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Rule 497(c)
Registration No. 33-21489
File No. 811-5545
THE KEYPREMIER AGGRESSIVE GROWTH FUND [KEYPREMIER FUNDS LOGO]
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3435 Stelzer Road
Columbus, Ohio 43219
For current purchase
and redemption information,
call (800) 766-3960.
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The Sessions Group (the "Group") is an open-end management investment company.
The Group includes The KeyPremier Aggressive Growth Fund (the "Fund") which is a
diversified portfolio of the Group. The Trustees of the Group have divided the
Fund's beneficial ownership into an unlimited number of transferable units
called shares ("Shares").
Martindale Andres & Company, Inc., West Conshohocken, Pennsylvania (the
"Adviser"), which is a wholly owned subsidiary of Keystone Financial, Inc.
("Keystone"), acts as the investment adviser to the Fund.
Additional information about the Fund and the Group, contained in a Statement
of Additional Information, has been filed with the Securities and Exchange
Commission and is available upon request without charge by writing to the Group
at its address or by calling the Group at the telephone number shown above. The
Statement of Additional Information bears the same date as this Prospectus and
is incorporated by reference in its entirety into this Prospectus.
This Prospectus sets forth concisely the information about the Fund and the
Group that a prospective investor ought to know before investing. Investors
should read this Prospectus and retain it for future reference.
The Fund's net asset value per share will fluctuate as the value of its
portfolio changes in response to changing market prices and/or other factors.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
Columbus, Ohio, acts as the Fund's administrator and distributor. BISYS Fund
Services, Inc., Columbus, Ohio, the corporate general partner of BISYS, acts as
the Fund's transfer agent (the "Transfer Agent") and performs certain fund
accounting services for the Fund.
THE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE ADVISER, KEYSTONE OR ANY OF THEIR AFFILIATES. SUCH SHARES ARE
NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL
AGENCY, AND AN INVESTMENT IN THE FUND INVOLVES CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is January 29, 1997.
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PROSPECTUS SUMMARY
SHARES OFFERED: Units of beneficial interest ("Shares") of the Fund, one
separate investment fund of The Sessions Group, an Ohio business trust (the
"Group").
OFFERING PRICE: The public offering price of the Fund is equal to the net
asset value per share plus a sales charge of 4.50% of the public offering price,
reduced on investments of $100,000 or more (See "HOW TO PURCHASE AND REDEEM
SHARES -- Sales Charges"). Under certain circumstances, the sales charge may be
eliminated (See "HOW TO PURCHASE AND REDEEM SHARES -- Sales Charge Waivers").
MINIMUM PURCHASE: $1,000 minimum initial investment with $25 minimum
subsequent investments. Such minimum initial investment is reduced for investors
using the Auto Invest Plan described herein and for employees of the Adviser and
its affiliates.
TYPE OF COMPANY: The Fund is a diversified series of an open-end,
management investment company.
INVESTMENT OBJECTIVE: Growth of capital.
INVESTMENT POLICIES: Under normal market conditions, the Fund will invest
substantially all, but under such conditions in no event less than 65%, of its
total assets in common stocks and securities convertible into common stocks of
companies with market capitalizations ranging between $100 million and $5
billion.
RISK FACTORS AND SPECIAL CONSIDERATIONS: An investment in the Fund is
subject to certain risks, including market risk, as set forth in detail under
"INVESTMENT OBJECTIVES AND POLICIES -- Risk Factors and Investment Techniques."
As with other mutual funds, there can be no assurance that the Fund will achieve
its investment objective. The Fund, to the extent set forth under "INVESTMENT
OBJECTIVE AND POLICIES," may engage in the following practices: the use of
repurchase agreements and reverse repurchase agreements, entering into options
and futures transactions, the purchase of securities on a when-issued or
delayed-delivery basis and the purchase of foreign securities through American
Depository Receipts, and derivatives.
INVESTMENT ADVISER: Martindale Andres & Company, Inc. (the "Adviser").
DIVIDENDS: Dividends from net income are declared and generally paid
quarterly. Net realized capital gains are distributed at least annually.
DISTRIBUTOR: BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services ("BISYS").
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FEE TABLE
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................................... 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees(1).................................................................. 1.00%
12b-1 Fees.......................................................................... None
Other Expenses(2)................................................................... .31
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Estimated Total Fund Operating Expenses............................................. 1.31%
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</TABLE>
Example You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C>
$ 58 $85
</TABLE>
The purpose of the above table is to assist a potential purchaser of Shares of
the Fund in understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. Such expenses do not include any fees
charged by the Adviser or any of its affiliates to its customer accounts which
may have invested in Shares of the Fund. See "MANAGEMENT OF THE GROUP" and
"GENERAL INFORMATION" for a more complete discussion of the annual operating
expenses of the Fund. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
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(1) The Adviser has agreed with the Group to waive all of its investment
advisory fees for the Fund through March 31, 1997.
(2) "Other Expenses" are estimated for the current fiscal year.
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PERFORMANCE INFORMATION
From time to time performance information for the Fund showing the Fund's
average annual total return may be presented in advertisements, sales literature
and shareholder reports. SUCH PERFORMANCE FIGURES ARE BASED ON HISTORICAL
RESULTS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. Average annual
total return will be calculated for the period since commencement of operations
for the Fund (or its respective collective investment and common trust funds)
and will reflect the imposition of the maximum sales charge, if any. Average
annual total return is measured by comparing the value of an investment in the
Fund at the beginning of the relevant period to the redeemable value of the
investment at the end of the period (assuming immediate reinvestment of any
dividends or capital gains distributions), which figure is then annualized. The
Fund may also present its average annual total return excluding the effect of a
sales charge.
The Fund has been initially funded by the transfer of all of the assets of a
corresponding collective investment fund and common trust fund managed by the
Adviser (collectively the "CIFs"). Because the management of the Fund is
substantially the same as the CIFs, the quoted performance of the Fund will
include the performance of the CIFs for the periods prior to the effectiveness
of the Group's registration statement as it relates to the Fund. Such
performance will be restated to reflect the estimated current fees of the Fund.
The CIFs were not registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), and therefore were not subject to certain investment
restrictions that are imposed by the 1940 Act. If the CIFs had been so
registered, their performance might have been adversely affected.
Investors may also judge the performance of the Fund by comparing or
referencing it to the performance of other mutual funds with comparable
investment objectives and policies through various mutual fund or market indices
and to data prepared by various services, which indices or data may be published
by such services or by other services or publications. In addition to
performance information, general information about the Fund that appears in such
publications may be included in advertisements, sales literature and reports to
Shareholders.
Total return is generally a function of market conditions, types of
investments held, and operating expenses. Consequently, current total return
will fluctuate and is not necessarily representative of future results. Any fees
charged by Keystone or by any of its affiliates, including the Adviser, to its
customer accounts which may have invested in Shares of the Fund will not be
included in performance calculations; such fees, if charged, will reduce the
actual performance from that quoted. In addition, if the Adviser or BISYS
voluntarily reduces all or part of its fees for the Fund, as discussed below,
the total return for the Fund will be higher than it would otherwise be in the
absence of such voluntary fee reductions.
INVESTMENT OBJECTIVE AND POLICIES
IN GENERAL
The investment objective for the Fund is growth of capital. The investment
objective of the Fund is a non-fundamental policy, meaning that such objective
may be changed by the Group's Trustees without the vote of the Shareholders of
the Fund. There can be no assurance that the investment objective of the Fund
will be achieved. Any income earned by the Fund will be incidental to its
overall objective of growth of capital.
Under normal market conditions, the Fund will invest substantially all, but
under such conditions in no event less than 65%, of its total assets in common
stocks and securities convertible into common stocks of companies with market
capitalizations ranging between $100
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million and $5 billion. Under normal market conditions, the Fund intends to
operate with a fully invested philosophy, i.e., the Fund will generally invest
90% or more of its assets in common stocks and securities convertible into
common stocks.
The Fund attempts to invest in high quality small to mid capitalization
companies that the Adviser believes have demonstrated one or more of the
following characteristics: (1) strong management team with an ownership stake in
the business; (2) solid revenue and earnings history; (3) unique position in the
company's targeted market; (4) innovative products and solid new product
distribution channels; and (5) solid balance sheet. In addition, the Adviser
attempts to invest in companies that are selling at earnings multiples which the
Adviser believes to be less than their expected long-term growth rate.
The Adviser employs a "bottom-up" approach in its security selection process.
A "bottom-up" approach emphasizes company specific factors rather than industry
factors when making its buy/sell decisions. As a result of this approach, the
Adviser does not utilize a sector neutral strategy. The Adviser does not seek to
have the Fund have representation in all economic sectors; therefore, the Fund's
sector weightings may be overweighted and/or underweighted relative to its
appropriate peers and/or benchmarks.
For purposes of the foregoing, securities convertible into common stocks
include convertible bonds, convertible preferred stock, options and rights. The
securities purchased by the Fund are generally traded on established U.S.
markets and exchanges, although as discussed below, the Fund may invest in
restricted or privately placed securities. Under normal market conditions, the
Fund may also invest up to 35% of its total assets in warrants, foreign
securities through sponsored American Depositary Receipts ("ADRs"), securities
of other investment companies and equity REITs (real estate investment trusts),
cash and Short-Term Obligations and may engage in other investment techniques
described below.
"Short-Term Obligations" consist of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (including U.S. Treasury
securities stripped of the unmatured interest coupons and such stripped interest
coupons), with maturities of 12 months or less, certificates of deposit,
bankers' acceptances and demand and time deposits of selected banks, securities
of money market mutual funds, and commercial paper rated in one of the two
highest rating categories by appropriate nationally recognized statistical
rating organizations (e.g., Standard & Poor's Corporation and Moody's Investors
Service) and repurchase agreements collateralized by such obligations. These
obligations are described further in the Statement of Additional Information.
The Fund may also invest up to 100% of its total assets in Short-Term
Obligations and cash when deemed appropriate for temporary defensive purposes as
determined by the Adviser to be warranted due to current or anticipated market
conditions. However, to the extent that the Fund is so invested, it may not
achieve its investment objectives.
RISK FACTORS AND INVESTMENT TECHNIQUES
Like any investment program, an investment in the Fund entails certain risks.
Equity securities such as those in which the Fund may invest are more volatile
and carry more risk than some other forms of investment, including investments
in equity securities of large capitalization issuers or in high grade fixed
income securities. Therefore, the Fund is subject to stock market risk, i.e.,
the possibility that stock prices in general will decline over short or even
extended periods of time. The Fund is intended for investors who have a
long-term investment time horizon and who can accept the higher risks involved
in seeking potentially higher capital appreciation through invest-
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ments in growth oriented companies. A growth oriented company typically invests
most of its net income in its enterprise and does not pay out much, if any, in
dividends. Accordingly, the Fund does not anticipate any significant
distributions to Shareholders from net investment income, and potential
investors should be in a financial position to forego current income from their
investment in the Fund. In addition, smaller capitalized companies generally
have limited product lines, markets and financial resources and are dependent
upon a limited management group. The securities of less seasoned companies
and/or smaller capitalized companies may have limited marketability, which may
effect or limit their liquidity and therefore the ability of the Fund to sell
such securities at the time and price it deems advisable. In addition, such
securities may be subject to more abrupt or erratic market movements over time
than securities of more seasoned and/or larger capitalized companies or the
market as a whole.
Depending upon the performance of the Fund's investments, the net asset value
per share of the Fund may decrease instead of increase.
The Fund may invest in put and call options and futures as more fully
discussed below. Such instruments are considered to be "derivatives." A
derivative is generally defined as an instrument whose value is based upon, or
derived from, some underlying index, reference rate (e.g., interest rates),
security, commodity or other asset. The Fund will not invest more than 20% of
its total assets in any such derivatives at any one time.
Repurchase Agreements. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Fund would
acquire securities, in exchange for cash, from banks and/or registered broker-
dealers which the Adviser deems creditworthy under guidelines approved by the
Group's Board of Trustees. The seller agrees to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally equals the
price paid by the Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. Securities subject to repurchase agreements must be of the
same type and quality as those in which the Fund may invest directly. Repurchase
agreements are considered to be loans by the Fund under the 1940 Act. For
further information about repurchase agreements and the related risks, see
"INVESTMENT OBJECTIVE AND POLICIES--Additional Information on Portfolio
Instruments--Repurchase Agreements" in the Statement of Additional Information.
Reverse Repurchase Agreements. The Fund may borrow funds by entering into
reverse repurchase agreements in accordance with the investment restrictions
described below. Pursuant to such agreements, the 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 the
Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account assets such as U.S. Government securities or other liquid
high-grade debt securities consistent with the Fund's investment restrictions
having a value equal to the repurchase price (including accrued interest), and
will continually monitor the account to ensure that such equivalent value is
maintained at all times. Reverse repurchase agreements involve the risk that the
market value of the securities sold by the Fund may decline below the price at
which the Fund is obligated to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings by the Fund under the 1940 Act and
therefore a form of leverage. The Fund may experience a negative impact on its
net asset value if interest rates rise during the term of a reverse repurchase
agreement. The Fund generally will invest the proceeds of such borrow-
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ings only when such borrowings will enhance the Fund's liquidity or when the
Fund reasonably expects that the interest income to be earned from the
investment of the proceeds is greater than the interest expense of the
transaction. For further information about reverse repurchase agreements, see
"INVESTMENT OBJECTIVE AND POLICIES--Additional Information on Portfolio
Instruments--Reverse Repurchase Agreements" in the Statement of Additional
Information.
Except as otherwise disclosed to the Shareholders of the Fund, the Group will
not execute portfolio transactions through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with the Adviser, BISYS, or their affiliates, and will not give
preference to the Adviser's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements, and reverse repurchase
agreements.
Foreign Investments. ADRs are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying foreign securities
and are denominated in U.S. dollars.
Investments in foreign securities, including ADRs, may subject the Fund to
investment risks that differ in some respects from those related to investments
in securities of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other investment income, possible seizure, nationalization,
or expropriation of foreign deposits or investments, the possible establishment
of exchange controls or taxation at the source, less stringent disclosure
requirements, less liquid or developed securities markets or the adoption of
other foreign governmental restrictions which might adversely affect the payment
of principal, interest or dividends on such securities or the purchase or sale
thereof.
Restricted Securities. Securities in which the Fund may invest include
securities issued by corporations without registration under the Securities Act
of 1933, as amended (the "1933 Act"), such as securities issued in reliance on
the so-called "private placement" exemption from registration which is afforded
by Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2)
securities are restricted as to disposition under the Federal securities laws,
and generally are sold to institutional investors such as the Fund who agree
that they are purchasing the securities for investment and not with a view to
public distribution. Any resale must also generally be made in an exempt
transaction. Section 4(2) securities are normally resold, if at all, to other
institutional investors through or with the assistance of the issuer or
investment dealers who facilitate the resale of such Section 4(2) securities,
thus providing some liquidity.
