<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE SESSIONS GROUP
- --------------------------------------------------------------------------------
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N/A
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<PAGE> 2
THE SESSIONS GROUP
3435 STELZER ROAD
COLUMBUS, OHIO 43219
Dear Shareholders of Riverside Capital Money Market Fund,
Riverside Capital Value Equity Fund,
Riverside Capital Fixed Income Fund and
Riverside Capital Growth Fund (the "Funds"):
Attached to this letter you will find a Notice of Special Meeting of
Shareholders and related Proxy Statement for a Special Meeting of Shareholders
to be held on December 24, 1997. The Board of Trustees of The Sessions Group
(the "Group") has called this Meeting to ask you to approve, among other things,
the hiring of Morgan Stanley Asset Management Inc. ("MSAM") and Miller Anderson
& Sherrerd, LLP ("Miller Anderson") as sub-investment advisers for the Funds.
These two sub-investment advisers are subsidiaries of Morgan Stanley, Dean
Witter, Discover & Co., and have tremendous depth and experience and good
performance track records in managing mutual funds, such as the Funds.
As required by applicable federal law, you are being asked to vote on
numerous issues, including a revised investment advisory agreement between the
Group, on behalf of the Funds, and National Bank of Commerce, proposed
sub-investment advisory agreements with MSAM and Miller Anderson and several
proposals to amend the investment objectives, policies and restrictions of the
Funds. Generally we are proposing that the investment objectives, policies and
restrictions of the Funds be amended so that they are consistent with one
another and more closely match those of certain other funds currently managed by
MSAM and Miller Anderson which we believe to be similar to the Funds. In
proposing to hire MSAM and Miller Anderson we anticipate that MSAM and Miller
Anderson will manage the Funds in a manner substantially similar to the manner
in which they currently manage their other similar funds. In addition, we are
recommending that a number of investment restrictions be deleted since they are
no longer required by various state regulators and may unnecessarily limit
MSAM's and Miller Anderson's ability to manage the Funds based upon their
respective current styles.
The proposed investment advisory agreement with National Bank of Commerce
includes somewhat higher investment advisory fees for the Value Equity Fund and
the Growth Fund in order to provide for appropriate compensation of Miller
Anderson and MSAM. The Board of Trustees of the Group unanimously approved each
of the matters described in the attached Proxy Statement and believes that they
are in the best interests of the Funds and their shareholders.
It is important for you to read the attached Notice of Special Meeting and
Proxy Statement and to complete the proxy card and return it to us before
December 24th, the meeting date, if you are unable to attend in person.
Thank you for your continued interest in the Funds.
Yours Very Truly,
Walter B. Grimm,
Chairman of the Board
<PAGE> 3
PRELIMINARY
COPY
RIVERSIDE CAPITAL MONEY MARKET FUND
RIVERSIDE CAPITAL VALUE EQUITY FUND
RIVERSIDE CAPITAL FIXED INCOME FUND
RIVERSIDE CAPITAL GROWTH FUND
FOUR SERIES OF
THE SESSIONS GROUP
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of Riverside Capital
Money Market Fund, Riverside Capital Value
Equity Fund, Riverside Capital Fixed Income
Fund and Riverside Capital Growth Fund
(collectively, the "Riverside Capital Funds"):
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of the Riverside Capital Funds, series of The Sessions Group (the
"Group"), will be held on Wednesday, December 24, 1997, at 10:00 a.m., Eastern
Time, at 3435 Stelzer Road, Columbus, Ohio, for the purpose of considering and
acting on the following matters:
1. To approve a new Investment Advisory Agreement between the Group
and National Bank of Commerce ("NBC") with respect to the Riverside Capital
Funds to permit, among other things, the appointment of a sub-investment
adviser for the Riverside Capital Funds;
2. To approve a Sub-Investment Advisory Agreement between NBC and
Miller Anderson & Sherrerd, LLP with respect to Riverside Capital Value
Equity Fund and Riverside Capital Fixed Income Fund;
3. To approve a Sub-Investment Advisory Agreement between NBC and
Morgan Stanley Asset Management Inc. with respect to Riverside Capital
Money Market Fund and Riverside Capital Growth Fund;
4. To approve an amendment of the investment objective of the
Riverside Capital Money Market Fund;
5. To approve an amendment of the investment objective of the
Riverside Capital Value Equity Fund;
6. To approve an amendment of the investment objective of the
Riverside Capital Fixed Income Fund;
7. To approve an amendment of the investment objective of the
Riverside Capital Growth Fund;
8. To approve the following matters with respect to certain
fundamental policies of each of the Riverside Capital Funds:
a. Amend such Funds' fundamental policies with respect to
diversification;
b. Amend such Funds' fundamental policies with respect to portfolio
concentration;
c. Amend such Funds' fundamental policies with respect to borrowing
money or issuing senior securities;
d. Amend such Funds' fundamental policies with respect to
purchasing or selling real estate;
<PAGE> 4
e. Amend such Funds' fundamental policies with respect to
purchasing securities on margin and reclassify such policies as
nonfundamental policies;
f. Reclassify such Funds' fundamental policies with respect to
selling securities short to make such policies nonfundamental;
9. To approve an amendment of the fundamental policy of the Riverside
Capital Money Market Fund with respect to investing in commodities
or commodity contracts;
10. To approve the following matters with respect to certain
fundamental policies of each of the Riverside Capital Money
Market, Value Equity and Fixed Income Funds:
a. Amend such Funds' fundamental policies with respect to making
loans;
b. Amend such Funds' fundamental policies with respect to
underwriting securities;
c. Reclassify such Funds' fundamental policies with respect to
mortgaging or pledging assets to make such policies nonfundamental;
d. Deleting such Funds' fundamental policies with respect to oil,
gas and mineral participations;
e. Deleting such Funds' fundamental policies with respect to
options;
f. Deleting such Funds' fundamental policies with respect to
purchasing or retaining certain securities held by trustees, officers or
directors of the Group or its investment adviser;
g. Deleting such Funds' fundamental policies with respect to
purchasing securities of issuers with less than three years of
continuous operation;
11. To approve the deletion of the fundamental policy of the Riverside
Capital Money Market Fund with respect to investing in companies for
purposes of exercising control;
12. To approve the deletion of the fundamental policies of the
Riverside Capital Value Equity Fund and the Riverside Capital Fixed Income
Fund with respect to investing in warrants; and
13. To consider and act upon any matters incidental to the foregoing
and to transact such other business as may properly come before the Meeting
and any adjournment or adjournments thereof.
The close of business on October 28, 1997, has been fixed as the record
date for the determination of shareholders of the Riverside Capital Funds
entitled to notice of and to vote at the Meeting.
All shareholders of the Riverside Capital Funds are cordially invited to
attend the Meeting in person. If you are unable to do so, please complete the
enclosed proxy and return it in the enclosed envelope.
By Order of the Trustees,
George L. Stevens, Secretary
November , 1997
YOUR VOTE IS IMPORTANT
In order to avoid the additional expense of a second solicitation, we urge you
to complete, sign and return promptly the enclosed Proxy. The enclosed addressed
envelope requires no postage and is intended for your convenience.
<PAGE> 5
PRELIMINARY
COPY
RIVERSIDE CAPITAL MONEY MARKET FUND
RIVERSIDE CAPITAL VALUE EQUITY FUND
RIVERSIDE CAPITAL FIXED INCOME FUND
RIVERSIDE CAPITAL GROWTH FUND
FOUR SERIES OF
THE SESSIONS GROUP
3435 Stelzer Road
Columbus, Ohio 43219
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Trustees of The Sessions Group, an Ohio business trust (the
"Group"), to be used in connection with a Special Meeting of Shareholders of
Riverside Capital Money Market Fund (the "Money Market Fund"), Riverside Capital
Value Equity Fund (the "Value Fund"), Riverside Capital Fixed Income Fund (the
"Income Fund") and Riverside Capital Growth Fund (the "Growth Fund"), four
series of the Group (collectively, the "Riverside Capital Funds" and
individually a "Riverside Capital Fund") to be held at 10:00 a.m., Eastern time,
on Wednesday, December 24, 1997 (the "Meeting"). All persons who are
shareholders of the Riverside Capital Funds as of October 28, 1997, the record
date (the "Record Date"), will be entitled to notice of and to vote at the
Meeting.
The Group knows of no other business to be voted upon at the Meeting other
than Proposals 1 through 12 set forth in the accompanying Notice of Special
Meeting of Shareholders and as described in this Proxy Statement. If any other
matters are presented, it is the intention of the persons named on the enclosed
proxies to vote proxies in accordance with their best judgment. The mailing
address of the principal executive offices of the Group is: 3435 Stelzer Road,
Columbus, Ohio 43219. The approximate date on which this Proxy Statement and
forms of proxy are first sent to shareholders of the Riverside Capital Funds is
November 26, 1997.
The Trustees have fixed the close of business on the Record Date as the
date for the determination of shareholders entitled to notice of and to vote at
the Meeting. On the Record Date the following shares of beneficial interest
(collectively the "Shares" and individually a "Share") of the Riverside Capital
Funds were outstanding and entitled to vote at the Meeting: the Money Market
Fund -- 158,363,416.940 Shares; the Value Fund -- 5,044,680.632 Shares; the
Income Fund -- 2,041,212.036 Shares; and the Growth Fund -- 2,156,423.212
Shares. Each of the Shares is entitled to one vote for each dollar of net asset
value of such Share (and a proportionate fractional vote for any fractional
dollar value) as of the close of business on the Record Date. As of such time,
the net asset values per share of each of the Riverside Capital Funds were as
follows: the Money Market Fund -- $1.00; the Value Fund -- $17.15; the Income
Fund -- $8.69; and the Growth Fund -- $18.60.
Shares represented by management proxies, unless previously revoked, will
be voted at the Meeting in accordance with the instructions of the shareholders.
If no instructions are given and the proxy is properly executed and returned to
the Group, the proxies will be voted in favor of the Proposals. To revoke a
management proxy, the shareholder giving such proxy must either submit to the
Group a subsequently dated proxy, deliver to the Group a written notice of
revocation or otherwise give notice of revocation in open meeting, in all cases
prior to the exercise of the authority granted in the management proxy.
<PAGE> 6
In the event that (1) sufficient votes to constitute a quorum are not
received by the date of the Meeting or (2) a quorum as to a particular Proposal
is present at the Meeting but sufficient votes to approve such Proposal with
respect to one or more of the Riverside Capital Funds are not received, a person
named as proxy may propose one or more adjournments of the Meeting for a
reasonable period or periods to permit further solicitation of proxies, provided
they determine that such an adjournment and additional solicitation is
reasonable and in the interest of shareholders. Any such adjournment will
require the affirmative vote of the holders of a majority of the votes
attributable to the Shares present at the Meeting in person or by proxy. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor of the Proposals and will vote against
any such adjournment those proxies required to be voted against the Proposals.
THE GROUP WILL FURNISH, WITHOUT CHARGE, A COPY OF THE GROUP'S MOST RECENT
ANNUAL REPORT TO SHAREHOLDERS FOR THE RIVERSIDE CAPITAL FUNDS UPON REQUEST,
WHICH REQUEST MAY BE MADE EITHER BY WRITING TO THE GROUP AT THE ADDRESS ABOVE OR
BY CALLING TOLL-FREE (800) 874-8376. THE ANNUAL REPORT WILL BE MAILED TO YOU BY
FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS OF YOUR REQUEST.
The following table summarizes the Proposals on which shareholders of the
Riverside Capital Funds are being asked to vote and indicates the manner of
voting on each Proposal.
<TABLE>
<CAPTION>
SHAREHOLDERS ELIGIBLE TO
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- ------------- ------------------------------------------------ --------------------------
<S> <C> <C>
Proposal 1 To approve a new Investment Advisory Agreement Shareholders of each of
with National Bank of Commerce the four Riverside Capital
Funds, Voting Separately
by Fund
Proposal 2 To approve a Sub-Investment Advisory Agreement Shareholders of each of
between National Bank of Commerce and Miller the Value Fund and the
Anderson & Sherrerd, LLP for the Value Fund and Income Fund, Voting
the Income Fund Separately by Fund
Proposal 3 To approve a Sub-Investment Advisory Agreement Shareholders of each of
between National Bank of Commerce and Morgan the Money Market Fund and
Stanley Asset Management Inc. for the Money Growth Fund, Voting
Market Fund and the Growth Fund Separately by Fund
Proposal 4 To approve an amendment of the investment Shareholders of the Money
objective of the Money Market Fund Market Fund Only
Proposal 5 To approve an amendment of the investment Shareholders of the Value
objective of the Value Fund Fund Only
Proposal 6 To approve an amendment of the investment Shareholders of the Income
objective of the Income Fund Fund Only
Proposal 7 To approve an amendment of the investment Shareholders of the Growth
objective of the Growth Fund Fund Only
Proposal 8 To approve the following matters with respect to
certain fundamental investment policies of each
of the Riverside Capital Funds:
a. Amend such Funds' fundamental policies with Shareholders of each of
respect to diversification the four Riverside Capital
Funds, Voting Separately
by Fund
b. Amend such Funds' fundamental policies with Shareholders of each of
respect to portfolio concentration the four Riverside Capital
Funds, Voting Separately
by Fund
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
SHAREHOLDERS ELIGIBLE TO
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- ------------- ------------------------------------------------ --------------------------
<S> <C> <C>
c. Amend such Funds' fundamental policies with Shareholders of each of
respect to borrowing money or issuing senior the four Riverside Capital
securities Funds, Voting Separately
by Fund
d. Amend such Funds' fundamental policies with Shareholders of each of
respect to purchasing or selling real estate the four Riverside Capital
Funds, Voting Separately
by Fund
e. Amend such Funds' fundamental policies with Shareholders of each of
respect to purchasing securities on margin and the four Riverside Capital
reclassify such policies as non-fundamental Funds, Voting Separately
policies by Fund
f. Reclassify such Funds' fundamental policies with Shareholders of each of
respect to selling securities short to make such the four Riverside Capital
policies non-fundamental Funds, Voting Separately
by Fund
Proposal 9 To approve an amendment of the fundamental Shareholders of the Money
policy of the Money Market with respect to Market Fund Only
investing in commodities or commodity contracts
Proposal 10 To approve the following matters with respect to
certain fundamental investment policies of each
of the Money Market, Value and Income Funds:
a. Amend such Funds' fundamental policies with Shareholders of each of
respect to making loans the Money Market Fund, the
Value Fund and the Income
Fund, Voting Separately by
Fund
b. Amend such Funds' fundamental policies with Shareholders of each of
respect to underwriting securities the Money Market Fund, the
Value Fund and the Income
Fund, Voting Separately by
Fund
c. Reclassify such Funds' fundamental policies with Shareholders of each of
respect to mortgaging or pledging assets to make the Money Market Fund, the
such policies non-fundamental Value Fund and the Income
Fund, Voting Separately by
Fund
d. Deleting such Funds' fundamental policies with Shareholders of each of
respect to oil, gas and mineral participations the Money Market Fund, the
Value Fund and the Income
Fund, Voting Separately by
Fund
e. Deleting such Funds' fundamental policies with Shareholders of each of
respect to options the Money Market Fund, the
Value Fund and the Income
Fund, Voting Separately by
Fund
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
SHAREHOLDERS ELIGIBLE TO
PROPOSAL BRIEF DESCRIPTION OF THE PROPOSAL VOTE ON THE PROPOSAL
- ------------- ------------------------------------------------ --------------------------
<S> <C> <C>
f. Deleting such Funds' fundamental policies with Shareholders of each of
respect to purchasing or retaining certain the Money Market Fund, the
securities held by trustees, officers or Value Fund and the Income
directors of the Group or its investment adviser Fund, Voting Separately by
Fund
g. Deleting such Funds' fundamental policies with Shareholders of each of
respect to purchasing securities of issuers with the Money Market Fund, the
less than three years of continuous operation Value Fund and the Income
Fund, Voting Separately by
Fund
Proposal 11 To approve the deletion of the fundamental Shareholders of the Money
policy of the Money Market Fund with respect to Market Fund Only
investing in companies for purposes of
exercising control
Proposal 12 To approve the deletion of the fundamental Shareholders of each of
policies of the Value Fund and the Income Fund the Value Fund and the
with respect to investing in warrants Income Fund, Voting
Separately by Fund
</TABLE>
PROPOSAL 1 -- APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
CURRENT AGREEMENT
National Bank of Commerce ("NBC"), One Commerce Square, Memphis, Tennessee
38150, currently serves as investment adviser to each of the Riverside Capital
Funds pursuant to an Investment Advisory Agreement dated as of July 19, 1988
(with respect to the Money Market Fund), an Investment Advisory Agreement dated
as of September 20, 1991 (with respect to the Value Fund and the Income Fund),
and an Investment Advisory Agreement dated as of April 5, 1994, as amended as of
June 3, 1994 (with respect to the Growth Fund) (collectively, the "Current
Investment Advisory Agreement"). Pursuant to the terms of the Current Investment
Advisory Agreement, NBC is responsible for managing the investment and
reinvestment of the Riverside Capital Funds' assets in conformity with their
respective investment objectives, policies and restrictions, all as set forth in
the Riverside Capital Funds' most recent Prospectus and Statement of Additional
Information.
The Group's Board of Trustees most recently approved the Current Investment
Advisory Agreement on February 21, 1997. The Current Investment Advisory
Agreement was approved by the initial shareholders of the Riverside Capital
Funds as of July 20, 1988 (with respect to the Money Market Fund), October 30,
1991 (with respect to the Value Fund and the Income Fund) and April 5, 1994
(with respect to the Growth Fund). In addition, the Current Investment Advisory
Agreement regarding the Money Market Fund was approved by its shareholders on
October 23, 1989, and, regarding the Value Fund and the Income Fund, was
approved by their respective shareholders on December 2, 1992. Since those
dates, the Current Investment Advisory Agreement has not been submitted to
shareholders for their approval.
