<PAGE>
[LOGO OF RIVERSIDE
CAPITAL FUNDS]
RIVERSIDE
CAPITAL FUNDS
----------------------------------
Mid-Year Report to
Shareholders
December 31, 1996
----------------------------------
[LOGO OF NATIONAL BANK OF COMMERCE]
National Bank
of Commerce
Memphis, Tennessee
Investment Adviser
BISYS FUND SERVICES
Administrator and Distributor
3435 Stelzer Road
Columbus, Ohio 43219-3035
<PAGE>
RIVERSIDE
CAPITAL
MESSAGE FROM THE CHAIRMAN AND INVESTMENT ADVISER FUNDS
Dear Shareholders:
We're pleased to report that the six months ended December 31, 1996, were
strong ones for the Riverside Capital Mutual Funds. After a sharp sell-off in
July, the market quickly bounced back. By the period's end, all ground that
had been lost was regained, and stocks had moved to even higher levels. Bonds,
too, experienced some volatility as investors' expectations of possible
Federal Reserve action rose and fell. By the fall, however, the markets
firmed, and bonds posted positive returns for the period.
Moreover, during the period, investors continued to invest record amounts in
mutual funds. We are pleased that many chose to do so with the Riverside
Capital Funds.
FUND RANKS #1 AMONG PEERS
We are also extremely pleased to report that the Riverside Capital Tennessee
Municipal Obligations Fund was ranked #1 of Lipper's 20 Tennessee Municipal
Debt Funds as of December 31, 1996. The Fund was also ranked 7 of 949
Morningstar Municipal Bond Funds. This puts the Riverside Capital Tennessee
Municipal Obligation Fund in the top one percent of its peers.*
TURNING TO THE MARKETS
In short, while the year overall was a trying one for fixed income investors,
the second half was far better than the first. Throughout the first half,
market sentiment on the direction of interest rates changed rapidly and
regularly. Time and time again, reports on stronger-than-expected growth led
investors to anticipate action by the Federal Reserve. But in the face of
conflicting data--and the possibility that its actions might be construed in
some way as politically biased during an election year, the Fed opted to sit
on the sidelines. By late September, expectations that a rate hike was
imminent dissipated. With the anxiety level lowered, bonds moved higher
through October and November. As the election season faded from memory and the
year drew to a close, however, the markets weakened slightly.
The picture was much brighter for stocks. Early in July, disappointing
earnings reports from several leaders in the technology sector caused a brief
but sharp sell-off. But enthusiasm quickly returned. In fact, many in the
marketplace regarded the July drop as nothing more than a brief fire sale.
Moreover, many considered this a major opportunity to buy technology stocks--
and the sector bounced back and roared higher. Given the stratospheric levels
of the market after its July correction, however, investors steered clear of
small cap stocks in general and sought reassurance in larger cap stocks.
Nonetheless, the period overall was another very good one for stock investors.
ENJOY THE PARTY, BUT DANCE NEAR THE DOOR
In fact, as the year drew to an end, the stock market continued to reach new
highs. Even more importantly and somewhat worrisome, valuations based on
dividend yields are now at or very near all-time highs. While it is unlikely
that the economy will slide into a recession in the immediate future, it will
very likely slow down. While a slow growth, low inflation environment bodes
well for the fixed income markets, it may not for the stock market. Slower
growth means year over year earnings growth may also slow. Profit margins will
be squeezed. Yet, even in the face of this, investor expectations remain
extraordinarily high. Disappointments may be treated very harshly indeed.
As a result, we believe the year ahead will be a very interesting one for the
market--and one that calls for caution. As we have in recent weeks, we will
continue to sell stocks that we consider too richly valued and reinvest in
those companies we believe have been overlooked and undervalued by the market.
Moreover, we may also opt to hold some of our stock portfolio's cash on the
sidelines--in an effort to position the funds to take advantage of any
bargains that might appear in a stock market correction.
*Past performance is not indicative of future results. Rankings based on
1-year total return ended December 31, 1996. Total return numbers do not
reflect the deduction of the sales charge. During the period the fund waived a
portion of it's advisory or administrative fees. Without the waiver of fees,
total return would have been lower.
THE RIVERSIDE CAPITAL FUNDS ARE NOT FDIC INSURED AND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY, NATIONAL BANK OF COMMERCE OR ANY
OF ITS AFFILIATES. INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
-1-
<PAGE>
Still, the underlying fundamentals of our economy are strong. As a result,
beyond the immediate future, we are very optimistic about the prospects for the
financial markets and for our funds over the next several years. Historically,
those who invest with a long-term perspective have reaped far greater rewards
than those who invest based on short-term forecasts.
IN CLOSING. . . .
In the pages that follow, you will find a detailed discussion about the
performance of each of The Riverside Capital Mutual Funds during the six months
ended December 31, 1996. We urge you to read this material closely.
Finally, we thank you for your continued confidence in us. We look forward to
providing you with superior investment management and to serving your needs now
and in the years ahead. As always, if you have any questions or require any
assistance, please don't hesitate to call us at 1-800-8-RIVER-6.
Sincerely,
/s/ Walter B. Grimm /s/ Alfred H. Jordan
- ----------------------- -------------------------
Walter B. Grimm Alfred H. Jordan
Chairman National Bank of Commerce
Riverside Capital Funds Investment Adviser
-2-
<PAGE>
THE PORTFOLIOS
THE RIVERSIDE CAPITAL VALUE EQUITY FUND
The six months ended December 31, 1996 were very good ones for the Fund. After
a short but dramatic drop in July, the market moved higher throughout the
fall. More importantly, value stocks led the way as investors, seeking
reassurance at ever headier levels, focused on fundamentals.
While holdings in sectors across the board advanced, several of our financial,
technology and energy stocks made substantial contributions to performance.
Sunamerica (3.78% of the portfolio's assets), IBM (3.01%), B.J. Services
(4.55%) and Amdahl (2.95%) all posted impressive gains over the period. The
Fund also benefited from a wave of consolidation that swept the marketplace.
Augat Inc., a manufacturer of electrical connectors, was acquired by Thomas
Betts (3.08%).**
As a result, the Fund performed strongly and in line with its peers for the
six months ended December 31, 1996. Total return for the period was 12.02%.*
AN INTERESTING YEAR LIES AHEAD
The economy appears to be in very good shape, and inflation is under control;
clearly, the stock market may need to catch its breath after the fast dash
upward of the past year. Valuations are now close to all time highs--and a
correction would not be at all surprising. Consequently, we expect to approach
the market very cautiously in the months ahead.
As always, we will continue to sell holdings in companies we feel are too
richly valued. We will also continue to seek out and invest in "good companies
at good prices," e.g., those selling at a discount to their intrinsic value.
Admittedly, such companies are getting much harder to find. Nonetheless, we
believe opportunities will continue to arise in the financial, technology and
energy sectors among others. A correction, too, is sure to create a number of
attractive buying opportunities.
As of December 31, 1996, the top five holdings in the Fund's portfolio were:
B.J. Services (4.55%), Global Industries Technology, Inc. (4.28%), Unum Corp.
(4.16%), Travelers Group, Inc. (3.99%) and H.F. Ahmanson & Co. (3.97%).**
*The Fund's total return with the maximum 4.50% sales charge was 6.94% for
the same period.
**The composition of the Fund's portfolio is subject to change.
Past performance is not predictive of future results. The value of shares in
the Riverside Capital Value Equity Fund will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost.
THE RIVERSIDE CAPITAL GROWTH FUND
The market continued to rumble upward during the second half of the year, but
the most impressive gains were experienced by a relatively small group of
better known big names. With approximately 70% of its holdings in larger
capitalization companies, the Fund performed well in the environment of the
period.
Among our strongest performers were General Electric (3.57% of the portfolio's
assets), Philip Morris, (4.48%) and Intel, (3.71%). EMC, (3.49%), a disk-
drive-memory manufacturer, also advanced impressively. Financial holdings,
too, like SouthTrust, (3.59%), and NationsBank, (2.80%), made substantial
contributions to performance.**
Overall, however, the Fund underperformed slightly due to smaller cap names in
the portfolio. Fundamentally strong, these companies were simply overlooked as
investors favored bigger names during the period. Still, many did post gains--
gains that in any period would be considered very respectable. Nevertheless,
they weren't enough to compete with astonishing gains experienced by the
market's favorites. As a result, the Fund posted total return of 8.97%* for
the period.
HIGHER AND HIGHER?
Given the current levels of stock prices, we expect to approach the markets
cautiously in the months ahead. Also, in recent months, we have made several
moves designed to cushion the Fund from any disruption that a correction might
cause. Several REITS and defensive growth stocks--income-oriented issues from
companies with solid growth potential--have been added to the portfolio.
Moreover, in recent weeks as valuations of blue-chip stocks have soared, we
moved to lighten exposures in this area.
Finally, because a drop in the stock market will create some very attractive
buying opportunities, the Fund's cash holdings have been gradually increased.
We may add to this position slightly in the months ahead in order to allow the
Fund to take full advantage of any drop or correction in the market.
As of December 31, 1996, the top five holdings in the Fund's portfolio were
Philip Morris (4.48%), Intel (3.71%), SouthTrust (3.59%), General Electric Co.
(3.57%) and EMC Corp. (3.49%).
*The Fund's total return with the maximum 4.50% sales charge was 4.07% for
the same period.
**The composition of the Fund's portfolio is subject to change.
Past performance is not predictive of future results. The value of shares in
the Riverside Capital Growth Fund will fluctuate, so that the shares, when
redeemed, may be worth more or less than their original cost.
-3-
<PAGE>
THE RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
Across the country, demand for municipal securities remained very strong, and
taxpayers remained adamantly opposed to increased spending. The result was a
very firm marketplace--particularly for high-quality securities issued by the
state of Tennessee--and tight supply dampened volatility.
