<PAGE>
RIVERSIDE(R)
CAPITAL FUNDS
----------------------
ANNUAL REPORT TO
SHAREHOLDERS
JUNE 30, 1997
----------------------
[LOGO]
NATIONAL BANK
OF COMMERCE
Memphis, Tennessee
Investment Adviser
<PAGE>
RIVERSIDE
CAPITAL
MESSAGE FROM THE CHAIRMAN FUNDS
AND INVESTMENT ADVISER
Dear Shareholders:
We are pleased to report that the Riverside Capital Funds of The Sessions Group
performed well during the year ended June 30, 1997. During the period, stocks
continued to post record gains. The Dow Jones Industrial Average and the
Standard & Poor's 500 Index rose 36.7% and 33.6%, respectively, as investors
continued to focus on large-capitalization stocks. The broader stock market
also did well, but to a lesser degree. The S&P Midcap 400 Index was up 22.4%,
while the S&P 600 Small Cap was up 20.8%. Bonds produced average returns during
the year, providing steady income to investors.
The reason for the continued market strength is simple. The economy is
exhibiting moderate growth, but inflation has remained in check. As a result,
the Federal Reserve has stayed on the sidelines for the most part, and interest
rates, despite some volatility during the year, have fallen from their highs.
In short, it has been an ideal environment for corporate earnings and,
therefore, for the stock market. Likewise, bonds have benefited from the benign
interest rate environment.
STOCKS: A TIME FOR CELEBRATION, AND A TIME FOR CAUTION
The S&P 500, at over 21 times 1997 earnings and with a dividend yield well
under 2%, is selling at the upper end of its historic valuation range. True, it
appears to be the best of all worlds with respect to the economy, inflation and
interest rates, and record mutual fund inflows continue to give the market
support. Admittedly, we can't see anything on the horizon to cause concern, but
we know that markets don't move in straight lines indefinitely. Even in a
favorable economic and monetary environment, we can expect the occasional
pullback as the market brings valuations back into line. In fact, during the
last twelve months, we have had two brief, but sharp, corrections in the stock
market, and a more serious--and less publicized--correction in the small-cap
market.
As a result, looking forward, we would not be surprised to see a market
correction of some magnitude during the next twelve months. However, because
market direction, in our opinion, is difficult if not impossible to predict
with any degree of accuracy, we believe that the best way to control risk is to
maintain a long-term perspective with a diversified portfolio of financially
strong, well-managed and well-positioned companies that we think represent
outstanding value.
A SHRINKING BUDGET DEFICIT BODES WELL FOR BONDS
The federal budget deficit is estimated to be $70 billion in fiscal 1997,
roughly 1% of the Gross Domestic Product. In addition, Congress and the
President have agreed to a balanced budget between now and 2002. This is
remarkable progress on a deficit that approached $300 billion just a few years
ago. A shrinking deficit means fewer government bonds will be issued, which
exerts downward pressure on interest rates.
Global competition and increased productivity due to technological
advancements, along with our ability to outsource manufacturing to other
countries, continue to keep inflation pressures at a minimum. As a result, we
think the long-term trend for interest rates is stable to downward, suggesting
that bonds should continue to perform in line with historical averages.
IN CLOSING...
In the pages that follow, you will find a detailed discussion about the
performance of each of the Riverside Capital Funds during the year ended June
30, 1997. We urge you to read this material closely.
Thank you for your continued confidence in us. We look forward to providing you
with superior investment management and to serving your needs now and in the
years ahead. As always, if you have any questions or require any assistance,
please don't hesitate to call us at 1-800-8-RIVER-6.
Sincerely,
/s/ Walter B. Grimm /s/ E. Alan Catmur
Walter B. Grimm E. Alan Catmur
Chairman National Bank of Commerce
The Sessions Group Investment Adviser
THE RIVERSIDE CAPITAL FUNDS ARE NOT FDIC INSURED AND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, NATIONAL BANK OF COMMERCE OR ANY
OF ITS AFFILIATES. INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
-1-
<PAGE>
THE PORTFOLIOS
THE RIVERSIDE CAPITAL VALUE EQUITY FUND
As "value" managers, we attempt to identify companies whose stocks are selling
at a deep discount to their long-term intrinsic value. Instead of trying to
time the stock market, we believe that by focusing on intrinsic value, we can
construct a portfolio of undervalued equities that will outperform the broader
market over time. As a result, our average holding period is three to four
years, and we have relatively low turnover. While we own a number of large-cap
stocks, we traditionally have had a bias toward small- to mid-cap stocks.
During the past year, investors continued to favor large-cap growth stocks, as
they have for much of the past three years. As a result, the total return for
the Fund over the past 12 months (at 23.7%) was behind the S&P 500, but in line
with small and mid-cap indicies.+
While a number of companies contributed to our results, the stocks of
Burlington Coat Factory (which has since been sold), Travelers (5.2% of net
assets), Valero Energy (4.6%), IBM (3.5%), H.F. Ahmanson (3.0%), BJ Services
(2.8%) and SunAmerica (2.0%) made particularly impressive gains during the
year. The Fund's performance was also helped by the acquisition of Augat by
Thomas & Betts (3.4%) in December and the subsequent strong performance by
Thomas & Betts which we continue to hold in the portfolio.
SEARCH FOR VALUE
With the stock market at all-time highs, it is increasingly difficult to find
new companies that meet our investment criteria. Nonetheless, we have recently
added two new companies to the Fund's portfolio. In March, we bought shares of
Century Telephone Enterprises (3.3%), a telephone company with operations in
Louisiana, Mississippi, Michigan and Ohio. We believe that the market has
failed to recognize the full value of Century's overlapping land line and
cellular franchises in the less competitive rural and suburban markets. In
April, we also added Pride International Inc. (3.7%), a domestic and
international oil services company. We don't believe investors are giving Pride
credit for its growing contract drilling business in Latin America.
In spite of the temptation to predict the direction of the economy or the stock
market, particularly at current levels, we will continue to focus on the
individual companies in the Fund's portfolio and their prospects. We will sell
those positions that we believe are fully valued and add companies that we
believe are significantly undervalued.
As of June 30, 1997, the top five holdings in the Fund's portfolio were
Travelers, Inc. (5.2%), Valero Energy Corp. (4.6%), Hancock Fabrics, Inc.
(4.5%), UNUM (4.4%) and Phoenix Corp. (PXRE) (3.9%).**
+The Fund's total return with the maximum 4.50% sales charge was 18.1% for the
same period.
**The composition of the Fund's portfolio is subject to change.
<TABLE>
<CAPTION>
[GRAPH APPEARS HERE OF VALUE EQUITY FUND APPEARS HERE]
VALUE EQUITY FUND S&P 500 INDEX
----------------- -------------
<S> <C> <C>
10/31/91 $ 9,551 $10,000
6/30/92 $10,701 $10,610
6/30/93 $11,872 $12,057
6/30/94 $13,267 $12,227
6/30/95 $14,332 $15,412
6/30/96 $17,271 $19,427
6/30/97 $21,357 $26,146
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
---------------------------------------------
SINCE
INCEPTION
DATE 1 YEAR 5 YEAR (10/31/91)
---------------------------------------------
<S> <C> <C> <C>
6/30/97 18.05% 13.77% 14.32%
</TABLE>
*Reflects 4.50% Sales Charge.
Past performance is not predictive of future performance. Investment return and
principal value of the Riverside Capital Value Equity Fund will fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost.
The Standard & Poor's 500 Stock Index is an unmanaged index considered to be
representative of the stock market as a whole. It does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The performance of the Riverside Capital
Value Equity Fund reflects the deduction of fees for these value-added
services.
-2-
<PAGE>
THE RIVERSIDE CAPITAL GROWTH FUND
The Riverside Capital Growth Fund concentrates on large-capitalization growth
stocks such as General Electric (4.2% of net assets), Intel (3.6%), Coca-Cola
(3.5%), Schering Plough (3.4%) and NationsBank (3.3%). About 75% of the
portfolio is invested in large-cap companies, with the balance invested in
smaller cap names.
As a result of this emphasis on large-cap stocks, the Fund kept up with the S&P
500 Index in the first half of 1997, up 19.1% excluding the maximum sales
charge. For the full year ended June 30, 1997, the Fund's total return was
29.9%+, compared to 33.6% on the S&P 500 Index.
Large-capitalization stocks have dominated the market for the last few years.
There are several reasons for this. One reason is that there is a tremendous
inflow of money into the U.S. stock market from investors all over the world.
Money managers can put this new cash to work much more efficiently in the
larger capitalization stocks. Another reason large-capitalization stocks have
dominated the market is that they are perceived as a safe haven when and if the
market turns downward. Finally, the initial public offering market has been
extremely strong, inundating investors with new small-capitalization
alternatives.
MIXED SUCCESS IN SMALL CAP
We've had mixed success in the small-cap arena. World Access (3.3%), an
Atlanta-based telecommunications equipment supplier to emerging markets around
the world, has been a big winner. The stock has more than doubled since we
bought it in 1996. On the other hand, some of our small-cap exposure has hurt
the portfolio in recent months. Small companies that are growing rapidly often
run into short-term problems that might hurt the business on a quarterly basis,
and negative earnings surprises do not go over well on Wall Street.
Recently, it has been difficult to put new money to work in blue-chip growth
stocks because prices are so high. Coca-Cola, which historically has exhibited
17% to 18% earnings growth per year, is currently trading at 40 times 1997
earnings. General Electric, which has grown 13% to 14% per year, is selling at
26 times 1997 earnings. These are historically high valuation levels.