For the services provided and expenses assumed pursuant to the Current
Investment Advisory Agreement, (1) the Money Market Fund pays NBC a fee computed
daily and paid monthly, at the annual rate of thirty-five one-hundredths of one
percent (0.35%) of the average daily net assets of the Money Market Fund; (2)
the Value Fund pays NBC a fee equal to the lesser of (a) a fee computed daily
and paid monthly, at an annual rate of one percent (1.00%) of the first $50
million of the Value Fund's average daily net assets and seventy-five
one-hundredths of one percent (0.75%) of the Value Fund's remaining average
daily net assets or (b) such other fee as may be agreed upon in writing by NBC
and the Group; (3) the Income Fund pays NBC a fee equal to the lesser of (a) a
fee computed daily and paid monthly, at an annual rate, calculated as a
percentage of the average daily net assets of the Income Fund, of sixty-five
one-hundredths of one percent
4
<PAGE> 9
(0.65%) or (b) such other fee as may be agreed upon in writing by NBC and the
Group; and (4) the Growth Fund pays NBC a fee, computed daily and paid monthly,
at an annual rate of one percent (1.00%) of the first $50 million of the Growth
Fund's average daily net assets and seventy-five one-hundredths of one percent
(0.75%) of the Growth Fund's remaining average daily net assets. NBC has in the
past and may in the future periodically voluntarily waive all or a portion of
its advisory fee with respect to a Riverside Capital Fund to increase the net
income of that Fund available for distribution as dividends. Any such waiver may
be discontinued at any time.
As of the date hereof, NBC also provides investment advisory services to
one other fund of the Group -- Riverside Capital Tennessee Municipal Obligations
Fund (the "Tennessee Fund"). For its services as investment adviser to the
Tennessee Fund, NBC receives a fee, computed daily and paid monthly, equal to
the lesser of (a) a fee computed daily and paid monthly, at an annual rate,
calculated as a percentage of the average daily net assets of that Fund of
sixty-five one-hundredths of one percent (0.65%) or (b) such other fee as may be
agreed upon in writing by NBC and the Group. Prior to November , 1997 NBC also
provided investment advisory services to Riverside Capital Low Duration
Government Securities Fund (the "Government Securities Fund"). On November ,
1997, the Government Securities Fund's operations were terminated and such Fund
was liquidated. For its services as investment adviser to the Government
Securities Fund, NBC received a fee, computed daily and paid monthly, at the
annual rate of fifty one-hundredths of one percent (0.50%) of the average daily
net assets of the Government Securities Fund.
For the fiscal year ended June 30, 1997, NBC earned and voluntarily waived
the amounts indicated below with respect to its investment advisory services to
the Riverside Capital Funds pursuant to the Current Investment Advisory
Agreement and to the Tennessee Fund and the Government Securities Fund:
<TABLE>
<CAPTION>
FEES FEES
EARNED WAIVED
-------- --------
<S> <C> <C>
Money Market Fund.......................................... $480,718 --
Value Fund................................................. 694,259 --
Income Fund................................................ 156,128 --
Growth Fund................................................ 332,857 $216,357
Tennessee Fund............................................. 122,007 112,622
Government Securities Fund................................. 35,860 35,860
</TABLE>
NBC will continue to provide the day-to-day management of the Tennessee
Fund's portfolio with no proposed changes to the investment advisory agreement
between the Group and NBC with respect to such Fund.
Unless sooner terminated, the Current Investment Advisory Agreement
continues in effect with respect to a Riverside Capital Fund from year to year
for successive annual periods ending on March 31st, if, as to each Riverside
Capital Fund, such continuance is approved at least annually by (a) the Group's
Board of Trustees or the vote of a majority of the outstanding Shares of the
relevant Riverside Capital Fund and (b) a majority of the Trustees who are not
parties to the Current Investment Advisory Agreement or interested persons (as
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of
any party to the Current Investment Advisory Agreement, by votes cast in person
at a meeting called for such purpose. The Current Investment Advisory Agreement
is terminable as to a Riverside Capital Fund at any time on at least 60 days'
written notice without penalty by the Trustees, by vote of a majority of the
outstanding Shares of that Riverside Capital Fund, or by NBC. The Current
Investment Advisory Agreement also terminates automatically in the event of any
assignment, as that term is defined in the 1940 Act.
The Current Investment Advisory Agreement provides that NBC shall not be
liable for any error of judgment or mistake of law or for any loss suffered by a
Riverside Capital Fund in connection with NBC's performance of its obligations
under the Current Investment Advisory Agreement, except a loss resulting from a
breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from wilful misfeasance, bad faith, or gross
negligence on the part of NBC in the performance of its duties, or from reckless
disregard by NBC of its duties and obligations thereunder.
5
<PAGE> 10
INFORMATION REGARDING NBC
NBC is a wholly owned subsidiary of National Commerce Bancorporation
("NCBC"), which is a publicly held bank holding company. NCBC's address is also
One Commerce Square, Memphis, Tennessee 38150.
The name, address and principal occupation of the principal executive
officer and each director of NBC are as follows:
<TABLE>
<CAPTION>
POSITION
NAME WITH NBC PRINCIPAL OCCUPATION
- ------------------------- ----------- ---------------------------------------------------
<S> <C> <C>
Frank G. Barton, Jr. Director Chairman of the Board
Barton Group, Inc.
2620 Thousand Oaks Blvd.,
Suite 1200
Memphis, Tennessee 38118
(Retail Equipment Sales)
Jack R. Blair Director Smith & Nephew North America
1450 East Brooks Road
Memphis, Tennessee 38116
(Medical Devices)
R. Grattan Brown, Jr. Director Partner, law firm of Glankler, Brown, Gilliland,
Chase, Robinson & Raines
One Commerce Square
Memphis, Tennessee 38103
Bruce E. Campbell, Jr. Director Former Chairman
National Bank of Commerce
and National Commerce
Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Christopher W. Canale Director President
D. Canale Beverages, Inc.
45 E.H. Crumps Blvd.
Memphis, Tennessee 38106
(Distribution)
John D. Canale III Director President
D. Canale Food Services, Inc.
7 West Georgia
Memphis, Tennessee 38103
(Distribution)
Edmond D. Cicala Director President
Edmond Enterprises, Inc.
1213 Park Place Center
Suite 200
Memphis, Tennessee 38119
(Consulting)
John S. Evans Director Former President
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
</TABLE>
6
<PAGE> 11
<TABLE>
<CAPTION>
POSITION
NAME WITH NBC PRINCIPAL OCCUPATION
- ------------------------- ----------- ---------------------------------------------------
<S> <C> <C>
Thomas C. Farnsworth, Jr. Director Farnsworth Investment Co.
2175 Business Center Drive
Suite 11
Memphis, Tennessee 38134-5621
(Real Estate)
Thomas M. Garrott Chairman Chairman of the Board and Chief Executive Officer
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Mackie H. Gober President/ President
Director National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Lewis E. Holland Director Executive Vice President and Chief Financial
Officer
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150;
prior thereto -- Partner Ernst & Young
(Accounting)
R. Lee Jenkins Director Retired
6075 Poplar Avenue, Suite 721
Memphis, Tennessee 38119
James E. McGehee, Jr. Director President
McGehee Realty & Development Company
675 Oakleaf Office Lane,
Suite 102
Memphis, Tennessee 38117
(Real Estate)
W. Neely Mallory, Jr. Director President
Memphis Compress & Storage Company
P.O. Box 9436
Memphis, Tennessee 38109
(Cotton Warehousing)
Harry J. Phillips, Sr. Director Chairman of the Executive Committee
Browning-Ferris Industries
2750 One Commerce Square
Memphis, Tennessee 38103
(Waste Disposal Services)
William R. Reed, Jr. Director Executive Vice President
National Commerce Bancorporation
One Commerce Square
Memphis, Tennessee 38150
Rudi E. Scheidt Director Retired
54 South White Station
Memphis, Tennessee 38117
</TABLE>
7
<PAGE> 12
<TABLE>
<CAPTION>
POSITION
NAME WITH NBC PRINCIPAL OCCUPATION
- ------------------------- ----------- ---------------------------------------------------
<S> <C> <C>
Lucy Y. Shaw Director President
Common Denominator, Inc.
2195 Poplar Avenue, Suite 505
East Memphis, Tennessee 38104;
prior thereto -- Chief Executive Officer Regional
Medical Center at Memphis
(Hospital)
Robert M. Solmson Director President
RFS Hotel Investors, Inc.
1213 Park Place Center, Suite 200
Memphis, Tennessee 38119
(Real Estate)
Sidney A. Stewart, Jr. Director Retired
5350 Poplar Avenue
Memphis, Tennessee 38119
R. Lee Taylor Director Private Investor
1755-A Lynnfield Drive
Suite 232
Memphis, Tennessee 38119
Henry M. Turley, Jr. Director President
Henry Turley Company
65 Union Avenue, Suite 1200
Memphis, Tennessee 38103
(Real Estate Management and Investment)
</TABLE>
In addition to NBC's serving as investment adviser to the Riverside Capital
Funds, as authorized by a Distribution and Shareholder Plan adopted by the Group
pursuant to Rule 12b-1 of the 1940 Act (the "Plan"), BISYS Fund Services Limited
Partnership, as distributor of the Riverside Capital Funds' Shares ("BISYS"),
has entered into Rule 12b-1 Agreements with NBC Capital Markets Group, Inc., a
wholly owned subsidiary of NBC (the "Capital Markets Group"), to provide certain
distribution and shareholder services in connection with the distribution of the
Shares of each of the Riverside Capital Funds and the Tennessee Fund, including,
but not limited to, maintaining shareholder relations, answering questions about
such Funds and distributing prospectuses to persons other than current
shareholders. In consideration of such services BISYS has agreed to pay the
Capital Markets Group a monthly fee, computed at the annual rate of up to 0.25%
of the average aggregate net asset value of Shares held during the period in
accounts for which the Capital Markets Group provided services under such
agreement. BISYS is compensated by each Riverside Capital Fund and the Tennessee
Fund, in an amount equal to its payments to the Capital Markets Group under the
Rule 12b-1 Agreement with respect to that Fund.
For the fiscal year ended June 30, 1997, the Capital Markets Group earned
the amounts indicated below with respect to its distribution and shareholder
services to the Riverside Capital Funds, the Tennessee Fund and the Government
Securities Fund:
<TABLE>
<CAPTION>
FEES EARNED
-----------
<S> <C>
Money Market Fund............................................. $ 43
Value Fund.................................................... 4,111
Income Fund................................................... 394
Growth Fund................................................... 984
Tennessee Fund................................................ 168
Government Securities Fund.................................... 14
</TABLE>
8
<PAGE> 13
As authorized by an Administrative Services Plan adopted by the Group, the
Group also has entered into Servicing Agreements with NBC pursuant to which NBC
has agreed to provide certain administrative support services in connection with
Shares of the Riverside Capital Funds and the Tennessee Fund owned of record or
beneficially by NBC's customers. Such administrative support services may
include, but are not limited to, (i) processing dividend and distribution
payments from a Fund on behalf of customers; (ii) providing periodic statements
to its customers showing their positions in the Shares; (iii) arranging for bank
wires; (iv) responding to routine customer inquiries relating to services
performed by NBC; (v) providing subaccounting with respect to the Shares
beneficially owned by NBC's customers or the information necessary for
sub-accounting; (vi) if required by law, forwarding shareholder communications
from a Fund (such as proxy materials, shareholders reports, annual and
semiannual financial statements and dividend, distribution and tax notices) to
its customers; (vii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Shares pursuant to specific or
pre-authorized instructions. In consideration of such services, the Group, on
behalf of each Riverside Capital Fund and the Tennessee Fund, has agreed to pay
NBC a monthly fee, computed at the annual rate of up to twenty-five
one-hundredths of one percent (0.25%) of the average aggregate net asset value
of Shares of that Fund held during the period by customers for whom NBC has
provided services under the Servicing Agreements.
For the fiscal year ended June 30, 1997, NBC earned the amounts indicated
below with respect to its administrative support services under the Servicing
Agreements:
<TABLE>
<CAPTION>
FEES EARNED
-----------
<S> <C>
Money Market Fund............................................. $ 194,676
Value Fund.................................................... 148,346
Income Fund................................................... 56,742
Growth Fund................................................... 69,733
Tennessee Fund................................................ 26,308
Government Securities Fund.................................... 12,993
</TABLE>
It is anticipated that these services provided by the Capital Markets Group
and NBC will continue to be provided whether or not the proposed Investment
Advisory Agreement and Sub-Investment Advisory Agreements are approved by
shareholders.
REASONS FOR THE PROPOSED CHANGES
NBC has evaluated its ability and desire to remain primarily responsible
for the day-to-day management of the Riverside Capital Funds' portfolios and has
determined that it is in the best interests of the Riverside Capital Funds and
their shareholders to retain one or more entities affiliated with Morgan
Stanley, Dean Witter, Discover & Co. ("Morgan Stanley") to take over the
management of the day-to-day investments of the Riverside Capital Funds.
Specifically, NBC has recommended to the Group's Board of Trustees that Miller
Anderson & Sherrerd, LLP, a Pennsylvania limited liability partnership wholly
owned by Morgan Stanley ("Miller Anderson"), be retained as sub-investment
adviser for the Value Fund and the Income Fund, and that Morgan Stanley Asset
Management Inc., a Delaware corporation also wholly owned by Morgan Stanley
("MSAM"), be retained as sub-investment adviser for the Money Market Fund and
the Growth Fund. NBC will continue to be responsible for the day-to-day
management of the Tennessee Fund.
NBC has also proposed that the fees charged by NBC to the Value Fund and
the Growth Fund be increased as described more fully below under "PROPOSED
INVESTMENT ADVISORY AGREEMENT", in order both to provide the requisite financial
incentive to Miller Anderson and MSAM to manage those Funds and to compensate
NBC for the services it proposes to provide such Funds. Fees charged by NBC to
the Money Market Fund and the Income Fund are proposed to remain unchanged.
The Board of Trustees in making its determination to approve the proposed
Investment Advisory Agreement and the Sub-Investment Advisory Agreements with
Miller Anderson and MSAM, as more fully
9
<PAGE> 14
described below, considered the past performance of the Riverside Capital Funds,
the level and quality of services provided by NBC and to be offered by Miller
Anderson and MSAM, comparative expense and performance information, the current
investment advisory fees paid by funds similar in size and investment objective
to the Riverside Capital Funds and the need to improve investment management
services to the Riverside Capital Funds.
PROPOSED INVESTMENT ADVISORY AGREEMENT
A copy of the proposed Investment Advisory Agreement between NBC and the
Group with respect to the Riverside Capital Funds is attached hereto as Exhibit
A. The proposed Investment Advisory Agreement was approved unanimously by the
Group's Board of Trustees, including all of the Trustees who are not parties to
such Agreement or interested persons of any such party (hereinafter generally
referred to as the "Disinterested Trustees"), at a special meeting held on
October 20, 1997, and is being submitted to the shareholders of each of the
Riverside Capital Funds for their approval at the Meeting.
The proposed Investment Advisory Agreement is the same in all material
respects to the Current Investment Advisory Agreement with respect to those
Funds except that (a) the proposed Investment Advisory Agreement includes
references and specific requirements with respect to NBC's retention of one or
more sub-investment advisers; (b) the proposed Investment Advisory Agreement
would permit the Riverside Capital Funds to "pay up" for research in soft dollar
transactions which fit within the safe harbor of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"); (c) the proposed Investment
Advisory Agreement does not include references to state expense limitations and
NBC's obligation to reimburse the Riverside Capital Funds to come within any
such limitations since such state laws were preempted by the National Securities
Markets Improvement Act of 1996 adopted in October 1996; (d) the proposed
Investment Advisory Agreement acknowledges that the name "First Market" (which
the Board has approved as the new name of each of the Riverside Capital Funds
effective January 1, 1998 subject to shareholder approval of such Agreement)
belongs to NBC and that NBC has granted the Group a non-exclusive license to use
that name so long as the proposed Investment Advisory Agreement is in effect;
and (e) the maximum investment advisory fees to be paid by the Value Fund and
the Growth Fund under the Current Investment Advisory Agreement with NBC are
modified as follows:
<TABLE>
<CAPTION>
FUND CURRENT ADVISORY FEE PROPOSED ADVISORY FEE
- ------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Value Fund One percent (1.00%) of the first $50 One percent (1.00%) of the first
million of such Fund's average daily $250 million of such Fund's average
net assets and seventy-five daily net assets and seventy-five
one-hundredths of one percent one-hundredths of one percent
(0.75%) of such Fund's remaining (0.75%) of such Fund's remaining
average daily net assets average daily net assets
Growth Fund One percent (1.00%) of the first $50 One percent (1.00%) of the first
million of such Fund's average daily $250 million of such Fund's average
net assets and seventy-five daily net assets and seventy-five
one-hundredths of one percent one-hundredths of one percent
(0.75%) of such Fund's remaining (0.75%) of such Fund's remaining
average daily net assets average daily net assets
</TABLE>
10
<PAGE> 15
The table below compares the current expenses of the Value Fund (assuming
the average net asset level of such Fund equaled the net assets as of June 30,
1997, which were $79,564,382), including investment advisory fees paid by such
Fund, to those expenses (assuming the same net asset level) which would be borne
by that Fund, on a pro forma basis, if the proposed Investment Advisory
Agreement and the proposed Sub-Investment Advisory Agreement with Miller
Anderson were each in effect. Such pro forma fees reflect the effect of the full
proposed investment advisory fees and do not reflect any voluntary investment
advisory fee waivers.
