Fund's portfolio transactions. Purchases and sales of
portfolio securities with respect to the Money Market Fund, the Fixed Income
Fund, the Tennessee Fund and the Government Securities 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. 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 Share-
B-26
<PAGE> 75
holders. 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. 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 the Funds. Such
information may be useful to the Adviser in serving both the Funds 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 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. For the fiscal years ended June 30,
1996, 1995 and 1994, the Group paid in brokerage commissions on behalf of the
Value Fund of approximately $133,509, $171,045 and $430,855, respectively; for
the fiscal years ended June 30, 1996 and 1995, and the fiscal period ended June
30, 1994, paid on behalf of the Growth Fund approximately $43,315, $32,075 and
$9,368, respectively, and for the fiscal year ended June 30, 1995, paid on
behalf of the Fixed Income Fund approximately $2,500 in brokerage commissions.
During the past three fiscal years, no brokerage commissions were paid by the
Group on behalf of the Money Market Fund, the Fixed Income Fund, the Tennessee
Fund or the Government Securities Fund. In addition, the Adviser, on behalf of
the Value Fund, may direct brokerage transactions to (1) Interstate Johnson
Lane in return for the provision of portfolio management software and various
news service subscriptions, including Barrons, Bloomberg, Morningstar and Value
Line Institutional and (2) Frank Russell in return for chart and graph
services. For the fiscal year ended June 30, 1996, the amount of such
transactions and related commissions on behalf of the Value Fund were
$18,247,862 and $59,555, respectively. Such brokerage transactions are
subject to the requirements as to price and execution as described above.
Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable laws, rules and regulations, the Group will not, on
behalf of the Funds, execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with the Adviser, BISYS, or their affiliates, and
will not give preference to the Adviser's correspondents with respect to such
transactions, securities, savings deposits, repurchase agreements, and reverse
repurchase agreements.
Investment decisions for each Fund are made independently from those for
the other funds 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 the Funds. When a
purchase or sale of the same security is made at substantially the same time on
behalf of a Fund and another fund of the Group, investment company or account,
the transaction will be averaged as to price and available investments will be
allocated as to amount in a manner which the Adviser believes to be equitable to
the Fund(s) and such other 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-27
<PAGE> 76
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 the other Funds or
for other 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.
None of the Funds during the fiscal year ended June 30, 1996, held
securities of its regular brokers or dealers, as defined in Rule 10b-1 under
the 1940 Act, or their parent companies.
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.
B-28
<PAGE> 77
The Adviser believes that it possesses the legal authority to perform the
services for the Funds contemplated by the Prospectus, this Statement of
Additional Information, the Investment Advisory Agreement and the Servicing
Agreement without violation of applicable statutes and regulations. Commerce
Investment Corporation believes that it possesses the legal authority to perform
the services for the Funds as set forth in the Rule 12b-1 Agreement with BISYS,
as described below, without violation of applicable statutes and regulations.
Future changes in either Federal or state statutes and regulations relating to
the permissible activities of banks or bank holding companies and the
subsidiaries or affiliates of those entities, as well as further judicial or
administrative decisions or interpretations of present and future statutes and
regulations, could prevent or restrict the Adviser or Commerce Investment
Corporation from continuing to perform such services for the Group. In addition,
current state securities laws on the issue of the registration of banks as
brokers or dealers may differ from the interpretation of federal law, and banks
and financial institutions may be required to register as dealers pursuant to
the laws of a specific state. Depending upon the nature of any changes in the
services which could be provided by the Adviser or Commerce Investment
Corporation, the Board of Trustees of the Group would review the Group's
relationship with the Adviser or Commerce Investment Corporation, as the case
may be, and consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit or
restrict the proposed activities of the Adviser, Commerce Investment Corporation
and/or the Adviser's affiliated and correspondent banks in connection with
Customer purchases of Shares of any of the Funds, those banks might be required
to alter materially or discontinue the services offered by them to Customers. It
is not anticipated, however, that any change in the Group's method of operations
would 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 August 23, 1990, as amended
October 27, 1992 (with respect to the Money Market Fund, the Value Fund, the
Fixed Income Fund and the Tennessee Fund) and a Management and Administration
Agreement dated April 5, 1994, as amended June 3, 1994 (with respect to the
Government Securities Fund and the Growth Fund (collectively, the
"Administration Agreement"). The Administrator assists in supervising all
operations of each Fund (other than those performed by the Adviser under the
Investment Advisory Agreement, by National City Bank under the Custodial
Services Agreement and by BISYS Fund Services Ohio, Inc. under the Transfer
Agency Agreement and Fund Accounting Agreements). The Administrator is a
broker-dealer
B-29
<PAGE> 78
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 financial accounts and records
of each Fund, including calculation of daily expense accruals; determine the
actual variance from $1.00 of the Money Market Fund's net asset value per share;
and generally assist in all aspects of the Funds' operations other than those
performed by the Adviser under the Investment Advisory Agreement, by National
City Bank under the Custodial Services Agreement and by BISYS Fund Services
Ohio, Inc. under the Transfer Agency Agreement and Fund Accounting Agreements.
Under the Administration Agreement, the Administrator may delegate all or any
part of its responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
equal (a) with respect to the Money Market, Value, Fixed Income and Tennessee
Funds, to the lesser of (i) a fee calculated daily and paid periodically, at the
annual rate equal to twenty one-hundredths of one percent (.20%) of that Fund's
average daily net assets or (ii) such other fee as may be agreed upon in writing
by the Group and the Administrator, and (b) with respect to the Government
Securities and Growth Funds, to a fee, calculated daily and paid periodically,
at the annual rate equal to twenty one-hundredths of one percent (.20%) of that
Fund's average daily net assets.
For the fiscal years ended June 30, 1996, 1995 and 1994, the Administrator
earned and voluntarily waived the amounts indicated below with respect to its
administrative services to the indicated Funds:
B-30
<PAGE> 79
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
1996 1995 1994
---- ---- ----
Fees Fees Fees Fees Fees Fees
Earned Waived Earned Waived Earned Waived
-------- ------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund $299,701 -- $314,096 -- $257,644 $1,112
Value Fund 166,025 -- 158,632 -- 150,302 --
Fixed Income
Fund 68,916 -- 82,655 -- 85,948 --
Tennessee Fund 39,991 -- 39,375 -- 42,777 846
Government
Securities
Fund(1) 15,426 $ 3,856 16,402 $5,393 2,912 1,477
Growth Fund(1) 56,958 14,290 23,678 7,277 2,278 1,156
</TABLE>
(1) Commenced operations April 18, 1994.
Unless sooner terminated as provided therein, the Administration
Agreement, with respect to the Government Securities Fund and the Growth Fund,
has an initial term expiring on March 31, 1999, and with respect to each of the
other Funds, the Administration Agreement, by its terms, has been renewed until
March 31, 1998. The Administration Agreement thereafter, respectively, shall be
renewed automatically for successive five-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 Administration Agreement
is terminable with respect to a particular Fund only upon mutual agreement of
the parties to the Administration Agreement and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Group's Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not be
liable for any error of judgment or mistake of law or any loss suffered by
either Fund in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
B-31
<PAGE> 80
Expenses
If total expenses borne by any of the Funds in any fiscal year exceed
expense limitations imposed by applicable state securities regulations, the
Adviser and the Administrator will reimburse that Fund by the amount of such
excess in proportion to their respective fees. As of the date of this Statement
of Additional Information, the most restrictive expense limitation applicable to
the Funds limits each Fund's aggregate annual expenses, including management and
advisory fees but excluding interest, taxes, brokerage commissions and certain
other expenses, to 2 1/2% of the first $30 million of a Fund's average net
assets, 2% of the next $70 million of such Fund's average net assets, and 1/2%
of such Fund's remaining average net assets. Any expense reimbursements will be
estimated daily and reconciled and paid on a monthly basis. Fees imposed upon
customer accounts by the Adviser or its affiliated or correspondent banks for
cash management services would not be included within Fund expenses for purposes
of any such expense limitation.
Distributor
BISYS serves as agent for each of the Funds in the distribution of its
Shares pursuant to a Distribution Agreement dated October 1, 1993, as amended as
of June 3, 1994 (the "Distribution Agreement"). Unless otherwise terminated, the
Distribution Agreement remains in effect from year to year for successive annual
periods ending March 31 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 Group,
and (ii) by the vote of a majority of the Trustees of the Group who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.
In its capacity as Distributor, BISYS solicits orders for the sale of
Shares, advertises and pays the costs of advertising, office space and the
personnel involved in such activities. BISYS receives no compensation under the
Distribution Agreement with the Group, but may retain all or a portion of the
sales charge imposed upon sales of Shares of each of the Funds, other than the
Money Market Fund. For the three fiscal years ended June 30, 1996, 1995 and
1994, commissions paid to BISYS under the Distribution Agreement with respect to
the sale of Shares of such Funds, after discounts to dealers, were $5,030,
$27,404 and $16,062, respectively. For the years ended June 30, 1996, 1995 and
1994, $4,090, $10,212 and $88,354,
B-32
<PAGE> 81
respectively, were reallowed by BISYS to Commerce Investment Corporation.
As described in the Prospectus, the Group has adopted a Distribution and
Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act
under which each Fund is authorized to pay BISYS for payments it makes to banks,
including the Adviser, other institutions and broker-dealers, and for expenses
BISYS and any of its affiliates or subsidiaries incur (with all of the foregoing
organizations being referred to as "Participating Organizations") for providing
distribution or shareholder service assistance. Payments to such Participating
Organizations may be made pursuant to agreements entered into with BISYS. The
Plan authorizes each Fund to make payments to BISYS in an amount not in excess,
on an annual basis, of 0.25% of the average daily net asset value of that Fund.
As required by Rule 12b-1, the Plan was approved by the Shareholders of each of
the Funds and by the Board of Trustees, including a majority of the Trustees who
are not interested persons of any of the Funds and who have no direct or
indirect financial interest in the operation of the Plan (the "Independent
Trustees"). The Plan may be terminated as to a Fund by vote of a majority of the
Independent Trustees, or by vote of majority of the outstanding Shares of that
Fund. Any change in the Plan that would materially increase the distribution
cost to a Fund requires Shareholder approval. The Trustees review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. The Plan may be amended by vote of the Trustees including a majority
of the Independent Trustees, cast in person at a meeting called for that
purpose. For so long as the Plan is in effect, selection and nomination of those
Trustees who are not interested persons of the Group shall be committed to the
discretion of such disinterested persons. All agreements with any person
relating to the implementation of the Plan may be terminated at any time on 60
days' written notice without payment of any penalty, by vote of a majority of
the Independent Trustees or by a vote of the majority of the outstanding Shares
of the Fund. The Plan will continue in effect for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the Independent Trustees, and (ii) by a vote of a majority of the
entire Board of Trustees cast in person at a meeting called for that purpose.
The Board of Trustees has a duty to request and evaluate such information as may
be reasonably necessary for them to make an informed determination of whether
the Plan should be implemented or continued. In addition the Trustees in
approving the Plan must determine that there is a reasonable likelihood that the
Plan will benefit each Fund and its Shareholders.
The Board of Trustees of the Group believes that the Plan is in the best
interests of each Fund since it encourages Fund growth and maintenance of Fund
assets. As a Fund grows in size, certain
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expenses, and therefore total expenses per Share, may be reduced and overall
performance per Share may be improved.
As authorized by the Plan, BISYS has entered into Rule 12b-1 Agreements
with Commerce Investment Corporation, a wholly owned subsidiary of the Adviser
("C.I.C."), to provide certain distribution and shareholder services in
connection with the distribution of the Shares of each of the Funds including,
but not limited to, maintaining Shareholder relations, answering questions about
the Funds and distributing prospectuses to persons other than Shareholders of
the Funds. In consideration of such services BISYS has agreed to pay C.I.C. a
monthly fee, computed at the annual rate of .25% of the average aggregate net
asset value of Shares held during the period in accounts for which C.I.C
provided services under such agreement. BISYS will be compensated by each Fund
in an amount equal to its payments to C.I.C. under the Rule 12b-1 Agreement with
respect to that Fund.
The Group has also entered into Rule 12b-1 Agreements with BISYS pursuant
to which BISYS has agreed to provide certain distribution and shareholder
support services to each of the Funds and their Shareholders, including, but not
limited to, advertising and marketing the Shares of the Funds, maintaining
Shareholder relations, answering questions about the Funds, distributing
prospectuses to persons other than Shareholders of the Funds, and providing such
other services as a Fund may reasonably request. In consideration of such
services, the Group has agreed to pay BISYS a monthly fee, computed at the
annual rate of .25% of the average aggregate net asset value of Shares held
during the period in client accounts for which BISYS has provided services under
this Rule 12b-1 Agreement. Such fee may exceed the actual costs incurred by
BISYS in providing such services.
In addition, BISYS has entered into and may enter into, from time to time,
other Rule 12b-1 Agreements with selected dealers pursuant to which such dealers
will provide certain services in connection with the distribution of a Fund's
Shares including, but not limited to, those discussed above.
For the fiscal year ended June 30, 1996, the Group, on behalf of the
Funds, incurred the following amounts pursuant to the Plan for payments made by
BISYS to C.I.C. and for payments made by the Group to BISYS for certain
administrative and shareholder support services as more fully described above:
B-34
<PAGE> 83
<TABLE>
<CAPTION>
Payments Made Payments Made
Fund to BISYS to CIC
---- ------------- -------------
<S> <C> <C>
Money Market Fund $176,724 $3,289
Value Fund 57,568 1,071
Fixed Income Fund 22,979 427
Tennessee Fund 30,829 570
Government Securities Fund 6,110 109
Growth Fund 15,515 288
</TABLE>
Administrative Services Plan
As described in the Prospectus, the Group has also adopted an
Administrative Services Plan (the "Services Plan") under which each Fund is
authorized to pay certain financial institutions, including the Adviser, its
correspondent and affiliated banks, and BISYS (a "Service Organization"), to
provide certain ministerial, record keeping, and administrative support services
to their customers who own of record or beneficially Shares in a Fund. Payments
to such Service Organizations are made pursuant to Servicing Agreements between
the Group and the Service Organization. The Services Plan authorizes each Fund
to make payments to Service Organizations in an amount, on an annual basis, of
up to 0.25% of the average daily net asset value of that Fund. The Services Plan
has been approved by the Board of Trustees of the Group, including a majority of
the Trustees who are not interested persons of the Group (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of
the Services Plan or in any Servicing Agreements thereunder (the "Disinterested
Trustees"). The Services Plan may be terminated as to a Fund by a vote of a
majority of the Disinterested Trustees. The Trustees review quarterly a written
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 authorized by the Services Plan, the Group has entered into a Servicing
Agreement with the Adviser pursuant to which the Adviser has agreed to provide
certain administrative support services in connection with Shares of the Funds
owned of record or beneficially by its customers. Such administrative support
services may
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<PAGE> 84
include, but are not limited to, (i) processing dividend and distribution
payments from a Fund on behalf of customers; (ii) providing periodic statements
to its customers showing their positions in the Shares; (iii) arranging for bank
wires; (iv) responding to routine customer inquiries relating to services
performed by the Adviser; (v) providing sub-accounting with respect to the
Shares beneficially owned by the Adviser's customers or the information
necessary for sub-accounting; (vi) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (vii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Shares pursuant to specific or
pre-authorized instructions. In consideration of such services, the Group, on
behalf of each Fund, has agreed to pay the Adviser a monthly fee, computed at
the annual rate of .25% of the average aggregate net asset value of Shares of
that Fund held during the period by customers for whom the Adviser has provided
services under the Servicing Agreement.
For the fiscal year ended June 30, 1996, the Group incurred the following
amounts on behalf of the designated Fund for payments made to the Adviser
pursuant to the Services Plan: the Money Market Fund -- $231,497; the Value Fund
- -- $185,066; the Fixed Income Fund -- $77,654; the Tennessee Fund -- $28,369;
the Government Securities Fund -- $15,468; and the Growth Fund -- $66,698. Such
fees reflect the voluntary fee reductions made by the Adviser with respect to
each of the Funds.
Custodian
National City Bank, 1900 East 9th Street, Cleveland, Ohio 44114 serves as
custodian (the "Custodian") to the Funds pursuant to the Custodial Services
Agreement dated as of March 1, 1995. The Custodian's responsibilities include
safeguarding and controlling the Funds' cash and securities, handling the
receipt and delivery of securities, and collecting interest and dividends on the
Funds' investments.
Transfer Agency and Fund Accounting Services
BISYS Fund Services Ohio, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for all of the Funds pursuant to the
Transfer Agency Agreement dated September 1, 1992, as amended as of May 1, 1994.
Pursuant to such Agreement, the Transfer Agent, among other things, performs the
following services in connection with each Fund's shareholders of record:
maintenance of shareholder records for each of the Group's
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<PAGE> 85
shareholders of record; processing shareholder purchase and redemption orders;
processing transfers and exchanges of shares of the Group 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 three fiscal years ended June 30,
1996, 1995 and 1994, the Transfer Agent received the following fees from the
Group for services as transfer agent for the Funds:
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
1996 1995 1994
---- ---- ----
Fees Fees Fees
Earned Earned Earned
------- ------- -------
<S> <C> <C> <C>
Money Market Fund $30,704 $24,708 $20,055
Value Fund 39,661 36,068 25,092
Fixed Income
Fund 23,980 23,115 19,464
Tennessee Fund 21,959 21,103 18,740
Government Securities
Fund(1) 20,039 19,676 4,811
Growth Fund(1) 23,662 20,339 4,800
</TABLE>
(1) Commenced operations April 18, 1994.
In addition, BISYS Fund Services Ohio, Inc. provides certain fund
accounting services to the Funds pursuant to a Fund Accounting Agreement dated
February 4, 1993. BISYS Fund Services Ohio, 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 ($40,000 with respect to the Tennessee
Fund). Under such Agreement, BISYS Fund Services Ohio, Inc. maintains the
accounting books and records for each Fund, including journals containing an
itemized daily record of all purchases and sales of portfolio securities, all
receipts and disbursements of cash and all other debits and credits, general and
auxiliary ledgers reflecting all asset, liability, reserve, capital, income and
expense accounts, including interest accrued and interest received, and other
required separate ledger accounts; maintains a monthly trial balance of all
ledger accounts; performs certain accounting services for the Fund, including
calculation of
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<PAGE> 86
the net asset value per share, calculation of the dividend and capital gain
distributions, if any, and of yield, reconciliation of cash movements with the
Fund's custodian, affirmation to the Fund's custodian of all portfolio trades
and cash settlements, verification and reconciliation with the Fund's custodian
of all daily trade activity; provides certain reports; obtains dealer
quotations, prices from a pricing service or matrix prices on all portfolio
securities in order to mark the portfolio to the market; and prepares an interim
balance sheet, statement of income and expense, and statement of changes in net
assets for each Fund.
For the fiscal years ended June 30, 1996, 1995 and 1994, BISYS Fund
Services Ohio, Inc. received the fees indicated below with respect to its fund
accounting services to the indicated Funds:
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
Fund 1996 1995 1994
- ---- ---- ---- ----
<S> <C> <C> <C>
Money Market Fund $45,640 $47,114 $36,284
Value Fund 31,181 30,902 31,025
Fixed Income
Fund 34,256 35,829 36,290
Tennessee Fund 49,248 48,522 48,498
Government Securities(1)
Fund 31,276 30,000 7,858
Growth Fund(1) 31,461 30,695 6,600
</TABLE>
(1) Commenced operations April 18, 1994.
Auditors
The financial statements of each of the Funds as of June 30, 1996, and for
the periods indicated therein, appearing in this Statement of Additional
Information have been audited by KPMG Peat Marwick LLP, Two Nationwide Plaza,
Columbus, Ohio 43215, as set forth in their report appearing elsewhere herein,
and are included in reliance upon such report and on the authority of such firm
as experts in auditing and accounting.
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
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<PAGE> 87
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 Money Market Fund, one of which
represents interests in the Value Fund, one of which represents interests in the
Fixed Income Fund, one of which represents interests in the Tennessee Fund, one
of which represents interests in the Government Securities Fund and one of which
represents interests in the Growth Fund. The other ten series are The KeyPremier
Prime Obligations Money Market Fund, The KeyPremier Pennsylvania Municipal Bond
Fund, The KeyPremier Established Growth Fund, The KeyPremier Intermediate Term
Income 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 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
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<PAGE> 88
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 October 4, 1996, the Adviser, either directly or through CCMI, owned
of record and beneficially 68.32% and 51.56%, respectively, of the outstanding
Shares of the Money Market Fund; 92.67% and 92.67%, respectively, of the
outstanding Shares of the Value Fund; 92.81% and 92.81%, respectively, of the
outstanding Shares of the Fixed Income Fund; 80.50% and 80.50%, respectively, of
the outstanding Shares of the Tennessee Fund; 99.44% and 99.44%, respectively of
the outstanding Shares of the Government Securities Fund; and 95.51% and 95.51%,
respectively, of the outstanding Shares of the Growth Fund. In addition, as of
such date, the Adviser owned of record and beneficially more than 25% of the
total outstanding shares of the Group. Therefore, as of such date the Adviser
may be presumed to control each of the Funds and the Group, and as a result of
such control, the Adviser may have the power to approve the Investment Advisory
Agreement for each of the Funds and to control any other matters submitted to
the Shareholders of the Funds or shareholders of the Group as a whole, including
the election of trustees.
As of October 4, 1996, Northern Trust Company, FBO Metropolitan Employee
Benefit Board, P. O. Box 92956, Chicago, Illinois 60675, owned beneficially 22%
of the outstanding Shares of the Money Market Fund; and Mary M. Walker, 2724
Lombardy, Memphis, Tennessee 38111, owned beneficially 5.4% of the outstanding
Shares of the Tennessee Fund. To the knowledge of the Group, there are no other
beneficial owners of 5% or more of the outstanding Shares of any of the Funds as
of such date.
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
that Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of Shareholders of that Fund.
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<PAGE> 89
Additional Tax Information
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code") for so long as such
qualification is in the best interest of that Fund's shareholders. In order to
qualify as a regulated investment company, each Fund must, among other things:
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, and gains from the sale or other disposition of
securities or foreign currencies, or other income derived with respect to its
business of investing in such stock, securities, or currencies; derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, future contracts or foreign currencies held less than three months; and
diversify its investments within certain prescribed limits. In addition, to
utilize the tax provisions specially applicable to regulated investment
companies, each Fund must distribute to its Shareholders at least 90% of its
investment company taxable income for the year. In general, a Fund's investment
company taxable income will be its taxable income subject to certain adjustments
and excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a non-deductible excise tax equal to 4% of the deficiency.
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located, or
in which it is otherwise deemed to be conducting business, a Fund may be subject
to the tax laws of such states or localities. In addition, if for any taxable
year a Fund does not qualify for the special tax treatment afforded regulated
investment companies, all of its taxable income will be subject to federal tax
at regular corporate rates (without any deduction for distributions to its
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.
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<PAGE> 90
It is expected that each Fund will distribute annually to Shareholders all
or substantially all of the Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to Shareholders for federal income tax
purposes, even if paid in additional Shares of the Fund and not in cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to Shareholders as long-term capital gain
in the year in which it is received, regardless of how long the Shareholder has
held the Shares. Such distributions are not eligible for the dividends-received
deduction.
Federal taxable income of individuals is subject to graduated tax rates of
15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess of
39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on long-term capital gains
of individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
and deducted in future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by the
Fund for its taxable year that qualifies for the dividends received deduction.
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<PAGE> 91
Because all of the Government Obligations Fund's net investment income is
expected to be derived from earned interest, it is anticipated that no
distributions from that 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 one
Fund's total assets at the end of its fiscal year are expected to be invested in
stocks or securities of foreign corporations, such Fund will not be entitled
under the Code to pass through to its Shareholders their pro rata share of the
foreign taxes paid by the Fund. These taxes will be taken as a deduction by such
Fund.
The Tennessee Fund. The Tennessee Fund is not intended to constitute a
balanced investment program and is not designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tennessee Fund would not be suitable for tax-exempt
institutions and may not be suitable for retirement plans qualified under
Section 401 of the Code, H.R. 10 plans, and individual retirement accounts,
since such plans and accounts are generally tax-exempt and, therefore, would not
gain any additional benefit from all or a portion of the Tennessee Fund's
dividends being tax-exempt and such dividends would be ultimately taxable to the
beneficiaries when distributed to them. In addition, the Tennessee Fund may not
be appropriate investments for entities which are "substantial users," or
"related persons" thereof, of facilities financed by private activity bonds held
by the Tennessee Fund.
The Code permits a regulated investment company which invests in Exempt
Securities to pay to its Shareholders "exempt-interest dividends," which are
excluded from gross income for federal income tax purposes, if at the close of
each quarter of its taxable year at least 50% of its total assets consist of
Exempt Securities.
An exempt-interest dividend is any dividend or part thereof (other than a
capital gain dividend) paid by the Tennessee Fund that is derived from interest
received by the Tennessee Fund that is excluded from gross income for federal
income tax purposes, net of certain deductions, provided the dividend is
designated as an exempt-interest dividend in a written notice mailed to
Shareholders not later than sixty days after the close of the Tennessee Fund's
taxable year. The percentage of the total dividends paid by the Tennessee Fund
during any taxable year that qualifies as exempt- interest dividends will be the
same for all Shareholders of the Tennessee Fund receiving dividends during such
year. Exempt- interest dividends shall be treated by the Tennessee Fund's
Shareholders as items of interest excludable from their gross income for Federal
income tax purposes under Section 103(a) of the Code. However, a Shareholder is
advised to consult his tax adviser
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<PAGE> 92
with respect to whether exempt-interest dividends retain the exclusion under
Section 103(a) of the Code if such Shareholder is a "substantial user" or a
"related person" to such user under Section 147(a) of the Code with respect to
any of the Exempt Securities held by the Tennessee Fund. If a Shareholder
receives an exempt-interest dividend with respect to any Share and such Share is
held by the Shareholder for six months or less, any loss on the sale or exchange
of such Share shall be disallowed to the extent of the amount of such
exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
Shareholder to purchase or carry Shares is not deductible for federal income tax
purposes if the Tennessee Fund distributes exempt-interest dividends during the
Shareholder's taxable year. A Shareholder of the Tennessee Fund that is a
financial institution may not deduct interest expense attributable to
indebtedness incurred or continued to purchase or carry Shares of the Tennessee
Fund if the Tennessee Fund distributes exempt-interest dividends during the
Shareholder's taxable year. Certain federal income tax deductions of property
and casualty insurance companies holding Shares of the Tennessee Fund and
receiving exempt-interest dividends may also be adversely affected. In certain
limited instances, the portion of Social Security benefits received by a
Shareholder which may be subject to federal income tax may be affected by the
amount of tax-exempt interest income, including exempt-interest dividends
received by Shareholders of the Tennessee Fund.
In the event the Tennessee Fund realizes long-term capital gains, such
Fund intends to distribute any realized net long-term capital gains annually. If
the Tennessee Fund distributes such gains, such Fund will have no tax liability
with respect to such gains, and the distributions will be taxable to
Shareholders as long-term capital gains regardless of how long the Shareholders
have held their Shares. Any such distributions will be designated as a capital
gain dividend in a written notice mailed by the Tennessee Fund to the
Shareholders not later than sixty days after the close of the Tennessee Fund's
taxable year. It should be noted, however, that capital gains are taxed like
ordinary income except that net capital gains of individuals are subject to a
maximum federal income tax rate of 28%. Net capital gains are the excess of net
long-term capital gains over net short-term capital losses. Any net short-term
capital gains are taxed at ordinary income tax rates. If a Shareholder receives
a capital gain dividend with respect to any Share and then sells the Share
before he has held it for more than six months, any loss on the sale of the
Share is treated as long-term capital loss to the extent of the capital gain
dividend received.
Interest earned on certain municipal obligations issued on or after August
8, 1986, to finance certain private activities will be
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<PAGE> 93
treated as a tax preference item in computing the alternative minimum tax. It is
likely that exempt-interest dividends received by Shareholders from the
Tennessee Fund will also be treated as tax preference items in computing the
alternative minimum tax to the extent that distributions by the Tennessee Fund
are attributable to such obligations. Also, a portion of all other interest
excluded from gross income for federal income tax purposes earned by a
corporation may be subject to the alternative minimum tax as a result of the
inclusion in alternative minimum taxable income of 75% of the excess of adjusted
current earnings and profits over pre-book alternative minimum taxable income.
Adjusted current earnings and profits would include exempt-interest dividends
distributed by the Tennessee Fund to corporate Shareholders. For individuals the
alternative minimum tax rate is 26% on alternative minimum taxable income up to
$175,000 and 28% on the excess of $175,000; for corporations the alternative
minimum tax rate is 20%.
For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a rate of 0.12 of one percent on the
excess over $2,000,000 of such corporation's "modified alternative minimum
taxable income", which would include a portion of the exempt-interest dividends
distributed by the Tennessee Fund to such corporation. In addition,
exempt-interest dividends distributed to certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed
by Section 884 of the Code.
Distributions of exempt-interest dividends by the Tennessee Fund may be
subject to state and local taxes even though a substantial portion of such
distributions may be derived from interest on obligations which, if received
directly, would be exempt from such taxes. The Tennessee Fund will report to its
Shareholders annually after the close of its taxable year the percentage and
source, on a state-by-state basis, of interest income earned on municipal
obligations held by the Tennessee Fund during the preceding year. Shareholders
are advised to consult their tax advisers concerning the application of state
and local taxes.
As indicated in the Prospectus, the Tennessee Fund may acquire rights
regarding specified portfolio securities under puts. See "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Information on Portfolio Instruments - Puts" in this
Statement of Additional Information. The policy of the Tennessee Fund is to
limit its acquisition of puts to those under which it will be treated for
federal income tax purposes as the owner of the Exempt Securities acquired
subject to the put and the interest on the Exempt Securities will be tax-exempt
to it. Although the Internal Revenue Service has issued a published ruling that
provides some guidance regarding the tax consequences of the purchase of puts,
there is
B-45
<PAGE> 94
currently no guidance available from the Internal Revenue Service that
definitively establishes the tax consequences of many of the types of puts that
the Tennessee Fund could acquire under the 1940 Act. Therefore, although the
Tennessee Fund will only acquire a put after concluding that it will have the
tax consequences described above, the Internal Revenue Service could reach a
different conclusion.