One big advantage of the large-cap stocks still remains: international
exposure. Roughly 80% of Coca-Cola's income comes from outside the United
States. We would like to own Coca-Cola in Russia, China and Brazil. In
comparison to Coca-Cola abroad, Coca-Cola USA would not be enough of a growth
vehicle.
As of June 30, 1997, the top five holdings in the Fund's portfolio were Philip
Morris, Inc. (4.7%), General Electric Co. (4.2%), Home Depot, Inc. (4.0%),
American International (3.8%) and SouthTrust Corp. (3.8%).**
+The Fund's total return with the maximum 4.50% sales charge was 24.1% for the
same period.
**The composition of the Fund's portfolio is subject to change.
<TABLE>
<CAPTION>
[GRAPH OF GROWTH FUND APPEARS HERE]
GROWTH FUND S&P 500
----------- -------
<S> <C> <C>
4/15/94 $ 9,551 $10,000
6/30/94 $ 9,379 $10,015
6/30/95 $11,749 $12,624
6/30/96 $14,024 $15,913
6/30/97 $18,217 $21,416
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
-------------------------------
DATE 1 YEAR (4/15/94)
-------------------------------
<S> <C> <C>
6/30/97 24.06% 20.52%
</TABLE>
* Reflects 4.50% Sales Charge.
Past performance is not predictive of future performance. Investment return and
principal value of the Riverside Capital Growth Fund will fluctuate, so that the
shares, when redeemed, may be worth more or less than their original cost.
The Standard & Poor's 500 Stock Index is an unmanaged index considered to be
representative of the stock market as a whole. It does not reflect the
deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. The performance of the Riverside Capital
Growth Fund reflects the deduction of fees for these value-added services.
-3-
<PAGE>
THE RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
By focusing on callable bonds with high yield, the Fund continued to be
competitive during the past fiscal year. For the year ended June 30, 1997, the
Riverside Capital Tennessee Municipal Obligations Fund produced a total return
of 7.4%.++ In comparison, the Lehman Brothers Municipal General Obligation
Bond Index produced a total return of 8.3%.
Municipal bonds can be issued with a call feature that allows the issuer to
retire the bonds when interest rates fall so they can reissue bonds at a lower
interest rate. Such a call feature costs the issuer a premium yield. From our
perspective, we are able to collect the higher yield as long as interest rates
don't fall too far. So far, we have benefited from these callable bonds
because interest rates traded in a narrow range during the past fiscal year.
In addition to callable bonds, we're finding value in the health-care sector
of the municipal bond market. Because of uncertainty surrounding managed
care and Medicare financing, health-care issues haven't attracted investor
interest, thus they are less expensive. Knowing that, we're careful to
maintain the portfolio's strong credit quality.
SEEKING TAX RELIEF
The Tennessee economy is excellent, and Tennessee general obligation bonds are
in high demand. For Tennessee residents, the maximum combined federal and
state income tax bracket is 43.2%. As of June 30, the 30-day SEC yield was
4.91% without the load, and 4.76% including the maximum sales charge.** An
investor in the top tax bracket would have had to receive a yield of 8.64%
without the sales load on a taxable equivalent basis.
Our strategy over the next several months is to continue to focus on the
highest credit quality, but to begin to look for call protection in what could
be a falling interest rate environment.
As of June 30, 1997, the Fund's portfolio held 46 issues, of which 12.6% were
issued by municipalities outside of Tennessee. The average maturity of the
portfolio was 10.6 years. The credit quality of its rated holdings ranged from
A to AAA.***
++The Fund's total return with the maximum 3.00% sales charge was 4.2% for
the same period.
**Income may be subject to the federal alternative minimum tax. During the
period, certain fees were voluntarily waived. Had these waivers not been in
effect, the 30-day SEC yield would have been 4.10% at NAV and 3.97% including
the maximum sales charge.
***The composition of the Fund's portfolio is subject to change.
<TABLE>
<CAPTION>
[GRAPH OF TENNESSEE MUNICIPAL OBLIGATIONS FUND APPEARS HERE]
TENNESSEE MUNICIPAL S&P 500
------------------- -------
<S> <C> <C>
11/4/92 $ 9,699 $10,000
6/30/93 $10,416 $10,979
6/30/94 $10,312 $11,046
6/30/95 $10,890 $11,955
6/30/96 $11,398 $12,723
6/30/97 $12,239 $13,775
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
-------------------------------
DATE 1 YEAR (11/04/92)
-------------------------------
<S> <C> <C>
6/30/97 4.17% 4.43%
</TABLE>
* Reflects 3.00% Sales Charge.
Past performance is not predictive of future performance. Investment return and
principal value of the Riverside Capital Tennessee Municipal Obligations Fund
will fluctuate, so that the shares, when redeemed, may be worth more or less
than their original cost.
The Lehman Brothers Municipal General Obligation Bond Index is an unmanaged
index considered to be representative of the municipal bond market as a whole.
It does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. The performance of the
Riverside Capital Tennessee Municipal Obligations Fund reflects the deduction
of fees for these value-added services.
-4-
<PAGE>
THE RIVERSIDE CAPITAL FIXED INCOME FUND
Although there has been volatility in the fixed-income markets, interest rates
have moved in a relatively narrow range over the past year. For instance, the
benchmark 30-year U.S. Treasury bond yielded 6.87% on July 1, 1996. It yielded
6.73% on June 30, 1997. Since bond prices move inversely to interest rates,
there hasn't been much fluctuation in the net asset value of bond funds.
A FOCUS ON CALLABLE BONDS
In this environment, fixed-income securities paying a high yield have been
desirable, since the majority of a bond's return comes from income, and not
capital appreciation due to relatively stable interest rates. Since bonds with
call features offered the highest yields, the portfolio's performance was
determined by the degree to which we held these types of securities. Callable
bonds pay a higher yield in exchange for the right by the issuer to retire the
bonds if interest rates fall.
TAXABLE MUNIS OFFER HIGH YIELD
In addition to buying U.S. Government bonds, the portfolio invests in taxable
bonds issued by municipalities. Most investors are familiar with tax-free
municipal bonds. But sometimes, a city, county, state or other political
subdivision will have reached its legal quota of tax-free bonds and, yet, still
need to raise more money. Because taxable munis are not that well known, yields
tend to be higher than comparably rated corporate bonds.
For the year ended June 30, 1997, The Riverside Capital Fixed Income Fund
produced a total return of 5.6%.+ ++ In comparison, the Lehman Brothers
Government/Corporate Intermediate Bond Index produced a total return of 7.2%.
As of June 30, 1997, the average maturity of the Fund's holdings was
approximately 5.6 years. With about 60% of the portfolio in U.S. government
securities, we have reduced our exposure to corporate bonds because we believe
that the additional yield they offer is not worth the additional credit risk to
the portfolio.**
+The Fund's total return with the maximum 3.00% sales charge was 2.4% for the
same period.
**The composition of the Fund's portfolio is subject to change.
<TABLE>
<CAPTION>
[GRAPH OF FIXED INCOME FUND APPEARS HERE]
FIXED INCOME FUND LEHMAN BROTHER
----------------- --------------
<S> <C> <C>
10/31/91 $ 9,699 $10,000
6/30/92 $10,336 $10,674
6/30/93 $11,333 $11,795
6/30/94 $11,084 $11,767
6/30/95 $11,618 $12,987
6/30/96 $11,740 $13,638
6/30/97 $12,392 $14,606
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*++
---------------------------------------
SINCE
INCEPTION
DATE 1 YEAR 5 YEAR (10/31/91)
---------------------------------------
<S> <C> <C> <C>
6/30/97 2.39% 3.06% 3.85%
</TABLE>
* Reflects 3.00% Sales Charge.
Past performance is not predictive of future performance. Investment return and
principal value of the Riverside Capital Fixed Income Fund will fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost.
++These returns include the affect of the capital contribution, which is
discussed further in the financial highlights.
The Lehman Brothers Government/Corporate Intermediate Bond Index is an
unmanaged index considered to be representative of bonds with maturities
between one and ten years. It does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund
accounting fees. The performance of the Riverside Capital Fixed Income Fund
reflects the deduction of fees for these value-added services.
-5-
<PAGE>
THE RIVERSIDE CAPITAL LOW DURATION GOVERNMENT SECURITIES FUND
Short-term interest rates were relatively stable during the year, as the
Federal Reserve Board raised rates just once during the period. Because bond
prices move inversely to interest rates, there was little capital appreciation
or depreciation due to interest rate movements. As a result, the best
performing securities were those that offered the highest yield, such as
callable government agency bonds. The additional yield--as much as half a
percentage point--offered by callable securities was significant enough to
warrant buying them.
For the year ended June 30, 1997, the Riverside Capital Low Duration Government
Securities Fund produced a total return of 6.1%.+ In comparison, the Lehman
Brothers Intermediate Government Bond Index produced a total return of 7.0%.
This Fund continues to invest only in securities issued by the U.S. Government
and its agencies. The average credit quality of the Fund's holdings as of June
30, 1997, was AAA. The average maturity of the portfolio was about 2.6 years.**
+The Fund's total return with the maximum 2.00% sales charge was 4.0% for the
same period.
**The composition of the Fund's portfolio is subject to change.
<TABLE>
<CAPTION>
[GRAPH OF LOW DURATION GOVERNMENT SECURITIES FUND APPEARS HERE]
LOW DURATION GOVERNMENT LEHMAN BROTHER
----------------------- --------------
<S> <C> <C>
4/14/94 $ 9,804 $10,000
6/30/94 $ 9,791 $ 9,977
6/30/95 $10,578 $11,242
6/30/96 $10,928 $11,795
6/30/97 $11,596 $12,615
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN*
---------------------------------
SINCE
INCEPTION
DATE 1 YEAR (4/15/94)
---------------------------------
<S> <C> <C>
6/30/97 4.03% 4.72%
</TABLE>
* Reflects 2.00% Sales Charge.