VALUE FUND
<TABLE>
<CAPTION>
CURRENT FEES PROPOSED FEES
------------ -------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (as a percentage of offering price)..................... 4.50% 4.50%
Annual Fund Expenses (as a percentage of average net assets)
Investment Advisory Fees............................................. .91% 1.00%
12b-1 Fees After Voluntary Fee Reduction(1).......................... .09 .09
Other Expenses....................................................... .59 .62
----- -----
Total Fund Operating Expenses........................................ 1.59% 1.71%
===== =====
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
CURRENT FEES PROPOSED FEES
------------ -------------
<S> <C> <C>
One Year............................................................. $ 61 $ 62
Three Years.......................................................... $ 94 $ 96
Five Years........................................................... $129 $ 134
Ten Years............................................................ $229 $ 238
</TABLE>
- ---------------
(1) BISYS has agreed with the Group to reduce voluntarily the amount of its
12b-1 Fees until on or about December 31, 1997, to the extent necessary to
cause the total of Rule 12b-1 fees and administrative service fees not to
exceed 0.29% of the Value Fund's net assets. From January 1, 1998 until
further written notice to shareholders, BISYS has agreed to reduce
voluntarily the amount of its 12b-1 fees to the extent necessary to cause
the total of Rule 12b-1 fees and administrative service fees not to exceed
0.32% of the Value Fund's net assets.
As described above, NBC earned $694,259 in connection with serving as
investment adviser to the Value Fund for the fiscal year ended June 30, 1997,
all of which it retained. Had the proposed Investment Advisory Agreement with
the amended fees for the Value Fund and the proposed Sub-Investment Advisory
Agreement with Miller Anderson been in place throughout such fiscal year, NBC
would have earned $759,150 of investment advisory fees, from which it would have
paid $425,124 to Miller Anderson for its services as sub-investment adviser, and
with NBC retaining the difference, or $334,026. While the $759,150 that NBC
would have earned under the proposed Investment Advisory Agreement during the
past fiscal year would have resulted in a 9.35% increase in the amount of fees
earned by NBC during that time, after taking into account the sub-investment
advisory fees that NBC would have paid to Miller Anderson, NBC would have
retained $334,026 or 44% of the investment advisory fees earned by NBC during
that year.
NBC is also proposing to increase from $50 million to $250 million the
level of the Growth Fund's average net assets at which NBC's investment advisory
fee would decrease from 1.00% to 0.75% of average daily net assets. Because the
Growth Fund's net assets are currently below $50 million (such Fund had net
assets of approximately $33.8 million as of June 30, 1997), the proposed change
in investment advisory fees will not increase immediately the investment
advisory fees paid by the Growth Fund. If, however, the Growth Fund's assets
would increase to $50 million or more, under the proposed Investment Advisory
Agreement, the Growth Fund would continue to pay the annual fee of 1.00% of such
Fund's average daily net assets until the Growth Fund's assets reached $250
million, unlike the Current Investment Advisory Agreement which
11
<PAGE> 16
provides that the Growth Fund would only pay an annual fee of 0.75% of such
Fund's average daily net assets in excess of $50 million. Said another way,
under the proposed Investment Advisory Agreement, for both the Value Fund and
the Growth Fund, NBC would collect an additional annual fee of 0.25% for any of
such Fund's net assets between $50 million and $250 million.
NBC is proposing these changes in the levels of the fees paid by the Value
Fund and the Growth Fund in connection with the proposed retention of Miller
Anderson and MSAM, respectively, to manage day-to-day the portfolios of those
Funds. Therefore, as described below, a portion of the investment advisory fees
that would be received by NBC under the proposed Investment Advisory Agreement
would be paid to Miller Anderson and MSAM. NBC believes that the higher
investment advisory fees to be paid by the Value Fund and the Growth Fund are
necessary both to compensate Miller Anderson and MSAM, respectively, for the
services they propose to provide and to compensate NBC for its services under
the proposed Investment Advisory Agreement.
The proposed Investment Advisory Agreement requires that NBC provide the
following services to the Group and to the Riverside Capital Funds: (a) prepare
and provide to the Group's Board of Trustee monthly portfolio compliance reports
for the Riverside Capital Funds; (b) maintain in accordance with the provisions
of the 1940 Act each Riverside Capital Fund's records relating to the purchase
and sale of portfolio securities; (c) provide general oversight of the Riverside
Capital Funds' continuous investment programs; and (d) periodically review,
evaluate and report, no less frequently than quarterly, to the Group's Board of
Trustees with respect to the performance of Miller Anderson and MSAM and the
activities and performance of NBC.
In determining to approve the Investment Advisory Agreement, the Board of
Trustees considered, among other things, the following material factors, (i) the
services to be provided, and expenses assumed, by NBC under such Agreement, (ii)
the past performance of the Riverside Capital Funds, (iii) the number and
quality of NBC's portfolio managers, (iv) the expense ratios of the Riverside
Capital Funds compared with peer group funds, (v) the current and proposed
investment adviser fees, (vi) NBC's profitability in relation to the current
Investment Advisory Agreement and as a result of other income generated from the
Riverside Capital Funds, (vii) investment advisory fees paid by similar funds,
and (viii) NBC's plan to involve Miller Anderson and MSAM as sub-investment
advisers. After such considerations the Board concluded that approval of the
proposed Investment Advisory Agreement was appropriate and that the compensation
payable thereunder was determined to be fair and reasonable.
Approval of the proposed Investment Advisory Agreement with respect to each
Riverside Capital Fund requires the affirmative vote of a majority of the votes
attributable to the outstanding Shares of that Riverside Capital Fund. If the
proposed Investment Advisory Agreement and the applicable new Sub-Investment
Advisory Agreement described below under PROPOSALS 2 AND 3 are not each approved
with respect to a particular Riverside Capital Fund, the Trustees of the Group
will be required to consider other alternatives, including NBC's continuing to
provide the day-to-day management of that Riverside Capital Fund.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSAL 1.
PROPOSALS 2 AND 3 -- APPROVAL OF SUB-INVESTMENT
ADVISORY AGREEMENTS
As discussed above, NBC has proposed that two wholly owned subsidiaries of
Morgan Stanley be retained to serve as sub-investment advisers for the Riverside
Capital Funds and, as such, to provide the day-to-day management of the assets
of those Funds. As proposed, Miller Anderson would be retained by NBC as the
sub-investment adviser of the Value Fund and the Income Fund, and MSAM would be
retained by NBC as the sub-investment adviser for the Money Market Fund and the
Growth Fund.
INFORMATION REGARDING MILLER ANDERSON AND MSAM
Miller Anderson's address is One Tower Bridge, Suite 1100, West
Conshohocken, Pennsylvania 19428. MSAM's address is 1221 Avenue of the Americas,
New York, New York 10036. Each of Miller Anderson
12
<PAGE> 17
and MSAM is wholly owned by Morgan Stanley, 1585 Broadway, New York, New York
10036. Miller Anderson was founded in 1969 and was acquired by Morgan Stanley
Group, Inc. in 1996. On May 31, 1997, Morgan Stanley Group, Inc. merged with and
into Dean Witter, Discover & Co. to create Morgan Stanley, Dean Witter, Discover
& Co.
The name and principal occupation of the members of the management
committee of Miller Anderson who are proposed to have significant management
responsibilities relating to the Value Fund and the Income Fund are set forth in
the following table. The business address of each is the same as Miller
Anderson's.
<TABLE>
<CAPTION>
POSITION
NAME WITH MILLER ANDERSON PRINCIPAL OCCUPATION
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Thomas Leonard Bennett Executive Committee Member Managing Director of Morgan
and Fixed Income Portfolio Stanley & Co., Incorporated
Manager
Richard Brown Worley Executive Committee Member Managing Director of Morgan
and Fixed Income Portfolio Stanley & Co., Incorporated
Manager
Richard M. Behler Equity Portfolio Manager Principal of Morgan Stanley
& Co., Incorporated
Kenneth Bradford Dunn Fixed Income Portfolio Managing Director of Morgan
Manager Stanley & Co., Incorporated
Nicholas Joseph Kovich Equity Portfolio Manager Managing Director of Morgan
Stanley & Co., Incorporated
Robert J. Marcin Equity Portfolio Manager Managing Director of Morgan
Stanley & Co., Incorporated
</TABLE>
Miller Anderson provides advice primarily to institutions, including other
investment companies, and had approximately $59.6 billion in assets under
management as of September 30, 1997. Miller Anderson currently serves as one of
three sub-investment advisers for another series of the Group, 1st Source
Monogram Diversified Equity Fund (the "1st Source Fund"). The investment
policies employed by Miller Anderson in connection with the 1st Source Fund are
substantially similar to those Miller Anderson proposes to employ with respect
to the Value Fund. For its investment advisory services to the 1st Source Fund,
Miller Anderson receives from such fund's investment adviser, 1st Source Bank,
the following fee (computed daily and paid monthly as a percentage of that
portion of the 1st Source Fund's average daily net assets managed by Miller
Anderson): 0.625% for the first $25 million and 0.375% for assets in excess of
$25 million. For the fiscal year ended June 30, 1997, Miller Anderson earned
$88,731 in sub-investment advisory fees for its services to the 1st Source Fund.
Miller Anderson also serves as investment adviser to The Value Portfolio
and The Fixed Income Portfolio of MAS Funds, an investment company registered
under the 1940 Act, which have investment objectives and policies which are
substantially similar to those of the Value Fund and the Income Fund,
respectively (as some of those objectives and policies are proposed to be
amended as described in Proposals 5 though 12 below). For its services as
investment adviser to The Value Portfolio, Miller Anderson receives an advisory
fee calculated by applying a quarterly rate, based on an annual percentage of
0.50% to such Portfolio's average daily net assets for the quarter. For its
services as investment adviser to The Fixed Income Portfolio, Miller Anderson
receives an advisory fee calculated by applying a quarterly rate, based on an
annual percentage of 0.375% to such Portfolio's average daily net assets for the
quarter. As of September 30, 1996, The Value Portfolio had net assets of
approximately $15.5 million, and the Fixed Income Portfolio had net assets of
approximately $1.8 billion.
MSAM provides portfolio management and named fiduciary services to various
closed-end and open-end investment companies, taxable and nontaxable
institutions, international organizations and individuals investing in United
States and international equities and fixed-income securities. At December 31,
1996, MSAM had, together with its affiliated investment management companies
(which included Van Kampen
13
<PAGE> 18
American Capital, Inc. and Miller Anderson), assets under management (including
assets under fiduciary advisory control) totaling approximately $162.0 billion.
As an investment adviser, MSAM emphasizes a global investment strategy and
benefits from research coverage of a broad spectrum of investment opportunities
worldwide. MSAM draws upon the capabilities of its asset management specialists
located in various offices throughout the world. It also draws upon the research
capabilities of Morgan Stanley and its other affiliates, as well as the research
and investment ideas of other companies whose brokerage services MSAM utilizes.
The name and principal occupation of the principal executive officer and
each director of MSAM are set forth in the following table. The business address
of each is the same as MSAM's.
<TABLE>
<CAPTION>
POSITION
NAME WITH MSAM PRINCIPAL OCCUPATION
- --------------------------------- ------------------- ---------------------------------
<S> <C> <C>
Barton Michael Biggs Chairman and Chairman and Director of MSAM;
Director Managing Director of Morgan
Stanley & Co., Incorporated
Peter Andras Nadosy Vice Chairman and Vice Chairman and Director of
Director MSAM; Managing Director of Morgan
Stanley & Co., Incorporated
Gordon Spotswood Gray Director and Director and Managing Director
Managing Director MSAM; Managing Director of Morgan
Stanley & Co., Incorporated
Dennis Garfield Sherva Director and Director and Managing Director of
Managing Director MSAM; Managing Director of Morgan
Stanley & Co., Incorporated
James Michael Allwin President, Director President, Director and Managing
and Managing Director of MSAM; Managing
Director Director of Morgan Stanley & Co.,
Incorporated
</TABLE>
MSAM serves as investment adviser to the Money Market Portfolio and the
Equity Growth Portfolio of the Morgan Stanley Institutional Fund, Inc., an
investment company registered under the 1940 Act, which have investment
objectives and policies which are substantially similar to those of the Money
Market Fund and the Growth Fund, respectively (as certain of those objectives
and policies are proposed to be amended as described in Proposals 4 though 12
below). For its services as investment adviser to the Money Market Portfolio,
MSAM receives an advisory fee calculated by applying a quarterly rate, based on
an annual percentage of 0.30% to such Portfolio's average daily net assets for
the quarter. For its services as investment adviser to the Equity Growth
Portfolio, MSAM receives an advisory fee calculated by applying a quarterly
rate, based on an annual percentage of 0.60% to such Portfolio's average daily
net assets for the quarter. As of December 31, 1996, the Money Market Portfolio
had net assets of approximately $1.3 billion, and the Equity Growth Portfolio
had net assets of approximately $358 million.
THE PROPOSED SUB-INVESTMENT ADVISORY AGREEMENTS
A copy of the proposed Sub-Investment Advisory Agreement between NBC and
Miller Anderson with respect to the Value Fund and the Income Fund is attached
hereto as Exhibit B (the "Miller Anderson Agreement"). A copy of the proposed
Sub-Investment Advisory Agreement between NBC and MSAM with respect to the Money
Market Fund and the Growth Fund is attached hereto as Exhibit C (the "MSAM
Agreement"). The Miller Anderson Agreement and the MSAM Agreement have
substantially identical terms and conditions, except for the compensation
payable thereunder, and are hereinafter jointly referred to as the "Subadvisory
Agreements," and Miller Anderson and MSAM are hereinafter jointly referred to as
the "Subadvisers" or individually as a "Subadviser." Although the material terms
of each of the Subadvisory
14
<PAGE> 19
Agreements are summarized below, this summary is qualified in its entirety by
reference to the attached forms of the Subadvisory Agreements.
Each of the Subadvisory Agreements was approved unanimously by the Group's
Board of Trustees, including all of the Disinterested Trustees, at a Meeting
held on October 20, 1997, and is being submitted to the shareholders of
applicable Riverside Capital Fund for their approval at the Meeting.
Pursuant to the terms of the applicable Subadvisory Agreement, each
Subadviser has agreed to provide the appropriate Riverside Capital Funds with a
continuous investment program, including management with respect to all
securities and investments and cash equivalents in such Funds, subject to the
respective Fund's investment objectives, policies and restrictions as set forth
in its then current Prospectus and Statement of Additional Information. As
compensation for such services, NBC has agreed to pay Miller Anderson fees,
computed daily and paid monthly, based on the annual rates as follows: (1) for
the Value Fund, 0.625% of the average daily net assets of such Fund up to $20
million, 0.50% of the average daily net assets of such Fund from $20 million up
to $30 million, and 0.375% of the average daily net assets of such Fund from $30
million to $35 million -- if the average daily net assets of such Fund equal or
exceed $35 million, the annual rate of 0.56% of the average daily net assets of
such Fund; and (2) for the Income Fund, 0.50% of the average daily net assets of
such Fund up to $25 million and 0.25% of the average daily net assets of such
Fund from $25 million to $75 million -- if the average daily net assets of such
Fund equal or exceed $75 million, the annual rate of 0.33% of the average daily
net assets of such Fund. As compensation for such services by MSAM, NBC has
agreed to pay MSAM fees, computed daily and paid monthly, based upon the annual
rates as follows: (1) for the Money Market Fund, 0.25% of the average daily net
assets of such Fund; and (2) for the Growth Fund, 0.625% of the average daily
net assets of such Fund up to $20 million, 0.50% of the average daily net assets
of such Fund from $20 million up to $30 million, and 0.375% of the average daily
net assets of such Fund from $30 million to $35 million -- if the average daily
net assets of such Fund equal or exceed $35 million, the annual rate of 0.56% of
the average daily net assets of such Fund.
Under each Subadvisory Agreement, the Subadviser, under policies
established by the Board of Trustees of the Group, will select broker-dealers to
execute transactions for the applicable Riverside Capital Fund. It is the policy
of the Group, in effecting transactions in portfolio securities, to seek best
execution of and best price for orders. The determination of what may constitute
best execution and price in the execution of a transaction by a broker involves
a number of considerations, including, without limitation, the overall direct
net economic result to the particular Fund, involving both price paid or
received and any commissions and other costs paid, the breadth of the market
where executed, the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block is involved, the
availability of the broker to stand ready to execute potentially difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by the Board of
Trustees in determining the overall reasonableness of brokerage commissions
paid.
In determining best execution and selecting brokers to execute
transactions, each Subadviser may consider brokerage and research services, such
as analyses and reports concerning issuers, industries, securities, economic
factors and trends and other statistical and factual information provided to a
Riverside Capital Fund or to any other account over which that Subadviser
exercises investment discretion. Each Subadviser is authorized by its respective
Subadvisory Agreement to pay a broker-dealer who provides such brokerage and
research services a commission for executing a Riverside Capital Fund's
transactions which is in excess of the amount of commission another broker would
have charged for effecting that transaction if, but only if, such practice is in
accordance with Section 28(e) of the 1934 Act, including that the Subadviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker viewed in
terms of that particular transaction or in terms of all of the accounts over
which it exercises investment discretion.
Any such research and other statistical and factual information provided by
brokers to the Riverside Capital Funds or to the Subadvisers is considered to be
in addition to and not in lieu of services required to be performed by the
Subadviser under its Subadvisory Agreement with NBC. The cost, value and
specific application of such information are indeterminable and hence are not
practicably allocable among a Riverside
15
<PAGE> 20
Capital Fund and other clients of the Subadviser who may indirectly benefit from
the availability of such information. Similarly, a Riverside Capital Fund may
indirectly benefit from information made available as a result of transactions
effected for such other clients. In the event a Subadviser does follow such a
practice, it will do so on a basis which is fair and equitable to the Group and
the affected Riverside Capital Fund.
If the proposed Investment Advisory Agreement and each of the Subadvisory
Agreements are approved, the Sub-Advisers anticipate that they may place
brokerage transactions on behalf of one or more of the Riverside Capital Funds
with the Capital Markets Group, affiliated with NBC, or with a broker-dealer
affiliated with the Subadvisers. Any such brokerage transaction will be effected
in accordance with the applicable provisions of the 1934 Act and the 1940 Act.
Unless sooner terminated, each Subadvisory Agreement by its terms continues
in effect with respect to a Riverside Capital Fund until January 1, 2000, and
thereafter for successive one-year periods ending December 31st of each year so
long as (1) such continuance is specifically approved at least annually by the
Group's Board of Trustees or by a vote of a majority of the outstanding voting
securities of that Riverside Capital Fund, and (2) such renewal has been
approved by the vote of a majority of the Disinterested Trustees, cast in person
at a meeting called for the purpose of voting on such approval.