Pursuant to procedures adopted by the Board of Trustees of the Group, the
Adviser may determine Section 4(2) securities to be liquid if such securities
are eligible for resale under Rule 144A under the 1933 Act and are readily
saleable. Rule 144A permits the Fund to purchase securities which have been
privately placed and resell such securities to certain qualified institutional
buyers without restriction. For purposes of determining whether a Rule 144A
security is readily saleable, and therefore liquid, the Adviser must consider,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to purchase or sell the security, the number of
potential purchasers, dealer undertakings to make a market in the security, and
the nature of the security and marketplace trades of such security. However,
investing in Rule 144A securities, even if such securities are initially
determined to be liquid, could have the effect of increasing the level of the
Fund's illiquidity to the extent that qualified institutional buyers become, for
a time, uninterested in purchasing these securities.
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Securities Lending. In order to generate additional income, the Fund may, from
time to time, lend its portfolio securities to broker-dealers, banks, or
institutional borrowers of securities. The Fund must receive 100% collateral in
the form of cash or U.S. Government securities. This collateral will be valued
daily by the Adviser. Should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest received on such securities. Loans are subject to termination by the
Fund or the borrower at any time. While the Fund does not have the right to vote
securities on loan, the Fund intends to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. In the
event the borrower would default in its obligations, the Fund bears the risk of
delay in recovery of the portfolio securities and the loss of rights in the
collateral. The Fund will enter into loan agreements only with broker-dealers,
banks, or other institutions that the Adviser has determined are creditworthy
under guidelines established by the Group's Board of Trustees. The Fund will not
lend more than 33% of the total value of its portfolio securities at any one
time.
Writing Covered Call and Put Options. The Fund may write covered call and
covered put options on securities, or futures contracts regarding securities, in
which the Fund may invest, in an effort to realize additional income. A put
option gives the purchaser the right to sell the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. A call option gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is consideration for undertaking the obligations
under the option contract. Such options will be listed on national securities or
futures exchanges. The Fund may write covered call options as a means of seeking
to enhance its income through the receipt of premiums in instances in which the
Adviser determines that the underlying securities or futures contracts are not
likely to increase in value above the exercise price. The Fund also may seek to
earn additional income through the receipt of premiums by writing put options.
By writing a call option, the Fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise price
of the option; by writing a put option, the Fund assumes the risk that it may be
required to purchase the underlying security at a price in excess of its then
current market value.
The Fund, as part of its option transactions, also may write index put and
call options. Through the writing of index options the Fund can achieve many of
the same objectives as through the use of options on individual securities.
Options on securities indices are similar to options on a security except that,
rather than the right to take or make delivery of a security at a specified
price, an option on a securities index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
When the Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the mean between bid
and asked price. If an option expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or
a loss if the cost of
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a closing purchase transaction exceeds the net premium received when the option
is sold) and the deferred credit related to such option will be eliminated. If a
call option is exercised, the Fund may deliver the underlying security in the
open market. In either event, the proceeds of the sale will be increased by the
net premium originally received and the Fund will realize a gain or loss. The
Fund will limit its writing of options such that at no time will more than 20%
of the Fund's total assets be subject to such option transactions.
Purchasing Options. In addition, the Fund may purchase put and call options
written by third parties covering indices and those types of financial
instruments or securities in which the Fund may invest to attempt to provide
protection against adverse price effects from anticipated changes in prevailing
prices for such instruments. The purchase of a put option is intended to protect
the value of the Fund's holdings in a falling market while the purchase of a
call option is intended to protect the value of the Fund's positions in a rising
market. Put and call options purchased by the Fund will be valued at the last
sale price, or in the absence of such a price, at the mean between bid and asked
price. Such options will be listed on national securities or futures exchanges.
In purchasing a call option, the Fund would be in a position to realize a gain
if, during the option period, the price of the underlying security, index or
futures contract increased by an amount in excess of the premium paid for the
call option. It would realize a loss if the price of the underlying security,
index or futures contract declined or remained the same or did not increase
during the period by more than the amount of the premium. By purchasing a put
option, the Fund would be in a position to realize a gain if, during the option
period, the price of the security, index or futures contract declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the security, index or futures contract increased or remained the same or did
not decrease during that period by more than the amount of the premium. If a put
or call option purchased by the Fund were permitted to expire without being sold
or exercised, its premium would represent a realized loss to the Fund.
Futures Contracts. The Fund may purchase or sell contracts for the future
delivery of the specific financial instruments or securities in which the Fund
may invest, and indices based upon the types of securities in which the Fund may
invest (collectively, "Futures Contracts"). The Fund may use this investment
technique as a substitute for a comparable market position in the underlying
securities or to hedge against anticipated future changes in market prices,
which otherwise might adversely affect either the value of the Fund's securities
or the prices of securities which the Fund intends to purchase at a later date.
To the extent the Fund is engaging in a futures transaction as a hedging
device, because of the risk of an imperfect correlation between securities in
the Fund's portfolio that are the subject of a hedging transaction and the
futures contract used as a hedging device, it is possible that the hedge will
not be fully effective if, for example, losses on the portfolio securities
exceed gains on the futures contract or losses on the futures contract exceed
gains on the portfolio securities. For futures contracts based on indices, the
risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to compensate
for the imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, the Fund may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the future contract
has been less or greater than that of the securities. Such "over hedging" or
"under hedging" may
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adversely affect the Fund's net investment results if the market does not move
as anticipated when the hedge is established.
Successful use of futures by the Fund also is subject to the Adviser's ability
to predict correctly movements in the direction of the market. For example, if
the Fund has hedged against the possibility of a decline in the market adversely
affecting the value of securities held in its portfolio and prices increase
instead, the Fund will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). Upon exercise of the option, the assumption of offsetting futures
positions by the writer and holder of the option will be accompanied by delivery
of the accumulated cash balance in the writer's futures margin account which
represents the amount by which the market price of the futures contract, at
exercise, exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract.
Call options sold by the Fund with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the prices of which are
expected to move relatively consistently with the instruments underlying, the
futures contract. Put options sold by the Fund with respect to futures contracts
will be covered when, among other things, cash or liquid securities are placed
in a segregated account to fulfill the obligation undertaken.
The Fund may utilize various index futures to protect against changes in the
market value of the securities in its portfolio or which it intends to acquire.
Securities index futures contracts are based on an index of various types of
securities, e.g., stocks. The index assigns relative values to the securities
included in an index, and fluctuates with changes in the market value of such
securities. The contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash based upon the difference between the
value of the index at the close of the last trading day of the contract and the
price at which the index contract was originally written. The acquisition or
sale of an index futures contract enables the Fund to protect its assets from
fluctuations in rates or prices of certain securities without actually buying or
selling such securities.
In general, the value of futures contracts sold by the Fund to offset declines
in its portfolio securities will not exceed the total market value of the
portfolio securities to be hedged, and futures contracts purchased by the Fund
will be covered by a segregated account consisting of cash or liquid securities
in an amount equal to the total market value of such futures contracts, less the
initial margin deposited therefor.
When buying futures contracts and when writing put options, the Fund will be
required to segregate in a separate account cash and/or U.S. Government
securities in an amount sufficient to meet its obligations. When writing call
options, the Fund will be required to own the financial instrument or futures
contract underlying the option or segregate cash and/or U.S.
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<PAGE> 11
Government securities in an amount sufficient to meet its obligations under
written calls.
When-Issued or Delayed-Delivery Securities. The Fund may purchase securities
on a when-issued or delayed-delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The Fund will engage in when-issued and delayed-delivery
transactions only for the purpose of acquiring portfolio securities consistent
with and in furtherance of its investment objectives and policies, not for
investment leverage, although such transactions represent a form of leveraging.
When-issued or delayed-delivery securities are securities purchased for delivery
beyond the normal settlement date at a stated price and thereby involve a risk
that the price obtained in the transaction will be less advantageous than those
available in the market when delivery takes place. The Fund will generally not
pay for such securities or start earning dividends, if any, on them until they
are received on the settlement date. When the Fund agrees to purchase such
securities, however, its custodian will set aside cash or liquid securities
equal to the amount of the commitment in a separate account. Securities
purchased on a when-issued or delayed-delivery basis are recorded as an asset
and are subject to changes in value based upon market factors. In when-issued
and delayed-delivery transactions, the Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause the Fund to miss a price
considered to be advantageous.
Investment Company Securities. The Fund may also invest in the securities of
other investment companies in accordance with the limitations of the 1940 Act
and any exemptions therefrom. The Fund intends to invest in other investment
companies which, in the opinion of the Adviser, will assist such Fund in
achieving its investment objective and in money market mutual funds for purposes
of short-term cash management. The Fund will incur additional expenses due to
the duplication of fees and expenses as a result of investing in mutual funds.
Additional restrictions on the Fund's investments in the securities of other
mutual funds are contained in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that may be changed
only by a vote of a majority of the outstanding Shares of the Fund (as defined
under "GENERAL INFORMATION--Miscellaneous" herein). The Fund will not:
1. Purchase securities of any one issuer, other than obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the Fund's total assets would
be invested in such issuer or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that 25% or less of the
Fund's total assets may be invested without regard to such limitations. There
is no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the Fund's
total assets at the time of purchase to be invested in securities of one or
more issuers conducting their principal business activities in the same
industry, provided that (a) there is no limitation with respect to obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements secured by obligations of the
U.S. Government, its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) technology companies will be divided according to their
11
<PAGE> 12
services. For example, medical devices, biotechnology, semi-conductor,
software and communications will each be considered a separate industry.
3. Borrow money or issue senior securities except that the Fund may enter
into reverse repurchase agreements and may otherwise borrow money or issue
senior securities as and to the extent permitted by the 1940 Act or any rule,
order or interpretation thereunder.
4. Make loans, except that the Fund may purchase or hold debt instruments
and lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions and enter into
repurchase agreements.
The following additional investment restriction may be changed without the
vote of a majority of the outstanding Shares of the Fund: the Fund may not
purchase or otherwise acquire any security if, as a result, more than 15% of its
net assets would be invested in securities that are illiquid. For purposes of
this investment restriction, illiquid securities include securities which are
not readily marketable and repurchase agreements with maturities in excess of
seven days.
VALUATION OF SHARES
The net asset value of the Fund is determined and its Shares are priced as of
the close of regular trading on the New York Stock Exchange (the "Exchange")
(generally 4:00 p.m. Eastern time) on each Business Day of the Fund. The time at
which the Shares of the Fund are priced is hereinafter referred to as the
"Valuation Time." A "Business Day" of the Fund is a day on which the Exchange is
open for trading and any other day (other than a day on which no Shares of the
Fund are tendered for redemption and no order to purchase any Shares of the Fund
is received) during which there is sufficient trading in portfolio instruments
such that the Fund's net asset value per share might be materially affected. The
Exchange will not be open in observance of the following holidays: New Year's
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share for purposes of pricing
purchases and redemptions is calculated by dividing the value of all securities
and other assets belonging to the Fund, less the liabilities charged to the
Fund, by the number of the Fund's outstanding Shares.
The net asset value per share for the Fund will fluctuate as the value of the
investment portfolio of the Fund changes. The Trustees of the Group have set the
initial price of the Fund's Shares at $10 per share.
The portfolio securities for which market quotations are readily available are
valued based upon their current available prices in the principal market in
which such securities normally are traded. Unlisted securities for which market
quotations are readily available are valued at such market values. Other
securities, including restricted securities and other securities for which
market quotations are not readily available, and other assets are valued at fair
value by the Adviser under procedures established by, and under the supervision
of the Group's Board of Trustees. Securities may be valued by an independent
pricing service approved by the Group's Board of Trustees. Investments in debt
securities with remaining maturities of 60 days or less may be valued based upon
the amortized cost method.
HOW TO PURCHASE
AND REDEEM SHARES
DISTRIBUTOR
Shares of the Fund are sold on a continuous basis by the Group's distributor,
BISYS (the "Distributor"). The principal office of the Distributor is 3435
Stelzer Road, Columbus, Ohio 43219. If you wish to purchase Shares, telephone
the Group at (800) 766-3960.
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<PAGE> 13
PURCHASES OF SHARES
Shares may be purchased through procedures established by the Distributor in
connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by the Adviser, its affiliates or its
correspondent entities (collectively, "Entities").
Shares of the Fund sold to the Entities acting in a fiduciary, advisory,
custodial, agency, or other similar capacity on behalf of Customers will
normally be held of record by the Entities. With respect to Shares of the Fund
so sold, it is the responsibility of the particular Entity to transmit purchase
or redemption orders to the Distributor and to deliver federal funds for
purchase on a timely basis. Beneficial ownership of Shares will be recorded by
the Entities and reflected in the account statements provided by the Entities to
Customers.
Investors may also purchase Shares of the Fund by completing and signing an
Account Registration Form and mailing it, together with a check (or other
negotiable bank draft or money order) in at least the minimum initial purchase
amount, payable to the applicable Fund, to The KeyPremier Funds, P.O. Box
182707, Columbus, Ohio 43218-2707. Subsequent purchases of Shares of the Fund
may be made at any time by mailing a check (or other negotiable bank draft or
money order) payable to the Group to the above address.
If an Account Registration Form has been previously received by the Group,
investors may also purchase Shares by wiring funds to the Fund's custodian.
Prior to wiring any such funds and in order to ensure that wire orders are
invested promptly, investors must call the Group at (800) 766-3960 to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Shares of the Fund are purchased at the net asset value per share (see
"VALUATION OF SHARES") next determined after receipt by the Distributor, its
agents or broker-dealers with whom it has an agreement of an order in good form
to purchase Shares plus any applicable sales charge as described below.
Purchases of Shares of the Fund will be effected only on a Business Day (as
defined in "VALUATION OF SHARES") of the Fund.
For an order for the purchase of Shares of the Fund that is placed through a
broker-dealer, the applicable public offering price will be the net asset value
as so determined (plus any applicable sales charge), but only if the
broker-dealer receives the order and transmits it to the Distributor prior to
the Valuation Time for that day. The broker-dealer is responsible for
transmitting such orders by the Valuation Time. If the broker-dealer fails to do
so, the investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next Business Day.
MINIMUM INVESTMENT
Except as otherwise discussed below under "Auto Invest Plan," the minimum
investment is $1,000 for the initial purchase of Shares of the Fund by an
investor and $25 for subsequent purchases of Shares of the Fund. The initial
minimum investment amount is reduced to $250 for employees of the Adviser,
Keystone or any of their affiliates.
Depending upon the terms of a particular Customer's account, the Entities or
their affiliates may charge a Customer account fees for automatic investment and
other cash management services provided in connection with an investment in the
Fund. Information concerning these services and any charges will be provided by
the Entities. This Prospectus should be read in conjunction with any such
information received from the Entities or their affiliates.
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<PAGE> 14
The Fund reserves the right to reject any order for the purchase of its Shares
in whole or in part, including purchases made with foreign checks and third
party checks not originally made payable to the order of the investor.