Although the Tennessee 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, the
Tennessee Fund may be subject to the tax laws of such states or localities. In
addition, if for any taxable year the Tennessee 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.
Income itself exempt from Federal income taxation may be considered in
addition to taxable income when determining whether Social Security payments
received by a Shareholder are subject to federal income taxation.
General. Each Fund may be required by federal law to withhold and remit to
the U.S. Treasury 31% of taxable dividends, if any, and capital gain
distributions to any Shareholder, and the proceeds of redemption or the values
of any exchanges of Shares of a Fund, if such Shareholder (1) fails to furnish
the Fund with a correct taxpayer identification number, (2) under-reports
dividend or interest income, or (3) fails to certify to the Fund that he or she
is not subject to such withholding. An individual's taxpayer identification
number is his or her Social Security number.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to Federal taxation is only a summary of some of the
important Federal tax considerations generally affecting purchasers of Shares of
a Fund. No attempt has been made to present a detailed explanation of the
Federal income tax treatment of a Fund or its Shareholders and this discussion
is not intended as a substitute for careful tax planning. Accordingly, potential
purchasers of Shares of a Fund are urged to consult their tax advisers with
specific reference to their own tax situation. In addition, the tax discussion
in the Prospectus and this Statement of Additional Information is based on tax
laws and regulations which are in effect on the date of the Prospectus and
B-46
<PAGE> 95
this Statement of Additional Information; such laws and regulations may be
changed by legislative or administrative action. As of the date hereof, several
proposals have been introduced by the 104th Congress, which if enacted, could
affect much of the information contained in this section. However, it is not
possible at this time to assess which, if any, of such proposals will be acted
upon and the effect thereof, if any, on this information.
Information as to the federal income tax status of all distributions will
be mailed annually to each Shareholder.
Seven-Day Yield of the Money Market Fund
For the seven-day period ended June 30, 1996, the Money Market Fund's
seven-day yield and seven-day effective yield were 4.40% and 4.50%,
respectively. For the 30-day period ended June 30, 1996, the yield and effective
yield for the Money Market Fund were 4.42% and 4.51%, respectively. The
standardized seven-day yield for the Money Market Fund is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical preexisting account in the Money Market Fund having a balance of
one Share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from Shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by (365/7). The net
change in the account value of the Money Market Fund includes the value of
additional Shares purchased with dividends from the original Share, dividends
declared on both the original Share and any such additional Shares, and all
fees, other than nonrecurring account or sales charges, that are charged to all
Shareholder accounts in proportion to the length of the base period and assuming
the Money Market Fund's average account size. The capital changes to be excluded
from the calculation of the net change in account value are realized gains and
losses from the sale of securities and unrealized appreciation and depreciation.
The 30-day yield is calculated as described above except that the base period is
30 days rather than seven days.
The effective yield for the Money Market Fund is computed by compounding
the base period return, as calculated above, by adding 1 to the base period
return raising the sum to a power equal to 365 divided by seven and subtracting
1 from the result.
Yields of the Other Funds
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," yields of the Funds will be computed by annualizing net investment
income per share for a recent 30-day period and dividing that amount by a Fund
Share's maximum offering price (reduced by any undeclared earned income expected
to be paid
B-47
<PAGE> 96
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 each of these Funds
will vary from time to time depending upon market conditions, the composition of
the particular Fund's portfolio and operating expenses of the Group allocated to
each Fund. These factors and possible differences in the methods used in
calculating yield should be considered when comparing a Fund's yield to yields
published for other investment companies and other investment vehicles. Yield
should also be considered relative to changes in the value of a Fund's Shares
and to the relative risks associated with the investment objectives and policies
of each of the Funds.
In addition, with respect to the Tennessee Fund, tax equivalent yields
will be computed by dividing that portion of such Fund's yield (as computed
above) which is tax-exempt by one minus a stated income tax rate and adding that
result to that portion, if any, of the yield of that Fund which is not
tax-exempt.
For the 30-day period ended June 30, 1996, the yields for the Fixed Income
Fund, the Tennessee Fund, and the Government Securities Fund were 6.58%, 7.56%,
and 5.36%, respectively, assuming the imposition of the maximum sales charge,
and 6.79%, 7.79%, and 5.47%, respectively, excluding the effect of a sales
charge. If the fee waivers and/or expense reimbursements described above and in
the Prospectus had not been in place, the yields for the Fixed Income Fund, the
Tennessee Fund and the Government Securities Fund, assuming the imposition of
the maximum sales charge, would have been 6.38%, 6.76% and 4.62%, respectively,
and 6.58%, 6.76% and 4.62%, respectively, excluding the effect of a sales
charge. For the same period, the tax equivalent yield for the Tennessee Fund,
assuming a 39.6% federal tax rate, were 12.52%, assuming the imposition of the
maximum sales charge, and 12.90%, excluding the effect of a sales charge, and
without the fee waivers and/or expense reimbursements, such tax equivalent
yields would have been 11.19% and 11.54%, respectively.
Tax-Free vs. Taxable Income
The table below show the effect, as of the date hereof, of the tax status
of bonds on the tax equivalent yield received by their holders under the regular
Federal income tax and the Tennessee Hall Income tax laws. They give the
approximate yield a taxable security must earn for residents of Tennessee, at
various income brackets to produce after-tax yields equivalent to those of tax
exempt bonds yielding varying rates from 4% to 10%. This table,
B-48
<PAGE> 97
however, does not reflect the phase out of itemized deductions for certain high
income taxpayers.
<TABLE>
<S> <C> <C> <C> <C> <C>
Single Return $0 - $24,000 $24,001 - $ 58,151 - $121,301 - $263,751 -
58,150 121,300 263,750
Joint Return $0 - $40,100 $40,101 - $ 96,901 - $147,701 - $263,751 -
96,900 147,700 263,750
If your combined
federal and state
tax bracket is... 20.10% 32.32% 35.14% 39.84% 43.22%
And you have a Then you'll be earning the
tax-exempt invest- equivalent of a taxable
ment yielding... investment yielding...
4.00% 5.01% 5.91% 6.17% 6.65% 7.05%
4.50% 5.63% 6.65% 6.94% 7.48% 7.93%
5.00% 6.26% 7.39% 7.71% 8.31% 8.81%
5.50% 6.88% 8.13% 8.48% 9.14% 9.69%
6.00% 7.51% 8.87% 9.25% 9.97% 10.57%
6.50% 8.14% 9.60% 10.02% 10.80% 11.45%
7.00% 8.76% 10.34% 10.79% 11.64% 12.33%
7.50% 9.39% 11.08% 11.56% 12.47% 13.21%
8.00% 10.01% 11.82% 12.33% 13.30% 14.09%
8.50% 10.64% 12.56% 13.11% 14.13% 14.97%
9.00% 11.26% 13.30% 13.88% 14.90% 15.85%
9.50% 11.89% 14.04% 14.65% 15.79% 16.73%
10.00% 12.52% 14.78% 15.42% 16.62% 17.61%
</TABLE>
Calculation of Total Return
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," average annual total return is a measure of the change in value of
an investment in a Fund over the period covered, which assumes any dividends or
capital gains distributions are reinvested in the Fund immediately rather than
paid to the investor in cash. Average annual total return will be calculated by:
(1) adding to the total number of Shares purchased by a hypothetical $1,000
investment in that Fund (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. Each Fund, however,
may also advertise aggregate total return in addition to average annual total
return. Aggregate total return is a measure of the change in
B-49
<PAGE> 98
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.
For the one year and five year periods ended June 30, 1996, and the
respective periods from commencement of operations to June 30, 1996, the average
annual returns with the maximum sales charge and without the maximum sales
charges for the Funds were as follows:
<TABLE>
<CAPTION>
With Maximum Without Maximum
------------ ---------------
Sales Charge Sales Charge
------------ ------------
Since Since
----- -----
Fund 1 Year 5 Year Inception 1 Year 5 Year Inception
---- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund(1) 4.75% 4.75%
Value Fund(2) 15.04% -- 12.41% 20.50% -- 13.52%
Fixed Income Fund(2) -2.02% -- 3.49% 1.05% -- 4.17%
Tennessee Fund(3) 1.57% -- 3.64% 4.67% -- 4.51%
</TABLE>
B-50
<PAGE> 99
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Government Securities 1.11% -- 4.04% 3.21% -- 4.97%
Fund(4)
Growth Fund(4) 14.08% -- 16.54% 19.44% -- 18.98%
</TABLE>
(1) Commenced operations July 25, 1988.
(2) Commenced operations October 31, 1991.
(3) Commenced operations November 4, 1992.
(4) Commenced operations April 15, 1994.
Distribution Rates
Each of the Funds, other than the Money Market Fund, may from time to time
advertise current distribution rates which are calculated in accordance with the
method disclosed in the Prospectus. For the fiscal year ended June 30, 1996, the
distribution rates, including the maximum sales load and capital gains; the
distribution rates, excluding the effect of capital gains but including a sales
load; and the distribution rates, excluding the effect of both capital gains and
a sales load, for the Value Fund, the Fixed Income Fund, the Tennessee Fund, the
Government Securities Fund and the Growth Fund, respectively, were as follows:
<TABLE>
<CAPTION>
Excluding Capital
Including Maximum Gains But Excluding Both
Sales Load and Including Maximum Capital Gains and
Fund Capital Gains Sales Load Maximum Sales Load
---- ----------------- ----------------- ------------------
<S> <C> <C> <C>
Value Fund 4.13% .91% .95%
Fixed Income Fund 6.69% 6.69% 6.90%
Tennessee Fund 5.22% 5.22% 5.38%
Government
Securities Fund 5.25% 5.25% 5.36%
Growth Fund 2.98% 1.29% 1.35%
</TABLE>
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
B-51
<PAGE> 100
through various mutual fund or market indices such as those prepared by Dow
Jones & Co., Inc. and Standard & Poor's Corporation and to data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service which
monitors the performance of mutual funds. Comparisons may also be made to
indices or data published in Money Magazine, Forbes, Barron's, The Wall Street
Journal, Morningstar, Inc., Ibbotson Associates, CDA/Wiesenberger, The New York
Times, Business Week, U.S.A. Today and local periodicals. In addition to
performance information, general information about these Funds that appears in a
publication such as those mentioned above may be included in advertisements,
sales literature and reports to shareholders. The Funds may also include in
advertisements and reports to shareholders information discussing the
performance of the Adviser in comparison to other investment advisers and to
other banking institutions.
From time to time, the Group may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of dollar
cost averaging); (2) discussions of general economic trends; (3) presentations
of statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for one or more of the Funds within the Group;
(5) descriptions of investment strategies for one or more of such Funds; (6)
descriptions or comparisons of various investment products, which may or may not
include the Funds; (7) comparisons of investment products (including the Funds)
with relevant market or industry indices or other appropriate benchmarks; (8)
discussions of fund rankings or ratings by recognized rating organizations; and
(9) testimonials describing the experience of persons that have invested in one
or more of the Funds. The Group may also include calculations, such as
hypothetical compounding examples, which describe hypothetical investment
results in such communications. Such performance examples will be based on an
express set of assumptions and are not indicative of the performance of any
Fund. In addition, the Tennessee Fund may include in its advertisements charts
comparing various tax-free yields to taxable yield equivalents at different
income levels.
Current yields or total return will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
total return may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and total
return are functions of a Fund's quality, composition and maturity, as well as
expenses allocated to such Fund. Fees imposed upon Customer accounts by the
Adviser or its affiliated or correspondent banks for cash management services
will reduce a Fund's effective yield and total return to Customers.
Miscellaneous
Individual Trustees are generally elected by the Shareholders and, subject
to removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of shareholders at which Trustees are elected.
Such meetings are not required to be held at any specific intervals. Generally,
shareholders owning not less than 20% of the outstanding shares of the Group
entitled to vote may cause the Trustees to call a special meeting. However, the
Group has represented to the Commission that the Trustees will call a special
meeting for the purpose of considering the removal of one or more Trustees upon
written request therefor from shareholders owning not less than 10% of the
outstanding votes of the Group entitled to vote. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
The Group is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of the Group.
The Prospectus and this Statement of Additional Information omit certain
of the information contained in the Registration 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-52
<PAGE> 101
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees
The Sessions Group-
The Riverside Capital Funds:
We have audited the accompanying statements of assets and liabilities of The
Sessions Group- The Riverside Capital Funds (comprised of the Riverside Capital
Money Market Fund, Riverside Capital Value Equity Fund, Riverside Capital
Growth Fund, Riverside Capital Fixed Income Fund, Riverside Capital Low
Duration Government Securities Fund and Riverside Capital Tennessee Municipal
Obligations Fund), including the schedules of portfolio investments as of June
30, 1996, and the related statements of operations, statements of changes in
net assets and the financial highlights for each of the periods indicated
herein. These financial statements and the financial highlights are the
responsibility of The Sessions Group - The Riverside Capital Funds' management.
Our responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of June
30, 1996 by confirmation with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Session Group - The Riverside Capital
Funds at June 30, 1996, the results of their operations, the changes in their
net assets and the financial highlights for each of the periods indicated
herein, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
August 26, 1996
B-53
<PAGE> 102
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$125,869,852; $66,911,792; and
$28,072,751, respectively).......... $125,869,852 $80,426,289 $33,878,339
Repurchase agreements (cost
$7,714,419)......................... 7,714,419 -- --
------------ ----------- -----------
Total investments.................... 133,584,271 80,426,289 33,878,339
Interest and dividends receivable.... 1,122,472 214,984 75,842
Receivable from brokers for
investments sold.................... -- 470,068 --
Prepaid expenses..................... 26,402 7,278 3,142
------------ ----------- -----------
Total Assets....................... 134,733,145 81,118,619 33,957,323
------------ ----------- -----------
LIABILITIES:
Dividends payable.................... 502,254 -- --
Payable to brokers for investments
purchased........................... -- -- 166,450
Accrued expenses and other payables:
Investment advisory fees........... 3,854 6,024 971
Administration fees................ 7,351 4,473 1,390
Administrative services fees....... 13,805 12,959 4,351
12b-1 fees......................... 25,042 2,720 1,121
Custodian and accounting fees...... 1,103 3,736 2,003
Legal and audit fees............... 29,881 24,544 11,142
Printing fees...................... 3,293 4,899 785
Transfer agent fees................ 939 3,951 735
Other.............................. -- 179 1,006
------------ ----------- -----------
Total Liabilities.................. 587,522 63,485 189,954
------------ ----------- -----------
NET ASSETS:
Capital.............................. 134,348,768 60,131,224 27,015,438
Undistributed net investment income.. -- 106,815 11,382
Net unrealized appreciation on
investments......................... -- 13,514,497 5,805,588
Accumulated undistributed net
realized gains (losses) on
investment transactions............. (203,145) 7,302,598 934,961
------------ ----------- -----------
Net Assets......................... $134,145,623 $81,055,134 $33,767,369
============ =========== ===========
Outstanding units of beneficial
interest (shares)................... 134,348,769 5,573,485 2,409,383
============ =========== ===========
Net asset value--redemption price
per share........................... $ 1.00 $ 14.54 $ 14.01
============ =========== ===========
Maximum Sales Charge................. 4.50% 4.50%
=========== ===========
Maximum Offering Price (100%/(100%--
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share............................... $ 1.00(a) $ 15.23 $ 14.67
============ =========== ===========
<FN>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
</TABLE>
See notes to financial statements.
B-54
<PAGE> 103
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
GOVERNMENT MUNICIPAL
FIXED INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $29,370,100;
$7,363,027; and $18,441,220, respec-
tively)................................ $29,388,109 $7,354,770 $18,683,329
Interest and dividends receivable....... 654,353 134,738 396,380
Receivable from brokers for investments
sold................................... 3,140,789 -- --
Unamortized organization costs.......... -- -- 11,952
Prepaid expenses........................ 3,143 617 4,418
----------- ---------- -----------
Total Assets.......................... 33,186,394 7,490,125 19,096,079
----------- ---------- -----------
LIABILITIES:
Cash overdraft.......................... 399,580 1,185 35,935
Payable to brokers for investments pur-
chased................................. 3,779,764 -- --
Accrued expenses and other payables:
Investment advisory fees.............. 1,541 -- 78
Administration fees................... 1,577 303 1,034
Administrative services fees.......... 2,700 1,686 1,880
12b-1 fees............................ 945 1,475 1,548
Custodian and accounting fees......... 5,133 9,332 1,452
Trustees' fees........................ 479 42 205
Legal and audit fees.................. 13,735 10,880 13,186
Transfer agent fees................... 2,892 1,136 1,762
Printing fees......................... 2,713 2,460 1,911
Other................................. 128,126 635 --
----------- ---------- -----------
Total Liabilities..................... 4,339,185 29,134 58,991
----------- ---------- -----------
NET ASSETS:
Capital................................. 35,111,736 7,487,755 19,961,714
Undistributed net investment income..... 72,377 15,797 41,200
Net unrealized appreciation (deprecia-
tion) on investments................... 18,009 (8,257) 242,109
Accumulated undistributed net realized
losses on investment transactions...... (6,354,913) (34,304) (1,207,935)
----------- ---------- -----------
Net Assets............................ $28,847,209 $7,460,991 $19,037,088
=========== ========== ===========
Outstanding units of beneficial interest
(shares)............................... 3,289,966 750,109 1,949,549
=========== ========== ===========
Net asset value--redemption price per
share.................................. $ 8.77 $ 9.95 $ 9.76
=========== ========== ===========
Maximum Sales Charge.................... 3.00% 2.00% 3.00%
=========== ========== ===========
Maximum Offering Price (100%/(100%--Max-
imum Sales Charge) of net asset value
adjusted to nearest cent) per share.... $ 9.04 $ 10.15 $ 10.06
=========== ========== ===========
</TABLE>
See notes to financial statements.
B-55
<PAGE> 104
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
---------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................... $8,446,191 $ 47,939 $ 49,358
Dividend income......................... -- 2,101,037 637,528
---------- ----------- ----------
Total Income............................ 8,446,191 2,148,976 686,886
---------- ----------- ----------
EXPENSES:
Investment advisory fees................ 524,476 747,594 284,790
Administration fees..................... 299,701 166,025 56,958
Administrative services fees............ 374,626 207,537 71,198
12b-1 fees.............................. 374,626 207,537 71,198
Custodian and accounting fees........... 67,844 45,604 34,999
Legal and audit fees.................... 45,430 29,575 5,713
Organization costs...................... -- -- 5,124
Trustees' fees and expenses............. 13,828 7,445 2,428
Transfer agent fees..................... 31,646 41,742 21,594
Interest expense........................ 20,788 -- --
Registration and filing fees............ 7,214 10,730 3,049
Printing costs.......................... 24,317 14,247 1,895
Other................................... 14,944 8,132 1,579
---------- ----------- ----------
Expenses before fee waivers............. 1,799,440 1,486,168 560,525
Less: Fee waivers....................... (314,686) (174,337) (262,782)
---------- ----------- ----------
Net Expenses............................ 1,484,754 1,311,831 297,743
---------- ----------- ----------
Net Investment Income................... 6,961,437 837,145 389,143
---------- ----------- ----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment
transactions......................... 141,785 9,340,011 1,167,209
Change in unrealized appreciation on
investments.......................... -- 5,384,702 3,513,955
---------- ----------- ----------
Net realized/unrealized gains on
investments......................... 141,785 14,724,713 4,681,164
---------- ----------- ----------
Change in net assets resulting from
operations.............................. $7,103,222 $15,561,858 $5,070,307
========== =========== ==========
</TABLE>
See notes to financial statements.
B-56
<PAGE> 105
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
FIXED GOVERNMENT MUNICIPAL
INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income....................... $ 2,583,016 $ 511,233 $ 1,277,149
Dividend income....................... 105,493 22 --
----------- --------- -----------
Total Income.......................... 2,688,509 511,255 1,277,149
----------- --------- -----------
EXPENSES:
Investment advisory fees.............. 223,976 38,565 129,939
Administration fees................... 68,916 15,426 39,991
Administrative services fees.......... 86,072 19,283 49,977
12b-1 fees............................ 86,072 19,283 49,977
Custodian and accounting fees......... 59,324 41,676 50,864
Legal and audit fees.................. 15,283 7,329 8,927
Organization costs.................... -- 3,294 9,025
Trustees' fees and expenses........... 4,267 848 2,071
Transfer agent fees................... 24,049 18,791 20,871
Registration and filing fees.......... 5,125 3,787 366
Printing costs........................ 5,972 751 2,312
Other................................. 4,124 848 2,062
----------- --------- -----------
Expenses before fee waivers........... 583,180 169,881 366,382
Less: Fee waivers..................... (72,216) (58,617) (169,544)
----------- --------- -----------
Net Expenses.......................... 510,964 111,264 196,838
----------- --------- -----------
Net Investment Income................. 2,177,545 399,991 1,080,311
----------- --------- -----------
REALIZED/UNREALIZED LOSSES ON
INVESTMENTS:
Net realized losses on investment
transactions....................... (1,646,585) (1,813) (37,429)
Change in unrealized appreciation
(depreciation) on investments...... 29,430 (149,458) (106,825)
----------- --------- -----------
Net realized/unrealized losses on
investments........................ (1,617,155) (151,271) (144,254)
----------- --------- -----------
Change in net assets resulting from
operations......................... $ 560,390 $ 248,720 $ 936,057
=========== ========= ===========
</TABLE>
See notes to financial statements.
B-57
<PAGE> 106
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND VALUE EQUITY FUND GROWTH FUND
---------------------------- -------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.. $ 6,961,437 $ 6,920,710 $ 837,145 $ 899,777 $ 389,143 $ 194,157
Net realized gains
(losses)
on investment
transactions......... 141,785 (948,499) 9,340,011 953,377 1,167,209 273,411
Net change in
unrealized
appreciation on
investments.......... -- -- 5,384,702 3,898,036 3,513,955 2,415,733
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
resulting from
operations........... 7,103,222 5,972,211 15,561,858 5,751,190 5,070,307 2,883,301
------------- ------------- ------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (6,961,437) (6,920,710) (827,973) (841,639) (389,143) (165,741)
In excess of net
investment income.... -- -- -- -- (19,825) --
From net realized gains
on investments....... -- -- (2,982,043) (953,377) (505,659) --
In excess of net
realized
gains on investments. -- -- -- (4,237,871) -- --
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
from shareholder
distributions........ (6,961,437) (6,920,710) (3,810,016) (6,032,887) (914,627) (165,741)
------------- ------------- ------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 426,124,612 481,425,381 5,108,660 9,107,308 10,696,082 13,601,991
Dividends reinvested... 512,232 559,926 1,808,516 2,629,804 383,839 85,237
Cost of shares
redeemed............. (450,674,926) (451,762,504) (17,877,680) (10,424,030) (2,953,582) (1,264,531)
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
from capital
transactions......... (24,038,082) 30,222,803 (10,960,504) 1,313,082 8,126,339 12,422,697
------------- ------------- ------------ ------------ ----------- -----------
Capital contribution... 138,311 628,737 -- -- -- --
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets... (23,757,986) 29,903,041 791,338 1,031,385 12,282,019 15,140,257
NET ASSETS:
Beginning of period.... 157,903,609 128,000,568 80,263,796 79,232,411 21,485,350 6,345,093
------------- ------------- ------------ ------------ ----------- -----------
End of period.......... $ 134,145,623 $ 157,903,609 $ 81,055,134 $ 80,263,796 $33,767,369 $21,485,350
============= ============= ============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued................. 426,124,613 481,425,381 373,123 734,724 832,694 1,231,162
Reinvested............. 512,232 559,926 133,595 232,650 29,644 7,846
Redeemed............... (450,674,926) (451,762,504) (1,290,025) (862,147) (222,427) (115,950)
------------- ------------- ------------ ------------ ----------- -----------
Change in shares....... (24,038,081) 30,222,803 (783,307) 105,227 639,911 1,123,058
============= ============= ============ ============ =========== ===========
</TABLE>
See notes to financial statements.
B-58
<PAGE> 107
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LOW DURATION GOVERNMENT TENNESSEE MUNICIPAL
FIXED INCOME FUND SECURITIES FUND OBLIGATIONS FUND
-------------------------- ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1996 1995 1996 1995
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 2,177,545 $ 2,614,835 $ 399,991 $ 464,598 $ 1,080,311 $ 1,030,817
Net realized losses on
investment
transactions......... (1,646,585) (3,007,163) (1,813) (21,516) (37,429) (980,042)
Net change in
unrealized
appreciation
(depreciation)
on investments....... 29,430 2,284,408 (149,458) 187,815 (106,825) 925,567
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets
resulting from
operations........... 560,390 1,892,080 248,720 630,897 936,057 976,342
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (2,163,561) (2,614,835) (399,991) (454,961) (1,077,559) (1,021,053)
In excess of net
investment income.... -- (39,804) (3,182) -- -- --
In excess of net
realized gains on
investments.......... (104,990) -- (2,537) -- (906) --
------------ ------------ ----------- ----------- ----------- -----------
(2,268,551) (2,654,639) (405,710) (454,961) (1,078,465) (1,021,053)
------------ ------------ ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 2,751,575 9,410,452 688,187 2,084,648 3,937,416 8,742,390
Dividends reinvested... 971,603 957,588 339,394 404,688 294,830 262,359
Cost of shares
redeemed............. (12,664,268) (12,417,944) (1,062,808) (2,704,498) (5,879,537) (8,098,317)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets
from capital
transactions......... (8,941,090) (2,049,904) (35,227) (215,162) (1,647,291) 906,432
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets... (10,649,251) (2,812,463) (192,217) (39,226) (1,789,699) 861,721
NET ASSETS:
Beginning of period.... 39,496,460 42,308,923 7,653,208 7,692,434 20,826,787 19,965,066
------------ ------------ ----------- ----------- ----------- -----------
End of period.......... $ 28,847,209 $ 39,496,460 $ 7,460,991 $ 7,653,208 $19,037,088 $20,826,787
============ ============ =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 300,179 1,017,567 67,717 212,299 402,934 903,304
Reinvested............. 106,183 103,889 33,512 41,066 30,243 27,164
Redeemed............... (1,377,873) (1,347,411) (105,303) (273,850) (600,866) (848,954)
------------ ------------ ----------- ----------- ----------- -----------
Change in shares....... (971,511) (225,955) (4,074) (20,485) (167,689) 81,514
============ ============ =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
B-59
<PAGE> 108
THE SESSIONS GROUP
RIVERSIDE CAPITAL MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ------------------------------------------------------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (93.8%):
A.I.D. to Israel:
$ 1,510,000 5.45%, 11/15/99*....................................... $1,495,175
A.I.D. to Jamaica:
750,000 5.94%, 10/5/12*........................................ 755,694
Federal Farm Credit Bank:
5,000,000 5.26%, 7/1/96.......................................... 5,000,000
Federal Home Loan Bank:
5,000,000 5.31%, 12/27/96........................................ 5,000,000
1,000,000 5.31%, 2/14/97*........................................ 999,194
2,000,000 5.28%, 4/4/97*......................................... 1,999,037
Federal National Mortgage Assoc.:
10,000,000 5.30%, 12/26/96........................................ 9,996,307
10,000,000 5.24%, 3/25/97*........................................ 9,996,291
3,000,000 5.49%, 7/28/97*........................................ 2,990,232
5,000,000 5.43%, 9/2/97*......................................... 4,995,023
Student Loan Marketing Assoc.:
7,000,000 5.54%, 7/11/96*........................................ 7,000,000
2,000,000 5.39%, 9/12/96*........................................ 2,000,000
650,000 5.61%, 11/27/96*....................................... 650,226
3,750,000 5.56%, 3/3/97*......................................... 3,750,000
1,000,000 5.70%, 4/21/97*........................................ 1,002,820
10,000,000 5.41%, 10/14/97*....................................... 9,990,711
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------------------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Student Loan Marketing Assoc., continued:
$ 4,830,000 5.41%, 11/24/97*.................................... $ 4,820,654
8,000,000 5.43%, 8/20/98*..................................... 7,989,927
2,000,000 5.43%, 9/28/98*..................................... 1,997,352
9,000,000 5.43%, 11/10/98*.................................... 8,987,219
6,000,000 5.45%, 1/13/99*..................................... 5,982,614
6,850,000 5.45%, 2/8/99*...................................... 6,835,109
1,000,000 5.45%, 7/12/99*..................................... 994,323
14,000,000 5.46%, 8/2/99*...................................... 13,984,811
Overseas Private Investment Corp.:
6,641,000 5.75%, 6/1/00*...................................... 6,657,133
------------
Total U.S. Government Agencies 125,869,852
------------
Total Investments, at amortized cost 125,869,852
------------
REPURCHASE AGREEMENTS (5.8%):
7,714,419 Zions Securities, 5.30%, 7/1/96 (Collateralized by
$7,420,000 U.S. Treasury Notes, 7.25%, 8/15/04,
market value--$7,887,649)........................... 7,714,419
------------
Total Repurchase Agreements 7,714,419
------------
Total (Cost--$133,584,271)(a) $133,584,271
============
- ------
<FN>
Percentages indicated are based on net assets of $134,145,623.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Floating Variable Rate Certificates are securities with interest rates that
change periodically and are payable on different dates ranging from daily,
weekly, monthly, quarterly or semi-annually. The interest rate is based on
an index of market interest rates. The rate reflected on the Schedule of
Portfolio Investments is the rate in effect on June 30, 1996.
</TABLE>
See notes to financial statements.