Any liability of a Subadviser under the Subadvisory Agreement is limited to
situations involving its wilful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties under such Agreement. A
Subadvisory Agreement is not assignable and may be terminated with respect to a
Riverside Capital Fund without penalty on at least 60 days' written notice at
the option of either party or by a vote of the shareholders of that Riverside
Capital Fund or by the Group's Board of Trustees.
In determining to approve the Sub-Investment Advisory Agreement, the Board
of Trustees considered, among other things, the following material factors, (i)
the services to be provided, by Miller Anderson and MSAM under such Agreements,
(ii) the investment company clients of Miller Anderson and MSAM, (iii) the
investment personnel of Miller Anderson and MSAM, (iv) the general compliance
procedures of Miller Anderson and MSAM, (v) the characteristics and performance
of similar funds managed by Miller Anderson and MSAM, and (vi) the fees payable
by NBC to Miller Anderson and MSAM under such Agreements. After such
considerations, the Board concluded that approval of the proposed Sub-Investment
Advisory Agreements was appropriate and that the compensation payable thereunder
was determined to be fair and reasonable.
Approval of the Miller Anderson Agreement with respect to each of the Value
Fund and the Income Fund requires the affirmative vote of a majority of all
votes attributable to the outstanding Shares of that Riverside Capital Fund, as
defined above under PROPOSAL 1. Similarly, approval of the MSAM Agreement with
respect to each of the Money Market Fund and the Growth Fund requires the
affirmative vote of a majority of all votes attributable to the outstanding
Shares of that Riverside Capital Fund, as defined above under PROPOSAL 1. If the
proposed Subadvisory Agreement and the proposed Investment Advisory Agreement
described above under PROPOSAL 1 are not each approved by shareholders of a
Riverside Capital Fund, the Trustees of the Group will be required to consider
other alternatives, including NBC's continuing to provide the day-to-day
management of that particular Riverside Capital Fund pursuant to the Current
Investment Advisory Agreement.
Assuming Proposals 1, 2 and 3 are approved, and subject to the limitations
of the 1940 Act and other applicable statutes and regulations, the Value Fund
and the Growth Fund may recognize material capital gains in connection with
sales of portfolio securities associated with the transition to new
sub-investment advisers and may consider the payment in January, 1998, of a
special capital gains distribution in connection therewith.
16
<PAGE> 21
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSALS 2 AND 3,
AS THOSE PROPOSALS MAY BE APPLICABLE TO YOU.
PROPOSALS 4-7 -- APPROVAL OF AMENDMENTS TO FUNDAMENTAL
INVESTMENT OBJECTIVES
Generally, Proposals 4 through 7, each of which is discussed more fully
below, relate to amendments to the investment objective of each of the Riverside
Capital Funds as proposed by Miller Anderson and MSAM in connection with their
proposed appointment as sub-investment advisers to those Funds. In determining
to retain the Subadvisers, NBC evaluated each Subadviser based in part on its
performance as investment adviser to certain mutual funds which NBC and the
Subadvisers believe to have investment objectives and holdings which are
similar, but not identical, to the Riverside Capital Funds (collectively, the
"Subadvisers' Funds"). The Subadvisers have represented to NBC and the Group
that they intend to manage their respective Riverside Capital Funds in
substantially the same manner as they currently manage the Subadvisers' Funds.
Because the investment objectives of the Riverside Capital Funds are not
identical to those of the respective Subadvisers' Funds, the Subadvisers have
requested that the Riverside Capital Funds accordingly amend their investment
objectives. Since the investment objectives of each of the Riverside Capital
Funds are fundamental, meaning that they may not be changed without shareholder
approval, such investment objectives as proposed to be changed are being
submitted to shareholders for their approval at the Meeting.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" PROPOSALS 4, 5, 6 AND 7,
AS THOSE PROPOSALS MAY BE APPLICABLE TO YOU.
PROPOSAL 4 -- AMENDMENT OF THE MONEY MARKET FUND'S INVESTMENT OBJECTIVE
The current investment objective of the Money Market Fund is to seek
current income with liquidity and stability of principal. It is proposed that
such investment objective be amended to read as follows:
[The Money Market Fund seeks] to maximize current income and
preserve capital while maintaining high levels of liquidity through
investing in high quality money market instruments.
Management of the Group does not believe that this proposed amendment to
the Money Market Fund's investment objective alters the investment objective of
the Money Market Fund in any meaningful way; however, MSAM, as the proposed
sub-investment adviser to the Money Market Fund, has requested this change in
investment objective to assist it in its obligation to manage the Money Market
Fund in accordance with its stated investment objective and policies.
Approval of the amendment to the Money Market Fund's fundamental investment
objective requires the affirmative vote of a majority of all votes attributable
to the outstanding Shares of the Money Market Fund, as defined above under
PROPOSAL 1. If the proposed amendment is not adopted by shareholders, the Money
Market Fund's investment objective will remain unchanged.
PROPOSAL 5 -- AMENDMENT OF THE VALUE FUND'S INVESTMENT OBJECTIVE
The current investment objective of the Value Fund is to seek growth of
capital by investing primarily in a diversified portfolio of common stocks and
securities convertible into common stocks. It is proposed that such investment
objective be amended to read as follows:
[The Value Fund seeks] to achieve above-average total return over
a market cycle of three to five years, consistent with reasonable
risk, by investing primarily in equity securities of issuers with
equity capitalizations usually greater than $300 million.
As discussed above, Miller Anderson, as the proposed sub-investment adviser
to the Value Fund, has requested that the investment objective of the Value Fund
be amended to match the investment objective of the corresponding Subadvisers'
Fund and therefore to permit Miller Anderson to manage the Value Fund in the
same manner as it manages such Subadvisers' Fund. Miller Anderson also believes
that such amendment
17
<PAGE> 22
will assist it in its obligation to manage the Value Fund in accordance with its
stated investment objective and policies. The focus of the change in the
objective will be for Miller Anderson, as Subadviser, to attain overall
above-average total return for the Value Fund from a combination of growth of
capital and income instead of primarily focusing on growth of capital.
Approval of the amendment to the Value Fund's fundamental investment
objective requires the affirmative vote of a majority of all votes attributable
to the outstanding Shares of the Value Fund, as defined above under PROPOSAL 1.
If the proposed amendment is not adopted by shareholders, the Value Fund's
investment objective will remain unchanged.
PROPOSAL 6 -- AMENDMENT OF THE INCOME FUND'S INVESTMENT OBJECTIVE
The current investment objective of the Income Fund is to seek current
income and preservation of capital through investment in high grade fixed income
securities. It is proposed that such investment objective be amended to read as
follows:
[The Income Fund seeks] to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable
risk, by investing in a diversified portfolio of U.S. Government
securities, corporate bonds (including bonds rated below investment
grade, commonly referred to as junk bonds), foreign fixed-income
securities and mortgage-backed securities of domestic issuers and
other fixed-income securities.
As discussed above, Miller Anderson, as the proposed sub-investment adviser
to the Income Fund, has requested that the investment objective of the Income
Fund be amended to match the investment objective of the corresponding
Subadvisers' Fund and therefore to permit Miller Anderson to manage the Income
Fund in the same manner as it manages such Subadvisers' Fund. Miller Anderson
also believes that such amendment will assist it in its obligation to manage the
Income Fund in accordance with its stated investment objective and policies. The
focus of the change in the objective will be for Miller Anderson, as Subadviser,
to attain overall above-average total return for such Fund which return may
derive from capital appreciation as well as income from fixed income securities
instead of focusing on current income with preservation of capital. In addition,
the Income Fund under the new investment objective may invest in fixed income
securities which are rated below investment grade.
Approval of the amendment to the Income Fund's fundamental investment
objective requires the affirmative vote of a majority of all votes attributable
to the outstanding Shares of the Income Fund, as defined above under PROPOSAL 1.
If the proposed amendment is not adopted by shareholders, the Income Fund's
investment objective will remain unchanged.
PROPOSAL 7 -- AMENDMENT OF THE GROWTH FUND'S INVESTMENT OBJECTIVE
The current 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 stock. It is proposed that such investment
objective be amended to read as follows:
[The Growth Fund seeks] to achieve long-term capital appreciation by
investing in growth oriented equity securities of medium and large
capitalization companies.
As discussed above, MSAM, as the proposed sub-investment adviser to the
Growth Fund, has requested that the investment objective of the Growth Fund be
amended to match the investment objective of the corresponding Subadvisers' Fund
and therefore to permit MSAM to manage the Growth Fund in the same manner as it
manages such Subadvisers' Fund. The focus of the changes in the objective will
be for MSAM, as Subadviser, to seek to obtain long-term capital appreciation, as
opposed to growth of capital, and that MSAM will invest the Growth Fund's assets
in equity securities of medium and large capitalization companies.
Approval of the amendment to the Growth Fund's fundamental investment
objective requires the affirmative vote of a majority of all votes attributable
to the outstanding Shares of the Growth Fund, as defined
18
<PAGE> 23
above under PROPOSAL 1. If the proposed amendment is not adopted by
shareholders, the Growth Fund's investment objective will remain unchanged.
PROPOSALS 8 - 12 -- APPROVAL OF MODIFICATIONS TO FUNDAMENTAL
INVESTMENT POLICIES
Generally Proposals 8 through 12, each of which is discussed more fully
below, relate to the proposed amendment, deletion and/or reclassification of
many of the fundamental investment policies and restrictions of the Riverside
Capital Funds. Such amendments, deletions and/or reclassifications are proposed
in order to standardize such policies among all of the Riverside Capital Funds
and to amend or delete those policies and restrictions which were imposed by
various state securities administrators pursuant to state securities laws that
have been either amended or pre-empted by Federal law and may now unnecessarily
hinder Miller Anderson and MSAM in their management of the Riverside Capital
Funds. NBC believes that such amendments, deletions and/or reclassifications
will promote operational efficiencies among the Riverside Capital Funds and
facilitate monitoring compliance with such policies. In addition, the
Subadvisers have represented to the Group that such changes are needed to
provide them with the flexibility they need to manage the Riverside Capital
Funds in the same manner as the Subadvisers' Funds and to assist them in their
compliance obligations.
As FUNDAMENTAL policies, such investment policies and restrictions may not
be amended, deleted or reclassified without shareholder approval. Therefore,
such investment policies as proposed to be changed are being submitted to
shareholders for their approval.
To assist shareholders of each of the Riverside Capital Funds in reviewing
such fundamental investment policies and how they are proposed to be amended,
deleted or reclassified, attached to this Proxy Statement as Exhibit D is a
chart which compares these current fundamental policies to those policies that
are proposed to be amended and identifies which of the policies are proposed to
be deleted or reclassified as non-fundamental (meaning that they may be changed
by the Group's Trustees without shareholder approval).
Approval of the amendment, deletion and/or reclassification of a
fundamental investment policy of a Riverside Capital Fund requires the
affirmative vote of a majority of all votes attributable to the outstanding
Shares of that Fund, as defined above under PROPOSAL 1. If the proposed
amendment is not adopted by shareholders of a Riverside Capital Fund, the
fundamental investment policy or restriction as currently stated with respect to
such Fund will remain in effect.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" EACH OF PROPOSALS 8-12.
PROPOSAL 8.a. -- AMENDMENT OF EACH OF THE RIVERSIDE CAPITAL FUNDS' FUNDAMENTAL
POLICY REGARDING DIVERSIFICATION
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to diversification is proposed to be amended. The
proposed investment policy on diversification more closely tracks the definition
of a "diversified" investment company as set forth in Section 5(b)(1) of the
1940 Act and eliminates certain inconsistencies among each of the Riverside
Capital Fund's policies. It is not anticipated that this amendment to a
Riverside Capital Fund's investment policy with respect to diversification will
affect the management of any Riverside Capital Fund's portfolio.
PROPOSAL 8.b. -- AMENDMENT OF EACH OF THE RIVERSIDE CAPITAL FUNDS' FUNDAMENTAL
POLICY REGARDING PORTFOLIO CONCENTRATION
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to portfolio concentration regarding securities of
issuers within the same industry is proposed to be amended. The proposed
investment policy on concentration is substantially the same as the policies
currently in place for the Riverside Capital Funds except that the proposed
policy provides further guidance on how securities of issuers in the financial
services industry and asset-backed securities will be classified for purposes of
determining whether a Riverside Capital Fund's investments are concentrated in a
specific industry. It is not anticipated
19
<PAGE> 24
that this amendment to a Riverside Capital Fund's investment policy with respect
to portfolio concentration will materially affect the management of any
Riverside Capital Fund's portfolio.
PROPOSAL 8.c. -- AMENDMENT OF THE RIVERSIDE CAPITAL FUNDS' FUNDAMENTAL POLICY
REGARDING BORROWING MONEY OR ISSUING SENIOR SECURITIES
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to borrowing money or issuing senior securities is
proposed to be amended. The proposed investment policy on borrowing money and
issuing senior securities is intended to provide each Fund with greater
flexibility with regard to such activities to the extent permitted by the 1940
Act. A mutual fund's ability to borrow money or issue senior securities is
already significantly limited by the 1940 Act and the rules and interpretations
of the Staff of the Securities and Exchange Commission (the "Commission"). The
proposed amendments would permit the Riverside Capital Funds to engage in such
activities to the extent permitted by the 1940 Act subject to current and any
future rules or interpretations promulgated or issued by the Staff of the
Commission thereunder. Consistent with the Staff's current policy with respect
to a money market fund's ability to leverage its portfolio, the Money Market
Fund would retain the fundamental investment restriction of not purchasing
portfolio securities while its borrowings exceed 5% of its total assets.
It is not anticipated that this amendment to a Riverside Capital Fund's
investment policy with respect to borrowing money or issuing senior securities
will materially affect the current management of any Riverside Capital Fund's
portfolio.
PROPOSAL 8.d. -- AMENDMENT OF EACH OF THE RIVERSIDE CAPITAL FUNDS' FUNDAMENTAL
POLICY REGARDING PURCHASING REAL ESTATE
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to purchasing or selling real estate, or interests
therein, is proposed to be amended. This policy as proposed to be amended would
conform each of those Funds' policies with respect to purchasing real estate or
interests therein and clarify that each of the Funds may purchase securities of
companies engage in the real estate business and securities which are backed by
real estate or interests therein.
PROPOSAL 8.e. -- AMENDMENT AND RECLASSIFICATION OF EACH OF THE RIVERSIDE CAPITAL
FUNDS' FUNDAMENTAL POLICY REGARDING PURCHASING SECURITIES ON
MARGIN
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to purchasing securities on margin is proposed to be
amended and reclassified as a NON-FUNDAMENTAL policy. This policy as proposed to
be amended would conform each of those Funds' policies with respect to
purchasing securities on margin and clarify that the Riverside Capital Funds, to
the extent disclosed in their Prospectus and Statement of Additional Information
and as permitted by the 1940 Act, may make margin payments in connection with
certain derivative transactions, including entering into options and futures
transactions. Furthermore, the 1940 Act does not require that a mutual fund's
policy regarding purchasing securities on margin be a fundamental policy.
PROPOSAL 8.f. -- RECLASSIFICATION OF EACH OF THE RIVERSIDE CAPITAL FUNDS'
FUNDAMENTAL POLICY REGARDING THE SHORT SELLING OF SECURITIES
As set forth in Exhibit D, the fundamental policy of each of the Riverside
Capital Funds with respect to short selling securities is proposed to be
reclassified as a NON-FUNDAMENTAL policy. The 1940 Act does not require that a
mutual fund have a fundamental investment policy regarding short selling of
securities. None of the Riverside Capital Funds currently intends to sell
securities short so their current policy, other than being reclassified as
non-fundamental, is not proposed to be changed. However, should any of the
Riverside Capital Funds desire to sell short securities in the future, the
Trustees could authorize such a technique, subject to the requirements imposed
by the 1940 Act and the Commission's interpretations thereunder, without further
shareholder approval.
20
<PAGE> 25
PROPOSAL 9 -- AMENDMENT OF THE MONEY MARKET FUND'S FUNDAMENTAL POLICY REGARDING
PURCHASING COMMODITIES
As set forth in Exhibit D, the fundamental policy of the Money Market Fund
with respect to purchasing or selling commodities or commodity contracts is
proposed to be amended. This policy as proposed to be amended would conform the
Money Market Fund's policies with respect to purchasing commodities or commodity
contracts to each of the other Riverside Capital Funds' policy. It is not
currently anticipated, however, that the Money Market Fund will invest in any
commodities or commodity contracts, including futures contracts.
PROPOSAL 10.a. -- AMENDMENT OF THE MONEY MARKET FUND'S, THE VALUE FUND'S AND THE
INCOME FUND'S FUNDAMENTAL POLICIES REGARDING MAKING LOANS
As set forth in Exhibit D, the fundamental policy of each of the Money
Market Fund, the Value Fund and the Income Fund with respect to making loans is
proposed to be amended. This policy as proposed to be amended would conform to
the Growth Fund's current policy and would clarify that making time deposits
with financial institutions is a permissible investment technique by such Funds.
PROPOSAL 10.b. -- AMENDMENT OF THE MONEY MARKET FUND'S, THE VALUE FUND'S AND THE
INCOME FUND'S FUNDAMENTAL POLICY REGARDING UNDERWRITING
SECURITIES
As set forth in Exhibit D, the fundamental policy of each of the Money
Market Fund, the Value Fund and the Income Fund with respect to underwriting
securities is proposed to be amended. This policy as proposed to be amended
would conform to the Growth Fund's current policy by modifying certain technical
differences in the language used. It is not anticipated that this amendment to
such Riverside Capital Funds' investment policy with respect to underwriting
securities will affect the management of any of those Fund's portfolios.
