<PAGE> 1
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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Dear Shareholder:
We are pleased to present the first semi-annual report since the inception of
the mutual fund family in September 1996.
This is a very exciting time in the history of the financial markets, as the
major market indexes continue to hit new highs. The 1st Source Monogram equity
funds--the Diversified Equity Fund, the Income Equity Fund and the Special
Equity Fund--are designed to help investors participate in the opportunity for
capital appreciation offered by the U.S. stock market. The 1st Source Monogram
Income Fund is available for investors seeking income and balance in their
portfolios.
As managers of the 1st Source Monogram Funds, we are keenly aware that we are in
the midst of one of the longest bull markets in history. It is clearly a time
for caution, as the current economic expansion reaches seven years. Mutual funds
offer broad diversification as well as professional management as a means of
controlling risk.
By investing in the 1st Source Monogram Funds, you enjoy the management
expertise of the 1st Source Bank, which has been managing money for its clients
since 1936 and currently manages over $1.2 billion in assets. This semi-annual
report details the list of investments held by each portfolio, as well as the
strategy of each portfolio manager. We urge you to read the entire report
closely to help you monitor the progress of your investment in the Funds.
If you have any questions about your investment, or would like a prospectus or
more information about any of our funds, please contact your account
representative or call the Fund at 1-800-766-8938. Thank you for investing in
the 1st Source Monogram Funds.
INVESTMENT OUTLOOK
During the past two years, the stock market advanced by more than 60% as the
U.S. economy continued to grow moderately with the absence of significant
inflation. During that same period, corporate profits advanced at a double-digit
rate, while interest rates were generally low. It has been an excellent
environment for U.S. equities, particularly the large-capitalization stocks
comprising the Standard & Poor's 500 Index.
1ST SOURCE BANK PROVIDES INVESTMENT ADVISORY AND OTHER SERVICES TO THE FUNDS AND
RECEIVES A FEE FOR THOSE SERVICES. THIS MATERIAL IS AUTHORIZED FOR DISTRIBUTION
ONLY WHEN PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE FUNDS ARE DISTRIBUTED BY
BISYS FUND SERVICES. MUTUAL FUNDS ARE NOT FDIC INSURED. THERE IS NO BANK
GUARANTEE. MUTUAL FUNDS MAY LOSE VALUE.
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<PAGE> 2
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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For bonds, 1996 was more difficult, as interest rates rose during the first
eight months of the year and then fell sharply when it became clear that the
economy was not growing as rapidly as it had appeared. We have maintained an
intermediate maturity position in our fixed-income portfolio, believing that the
best valuation and risk/return opportunities were in short- and
intermediate-term securities rather than in owning long-term bonds through a
majority of the year.
As we move into 1997, interest rates remain low, and corporate profits continue
to advance. The U.S. economy appears to be growing at an annual rate of about 2%
to 3%. As consumers become increasingly burdened and government spending
shrinks, there is downward pressure on the U.S. economy. However, given the low
unemployment rate, it is unlikely that the Federal Reserve Board will lower
interest rates.
As for inflation, rising U.S. productivity as well as wage competition from
overseas, continues to offset increasing wage pressure. The continuation of a
low-growth/low-inflationary environment is generally positive for stocks and
bonds, although we believe that a modest stock market correction from these
levels could occur. We believe that in the long term, the overall environment
for stocks and bonds is very positive.
Sincerely,
Ralph C. Shive, CFA
J. Gregory Turner, CFA
Andrew R. Haddock, CFA
John Seidl, CFA
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<PAGE> 3
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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DIVERSIFIED EQUITY FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
For the six month period ended December 31, 1996, the Fund's total return was
8.61%.1 In comparison, the Standard & Poor's 500 Index was up 11.69% during the
same period.2
The Diversified Equity Fund is a multi-style, multi-manager portfolio with three
subadvisers representing the sector rotation, value and growth styles. The
following interview is with portfolio managers Dan Pickett of Columbus Circle
Investors (sector rotation), Robert Marcin of Miller Anderson & Sherrerd LLP
(value) and Bob Takazawa of
Loomis Sayles & Company LP (growth).
WHAT FACTORS AFFECTED YOUR PERFORMANCE?
DAN PICKETT, COLUMBUS CIRCLE INVESTORS:
The biggest driver of the markets in that period was liquidity flows--money
coming into the market at the mutual fund level or fund flows from foreign
investors. Most of that money went into the large-capitalization stocks. Our
particular emphasis on stock selection took a back seat, although we're seeing
that reverse in early 1997.
ROBERT MARCIN, MILLER ANDERSON & SHERRERD:
Because of our valuation restrictions, the portfolio tends to include smaller
and more cyclical companies than the S&P 500. Growth stocks outperformed
cyclicals during the period. On the plus side, the portfolio's overweighting in
financial
services and heavy industrial companies positively impacted performance.
BOB TAKAZAWA, LOOMIS SAYLES:
We have skewed the portfolio more toward the mid-capitalization part of the
market, and mid-caps lagged the market during the period. Our focus on earnings
gains and our valuation discipline has taken us gradually more and more away
from a heavy concentration in the large-capitalization stocks.
WHAT IS YOUR STRATEGY?
DAN PICKETT, COLUMBUS CIRCLE INVESTORS:
Our efforts are working toward identifying which companies' underlying
businesses are fundamentally improving at a rate that exceeds the consensus
expectation. We have a relatively large research group that analyzes industries
and stocks, with the objective of recognizing when there's a change in those
leading indicators that will lead to surprisingly strong financial performance.
Then we position the portfolio to take advantage of those changes.
ROBERT MARCIN, MILLER ANDERSON & SHERRERD:
From a strategic perspective, the portfolio remains committed to economically
sensitive and financial-services sectors of the stock market. The heavy-industry
sector is our largest overweighting, and our individual holdings trade at large
valuation discounts versus the S&P 500, while providing significant revenue and
profit-growth opportunities. The financial-services sector, notably banks and
insurance companies, continues to deliver healthy earnings growth.
BOB TAKAZAWA, LOOMIS SAYLES:
Currently, we have a heavy commitment to technology, energy and health-care
stocks. Our strategy is a bottom-up approach to individual stock selection in
which we are seeking growth.
WHAT WOULD BE SOME INTERESTING STOCKS IN THE PORTFOLIO?
DAN PICKETT, COLUMBUS CIRCLE INVESTORS:
One interesting portfolio holding is HBO & Co. (1.23%), which produces
information systems
that are used to manage hospitals. We believe that they have the most
comprehensive system in the market, and they have dramatically exceeded
expectations regarding the number of hospitals that buy the systems.
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<PAGE> 4
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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ROBERT MARCIN, MILLER ANDERSON & SHERRERD:
We are overweighted in consumer durables, including large positions in Ford
(0.65%), General Motors (0.62%) and Goodyear Tire (0.73%). High dividend yields
and unrealized asset values in subsidiaries support current automaker price
levels. Consolidation in banking and insurance should continue to benefit
shareholders in these businesses. Our larger holdings include Allstate (1.39%),
Citicorp (0.38%) and Transatlantic Holdings (0.26%). In technology, we hold
significant positions in IBM (1.24%), Seagate Technologies (0.69%), Compaq
(0.39%) and Tektronix (0.40%), but the group's stellar performance in 1996 has
priced most technology stocks out of our valuation universe.
BOB TAKAZAWA, LOOMIS SAYLES:
Due to technological advances, energy service companies such as Rowan Companies
(1.23%) are much more profitable at lower levels of activity. Major oil
companies now say that they can profitably search for oil in waters that are
5,000 feet deep with the price of oil at about $17 per barrel. In 1980, those
same oil companies said they would need $40 to $50 per barrel to drill 500 feet.
In health-care, Merck's (1.15%) stock was very successful during the period. The
company has had eight new products come to market over the past 18 months, and
they're all contributing handsomely to earnings growth. In addition, Microsoft
(1.48%) has produced excellent earnings for the quarter and its appreciation has
continued.
WHAT IS YOUR OUTLOOK?
DAN PICKETT, COLUMBUS CIRCLE INVESTORS:
The prospects for our relative performance are actually better than they have
been in a long time. Although absolute returns may be lower than the past few
years, there will be a much greater opportunity for stock pickers to
differentiate themselves. Since we try to identify the surprisingly strong
companies in the market, we expect to have a good year relative to the market.
ROBERT MARCIN, MILLER ANDERSON & SHERRERD:
Over the long term, we have much faith in the equity market as a creator of
wealth, although we recognize that asset allocation decisions need to be
revisited regularly. Given today's historically high valuation levels, we
understand the need to shift a portion of assets away from the domestic equity
market. However, we also maintain our strong belief in the ability of
value-oriented investing to produce superior returns over the long term.
BOB TAKAZAWA, LOOMIS SAYLES:
We expect earnings for the S&P 500 Index to grow in the range of 5% to 7% in
1997, down from the double digit gains in 1996. In contrast, earnings gains in
the smaller capitalization and midsize companies should be significantly
stronger, perhaps 10% to 12%. Therefore, we believe small- and mid-cap stocks
should outperform the large indexes in 1997.