B-60
<PAGE> 109
THE SESSIONS GROUP
RIVERSIDE CAPITAL VALUE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS (98.7%):
Automobiles (3.5%):
74,900 Echlin, Inc............................................ $ 2,836,838
-----------
Banking (1.3%):
36,965 First Hawaiian, Inc. .................................. 1,053,503
-----------
Computers & Peripherals (5.8%):
203,650 Amdahl Corp. (b)....................................... 2,189,238
25,200 I.B.M. Corp............................................ 2,494,800
-----------
4,684,038
-----------
Department Stores (3.1%):
155,000 Global Industries
Technology, Inc. (b).................................. 2,480,000
-----------
Electrical Equipment (2.6%):
109,700 Augat, Inc. ........................................... 2,098,013
-----------
Entertainment (3.6%):
81,300 Hasbro, Inc. .......................................... 2,906,475
-----------
Financial Services (3.4%):
61,046 Travelers, Inc......................................... 2,785,201
-----------
Food Processing & Packaging (5.5%):
164,100 J & J Snack Foods, Inc. (b)............................ 1,887,150
117,050 McCormick & Company, Inc............................... 2,589,731
-----------
4,476,881
-----------
Hotels & Motels (3.2%):
227,500 Equity Inns, Inc....................................... 2,616,250
-----------
Insurance (8.5%):
23,000 Phoenix Re Corp........................................ 557,750
53,800 SunAmerica, Inc........................................ 3,039,700
52,600 UNUM Corp.............................................. 3,274,350
-----------
6,871,800
-----------
Medical Services (3.0%):
102,700 Value Health, Inc. (b)................................. 2,426,288
-----------
Metal & Mineral Production (2.7%):
55,650 Cleveland Cliffs....................................... 2,177,306
-----------
Mobile Homes & Manufactured Housing (3.2%):
104,300 Skyline Corp........................................... 2,607,500
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Oil & Gas (3.3%):
108,380 Valero Energy Corp..................................... $ 2,709,500
-----------
Oilfield Equipment & Services (3.3%):
75,195 B. J. Services (b)..................................... 2,641,224
-----------
Pollution Control Services & Equipment (3.9%):
178,700 Safety Kleen........................................... 3,127,250
-----------
Real Estate Investment Trusts (9.7%):
88,938 Mid-America Apartment Community........................ 2,256,802
75,260 Storage USA............................................ 2,427,135
127,625 Transnational Re Corp.................................. 3,142,765
-----------
7,826,702
-----------
Restaurants (3.0%):
226,600 Darden Restaurants, Inc................................ 2,435,950
-----------
Retail (7.8%):
262,650 Burlington Coat Factory (b)............................ 2,757,825
327,100 Hancock Fabrics........................................ 3,598,100
-----------
6,355,925
-----------
Savings & Loan Companies (3.8%):
113,100 Ahmanson (HF) & Co..................................... 3,053,700
-----------
Steel (2.7%):
132,400 Birmingham Steel Corp.................................. 2,168,050
-----------
Tobacco (7.7%):
35,050 Philip Morris Cos., Inc................................ 3,645,200
77,000 UST, Inc............................................... 2,637,250
-----------
6,282,450
-----------
Trucking (4.1%):
129,100 Werner Enterprises, Inc................................ 3,356,599
-----------
Total Common Stocks 79,977,443
-----------
INVESTMENT COMPANIES (0.6%):
443,929 Dreyfus Treasury Prime Fund............................ 443,929
4,917 Riverside Capital Money Market Fund.................... 4,917
-----------
Total Investment Companies 448,846
-----------
Total (Cost--$66,911,792)(a) $80,426,289
===========
- ------
<FN>
Percentages indicated are based on net assets of $81,055,134.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized appreciation...................................... $15,988,069
Unrealized depreciation...................................... (2,473,572)
-----------
Net unrealized appreciation.................................. $13,514,497
===========
(b) Represents non-income producing securities.
</TABLE>
See notes to financial statements.
B-61
<PAGE> 110
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS (92.4%):
Automotive Parts (3.8%):
38,950 Titan Wheel International, Inc........................... $ 623,200
33,200 Walbro Corp. ............................................ 672,300
-----------
1,295,500
-----------
Banking (6.5%):
9,500 NationsBank Corp......................................... 784,938
14,200 Southern National Corp................................... 450,850
34,200 SouthTrust Corp.......................................... 961,875
-----------
2,197,663
-----------
Beverages (3.0%):
20,800 Coca-Cola Co............................................. 1,016,600
-----------
Computers (1.3%):
30,000 Checkmate Electronics, Inc. (b).......................... 435,000
-----------
Computers & Peripherals (2.0%):
35,000 EMC Corp.(b)............................................. 651,875
-----------
Construction (2.5%):
42,756 Clayton Homes, Inc....................................... 855,120
-----------
Electrical Equipment (4.7%):
18,500 General Electric Co. .................................... 1,600,250
-----------
Electronic & Electrical (5.4%):
21,000 AMP, Inc. ............................................... 842,625
15,500 Motorola, Inc. .......................................... 974,563
-----------
1,817,188
-----------
Food Processing & Packaging (4.7%):
25,000 Nabisco Holdings Corp. .................................. 884,375
22,000 Sara Lee Corp............................................ 712,250
-----------
1,596,625
-----------
Insurance (8.4%):
9,500 American International
Group, Inc.............................................. 936,937
49,400 First Colony Corp........................................ 1,531,400
9,000 Providian Corp........................................... 385,875
-----------
2,854,212
-----------
Manufacturing-Capital Goods (3.3%):
40,000 Metrotrans Corp. (b)..................................... 560,000
32,000 Wabash National Corp. ................................... 568,000
-----------
1,128,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Medical Services (1.6%):
30,000 Healthsource, Inc. (b)................................... $ 525,000
-----------
Oil--Integrated Companies (4.7%):
7,400 Atlantic Richfield Co.................................... 876,900
8,500 Texaco, Inc.............................................. 712,938
-----------
1,589,838
-----------
Pharmaceuticals (6.5%):
22,500 Abbott Laboratories...................................... 978,750
19,100 Schering-Plough.......................................... 1,198,525
-----------
2,177,275
-----------
Pollution Control Services & Equipment (2.0%):
23,500 Browning-Ferris Industries, Inc.......................... 681,500
-----------
Real Estate Investment Trusts (5.3%):
44,000 Merry Land & Investment Co............................... 924,000
27,300 Storage USA.............................................. 880,425
-----------
1,804,425
-----------
Restaurants (2.7%):
37,000 Cracker Barrel Old Country Store, Inc.................... 897,250
-----------
Retail (6.8%):
45,000 Books-A-Million (b)...................................... 376,875
21,700 Home Depot, Inc.......................................... 1,171,800
29,000 Wal-Mart Stores, Inc. ................................... 735,875
-----------
2,284,550
-----------
Semiconductors (3.0%):
13,800 Intel Corp............................................... 1,013,437
-----------
Services (Non-Financial) (2.5%):
35,000 Rollins, Inc............................................. 822,500
-----------
Soaps & Cleaning Agents (2.1%):
8,000 Procter & Gamble Co. .................................... 725,000
-----------
Tobacco (4.1%):
13,200 Philip Morris Cos., Inc.................................. 1,372,800
-----------
Toys & Bicycles--Manufacturing (3.0%):
35,675 Mattel, Inc.............................................. 1,021,196
-----------
Utilities--Telecommunications (2.5%):
33,000 MCI Telecommunications
Corp.................................................... 845,625
-----------
Total Common Stocks 31,208,429
-----------
</TABLE>
Continued
B-62
<PAGE> 111
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ -------------------------------------------------------- ----------
<S> <C> <C>
INVESTMENT COMPANIES (7.9%):
1,334,955 Dreyfus Treasury Prime Fund............................. $1,334,955
1,334,955 Riverside Capital Money Market Fund..................... 1,334,955
----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ -------------------------------------------------------- ----------
<S> <C> <C>
INVESTMENT COMPANIES, CONTINUED:
Total Investment Companies $ 2,669,910
-----------
Total (Cost--$28,072,751)(a) $33,878,339
===========
- ------
<FN>
Percentages indicated are based on net assets of $33,767,369.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized appreciation....................................... $6,581,859
Unrealized depreciation....................................... (776,271)
----------
Net unrealized appreciation................................... $5,805,588
==========
(b) Represents non-income producing securities.
</TABLE>
See notes to financial statements.
B-63
<PAGE> 112
THE SESSION GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS (24.8%):
Banking (5.5%):
$1,500,000 Commerce Bancorp, Inc., 8.38%, 7/15/03............... $ 1,587,914
-----------
Industrial Goods & Services (13.9%):
1,500,000 Montalbano Builders, 10.00%, 5/1/99, Callable 5/1/98
@100................................................ 1,500,000
889,787 Rosewood Care Center Funding, 7.25%, 11/1/13......... 902,022
1,600,000 Voyager Lines Private Placement, 9.50%, 11/1/99,
Callable 11/1/96 @100 (b)........................... 1,600,000
-----------
4,002,022
-----------
Manufacturing (1.5%):
450,000 Timken, 7.25%, 8/20/02............................... 449,438
-----------
Transportation & Shipping (3.9%):
1,125,000 Ray and Ross Transport, Inc., 10.00%, 2/1/06,
Callable 1/1/97 @100................................ 1,125,000
-----------
Total Corporate Bonds 7,164,374
-----------
PREFERRED STOCKS (2.2%):
Financial Services (2.2%):
25,000 Lincoln National PLC, 8.75%, Callable 7/2/01 @25..... 625,000
-----------
Total Preferred Stocks 625,000
-----------
TAXABLE MUNICIPAL BONDS (12.3%):
Illinois (0.5%):
132,036 Belleville, St. Clair County, CMO, 7.35%, 11/15/09... 131,141
-----------
Indiana (1.5%):
420,000 Jeffersonville, Public Warehouse Income Project,
10.45%, 4/1/05, LOC: State Bank of Austria.......... 436,275
-----------
Tennessee (4.8%):
130,000 Decatur County, Tennessee Health, Educational &
Housing Facilities Board Revenue, First Mortgage,
8.00%, 9/1/97....................................... 127,752
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
TAXABLE MUNICIPAL BONDS, CONTINUED:
Tennessee, continued:
$ 745,000 Hamilton County, Tennessee Industrial Development
Board, Multifamily Housing Revenue, Waterford
Apartments, Project A, 8.50%, 8/1/10................ $ 729,385
120,000 Jackson County, Tennessee Health & Educational
Facilities, First Mortgage, Forest Cove B, 8.00%,
9/1/97.............................................. 117,925
410,000 Memphis-Shelby County, Tennessee Industrial
Development Board, Economic Development Revenue,
Cleo Project B, 9.10%, 2/1/04....................... 419,840
-----------
1,394,902
-----------
West Virginia (5.5%):
110,000 Harrison County, West Virginia Revenue Refunding,
First Mortgage, Meadow B, 9.25%, 11/1/08............ 109,968
285,000 Summers County, West Virginia First Mortgage Gross
Revenue Refunding, Limited Partnership, 8.00%,
10/1/03............................................. 277,185
1,230,000 West Virginia State Hospital Financial Authority,
Hospital Revenue, Nellas Income Project, 9.50%,
8/1/15.............................................. 1,205,941
-----------
1,593,094
-----------
Total Taxable Municipal Bonds 3,555,412
-----------
</TABLE>
Continued
B-64
<PAGE> 113
THE SESSION GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (60.0%):
Federal Home Loan Bank:
$ 620,000 6.75%, 4/10/06, Callable 7/10/96 @100................. $ 602,671
Federal Home Loan Mortgage Corp.:
5,000,000 7.52%, 4/21/06, Callable 4/21/99 @100................. 4,961,356
3,000,000 7.55%, 4/26/06, Callable 4/26/99 @100................. 2,987,190
2,500,000 7.40%, 3/28/11, Callable 3/28/01 @100................. 2,433,025
Federal National Mortgage Assoc.:
3,000,000 6.93%, 10/26/05, Callable 10/26/98 @100............... 2,901,900
3,330,000 6.69%, 2/2/11, Callable 2/2/01 @100................... 3,090,140
Government Trust Certificates, State of Israel:
8,314 9.13%, 11/15/96....................................... 8,376
Puerto Rico, HUD 94A Caguas:
340,000 6.85%, 8/1/07......................................... 332,248
-----------
Total U.S. Government Agencies 17,316,906
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
U.S. TREASURY BONDS (0.2%):
$ 49,000 9.13%, 5/15/09........................................ $ 55,849
-----------
Total U.S. Treasury Bonds 55,849
-----------
INVESTMENT COMPANIES (2.3%):
670,568 Riverside Capital Money Market Fund................... 670,568
-----------
Total Investment Companies 670,568
-----------
Total (Cost--$29,370,100)(a) $29,388,109
===========
- ------
<FN>
Percentages indicated are based on net assets of $28,847,209.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized appreciation........................................ $ 224,796
Unrealized depreciation........................................ (206,787)
---------
Net unrealized appreciation.................................... $ 18,009
=========
(b) Represents a restricted security, purchased under Rule 144A, which is
exempt from registration under the Securities Act of 1933, as amended.
CMO-- Collateralized Mortgage Obligation
LOC-- Letter of Credit
PLC-- Public Liability Company
</TABLE>
See notes to financial statements.
B-65
<PAGE> 114
THE SESSIONS GROUP
RIVERSIDE CAPITAL LOW DURATION GOVERNMENT SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (96.8%):
Federal Farm Credit Bank:
$ 700,000 8.80%, 1/31/02........................................... $ 766,451
250,000 7.10%, 11/12/02.......................................... 253,792
Federal Home Loan Bank:
700,000 4.54%, 7/15/98*.......................................... 661,252
250,000 5.50%, 1/23/01........................................... 238,830
Federal Home Loan Mortgage Corp.:
250,000 7.75%, 11/07/01.......................................... 261,950
750,000 7.54%, 5/3/04............................................ 750,255
500,000 7.89%, 5/12/04........................................... 500,410
Federal National Mortgage Assoc.:
250,000 5.55%, 1/17/01........................................... 239,352
545,000 7.20%, 1/10/02........................................... 545,033
Guaranteed Export Certificates--Series 1994-A:
2,215,555 7.12%, 4/15/06........................................... 2,243,271
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Private Export Funding:
$ 466,900 5.65%, 3/15/03......................................... $ 448,808
Shipco 668 Series A-Title XI:
316,000 8.50%, 5/11/02......................................... 316,365
----------
Total U.S. Government Agencies 7,225,769
----------
INVESTMENT COMPANIES (1.7%):
1 Dreyfus Treasury Prime Fund............................ 1
129,000 Riverside Capital Money Market Fund.................... 129,000
----------
Total Investment Companies 129,001
----------
Total (Cost--$7,363,027)(a) $7,354,770
==========
- ------
<FN>
Percentages indicated are based on net assets of $7,460,991.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<S> <C>
Unrealized appreciation........................................ $ 77,980
Unrealized depreciation........................................ (86,237)
--------
Net unrealized depreciation.................................... $ (8,257)
========
* Floating Variable Rate Certificates are securities with interest rates that
change periodically and are payable on different dates ranging from daily,
weekly, monthly, quarterly or semi-annually. The interest rate is based on an
index of market interest rates or other index. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect on June 30, 1996.
</TABLE>
See notes to financial statements.
B-66
<PAGE> 115
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<S> <C> <C>
MUNICIPAL BONDS (85.8%):
Alabama (1.3%):
$ 250,000 Troy, Affordable Housing Revenue, 6.30%, 7/1/01...... $ 246,322
-----------
Georgia (2.2%):
400,000 Atlanta, Georgia Housing Development Corp., Mortgage
Revenue, 7.00%, 12/1/20, Callable 12/1/05 @102...... 418,552
-----------
Kansas (3.9%):
750,000 Manhattan, Kansas Industrial Revenue, 7.00%, 12/1/14,
Callable 12/1/05 @100............................... 734,467
-----------
Louisiana (4.3%):
750,000 New Orleans, Louisiana Audubon Park Revenue, 8.00%,
4/1/12.............................................. 812,273
-----------
Pennsylvania (2.6%):
250,000 Schuylkill County, Pennsylvania Industrial
Development Authority Revenue, Beverly Enterprises
Project, 6.63%, 5/1/03.............................. 252,238
250,000 Wyoming County, Pennsylvania Industrial Development
Authority Revenue, Beverly Enterprises Project,
6.25%, 7/1/06....................................... 250,260
-----------
502,498
-----------
Puerto Rico (3.3%):
195,000 Puerto Rico Commonwealth Highway & Transportation,
5.50%, 7/1/19, Callable 7/1/03 @101.5............... 183,265
450,000 Puerto Rico Electric Power Authority, 6.00%, 7/1/15,
Callable 7/1/05 @102................................ 454,144
-----------
637,409
-----------
South Carolina (1.1%):
200,000 Charleston County, South Carolina Health Facilities
Revenue, Franke Home Project, 8.00%, 11/1/24........ 207,694
-----------
Tennessee (65.2%):
105,000 Blount County, Tennessee Health & Educational
Facilities Board Revenue, Multifamily Mortgage,
Maryville Towers Project, 6.20%, 7/20/28, GNMA...... 105,066
100,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/13....................................... 104,650
105,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/14....................................... 109,882
115,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/15....................................... 120,698
125,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/16....................................... 131,194
100,000 Chattanooga, Tennessee Industrial Development Board
Revenue, 7.05%, 8/15/05............................. 108,019
395,000 Clarkesville, Tennessee Water, Sewer & Gas Refunding
& Improvement, 6.25%, 2/1/18, MBIA.................. 406,131
100,000 Dayton, Tennessee Housing Assistance, Pikeville
Townhomes, 5.75%, 11/1/13........................... 97,951
470,000 Dyer County, Tennessee Health, Educational & Housing
Facilities Board Revenue, 1st Mortgage Parkview
Convalescent, 7.25%, 10/1/04........................ 490,356
500,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Park at 58
Project, 6.70%, 3/1/21, Callable 3/1/06 @101........ 506,015
250,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Pattern Towers,
6.38%, 8/1/26, Callable 8/1/05 @102................. 247,177
</TABLE>
Continued
B-67
<PAGE> 116
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Tennessee, continued:
$ 890,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Waterford Place
Apartments, Series B, 6.60%, 2/1/24, FGIC........... $ 864,653
300,000 Jackson, Tennessee Health, Educational & Housing,
Posthouse Apartments, 7.00%, 5/1/17................. 313,545
100,000 Johnson City, Tennessee Health & Education Refunding
Bonds, Health Hospital, Nursing Home, 6.75%, 7/1/06,
Prerefunded 7/1/01 @102............................. 110,379
100,000 Knox County, Tennessee Industrial Development Board,
Multifamily Revenue, 5.85%, 3/1/15, Callable 9/1/05
@102................................................ 99,094
350,000 Knox County, Tennessee Public Improvement, GO, 6.38%,
4/1/07.............................................. 378,885
350,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.60%,
10/15/07............................................ 362,834
250,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.65%,
10/15/10............................................ 256,855
250,000 Lawrance County, GO, 6.63%, 3/1/14................... 266,025
115,000 Manchester, Tennessee Water & Sewer Revenue, Series
1992, GO, 6.00%, 7/1/06, AMBAC...................... 118,352
450,000 Maury County Industrial Development Board, PCR,
6.50%, 9/1/24, Callable 9/1/04 @102................. 463,140
250,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Mortgage Revenue, Edgewater
Terrace Project, 7.38%, 1/20/27, FHA, LOC: First
Alabama Birmingham.................................. 264,007
250,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Multifamily Refunding, River Trace
II, 6.45%, 4/1/26................................... 253,902
250,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Health & Educational Facilities Board
Revenue, 1st Mortgage, Blakeford Project, 7.50%,
7/1/99.............................................. 259,903
100,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Housing & Educational Facilities Board
Revenue, Vanderbilt University, Series A, 6.00%,
10/1/16............................................. 100,798
170,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Water & Sewer Revenue, 7.00%, 1/1/14...... 173,798
150,000 Morristown, Tennessee Housing Development Corp.,
Multifamily Revenue, 6.25%, 5/1/18.................. 151,988
150,000 Poplar Grove, Tennessee Utility District, Tipton
County Gas System Revenue, Series 1993, 6.90%,
1/15/07............................................. 154,623
130,000 Poplar Grove, Tennessee Utility District, Waterworks
Revenue Refunding & Improvement, 6.05%, 4/1/05...... 136,715
160,000 Rutherford County, 0.00%, 5/1/13..................... 58,315
370,000 Shelby County, Tennessee Compound Interest School
Bonds, Series A, GO, 0.00%, 5/1/12.................. 140,940
1,150,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Multifamily
Housing, Windsor Apartments, 6.75%, 10/1/17......... 1,186,513
250,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue Refunding, Beverly
Enterprises Project, 6.50%, 3/1/09.................. 251,428
</TABLE>
Continued
B-68
<PAGE> 117
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Tennessee, continued:
$ 125,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue Refunding,
Industrial Development, 1st Healthcare Project,
6.50%, 4/1/02....................................... $ 122,930
725,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue Refunding, Heritage
Place Project, 7.12%, 7/1/25, MBIA, FHA............. 768,892
500,000 Shelby County, 6.00%, 4/15/24........................ 481,015
500,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Trezevant Manor
Project, 6.00%, 8/1/16.............................. 472,300
500,000 South Fulton, Tennessee Industrial Development
Revenue, 6.35%, 10/1/15, Callable 10/1/05 @102...... 501,135
310,000 South Fulton, Tennessee Industrial Revenue Authority,
6.00%, 10/1/10, Callable 10/1/05 @102............... 307,914
200,000 Spring City, Tennessee Health, Educational & Housing
Facility, Spring City Care Center, 8.75%, 9/1/24.... 208,002
100,000 Tennessee State School Board Authority, Higher
Education Facilities, Series A, 6.25%, 5/1/17....... 103,523
100,000 Weakley County, GO, 6.00%, 8/1/12.................... 103,085
550,000 Winchester, Tennessee Health & Educational Facilities
Board, Revenue Refunding, Beverly Enterprises Income
Project, 7.00%, 6/1/09.............................. 557,838
-----------
12,420,465
-----------
West Virginia (0.7%):
125,000 Summers County, West Virginia, First Mortgage Gross
Revenue Refunding, 7.25%, 10/1/09................... 128,095
-----------
Wyoming (1.2%):
65,000 Sweetwater County, PCR, Idaho Power Company, Series
C, 7.63%, 12/1/13, Callable 11/3/96 @103............ 67,428
150,000 Sweetwater County, PCR, Idaho Power Company, Series
D, 7.63%, 12/1/13, Callable 11/3/96 @103............ 155,602
-----------
223,030
-----------
Total Municipal Bonds........................................... 16,330,805
-----------
ALTERNATIVE MINIMUM TAX PAPER (12.4%):
Oklahoma (1.6%):
300,000 Oklahoma Development Finance Authority Revenue, First
Mortgage, Bake Rite Income Project, 8.38%, 8/1/11... 303,015
-----------
Tennessee (10.8%):
530,000 Loudon County, Tennessee Industrial Development
Board, Solid Waste Disposal Revenue, Kimberly-Clark
Corp. Project, 6.20%, 2/1/23........................ 533,609
100,000 Memphis Shelby County, Tennessee Airport Revenue,
8.13%, 2/15/12, MBIA................................ 106,957
740,000 Tennessee Housing Development Agency, 7.05%, 7/1/20.. 758,360
145,000 Tennessee Housing Development Agency Mortgage, Series
A, 6.90%, 7/1/25.................................... 150,188
</TABLE>
Continued
B-69
<PAGE> 118
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<S> <C> <C>
ALTERNATIVE MINIMUM TAX PAPER, CONTINUED:
Tennessee, continued:
$ 500,000 Tennessee Housing Development Agency Mortgage,
Series C, 6.10%, 7/1/15............................... $ 500,395
-----------
2,049,509
-----------
Total Alternative Minimum Tax Paper............................. 2,352,524
-----------
Total (Cost--$18,441,220)(a).................................... $18,683,329
===========
- --------
<FN>
Percentages indicated are based on net assets of $19,037,088.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<S> <C>
Unrealized appreciation........................................ $ 359,432
Unrealized depreciation........................................ (117,323)
---------
Net unrealized appreciation.................................... $ 242,109
=========
AMBAC Insured by American Municipal Bond Assurance Corp.
FGIC Insured by Financial Guaranty Insurance Corp.
FHA Insured by Federal Housing Administration
GNMA Insured by Government National Mortgage Assoc.
GO General Obligation
LOC Letter of Credit
MBIA Insured by Municipal Bond Insurance Assoc.
PCR Pollution Control Revenue
</TABLE>
See notes to financial statements.
B-70
<PAGE> 119
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION:
The Sessions Group (the "Group") was organized on April 25, 1988 as an Ohio
business trust, and is registered under the Investment Company Act of 1940
as amended, (the "1940 Act"), as an open-end management investment company.
Between the date of organization and the dates of commencement of operations
of the Riverside Capital Money Market Fund, the Riverside Capital Value
Equity Fund, the Riverside Capital Growth Fund, the Riverside Capital Fixed
Income Fund, the Riverside Capital Low Duration Government Securities Fund
and the Riverside Capital Tennessee Municipal Obligation Fund (individually,
a "Fund" and collectively, the "Funds"), each a series of the Group, the
Funds earned no investment income and had no operations other than incurring
organizational expenses and the sale of initial units of beneficial interest
("shares") of the Funds. On August 29, 1995, the Riverside Capital Equity
and Municipal Income Fund liquidated and ceased operations.
The investment objective of the Money Market Fund is to seek current income
with liquidity and stability of principal. The investment objective of the
Value Equity Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into
common stocks. The investment objective of the Growth Fund is to seek growth
of capital by investing primarily in a diversified portfolio of common
stocks and securities convertible into common stocks. The investment
objective of the Fixed Income Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high grade fixed
income securities. The investment objective of the Low Duration Government
Securities Fund is to seek current income consistent with preservation of
capital. The investment objectives of the Tennessee Municipal Obligations
Fund are to seek (1) income which is exempt from federal income tax and
Tennessee state income tax, and (2) preservation of capital.
The Group is authorized to issue an unlimited number of shares without par
value. Sales of shares of the Funds may be made to customers of National
Bank of Commerce ("NBC") and its affiliates, to all accounts of
correspondent banks of NBC and to the general public. NBC serves as
investment adviser to the Funds.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the Money Market Fund are valued at either amortized cost,
which approximates market value, or at original cost, which combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the maturity
of the security. In addition, the Fund may not a) purchase any instrument
with a remaining maturity greater than thirteen months unless such
investment is subject to a demand feature, or b) maintain a dollar-weighted
average portfolio maturity which exceeds 90 days.
Continued
B-71
<PAGE> 120
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
Investments in common and preferred stocks and commercial paper of the Value
Equity Fund, the Growth Fund, the Fixed Income Fund, the Low Duration
Government Securities Fund and the Tennessee Municipal Obligations Fund
(collectively, "the variable net asset value funds"), are valued at their
market values determined on the basis of the latest available bid quotations
in the principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Investments in
corporate bonds, municipal securities and U.S. Government securities of the
variable net asset value funds are valued at their market values determined
on the basis of the mean of the latest bid and asked quotations in the
principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Investments in
investment companies are valued at their net asset values as reported by
such companies. Other securities for which quotations are not readily
available are valued at their fair value under procedures established by the
Group's Board of Trustees. The differences between the cost and market
values of investments held by the variable net asset value funds are
reflected as either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the amortization of premium or
discount. Dividend income is recorded on the ex-dividend date. Gains or
losses realized on sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions such
as banks and broker dealers which NBC deems creditworthy under guidelines
approved by the Board of Trustees, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each 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, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by
the Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the Funds under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for temporary purposes by entering into reverse
repurchase agreements. 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
places in a segregated custodial account assets having a value equal to the
repurchase price (including accrued interest), and will continually monitor
the account to ensure such equivalent value is maintained at all times.
Reverse repurchase agreements are considered to be borrowings by the Funds
under the 1940 Act.
DERIVATIVES:
A derivative is defined as a financial instrument whose value is derived
from the performance of underlying assets, interest rate and currency
exchange rates, or indices, and include (but are not limited to) structured
Continued
B-72
<PAGE> 121
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
debt obligations, interest rate and currency swaps, futures contracts,
options, and forward currency contracts. The variable net asset value funds
may invest in structured debt obligations for the purpose of mitigating
interest rate risk in the portfolio. Such structured debt obligations have
floating interest rates that reset to various indices, which may include
swap rates or floors, and which reset at periodic intervals, as disclosed in
the accompanying Schedules of Portfolio Investments. Risks of entering into
such transactions include the potential inability of the dealer to meet
their obligations and unanticipated movements in the value of the security
or the underlying assets or indices. It is possible that the Funds will
incur a loss as a result of their investments in derivative instruments. It
is the Fund's policy to the extent that there exists no readily available
market for such securities, that the investment will be treated as an
illiquid security for purposes of calculating the Funds' limitations in
illiquid securities as set forth in the Funds' investment restrictions.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly and
distributable net realized capital gains, if any, are declared and
distributed at least annually for the Money Market Fund. Dividends from net
investment income are declared and paid monthly and distributable net
realized capital gains, if any, are declared and distributed annually for
the variable net asset value funds.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for net operating losses, expiring capital loss
carry forwards, and deferral of certain losses. The following
reclassification has been made to the components of net assets of the Money
Market Fund as of June 30, 1996 to more clearly reflect the differences
between financial statement amounts available for distribution and the
amounts available for distribution to comply with income tax regulations: an
decrease in capital and corresponding decrease in accumulated undistributed
net realized losses on investment transactions in the amount of
approximately $138,000.
FEDERAL INCOME TAXES:
It is the policy of each of the Funds to qualify or continue to qualify as a
regulation investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
ORGANIZATION COSTS:
All expenses in connection with each Fund's organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by the Funds.