Throughout the period, rates traded in a relatively narrow range.
Consequently, we focused our efforts on yield enhancement. In addition, we
continued to look beyond our state for high-quality securities offering high
current returns. As a result, the Fund performed well in the challenging
environment and for the six months ended December 31, 1996, posted a total
return of 4.06%*.
DEMAND LIKELY TO BOOM
Under intense pressure from constituents to cut borrowing dramatically,
municipalities are very unlikely to increase issuance significantly in the
near future. Moreover, demand for high-quality issues--already strong--can be
expected to increase as the baby-boomer generation moves closer to retirement.
As a result, we expect the years ahead to be good ones for the municipal
markets in general and very good ones indeed for high-quality municipal
markets like Tennessee.
As of December 31, 1996, the Fund's portfolio held approximately 50 issues.
Some 12% were issued by municipalities outside of Tennessee. The average
maturity of the portfolio was 10 years; the credit quality of its holdings
ranged from A to AAA.**
*The Fund's total return with the maximum 3.00% sales charge was 0.95% for
the same period.
**The composition of the Fund's portfolio is subject to change.
Past performance is not predictive of future results. The value of shares in
the Riverside Capital Tennessee Municipal Obligations Fund will fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost.
THE RIVERSIDE CAPITAL FIXED INCOME FUND
Well aware of the risks involved with chasing rates up and down, we continued
to focus on high-quality issues in the second half of 1996. Yield enhancement,
as opposed to price appreciation, was emphasized. Maturities were shortened to
better position the Fund to capture these opportunities--and many arose in
U.S. Government agency securities, which offered investors competitive yields
with less credit risk than corporate bonds.
While somewhat conservative, the strategy paid off. Performance lagged a bit
as bonds rallied in the fall, but the portfolio held its ground when a wave of
selling swept through the marketplace in December. As a result, for the six
months ended December 31, 1996, the Fund performed in line with its peers and
posted a total return of 3.75%*.
PRUDENCE WILL CONTINUE TO PAY OFF
We expect to see interest rates continue to seesaw within a relatively narrow
range in the months ahead. Nonetheless, while changes in direction may be
small, we believe they will continue to be rapid--and extremely difficult to
predict with any degree of precision. Those who attempt to do so may pay
dearly for their efforts. Consequently, moving forward, we will continue to
focus on safety and quality.
As of December 31, 1996, the average maturity of the Fund's holdings was
approximately 7 years. With over 30% of its holdings in U.S. Government agency
securities, the average credit quality of the portfolio's holdings was AAA.**
*The Fund's total return with the maximum 3.00% sales charge was 0.65% for
the same period.
**The composition of the Fund's portfolio is subject to change.
Past performance is not predictive of future results. The value of shares in
the Riverside Capital Fixed Income Fund will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost.
THE RIVERSIDE CAPITAL LOW DURATION GOVERNMENT SECURITIES FUND
Stronger than anticipated growth led investors to believe that Federal Reserve
action was imminent throughout much of the summer. The Fed stuck to its guns,
however, and maintained its neutrality--a positioning investors finally
accepted in September. Anxiety levels dropped, and bonds rallied. Year-end
jumpiness, however, limited gains. In fact, despite all the sound and fury,
the net change in interest rates over the six month period ended December 31,
1996, was minimal.
A DIVERSIFIED, CONSERVATIVE APPROACH
Given the environment, the Fund was positioned conservatively--and given how
rapidly investor sentiment shifted, we believe our caution was more than
warranted. Maturities were shortened in an effort to maximize the portfolio's
flexibility. In addition, the volatility of the environment created many
opportunities to increase yield without increasing risk--and we capitalized on
them whenever and wherever they arose. As a result, while the period was a
challenging one, it was also a relatively good one with the Fund posting a
total return of 4.14%*.
Invested primarily in securities issued by the U.S. government and its
agencies, the average credit quality of the Fund's holdings as of December 31,
1996, was AAA. The average maturity of the portfolio was approximately 6
years.**
*The Fund's total return with the maximum 2.00% sales charge was 2.08% for
the same period.
**The composition of the Fund's portfolio is subject to change.
Past performance is not predictive of future results. The value of shares in
the Riverside Capital Low Duration Government Securities Fund will fluctuate,
so that the shares, when redeemed, may be worth more or less than their
original cost.
-4-
<PAGE>
THE RIVERSIDE CAPITAL MONEY MARKET FUND
After waiting anxiously for a rate hike throughout much of the summer, in
September, investors accepted the fact that the Federal Reserve was content to
sit on the sidelines--and would be more than likely to sit there until sometime
after the election. The money markets cooled off, and throughout the fall, the
environment was far more stable than it had been for quite
some time.
With the economy on an even keel and inflation at benign levels, we expect to
see rates trade in a relatively narrow range for the foreseeable future.
Nevertheless, we will continue to approach the markets cautiously in the months
ahead in an effort to deliver stability and current income.
As of December 31, 1996, the average maturity of the Fund's holdings was 42
days. Moreover, the portfolio's assets were invested in the highest quality
short-term instruments available--U.S. Government agency securities and
repurchase agreements collateralized by U.S. Treasury bonds.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. Yields will fluctuate, and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1 per share.
This material is authorized for distribution to prospective investors only when
preceded or accompanied by a prospectus.
For more information, including charges and expenses, call 1-800-8-RIVER-6 to
receive a prospectus, which should be read carefully before you invest or send
money. The Riverside Capital Funds are distributed by BISYS Fund Services. The
composition of the Funds' holdings is subject to change.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, NATIONAL BANK OF COMMERCE, OR ANY OF ITS AFFILIATES, AND SHARES
ARE NOT FEDERALLY INSURED BY THE FDIC OR ANY OTHER AGENCY. AN INVESTMENT IN
SHARES OF THE FUNDS INVOLVES THE POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
-5-
<PAGE>
TABLE OF CONTENTS
Statements of Assets and Liabilities
Page 7
Statements of Operations
Page 9
Statements of Changes in Net Assets
Page 11
Schedules of Portfolio Investments
Page 13
Notes to Financial Statements
Page 23
Financial Highlights
Page 29
-6-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost
$137,019,445; $60,465,423; and
$25,746,510, respectively).......... $137,019,445 $77,539,992 $33,202,517
Repurchase agreements (cost
$9,777,449, $0 and $0,
respectively)....................... 9,777,449 -- --
------------ ----------- -----------
Total investments.................... 146,796,894 77,539,992 33,202,517
Interest and dividends receivable.... 1,103,938 105,238 66,797
Receivable for capital shares issued. -- -- 5,730
Prepaid expenses..................... 18,677 4,496 1,574
------------ ----------- -----------
Total Assets....................... 147,919,509 77,649,726 33,276,618
------------ ----------- -----------
LIABILITIES:
Dividends payable.................... 541,711 -- --
Payable for capital shares redeemed.. -- 19 --
Payable for investments purchased.... 5,000,000 -- --
Accrued expenses and other payables:
Investment advisory fees........... 1,366 1,951 320
Administration fees................ 9,482 5,102 1,641
Administrative services fees....... 20,763 10,895 5,341
12b-1 fees......................... 16,018 7,668 2,788
Custodian and accounting fees...... 1,359 4,707 2,389
Legal and audit fees............... 7,881 13,738 7,541
Printing fees...................... 18,230 12,665 4,300
Transfer agent fees................ 11,793 16,934 11,435
Registration and filing fees....... 1,780 -- 235
------------ ----------- -----------
Total Liabilities.................. 5,630,383 73,679 35,990
------------ ----------- -----------
NET ASSETS:
Capital.............................. 142,411,971 59,097,035 24,998,257
Undistributed net investment income
(Distributions in excess of net in-
vestment income).................... -- (6,911) 965
Net unrealized appreciation on in-
vestments........................... -- 17,074,569 7,456,007
Accumulated undistributed net
realized gains (losses) on
investment transactions............. (122,845) 1,411,354 785,399
------------ ----------- -----------
Net Assets......................... $142,289,126 $77,576,047 $33,240,628
============ =========== ===========
Outstanding units of beneficial in-
terest (shares)..................... 142,411,972 5,503,100 2,250,246
============ =========== ===========
Net asset value--redemption price per
share............................... $ 1.00 $ 14.10 $ 14.77
============ =========== ===========
Maximum Sales Charge................. 4.50% 4.50%
=========== ===========
Maximum Offering Price (100%/(100%--
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share............................... $ 1.00(a) $ 14.76 $ 15.47
============ =========== ===========
</TABLE>
- ------
(a) Offering price and redemption price are the same for the Money Market Fund.
See notes to financial statements.