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<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
-------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
---------- -------------
<S> <C> <C>
1 Year...................... 13.19% 19.24%
5 Year...................... 11.02% 12.20%
10 Year..................... 12.15% 12.74%
Since Inception (9/20/96)... 11.15% 11.65%
</TABLE>
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* Reflects 5.00% Sales Charge
1 The Fund's total return with the maximum sales charge of 5.00%, was 3.03% for
the period. The total return set forth may reflect the waiver of a portion of
the Fund's fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower. The
1st Source Monogram Diversified Equity Fund commenced operations on September
20, 1996 through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by 1st Source Bank, using substantially the
same investment objective, policies and methodologies as the Fund. The quoted
performance of the Fund includes performance of the Commingled accounts for
periods dating back to 6/30/85, and prior to the Fund's commencement of
operations, as adjusted to reflect the
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<PAGE> 5
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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expenses associated with the Fund. The Commingled accounts were not registered
with the Securities and Exchange Commission and, therefore, were not subject to
the investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been registered, the Commingled accounts' performance
may have been adversely affected. The performance also reflects reinvestment of
all dividends and capital-gains distributions. Past performance is not a
prediction of future results. The Fund's investment return and principal value
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than their original purchase price.
2 The S&P 500 is an unmanaged index generally representative of the stock market
as a whole.
The portfolio composition is subject to change.
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<PAGE> 6
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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SPECIAL EQUITY FUND/J. GREGORY TURNER, CFA
HOW DID THE FUND PERFORM DURING THE PERIOD?
For the six month period ended December 31, 1996, the Fund's total return was
- -2.30%.1 In comparison, the Russell 2000 was up 5.56%, while the Standard &
Poor's 500 Index rose 11.69%.2
WHAT FACTORS AFFECTED YOUR PERFORMANCE?
Large, blue chip stocks dominated the fourth quarter of 1996, as investors
remained wary of the small stocks that had retreated in the summer stock market
correction. Small stocks as a group underperformed the major market indexes, and
many individual stocks were down as much as 25% from their highs set in May.
WHAT IS YOUR STRATEGY?
My goal is to find small- to medium-sized companies with strong earnings growth
and price momentum. The average market capitalization of the portfolio is $450
million, with companies ranging as small as $50 million and as large as $1.5
billion. I am trying to find out what's in fashion and what sectors are
currently in favor. The portfolio tends to have a high price/earnings ratio and
volatility that exceeds the market as a whole. In the fourth quarter, I began to
buy semiconductor and electronics hardware companies more aggressively after
Intel Corp., the world's leading maker of personal-computer components, reported
strong results in August. However, a number of my temporary help companies gave
up quite a bit of ground as the economy slowed in the fourth quarter.
DESCRIBE SOME STOCKS CURRENTLY IN THE PORTFOLIO.
Oak Technology, the largest holding (3.93% of the portfolio) as of December 31,
1996, makes CD-ROM controller chips. Our investment is a play on growing
personal-computer sales and the fact that most PCs sold these days probably
include a CD-ROM. The second largest position is Healthsouth, which owns surgery
centers and sports-related rehabilitation centers. They are a low-cost
high-quality provider of elective surgery and sports rehabilitation. The company
is based in Alabama and is in the process of expanding nationwide. In
biotechnology, the portfolio includes Agouron Pharmaceuticals (2.13%), which is
engaged in cancer and AIDs research. In financial services, I've got a major
position in small savings and loans as takeover targets. The portfolio tends to
have more technology-type stocks than the average mutual fund, even more than
the Russell 2000. It is my belief that the 1990s is the decade of reinvestment
in infrastructure--but now such reinvestment means technology rather than
machine tools and manufacturing. Technology is fueling U.S. economic growth.
WHAT IS YOUR OUTLOOK?
On balance, smaller companies underperformed relative to the S&P 500 during the
second half of 1996. Yet, earnings continued to be strong in most cases. These
stocks currently appear undervalued relative to their earnings growth. We're
starting to see some life in small- and mid-cap companies, and my outlook would
be for them to catch up with the big-cap stocks going into the second quarter of
1997.
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<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
-------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
---------- -------------
<S> <C> <C>
1 Year...................... 15.98% 22.10%
5 Year...................... 12.17% 13.33%
10 Year..................... 15.39% 15.97%
Since Inception (9/19/96)... 13.60% 14.11%
</TABLE>
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* Reflects 5.00% Sales Charge
1 The Fund's total return, with the maximum sales charge of 5.00%, was -7.17%
for the period. The total return set forth may reflect the waiver of a portion
of the Fund's fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower. The
1st Source Monogram Special Equity Fund commenced operations on September 19,
1996 through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by 1st Source
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<PAGE> 7
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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Bank, using substantially the same investment objective, policies and
methodologies as the Fund. The quoted performance of the Fund includes
performance of the Commingled accounts for periods dating back to 11/30/85,
and prior to the Fund's commencement of operations, as adjusted to reflect
the expenses associated with the Fund. The Commingled accounts were not
registered with the Securities and Exchange Commission and, therefore, were
not subject to the investment restrictions imposed by law on registered
mutual funds. If the Commingled accounts had been registered, the Commingled
accounts' performance may have been adversely affected. The performance also
reflects reinvestment of all dividends and capital-gains distributions. Past
performance is not a prediction of future results. The Fund's investment
return and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original purchase price.
2 The S&P 500 and the Russell 2000 are unmanaged indices generally
representative of the stock market as a whole and the small-cap stock market,
respectively.
The portfolio composition is subject to change.
Small capitalization funds typically carry additional risks, since smaller
companies generally have a higher risk of failure and, historically, their
stocks have experienced a greater degree of market volatility than stocks on
average.
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<PAGE> 8
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
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INCOME FUND/ANDREW R. HADDOCK, CFA
HOW DID THE FUND PERFORM DURING THE PERIOD?
For the six month period ended December 31, 1996, the Fund's total return was
4.38%.1 In comparison, the Lehman Brothers Intermediate Government/ Corporate
Bond Index was up 4.27%.2
WHAT FACTORS AFFECTED YOUR PERFORMANCE?
The reason that the Fund outperformed the index was primarily due to the Fund's
duration, or sensitivity to changes in interest rates. The Fund's duration, at 4
years, was significantly greater than the Index, which helped the Fund's
performance as interest rates fell in the fourth quarter. Corporate yield
spreads are very tight by historical standards, so there is little incentive to
make a large shift into corporates, although I am buying some where value is
evident.
WHY ARE CORPORATE YIELD SPREADS SO NARROW?
In the early 1990s, short-term corporate bond yields were 0.50% higher than
Treasuries. When there was more yield spread and the economy was weaker, there
was a much heavier weighting in corporates--as high as 90%. During the 1990s,
the economy has performed well, corporate cash flows have been strong and the
perceived risk of corporate bonds has diminished, thereby causing a decline in
spreads. This yield compression is more pronounced in the 1-5 year area of the
interest rate spectrum, where the spread is only about 0.25%.
DESCRIBE SOME CORPORATE BONDS IN THE PORTFOLIO.
The average credit quality of the corporate portfolio is A. As of December 31,
1996, the portfolio included JC Penney (2.59% of the portfolio), an
A-rated credit maturing in 2008. Another strong credit is Texas Instruments
(4.14%), an A-rated security maturing in 2000. Some of the
intermediate-term brokerage paper offers a little bit more spread, such as Smith
Barney (2.12%), due in 1999. Generally, financial companies offer wider spreads
than industrials because financial companies typically have more leverage.
Another bond in the portfolio is General Electric (2.92%), rated AAA due in
2009. When the economy begins to weaken, and spreads begin to widen out, we will
take advantage of that trend and increase the weighting in corporates. In the
meantime, with very narrow spreads, we are very selective and looking at
individual cases as a means to add value to the portfolio. For instance, we own
Norfolk & Southern (N&S) (4.33%) bonds, which are trading like a security rated
BAA because of an unfriendly takeover bid for Conrail. We do not expect N&S to
gain control of Conrail, due to a competing bid by CSX Corp. If the transaction
is not completed, then N&S bonds will once again trade as if they are rated AA,
at which point we would have a relative gain compared to holding a U.S. Treasury
bond of the same maturity.
WHAT IS YOUR OUTLOOK FOR THE ECONOMY AND THE BOND MARKET?
It has been my position that we will continue in a relatively slow growth
environment, with real Gross Domestic Product in the 2%-2.5% range. Inflation
will remain at its five-year average of about 3% per year. While a major
downturn doesn't appear likely, consumer debt levels are a concern, as is the
increasing trend in bankruptcies and delinquencies. In addition, continued
pressure for a balanced budget will constrain government spending, which is 17%
of GDP. However, given the relatively low unemployment rate of 5.3%, the
strength of the labor market would prevent the Federal Reserve Board from
lowering interest rates in response to a weakening economy. The hottest
component of the economy is investment spending on plant and equipment, which
over the long term bodes well for a low structural rate of inflation. As
companies become more efficient through additions of new equipment, and as they
become more productive and add to capacity, that helps to keep the inflation
rate low. In addition, global competition is
- --------------------------------------------------------------------------------
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<PAGE> 9
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
- --------------------------------------------------------------------------------
becoming more intense. As foreign economies begin to rebound from a weak 1996,
competitive factors will become stronger, which will keep a lid on inflation. My
only real concern right now is with the price of oil, which has risen quite a
bit. To the extent that it stays high, there could be a problem with inflation,
perhaps rising at an annual rate of 3.5% to 3.75% in late 1997.
The bond market was very choppy in 1996, and I would expect 1997 to be the same.
