<PAGE> 1
MESSAGE FROM THE CHAIRMAN KeyPremier Funds
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to present our first semi-annual report since our inception as a
mutual fund family on October 1, 1996.
This is a very exciting time in the history of the financial markets, as the Dow
Jones Industrial Average continues to hit new highs. Our KeyPremier Established
Growth Fund is designed to help investors participate in the opportunity for
capital appreciation offered by the U.S. stock market. We also offer the
KeyPremier Intermediate Term Income Fund and the KeyPremier Pennsylvania
Municipal Bond Fund for investors seeking income and balance in their
portfolios. In addition, we offer the KeyPremier Prime Money Market Fund for
investors seeking safety, liquidity and current income.
At KeyPremier Funds, we are keenly aware that we are in the midst of one of the
longest bull markets in history. It is clearly a time for caution, as the
current economic expansion reaches seven years. Mutual funds such as KeyPremier
Funds offer professional management as well as broad diversification as a means
of controlling risk.
By investing in the KeyPremier Funds, you enjoy the expertise of Martindale
Andres & Company, Inc., a wholly-owned subsidiary of Keystone Financial, Inc.,
which has more than $1.7 billion under management. Each professional responsible
for the KeyPremier Funds has between ten and 30 years of experience in the
investment field. Prior to being acquired by Keystone Financial, Martindale
Andres & Company focused on managing money exclusively for high net worth
individuals. Now, that expertise is available to a broader array of clientele.
Many of our competitors are including mutual funds to retain their advantage in
the 401(k) marketplace. By launching the KeyPremier Funds, a proprietary fund
family, our aim is to remain ahead of the competition and move forward in the
booming 401(k) field.
This semi-annual report includes a Schedule of Portfolio Investments, which
provides a list of each fund's holdings, and interviews with portfolio managers.
We urge you to read the entire report closely to help you monitor the progress
of your investment in the KeyPremier Funds.
If you have any questions about your investment in the KeyPremier Funds, or
would like a prospectus or other information about any of our funds, please
contact your account representative or call the Funds at 1-800-766-3960. Thank
you for investing in the KeyPremier Funds.
Sincerely,
Robert E. Leech
President & CEO
Keystone Asset Management Division
MARTINDALE ANDRES & COMPANY IS A SUBSIDIARY OF KEYSTONE FINANCIAL, INC. AND
PROVIDES INVESTMENT ADVISORY AND OTHER SERVICES TO THE FUNDS AND RECEIVES FEES
FOR THOSE SERVICES. THIS MATERIAL IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN
ACCOMPANIED OR PRECEDED BY A PROSPECTUS. THE FUNDS ARE DISTRIBUTED BY BISYS FUND
SERVICES. MUTUAL FUNDS ARE NOT FDIC INSURED. THERE IS NO BANK GUARANTEE AND THEY
MAY LOSE VALUE.
- --------------------------------------------------------------------------------
-1-
<PAGE> 2
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
Dear KeyPremier Fund Shareholder:
It is a pleasure to offer to you this first report since the inception of the
KeyPremier Funds in the fall of 1996. The KeyPremier family of mutual funds is
designed to provide you with an array of investment choices based on your
investment goals and risk tolerances.
The U.S. equity markets provided investors with a second consecutive year of
strong returns in 1996. The Standard & Poor's 500 Index (the most common
benchmark for large-capitalization stocks) recorded almost a 23% gain, while the
Russell 2000 Index (the benchmark for small-capitalization stocks) posted a
16.5% increase. Four primary factors fueled last year's results for the equity
markets: 1) growth in corporate earnings, 2) a favorable environment for
interest rates, 3) record inflows of new cash into equity mutual funds and 4)
strong merger and acquisition activity.
The outlook for 1997 remains uncertain at present, but the conventional wisdom
suggests that investor expectations are out of line with reality. In 1997 we
believe that total returns on equities will most likely revert to historic
norms. Nonetheless, investors in the KeyPremier Equity Funds should be reminded
that our equity strategy does not try to "time" the direction of the market, but
instead focuses on selection of specific companies with a likelihood of
producing superior long-term returns.
One trend that we do expect to continue in 1997 would be a narrowing of the
returns between large-and small-capitalization stocks. Recent out-performance by
large-capitalization stocks can be attributed to a liquidity premium investors
have placed on many blue-chip names. In fact, 25% of the S&P 500 performance in
1996 was attributed to strength in just five companies--IBM, Intel, Microsoft,
Coca-Cola and General Electric. We anticipate that investors may evidence
renewed interest in smaller companies that can grow faster than the economy at
large.
Fixed-income investors experienced a roller-coaster ride in 1996. Interest rates
on intermediate- and long-term securities rose approximately 1.3% during the
first eight months of the year amid fear of inflation and a sharply growing
economy. Rates subsequently declined as these fears were quelled and ended the
year about .6% higher than at the beginning of the year. The purchase of U.S.
Treasuries by foreign central banks also provided a key measure of support to
the market during 1996.
Municipal-bond investors began the year under a cloud of political debate on tax
reform issues that would have adversely affected tax-exempt securities. When the
debate on a flat tax dissipated, municipal securities rallied impressively.
Supply issues also impacted the municipal market, as there was no net new
issuance of securities during the year. In fact, municipal bonds actually
out-performed U.S. Treasuries in 1996.
At present, the U.S. economy appears to be growing about 2% to 3% a year, with
only modest inflation. If this scenario persists, we believe that 1997 should be
a good year for bonds. Meanwhile, investors should find the yields on municipal
bonds particularly attractive. Despite this forecast, we will watch the economy
closely in the coming year. A very low unemployment rate, coupled with factories
operating at near-full capacity, could trigger some inflationary pressure. We
will continue to monitor the role of foreign central banks and their impact on
the U.S. Treasury market.
We appreciate the opportunity to serve your investment needs, and while we are
cautious about 1997, the long-term prospects for stocks and bonds remain very
favorable.
Sincerely,
Robert P. Andres
Managing Principal
Martindale Andres & Company, Inc.
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-2-
<PAGE> 3
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
WHAT IS YOUR CURRENT STRATEGY IN MANAGING THE MONEY MARKET FUND?
The portfolio is managed in a very conservative manner. For instance, at the end
of 1996, the portfolio was composed entirely of U.S. government agency notes and
Treasuries. There were no corporates or commercial paper, which typically offer
higher yields. Currently, the additional yield is minimal and not worth the
additional credit risk. We also look for maturities that are yielding the
highest returns for the risk that we are taking. At this point in time, it's not
appropriate to have an average maturity longer than about two weeks, because
securities with longer maturities are not paying much more in yield. Often,
money market funds are out from 45 to 80 days. If we're going to extend our
maturities, then we want to be properly compensated.