Past performance is not predictive of future performance. Investment return and
principal value of the Riverside Capital Low Duration Government Securities Fund
will fluctuate, so that the shares, when redeemed, may be worth more or less
than their original cost.
The Lehman Brothers Intermediate Government Bond Index is an unmanaged index
considered to be representative of government bonds with maturities between one
and ten years. It does not reflect the deduction of expenses associated with a
mutual fund, such as investment management and fund accounting fees. The
performance of the Riverside Capital Low Duration Government Securities Fund
reflects the deduction of fees for these value-added services.
THE RIVERSIDE CAPITAL MONEY MARKET FUND
On March 25, 1997, the Federal Reserve Board raised interest rates charged to
member banks for overnight loans from 5.25% to 5.50%. Despite much anticipation
in the market, that was the only Fed move for the entire fiscal year.
Even though we are concerned about the direction of Fed policy, we do not try
to outguess the movement of interest rates. As a result, we keep the
portfolio's average maturity as short as possible. As of June 30, 1997, the
average maturity of the Fund's holdings was 35 days. Although we would obtain a
little extra yield by extending the portfolio, we don't think it is worth
taking the risk of holding longer term securities in a suddenly rising interest
rate environment.
In addition, the portfolio's assets were invested in the highest quality short-
term instruments available: U.S. Government agency securities and repurchase
agreements collateralized by U.S. Treasury bonds.
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 per share.
This material is authorized for distribution to prospective investors only when
preceded or accompanied by a prospectus.
For more information, including charges and expenses, call 1-800-8-RIVER-6 to
receive a prospectus, which should be read carefully before you invest or send
money. The Riverside Capital Funds are distributed by BISYS Fund Services. The
composition of the Funds' holdings is subject to change.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, NATIONAL BANK OF COMMERCE, OR ANY OF ITS AFFILIATES, AND SHARES
ARE NOT FEDERALLY INSURED BY THE FDIC OR ANY OTHER AGENCY. AN INVESTMENT IN
SHARES OF THE FUNDS INVOLVES THE POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
-6-
<PAGE>
TABLE OF CONTENTS
Independent Auditors' Report
Page 8
Statements of Assets and Liabilities
Page 9
Statements of Operations
Page 11
Statements of Changes in Net Assets
Page 13
Schedules of Portfolio Investments
Page 15
Notes to Financial Statements
Page 26
Financial Highlights
Page 33
-7-
<PAGE>
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, collectively the Funds), including the schedules
of portfolio investments as of June 30, 1997, 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 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, 1997 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 Sessions Group--The Riverside
Capital Funds at June 30, 1997, and 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 22, 1997
-8-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$137,756,527; $57,793,710; and
$24,543,367, respectively).......... $137,756,527 $78,030,312 $37,369,819
Repurchase agreements (cost
$1,488,296; $1,456,177; and $0, re-
spectively)......................... 1,488,296 1,456,177 --
------------ ----------- -----------
Total investments.................... 139,244,823 79,486,489 37,369,819
Cash................................. 611 1,900 320
Interest and dividends receivable.... 1,513,902 150,604 70,344
Prepaid expenses..................... 3,117 30 801
------------ ----------- -----------
Total Assets....................... 140,762,453 79,639,023 37,441,284
------------ ----------- -----------
LIABILITIES:
Dividends payable.................... 491,130 -- --
Accrued expenses and other payables:
Investment advisory fees........... 4,035 5,942 1,075
Administration fees................ 3,065 1,745 614
Administrative services fees....... 19,505 7,557 4,318
12b-1 fees......................... 13,823 11,178 4,520
Custodian fees..................... 3,013 2,737 2,653
Accounting fees.................... 616 380 373
Trustees' fees..................... -- 1,270 --
Legal fees......................... 7,606 10,308 5,528
Audit fees......................... 26,722 16,257 6,912
Printing fees...................... 15,785 7,027 3,058
Transfer agent fees................ -- 7,321 2,946
Registration and filing fees....... 2,789 1,104 --
Other.............................. 16 1,815 3,873
------------ ----------- -----------
Total Liabilities.................. 588,105 74,641 35,870
------------ ----------- -----------
NET ASSETS:
Capital.............................. 140,217,042 53,750,542 23,198,904
Undistributed net investment income.. 1,035 68,203 9,950
Net unrealized appreciation on in-
vestments........................... -- 20,236,602 12,826,452
Accumulated undistributed net
realized gains (losses) on
investment transactions............. (43,729) 5,509,035 1,370,108
------------ ----------- -----------
Net Assets......................... $140,174,348 $79,564,382 $37,405,414
============ =========== ===========
Outstanding units of beneficial in-
terest (shares)..................... 140,207,056 5,123,020 2,136,152
============ =========== ===========
Net asset value--redemption price per
share............................... $ 1.00 $ 15.53 $ 17.51
============ =========== ===========
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) $ 16.26 $ 18.34
============ =========== ===========
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
-9-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
GOVERNMENT MUNICIPAL
FIXED INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $18,051,043;
$6,814,208; and $16,930,150, respec-
tively)................................ $18,148,196 $6,860,099 $17,403,966
Interest and dividends receivable....... 295,217 111,784 403,412
Receivable from brokers for investments
sold................................... -- -- 563,640
Unamortized organization costs.......... -- -- 3,133
Prepaid expenses........................ 3,609 193 959
----------- ---------- -----------
Total Assets.......................... 18,447,022 6,972,076 18,375,110
----------- ---------- -----------
LIABILITIES:
Cash overdraft.......................... 199,161 -- --
Payable for capital shares redeemed..... 252 -- --
Accrued expenses and other payables:
Investment advisory fees.............. 976 -- 75
Administration fees................... 400 114 402
Administrative services fees.......... 3,375 1,391 1,266
12b-1 fees............................ 1,034 266 3,165
Custodian fees........................ 329 8,618 438
Accounting fees....................... 697 474 1,429
Legal fees............................ 1,770 7,201 6,533
Audit fees............................ 5,477 2,783 3,829
Transfer agent fees................... 1,937 1,461 3,067
Printing fees......................... 2,771 1,809 2,034
Registration and filing fees.......... 1,281 861 90
Other................................. 783 2,106 422
----------- ---------- -----------
Total Liabilities..................... 220,243 27,084 22,750
----------- ---------- -----------
NET ASSETS:
Capital................................. 24,704,152 6,933,266 18,944,032
Undistributed net investment income..... 35,281 14,939 41,771
Net unrealized appreciation on invest-
ments.................................. 97,153 45,891 473,816
Accumulated undistributed net realized
losses on investment transactions...... (6,609,807) (49,104) (1,107,259)
----------- ---------- -----------
Net Assets............................ $18,226,779 $6,944,992 $18,352,360
=========== ========== ===========
Outstanding units of beneficial interest
(shares)............................... 2,099,019 694,680 1,843,918
=========== ========== ===========
Net asset value--redemption price per
share.................................. $ 8.68 $ 10.00 $ 9.95
=========== ========== ===========
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.... $ 8.95 $ 10.20 $ 10.26
=========== ========== ===========
</TABLE>
See notes to financial statements.
-10-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
---------- ----------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income......................... $7,473,132 $ 25,268 $ 5,539
Dividend income......................... -- 1,671,207 707,799
---------- ----------- ----------
Total Income............................ 7,473,132 1,696,475 713,338
---------- ----------- ----------
EXPENSES:
Investment advisory fees................ 480,718 694,259 332,857
Administration fees..................... 274,696 151,803 66,572
Administrative services fees............ 343,051 189,753 83,214
12b-1 fees.............................. 343,051 189,753 83,214
Custodian fees.......................... 35,910 15,139 6,767
Accounting fees......................... 42,510 31,306 31,709
Legal fees.............................. 91,131 14,387 4,367
Audit fees.............................. 30,377 18,414 7,505
Trustees' fees and expenses............. 16,040 9,064 3,265
Transfer agent fees..................... 28,413 44,781 27,836
Interest expense........................ 34,819 -- --
Registration and filing fees............ 7,229 7,066 1,989
Printing costs.......................... 33,841 15,612 8,078
Other................................... 17,458 8,787 5,871
---------- ----------- ----------
Total Expenses.......................... 1,779,244 1,390,124 663,244
Less: Fee waivers....................... (287,792) (159,393) (302,900)
---------- ----------- ----------
Net Expenses............................ 1,491,452 1,230,731 360,344
---------- ----------- ----------
Net Investment Income................... 5,981,680 465,744 352,994
---------- ----------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on
investment transactions............ (4,905) 8,840,538 1,370,108
Change in unrealized appreciation on
investments........................ -- 6,722,105 7,020,864
---------- ----------- ----------
Net realized/unrealized gains (losses)
on investments.......................... (4,905) 15,562,643 8,390,972
---------- ----------- ----------
Change in net assets resulting from
operations.............................. $5,976,775 $16,028,387 $8,743,966
========== =========== ==========
</TABLE>
See notes to financial statements.