I don't see any change in short-term rates, but I do see a lot of shifting
sentiment as to whether the Fed will tighten or ease, which will create a lot of
volatility. I think long-term interest rates will fluctuate anywhere from 6.25%
to 7.25%. Since my long-term outlook is for a slow economy, I'm inclined toward
longer duration relative to the benchmark most of the year. However, if
inflation starts to rise, the duration of the portfolio will be shortened--but
that has yet to unfold.
- ------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
-------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
---------- -------------
<S> <C> <C>
1 Year...................... -1.55% 2.58%
5 Year...................... 5.21% 6.08%
10 Year..................... 6.45% 6.87%
Since Inception (9/23/96)... 7.22% 7.68%
</TABLE>
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* Reflects 4.00% Sales Charge
1 The Fund's total return, with the maximum sales charge of 4.00%, was 0.26% for
the period. The total return set forth may reflect the waiver of a portion of
the Fund's fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower. The
1st Source Monogram Income Fund commenced operations on September 23, 1996
through a transfer of assets from certain collective trust fund ("Commingled")
accounts managed by 1st Source Bank, using substantially the same investment
objective, policies and methodologies as the Fund. The quoted performance of
the Fund includes performance of the Commingled accounts for periods dating
back to 6/30/85, and prior to the Fund's commencement of operations, as
adjusted to reflect the expenses associated with the Fund. The Commingled
accounts were not registered with the Securities and Exchange Commission and,
therefore, were not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled accounts had been registered, the
Commingled accounts' performance may have been adversely affected. The
performance also reflects reinvestment of all dividends and capital-gains
distributions. Past performance is not a prediction of future results. The
Fund's investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original purchase price.
2 The Lehman Brothers Intermediate Government/Corporate Bond Index is an
unmanaged index generally representative of the intermediate-term government
and corporate bond markets.
The portfolio composition is subject to change.
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<PAGE> 10
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
- --------------------------------------------------------------------------------
INCOME EQUITY FUND/RALPH C. SHIVE, CFA
HOW DID THE FUND PERFORM DURING THE PERIOD?
For the six month period ended December 31, 1996, the Fund's total return was
10.25%.1 In comparison, the Standard & Poor's 500 Index rose 11.69%.2
WHAT FACTORS AFFECTED YOUR PERFORMANCE?
The portfolio included healthy weightings in the insurance, communications and
real estate investment trust sectors, all of which performed well. REITs in the
portfolio include Wellsford Residential (1.77% of the portfolio), an apartment
REIT with properties in Seattle, Denver and Dallas, three strong markets. I have
chosen to use REITs to obtain yield rather than the more traditional approach of
electric utilities, and that has turned out to be a good decision. In
property/casualty insurance, companies such as Conseco (2.09%), USF&G (1.41%)
and Travelers/Aetna (1.85%) are attractive, as are industrials such as AMP
(1.41%), Emerson Electric (1.84%) and Deere (0.75%). In communications, the
portfolio includes GM Hughes (1.55%), which is in the satellite/direct TV
industry; and L.M. Ericsson (1.55%), which focuses on cellular and personal
communications systems equipment.
WHAT IS YOUR STRATEGY?
I have an eclectic approach within the yield/value investment style. Buying some
higher yielding convertible securities allows me to buy some other lower
yielding companies for capital growth. Overall, the portfolio yield is kept
steady at 1.5 times the S&P 500 yield. The portfolio tends to focus on
large-capitalization stocks such as Ford (1.47%), Bristol-Myers (2.00%) and
Merck (1.95%), which was very helpful in the fourth quarter, but we also own
some mid-cap stocks, some of which were takeover targets; for instance, Tyco
Toys (1.55%), maker of the "Tickle Me Elmo" dolls. The portfolio's average
market capitalization is $8.6 billion, which is smaller than the S&P 500 Index,
which has an average market cap of $11.2 billion. The portfolio seeks an
above-average yield and below-average volatility. Use of convertibles helps in
the design.
WHAT IS YOUR OUTLOOK?
The supercycle is still intact--low inflation, slow economic growth, good
international trade. Those are the primary underpinnings of the bull market
since 1982. Throw in the demographics, where investing is becoming a national
topic like buying real estate used to be, and the long-term outlook is still
bullish. We're still optimistic that inflation is under control and that
interest rates could decline. However, after two great years, I'm not that
optimistic that 1997 will continue to provide great returns. Short term, any
type of adverse news event could cause the market to go down temporarily, since
there is a great deal of profit to take.
- ------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN
-------------------------
WITH SALES WITHOUT SALES
CHARGE* CHARGE
---------- -------------
<S> <C> <C>
1 Year...................... 11.67% 17.58%
5 Year...................... 13.93% 15.78%
10 Year..................... 11.56% 12.13%
Since Inception (9/24/96)... 12.54% 13.09%
</TABLE>
- ------------------------------------------------------
* Reflects 5.00% Sales Charge
1 The Fund's total return, with the maximum sales charge of 5.00%, was 4.68% for
the period. The total return set forth may reflect the waiver of a portion of
the Fund's fees for certain periods since the inception date. In such
instances, and without waiver of fees, total return would have been lower. The
1st Source Monogram Income Equity Fund commenced operations on September 24,
1996 through a transfer of assets from certain collective trust fund
("Commingled") accounts managed by 1st Source Bank using substantially the
same investment objective, policies and methodologies as the Fund. The quoted
performance of the Fund includes performance of the Commingled accounts for
periods dating back to 11/30/85, and prior to the Fund's commencement of
operations, as adjusted to reflect the expenses associated with the Fund. The
Commingled accounts were not registered with the Securities and Exchange
Commission and, therefore, were not subject to the investment restrictions
imposed by law on registered mutual funds. If the Commingled
- --------------------------------------------------------------------------------
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<PAGE> 11
MESSAGE FROM THE INVESTMENT ADVISER 1st Source Monogram Funds
- --------------------------------------------------------------------------------
accounts had been registered, the Commingled accounts' performance may have
been adversely affected. The performance also reflects reinvestment of all
dividends and capital-gains distributions. Past performance is not a
prediction of future results. The Fund's investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original purchase price.
2 The S&P 500 is an unmanaged index generally representative of the stock market
as a whole.
The portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-11-
<PAGE> 12
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 13
Statements of Operations
PAGE 14
Statements of Changes in Net Assets
PAGE 15
Schedules of Portfolio Investments
PAGE 16
Notes to Financial Statements
PAGE 26
Financial Highlights
PAGE 32
-12-
<PAGE> 13
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY EQUITY INCOME EQUITY
FUND FUND FUND FUND
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $55,146,136; $24,173,510;
$48,295,225; and $28,424,948, respectively)................. $65,683,448 $26,071,582 $48,303,209 $33,576,629
----------- ----------- ----------- -----------
Cash.......................................................... -- -- 2,840 --
Interest and dividends receivable............................. 68,252 16,060 682,897 148,886
Income and other receivables.................................. -- -- 5,833 5,119
Receivable from brokers for investments sold.................. 111,049 -- -- --
Unamortized organization costs................................ 13,389 4,741 10,499 6,706
Prepaid expenses and other assets............................. 2,184 702 1,317 3,141
----------- ----------- ----------- -----------
Total Assets............................................ 65,878,322 26,093,085 49,006,595 33,740,481
----------- ----------- ----------- -----------
LIABILITIES:
Payable to brokers for investments purchased.................. 105,156 -- -- 1,118,915
Accrued expenses and other payables:
Investment advisory fees.................................. 61,600 17,556 22,914 22,072
Administration fees....................................... 4,319 1,673 3,215 2,140
Custodian and accounting fees............................. 1,835 1,559 1,398 960
Legal and audit fees...................................... 16,200 5,970 12,417 7,570
Transfer agent fees....................................... 6,826 6,077 5,738 5,981
Registration and filing fees.............................. 1,089 1,513 1,161 2,155
Other..................................................... 650 270 483 319
----------- ----------- ----------- -----------
Total Liabilities....................................... 197,675 34,618 47,326 1,160,112
----------- ----------- ----------- -----------
NET ASSETS:
Capital....................................................... 53,849,964 24,563,728 49,032,402 26,610,288
Undistributed (distributed in excess of) net investment
income...................................................... (15,302) (4,870) 969 4,988
Net unrealized appreciation on investments.................... 10,537,312 1,898,072 7,984 5,151,681
Accumulated undistributed net realized gains (losses) on
investment transactions..................................... 1,308,673 (398,463) (82,086) 813,412
----------- ----------- ----------- -----------
Net Assets................................................ $65,680,647 $26,058,467 $48,959,269 $32,580,369
=========== =========== =========== ===========
Outstanding units of beneficial interest (shares)............. 6,280,137 2,688,604 4,812,756 3,035,244
=========== =========== =========== ===========
Net asset value--redemption price per share $ 10.46 $ 9.69 $ 10.17 $ 10.73
=========== =========== =========== ===========
Maximum Sales Charge.......................................... 5.00% 5.00% 4.00% 5.00%
=========== =========== =========== ===========
Maximum Offering Price (100%/(100%-Maximum Sales Charge) of
net asset value adjusted to nearest cent) per share......... $ 11.01 $ 10.20 $ 10.59 $ 11.29
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
-13-
<PAGE> 14
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF OPERATIONS
FOR PERIOD ENDED DECEMBER 31, 1996 (A)
(UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY EQUITY INCOME EQUITY
FUND FUND FUND FUND
----------- ---------- -------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.............................. $ 1,222 $ 41,056 $871,853 $ 101,517
Dividend income.............................. 273,706 50,160 17,869 258,821
----------- ---------- -------- ----------
Total Income............................ 274,928 91,216 889,722 360,338
----------- ---------- -------- ----------
EXPENSES:
Investment advisory fees..................... 203,061 57,893 73,128 67,739
Administration fees.......................... 36,921 14,473 26,592 16,935
12b-1 fees................................... 46,151 18,094 33,240 21,178
Custodian and accounting fees................ 14,158 5,304 6,362 4,712
Legal and audit fees......................... 16,200 5,970 12,417 7,570
Organization costs........................... 2,130 747 1,629 1,004
Trustees' fees and expenses.................. 900 309 663 422
Transfer agent fees.......................... 7,760 6,489 6,465 6,626
Registration and filing fees................. 1,700 1,957 1,713 2,646
Printing costs............................... 6,090 2,459 4,554 3,294
Other........................................ 1,310 485 802 821
----------- ---------- -------- ----------
Total Expenses............................... 336,381 114,180 167,565 132,947
Less: Expenses voluntarily reduced...... (46,151) (18,094) (33,240) (21,178)
Net Expenses............................ 290,230 96,086 134,325 111,769
----------- ---------- -------- ----------
Net Investment Income........................ (15,302) (4,870) 755,397 248,569
----------- ---------- -------- ----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment
transactions............................... 2,641,501 402,552 (82,086) 972,001
Change in unrealized appreciation
(depreciation) on investments.............. 10,537,312 1,898,072 7,984 5,151,681
----------- ---------- -------- ----------
Net realized (unrealized) gains on
investments................................ 13,178,813 2,300,624 (74,102) 6,123,682
----------- ---------- -------- ----------
Change in net assets resulting from
operations................................. $13,163,511 $2,295,754 $681,295 $6,372,251
=========== ========== ======== ==========
</TABLE>
- ---------
(a) Commencement of the Funds began September 20, September 19, September 23,
September 24, respectively.