-7-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
GOVERNMENT MUNICIPAL
FIXED INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $24,033,785;
$7,094,466; and $17,887,329, respec-
tively)................................ $24,287,172 $7,117,190 $18,387,288
Interest and dividends receivable....... 405,073 104,243 393,304
Unamortized organization costs.......... -- -- 7,478
Prepaid expenses........................ 805 201 5,730
----------- ---------- -----------
Total Assets.......................... 24,693,050 7,221,634 18,793,800
----------- ---------- -----------
LIABILITIES:
Cash overdraft.......................... -- -- 77,505
Payable for capital shares redeemed..... -- -- 1,850
Accrued expenses and other payables:
Investment advisory fees.............. 443 -- 26
Administration fees................... 1,667 105 1,230
Administrative services fees.......... 5,077 1,345 1,896
12b-1 fees............................ 1,349 432 2,716
Custodian and accounting fees......... 6,095 10,350 2,014
Trustees' fees........................ 479 119 245
Legal and audit fees.................. 7,706 8,645 9,219
Transfer agent fees................... 9,512 8,177 8,053
Printing fees......................... 5,014 2,834 3,538
Registration and filing fees.......... 669 1,571 --
----------- ---------- -----------
Total Liabilities..................... 38,011 33,578 108,290
----------- ---------- -----------
NET ASSETS:
Capital................................. 30,840,378 7,149,156 19,418,315
Undistributed net investment income
(Distributions in excess of net invest-
ment income)........................... (6,952) (7,565) (5,961)
Net unrealized appreciation on invest-
ments.................................. 253,387 22,724 499,959
Accumulated undistributed net realized
gains (losses) on investment transac-
tions.................................. (6,429,774) 23,741 (1,226,803)
----------- ---------- -----------
Net Assets............................ $24,655,039 $7,188,056 $18,685,510
=========== ========== ===========
Outstanding units of beneficial interest
(shares)............................... 2,804,033 716,230 1,894,225
=========== ========== ===========
Net asset value--redemption price per
share.................................. $ 8.79 $ 10.04 $ 9.86
=========== ========== ===========
Maximum Sales Charge.................... 3.00% 2.00% 3.00%
=========== ========== ===========
Maximum Offering Price (100%/(100%--Max-
imum Sales Charge) of net asset value
adjusted to nearest cent) per share.... $ 9.06 $ 10.24 $ 10.16
=========== ========== ===========
</TABLE>
See notes to financial statements.
-8-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
---------- ---------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $3,681,422 $ 4,424 $ 3,216
Dividend income.......................... -- 837,625 346,221
---------- ---------- ----------
Total Income............................. 3,681,422 842,049 349,437
---------- ---------- ----------
EXPENSES:
Investment advisory fees................. 239,173 348,677 160,689
Administration fees...................... 136,670 76,177 32,138
Administrative services fees............. 170,838 95,197 40,172
12b-1 fees............................... 170,838 95,197 40,172
Custodian and accounting fees............ 39,484 23,970 19,271
Legal and audit fees..................... 31,386 15,150 4,644
Organization costs....................... -- -- 2,156
Trustees' fees and expenses.............. 10,308 4,718 2,180
Transfer agent fees...................... 17,976 22,894 13,730
Interest expense......................... 14,041 -- --
Registration and filing fees............. 3,941 3,612 1,800
Printing costs........................... 17,210 8,964 4,004
Other.................................... 7,572 3,706 1,299
---------- ---------- ----------
Total Expenses........................... 859,437 698,262 322,255
Less: Fee waivers........................ (144,277) (80,304) (146,402)
---------- ---------- ----------
Net Expenses............................. 715,160 617,958 175,853
---------- ---------- ----------
Net Investment Income.................... 2,966,262 224,091 173,584
---------- ---------- ----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment
transactions........................ 80,300 4,742,857 785,256
Change in unrealized appreciation on
investments......................... -- 3,560,072 1,650,419
---------- ---------- ----------
Net realized/unrealized gains on
investments.............................. 80,300 8,302,929 2,435,675
---------- ---------- ----------
Change in net assets resulting from
operations................................. $3,046,562 $8,527,020 $2,609,259
========== ========== ==========
</TABLE>
See notes to financial statements.
-9-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
FIXED GOVERNMENT MUNICIPAL
INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................ $ 1,044,405 $ 246,208 $ 610,737
Dividend income........................ 15,335 1,934 623
----------- --------- ---------
Total Income........................... 1,059,740 248,142 611,360
----------- --------- ---------
EXPENSES:
Investment advisory fees............... 88,882 18,356 61,564
Administration fees.................... 27,348 7,343 18,945
Administrative services fees........... 34,157 9,178 23,678
12b-1 fees............................. 34,157 9,178 23,678
Custodian and accounting fees.......... 22,234 17,520 28,060
Legal and audit fees................... 3,692 2,104 2,590
Organization costs..................... -- 1,386 4,474
Trustees' fees and expenses............ 1,878 558 1,272
Transfer agent fees.................... 12,538 10,074 11,822
Registration and filing fees........... 2,210 1,540 364
Printing costs......................... 2,750 458 1,918
Other.................................. 1,567 299 880
----------- --------- ---------
Total Expenses......................... 231,413 77,994 179,245
Less: Fee waivers...................... (28,988) (27,931) (76,737)
----------- --------- ---------
Net Expenses........................... 202,425 50,063 102,508
----------- --------- ---------
Net Investment Income.................. 857,315 198,079 508,852
----------- --------- ---------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains (losses) on
investment transactions................ (74,861) 58,045 (18,868)
Change in unrealized appreciation on
investments....................... 235,378 30,981 257,850
----------- --------- ---------
Net realized/unrealized gains on
investments............................ 160,517 89,026 238,982
----------- --------- ---------
Change in net assets resulting from
operations............................. $ 1,017,832 $ 287,105 $ 747,834
=========== ========= =========
</TABLE>
See notes to financial statements.
-10-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MONEY MARKET FUND VALUE EQUITY FUND GROWTH FUND
---------------------------- -------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1996 1996 1996 1996 1996
------------- ------------- ------------ ------------ ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.. $ 2,966,262 $ 6,961,437 $ 224,091 $ 837,145 $ 173,584 $ 389,143
Net realized gains on
investments
transactions.......... 80,300 141,785 4,742,857 9,340,011 785,256 1,167,209
Net change in
unrealized
appreciation on
investments........... -- -- 3,560,072 5,384,702 1,650,419 3,513,955
------------- ------------- ----------- ------------ ----------- -----------
Change in net assets
resulting from
operations............ 3,046,562 7,103,222 8,527,020 15,561,858 2,609,259 5,070,307
------------- ------------- ----------- ------------ ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income................ (2,966,262) (6,961,437) (224,091) (827,973) (173,584) (389,143)
In excess of net
investment income..... -- -- (113,726) -- (10,417) (19,825)
From net realized gains
on investments........ -- -- (4,742,857) (2,982,043) (785,256) (505,659)
In excess of net
realized
gains on investments.. -- -- (5,891,244) -- (149,562) --
------------- ------------- ----------- ------------ ----------- -----------
Change in net assets
from shareholder
distributions......... (2,966,262) (6,961,437) (10,971,918) (3,810,016) (1,118,819) (914,627)
------------- ------------- ----------- ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 184,648,197 426,124,612 2,163,934 5,108,660 1,163,485 10,696,082
Dividends reinvested... 182,553 512,232 5,016,996 1,808,518 489,190 383,639
Cost of shares
redeemed.............. (176,852,532) (450,674,926) (8,215,119) (17,877,680) (3,669,856) (2,953,582)
------------- ------------- ----------- ------------ ----------- -----------
Change in net assets
from capital
transactions.......... 7,978,218 (24,038,082) (1,034,189) (10,960,504) (2,017,181) 8,126,339
------------- ------------- ----------- ------------ ----------- -----------
Capital contribution... 84,985 138,311 -- -- -- --
------------- ------------- ----------- ------------ ----------- -----------
Change in net assets... 8,143,503 (23,757,986) (3,479,087) 791,338 (526,741) 12,282,019
NET ASSETS:
Beginning of period.... 134,145,623 157,903,609 81,055,134 80,283,796 33,787,369 21,485,350
------------- ------------- ----------- ------------ ----------- -----------
End of period.......... $ 142,289,126 $ 134,145,623 $77,576,047 $ 81,055,134 $33,240,628 $33,767,369
============= ============= =========== ============ =========== ===========
SHARE TRANSACTIONS:
Issued................. 184,733,182 426,124,613 150,853 373,123 82,213 832,694
Reinvested............. 182,553 512,232 364,376 133,595 33,183 29,644
Redeemed............... (176,852,532) (450,674,926) (585,614) (1,290,025) (274,533) (222,427)
------------- ------------- ----------- ------------ ----------- -----------
Change in shares....... 8,063,203 (24,038,081) (70,385) (783,307) (159,137) 639,911
============= ============= =========== ============ =========== ===========
</TABLE>
See notes to financial statements.