Every Shareholder will receive a confirmation of each new transaction in his
or her account, which will also show the total number of Shares owned by the
Shareholder and the number of Shares being held in safekeeping by the Transfer
Agent for the account of the Shareholder. Reports of purchases and redemptions
of Shares by Entities on behalf of their Customers will be sent by the Entities
to their Customers. Shareholders may rely on these statements in lieu of
certificates. Certificates representing Shares will not be issued.
AUTO INVEST PLAN
The KeyPremier Funds Auto Invest Plan enables Shareholders to make regular
monthly or quarterly purchases of Shares of the Fund through automatic
deduction from their bank accounts, provided that the Shareholder's bank is a
member of the Federal Reserve and the Automated Clearing House (ACH) system.
With Shareholder authorization the Transfer Agent will deduct the amount
specified (subject to the applicable minimums) from the Shareholder's bank
account which will automatically be invested in Shares of the Fund at the
public offering price next determined after receipt of payment by the Transfer
Agent. The required minimum initial investment when opening an account using
the Auto Invest Plan is $250; the minimum amount for subsequent investments is
$25. To participate in the Auto Invest Plan, Shareholders should complete the
appropriate section of the Account Registration Form or a supplemental sign-up
form which can be acquired by calling the Group at (800) 766-3960. For a
Shareholder to change the Auto Invest instructions, the request must be made in
writing to the Group at: 3435 Stelzer Road, Columbus, Ohio 43219.
The Group may eliminate or change the Auto Invest Plan at any time or from
time to time without notice thereof.
IN-KIND PURCHASES
Payment for Shares of the Fund may, in the discretion of the Adviser, be made
in the form of securities that are permissible investments for the Fund as
described in this Prospectus. For further information about this form of
payment, contact the Adviser. In connection with an in-kind securities payment,
the Fund will require, among other things, that the securities be valued on the
day of purchase in accordance with the pricing methods used by the Fund and that
the Fund received satisfactory assurances that it will have good and marketable
title to the securities received by it; that the securities be in proper form of
transfer to the Fund; and that adequate information be provided concerning the
basis and other tax matters relating to the securities.
SALES CHARGES
The public offering price of Shares of the Fund equals net asset value plus
a sales charge in accordance with the table below. BISYS receives this sales
charge as Distributor and reallows a portion of it as dealer discounts and
brokerage commissions. However, the Distributor, in its sole discretion may pay
certain dealers all or part of the portion of the sales charge it receives. The
broker or dealer who receives a reallowance in excess of 90% of the sales
charge may be deemed to be an "underwriter" for purposes of the Securities Act
of 1933.
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<PAGE> 15
<TABLE>
<CAPTION>
SALES DEALER
CHARGE SALES DISCOUNTS AND
AS CHARGE AS BROKERAGE
AMOUNT OF % OF NET % OF PUBLIC COMMISSIONS AS
TRANSACTION AT AMOUNT OFFERING % OF PUBLIC
PUBLIC OFFERING PRICE INVESTED PRICE OFFERING PRICE
- --------------------- -------- ----------- --------------
<S> <C> <C> <C>
Less than $100,000... 4.71% 4.50% 4.05%
$100,000 but less
than $250,000...... 3.63 3.50 3.15
$250,000 but less
than $500,000...... 2.56 2.50 2.25
$500,000 but less
than $1,000,000.... 1.52 1.50 1.35
$1,000,000 or more... 0 0 0
</TABLE>
From time to time dealers who receive dealer discounts and brokerage
commissions from the Distributor may reallow all or a portion of such dealer
discounts and brokerage commissions to other dealers or brokers. The
Distributor, at its expense, will also provide additional compensation to
dealers in connection with sales of Shares of the Fund. Such compensation will
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events. In
some instances, this compensation will be made available only to certain dealers
whose representatives have sold a significant amount of such Shares.
Compensation will include payment for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and members of their families to locations within or outside of the United
States for meetings or seminars of a business nature. Compensation will also
include the following types of non-cash compensation offered through sales
contests: (1) vacation trips, including the provision of travel arrangements and
lodging at luxury resorts at an exotic location, (2) tickets for entertainment
events (such as concerts, cruises and sporting events) and (3) merchandise (such
as clothing, trophies, clocks and pens). Dealers may not use sales of the Fund's
Shares to qualify for this compensation to the extent such may be prohibited by
the laws of any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned compensation
is paid for by the Fund or its Shareholders.
SALES CHARGE WAIVERS
The Distributor will waive sales charges for the purchase of Shares of the
Fund by or on behalf of (1) purchasers for whom Keystone, the Adviser, one of
their affiliates or another financial institution acts in a fiduciary, advisory,
agency, custodial (other than individual retirement accounts), or similar
capacity, (2) officers, trustees, directors, advisory board members, employees
and retired employees (including spouses, children and parents of the foregoing)
of Keystone, the Adviser, the Group, BISYS and any affiliated company thereof,
(3) investors who purchase Shares with the proceeds from a distribution from the
Adviser, Keystone or an affiliate trust or agency account, and (4) brokers,
dealers and agents who have a sales agreement with the Distributor, and their
employees (and their spouses and children under 21). The Distributor may change
or eliminate the foregoing waivers at any time or from time to time without
notice thereof. The Distributor may also periodically waive all or a portion of
the sales charge for all investors with respect to the Fund.
In addition, the Distributor may waive sales charges for the purchase of the
Fund's Shares with the proceeds from the recent redemption of shares of a
non-money market fund that imposes a sales charge. The purchase must be made
within 60 days of the redemption, and the Distributor must be notified in
writing by the investor, or by his financial institution, at the time the
purchase is made. A copy of the investor's account statement showing such
redemption must accompany such notice.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, investors have the
privilege of combining concurrent purchases of the Fund and one or more of the
other funds of the Group sold with a sales charge and advised by the Adviser
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<PAGE> 16
("KeyPremier Load Funds"). For example, if a Shareholder concurrently purchases
Shares of the Fund at the total public offering price of $50,000 and Shares of
another KeyPremier Load Fund at the total public offering price of $50,000, the
sales charge would be that applicable to a $100,000 purchase as shown in the
table above. This privilege, however, may be modified or eliminated at any time
or from time to time by the Group without notice thereof.
LETTER OF INTENT
An investor may obtain a reduced sales charge by means of a written Letter of
Intent which expresses the intention of such investor to purchase Shares of the
Fund at a designated total public offering price within a designated 13-month
period. Each purchase of Shares under a Letter of Intent will be made at the net
asset value plus the sales charge applicable at the time of such purchase to a
single transaction of the total dollar amount indicated in the Letter of Intent.
A Letter of Intent may include purchases of Shares made not more than 90 days
prior to the date such investor signs a Letter of Intent; however, the 13-month
period during which the Letter of Intent is in effect will begin on the date of
the earliest purchase to be included. This program may be modified or eliminated
at any time or from time to time by the Group without notice. For further
information about letters of intent, interested investors should contact the
Group at (800) 766-3960.
A Letter of Intent is not a binding obligation upon the investor to purchase
the full amount indicated. The minimum initial investment under a Letter of
Intent is 5% of such amount. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in the name of the investor)
to secure payment of the higher sales charge applicable to the Shares actually
purchased if the full amount indicated is not purchased, and such escrowed
Shares will be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed Shares, whether paid in cash or reinvested in
additional Shares, are not subject to escrow. The escrowed Shares will not be
available for disposal by the investor until all purchases pursuant to the
Letter of Intent have been made or the higher sales charge has been paid. When
the full amount indicated has been purchased, the escrow will be released. An
adjustment will be made to reflect any reduced sales charge applicable to Shares
purchased during the 90-day period prior to the date the Letter of Intent was
entered into at the conclusion of the 13-month period and in the form of
additional Shares credited to the Shareholder's account at the then current
public offering price applicable to a single purchase of the total amount of the
total purchases. Additionally, if the total purchases within the 13-month period
exceed the amount specified, a similar adjustment will be made to reflect
further reduced sales charges applicable to such purchases, if any.
RIGHT OF ACCUMULATION
Pursuant to the right of accumulation, investors are permitted to purchase
Shares of the Fund at the public offering price applicable to the total of (a)
the total public offering price of the Shares then being purchased plus (b) an
amount equal to the then current net asset value of the purchaser's combined
holdings of the Shares of all KeyPremier Load Funds. The "purchaser's combined
holdings" described in the preceding sentence shall include the combined
holdings of the purchaser, the purchaser's spouse and children under the age of
21 and the purchaser's retirement plan accounts. To receive the applicable
public offering price pursuant to the right of accumulation, Shareholders must,
at the time of purchase, give the Transfer Agent sufficient information to
permit confirmation of qualification. This right of accumulation, however, may
be modified or eliminated at any time or from time to time by the Group without
notice.
16
<PAGE> 17
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for Shares of The KeyPremier Prime Money
Market Fund or any other KeyPremier Load Fund at respective net asset values if
the amount to be exchanged meets the applicable minimum investment requirements
and the exchange is made in a state where it is legally authorized. When shares
of The KeyPremier Prime Money Market Fund are exchanged for Shares of the Fund
or other KeyPremier Load Fund, the applicable sales load will be assessed,
unless such shares to be exchanged were acquired through a previous exchange for
shares on which a sales charge was paid. Under such circumstances, the
Shareholder must notify the Group that a sales charge was originally paid and
provide the Group with sufficient information to permit confirmation of the
Shareholder's right not to pay a sales charge.
An exchange is considered a sale of Shares for federal income tax purposes.
However, a Shareholder may not include any sales charge on Shares of the Fund as
a part of the cost of those Shares for purposes of calculating the gain or loss
realized on an exchange of those Shares within 90 days of their purchase.
The Group may at any time modify or terminate the foregoing exchange
privileges. The Group, however, will give Shareholders 60 days' advance written
notice of any such modification.
A Shareholder wishing to exchange his or her Shares may do so by contacting
the Group at (800) 766-3960 or by providing written instructions to the Group.
Any Shareholder who wishes to make an exchange should obtain and review the
current prospectus of the fund in which he or she wishes to invest before making
the exchange. For a discussion of risks associated with unauthorized telephone
exchanges, see "Redemption by Telephone" below.
REDEMPTION OF SHARES
Shares may ordinarily be redeemed by mail or by telephone. However, all or
part of a Customer's Shares may be redeemed in accordance with instructions and
limitations pertaining to his or her account at an Entity. For example, if a
Customer has agreed with an Entity to maintain a minimum balance in his or her
account with the Entity, and the balance in that account falls below that
minimum, the Customer may be obliged to redeem, or the Entity may redeem on
behalf of the Customer, all or part of the Customer's Shares of the Fund to the
extent necessary to maintain the required minimum balance.
REDEMPTION BY MAIL
A written request for redemption must be received by the Group, at the address
shown on the front page of this Prospectus, in order to honor the request. The
Transfer Agent will require a signature guarantee by an eligible guarantor
institution. The signature guarantee requirement will be waived if the following
conditions apply: (1) the redemption check is payable to the Shareholder(s) of
record, and (2) the redemption check is mailed to the Shareholder(s) at the
address of record or mailed or wired to a commercial bank account previously
designated on the Account Registration Form. There is no charge for having
redemption proceeds mailed to a designated bank account. To change the address
to which a redemption check is to be mailed, a written request therefor must be
received by the Transfer Agent. In connection with such request, the Transfer
Agent will require a signature guarantee by an eligible guarantor institution.
For purposes of this policy, the term "eligible guarantor institution" shall
include banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations as those terms are
defined in the Securities Exchange Act of 1934. The Transfer Agent reserves the
right to reject any signature guarantee if (1) it has
17
<PAGE> 18
reason to believe that the signature is not genuine, (2) it has reason to
believe that the transaction would otherwise be improper, or (3) the guarantor
institution is a broker or dealer that is neither a member of a clearing
corporation nor maintains net capital of at least $100,000.
REDEMPTION BY TELEPHONE
If a Shareholder has so designated on the Account Registration Form, a
Shareholder may request a redemption of his or her Shares by telephoning the
Group and having the payment of redemption requests sent electronically directly
to a domestic commercial bank account previously designated by the Shareholder
on the Account Registration Form. A Shareholder may also have such payment
mailed directly to the Shareholder at the Shareholder's address as recorded by
the Transfer Agent. However, this option may be suspended for a period of 30
days following a telephonic address change. Under most circumstances, such
payments will be transmitted on the next Business Day following receipt of a
valid request for redemption. The Group may reduce the amount of a wire
redemption payment by the then-current wire redemption charge of the Fund's
custodian. There is currently no charge for having payment of redemption
requests mailed or sent electronically to a designated bank account. For
telephone redemptions, call the Group at (800) 766-3960.
Neither the Group, the Fund nor their service providers will be liable for any
loss, damages, expense or cost arising out of any telephone redemption effected
in accordance with the Group's telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. The Group will employ procedures
designed to provide reasonable assurance that instructions by telephone are
genuine; if these procedures are not followed, the Group, the Fund or their
service providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording all phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, verification of account name and account number or tax
identification number, and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, Shareholders are unable to effect telephone transactions,
Shareholders may also mail the redemption request to the Group at the address
shown on the front page of this Prospectus.
AUTO WITHDRAWAL PLAN
The Auto Withdrawal Plan enables Shareholders of the Fund, with an account
balance in the Fund of $5,000 or more, to make regular monthly or quarterly
redemptions of Shares. With Shareholder authorization, the Transfer Agent will
automatically redeem Shares at the net asset value on the dates of the
withdrawal and have a check in the amount specified mailed to the Shareholder.
The required minimum withdrawal is $50 monthly. To participate in the Auto
Withdrawal Plan, Shareholders should call (800) 766-3960 for more information.
Purchases of additional Shares, including use of the Auto Invest Plan described
above, concurrent with withdrawals may be disadvantageous to certain
Shareholders because of tax liabilities and sales charges. For a Shareholder to
change the Auto Withdrawal instructions, the request must be made in writing to
the Group.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, the Fund will attempt to honor requests from
Shareholders for next day payments upon redemption of Shares if the
18
<PAGE> 19
request for redemption is received by the Distributor before the Valuation Time
on a Business Day or, if the request for redemption is received after the
Valuation Time, to honor requests for payment on the second Business Day. The
Fund will attempt to so honor redemption requests unless it would be
disadvantageous to the Fund or the Shareholders of the Fund to sell or liquidate
portfolio securities in an amount sufficient to satisfy requests for payments in
that manner.