PROPOSAL 10.c. -- RECLASSIFICATION OF THE MONEY MARKET FUND'S, THE VALUE FUND'S
AND THE INCOME FUND'S FUNDAMENTAL POLICY REGARDING MORTGAGING
OR PLEDGING ASSETS
As set forth in Exhibit D, the fundamental policy of each of the Money
Market Fund, the Value Fund and the Income Fund with respect to mortgaging or
pledging assets is proposed to be reclassified as a NON-FUNDAMENTAL policy and
to be amended. The 1940 Act does not require that a mutual fund have a
fundamental investment policy regarding mortgaging or pledging assets. The
policy as proposed to be reclassified and amended expands the ability of each of
those Funds to mortgage its assets in connection with permissible investment
techniques. In addition it clarifies that such Riverside Capital Funds are
allowed to segregate assets without limit to cover certain commitments that are
entered into by that Fund as may be required under applicable interpretations or
rules of the Commission. For example, when a Riverside Capital Fund enters into
an agreement to purchase securities on a when-issued basis (i.e., delivery of
such securities at a date beyond the normal settlement date), the Staff of the
Commission has taken the position that such Fund must place liquid assets equal
to such commitment in a segregated account with the Riverside Capital Fund's
custodian until such commitment is fulfilled.
PROPOSALS 10.d. -- 12 DELETION OF THE MONEY MARKET FUND'S, THE VALUE FUND'S
AND/OR THE INCOME FUND'S POLICIES REGARDING PURCHASING
SECURITIES OF ISSUERS WITH LESS THAN THREE YEARS OF
CONTINUOUS OPERATION, OIL, GAS AND MINERAL INTERESTS,
OPTIONS, CERTAIN SECURITIES HELD BY TRUSTEES, OFFICERS OR
DIRECTORS OF THE GROUP OR ITS INVESTMENT ADVISER, AND
WARRANTS AND INVESTING IN COMPANIES FOR PURPOSES OF
EXERCISING CONTROL.
As set forth in Exhibit D, the fundamental investment policies of (1) each
of the Money Market Fund, the Value Fund and the Income Fund with respect to
investing (a) in securities of issuers with less than three years of continuous
operation, (b) in oil, gas or mineral interests, (c) in options and (d) in
securities of issuers if the officers or Trustees of the Group or the officers
or directors of its investment adviser who own beneficially more than one-half
of 1% of the securities of such issuer together own beneficially more than 5%
21
<PAGE> 26
of such securities, (2) the Money Market Fund with respect to investing in
companies for purposes of exercising control, and (3) each of the Value Fund and
the Income Fund with respect to investing in warrants are proposed to be
deleted. These policies were previously adopted as a result of comments received
by such Funds from certain state securities administrators several years ago and
are no longer required. In addition, these policies may unduly restrict the
management of the Riverside Capital Funds and in some instances it is not
practical to monitor compliance therewith.
It is not anticipated that the deletions of these investment policies will
substantially increase the risks associated with an investment in any of those
Riverside Capital Funds.
OTHER INFORMATION
DISTRIBUTOR AND ADMINISTRATOR
BISYS serves as the principal underwriter of Shares of each Riverside
Capital Fund pursuant to a Distribution Agreement with the Group. In its
capacity as principal underwriter, BISYS is available to receive purchase orders
and redemption requests relating to Shares of the Riverside Capital Funds. BISYS
also serves as administrator of each of the Riverside Capital Funds pursuant to
an Administration Agreement with the Group. BISYS' address is 3435 Stelzer Road,
Columbus, Ohio 43219.
The sole general partner of BISYS is BISYS Fund Services, Inc., whose
address is 3435 Stelzer Road, Columbus, Ohio 43219, and its sole limited partner
is WC Subsidiary Corporation, whose address is 150 Clove Road, Little Falls, New
Jersey 07424. BISYS Fund Services, Inc. and WC Subsidiary Corporation are both
wholly owned by The BISYS Group, Inc., 150 Clove Road, Little Falls, New Jersey
07424, a publicly held corporation. BISYS Fund Services, Inc. receives
compensation from the Group for providing certain fund accounting services to
the Riverside Capital Funds.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information as of October 28, 1997,
for each of the series of the Group with respect to each person or group known
by the Group to be the beneficial owner of more than 5% of any class of the
Group's outstanding voting securities:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------- -------------------------------- ------------- --------
<S> <C> <C> <C>
Shares of the Money National Bank of Commerce 70,919,919.66(1) 44.78%
Market Fund One Commerce Square
Memphis, Tennessee 38150
Northern Trust Company 56,278,001.15 35.54%
as Custodian FBO
Metropolitian Employee
Benefit Board
P.O. Box 92956
Chicago, Illinois 60675-2956
Shares of the Value National Bank of Commerce 4,584,896.11(1) 90.88%
Fund One Commerce Square
Memphis, Tennessee 38150
Shares of the Income National Bank of Commerce 1,879,839.74(1) 92.09%
Fund One Commerce Square
Memphis, Tennessee 38150
Shares of the National Bank of Commerce 1,428,081.72(1) 80.04%
Tennessee Fund One Commerce Square
Memphis, Tennessee 38150
</TABLE>
22
<PAGE> 27
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------- -------------------------------- ------------- --------
<S> <C> <C> <C>
Mary Mhoon Walker 112,633.76 6.31%
2724 Lombardy
Memphis, Tennessee 38111-1922
Shares of the Growth National Bank of Commerce 2,025,859.02(1) 93.94%
Fund One Commerce Square
Memphis, Tennessee 38150
Shares of the National Bank of Commerce 671,870.68(1) 99.99%
Government Securities One Commerce Square
Fund Memphis, Tennessee 38150
Shares of KeyPremier Keystone Financial, Inc. 90,378,409.53(1) 70.24%
Prime Obligations 1315 Eleventh Avenue
Money Market Fund P. O. Box 2450
Altoona, PA 16601
Shares of KeyPremier Keystone Financial, Inc. 11,131,218.69(1) 97.49%
Pennsylvania 1315 Eleventh Avenue
Municipal Bond Fund P. O. Box 2450
Altoona, PA 16601
Shares of KeyPremier Keystone Financial, Inc. 16,833,703.49(1) 96.32%
Established Growth 1315 Eleventh Avenue
Fund P. O. Box 2450
Altoona, PA 16601
Shares of KeyPremier Keystone Financial, Inc. 22,200,048.02(1) 98.27%
Intermediate Term 1315 Eleventh Avenue
Income Fund P. O. Box 2450
Altoona, PA 16601
Shares of KeyPremier Keystone Financial, Inc. 10,209,136.57(1) 95.25%
Aggressive Growth 1315 Eleventh Avenue
Fund P. O. Box 2450
Altoona, PA 16601
Shares of KeyPremier Keystone Financial, Inc. 21,509,535.61(1) 64.55%
U.S. Treasury 1315 Eleventh Avenue
Obligations Money P. O. Box 2450
Market Fund Altoona, PA 16601
KeyPremier Intermediate 3,000,000.00 9.00%
Term Income Fund
c/o Martindale Andres & Co.
200 Four Falls Corporate Center
Suite 200
West Conshohochen, PA 19428
KeyPremier Established 2,000,000.00 6.00%
Growth Fund
c/o Martindale Andres & Co.
200 Four Falls Corporate Center
Suite 200
West Conshohochen, PA 19428
KeyPremier Aggressive 2,000,000.00 6.00%
Growth Fund
c/o Martindale Andres & Co.
200 Four Falls Corporate Center
Suite 200
West Conshohochen, PA 19428
</TABLE>
23
<PAGE> 28
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
- --------------------- -------------------------------- ------------- --------
<S> <C> <C> <C>
Shares of KeyPremier Keystone Financial, Inc. 3,539,358.88(1) 99.35%
Limited Duration 1315 Eleventh Avenue
Government Securities P. O. Box 2450
Fund Altoona, PA 16601
Shares of 1st Source 1st Source Bank 6,510,826.83(1) 97.94%
Monogram Diversified P.O. Box 1602
Equity Fund South Bend,
Indiana 46634
Shares of 1st Source 1st Source Bank 3,274,630.56(1) 96.12%
Monogram Income P.O. Box 1602
Equity Fund South Bend,
Indiana 46634
Shares of 1st Source 1st Source Bank 3,001,268.034(1) 95.27%
Monogram Special P.O. Box 1602
Equity Fund South Bend,
Indiana 46634
Shares of 1st Source 1st Source Bank 5,554,533.92(1) 97.17%
Monogram Income Fund P.O. Box 1602
South Bend,
Indiana 46634
</TABLE>
- ---------------
(1) The designated beneficial owner possesses on behalf of its underlying
accounts voting or investment power with respect to these Shares.
As of October 28, 1997, the Trustees and executive officers of the Group,
as a group, did not own more than one percent of the outstanding shares of any
series of the Group.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at any future Meeting of
Shareholders must be received by the Group at its principal office a reasonable
time before the Group's solicitation of proxies for such meeting in order for
such proposal to be considered for inclusion in the Group's Proxy Statement and
form or forms of Proxy relating to such meeting.
ADDITIONAL INFORMATION
With respect to the actions to be taken by the shareholders of the
Riverside Capital Funds on the matters described in this Proxy Statement, (i) a
majority of all votes attributable to the outstanding Shares of a Riverside
Capital Fund entitled to vote with respect to that matter present in person or
by proxy at the Meeting shall constitute a quorum; provided, that no action
required by law or the Group's Declaration of Trust to be taken by the holders
of a designated proportion of Shares may be authorized or taken by a lesser
proportion; and (ii) abstentions shall be treated as votes present for purposes
of determining whether a quorum exists, and for purposes of determining whether
an issue has been approved, abstentions are treated as against votes. Broker
non-votes, as described below, will not be counted for purposes of determining
whether a quorum exists or whether an issue has been approved or rejected. As
used above, broker non-votes are Shares for which a broker holding such Shares
for a beneficial owner has not received instructions from the beneficial owner
and may not exercise discretionary voting power with respect thereto, although
such broker may have been able to vote such Shares on other matters at the
Meeting for which it has discretionary authority or instructions from the
beneficial owner. The costs associated with the solicitation of proxies from the
shareholders will be borne by NBC.
By Order of the Trustees,
George L. Stevens, Secretary
November , 1997
24
<PAGE> 29
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of January 1, 1998, between The Sessions Group,
an Ohio business trust (the "Trust"), and National Bank of Commerce, a national
banking association (the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Trust desires to confirm and retain the Investment Adviser to
continue to provide, or to arrange for the provision of, investment advisory
services to four investment portfolios of the Trust and may retain the
Investment Adviser to serve in such capacity to certain additional investment
portfolios of the Trust, all as now or hereafter may be identified in Schedule A
hereto (such four existing investment portfolios and any such additional
investment portfolios together called the "Funds") and the Investment Adviser
represents that it is willing and possesses legal authority to so furnish such
services without violation of applicable laws (including the Glass-Steagall Act)
and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
sec.1. Appointment. The Trust hereby appoints the Investment Adviser to
act as investment adviser to the Funds for the period and on the terms set forth
in this Agreement. The Investment Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
Additional investment portfolios may from time to time be added to those covered
by this Agreement by the parties executing a new Schedule A which shall become
effective upon its execution and shall supersede any Schedule A having an
earlier date.
sec.2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
(a) the Trust's Declaration of Trust, executed as of April 25, 1988,
and as filed with the Secretary of State of Ohio on April 25, 1988, and any
and all amendments thereto or restatements thereof (such Declaration, as
presently in effect and as it shall from time to time be amended or
restated, is herein called the "Declaration of Trust");
(b) the Trust's By-Laws and any amendments thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this Agreement;
(d) the Trust's Notification of Registration on Form N-8A under the
1940 Act as filed with the Securities and Exchange Commission on April 27,
1988 and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended ("1933 Act"), (File No. 33-21489), and
under the 1940 Act as filed with the Securities and Exchange Commission and
the most recent amendment thereto relating to the Funds; and
(f) the most recent Prospectus and Statement of Additional Information
of each of the Funds (such Prospectus and Statement of Additional
Information, as presently in effect, and all amendments and supplements
thereto, are herein collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
sec.3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide, or arrange for the provision of,
a continuous investment program for each of the Funds, including investment
research and management with respect to all securities and investments and cash
equivalents in the Funds. The Investment Adviser will determine, or arrange for
others to determine, from time to time what securities and other investments
will be purchased, retained or sold by the Trust with respect to the Funds and
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<PAGE> 30
will implement, or arrange for others to implement, such determinations through
the placement, in the name of the Funds, of orders for the execution of
portfolio transactions with or through such brokers or dealers as it may select.
The Investment Adviser will provide, or arrange for the provision of, the
services under this Agreement in accordance with each of the Fund's investment
objectives, policies, and restrictions as stated in the Prospectus and
resolutions of the Trust's Board of Trustees.
Subject to the provisions of this Agreement, the Declaration of Trust and
the 1940 Act, the Investment Adviser directly and indirectly may select and
enter into contracts with one or more qualified investment advisers
("Sub-Advisers") to provide to the Trust some or all of the services required by
this Agreement. With respect to any such appointment by the Investment Adviser
of any of the Sub-Advisers, the Investment Adviser will, as appropriate:
(a) prepare and provide to the Trust's Board of Trustees monthly
portfolio compliance reports for the Funds;
(b) maintain in accordance with the provisions of the 1940 Act each
Fund's records relating to the purchase and sale of portfolio securities;
(c) provide general oversight of the Funds' continuous investment
programs; and
(d) periodically review, evaluate and report, no less frequently than
quarterly, to the Trust's Board of Trustees with respect to the performance
of the Sub-Advisers and the activities and performance of the Adviser.
In fulfilling its responsibilities hereunder, the Investment Adviser
further agrees that it will, or, with respect to services provided to the Trust
by any of the Sub-Advisers appointed by the Investment Adviser, that it will
require that each of the Sub-Advisers:
(i) use the same skill and care in providing such services as it uses
in providing services to fiduciary accounts for which it has investment
responsibilities;
(ii) conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its
activities under this Agreement (or any applicable sub-investment advisory
agreement) in accordance with any applicable regulations of any
governmental authority pertaining to the investment advisory activities of
the Investment Adviser;
(iii) not make loans to any person to purchase or carry shares of
beneficial interest in the Trust or make loans to the Trust;
(iv) place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Investment Adviser will
attempt to obtain, or require that each of the Sub-Advisers obtain, prompt
execution of orders in an effective manner at the most favorable price. In
assessing the best execution available for any transaction, the Investment
Adviser or any of the Sub-Advisers shall consider all factors it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker-dealer and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). Consistent with this
obligation, the Investment Adviser and any of the Sub-Advisers may, in its
discretion and to the extent permitted by law, purchase and sell portfolio
securities to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to or for the benefit of the Funds and/or other
accounts over which the Investment Adviser or any of the Sub-Advisers
exercises investment discretion. Subject to the review of the Trust's Board
of Trustees from time to time with respect to the extent and continuation
of the policy, the Investment Adviser and any of the Sub-Advisers are
authorized to pay a broker or dealer who provides such brokerage and
research services a commission for effecting a securities transaction for
any of the Funds which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but
only if, the Investment Adviser or Sub-Advisers determine in good faith
that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either
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<PAGE> 31
that particular transaction or the overall responsibilities of the
Investment Adviser or Sub-Advisers with respect to the accounts as to which
it exercises investment discretion. In placing orders with brokers and
dealers, consistent with applicable laws, rules and regulations, the
Investment Adviser may consider the sale of shares of the Trust. Except as
otherwise permitted by applicable laws, rules and regulations or any
exemptions therefrom, in no instance will portfolio securities be purchased
from or sold to BISYS Fund Services Limited Partnership, the Investment
Adviser, any Sub-Adviser, or any affiliated person of the Trust, BISYS Fund
Services Limited Partnership, the Investment Adviser or any Sub-Adviser;
(v) will maintain all books and records with respect to the securities
transactions of the Funds and will furnish the Trust's Board of Trustees
such periodic and special reports as the Board may request;
(vi) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and the Funds
and prior, present, or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Investment Adviser
or any Sub-Adviser may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust; and
(vii) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations for
the Funds, the Investment Adviser's or Sub-Advisers' personnel will not
inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Trust's account are customers of the
Investment Adviser or any Sub-Adviser or of their respective parents,
subsidiaries or affiliates. In dealing with such customers, the Investment
Adviser or any Sub-Adviser and their respective parents, subsidiaries, and
affiliates will not inquire or take into consideration whether securities
of those customers are held by the Trust.
sec.4. Services Not Exclusive. The investment management services
furnished by the Investment Adviser and any Sub-Adviser hereunder are not to be
deemed exclusive, and the Investment Adviser and any Sub-Adviser shall be free
to furnish similar services to others so long as its services under this
Agreement or any sub-advisory agreement are not impaired thereby.
sec.5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records
which it maintains for the Funds are the property of the Trust and further
agrees to surrender promptly, and to require each of the Sub-Advisers to
surrender promptly, to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve, and to require each of the
Sub-Advisers to preserve, for the periods prescribed by Rule 31a-2 under the
1940 Act, the records required to be maintained by Rule 31a-1 under the 1940
Act.
sec.6. Expenses. During the term of this Agreement, the Investment Adviser
will pay all expenses, including as applicable, the compensation of any
Sub-Advisers appointed by it, incurred by it in connection with its activities
under this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Funds.
sec.7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Investment Adviser
and the Investment Adviser will accept as full compensation therefor a fee as
set forth on Schedule A hereto. The obligations of the Funds to pay the above-
described fee to the Investment Adviser will begin as of the effective date of
this Agreement; provided, however, that the Investment Adviser may from time to
time waive some or all of such fees until such time as it notifies the Trust
that it has terminated such waiver.
sec.8. Limitation of Liability. The Investment Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
A-3
<PAGE> 32
sec.9. Duration and Termination. This Agreement will become effective as
of the date first written above (or, if a particular Fund is not in existence on
that date, on the date a registration statement relating to that Fund becomes
effective with the Securities and Exchange Commission and Schedule A hereto is
amended to add such Fund), provided that it shall have been approved by vote of
a majority of the outstanding voting securities of such Fund, in accordance with
the requirements under the 1940 Act, and, unless sooner terminated as provided
herein, shall continue in effect until December 31, 1999.