-11-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LOW DURATION GOVERNMENT TENNESSEE MUNICIPAL
FIXED INCOME FUND SECURITIES FUND OBLIGATIONS FUND
-------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
1996 1996 1996 1996 1996 1996
------------ ------------ ------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 857,315 $ 2,177,545 $ 198,079 $ 399,991 $ 508,852 $ 1,080,311
Net realized gains
(losses) on
investments
transactions......... (74,861) (1,646,585) 58,045 (1,813) (18,868) (37,429)
Net change in
unrealized
appreciation
(depreciation)
on investments....... 235,378 29,430 30,981 (149,458) 257,850 (106,825)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets
resulting from
operations........... 1,017,832 560,390 287,105 248,720 747,834 936,057
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment
income............... (857,315) (2,163,561) (198,079) (399,991) (508,852) (1,077,559)
In excess of net
investment income.... (81,329) -- (23,362) (3,182) (47,161) --
In excess of net
realized gains on
investments.......... -- (104,990) -- (2,537) -- (906)
------------ ------------ ----------- ----------- ----------- -----------
(938,644) (2,268,551) (221,441) (405,710) (556,013) (1,078,465)
------------ ------------ ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 495,473 2,751,575 5,306 688,187 299,795 3,937,416
Dividends reinvested... 429,988 971,603 179,452 339,394 171,062 294,830
Cost of shares
redeemed............. (5,196,819) (12,664,268) (523,357) (1,062,808) (1,014,256) (5,879,537)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets
from
capital transactions. (4,271,358) (8,941,090) (338,599) (35,227) (543,399) (1,647,291)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets... (4,192,170) (10,649,251) (272,935) (192,217) (351,578) (1,789,699)
NET ASSETS:
Beginning of period.... 28,847,209 39,496,460 7,460,991 7,653,208 19,037,088 20,826,787
------------ ------------ ----------- ----------- ----------- -----------
End of period.......... $ 24,655,039 $ 28,847,209 $ 7,188,056 $ 7,460,991 $18,685,510 $19,037,088
============ ============ =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 56,190 300,179 532 67,717 30,535 402,934
Reinvested............. 48,885 106,183 17,961 33,512 17,418 30,243
Redeemed............... (591,008) (1,377,873) (52,372) (105,303) (103,277) (600,866)
------------ ------------ ----------- ----------- ----------- -----------
Change in shares....... (485,933) (971,511) (33,879) (4,074) (55,324) (167,689)
============ ============ =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-12-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
----------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (96.3%):
Federal Farm Credit Bank:
$ 5,000,000 5.43%, 3/3/97......................................... $ 5,000,000
15,500,000 5.44%, 9/1/98*........................................ 15,500,000
Federal Home Loan Bank:
1,000,000 5.31%, 12/14/97**..................................... 999,844
2,000,000 5.40%, 4/4/97**....................................... 1,999,677
1,000,000 6.63%, 5/23/97........................................ 1,003,558
3,000,000 5.28%, 8/14/97*....................................... 2,998,656
5,000,000 5.65%, 1/7/98......................................... 5,000,000
Federal National Mortgage Assoc.:
10,000,000 5.24%, 3/25/97*....................................... 9,998,847
2,000,000 5.45%, 6/20/97*....................................... 1,999,346
3,000,000 5.49%, 7/28/97**...................................... 2,994,817
5,000,000 5.40%, 9/2/97**....................................... 4,997,163
10,000,000 5.40%, 12/3/97*....................................... 9,995,442
2,500,000 5.32%, 7/14/99*....................................... 2,490,054
Private Export Funding:
3,300,000 5.49%, 2/28/99*....................................... 3,292,897
Student Loan Marketing Assoc.:
1,000,000 5.83%, 4/21/97**...................................... 1,001,055
10,000,000 5.39%, 10/14/97**..................................... 9,994,347
500,000 5.57%, 10/30/97**..................................... 500,378
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Student Loan Marketing Assoc., continued:
$ 4,830,000 5.39%, 11/24/97*.................................... $ 4,824,019
8,000,000 5.40%, 8/20/98**.................................... 7,992,303
2,000,000 5.40%, 9/28/98**.................................... 1,997,947
14,000,000 5.40%, 11/10/98**................................... 13,985,239
5,000,000 5.43%, 2/8/99**..................................... 4,990,235
7,000,000 5.41%, 2/22/99*..................................... 6,987,010
2,500,000 5.32%, 7/12/99*..................................... 2,489,319
14,000,000 5.44%, 8/2/99*...................................... 13,987,292
------------
Total U.S. Government Agency 137,019,445
------------
Total Investments, at Amortized Cost 137,019,445
------------
REPURCHASE AGREEMENTS (6.9%):
9,777,449 Zions Securities, 5.75%, 1/2/97, (Collateralized by
$9,230,000 U.S. Treasury Notes, 7.25%, 8/15/04,
Market Value = $9,780,572).......................... 9,777,449
------------
Total Repurchase Agreements 9,777,449
------------
Total (Cost--$146,796,894)(a) $146,796,894
============
</TABLE>
- ------
Percentages indicated are based on net assets of $142,289,126.
(a)Cost for federal income tax and financial reporting purposes are the same.
* Floating Rate Certificates are securities with interest rates that change
whenever a specific interest rate changes. The interest rate is based on an
index of market interest rates or other index. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect on December 31,
1996.
** Variable Rate Certificates are securities with interest rates that change
periodically and are payable on different dates ranging from daily, weekly,
monthly, quarterly, or semi-annually. The rate reflected on the Schedule of
Portfolio Investments is the rate in effect on December 31, 1996.
See notes to financial statements.
-13-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL VALUE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (98.8%):
Automotive Parts (2.9%):
71,100 Echlin, Inc............................................ $ 2,248,538
-----------
Banking (1.2%):
26,965 First Hawaiian, Inc. .................................. 943,775
-----------
Capital Goods (4.3%):
150,000 Global Industries Technology, Inc. (b)................. 3,318,750
-----------
Computers & Peripherals (5.9%):
188,650 Amdahl Corp. (b)....................................... 2,287,381
15,450 International Business Machines Corp................... 2,332,950
-----------
4,620,331
-----------
Containers--Metal, Glass, Paper,
Plastic (2.8%):
94,050 Rubbermaid, Inc ....................................... 2,139,638
-----------
Electrical Equipment (3.1%):
53,835 Thomas & Betts Corp. .................................. 2,388,928
-----------
Entertainment (3.5%):
69,300 Hasbro, Inc. .......................................... 2,694,038
-----------
Financial Services (3.7%):
66,100 SunAmerica, Inc. ...................................... 2,933,188
-----------
Food Processing & Packaging (5.9%):
144,100 J & J Snack Foods Corp. (b)............................ 1,945,350
110,800 McCormick & Company, Inc............................... 2,610,725
-----------
4,556,075
-----------
Insurance (12.1%):
124,652 PXRE Corp.............................................. 3,053,979
68,132 Travelers Group, Inc... 3,091,490
44,600 UNUM Corp.............................................. 3,222,350
-----------
9,367,819
-----------
Medical Services (3.4%):
133,700 Value Health, Inc. (b)................................. 2,607,150
-----------
Metal & Mineral Production (2.6%):
44,900 Cleveland Cliffs, Inc.................................. 2,037,338
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Mobile Homes & Manufactured Housing (1.4%):
42,600 Skyline Corp........................................... $ 1,054,350
-----------
Oil & Gas (3.9%):
105,180 Valero Energy Corp..................................... 3,010,777
-----------
Oilfield Equipment & Services (4.5%):
69,150 B. J. Services (b)..................................... 3,526,650
-----------
Pollution Control Services & Equipment (3.3%):
158,700 Safety-Kleen Corp...................................... 2,598,712
-----------
Real Estate Investment Trusts (9.4%):
197,500 Equity Inns, Inc....................................... 2,567,500
77,700 Mid-America Apartment Communities, Inc................. 2,243,587
65,710 Storage USA, Inc....................................... 2,472,338
-----------
7,283,425
-----------
Restaurants (2.7%):
241,750 Darden Restaurants, Inc................................ 2,115,312
-----------
Retail (7.7%):
236,600 Burlington Coat Factory Warehouses (b)................. 3,075,800
279,100 Hancock Fabrics, Inc................................... 2,895,662
-----------
5,971,462
-----------
Savings & Loan Companies (4.0%):
94,700 H. F. Ahmanson & Co.................................... 3,077,750
-----------
Steel (3.9%):
160,000 Birmingham Steel Corp.................................. 3,040,000
-----------
Tobacco & Tobacco Products (2.7%):
64,500 UST, Inc............................................... 2,088,188
-----------
Trucking (3.9%):
166,650 Werner Enterprises, Inc................................ 3,020,531
-----------
Total Common Stocks 76,642,725
-----------
INVESTMENT COMPANIES (1.2%):
212,915 Dreyfus Treasury Prime Fund............................ 212,915
684,352 Riverside Capital Money Market Fund.................... 684,352
-----------
Total Investment Companies 897,267
-----------
Total (Cost--$60,465,423)(a) $77,539,992
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $77,576,047.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $19,555,849
Unrealized depreciation...................................... (2,481,280)
-----------
Net unrealized appreciation.................................. $17,074,569
===========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
-14-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (90.4%):
Amusement & Recreation (2.0%):
18,000 Cedar Fair L.P......................................... $ 666,000
-----------
Automotive Parts (1.6%):
38,950 Titan Wheel International, Inc......................... 496,613
2,200 Walbro Corp. .......................................... 40,150
-----------
536,763
-----------
Banking (6.4%):
9,500 NationsBank Corp....................................... 928,625
34,200 SouthTrust Corp........................................ 1,192,725
-----------
2,121,350
-----------
Beverages (3.0%):
18,800 Coca-Cola Co........................................... 989,350
-----------
Computers (1.2%):
30,000 Checkmate Electronics, Inc. (b)........................ 390,000