-11-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
FIXED GOVERNMENT MUNICIPAL
INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................ $ 1,877,178 $472,604 $1,195,725
Dividend income........................ 27,571 8,356 9,855
----------- -------- ----------
Total Income........................... 1,904,749 480,960 1,205,580
----------- -------- ----------
EXPENSES:
Investment advisory fees............... 156,128 35,860 122,007
Administration fees.................... 48,039 14,344 37,541
Administrative services fees........... 60,049 17,930 46,926
12b-1 fees............................. 60,049 17,930 46,926
Custodian fees......................... 8,157 2,030 10,067
Accounting fees........................ 31,777 31,418 47,917
Legal fees............................. 1,833 812 928
Audit fees............................. 6,273 3,281 4,374
Organization costs..................... -- -- 8,819
Trustees' fees and expenses............ 2,061 559 1,634
Transfer agent fees.................... 22,665 20,566 23,580
Registration and filing fees........... 3,110 1,540 1,627
Printing costs......................... 4,544 542 3,622
Other.................................. 3,377 1,961 1,882
----------- -------- ----------
Total Expenses......................... 408,062 148,773 357,850
Less: Fee waivers...................... (50,442) (54,508) (152,040)
----------- -------- ----------
Net Expenses........................... 357,620 94,265 205,810
----------- -------- ----------
Net Investment Income.................. 1,547,129 386,695 999,770
----------- -------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on
investment transactions................ (434,866) (12,845) 101,371
Change in unrealized
appreciation/depreciation on
investments....................... (2,855,544) 54,148 231,707
----------- -------- ----------
Net realized/unrealized gains (losses)
on investments......................... (3,290,410) 41,303 333,078
----------- -------- ----------
Change in net assets resulting from
operations............................. $(1,743,281) $427,998 $1,332,848
=========== ======== ==========
</TABLE>
See notes to financial statements.
-12-
<PAGE>
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,
1997 1996 1997 1996 1997 1996
------------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 5,981,680 $ 6,961,437 $ 465,744 $ 837,145 $ 352,994 $ 389,143
Net realized gains
(losses) on
investments
transactions.......... (4,905) 141,785 8,840,538 9,340,011 1,370,108 1,167,209
Net change in unrealized
appreciation/depreciation
on investments........ -- -- 6,722,105 5,384,702 7,020,864 3,513,955
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
resulting from
operations............ 5,976,775 7,103,222 16,028,387 15,561,858 8,743,966 5,070,307
------------- ------------- ------------ ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (5,981,680) (6,961,437) (504,356) (827,973) (354,568) (389,143)
In excess of net
investment income..... -- -- -- -- -- (19,825)
From net realized gains
on investments........ -- -- (10,634,101) (2,982,043) (934,819) (505,659)
In excess of net
realized gains on
investments........... -- -- -- -- -- --
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
from shareholder
distributions......... (5,981,680) (6,961,437) (11,138,457) (3,810,016) (1,289,387) (914,627)
------------- ------------- ------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 364,918,577 426,124,612 4,195,632 5,108,660 2,745,588 10,696,082
Dividends reinvested.... 336,522 512,232 5,098,769 1,808,516 568,918 383,839
Cost of shares redeemed. (359,396,813) (450,674,926) (15,675,083) (17,877,680) (7,131,040) (2,953,582)
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets
from
capital transactions.. 5,858,286 (24,038,082) (6,380,682) (10,960,504) (3,816,534) (8,126,339)
------------- ------------- ------------ ------------ ----------- -----------
Capital contributions... 175,344 138,311 -- -- -- --
------------- ------------- ------------ ------------ ----------- -----------
Change in net assets.... 6,028,725 (23,757,986) (1,490,752) 791,338 3,638,045 12,282,019
NET ASSETS:
Beginning of period..... 134,145,623 157,903,609 81,055,134 80,263,796 33,767,369 21,485,350
------------- ------------- ------------ ------------ ----------- -----------
End of period........... $ 140,174,348 $ 134,145,623 $ 79,564,382 $ 81,055,134 $37,405,414 $33,767,369
============= ============= ============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued.................. 364,918,578 426,124,613 290,948 373,123 182,434 832,694
Reinvested.............. 336,522 512,232 370,120 133,595 38,111 29,644
Redeemed................ (359,396,813) (450,674,926) (1,111,533) (1,209,025) (493,776) (222,427)
------------- ------------- ------------ ------------ ----------- -----------
Change in shares........ 5,858,287 (24,038,081) (450,465) (783,307) (273,231) 639,911
============= ============= ============ ============ =========== ===========
</TABLE>
See notes to financial statements.
-13-
<PAGE>
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,
1997 1996 1997 1996 1997 1996
------------ ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income... $ 1,547,129 $ 2,177,545 $ 386,695 $ 399,991 $ 999,770 $ 1,080,311
Net realized gains
(losses) on
investments
transactions.......... (434,866) (1,646,585) (12,845) (1,813) 101,371 (37,429)
Net change in unrealized
appreciation/depreciation
on investments........ (2,855,544) 29,430 54,148 (149,458) 231,707 (106,825)
------------ ------------ ---------- ----------- ----------- -----------
Change in net assets
resulting from
operations............ (1,743,281) 560,390 427,998 248,720 1,332,848 936,057
------------ ------------ ---------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (1,546,955) (2,163,561) (389,508) (399,991) (974,115) (1,077,559)
In excess of net
investment income..... -- -- -- (3,182) -- --
In excess of net
realized gains on
investments........... -- (104,990) -- (2,537) -- (906)
------------ ------------ ---------- ----------- ----------- -----------
Change in net assets
from shareholder
distributions......... (1,546,955) (2,268,551) (389,508) (405,710) (974,115) (1,078,465)
------------ ------------ ---------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 789,954 2,751,575 110,306 688,187 893,164 3,937,416
Dividends reinvested.... 725,558 971,603 313,527 339,394 298,374 294,830
Cost of shares redeemed. (11,930,394) (12,664,268) (978,322) (1,062,808) (2,234,999) (5,879,537)
------------ ------------ ---------- ----------- ----------- -----------
Change in net assets
from
capital transactions.. (10,414,882) (8,941,090) (554,489) (35,227) (1,043,461) (1,647,291)
------------ ------------ ---------- ----------- ----------- -----------
Capital contribution.... 3,084,688 -- -- -- -- --
------------ ------------ ---------- ----------- ----------- -----------
Change in net assets.... (10,620,430) (10,649,251) (515,999) (192,217) (684,728) (1,789,699)
NET ASSETS:
Beginning of period..... 28,847,209 39,496,460 7,460,991 7,653,208 19,037,088 20,826,787
------------ ------------ ---------- ----------- ----------- -----------
End of period........... $ 18,226,779 $ 28,847,209 $6,944,992 $ 7,460,991 $18,352,360 $19,037,088
============ ============ ========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued.................. 90,153 300,179 11,000 67,717 90,725 402,934
Reinvested.............. 82,987 106,183 31,418 33,512 30,318 30,243
Redeemed................ (1,364,087) (1,377,873) (97,847) (105,303) (226,674) (600,866)
------------ ------------ ---------- ----------- ----------- -----------
Change in shares........ (1,190,947) (971,511) (55,429) (4,074) (105,631) (167,689)
============ ============ ========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-14-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (98.3%):
Federal Farm Credit Bank (11.1%):
$15,500,000 5.46%, 9/1/98*...................................... $ 15,500,000
------------
Federal Home Loan Bank (12.1%):
3,000,000 5.25%, 8/14/97*..................................... 2,999,737
5,000,000 5.77%, 11/5/97...................................... 5,000,000
2,000,000 5.88%, 2/26/98...................................... 2,000,000
2,000,000 5.70%, 3/4/98....................................... 2,000,000
5,000,000 5.89%, 3/30/98...................................... 5,000,000
------------
16,999,737
------------
Federal National Mortgage Assoc. (14.6%):
3,000,000 5.25%, 7/28/97**.................................... 2,999,327
5,000,000 5.44%, 9/2/97**..................................... 4,999,267
10,000,000 5.53%, 12/3/97*..................................... 9,997,898
2,500,000 5.25%, 7/14/99*..................................... 2,492,002
------------
20,488,494
------------
Student Loan Marketing Assoc. (60.5%):
10,000,000 5.24%, 10/14/97**................................... 9,997,925
500,000 5.42%, 10/30/97**................................... 500,151
4,830,000 5.24%, 11/24/97*.................................... 4,827,330
5,000,000 5.65%, 3/17/98...................................... 5,000,000
8,000,000 5.26%, 8/20/98**.................................... 7,994,641
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Student Loan Marketing Assoc., continued:
$ 2,000,000 5.26%, 9/28/98**................................... $ 1,998,532
5,000,000 5.31%, 11/6/98*.................................... 5,000,000
20,000,000 5.26%, 11/10/98**.................................. 19,987,702
5,000,000 5.28%, 2/8/99**.................................... 4,992,537
7,000,000 5.27%, 2/22/99*.................................... 6,990,017
3,500,000 5.25%, 7/12/99*.................................... 3,489,730
14,000,000 5.29%, 8/2/99*..................................... 13,989,731
------------
84,768,296
------------
Total U.S. Government Agencies 137,756,527
------------
REPURCHASE AGREEMENTS (1.1%):
1,488,296 Zions Securities, 5.75%, 7/1/97, (Collateralized by
$1,510,000 U.S. Treasury Notes, 6.25%, 5/31/99,
Market Value = $1,513,775)........................ 1,488,296
------------
Total Repurchase Agreements 1,488,296
------------
Total (Amortized Cost--
$139,244,823)(a) $139,244,823
============
</TABLE>
- ------
Percentages indicated are based on net assets of $140,174,348.
(a)Cost for federal income tax and financial reporting purposes are the same.
* Floating Rate Certificates are securities with interest rates that change
whenever a specific interest rate changes. 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, 1997.
** 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 rate reflected on the Schedule of
Portfolio Investments is the rate in effect on June 30, 1997.
See notes to financial statements.