Thereafter, if not terminated, this Agreement shall continue in effect as
to a particular Fund for successive periods of twelve months each ending on
December 31st of each year, provided such continuance is specifically approved
at least annually (a) by the vote of a majority of those members of the Trust's
Board of Trustees who are not parties to this Agreement or interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, and (b) by the vote of a majority of the Trust's
Board of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on at least sixty days'
written notice, without the payment of any penalty, by the Trust (by vote of the
Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund) or by the Investment Adviser. This Agreement will
immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meanings as ascribed
to such terms in the 1940 Act.)
sec.10. Investment Adviser's Representations. The Investment Adviser
hereby represents that it is willing and possesses all requisite legal authority
to provide the services contemplated by this Agreement without violation of
applicable laws and regulations, including but not limited to the Glass-Steagall
Act and the regulations promulgated thereunder.
sec.11. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
sec.12. Name. The Trust hereby acknowledges that the name "First Market"
is a property right of the Investment Adviser. The Investment Adviser agrees
that the Trust and the Funds may, so long as this Agreement remains in effect,
use "First Market" as part of its name. The Investment Adviser may permit other
persons, firms or corporations, including other investment companies, to use
such name and may, upon termination of this Agreement, require the Trust and the
Funds to refrain from using the name "First Market" in any form or combination
in its name or in its business or in the name of any of its Funds, and the Trust
shall, as soon as practicable following its receipt of any such request from the
Investment Adviser, so refrain from using such name.
sec.13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by the law of the State of Ohio.
The Sessions Group is a business trust organized under Chapter 1746, Ohio
Revised Code and under a Declaration of Trust, to which reference is hereby made
and a copy of which is on file at the office of the Secretary of State of Ohio
as required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
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<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<TABLE>
<S> <C>
NATIONAL BANK OF COMMERCE THE SESSIONS GROUP
By By
- -------------------------------------------- --------------------------------------------
Name Name
- -------------------------------------------- --------------------------------------------
Title Title
- -------------------------------------------- --------------------------------------------
</TABLE>
A-5
<PAGE> 34
DATED: JANUARY 1, 1998
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
BETWEEN THE SESSIONS GROUP AND
NATIONAL BANK OF COMMERCE
DATED AS OF JANUARY 1, 1998
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION* DATE
- ------------------------- ---------------------------------------------- ----------------
<S> <C> <C>
First Market Money Annual Rate of thirty-five one-hundredths of January 1, 1998
Market Fund one percent (0.35%) of such Fund's average net
assets
First Market Value Annual rate of one percent (1.00%) of such January 1, 1998
Equity Fund Fund's first $250 million of average daily net
assets and seventy-five one-hundredths of one
percent (0.75%) of such Fund's remaining
average daily net assets
First Market Fixed Annual rate of sixty-five one-hundredths of January 1, 1998
Income Fund one percent (0.65%) of such Fund's average
daily net assets
First Market Growth Annual rate of one percent (1.00%) of such January 1, 1998
Fund Fund's first $250 million of average daily net
assets and seventy-five one-hundredths of one
percent (0.75%) of such Fund's remaining
average daily net assets
</TABLE>
- ---------------
* All Fees are computed daily and paid monthly.
THE SESSIONS GROUP
By
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
NATIONAL BANK OF COMMERCE
By
--------------------------------------
Name
--------------------------------------
Title
--------------------------------------
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<PAGE> 35
EXHIBIT B
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 1st day of
January, 1998, by and between National Bank of Commerce, a national banking
association (the "Adviser"), and Miller Anderson & Sherrerd, LLP, a Pennsylvania
limited liability partnership (the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios of
The Sessions Group, an Ohio business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment portfolios,
five of which currently are advised by the Adviser and are generally known as
the "First Market Funds;" and
WHEREAS, the Adviser desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser experienced in the
management of portfolio securities to assist the Adviser in performing services
for certain of the First Market Funds, all as now or hereafter may be identified
in Schedule A hereto (such existing investment portfolios and any such
additional investment portfolios as may be added to Schedule A hereto from time
to time are together called the "Funds"); and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Funds and has reviewed the Investment Advisory
Agreement dated as of January 1, 1998, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
sec.1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for the Funds, subject to
such instructions and supervision as the Adviser may from time to time furnish
and further subject to the control and direction of the Trust's Board of
Trustees, for the period and on the terms hereinafter set forth. The Sub-Adviser
hereby accepts such appointment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Sub-Adviser will provide the services under this Agreement
in accordance with the Funds' investment objectives, policies and restrictions
as stated in the Funds' most recent Prospectus and Statement of Additional
Information and as the same may, from time to time, be supplemented or amended
and in resolutions of the Trust's Board of Trustees. The Adviser agrees to
furnish the Sub-Adviser copies of all amendments of or supplements to such
Prospectus and Statement of Additional Information within three business days of
their filing with the United States Securities and Exchange Commission ("SEC").
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Adviser, the Funds
or the Trust in any way.
sec.2. Sub-Advisory Services. Subject to such instructions and supervision
as the Adviser may from time to time furnish, the continuous investment program
of the Funds provided by the SubAdviser shall include, among other things,
investment research and management with respect to all securities, investments
and cash equivalents in the Funds. The Sub-Adviser will determine from time to
time what securities and other investments will be purchased, retained or sold
by the Funds, the appropriate portion of each Fund's assets to be invested in
particular countries or geographic regions, the use of foreign exchange
contracts and other foreign currency matters, and the manner in which voting
rights, rights to consent to corporate action and other rights pertaining to the
Funds' investments should be exercised. The Sub-Adviser will implement such
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<PAGE> 36
determinations through the placement, in the name of the applicable Fund, of
orders for the execution of portfolio transactions with it through such brokers
or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees that
it will:
(a) use the same skill and care in providing such services as it uses
in providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the SEC and
in addition will conduct its activities under this Agreement in accordance
with any applicable regulations of any government authority pertaining to
the investment advisory activities of the Sub-Adviser and shall furnish
such written reports or other documents substantiating such compliance as
the Adviser reasonably may from time to time request;
(c) place orders pursuant to investment determinations for the Funds
either directly with the issuer or with an underwriter, market maker or
broker or dealer. In placing orders with brokers and dealers, the
Sub-Adviser will use its reasonable best efforts to obtain prompt execution
of orders in an effective manner at the most favorable price. Consistent
with this obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of Section
28(e) of the Securities Exchange Act of 1934) to or for the benefit of the
Funds and/or other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of Trustees from
time to time with respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Sub-Adviser may consider the
sale of shares of the Trust. In no instance will portfolio securities be
purchased from or sold to the Trust, BISYS Fund Services Limited
Partnership, the Adviser, any other sub-investment adviser for the Trust
("other sub-advisers"), or the Sub-Adviser or any affiliate of the
foregoing except as may be permitted by the 1940 Act, any rules or
regulations thereunder, or an exemption therefrom;
(d) maintain all necessary or appropriate books and records with
respect to the Funds' securities transactions in accordance with all
applicable laws, rules and regulations, including but not limited to
Section 31(a) of the 1940 Act and will furnish the Trust's Board of
Trustees such periodic and special reports as the Board reasonably may
request;
(e) treat confidentially and as proprietary information of the Adviser
and the Trust all records and other information relative to the Adviser and
the Trust and prior, present, or potential shareholders, and will not use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except that subject to prompt
notification to the Trust and the Adviser, the Sub-Adviser may divulge such
information to duly constituted authorities, or when so requested by the
Adviser and the Trust, provided, however, that nothing contained herein
shall prohibit the Sub-Adviser from complying with applicable laws or
regulations or advertising or soliciting the public generally with respect
to other products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of the
Fund;
(f) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Trust, the Sub-Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or
sale for the Trust's account are customers of the Adviser, other
sub-advisers, the Sub-Adviser or of their respective parents, subsidiaries
or affiliates. In dealing with such customers, the Sub-Adviser and its
parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust;
and
B-2
<PAGE> 37
(g) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities of the
Funds.
sec.3. Expenses. During the term of this Agreement, the Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions and
taxes, if any) purchased for the Funds.
sec.4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the Funds are the property of the Funds and further
agrees to surrender promptly to the Adviser or the Trust any such records upon
the Adviser's or the Trust's request and that such records shall be available
for inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
sec.5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of each Fund's average daily net assets set
forth in Schedule A hereto; provided, however, that the Sub-Adviser may from
time to time waive some or all of such fees until such time as it notifies the
Trust that it has terminated such waiver. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the Sub-
Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Funds' net assets shall be computed at the
times and in the manner specified in the Trust's Registration Statement.
Notwithstanding anything contained herein to the contrary, the SubAdviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of any Fund or any portion thereof except as may be authorized by
applicable law.
sec.6. Services Not Exclusive. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others, including others who may invest in the same
securities as the Funds, and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the SubAdviser under this Agreement may differ from the advice given or
the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
sec.7. Use of Names. The Adviser shall not use the name of the Sub-Adviser
in any prospectus, sales literature or other material relating to the Trust in
any manner not approved prior thereto in writing by the Sub-Adviser; provided,
however, that the Sub-Adviser shall approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and, provided further, that in no
event shall such approval be unreasonably withheld. The SubAdviser shall not use
the name of the Trust, the Fund or the Adviser in any material relating to the
Sub-Adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Adviser shall approve all uses of its and the Fund's or the
Trust's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
sec.8. Liability of the Sub-Adviser; Indemnification. (a) The Sub-Adviser
may rely on information believed by it to be accurate and reliable. Neither the
Sub-Adviser nor its officers, directors, employees, agents or controlling
persons (as defined in the 1940 Act) shall be subject to any liability for any
act or omission, error of judgment or mistake of law, or for any loss suffered
by the Trust or a Fund, in the course of, connected with or arising out of any
services to be rendered hereunder, except by reason of wilful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or by reason of reckless disregard on the part of the Sub-Adviser of
its obligations and duties under this Agreement. Any person, even though also
employed by the Sub-Adviser shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as an employee or agent of the Sub-Adviser.
B-3
<PAGE> 38
(b) The Adviser agrees to indemnify and hold harmless the Sub-Adviser, and
each of its affiliates, agents, directors, officers and employees (each of the
foregoing being hereinafter referred to as a "Sub-Adviser Indemnified Person")
from and against any and all losses, liabilities, judgments, settlements,
claims, damages and expenses whatsoever, including, without limitation, all
expenses, including attorneys' fees and disbursements, reasonably incurred in
connection with the investigation of, the preparation for, or the defense of any
claim, action, investigation or proceeding (collectively, "Losses"), whether or
not instituted or resulting in liability and whether or not any Sub-Adviser
Indemnified Person is named as a party thereto, as and when incurred by any
Sub-Adviser Indemnified Person, arising out of, relating to or incurred in
connection with:
(i) any violation or alleged violation of any law, rule or regulation
or any judgment, order or decree caused by any action taken or omitted to
be taken by the Adviser or any of its affiliates in connection with the
performance by the Adviser of the obligations arising out of this
Agreement; and
(ii) any breach or alleged breach by the Adviser or any of its
affiliates of any of their respective obligations, representations,
warranties or agreements contained herein.
(c) The Sub-Adviser agrees to indemnify and hold harmless the Adviser, and
each of its affiliates, agents, directors, officers and employees (each of the
foregoing being hereinafter referred to as an "Adviser Indemnified Person") from
and against any and all Losses, whether or not instituted or resulting in
liability and whether or not any Adviser Indemnified Person is named as a party
thereto, as and when incurred by any Adviser Indemnified Person, arising out of,
relating to or incurred in connection with:
(i) any violation or alleged violation of any law, rule or regulation
or any judgment, order or decree caused by any action taken or omitted to
be taken by the Sub-Adviser or any of its affiliates in connection with the
performance by the Sub-Adviser of the obligations arising out of this
Agreement; and
(ii) any breach or alleged breach by the Sub-Adviser or any of its
affiliates of any of their respective obligations, representations,
warranties or agreements contained herein.
(d) Each person entitled to indemnification under Subsections (b) or (c)
above (an "indemnified party") shall give prompt notice to each person
responsible for indemnifying such indemnified party (an "indemnifying party") of
any action commenced against it in respect of which indemnify may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability that it may have otherwise than on account
of this Section. An indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the indemnified parities, and that all such fees and expenses shall
be reimbursed as they are incurred. In the case of any such separate firm for an
Adviser Indemnified Person, such firm shall be designated in writing by the
Adviser. In the case of any such separate firm for a Sub-Adviser Indemnified
Person, such firm shall be designated in writing by the Sub-Adviser. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any Losses by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceedings.
B-4
<PAGE> 39
sec.9. Limitation of Trust's Liability. The Sub-Adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's and the
Funds' liability set forth in its Declaration of Trust and under Ohio law. The
Sub-Adviser agrees that any of the Trust's obligations shall be limited to the
assets of the Funds and that the Sub-Adviser shall not seek satisfaction of any
such obligation from the shareholders of the Trust nor from any Trustee,
officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746, Ohio
Revised Code and under a Declaration of Trust, to which reference is hereby made
and a copy of which is on file at the office of the Secretary of State of Ohio
as required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
sec.10. Duration, Renewal, Termination and Amendment. This Agreement will
become effective as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of each
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until January 1, 2000.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to a Fund for successive periods of one year each ending on December
31st of each year, provided such continuance is specifically approved with
respect to a Fund at least annually (a) by the vote of a majority of those
members of the Trust's Board of Trustees who are not parties to this Agreement
or interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of a majority of
all votes attributable to the outstanding Shares of that Fund. This Agreement
may be terminated as to a Fund at any time, without payment of any penalty, by
the Trust's Board of Trustees, by the Adviser, or by a vote of the majority of
the outstanding voting securities of that Fund upon, at least 60 days' prior
written notice to the Sub-Adviser, or by the Sub-Adviser upon at least 60 days'
prior written notice to the Adviser and the Trust's Board of Trustees, or upon
such shorter notice as may be mutually agreed upon. This Agreement shall
terminate automatically and immediately upon termination of the Adviser
Agreement. This Agreement shall terminate automatically and immediately in the
event of its assignment. The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act. This Agreement may be amended at any time by the Adviser and
the Sub-Adviser, subject to approval by the Trust's Board of Trustees and by a
majority of the Trust's Board of Trustees who are not "interested persons" of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval, and, if required by the 1940 Act and applicable SEC rules and
regulations, a vote of a majority of the applicable Fund's outstanding voting
securities.
sec.11. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
sec.12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
sec.13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of New York, provided that nothing herein shall be construed as being
inconsistent with the 1940 Act. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed in
several counterparts, all of which together shall for all purposes constitute
one Agreement, binding on all parties.
B-5
<PAGE> 40
sec.14. Potential Conflicts of Interest. (a) Subject to applicable
statutes and regulations, it is understood that trustees, officers or agents of
the Trust are or may be interested in the Sub-Adviser or its affiliates as
directors, officers, employees, agents, shareholders or otherwise, and that the
directors, officers, employees, agents or shareholders of the SubAdviser or its
affiliates may be interested in the Trust, as trustees, officers, agents or
otherwise.
(b) If the Sub-Adviser considers the purchase or sale of securities for a
Fund and other advisory clients of the Sub-Adviser at or about the same time,
transactions in such securities will be allocated among such Fund and such other
clients in a manner deemed fair and reasonable by the Sub-Adviser, subject to
any guidelines that may be adopted by the Board of Trustees of the Trust.
sec.15. Notices. Any communication hereunder shall be in writing and shall
be delivered in person or by facsimile (followed by mailing such written
communication, air mail postage prepaid, on the date on which such facsimile is
sent, to the address set forth below). Any communication or document to be made
or delivered by one person to another pursuant to this Agreement shall be made
or delivered to that other person at the following relevant address (unless that
other person has by fifteen (15) days' notice to the other specified another
address):
If to the Sub-Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: General Counsel
Telephone No.: (212) 296-7100
Facsimile No.: (212) 921-5477
If to the Adviser:
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Attention:
--------------------
Telephone No. (901)
-------------
Facsimile No.:
--------------------
Communications or documents made or delivered by personal delivery shall be
deemed to have been received on the day of such delivery. Communications or
documents made or delivered by facsimile shall be deemed to have been received
upon production of a transmission report by the machine from which the facsimile
was sent which indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient; provided that a hard copy of the
communication or document so made or delivered by facsimile was posted the same
day as the communication or document was made or delivered by electronic means.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
<TABLE>
<S> <C>
NATIONAL BANK OF COMMERCE MILLER ANDERSON & SHERRERD, LLP
By Morgan Stanley Asset Management Holdings,
Inc., its General Partner
By
- -------------------------------------------- --------------------------------------------
Title
- --------------------------------------------
--------------------------------------------
</TABLE>
B-6
<PAGE> 41
DATED: JANUARY 1, 1998
SCHEDULE A
TO THE SUB-INVESTMENT ADVISORY AGREEMENT
BETWEEN NATIONAL BANK OF COMMERCE AND
MILLER ANDERSON & SHERRERD, LLP
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION* DATE
- ------------------------- ---------------------------------------------- ----------------
<S> <C> <C>
First Market Value Annual rate of 0.625% of the average daily net January 1, 1998
Equity Fund assets of such Fund up to $20 million, 0.50%
of the average daily net assets of such Fund
from $20 million up to $30 million, and 0.375%
of the average daily net assets of such Fund
from $30 million to $35 million. If the
average daily net assets of such Fund equal or
exceed $35 million, the annual rate of 0.56%
of the average daily net assets of such Fund.
First Market Fixed Annual Rate of 0.50% of the average daily net January 1, 1998
Income Fund assets of such Fund up to $25 million and
0.25% of the average daily net assets of such
Fund from $25 million to $75 million. If the
average daily net assets of such Fund equal or
exceed $75 million, the annual rate of 0.33%
of the average daily net assets of such Fund.