-----------
Computers & Peripherals (3.5%):
35,000 EMC Corp. (b).......................................... 1,159,375
-----------
Construction (2.2%):
53,445 Clayton Homes, Inc..................................... 721,507
-----------
Department Stores (1.2%):
31,200 Claire's Stores, Inc. ................................. 405,600
-----------
Electrical Components (1.0%):
40,000 World Access, Inc. (b)................................. 320,000
-----------
Electrical Equipment (3.6%):
12,000 General Electric Co. .................................. 1,186,500
-----------
Electronic & Electrical (5.3%):
21,000 AMP, Inc. ............................................. 805,875
15,500 Motorola, Inc. ........................................ 951,313
-----------
1,757,188
-----------
Food Processing & Packaging (5.4%):
25,000 Nabisco Holdings Corp. ................................ 971,875
22,000 Sara Lee Corp.......................................... 819,500
-----------
1,791,375
-----------
Insurance (3.1%):
9,500 American International
Group, Inc............................................ 1,028,375
-----------
</TABLE>
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
--------- --------------------------------------------------------- ---------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Manufacturing--Capital Goods (1.9%):
45,000 Metrotrans Corp. (b)..................................... $ 630,000
---------
Measuring & Controlling Devices (1.7%):
14,100 Thermo Electron Corp. (b)................................ 581,625
---------
Oil-Integrated Companies (5.4%):
7,400 Atlantic Richfield Co. .................................. 980,500
8,500 Texaco, Inc.............................................. 834,062
---------
1,814,562
---------
Pharmaceuticals (5.8%):
17,500 Abbott Laboratories...................................... 888,125
16,100 Schering-Plough Corp. ................................... 1,042,475
---------
1,930,600
---------
Pollution Control Services & Equipment (1.8%):
23,500 Browning-Ferris Industries, Inc.......................... 616,875
---------
Real Estate Investment Trusts (7.4%):
44,000 Merry Land & Investment
Co., Inc. .............................................. 946,000
27,300 Storage USA, Inc. ....................................... 1,027,163
37,100 Winston Hotels, Inc. .................................... 505,488
---------
2,478,650
---------
Restaurants (2.8%):
37,000 Cracker Barrel Old Country Store, Inc.................... 938,875
---------
Retail (5.3%):
21,700 Home Depot, Inc.......................................... 1,087,713
29,000 Wal-Mart Stores, Inc. ................................... 663,375
---------
1,751,088
---------
Semiconductors (3.7%):
9,400 Intel Corp............................................... 1,230,812
---------
Services (Non-Financial) (2.1%):
35,000 Rollins, Inc............................................. 700,000
---------
Soaps & Cleaning Agents (2.3%):
7,000 Procter & Gamble Co. .................................... 752,500
---------
Tobacco (4.5%):
13,200 Philip Morris Cos., Inc.................................. 1,486,650
---------
Toys & Bicycles--Manufacturing (3.0%):
35,675 Mattel, Inc.............................................. 989,981
---------
</TABLE>
Continued
-15-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
------ ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telecommunications (3.2%):
33,000 MCI Telecommunications
Corp.................................................. $ 1,078,688
-----------
Total Common Stocks 30,054,289
-----------
INVESTMENT COMPANIES (9.5%):
1,574,114 Dreyfus Treasury Prime Fund............................ 1,574,114
</TABLE>
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
------ ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES, CONTINUED:
1,574,114 Riverside Capital Money Market Fund.................... $ 1,574,114
-----------
Total Investment Companies 3,148,228
-----------
Total (Cost--$25,746,510)(a) $33,202,517
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $33,240,628.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $8,038,208
Unrealized depreciation....................................... (582,201)
----------
Net unrealized appreciation................................... $7,456,007
==========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
-16-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS (31.1%):
Banking (6.5%):
$1,500,000 Commerce Bancorp, Inc., 8.38%, 7/15/03............... $ 1,605,015
-----------
Financial Services (4.2%):
1,000,000 Security Capital Pacific Trust, 7.65%, 8/1/10,
Callable @ Whole + 25Bp............................. 1,027,500
-----------
Industrial Goods & Services (15.9%):
1,500,000 Montalbano Builders, 10.00%, 5/1/99, Callable 5/1/98
@100................................................ 1,500,000
852,570 Rosewood Care Center Funding, 7.25%, 11/1/13......... 818,467
1,600,000 Voyager Lines Private Placement, 9.50%, 11/1/99,
Callable 2/18/97 @100 (b)........................... 1,600,000
-----------
3,918,467
-----------
Transportation & Shipping (4.5%):
1,125,000 Ray & Ross Transport, Inc., 10.00%, 2/1/06, Callable
1/1/97 @100......................................... 1,125,000
-----------
Total Corporate Bonds 7,675,982
-----------
MUNICIPAL BONDS (5.3%):
Arkansas (5.3%):
1,300,000 Union County Arkansas Revenue, Hillsboro Manor
Project, 9.50%, 9/1/17.............................. 1,296,750
-----------
Total Municipal Bonds 1,296,750
-----------
TAXABLE MUNICIPAL BONDS (20.1%):
California (6.1%):
1,500,000 Corona, California, Single Family, 6.88%, 11/1/17,
Callable 11/1/06 @102............................... 1,499,550
-----------
Illinois (0.5%):
119,130 Belleville, St. Clair County, CMO, 7.35%, 11/15/09... 122,825
-----------
Oaklahoma (4.1%):
1,000,000 Oklahoma County Financial Authority, 8.05%, 10/1/09.. 1,010,000
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
TAXABLE MUNICIPAL BONDS, CONTINUED:
Tennessee (3.0%):
$ 745,000 Hamilton County, Tennessee Industrial Development
Board, Multifamily Housing Revenue, Waterford
Apartments, Project A, 8.50%, 8/1/10................ $ 739,003
-----------
West Virginia (6.4%):
105,000 Harrison County, West Virginia Revenue Refunding,
First Mortgage, Meadow B, 9.25%, 11/1/08............ 104,440
260,000 Summers County, West Virginia First Mortgage Gross
Revenue Refunding, Limited Partnership, 8.00%,
10/1/03............................................. 255,572
1,230,000 West Virginia State Hospital Financial Authority,
Hospital Revenue, Nellas Income Project, 9.50%,
8/1/15.............................................. 1,215,056
-----------
1,575,068
-----------
Total Taxable Municipal Bonds 4,946,446
-----------
</TABLE>
Continued
-17-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FIXED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (32.2%):
Federal Home Loan Mortgage Corp.:
$1,200,000 8.60%, 10/27/09....................................... $ 1,248,456
2,580,000 8.06%, 8/9/11, Callable 8/9/99 @100................... 2,664,830
Federal National Mortgage Assoc.:
405,000 6.65%, 3/8/06, Callable 10/27/99 @100................. 393,591
3,800,000 6.69%, 2/2/11, Callable 2/2/01 @100................... 3,633,104
-----------
Total U.S. Government Agencies 7,939,981
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. TREASURY BONDS (0.2%):
$ 49,000 9.13%, 5/15/09........................................ $ 56,524
-----------
Total U.S. Treasury Bonds 56,524
-----------
INVESTMENT COMPANIES (9.6%):
1,235,317 Dreyfus Treasury Prime Fund........................... 1,235,317
1,136,171 Riverside Capital Money Market Fund................... 1,136,171
-----------
Total Investment Companies 2,371,488
-----------
Total (Cost--$24,033,785)(a) $24,287,172
===========
</TABLE>
- ------
Percentages indicated are based on net assets of $24,655,039.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $ 354,523
Unrealized depreciation........................................ (101,136)
---------
Net unrealized appreciation.................................... $ 253,387
=========
</TABLE>
(b) Represents a restricted security, purchased under Rule 144A, which is
exempt from registration under the Securities Act of 1933, as amended.
CMO--Collateralized Mortgage Obligation
See notes to financial statements.
-18-
<PAGE>
THE SESSION GROUP
RIVERSIDE CAPITAL LOW DURATION GOVERNMENT SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------------- ----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (94.0%):
Federal Farm Credit Bank:
$700,000 8.80%, 1/31/02........................................... $ 774,053
250,000 7.10%, 11/12/02.......................................... 259,520
Federal Home Loan Bank:
700,000 3.82%, 7/15/98*.......................................... 675,004
250,000 5.50%, 1/23/01........................................... 242,833
775,000 6.10%, 11/26/01.......................................... 772,094
Federal Home Loan Mortgage Corp.:
250,000 7.75%, 11/7/01........................................... 264,265
750,000 7.54%, 5/3/04............................................ 761,235
500,000 7.89%, 5/12/04........................................... 501,370
Federal National Mortgage Assoc.:
250,000 5.55%, 1/17/01........................................... 243,303
545,000 7.20%, 1/10/02........................................... 545,000
Private Export Funding:
433,550 5.65%, 3/15/03........................................... 426,505
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------- ----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Shipco 668 Series A-Title XI:
$ 295,000 8.50%, 5/11/02......................................... $ 295,391
Small Business Investment Corp.:
1,000,000 7.08%, 12/1/06......................................... 998,500
----------
Total U.S. Government Agencies 6,759,071
----------
INVESTMENT COMPANIES (5.0%):
1 Dreyfus Treasury Prime Fund............................ 1
358,118 Riverside Capital Money Market Fund.................... 358,118
----------
Total Investment Companies 358,119
----------
Total (Cost--$7,094,466)(a) $7,117,190
==========
</TABLE>
- ------
Percentages indicated are based on net assets of $7,188,056.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $ 73,956
Unrealized depreciation......................................... (51,232)
--------
Net unrealized depreciation..................................... $ 22,724
========
</TABLE>
* Variable Rate Certificates are securities with interest rates that change
periodically and are payable on different dates ranging from daily, weekly,
monthly, quarterly or semi-annually. The rate reflected on the Schedule of
Portfolio Investments is the rate in effect on December 31, 1996.
See notes to financial statements.