See notes to financial statements.
-14-
<PAGE> 15
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY FUND EQUITY FUND INCOME FUND EQUITY FUND
------------ ------------ ------------ ------------
FOR PERIOD FOR PERIOD FOR PERIOD FOR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 (A) 1996 (A) 1996 (A) 1996 (A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.............................. $ (15,302) $ (4,870) $ 755,397 $ 248,569
Net realized gains (losses) on investments
transactions..................................... 2,641,501 402,552 (82,086) 972,001
Net change in unrealized appreciation
(depreciation) on investments.................... 10,537,312 1,898,072 7,984 5,151,681
----------- ----------- ----------- -----------
Change in net assets resulting from operations....... 13,163,511 2,295,754 681,295 6,372,251
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......................... -- -- (754,428) (243,581)
In excess of net investment income................. -- -- -- --
From net realized gains on investments............. (1,332,828) (402,552) -- (158,589)
In excess of net realized gains on investments..... -- (398,463) -- --
----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions...................................... (1,332,828) (801,015) (754,428) (402,170)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........................ 66,356,782 28,579,625 57,187,896 31,920,854
Dividends reinvested 1,332,616 800,775 754,124 402,085
Cost of shares redeemed............................ (13,839,434) (4,816,672) (8,909,618) (5,712,651)
----------- ----------- ----------- -----------
Change in net assets from capital transactions..... 53,849,964 24,563,728 49,032,402 26,610,288
----------- ----------- ----------- -----------
Change in net assets............................... 65,680,647 26,058,467 48,959,269 32,580,369
NET ASSETS:
Beginning of period................................ 0 0 0 0
----------- ----------- ----------- -----------
End of period...................................... $65,680,647 $26,058,467 $48,959,269 $32,580,369
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued............................................. 7,508,928 3,076,523 5,619,664 3,556,123
Reinvested......................................... 125,956 82,639 73,986 37,959
Redeemed........................................... (1,354,747) (470,559) (880,894) (558,838)
----------- ----------- ----------- -----------
Change in shares..................................... 6,280,137 2,688,603 4,812,756 3,035,244
=========== =========== =========== ===========
</TABLE>
- ---------
(a) Commencement of the Funds began September, 20, September 19, September 23,
September 24, respectively.
See notes to financial statements.
-15-
<PAGE> 16
THE SESSIONS GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS (95.2%):
Aerospace/Defense (3.4%):
11,900 Boeing Co...................... $ 1,265,863
4,700 Lockheed Martin Corp........... 430,050
3,900 Raytheon Co.................... 187,688
3,400 Textron, Inc................... 320,450
------------
2,204,051
------------
Apparel (0.6%):
2,800 Talbots, Inc................... 80,150
4,400 VF Corp........................ 297,000
------------
377,150
------------
Automotive Parts (0.8%):
4,100 Eaton Corp..................... 285,975
5,000 TRW, Inc....................... 247,500
------------
533,475
------------
Banks (4.3%):
5,700 Bank of New York, Inc.......... 192,374
9,500 Chase Manhattan Corp........... 847,874
1,500 Crestar Financial Corp......... 111,562
5,478 First Chicago NBD Corp......... 294,442
2,500 First Union Corp............... 184,999
2,400 Mellon Bank Corp............... 170,399
5,300 NationsBank Corp............... 518,074
2,300 Republic New York Corp......... 187,737
5,800 Signet Banking Corp............ 178,349
3,000 Standard Federal Bancorp....... 170,624
------------
2,856,434
------------
Business Equip & Services (1.2%):
32,850 CUC International, Inc. (b).... 780,188
------------
Chemicals (4.5%):
3,200 Cabot Corp..................... 80,400
1,900 Dow Chemical Co................ 148,913
3,500 E. I. du Pont de Nemours &
Co........................... 330,313
3,500 FMC Corp. (b).................. 245,438
7,500 Great Lakes Chemical Corp...... 350,625
18,900 Monsanto Corp.................. 734,738
14,000 Morton International, Inc...... 570,500
5,700 Rhone Poulene S.A.............. 193,088
3,900 Rohm & Haas Co................. 318,338
------------
2,972,353
------------
Coal (0.4%):
7,600 MAPCO, Inc..................... 258,400
------------
Computers (6.9%):
8,100 Apple Computer, Inc. (b)....... 169,088
4,500 Cabletron Systems, Inc. (b).... 149,625
3,400 Compaq Computer Corp. (b)...... 252,450
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Computers, continued:
8,500 Dell Computer Corp. (b)........ $ 451,563
13,600 HBO & Co....................... 807,500
5,600 Honeywell, Inc................. 368,200
6,200 Intel Corp..................... 811,813
5,400 International Business Machines
Corp......................... 815,400
11,400 Seagate Technology, Inc. (b)... 450,300
10,000 Stratus Computer, Inc. (b)..... 272,500
------------
4,548,439
------------
Computer Software (6.0%):
17,500 Cisco Systems, Inc. (b)........ 1,113,438
6,225 Computer Associates
International, Inc........... 309,694
5,600 First Data Corp................ 204,400
5,600 Fiserv, Inc. (b)............... 205,800
11,800 Microsoft Corp. (b)............ 974,975
5,600 Netscape Communications Corp.
(b).......................... 318,500
12,475 Oracle Corp. (b)............... 520,831
5,800 Parametric Technology Corp.
(b).......................... 297,975
------------
3,945,613
-----------
Cosmetics & Toiletries (0.9%):
3,600 Avon Products, Inc............. 205,650
4,600 Gillette Co.................... 357,650
------------
563,300
------------
Electrical Equipment (0.3%):
4,738 Molex Inc...................... 168,791
------------
Electronic Components (1.2%):
8,200 Adaptec, Inc. (b).............. 328,000
7,200 LSI Logic Corp. (b)............ 192,600
5,100 Tektronix, Inc................. 261,375
------------
781,975
------------
Engines--Internal Combustion (0.6%):
9,300 Cummins Engine Co., Inc........ 427,800
------------
Financial Services (5.0%):
7,300 Associates First Capital
Corp......................... 322,112
5,100 Capital One Financial Corp..... 183,599
2,400 Citicorp....................... 247,199
3,313 Dean Witter Discover & Co...... 219,485
1,400 Federal Home Loan Mortgage
Corp......................... 154,174
5,700 Federal National Mortgage
Assoc........................ 212,324
8,400 Great Western Financial
Corp......................... 243,599
10,500 Green Tree Financial Corp...... 405,562
3,400 Merrill Lynch & Co., Inc....... 277,099
</TABLE>
Continued
-16-
<PAGE> 17
THE SESSIONS GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Financial Services, continued:
7,800 MGIC Investment Corp........... $ 592,799
2,700 Salomon, Inc................... 127,237
9,000 Schwab, Charles Corp........... 287,999
------------
3,273,188
------------
Food & Related (0.9%):
9,791 Archer-Daniels-Midland Co...... 215,401
8,100 IBP, Inc....................... 196,424
4,800 Universal Foods Corp........... 169,199
------------
581,024
------------
Forest & Paper Products (0.7%):
1,300 Bowater, Inc................... 48,913
4,000 Kimberly-Clark Corp............ 381,000
------------
429,913
------------
Hospital Supply & Management (0.9%):
11,566 Columbia/HCA Healthcare
Corp......................... 471,315
6,000 Tenet Healthcare Corp. (b)..... 131,250
------------
602,565
------------
Hotels & Gaming (0.7%):
17,800 Hilton Hotels Corp............. 465,025
------------
Household--General Products (0.2%):
4,800 Premark International, Inc..... 106,800
------------
Human Resources (0.2%):
7,400 Olsten Corp.................... 111,925
------------
Insurance (5.5%):
15,800 Allstate Corp.................. 914,425
4,800 American General Corp.......... 196,200
5,100 American International
Group, Inc................... 552,075
3,200 Chubb Corp..................... 172,000
4,100 Everest Reinsurance
Holdings, Inc................ 117,875
11,500 Exel Ltd....................... 435,563
3,000 ITT Hartford Group, Inc........ 202,500
6,500 Old Republic International
Corp......................... 173,875
6,900 Providian Corp................. 354,488
3,400 ReliaStar Financial Corp....... 196,350
2,100 St. Paul Cos., Inc............. 123,113
2,100 Transatlantic Holdings, Inc.... 169,050
------------
3,607,514
------------
Linen Supply & Related Items (0.2%):
2,600 Cintas Corp.................... 152,750
------------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Machine Tools & Related Products (0.5%):
9,200 Kennametal, Inc................ $ 357,650
------------
Machinery & Equipment (3.8%):
5,200 Case Corp...................... 283,400
2,000 Caterpillar, Inc............... 150,500
5,700 Deere & Co..................... 231,563
11,700 Halliburton Co................. 704,925
9,300 Harnischfeger Industries,
Inc.......................... 447,563
6,000 Tecumseh Products Co.,......... 344,250
8,100 Thermo Electron Corp. (b)...... 334,125
------------
2,496,326
------------
Manufacturing (1.4%):
5,600 Parker-Hannifin Corp........... 217,000
6,800 Service Corp. International.... 190,400
2,700 Springs Industries, Inc........ 116,100
10,700 TRINOVA Corp................... 389,213
------------
912,713
------------
Medical--HMO (0.5%):
6,800 Foundation Health Corp. (b).... 215,900
4,300 Maxicare Health Plans, Inc.