-15-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL VALUE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (96.9%):
Automotive Parts (3.5%):
76,650 Echlin, Inc.............................................. $ 2,759,400
-----------
Computers & Peripherals (5.6%):
188,650 Amdahl Corp. (b)......................................... 1,650,688
30,900 International Business
Machines Corp........................................... 2,786,793
-----------
4,437,481
-----------
Containers--Metal, Glass, Paper, Plastic (3.5%):
94,050 Rubbermaid, Inc.......................................... 2,797,988
-----------
Electrical Equipment (3.4%):
51,835 Thomas & Betts Corp...................................... 2,724,577
-----------
Entertainment (3.6%):
100,000 Hasbro, Inc.............................................. 2,837,500
-----------
Financial Services (2.0%):
33,200 SunAmerica, Inc.......................................... 1,618,500
-----------
Food Processing & Packaging (6.1%):
144,100 J&J Snack Foods Corp. (b)................................ 2,215,538
105,800 McCormick & Company, Inc................................. 2,671,450
-----------
4,886,988
-----------
Insurance (13.6%):
100,652 PXRE Corp................................................ 3,095,049
66,133 Travelers Group, Inc..................................... 4,170,511
83,200 UNUM Corp................................................ 3,494,400
-----------
10,759,960
-----------
Manufactured Housing (1.3%):
42,600 Skyline Corp............................................. 1,049,025
-----------
Medical Services (3.4%):
133,700 Value Health, Inc. (b)................................... 2,707,425
-----------
Metal & Mineral Production (2.3%):
44,900 Cleveland Cliffs, Inc.................................... 1,829,675
-----------
Oil & Gas (8.3%):
121,000 Pride International Inc. (b)............................. 2,904,000
101,180 Valero Energy Corp....................................... 3,667,775
-----------
6,571,775
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------- --------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oilfield Equipment & Services (2.7%):
40,750 BJ Services Co.(b)....................................... $ 2,185,219
-----------
Pollution Control Services & Equipment (3.2%):
148,700 Safety-Kleen Corp........................................ 2,509,313
-----------
Real Estate Investment Trusts (8.5%):
177,500 Equity Inns, Inc......................................... 2,374,063
67,700 Mid-America Apartment Communities, Inc................... 1,899,831
65,710 Storage USA, Inc......................................... 2,513,407
-----------
6,787,301
-----------
Restaurants (2.8%):
241,750 Darden Restaurants, Inc.................................. 2,190,859
-----------
Retail (4.5%):
259,100 Hancock Fabrics, Inc..................................... 3,562,625
-----------
Savings & Loan Companies (3.0%):
55,350 H. F. Ahmanson & Co...................................... 2,380,050
-----------
Steel (3.1%):
160,000 Birmingham Steel Corp.................................... 2,480,000
-----------
Technology (3.3%):
130,000 Global Industries Technology, Inc. (b)................... 2,665,000
-----------
Telecommunications (3.3%):
77,000 Century Telephone Enterprise............................. 2,593,938
-----------
Tobacco & Tobacco Products (2.2%):
64,500 UST, Inc................................................. 1,789,875
-----------
Trucking (3.7%):
150,650 Werner Enterprises, Inc.................................. 2,918,844
-----------
Total Common Stocks 77,043,318
-----------
INVESTMENT COMPANIES (1.2%):
1 Dreyfus Treasury Prime Fund.............................. 1
986,993 Riverside Capital Money Market Fund...................... 986,993
-----------
Total Investment Companies 986,994
-----------
</TABLE>
Continued
-16-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL VALUE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ---------------------------------------------------- -----------
<C> <S> <C>
REPURCHASE AGREEMENTS (1.8%):
$1,456,177 Zions Securities, 5.75%, 7/1/97, (Collateralized by
$1,480,000 U.S. Treasury Notes, 6.25%, 5/31/99,
Market Value = $1,483,700)......................... $ 1,456,177
-----------
Total Repurchase Agreements 1,456,177
-----------
Total (Cost--$59,249,887)(a) $79,486,489
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $79,564,382.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $22,299,584
Unrealized depreciation...................................... (2,062,982)
-----------
Net unrealized appreciation.................................. $20,236,602
===========
</TABLE>
(b)Represents non-income producing securities.
See notes to financial statements.
-17-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (94.7%):
Amusement & Recreation (2.1%):
18,000 Cedar Fair L.P.......................................... $ 787,500
-----------
Automotive Parts (1.9%):
30,000 AutoZone Inc. (b)....................................... 706,875
-----------
Banking (7.1%):
19,000 NationsBank Corp........................................ 1,225,500
34,200 SouthTrust Corp......................................... 1,415,024
-----------
2,640,524
-----------
Beverages (3.5%):
18,800 Coca-Cola Co............................................ 1,311,300
-----------
Computers (1.0%):
40,000 Checkmate Electronics,
Inc. (b)............................................... 360,000
-----------
Computers & Peripherals (2.2%):
15,000 Hewlett Packard Co...................................... 840,000
-----------
Construction (2.7%):
69,695 Clayton Homes, Inc...................................... 993,154
-----------
Electrical Component (3.3%):
60,000 World Access, Inc. (b).................................. 1,230,000
-----------
Electrical Equipment (4.2%):
24,000 General Electric Co..................................... 1,569,000
-----------
Electronic & Electrical (2.3%):
21,000 AMP, Inc................................................ 876,750
-----------
Food Processing & Packaging (5.1%):
25,000 Nabisco Holdings Corp................................... 996,875
22,000 Sara Lee Corp........................................... 915,750
-----------
1,912,625
-----------
Furniture (2.2%):
41,500 Heilig Myers Co......................................... 814,438
-----------
Household Products/Wares (2.6%):
7,000 Procter & Gamble Co..................................... 988,750
-----------
Insurance (3.8%):
9,500 American International Group, Inc....................... 1,419,063
-----------
Measuring & Controlling Devices (1.8%):
20,100 Thermo Electron Corp. (b)............................... 683,400
-----------
Motels & Hotels (1.5%):
37,100 Winston Hotels, Inc..................................... 558,819
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Office Equipment & Supplies (1.6%):
8,400 Pitney Bowes, Inc....................................... $ 598,500
-----------
Oil--Integrated Companies (5.3%):
14,800 Atlantic Richfield Co................................... 1,043,400
8,500 Texaco, Inc. ........................................... 924,375
-----------
1,967,775
-----------
Pharmaceuticals (6.5%):
17,500 Abbott Laboratories..................................... 1,168,125
26,200 Schering-Plough Corp.................................... 1,254,325
-----------
2,422,450
-----------
Real Estate Investment Trusts (5.3%):
44,000 Merry Land & Investment Co., Inc........................ 954,250
27,300 Storage USA, Inc........................................ 1,044,225
-----------
1,998,475
-----------
Restaurants (2.6%):
37,000 Cracker Barrel Old Country
Store, Inc............................................. 980,500
-----------
Retail (8.1%):
31,200 Claire's Stores, Inc.................................... 546,000
21,700 Home Depot, Inc......................................... 1,495,943
29,000 Wal-Mart Stores, Inc.................................... 980,562
-----------
3,022,505
-----------
Semiconductors (3.6%):
9,400 Intel Corp.............................................. 1,333,038
-----------
Telecommunications (3.1%):
15,500 Motorola, Inc........................................... 1,178,000
-----------
Tobacco (4.7%):
39,600 Philip Morris Cos., Inc................................. 1,757,250
-----------
Toys & Bicycles--Manufacturing (3.2%):
35,675 Mattel, Inc............................................. 1,208,491
-----------
Utilities--Telecommunications (3.4%):
33,000 MCI Telecommunications Corp............................. 1,263,281
-----------
Total Common Stocks 35,422,463
-----------
</TABLE>
Continued
-18-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
--------- -------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (5.2%):
1,103,675 Dreyfus Treasury Prime Fund............................. $ 1,103,675
843,681 Riverside Capital Money
Market Fund............................................ 843,681
-----------
Total Investment Companies 1,947,356
-----------
Total (Cost--$24,543,367)(a) $37,369,819
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $37,405,414.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $13,092,101
Unrealized depreciation...................................... (265,649)
-----------
Net unrealized appreciation.................................. $12,826,452
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
-19-
<PAGE>
THE SESSION GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<C> <S> <C>
CORPORATE BONDS (15.0%):
Industrial Goods & Services (8.8%):
1,600,000 Voyager Lines Private Placement, 9.50%, 11/1/99 (b),
secured by Bank of New York letter of credit,
see note 5 (c)........................................ $1,600,000
Transportation & Shipping (6.2%):
1,125,000 Ray & Ross Transport, Inc., 10.00%, 2/1/06 secured by
Bank of New York letter of credit, see note 5 (c)..... 1,125,000
----------
Total Corporate Bonds 2,725,000
----------
TAXABLE MUNICIPAL BONDS (24.0%):
Arkansas (7.0%):
1,300,000 Union County Arkansas Revenue, Hillsboro Manor Project,
9.50%, 9/1/17......................................... 1,269,125
----------
Illinois (0.6%):
111,718 Belleville, St. Clair County, CMO, 7.35%, 11/15/09..... 114,667
----------
Oklahoma (5.6%):
1,000,000 Oklahoma County Financial Authority, 8.05%, 10/1/09.... 1,023,870
----------
Tennessee (4.1%):
745,000 Hamilton County, Tennessee Industrial Development
Board, Multifamily Housing Revenue, Waterford
Apartments, Project A, 8.50%, 8/1/10.................. 740,560
----------
West Virginia (6.7%):
260,000 Summers County, West Virginia First Mortgage Gross
Revenue Refunding, Limited Partnership, 8.00%,
10/1/03............................................... 255,954
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
TAXABLE MUNICIPAL BONDS, CONTINUED:
West Virginia, continued:
980,000 West Virginia State Hospital Financial Authority,
Hospital Revenue, Nellas Income Project, 9.50%,
8/1/15............................................... $ 970,269
-----------
1,226,223
-----------
Total Taxable Municipal Bonds 4,374,445
-----------
U.S. TREASURY BONDS (0.3%):
49,000 9.13%, 5/15/09........................................ 55,708
-----------
Total U.S. Treasury Bonds 55,708
-----------
U.S. TREASURY NOTES (16.5%):
3,000,000 6.38%, 4/30/99........................................ 3,015,720
-----------
Total U.S. Treasury Notes 3,015,720
-----------
U.S. GOVERNMENT AGENCIES (43.8%):
Federal Home Loan Bank (12.4%):
2,230,000 7.25%, 5/14/04........................................ 2,260,908
-----------
Federal Home Loan Mortgage Corp. (14.6%):
2,580,000 8.06%, 8/9/11, Callable 8/9/99 @ 100.................. 2,667,694
-----------
Federal National Mortgage Assoc. (16.8%):
1,000,000 7.30%, 5/13/04, Callable 5/13/99 @ 100................ 1,001,590
2,000,000 8.08%, 7/14/06, Callable 7/17/98 @ 100................ 2,046,120
-----------
3,047,710
-----------
Total U.S. Government Agencies 7,976,312
-----------
</TABLE>
Continued
-20-
<PAGE>
THE SESSION GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (0.0%):
1 Dreyfus Treasury Prime Fund............................ $ 1
1,010 Riverside Capital Money Market Fund.................... 1,010
-----------
Total Investment Companies 1,011
-----------
Total (Cost--$18,051,043)(a) $18,148,196
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $18,226,779.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $115,978
Unrealized depreciation......................................... (18,825)
--------
Net unrealized appreciation..................................... $ 97,153
========
</TABLE>
(b) Represents a restricted security, purchased under Rule 144A, which is
exempt from registration under the Securities Act of 1933, as amended.