-19-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
MUNICIPAL BONDS (84.2%):
Georgia (2.3%):
$400,000 Atlanta, Georgia Housing Development Corp., Mortgage
Revenue, 7.00%, 12/1/20, Callable 12/1/05, @102...... $ 423,128
-----------
Louisiana (4.4%):
750,000 New Orleans, Louisiana Audubon Park Revenue, 8.00%,
4/1/12............................................... 821,730
-----------
Pennsylvania (2.7%):
250,000 Schuylkill County, Pennsylvania Industrial Development
Authority Revenue, Beverly Enterprises Project,
6.63%, 5/1/03........................................ 253,798
250,000 Wyoming County, Pennsylvania Industrial Development
Authority Revenue, Beverly Enterprises Project,
6.25%, 7/1/06........................................ 252,300
-----------
506,098
-----------
South Carolina (1.1%):
200,000 Charleston County, South Carolina Health Facilities
Revenue, Franke Home Project, 8.00%, 11/1/24......... 209,756
-----------
Tennessee (72.1%):
5,000 Blount County, Tennessee Health & Educational
Facilities Board Revenue, Multifamily Mortgage,
Maryville Towers Project, 6.20%, 7/20/28, GNMA....... 5,093
100,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/13........................................ 105,506
105,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.70%, 3/1/14........................................ 110,718
115,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/15........................................ 121,389
125,000 Bruceton, Tennessee Water & Sewer Development, GO,
6.75%, 3/1/16........................................ 131,720
395,000 Clarkesville, Tennessee Water, Sewer & Gas Refunding &
Improvement, 6.25%, 2/1/18, MBIA..................... 418,692
435,000 Dyer County, Tennessee Health, Educational & Housing
Facilities Board Revenue, 1st Mortgage Parkview
Convalescent, 7.25%, 10/1/04......................... 460,113
500,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Park at 58
Project, 6.70%, 3/1/21, Callable 3/1/06 @101......... 514,790
250,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Pattern Towers,
6.38%, 8/1/26, Callable 8/1/05 @102.................. 252,375
890,000 Hamilton County, Tennessee Industrial Development
Board Revenue, Multifamily Housing, Waterford Place
Apartments Project, Series B, 6.60%, 2/1/24, FGIC.... 884,375
300,000 Jackson, Tennessee Health, Educational & Housing,
Posthouse Apartments, 7.00%, 5/1/17.................. 316,028
350,000 Knox County, Tennessee Public Improvement, GO, 6.38%,
4/1/07............................................... 381,752
350,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.60%,
10/15/07............................................. 365,526
250,000 Knoxville, Tennessee Community Development Corp.,
Clinton Towers Housing Revenue, Multifamily, 6.65%,
10/15/10............................................. 259,178
250,000 Lawrance County, GO, 6.63%, 3/1/14.................... 273,528
115,000 Manchester, Tennessee Water & Sewer Revenue, Series
1992, GO, 6.00%, 7/1/06, AMBAC....................... 119,278
</TABLE>
Continued
-20-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Tennessee, continued:
$ 450,000 Maury County Industrial Development Board, PCR,
6.50%, 9/1/24, Callable 9/1/04 @102................. $ 474,444
250,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Mortgage Revenue, Edgewater
Terrace Project, 7.38%, 1/20/27, FHA, LOC: First
Alabama Birmingham.................................. 266,758
250,000 Memphis, Tennessee Health, Educational, & Housing
Facilities Board, Multifamily Refunding, River Trace
II, 6.45%, 4/1/26................................... 259,305
250,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Health & Educational Facilities Board
Revenue, 1st Mortgage, Blakeford Project, 7.50%,
7/1/99.............................................. 254,525
75,000 Metropolitan Government, Nashville & Davidson County,
Tennessee Water & Sewer Revenue, 7.00%, 1/1/14...... 75,930
150,000 Morristown, Tennessee Housing Development Corp.,
Multifamily Revenue, 6.25%, 5/1/18.................. 154,707
150,000 Poplar Grove, Tennessee Utility District, Tipton
County Gas System Revenue, Series 1993, 6.90%,
1/15/07............................................. 155,928
130,000 Poplar Grove, Tennessee Utility District, Waterworks
Revenue Refunding & Improvement, 6.05%, 4/1/05...... 138,852
160,000 Rutherford County, 0.00%, 5/1/13..................... 63,726
370,000 Shelby County, Tennessee Compound Interest School
Bonds, Series A, GO, 0.00%, 5/1/12.................. 159,662
900,000 Shelby County, Tennessee Health Educational & Housing
Facilities Board Revenue, 8.50%, 7/1/26............. 917,982
500,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Trezevant Manor
Project, 6.00%, 8/1/16.............................. 478,515
125,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Industrial
Development, 1st Healthcare Project, 6.50%, 4/1/02.. 124,846
250,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Beverly
Enterprises Project, 6.50%, 3/1/09.................. 253,135
1,150,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Multifamily
Housing, Windsor Apartments, 6.75%, 10/1/17......... 1,201,244
725,000 Shelby County, Tennessee Health, Educational &
Housing Facilities Board Revenue, Heritage Place
Project, 7.12%, 7/1/25, MBIA, FHA................... 774,851
500,000 Shelby County, Tennessee, 6.00%, 4/15/24............. 497,950
300,000 Shelby County, Tennessee, 6.63%, 7/1/17, Callable
12/1/06 @102........................................ 300,468
500,000 Shelby County, Tennessee, 6.75%, 1/1/28, Callable
12/1/06 @102........................................ 500,770
500,000 South Fulton, Tennessee Industrial Development
Revenue, 6.35%, 10/1/15, Callable 10/1/05 @102...... 513,660
310,000 South Fulton, Tennessee Industrial Revenue Authority,
6.00%, 10/1/10, Callable 10/1/05 @102............... 315,868
300,000 Spring City, Tennessee Health, Educational & Housing
Facility, 1st Mortgage, Spring City Care Center,
8.75%, 9/1/24....................................... 313,620
550,000 Winchester, Tennessee Health & Educational Facilities
Board, Revenue Refunding, Beverly Enterprises Income
Project, 7.00%, 6/1/09.............................. 561,374
-----------
13,478,181
-----------
</TABLE>
Continued
-21-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL TENNESSEE MUNICIPAL OBLIGATIONS FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
---------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
West Virginia (0.7%):
$1,000,000 Charleston W. Virginia Building, 0.00%, 12/1/24...... $ 148,890
125,000 Summers County, West Virginia, First Mortgage Gross
Revenue Refunding, 7.25%, 10/1/09................... 128,874
-----------
277,764
-----------
Total Municipal Bonds........................................... 15,716,657
-----------
ALTERNATIVE MINIMUM TAX PAPER (14.3%):
Oklahoma (1.6%):
300,000 Oklahoma Development Finance Authority Revenue, First
Mortgage, Bake Rite Income Project, 8.38%, 8/1/11... 305,520
-----------
Tennessee (12.7%):
815,000 Loudon County, Tennessee Industrial Development
Board, Solid Waste Disposal Revenue, Kimberly-Clark
Corp. Project, 6.20%, 2/1/23........................ 831,015
100,000 Memphis Shelby County, Tennessee Airport Revenue,
8.13%, 2/15/12, MBIA................................ 105,995
740,000 Tennessee Housing Development Agency, 7.05%, 7/1/20.. 152,099
145,000 Tennessee Housing Development Agency Mortgage, Series
A, 6.90%, 7/1/25.................................... 765,907
500,000 Tennessee Housing Development Agency Mortgage, Series
C, 6.10%, 7/1/15.................................... 510,095
-----------
2,365,111
-----------
Total Alternative Minimum Tax Paper............................. 2,670,631
-----------
Total (Cost--$17,887,329)(a).................................... $18,387,288
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $18,685,510.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $ 538,379
Unrealized depreciation........................................ (38,420)
---------
Net unrealized appreciation.................................... $ 499,959
=========
</TABLE>
AMBAC--Insured by American Municipal Bond Assurance Corp.
FGIC--Insured by Financial Guarantee Insurance Corp.
FHA--Insured by Federal Housing Administration
GNMA--Insured by Government National Mortgage Assoc.
GO--General Obligation
LOC--Letter of Credit
MBIA--Insured by Municipal Bond Insurance Assoc.
PCR--Pollution Control Revenue
See notes to financial statements.
-22-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
The Sessions Group (the "Group") was organized on April 25, 1988 as an Ohio
business trust, and is registered under the Investment Company Act of 1940
as amended, (the "1940 Act"), as an open-end management investment company.
Between the date of organization and the dates of commencement of operations
of the Riverside Capital Money Market Fund, the Riverside Capital Value
Equity Fund, the Riverside Capital Growth Fund, the Riverside Capital Fixed
Income Fund, the Riverside Capital Low Duration Government Securities Fund
and the Riverside Capital Tennessee Municipal Obligations Fund (individually
, a "Fund" and collectively, the "Funds"), each a series of the Group, the
Funds earned no investment income and had no operations other than incurring
organizational expenses and the sale of initial units of beneficial interest
("shares") of the Funds.
The investment objective of the Money Market Fund is to seek current income
with liquidity and stability of principal. The investment objective of the
Value Equity Fund is to seek growth of capital by investing primarily in a
diversified portfolio of common stocks and securities convertible into
common stocks. The investment objective of the Growth Fund is to seek growth
of capital by investing primarily in a diversified portfolio of common
stocks and securities convertible into common stocks. The investment
objective of the Fixed Income Fund is to seek current income as well as
preservation of capital by investing in a portfolio of high grade fixed
income securities. The investment objective of the Low Duration Government
Securities Fund is to seek current income consistent with preservation of
capital. The investment objectives of the Tennessee Municipal Obligations
Fund are to seek (1) income which is exempt from federal income tax and
Tennessee state income tax, and (2) preservation of capital.
The Group is authorized to issue an unlimited number of shares, without par
value. Sales of shares of the Funds may be made to customers of National
Bank of Commerce ("NBC") and its affiliates, to all accounts of
correspondent banks of NBC and to the general public. NBC serves as
investment adviser to the Funds.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the Money Market Fund are valued at either amortized cost,
which approximates market value, or at original cost, which combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the maturity
of the security. In addition, the Fund may not a) purchase any instrument
with a remaining maturity greater than 397 calendar days unless such
investment is subject to a demand feature, or b) maintain a dollar-weighted
average portfolio maturity which exceeds 90 days.
Continued
-23-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
Investments in common and preferred stocks and commercial paper of the Value
Equity Fund, the Growth Fund, the Fixed Income Fund, the Low Duration
Government Securities Fund and the Tennessee Municipal Obligations Fund
(collectively, "the variable net asset value funds"), are valued at their
market values determined on the basis of the latest available bid quotation
in the principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Investments in
corporate bonds, municipal securities and U.S. Government securities of the
variable net asset value funds are valued at their market values determined
on the basis of the mean of the latest bid and asked quotations in the
principal market (closing sales prices if the principal market is an
exchange) in which such securities are normally traded. Investments in
investment companies are valued at their net asset values as reported by
such companies. Other securities for which quotations are not readily
available are valued at their fair value under procedures established by the
Group's Board of Trustees. The differences between the cost and market
values of investments held by the variable net asset value funds are
reflected as either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the amortization of premium or
discount. Dividend income is recorded on the ex-dividend date. Gains or
losses realized on sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions such
as banks and broker dealers which NBC deems creditworthy under guidelines
approved by the Board of Trustees, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by each Fund plus interest
negotiated on the basis of current short-term rates, which may be more or
less than the rate on the underlying portfolio securities. The seller, under
a repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by
the Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the Funds under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and
brokerdealers, and agree to repurchase them at a mutually agreed-upon date
and price. At the time a Fund enters into a reverse repurchase agreement, it
places in a segregated custodial account assets having a value equal to the
repurchase price (including accrued interest), and will continually monitor
the account to ensure such equivalent value is maintained at all times.