(b).......................... 95,675
------------
311,575
------------
Medical--Instruments/Products (3.1%):
7,300 Beckman Instruments Inc........ 280,138
10,100 Boston Scientific Corp. (b).... 606,000
6,100 Mallinckrodt, Inc.............. 269,163
12,800 Medtronic, Inc................. 870,400
1,500 Nellcor Puritan Bennrtt, Inc.
(b).......................... 32,813
------------
2,058,514
------------
Medical Services & Supplies (0.8%):
14,100 HEALTHSOUTH Corp. (b).......... 544,613
------------
Mining (0.3%):
5,100 Cyprus Amax Minerals Co........ 119,213
1,100 Potash Corp. of
Saskatchewan, Inc............ 93,500
------------
212,713
------------
Motor Vehicles (1.3%):
13,300 Ford Motor Co.................. 423,938
7,300 General Motors Corp............ 406,975
------------
830,913
------------
Multi--Media (0.4%):
3,500 Walt Disney Co................. 243,688
------------
Office Supplies & Forms (0.2%):
3,400 Standard Register Co........... 110,500
------------
</TABLE>
Continued
-17-
<PAGE> 18
THE SESSIONS GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oil & Gas--Domestic (2.5%):
3,300 Amoco Corp..................... $ 265,650
4,400 Atlantic Richfield Co.......... 583,000
2,300 British Petroleum Co., Plc..... 325,163
3,400 Panenergy Corp................. 153,000
13,000 USX--Marathon Group............ 310,375
------------
1,637,188
------------
Oil & Gas--Exploration/Production (4.3%):
16,100 Anadarko Petroleum Corp........ 1,042,475
5,600 Burlington Resources, Inc...... 282,100
8,600 Cross Timbers Oil Co........... 216,075
18,200 Enron Oil & Gas Co............. 459,550
4,300 Repsol SA...................... 163,938
2,700 Transocean Offshore, Inc....... 169,088
5,400 Ultramar Diamond
Shamrock Corp................ 170,775
10,600 Union Pacific Resources Group,
Inc.......................... 310,050
------------
2,814,051
------------
Oil & Gas--Services (5.8%):
25,400 Baker Hughes, Inc.............. 876,300
2,700 El Paso Natural Gas Co......... 136,350
8,400 IMC Global, Inc................ 328,650
35,800 Rowan Cos., Inc. (b)........... 809,975
16,900 Schlumberger Ltd............... 1,687,888
------------
3,839,163
------------
Pharmaceuticals (6.4%):
3,600 American Home Products Corp.... 211,050
8,900 Amgen, Inc. (b)................ 483,938
7,700 Bergen Brunswig Corp. Class
A............................ 219,450
20,400 Biogen, Inc. (b)............... 790,500
3,750 Cardinal Health, Inc........... 218,438
9,900 Lilly, Eli & Co................ 722,700
7,800 Johnson & Johnson.............. 388,050
9,500 Merck & Co., Inc............... 752,875
3,700 Pfizer Inc..................... 306,638
11,200 Somatogen, Inc. (b)............ 123,200
------------
4,216,839
------------
Photographic Equipment (0.7%):
5,500 Eastman Kodak Co............... 441,375
------------
Restaurants (0.7%):
13,700 Boston Chicken, Inc. (b)....... 491,488
------------
Retail (4.7%):
8,500 AutoZone, Inc. (b)............. 233,750
5,700 Dillard Department Stores,
Inc.......................... 175,988
4,000 Home Depot, Inc................ 200,500
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Retail, continued:
15,700 PETsMART, Inc. (b)............. $ 343,438
14,000 Price/Costco, Inc. (b)......... 351,750
5,500 Safeway, Inc. (b).............. 235,125
19,100 Staples, Inc. (b).............. 344,994
14,900 Starbucks Corp. (b)............ 426,513
8,200 TJX Cos., Inc.................. 388,475
12,800 Toys "R" Us, Inc. (b).......... 384,000
------------
3,084,533
------------
Shoes--Leather (0.4%):
4,700 Nike, Inc., Class B............ 280,825
------------
Steel (0.2%):
2,200 Nucor Corp..................... 112,200
------------
Telecommunications (5.6%):
6,400 Ascend Communications, Inc.
(b).......................... 397,600
8,000 Cascade Communications
Corp. (b).................... 441,000
6,350 Glenayre Technologies, Inc.
(b).......................... 136,921
10,300 Lucent Technologies, Inc....... 476,375
8,200 MCI Communications Corp........ 268,037
11,300 QUALCOMM, Inc. (b)............. 450,588
5,000 Sprint Corp.................... 199,375
6,400 Tellabs, Inc. (b).............. 240,800
5,400 U.S. Robotics Corp. (b)........ 388,800
26,300 WorldCom, Inc. (b)............. 685,444
------------
3,684,940
------------
Tires & Rubber Products (0.7%):
9,300 Goodyear Tire & Rubber Co...... 477,788
------------
Tobacco (1.5%):
7,300 Philip Morris Cos., Inc........ 822,163
5,200 RJR Nabisco Holdings Corp...... 176,800
------------
998,963
------------
Transportation--Air (1.4%):
3,300 AMR Corp. Del (b).............. 290,813
16,100 Southwest Airlines Co.......... 356,213
4,500 UAL Corp. (b).................. 281,250
------------
928,276
------------
Transportation--Rail (0.6%):
2,600 Burlington Northern Santa Fe... 224,575
3,500 CSX Corp....................... 147,875
------------
372,450
------------
Utilities--Electric (1.5%):
7,400 Central Maine Power Co......... 86,025
3,100 CINergy Corp................... 103,463
4,800 DTE Energy Co.................. 155,400
</TABLE>
Continued
-18-
<PAGE> 19
THE SESSIONS GROUP
1ST SOURCE MONOGRAM DIVERSIFIED EQUITY
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric, continued:
5,600 Entergy Corp................... $ 155,400
4,600 GPU, Inc....................... 154,675
6,400 Peco Energy Co................. 161,600
5,500 Unicom Corp.................... 149,188
------------
965,751
------------
Utilities--Gas & Pipeline (0.5%):
6,500 Sonat, Inc..................... 334,750
------------
Total Common Stocks............ 62,508,458
------------
PREFERRED STOCKS (0.4%):
Forest & Paper Products (0.1%):
2,200 Westvaco Corp.................. 63,250
------------
Oil & Gas (0.3%):
6,700 YPF Sociedad Anonima-Spondored
ADR.......................... 169,175
------------
Total Preferred Stocks......... 232,425
------------
SECURITY
SHARES DESCRIPTION VALUE
- ---------- ------------------------------- ------------
MUTUAL FUNDS (4.5%):
2,094,909 Fountain Square Treasury
Fund......................... $ 2,094,909
847,656 Fountain Square Commercial
Paper Fund................... 847,656
------------
Total Mutual Funds............. 2,942,565
------------
Total (Cost-$55,146,136)....... $ 65,683,448
==========
</TABLE>
- ---------
Percentages indicated are based on net assets of $65,680,647.
(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.......................... $11,793,034
Unrealized depreciation.......................... (1,255,722)
-----------
Net unrealized appreciation...................... $10,537,312
==========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
-19-
<PAGE> 20
THE SESSIONS GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (4.8%):
$ 600,000 General Electric Capital Corp.
5.40%, 1/31/97............... $ 600,000
645,000 General Electric Capital Corp.