WHAT IS YOUR OUTLOOK FOR SHORT-TERM INTEREST RATES?
Short-term interest rates could continue to be under upward pressure in 1997
because the economy is doing well and we're at full employment. Although
inflationary pressures could be building, the current spread between money
market yields and inflation is very wide. As a result, money market funds are an
excellent place for investors seeking safety, liquidity and income.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. YIELDS WILL FLUCTUATE, AND THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
- --------------------------------------------------------------------------------
-3-
<PAGE> 4
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL BOND FUND
HOW DID THE FUND PERFORM SINCE ITS INCEPTION AS A MUTUAL FUND ON OCTOBER 1,
1996?
Since inception through December 31, 1996, the Fund produced a total return of
2.34%.(1) In comparison, the Lipper Intermediate Pennsylvania Fund Average--a
composite of 12 mutual funds that invest in securities issued by the State of
Pennsylvania and its municipalities--rose 2.08%.
WHAT FACTORS AFFECTED YOUR PERFORMANCE?
The portfolio structure was key. First, we maintained a higher grade portfolio
than most funds. Not only is the credit quality of our holdings near AAA, but
the bonds we own are highly liquid, which is important in a volatile
interest-rate environment. Secondly, we emphasized high-coupon noncallable
bonds. The high coupon is a defensive feature in a rising-rate environment. In a
declining-rate environment, the noncallable feature produces higher appreciation
because the issuing entity cannot redeem the bonds as interest rates fall. In
1996, municipal securities outperformed taxable securities by a significant
margin.
DESCRIBE SOME SECURITIES IN THE PORTFOLIO THAT ILLUSTRATE YOUR STRATEGY.
We own Montgomery County general obligation bonds. This AAA-rated bond is
probably the most liquid bond in the entire state. The Fund also owns
Pennsylvania Turnpike revenue bonds which are attractive for their high coupon
and liquidity characteristics. The portfolio includes about 50 securities, and
it is very well diversified, with a broad mixture of maturities. Our goal is to
own the highest quality bonds that are going to perform well in any
interest-rate environment, consistent with providing the highest level of
current income. As of December 31, 1996, the portfolio had a 6.10% average
coupon rate, which is among the highest of any fund in Pennsylvania.(2)
WHAT IS YOUR OUTLOOK FOR THE MARKET?
Unlike 1996, the spector of tax reform is no longer an issue in the municipal
bond market. As a result, municipal bonds are now trading at near historic highs
in relation to Treasury securities--75% to 80%. For high-income taxpayers,
municipal bonds offer extremely competitive returns on an aftertax basis,
suggesting that the demand for municipals will remain strong in 1997. Because we
believe that intermediate-term interest rates will remain in a trading range,
municipal bond funds will derive a large proportion of their total return from
coupon payments rather than from capital appreciation. As a result, the
portfolio maintains a high average coupon.
(1) The fund's total return with the maximum sales charge of 4.50% was -2.26%
for the period.
(2) The portfolio's composition is subject to change.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
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-4-
<PAGE> 5
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
ESTABLISHED GROWTH FUND
HOW WOULD YOU DESCRIBE THE ESTABLISHED GROWTH FUND?
"Established" characterizes the companies in which we're investing and, "Growth"
is the objective. The companies in the portfolio have been around for a long
period of time and have been recognized in the marketplace as leaders in their
field. Typically, these companies have experienced strong unit growth and have
capitalizations in excess of $5 billion, although we also own some mid-sized
companies--ones in which the minimum market capitalization is $1 billion. In
addition, we like to buy shares in these companies at a discount to their growth
rate. We're trying to find companies where we understand the corporate mission,
the management strategy and the theme behind the company as an entity. We're not
traders, so we take a long view. We try to acquire these companies with a
complete understanding of what management is doing and invest alongside
management for the long-term. The portfolio is well diversified, but we're not
trying to match an index such as the S&P 500 by sector.
HOW DID THE FUND PERFORM SINCE ITS INCEPTION AS A MUTUAL FUND ON SEPTEMBER 23,
1996?
For the period ended December 31, 1996, the Fund's total return was 7.58%.(1) In
contrast, the average large growth fund, as measured by Lipper Analytical
Services Inc., was up 5.80% while the Standard & Poor's 500 Stock Index rose
8.37%.
WHAT FACTORS AFFECTED THE PORTFOLIO'S PERFORMANCE IN 1996?
In 1996, just like 1995, it was very difficult for an investment manager to beat
the S&P 500 Index. In 1996, there was a significant run-up in the largest stocks
in the Index, and very few fund managers had the proper weighting in those
stocks.
WHAT AREAS OF THE MARKET WERE PARTICULARLY SUCCESSFUL FOR YOU?
We have a position in Dean Witter/Discover (2.7% of the portfolio), which is a
credit-card operation with a brokerage subsidiary. It was a spin-off from Sears
a couple of years ago. We bought the stock at what we thought was a low price in
relation to its growth rate, and it has emerged as a strong holding of ours.
Credit-card companies are able to charge very high rates of interest in
comparison to their cost of funds--and they do well as long as they keep their
losses under control. Another financial stock in the portfolio is Green Tree
Financial (3.9%), which finances mobile homes, consumer purchases, equipment,
etc. While keeping losses low, they have been a very aggressive marketer. In the
consumer cyclical area, Unifi (3.5%) is the largest texturizer in the world for
polyester and nylon products. The texturizing process makes polyester and nylon
more like natural fibers such as cotton and wool. Unifi has invested heavily in
their own business during the past few years, and that's now materializing in a
strong earnings curve. This company dominates the texturizing process in the
United States and is among the most competitive in the world. In basic
materials, a company such as Potash (4.0%) benefited from the short supply and
high price of basic commodities. In technology, Seagate Technology (0.7%), the
largest disk drive manufacturer in the world, has an intrinsic growth rate of
20%, and we bought it at 12 times earnings. Medtronic (3.6%) is the leading
maker of heart pacemakers, valves and other medical equipment. In manufacturing,
Danaher (3.3%) makes process controls, tools and other products for machinery
and equipment. Medtronic and Danaher have been very strong holdings this past
year.(2)
WHAT IS YOUR OUTLOOK?