(c) Absent the letter of credit the management of the Fund has deemed these
fixed income securities to have no value based on the Fund's established
securities valuation procedures.
CMO--Collateralized Mortgage Obligations
See notes to financial statements.
-21-
<PAGE>
THE SESSION GROUP
RIVERSIDE CAPITAL LOW DURATION GOVERNMENT SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------- ----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (94.6%):
Federal Home Loan Bank (20.1%):
$ 700,000 3.83%, 7/15/98*........................................ $ 682,465
700,000 7.38%, 4/17/02......................................... 710,843
----------
1,393,308
----------
Federal Home Loan Mortgage Corp. (8.6%):
600,000 6.75%, 11/27/01........................................ 599,910
----------
Federal National Mortgage Assoc. (28.6%):
1,000,000 7.00%, 2/6/02.......................................... 1,000,360
1,000,000 6.83%, 3/10/06......................................... 985,090
----------
1,985,450
----------
Shipco 668 Series A-Title XI (3.9%):
273,000 8.50%, 5/11/02**....................................... 269,479
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------- ----------
<C> <S> <C>
U.S. Treasury Notes (33.4%):
$2,300,000 6.63%, 3/31/02......................................... $2,320,562
----------
Total U.S. Government Agencies 6,568,709
----------
INVESTMENT COMPANIES (4.2%):
8 Dreyfus Treasury Prime Fund............................ 8
291,382 Riverside Capital Money Market Fund.................... 291,382
----------
Total Investment Companies 291,390
----------
Total (Cost--$6,814,208)(a) $6,860,099
==========
</TABLE>
- ------
Percentages indicated are based on net assets of $6,944,992.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation.......................................... $54,872
Unrealized depreciation.......................................... (8,981)
-------
Net unrealized appreciation...................................... $45,891
=======
</TABLE>
* 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 rate reflected on the Schedule of
Portfolio Investments is the rate in effect on June 30, 1997.
** This security is guaranteed by U.S. Government Agency collateral.
See notes to financial statements.
-22-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS (75.0%):
Georgia (2.3%):
$ 400,000 Atlanta, Georgia Housing Development Corp., Mortgage
Revenue, 7.00%, 12/1/20, Callable 12/1/05 @ 102..... $ 427,432
-----------
Kentucky (0.6%):
100,000 Pike County Public Corp., 6.00%, 9/1/18, Callable
3/1/07 @ 102........................................ 102,653
-----------
Louisianna (4.5%):
750,000 New Orleans, Louisiana Audubon Park Revenue, 8.00%,
4/1/12.............................................. 822,615
-----------
Pennsylvania (1.4%):
250,000 Schuylkill County, Pennsylvania Industrial
Development Authority Revenue, Beverly Enterprises
Project, 6.63%, 5/1/03.............................. 253,998
-----------
Puerto Rico (1.4%):
250,000 Puerto Rico CommonWealth GO, 6.00%, 7/1/14........... 259,460
-----------
Tennessee (64.1%):
5,000 Blount County, Tennessee Health & Educational
Facilities Board Revenue, Multifamily Mortgage,
Maryville Towers Project, 6.20%, 7/20/28, GNMA...... 5,111
100,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/13....................................... 105,276
105,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/14....................................... 110,361
115,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/15....................................... 121,057
125,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/16....................................... 131,301
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....... 516,090
250,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Patten Towers,
6.38%, 8/1/26, Callable 8/1/05 @ 102................ 253,415
890,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Waterford Place
Apartments Project, Series B, 6.60%, 2/1/24, FGIC... 895,580
850,000 Hardeman County Correctional Facility, 7.00%, 8/1/04. 874,735
300,000 Jackson, Tennessee Health, Educational & Housing,
Posthouse Apartments, 7.00%, 5/1/17................. 316,182
350,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.60%,
10/15/07............................................ 365,362
250,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.65%,
10/15/10............................................ 259,603
115,000 Manchester, Tennessee Water & Sewer Revenue, Series
1992, GO, 6.00%, 7/1/06, AMBAC...................... 119,155
900,000 Maury County Industrial Development Board, PCR,
6.50%, 9/1/24, Callable 9/1/04 @ 102................ 959,913
245,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Mortgage Revenue, Edgewater
Terrace Project, 7.38%, 1/20/27, FHA, LOC: First
Alabama Birmingham.................................. 261,322
</TABLE>
Continued
-23-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Tennessee, continued:
$ 250,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Multifamily Refunding, River Trace
II, 6.45%, 4/1/26................................... $ 260,210
340,000 Memphis, Tennessee Referendum GO, 5.60%, 8/1/10...... 348,551
250,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Health & Educational Facilities Board
Revenue, 1st Mortgage, Blakeford Project, 7.50%,
7/1/99.............................................. 252,525
45,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Water & Sewer Revenue, 7.00%, 1/1/14...... 45,561
150,000 Morristown, Tennessee Housing Development Corp.,
Multifamily Revenue, 6.25%, 5/1/18.................. 155,561
130,000 Poplar Grove, Tennesse Utility District, Waterworks
Revenue Refunding & Improvement, 6.05%, 4/1/05...... 138,724
250,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Beverly
Enterprises Project, 6.50%, 3/1/09.................. 253,470
725,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Heritage Place
Project, 7.13%, 7/1/25, MBIA, FHA................... 807,940
125,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Industrial
Development, 1st Healthcare Project, 6.50%, 4/1/02.. 125,850
1,150,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Multifamily
Housing, Windsor Apartments, 6.75%, 10/1/17......... 1,201,358
500,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Trezevant Manor
Project, 6.00%, 8/1/16.............................. 491,885
500,000 Shelby County, Tennessee, 6.00%, 4/15/24............. 501,595
300,000 Shelby County, Tennessee, 6.63%, 7/1/17, Callable
12/1/06 @ 102....................................... 307,344
500,000 Shelby County, Tennessee, 6.75%, 1/1/28, Callable
12/1/06 @ 102....................................... 513,580
500,000 South Fulton, Tennessee Industrial Development
Revenue, 6.35%, 10/1/15, Callable 10/1/05 @102...... 518,745
310,000 South Fulton, Tennessee Industrial Revenue Authority,
6.00%, 10/1/10, Callable 10/1/05 @102............... 319,542
235,000 Tennessee Housing Development, 5.90%, 7/1/18......... 236,936
-----------
11,773,840
-----------
West Virginia (0.7%):
125,000 Summers County, West Virginia, First Mortgage Gross
Revenue Refunding, 7.25%, 10/1/09................... 128,885
-----------
Total Municipal Bonds 13,768,883
-----------
INVESTMENT COMPANIES (2.0%):
372,984 Dreyfus Municipal Cash Management Plus............... 372,984
-----------
Total Investment Companies 372,984
-----------
</TABLE>
Continued
-24-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
ALTERNATIVE MINIMUM TAX PAPER (17.8%):
Oklahoma (1.7%):
$ 300,000 Oklahoma Development Finance Authority Revenue, First
Mortgage, Bake Rite Income Project, 8.38%, 8/1/11... $ 306,384
-----------
Tennessee (16.1%):
920,000 Loudon County, Tennessee Industrial Development
Board, Solid Waste Disposal Revenue, Kimberly-Clark
Corp. Project, 6.20%, 2/1/23........................ 947,554
100,000 Memphis Shelby County, Tennessee Airport Revenue,
8.13%, 2/15/12, MBIA................................ 104,200
145,000 Tennessee Housing Development Agency Mortgage, Series
A, 6.90%, 7/1/25.................................... 152,637
500,000 Tennessee Housing Development Agency Mortgage, Series
C, 6.10%, 7/1/15.................................... 510,885
740,000 Tennessee Housing Development Agency, 7.05%, 7/1/20.. 783,024
440,000 Tennessee Housing Development, 6.45%, 7/1/21......... 457,415
-----------
2,955,715
-----------
Total Alternative Minimum Tax Paper 3,262,099
-----------
Total (Cost--$16,930,150)(a) $17,403,966
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $18,352,360.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $489,617
Unrealized depreciation......................................... (15,801)
--------
Net unrealized appreciation..................................... $473,816
========
</TABLE>
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
See notes to financial statements.