5.25%, 1/3/97................ 645,000
------------
Total Commercial Paper 1,245,000
------------
COMMON STOCKS (83.2%):
Apparel Manufacturers (2.7%):
19,900 Sport-Haley, Inc. (b).......... 249,993
10,400 St. John Knits, Inc............ 452,400
------------
702,393
------------
Banking (2.8%):
11,000 Bank United Corp., Class A..... 294,250
29,000 Commonwealth Bancorp, Inc...... 435,000
------------
729,250
------------
Beer, Wine & Distilled Beverages (0.8%):
20,000 Boston Beer Co., Inc. (b)...... 205,000
------------
Commercial Goods & Services (4.8%):
21,000 CCC Information Services Group
(b).......................... 336,000
25,400 ICTS Holland Productions....... 257,175
10,950 Sykes Enterprises, Inc. (b).... 410,625
21,900 Warrentec Corp. (b)............ 251,850
------------
1,255,650
------------
Communications Equipment (3.6%):
21,000 TALX Corp. (b)................. 173,250
19,000 Sawtek, Inc. (b)............... 752,875
------------
926,125
------------
Computer Software (18.5%):
12,200 Citrix Systems, Inc. (b)....... 476,563
21,000 Digex, Inc. (b)................ 217,875
7,000 ForeFront Group, Inc. (b)...... 38,500
19,000 Geoworks (b)................... 465,500
40,000 Microware Systems Corp. (b).... 570,000
13,100 Netscape Communications
Corp. (b).................... 745,063
91,000 Oak Technology, Inc. (b)....... 1,023,750
35,000 Platinum Technology, Inc.
(b).......................... 476,875
84,500 Ross Systems, Inc. (b)......... 813,312
------------
4,827,438
------------
Educational Services (0.9%):
18,200 Childrens Comprehensive
Services, Inc. (b)........... 238,875
------------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electronic Components (11.7%):
21,000 Chips & Technologies, Inc.
(b).......................... $ 383,250
518 Comptronix Corp., Class A
(b).......................... 5
14,700 Micron Technology, Inc......... 428,137
40,900 S 3, Inc. (b).................. 664,625
55,200 Sonic Solutions, Inc. (b)...... 372,600
20,000 Triquint Semiconductor, Inc.
(b).......................... 527,500
14,500 Vitesse Semiconductor (b)...... 659,750
------------
3,035,867
------------
Emerging Technology (1.0%):
19,000 Electric Fuel Corp. (b)........ 133,000
12,000 General Scanning, Inc. (b)..... 141,000
------------
274,000
------------
Environmental Services (0.9%):
7,000 U.S. Filter Corp. (b).......... 222,250
------------
Human Resources (0.9%):
21,900 SOS Staffing Services, Inc.
(b).......................... 229,950
------------
Leisure & Recreational Products (2.4%):
17,600 Cannondale Corp. (b)........... 396,000
12,000 North Face, Inc. (b)........... 231,000
------------
627,000
------------
Medical--Hospitals (0.7%):
49,000 Integrated Medical
Resources (b)................ 189,875
------------
Medical Services & Supplies (10.3%):
8,200 Agouron Pharmaceuticals, Inc. (b).. 555,550
18,000 Cephalon, Inc. (b)............. 369,000
16,000 HEALTHSOUTH Corp. (b).......... 618,000
29,000 ICOS Corp. (b)................. 221,125
28,000 Innotech, Inc. (b)............. 217,000
7,200 Sola International, Inc. (b)... 273,600
12,000 Vivus, Inc. (b)................ 435,000
------------
2,689,275
------------
Oil--Field Services (2.6%):
28,700 Pride Petroleum
Services, Inc. (b)........... 667,275
------------
Retail--Specialty Stores (0.7%):
6,500 Insight Enterprises, Inc.
(b).......................... 182,000
------------
Savings & Loans (10.6%):
18,000 Dime Community
Bancorp, Inc. (b)............ 265,500
13,300 First Bell Bancorp, Inc........ 176,225
</TABLE>
Continued
-20-
<PAGE> 21
THE SESSIONS GROUP
1ST SOURCE MONOGRAM SPECIAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Savings & Loans, continued
18,700 First Federal Savings Bank of
Colorado..................... $ 317,900
16,000 First Savings Bank of
Washington Bancorp, Inc...... 294,000
7,000 GreenPoint Financial Corp...... 330,750
14,000 Home Bancorp of Elgin, Inc.
(b).......................... 189,000
17,500 PFF Bancorp, Inc. (b).......... 260,313
20,000 Provident Financial
Holdings, Inc. (b)........... 280,000
11,700 St. Paul Bancorp, Inc.......... 343,688
7,000 Washington Mutual, Inc......... 303,188
------------
2,760,564
------------
Steel (0.5%):
7,000 Steel Dynamics, Inc. (b)....... 133,875
------------
Telecommunications--Equipment (6.8%):
7,000 Ascend Communications, Inc. (b)... 434,875
16,700 InterVoice, Inc. (b)........... 204,575
17,200 Verilink Corp. (b)............. 571,900
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Telecommunications--Equipment, continued
22,000 WorldCom, Inc. (b)............. $ 573,375
------------
1,784,725
------------
Total Common Stocks 21,681,387
------------
U.S. TREASURY BILLS (6.1%):
$1,600,000 5.04%, 1/30/97................. 1,593,827
------------
Total U.S. Treasury Bills 1,593,827
------------
WARRANTS (0.0%):
5,000 Alza Corp...................... 625
------------
Total Warrants 625
------------
MUTUAL FUNDS (6.0%):
1,164,640 Fountain Square Treasury
Fund......................... 1,164,640
386,103 Fountain Square Commercial
Paper Fund................... 386,103
------------
Total Mutual Funds 1,550,743
------------
Total (cost-$24,173,510)(a) $ 26,071,582
==========
</TABLE>
- ---------
Percentages indicated are based on net assets of $26,058,467.
(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.......................... $ 3,737,578
Unrealized depreciation.......................... (1,839,506)
-----------
Net unrealized appreciation...................... $ 1,898,072
==========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
-21-
<PAGE> 22
THE SESSIONS GROUP
1ST SOURCE INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS (37.7%):
Banking (2.1%):
$ 1,000,000 Firstar Corp., 7.15%, 9/1/00,
Callable 9/1/98 @ 100 $ 1,007,661
------------
Financial Services (15.3%):
1,000,000 Associates Corp., 6.75%,
7/15/01..................... 1,004,869
1,000,000 Bear Stearns Co., Inc., 7.63%,
4/15/00..................... 1,031,797
1,250,000 General Electric Capital
Corp., 8.65%, 5/15/09,
Callable 5/15/97 @ 100...... 1,430,690
2,000,000 Lehman Brothers Holding Co.,
7.25%, 10/15/03............. 2,005,968
1,000,000 Salomon, Inc., 7.00%,
1/20/98..................... 1,007,685
1,000,000 Smith Barney Holdings, Inc.,
7.88%, 10/1/99.............. 1,035,493
------------
7,516,502
------------
Industrial Goods & Services (9.3%):
1,500,000 Smithkline Beecham Corp.,
7.50%, 5/1/02............... 1,530,366
2,000,000 Texas Instruments, Inc.,
6.88%, 7/15/00.............. 2,022,616
1,000,000 Union Pacific Resources,
7.00%, 10/15/06............. 1,003,154
------------
4,556,136
------------
Retail--Department Stores (2.6%):
1,250,000 J.C. Penney Co., Inc., 7.38%,
8/15/08..................... 1,268,032
------------
Paper Products (2.1%):
1,000,000 International Paper Co.,
7.00%, 6/1/01............... 1,014,203
------------
Tobacco (4.0%):
2,000,000 Philip Morris Cos., Inc.,
6.80%, 12/1/03.............. 1,970,992
------------
Transportation & Shipping (4.3%):
2,000,000 Norfolk Southern, 7.88%,
2/15/04....................... 2,117,584
------------
Total Corporate Bonds 19,451,110
------------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
PREFERRED STOCKS (4.0%):
Electrical & Electronic (2.0%):
40,000 Southwestern Public Services,
Series A, 7.85%, 10/21/01,
Callable 10/21/01 @ 25.00... $ 995,000
------------
Food Related (2.0%):
40,000 McDonald's Corp., 7.50%,
9/30/36, Callable 12/31/01 @
25.00....................... 980,000
------------
Total Preferred Stocks 1,975,000
------------
U.S. TREASURY NOTES (27.0%):
$ 1,000,000 5.38%, 5/31/98................ 992,500
2,000,000 5.88%, 11/15/99............... 1,993,750
2,000,000 6.25%, 5/31/00................ 2,008,750
3,000,000 7.75%, 2/15/01................ 3,170,625
5,000,000 6.50%, 10/15/06............... 5,028,125
------------
Total U.S. Treasury Notes 13,193,750
------------
U.S. TREASURY BONDS (6.1%):
3,000,000 5.63%, 11/30/98............... 2,984,064
------------
Total U.S. Treasury Bonds 2,984,064
------------
U.S. GOVERNMENT AGENCIES (20.3%):
Federal Home Loan Mortgage Corp.:
3,000,000 6.89%, 9/26/05................ 2,978,292
2,000,000 6.00%, 9/25/06................ 1,958,080
1,000,000 7.02%, 4/10/06................ 999,094
1,000,000 7.00%, 8/15/07................ 993,300
1,000,000 6.50%, 2/15/08................ 981,805
Government National Mortgage Assoc.:
2,000,000 7.00%, 12/16/06............... 1,995,580
------------
Total U.S. Government Agencies 9,906,151
------------
INVESTMENT COMPANIES (1.6%):
793,135 Fountain Square Treasury
Fund........................ 793,134
------------
Total Investments Companies 793,134
------------
Total (Cost-$48,295,225)(a) $48,303,209
==========
</TABLE>
- ---------
Percentages indicated are based on net assets of $48,959,269
(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.......................... $ 340,509
Unrealized depreciation.......................... (332,525)
---------
Net unrealized appreciation...................... $ 7,984
=========
</TABLE>
See notes to financial statements.