Such expenses are amortized over a period of two years commencing with the
date of the initial public offering (five years for the Tennessee Municipal
Obligations Fund). In the event that any of the initial shares of a Fund are
redeemed during such period by any holder thereof, the redemption proceeds
will be reduced by a pro rata portion of any remaining organization costs in
the same proportion as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
Continued
B-73
<PAGE> 122
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended June 30, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Value Equity Fund.................................. $ 22,246,521 $ 34,354,010
Growth Fund........................................ $ 15,450,988 $ 8,085,554
Fixed Income Fund.................................. $117,254,138 $120,909,929
Low Duration Government Securities Fund............ $ 1,547,136 $ 1,472,589
Tennessee Municipal Obligations Fund............... $ 11,843,364 $ 13,329,531
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by NBC. Under the
terms of the investment advisory agreement, NBC is entitled to receive fees
based on a percentage of the average net assets of each Fund. NBC has agreed
that if the aggregate expenses of the Funds, as defined, for any fiscal year
exceed limitations of any state having jurisdiction over the Funds, NBC will
refund to the Funds, or otherwise bear, such excess. Such limitation did not
affect the calculation of the investment advisory fees during the year ended
June 30, 1996.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio limited partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator. Such officers and trustees are paid no
fees directly by the Funds for serving as officers and trustees of the
Group. Under the terms of the administration agreement, BISYS fees are
computed daily as a percentage of the average net assets of each Fund. BISYS
Ohio serves the Funds as transfer agent and fund accountant.
During the year ended, June 30, 1996, NBC voluntarily contributed $124,984
of its investment advisory fees and BISYS voluntarily contributed $13,327 of
its administrative fees to the Money Market Fund. During the year ended,
June 30, 1995, NBC voluntarily contributed $97,370 of its investment
advisory fees to the Money Market Fund. In addition, during the year ended
June 30, 1995, NBC purchased securities from the Fund for their carrying
value of $14,199,150 plus accrued interest. The market value of these
securities at the date of the sale to NBC was $13,667,783. The voluntary
contribution of investment advisory fees and administrative fees, and the
difference between the market value and carrying value of the securities on
the transaction date are reflected in the accompanying financial statements
as a capital contribution to the Fund.
The Group has adopted a Distribution and Shareholder Service Plan in
accordance with Rule 12b-1 under the 1940 Act, pursuant to which each Fund
is authorized to pay or reimburse BISYS, as distributor, a periodic amount,
calculated at an annual rate not to exceed 0.25% of the average daily net
asset value of each Fund. These fees are used by BISYS to pay banks,
including NBC, broker dealers and other institutions, or to reimburse BISYS
or its affiliates, for administration, distribution and shareholder services
in connection with the distribution of Fund shares.
Continued
B-74
<PAGE> 123
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
The Group has adopted an Administrative Services Plan, pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include NBC, its correspondent and affiliated banks
and BISYS, for providing ministerial, recordkeeping and/or administrative
support services to their customers who are the beneficial or record owners
of a Fund. The compensation which may be paid under the Administrative
Services Plan is a fee computed daily at an annual rate of up to 0.25% of
the average daily net asset value of a Fund.
BISYS is also entitled to receive commissions on sales of shares of the
variable net asset value funds. For the year ended June 30, 1996, BISYS
received $9,120 from commissions earned on sales of shares of the variable
net asset value funds, of which $4,090 was reallowed to affiliated
broker/dealers.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
Information regarding these transactions is as follows for the year ended
June 30, 1996:
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
-------- ----------------- -----------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee .35% 1.00% of 1.00% of
reductions (percentage of average first $50 million first $50 million
net assets)....................... .75% of remaining .75% of remaining
Voluntary fee reductions........... -- -- $188,588
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions (percentage of average
net assets)....................... .20% .20% .20%
Voluntary fee reductions........... -- -- $14,290
12b-1 FEES:
Annual fee before voluntary fee
reductions (percentage of average
net assets)....................... .25% .25% .25%
Voluntary fee reductions........... $171,557 $151,866 $55,404
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee
reductions (percentage of average
net assets)....................... .25% .25% .25%
Voluntary fee reductions........... $143,129 $22,471 $4,500
FUND ACCOUNTANT AND TRANSFER
AGENT FEES......................... $76,601 $72,840 $52,692
</TABLE>
Continued
B-75
<PAGE> 124
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
FIXED GOVERNMENT MUNICIPAL
INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before
voluntary fee reductions
(percentage of average
net assets)............... .65% .50% .65%
Voluntary fee reductions... -- $38,565 $127,577
ADMINISTRATION FEES:
Annual fee before
voluntary fee reductions
(percentage of average
net assets)............... .20% .20% .20%
Voluntary fee reductions:.. -- $ 3,856 --
12b-1 FEES:
Annual fee before
voluntary fee reductions
(percentage of average
net assets)............... .25% .25% .25%
Voluntary fee reductions:.. $63,798 $12,381 $20,359
ADMINISTRATIVE SERVICES
FEES:
Annual fee before
voluntary fee reductions
(percentage of average
net assets)............... .25% .25% .25%
Voluntary fee reductions... $8,418 $3,815 $21,608
FUND ACCOUNTANT AND
TRANSFER AGENT FEES........ $58,691 $49,282 $70,155
</TABLE>
5. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Funds have capital loss
carryforwards as of June 30, 1996, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
--------- -------
<S> <C> <C>
Money Market Fund........................................... $145,161 2003
69,007 2004
Fixed Income Fund........................................... 2,812,097 2003
2,114,706 2004
Low Duration Government Securities Fund..................... 8,905 2003
23,561 2004
Tennessee Municipal Obligations Fund........................ 235,900 2003
968,507 2004
</TABLE>
Continued
B-76
<PAGE> 125
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
6. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Group designates the following eligible distributions for the dividends
received deduction for corporations:
<TABLE>
<CAPTION>
VALUE
EQUITY GROWTH
FUND FUND
---------- --------
<S> <C> <C>
Dividend Income.......................................... $2,101,037 $637,528
Dividend Income Per Share................................ $ 0.137 $ 0.167
</TABLE>
7. EXEMPT-INTEREST INCOME DESIGNATIONS (UNAUDITED):
The Group designates the following exempt-interest income for the Tennessee
Municipal Obligations Fund's taxable year ended June 30, 1996:
<TABLE>
<S> <C>
Exempt-Interest Distributions...................................... $1,077,559
Exempt-Interest Distributions Per Share............................ $ 0.53
</TABLE>
The percentage break-down of the exempt-interest income by state for the
Tennessee Municipal Obligations Fund's taxable year ended June 30, 1996 was
as follows:
<TABLE>
<S> <C>
Alabama............................................................... 1.69%
Arkansas.............................................................. 0.33%
Georgia............................................................... 0.11%
Kansas................................................................ 2.63%
Kentucky.............................................................. 0.17%
Louisiana............................................................. 2.18%
Minnesota............................................................. 0.38%
Oklahoma.............................................................. 1.98%
Pennsylvania.......................................................... 2.54%
Puerto Rico........................................................... 1.66%
South Carolina........................................................ 1.26%
Tennessee............................................................. 79.24%
Texas................................................................. 0.59%
West Virginia......................................................... 5.11%
Wyoming............................................................... 0.13%
------
100.00%
======
</TABLE>
For the year ended June 30, 1996, 9.5% of the income earned by the Tennessee
Municipal Obligations Fund may be subject to the alternative minimum tax.
B-77
<PAGE> 126
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET FUND
------------------------------------------------------
YEAR ENDED JUNE 30,
------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment Activities
Net investment income. 0.046 0.044 0.026 0.032 0.051
Net realized and
unrealized gains
(losses) on invest-
ments................ -- (0.004) -- -- 0.003
-------- -------- -------- -------- --------
Total from Invest-
ment Activities.... 0.046 0.040 0.026 0.032 0.054
-------- -------- -------- -------- --------
Distributions
Net investment income. (0.046) (0.044) (0.026) (0.032) (0.051)
Net realized gains.... -- -- -- -- (0.003)
-------- -------- -------- -------- --------
Total distributions. (0.046) (0.044) (0.026) (0.032) (0.054)
-------- -------- -------- -------- --------
Capital Transactions.... -- 0.004 -- -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............ 4.75%(a) 4.44%(a) 2.65% 3.20% 5.61%
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, at end of
period (000)........... $134,146 $157,904 $128,001 $141,840 $162,361
Ratio of expenses to
average net assets..... 0.99% 0.97% 0.95% 0.85% 0.66%
Ratio of net investment
income to average
net assets............. 4.65% 4.41% 2.62% 3.17% 5.12%
Ratio of expenses to
average net assets*.... 1.20% 1.18% 1.09% 0.94% 0.91%
Ratio of net investment
income to average
net assets*............ 4.44% 4.20% 2.48% 3.08% 4.87%
- ------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) The capital contribution had no impact on the total return for the years
ended June 30, 1995 and June 30, 1996.
</TABLE>
See notes to financial statements.
B-78
<PAGE> 127
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
VALUE EQUITY FUND
----------------------------------------------------
YEAR ENDED JUNE 30, OCTOBER 31, 1991
---------------------------------- TO JUNE 30,
1996 1995 1994 1993 1992 (a)
------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 12.63 $ 12.67 $ 11.57 $ 11.04 $ 10.00
------- ------- ------- ------- -------
Investment Activities
Net investment income... 0.14 0.14 0.07 0.21 0.17
Net realized and
unrealized gains on
investments............ 2.40 0.76 1.28 0.96 1.03
------- ------- ------- ------- -------
Total from Investment
Activities........... 2.54 0.90 1.35 1.17 1.20
------- ------- ------- ------- -------
Distributions
Net investment income... (0.14) (0.13) (0.06) (0.22) (0.16)
Net realized gains...... (0.49) (0.15) (0.19) (0.42) --
In excess of net
realized gains......... -- (0.66) -- -- --
------- ------- ------- ------- -------
Total Distributions... (0.63) (0.94) (0.25) (0.64) (0.16)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 14.54 $ 12.63 $ 12.67 $ 11.57 $ 11.04
======= ======= ======= ======= =======
Total Return (excludes
sales charges)........... 20.50% 8.03% 11.76% 10.94% 12.04%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)............. $81,055 $80,264 $79,232 $52,629 $25,461
Ratio of expenses to
average net assets....... 1.58% 1.58% 1.36% 0.73% 0.67%(c)
Ratio of net investment
income to average
net assets............... 1.01% 1.13% 0.52% 1.84% 2.43%(c)
Ratio of expenses to
average net assets*...... 1.79% 1.79% 1.74% 1.69% 1.95%(c)
Ratio of net investment
income to average
net assets*.............. 0.80% 0.92% 0.14% 0.88% 1.15%(c)
Portfolio turnover........ 27.89% 35.64% 62.17% 16.13% 23.07%
Average commission rate
paid (d)................. $0.0605 -- -- -- --
- ------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See notes to financial statements.
B-79
<PAGE> 128
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH FUND
------------------------------------
YEAR ENDED JUNE 30, APRIL 15, 1994
-------------------- TO JUNE 30,
1996 1995 1994(a)
--------- --------- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..... $ 12.14 $ 9.82 $10.00
--------- --------- ------
Investment Activities
Net investment income.................. 0.18 0.16 --
Net realized and unrealized gains
(losses) on investments............... 2.13 2.30 (0.18)
--------- --------- ------
Total from Investment Activities..... 2.31 2.46 (0.18)
--------- --------- ------
Distributions
Net investment income.................. (0.18) (0.14) --
In excess of net investment income..... (0.01) -- --
Net realized gains..................... (0.25) -- --
--------- --------- ------
Total Distributions.................. (0.44) (0.14) --
--------- --------- ------
NET ASSET VALUE, END OF PERIOD........... $ 14.01 $ 12.14 $ 9.82
========= ========= ======
Total Return (excludes sales charges).... 19.35% 25.27% (1.80)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)....... $33,767 $21,485 $6,345
Ratio of expenses to average net assets.. 1.05% 1.24% 2.59%(c)
Ratio of net investment income to average
net assets.............................. 1.37% 1.64% 0.25%(c)
Ratio of expenses to average net assets*. 1.97% 2.51% 3.90%(c)
Ratio of net investment income (loss) to
average net assets*..................... 0.45% 0.37% (1.07)%(c)
Portfolio turnover....................... 31.22% 29.36% 0.00%
Average commissions rate paid (d)........ $ 0.0686 -- --
- ------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
</TABLE>
See notes to financial statements.
B-80
<PAGE> 129
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FIXED INCOME FUND
-----------------------------------------------------
YEAR ENDED JUNE 30, OCTOBER 31, 1991
----------------------------------- TO JUNE 30,
1996 1995 1994 1993 1992 (a)
------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 9.27 $ 9.43 $ 10.44 $ 10.26 $ 10.00
------- ------- ------- ------- -------
Investment Activities
Net investment income.. 0.59 0.58 0.57 0.68 0.42
Net realized and
unrealized gains
(losses) on
investments........... (0.48) (0.15) (0.76) 0.27 0.22
------- ------- ------- ------- -------
Total from Investment
Activities.......... 0.11 0.43 (0.19) 0.95 0.64
------- ------- ------- ------- -------
Distributions
Net investment income.. (0.58) (0.58) (0.57) (0.69) (0.38)
In excess of net
investment income..... -- (0.01) -- -- --
Net realized gains..... -- -- -- (0.08) --
In excess of net
realized gains........ (0.03) -- (0.25) -- --
------- ------- ------- ------- -------
Total Distributions.. (0.61) (0.59) (0.82) (0.77) (0.38)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 8.77 $ 9.27 $ 9.43 $ 10.44 $ 10.26
======= ======= ======= ======= =======
Total Return (excludes
sales charges).......... 1.05% 4.82% (2.20)% 9.64% 6.56%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of
period (000)............ $28,847 $39,496 $42,309 $35,951 $27,256
Ratio of expenses to
average net assets...... 1.48% 1.43% 1.37% 0.74% 0.69%(c)
Ratio of net investment
income to average
net assets.............. 6.32% 6.33% 5.61% 6.65% 6.51%(c)
Ratio of expenses to
average net assets*..... 1.69% 1.64% 1.70% 1.42% 1.63%(c)
Ratio of net investment
income to average
net assets*............. 6.11% 6.12% 5.28% 5.97% 5.58%(c)
Portfolio turnover....... 363.84% 223.29% 328.44% 234.71% 40.85%
- ------
<FN>
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
See notes to financial statements.
B-81
<PAGE> 130
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LOW DURATION GOVERNMENT
SECURITIES FUND
------------------------------
YEAR ENDED
JUNE 30, APRIL 15, 1994
-------------- TO JUNE 30,
1996 1995 1994 (a)
------ ------ --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........... $10.15 $ 9.93 $10.00
------ ------ ------
Investment Activities
Net investment income........................ 0.53 0.56 0.07
Net realized and unrealized gains (losses) on
investments................................. (0.20) 0.21 (0.08)
------ ------ ------
Total from Investment Activities........... 0.33 0.77 (0.01)
------ ------ ------
Distributions
Net investment income........................ (0.53) (0.55) (0.06)
------ ------ ------
NET ASSET VALUE, END OF PERIOD................. $ 9.95 $10.15 $ 9.93
====== ====== ======
Total Return (excludes sales charges).......... 3.31% 8.03% (0.13)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)............. $7,461 $7,653 $7,692
Ratio of expenses to average net assets........ 1.44% 1.33% 2.85%(c)
Ratio of net investment income to average net
assets........................................ 5.19% 5.67% 3.63%(c)
Ratio of expenses to average net assets*....... 2.20% 2.10% 3.67%(c)
Ratio of net investment income to average net
assets*....................................... 4.43% 4.89% 2.81%(c)
Portfolio turnover............................. 20.87% 34.47% 21.20%
- ------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
See notes to financial statements.
B-80
<PAGE> 131
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TENNESSEE MUNICIPAL OBLIGATIONS FUND
--------------------------------------------
YEAR ENDED JUNE 30, NOVEMBER 4, 1992
------------------------- TO JUNE 30,
1996 1995 1994 1993 (a)
------- ------- ------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 9.84 $ 9.81 $ 10.44 $ 10.00
------- ------- ------- -------
Investment Activities
Net investment income........... 0.53 0.50 0.48 0.30
Net realized and unrealized
gains (losses) on investments.. (0.08) 0.03 (0.57) 0.43
------- ------- ------- -------
Total from Investment
Activities................... 0.45 0.53 (0.09) 0.73
------- ------- ------- -------
Distributions
Net investment income........... (0.53) (0.50) (0.48) (0.29)
In excess of net realized gains. -- -- (0.06) --
------- ------- ------- -------
Total Distributions........... (0.53) (0.50) (0.54) (0.29)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 9.76 $ 9.84 $ 9.81 $ 10.44
======= ======= ======= =======
Total Return (excludes sales
charges)......................... 4.67% 5.61% (1.00)% 7.39%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)............................ $19,037 $20,827 $19,965 $17,425
Ratio of expenses to average net
assets........................... 0.98% 1.12% 1.19% 0.82%(c)
Ratio of net investment income to
average net assets............... 5.40% 5.24% 4.67% 4.76%(c)
Ratio of expenses to average net
assets*.......................... 1.83% 1.98% 1.99% 1.62%(c)
Ratio of net investment income to
average net assets*.............. 4.55% 4.38% 3.87% 3.96%(c)
Portfolio turnover................ 60.76% 62.59% 86.57% 52.52%
- ------
<FN>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
See notes to financial statements.
B-83
<PAGE> 132
APPENDIX
Commercial Paper Ratings. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short term in the relevant market. Commercial paper rated A-1
by S&P indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted A-1+. Commercial paper rated A-2 by S&P indicates that capacity for
timely payment on issues is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1. Commercial paper rated A-3 by S&P
indicates adequate capacity for timely payment. Such paper is, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. Commercial paper rated B by S&P is regarded as
having only speculative capacity for timely payment. Commercial paper rated C by
S&P is regarded as short-term obligations with a doubtful capacity for payment.
Commercial paper rated D by S&P is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
Moody's Investors Service, Inc.'s ("Moody's") commercial paper rating are
opinions of the ability of issuers to repay punctually senior debt obligations
which have an original maturity not exceeding one year. The rating Prime-1 is
the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1
(or supporting institutions) are considered to have a superior capacity for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: leading market
positions in well established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics of Prime-1 rated issuers, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variations. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Issuers rated Prime-3 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. The effects of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and the requirement for relatively high financial leverage.
Adequate
A-1
<PAGE> 133
alternate liquidity is maintained. Issuers rated Not Prime do not fall within
any of the Prime rating categories.
Commercial paper rated F-1+ by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-1 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-1+. Commercial
paper rated F-2 by Fitch is regarded as having a satisfactory degree of
assurance of timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 ratings. Commercial paper rated F-3 by Fitch is
regarded as having characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes could cause these
securities to be rated below investment grade. Commercial paper rated F-S by
Fitch is regarded as having characteristics suggesting a minimal degree of
assurance for timely payment and is vulnerable to near term adverse changes in
financial and economic conditions. Commercial paper rated D by Fitch is in
actual or imminent payment default.
The description of the three highest short-term debt ratings by Duff &
Phelps, Inc. ("Duff") (Duff incorporates gradations of "1+" (one plus) and "1-"
(one minus) to assist investors in recognizing quality differences within the
highest rating category) are as follows. Duff 1+ is regarded as having the
highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
is regarded as having a very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection factors. Risk factors
are minor. Duff 1- is regarded as having a high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are minor. Duff 2 is regarded as having a good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small. Duff 3 is regarded as having
a satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected. Duff 4 is considered as having
speculative investment characteristics. Liquidity is not sufficient to insure
against disruption in debt service. Operating factors and market access may be
subject to a high degree of variation. Duff 5 indicates that the issuer has
failed to meet scheduled principal and/or interest payments.
Commercial paper rated A1 by IBCA Limited and its affiliate, IBCA Inc.
(collectively "IBCA") is regarded by IBCA as obligations supported by the
highest capacity for timely repayment. Where
A-2
<PAGE> 134
issues possess a particularly strong credit feature, a rating of A1+ is
assigned. Obligations rated A2 are supported by a good capacity for timely
repayment. Obligations rated A3 are supported by a satisfactory capacity for
timely repayment. Obligations rated B are those for which there is an
uncertainty as to the capacity to ensure timely repayment. Obligations rated C
are those for which there is a high risk of default or which are currently in
default.
The following summarizes the description of the three highest short-term
ratings of Thomson BankWatch, Inc. ("Thomson"). TBW-1 is the highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis. TBW-2 is the second highest category indicating that while the
degree of safety regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues rated "TBW-1." TBW-3
is the lowest investment grade category and indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest in a
timely fashion is considered adequate. TBW-4 is the lowest rating category and
is regarded as non-investment grade and therefore speculative.
The plus (+) sign is used after a rating symbol to designate the relative
position of an issuer within the rating category.
Corporate Debt Ratings. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong capacity to
pay interest and repay principal although it is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. 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.
The following summarizes the four 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
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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.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through Baa. 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 four highest long-term debt ratings by Duff.
Debt rated AAA has the highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury debt. Debt rated AA
has a high credit quality and protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions. Debt rated A
has protection factors that are average but adequate. However, risk factors are
more variable and greater in periods of economic stress. 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.
To provide more detailed indications of credit quality, the ratings from
AA to BBB 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 four 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
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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.
The following summarizes IBCA's four 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.
The following summarizes Thomson's description of its four 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.
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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.
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 four 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
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fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
"A": Bonds which possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
"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.
The following summarizes the four 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.
"BBB": Debt which has 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 then in higher rated
categories.
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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
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
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Farm Credit Banks, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government- sponsored instrumentalities if it is not obligated to do so
by law.
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Registration Statement
of
THE SESSIONS GROUP
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
(i) Riverside Capital Money Market Fund
Financial Highlights
(ii) Riverside Capital Value Equity Fund
Financial Highlights
(iii) Riverside Capital Fixed Income Fund
Financial Highlights
(iv) Riverside Capital Tennessee Municipal Obligations Fund
Financial Highlights
(v) Riverside Capital Low Duration Government Securities Fund
Financial Highlights
(vi) Riverside Capital Growth Fund
Financial Highlights
(vii) KeyPremier Prime Money Market Fund
None
(viii) KeyPremier Pennsylvania Municipal Bond Fund
None
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(ix) 1st Source Monogram U.S. Treasury Obligations Money Market Fund
None
(x) 1st Source Monogram Diversified Equity Fund
None
(xi) 1st Source Monogram Income Equity Fund
None
(xii) 1st Source Monogram Special Equity Fund
None
(xiii) 1st Source Monogram Income Fund
None
(xiv) 1st Source Monogram Intermediate Tax-Free Bond Fund
None
(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 26, 1996.
Statements of Assets and Liabilities dated June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
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Financial Highlights for the years ended June 30, 1996, 1995,
1994, 1993 and 1992.
(ii) Riverside Capital Value Equity Fund
Independent Auditors' Report dated August 26, 1996.
Statements of Assets and Liabilities dated June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
Financial Highlights for the years ended June 30, 1996, 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 26, 1996.
Statements of Assets and Liabilities dated June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
Financial Highlights for the years ended June 30, 1996, 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
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Independent Auditors' Report dated August 26, 1996.
Statements of Assets and Liabilities at June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
Financial Highlights for the years ended June 30, 1996, 1995 and
1994, and for the period from commencement of operations
(November 4, 1992) to June 30, 1993.
(v) Riverside Capital Low Duration Government Securities Fund
Independent Auditor's Report dated August 26, 1996.
Statements of Assets and Liabilities at June 30, 1996.
Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
Financial Highlights for the year ended June 30, 1996 and 1995,
and for the period from commencement of operations (April 15,
1994) to June 30, 1994.
(vi) Riverside Capital Growth Fund
Independent Auditor's Report dated August 26, 1996.
Statements of Assets and Liabilities at June 30, 1996.
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Statements of Operations for the year ended June 30, 1996.
Statements of Changes in Net Assets for the years ended June 30,
1996 and 1995.
Schedule of Portfolio Investments as of June 30, 1996.
Notes to Financial Statements.
Financial Highlights for the year ended June 30, 1996 and 1995,
and for the period from commencement of operations (April 15,
1994) to June 30, 1994.
(vii) KeyPremier Prime Money Market Fund
To be filed by amendment.
(viii) KeyPremier Pennsylvania Municipal Bond Fund
To be filed by amendment.
(ix) 1st Source Monogram U.S. Treasury Obligations Money Market Fund
To be filed by amendment.
(x) 1st Source Monogram Diversified Equity Fund
To be filed by amendment.
(xi) 1st Source Monogram Income Equity Fund
To be filed by amendment.
(xii) 1st Source Monogram Special Equity Fund
To be filed by amendment.
(xiii) 1st Source Monogram Income Fund
To be filed by amendment.
(xiv) 1st Source Monogram Intermediate Tax-Free Bond Fund
To be filed by amendment.
(xv) KeyPremier Established Growth Fund
To be filed by amendment.
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(xvi) KeyPremier Intermediate Term Income Fund
To be filed by amendment.
(xvii) 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, 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.
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(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, is incorporated
by reference to Exhibit (1)(k) of Post-Effective
Amendment No. 36 to Registrant's Registration
Statement (No. 33-21489) filed on August 16, 1996.
(2) By-Laws are incorporated by reference to Exhibit (2) of
Post-Effective Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489) filed on April 25,
1996.
(3) None.
(4) Certificates for Shares are not issued. Articles IV, V, VI
and VII of the Declaration of Trust, filed as Exhibit 1
hereto, define rights of holders of Shares.
(5) (a) Investment Advisory Agreement dated as of July
19, 1988, between Registrant and National Bank of
Commerce (with respect to Riverside Capital Money
Market Fund) is incorporated by reference to Exhibit
(5)(a) of Post-Effective
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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) is
incorporated by reference to Exhibit (5)(e) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(f) Investment Advisory Agreement dated August 20, 1996,
between Registrant and 1st Source Bank (with respect
to the 1st Source Monogram Funds).
(g) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Miller, Anderson
and Sherrerd, LLP (with
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respect to 1st Source Monogram Diversified Equity
Fund).
(h) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Loomis Sayles &
Company, L.P. (with respect to 1st Source Monogram
Diversified Equity Fund).
(i) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Columbus Circle
Investors (with respect to 1st Source Monogram
Diversified Equity Fund).
(6) (a) Distribution Agreement dated October 1, 1993, as
amended as of June 3, 1994, between Registrant and
The Winsbury Company Limited Partnership is
incorporated by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed on August
24, 1994.
(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) is
incorporated by reference to Exhibit (6)(c) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(d) Form of Shareholder Services Agreement is
incorporated by reference to Exhibit (6)(d) of
Post-Effective Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489) filed on April
25, 1996.
(e) Distribution Agreement dated as of August 20, 1996,
between Registrant and BISYS Fund Services Limited
Partnership (relating to the 1st Source Monogram
Funds).
(7) None.
(8) (a) Custodial Services Agreement dated as of March 1,
1995, between Registrant and National
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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) is incorporated by reference to
Exhibit (8)(b) of Post-Effective Amendment No. 36 to
Registrant's Registration Statement (No. 33-21489)
filed on August 16, 1996.
(c) Custody Agreement dated August 20, 1996, between
Registrant and The Fifth Third Bank (with respect to
the 1st Source Monogram Funds).
(9) (a) Management and Administration Agreement dated
August 23, 1990, as amended October 27, 1992, between
Registrant and The Winsbury Company Limited
Partnership (with respect to Riverside Capital Money
Market Fund, Riverside Capital 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 Septem- ber 1,
1992, as amended as of May 1, 1994, between
Registrant and BISYS Fund Services Ohio, Inc.
(formerly The Winsbury Service Corporation) (with
respect to the Riverside Capital Funds) is
incorporated by reference to Exhibit (9)(g) of
Post-Effective Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed on August
24, 1994.
(h) Fund Accounting Agreement dated February 4, 1993,
between Registrant and The Winsbury Service
Corporation (with respect to Riverside Capital Money
Market Fund, Riverside Capital Equity Fund, Riverside
Capital Fixed Income Fund and Riverside Capital
Tennessee Municipal Obligations Fund) is incorporated
by reference to Exhibit (9)(h) of Post-Effective
Amendment
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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 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.
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(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) is incorporated by reference to Exhibit (9)(x)
of Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(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) is
incorporated by reference to Exhibit (9)(y) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(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) is
incorporated by reference to Exhibit (9)(z) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(aa) Management and Administration Agreement dated August
20, 1996, between Registrant and BISYS Fund Services
Limited Partnership (with respect to the 1st Source
Monogram Funds).
(ab) Fund Accounting Agreement dated August 20, 1996,
between Registrant and BISYS Fund Services, Inc.
(with respect to the 1st Source Monogram Funds).
(ac) Transfer Agency Agreement dated August 20, 1996,
between Registrant and BISYS Fund Services, Inc.
(with respect to the 1st Source Monogram Funds).
(ad) Form of Servicing Agreement to Administrative
Services Plan 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 is
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<PAGE> 153
incorporated by reference to Exhibit (10)(a) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996. 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)(a) 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 28, 1996, 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.
(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
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<PAGE> 154
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 Exhibit (13) of
Pre-Effective Amendment 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, 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.
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<PAGE> 155
(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 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,
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<PAGE> 156
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.
(i) Computation of Performance Quotations for
KeyPremier Prime Money Market Fund, KeyPremier
Pennsylvania Municipal Bond Fund, KeyPremier
Established Growth Fund and
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<PAGE> 157
KeyPremier Intermediate Term Income Fund to be filed
by amendment.
(j) Computation of Performance Quotations for the 1st
Source Monogram Funds.
(17) Financial Data Schedules for the Riverside Capital
Funds. 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 is
incorporated by reference to Exhibit (19)(c) of
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on August
16, 1996.
(d) Power of Attorney of James H. Woodward.
Item 25. Persons Controlled By or Under Common Control with
--------------------------------------------------
Registrant
----------
None.