At various times, the Group may be requested to redeem Shares for which it has
not yet received good payment. In such circumstances, the Group may delay the
forwarding of proceeds for up to 15 days or more until payment has been
collected for the purchase of such Shares. The Group intends to pay cash for all
Shares redeemed, but under abnormal conditions which make payment in cash
unwise, the Group may make payment wholly or partly in portfolio securities at
their then market value equal to the redemption price. In such cases, an
investor may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the Group
reserves the right to redeem, at net asset value, the Shares of the Fund of any
Shareholder if, because of redemptions of Shares by or on behalf of the
Shareholder (but not as a result of a decrease in the market price of such
Shares, the deduction of any sales charge or the establishment of an account
with less than $1,000 using the Auto Invest Plan), the account of such
Shareholder has a value of less than $1,000 ($250 if the Shareholder is an
employee of the Adviser or one of its affiliates). Accordingly, an investor
purchasing Shares of the Fund in only the minimum investment amount may be
subject to such involuntary redemption if he or she thereafter redeems some of
his or her Shares. Before the Group exercises its right to redeem such Shares
and to send the proceeds to the Shareholder, the Shareholder will be given
notice that the value of the Shares in his or her account is less than the
minimum amount and will be allowed at least 60 days to make an additional
investment in an amount which will increase the value of the account to at least
$1,000 ($250 if the Shareholder is an employee of the Adviser or one of its
affiliates).
See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION" in the Statement of
Additional Information for examples of when the Group may suspend the right of
redemption.
DIVIDENDS AND TAXES
DIVIDENDS
A dividend for the Fund is declared quarterly at the close of business on the
day of declaration consisting of an amount of accumulated undistributed net
income, if any, of the Fund as determined necessary or appropriate by the
appropriate officers of the Group. Such dividend is generally paid quarterly.
Shareholders will automatically receive all income dividends and capital gains
distributions in additional full and fractional Shares of the Fund at the net
asset value as of the date of payment, unless the Shareholder elects to receive
dividends or distributions in cash. Such election, or any revocation thereof,
must be made in writing to the Transfer Agent at 3435 Stelzer Road, Columbus,
Ohio 43219, and will become effective with respect to dividends and
distributions having record dates after its receipt by the Transfer Agent.
Distributable net realized capital gains, if any, for the Fund are distributed
at least annually. Dividends are paid in cash not later than seven Business Days
after a Shareholder's complete redemption of his or her Shares in the Fund.
If a Shareholder elects to receive distributions in cash, and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the Shareholder's cash
19
<PAGE> 20
election will be changed automatically and future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.
FEDERAL TAXES
The Fund is treated as a separate entity for federal income tax purposes and
intends to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986 (the "Code") for so long as such qualification is in the
best interest of the Fund's Shareholders. Qualification as a regulated
investment company under the Code requires, among other things, that the
regulated investment company distribute to its shareholders at least 90% of its
investment company taxable income. The Fund contemplates declaring as dividends
all or substantially all of its investment company taxable income (before
deduction of dividends paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of having a
non-calendar taxable year) an amount equal to 98% of their ordinary income for
the calendar year plus 98% of their capital gain net income for the one-year
period ending on October 31 of such calendar year. If distributions during a
calendar year were less than the required amount, the Fund would be subject to a
nondeductible 4% excise tax on the deficiency.
It is expected that the Fund will distribute annually to its Shareholders all
or substantially all of the Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to Shareholders for federal income tax
purposes, even if paid in additional Shares of the Fund and not in cash. The
dividends received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends deduction, if any, received by the Fund
bear to its gross income.
Distribution by the Fund of the excess of net long-term capital gain, if any,
over net short-term capital loss is taxable to Shareholders as long-term capital
gain in the year in which it is received, regardless of how long the Shareholder
has held the Shares. Such distributions are not eligible for the dividends
received deduction.
If the net asset value of a Share is reduced below the Shareholder's cost of
that Share by the distribution of income or gain realized on the sale of
securities, the distribution, from a practical standpoint, is a return of
invested principal, although taxable as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
Additional information regarding federal taxes is contained in the Statement
of Additional Information under the heading "ADDITIONAL
INFORMATION -- Additional General Tax Information." However, the information
contained in this Prospectus and the additional material in the Statement of
Additional Information are only brief summaries of some of the important tax
considerations generally affecting the Fund and its Shareholders. Accordingly,
potential investors are urged to consult their own tax advisers concerning the
application of federal, state and local taxes as
20
<PAGE> 21
such laws and regulations affect their own tax situation.
Shareholders will be advised at least annually as to the federal income tax
consequences of distributions made to them during the year.
MANAGEMENT OF THE GROUP
TRUSTEES OF THE GROUP
Overall responsibility for management of the Group rests with its Board of
Trustees. Unless so required by the Group's Declaration of Trust or By-Laws or
by Ohio law, at any given time all of the Trustees may not have been elected by
the shareholders of the Group. The Group will be managed by the Trustees in
accordance with the laws of Ohio governing business trusts. The Trustees, in
turn, elect the officers of the Group to supervise its day-to-day operations.
The Trustees of the Group receive fees and are reimbursed for their expenses
in connection with each meeting of the Board of Trustees they attend. However,
no officer or employee of BISYS Fund Services Inc., the sole general partner of
BISYS, or BISYS receives any compensation from the Group for acting as a Trustee
of the Group. The officers of the Group receive no compensation directly from
the Group for performing the duties of their offices. BISYS receives fees from
the Fund for acting as Administrator, may receive fees under the Administrative
Services Plan discussed below and may retain all or a portion of any sales load
imposed upon purchases of Shares. BISYS Fund Services, Inc. receives fees from
the Fund for acting as Transfer Agent and for providing certain fund accounting
services.
INVESTMENT ADVISER
Martindale Andres & Company, Inc., Four Falls Corporate Center, Suite 200,
West Conshohocken, Pennsylvania 19428, is the investment adviser of the Fund and
has served as such since the Fund's inception. The Adviser is a wholly owned
subsidiary of Keystone Financial, Inc., 1 Keystone Plaza, Harrisburg,
Pennsylvania 17101 ("Keystone"). The Adviser was organized in 1989 and was
acquired by Keystone in December 1995. Except with respect to the KeyPremier
Load Funds and The KeyPremier Prime Money Market Fund, the Adviser has not
previously served as the investment adviser to a registered open-end management
investment company. However, the Adviser has managed since its founding the
investment portfolio of high net worth individuals, endowments, pension and
common trust funds. The Adviser currently has over $1.6 billion under
management.
Subject to the general supervision of the Board of Trustees of the Group and
in accordance with the investment objective and restrictions of the Fund, the
Adviser manages the Fund, makes decisions with respect to and places orders for
all purchases and sales of its portfolio securities, and maintains the Fund's
records relating to such purchases and sales.
William C. Martindale, Jr. is responsible for the day-to-day management of the
Fund's portfolio, has managed the CIFs since July 1, 1994, and has over 25 years
of equity investment experience. Mr. Martindale co-founded the Adviser in 1989
and serves as its Chief Investment Officer. Prior to 1989, Mr. Martindale served
in various investment-related capacities with Dean Witter Reynolds.
For the services provided and expenses assumed pursuant to its Investment
Advisory Agreement with the Group, the Adviser receives a fee from the Fund,
computed daily and paid monthly, at the annual rate of one percent (1.00%) of
the Fund's average daily net assets.
The Adviser may periodically voluntarily reduce all or a portion of its
advisory fee with respect to the Fund to increase the net income of the Fund
available for distribution as dividends. The Adviser may not seek reimburse-
21
<PAGE> 22
ment of such voluntarily reduced fees after the end of the fiscal year in which
the fees were reduced. The reduction of such fee will cause the total return of
the Fund to be higher than it would otherwise be in the absence of such a
reduction.
ADMINISTRATOR AND DISTRIBUTOR
BISYS is the administrator for the Fund and also acts as the Fund's principal
underwriter and distributor (the "Administrator" or the "Distributor," as the
context indicates). BISYS and its affiliated companies, including BISYS Fund
Services, Inc., are wholly owned by The BISYS Group, Inc., a publicly-held
company which is a provider of information processing, loan servicing and 401(k)
administration and recordkeeping services to and through banking and other
financial organizations.
The Administrator generally assists in all aspects of the Fund's
administration and operation. For expenses assumed and services provided as
administrator pursuant to its management and administration agreement with the
Group, the Administrator receives a fee from the Fund, computed daily and paid
periodically, calculated at an annual rate of eleven and one-half one-hundredths
of one percent (.115%) of the Fund's average daily net assets. The Administrator
may periodically voluntarily reduce all or a portion of its administration fee
with respect to the Fund to increase the net income of the Fund available for
distribution as dividends. The Administrator may not seek reimbursement of such
reduced fees after the end of the fiscal year in which the fees were reduced.
The voluntary reduction of such fee will cause the total return of the Fund to
be higher than it would otherwise be in the absence of such a fee reduction.
The Distributor acts as agent for the Fund in the distribution of its Shares
and, in such capacity, solicits orders for the sale of Shares, advertises, and
pays the costs of advertising, office space and its personnel involved in such
activities. The Distributor receives no compensation under its Distribution
Agreement with the Group, but may retain all or a portion of any sales charge
imposed upon the purchase of Shares. See "HOW TO PURCHASE AND REDEEM
SHARES--Sales Charges."
EXPENSES
The Adviser and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund. The Fund will bear the following
expenses relating to its operations: organizational expenses, taxes, interest,
any brokerage fees and commissions, fees and expenses of the Trustees of the
Group, Commission fees, state securities qualification fees, costs of preparing
and printing prospectuses for regulatory purposes and for distribution to the
Fund's current shareholders, outside auditing and legal expenses, advisory fees,
fees and out-of-pocket expenses of the custodian, fund accountant and Transfer
Agent, costs for independent pricing services, certain insurance premiums, costs
of maintenance of the Group's existence, costs of shareholders' reports and
meetings, expenses incurred under the Administrative Services Plan described
below and any extraordinary expenses incurred in the Fund's operation.
ADMINISTRATIVE SERVICES PLAN
The Group has adopted an Administrative Services Plan (the "Services Plan")
pursuant to which the Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include the
Adviser, Entities, and BISYS, which agree to provide certain ministerial, record
keeping and/or administrative support services for their customers or account
holders (collectively, "customers") who are the beneficial or record owner of
Shares of the Fund. In consideration for such services, a Service Organiza-
22
<PAGE> 23
tion receives a fee from the Fund, computed daily and paid monthly, at an annual
rate of up to .25% of the average daily net asset value of Shares of the Fund
owned beneficially or of record by such Service Organization's customers for
whom the Service Organization provides such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, record keeping and/or administrative support
services with respect to the beneficial or record owners of Shares of the Fund,
such as processing dividend and distribution payments from the Fund on behalf of
customers, providing periodic statements to customers showing their positions in
the Shares of the Fund, providing sub-accounting with respect to Shares
beneficially owned by such customers and/or providing customers with a service
that invests the assets of their accounts in Shares of the Fund pursuant to
specific or pre-authorized instructions. As of the date hereof, no such
servicing agreements have been entered into by the Group on behalf of the Fund.
BANKING LAWS
The Adviser believes that it possesses the legal authority to perform the
investment advisory services for the Fund contemplated by its investment
advisory agreement with the Group, as described in this Prospectus, without
violation of applicable banking laws and regulations, and has so represented in
its investment advisory agreement with the Group. Future changes in Federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which the Adviser could
continue to perform such services for the Fund. See "MANAGEMENT OF THE
GROUP--Glass-Steagall Act" in the Statement of Additional Information for
further discussion of applicable law and regulations.
GENERAL INFORMATION
DESCRIPTION OF THE GROUP AND ITS SHARES
The Group was organized as an Ohio business trust on April 25, 1988. The Group
consists of seventeen funds, each having its own class of shares. Each share
represents an equal proportionate interest in a fund with other shares of the
same fund, and is entitled to such dividends and distributions out of the income
earned on the assets belonging to the fund as are declared at the discretion of
the Trustees (see "Miscellaneous" below). The other funds of the Group are The
KeyPremier Prime Money Market Fund, The KeyPremier Pennsylvania Municipal Bond
Fund, The KeyPremier Established Growth Fund, The KeyPremier Intermediate Term
Income Fund, 1st Source Monogram U.S. Treasury Obligations Money Market Fund,
1st Source Monogram Diversified Equity Fund, 1st Source Monogram Income Equity
Fund, 1st Source Monogram Special Equity Fund, 1st Source Monogram Income Fund,
1st Source Monogram Intermediate Tax-Free Bond Fund, Riverside Capital Money
Market Fund, Riverside Capital Value Fund, Riverside Capital Fixed Income Fund,
Riverside Capital Growth Fund, Riverside Capital Tennessee Municipal Obligations
Fund and Riverside Capital Low Duration Government Securities Fund.
Shareholders are entitled to one vote for each dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested, and will
vote in the aggregate and not by fund except as otherwise expressly required by
law. For example, Shareholders of the Fund will vote in the aggregate with other
shareholders of the Group with respect to the election of Trustees. However,
Shareholders of the Fund will vote as a fund, and not in the aggregate with
other shareholders of the Group, for pur-
23
<PAGE> 24
poses of approval or amendment of the Group's investment advisory agreement as
it relates to the Fund.
Overall responsibility for the management of the Fund is vested in the Board
of Trustees of the Group. See "MANAGEMENT OF THE GROUP--Trustees of the Group."
Individual Trustees are elected by the shareholders of the Group, although
Trustees may, under certain circumstances, fill vacancies, including vacancies
created by expanding the size of the Board. Trustees may be removed by the Board
of Trustees or shareholders in accordance with the provisions of the Declaration
of Trust and By-Laws of the Group and Ohio law. See "ADDITIONAL
INFORMATION--Miscellaneous" in the Statement of Additional Information for
further information.
An annual or special meeting of shareholders to conduct necessary business is
not required by the Declaration of Trust, the 1940 Act or other authority
except, under certain circumstances, to elect Trustees, to amend the Declaration
of Trust, the investment advisory agreement or the Fund's fundamental policies
and to satisfy certain other requirements. To the extent that such a meeting is
not required, the Group does not intend to have an annual or special meeting of
shareholders.
The Group has represented to the Commission that the Trustees will call a
special meeting of shareholders for the purpose of considering the removal of
one or more Trustees upon written request therefor from shareholders holding not
less than 10% of the outstanding votes of the Group. At such a meeting, a quorum
of shareholders (constituting a majority of votes attributable to all
outstanding shares of the Group), by majority vote, has the power to remove one
or more Trustees.
Immediately prior to the public offering of the Fund's Shares, BISYS Fund
Services Ohio, Inc. was the sole shareholder of the Fund. It is expected that
immediately after the public offering of the Fund's Shares, BISYS Fund Services
Ohio, Inc.'s holding of Shares of the Fund will be reduced below 5%.
CUSTODIAN
The Bank of New York serves as the custodian for the Fund.
TRANSFER AGENCY AND FUND ACCOUNTING SERVICES
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, serves as
the Fund's transfer agent pursuant to a Transfer Agency Agreement with the Group
and receives a fee for such services. BISYS Fund Services, Inc. also provides
certain accounting services for the Fund pursuant to the Fund Accounting
Agreement and receives a fee from the Fund for such services equal to the
greater of (a) a fee computed at an annual rate of 0.03% of the Fund's average
daily net assets or (b) the annual fee of $30,000. See "MANAGEMENT OF THE
GROUP--Transfer Agency and Fund Accounting Services" in the Statement of
Additional Information for further information.
MISCELLANEOUS
Shareholders will receive unaudited semi-annual reports and annual reports
audited by independent public accountants.