If you go back to early 1996, the fear was that the economy was too strong and
it was going to cause inflationary pressures. As we rolled into the fall,
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
that fear dissipated. Corporate profits were up, but we didn't get the huge
pressure on wages. Now, the view is that the economy will flatten out, but
corporate profits in some areas are expected to be pretty strong. Although we
have a charter to be fully invested, we are certainly aware that the stock
market has run up the past few years. I can't tell you when it's going to
correct--but I can tell you that it will, eventually. Our view on the market is
cautious, but our view of our companies is strong.
<TABLE>
- ----------------------------------
AVERAGE ANNUAL TOTAL RETURN
AS OF DECEMBER 31, 1996*
- ----------------------------------
<S> <C>
1 Year 16.43%
- ----------------------------------
Since Inception 28.15%
- ----------------------------------
</TABLE>
(1) The fund's total return with the maximum sales charge of 4.50% was 2.79% for
the period. The total return set forth may reflect the waiver of a portion
of the fund's advisory or administrative fees for certain periods since the
inception date. In such instances, and without waiver of fees, total return
would have been lower. The performance data quoted represents past
performance and is not an indication of future results. The investment
return and net asset value will fluctuate, so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
(2) The portfolio composition is subject to change.
* The quoted performance of the KeyPremier Established Growth Fund includes
performance of certain collective trust fund ("Commingled") accounts advised
by KeyStone Bank, for periods dating back to 1/1/95 and prior to the mutual
finds commencement of operations on 9/23/96, as adjusted to reflect the
expenses associated with the mutual funds. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore, were
not subject to the investment restrictions imposed by law on registered mutual
funds. If the Commingled accounts had been registered, the Commingled
accounts' performance may have been adversely affected. The performance shown
reflects the deduction of fees for value-added services associated with a
mutual fund, such as investment-management and accounting fees. The
performance also reflects reinvestment of all dividends and capital-gains
distributions.
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
INTERMEDIATE-TERM INCOME FUND
HOW WOULD YOU DESCRIBE THIS PORTFOLIO?
This is an intermediate-maturity, taxable bond fund that is primarily invested
in U.S. investment-grade fixed-income securities. The Fund seeks to provide
current income and some long-term growth of capital. Currently, about 70% of the
portfolio is invested in U.S. government securities, 15% is invested in
corporate bonds, 5% is invested in mortgage-backed securities, 5% is invested in
asset-backed securities and the balance is in cash equivalents.(1)
WHAT IS YOUR INVESTMENT PROCESS?
The investment process is an active management approach utilizing interest-rate
forecasts and sector evaluation. Determining the direction and magnitude of
movements in interest rates is our primary challenge. We use this interest-rate
forecast to set the overall duration (sensitivity to interest rates) of the
portfolio and actively manage the duration as our interest-rate expectations
change. The other area that we are looking to actively manage is the sector
weightings of the portfolio. For instance, the yield advantage of corporates
relative to Treasuries has narrowed significantly over the past two years. We
currently view corporate spreads as too tight and feel that sector is
unattractive relative to Treasuries. In many circumstances, we don't think
investors are being paid to take on the additional risks inherent in corporate
securities, such as credit and call risk. As a result, we are underweighted in
corporates, relative to the benchmark Lehman Brothers Intermediate
Government/Corporate Bond Index.
WHAT ADVANTAGE DO YOU SEE IN THE INTERMEDIATE AREA OF THE BOND MARKET?
Although we have the ability within the Fund to purchase longer term bonds, we
will keep the overall average maturity of the Fund in the intermediate area. We
have done some historical analysis involving the returns and risks of
intermediate- versus long-term bonds, and based on our analysis,
intermediate-term bonds offer nearly 90% of the returns of long-term bonds, with
significantly less interest-rate risk.
WHAT IS YOUR OUTLOOK FOR INTEREST RATES AND FIXED-INCOME SECURITIES?
I think we'll see interest rates stay somewhat stable over the next year or so.
The economy is doing quite well. The Federal Reserve Board has done a relatively
good job providing for moderate growth and keeping inflation in check. Consumer
confidence is high right now, and unemployment is low.
I don't see a reason for a significant shift in intermediate- or long-term
rates, unless we begin to see some wage inflation.
WITH STOCKS UP SHARPLY IN THE PAST TWO YEARS, WHAT IS THE CASE FOR INVESTING IN
BONDS? In a balanced-investment approach, the fixed-income component can
lessen the overall risk profile of the portfolio. Although stocks have been up
sharply over the past two years, they could be down significantly in any given
year. Bonds can provide income, liquidity, deflation protection and a reduced
risk profile to a balanced asset-allocation strategy.
(1) The portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-7-
<PAGE> 8
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 9
Statements of Operations
PAGE 10
Statements of Changes in Net Assets
PAGE 11
Schedules of Portfolio Investments
PAGE 12
Notes to Financial Statements
PAGE 18
Financial Highlights
PAGE 23
-8-
<PAGE> 9
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE
PRIME PENNSYLVANIA ESTABLISHED TERM
MONEY MARKET MUNICIPAL GROWTH INCOME
FUND FUND FUND FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $102,898,736;
$105,025,259; $101,950,409; and $181,480,352,
respectively)................................... $102,898,736 $106,411,146 $159,249,409 $180,941,609
Repurchase agreements............................. -- -- -- --
------------ ------------ ------------ ------------
Total Investments........................... 102,898,736 106,411,146 159,249,409 180,941,609
Cash.............................................. 2,074,272 -- -- --
Interest and dividends receivable................. -- 1,793,446 216,304 1,966,629
Income and other receivables...................... -- 764 -- --
Receivable from brokers for investments sold...... -- 247,500 -- 7,441,875
Unamortized organization costs.................... 20,589 22,020 17,839 21,079
Prepaid expenses and other assets................. 2,912 2,126 5,297 6,112
------------ ------------ ------------ ------------
Total Assets................................ 104,996,509 108,477,002 159,488,849 190,377,304
------------ ------------ ------------ ------------
LIABILITIES:
Dividends payable................................. 450,739 447,394 271,315 867,149
Accrued expenses and other payables:
Administration fees........................... 3,985 4,149 6,103 7,207
Custodian and accounting fees................. 3,269 3,891 2,722 2,880
Legal and audit fees.......................... 9,802 9,513 3,548 4,174
Printing...................................... 5,171 3,775 -- --
Transfer agent fees........................... 6,682 6,788 2,422 2,410
Registration and filing fees.................. 2,349 633 -- --
Other......................................... 427 397 105 150
------------ ------------ ------------ ------------
Total Liabilities........................... 482,424 476,540 286,215 883,970
------------ ------------ ------------ ------------
NET ASSETS:
Capital........................................... 104,512,330 106,510,905 101,897,711 190,140,035
Distributed in excess of net investment income.... -- (278) (1) (2)
Net unrealized appreciation (depreciation) on
investments..................................... -- 1,385,887 57,299,000 (538,743)
Accumulated undistributed net realized gains
(losses) on investment transactions............. 1,755 103,948 5,924 (107,956)
------------ ------------ ------------ ------------
Net Assets.................................... $104,514,085 $108,000,462 $159,202,634 $189,493,334
============ ============ ============ ============
Outstanding units of beneficial interest
(shares)........................................ 104,512,330 10,437,558 16,229,902 19,188,146
=========== ============ ============ ============
Net asset value--redemption price per share $ 1.00 $ 10.35 $ 9.81 $ 9.88
=========== ============ ============ ============
Maximum Sales Charge.............................. -- 4.50% 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) $ 10.84 $ 10.27 $ 10.35
=========== ============ ============ ============
</TABLE>
- ---------
(a) Offering price and redemption price are the same for the Prime Money Market
Fund.