-25-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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 Obligations 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.
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.
Investments in common and preferred stocks 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 quotation 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
Continued
-26-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
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. The variable net asset value funds may also use an
independent pricing service approved by the Board of Trustees to value
certain other securities. Such prices reflect market values which may be
established through the use of electronic and matrix techniques. 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.
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. The
Funds did not have significant holdings in reverse repurchase agreements
during the fiscal year.
DERIVATIVES:
A derivative is defined as a financial instrument whose value is derived
from the performance of underlying assets, interest rates and currency
exchange rates, or indices, and include (but are not limited to) structured
debt obligations, interest rate and currency swaps, future 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 that fund. Such structured debt obligations may 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
Continued
-27-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
security or the underlying assets or indices. It is possible that the Funds
may incur a loss as a result of their investments in derivative instruments.
It is each 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 limitation on
investments in illiquid securities as set forth in that Funds investment
restrictions. The Funds did not have significant holdings in derivative
investments during the fiscal year, as described above.
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 and Fixed Income Fund as of June 30, 1997, 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: a decrease in capital and a corresponding decrease
in accumulated undistributed net realized losses on investment transactions
in the amount of $175,344 and $150,000, respectively.
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 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).
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Value Equity Fund..................................... $ 8,486,414 $26,983,657
Growth Fund........................................... $ 7,537,463 $11,785,774
Fixed Income Fund..................................... $46,649,671 $58,896,701
Low Duration Government Securities Fund............... $ 7,346,080 $ 8,794,449
Tennessee Municipal Obligations Fund.................. $ 7,099,444 $ 9,085,627
</TABLE>
Continued
-28-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by NBC. Under the
terms of the investment advisory agreement, NBC's fees are computed daily as
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, 1997.
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 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 Ohio serves the Funds as transfer agent and fund
accountant.
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 distribution and shareholder services in connection
with the distribution of Fund shares.
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, 1997, BISYS
received $2,486 from commissions earned on sales of shares of the variable
net asset value funds, of which $246 was reallowed to affiliated
broker/dealers.
The Funds may and do invest available cash balances in the Group's Money
Market Fund.
Fees may be voluntarily reduced to assist the Funds in maintaining more
competitive expense ratios.
Continued
-29-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
Information regarding these transactions is as follows for the year ended
June 30, 1997:
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
-------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions .35% 1.00% of 1.00% of
(percentage of average net assets)....... first first
$50 million $50 million
.75% of .75% of
remaining remaining
Voluntary fee reductions.................. -- -- $216,357
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .20% .20% .20%
Voluntary fee reductions.................. -- -- $16,643
12B-1 FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .25% .25% .25%
Voluntary fee reductions.................. $139,417 $117,986 $56,419
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .25% .25% .25%
Voluntary fee reductions.................. $148,375 $41,407 $13,481
FUND ACCOUNTANT AND TRANSFER AGENT FEES... $70,923 $76,087 $59,545
</TABLE>
<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..................... -- $35,860 $112,622
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets).......... .20% .20% .20%
Voluntary fee reductions..................... -- $3,586 --
12B-1 FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets).......... .25% .25% .25%
Voluntary fee reductions..................... $47,135 $10,065 $18,800
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets).......... .25% .25% .25%
Voluntary fee reductions..................... $3,307 $4,997 $20,618
FUND ACCOUNTANT AND TRANSFER AGENT FEES...... $54,442 $51,984 $71,497
</TABLE>
Continued
-30-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
5. CAPITAL CONTRIBUTIONS
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.
During the year ended, June 30, 1997, NBC voluntarily contributed $134,389
of its investment advisory fees and BISYS voluntarily contributed $40,955 of
its administrative fees to the Money Market Fund. During the years ended
June 30, 1996 and June 30, 1995, NBC voluntarily contributed $124,984 and
$97,370, respectively, of its investment advisory fees to the Money Market
Fund. In addition, during the year June 30, 1996 BISYS contributed $13,327
of its administrative fees to the Money Market Fund. The voluntary
contribution of investment advisory and administrative fees, and the
difference between the market value and the carrying value of the securities
on the transaction date are reflected in the accompanying financial
statements as a capital contribution to the Fund.
During the year ended June 30, 1997, NBC voluntarily contributed $150,000 to
reimburse the Fixed Income Fund for a loss realized on the disposition of a
bond issued by Montalbano Builders. In addition, NBC voluntarily established
an Irrevocable Letter of Credit (LOC) with The Bank of New York on June 4,
1997, with the Fixed Income Fund as the beneficiary of the LOC, in order to
support the value of two defaulted fixed income securities issued by Voyager
Lines Private Placement and Ray & Ross Transport. Prior to the Letter of
Credit NBC unconditionally and irrevocably committed to support the value of
these fixed income securities. These fixed income securities are holdings of
the Fixed Income Fund as of June 30, 1997.
The stated amount of the LOC is the lesser of $4,500,000 or the aggregate
amount of the unpaid par value and accrued interest on these defaulted fixed
income securities ($2,934,688 on the date the Letter of Credit was
established June 4, 1997). The Letter of Credit is payable to the Fixed
Income Fund upon certain payment events which include: (1) the issuer of one
or both of these fixed income securities has failed to repay the beneficiary
the par value and accrued interest due under the securities on the original
maturity date of the respective securities or such later date agreed to by
the Fixed Income Fund; (2) the Fixed Income Fund sells one or both of these
fixed income securities; or (3) one or both of these fixed income securities
have been disposed of and the Fixed Income Fund has either not assented to
such disposition or has revoked assent to such disposition.
The stated amount of the LOC exceeded the fair value of these securities by
$2,725,000 on the date the LOC was established. This amount, including
accrued interest and contributed capital for the realized loss on the
Montalbano Security, is accounted for in the accompanying financial
statements as a capital contribution to the Fixed Income Fund.
6. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Funds have capital loss
carryforwards as of June 30, 1997, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
AMOUNT EXPIRES
---------- -------
<S> <C> <C>
Money Market Fund........................................... $ 41,870 2004
Fixed Income Fund........................................... 2,812,097 2003
2,114,706 2004
1,586,579 2005
</TABLE>
Continued
-31-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1997
<TABLE>
<CAPTION>
AMOUNT EXPIRES
------- -------
<S> <C> <C>
Low Duration Government Securities............................. 8,905 2003
23,561 2004
1,840 2005
Tennessee Municipal Obligations Fund........................... 138,752 2003
968,507 2004
</TABLE>
7. 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........................................... $1,556,172 $581,028
Dividend Income Per Share................................. $ 0.093 $ 0.131
</TABLE>
8. EXEMPT-INTEREST INCOME DESIGNATIONS (UNAUDITED):
The Sessions Group designates the following exempt-interest income for the
Tennessee Municipal Obligations Fund's taxable year ended June 30, 1997:
<TABLE>
<S> <C>
Exempt-Interest Distributions................................... $973,731
Exempt-Interest Distributions Per Share......................... $ 0.42
</TABLE>
The percentage break-down of the exempt-interest income by state for the
Tennessee Municipal Obligations Fund's taxable year ended June 30, 1997 was
as follows:
<TABLE>
<S> <C>
Alabama.......................................................... 0.26%
Arkansas......................................................... 0.04%
Georgia.......................................................... 2.28%
Kansas........................................................... 0.63%
Kentucky......................................................... 0.18%
Louisiana........................................................ 4.51%
Oklahoma......................................................... 2.10%
Pennsylvania..................................................... 2.48%
Puerto Rico...................................................... 0.81%
South Carolina................................................... 1.19%
Tennessee........................................................ 83.39%
West Virginia.................................................... 1.82%
Wyoming.......................................................... 0.31%
------
100.00%
</TABLE>
For the year ended June 30, 1997, 14.50% of the income earned by the
Tennessee Municipal Obligations may be subject to the alternative minimum
tax.
-32-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET FUND
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<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. 0.044 0.046 0.044 0.026 0.032
Net realized losses... -- -- (0.004) -- --
-------- -------- -------- -------- --------
Total from Invest-
ment
Activities......... 0.044 0.046 0.040 0.026 0.032
-------- -------- -------- -------- --------
Distributions
Net investment income. (0.044) (0.046) (0.044) (0.026) (0.032)
-------- -------- -------- -------- --------
Total Distributions. (0.044) (0.046) (0.044) (0.026) (0.032)
-------- -------- -------- -------- --------
Capital transactions.... -- -- 0.004 -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............ 4.44%(a) 4.75%(a) 4.44%(a) 2.65% 3.20%
RATIOS/SUPPLEMENTAL DA-
TA:
Net Assets, at end of
period (000)........... $140,174 $134,146 $157,904 $128,001 $141,840
Ratio of expenses to av-
erage net assets....... 1.09% 0.99% 0.97% 0.95% 0.85%
Ratio of net investment
income to average net
assets................. 4.36% 4.65% 4.41% 2.62% 3.17%
Ratio of expenses to av-
erage net assets*...... 1.30% 1.20% 1.18% 1.09% 0.94%
Ratio of net investment
income to average net
assets*................ 4.15% 4.44% 4.20% 2.48% 3.08%
</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) The capital contribution had no impact on the total return for the years
ended June 30, 1995, June 30, 1996, and June 30, 1997.