As used in this Prospectus and in the Statement of Additional Information,
"assets belonging to the fund" means the consideration received by a fund upon
the issuance or sale of shares in the fund, together with all income, earnings,
profits, and proceeds derived from the investment thereof, including any
proceeds from the sale, exchange, or liquidation of such investments, and any
funds or amounts derived from any reinvestment of such proceeds, and any general
assets of the Group not readily identified as belonging to a particular fund
that are allocated to such fund by the Group's Board of Trustees. The Board of
Trustees may allocate such general assets in any manner it deems fair and
equitable. Determinations by
24
<PAGE> 25
the Board of Trustees of the Group as to the timing of the allocation of general
liabilities and expenses and as to the timing and allocable portion of any
general assets with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional Information, a
"vote of a majority of the outstanding Shares" of the Fund means the affirmative
vote, at a meeting of Shareholders duly called, of the lesser of (a) 67% or more
of the votes of Shareholders of the Fund present at a meeting at which the
holders of more than 50% of the votes attributable to Shareholders of record of
the Fund are represented in person or by proxy, or (b) the holders of more than
50% of the outstanding votes of Shareholders of the Fund.
Inquiries regarding the Fund may be directed in writing to the Group at 3435
Stelzer Road, Columbus, Ohio 43219, or by calling toll free (800) 766-3960.
25
<PAGE> 26
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 27
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 28
INVESTMENT ADVISER
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, Pennsylvania 19428
ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
LEGAL COUNSEL
Baker & Hostetler LLP
65 East State Street
Columbus, Ohio 43215
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.................... 2
FEE TABLE............................. 3
PERFORMANCE INFORMATION............... 4
INVESTMENT OBJECTIVES AND
POLICIES............................ 4
INVESTMENT RESTRICTIONS............... 11
VALUATION OF SHARES................... 12
HOW TO PURCHASE AND REDEEM
SHARES.............................. 12
REDEMPTION OF SHARES.................. 17
DIVIDENDS AND TAXES................... 19
MANAGEMENT OF THE GROUP............... 21
GENERAL INFORMATION................... 23
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR
ITS DISTRIBUTOR, BISYS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE
FUND OR BY BISYS IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
[KEYPREMIER FUNDS(SM) LOGO]
THE
KEYPREMIER
AGGRESSIVE
GROWTH FUND
MARTINDALE
ANDRES & COMPANY, INC.
INVESTMENT ADVISER
Prospectus
dated January 29, 1997
<PAGE> 29
Rule 497(c)
Registration No. 33-21489
File No. 811-5545
THE KEYPREMIER AGGRESSIVE GROWTH FUND
One Investment Portfolio of
THE SESSIONS GROUP
Statement of Additional Information
January 29, 1997
This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the prospectus (the "Prospectus") of The
KeyPremier Aggressive Growth Fund (the "Fund"), dated as of the date hereof. The
Fund is one of seventeen funds of The Sessions Group, an Ohio business trust
(the "Group"). This Statement of Additional Information is incorporated in its
entirety into the Prospectus. Copies of the Prospectus may be obtained by
writing the Group at 3435 Stelzer Road, Columbus, Ohio 43219, or by telephoning
toll free (800) 766-3960.
<PAGE> 30
TABLE OF CONTENTS
-----------------
Page
THE SESSIONS GROUP....................................................... B-1
INVESTMENT OBJECTIVE AND POLICIES........................................ B-1
Additional Information on Portfolio Instruments..................... B-1
Investment Restrictions............................................. B-9
Portfolio Turnover.................................................. B-10
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION........................... B-10
MANAGEMENT OF THE GROUP.................................................. B-11
Trustees and Officers............................................... B-11
Investment Adviser.................................................. B-13
Portfolio Transactions.............................................. B-15
Glass-Steagall Act.................................................. B-17
Administrator....................................................... B-18
Distributor......................................................... B-19
Administrative Services Plan........................................ B-20
Custodian........................................................... B-21
Transfer Agency and Fund Accounting Services........................ B-21
Auditors............................................................ B-22
Legal Counsel....................................................... B-22
ADDITIONAL INFORMATION................................................... B-23
Description of Shares............................................... B-23
Vote of a Majority of the Outstanding Shares........................ B-24
Additional General Tax Information.................................. B-24
Calculation of Total Return......................................... B-28
Performance Comparisons............................................. B-28
Miscellaneous....................................................... B-29
APPENDIX..................................................................A-1
- i -
<PAGE> 31
STATEMENT OF ADDITIONAL INFORMATION
THE SESSIONS GROUP
The Sessions Group (the "Group") is an open-end management investment
company which currently offers seventeen separate investment portfolios. This
Statement of Additional Information deals with one of those portfolios, The
KeyPremier Aggressive Growth Fund (the "Fund"), which is considered to be a
diversified portfolio.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. Capitalized terms
not defined herein are defined in the Prospectus. No investment in Shares of the
Fund should be made without first reading the Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objective and policies
of the Fund as set forth in the Prospectus.
BANK OBLIGATIONS. The Fund may invest in bank obligations such as
bankers' acceptances, certificates of deposit, and demand and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by the Fund will be those guaranteed by
domestic and foreign banks having, at the time of investment, capital, surplus,
and undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
and demand and time deposits will be those of domestic and foreign banks and
savings and loan associations, if (a) at the time of investment the depository
institution has capital, surplus, and undivided profits in excess of
$100,000,000 (as of the date of its most recently published financial
statements), or (b) the principal amount of the instrument is insured in full by
the Federal Deposit Insurance Corporation.
COMMERCIAL PAPER. Commercial paper consists of unsecured
promissory notes issued by corporations. Issues of commercial
<PAGE> 32
paper normally have maturities of less than nine months and fixed rates of
return.
The Fund will purchase commercial paper consisting of issues rated at
the time of purchase by one or more appropriate nationally recognized
statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations. The Fund may also invest in commercial paper
that is not rated but that is determined by the Adviser to be of comparable
quality to instruments that are so rated by an NRSRO that is neither
controlling, controlled by, or under common control with the issuer of, or any
issuer, guarantor, or provider of credit support for, the instruments. For a
description of the rating symbols of the NRSROs, see the Appendix.
FOREIGN INVESTMENT. Investments in securities issued by foreign
issuers, including ADRs, may subject the Fund to investment risks that differ in
some respects from those related to investment in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
possible seizure, nationalization, or expropriation of foreign investments, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. The Fund will acquire such securities only when the
Adviser believes the risks associated with such investments are minimal.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Obligations of certain agencies and instrumentalities of
the U.S. Government are supported by the full faith and credit of the U.S.
Treasury; others are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others are supported
only by the credit of the instrumentality. No assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
agencies or instrumentalities if it is not obligated to do so by law.
The Fund may also invest in the following types of U.S. Treasury
securities: direct obligations issued by the U.S. Treasury including bills,
notes and bonds which differ from each other only in interest rates, maturities
and times of issuance; U.S. Treasury securities that have been stripped of their
unmatured interest coupons (which typically provide for interest payments
semi-annually); interest coupons that have been stripped from such U.S. Treasury
securities; receipts and certificates for such stripped debt obligations and
stripped coupons (collectively, "Stripped Treasury Securities"); and in
repurchase agreements
B-2
<PAGE> 33
collateralized by such securities. Stripped Treasury Securities will include (1)
coupons that have been stripped from U.S. Treasury bonds, which may be held
through the Federal Reserve Bank's book-entry system called "Separate Trading of
Registered Interest and Principal of Securities" ("STRIPS") or through a program
entitled "Coupon Under Book-Entry Safekeeping" ("CUBES").
Treasury bills have maturities of one year or less; Treasury notes have
maturities of one to ten years and Treasury bonds generally have maturities of
greater than ten years. Stripped Treasury Securities are sold at a deep discount
because the buyer of those securities receives only the right to receive a
future fixed payment (representing principal or interest) on the security and
does not receive any rights to periodic interest payments on the security.
REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in equity REITs.
REITs pool investors' funds for investment primarily in commercial real estate
properties. Investment in REITs may subject the Fund to certain risks. REITs may
be affected by changes in the value of the underlying property owned by the
trust. REITs are dependent upon specialized management skill, may not be
diversified and are subject to the risks of financing projects. REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self liquidation
and the possibility of failing to qualify for the beneficial tax treatment
available to REITs under the Internal Revenue Code and to maintain its exemption
from the 1940 Act. As a shareholder in a REIT, the Fund would bear, along with
other shareholders, its pro rata portion of the REIT's operating expenses. These
expenses would be in addition to the advisory and other expenses the Fund bears
directly in connection with its own operations.
RESTRICTED SECURITIES. Securities in which the Fund may invest include
securities issued by corporations without registration under the Securities Act
of 1933, as amended (the "1933 Act"), such as securities issued in reliance on
the so-called "private placement" exemption from registration which is afforded
by Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section 4(2)
securities are restricted as to disposition under the Federal securities laws,
and generally are sold to institutional investors such as the Fund who agree
that they are purchasing the securities for investment and not with a view to
public distribution. Any resale must also generally be made in an exempt
transaction. Section 4(2) securities are normally resold to other institutional
investors through or with the assistance of the issuer or investment dealers who
make a market in such Section 4(2) securities, thus providing liquidity. Any
such restricted securities will be considered to be illiquid for purposes of the
Fund's limitations on investments in illiquid securities unless, pursuant to
procedures adopted by the Board of Trustees of the
B-3
<PAGE> 34
Group, the Adviser has determined such securities to be liquid because such
securities are eligible for resale under Rule 144A under the 1933 Act and are
readily saleable. The Fund will limit its investment in Section 4(2) securities
to not more than 5% of its net assets.
WHEN-ISSUED SECURITIES. As discussed in the Prospectus, the Fund may
purchase securities on a "when-issued" basis (I.E., for delivery beyond the
normal settlement date at a stated price and yield). When the Fund agrees to
purchase securities on a "when-issued" basis, the Fund's custodian will set
aside cash or liquid portfolio securities equal to the amount of the commitment
in a separate account. Normally, the Fund's custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, the Fund may
be required subsequently to place additional assets in the separate account in
order to assure that the value of the account remains equal to the amount of the
Fund's commitment. It may be expected that the Fund's net assets will fluctuate
to a greater degree when it sets aside portfolio securities to cover such
purchase commitments than when it sets aside cash. In addition, because the Fund
will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described above, the Fund's liquidity and the ability
of the Adviser to manage it might be affected in the event its commitments to
purchase "when-issued" securities ever exceeded 25% of its total assets. Under
normal market conditions, however, the Fund's commitment to purchase
"when-issued" or "delayed-delivery" securities will not exceed 25% of its total
assets.
When the Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in the
Fund's incurring a loss or missing the opportunity to obtain a price considered
to be advantageous. The Fund will engage in "when-issued" transactions only for
the purpose of acquiring portfolio securities consistent with the Fund's
investment objective and policies and not for investment leverage.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Fund would
acquire securities from banks and registered broker-dealers which the Adviser
deems creditworthy under guidelines approved by the Group's Board of Trustees,
subject to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price would generally equal the price
paid by the Fund plus interest negotiated on the basis of current short-term
rates, which may be more or less than the rate on the underlying portfolio
securities. The seller under a repurchase agreement will be required to maintain
continually the value of collateral held pursuant to the agreement at not less
than the repurchase price (including accrued interest). This requirement will be
continually monitored by the Adviser. If
B-4
<PAGE> 35
the seller were to default on its repurchase obligation or become insolvent, the
Fund would suffer a loss to the extent that the proceeds from a sale of the
underlying portfolio securities were less than the repurchase price under the
agreement, or to the extent that the disposition of such securities by the Fund
were delayed pending court action. Additionally, there is no controlling legal
precedent confirming that the Fund would be entitled, as against a claim by such
seller or its receiver or trustee in bankruptcy, to retain the underlying
securities. Securities subject to repurchase agreements will be held by the
Fund's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system.
REVERSE REPURCHASE AGREEMENTS. As discussed in the Prospectus, the Fund
may borrow funds by entering into reverse repurchase agreements in accordance
with its investment restrictions. Pursuant to such agreements, the Fund would
sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase the securities at a mutually agreed-upon
date and price. At the time the Fund enters into a reverse repurchase agreement,
it will place in a segregated custodial account assets such as U.S. Government
securities or other liquid, high grade debt securities consistent with the
Fund's investment restrictions having a value equal to the repurchase price
(including accrued interest), and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the price at which the Fund is obligated to
repurchase the securities. Reverse repurchase agreements are considered to be
borrowings by the Fund under the 1940 Act and therefore a form of leveraging.
HEDGING TRANSACTIONS. Hedging transactions, including the use of
options and futures, in which the Fund is authorized to engage as described in
the Prospectus, have risks associated with them including possible default by
the other party to the transaction, illiquidity and, to the extent the Adviser's
view as to certain market movements is incorrect, the risk that the use of such
hedging transactions could result in losses greater than if they had not been
used.
Use of put and call options may result in losses to the Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation the Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in
B-5
<PAGE> 36
the related portfolio position of the Fund create the possibility that losses on
the hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances. As a result, in certain markets, the Fund might not be able to
close out a transaction without incurring substantial losses, if at all.
Although the use of futures and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of hedging
transactions would reduce net asset value, and possible income, and such losses
can be greater than if the hedging transactions had not been utilized.
GENERAL CHARACTERISTICS OF OPTIONS. Put options and call options
typically have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or sold.
Thus, the following general discussion relates to each of the particular types
of options discussed in the Prospectus and in greater detail below. In addition,
many hedging transactions involving options require segregation of the Fund's
assets in special accounts, as described further below.
With certain exceptions, exchange-listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options are cash settled for the net
amount, if any, by which the option is "in-the-money" (i.e., where the value of
the underlying instrument exceeds, in the case of a call option, or is less
than, in the case of a put option, the exercise price of the option) at the time
the option is exercised. Frequently, rather than taking or making delivery of
the underlying instrument through the process of exercising the option, listed
options are closed by entering into offsetting purchase or sale transactions
that do not result in ownership of the new option. The Fund's ability to close
out its position as a purchaser or seller of a put or call option is dependent
in part, upon the liquidity of the option market. In addition, the hours of
trading for listed options may not coincide with the hours during which the
underlying financial instruments are traded. To the extent that the options
markets close before the markets for the underlying financial instruments,
significant price and rate movements can take place in the underlying markets
that cannot be reflected in the option markets.
Exchange-traded options generally have standardized terms and
performance mechanics unlike over-the-counter traded options. The
B-6
<PAGE> 37
Fund currently expects to purchase and sell only exchange-traded options.
Exchange-traded options generally are guaranteed by the clearing agency which is
the issuer or counterparty to such options. This guarantee usually is supported
by a daily payment system (i.e., variation margin requirements) operated by the
clearing agency in order to reduce overall credit risk. As a result, unless the
clearing agency defaults, there is relatively little counterparty credit risk
associated with options purchased on an exchange.