See notes to financial statements.
-9-
<PAGE> 10
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF OPERATIONS(a)
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INTERMEDIATE
PRIME PENNSYLVANIA ESTABLISHED TERM
MONEY MARKET MUNICIPAL GROWTH INCOME
FUND FUND FUND FUND
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $1,257,381 $ 1,098,607 $ 53 $ 836,822
Dividend income.......................... -- 4,799 303,359 67,269
---------- ---------- ---------- -----------
Total Income...................... 1,257,381 1,103,406 303,412 904,091
---------- ---------- ---------- -----------
EXPENSES:
Investment advisory fees................. 96,110 167,165 98,518 93,788
Administration fees...................... 27,632 32,022 15,106 17,976
Custodian and accounting fees............ 9,488 12,328 5,261 5,828
Legal and audit fees..................... 10,436 10,191 4,230 4,960
Organization costs....................... 2,230 1,914 150 180
Trustee fees and expenses................ 1,114 1,053 480 540
Transfer agent fees...................... 6,682 7,875 2,490 2,490
Registration and filing fees............. 2,868 1,023 1,260 1,260
Printing costs........................... 7,998 6,774 2,460 2,950
Other.................................... 1,458 1,302 661 760
---------- ---------- ---------- -----------
Total Expenses........................... 166,016 241,647 130,616 130,732
Less: Expenses voluntarily
reduced...................... (96,110) (167,165) (98,518) (93,788)
---------- ---------- ---------- -----------
Net Expenses............................. 69,906 74,482 32,098 36,944
---------- ---------- ---------- -----------
Net Investment Income.................... 1,187,475 1,028,924 271,314 867,147
---------- ---------- ---------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses)
investment transactions................ 1,755 111,438 5,924 (107,956)
Change in unrealized appreciation
(depreciation) on investments.......... -- 1,385,887 57,299,000 (538,743)
---------- ---------- ---------- -----------
Net realized/unrealized gains (losses) on
investments............................ 1,755 1,497,325 57,304,924 (646,699)
---------- ---------- ---------- -----------
Change in net assets resulting from
operations............................. $1,189,230 $ 2,526,249 $57,576,238 $ 220,448
========== ========== ========== ===========
</TABLE>
- ---------
(a) Commencement of the Funds began October 7, October 1, November 30, and
November 30, respectively.
See notes to financial statements.
-10-
<PAGE> 11
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA INTERMEDIATE
MONEY MARKET MUNICIPAL ESTABLISHED TERM
FUND FUND GROWTH INCOME FUND
------------ ------------ ------------ ------------
FOR PERIOD FOR PERIOD FOR PERIOD FOR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996(a) 1996(a) 1996(a) 1996(a)
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.................... $ 1,187,475 $ 1,028,924 $ 271,314 $ 867,147
Net realized gains (losses) on
investments transactions............... 1,755 111,438 5,924 (107,956)
Net change in unrealized appreciation
(depreciation) on investments.......... -- 1,385,887 57,299,000 (538,743)
----------- ------------ ------------ ------------
Change in net assets resulting from
operations............................... 1,189,230 2,526,249 57,576,238 220,448
----------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............... (1,187,475) (1,028,924) (271,314) (867,147)
In excess of net investment income....... -- (278) (1) (2)
From net realized gains on investments... -- (7,490) -- --
----------- ------------ ------------ ------------
Change in net assets from shareholder
distributions............................ (1,187,475) (1,036,692) (271,315) (867,149)
----------- ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.............. 179,091,701 115,331,885 103,428,704 192,848,494
Dividends reinvested..................... -- -- -- --
Cost of shares redeemed.................. (74,579,371) (8,820,980) (1,530,993) (2,708,459)
----------- ------------ ------------ ------------
Change in net assets from capital
transactions............................. 104,512,330 106,510,905 101,897,711 190,140,035
------------ ------------ ------------ ------------
Change in net assets....................... 104,514,085 108,000,462 159,202,634 189,493,334
NET ASSETS:
Beginning of period...................... -- -- -- --
----------- ------------ ------------ ------------
End of period............................ $104,514,085 $108,000,462 $159,202,634 $189,493,334
============ ============= ============ ============
SHARE TRANSACTIONS:
Issued................................... 179,091,701 11,289,561 16,384,743 19,460,390
Reinvested............................... -- -- -- --
Redeemed................................. (74,579,371) (852,003) (154,841) (272,244)
----------- ------------ ------------- ------------
Change in shares........................... 104,512,330 10,437,558 16,229,902 19,188,146
=========== ============ ============ ============
</TABLE>
- ---------
(a) Commencement of the Funds began October 7, October 1, November 30, and
November 30, respectively.
See notes to financial statements.