Reverse repurchase agreements are considered to be borrowing by the Funds
under the 1940 Act.
DERIVATIVES:
A derivative is defined as a financial instrument whose value is derived
from the performance of underlying assets, interest rate and currency
exchange rates, or indices, and include (but are not limited to) structured
Continued
-24-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
debt obligations, interest rate and currency swaps, future contracts,
options, and forward currency contracts. The variable net asset value funds
may invest in structured debt obligations for the purpose of mitigating
interest rate risk in the portfolio. Such structured debt obligations have
floating interest rates that reset to various indices, which may include
swap rates or floors, and which reset at periodic intervals, as disclosed in
the accompanying Schedules of Portfolio Investments. Risks of entering into
such transactions include the potential inability of the dealer to meet
their obligations and unanticipated movements in the value of the security
or the underlying assets or indices. It is possible that the Funds will
incur a loss as a result of their December 31, 1996 investments in
derivative instruments. It is the Fund's policy to the extent that there
exists no readily available market for such securities, that the investment
will be treated as an illiquid security for purposes of calculating the
Funds' limitation on investments in illiquid securities as set forth in the
Funds' investment restrictions.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly and
distributable net realized capital gains, if any, are declared and
distributed at least annually for the Money Market Fund. Dividends from net
investment income are declared and paid monthly and distributable net
realized capital gains, if any, are declared and distributed annually for
the variable net asset value funds.
Dividends from net investment income and net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for net operating losses, expiring capital loss
carry forwards, and deferral of certain losses.
FEDERAL INCOME TAXES:
It is the policy of each of the Funds to qualify or continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, Federal income taxes.
ORGANIZATION COSTS:
All expenses in connection with each Fund's organization and registration
under the 1940 Act and the Securities Act of 1933 were paid by the Funds.
Such expenses are amortized over a period of two years commencing with the
date of the initial public offering (five years for the Tennessee Municipal
Obligations Fund).
Continued
-25-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six month ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Value Equity Fund.................................... $ 3,717,711 $15,355,832
Growth Fund.......................................... $ 3,988,822 $ 7,578,649
Fixed Income Fund.................................... $29,658,984 $36,627,631
Low Duration Government Securities Fund.............. $ 1,771,973 $ 2,327,700
Tennessee Municipal Obligations Fund................. $ 3,762,843 $ 4,302,346
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by NBC. Under the
terms of the investment advisory agreements, NBC is entitled to receive fees
based on a percentage of the average net assets of each Fund. NBC has agreed
that if the aggregate expenses of the Funds, as defined, for any fiscal year
exceed limitations of any state having jurisdiction over the Funds, NBC will
refund to the Funds, or otherwise bear a portion of such excess. BISYS has
agreed to bear the balance. Such limitation did not affect the calculation
of the investment advisory fees during the six months ended December 31,
1996.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio limited partnership, and BISYS Fund Services, Inc. ("BISYS
Services") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator. Such officers and trustees are paid no
fees directly by the Funds for serving as officers and trustees of the
Group. Under the terms of the administration agreements, BISYS' fees are
computed daily as a percentage of the average net assets of each Fund. BISYS
Services serves the Funds as transfer agent and fund accountant.
During the six month ended, December 31, 1996, NBC voluntarily contributed
$67,384 of its investment advisory fees and BISYS voluntarily contributed
$17,601 of its administrative fees to the Money Market Fund. During the
years ended, June 30, 1995 and June 30, 1996 NBC voluntarily contributed
$124,984 and $97,370, respectively, of its investment advisory fees to the
Money Market Fund. In addition during the year June 30, 1996 BISYS
contributed $13,327 of its administrative fees to the Money Market Fund.
During the year ended June 30, 1995, NBC purchased securities from the Fund
for their carrying value of $14,199,150 plus accrued interest. The market
value of these securities at the date of sale to NBC was $13,667,783. The
voluntary contribution of investment advisory and administrative fees, and
the difference between the market value and carrying value of the securities
on the transaction date are reflected in the accompanying financial
statements as a capital contribution to the Fund.
The Group has adopted a Distribution and Shareholder Service Plan in
accordance with Rule 12b-1 under the 1940 Act, pursuant to which each Fund
is authorized to pay or reimburse BISYS, as distributor, a periodic amount,
calculated at an annual rate not to exceed 0.25% of the average daily net
asset value of each Fund. These fees are used by BISYS to pay banks,
including NBC, broker dealers and other institutions, or to reimburse BISYS
or its affiliates, for administration, distribution and shareholder services
in connection with the distribution of Fund shares.
Continued
-26-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
The Group has adopted an Administrative Services Plan, pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions, which may include NBC, its correspondent and affiliated banks
and BISYS, for providing ministerial, recordkeeping and/or administrative
support services to their customers who are the beneficial or record owners
of a Fund. The compensation which may be paid under the Administrative
Services Plan is a fee computed daily at an annual rate of up to 0.25% of
the average daily net asset value of a Fund.
BISYS is also entitled to receive commissions on sales of shares of the
variable net asset value funds. For the six month ended December 31, 1996,
BISYS received $2,659 from commissions earned on sales of shares of the
variable net asset value funds, of which $2,607 was reallowed to affiliated
broker/dealers.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
Information regarding these transactions is as follows for the six month
ended December 31, 1996:
<TABLE>
<CAPTION>
MONEY VALUE
MARKET EQUITY GROWTH
FUND FUND FUND
------- ----------- -----------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .35% 1.00% of 1.00% of
first first
$50 million $50 million
.75% of .75% of
remaining remaining
Voluntary fee reductions.................. -- -- $104,443
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .20% .20% .20%
Voluntary fee reductions.................. -- -- $8,033
12B-1 FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .25% .25% .25%
Voluntary fee reductions.................. $58,340 $65,254 $29,232
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)....... .25% .25% .25%
Voluntary fee reductions.................. $85,164 $14,683 $4,508
FUND ACCOUNTANT AND TRANSFER AGENT FEES... $39,059 $38,599 $29,657
</TABLE>
Continued
-27-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LOW DURATION TENNESSEE
FIXED GOVERNMENT MUNICIPAL
INCOME SECURITIES OBLIGATIONS
FUND FUND FUND
------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT ADVISORY
FEES:
Annual fee before
voluntary fee
reductions
(percentage of average
net assets)............ .65% .50% .65%
Voluntary fee
reductions............. -- $18,356 $56,828
ADMINISTRATION FEES:
Annual fee before
voluntary fee
reductions
(percentage of average
net assets)............ .20% .20% .20%
Voluntary fee
reductions............. -- $ 1,835 --
12B-1 FEES:
Annual fee before
voluntary fee
reductions
(percentage of average
net assets)............ .25% .25% .25%
Voluntary fee
reductions............. $27,257 $ 3,921 $10,796
ADMINISTRATIVE SERVICES
FEES:
Annual fee before
voluntary fee
reductions
(percentage of average
net assets)............ .25% .25% .25%
Voluntary fee
reductions............. $ 1,403 $ 3,786 $ 9,091
FUND ACCOUNTANT AND
TRANSFER AGENT FEES.... $29,251 $25,531 $36,282
</TABLE>
-28-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MONEY MARKET FUND
-----------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------
SIX MONTHS
ENDED
DECEMBER 31,
1996 1996 1995 1994 1993
------------ -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Investment Activities
Net investment income. 0.022 0.046 0.044 0.026 0.032
Net realized and
unrealized gains
(losses) on invest-
ments................ -- -- (0.004) -- --
-------- -------- -------- -------- --------
Total from Invest-
ment
Activities......... 0.022 0.046 0.040 0.026 0.032
-------- -------- -------- -------- --------
Distributions
Net investment income. (0.022) (0.046) (0.044) (0.026) (0.032)
-------- -------- -------- -------- --------
Total Distributions. (0.022) (0.046) (0.044) (0.026) (0.032)
-------- -------- -------- -------- --------
Capital transactions.... -- -- 0.004 -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return............ 2.21%(a) 4.75%(c) 4.44%(c) 2.65% 3.20%
RATIOS/SUPPLEMENTAL DA-
TA:
Net Assets, at end of
period (000)........... $142,289 $134,146 $157,904 $128,001 $141,840
Ratio of expenses to av-
erage net assets....... 1.05%(b) 0.99% 0.97% 0.95% 0.85%
Ratio of net investment
income to average net
assets................. 4.34%(b) 4.65% 4.41% 2.62% 3.17%
Ratio of expenses to av-
erage net assets*...... 1.26%(b) 1.20% 1.18% 1.09% 0.94%
Ratio of net investment
income to average net
assets*................ 4.13%(b) 4.44% 4.20% 2.48% 3.08%
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) The capital contribution had no impact on the total return for the years
ended June 30, 1995 and June 30, 1996.
See notes to financial statements.