-22-
<PAGE> 23
THE SESSIONS GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (82.6%):
Aerospace/Defense (2.8%):
8,000 Raytheon Co................... $ 385,000
12,500 Sundstrand Corp............... 531,250
------------
916,250
------------
Automobiles (1.5%):
15,000 Ford Motor Co................. 478,125
------------
Automotive Parts (1.4%):
28,000 Excel Industries, Inc......... 465,500
------------
Banking (2.4%):
8,800 Fort Wayne National Corp...... 334,400
15,000 Magna Group, Inc.............. 442,500
------------
776,900
------------
Chemicals & Allied Parts (6.5%):
9,000 Betz Laboratories, Inc........ 526,500
20,000 Calgon Carbon Corp............ 245,000
10,000 Great Lakes Chemical Corp..... 467,500
11,000 Lubrizol Corp................. 341,000
25,000 Hanna (M. A.) Co.............. 546,875
------------
2,126,875
------------
Communications Equipment (5.7%):
9,000 General Motors Corp.--Class
H........................... 506,250
5,000 Harris Corp................... 343,125
16,700 L. M. Ericsson Telephone Co.
ADR......................... 504,131
8,000 Motorola, Inc................. 491,000
------------
1,844,506
------------
Computer Services (1.5%):
11,000 Electronic Data Systems
Corp........................ 475,750
------------
Construction--Engineering (1.1%):
10,000 Foster Wheeler Corp........... 371,250
------------
Cosmetics & Toiletries (1.4%):
8,000 Avon Products, Inc............ 457,000
------------
Electrical Equipment (4.9%):
12,000 AMP, Inc...................... 460,500
6,200 Emerson Electric Co........... 599,850
21,000 Esterline Technologies, Corp.
(b)......................... 548,625
------------
1,608,975
------------
Environmental Services (1.7%):
21,100 Browning-Ferris Industries,
Inc......................... 553,875
------------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Financial Services (3.7%):
11,000 H & R Block, Inc.............. $ 319,000
10,000 Morgan Stanley Group, Inc..... 571,250
14,480 PIMCO Advisors L. P........... 325,800
------------
1,216,050
------------
Insurance (6.5%):
20,000 Le Salle RE Holdings 585,000
9,000 Lincoln National Corp......... 472,500
17,000 Travelers/Aetna Property &
Casualty Corp............... 601,375
22,000 USF&G Corp.................... 459,250
------------
2,118,125
------------
Machinery & Equipment (1.7%):
6,000 Deere & Co.................... 243,750
15,900 Keystone International,
Inc......................... 319,987
------------
563,737
------------
Medical Equipment & Supplies (0.9%):
10,000 Bard (C. R.), Inc............. 280,000
------------
Mining (4.0%):
30,000 Homestake Mining Co........... 427,500
11,000 IMC Global Strypes............ 441,375
5,000 Potash Corp. of
Saskatchewan, Inc........... 425,000
------------
1,293,875
------------
Oil--Integrated Companies (1.6%):
4,000 Atlantic Richfield Co......... 530,000
------------
Pharmaceuticals (5.8%):
9,000 Abbott Laboratories........... 456,750
6,000 Bristol-Myers Squibb Co....... 652,500
14,700 IVAX Corp..................... 150,675
8,000 Merck & Co., Inc.............. 634,000
------------
1,893,925
------------
Petroleum Refining (3.6%):
8,000 MAPCO, Inc.................... 272,000
10,000 Phillips Petroleum Co......... 442,500
19,000 USX--Marathon Group........... 453,625
------------
1,168,125
------------
Office--Automation & Equipment (0.8%):
5,000 Xerox Corp.................... 263,125
------------
</TABLE>
Continued
-23-
<PAGE> 24
THE SESSIONS GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Publishing (3.2%):
17,000 American Greetings Corp....... $ 482,375
7,000 Tribune Co.................... 552,125
------------
1,034,500
------------
Railroad (1.4%):
10,000 Kansas City Southern
Industries, Inc............. 450,000
------------
Real Estate Investment Trust (6.2%):
22,000 Burnham Pacific Properties,
Inc. 330,000
12,000 Hospitality Properties
Trust....................... 348,000
10,000 Prentiss Properties Trust..... 250,000
24,000 Thornburg Mortgage Asset
Corp........................ 513,000
23,800 Wellsford Residential Property
Trust....................... 577,150
------------
2,018,150
------------
Retail (2.9%):
9,000 J.C. Penney Co., Inc.......... 438,750
10,000 Long's Drug Stores, Inc....... 491,250
1 Price/Costco Inc. (b)......... 25
------------
930,025
------------
Steel (1.1%):
10,000 Carpenter Technology Corp..... 366,250
------------
Tires & Rubber Products (1.5%):
25,000 Cooper Tire & Rubber Co....... 493,750
------------
Telecommunications (2.6%):
10,000 Alltel Corp................... 313,750
17,000 US West Communications,
Inc......................... 548,250
------------
862,000
------------
Utilities--Electric (4.2%):
13,000 American Electric Power,
Co.......................... 534,625
16,000 Houston Industries, Inc....... 362,000
22,000 Montana Power Co.............. 470,250
------------
1,366,875
------------
Total Common Stocks 26,923,518
------------
PREFERRED STOCKS (6.3%):
Financial Services (2.1%):
6,000 Conseco, Inc., 7.00%, 2/1/00,
Callable 2/1/99 @ 62.20..... 682,500
------------
<CAPTION>
SHARES OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
PREFERRED STOCKS, CONTINUED:
Industrial (1.7%):
8,000 Airtouch Communications,
Series B, 6.00%, 8/16/99.... $ 218,000
14,000 Snyder Oil Corp., Callable
3/31/ 97 @ 25.90............ 339,500
------------
557,500
------------
Retail Stores (0.9%):
6,000 K Mart Preferred, 7.75%,
6/15/16, Callable 6/17/99 @
52.71....................... 292,500
------------
Toys (1.6%):
50,000 Tyco Toys, Inc., Series C,
Callable 7/1/99 @ 5.10...... 506,250
-----------
Total Preferred Stocks 2,038,750
------------
MUTUAL FUNDS (6.1%):
1,037,698 Fountain Square Treasury Fund 1,037,698
950,287 Fountain Square Commercial
Paper Fund.................. 950,287
------------
1,987,985
------------
CONVERTIBLE BONDS (8.1%):
Industrial Goods & Services (4.4%):
$ 300,000 General Instrument Corp.,
5.00%, 6/15/00, Callable
6/15/97 @ 102.14............ 319,500
150,000 IVAC Corp. 6.50%, 11/15/01,
Callable 11/15/97 @
100.93...................... 139,688
450,000 Mascotech 4.50%, 12/15/03,
Callable 12/15/97, @
102.50...................... 363,375
285,000 Oryx Energy Co. 7.50%,
5/15/14, Callable 5/15/98 @
101.50...................... 274,313
400,000 Park Electrochem 5.50%,
3/1/06, Callable 3/1/99 @
102.75...................... 350,000
------------
1,446,876
------------
Metals And Mining (1.2%):
400,000 Coeur D'Alene Mines Corp.
6.38%, 1/31/04, Callable
1/31/97 @ 103.64............ 370,500
------------
Technology (2.5%):
450,000 Integrated Device Technology
5.50%, 6/1/02, Callable
6/2/98 @ 102.75............. 397,125
</TABLE>
Continued
-24-
<PAGE> 25
THE SESSIONS GROUP
1ST SOURCE MONOGRAM INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
CONVERTIBLE BONDS, CONTINUED:
Technology, continued:
$ 500,000 Telxon Cvt. 5.75%, 1/1/03,
Callable 1/5/99 @ 103.29.... $ 411,875
------------
809,000
------------
Total Convertible Bonds 2,626,376
------------
Total (Cost--$28,424,948) $ 33,576,629
==========
</TABLE>
- ---------
Percentages indicated are based on net assets of $32,580,369.
(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.......................... $ 5,839,635
Unrealized depreciation.......................... (687,954)
-----------
Net unrealized appreciation...................... $ 5,151,681
==========
</TABLE>
(b) Non-income producing securities.
See notes to financial statements.
-25-
<PAGE> 26
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Unaudited)
1. ORGANIZATION:
The Sessions Group (the "Group") was organized on April 25, 1988 as an Ohio
business trust, and is registered under the Investment Company Act of 1940,
as amended, (the "1940 Act") as an open-end management investment company.
The Group is authorized to issue an unlimited number of shares, which are
units of beneficial interest, without par value. The Group offers shares of
a number of different series or portfolios including the following series
for which 1st Source Bank serves as investment adviser: shares of the 1st
Source Monogram Diversified Equity Fund, 1st Source Monogram Special Equity
Fund, 1st Source Monogram Income Fund, and the 1st Source Monogram Income
Equity Fund (collectively, the "Funds" and individually, a "Fund").