See notes to financial statements.
-33-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
VALUE EQUITY FUND
-------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 14.54 $ 12.63 $ 12.67 $ 11.57 $ 11.04
------- ------- ------- ------- -------
Investment Activities
Net investment income........... 0.09 0.14 0.14 0.07 0.21
Net realized and unrealized
gains on investments........... 3.06 2.40 0.76 1.28 0.96
------- ------- ------- ------- -------
Total from Investment
Activities................... 3.15 2.54 0.90 1.35 1.17
------- ------- ------- ------- -------
Distributions
Net investment income........... (0.10) (0.14) (0.13) (0.06) (0.22)
In excess of net investment
income......................... -- -- -- -- --
Net realized gains.............. (2.06) (0.49) (0.15) (0.19) (0.42)
In excess of net realized gains. -- (0.66) -- --
------- ------- ------- ------- -------
Total Distributions........... (2.16) (0.63) (0.94) (0.25) (0.64)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.... $ 15.53 $ 14.54 $ 12.63 $ 12.67 $ 11.57
======= ======= ======= ======= =======
Total Return (excludes sales
charges)......................... 23.66% 20.50% 8.03% 11.76% 10.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)............................ $79,564 $81,055 $80,264 $79,232 $52,629
Ratio of expenses to average net
assets........................... 1.62% 1.58% 1.58% 1.36% 0.73%
Ratio of net investment income to
average
net assets....................... 0.61% 1.01% 1.13% 0.52% 1.84%
Ratio of expenses to average net
assets*.......................... 1.83% 1.79% 1.79% 1.74% 1.69%
Ratio of net investment income to
average
net assets*...................... 0.40% 0.80% 0.92% 0.14% 0.88%
Portfolio turnover................ 11.47% 27.89% 35.64% 62.17% 16.13%
Average commission rate paid (a).. $0.0604 $0.0605 -- -- --
</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) Represents the total dollar amount of commissions paid on portfolio equity
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged. Disclosure of these rates were
not required until fiscal year 1996.
See notes to financial statements.
-34-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH FUND
------------------------------------
APRIL 15,
YEAR ENDED JUNE 30, 1994 TO
------------------------- JUNE 30,
1997 1996 1995 1994 (B)
------- ------- ------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $14.01 $ 12.14 $ 9.82 $10.00
------- ------- ------- ------
Investment Activities
Net investment income................ 0.16 0.18 0.16 --
Net realized and unrealized gains
(losses) on investments............. 3.92 2.13 2.30 (0.18)
------- ------- ------- ------
Total from Investment Activities... 4.08 2.31 2.46 (0.18)
------- ------- ------- ------
Distributions
Net investment income................ (0.16) (0.18) (0.14) --
In excess of net investment income... -- (0.01) -- --
Net realized gains................... (0.42) (0.25) -- --
------- ------- ------- ------
Total Distributions................ (0.58) (0.44) (0.14) --
------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD......... $17.51 $ 14.01 $ 12.14 $ 9.82
======= ======= ======= ======
Total Return (excludes sales charges).. 29.91% 19.35% 25.27% (1.80)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)..... $37,405 $33,767 $21,485 $6,345
Ratio of expenses to average net
assets................................ 1.08% 1.05% 1.24% 2.59%(d)
Ratio of net investment income to
average net assets.................... 1.06% 1.37% 1.64% 0.25%(d)
Ratio of expenses to average net
assets*............................... 1.99% 1.97% 2.51% 3.90%(d)
Ratio of net investment income (loss)
to average net assets*................ 0.15% 0.45% 0.37% (1.07)%(d)
Portfolio turnover..................... 24.07% 31.22% 29.36% 0.00%
Average commissions rate paid (a)...... $0.0696 $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) Represents the total dollar amount of commissions paid on portfolio equity
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged. Disclosure of these rates were
not required until fiscal year 1996.
(b)Period from commencement of operations.
(c)Not annualized.
(d)Annualized.
See notes to financial statements.
-35-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FIXED INCOME FUND
-----------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 8.77 $ 9.27 $ 9.43 $ 10.44 $ 10.26
------- ------- ------- ------- -------
Investment Activities
Net investment income....... 0.57 0.59 0.58 0.57 0.68
Net realized and unrealized
gains (losses) on
investments................ (1.39) (0.48) (0.15) (0.76) 0.27
------- ------- ------- ------- -------
Total from Investment
Activities............... (.82) 0.11 0.43 (0.19) 0.95
------- ------- ------- ------- -------
Distributions
Net investment income....... (0.56) (0.58) (0.58) (0.57) (0.69)
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....... (0.56) (0.61) (0.59) (0.82) (0.77)
------- ------- ------- ------- -------
Capital Transactions.......... $ 1.29 -- -- -- --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD....................... $ 8.68 $ 8.77 $ 9.27 $ 9.43 $ 10.44
======= ======= ======= ======= =======
Total Return (excludes sales
charges)..................... 5.55%(a) 1.05% 4.82% (2.20)% 9.64%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)........................ $18,227 $28,847 $39,496 $42,309 $35,951
Ratio of expenses to average
net assets................... 1.49% 1.48% 1.43% 1.37% 0.74%
Ratio of net investment income
to average
net assets................... 6.44% 6.32% 6.33% 5.61% 6.65%
Ratio of expenses to average
net assets*.................. 1.70% 1.69% 1.64% 1.70% 1.42%
Ratio of net investment income
to average
net assets*.................. 6.23% 6.11% 6.12% 5.28% 5.97%
Portfolio turnover............ 196.97% 363.84% 223.29% 328.44% 234.71%
</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) The total return for 1997 includes the effect of a capital contribution
from the Investment Advisor. Without the capital contribution the total
return would have been (12.33%).
See notes to financial statements.
-36-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LOW DURATION GOVERNMENT
SECURITIES FUND
---------------------------------
APRIL 15,
YEAR ENDED JUNE 30, 1994 TO
---------------------- JUNE 30,
1997 1996 1995 1994 (A)
------ ------ ------ ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...... $ 9.95 $10.15 $ 9.93 $10.00
------ ------ ------ ------
Investment Activities
Net investment income................... 0.54 0.53 0.56 0.07
Net realized and unrealized gains
(losses) on investments................ 0.05 (0.20) 0.21 (0.08)
------ ------ ------ ------
Total from Investment Activities...... 0.59 0.33 0.77 (0.01)
------ ------ ------ ------
Distributions
Net investment income................... (0.54) (0.53) (0.55) (0.06)
------ ------ ------ ------
Total Distributions................... (0.54) (0.53) (0.55) (0.06)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD............ $10.00 $ 9.95 $10.15 $ 9.93
====== ====== ====== ======
Total Return (excludes sales charges)..... 6.12% 3.31% 8.03% (0.13)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)........ $6,945 $7,461 $7,653 $7,692
Ratio of expenses to average net assets... 1.31% 1.44% 1.33% 2.85%(b)
Ratio of net investment income to average
net assets............................... 5.39% 5.19% 5.67% 3.63%(b)
Ratio of expenses to average net assets*.. 2.07% 2.20% 2.10% 3.67%(b)
Ratio of net investment income to average
net assets*.............................. 4.63% 4.43% 4.89% 2.81%(b)
Portfolio turnover........................ 104.79% 20.87% 34.47% 21.20%
</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) Annualized.
(c) Not annualized.
See notes to financial statements.
-37-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TENNESSEE MUNICIPAL OBLIGATIONS FUND
------------------------------------------------
NOVEMBER 4,
YEAR ENDED JUNE 30, 1992 TO
---------------------------------- JUNE 30,
1997 1996 1995 1994 1993 (A)
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 9.76 $ 9.84 $ 9.81 $ 10.44 $ 10.00
------- ------- ------- ------- -------
Investment Activities
Net investment income..... 0.53 0.53 0.50 0.48 0.30
Net realized and
unrealized gains
(losses) on investments.. 0.17 (0.08) 0.03 (0.57) 0.43
------- ------- ------- ------- -------
Total from Investment
Activities............. 0.70 0.45 0.53 (0.09) 0.73
------- ------- ------- ------- -------
Distributions
Net investment income..... (0.51) (0.53) (0.50) (0.48) (0.29)
In excess of net realized
gains.................... -- -- -- (0.06) --
------- ------- ------- ------- -------
Total Distributions..... (0.51) (0.53) (0.50) (0.54) (0.29)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD..................... $ 9.95 $ 9.76 $ 9.84 $ 9.81 $ 10.44
======= ======= ======= ======= =======
Total Return (excludes sales
charges)................... 7.38% 4.67% 5.61% (1.00)% 7.39%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)...................... $18,352 $19,037 $20,827 $19,965 $17,425
Ratio of expenses to average
net assets................. 1.10% 0.98% 1.12% 1.19% 0.82%(b)
Ratio of net investment
income to average
net assets................. 5.33% 5.40% 5.24% 4.67% 4.76%(b)
Ratio of expenses to average
net assets*................ 1.91% 1.83% 1.98% 1.99% 1.62%(b)
Ratio of net investment
income to average
net assets*................ 4.52% 4.55% 4.38% 3.87% 3.96%(b)
Portfolio turnover.......... 38.66% 60.76% 62.59% 86.57% 52.52%
</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) Annualized.
(c) Not annualized.
See notes to financial statements.
-38-
<PAGE>
- ---------------------------------
Investment Adviser
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Administrator and Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
Legal Counsel
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