All options written by the Fund must be "covered" (i.e., the Fund must
own the securities or futures contract subject to a call option or must meet the
asset segregation requirements) as long as the call is outstanding. Even though
the Fund will receive the option premium to help protect it against loss, a call
option written by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold. With respect to put options
written by the Fund, the Fund will place high quality liquid debt securities in
a segregated account to cover its obligations under such put option and will
monitor the value of the assets in such account and its obligations under the
put option daily.
FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may enter
into futures contracts. This investment technique is designed primarily to act
as a substitute for a position in the underlying security and to hedge against
anticipated future changes in market conditions which otherwise might adversely
affect the value of securities which the Fund holds or intends to purchase. For
example, when market values of portfolio securities are expected to fall, the
Fund can seek through the sale of futures contracts to offset a decline in the
value of its portfolio securities. When market values are expected to rise, the
Fund, through the purchase of such contracts, can attempt to secure better
prices for the Fund than might later be available in the market when it effects
anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give the Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require the Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. The Fund may lose the expected benefit of futures transactions if
securities prices or foreign exchange rates move in an unanticipated manner.
Such
B-7
<PAGE> 38
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of
the Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities, limiting the Fund's
ability to hedge effectively against market risk and giving rise to additional
risks. There is no assurance of liquidity in the secondary market for purposes
of closing out futures positions.
REGULATORY RESTRICTIONS. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, the Fund will maintain in a segregated
account cash or liquid high-grade securities equal to the value of such
contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," the Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of the Fund's total assets after taking
into account unrealized profits and unrealized losses on any contracts entered
into. The Fund will not engage in transactions in futures contracts or options
thereon for speculation, but only to attempt to hedge against changes in market
conditions affecting the values of securities which the Fund holds or intends to
purchase.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
securities issued by other investment companies. The Fund currently intends to
limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will be
invested in the securities of any one investment company; (b) not more than 10%
of the value of its total assets will be invested in the aggregate in securities
of investment companies as a group; and (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund. As a
shareholder of another investment company, the Fund would bear, along with other
shareholders, its pro rata portion of that company's expenses, including
advisory fees. These expenses would be in addition to the advisory and other
expenses that the Fund bears directly in connection with its own operations.
Investment companies in which the Fund may invest may also impose a sales or
distribution charge in connection with the purchase or redemption of their
shares and other types of commissions or charges. Such charges will be payable
by the Fund and, therefore, will be borne directly by shareholders of the Fund.
B-8
<PAGE> 39
Investment Restrictions
- -----------------------
The Fund's investment objective is a non-fundamental policy and may be
changed without a vote of the shareholders of the Fund. In addition to the
fundamental investment policies listed in the Prospectus, the following
investment restrictions may be changed only by a vote of the majority of the
outstanding Shares of the Fund (as defined under "ADDITIONAL INFORMATION - Vote
of a Majority of the Outstanding Shares").
In addition to the investment restrictions set forth in the Prospectus,
the Fund may not:
1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities and except as may
be necessary to make margin payments in connection with derivative securities
transactions;
2. Underwrite the securities issued by other persons, except to the
extent that the Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities;"
3. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction); and
4. Purchase or sell commodities or commodities contracts, except to the
extent disclosed in the current Prospectus of the Fund.
The following additional investment restrictions may be changed without
the vote of a majority of the outstanding Shares of the Fund. The Fund may not:
1. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act, or pursuant to any exemptions
therefrom;
2. Engage in any short sales;
3. Purchase or retain the securities of an issuer if the officers or
trustees of the Group, or the officers or directors of the Adviser, who each
owns beneficially more than .5% of the outstanding securities of such issuer,
together own beneficially more than 5% of such securities; and
4. Mortgage or hypothecate the Fund's assets in excess of one-third of
the Fund's total assets.
B-9
<PAGE> 40
If any percentage restriction or requirement described above is
satisfied at the time of investment, a later increase or decrease in such
percentage resulting from a change in asset value will not constitute a
violation of such restriction or requirement. However, should a change in net
asset value or other external events cause the Fund's investments in illiquid
securities, repurchase agreements with maturities in excess of seven days and
other instruments in the Fund which are not readily marketable to exceed the
limit set forth in the Fund's Prospectus for its investment in illiquid
securities, the Fund will act to cause the aggregate amount of such securities
to come within such limit as soon as reasonably practicable. In such an event,
however, the Fund would not be required to liquidate any portfolio securities
where the Fund would suffer a loss on the sale of such securities.
Portfolio Turnover
- ------------------
The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The Commission requires
that the calculation exclude all securities whose remaining maturities at the
time of acquisition were one year or less.
The portfolio turnover rate for the Fund for its first fiscal period
ending June 30, 1997, is estimated to be less than 50%. The portfolio turnover
rate for the Fund may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of Shares. High portfolio turnover rates will generally result in higher
transaction costs, including brokerage commissions, to the Fund and may result
in additional tax consequences to the Fund's Shareholders. Portfolio turnover
will not be a limiting factor in making investment decisions.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Fund are sold on a continuous basis by BISYS, and BISYS
has agreed to use appropriate efforts to solicit all purchase orders. In
addition to purchasing Shares directly from BISYS, Shares may be purchased
through procedures established by BISYS in connection with the requirements of
accounts at the Adviser or the Adviser's affiliated entities (collectively,
"Entities"). Customers purchasing Shares of the Fund may include officers,
directors, or employees of the Adviser or the Entities.
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the Exchange is
restricted by applicable rules and regulations of the Commission, (b) the
Exchange is closed for other than customary weekend and holiday closings, (c)
the Commission has by order permitted such suspension, or (d) an emergency
exists as a result of which (i) disposal by the Group of securities owned by it
is not
B-10
<PAGE> 41
reasonably practical, or (ii) it is not reasonably practical for the Group to
determine the fair value of its net assets.
MANAGEMENT OF THE GROUP
Trustees and Officers
- ---------------------
Overall responsibility for management of the Group rests with its Board
of Trustees. The Trustees elect the officers of the Group to supervise actively
its day-to-day operations.
The names of the Trustees and officers of the Group, their addresses,
and principal occupations during the past five years are as follows:
Position(s) Held Principal Occupation
Name, Age and Address With the Group During Past 5 Years
- --------------------- -------------- -------------------
Walter B. Grimm* Chairman, From June, 1992 to
3435 Stelzer Road President and present, employee of
Columbus, Ohio 43219 Trustee BISYS Fund Services
Age: 51 Limited Partnership
(formerly The Winsbury
Company); from July,
1981 to June, 1992,
President of Leigh
Investments Consulting
(investment firm).
Nancy E. Converse* Trustee Since July, 1990,
3435 Stelzer Road Assistant and employee of BISYS Fund
Columbus, Ohio 43219 Secretary Services Limited
Age: 47 Partnership (formerly
The Winsbury Company) or
BISYS Fund Services
Ohio, Inc. (formerly The
Winsbury Service
Corporation).
Maurice G. Stark Trustee Consultant; from 1979 to
7662 Cloister Drive December, 1994, Vice
Columbus, Ohio 43235 President-Finance and
Age: 61 Chief Financial Officer,
Battelle Memorial
Institute (scientific
research and development
service corporation).
James H. Woodward, Ph.D. Trustee Since July 1991,
The University of North Chancellor of The
Carolina at Charlotte University of North
Charlotte, NC 28223 Carolina at Charlotte.
Age: 56
Chalmers P. Wylie Trustee From April, 1993 to
754 Stonewood Court present, Of Counsel with
Columbus, Ohio 43235 Emens, Kegler, Brown,
Age: 75 Hill & Ritter (law
firm); from January,
1993 to present, Adjunct
Professor at The Ohio
State University; from
January, 1967 to
January, 1993, Member of
the United States House
of Representatives for
the 15th District.
B-11
<PAGE> 42
J. David Huber Vice President Since January, 1996,
3435 Stelzer Road President of BISYS Fund
Columbus, Ohio 43219 Services Limited
Age: 50 Partnership; from June,
1987 to December, 1995,
employee of BISYS Fund
Services Limited
Partnership (formerly
The Winsbury Company);
from September, 1988 to
present, Vice President
of BISYS Fund Services
Ohio, Inc. (formerly The
Winsbury Service
Corporation).
William J. Tomko Vice President From April, 1987 to
3435 Stelzer Road present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 37 Limited Partnership
(formerly The Winsbury
Company).
Stephen G. Mintos Treasurer From January, 1987 to
3435 Stelzer Road present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 42 Limited Partnership
(formerly The Winsbury
Company).
George Stephens Secretary From September, 1996 to
3435 Stelzer Road present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 46 Limited Partnership;
from September, 1995 to
August, 1996, consultant
on bank investment
products and activities;
from June, 1980 to
September, 1995,
employee of AmSouth
Bank.
Alaina V. Metz Assistant From June, 1995 to
3435 Stelzer Road Secretary present, employee of
Columbus, Ohio 43219 BISYS Fund Services
Age: 29 Limited Partnership;
prior to June, 1995,
supervisor at Alliance
Capital Management, L.P.
(investment management
firm).
- -------------------
*Mr. Grimm and Ms. Converse are each considered to be an "interested
person" of the Group as defined in the 1940 Act.
As of the date of this Statement of Additional Information, the Group's
officers and trustees, as a group, own less than 1% of the Fund's Shares.
No officer or employee of BISYS or BISYS Fund Services, Inc. receives
any compensation from the Group for acting as trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. BISYS receives fees from the Fund for acting as
Administrator, may
B-12
<PAGE> 43
receive fees pursuant to the Administrative Services Plan described
below and may retain all or a portion of any sales load imposed
upon purchases of Shares. BISYS Fund Services, Inc. receives fees
from the Fund for acting as transfer agent and for providing
certain fund accounting services. Messrs. Grimm, Huber, Mintos,
Tomko and Stephens, Ms. Converse and Ms. Metz are employees of
BISYS.
The following table sets forth information regarding all
compensation paid by the Group to its Trustees for their services
as trustees during the fiscal year ended June 30, 1996. The Group
has no pension or retirement plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position Compensation From the Group
With the Group From the Group and the Fund Complex*
- ----------------- -------------- ---------------------
<S> <C> <C>
Walter B. Grimm $0 $0
Trustee
Nancy E. Converse $0 $0
Trustee
Maurice G. Stark $7,772.17 $7,772.17
Trustee
Michael M. VanBuskirk(1) $7,772.17 $7,772.17
Trustee
James H. Woodward, Ph.D. $0 $0
Trustee
Chalmers P. Wylie $7,772.17 $7,772.17
Trustee
<FN>
- ----------
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Funds, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
(1) Mr. VanBuskirk resigned his position as a trustee of the
Group effective May 3, 1996.
Ms. Converse and Dr. Woodward were elected trustees of the
Group on June 28, 1996.
</TABLE>
Investment Adviser
- ------------------
Investment advisory and management services are provided to the
Fund by Martindale Andres & Company, Inc. (the "Adviser"), pursuant
to an Investment Advisory Agreement dated as of July 9, 1996, as
amended as of January 29, 1997. Under the Investment Advisory
B-13
<PAGE> 44
Agreement, the Adviser has agreed to provide investment advisory services as
described in the Prospectus. For the services provided and expenses assumed
pursuant to the Investment Advisory Agreement, the Fund pays the Adviser a fee,
computed daily and paid monthly, at the annual rate of one percent (1.00%) of
the average daily net assets of the Fund. Pursuant to such Investment Advisory
Agreement, the Adviser also provides investment advisory and management services
to four other funds of the Group: The KeyPremier Prime Money Market Fund (the
"Money Market Fund"), The KeyPremier Pennsylvania Municipal Bond Fund (the
"Pennsylvania Bond Fund"), The KeyPremier Established Growth Fund (the "Growth
Fund") and The KeyPremier Intermediate Term Income Fund (the "Income Fund"). The
Money Market Fund pays the Adviser a fee, computed daily and paid monthly, at
the annual rate of forty one-hundredths of one percent (.40%) of the average
daily net assets of the Money Market Fund. The Pennsylvania Bond Fund and the
Income Fund each pay the Adviser a fee, computed daily and paid monthly, at the
annual rate of sixty one-hundredths of one percent (.60%) of the average daily
net assets of such Fund. The Growth Fund pays the Adviser a fee, computed daily
and paid monthly, at the annual rate of seventy-five one-hundredths of one
percent (.75%) of the average daily net assets of the Growth Fund. The Adviser
may from time to time voluntarily reduce all or a portion of its advisory fee
with respect to a Fund to increase the net income of that Fund available for
distribution as dividends.
For the year ended June 30, 1996, the Adviser had not received any
compensation under the Investment Advisory Agreement with respect to the Fund
since the Fund had not yet commenced operations.
Unless sooner terminated, the Investment Advisory Agreement will
continue in effect with respect to the Fund until July 9, 1998, and from year to
year thereafter, for successive annual periods ending on July 9th, if, as to the
Fund, such continuance is approved at least annually by the Group's Board of
Trustees or by vote of a majority of the outstanding Shares of the Fund (as
defined under "GENERAL INFORMATION - Miscellaneous" in the Prospectus), and a
majority of the Trustees who are not parties to the Investment Advisory
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Investment Advisory Agreement by votes cast in person at a meeting called for
such purpose. The Investment Advisory Agreement is terminable as to the Fund at
any time on 60 days' written notice without penalty by the Trustees, by vote of
a majority of the outstanding Shares of the Fund, or by the Adviser. The
Investment Advisory Agreement also terminates automatically in the event of any
assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or
B-14
<PAGE> 45
for any loss suffered by the Fund in connection with the performance of the
Investment Advisory Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the Adviser in the performance of its duties, or from reckless disregard
by the Adviser of its duties and obligations thereunder.
The Adviser has agreed that the Fund and the Group may use the name
"KeyPremier" on a royalty-free basis and the Adviser has reserved to itself the
right to grant the non-exclusive right to use the name "KeyPremier" to any other
person. At such time as the Investment Advisory Agreement is no longer in
effect, the Adviser may require the Fund to cease using the name "KeyPremier."
Portfolio Transactions
- ----------------------
Pursuant to the Investment Advisory Agreement, the Adviser determines,
subject to the general supervision of the Board of Trustees of the Group and in
accordance with the Fund's investment objective and restrictions, which
securities are to be purchased and sold by the Fund, and which brokers and
dealers are to be eligible to execute the Fund's portfolio transactions.
Purchases and sales of portfolio securities with respect to the Fund usually are
effected on a national securities exchange or in the over-the-counter market.
Transactions on stock exchanges involve the payment of negotiated brokerage
commissions. Transactions in the over-the-counter market are generally principal
transactions with dealers. With respect to the over-the-counter market, the
Group, where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere.
Allocation of transactions, including their frequency, to various
brokers and dealers is determined by the Adviser in its best judgment and in a
manner deemed fair and reasonable to Shareholders. The primary consideration is
prompt execution of orders in an effective manner at the most favorable price.