The investment objective for each of the Diversified Equity Fund and the
Special Equity Fund is capital appreciation. The investment objectives of
the Income Equity Fund are capital appreciation with current income as a
secondary objective. The investment objective of the Income Fund is current
income consistent with preservation of capital.
Sales of shares of the Funds may be made to customers of 1st Source Bank
and its affiliates, to all accounts of correspondent banks of 1st Source
Bank and to the general public.
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 in common and preferred stocks, corporate bonds, commercial
paper, municipal securities and U.S. Government securities of the
Diversified Equity Fund, the Special Equity Fund, the Income Fund, the
Income Equity Fund are valued at their market values determined on the
basis of the latest available bid quotation in the principal market
(closing sales prices if the principal market is an exchange or NASDAQ
Market) in which such securities are normally traded. Investments in
investment companies are valued at their net asset values as reported by
such companies. Other securities for which quotations are not readily
available are valued at their fair value under procedures established by
the Group's Board of Trustees. The differences between the cost and
market values of investments held by the variable net asset value funds
are reflected as either unrealized appreciation or depreciation.
Continued
-26-
<PAGE> 27
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
(Unaudited)
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 1st Source Bank deems
creditworthy under guidelines approved by the Board of Trustees, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the
price paid by each Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller, under a repurchase
agreement, is required to maintain the value of collateral held pursuant
to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held
by the Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by the Funds under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and
broker/dealers, and agree to repurchase them at a mutually agreed-upon
date and price. At the time a Fund enters into a reverse repurchase
agreement, it places in a segregated custodial account assets having a
value equal to the repurchase price (including accrued interest), and
will continually monitor the account to ensure such equivalent value is
maintained at all times. Reverse repurchase agreements are considered to
be borrowing by the Funds under the 1940 Act.
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 debt obligations, interest rate and currency swaps, future
contracts, options, and forward currency contracts. The 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
Continued
-27-
<PAGE> 28
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
(Unaudited)
unanticipated movements in the value of the security or the underlying
assets or indices. It is possible that the Funds will incur a loss as a
result of their investments in derivative instruments. It is the Fund's
policy to the extent that there exists no readily available market for
such securities, that the investment will be treated as an illiquid
security for purposes of calculating the Funds' limitation on
investments in illiquid securities as set forth in the Funds' investment
restrictions.
DIVIDENDS TO SHAREHOLDERS:
A dividend for each of the Funds, other than the Special Equity Fund, is
declared monthly at the close of business on the day of declaration and
is paid monthly. A dividend for the Special Equity Fund is declared
quarterly at the close of business on the day of declaration and is paid
quarterly. Each such dividend consists of an amount of accumulated
undistributed net income of that Fund as determined necessary or
appropriate by the appropriate officers of the Group.
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 five years
commencing with the date of the initial public offering.
Continued
-28-
<PAGE> 29
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
(Unaudited)
3. PURCHASES AND SALES OF PORTFOLIO SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the period ended December 31, 1996 are as follows
(Commencement of operations for the funds was September 20, 1996, September
19, 1996, September 23, 1996, and September 24, 1996, respectively):
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Diversified Equity Fund........................................ $17,556,643 $13,899,698
Special Equity Fund............................................ 9,742,055 7,820,298
Income Fund.................................................... 34,272,558 31,542,418
Income Equity Fund............................................. 8,024,617 4,222,759
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by 1st Source Bank.
Under the terms of the investment advisory agreement, 1st Source Bank is
entitled to receive fees based on a percentage of the average net assets of
each Fund. 1st Source Bank 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, 1st Source Bank will refund to the
Funds, or otherwise bear, such excess. Such limitation did not affect the
calculation of the investment advisory fees during the period ended
December 31, 1996.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services, Inc.
("BISYS Services") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator and distributor. Such officers and
trustees are paid no fees directly by the Funds for serving as officers and
trustees of the Group. Under the terms of the administration agreement,
BISYS 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.
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 1st Source Bank, 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.
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 1st Source Bank, its correspondent and
affiliated banks and BISYS, for providing ministerial, recordkeeping and/or
adminis-
Continued
-29-
<PAGE> 30
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
(Unaudited)
trative 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. The Group has
not implemented such plan as of December 31, 1996.
BISYS is also entitled to receive commissions on sales of shares of the
variable net asset value funds. For the period ended December 31, 1996,
BISYS received $1,222 from commissions earned on sales of shares of the
variable net asset value funds, of which $995 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 period ended
December 31, 1996:
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY EQUITY INCOME EQUITY
FUND FUND FUND FUND
----------- ------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ 1.10% .80% .55% .80%
Voluntary fee reductions.................... -- -- -- --
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ .20% .20% .20% .20%
Voluntary fee reductions.................... -- -- -- --
12B-1 FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ .25% .25% .25% .25%
Voluntary fee reductions.................... $46,151 $18,094 $33,240 $21,178
FUND ACCOUNTANT FEES........................ $ 8,168 $ 5,087 $ 3,626 $ 3,170
TRANSFER AGENT FEES......................... $ 7,760 $ 6,489 $ 6,465 $ 6,626
</TABLE>
5. ACQUISITION OF COMMON TRUST FUNDS
On September 20, 1996, September 19, 1996, September 23, 1996, September
24, 1996, respectively, the Diversified Equity, Special Equity, Income, and
Income Equity Funds acquired all of the assets of the Diversified Equity,
Special Equity Income, and Income Equity Common Trust Funds of 1st Source
Continued
-30-
<PAGE> 31
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1996
(Unaudited)
Bank. The following is a summary of shares issued, net assets acquired, net
asset value per share and unrealized appreciation (depreciation) as of the
dates of acquisition:
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY EQUITY INCOME EQUITY
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares................................ 6,620,301 2,687,767 3,096,895 4,788,284
Net Assets............................ $66,203,008 $26,877,666 $30,968,953 $47,882,850
Net Asset Value....................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
Unrealized Appreciation
(Depreciation)...................... $ 8,888,125 $ 2,343,983 $ (926,960) $ 3,626,554
</TABLE>
Continued
-31-
<PAGE> 32
THE SESSIONS GROUP
1ST SOURCE MONOGRAM FUNDS
FINANCIAL HIGHLIGHTS
(Unaudited)
<TABLE>
<CAPTION>
DIVERSIFIED SPECIAL INCOME
EQUITY EQUITY INCOME EQUITY
------------ ------------ ------------ ------------
FOR PERIOD FOR PERIOD FOR PERIOD FOR PERIOD
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 (C) 1996 (C) 1996 (C) 1996 (C)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................. $ 10.00 $ 10.00 $ 10.00 $ 10.00
------------ ------------ ------------ ------------
INVESTMENT ACTIVITIES
Net investment income.............................. -- -- 0.16 0.08
Net realized gains (losses) on investments......... 0.42 0.16 (0.02) 0.30
Net unrealized gains (losses) on investments....... 0.26 (0.16) 0.19 0.48
------------ ------------ ------------ ------------
Total from Investment Activities................. 0.68 0.00 0.33 0.86
------------ ------------ ------------ ------------
DISTRIBUTIONS
Net investment income.............................. -- -- (0.16) (0.08)
In excess of net investment income................. -- -- -- --
Net realized gains................................. (0.22) (0.16) -- (0.05)
In excess of realized gains........................ -- (0.15) -- --
------------ ------------ ------------ ------------
Total Distributions.............................. (0.22) (0.31) (0.16) (0.13)
------------ ------------ ------------ ------------
Capital transactions................................. -- -- -- --
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD....................... $ 10.46 $ 9.69 $ 10.17 $ 10.73
============= ============= ============= =============
Total Return (excludes sales charge)................. 8.61%(a) -2.30%(a) 4.38%(a) 10.25%(a)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (000)................. $ 65,681 $ 26,058 $ 48,959 $ 32,580
Ratio of expenses to average net assets............ 1.57%(b) 1.33%(b) 1.01%(b) 1.32%(b)
Ratio of net investment income to average net
assets........................................... -0.08%(b) -0.11%(b) 1.31%(b) 2.39%(b)
Ratio of expenses to average net assets*........... 1.82%(b) 1.58%(b) 1.26%(b) 1.57%(b)
Ratio of net investment income to average net
assets*.......................................... -0.33%(b) -0.36%(b) 1.06%(b) 2.14%(b)
Portfolio Turnover Rate............................ 23% 37% 71% 14%
</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. The quoted return of the Portfolio includes performance of
certain collective trust portfolio ("Commingled") accounts for the periods
from June 30, 1985, November 30, 1985, June 30, 1985, and November 30, 1985,
respectively, to the mutual fund's commencement of operations.
(b) Annualized
(c) Commencement of the Funds began September 20, September 19, September 23,
and September 24, respectively.
See notes to financial statements.
-32-
<PAGE> 33
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<PAGE> 34
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<PAGE> 35
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 36
Semi-Annual Report
1st Source
Monogram Logo
Funds(TM)
Semi-Annual Report
December 31, 1996
1st Source
Monogram Logo
Funds(TM)
INVESTMENT ADVISER
1st Source Bank
100 North Michigan Street
South Bend, IN 46634
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
FOR ADDITIONAL INFORMATION CALL:
1-800-766-8938
This material must be preceded or accompanied by a current prospectus.
2/97