-11-
<PAGE> 12
THE SESSIONS GROUP
KEYPREMIER PRIME MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ----------------------------- -------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (90.8%):
Federal Home Loan Bank:
$ 5,000,000 5.36%, 1/3/97................ $ 4,998,511
50,000,000 5.46%, 1/3/97................ 49,984,833
Federal Home Loan Mortgage Corp.:
5,000,000 5.37%, 1/2/97................ 4,999,254
Federal National Mortgage Assoc.:
5,000,000 5.44%, 1/6/97................ 4,996,222
5,000,000 5.32%, 1/14/97............... 4,990,395
5,000,000 5.30%, 1/16/97............... 4,988,958
5,000,000 5.30%, 1/17/97............... 4,988,222
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc.Continued:
$ 5,000,000 5.37%, 1/21/97............... $ 4,985,083
5,000,000 5.37%, 1/22/97............... 4,984,338
5,000,000 5.27%, 1/23/97............... 4,983,897
-------------
Total U.S. Government Agencies 94,899,713
U.S. TREASURY BILLS (7.7%):
8,000,000 4.40%, 1/2/97................ 7,999,023
-------------
Total(Cost--$102,898,736) (a) $ 102,898,736
=============
</TABLE>
- ---------
Percentages indicated are based on net assets of $104,514,085.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
-12-
<PAGE> 13
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ----------------------------------------------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS (98.0%):
Pennsylvania (93.1%):
$1,330,000 Berks County, Pennsylvania Municipal Authority, 7.10%, 5/15/22, Callable 5/15/04 @ 100... $ 1,522,850
1,000,000 Berks County, Pennsylvania Municipal Authority Hospital Revenues, 5.00%, 10/1/02......... 1,020,000
1,000,000 Bethel Park, Pennsylvania School District, 5.40%, 8/1/00, Callable 8/1/99 @ 100.......... 1,026,250
1,000,000 Bethlehem, Pennsylvania Area School District, Series A, 6.50%, 9/1/00.................... 1,071,250
4,065,000 Bethlehem, Pennsylvania Water Authority, Series A, 6.30%, 11/15/15, Callable 11/15/02 @
100.................................................................................... 4,415,606
1,000,000 Bucks County, Pennsylvania, Series A, 6.00%, 3/1/01...................................... 1,058,750
1,000,000 Bucks County, Pennsylvania Water & Sewer Authority, Series B, 6.50%, 12/1/02,
Callable 12/1/02 @ 100................................................................. 1,097,500
1,900,000 Central Dauphin, Pennsylvania School District, 6.00%, 6/1/01............................. 2,018,750
1,875,000 Chester County, Pennsylvania, 5.60%, 12/15/08, Callable 12/15/03 @ 100................... 1,933,594
1,000,000 Chester County, Pennsylvania, 5.05%, 11/1/08, Callable 11/1/06 @ 100..................... 996,250
1,050,000 Chester County, Pennsylvania, 5.15%, 11/1/09, Callable 11/1/06 @ 100..................... 1,046,063
1,250,000 Delaware County, Pennsylvania, 5.40%, 10/1/10, Callable 10/1/05 @ 100.................... 1,256,250
700,000 Delaware County, Pennsylvania Industrial Development Authority, Series A, 8.10%, 12/1/13,
Callable 6/1/97 @ 103.5................................................................ 732,067
2,000,000 Geisinger, Pennsylvania Health Systems Authority, Series B, 7.38%, 7/1/02, Callable
7/1/99 @ 102........................................................................... 2,150,000
1,000,000 Hempfield, Pennsylvania School District, Lancaster County, 6.40%, 8/15/05,
Callable 8/15/02 @ 100................................................................. 1,082,500
3,500,000 Indiana County, Pennsylvania Industrial Development Authority, Series A, 6.00%, 6/1/06... 3,797,500
5,250,000 Indiana County, Pennsylvania Industrial Development Authority, 5.35%, 11/1/10............ 5,282,813
1,000,000 Lewisburg, Pennsylvania Area School District, 4.85%, 3/15/09, Callable 3/15/06 @ 100..... 967,500
500,000 Lycoming County, Pennsylvania Hospital Authority, Series B, 7.40%, 7/1/99................ 536,875
1,000,000 Montgomery County, Pennsylvania, Series B, 5.20%, 10/15/11, Callable 10/15/06 @ 100...... 983,750
2,155,000 Northampton County, Pennsylvania Higher Education Authority, 6.90%, 10/15/06,
Callable 10/15/01 @ 102................................................................ 2,381,275
1,000,000 Northampton County, Pennsylvania Higher Education Authority, 6.00%, 9/1/01............... 1,055,000
3,000,000 Pennsbury, Pennsylvania School District, 6.80%, 8/15/14, Callable 8/15/04 @ 100.......... 3,390,000
2,000,000 Pennsylvania Housing Finance Agency, 5.40%, 1/1/00....................................... 2,042,500
3,325,000 Pennsylvania Infrastructure Investment Authority, 6.00%, 9/1/05.......................... 3,603,469
2,000,000 Pennsylvania Infrastructure Investment Authority, 6.00%, 9/1/03.......................... 2,157,500
4,425,000 Pennsylvania Intergovernmental Cooperation Authority, 7.00%, 6/15/14, Callable 6/15/05 @
100.................................................................................... 5,077,688
3,500,000 Pennsylvania State, Series A, 6.70%, 1/1/02, Callable 1/1/01 @ 101.5..................... 3,823,750
3,000,000 Pennsylvania State, 5.38%, 5/15/05....................................................... 3,071,250
3,000,000 Pennsylvania State, 5.30%, 5/1/06, Callable 5/1/04 @ 101.5............................... 3,108,750
1,375,000 Pennsylvania State Higher Education Assistance Agency, Series A, 6.80%, 12/1/00.......... 1,469,531
375,000 Pennsylvania State Higher Education Facilities Authority, Series A, 6.88%, 7/1/99........ 398,437
2,000,000 Pennsylvania State Higher Education Facilities Authority, Series A, 5.90%, 8/15/00....... 2,102,500
750,000 Pennsylvania State Higher Education Facilities Authority, Series A, 6.40%, 1/1/02,
Callable 1/1/97 @100................................................................... 750,000
1,000,000 Pennsylvania State Higher Education Facilities Authority, 7.00%, 5/1/02, Callable 5/1/00
@ 100.................................................................................. 1,085,000
5,000,000 Pennsylvania State Higher Education Facilities Authority, Series A, 5.35%, 1/1/08,
Callable 1/1/06 @ 101.................................................................. 5,068,750
1,750,000 Pennsylvania State Higher Education Facilities Authority, Series D, 7.15%, 6/15/15,
Callable 6/15/00 @ 100................................................................. 1,905,312
</TABLE>
Continued
-13-
<PAGE> 14
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ----------------------------------------------------------------------------------------- ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
$1,500,000 Pennsylvania State Industrial Development Authority, 5.00%, 7/1/00....................... $ 1,531,875
1,000,000 Pennsylvania State Turnpike, Series J, 6.40%, 12/1/00.................................... 1,072,500