Subject to this consideration, brokers and dealers who provide supplemental
investment research to the Adviser may receive orders for transactions on behalf
of the Fund. The Adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing the Fund's brokerage
transactions which is in excess of the amount of commission another broker would
have charged for effecting that transaction if, but only if, the Adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker viewed in
terms of that particular transaction or in terms of all of the accounts over
which it exercises investment discretion. Any such research and other
statistical and factual information provided by brokers to
B-15
<PAGE> 46
the Fund or to the Adviser is considered to be in addition to and not in lieu of
services required to be performed by the Adviser under its agreement regarding
management of the Fund. The cost, value and specific application of such
information are indeterminable and hence are not practicably allocable among the
Fund and other clients of the Adviser who may indirectly benefit from the
availability of such information. Similarly, the Fund may indirectly benefit
from information made available as a result of transactions effected for such
other clients. Under the Investment Advisory Agreement, the Adviser is permitted
to pay higher brokerage commissions for brokerage and research services in
accordance with Section 28(e) of the Securities Exchange Act of 1934. In the
event the Adviser does follow such a practice, it will do so on a basis which is
fair and equitable to the Group and the Fund.
While the Adviser generally seeks competitive commissions, the Group may
not necessarily pay the lowest commission available on each brokerage
transaction, for reasons discussed above. Information so received is in addition
to and not in lieu of services required to be performed by the Adviser and does
not reduce the advisory fees payable to the Adviser by the Fund. Such
information may be useful to the Adviser in serving both the Fund and other
clients and, conversely, supplemental information obtained by the placement of
business of other clients may be useful to the Adviser in carrying out its
obligations to the Fund.
Except as otherwise disclosed to the Shareholders of the Fund and as
permitted by applicable laws, rules and regulations, the Group will not, on
behalf of the Fund, execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with the Adviser, Keystone, BISYS, or their
affiliates, and will not give preference to the Adviser's or Keystone's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Investment decisions for the Fund are made independently from those for
other funds of the Group or any other investment company or account managed by
the Adviser. Any such other fund, investment company or account may also invest
in the same securities as the Group on behalf of the Fund. When a purchase or
sale of the same security is made at substantially the same time on behalf of
the Fund and another fund of the Group, investment company or account, the
transaction will be averaged as to price and available investments will be
allocated as to amount in a manner which the Adviser believes to be equitable to
the Fund and such other fund, investment company or account. In some instances,
this investment procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained by the Fund. To the
B-16
<PAGE> 47
extent permitted by law, the Adviser may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other funds of the
Group, investment companies or accounts in order to obtain best execution. As
provided by the Investment Advisory Agreement, in making investment
recommendations for the Fund, the Adviser will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Group is a customer of the Adviser, its parent or its subsidiaries or
affiliates and, in dealing with its customers, the Adviser, its parent,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Fund or any other fund of the
Group.
Glass-Steagall Act
- ------------------
In 1971, the United States Supreme Court held in INVESTMENT COMPANY
INSTITUTE V. CAMP that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a national bank from operating a mutual fund for
the collective investment of managing agency accounts. Subsequently, the Board
of Governors of the Federal Reserve System (the "Board") issued a regulation and
interpretation to the effect that the Glass-Steagall Act and such decision: (a)
forbid a bank holding company registered under the Federal Bank Holding Company
Act of 1956 (the "Holding Company Act") or any non-bank affiliate thereof from
sponsoring, organizing, or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, but (b) do not prohibit such
a holding company or affiliate from acting as investment adviser, transfer
agent, and custodian to such an investment company. In 1981, the United States
Supreme Court held in BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM V.
INVESTMENT COMPANY INSTITUTE that the Board did not exceed its authority under
the Holding Company Act when it adopted its regulation and interpretation
authorizing bank holding companies and their non-bank affiliates to act as
investment advisers to registered closed-end investment companies. In the BOARD
OF GOVERNORS case, the Supreme Court also stated that if a national bank
complied with the restrictions imposed by the Board in its regulation and
interpretation authorizing bank holding companies and their non-bank affiliates
to act as investment advisers to investment companies, a national bank
performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
The Adviser believes that it possesses the legal authority to perform
the services for the Fund contemplated by the Prospectus, this Statement of
Additional Information and the Investment Advisory Agreement without violation
of applicable statutes and regulations. Future changes in either Federal or
state statutes and regulations relating to the permissible activities of banks
or bank holding companies and the subsidiaries or affiliates of those entities,
as well as further judicial or administrative decisions
B-17
<PAGE> 48
or interpretations of present and future statutes and regulations, could prevent
or restrict the Adviser from continuing to perform such services for the Group.
In addition, current state securities laws on the issue of the registration of
banks as brokers or dealers may differ from the interpretation of federal law,
and banks and financial institutions may be required to register as dealers
pursuant to the laws of a specific state. Depending upon the nature of any
changes in the services which could be provided by the Adviser, the Board of
Trustees of the Group would review the Group's relationship with the Adviser and
consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of the Adviser and/or the Adviser's
affiliated and correspondent banks in connection with Customer purchases of
Shares of the Fund, those banks might be required to alter materially or
discontinue the services offered by them to Customers. It is not anticipated,
however, that any change in the Group's method of operations would affect its
net asset value per share or result in financial losses to any Customer.
Administrator
- -------------
BISYS serves as administrator (the "Administrator") to the Fund pursuant
to a Management and Administration Agreement dated July 9, 1996, as amended as
of January 29, 1997 (the "Administration Agreement"). The Administrator assists
in supervising all operations of the Fund (other than those performed by the
Adviser under the Investment Advisory Agreement, by The Bank of New York under
the Custody Agreement and by BISYS Fund Services, Inc. under the Transfer Agency
Agreement and Fund Accounting Agreement). The Administrator is a broker-dealer
registered with the Commission, and is a member of the National Association of
Securities Dealers, Inc. The Administrator provides financial services to
institutional clients.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities; furnish statistical and research data, clerical,
certain bookkeeping services and stationery and office supplies; prepare the
periodic reports to the Commission on Form N-SAR or any replacement forms
therefor; compile data for, prepare for execution by the Fund and file all of
the Fund's federal and state tax returns and required tax filings other than
those required to be made by the Fund's custodian and Transfer Agent; prepare
compliance filings pursuant to state securities laws with the advice of the
Group's counsel; assist to the extent requested by the Group with the Group's
preparation of its Annual and Semi-Annual Reports to Shareholders and its
Registration Statement (on Form N-1A or any replacement therefor); compile data
for, prepare and file timely Notices to the Commission required pursuant to Rule
24f-2 under the 1940 Act; keep and maintain the
B-18
<PAGE> 49
financial accounts and records of the Fund, including calculation of daily
expense accruals; and generally assist in all aspects of the Fund's operations
other than those performed by the Adviser under the Investment Advisory
Agreement, by The Bank of New York under the Custody Agreement and by BISYS Fund
Services, Inc. under the Transfer Agency Agreement and Fund Accounting
Agreement. Under the Administration Agreement, the Administrator may delegate
all or any part of its responsibilities thereunder.
The Administrator receives a fee from the Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
equal to a fee, calculated daily and paid periodically, at the annual rate equal
to eleven and one-half one-hundredths of one percent (.115%) of the Fund's
average daily net assets.
For the fiscal year ended June 30, 1996, the Administrator had not
received any compensation under the Administration Agreement with respect to the
Fund since the Fund had not yet commenced operations.
Unless sooner terminated as provided therein, the Administration
Agreement has an initial term expiring on July 9, 1999, and thereafter shall be
renewed automatically for successive one-year terms, unless written notice not
to renew is given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term. The Administration Agreement
is terminable with respect to the Fund upon mutual agreement of the parties to
the Administration Agreement; through a failure to renew at the end of a
one-year term; upon 180 days' written notice by the Group after the initial term
but only in connection with the reorganization of the Fund into another
registered management investment company; and for cause (as defined in the
Administration Agreement) by the party alleging cause, on not less than 60 days'
notice by the Group's Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error of judgment or mistake of law or any loss suffered by
the Fund in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
Distributor
- -----------
BISYS serves as agent for the Fund in the distribution of its Shares
pursuant to a Distribution Agreement dated July 9, 1996, as amended as of
January 29, 1997 (the "Distribution Agreement"). Unless otherwise terminated,
the Distribution Agreement has an initial term expiring on July 9, 1998, and
thereafter shall be
B-19
<PAGE> 50
renewed automatically for successive annual periods ending July 9th if approved
at least annually (i) by the Group's Board of Trustees or by the vote of a
majority of the outstanding Shares of the Fund, and (ii) by the vote of a
majority of the Trustees of the Group who are not parties to the Distribution
Agreement or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, BISYS solicits orders for the sale of
Shares, advertises and pays the costs of advertising, office space and the
personnel involved in such activities. BISYS receives no compensation under the
Distribution Agreement with the Group but retain all or a portion of any sales
charge imposed upon a purchase of the Shares.
Administrative Services Plan
- ----------------------------
As described in the Prospectus, the Group has also adopted an
Administrative Services Plan (the "Services Plan") under which the Fund is
authorized to pay certain financial institutions, including the Adviser, its
affiliates and their correspondent banks, and BISYS (a "Service Organization"),
to provide certain ministerial, record keeping, and administrative support
services to their customers who own of record or beneficially Shares in the
Fund. Payments to such Service Organizations are made pursuant to Servicing
Agreements between the Group and the Service Organization. The Services Plan
authorizes the Fund to make payments to Service Organizations in an amount, on
an annual basis, of up to 0.25% of the average daily net asset value of the
Fund. The Services Plan has been approved by the Board of Trustees of the Group,
including a majority of the Trustees who are not interested persons of the Group
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Services Plan or in any Servicing Agreements
thereunder (the "Disinterested Trustees"). The Services Plan may be terminated
as to the Fund by a vote of a majority of the Disinterested Trustees. The
Trustees review quarterly a written report of the amounts expended pursuant to
the Services Plan and the purposes for which such expenditures were made. The
Services Plan may be amended by a vote of the Trustees, provided that any
material amendments also require the vote of a majority of the Disinterested
Trustees. For so long as the Services Plan is in effect, selection and
nomination of those Disinterested Trustees shall be committed to the discretion
of the Group's Disinterested Trustees. All Servicing Agreements may be
terminated at any time without the payment of any penalty by a vote of a
majority of the Disinterested Trustees. The Services Plan will continue in
effect for successive one-year periods, provided that each such continuance is
specifically
B-20
<PAGE> 51
approved by a majority of the Board of Trustees, including a majority of the
Disinterested Trustees.
As of the date hereof, no Servicing Agreement has been entered into by
the Group with respect to the Fund.
Custodian
- ---------
The Bank of New York, 48 Wall Street, New York, New York, 10286, serves
as custodian (the "Custodian") to the Fund pursuant to the Custody Agreement
dated as of July 9, 1996, as amended as of January 29, 1997. The Custodian's
responsibilities include safeguarding and controlling the Fund's cash and
securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's investments.
Transfer Agency and Fund Accounting Services
- --------------------------------------------
BISYS Fund Services, Inc. serves as transfer agent and dividend
disbursing agent (the "Transfer Agent") for the Fund pursuant to the Transfer
Agency Agreement dated July 9, 1996, as amended as of January 29, 1997. Pursuant
to such Agreement, the Transfer Agent, among other things, performs the
following services in connection with the Fund's Shareholders of record:
maintenance of shareholder records for each of the Fund's Shareholders of
record; processing Shareholder purchase and redemption orders; processing
transfers and exchanges of Shares of the Fund on the shareholder files and
records; processing dividend payments and reinvestments; and assistance in the
mailing of Shareholder reports and proxy solicitation materials. For such
services the Transfer Agent receives a fee based on the number of shareholders
of record. For the fiscal year ended June 30, 1996, the Transfer Agent received
no compensation from the Group for services as transfer agent for the Fund since
the Fund had not yet commenced operations.
In addition, BISYS Fund Services, Inc. provides certain fund accounting
services to the Fund pursuant to the Fund Accounting Agreement dated July 9,
1996, as amended as of January 29, 1997. BISYS Fund Services, Inc. receives a
fee from the Fund for such services equal to the greater of (a) a fee computed
at an annual rate of three one-hundredths of one percent (.03%) of the Fund's
average daily net assets, or (b) the annual fee of $30,000. Under such
Agreement, BISYS Fund Services, Inc. maintains the accounting books and records
for the Fund, including journals containing an itemized daily record of all
purchases and sales of portfolio securities, all receipts and disbursements of
cash and all other debits and credits, general and auxiliary ledgers reflecting
all asset, liability, reserve, capital, income and expense accounts, including
interest accrued and interest received, and other required separate ledger
accounts; maintains a monthly trial balance of all ledger accounts; performs
certain accounting
B-21
<PAGE> 52
services for the Fund, including calculation of the net asset value per share,
calculation of the dividend and capital gain distributions, if any, and of
yield, reconciliation of cash movements with the Fund's custodian, affirmation
to the Fund's custodian of all portfolio trades and cash settlements,
verification and reconciliation with the Fund's custodian of all daily trade
activity; provides certain reports; obtains dealer quotations, prices from a
pricing service or matrix prices on all portfolio securities in order to mark
the portfolio to the market; and prepares an interim balance sheet, statement of
income and expense, and statement of changes in net assets for the Fund.
Unless sooner terminated as provided therein, the Fund Accounting
Agreement has an initial term expiring on July 9, 1999, and thereafter shall be
renewed automatically for successive one-year terms, unless written notice not
to renew is given by the non-renewing party to the other party at least 60 days
prior to the expiration of the then-current term. The Fund Accounting Agreement
is terminable with respect to the Fund upon mutual agreement of the parties to
the Fund Accounting Agreement; upon 180 days' written notice by the Group after
the initial term but only in connection with the reorganization of the Fund into
another registered management investment company; and for cause (as defined in
the Fund Accounting Agreement) by the party alleging cause, on not less than 60
days' notice by the Group's Board of Trustees or by BISYS Fund Services, Inc.
The Fund Accounting Agreement provides that BISYS Fund Services, Inc.
shall not be liable for any error of judgment or mistake of law or any loss
suffered by the Fund in connection with the matters to which the Fund Accounting
Agreement relates, except a loss resulting from willful misfeasance, bad faith,
or negligence in the performance of its duties, or from the reckless disregard
by BISYS Fund Services, Inc. of its obligations and duties thereunder.
For the fiscal year ended June 30, 1996, BISYS Fund Services, Inc.
earned no fees with respect to its fund accounting services to the Fund since
the Fund had not yet commenced operations.
Auditors
- --------
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215, has
been selected as the independent auditors for the Fund and as such will audit
the financial statements of the Fund.
Legal Counsel
- -------------
Baker & Hostetler LLP, 65 East State Street, Columbus, Ohio 43215 is
counsel to the Group and will pass upon the legality of the Shares offered
hereby.