MILLER ANDERSON & SHERRERD, LLP NATIONAL BANK OF COMMERCE
By Morgan Stanley Asset
Management Holdings, Inc., its
General Partner
By By
- --------------------------------------------- ---------------------------------------------
Title Title
- --------------------------------------------- ---------------------------------------------
</TABLE>
- ---------------
*All fees are computed daily and paid monthly.
B-7
<PAGE> 42
[This Page Intentionally Left Blank]
<PAGE> 43
EXHIBIT C
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 1st day of
January, 1998, by and between National Bank of Commerce, a national banking
association (the "Adviser"), and Morgan Stanley Asset Management, Inc. a
Delaware corporation (the "Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of certain portfolios of
The Sessions Group, an Ohio business trust and an open-end management investment
company (the "Trust"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Trust is comprised of several separate investment portfolios,
five of which currently are advised by the Adviser and are generally known as
the "First Market Funds;" and
WHEREAS, the Adviser desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser experienced in the
management of portfolio securities to assist the Adviser in performing services
for certain of the First Market Funds, all as now or hereafter may be identified
in Schedule A hereto (such existing investment portfolios and any such
additional investment portfolios as may be added to Schedule A hereto from time
to time are together called the "Funds"); and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Trust and the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Funds and has reviewed the Investment Advisory
Agreement dated as of January 1, 1998, between the Adviser and the Trust (the
"Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
sec.1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for the Funds, subject to
such instructions and supervision as the Adviser may from time to time furnish
and further subject to the control and direction of the Trust's Board of
Trustees, for the period and on the terms hereinafter set forth. The Sub-Adviser
hereby accepts such appointment and agrees during such period to render the
services and to assume the obligations herein set forth for the compensation
herein provided. The Sub-Adviser will provide the services under this Agreement
in accordance with the Funds' investment objectives, policies and restrictions
as stated in the Funds' most recent Prospectus and Statement of Additional
Information and as the same may, from time to time, be supplemented or amended
and in resolutions of the Trust's Board of Trustees. The Adviser agrees to
furnish the Sub-Adviser copies of all amendments of or supplements to such
Prospectus and Statement of Additional Information within three business days of
their filing with the United States Securities and Exchange Commission ("SEC").
The Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Adviser, the Funds
or the Trust in any way.
sec.2. Sub-Advisory Services. Subject to such instructions and supervision
as the Adviser may from time to time furnish, the continuous investment program
of the Funds provided by the SubAdviser shall include, among other things,
investment research and management with respect to all securities, investments
and cash equivalents in the Funds. The Sub-Adviser will determine from time to
time what securities and other investments will be purchased, retained or sold
by the Funds, the appropriate portion of each Fund's assets to be invested in
particular countries or geographic regions, the use of foreign exchange
contracts and other foreign currency matters, and the manner in which voting
rights, rights to consent to corporate action and other rights pertaining to the
Funds' investments should be exercised. The Sub-Adviser will implement such
C-1
<PAGE> 44
determinations through the placement, in the name of the applicable Fund, of
orders for the execution of portfolio transactions with it through such brokers
or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees that
it will:
(a) use the same skill and care in providing such services as it uses
in providing services to other fiduciary accounts for which it has
investment responsibilities;
(b) conform with all applicable Rules and Regulations of the SEC and
in addition will conduct its activities under this Agreement in accordance
with any applicable regulations of any government authority pertaining to
the investment advisory activities of the Sub-Adviser and shall furnish
such written reports or other documents substantiating such compliance as
the Adviser reasonably may from time to time request;
(c) place orders pursuant to investment determinations for the Funds
either directly with the issuer or with an underwriter, market maker or
broker or dealer. In placing orders with brokers and dealers, the
Sub-Adviser will use its reasonable best efforts to obtain prompt execution
of orders in an effective manner at the most favorable price. Consistent
with this obligation, the Sub-Adviser may, to the extent permitted by law,
purchase and sell portfolio securities to and from brokers and dealers who
provide brokerage and research services (within the meaning of Section
28(e) of the Securities Exchange Act of 1934) to or for the benefit of the
Funds and/or other accounts over which the Sub-Adviser exercises investment
discretion. Subject to the review of the Trust's Board of Trustees from
time to time with respect to the extent and continuation of the policy, the
Sub-Adviser is authorized to pay a broker or dealer who provides such
brokerage and research services a commission for effecting a securities
transaction for the Fund which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Sub-Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In placing orders with brokers and dealers, consistent with
applicable laws, rules and regulations, the Sub-Adviser may consider the
sale of shares of the Trust. In no instance will portfolio securities be
purchased from or sold to the Trust, BISYS Fund Services Limited
Partnership, the Adviser, any other sub-investment adviser for the Trust
("other sub-advisers"), or the Sub-Adviser or any affiliate of the
foregoing except as may be permitted by the 1940 Act, any rules or
regulations thereunder, or an exemption therefrom;
(d) maintain all necessary or appropriate books and records with
respect to the Funds' securities transactions in accordance with all
applicable laws, rules and regulations, including but not limited to
Section 31(a) of the 1940 Act and will furnish the Trust's Board of
Trustees such periodic and special reports as the Board reasonably may
request;
(e) treat confidentially and as proprietary information of the Adviser
and the Trust all records and other information relative to the Adviser and
the Trust and prior, present, or potential shareholders, and will not use
such records and information for any purpose other than performance of its
responsibilities and duties hereunder, except that subject to prompt
notification to the Trust and the Adviser, the Sub-Adviser may divulge such
information to duly constituted authorities, or when so requested by the
Adviser and the Trust, provided, however, that nothing contained herein
shall prohibit the Sub-Adviser from complying with applicable laws or
regulations or advertising or soliciting the public generally with respect
to other products or services, regardless of whether such advertisement or
solicitation may include prior, present or potential shareholders of the
Fund;
(f) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Trust, the Sub-Adviser's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or
sale for the Trust's account are customers of the Adviser, other
sub-advisers, the Sub-Adviser or of their respective parents, subsidiaries
or affiliates. In dealing with such customers, the Sub-Adviser and its
parent, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the Trust;
and
C-2
<PAGE> 45
(g) render, upon request of the Adviser or the Trust's Board of
Trustees, written reports concerning the investment activities of the
Funds.
sec.3. Expenses. During the term of this Agreement, the SubAdviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage commissions and
taxes, if any) purchased for the Funds.
sec.4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the Funds are the property of the Funds and further
agrees to surrender promptly to the Adviser or the Trust any such records upon
the Adviser's or the Trust's request and that such records shall be available
for inspection by the SEC. The Sub-Adviser further agrees to preserve for the
periods and at the places prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
sec.5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of each Fund's average daily net assets set
forth in Schedule A hereto; provided, however, that the Sub-Adviser may from
time to time waive some or all of such fees until such time as it notifies the
Trust that it has terminated such waiver. Such fee shall be accrued daily and
paid monthly as soon as practicable after the end of each month. If the Sub-
Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Funds' net assets shall be computed at the
times and in the manner specified in the Trust's Registration Statement.
Notwithstanding anything contained herein to the contrary, the SubAdviser shall
not be compensated on the basis of a share of capital gains or upon capital
appreciation of any Fund or any portion thereof except as may be authorized by
applicable law.
sec.6. Services Not Exclusive. The services of the Sub-Adviser hereunder
are not to be deemed exclusive, and the Sub-Adviser shall be free to render
similar services to others, including others who may invest in the same
securities as the Funds, and to engage in other activities, so long as the
services rendered hereunder are not impaired. It is understood that the action
taken by the SubAdviser under this Agreement may differ from the advice given or
the timing or nature of action taken with respect to other clients of the
Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
sec.7. Use of Names. The Adviser shall not use the name of the Sub-Adviser
in any prospectus, sales literature or other material relating to the Trust in
any manner not approved prior thereto, in writing by the Sub-Adviser; provided,
however, that the Sub-Adviser shall approve all uses of its name which merely
refer in accurate terms to its appointment hereunder or which are required by
the SEC or a state securities commission; and, provided further, that in no
event shall such approval be unreasonably withheld. The SubAdviser shall not use
the name of the Trust, the Fund or the Adviser in any material relating to the
Sub-Adviser in any manner not approved prior thereto by the Adviser; provided,
however, that the Adviser shall approve all uses of its and the Fund's or the
Trust's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
sec.8. Liability of the Sub-Adviser; Indemnification. (a) The Sub-Adviser
may rely on information believed by it to be accurate and reliable. Neither the
Sub-Adviser nor its officers, directors, employees, agents or controlling
persons (as defined in the 1940 Act) shall be subject to any liability for any
act or omission, error of judgment or mistake of law, or for any loss suffered
by the Trust or a Fund, in the course of, connected with or arising out of any
services to be rendered hereunder, except by reason of wilful misfeasance, bad
faith or gross negligence on the part of the Sub-Adviser in the performance of
its duties or by reason of reckless disregard on the part of the Sub-Adviser of
its obligations and duties under this Agreement. Any person, even though also
employed by the Sub-Adviser shall be deemed, when acting within the scope of his
employment by the Trust, to be acting in such employment solely for the Trust
and not as an employee or agent of the Sub-Adviser.
(b) The Adviser agrees to indemnify and hold harmless the Sub-Adviser, and
each of its affiliates, agents, directors, officers and employees (each of the
foregoing being hereinafter referred to as a "Sub-Adviser
C-3
<PAGE> 46
Indemnified Person") from and against any and all losses, liabilities,
judgments, settlements, claims, damages and expenses whatsoever, including,
without limitation, all expenses, including attorneys' fees and disbursements,
reasonably incurred in connection with the investigation of, the preparation
for, or the defense of any claim, action, investigation or proceeding
(collectively, "Losses"), whether or not instituted or resulting in liability
and whether or not any Sub-Adviser Indemnified Person is named as a party
thereto, as and when incurred by any Sub-Adviser Indemnified Person, arising out
of, relating to or incurred in connection with:
(i) any violation or alleged violation of any law, rule or regulation
or any judgment, order or decree caused by any action taken or omitted to
be taken by the Adviser or any of its affiliates in connection with the
performance by the Adviser of the obligations arising out of this
Agreement; and
(ii) any breach or alleged breach by the Adviser or any of its
affiliates of any of their respective obligations, representations,
warranties or agreements contained herein.
(c) The Sub-Adviser agrees to indemnify and hold harmless the Adviser, and
each of its affiliates, agents, directors, officers and employees (each of the
foregoing being hereinafter referred to as an "Adviser Indemnified Person") from
and against any and all Losses, whether or not instituted or resulting in
liability and whether or not any Adviser Indemnified Person is named as a party
thereto, as and when incurred by any Adviser Indemnified Person, arising out of,
relating to or incurred in connection with:
(i) any violation or alleged violation of any law, rule or regulation
or any judgment, order or decree caused by any action taken or omitted to
be taken by the Sub-Adviser or any of its affiliates in connection with the
performance by the Sub-Adviser of the obligations arising out of this
Agreement; and
(ii) any breach or alleged breach by the Sub-Adviser or any of its
affiliates of any of their respective obligations, representations,
warranties or agreements contained herein.
(d) Each person entitled to indemnification under Subsections (b) or (c)
above (an "indemnified party") shall give prompt notice to each person
responsible for indemnifying such indemnified party (an "indemnifying party") of
any action commenced against it in respect of which indemnify may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability that it may have otherwise than on account
of this Section. An indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the indemnified parities, and that all such fees and expenses shall
be reimbursed as they are incurred. In the case of any such separate firm for an
Adviser Indemnified Person, such firm shall be designated in writing by the
Adviser. In the case of any such separate firm for a Sub-Adviser Indemnified
Person, such firm shall be designated in writing by the SubAdviser. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any Losses by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceedings.
sec.9. Limitation of Trust's Liability. The Sub-Adviser acknowledges that
it has received notice of and accepts the limitations upon the Trust's and the
Funds' liability set forth in its Declaration of Trust and under
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<PAGE> 47
Ohio law. The Sub-Adviser agrees that any of the Trust's obligations shall be
limited to the assets of the Funds and that the Sub-Adviser shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
The Sessions Group is a business trust organized under Chapter 1746, Ohio
Revised Code and under a Declaration of Trust, to which reference is hereby made
and a copy of which is on file at the office of the Secretary of State of Ohio
as required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of "The Sessions Group" entered into in the name or on
behalf thereof by any of the Trustees, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Trustees, officers, employees, agents or shareholders of the Trust personally,
but bind only the assets of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, and all persons dealing with any of the Funds of the Trust must
look solely to the assets of the Trust belonging to such Fund for the
enforcement of any claims against the Trust.
sec.10. Duration, Renewal, Termination and Amendment. This Agreement will
become effective as of the date first written above, provided that it shall have
been approved by vote of a majority of the outstanding voting securities of each
Fund, in accordance with the requirements under the 1940 Act, and, unless sooner
terminated as provided herein, shall continue in effect until January 1, 2000.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to a Fund for successive periods of one year each ending on December
31st of each year, provided such continuance is specifically approved with
respect to a Fund at least annually (a) by the vote of a majority of those
members of the Trust's Board of Trustees who are not parties to this Agreement
or interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of a majority of
all votes attributable to the outstanding Shares of that Fund. This Agreement
may be terminated as to a Fund at any time, without payment of any penalty, by
the Trust's Board of Trustees, by the Adviser, or by a vote of the majority of
the outstanding voting securities of that Fund upon, at least 60 days' prior
written notice to the SubAdviser, or by the Sub-Adviser upon at least 60 days'
prior written notice to the Adviser and the Trust's Board of Trustees, or upon
such shorter notice as may be mutually agreed upon. This Agreement shall
terminate automatically and immediately upon termination of the Adviser
Agreement. This Agreement shall terminate automatically and immediately in the
event of its assignment. The terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the meaning set forth for such terms
in the 1940 Act. This Agreement may be amended at any time by the Adviser and
the Sub-Adviser, subject to approval by the Trust's Board of Trustees and by a
majority of the Trust's Board of Trustees who are not "interested persons" of
the Trust, cast in person at a meeting called for the purpose of voting on such
approval, and, if required by the 1940 Act and applicable SEC rules and
regulations, a vote of a majority of the applicable Fund's outstanding voting
securities.
sec.11. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as confidential and
shall not be disclosed to third parties except as required by law or by this
Agreement.
sec.12. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
sec.13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of New York, provided that nothing herein shall be construed as being
inconsistent with the 1940 Act. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed in
several counterparts, all of which together shall for all purposes constitute
one Agreement, binding on all parties.
sec.14. Potential Conflicts of Interest. (a) Subject to applicable
statutes and regulations, it is understood that trustees, officers or agents of
the Trust are or may be interested in the Sub-Adviser or its affiliates as
C-5
<PAGE> 48
directors, officers, employees, agents, shareholders or otherwise, and that the
directors, officers, employees, agents or shareholders of the SubAdviser or its
affiliates may be interested in the Trust, as trustees, officers, agents or
otherwise.
(b) If the Sub-Adviser considers the purchase or sale of securities for a
Fund and other advisory clients of the Sub-Adviser at or about the same time,
transactions in such securities will be allocated among such Fund and such other
clients in a manner deemed fair and reasonable by the Sub-Adviser, subject to
any guidelines that may be adopted by the Board of Trustees of the Trust.
sec.15. Notices. Any communication hereunder shall be in writing and shall
be delivered in person or by facsimile (followed by mailing such written
communication, air mail postage prepaid, on the date on which such facsimile is
sent, to the address set forth below). Any communication or document to be made
or delivered by one person to another pursuant to this Agreement shall be made
or delivered to that other person at the following relevant address (unless that
other person has by fifteen (15) days' notice to the other specified another
address):
If to the Sub-Adviser:
Morgan Stanley Asset Management Inc.
1221 Avenue of the America
New York, New York 10020
Attention: General Counsel
Telephone No.: (212) 296-7100
Facsimile No.: (212) 921-5477
If to the Adviser:
National Bank of Commerce
One Commerce Square
Memphis, Tennessee 38150
Attention:
Telephone No.: (901)
Facsimile No.:
Communications or documents made or delivered by personal delivery shall be
deemed to have been received on the day of such delivery. Communications or
documents made or delivered by facsimile shall be deemed to have been received
upon production of a transmission report by the machine from which the facsimile
was sent which indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient; provided that a hard copy of the
communication or document so made or delivered by facsimile was posted the same
day as the communication or document was made or delivered by electronic means.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NATIONAL BANK OF COMMERCE
By
--------------------------------------
Title
--------------------------------------
MORGAN STANLEY ASSET MANAGEMENT INC.
By
--------------------------------------
Title
--------------------------------------
C-6
<PAGE> 49
DATED: JANUARY 1, 1998
SCHEDULE A
TO THE SUB-INVESTMENT ADVISORY AGREEMENT
BETWEEN NATIONAL BANK OF COMMERCE AND
MORGAN STANLEY ASSET MANAGEMENT, INC.
<TABLE>
<CAPTION>
NAME OF FUND COMPENSATION* DATE
- ------------------------- ---------------------------------------------- ----------------
<S> <C> <C>
First Market Money Annual rate of 0.25% of the average daily net January 1, 1998
Market Fund assets of such Fund.
First Market Growth Annual rate of 0.625% of the average daily net January 1, 1998
Fund assets of such Fund up to $20 million, 0.50%
of the average daily net assets of such Fund
from $20 million up to $30 million, and 0.375%
of the average daily net assets of such Fund
from $30 million to $35 million. If the
average daily net assets of such Fund equal or
exceed $35 million, the annual rate of 0.56%
of the average daily net assets of such Fund.
MORGAN STANLEY ASSET MANAGEMENT INC. NATIONAL BANK OF COMMERCE
By By
- --------------------------------------------- ---------------------------------------------
Title Title
- --------------------------------------------- ---------------------------------------------
</TABLE>
- ---------------
*All fees are computed daily and paid monthly.