Item 26. Number of Holders of Securities
-------------------------------
As of September 24, 1996, the number of record holders of each
series of shares of the Registrant were as follows:
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<PAGE> 158
<TABLE>
<CAPTION>
Title of Series Number of Record Holders
--------------- ------------------------
<S> <C>
Riverside Capital Money
Market Fund 29
Riverside Capital
Value Equity Fund 155
Riverside Capital
Fixed Income Fund 35
Riverside Capital Tennessee Municipal
Obligations Fund 19
Riverside Capital Low Duration
Government Securities Fund 7
Riverside Capital Growth Fund 58
KeyPremier Prime
Money Market Fund 0
KeyPremier Pennsylvania
Municipal Bond Fund 0
1st Source Monogram U.S. Treasury
Obligations Money Market Fund 0
1st Source Monogram Diversified
Equity Fund 0
1st Source Monogram Income Equity Fund 0
1st Source Monogram Special Equity Fund 0
1st Source Monogram Income Fund 0
1st Source Monogram Intermediate Tax-Free
Bond Fund 0
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
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<PAGE> 159
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
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, 1996, totalled $3.9 billion,
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<PAGE> 160
and of which approximately $989 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 North America
1450 East Brooks Road
Memphis, Tennessee 38116
(Medical Devices)
R. Grattan Brown, Jr. Director Partner, law firm of
Glankler, Brown, Gilliland, Chase,
Robinson & Raines
One Commerce Square
Memphis, Tennessee 38103
Bruce E. Campbell, Jr. Director Former Chairman
National Bank of Commerce
and National Commerce
Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Christopher W. Canale Director President
D. Canale Beverages, Inc.
45 E.H. Crumps Blvd.
Memphis, Tennessee 38106
(Distribution)
John D. Canale III Director President
D. Canale Food Services, Inc.
7 West Georgia
Memphis, Tennessee 38103
(Distribution)
</TABLE>
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<PAGE> 161
<TABLE>
<S> <C> <C>
Edmond D. Cicala Director President
Edmond Enterprises, Inc.
1213 Park Place Center
Suite 200
Memphis, Tennessee 38119
(Consulting)
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. Garrott Chairman Chairman of the Board and
Chief Executive Officer
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Mackie H. Gober President/ President
Director National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Lewis E. Holland Director Executive Vice President and
Chief Financial Officer
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
prior thereto -
Partner
Ernst & Young
One Commerce Square
Memphis, Tennessee 38103
(Accounting)
R. Lee Jenkins Director Retired
6075 Poplar, Suite 721
Memphis, Tennessee 38119
</TABLE>
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<PAGE> 162
<TABLE>
<S> <C> <C>
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 President,
Common Denominator, Inc.
2195 Poplar Ave., Suite 505
Memphis, Tennessee 38104
(Medical training company)
prior thereto -
Chief Executive Officer
Regional Medical Center at Memphis
877 Jefferson Avenue
Memphis, Tennessee 38103
(Hospital)
Robert M. Solmson Director President
RFS Hotel Investors, 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
Henry M. Turley, Jr. Director President, Henry Turley Company
65 Union Avenue, Suite 1200
Memphis, Tennessee 38103
(Real Estate management and investment)
</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
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<PAGE> 163
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
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
</TABLE>
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<PAGE> 164
<TABLE>
<S> <C> <C>
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)
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
</TABLE>
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<PAGE> 165
<TABLE>
<S> <C> <C>
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
(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)
</TABLE>
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<PAGE> 166
<TABLE>
<S> <C> <C>
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
directors of Miller Anderson who are engaged in any other
business, profession, vocation, or employment of a substantial
nature.
<TABLE>
<CAPTION>
Partner Name and Address Nature of
of Miller Anderson of Business Connection
- ------------------ ----------- ----------
<S> <C> <C>
Dean Williams Shanghai Dazhong Taxi Director
Co., Ltd.
920 Nanjing Road
16th Floor
Shanghai, China 200041
Marna C. Whittington Rohm & Haas Company Director
Independence Mall West
Philadelphia, PA 19105
</TABLE>
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<PAGE> 167
<TABLE>
<S> <C> <C>
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 directors or
officers of Loomis is or has been at any time during the past
two fiscal years engaged in any other business, profession,
vocation or employment of a substantial nature.
(f) Columbus Circle Investors ("CCI") is a general
partnership formed on September 9, 1994, which is
registered as an investment adviser under the Investment
Advisers Act of 1940. PIMCO Advisors L.P. and Columbus
Circle Investors Management Inc. ("CCI, Inc."), a
wholly-owned subsidiary of PIMCO Advisors L.P., are the
general partners of CCI. CCI consists of the personnel
of the former Columbus Circle Investors Division of
Thomson Advisory Group L.P. ("TAGLP") and the investment
personnel of the former Mutual Funds Division of TAGLP.
CCI acts as sub-adviser to other mutual funds and also
advises and manages individual accounts, profit sharing
and pension funds and institutional accounts.
To the knowledge of Registrant, set forth below are the
substantial business engagements during at least the two past
fiscal years of each director or senior executive officer of
CCI:
C-27
<PAGE> 168
<TABLE>
<CAPTION>
NAME AND POSITION BUSINESS AND
WITH CCI OTHER CONNECTIONS
- ----------------- -----------------
<S> <C>
Irwin F. Smith Member of Equity and Operating Boards and
Chairman, Managing Operating Committee, PIMCO Advisors L.P.;
Director, Chief Director and Chairman, Columbus Circle
Executive Officer and Investors Management, Inc., Director,
Chief Investment Columbus Circle Trust Company
Officer
Donald A. Chiboucas Member of Operating Board, PIMCO Advisors
President and L.P.; Director and President, Columbus
Managing Director Circle Investors Management, Inc.
Louis P. Celentano Director and Vice President, Columbus
Managing Director Circle Investors Management, Inc.,
Director and Chairman, Columbus Circle
Trust Company
Daniel S. Pickett Member of Operating Board, PIMCO Advisors
Managing Director L.P. (1995); Director, Columbus Circle
Investors Management, Inc.
Amy M. Hogan Member of Operating Board, PIMCO Advisors
Managing Director L.P. (1996); Director, Columbus Circle
Investors Management, Inc.
Robert W. Fehrmann Director, Columbus Circle Investors
Managing Director Management Inc.
</TABLE>
The address of CCI, Columbus Circle Trust Company and
Columbus Circle Investors management Inc. is One Station
Place, Stamford, CT 06902.
PIMCO Advisors L.P. was organized as a limited
partnership under Delaware law in 1987 and is registered
as an investment adviser under the Investment Advisers
Act of 1940. In November 1994, PIMCO Advisors L.P. (then
known as Thomson Advisory Group, L.P. ("TAGLP")) combined
its investment advisory business with the investment
advisory business of several subsidiaries of Pacific
Mutual Life Insurance Company and changed its name to
PIMCO Advisors L.P. PIMCO Advisors L.P. manages three
mutual fund complexes. PIMCO Advisors L.P. also has
various subsidiary partnerships, including CCI, which
advise and manage mutual funds, individual accounts,
profit-sharing and pension funds and institutional
accounts and act as sub-advisers to certain mutual funds.
PIMCO Partners, G.P. ("PIMCO GP"), PIMCO Advisors L.P.'s
general partner, is a general partnership with two
partners: (i) an indirect wholly-owned subsidiary of
C-28
<PAGE> 169
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.
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.
C-29
<PAGE> 170
(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 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
C-30
<PAGE> 171
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
------------
None
C-31
<PAGE> 172
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 14th day of October, 1996.
Registrant hereby certifies that this Post-Effective Amendment to Registration
Statement meets all of the requirements for effectiveness pursuant to paragraph
(b) of Rule 485 under the Securities Act of 1933.
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 October 14, 1996
- -------------------------- Officer and Trustee
Walter B. Grimm
/s/*Stephen G. Mintos Principal Financial October 14, 1996
- -------------------------- Officer and Principal
Stephen G. Mintos Accounting Officer
/s/*Nancy E. Converse Trustee October 14, 1996
- --------------------------
Nancy E. Converse
/s/*Maurice G. Stark Trustee October 14, 1996
- --------------------------
Maurice G. Stark
/s/*James H. Woodward Trustee October 14, 1996
- --------------------------
James H. Woodward
/s/*Chalmers P. Wylie Trustee October 14, 1996
- --------------------------
Chalmers P. Wylie
*By/s/ Walter B. Grimm October 14, 1996
-----------------------
Walter B. Grimm
Attorney-In-Fact
</TABLE>
C-32
<PAGE> 173
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
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-33
<PAGE> 174
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, 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, was filed as
Exhibit (1)(k) to Post-Effective Amendment No. 36
to Registrant's Registration Statement (No.
33-21489) filed on August 16, 1996.
2 By-Laws were filed as Exhibit (2) to Post-Effective
Amendment No. 34 to Registrant's Registration
Statement (No. 33-21489) filed on April 25, 1996.
5(a) Investment Advisory Agreement dated as of July 19,
1988, between Registrant and National Bank of
Commerce (with respect to Riverside Capital Money
Market Fund) was filed as Exhibit (5)(a) to
</TABLE>
C-34
<PAGE> 175
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
Post-Effective Amendment No. 34 to Registrant's
Registration Statement (No. 33-21489) filed on
April 25, 1996.
(b) Investment Advisory Agreement dated as of September
20, 1991, between Registrant and National Bank of
Commerce (with respect to Riverside Capital Value
Equity Fund and Riverside Capital Fixed Income
Fund) was filed as Exhibit (5)(b) to Post-Effective
Amendment No. 34 to Registrant's Registration
Statement (No. 33-21489) filed on April 25, 1996.
(c) Investment Advisory Agreement dated as 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) was
filed as Exhibit (5)(e) to Post-Effective Amendment
No. 36 to Registrant's Registration Statement (No.
33-21489) filed on August 16, 1996.
</TABLE>
C-35
<PAGE> 176
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(f) Investment Advisory Agreement dated August 20,
1996, between Registrant and 1st Source Bank (with
respect to 1st Source Monogram Funds).
(g) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Miller Anderson &
Sherrerd LLP (with respect to 1st Source Monogram
Diversified Equity Fund).
(h) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Loomis Sayles &
Company, L.P. (with respect to 1st Source Monogram
Diversified Equity Fund).
(i) Sub-Investment Advisory Agreement dated August 20,
1996, between 1st Source Bank and Columbus Circle
Investors (with respect to 1st Source Monogram
Diversified Equity Fund).
6(a) Distribution Agreement dated October 1, 1993, as
amended as of June 3, 1994, between Registrant and
The Winsbury Company Limited Partnership was filed
as Exhibit (6)(a) to Post-Effective Amendment No.
30 to Registrant's Registration Statement (No.
33-21489) filed on August 24, 1994.
(b) Form of Selected Dealer Agreement was filed as
Exhibit (6)(b) to Post-Effective Amendment No. 34
to Registrant's Registration Statement (No.
33-21489) filed on April 25, 1996.
(c) 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) was
filed as Exhibit (6)(c) to Post- Effective
Amendment No. 36 to Registrant's Registration
Statement (No. 33-21489) filed on August 16, 1996.
</TABLE>
C-36
<PAGE> 177
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(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) Distribution Agreement dated as of August 20, 1996,
between Registrant and BISYS Fund Services Limited
Partnership (relating to the 1st Source Monogram
Funds).
8(a) Custodial Services Agreement dated as of March 1,
1995, between Registrant and National City Bank
(with respect to the Riverside Capital Funds) was
filed as Exhibit (8) of Post-Effective Amendment
No. 33 to Registrant's Registration Statement (No.
33-21489) filed on October 30, 1995.
(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) was filed as Exhibit
(8)(b) to Post-Effective Amendment No. 36 to
Registrant's Registration Statement (No. 33-21489)
filed on August 16, 1996.
(c) Custody Agreement dated August 20, 1996, between
Registrant and The Fifth Third Bank (with respect
to the 1st Source Monogram Funds).
</TABLE>
C-37
<PAGE> 178
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-38
<PAGE> 179
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-39
<PAGE> 180
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) was filed as Exhibit (9)(x) to
Post-Effective Amendment No. 36 to Registrant's
Registration Statement (No. 33-21489) filed on
August 16, 1996.
(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) was filed as
Exhibit (9)(y) to Post-Effective Amendment No. 36
to Registrant's Registration Statement (No.
33-21489) filed on August 16, 1996.
(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) was filed as
Exhibit (9)(z) to Post-Effective Amendment No. 36
to Registrant's Registration Statement (No.
33-21489) filed on August 16, 1996.
(aa) Management and Administration Agreement dated
August 20, 1996, between Registrant and BISYS Fund
Services Limited Partnership (with respect to the
1st Source Funds).
(ab) Fund Accounting Agreement dated August 20, 1996,
between Registrant and BISYS Fund Services, Inc.
(with respect to the 1st Source Monogram Funds).
(ac) Transfer Agency Agreement dated August 20, 1996,
between Registrant and BISYS Fund Services, Inc.
(with respect to the 1st Source Monogram Funds).
</TABLE>
C-40
<PAGE> 181
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 was filed as Exhibit
(10)(a) to Post-Effective Amendment No. 36 to
Registrant's Registration Statement (No. 33-21489)
filed on August 16, 1996. 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)(a) 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
28, 1996, 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
</TABLE>
C-41
<PAGE> 182
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(10)(b) to Post-Effective Amendment No. 23 to
Registrant's Registration Statement (No. 33-21489)
filed on October 30, 1992.
11(a) Consent of KPMG Peat Marwick LLP.
(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
</TABLE>
C-42
<PAGE> 183
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
Tennessee Municipal Obligations Fund) was filed as
Exhibit (15)(h) to Post-Effective Amendment No. 27
to Registrant's Registration Statement (No.
33-21489) filed on October 19, 1993.
(m) Rule 12b-1 Agreement dated October 1, 1993, between
The Winsbury Company Limited Partnership and
Commerce Investment Corporation (with respect to
Riverside Capital Money Market Fund, Riverside
Capital Value Equity Fund, Riverside Capital Fixed
Income Fund and Riverside Capital Tennessee
Municipal Obligations Fund) was filed as Exhibit
(15)(m) to Post-Effective Amendment No. 27 to
Registrant's Registration Statement (No. 33-21489)
filed on October 19, 1993.
(n) Rule 12b-1 Agreement dated October 19, 1993,
between Registrant and The Winsbury Company Limited
Partnership (with respect to Riverside Capital
Money Market Fund, Riverside Capital Value Equity
Fund, Riverside Capital Fixed Income Fund and
Riverside Capital Tennessee Municipal Obligations
Fund) was filed as Exhibit (15)(n) to
Post-Effective Amendment No. 28 to Registrant's
Registration Statement (No. 33-21489) filed on
February 4, 1994.
(o) Rule 12b-1 Agreement dated as of April 5, 1994,
between The Winsbury Company Limited Partnership
and Commerce Investment Corporation (with respect
to Riverside Capital Low Duration Government
Securities Fund and Riverside Capital Growth Fund)
was filed as Exhibit (15)(o) to Post-Effective
Amendment No. 30 to Registrant's Registration
Statement (No. 33-21489) filed on August 24, 1994.
(p) Rule 12b-1 Agreement dated as of April 5, 1994,
between Registrant and The Winsbury Company Limited
Partnership
</TABLE>
C-43
<PAGE> 184
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(with respect to Riverside Capital Low Duration
Government Securities Fund and Riverside Capital
Growth Fund) was filed as Exhibit (15)(p) to
Post-Effective Amendment No. 30 to Registrant's
Registration Statement (No. 33-21489) filed on
August 24, 1994.
(s) Rule 12b-1 Agreement dated as of May 16, 1994,
between J.C. Bradford & Co. and The Winsbury
Company Limited Partnership (with respect to The
Riverside Capital Funds) was filed as Exhibit
(15)(s) to Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No. 33-21489)
filed on August 24, 1994.
(t) Rule 12b-1 Agreement dated as of May 16, 1994,
between Morgan, Keegan & Co. and The Winsbury
Company Limited Partnership (with respect to The
Riverside Capital Funds) was filed as Exhibit
(15)(t) to Post-Effective Amendment No. 30 to
Registrant's Registration Statement (No. 33-21489)
filed on August 24, 1994.
(u) Rule 12b-1 Agreement dated as of August 1, 1994,
between J.J.B. Hilliard, W.L. Lyons, Inc. and The
Winsbury Company Limited Partnership (with respect
to the Riverside Capital Funds) was filed as
Exhibit (15)(u) to Post-Effective Amendment No. 31
to Registrant's Registration Statement (No.
33-21489) filed on October 14, 1994.
(v) Rule 12b-1 Agreement dated as of August 31, 1994,
between TrustMark Investments, Inc. and The
Winsbury Company Limited Partnership Agreement
(with respect to the Riverside Capital Funds) was
filed as Exhibit (15)(v) to Post-Effective
Amendment No. 31 to Registrant's Registration
Statement (No. 33-21489) filed on October 14, 1994.
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
</TABLE>
C-44
<PAGE> 185
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
Registrant's Registration Statement (No. 33-21489)
filed on October 19, 1993.
(b) Computation of Performance Quotations for Riverside
Capital Value Equity Fund and Riverside Capital
Fixed Income Fund was filed as Exhibit (16)(b) to
Post-Effective Amendment No. 27 to Registrant's
Registration Statement (No. 33-21489) filed on
October 19, 1993.
(f) Computation of Performance Quotations for Riverside
Capital Tennessee Municipal Obligations Fund was
filed as Exhibit (16)(f) to Post-Effective
Amendment No. 27 to Registrant's Registration
Statement (No. 33-21489) filed on October 19, 1993.
(h) Computation of Performance Quotations for Riverside
Capital Low Duration Government Securities Fund and
Riverside Capital Growth Fund was filed as Exhibit
(16)(h) to Post-Effective Amendment No. 33 to
Registrant's Registration Statement (No. 33-21489)
filed on October 30, 1995.
</TABLE>
C-45
<PAGE> 186
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(i) Computation of Performance Quotations for KeyPremier
Prime Money Market Fund, KeyPremier Pennsylvania
Municipal Bond Fund, KeyPremier Established Growth Fund
and KeyPremier Intermediate Term Income Fund to be filed
by amendment.
(j) Computation of Performance Quotations for the 1st
Source Monogram Funds.
17 Financial Data Schedules for the Riverside Capital
Funds. 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 was filed as
Exhibit 19(c) to Post-Effective Amendment No. 36 to
Registrant's Registration Statement (No. 33-21489)
filed on August 16, 1996.
(d) Power of Attorney of James H. Woodward.
</TABLE>
C-46
<PAGE> 187
As filed with the Securities and Exchange Commission October 21,
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. 37 / x /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / x /
Amendment No. 39 / 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 (5)(f)
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of August 20, 1996, between THE SESSIONS GROUP,
an Ohio business trust (the "Trust"), and 1st Source Bank, an Indiana banking
corporation (the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to provide, or
to arrange for the provision of, investment advisory services to six newly
created investment portfolios of the Trust and may retain the Investment Adviser
to serve in such capacity to certain additional investment portfolios of the
Trust, all as now or hereafter may be identified in Schedule A hereto (such new
investment portfolios and any such additional investment portfolios together
called the "Funds") and the Investment Adviser represents that it is willing and
possesses legal authority to so furnish such services without violation of
applicable laws (including the Glass-Steagall Act) and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
ss.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.
ss.2. DELIVERY OF DOCUMENTS. The Trust has furnished the Investment Adviser
with copies properly certified or authenticated of each of the following:
(a) the Trust's Declaration of Trust, executed as of April 25, 1988,
and as filed with the Secretary of State of Ohio on April 25, 1988, and any
and all amendments thereto or restatements thereof (such Declaration, as
presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
- 1 -
<PAGE> 3
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission on April 27,
1988 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-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
(f) the most recent Prospectus and Statement of Additional Information
of each of the Funds (such Prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto, are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
ss.3. MANAGEMENT. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide, or arrange for the provision of,
a continuous investment program for each of the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. The Investment Adviser will determine, or arrange for
others to determine, from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds and
will implement, or arrange for others to implement, such determinations through
the placement, in the name of the Funds, of orders for the execution of
portfolio transactions with or through such brokers or dealers as it may select.
The Investment Adviser will provide, or arrange for the provision of, the
services under this Agreement in accordance with each of the Fund's investment
objectives, policies, and restrictions as stated in the Prospectus and
resolutions of the Trust's Board of Trustees.
Subject to the provisions of this Agreement, the Declaration of Trust and
the 1940 Act, the Investment Adviser directly and indirectly may select and
enter into contracts with one or more qualified investment advisers
("Sub-Advisers") to provide to the Trust some or all of the services required by
this Agreement. With respect to any such appointment by the Investment Adviser
of any of the Sub-Advisers, the Investment Adviser will, as appropriate:
- 2 -
<PAGE> 4
(a) advise the Sub-Advisers with respect to economic conditions and
trends;
(b) assist Sub-Advisers with the placement of orders for the purchase and
sale of securities;
(c) assist and consult with the Sub-Advisers in connection with the Funds'
continuous investment programs; and
(d) periodically review, evaluate and report to the Trust's Board of
Trustees with respect to the performance of the Sub-Advisers.
In fulfilling its responsibilities hereunder, the Investment Adviser
further agrees that it will, or, with respect to services provided to the Trust
by any of the Sub-Advisers appointed by the Investment Adviser, that it will
require that each of the Sub-Advisers:
(a) use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(b) conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its
activities under this Agreement (or any applicable sub-investment advisory
agreement) in accordance with any applicable regulations of any
governmental authority pertaining to the investment advisory activities of
the Investment Adviser;
(c) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(d) place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment Adviser will
attempt to obtain, or require that each of the Sub-Advisers obtain, prompt
execution of orders in an effective manner at the most favorable price. In
assessing the best execution available for any transaction, the Investment
Adviser or any of the Sub-Advisers shall consider all factors it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker-dealer and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). Consistent with this
obligation, the Investment Adviser and any of the Sub-Advisers may, in its
discretion and to the extent permitted by law, purchase and sell portfolio
- 3 -
<PAGE> 5
securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to or for the benefit of the Funds and/or other
accounts over which the Investment Adviser or any of the Sub-Advisers
exercises investment discretion. Subject to the review of the Trust's Board
of Trustees from time to time with respect to the extent and continuation
of the policy, the Investment Adviser and any of the Sub-Advisers are
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for effecting a securities transaction for
any of the Funds which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but
only if, the Investment Adviser or Sub-Advisers determine in good faith
that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the overall
responsibilities of the Investment Adviser or Sub-Advisers with respect to
the accounts as to which it exercises investment discretion. In placing
orders with brokers and dealers, consistent with applicable laws, rules and
regulations, the Investment Adviser may consider the sale 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,
any Sub-Adviser, or any affiliated person of the Trust, BISYS Fund Services
Limited Partnership, the Investment Adviser or any Sub-Adviser;
(e) will maintain all books and records with respect to the securities
transactions of the Funds and will furnish the Trust's Board of Trustees
such periodic and special reports as the Board may request;
(f) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and the Funds
and prior, present, or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Investment Adviser
or any Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust; and
(g) will maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Funds, the Investment Adviser's or
- 4 -
<PAGE> 6
Sub-Advisers' 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 any Sub-Adviser or of
their respective parents, subsidiaries or affiliates. In dealing with such
customers, the Investment Adviser or any Sub-Adviser and their respective
parents, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust.
ss.4. SERVICES NOT EXCLUSIVE. The investment management services furnished
by the Investment Adviser and any Sub-Adviser hereunder are not to be deemed
exclusive, and the Investment Adviser and any Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Agreement
or any sub-advisory agreement are not impaired thereby.
ss.5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Investment Adviser hereby agrees that all records which
it maintains for the Funds are the property of the Trust and further agrees to
surrender promptly, and to require each of the Sub-Advisers to surrender
promptly, to the Trust any of such records upon the Trust's request. The
Investment Adviser further agrees to preserve, and to require each of the Sub-
Advisers to preserve, for the periods prescribed by Rule 31a-2 under the 1940
Act, the records required to be maintained by Rule 31a-1 under the 1940 Act.
ss.6. EXPENSES. During the term of this Agreement, the Investment Adviser
will pay all expenses, including as applicable, the compensation of any
Sub-Advisers appointed by it, incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
ss.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 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.
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
- 5 -
<PAGE> 7
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. The obligation of the Investment Adviser to reimburse the Funds hereunder
is limited in any fiscal year to the amount of its fee hereunder for such fiscal
year, provided, however, that notwithstanding the foregoing, the Investment
Adviser shall reimburse the Funds for such proportion of such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over the
Trust so require. Such expense reimbursement, if any, will be estimated daily
and reconciled and paid on a monthly basis.
ss.8. LIMITATION OF LIABILITY. The Investment Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
ss.9. DURATION AND TERMINATION. This Agreement will become effective as
of the date first written above (or, if a particular Fund is not in existence on
that date, on the date a registration statement relating to that Fund becomes
effective with the Securities and Exchange Commission and Schedule A hereto is
amended to add such Fund), provided that it shall have been approved by vote of
a majority of the outstanding voting securities of such Fund, in accordance with
the requirements under the 1940 Act, and, unless sooner terminated as provided
herein, shall continue in effect until August 20, 1998.
Thereafter, if not terminated, this Agreement shall continue
in effect as to a particular Fund for successive periods of twelve months each
ending on August 20 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
- 6 -
<PAGE> 8
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.)
ss.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.
ss.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.
ss.12. NAME. The Trust hereby acknowledges that the name "1st Source
Monogram" is a property right of the Investment Adviser. The Investment Adviser
agrees that the Trust and the Funds may, so long as this Agreement remains in
effect, use "1st Source" as part of its name. The Investment Adviser may permit
other persons, firms or corporations, including other investment companies, to
use such name and may, upon termination of this Agreement, require the Trust and
the Funds to refrain from using the name "1st Source" in any form or combination
in its name or in its business or in the name of any of its Funds, and the Trust
shall, as soon as practicable following its receipt of any such request from the
Investment Adviser, so refrain from using such name.
ss.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
- 7 -
<PAGE> 9
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 instrument to
be executed by their officers designated below as of the day and year first
above written.
THE SESSIONS GROUP
By /s/ Walter B. Grimm
---------------------------------------
Name Walter B. Grimm
-------------------------------------
Title President
------------------------------------
1ST SOURCE BANK
By /s/ John S. Seidl
---------------------------------------
Name John S. Seidl
-------------------------------------
Title Vice Pres. & Sr. Investment Officer
------------------------------------
- 8 -
<PAGE> 10
Dated: August 20, 1996
Schedule A
to the
Investment Advisory Agreement
between The Sessions Group and
1st Source Bank
dated as of August 20, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram Annual Rate of August 20, 1996
U.S. Treasury thirty-five one-
Obligations Money hundredths of one
Market Fund percent (0.35%) of
such Fund's average
net assets
1st Source Monogram Annual rate of one August 20, 1996
Diversified Equity hundred ten one-
Fund hundredths of one
percent (1.10%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August 20, 1996
Income Equity Fund eighty one-
hundredths of one
percent (0.80%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August 20, 1996
Special Equity Fund eighty one-
hundredths of one
percent (0.80%) of
such Fund's average
daily net assets
1st Source Monogram Annual rate of August 20, 1996
Income Fund fifty-five one-
hundredths of one
percent (0.55%) of
such Fund's average
daily net assets
<FN>
- --------
*All Fees are computed daily and paid monthly.
</TABLE>
A-1
<PAGE> 11
1st Source Monogram Annual Rate of August 20, 1996
Intermediate Tax- fifty-five one-
Free Bond Fund hundredths of one
percent (0.55%) of
such Fund's average
daily net assets
THE SESSIONS GROUP
By /s/ Walter B. Grimm
---------------------------------------
Name Walter B. Grimm
-------------------------------------
Title President
-----------------------------------
1ST SOURCE BANK
By /s/ John S. Seidl
---------------------------------------
Name John S. Seidl
-------------------------------------
Title Vice Pres. & Sr. Investment Officer
-----------------------------------
A-2
<PAGE> 1
EXHIBIT (5)(g)
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 20th day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Miller Andersen & Sherrerd, LLP, a Pennsylvania limited
liability partnership (the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund (the
"Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August 20, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
ss.1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "MAS Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the MAS Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time to time, be
supplemented or amended and in resolutions of the Trust's Board of Trustees. The
Adviser agrees to furnish the
<PAGE> 3
Sub-Adviser copies of all amendments of or supplements to such Prospectus and
Statement of Additional Information within three business days of their filing
with the United States Securities and Exchange Commission ("SEC"). The
Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Adviser, the Fund
or the Trust in any way.
ss.2. SUB-ADVISORY SERVICES. Subject to such instructions and
supervision as the Adviser may from time to time furnish, the continuous
investment program of the MAS Portfolio provided by the Sub-Adviser shall
include, among other things, investment research and management with respect to
all securities, investments and cash equivalents in the MAS Portfolio. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund for the MAS
Portfolio, the appropriate portion of the MAS Portfolio's assets to be invested
in particular countries or geographic regions, the use of foreign exchange
contracts and other foreign currency matters, and the manner in which voting
rights, rights to consent to corporate action and other rights pertaining to the
MAS Portfolio's investments should be exercised. The Sub-Adviser will implement
such determinations through the placement, in the name of the Fund for the MAS
Portfolio, of orders for the execution of portfolio transactions with it through
such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as
it uses in providing services to other fiduciary accounts
for which it has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the
SEC and in addition will conduct its activities under
this Agreement in accordance with any applicable
regulations of any government authority pertaining to the
investment advisory activities of the Sub-Adviser and
shall furnish such written reports or other documents
substantiating such compliance as the Adviser reasonably
may from time to time request;
(c) not make loans to any person to purchase or carry shares
of beneficial interest in the Trust or make loans to the
Trust;
(d) place orders pursuant to investment determinations for the MAS
Portfolio either directly with the issuer or with an
underwriter, market maker or broker or dealer. In placing
orders with brokers and dealers, the Sub-Adviser will use its
reasonable best efforts to obtain prompt execution of orders
in an effective manner at the most favorable price. Consistent
with this obligation, the
2
<PAGE> 4
Sub-Adviser may, to the extent permitted by law, purchase and
sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or
for the benefit of the Fund and/or other accounts over which
the Sub-Adviser exercises investment discretion. Subject to
the review of the Trust's Board of Trustees from time to time
with respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
effecting a securities transaction for the Fund which is in
excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the
Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. In
placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Sub-Adviser may
consider the sale of shares of the Trust. In no instance will
portfolio securities be purchased from or sold to the Trust,
BISYS Fund Services Limited Partnership, the Adviser, any
other sub-investment adviser for the Trust ("other
sub-advisers"), or the Sub-Adviser or any affiliate of the
foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the MAS Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of
the Adviser and the Trust all records and other
information relative to the Adviser and the Trust and
prior, present, or potential shareholders, and will not
use such records and information for any purpose other
than performance of its responsibilities and duties
hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge
such information to duly constituted authorities, or when
so requested by the Adviser and the Trust, PROVIDED,
HOWEVER, that nothing contained herein shall prohibit the
Sub-Adviser from complying with applicable laws or
regulations or advertising or soliciting the public
generally with respect to other products or services,
regardless of whether such advertisement or solicitation
3
<PAGE> 5
may include prior, present or potential shareholders of the Fund;
(g) maintain its policy and practice of conducting its fiduciary functions
independently. In making investment recommendations for the Trust, the
Sub-Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for
the Trust's account are customers of the Adviser, other sub-advisers,
the Sub-Adviser or of their respective parents, subsidiaries or
affiliates. In dealing with such customers, the Sub-Adviser and its
parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust; and
(h) render, upon request of the Adviser or the Trust's Board of Trustees,
written reports concerning the investment activities of the MAS
Portfolio.
ss.3. EXPENSES. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions and
taxes, if any) purchased for the MAS Portfolio.
ss.4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the MAS Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
ss.5. COMPENSATION OF THE SUB-ADVISER. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the MAS Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser 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. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the
Sub-Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Sub-Adviser, the value of the MAS Portfolio's net assets shall be computed
at the times and in the manner specified in the Trust's Registration Statement.