1,000,000 Pennsylvania State Turnpike, Series P, 5.20%, 12/1/00.................................... 1,027,500
1,000,000 Philadelphia, Pennsylvania Gas Works, 5.50%, 7/1/04...................................... 1,045,000
1,000,000 Philadelphia, Pennsylvania Water & Wastewater, 6.25%, 8/1/02............................. 1,085,000
5,250,000 Philadelphia, Pennsylvania Water & Wastewater, 6.25%, 8/1/08............................. 5,775,000
1,000,000 Philadelphia, Pennsylvania Hospitals & Higher Education Facilities Authority, Series A,
6.50%, 2/15/21, Callable 2/15/02 @ 102................................................. 1,101,250
1,000,000 Pittsburgh, Pennsylvania Water & Sewer Authority, Series A, 6.00%, 9/1/16,
Callable 9/1/01 @ 100.................................................................. 1,062,500
1,700,000 Sayre, Pennsylvania Health Care Facilities Authority, Series A, 6.60%, 3/1/01............ 1,833,875
2,200,000 Union County, Pennsylvania Higher Education Facilities Financing Authority, 5.75%,
4/1/00................................................................................. 2,304,500
1,000,000 West Shore, Pennsylvania School District, 6.40%, 9/1/01, Callable 9/1/98 @ 100........... 1,031,250
3,000,000 Westmoreland County, Pennsylvania, 6.70%, 8/1/09, Callable 8/1/01 @ 100.................. 3,270,000
1,850,000 York County, Pennsylvania Industrial Development Authority, 6.25%, 7/1/02................ 1,981,812
------------
100,608,892
------------
Puerto Rico (4.9%):
5,000,000 Puerto Rico Public Building Authority, Series M, 5.70%, 7/1/09........................... 5,262,500
------------
5,262,500
------------
Total Municipal Bonds 105,871,392
------------
VARIABLE RATE BANK ACCOUNT (0.5%):
539,754 Bank Of New York......................................................................... 539,754
------------
Total Variable Rate Bank Account 539,754
------------
Total (Cost--$105,025,259) $106,411,146
============
</TABLE>
- ---------
Percentages indicated are based on net assets of $108,000,462.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......................... $1,764,899
Unrealized depreciation.......................... (379,012)
----------
Net unrealized appreciation...................... $1,385,887
=========
</TABLE>
See notes to financial statements.
-14-
<PAGE> 15
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -------------
<S> <C>
COMMON STOCKS (96.6%):
Aerospace/Defense--Equipment (1.8%):
30,000 Textron, Inc......................... $ 2,827,500
-------------
Air Conditioning & Heating Equipment (1.6%):
45,000 Tecumseh Products Co., Class B....... 2,559,375
-------------
Automotive (2.1%):
100,000 Chrysler Corp........................ 3,300,000
-------------
Automotive Parts (2.9%):
24,000 Eaton Corp........................... 1,674,000
91,000 Echlin, Inc.......................... 2,877,875
-------------
4,551,875
-------------
Banking (3.4%):
72,000 Fleet Financial Group, Inc........... 3,591,000
62,000 Signet Banking Corp.................. 1,906,500
-------------
5,497,500
-------------
Beverages (3.1%):
94,000 Coca-Cola Co......................... 4,946,750
-------------
Chemicals (4.2%):
65,000 Hercules, Inc........................ 2,811,250
95,000 Morton International, Inc............ 3,871,250
-------------
6,682,500
-------------
Computers Networks (2.8%):
80,000 Silicon Graphics, Inc. (b)........... 2,040,000
100,000 Tandem Computers, Inc. (b)........... 1,375,000
26,000 Seagate Technology, Inc. (b)......... 1,027,000
-------------
4,442,000
-------------
Computer Software (3.3%):
105,000 Computer Associates
International, Inc................. 5,223,750
-------------
Data Processing & Preparation (2.4%):
90,000 Automatic Data Processing, Inc....... 3,858,750
-------------
Diversified/Conglomerate (2.9%):
47,000 General Electric Co.................. 4,647,125
-------------
Electronic Components--Semiconductors (1.6%):
85,000 Micron Technology, Inc............... 2,475,625
-------------
Financial Services (10.8%):
62,000 Capital One Financial Corp........... 2,232,000
65,000 Dean Witter Discover & Co............ 4,306,250
120,000 Federal National Mortgage
Assoc.............................. 4,470,000
160,000 Green Tree Financial Corp............ 6,180,000
-------------
17,188,250
-------------
Food Processing & Packaging (2.4%):
76,000 ConAgra, Inc......................... 3,781,000
-------------
Furniture & Furnishings (4.3%):
49,000 Armstrong World Industries, Inc..... $ 3,405,500
75,000 Lancaster Colony Corp............... 3,450,000
-------------
6,855,500
-------------
Household Products/Wares (3.0%):
45,000 Procter & Gamble Co................. 4,837,500
-------------
Insurance (2.9%):
13,251 Aetna, Inc.......................... 1,060,080
78,000 United Healthcare Corp.............. 3,510,000
-------------
4,570,080
-------------
Medical Instruments (3.6%):
84,000 Medtronic, Inc..................... 5,712,000
-------------
Mining (4.0%):
75,000 Potash Corp. of Saskatchewan, Inc.. 6,375,000
-------------
Office Supplies/Forms (1.0%):
32,000 Alco Standard Corp................. 1,652,000
-------------
Oil & Gas (4.4%):
74,000 Coastal Corp....................... 3,616,750
28,000 Mobil Corp......................... 3,423,000
-------------
7,039,750
-------------
Pharmaceuticals (5.3%):
28,000 American Home Products Corp........ 1,641,500
77,000 Schering-Plough Corp............... 4,985,750
36,000 Johnson & Johnson.................. 1,791,000
-------------
8,418,250
-------------
Restaurants (2.0%):
155,000 Wendy's International, Inc......... 3,177,500
-------------
Retail (0.9%):
50,000 Gap, Inc........................... 1,506,250
-------------
Telecommunications (2.7%):
22,332 360 Communications Co. (b)......... 516,427
110,000 Loral Space & Communications (b)... 2,021,250
30,000 Motorola, Inc...................... 1,841,250
-------------
4,378,927
-------------
Textile (3.5%):
175,000 Unifi, Inc.... 5,621,875
-------------
Tools (3.3%):
111,700 Danaher Corporation................ 5,208,013
-------------
</TABLE>
Continued
-15-
<PAGE> 16
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------ -------------
<C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric (3.3%):
100,000 Baltimore Gas & Electric Co.......................... $ 2,675,000
88,000 Consolidated Edison Co. of
New York.......................................... 2,574,000
-------------
5,249,000
-------------
Utilities--Gas & Pipeline (5.4%):
77,000 Sonat, Inc........................................... $ 3,965,500
123,000 Williams Cos., Inc................................... 4,612,500
-------------
8,578,000
-------------
Utilities--Telecommunications (1.7%):
67,000 Sprint Corp.......................................... 2,671,625
-------------
Total Common Stocks 153,833,270
-------------
PREFERRED STOCKS (0.2%):