C-7
<PAGE> 50
[This Page Intentionally Left Blank]
<PAGE> 51
EXHIBIT D
COMPARISON OF FUNDAMENTAL INVESTMENT POLICIES
<TABLE>
<CAPTION>
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
<S> <C>
WITH RESPECT TO DIVERSIFICATION: [PROPOSAL
8.a.]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Purchase securities of [No Riverside Capital Fund may:]
any one issuer, other than obligations issued or Purchase securities of any one
guaranteed by the U.S. Government, its agencies or issuer, other than obligations issued
instrumentalities, if, immediately after such purchase, or guaranteed by the U.S. Government,
more than 5% of the value of the Fund's total assets would its agencies or instrumentalities,
be invested in such issuer, except that 25% or less of the if, immediately after such purchase,
value of the Fund's total assets may be invested without more than 5% of the value of such
regard to such 5% limitation. There is no limit to the Fund's total assets would be invested
percentage of assets that may be invested in U.S. Treasury in such issuer, or such Fund would
bills, notes, or other obligations issued or guaranteed by hold more than 10% of the outstanding
the U.S. Government, its agencies or instrumentalities. voting securities of such issuer,
[Neither the Value Fund nor the Income Fund may:] Purchase except that 25% or less of the value
securities of any one issuer, other than obligations of such Fund's total assets may be
issued or guaranteed by the U.S. Government, its agencies invested without regard to such 5%
or instrumentalities, if, immediately after such purchase, limitation. There is no limit to the
more than 5% of the value of the Fund's total assets would percentage of assets that may be
be invested in such issuer, or the Fund would hold more invested in U.S. Treasury bills,
than 10% of any class of securities of the issuer, except notes, or other obligations issued or
that up to 25% of the value of the Fund's total assets may guaranteed by the U.S. Government,
be invested without regard to such 5% limitations, or such its agencies or instrumentalities.
Fund would hold more than 10% of the outstanding voting
securities of such issuer. There is no limit to the
percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or assets may be
invested without regard to such 5% limitations. There is
no limit to the percentage of assets that may be invested
in U.S. Treasury bills, notes, or other obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities. guaranteed by the U.S. Government, its
agencies or instrumentalities.
[The Growth Fund may not:] Purchase securities of any one
issuer, other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value
of the Fund's total assets would be invested in such
issuer, or the Fund would hold more than 10% of any class
of securities of the issuer, except that up to 25% of the
value of the Fund's total assets may be invested without
regard to such 5% limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury
bills, notes, or other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
- -----------------------------------------------------------------------------------------------------
</TABLE>
D-1
<PAGE> 52
<TABLE>
<CAPTION>
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
<S> <C>
WITH RESPECT TO PORTFOLIO CONCENTRATION:
[PROPOSAL
8.b.]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Purchase any securities [None of the Riverside Capital Funds
which would cause more than 25% of the value of the Fund's may:] Purchase any securities which
total assets at the time of purchase to be invested in would cause more than 25% of the
securities of one or more issuers conducting their value of such Fund's total assets at
principal business activities in the same industry, the time of purchase to be invested
provided that (a) there is no limitation with respect to in securities of one or more issuers
obligations issued or guaranteed by the U.S. Government, conducting their principal business
its agencies or instrumentalities, domestic bank activities in the same industry,
certificates of deposit or bankers' acceptances, and provided that (a) there is no
repurchase agreements secured by bank instruments or limitation with respect to
obligations of the U.S. Government, its agencies or obligations issued or guaranteed by
instrumentalities; (b) wholly owned finance companies will the U.S. Government, its agencies or
be considered to be in the industries of their parents if instrumentalities, and repurchase
their activities are primarily related to financing the agreements secured by obligations of
activities of their parents; and (c) utilities will be the U.S. Government, its agencies or
divided according to their services. For example, gas, gas instrumentalities; (b) with respect
transmission, electric and gas, electric, and telephone to the Money Market Fund only, there
will each be considered a separate industry. is no limitation with respect
[None of the Value Fund, the Income Fund or the Growth domestic bank instruments, including
Fund may:] Purchase any securities which would cause more certificates of deposit and bankers'
than 25% of the value of the Fund's total assets at the acceptances, and repurchase agreement
time of purchase to be invested in securities of one or secured by bank instruments; (c)
more issuers conducting their principal business wholly owned finance companies will
activities in the same industry, provided that (a) there be considered to be in the industries
is no limitation with respect to obligations issued or of their parents if their activities
guaranteed by the U.S. Government, its agencies or are primarily related to financing
instrumentalities and repurchase agreements secured by the activities of their parents; (d)
obligations of the U.S. Government, its agencies or financial services companies will be
instrumentalities; (b) wholly owned finance companies will classified according to the end users
be considered to be in the industries of their parents if of their services, for example,
their activities are primarily related to financing the automobile finance, bank finance and
activities of their parents; and (c) utilities will be diversified finance will each be
divided according to their services. For example, gas, gas considered a separate industry; (e)
transmission, electric and gas, electric, and telephone asset-backed securities will be
will each be considered a separate industry. classified according to the
underlying assets securing such
securities; and (f) utilities will be
divided according to their services.
For example, gas, gas transmission,
electric and gas, electric, and
telephone will each be considered a
separate industry.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO BORROWING MONEY OR ISSUING SENIOR
SECURITIES:
[PROPOSAL
8.c.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund or the [None of the Riverside Capital Funds
Income Fund may:] Borrow money or issue senior securities, may:] Borrow money or issue senior
except that the Fund may borrow from banks or enter into securities, except that each Fund may
reverse repurchase agreements for temporary purposes in enter into reverse repurchase
amounts up to 10% of the value of its total assets at the agreements and may otherwise borrow
time of such borrowing. The Fund will not purchase money or issue senior securities as
securities while its borrowings (including reverse and to the extent permitted by the
repurchase agreements) exceed 5% of its total assets. 1940 Act or any rule, order or
[The Growth Fund may not:] Borrow money or issue senior interpretation thereunder. The Money
securities, except that the Fund may borrow from banks or Market Fund will not purchase
enter into reverse repurchase agreements or dollar roll securities while its borrowings
agreements for temporary purposes in amounts up to 10% of (including reverse repurchase
the value of its total assets at the time of such agreements) exceed 5% of its total
borrowing, and except as permitted pursuant to appropriate assets.
exemptions from the 1940 Act. The Fund will not purchase
securities while its borrowings (including reverse
repurchase agreements and dollar roll agreements) exceed
5% of its total assets.
- -----------------------------------------------------------------------------------------------------
</TABLE>
D-2
<PAGE> 53
<TABLE>
<CAPTION>
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
<S> <C>
WITH RESPECT TO REAL ESTATE: [PROPOSAL
8.d.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund or the [No Riverside Capital Fund may:]
Income Fund may:] Purchase or sell real estate (although Purchase or sell real estate
investments in marketable securities of companies engaged (although investments in securities
in such activities are not prohibited by this of companies engaged in such
restriction). activities and securities secured by
[The Growth Fund may not:] Purchase or sell real estate real estate or interests therein are
(although investments in marketable securities of not prohibited by this restriction).
companies engaged in such activities and securities
secured by real estate or interests therein are not
prohibited by this restriction).
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO PURCHASING SECURITIES ON MARGIN:
[PROPOSAL
8.e.]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Purchase securities on Reclassified as a non-fundamental
margin. policy that provides as follows: [No
[Each of the Value Fund and the Income Fund may not:] Riverside Capital Fund may:] Purchase
Purchase securities on margin, except for use of securities on margin, except for use
short-term credit necessary for clearance of purchases of of short-term credit necessary for
portfolio securities. clearance of purchases of portfolio
[The Growth Fund may not:] Purchase securities on margin, securities and except as may be
except for use of short-term credit necessary for necessary to make margin payments in
clearance of purchases of portfolio securities and except connection with derivative securities
as may be necessary to make margin payments in connection transactions, including options,
with derivative securities transactions. futures and options on futures.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO THE SHORT-SELLING OF SECURITIES: [PROPOSAL
8.f.]
- -----------------------------------------------------------------------------------------------------
[None of the Riverside Capital Fund may:] Engage in any Reclassified as a non-fundamental
short sales. policy that provides as follows: [No
Riverside Capital Fund may:] Engage
in any short sales.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO COMMODITIES: [PROPOSAL
9]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not]: Purchase or sell [No Riverside Capital Fund may:]
commodities or commodity contracts (including futures Purchase or sell commodities or
contracts). commodity contracts except to the
extent disclosed in the current
Prospectus of the Fund.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO MAKING LOANS: [PROPOSAL
10.a.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund or the [No Riverside Capital Fund may:] Make
Income Fund may:] Make loans, except that each Fund may loans, except that the Fund may
purchase or hold debt instruments and lend portfolio purchase or hold debt instruments and
securities in accordance with its investment objective and lend portfolio securities in
policies, and may enter into repurchase agreements. accordance with its investment
objective and policies, make time
deposits with financial institutions
and may enter into repurchase
agreements.
- -----------------------------------------------------------------------------------------------------
</TABLE>
D-3
<PAGE> 54
<TABLE>
<CAPTION>
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
<S> <C>
WITH RESPECT TO THE UNDERWRITING OF SECURITIES: [PROPOSAL
10.b.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund and the [No Riverside Capital Fund may:]
Income Fund may:] Underwrite the securities issued by Underwrite the securities issued by
other persons, except to the extent that the Fund may be other persons, except to the extent
deemed to be an underwriter under certain securities laws that the Fund may be deemed to be an
in the disposition of "restricted securities" acquired in underwriter under certain securities
accordance with the Fund's investment objectives and laws in the disposition of
policies. "restricted securities."
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO MORTGAGING OR PLEDGING ASSETS: [PROPOSAL
10.c.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund or the Reclassified as a non-fundamental
Income Fund may:] Mortgage, pledge, or hypothecate any policy that provides as follows: [No
assets, except in connection with any [permissible] Riverside Capital Fund may:] Mortgage
borrowing and in amounts not in excess of the lesser of or hypothecate the Fund's assets in
the dollar amounts borrowed or 10% of the value of such excess of 50% of the Fund's total
Fund's total assets at the time of its borrowing. assets; provided that each Fund may
also segregate assets without limit
in order to comply with the
requirements of sec.18(f) of the 1940
Act and applicable interpretations
thereof published from time to time
by the Commission and its staff.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO OIL, GAS OR MINERAL INTERESTS: [PROPOSAL
10.d.]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Purchase or sell oil, gas None
or mineral exploration or development programs (although
investments in marketable securities of companies engaged
in such activities are not prohibited by this
restriction).
[Neither of the Value Fund nor the Income Fund may:]
Purchase participations or direct interests in oil, gas or
other mineral exploration or development programs
(although investments by the Fund in marketable securities
of companies engaged in such activities are not prohibited
by this restriction).
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO PURCHASING OR WRITING OPTIONS: [PROPOSAL
10.e.]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Write or purchase put or None
call options.
[Neither the Value Fund nor the Income Fund may:] Invest
more than 5% of total assets in puts, calls, straddles,
spreads or any combination thereof.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO INVESTING IN CERTAIN SECURITIES HELD BY
THE GROUP'S OR THE INVESTMENT ADVISER'S TRUSTEES/DIRECTORS
OR OFFICERS: [PROPOSAL
10.f.]
- -----------------------------------------------------------------------------------------------------
The Money Market Fund may not:] Purchase or retain None
securities of any issuer if the officers or Trustees of
the Group or the officers or directors of its investment
adviser owning beneficially more than one-half of 1% of
the securities of such issuer together own beneficially
more than 5% of such securities.
[Neither the Value Fund nor the Income Fund may:] Purchase
or retain the securities of an issuer if, to the knowledge
of the Fund's management, the officers or trustees of the
Group, and the officers or directors of the investment
adviser, who each owns beneficially more than .5% of the
outstanding securities of such issuer, together own
beneficially more than 5% of such securities.
- -----------------------------------------------------------------------------------------------------
</TABLE>
D-4
<PAGE> 55
<TABLE>
<CAPTION>
CURRENT FUNDAMENTAL POLICY PROPOSED FUNDAMENTAL POLICY
<S> <C>
WITH RESPECT TO SECURITIES OF ISSUERS WITH LESS THAN THREE
YEARS OF CONTINUOUS OPERATION: [PROPOSAL
10.g.]
- -----------------------------------------------------------------------------------------------------
[None of the Money Market Fund, the Value Fund or the None
Income Fund may:] Invest more than 5% of total assets in
securities of issuers, which, together with any
predecessors, have a record of less than three years of
continuous operation.
[The Money Market Fund may not:] Invest more than 10% of
total assets in securities of issuers which together with
any predecessors have a record of less than three years of
continuous operation.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO INVESTING IN COMPANIES FOR PURPOSES OF
EXERCISING CONTROL: [PROPOSAL
11]
- -----------------------------------------------------------------------------------------------------
[The Money Market Fund may not:] Invest in any issuer for None
purposes of exercising control or management.
- -----------------------------------------------------------------------------------------------------
WITH RESPECT TO INVESTING IN WARRANTS: [PROPOSAL
12]
- -----------------------------------------------------------------------------------------------------
[Neither the Value Fund nor the Income Fund may:] Invest None
more than 5% of net assets in warrants valued at the lower
of cost or market; provided that included within that
amount, but not to exceed 2% of net assets, may be
warrants which are not listed on the New York or American
Stock Exchange. For the purposes of this restriction,
warrants acquired in units or attached to securities are
deemed to be without value.
- -----------------------------------------------------------------------------------------------------
</TABLE>
D-5
<PAGE> 56
PRELIMINARY
COPY
FORM OF PROXY
THE SESSIONS GROUP
RIVERSIDE CAPITAL _________________ FUND
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE GROUP
The undersigned hereby appoints Walter B. Grimm, J. David Huber and
George L. Stevens and each of them, with full power of substitution, proxies to
vote and act with respect to all Shares of
Riverside Capital _______________ Fund
(the "Fund"), a series of The Sessions Group (the "Group"), which the
undersigned is entitled to vote, at the Special Meeting of Shareholders of the
Group (the "Meeting") to be held on Wednesday, December 24, 1997, at 3435
Stelzer Road, Columbus, Ohio 43219, at 10:00 a.m., EST, and at any and all
adjournments thereof, on the following proposals and any matters incidental to
such proposals, and to transact such other business as may properly come before
the Meeting.
The Shares represented by this Proxy will be voted upon the proposals
listed above in accordance with the instruction given by the Shareholder, but if
no instruction is given, this Proxy will be voted FOR the proposals and in
accordance with the best judgment of the proxies on any other matter which
properly comes before the Meeting.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders dated November 26, 1997, and the Proxy Statement
attached thereto.
Please mark, sign, date and return the proxy card promptly using the
enclosed envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [ ]
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NOTE: Please sign legibly and exactly as name appears on this card.
Vote on Proposals:
1. Approval of a new Investment FOR [ ] AGAINST [ ] ABSTAIN [ ]
Advisory Agreement between the Group and National Bank of Commerce ("NBC") with
respect to the Riverside Capital Funds,
<PAGE> 57
2. Approval a Sub-Investment FOR [ ] AGAINST [ ] ABSTAIN [ ]
Advisory Agreement between NBC and Miller Anderson & Sherrerd, LLP with respect
to Riverside Capital Value Equity Fund and Riverside Capital Fixed Income Fund.
3. Approval of a Sub-Investment FOR [ ] AGAINST [ ] ABSTAIN [ ]
Advisory Agreement between NBC and Morgan Stanley Asset Management Inc. with
respect to Riverside Capital Money Market Fund and Riverside Capital Growth
Fund.
4. Approval of an amendment of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the investment objective of the Riverside Capital Money Market Fund.
5. Approval of an amendment of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the investment objective of the Riverside Capital Value Equity Fund.
6. Approval of an amendment of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the investment objective of the Riverside Capital Fixed Income Fund.
7. Approval of an amendment of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the investment objective of the Riverside Capital Growth Fund.
8. Approval of the following
matters with respect to certain
fundamental policies of each of the
Riverside Capital Funds:
a. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to diversification.
b. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to portfolio concentration.
c. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to borrowing money or issuing senior securities.
d. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to purchasing or selling real estate.
e. Amendment of each such FOR [ ] AGAINST [ ] ABSTAIN [ ]
Fund's fundamental policy with respect to purchasing securities on margin and
reclassification of such policy non-fundamental.
<PAGE> 58
f. Reclassification of each such FOR [ ] AGAINST [ ] ABSTAIN [ ]
Fund's fundamental policy with respect to selling securities short to make such
policy non-fundamental.
9. Approval of an amendment FOR [ ] AGAINST [ ] ABSTAIN [ ]
of the Riverside Capital Money Market Fund's fundamental policy with respect to
investing in commodities or commodity contracts.
10. Approval of the following matters with respect to certain fundamental
policies of each of the Riverside Capital Money Market, Value Equity and Fixed
Income Funds:
a. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to making loans.
b. Amendment of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to underwriting securities.
c. Reclassification of each such FOR [ ] AGAINST [ ] ABSTAIN [ ]
Fund's fundamental policy with respect to mortgaging or pledging assets to make
such policy non-fundamental.
d. Deletion of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to oil, gas or mineral participations.
e. Deletion of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to options.
f. Deletion of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ] fundamental
policy with respect to purchasing or retaining certain securities
held by trustees, officers or directors of the Group or its investment adviser.
g. Deletion of each such Fund's FOR [ ] AGAINST [ ] ABSTAIN [ ]
fundamental policy with respect to securities of issuers with less than three
years of continuous operation.
11. Approval of the deletion of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the Riverside Capital Money Market Fund's fundamental policy with respect to
investing in companies for purposes of exercising control.
12. Approval of the deletion of FOR [ ] AGAINST [ ] ABSTAIN [ ]
the Riverside Capital Value Equity Fund's and the Riverside Capital Fixed Income
Fund's fundamental policy with respect to investing in warrants.
If Shares are registered in the name of joint owners, each must sign
the proxy. When signing as executor, administrator,
<PAGE> 59
attorney, trustee or guardian or as custodian for a minor, please give full
title as such. If a corporation, please sign in full corporate name and indicate
the signer's office. If a partner, please sign in partnership name.
- ---------------------------------- ------
Signature [PLEASE SIGN WITHIN BOX] Date
- ---------------------------------- ------
Signature (Joint Owners) Date