Notwithstanding anything contained herein to the contrary, the Sub-Adviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of the MAS Portfolio or any portion thereof except as may be
authorized by applicable law.
4
<PAGE> 6
ss.6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the Sub-Adviser under this Agreement may differ from the advice given
or the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
ss.7. USE OF NAMES. The Adviser shall not use the name of the
Sub-Adviser in any prospectus, sales literature or other material relating to
the Trust in any manner not approved prior thereto by the Sub-Adviser; provided,
however, that the Sub-Adviser shall approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and, provided further, that in no
event shall such approval be unreasonably withheld. The Sub-Adviser shall not
use the name of the Trust, the Fund or the Adviser in any material relating to
the Sub-Adviser in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its and the Fund's
or the Trust's name which merely refer in accurate terms to the appointment of
the Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
ss.8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty with respect to the receipt of compensation for services, the
Sub-Adviser shall not be liable for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
ss.9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser acknowledges
that it has received notice of and accepts the limitations upon the Trust's and
the Fund's liability set forth in its Declaration of Trust and under Ohio law.
The Sub-Adviser agrees that any of the Trust's obligations shall be limited to
the assets of the Fund and that the Sub-Adviser shall not seek satisfaction of
any such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are
5
<PAGE> 7
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.
ss.10. DURATION, RENEWAL, TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until August 20,
1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August 20th of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of Trustees, or upon such shorter notice as may be mutually agreed
upon. This Agreement shall terminate automatically and immediately upon
termination of the Adviser Agreement. This Agreement shall terminate
automatically and immediately in the event of its assignment. The terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the meaning set forth for such terms in the 1940 Act. This Agreement may be
amended at any time by the Adviser and the Sub-Adviser, subject to approval by
the Trust's Board of Trustees and, if required by the 1940 Act and applicable
SEC rules and regulations, a vote of a majority of the Fund's outstanding voting
securities.
ss.11. CONFIDENTIAL RELATIONSHIP. Any information and advice furnished
by either party to this Agreement to the other shall be treated as confidential
and shall not be disclosed to third parties except as required by law or by this
Agreement.
ss.12. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
ss.13. MISCELLANEOUS. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further
6
<PAGE> 8
actions and execute such further documents as are necessary to effectuate the
purposes hereof. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Ohio. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in several counterparts, all of which together shall
for all purposes constitute one Agreement, binding on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
1ST SOURCE BANK
By /s/ John S. Seidl
-----------------------------------------
Title Vice Pres. & Sr. Investment Officer
--------------------------------------
MILLER ANDERSEN & SHERRERD, LLP
By /s/ Marc Crespi, Principal
-----------------------------------------
(name) (title)
7
<PAGE> 9
Dated: August 20, 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Miller Andersen & Sherrerd, LLP
<TABLE>
<CAPTION>
Name of Fund COMPENSATION* DATE
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram Annual Rate of .625% of the August 20, 1996
Diversified Equity Fund average daily net assets of
the MAS Portfolio up to $25,000,000
and .375% of the average daily net
assets of the MAS Portfolio in
excess of $25,000,000.
</TABLE>
1ST SOURCE BANK
By /s/ John S. Seidl
--------------------------------------------
Title Vice Pres. & Senior Investment Officer
-----------------------------------------
MILLER ANDERSEN & SHERRERD, LLP
By /s/ Marc Crespi, Principal
--------------------------------------------
(name) (title)
- ----------
*All fees are computed daily and paid monthly.
8
<PAGE> 1
EXHIBIT (5)(h)
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 20th day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Loomis Sayles & Company, a Delaware limited partnership
(the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund (the
"Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August 20, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
ss.1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "LSC Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the LSC Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time
<PAGE> 3
to time, be supplemented or amended and in resolutions of the Trust's Board of
Trustees. The Adviser agrees to furnish the Sub-Adviser from time to time copies
of all amendments of or supplements to such Prospectus and Statement of
Additional Information. The Sub-Adviser shall for all purposes herein be deemed
to be an independent contractor and shall, except as expressly provided or
authorized (whether herein or otherwise), have no authority to act for or
represent the Adviser, the Fund or the Trust in any way.
ss.2. SUB-ADVISORY SERVICES. Subject to such instructions and
supervision as the Adviser may from time to time furnish, the continuous
investment program of the LSC Portfolio provided by the Sub-Adviser shall
include, among other things, investment research and management with respect to
all securities, investments and cash equivalents in the LSC Portfolio. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund for the LSC
Portfolio, the appropriate portion of the LSC Portfolio's assets to be invested
in particular countries or geographic regions, the use of foreign exchange
contracts and other foreign currency matters, and the manner in which voting
rights, rights to consent to corporate action and other rights pertaining to the
LSC Portfolio's investments should be exercised. The Sub-Adviser will implement
such determinations through the placement, in the name of the Fund for the LSC
Portfolio, of orders for the execution of portfolio transactions with it through
such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as
it uses in providing services to other fiduciary accounts
for which it has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the
United States Securities and Exchange Commission ("SEC")
and in addition will conduct its activities under this
Agreement in accordance with any applicable regulations
of any government authority pertaining to the investment
advisory activities of the Sub-Adviser and shall furnish
such written reports or other documents substantiating
such compliance as the Adviser reasonably may from time
to time request;
(c) not make loans to any person to purchase or carry shares
of beneficial interest in the Trust or make loans to the
Trust;
(d) place orders pursuant to investment determinations for
the LSC Portfolio either directly with the issuer or with
2
<PAGE> 4
an underwriter, market maker or broker or dealer. In placing
orders with brokers and dealers, the Sub-Adviser will use its
reasonable best efforts to obtain prompt execution of orders
in an effective manner at the most favorable price. Consistent
with this obligation, the Sub-Adviser may, to the extent
permitted by law, purchase and sell portfolio securities to
and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of the
Fund and/or other accounts over which the Sub-Adviser
exercises investment discretion. Subject to the review of the
Trust's Board of Trustees from time to time with respect to
the extent and continuation of the policy, the Sub-Adviser is
authorized to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a
securities transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have
charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. In
placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Sub-Adviser may
consider the sale of shares of the Trust. In no instance will
portfolio securities be purchased from or sold to the Trust,
BISYS Fund Services Limited Partnership, the Adviser, any
other sub-investment adviser for the Trust ("other
sub-advisers"), or the Sub-Adviser or any affiliate of the
foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the LSC Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of
the Adviser and the Trust all records and other
information relative to the Adviser and the Trust and
prior, present, or potential shareholders, and will not
use such records and information for any purpose other
than performance of its responsibilities and duties
hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge
3
<PAGE> 5
such information to duly constituted authorities, or when so requested
by the Adviser and the Trust, PROVIDED, HOWEVER, that nothing
contained herein shall prohibit the Sub-Adviser from advertising or
soliciting the public generally with respect to other products or
services, regardless of whether such advertisement or solicitation may
include prior, present or potential shareholders of the Fund;
(g) maintain its policy and practice of conducting its fiduciary functions
independently. In making investment recommendations for the Trust, the
Sub-Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for
the Trust's account are customers of the Adviser, other sub-advisers,
the Sub-Adviser or of their respective parents, subsidiaries or
affiliates. In dealing with such customers, the Sub-Adviser and its
parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust; and
(h) render, upon request of the Adviser or the Trust's Board of Trustees,
written reports concerning the investment activities of the LSC
Portfolio.
ss.3. EXPENSES. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the LSC Portfolio.
ss.4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the LSC Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
ss.5. COMPENSATION OF THE SUB-ADVISER. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the LSC Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser 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. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the
Sub-Adviser shall serve for less than the
4
<PAGE> 6
whole of any month, the foregoing compensation shall be prorated. For the
purpose of determining fees payable to the Sub-Adviser, the value of the LSC
Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement. If the Adviser is required to
reduce its fee or to reimburse the Trust because the expenses of the Fund exceed
applicable state securities regulations or are in excess of any voluntary
expense limitations set forth in the Trust's current Registration Statement, the
Sub-Adviser's fee hereunder shall be reduced by an amount equal to such excess
expense multiplied by the ratio that the Sub-Adviser's fee hereunder bears to
the sum of the fees paid to and retained by the Adviser and paid to BISYS Fund
Services Limited Partnership (under the Trust's Administration Agreement with
BISYS Fund Services Limited Partnership with respect to the Fund) by the Trust
with respect to the LSC Portfolio. Notwithstanding anything contained herein to
the contrary, the Sub-Adviser shall not be compensated on the basis of a share
of capital gains or upon capital appreciation of the LSC Portfolio or any
portion thereof except as may be authorized by applicable law.
ss.6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the SubAdviser under this Agreement may differ from the advice given or
the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
ss.7. USE OF NAMES. The Adviser shall not use the name of the
Sub-Adviser in any prospectus, sales literature or other material relating to
the Trust in any manner not approved prior thereto by the Sub-Adviser; provided,
however, that the Sub-Adviser shall approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and, provided further, that in no
event shall such approval be unreasonably withheld. The Sub-Adviser shall not
use the name of the Trust, the Fund or the Adviser in any material relating to
the Sub-Adviser in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its and the
Fund's or the Trust's name which merely refer in accurate terms to the
appointment of the Sub-Adviser hereunder or which are required by the SEC or a
state securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
ss.8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty with respect to the
5
<PAGE> 7
receipt of compensation for services, the Sub-Adviser shall not be liable for
any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security.
ss.9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser acknowledges
that it has received notice of and accepts the limitations upon the Trust's and
the Fund's liability set forth in its Declaration of Trust and under Ohio law.
The Sub-Adviser agrees that any of the Trust's obligations shall be limited to
the assets of the Fund and that the Sub-Adviser shall not seek satisfaction of
any such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
ss.10. DURATION, RENEWAL, TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until August 20,
1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August 20th of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60
6
<PAGE> 8
days' prior written notice to the Adviser and the Trust's Board of Trustees, or
upon such shorter notice as may be mutually agreed upon. This Agreement shall
terminate automatically and immediately upon termination of the Adviser
Agreement. This Agreement shall terminate automatically and immediately in the
event of its assignment. No assignment of this Agreement shall be made by the
Sub-Adviser without the consent of the Adviser and the Board of Trustees of the
Trust. The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Sub-Adviser,
subject to approval by the Trust's Board of Trustees and, if required by the
1940 Act and applicable SEC rules and regulations, a vote of a majority of the
Fund's outstanding voting securities.
ss.11. CONFIDENTIAL RELATIONSHIP. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
ss.12. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
ss.13. MISCELLANEOUS. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
1ST SOURCE BANK
By /s/ John S. Seidl
------------------------------------------
Title Vice Pres. & Sr. Investment Officer
---------------------------------------
LOOMIS SAYLES & COMPANY
By LOOMIS SAYLES & COMPANY INCORPORATED,
------------------------------------------
General Partner
By /s/ James A. Carter, Mg. Partner
------------------------------------------
(name) (title)
7
<PAGE> 9
Dated: August 20, 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Loomis Sayles & Company
<TABLE>
<CAPTION>
Name of Fund COMPENSATION* DATE
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram Annual Rate of .65% of the August 20, 1996
Diversified Equity Fund average daily net assets of
the LSC Portfolio up to $5,000,000
and .50% of the average daily net
assets of the LSC Portfolio in
excess of $5,000,000.
</TABLE>
1ST SOURCE BANK
By /s/ John S. Seidl
------------------------------------------
Title Vice Pres. & Sr. Investment Officer
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LOOMIS SAYLES & COMPANY
By LOOMIS SAYLES & COMPANY INCORPORATED,
------------------------------------------
General Partner
By /s/ James A. Carter, Mg. Partner
------------------------------------------
(name) (title)
*All fees are computed daily and paid monthly.
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EXHIBIT (5)(i)
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SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 20th day of
August, 1996, by and between 1st Source Bank, an Indiana banking corporation
(the "Adviser"), and Columbus Circle Investors, a __________ general partnership
(the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios
of The Sessions Group, an Ohio business trust and an open-end management
investment company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment
portfolios, one of which is 1st Source Monogram Diversified Equity Fund (the
"Fund"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of equity securities to assist the
Adviser in performing services for a portion of the Fund; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Fund and has reviewed the Investment Advisory
Agreement dated as of August 20, 1996, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
ss.1. APPOINTMENT OF THE SUB-ADVISER. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for that portion of the
Fund designated by the Adviser (the "CCI Portfolio"), subject to such
instructions and supervision as the Adviser may from time to time furnish and
further subject to the control and direction of the Trust's Board of Trustees,
for the period and on the terms hereinafter set forth. The Sub-Adviser hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations herein set forth for the compensation herein
provided. The Sub-Adviser will provide the services under this Agreement in
accordance with the Fund's and the CCI Portfolio's investment objectives,
policies and restrictions as stated in the Fund's most recent Prospectus and
Statement of Additional Information and as the same may, from time to time, be
supplemented or amended and in resolutions of the
<PAGE> 3
Trust's Board of Trustees. The Adviser agrees to furnish the SubAdviser from
time to time copies of all amendments of or supplements to such Prospectus and
Statement of Additional Information. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to act
for or represent the Adviser, the Fund or the Trust in any way.
ss.2. SUB-ADVISORY SERVICES. Subject to such instructions and
supervision as the Adviser may from time to time furnish, the continuous
investment program of the CCI Portfolio provided by the Sub-Adviser shall
include, among other things, investment research and management with respect to
all securities, investments and cash equivalents in the CCI Portfolio. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Fund for the CCI
Portfolio, the appropriate portion of the CCI Portfolio's assets to be invested
in particular countries or geographic regions, the use of foreign exchange
contracts and other foreign currency matters, and the manner in which voting
rights, rights to consent to corporate action and other rights pertaining to the
CCI Portfolio's investments should be exercised. The Sub-Adviser will implement
such determinations through the placement, in the name of the Fund for the CCI
Portfolio, of orders for the execution of portfolio transactions with it through
such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as
it uses in providing services to other fiduciary accounts
for which it has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the
United States Securities and Exchange Commission ("SEC")
and in addition will conduct its activities under this
Agreement in accordance with any applicable regulations
of any government authority pertaining to the investment
advisory activities of the Sub-Adviser and shall furnish
such written reports or other documents substantiating
such compliance as the Adviser reasonably may from time
to time request;
(c) not make loans to any person to purchase or carry shares
of beneficial interest in the Trust or make loans to the
Trust;
(d) place orders pursuant to investment determinations for
the CCI Portfolio either directly with the issuer or with
an underwriter, market maker or broker or dealer. In
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placing orders with brokers and dealers, the Sub-Adviser will
use its reasonable best efforts to obtain prompt execution of
orders in an effective manner at the most favorable price.
Consistent with this obligation, the Sub-Adviser may, to the
extent permitted by law, purchase and sell portfolio
securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section
28(e) of the Securities Exchange Act of 1934) to or for the
benefit of the Fund and/or other accounts over which the
Sub-Adviser exercises investment discretion. Subject to the
review of the Trust's Board of Trustees from time to time with
respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for
effecting a securities transaction for the Fund which is in
excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the
Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to the
accounts as to which it exercises investment discretion. In
placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Sub-Adviser may
consider the sale of shares of the Trust. In no instance will
portfolio securities be purchased from or sold to the Trust,
BISYS Fund Services Limited Partnership, the Adviser, any
other sub-investment adviser for the Trust ("other
sub-advisers"), or the Sub-Adviser or any affiliate of the
foregoing except as may be permitted by the 1940 Act or an
exemption therefrom;
(e) maintain all necessary or appropriate books and records with
respect to the CCI Portfolio's securities transactions in
accordance with all applicable laws, rules and regulations,
including but not limited to Section 31(a) of the 1940 Act and
will furnish the Trust's Board of Trustees such periodic and
special reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of
the Adviser and the Trust all records and other
information relative to the Adviser and the Trust and
prior, present, or potential shareholders, and will not
use such records and information for any purpose other
than performance of its responsibilities and duties
hereunder, except that subject to prompt notification to
the Trust and the Adviser, the Sub-Adviser may divulge
such information to duly constituted authorities, or when
3
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so requested by the Adviser and the Trust, provided, however, that
nothing contained herein shall prohibit the Sub-Adviser from
advertising or soliciting the public generally with respect to other
products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of
the Fund;
(g) maintain its policy and practice of conducting its fiduciary functions
independently. In making investment recommendations for the Trust, the
Sub-Adviser's personnel will not inquire or take into consideration
whether the issuers of securities proposed for purchase or sale for
the Trust's account are customers of the Adviser, other sub-advisers,
the Sub-Adviser or of their respective parents, subsidiaries or
affiliates. In dealing with such customers, the Sub-Adviser and its
parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Trust; and
(h) render, upon request of the Adviser or the Trust's Board of Trustees,
written reports concerning the investment activities of the CCI
Portfolio.
ss.3. EXPENSES. During the term of this Agreement, the Sub- Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions, if
any) purchased for the CCI Portfolio.
ss.4. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records, if any,
which it maintains for the CCI Portfolio are the property of the Fund and
further agrees to surrender promptly to the Adviser or the Trust any such
records upon the Adviser's or the Trust's request and that such records shall be
available for inspection by the SEC. The Sub-Adviser further agrees to preserve
for the periods and at the places prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
ss.5. COMPENSATION OF THE SUB-ADVISER. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the CCI Portfolio's average daily net assets
set forth in Schedule A hereto; provided, however, that the Sub-Adviser 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. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the
Sub-Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
4
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For the purpose of determining fees payable to the Sub-Adviser, the value of the
CCI Portfolio's net assets shall be computed at the times and in the manner
specified in the Trust's Registration Statement. If the Adviser is required to
reduce its fee or to reimburse the Trust because the expenses of the Fund exceed
applicable state securities regulations or are in excess of any voluntary
expense limitations set forth in the Trust's current Registration Statement, the
Sub-Adviser's fee hereunder shall be reduced by an amount equal to such excess
expense multiplied by the ratio that the Sub-Adviser's fee hereunder bears to
the sum of the fees paid to and retained by the Adviser and paid to BISYS Fund
Services Limited Partnership (under the Trust's Administration Agreement with
BISYS Fund Services Limited Partnership with respect to the Fund) by the Trust
with respect to the CCI Portfolio. Notwithstanding anything contained herein to
the contrary, the SubAdviser shall not be compensated on the basis of a share of
capital gains or upon capital appreciation of the CCI Portfolio or any portion
thereof except as may be authorized by applicable law.
ss.6. SERVICES NOT EXCLUSIVE. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the Sub-Adviser under this Agreement may differ from the advice given
or the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
ss.7. USE OF NAMES. The Adviser shall not use the name of the
Sub-Adviser in any prospectus, sales literature or other material relating to
the Trust in any manner not approved prior thereto by the Sub-Adviser;
provided, however, that the Sub-Adviser shall approve all uses of its name
which merely refer in accurate terms to its appointment hereunder or which are
required by the SEC or a state securities commission; and, provided further,
that in no event shall such approval be unreasonably withheld. The Sub-Adviser
shall not use the name of the Trust, the Fund or the Adviser in any material
relating to the Sub-Adviser in any manner not approved prior thereto by the
Adviser; provided, however, that the Adviser shall approve all uses of its and
the Fund's or the Trust's name which merely refer in accurate terms to the
appointment of the Sub-Adviser hereunder or which are required by the SEC or a
state securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld.
ss.8. LIABILITY OF THE SUB-ADVISER. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty with respect to the receipt of compensation for services, the
Sub-Adviser shall not be
5
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liable for any act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security.
ss.9. LIMITATION OF TRUST'S LIABILITY. The Sub-Adviser acknowledges
that it has received notice of and accepts the limitations upon the Trust's and
the Fund's liability set forth in its Declaration of Trust and under Ohio law.
The Sub-Adviser agrees that any of the Trust's obligations shall be limited to
the assets of the Fund and that the Sub-Adviser shall not seek satisfaction of
any such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter
1746, Ohio Revised Code and under a Declaration of Trust, to which reference is
hereby made and a copy of which is on file at the office of the Secretary of
State of Ohio as required by law, and to any and all amendments thereto so filed
or hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
ss.10. DURATION, RENEWAL, TERMINATION AND AMENDMENT. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Fund, in accordance with the requirements under the 1940 Act, and, unless
sooner terminated as provided herein, shall continue in effect until August 20,
1998.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Fund for successive periods of one year each ending on
August 20th of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of the Fund. This Agreement may be terminated as to the Fund
at any time, without payment of any penalty, by the Trust's Board of Trustees,
by the Adviser, or by a vote of the majority of the outstanding voting
securities of the Fund upon, 60 days' prior written notice to the Sub-Adviser,
or by the Sub-Adviser upon 60 days' prior written notice to the Adviser and the
Trust's Board of
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Trustees, or upon such shorter notice as may be mutually agreed upon. This
Agreement shall terminate automatically and immediately upon termination of the
Adviser Agreement. This Agreement shall terminate automatically and immediately
in the event of its assignment. No assignment of this Agreement shall be made by
the Sub-Adviser without the consent of the Adviser and the Board of Trustees of
the Trust. The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meaning set forth for such terms in the 1940
Act. This Agreement may be amended at any time by the Adviser and the
Sub-Adviser, subject to approval by the Trust's Board of Trustees and, if
required by the 1940 Act and applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities.
ss.11. CONFIDENTIAL RELATIONSHIP. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
ss.12. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
ss.13. MISCELLANEOUS. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
1ST SOURCE BANK
By /s/ John S. Seidl
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Title Vice Pres. & Sr. Investment Officer
----------------------------------------
COLUMBUS CIRCLE INVESTORS
By XXXXXXXXXXXXXXXXXX, General Partner
-------------------------------------------
By J. F. Smith, Chairman
-------------------------------------------
(name) (title)
7
<PAGE> 9
Dated: August 20, 1996
SCHEDULE A
To the Sub-Investment Advisory Agreement
between 1st Source Bank and
Columbus Circle Investors
Name of Fund COMPENSATION* DATE
- ------------ ------------- ----
1st Source Monogram Annual Rate of 1.00% of the August 20, 1996
Diversified Equity Fund average daily net assets of
the CCI Portfolio up to $10,000,000
and .50% of the average daily net
assets of the CCI Portfolio in
excess of $10,000,000.
1ST SOURCE BANK
By /s/ John S. Seidl
-------------------------------------------
Title Vice Pres. & Sr. Investment Officer
----------------------------------------
COLUMBUS CIRCLE INVESTORS
By XXXXXXXXXXXXXXXXXXX , General Partner
-------------------------------------------
By /s/ J.F. Smith, Chairman
-------------------------------------------
(name) (title)
*All fees are computed daily and paid monthly.
8
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EXHIBIT (6)(e)
<PAGE> 2
DISTRIBUTION AGREEMENT
This Agreement is made this 20th day of August, 1996, between The
Sessions Group, an Ohio business trust (the "Trust"), 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services, an Ohio limited partnership ("Distributor"), 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as an Ohio business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Trust identified on Schedule A hereto as such Schedule may be amended from
time to time (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
------------------------
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended ("1933 Act"). As used in this
Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Trust understands
that Distributor is now and, in the future, may be the distributor of the shares
of several investment companies or series (together, "Companies") including
Companies having investment objectives similar to those of the Trust. The Trust
further understands that investors and potential investors in the Trust may
invest in shares of such other Companies. The Trust agrees that Distributor's
duties to such Companies shall not be deemed in conflict with its duties to the
Trust under this paragraph 1.2.
<PAGE> 3
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and
custodian for the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly
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<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.
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<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. Fee.
----
Distributor shall receive from the Funds identified on Schedule B
hereto (the "Distribution Plan Funds") a 12b-1 fee at the rate and upon the
terms and conditions set forth in the Distribution and Shareholder Service Plan
attached as Schedule C hereto, and as amended from time to time. The 12b-1 fee
shall be accrued daily and shall be paid on the first business day of each
month, or at such time(s) as Distributor shall reasonably request.
3. Sale and Payment.
-----------------
Under this Agreement, the following provisions shall apply with respect
to the sale of and payment of Shares of a Fund sold at an offering price which
includes a sales load (collectively, the "Load Shares;" individually, a "Load
Share") as described in the prospectuses of any Funds identified on Schedule D
hereto (collectively, the "Load Funds"; individually, a "Load Fund"):
(a) Distributor shall have the right, as principal, to purchase
Load Shares at their net asset value and to sell such Load Shares to
the public against orders therefor at the applicable public offering
price, as defined in Section 4 hereof. Distributor shall also have the
right, as principal, to sell Load Shares to dealers against orders
therefor at the public offering price less a concession determined by
Distributor, which concession shall not exceed the amount of the sales
charge or underwriting discount, if any, referred to in Section 4
below.
- 7 -
<PAGE> 9
(b) Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or
cause to be paid to the Load Fund or to its order an amount in Boston
or New York clearing house funds equal to the applicable net asset
value of such Shares. Distributor may retain so much of any sales
charge or underwriting discount as is not allowed by Distributor as a
concession to dealers.
4. Public Offering Price.
----------------------
The public offering price of a Load Share shall be the net asset value
of such Load Shares, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Fund. The net asset value of Shares shall be
determined in accordance with the provisions of the Declaration of Trust and
By-Laws of the Trust and the then current prospectus of the Load Fund.
5. Issuance of Shares.
-------------------
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset value (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then current prospectus of the Load Fund; and (e) otherwise in accordance
with any then current prospectus of the Load Fund.
6. Term, Duration and Matters Relating to the Trust as an
------------------------------------------------------
Ohio Business Trust.
--------------------
This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date first set forth above (or, if a particular
Fund is not in existence on such date, on the date an amendment to Schedule A to
this Agreement relating to that Fund is executed), and, unless sooner terminated
as provided herein, shall continue in effect until August 20, 1998. Thereafter,
if not terminated as provided herein, this Agreement shall continue with respect
to a particular Fund in effect automatically for successive one-year periods
ending on August 20 of each year with respect to each of the Funds, provided
such continuance is specifically approved at least annually by (a) the Trust's
Board of Trustees or (b) by "vote of a majority of the
- 8 -
<PAGE> 10
outstanding voting securities" (as defined below) of the Trust, provided,
however, that in either event the continuance is also approved by a majority of
the Trust's Trustees who are not parties to the Agreement or interested persons
(as defined in the 1940 Act) of any such party, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable without penalty, on not less than sixty days' prior written notice,
by the Trust's Board of Trustees, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Trust or by Distributor.
This Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act).
The Sessions Group is a business trust organized under Chapter 1746,
Ohio Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Sessions Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Trust
personally, but bind only the assets of the Trust, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Trust must look solely to the assets of the Trust belonging to such Fund for
the enforcement of any claims against the Trust.
BISYS FUND SERVICES THE SESSIONS GROUP
LIMITED PARTNERSHIP
By BISYS Fund Services, Inc., By /s/ Walter B. Grimm
General Partner --------------------------
Name Walter B. Grimm
------------------------
By /s/ Stephen G. Mintos Title President
------------------------- -----------------------
Name Stephen G. Mintos
-----------------------
Title Exec. Vice President
----------------------
- 9 -
<PAGE> 11
Dated: August 20, 1996
Schedule A
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August 20, 1996
Name of Fund Date
- ------------ ----
1st Source Monogram U.S. Treasury August 20, 1996
Obligations Money Market Fund
1st Source Monogram Diversified Equity Fund August 20, 1996
1st Source Monogram Income Equity Fund August 20, 1996
1st Source Monogram Special Equity Fund August 20, 1996
1st Source Monogram Income Fund August 20, 1996
1st Source Monogram Intermediate Tax-Free August 20, 1996
Bond Fund
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By /s/ Stephen G. Mintos By /s/ Walter B. Grimm
-------------------------- --------------------------
Name Stephen G. Mintos Name Walter B. Grimm
------------------------ ------------------------
Title Exec. Vice President Title President
----------------------- -----------------------
A-1
<PAGE> 12
Dated: August 20, 1996
Schedule B
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August 20, 1996
Name of Distribution Plan Fund Date
- ------------------------------ ----
1st Source Monogram U.S. Treasury Obligations August 20, 1996
Money Market Fund
1st Source Monogram Diversified Equity Fund August 20, 1996
1st Source Monogram Income Equity Fund August 20, 1996
1st Source Monogram Special Equity Fund August 20, 1996
1st Source Monogram Income Fund August 20, 1996
1st Source Monogram Intermediate Tax-Free August 20, 1996
Bond Fund
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By /s/ Stephen G. Mintos By /s/ Walter B. Grimm
---------------------------- --------------------------
Name Stephen G. Mintos Name Walter B. Grimm
-------------------------- ------------------------
Title Exec. Vice President Title President
------------------------- -----------------------
B-1
<PAGE> 13
Schedule C
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August 20, 1996
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
-----------------------------------------
This Plan (the "Plan") constitutes the distribution and shareholder
service plan of The Sessions Group, an Ohio business trust (the "Trust"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act"). The Plan relates to those investment portfolios ("Funds")
identified on Schedule B to the Trust's Distribution Agreement dated as of
August 20, 1996, and as amended from time to time (the "Distribution Plan
Funds").