-29-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
VALUE EQUITY FUND
-------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DECEMBER 31, ----------------------------------
1996 1996 1995 1994 1993
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 14.54 $ 12.63 $ 12.67 $ 11.57 $ 11.04
------- ------- ------- ------- -------
Investment Activities
Net investment income...... 0.04 0.14 0.14 0.07 0.21
Net realized and unrealized
gains on investments...... 1.64 2.40 0.76 1.28 0.96
------- ------- ------- ------- -------
Total from Investment
Activities.............. 1.68 2.54 0.90 1.35 1.17
------- ------- ------- ------- -------
Distributions
Net investment income...... (0.04) (0.14) (0.13) (0.06) (0.22)
In excess of net investment
income.................... (0.02)
Net realized gains......... (1.64) (0.49) (0.15) (0.19) (0.42)
In excess of net realized
gains..................... (0.42) -- (0.66) -- --
------- ------- ------- ------- -------
Total Distributions...... (2.12) (0.63) (0.94) (0.25) (0.64)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD...................... $ 14.10 $ 14.54 $ 12.63 $ 12.67 $ 11.57
======= ======= ======= ======= =======
Total Return (excludes sales
charges).................... 12.02%(a) 20.50% 8.03% 11.76% 10.94%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)....................... $77,576 $81,055 $80,264 $79,232 $52,629
Ratio of expenses to average
net assets.................. 1.62%(b) 1.58% 1.58% 1.36% 0.73%
Ratio of net investment
income to average
net assets.................. 0.59%(b) 1.01% 1.13% 0.52% 1.84%
Ratio of expenses to average
net assets*................. 1.83%(b) 1.79% 1.79% 1.74% 1.69%
Ratio of net investment
income to average
net assets*................. 0.38%(b) 0.80% 0.92% 0.14% 0.88%
Portfolio turnover........... 5.02% 27.89% 35.64% 62.17% 16.13%
Average commission rate paid
(c)......................... $0.0602 $0.0605 -- -- --
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a)Not annualized.
(b)Annualized.
(c) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements.
-30-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GROWTH FUND
----------------------------------------------
SIX MONTHS APRIL 15,
ENDED YEAR ENDED JUNE 30, 1994 TO
DECEMBER 31, -------------------- JUNE 30,
1996 1996 1995 1994 (C)
------------ --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $14.01 $ 12.14 $ 9.82 $10.00
------- --------- --------- ------
Investment Activities
Net investment income....... 0.08 0.18 0.16 --
Net realized and unrealized
gains (losses) on
investments................ 1.18 2.13 2.30 (0.18)
------- --------- --------- ------
Total from Investment
Activities............... 1.26 2.31 2.46 (0.18)
------- --------- --------- ------
Distributions
Net investment income....... (0.08) (0.18) (0.14) --
In excess of net investment
income..................... -- (0.01) -- --
Net realized gains.......... (0.42) (0.25) -- --
------- --------- --------- ------
Total Distributions....... (0.50) (0.44) (0.14) --
------- --------- --------- ------
NET ASSET VALUE, END OF
PERIOD....................... $14.77 $ 14.01 $ 12.14 $ 9.82
======= ========= ========= ======
Total Return (excludes sales
charges)..................... 8.97%(a) 19.44% 25.27% (1.80)%(a)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)........................ $33,241 $33,767 $21,485 $6,345
Ratio of expenses to average
net assets................... 1.09%(b) 1.05% 1.24% 2.59%(b)
Ratio of net investment income
to average net assets........ 1.08%(b) 1.37% 1.64% 0.25%(b)
Ratio of expenses to average
net assets*.................. 2.00%(b) 1.97% 2.51% 3.90%(b)
Ratio of net investment income
(loss) to average net
assets*...................... 0.17%(b) 0.45% 0.37% (1.07)%(b)
Portfolio Turnover............ 13.23% 31.22% 29.36% 0.00%
Average commissions rate paid
(d).......................... 0.0662 $ 0.0686 -- --
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Period from commencement of operations.
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements.
-31-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FIXED INCOME FUND
-------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED JUNE 30,
DECEMBER 31, -----------------------------------
1996 1996 1995 1994 1993
------------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 8.77 $ 9.27 $ 9.43 $ 10.44 $ 10.26
------ ------- ------- ------- -------
Investment Activities
Net investment income..... 0.27 0.59 0.58 0.57 0.68
Net realized and
unrealized gains (losses)
on investments........... 0.05 (0.48) (0.15) (0.76) 0.27
------ ------- ------- ------- -------
Total from Investment
Activities............. 0.32 0.11 0.43 (0.19) 0.95
------ ------- ------- ------- -------
Distributions
Net investment income..... (0.27) (0.58) (0.58) (0.57) (0.69)
In excess of net
investment income........ (0.03) -- (0.01) -- --
Net realized gains........ -- -- -- -- (0.08)
In excess of net realized
gains.................... -- (0.03) -- (0.25) --
------ ------- ------- ------- -------
Total Distributions..... (0.30) (0.61) (0.59) (0.82) (0.77)
------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD..................... 8.79 $ 8.77 $ 9.27 $ 9.43 $ 10.44
====== ======= ======= ======= =======
Total Return (excludes sales
charges)................... 3.75%(a) 1.05% 4.82% (2.02)% 9.64%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period
(000)...................... 24,655 $28,847 $39,496 $42,309 $35,951
Ratio of expenses to average
net assets................. 1.48%(b) 1.48% 1.43% 1.37% 0.74%
Ratio of net investment
income to average
net assets................. 6.27%(b) 6.32% 6.33% 5.61% 6.65%
Ratio of expenses to average
net assets*................ 1.69%(b) 1.69% 1.64% 1.70% 1.42%
Ratio of net investment
income to average
net assets*................ 6.07%(b) 6.11% 6.12% 5.28% 5.97%
Portfolio Turnover.......... 113.28% 363.84% 223.29% 328.44% 234.71%
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
See notes to financial statements.
-32-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LOW DURATION GOVERNMENT SECURITIES
FUND
---------------------------------------
SIX MONTHS YEAR ENDED APRIL 15,
ENDED JUNE 30, 1994 TO
DECEMBER 31, -------------- JUNE 30,
1996 1996 1995 1994 (C)
------------ ------ ------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 9.95 $10.15 $ 9.93 $10.00
------ ------ ------ ------
Investment Activities
Net investment income............. 0.28 0.53 0.56 0.07
Net realized and unrealized gains
(losses) on investments.......... 0.12 (0.20) 0.21 (0.08)
------ ------ ------ ------
Total from Investment
Activities..................... 0.40 0.33 0.77 (0.01)
------ ------ ------ ------
Distributions
Net investment income............. (0.28) (0.53) (0.55) (0.06)
In excess of net investment
income........................... (0.03) -- -- --
------ ------ ------ ------
Total Distributions............. (0.31) (0.53) (0.55) (0.06)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...... $10.04 $ 9.95 $10.15 $ 9.93
====== ====== ====== ======
Total Return (excludes sales
charges)........................... 4.14%(a) 3.21% 8.03% (0.13)%(a)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000).. $7,188 $7,461 $7,653 $7,692
Ratio of expenses to average net
assets............................. 1.36%(b) 1.44% 1.33% 2.85%(b)
Ratio of net investment income to
average net assets................. 5.40%(b) 5.19% 5.67% 3.63%(b)
Ratio of expenses to average net
assets*............................ 2.12%(b) 2.20% 2.10% 3.67%(b)
Ratio of net investment income to
average net assets*................ 4.64%(b) 4.43% 4.89% 2.81%(b)
Portfolio Turnover.................. 24.85% 20.87% 34.47% 21.20%
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Period from commencement of operations.
See notes to financial statements.
-33-
<PAGE>
THE SESSIONS GROUP
RIVERSIDE CAPITAL FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TENNESSEE MUNICIPAL OBLIGATIONS FUND
------------------------------------------------------
SIX MONTHS NOVEMBER 4,
ENDED YEAR ENDED JUNE 30, 1992 TO
DECEMBER 31, ------------------------- JUNE 30,
1996 1996 1995 1994 1993 (C)
------------ ------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.76 $ 9.84 $ 9.81 $ 10.44 $ 10.00
------- ------- ------- ------- -------
Investment Activities
Net investment income. 0.27 0.53 0.50 0.48 0.30
Net realized and
unrealized gains
(losses) on
investments.......... 0.12 (0.08) 0.03 (0.57) 0.43
------- ------- ------- ------- -------
Total from
Investment
Activities......... 0.39 0.45 0.53 (0.09) 0.73
------- ------- ------- ------- -------
Distributions
Net investment income. (0.27) (0.53) (0.50) (0.48) (0.29)
In excess of net
investment income.... (0.02)
In excess of net
realized gains....... -- -- -- (0.06) --
------- ------- ------- ------- -------
Total Distributions. (0.29) (0.53) (0.50) (0.54) (0.29)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 9.86 $ 9.76 $ 9.84 $ 9.81 $ 10.44
======= ======= ======= ======= =======
Total Return (excludes
sales charges)......... 4.06%(a) 4.67% 5.61% (1.00)% 7.39%(a)
RATIOS/SUPPLEMENTAL
DATA:
Net Assets, at end of
period (000)........... $18,686 $19,037 $20,827 $19,965 $17,425
Ratio of expenses to
average net assets..... 1.08%(b) 0.98% 1.12% 1.19% 0.82%(b)
Ratio of net investment
income to average
net assets............. 5.37%(b) 5.40% 5.24% 4.67% 4.76%(b)
Ratio of expenses to
average net assets*.... 1.89%(b) 1.83% 1.98% 1.99% 1.62%(b)
Ratio of net investment
income to average
net assets*............ 4.56%(b) 4.55% 4.38% 3.87% 3.96%(b)
Portfolio turnover...... 20.02% 60.76% 62.59% 86.57% 52.52%
</TABLE>
- ------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Period from commencement of operations.
See notes to financial statements.
-34-
<PAGE>
- ------------------------------
Investment Adviser
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Administrator and Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
Legal Counsel
Baker & Hostettler
65 East State Street
Columbus, Ohio 43215
Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