Insurance (0.2%):
4,419 Aetna Services, Inc................................. $ 350,758
-------------
Total Preferred Stocks 350,758
-------------
INVESTMENT COMPANIES (3.2%):
5,065,381 Key Premier Prime Money Market
Fund.............................................. 5,065,381
-------------
Total Investment Companies 5,065,381
-------------
Total (Cost--$101,950,409)(a) $159,249,409
=============
</TABLE>
- ---------
Percentages indicated are based on net assets of $159,202,634.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......................... $59,372,000
Unrealized depreciation.......................... (2,073,000)
-----------
Net unrealized appreciation...................... $57,299,000
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-16-
<PAGE> 17
THE SESSIONS GROUP
KEYPREMIER INTERMEDIATE TERM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ------------ ---------------------------- -------------
<C> <S> <C>
CORPORATE BONDS (14.4%):
Automotive (3.0%):
$ 6,000,000 Ford Motor Credit, 6.13%,
1/9/06.................... $ 5,632,500
-------------
Electrical & Electronic (3.2%):
6,000,000 General Electric Capital
Corp., 6.29%, 12/15/07.... 6,000,000
-------------
Financial Services (5.1%):
6,000,000 General Motors Acceptance
Corp., 7.13%, 5/1/03...... 6,090,000
3,650,000 MBNA Master Credit Card
Trust, 5.79%, 12/15/08*... 3,659,125
-------------
9,749,125
-------------
Oil & Gas Transmission (3.1%):
6,000,000 Consolidated Natural Gas,
6.63%, 12/1/08............ 5,850,000
-------------
Total Corporate Bonds 27,231,625
-------------
U.S. GOVERNMENT AGENCIES (12.2%):
Federal Home Loan Bank:
3,000,000 7.00%, 11/3/03.............. 2,982,990
Federal Home Loan Mortgage:
5,000,000 7.20%, 7/18/06.............. 5,178,350
Federal National Mortgage Assoc.:
5,000,000 5.55%, 3/12/99.............. 4,950,850
5,000,000 7.22%, 7/6/01............... 5,014,500
Government National Mortgage Assoc.:
4,852,882 8.50%, 7/20/26, Pool
#2250..................... 4,990,461
-------------
Total U.S. Government Agencies 23,117,151
-------------
U.S. TREASURY NOTES (63.8%):
$ 46,000,000 7.75%, 11/30/99............. $ 48,054,820
38,000,000 6.25%, 5/31/00.............. 38,158,460
22,600,000 6.25%, 10/31/01............. 22,611,300
11,500,000 7.25%, 8/15/04.............. 12,101,910
-------------
Total U.S. Treasury Notes 120,926,490
-------------
INVESTMENT COMPANIES (5.0%):
9,474,292 Key Premier Prime Money
Market Fund............... 9,474,292
-------------
Total Investment Companies 9,474,292
-------------
VARIABLE RATE BANK ACCOUNT (0.1%):
192,050 Bank of New York
4.40%, 1/2/97............. 192,051
-------------
Total Variable Rate Bank Account 192,051
-------------
Total (Cost--$181,480,352) (a) $180,941,609
===========
</TABLE>
- ---------
Percentages indicated are based on net assets of $189,493,334.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......................... $ 278,880
Unrealized depreciation.......................... (817,623)
---------
Net unrealized depreciation $(538,743)
=========
</TABLE>
* Floating rate securities having liquidity sources through bank letters of
credit or other credit and/or liquidity agreements. The interest rate, which
will change periodically, is based upon bank prime rates or an index of market
interest rates. The rate reflected on the Schedule of Portfolio Investments is
the rate in effect at December 31, 1996.
See note to financial statements.
-17-
<PAGE> 18
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
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.
The Group is authorized to issue an unlimited number of shares which are
units of beneficial interest, without par value. The Group offers shares of
a number of different series or portfolios, including the following series
for which Martindale Andres & Company, Inc. serves as investment adviser:
shares of the KeyPremier Prime Money Market Fund, KeyPremier Pennsylvania
Municipal Bond Fund, KeyPremier Established Growth, KeyPremier Intermediate
Term Income Fund, (individually, a "Fund" and collectively, the "Funds").
The investment objective of the Prime Money Market Fund is to seek current
income with liquidity and stability of principal.The investment objectives
of the Pennsylvania Municipal Bond Fund are to seek income which is exempt
from federal income tax and Pennsylvania state income tax, although such
income may be subject to the federal alternative minimum tax when received
by certain shareholders, and preservation of capital. The investment
objectives for the Established Growth Fund are growth of capital with some
current income as a secondary objective. The investment objective of the
Intermediate Term Income Fund are current income with long-term growth of
capital as a secondary objective.
Shares of the Funds may be sold to customers by the Group's distributor,
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services (the
"Distributor") and its affiliates, to all accounts of correspondent banks
of Keystone Financial, Inc. and to the general public. Martindale Andres &
Company, Inc. 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 Prime 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 397 calendar days unless
such investment is subject to a demand feature, or b) maintain a
dollar-weighted average portfolio maturity which exceeds 90 days.
Continued
-18-
<PAGE> 19
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31,1996
(UNAUDITED)
Investments in common and preferred stocks, corporate bonds, commercial
paper, municipal securities and U.S. Government securities of the
Pennsylvania Municipal Bond Fund, Established Growth Fund and the
Intermediate Term Income Fund, (collectively, "the variable net asset value
funds"), are valued at their market values determined on the basis of the
latest available bid quotation in the principal market (closing sales
prices if the principal market is an exchange or NASDAQ National Market) 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 Martindale Andres & Company, Inc.
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
borrowing by the Funds under the 1940 Act.
Continued
-19-
<PAGE> 20
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31,1996
(UNAUDITED)
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 Prime 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 Pennsylvania Municipal Bond Fund and the Intermediate Term Income
Fund. Dividends from net investment income are declared and paid quarterly
and distributable net realized capital gains, if any, are declared and
distributed annually for the Established Growth Fund.
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.
FEDERAL INCOME TAXES:
It is the policy of each of the Funds to qualify or continue to qualify as
a regulated 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 each Fund.