SECTION 1. Each Distribution Plan Fund shall pay to BISYS Fund Services
Limited Partnership, the distributor (the "Distributor") of the Funds' shares of
beneficial interest (the "Shares") a fee in an amount not to exceed on an annual
basis .25% of the average daily net asset value of such Fund (the "12b-1 Fee")
for: (i) (a) efforts of the Distributor expended in respect of or in furtherance
of sales of Shares, and (b) to enable the Distributor to make payments to banks
and other institutions and broker/dealers (a "Participating Organization") for
distribution assistance pursuant to an agreement with the Participating
Organization; (ii) reimbursement of expenses (a) incurred by the Distributor,
and (b) incurred by a Participating Organization pursuant to an agreement in
connection with distribution assistance including, but not limited to, the
reimbursement of expenses relating to printing and distributing prospectuses to
persons other than Shareholders of such Distribution Plan Fund, printing and
distributing advertising and sales literature and reports to Shareholders for
use in connection with the sales of Shares, processing purchase, exchange and
redemption request from customers and placing orders with the Distributor or the
Distribution Plan Fund's transfer agent, and personnel and communication
equipment used in servicing Shareholder accounts and prospective shareholder
inquiries; (iii) (a) efforts of the Distributor expended in servicing
shareholders holding Shares, and (b) to enable the Distributor to make payments
to a Participating Organization for shareholder services pursuant to an
agreement with the Participating Organization; and (iv) reimbursement of
expenses (a) incurred by the Distributor, and (b) incurred by a Participating
Organization pursuant to an agreement in connection with shareholder service
including, but not limited to, personal, continuing services to investors in the
Shares of such Distribution Plan Fund, and providing office space, equipment,
telephone facilities and various personnel including clerical, supervisory
C-1
<PAGE> 14
and computer, as is necessary or beneficial in connection
therewith.
For purposes of the Plan, a Participating Organization may
include the Distributor or any of its affiliates or subsidiaries.
SECTION 2. The 12b-1 Fee shall be paid by the Distribution Plan Funds
to the Distributor only to compensate or to reimburse the Distributor for
payments or expenses incurred pursuant to Section 1.
SECTION 3. The Plan shall not take effect with respect to a
Distribution Plan Fund until it has been approved by a vote of the initial
shareholder of such Fund.
SECTION 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Trust, and (b) the Independent Trustees of the Trust cast in person at a
meeting called for the purpose of voting on the Plan or such agreement.
SECTION 5. The Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Distribution Plan Funds pursuant to the Plan or any
related agreement shall provide to the Trustees of the Trust, and the Trustees
shall review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made.
SECTION 7. The Plan may be terminated at any time as to a Distribution
Plan Fund by vote of a majority of the Independent Trustees, or by vote of a
majority of a Distribution Plan Fund's outstanding voting securities.
SECTION 8. All agreements with any person relating to implementation of
the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities
of the Distribution Plan Fund, on not more than 60 days' written notice
to any other party to the agreement; and
C-2
<PAGE> 15
(b) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 9. The Plan may not be amended to increase materially the
amount of distribution expenses permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to the Plan shall be approved in the manner provided for approval of the Plan in
Section 4.
SECTION 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of the
Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission.
C-3
<PAGE> 16
Schedule D Dated: August 20, 1996
to the
Distribution Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
August 20, 1996
Name of Load Fund Date
- ----------------- ----
1st Source Monogram Diversified Equity Fund August 20, 1996
1st Source Monogram Income Equity Fund August 20, 1996
1st Source Monogram Special Equity Fund August 20, 1996
1st Source Monogram Income Fund August 20, 1996
1st Source Monogram Intermediate Tax-Free August 20, 1996
Bond Fund
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By /s/ Stephen G. Mintos By /s/ Walter B. Grimm
-------------------------- -------------------------
Name Stephen G. Mintos Name Walter B. Grimm
------------------------ -----------------------
Title Exec. Vice President Title President
----------------------- ----------------------
D-1
<PAGE> 1
EXHIBIT (8)(c)
<PAGE> 2
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT, is made as of August 20, 1996, by and between The
Sessions Group, a business trust organized under the laws of the State of Ohio
(the "Trust"), and THE FIFTH THIRD BANK, a banking company organized under the
laws of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios and any additional portfolios of the Trust, as each are or
will be identified in Exhibit A hereto (such current investment portfolios and
any additional portfolios individually referred to herein as a "Fund" and
collectively as the "Funds"), be held and administered by the Custodian pursuant
to this Agreement; and
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Trust and named in Exhibit B hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time
serving under the Trust's Declaration of Trust, dated April 25, 1988, as from
time to time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
<PAGE> 3
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Fund computes the
net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Trust.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Trust shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Trust of such variance but such Oral Instructions will govern unless
the Custodian has not yet acted.
1.8 "CUSTODY ACCOUNT" shall mean any account in the name of the Trust,
which is provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Trust) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
ofdeposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or
-2-
<PAGE> 4
representing any other rights or interests therein, or any similar property or
assets that the Custodian has the facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest issued by
the Trust.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by one or more persons as the
Board of Trustees shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized, or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Trust at any time during the period of this Agreement, provided that such
Securities or cash at all times shall be and remain the property of the Trust.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as sub-
-3-
<PAGE> 5
custodian to hold Securities and cash of the Funds and to carry out such other
provisions of this Agreement as it may determine, and may also open and maintain
one or more banking accounts with such a bank or trust company (any such
accounts to be in the name of the Custodian and subject only to its draft or
order), provided, however, that the appointment of any such agent shall not
relieve the Custodian of any of its obligations or liabilities under this
Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Fund shall deliver, or cause to be
delivered, to the Custodian all of each Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book- Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book- Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed for the
deposit of Securities of the Funds, the Trust shall annually re-adopt
such resolution and deliver a copy thereof, certified by an Officer,
to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the books
of the Book-Entry System and Securities Depository as the case may be,
with respect to Securities of a Fund maintained in a Book-Entry System
or
-4-
<PAGE> 6
Securities Depository shall, by book-entry, or otherwise identify such
Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund are kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to the
Trust resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person for any loss or damage to
the Funds arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Trust has been made whole
for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon compliance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian
-5-
<PAGE> 7
appointed pursuant to Section 3.3 above) of such Securities
registered as provided in Section 3.9 below in proper form for
transfer, or if the purchase of such Securities is effected through a
Book-Entry System or Securities Depository, in accordance with the
conditions set forth in Section 3.5 above; (ii) in the case of
options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against delivery
to the Custodian (or such sub-custodian) of evidence of title thereto
in favor of the Trust or any nominee referred to in Section 3.9
below; and (iv) in the case of repurchase or reverse repurchase
agreements entered into between the Trust and a bank which is a
member of the Federal Reserve System or between the Trust and a
primary dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or
Securities Depository for the account of the Fund with such
Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of
a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of a Fund; in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Trust;
(g) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under
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<PAGE> 8
the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any contract market
(or any similar organization or organizations) regarding account
deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only against
receipt of payment therefor in cash, by certified or cashiers check or
bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Trust, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such
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<PAGE> 9
Securities, or pursuant to any deposit agreement, including surrender
or receipt of underlying Securities in connection with the issuance or
cancellation of depository receipts; provided that, in any such case,
the new Securities and cash, if any, are to be delivered to the
Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund, but
only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Trust on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Trust on behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of a Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such
-8-
<PAGE> 10
purpose to be a proper corporate purpose, and naming the person or
persons to whom delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Trust is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Trust, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Trust at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System for the account of the Trust on behalf of a Fund, if eligible therefor.
All other Securities held for a Fund may be registered in the name of the Trust
on behalf of such Fund, the Custodian, or any sub-custodian appointed pursuant
to Section 3.3 above, or in the name of any nominee of any of them, or in the
name of a Book-Entry System, Securities Depository or any nominee of either
thereof; provided, however, that such Securities are held
-9-
<PAGE> 11
specifically for the account of the Trust on behalf of a Fund. The Trust shall
furnish to the Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name of any of the
nominees hereinabove referred to or in the name of a Book-Entry System or
Securities Depository, any Securities registered in the name of a Fund.
3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Trust, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by Fund, of the Securities and moneys held for the Trust under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internaaccounting controls and procedures for safeguarding Securities, which are
employed by the Custodian or any sub-custodian appointed pursuant to Section 3.3
above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any,
-10-
<PAGE> 12
and promptly deliver to the Trust such proxies, all proxy soliciting materials,
which should include all other proxy materials, if any, and all notices to such
Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. Custodian will promptly notify the
Trust of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Daily Card Service, J.J. Kenny
Called Bond Service, DTC, or received by first class mail from the agent. For
market announcements not yet received and distributed by Custodian's services,
the Trust will inform its custody representative with appropriate instructions.
Custodian will, upon receipt of the Trust's response within the required
deadline, affect such action for receipt or payment for the Trust. For those
responses received after the deadline, Custodian will affect such action for
receipt or payment, subject to the limitations of the agent(s) affecting such
actions. Custodian will promptly notify the Trust for put options only if the
notice is received by first class mail from the agent. The Trust will provide or
cause to be provided to the Custodian with all relevant information contained in
the prospectus for any security which has unique put/option provisions and
provide the Custodian with specific tender instructions at least ten business
days prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
the Trust, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.
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<PAGE> 13
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii) income from
cash, Securities or other assets of the Trust. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust to facilitate
the settlement of a Trust transactions on behalf of a Fund in its Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
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<PAGE> 14
ARTICLE V
---------
REDEMPTION OF TRUST SHARES
--------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by the Trust with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
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<PAGE> 15
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss,
damages, cost, expense, liability or claim arises from negligence, bad faith or
willful misconduct on its part or on the part of any sub-custodian appointed
pursuant to Section 3.3 above. The Custodian shall be entitled to rely on and
may act upon advice of counsel on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice. The
Custodian shall promptly notify the Trust of any action taken or omitted by the
Custodian pursuant to advice of counsel. The Custodian shall not be under any
obligation at any time to ascertain whether the Trust is in compliance with the
1940 Act, the regulations thereunder, the provisions of the Trust's charter
documents or by-laws, or its investment objectives and policies as then in
effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Trust if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
-14-
<PAGE> 16
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.7 COOPERATION. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the Trust to
keep the books of account of the Trust and/or compute the value of the assets of
the Trust. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
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<PAGE> 17
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Trust and held by the Custodian as custodian, and (b) transfer any Securities
held in a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to
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<PAGE> 18
Section 10.1 above, then the Custodian shall have the right to deliver to a bank
or trust company of its own selection, which is (a) a "Bank" as defined in the
1940 Act, (b) has aggregate capital, surplus and undivided profits as shown on
its then most recent published report of not less than $25 million, and (c) is
doing business in New York, New York, all Securities, cash and other property
held by Custodian under this Agreement and to transfer to an account of or for
the Trust at such bank or trust company all Securities of the Trust held in a
Book-Entry System or Securities Depository. Upon such delivery and transfer,
such bank or trust company shall be the successor custodian under this Agreement
and the Custodian shall be relieved of all obligations under this Agreement. If,
after reasonable inquiry, the Custodian cannot find a successor custodian as
contemplated in this Section 10.3, then the Custodian shall have the right to
deliver to the Trust all Securities and cash then owned by the Trust and to
transfer any Securities held in a Book-Entry System or Securities Depository to
an account of or for the Trust. Thereafter, the Trust shall be deemed to be its
own custodian with respect to the Trust and the Custodian shall be relieved of
all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
The Trust is a business trust organized under the laws of the State of Ohio
and under a Declaration of Trust, to which reference is hereby made a copy of
which is on file at the office of the Secretary of State of Ohio as required by
law, and to any and all amendments thereto so filed or hereafter filed. The
obligations of the Trust entered into in the name of the Trust or on behalf
thereof by any of the Trustees, officers, employees or agents are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust or the Funds
personally, but bind only the assets of the Trust, and all persons dealing with
any of the Funds of the Trust must look solely to the assets of the Trust
belonging to such Fund for the enforcement of any claims against the Trust.
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<PAGE> 19
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the party at the address set forth after its name herein below:
To the Trust:
-------------
The Sessions Group
3435 Stelzer Road
Columbus, Ohio 43219
Attn: President
Telephone: (614) 470-8000
Facsimile: (614) 470-8715
To the Custodian:
-----------------
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the Trust
and such other printed matter as merely identifies Custodian as custodian for
the Trust. The Trust shall submit
-18-
<PAGE> 20
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
-19-
<PAGE> 21
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: THE SESSIONS GROUP
By: /s/ Walter B. Grimm
- ------------------------ ----------------------------------
Its: President
---------------------------------
ATTEST: THE FIFTH THIRD BANK
By: /s/ K. David Bane
- ------------------------ ----------------------------------
K. David Bane
Vice President
-20-
<PAGE> 22
Dated: August 20, 1996
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST 20, 1996
Name of Fund Date
------------ ----
1st Source U.S. Treasury Obligations August 20, 1996
Money Market Fund
1st Source Diversified Equity Fund August 20, 1996
1st Source Income Equity Fund August 20, 1996
1st Source Special Equity Fund August 20, 1996
1st Source Income Fund August 20, 1996
1st Source Intermediate Tax-Free Bond
Fund August 20, 1996
THE SESSIONS GROUP
By: /s/ Walter B. Grimm
----------------------------
Walter B. Grimm
President
THE FIFTH THIRD BANK
By: /s/ K. David Bane
----------------------------
K. David Bane
Vice President
-21-
<PAGE> 23
Dated: August 20, 1996
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST 20, 1996
AUTHORIZED PERSONS
for the following portfolios:
1st Source U.S. Treasury Obligations Money Market Fund
1st Source Diversified Equity Fund
1st Source Income Equity Fund
1st Source Special Equity Fund
1st Source Income Fund
1st Source Intermediate Tax-Free Bond Fund
Cash Movement of Shareholder Activity
(excluding Fund shareholder checks)
Officers of the Group
---------------------
Walter B. Grimm President
J. David Huber Vice President
William J. Tomko Vice President
Nancy E. Converse Secretary
Alaina V. Metz Assistant Secretary
R. Jeffrey Young Assistant Secretary
Employees of BISYS Ohio
-----------------------
Lisa K. Householder
Theresa L. Bailey
Romy Barden
Michael J. Brascetta
Katherine A. Campbell
James T. Gillespie
-22-
<PAGE> 24
Payment of Fund Expenses
Officers of the Group
---------------------
Walter B. Grimm President
J. David Huber Vice President
William J. Tomko Vice President
Stephen G. Mintos Treasurer
Nancy E. Converse Secretary
Alaina V. Metz Assistant Secretary
R. Jeffrey Young Assistant Secretary
Employees of BISYS
------------------
Martin R. Dean
Charles L. Booth
Jennifer Civiletti
Dana A. Gentile
Judi A. Bell
Laurice A. Alcorn
Lisa Tomich
Adam Zielachowski
Writing of Fund Shareholder Checks
for Redemptions or Dividends
Officers of the Group
---------------------
Walter B. Grimm President
J. David Huber Vice President
William J. Tomko Vice President
Stephen G. Mintos Treasurer
Nancy E. Converse Secretary
Alaina V. Metz Assistant Secretary
R. Jeffrey Young Assistant Secretary
-23-
<PAGE> 25
Authorized to Give Oral Instructions &
"Written Instructions" to the Custodian for
Purchases & Sales of Portfolio Securities
-----------------------------------------
1st Source Bank Miller, Anderson
--------------- ----------------
& Sherrend LLP
--------------
J. Gregory Turner
Ralph C. Shive Robert J. Marcin
Andrew R. Haddock
John S. Seidl
Loomis, Sayles Columbus Circle
-------------- ---------------
& Company, Inc. Investors
--------------- ---------
Jerry Castellini Daniel S. Pickett
-24-
<PAGE> 26
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
THE SESSIONS GROUP AND THE FIFTH THIRD BANK
AUGUST 20, 1996
MUTUAL FUND CUSTODY FEE SCHEDULE
I. MONTHLY BASIC PER ACCOUNT FEE
Annual Asset Based Fees
Under $25 Million 1 bp
$25 - $100 Million .75 bp
Over $100 Million .5 bp
Minimum $2,400.00
II. SECURITY TRANSACTION FEES
DTC & FED Eligible $9.00
Physical 25.00
Amortized Securities 25.00
Amortized Principal & Income Payments 5.00
Options 25.00
Mutual Funds 11.00
Repos/Money Markets (non 5/3) 11.00
Foreign - Euroclear & Cedel 50.00
Foreign - Other TBD
Other TBD
Turnaround Trade 50.00
Pair - off Trade 25.00
III. SYSTEMS
Automated Securities Workstation $150.00
$200.00 Initial Setup
Mainframe - To - Mainframe 150.00
$200.00 Initial Setup
ACCESS - Single Account 50.00
- Multiple Accounts 100.00
-25-
<PAGE> 27
IV. MISCELLANEOUS FEES
Per additional issue for repo collateral $5.00
Corporate Actions 25.00
Wire Transfers (In/Out) 7.00
Check Requests 6.00
Deposit Reject 25.00
Registration Fee 30.00
Automated Asset Reconciliation 25.00
Escrow Receipt 5.00
Special Services - per hr. fee 75.00
Overnight Packages 8.00
*FIFTH THIRD IS WILLING TO REDUCE THE TOTAL ACCOUNT FEE 50% FOR THE FIRST THREE
MONTHS AND 25% FOR THE SECOND THREE MONTHS OF THE LIVES OF THE FUND.
THE SESSIONS GROUP
By: /s/ Walter B. Grimm
------------------------
Walter B. Grimm
President
THE FIFTH THIRD BANK
By: /s/ K. David Bane
------------------------
K. David Bane
Vice President
-26-
<PAGE> 1
EXHIBIT (9)(aa)
<PAGE> 2
MANAGEMENT AND ADMINISTRATION AGREEMENT
This Agreement is made this 20th day of August, 1996, between The
Sessions Group, an Ohio business trust (the "Trust"), 3435 Stelzer Road,
Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership dba BISYS Fund
Services, an Ohio limited partnership ("Administrator"), 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as an Ohio business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain Administrator to furnish
management and administration services to certain investment portfolios of the
Trust and may retain Administrator to serve in such capacity with respect to
additional investment portfolios of the Trust, all as now or hereafter may be
identified in Schedule A hereto as such Schedule may be amended from time to
time (individually referred to herein as a "Fund" and collectively referred to
herein as the "Funds"); and
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Manager and Administrator
-------------------------------------
Subject to the direction and control of the Board of Trustees of the
Trust, Administrator will assist in supervising all aspects of the operations of
the Funds except those performed by the investment adviser for the Funds under
its Investment Advisory Agreement, the custodian for the Funds under its Custody
Agreement, the transfer agent for the Funds under its Transfer Agency Agreement
and the fund accountant for the Funds under its Fund Accounting Agreement.
Administrator will maintain office facilities (which may be in the
offices of Administrator or an affiliate but shall be in such location as the
Trust shall reasonably determine); furnish statistical and research data,
clerical, certain bookkeeping services and stationery and office supplies;
prepare the periodic reports to the Commission on Form N-SAR or any replacement
forms therefor; compile data for, assist the Trust or its designee in the
preparation of, and file, all the Funds' federal and state tax returns and
required tax filings other than those required to be made by the Funds'
custodian and transfer agent; prepare compliance filings pursuant to state
securities laws with the advice of the Trust's counsel; assist to the extent
requested by the Trust with the Trust's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statements (on Form
N-1A or any replacement therefor); compile data for, prepare and file timely
Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act;
keep and maintain the financial accounts and records of the Funds, including
calculation of daily expense accruals; in the case of money market funds,
periodic review of the amount of the
<PAGE> 3
deviation, if any, of the current net asset value per share (calculated using
available market quotations or an appropriate substitute that reflects current
market conditions) from each money market fund's amortized cost price per share;
and generally assist in all aspects of the operations of the Funds. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Administrator
hereby agrees that all records which it maintains for the Trust are the property
of the Trust and further agrees to surrender promptly to the Trust any of such
records upon the Trust's request. Administrator further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-1 under the 1940 Act. Administrator may delegate some
or all of its responsibilities under this Agreement.
Administrator may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Administrator shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Administrator shall be responsible, to the extent
provided in Section 4 hereof, for all acts of such subcontractor as if such acts
were its own.
2. Fees; Expenses; Expense Reimbursement
-------------------------------------
In consideration of services rendered and expenses assumed pursuant to
this Agreement, each of the Funds will pay Administrator on the first business
day of each month, or at such time(s) as Administrator shall request and the
parties hereto shall agree, a fee computed daily and paid as specified below
calculated at the applicable annual rate set forth on Schedule A hereto. The fee
for the period from the day of the month this Agreement is entered into until
the end of that month shall be prorated according to the proportion which such
period bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement.
For the purpose of determining fees payable to Administrator, the value
of the net assets of a particular Fund shall be computed in the manner described
in the Trust's Declaration of Trust or in the Prospectus or Statement of
Additional Information respecting that Fund as from time to time is in effect
for the computation of the value of such net assets in connection with the
determination of the liquidating value of the shares of such Fund.
Administrator will from time to time employ or associate with itself
such person or persons as Administrator may believe to be particularly fitted to
assist it in the performance of this Agreement. Such person or persons may be
partners, officers, or employees who are employed by both Administrator and the
Trust.
- 2 -
<PAGE> 4
The compensation of such person or persons shall be paid by Administrator and no
obligation may be incurred on behalf of the Funds in such respect. Other
expenses to be incurred in the operation of the Funds including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not partners,
officers, directors, shareholders or employees of Administrator or the
investment adviser or distributor for the Funds, Commission fees and state Blue
Sky qualification and renewal fees and expenses, advisory fees, pricing service
fees, custodian fees, transfer and dividend disbursing agents' fees, fund
accounting fees, certain insurance premiums, outside and, to the extent
authorized by the Trust, inside auditing and legal fees and expenses, costs of
maintenance of the Trust's existence, type-setting and printing prospectuses for
regulatory purposes and for distribution to current shareholders of the Funds,
costs of shareholders' and Trustees' reports and meetings, fees incurred under
the Trust's Distribution and Shareholder Service Plan and Administrative
Services Plan and any extraordinary expenses will be borne by the Funds.
If in any fiscal year the aggregate expenses of a particular Fund (as
defined under the securities regulations of any state having jurisdiction over
the Trust) exceed the expense limitations of any such state, Administrator will
reimburse such Fund for a portion of such excess expenses equal to such excess
times the ratio of the fees respecting such Fund otherwise payable to
Administrator hereunder to the aggregate fees respecting such Fund otherwise
payable to Administrator hereunder and to 1st Source Bank under the Investment
Advisory Agreement between 1st Source Bank and the Trust. The expense
reimbursement obligation of Administrator is limited to the amount of its fees
hereunder for such fiscal year, provided, however, that notwithstanding the
foregoing, Administrator shall reimburse a particular Fund for such proportion
of such excess expenses regardless of the amount of fees paid to it during such
fiscal year to the extent that the securities regulations of any state having
jurisdiction over the Trust so require. Such expense reimbursement, if any, will
be estimated daily and reconciled and paid on a monthly basis.
3. Proprietary and Confidential Information
----------------------------------------
Administrator agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Trust all records
and other information relative to the Trust and prior, present, or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld where Administrator may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such
- 3 -
<PAGE> 5
information by duly constituted authorities, or when so requested by the Trust.
4. Limitation of Liability
-----------------------
Administrator shall not be liable for any loss suffered by the Funds in
connection with the matters to which this Agreement relates, except for a loss
resulting from willful misfeasance, bad faith or negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also a partner,
employee, or agent of Administrator, who may be or become an officer, Trustee,
employee, or agent of the Trust or the Funds shall be deemed, when rendering
services to the Trust or the Funds, or acting on any business of that party, to
be rendering such services to or acting solely for that party and not as a
partner, employee, or agent or one under the control or direction of
Administrator even though paid by it.
5. Term
----
This Agreement shall become effective as of the date first written
above (or, if a particular Fund is not in existence on that date, on the date an
amendment to Schedule A to this Agreement relating to that Fund is executed)
and, unless sooner terminated as provided herein, shall continue until August
20, 1999, and thereafter shall be renewed automatically for successive one-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term; provided that the performance of Administrator is specifically reviewed at
least annually by the Trust's Board of Trustees. This Agreement is terminable
with respect to a particular Fund through a failure to renew at the end of a
one-year term; upon mutual agreement of the parties hereto; or for "cause" (as
defined below) by the party alleging "cause," in any case on not less than 60
days' notice by the Trust's Board of Trustees or by Administrator. Written
notice not to renew may be given for any reason, with or without "cause."
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) the dissolution or
liquidation of either party or other cessation of business other than a
reorganization or recapitalization of such party as an ongoing business; (d)
financial difficulties on the part of the party to be terminated which is
evidenced by the authorization or commencement of, or involvement by way of
pleading, answer, consent, or acquiescence in, a voluntary or
- 4 -
<PAGE> 6
involuntary case under Title 11 of the United States Code, as from time to time
in effect, or any applicable law, other than said Title 11, of any jurisdiction
relating to the liquidation or reorganization of debtors or to the modification
or alteration of the rights of creditors; or (e) any circumstance which
substantially impairs the performance of the obligations and duties of the party
to be terminated, or the ability to perform those obligations and duties as
contemplated herein. Notwithstanding the foregoing, the absence of an annual
review of this Agreement by the Board of Trustees shall not, in and of itself,
constitute "cause" as used herein.
6. Governing Law and Matters Relating to the Trust as an
-----------------------------------------------------
Ohio Business Trust
-------------------
This Agreement shall be governed by the law of the State of Ohio. The
Sessions Group is a business trust organized under Chapter 1746, Ohio Revised
Code and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner By /s/ Walter B. Grimm
--------------------------
Walter B. Grimm, President
By /s/ Stephen G. Mintos
-------------------------
(name) (title)
- 5 -
<PAGE> 7
Dated: August 20, 1996
Schedule A to the
Management and Administration Agreement
between The Sessions Group and
BISYS Fund Services Limited Partnership
dated August 20, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source U.S. Annual rate of twenty August 20, 1996
Treasury Obligations one-hundredths of
Money Market Fund one percent (.20%)
of such Fund's average
daily net assets
1st Source Diversified Annual rate of twenty August 20, 1996
Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Income Annual rate of twenty August 20, 1996
Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Special Annual rate of twenty August 20, 1996
Equity Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
1st Source Income Annual rate of twenty August 20, 1996
Fund hundredths of one
percent (.20%) of such
Fund's average daily net
assets
- --------
<FN>
*All fees are computed daily and paid periodically.
</TABLE>
A-1
<PAGE> 8
<TABLE>
<S> <C> <C>
1st Source Intermediate Annual rate of twenty August 20, 1996
Tax-Free Bond Fund one-hundredths of one
percent (.20%) of the
such Fund's average
daily net assets
</TABLE>
BISYS FUND SERVICES LIMITED THE SESSIONS GROUP
PARTNERSHIP
By BISYS Fund Services, Inc. By /s/ Walter B. Grimm
General Partner --------------------------
Walter B. Grimm, President
By /s/ Stephen G. Mintos
---------------------------
(name) (title)
A-2
<PAGE> 1
EXHIBIT (9)(ab)
<PAGE> 2
FUND ACCOUNTING AGREEMENT
This Agreement is made as of August 20, 1996 between The Sessions Group
(the "Trust"), an Ohio business trust having its principal place of business at
3435 Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services, Inc.
("BISYS"), a Delaware corporation having its principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust desires that BISYS perform certain fund accounting
services for each of 1st Source Monogram U.S. Treasury Obligations Money Market
Fund, 1st Source Monogram Diversified Equity Fund, 1st Source Monogram Income
Equity Fund, 1st Source Monogram Special Equity Fund, 1st Source Monogram Income
Fund and 1st Source Monogram Intermediate Tax-Free Bond Fund and such other
investment portfolios of the Trust identified on Schedule A hereto, as such
Schedule may be amended from time to time (individually referred to herein as a
"Fund" and collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT.
(a) MAINTENANCE OF BOOKS AND RECORDS. BISYS will keep and
maintain the following books and records of each Fund pursuant to Rule
31a-1 under the Investment Company Act of 1940 (the "Rule"):
(i) Journals containing an itemized daily record in
detail of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and credits, as
required by subsection (b)(1) of the Rule;
(ii) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income and expense
accounts, including interest accrued and interest received, as
required by subsection (b)(2)(i) of the Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts
(except shareholder accounts) as required by subsection (b)(8)
of the Rule.