B-22
<PAGE> 53
ADDITIONAL INFORMATION
Description of Shares
- ---------------------
The Group is an Ohio business trust. The Group was organized on April
25, 1988, and the Group's Declaration of Trust was filed with the Secretary of
State of Ohio on April 25, 1988. The Declaration of Trust authorizes the Board
of Trustees to issue an unlimited number of shares, which are shares of
beneficial interest, without par value. The Group presently has seventeen series
of shares, one of which represents interests in the Fund. The other sixteen
series are Riverside Capital Money Market Fund, Riverside Capital Value Equity
Fund, Riverside Capital Fixed Income Fund, Riverside Capital Tennessee Municipal
Obligations Fund, Riverside Capital Low Duration Government Securities Fund,
Riverside Capital Growth Fund, the Money Market Fund, the Pennsylvania Bond
Fund, the Growth Fund, the Income Fund, 1st Source Monogram U.S. Treasury
Obligations Money Market Fund, 1st Source Monogram Diversified Equity Fund, 1st
Source Monogram Income Equity Fund, 1st Source Monogram Special Equity Fund, 1st
Source Monogram Income Fund and 1st Source Monogram Intermediate Tax-Free Bond
Fund. The Group's Declaration of Trust authorizes the Board of Trustees to
divide or redivide any unissued shares of the Group into one or more additional
series by setting or changing in any one or more respects their respective
preferences, conversion or other rights, voting power, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Group,
shareholders of a fund are entitled to receive the assets available for
distribution belonging to that fund, and a proportionate distribution, based
upon the relative asset values of the respective funds, of any general assets
not belonging to any particular fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a fund will be required in
connection with a matter, a fund will be deemed to be affected by a matter
unless it is clear that the interests of each fund in the matter are identical,
or that the matter does not affect any interest of the fund. Under Rule 18f-2,
the approval of an
B-23
<PAGE> 54
investment advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a fund only if approved by a
majority of the outstanding shares of such fund. However, Rule 18f-2 also
provides that the election of Trustees may be effectively acted upon by
shareholders of the Group voting without regard to series.
As of the date immediately preceding the public offering of the Fund's
Shares, BISYS Fund Services Ohio, Inc. owned all of the issued and outstanding
Shares of the Fund. It is anticipated that, upon commencement of the public
offering of the Fund's Shares, BISYS Fund Services Ohio, Inc.'s holdings of
Shares in the Fund will be reduced below 5%.
Vote of A Majority of the Outstanding Shares
- --------------------------------------------
As used in the Prospectus and this Statement of Additional Information,
a "vote of a majority of the outstanding Shares" of the Fund means the
affirmative vote, at a meeting of Shareholders duly called, of the lesser of (a)
67% or more of the votes of Shareholders of the Fund present at a meeting at
which the holders of more than 50% of the votes attributable to Shareholders of
record of the Fund are represented in person or by proxy, or (b) the holders of
more than 50% of the outstanding votes of Shareholders of the Fund.
Additional General Tax Information
- ----------------------------------
Each of the seventeen funds of the Group is treated as a separate entity
for federal income tax purposes and intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for so long as such qualification is in the best interest of that
fund's shareholders. In order to qualify as a regulated investment company, the
Fund must, among other things: derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies; derive less than 30% of its gross income from the
sale or other disposition of stock, securities, options, future contracts or
foreign currencies held less than three months; and diversify its investments
within certain prescribed limits. In addition, to utilize the tax provisions
specially applicable to regulated investment companies, the Fund must distribute
to its Shareholders at least 90% of its investment company taxable income for
the year. In general, the Fund's investment company taxable income will be its
taxable income subject to certain adjustments and excluding the excess of any
net long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year.
B-24
<PAGE> 55
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.
Although the Fund expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located, or
in which it is otherwise deemed to be conducting business, the Fund may be
subject to the tax laws of such states or localities. In addition, if for any
taxable year the Fund does not qualify for the special tax treatment afforded
regulated investment companies, all of its taxable income will be subject to
federal tax at regular corporate rates (without any deduction for distributions
to its Shareholders). In such event, dividend distributions would be taxable to
Shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
It is expected that the Fund will distribute annually to Shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to Shareholders for federal income
tax purposes, even if paid in additional Shares of the Fund and not in cash.
Distribution by the Fund of the excess of net long-term capital gain
over net short-term capital loss, if any, is taxable to Shareholders as
long-term capital gain in the year in which it is received, regardless of how
long the Shareholder has held the Shares. Such distributions are not eligible
for the dividends-received deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on long-term capital gains
of individuals cannot exceed 28%. Capital
B-25
<PAGE> 56
losses may be used to offset capital gains. In addition, individuals may deduct
up to $3,000 of net capital loss each year to offset ordinary income. Excess net
capital loss may be carried forward and deducted in future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. The Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by the
Fund for its taxable year that qualifies for the dividends received deduction.
Foreign taxes may be imposed on the Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
the Fund's total assets at the end of its fiscal year are expected to be
invested in stocks or securities of foreign corporations, the Fund will not be
entitled under the Code to pass through to its Shareholders their pro rata share
of the foreign taxes paid by the Fund. These taxes will be taken as a deduction
by the Fund.
Under Section 1256 of the Code, gain or loss realized by the Fund from
certain financial futures and options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. Gain or
loss will arise upon exercise or lapse of such futures and options as well as
from closing transactions. In addition, any such futures and options remaining
unexercised at the end of the Fund's taxable year will be treated as sold for
their then fair market value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving certain futures
contracts or options transactions may be considered, for tax purposes, to
constitute "straddles." Straddles are defined to
B-26
<PAGE> 57
include "offsetting positions" in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Code, which,
in certain circumstances, overrides or modifies the provisions of Section 1256.
As such, all or a portion of any short or long-term capital gain from certain
straddle and/or conversion transactions may be recharacterized as ordinary
income.
If the Fund were treated as entering into straddles by reason of its
engaging in futures or options transactions, such straddles would be
characterized as "mixed straddles" if the futures or options comprising a part
of such straddles were governed by Section 1256 of the Code. The Fund may make
one or more elections with respect to mixed straddles. If no election is made,
to the extent the straddle rules apply to positions established by the Fund,
losses realized by the Fund will be deferred to the extent of unrealized gain in
any offsetting positions. Moreover, as a result of the straddle and conversion
transaction rules, short-term capital losses on straddle positions may be
recharacterized as long-term capital losses and long-term capital gains may be
recharacterized as short-term capital gain or ordinary income.
The Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any Shareholder, and the proceeds of redemption or the values of any
exchanges of Shares of the Fund, if such Shareholder (1) fails to furnish the
Fund with a correct taxpayer identification number, (2) under-reports dividend
or interest income, or (3) fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security number.
Information set forth in the Prospectus and this Statement of Additional
Information which relates to Federal taxation is only a summary of some of the
important Federal tax considerations generally affecting purchasers of Shares of
the Fund. No attempt has been made to present a detailed explanation of the
Federal income tax treatment of the Fund or its Shareholders and this discussion
is not intended as a substitute for careful tax planning. Accordingly, potential
purchasers of Shares of the Fund are urged to consult their tax advisers with
specific reference to their own tax situation. In addition, the tax discussion
in the Prospectus and this Statement of Additional Information is based on tax
laws and regulations which are in effect on the date of the Prospectus and this
Statement of Additional Information; such laws and regulations may be changed by
legislative or administrative action.
Information as to the federal income tax status of all distributions
will be mailed annually to each Shareholder.
B-27
<PAGE> 58
Calculation of Total Return
- ---------------------------
As summarized in the Prospectus under the heading "PERFORMANCE
INFORMATION," average annual total return is a measure of the change in value of
an investment in the Fund over the period covered, which assumes any dividends
or capital gains distributions are reinvested in the Fund immediately rather
than paid to the investor in cash. Average annual total return will be
calculated by: (1) adding to the total number of Shares purchased by a
hypothetical $1,000 investment in the Fund (less the maximum sales charge) all
additional Shares which would have been purchased if all dividends and
distributions paid or distributed during the period had been immediately
reinvested; (2) calculating the value of the hypothetical initial investment of
$1,000 as of the end of the period by multiplying the total number of Shares
owned at the end of the period by the net asset value per share on the last
trading day of the period; (3) assuming redemption at the end of the period; and
(4) dividing this account value for the hypothetical investor by the initial
$1,000 investment and annualizing the result for periods of less than one year.
For the one year period ended October 31, 1996, and the period from
commencement of operations to October 31, 1996, the average annual total returns
for the CIFs (the Fund's predecessors) have been restated to reflect the
estimated fees for such Fund for the current fiscal year and are as follows:
Average Annual Total Return
---------------------------
With Maximum Sales Load(1) Without Sales Load
-------------------------- ------------------
<TABLE>
<CAPTION>
Since Since
1 Year Inception 1 Year Inception
------ --------- ------ ---------
<S> <C> <C> <C>
3.20% 16.37% 8.04% 18.77%
<FN>
1 The maximum sales load for the Fund is 4.50%.
2 Commenced operations July 1, 1994.
</TABLE>
Such performance figures are not those of the Fund. And, of course,
past performance is no guarantee as to future performance.
Performance Comparisons
- -----------------------
Investors may judge the performance of the Fund by comparing it to the
performance of other mutual funds or mutual fund portfolios with comparable
investment objectives and policies through various mutual fund or market indices
such as those prepared by Dow Jones & Co., Inc. and Standard & Poor's
Corporation and to data prepared by Lipper Analytical Services, Inc., a widely
recognized independent service which monitors the performance of
B-28
<PAGE> 59
mutual funds. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, Morningstar, Inc., Ibbotson
Associates, CDA/Wiesenberger, The New York Times, Business Week, U.S.A. Today
and local periodicals. In addition to performance information, general
information about the Fund that appears in a publication such as those mentioned
above may be included in advertisements, sales literature and reports to
shareholders. The Fund may also include in advertisements and reports to
shareholders information discussing the performance of the Adviser in comparison
to other investment advisers and to other institutions.
From time to time, the Group may include the following types of
information in advertisements, supplemental sales literature and reports to
Shareholders: (1) discussions of general economic or financial principles (such
as the effects of inflation, the power of compounding and the benefits of dollar
cost averaging); (2) discussions of general economic trends; (3) presentations
of statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for the Fund; (5) descriptions of investment
strategies for the Fund; (6) descriptions or comparisons of various investment
products, which may or may not include the Fund; (7) comparisons of investment
products (including the Fund) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in the Fund. The Group may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of the Fund.
Current total return will fluctuate from time to time and is not
necessarily representative of future results. Accordingly, the Fund's total
return may not provide for comparison with bank deposits or other investments
that pay a fixed return for a stated period of time. Total return is a function
of the Fund's quality, composition, as well as expenses allocated to the Fund.
Fees imposed upon Customer accounts by the Adviser, its affiliates or its
affiliated or correspondent banks for cash management services or other services
will reduce the Fund's effective total return to Customers.
Miscellaneous
- -------------
Individual Trustees are generally elected by the shareholders
and, subject to removal by the vote of two-thirds of the Board of
Trustees, serve for a term lasting until the next meeting of
shareholders at which Trustees are elected. Such meetings are not
required to be held at any specific intervals. Generally,
B-29
<PAGE> 60
shareholders owning not less than 20% of the outstanding shares of the Group
entitled to vote may cause the Trustees to call a special meeting. However, the
Group has represented to the Commission that the Trustees will call a special
meeting for the purpose of considering the removal of one or more Trustees upon
written request therefor from shareholders owning not less than 10% of the
outstanding votes of the Group entitled to vote. At such a meeting, a quorum of
shareholders (constituting a majority of votes attributable to all outstanding
shares of the Group), by majority vote, has the power to remove one or more
Trustees.
The Group is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of the
management or policies of the Group.
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Commission. Copies of such information may be obtained from the Commission
upon payment of the prescribed fee.
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized to
give any information or make any representation other than those contained in
the Prospectus and this Statement of Additional Information.
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APPENDIX
COMMERCIAL PAPER RATINGS. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debt considered short term in the relevant market. Commercial paper rated A-1
by S&P indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted A-1+. Commercial paper rated A-2 by S&P indicates that capacity for
timely payment on issues is satisfactory. However, the relative degree of safety
is not as high as for issues designated A-1.
Moody's Investors Service, Inc.'s ("Moody's") commercial paper rating
are opinions of the ability of issuers to repay punctually senior debt
obligations which have an original maturity not exceeding one year. The rating
Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers
rated Prime-1 (or supporting institutions) are considered to have a superior
capacity for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics of Prime-1 rated issuers, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variations. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Commercial paper rated F-1+ by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-1 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, I.E., F-1+. Commercial
paper rated F-2 by Fitch is regarded as having a satisfactory degree of
assurance of timely payment, but the margin of safety is not as great as for
issues assigned F-1+ or F-1 ratings.
The description of the two highest short-term debt ratings by Duff &
Phelps, Inc. ("Duff") (Duff incorporates gradations of "1+" (one plus) and "1-"
(one minus) to assist investors in recognizing quality differences within the
highest rating category) are as follows. Duff 1+ is regarded as having the
highest certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations. Duff 1
is regarded as having a very high certainty of timely payment. Liquidity factors
are excellent and
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supported by good fundamental protection factors. Risk factors are minor. Duff
1- is regarded as having a high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are minor. Duff 2 is regarded as having a good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets is
good. Risk factors are small.
Commercial paper rated A1 by IBCA Limited and its affiliate, IBCA Inc.
(collectively "IBCA") is regarded by IBCA as obligations supported by the
highest capacity for timely repayment. Where issues possess a particularly
strong credit feature, a rating of A1+ is assigned. Obligations rated A2 are
supported by a good capacity for timely repayment.
The following summarizes the description of the two highest short-term
ratings of Thomson BankWatch, Inc. ("Thomson"). TBW-1 is the highest category
and indicates a very high likelihood that principal and interest will be paid on
a timely basis. TBW-2 is the second highest category indicating that while the
degree of safety regarding timely repayment of principal and interest is strong,
the relative degree of safety is not as high as for issues rated "TBW-1."
The plus (+) sign is used after a rating symbol to designate the
relative position of an issuer within the rating category.
Definitions of Certain Money Market Instruments
- -----------------------------------------------
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity.
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed
as to payment of principal and interest by the full faith and
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credit of the U.S. Government. These obligations may include
Treasury bills, notes and bonds, and issues of agencies and
instrumentalities of the U.S. Government, provided such obligations
are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. Government.
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. Government include Treasury bills, certificates
of indebtedness, notes and bonds, and issues of agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage Association,
the Tennessee Valley Authority, the Farmers Home Administration, the Federal
Home Loan Banks, the Federal Intermediate Credit Banks, the Federal Farm Credit
Banks, the Federal Land Banks, the Federal Housing Administration, the Federal
National Mortgage Association, the Federal Home Loan Mortgage Corporation, and
the Student Loan Marketing Association. Some of these obligations, such as those
of the Government National Mortgage Association, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the right of the issuer to borrow from
the Treasury; others, such as those of the Student Loan Marketing Association,
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the Federal Farm Credit
Banks, are supported only by the credit of the instrumentality. No assurance can
be given that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.
A-3