Such expenses are amortized over a period of five years commencing with the
date of the initial public offering.
3. PURCHASES AND SALES OF PORTFOLIO SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the variable net asset value funds for the period ended
December 31, 1996, are as follows (commencement of operations of such funds
was October 1, November 30 and November 30, respectively):
<TABLE>
<CAPTION>
PURCHASES SALES
------------ -----------
<S> <C> <C>
PA Municipal Bond Fund........................................ $ 36,348,637 $31,711,442
Established Growth Fund....................................... $ 3,272,009 $ 137,326
Intermediate Income Fund...................................... $253,869,567 $81,969,997
</TABLE>
Continued
-20-
<PAGE> 21
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31,1996
(UNAUDITED)
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by Martindale Andres
& Company, Inc. Under the terms of the investment advisory agreement,
Martindale Andres & Company, Inc. is entitled to receive fees based on a
percentage of the average net assets of each Fund. Martindale Andres &
Company, Inc. 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, Martindale Andres & Company, Inc. will refund
to the Funds, or otherwise bear, such excess. Such limitation did not
affect the calculation of the investment advisory fees during the period
ended December 31, 1996.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services, Inc.
("BISYS Services") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator and distributor. 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's fees are computed daily as a percentage of the average net assets
of each Fund. BISYS Services serves the Funds as transfer agent and mutual
fund accountant.
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 Martindale Andres & Company, Inc., its
correspondent and affiliated banks and BISYS, for providing ministerial,
record keeping 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 0.115% of the average daily net asset value of a
Fund. The Group has not implemented such plan as of December 31, 1996.
BISYS is also entitled to receive commissions on sales of shares of the
variable net asset value funds. For the period ended December 31, 1996,
BISYS received no commissions on sales of shares of the variable net asset
value funds.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
Continued
-21-
<PAGE> 22
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31,1996
(UNAUDITED)
Information regarding these transactions is as follows for the period ended
December 31, 1996:
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA INTERMEDIATE
MONEY MUNI ESTABLISHED TERM
MARKET BOND GROWTH INCOME
FUND FUND FUND FUND
------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee
reductions (percentage of average net
assets)............................... .40% .60% .75% .60%
Voluntary fee reductions................ $96,110 $167,165 $98,518 $ 93,788
ADMINISTRATION FEES:
Annual fee before voluntary fee
reductions (percentage of average net
assets)............................... .115% .115% .115% .115%
Voluntary fee reductions................ -- -- -- --
FUND ACCOUNTANT FEES.................... $ 7,208 $ 8,353 $ 3,940 $ 4,680
TRANSFER AGENT FEES..................... $ 6,682 $ 7,875 $ 2,490 $ 2,490
</TABLE>
5. ACQUISITION OF COMMON COLLECTIVE TRUST FUNDS
On October 1, 1996, November 30, 1996, and November 30, 1996, respectively,
the Pennsylvania Municipal Bond, Established Growth, and Intermediate Term
Income Funds acquired all of the assets of various common and collective
trust funds maintained by affiliates of Keystone Financial, Inc. The
following is a summary of shares issued, net assets acquired, net asset
value per share and unrealized appreciation as of the dates acquired:
<TABLE>
<CAPTION>
INTERMEDIATE
PENNSYLVANIA ESTABLISHED TERM
MUNI GROWTH INCOME
FUND FUND FUND
------------ ------------ ------------
<S> <C> <C> <C>
Shares......................................... 10,282,956 16,173,916 18,918,934
Net Assets..................................... $104,988,989 $161,739,160 $189,189,347
Net Asset Value................................ $ 10.21 $ 10.00 $ 10.00
Unrealized Appreciation (Depreciation)......... $ 398,186 $ 56,299,092 $ (1,493,470)
</TABLE>
-22-
<PAGE> 23
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA ESTABLISHED INTERMEDIATE
MONEY MARKET MUNICIPAL GROWTH TERM
FUND FUND FUND INCOME FUND
------------ ------------ ------------ ------------
FOR PERIOD FOR PERIOD FOR PERIOD FOR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996(a) 1996(a) 1996(a) 1996(a)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 1.00 $ 10.21 $ 10.00 $ 10.00
------------ ------------ ------------ ------------
Investment Activities
Net investment income.................. 0.004 0.04 0.02 0.05
Net realized and unrealized gains
(losses) on investments.............. -- 0.14 (0.19) (0.12)
------------ ------------ ------------ ------------
Total from Investment Activities... 0.004 0.18 (0.17) (0.07)
------------ ------------ ------------ ------------
Distributions
Net investment income.................. (0.004) (0.04) (0.02) (0.05)
Net realized gains..................... -- -- -- --
------------ ------------ ------------ ------------
Total Distributions................ (0.004) (0.04) (0.02) (0.05)
------------ ------------ ------------ ------------
Net Asset Value, End of Period........... $ 1.00 $ 10.35 $ 9.81 $ 9.88
=============== ============ ============== ==============
Total Return (excludes sales charge)..... 1.16%(b) 2.34%(b) 11.75%(b)(d) -0.75%(b)
Ratios/Supplemental Data:
Net Assets, at end of period (000)....... $104,514 $108,000 $159,203 $189,493
Ratio of expenses to average net
assets................................. 0.29%(c) 0.27%(c) 0.24%(c) 0.24%(c)
Ratio of net investment income to average
net assets............................. 4.94%(c) 1.26%(c) 2.07%(c) 5.55%(c)
Ratio of expenses to average net
assets*................................ 1.19%(c) 1.04%(c) 0.94%(c) 1.49%(c)
Ratio of net investment income to average
net assets*............................ 4.04%(c) 0.49%(c) 1.37%(c) 4.30%(c)
Portfolio Turnover....................... -- 30% -- 49%
</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) Commencement of the Funds began October 7, October 1, November 30, and
November 30, respectively.
(b) Not annualized
(c) Annualized
(d) The quoted return of the Portfolio includes performance of certain
collective trust portfolio ("Commingled") accounts for the period from
January 31, 1995 to the Mutual Funds commencement of operations on November
30, 1996 as adjusted to reflect the expenses associated with the Portfolio.
See notes to financial statements.
-23-
<PAGE> 24
KEYPREMIER FUNDS(SM)
INVESTMENT ADVISER
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, PA 19428
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
FOR ADDITIONAL INFORMATION CALL:
1-800-766-3960
KEYPREMIER FUNDS(SM)
SEMI-ANNUAL REPORT
------------------
December 31, 1996