<PAGE> 3
(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:
(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;
-2-
<PAGE> 4
(xii) Determine the outstanding receivables and
payables for all (1) security trades, (2) Fund share
transactions and (3) income and expense accounts;
(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;
-3-
<PAGE> 5
(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 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.
ss.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.
ss.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.
ss.4. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 3 hereof, the
Trust agrees to reimburse BISYS for BISYS's out-of-pocket expenses in providing
services hereunder, including without limitation the following:
(1) All freight and other delivery and bonding charges incur-
red by BISYS in delivering materials to and from the
Trust;
(2) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Trust, the Trust's investment adviser
or custodian, dealers or others as required for BISYS to
perform the services to be provided hereunder;
(3) The cost of obtaining security market quotes pursuant to
Section 1(b)(ii) above;
-4-
<PAGE> 6
(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.
ss.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").
ss.6. TERM. This Agreement shall continue in effect with respect to a
Fund, unless earlier terminated by either party hereto as provided hereunder,
until August 20, 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 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. This
Agreement is terminable with respect to a particular Fund only upon mutual
agreement of the parties hereto or for "cause" (as defined below) by the party
alleging "cause," in either case on not less than 60 days' notice by the Trust's
Board of Trustees or by BISYS.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
either party with respect to its obligations and duties
-5-
<PAGE> 7
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.
ss.7. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION. BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Trust
for any action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. A Fund agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement with respect to such Fund or based,
if applicable, upon reasonable reliance on information, records, instructions or
requests with respect to such Fund given or made to BISYS by a duly authorized
representative of the Trust; provided that this indemnification shall not apply
to actions or omissions of BISYS in cases of its own bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties, and further provided that prior to confessing any claim against it which
may be the subject of this indemnification, BISYS shall give the Trust written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of BISYS.
ss.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
-6-
<PAGE> 8
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.
ss.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.
ss.10. REPORTS. BISYS will furnish to the Trust and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Trust
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by BISYS,
or as subsequently agreed upon by the parties pursuant to an amendment hereto.
The Trust agrees to examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein no later than three
business days from the receipt thereof. In the event that errors or
discrepancies, except such errors and discrepancies as may not reasonably be
expected to be discovered by the recipient within ten days after conducting a
diligent examination, are not so reported within the aforesaid period of time, a
report will for all purposes be accepted by and binding upon the Trust and any
other recipient, and except as provided in Section 7 hereof, BISYS shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Trust.
ss.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.
ss.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
-7-
<PAGE> 9
turned over to the Trust unless the Trust authorizes in writing the destruction
of such records and documents.
ss.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.
ss.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.
ss.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.
ss.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,
-8-
<PAGE> 10
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.
ss.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.
ss.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.
ss.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
-9-
<PAGE> 11
under the Securities Act of 1933 and the 1940 Act has been declared or becomes
effective.
ss.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.
ss.21. HEADINGS. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
ss.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.
ss.23. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the State of Ohio.
ss.24. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS. The
Sessions Group is a business trust organized under Chapter 1746, Ohio Revised
Code and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE SESSIONS GROUP
By /S/ Walter B. Grimm
--------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By /S/ Stephen G. Mintos
--------------------------------
(name) (title)
-10-
<PAGE> 12
Dated: August 20, 1996
SCHEDULE A
TO THE
FUND ACCOUNTING AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
AUGUST 20, 1996
<TABLE>
<CAPTION>
Name of Fund Compensation* Date
- ------------ ------------- ----
<S> <C> <C>
1st Source Monogram U.S. The greater of (i) the August 20, 1996
Treasury Obligations Money annual rate of .03% of
Market Fund, 1st Source such Fund's average
Monogram Diversified Equity daily net assets or (ii)
Fund, 1st Source Monogram $50,000 minus the
Income Equity Fund, 1st fee paid by such Fund
Source Monogram Special under its Management
Equity Fund, 1st Source and Administration
Monogram Income Fund and Agreement with BISYS
1st Source Monogram Inter- Fund Services dated as
mediate Tax-Free Fund of the date hereof.
THE SESSIONS GROUP
By /S/ Walter B. Grimm
--------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By /S/ Stephen G. Mintos
--------------------------------
(name) (title)
- ----------
<FN>
* All fees are computed daily and paid periodically.
</TABLE>
-11-
<PAGE> 1
EXHIBIT (9)(ac)
<PAGE> 2
TRANSFER AGENCY AGREEMENT
-------------------------
This Agreement is made as of August 20, 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:
ss.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.
ss.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.
ss.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.
ss.4. EFFECTIVE DATE. This Agreement shall become effective as of the
date first written above (the "Effective Date").
ss.5. TERM. This Agreement shall continue in effect, unless earlier
terminated by either party hereto as provided hereunder, until August __, 1999.
Thereafter, this Agreement shall be renewed automatically for successive
one-year terms unless written notice not to renew is given by the non-renewing
party to the other party at least 60 days prior to the expiration of the
then-current term; provided, however, that after such termination, for so long
as BISYS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement or any Schedule
or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. 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. Further, this Agreement
is terminable with respect to a particular Fund only upon mutual agreement of
the parties hereto or for "cause" (as defined below) by the party alleging
"cause," in either case on not less than 60 days' notice by the Trust's Board of
Trustees or by BISYS.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial difficulties
on the part of the party to be terminated which are evidenced by the
authorization or commencement of, or involvement by way of pleading, answer,
consent, or acquiescence in, a voluntary or involuntary case under Title 11 of
the United States Code, as from time to time is in effect, or any applicable
law, other than said Title 11, of any jurisdiction relating to the liquidation
or reorganization of debtors or to the modification or alteration of the rights
of creditors; or (d) any circumstance which substantially impairs the
performance of the obligations and duties as contemplated herein of the party to
be terminated.
ss.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.
ss.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 or any Fund or any shareholder or beneficial owner of the Trust for
any action reasonably taken pursuant to such advice.
ss.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
- 4 -
<PAGE> 5
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.
ss.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.
ss.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
- 5 -
<PAGE> 6
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.
ss.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.
ss.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.
ss.13. RETURN OF RECORDS. BISYS may at its option at any time, and
shall promptly upon the Trust's demand, turn over to the Trust and cease to
retain BISYS' files, records and documents created and maintained by BISYS
pursuant to this Agreement which are no longer needed by BISYS in the
performance of its services or for its legal protection. If not so turned over
to the Trust, such documents and records will be retained by BISYS for six years
from the year of creation. At the end of such six-year period, such records and
documents will be turned over to the Trust unless the Trust authorizes in
writing the destruction of such records and documents.
- 6 -
<PAGE> 7
ss.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.
ss.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.
ss.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.
ss.17. INSURANCE. BISYS shall notify the Trust should its insurance
coverage with respect to professional liability or errors and omissions coverage
be cancelled or reduced. Such notification shall include the date of change and
the reasons therefor. BISYS shall notify the Trust of any material claims
against it with respect to services performed under this Agreement, whether or
not they may be covered by insurance, and shall notify the Trust from time to
time as may be appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
ss.18. INFORMATION TO BE FURNISHED BY THE TRUST AND FUNDS. The Trust
has furnished to BISYS the following:
- 7 -
<PAGE> 8
(a) Copies of the Declaration of Trust of the Trust and of any
amendments thereto, certified by the proper official of the
state in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Trust's By-Laws and any amendments thereto;
2. Certified copies of resolutions of the Board of
Trustees covering the following matters:
a. Approval of this Agreement and authorization
of a specified officer of the Trust to execute
and deliver this Agreement and authorization
of specified officers of the Trust to instruct
BISYS hereunder; and
b. Authorization of BISYS to act as Transfer
Agent for the Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are authorized
to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statements of Additional
Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the
Trust authorized, issued, and outstanding as of the
Effective Date of BISYS' appointment as Transfer Agent
(or as of the date on which BISYS' services are
commenced, whichever is the later date) and as to receipt
of full consideration by the Trust for all shares
outstanding, such statement to be certified by the
Treasurer of the Trust.
ss.19. INFORMATION FURNISHED BY BISYS. BISYS has furnished to the
Trust the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
- 8 -
<PAGE> 9
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver
this Agreement;
2. Authorization of BISYS to act as Transfer Agent for
the Trust.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Commission pursuant to Rule 17Ad-13 of the Exchange Act.
ss.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.
ss.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.
ss.22. COMPLIANCE WITH LAW. Except for the obligations of BISYS set
forth in Section 10 hereof, the Trust assumes full responsibility for the
preparation, contents and distribution of each prospectus of the Trust as to
compliance with all applicable requirements of the Securities Act of 1933, as
amended (the "1933 Act"), the 1940 Act and any other laws, rules and regulations
of governmental authorities having jurisdiction. BISYS shall have no obligation
to take cognizance of any laws relating to the sale of the Trust's shares. The
Trust represents and warrants that no shares of the Trust will be offered to the
public until the Trust's
- 9 -
<PAGE> 10
registration statement under the 1933 Act and the 1940 Act has been declared or
becomes effective.
ss.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.
ss.24. HEADINGS. Paragraph headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
ss.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.
ss.26. GOVERNING LAW. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the State of Ohio.
ss.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 /s/ Stephen G. Mintos By /s/ Walter B. Grimm
---------------------------- -----------------------------
(name) (title) Walter B. Grimm, President
- 10 -
<PAGE> 11
Dated: August 20, 1996
SCHEDULE A
TO THE
TRANSFER AGENCY AGREEMENT
BETWEEN
THE SESSIONS GROUP
AND
BISYS FUND SERVICES, INC.
AUGUST 20, 1996
Name of Fund Date
------------ ----
1st Source Monogram U.S. Treasury Obligations August 20, 1996
Money Market Fund, 1st Source Monogram
Diversified Equity Fund, 1st Source Monogram
Income Equity Fund, 1st Source Monogram Special
Equity Fund, 1st Source Monogram Income Fund and
1st Source Monogram Intermediate Tax-Free Bond
Fund
THE SESSIONS GROUP
By /s/ Walter B. Grimm
------------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By /s/ Stephen G. Mintos
------------------------------------
(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
Dated: August 20, 1996
SCHEDULE C
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 /s/ Walter B. Grimm
--------------------------------
Walter B. Grimm, President
BISYS FUND SERVICES, INC.
By /s/ Stephen G. Mintos
--------------------------------
(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 (11)(a)
<PAGE> 2
AUDITORS' CONSENT
The Board of Trustees of
The Sessions Group:
We consent to the use of our report dated August 26, 1996, included herein, for
Riverside Capital Money Market Fund, Riverside Capital Value Equity Fund,
Riverside Capital Growth Fund, Riverside Capital Fixed Income Fund, Riverside
Capital Low Duration Government Securities Fund, and Riverside Capital Tennessee
Municipal Obligations Fund, each a fund of The Sessions Group (the Group), as of
June 30, 1996, and for the periods indicated therein, and to the references to
our firm under the headings "Financial Highlights" in the Prospectus and
"Auditors" in the Statement of Additional Information.
KPMG PEAT MARWICK LLP
Columbus, Ohio
October 15, 1996
<PAGE> 1
EXHIBIT (16)(j)
<PAGE> 2
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
DIVERSIFIED EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
----------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
( 3,535.78 /1,000 to the power of (1/( 4081 /365))-1) = 11.96%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,066.14 /1,000) - 1 = 6.61%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,311.57 /1,000 to the power of (1/( 730 /365))-1) = 14.52%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,365.74 /1,000 to the power of (1/( 1095 /365))-1) = 10.95%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 1,744.18 /1,000 to the power of (1/( 1825 /365))-1) = 11.77%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 3,007.50 /1,000 to the power of (1/( 3650 /365))-1) = 11.64%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
----------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,013.56 /1,000) - 1 = 1.36%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
914.22 /1,000) - 1 = -8.58%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
981.39 /1,000) - 1 = -1.86%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,016.10 /1,000) - 1 = 1.61%
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
3,535.78 /1,000) - 1 = 253.58%
</TABLE>
<PAGE> 3
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
DIVERSIFIED EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
( 3,722.12 /1,000 to the power of (1/( 4081 /365))-1) = 12.47%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,122.23 /1,000) - 1 = 12.22%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,380.66 /1,000 to the power of (1/( 730 /365))-1) = 17.50%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,437.58 /1,000 to the power of (1/( 1095 /365))-1) = 12.86%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 1,836.02 /1,000 to the power of (1/( 1825 /365))-1) = 12.92%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 3,166.34 /1,000 to the power of (1/( 3650 /365))-1) = 12.22%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,066.89 /1,000) - 1 = 6.69%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
962.30 /1,000) - 1 = -3.77%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
1,032.97 /1,000) - 1 = 3.30%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,016.10 /1,000) - 1 = 1.61%
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
3,722.12 /1,000) - 1 = 272.21%
</TABLE>
<PAGE> 4
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
INCOME EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
( 3,799.83 /1,000 to the power of (1/( 3927 /365))-1) = 13.21%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,068.42 /1,000) - 1 = 6.84%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,215.10 /1,000 to the power of (1/( 730 /365))-1) = 10.23%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,337.98 /1,000 to the power of (1/( 1095 /365))-1) = 10.19%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 1,961.78 /1,000 to the power of (1/( 1825 /365))-1) = 14.43%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 2,954.17 /1,000 to the power of (1/( 3650 /365))-1) = 11.44%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,006.07 /1,000) - 1 = 0.61%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
931.33 /1,000) - 1 = -6.87%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
985.45 /1,000) - 1 = -1.46%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,030.30 /1,000) - 1 = 3.03%
SINCE INCEPTION: ( 08/02/96 TO 08/31/96 ):
3,799.83 /1,000) - 1 = 279.98%
</TABLE>
<PAGE> 5
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
INCOME EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
-------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
( 3,999.4 /1,000 to the power of (1/( 3927 /365))-1) = 13.75%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,124.70 /1,000) - 1 = 12.47%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,279.07 /1,000 to the power of (1/( 730 /365))-1) = 13.10%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,408.52 /1,000 to the power of (1/( 1095 /365))-1) = 12.10%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 2,065.20 /1,000 to the power of (1/( 1825 /365))-1) = 15.61%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 3,108.97 /1,000 to the power of (1/( 3650 /365))-1) = 12.01%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,058.89 /1,000) - 1 = 5.89%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
980.20 /1,000) - 1 = -1.98%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
1,037.10 /1,000) - 1 = 3.71%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,030.30 /1,000) - 1 = 3.03%
SINCE INCEPTION: ( 08/02/96 TO 08/31/96 ):
3,999.42 /1,000) - 1 = 299.94%
</TABLE>
<PAGE> 6
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
INCOME FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 4.00%
------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
( 2,374.20 /1,000 to the power of (1/( 4081 /365))-1) = 8.04%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 980.05 /1,000) - 1 = -2.00%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,084.49 /1,000 to the power of (1/( 730 /365))-1) = 4.14%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,080.81 /1,000 to the power of (1/( 1095 /365))-1) = 2.62%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 1,373.29 /1,000 to the power of (1/( 1825 /365))-1) = 6.55%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 1,999.13 /1,000 to the power of (1/( 3650 /365))-1) = 7.17%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 4.00%
------------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
937.56 /1,000) - 1 = -6.24%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
961.95 /1,000) - 1 = -3.81%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
948.15 /1,000) - 1 = -5.18%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
996.10 /1,000) - 1 = -0.39%
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
2,374.20 /1,000) - 1 = 137.42%
</TABLE>
<PAGE> 7
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
INCOME FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- ---------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 06/30/85 TO 08/31/96 ):
( 2,499.51 /1,000 to the power of (1/( 4081 /365))-1) = 8.54%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,031.73 /1,000) - 1 = 3.17%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,141.47 /1,000 to the power of (1/( 730 /365))-1) = 6.84%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,137.79 /1,000 to the power of (1/( 1095 /365))-1) = 4.40%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 1,445.53 /1,000 to the power of (1/( 1825 /365))-1) = 7.65%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 2,104.42 /1,000 to the power of (1/( 3650 /365))-1) = 7.72%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- ---------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
986.95 /1,000) - 1 = -1.30%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
1,012.64 /1,000) - 1 = 1.26%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
997.99 /1,000) - 1 = -0.20%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,031.73 /1,000) - 1 = 3.17%
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
2,499.58 /1,000) - 1 = 149.96%
</TABLE>
<PAGE> 8
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
SPECIAL EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
- -----------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
( 4,619.56 /1,000 to the power of (1/( 3928 /365))-1) = 15.28%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,232.10 /1,000) - 1 = 23.21%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,530.35 /1,000 to the power of (1/( 730 /365))-1) = 23.71%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,490.30 /1,000 to the power of (1/( 1095 /365))-1) = 14.22%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 2,182.61 /1,000 to the power of (1/( 1825 /365))-1) = 16.89%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 4,348.03 /1,000 to the power of (1/( 3650 /365))-1) = 15.83%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 5.00%
- -----------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,143.43 /1,000) - 1 = 14.34%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
880.12 /1,000) - 1 = -11.99%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
1,005.83 /1,000) - 1 = 0.58%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,141.20 /1,000) - 1 = 14.12%
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
4,864.33 /1,000) - 1 = 386.43%
</TABLE>
<PAGE> 9
THE SESSIONS
1st SOURCE FUNDS
EXHIBIT 16
TOTAL RETURN
SPECIAL EQUITY FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- -----------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
( 4,864.3 /1,000 to the power of (1/( 3928 /365))-1) = 15.84%
ONE YEAR: ( 09/01/95 TO 08/31/96 ):
( 1,296.90 /1,000) - 1 = 29.69%
TWO YEAR: ( 09/01/94 TO 08/31/96 ):
( 1,610.41 /1,000 to the power of (1/( 730 /365))-1) = 26.90%
THREE YEAR: ( 09/01/93 TO 08/31/96 ):
( 1,568.62 /1,000 to the power of (1/( 1095 /365))-1) = 16.19%
FIVE YEAR: ( 09/01/91 TO 08/31/96 ):
( 2,296.92 /1,000 to the power of (1/( 1825 /365))-1) = 18.09%
TEN YEAR: ( 09/01/86 TO 08/31/96 ):
( 4,576.88 /1,000 to the power of (1/( 3650 /365))-1) = 16.43%
AGGREGATE TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
- -----------------------------------
T = (ERV/P) - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
EXAMPLE:
YEAR TO DATE: ( 01/01/96 TO 08/31/96 ):
1,203.70 /1,000) - 1 = 20.37%
QUARTERLY: ( 06/01/96 TO 08/31/96 ):
926.52 /1,000) - 1 = -7.35%
MONTHLY: ( 08/01/96 TO 08/31/96 ):
1,058.91 /1,000) - 1 = 5.89%
SIX MONTH: ( 03/01/96 TO 08/31/96 ):
1,141.20 /1,000) - 1 = 14.12%
SINCE INCEPTION: ( 11/30/85 TO 08/31/96 ):
4,864.33 /1,000) - 1 = 386.40%
</TABLE>
<PAGE> 10
THE SESSIONS
1st SOURCE FUNDS
DISTRIBUTION RATES
EXHIBIT 16
DISTRIBUTION RATE (including capital gains)
-------------------------------------------
DISTRIBUTION RATE =D/P
WHERE: D = Distributions per share over a 12 month period
(income and capital gain distributions)
P = Share price at end of 12 month period
EXAMPLES ( 9/01/95 TO 08/31/96 )
LOAD
----
DIVERSIFIED EQUIT 5.00% 0.0000 / 87.72 = 0.00%
SPECIAL EQUITY 5.00% 0.0000 / 52.18 = 0.00%
INCOME EQUITY 5.00% 0.0000 / 42.48 = 0.00%
INCOME 4.00% 0.0000 / 79.88 = 0.00%
DISTRIBUTION RATE (excluding capital gains)
-------------------------------------------
DISTRIBUTION RATE =D/P
WHERE: D = Distributions per share over a 12 month period
(income distributions only)
P = Share price at end of 12 month period
EXAMPLES ( 09/01/95 TO 08/31/96 )
LOAD
----
DIVERSIFIED EQUIT 5.00% 0.0000 / 87.72 = 0.00%
SPECIAL EQUITY 5.00% 0.0000 / 52.18 = 0.00%
INCOME EQUITY 5.00% 0.0000 / 42.48 = 0.00%
INCOME 4.00% 0.0000 / 79.88 = 0.00%
DISTRIBUTION RATE (including capital gains)(no load)
----------------------------------------------------
DISTRIBUTION RATE =D/P
WHERE: D = Distributions per share over a 12 month period
(income and capital gain distributions)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 09.01.95 TO 08/31/96 )
DIVERSIFIED EQUITY 0.0000 / 83.34 = 0.00%
SPECIAL EQUITY 0.0000 / 49.57 = 0.00%
INCOME EQUITY 0.0000 / 40.35 = 0.00%
INCOME 0.0000 / 76.69 = 0.00%
DISTRIBUTION RATE (excluding capital gains)(no load)
----------------------------------------------------
DISTRIBUTION RATE =D/P
WHERE: D = Distributions per share over a 12 month period
(income distributions only)
P = Net Asset Value at end of 12 month period
EXAMPLES ( 09/01/95 TO 08/31/96 )
DIVERSIFIED EQUITY 0.0000 / 83.34 = 0.00%
SPECIAL EQUITY 0.0000 / 49.57 = 0.00%
INCOME EQUITY 0.0000 / 40.35 = 0.00%
INCOME 0.0000 / 76.69 = 0.00%
<PAGE> 1
EXHIBIT (19)(b)
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption of "Legal Counsel" including in or made a part of the
Registration Statement on Form N-1A, File No. 33-21489, filed under the
Securities Act of 1933, as amended, of The Sessions Group.
BAKER & HOSTETLER
Columbus, Ohio
October 14, 1996
<PAGE> 1
EXHIBIT (19)(d)
<PAGE> 2
POWER OF ATTORNEY
-----------------
James H. Woodward, whose signature appears below, does hereby
constitute and appoint J. David Huber, Stephen G. Mintos and Walter B. Grimm,
each individually, his 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/ James H. Woodward
----------------------------
James H. Woodward
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSIONS GROUP
<SERIES>
<NUMBER> 1
<NAME> THE RIVERSIDE CAPITAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 133584271
<INVESTMENTS-AT-VALUE> 133584271
<RECEIVABLES> 1122472
<ASSETS-OTHER> 26402
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 134733145
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 587522
<TOTAL-LIABILITIES> 587522
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 134348768
<SHARES-COMMON-STOCK> 134348769
<SHARES-COMMON-PRIOR> 158386850
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 203145
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 134145623
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8446191
<OTHER-INCOME> 0
<EXPENSES-NET> 1484754
<NET-INVESTMENT-INCOME> 6961437
<REALIZED-GAINS-CURRENT> 141785
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7103222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6961437
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 426124613
<NUMBER-OF-SHARES-REDEEMED> 450674926
<SHARES-REINVESTED> 512232
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<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 483241
<GROSS-ADVISORY-FEES> 524476
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1799440
<AVERAGE-NET-ASSETS> 149850394
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .046
<PER-SHARE-GAIN-APPREC> .000
<PER-SHARE-DIVIDEND> .000
<PER-SHARE-DISTRIBUTIONS> .046
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.990
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSIONS GROUP
<SERIES>
<NUMBER> 2
<NAME> THE RIVERSIDE VALUE EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 66911792
<INVESTMENTS-AT-VALUE> 80426289
<RECEIVABLES> 685052
<ASSETS-OTHER> 7278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81118619
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63485
<TOTAL-LIABILITIES> 63485
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60131224
<SHARES-COMMON-STOCK> 5573485
<SHARES-COMMON-PRIOR> 6356792
<ACCUMULATED-NII-CURRENT> 106815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7302598
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13514497
<NET-ASSETS> 81055134
<DIVIDEND-INCOME> 2101037
<INTEREST-INCOME> 47939
<OTHER-INCOME> 0
<EXPENSES-NET> 1311831
<NET-INVESTMENT-INCOME> 837145
<REALIZED-GAINS-CURRENT> 9340011
<APPREC-INCREASE-CURRENT> 5384702
<NET-CHANGE-FROM-OPS> 15561858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 827973
<DISTRIBUTIONS-OF-GAINS> 2982043
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 373123
<NUMBER-OF-SHARES-REDEEMED> 1290025
<SHARES-REINVESTED> 133595
<NET-CHANGE-IN-ASSETS> 791338
<ACCUMULATED-NII-PRIOR> 97643
<ACCUMULATED-GAINS-PRIOR> 944630
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 747594
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1486168
<AVERAGE-NET-ASSETS> 83014727
<PER-SHARE-NAV-BEGIN> 12.630
<PER-SHARE-NII> .140
<PER-SHARE-GAIN-APPREC> 2.400
<PER-SHARE-DIVIDEND> .000
<PER-SHARE-DISTRIBUTIONS> .630
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 14.540
<EXPENSE-RATIO> 1.580
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSIONS GROUP
<SERIES>
<NUMBER> 3
<NAME> THE RIVERSIDE FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 29370100
<INVESTMENTS-AT-VALUE> 29388109
<RECEIVABLES> 3795142
<ASSETS-OTHER> 3143
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33186394
<PAYABLE-FOR-SECURITIES> 3779764
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 559421
<TOTAL-LIABILITIES> 4339185
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3511736
<SHARES-COMMON-STOCK> 3289966
<SHARES-COMMON-PRIOR> 4261477
<ACCUMULATED-NII-CURRENT> 72377
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6354913
<ACCUM-APPREC-OR-DEPREC> 18009
<NET-ASSETS> 28847209
<DIVIDEND-INCOME> 105493
<INTEREST-INCOME> 2583016
<OTHER-INCOME> 0
<EXPENSES-NET> 510964
<NET-INVESTMENT-INCOME> 2177545
<REALIZED-GAINS-CURRENT> (1646585)
<APPREC-INCREASE-CURRENT> 29430
<NET-CHANGE-FROM-OPS> 560390
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2163561
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 104990
<NUMBER-OF-SHARES-SOLD> 300179
<NUMBER-OF-SHARES-REDEEMED> 1377873
<SHARES-REINVESTED> 106183
<NET-CHANGE-IN-ASSETS> (10649251)
<ACCUMULATED-NII-PRIOR> 58393
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4603338
<GROSS-ADVISORY-FEES> 223976
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 583180
<AVERAGE-NET-ASSETS> 34428801
<PER-SHARE-NAV-BEGIN> 9.270
<PER-SHARE-NII> .590
<PER-SHARE-GAIN-APPREC> (.480)
<PER-SHARE-DIVIDEND> .000
<PER-SHARE-DISTRIBUTIONS> .610
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 8.770
<EXPENSE-RATIO> 1.480
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSION GROUP
<SERIES>
<NUMBER> 5
<NAME> RIVERSIDE TENNESSEE MUNICIPAL OBLIGATIONS FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 18441220
<INVESTMENTS-AT-VALUE> 18683329
<RECEIVABLES> 396380
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19096079
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58991
<TOTAL-LIABILITIES> 58991
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19961714
<SHARES-COMMON-STOCK> 1949549
<SHARES-COMMON-PRIOR> 2117238
<ACCUMULATED-NII-CURRENT> 41200
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1207935
<ACCUM-APPREC-OR-DEPREC> 242109
<NET-ASSETS> 19037088
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1277149
<OTHER-INCOME> 0
<EXPENSES-NET> 196838
<NET-INVESTMENT-INCOME> 1080311
<REALIZED-GAINS-CURRENT> (37429)
<APPREC-INCREASE-CURRENT> (106825)
<NET-CHANGE-FROM-OPS> 936057
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1077559
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 906
<NUMBER-OF-SHARES-SOLD> 402934
<NUMBER-OF-SHARES-REDEEMED> 600866
<SHARES-REINVESTED> 30243
<NET-CHANGE-IN-ASSETS> 1789699
<ACCUMULATED-NII-PRIOR> 38448
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1169600
<GROSS-ADVISORY-FEES> 129939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 366382
<AVERAGE-NET-ASSETS> 19990680
<PER-SHARE-NAV-BEGIN> 9.840
<PER-SHARE-NII> .530
<PER-SHARE-GAIN-APPREC> (.080)
<PER-SHARE-DIVIDEND> .000
<PER-SHARE-DISTRIBUTIONS> .530
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.760
<EXPENSE-RATIO> .980
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSIONS GROUP
<SERIES>
<NUMBER> 9
<NAME> THE RIVERSIDE GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 28072751
<INVESTMENTS-AT-VALUE> 33878339
<RECEIVABLES> 75842
<ASSETS-OTHER> 3142
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33957323
<PAYABLE-FOR-SECURITIES> 166450
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23504
<TOTAL-LIABILITIES> 189954
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27015438
<SHARES-COMMON-STOCK> 2409383
<SHARES-COMMON-PRIOR> 1769472
<ACCUMULATED-NII-CURRENT> 11382
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 934961
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5805588
<NET-ASSETS> 33767369
<DIVIDEND-INCOME> 637528
<INTEREST-INCOME> 49358
<OTHER-INCOME> 0
<EXPENSES-NET> 297743
<NET-INVESTMENT-INCOME> 389143
<REALIZED-GAINS-CURRENT> 1167209
<APPREC-INCREASE-CURRENT> 3513955
<NET-CHANGE-FROM-OPS> 5070307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 408968
<DISTRIBUTIONS-OF-GAINS> 505659
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 832694
<NUMBER-OF-SHARES-REDEEMED> 222427
<SHARES-REINVESTED> 29644
<NET-CHANGE-IN-ASSETS> 12282019
<ACCUMULATED-NII-PRIOR> 31207
<ACCUMULATED-GAINS-PRIOR> 273411
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 284790
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 560525
<AVERAGE-NET-ASSETS> 28479001
<PER-SHARE-NAV-BEGIN> 12.140
<PER-SHARE-NII> .180
<PER-SHARE-GAIN-APPREC> 2.130
<PER-SHARE-DIVIDEND> .000
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<PER-SHARE-NAV-END> 14.010
<EXPENSE-RATIO> 1.050
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000832403
<NAME> THE SESSION GROUP
<SERIES>
<NUMBER> 10
<NAME> THE RIVERSIDE LOW DURATION GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 7363027
<INVESTMENTS-AT-VALUE> 7354770
<RECEIVABLES> 134738
<ASSETS-OTHER> 617
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7490125
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29134
<TOTAL-LIABILITIES> 29134
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7487755
<SHARES-COMMON-STOCK> 750109
<SHARES-COMMON-PRIOR> 754183
<ACCUMULATED-NII-CURRENT> 15797
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 34304
<ACCUM-APPREC-OR-DEPREC> (8257)
<NET-ASSETS> 7460991
<DIVIDEND-INCOME> 22
<INTEREST-INCOME> 511233
<OTHER-INCOME> 0
<EXPENSES-NET> 111264
<NET-INVESTMENT-INCOME> 399991
<REALIZED-GAINS-CURRENT> (1813)
<APPREC-INCREASE-CURRENT> (149458)
<NET-CHANGE-FROM-OPS> 248720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 403173
<DISTRIBUTIONS-OF-GAINS> 2537
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 67717
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