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KeyPremier Funds
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Dear Shareholder:
The Funds are pleased to present the 1997 semiannual report for the KeyPremier
Funds. Despite considerable volatility in the fourth quarter of 1997,
large-company U.S. stocks performed well during the past six months,
contributing to a solid return for the KeyPremier Established Growth Fund.
Small-company domestic stocks did not fare quite as well. After a strong rally
in the summer, they lost some of their momentum in the fall. This is one reason
the KeyPremier Aggressive Growth Fund lagged the larger cap Established Growth
Fund. Meanwhile, the U.S. bond markets posted their strongest six months in
several years, largely due to an unexpected "flight to quality" that made high-
quality U.S. bonds and other fixed-income securities the "investments of choice"
for overseas investors.
Certainly, it was an auspicious time to launch two additional KeyPremier
fixed-income funds. Both the KeyPremier Limited Duration Government Securities
Fund and the KeyPremier U.S. Treasury Obligations Money Market Fund benefited
from the bond market rally.
On the following pages, you will find remarks from the members of Martindale
Andres & Company, the day-to-day managers of your Funds. Robert Andres, managing
principal of Martindale Andres, provides an overview of the economic and market
factors that influenced their investment decisions during the past six months,
as well as his outlook for the future. Also included is an interview with each
Fund's portfolio manager, including Bill Martindale, who was featured in Money
Magazine's September 1997 issue.
The discussion and analysis will help you understand the particular tactics each
portfolio manager uses to pursue growth, income, preservation of capital or some
combination of these. We also provide for each Fund a comprehensive schedule of
Fund holdings; financial highlights and financial statements. We encourage you
to closely read the entire report.
Finally, thank you for your continued investment in the KeyPremier Funds. Please
feel free to contact The Funds at (888)539-1150 with any questions or comments.
Sincerely,
/s/ Robert E. Leech
Robert E. Leech
President and CEO
Keystone Asset Management Division
MARTINDALE ANDRES & COMPANY IS A WHOLLY OWNED SUBSIDIARY OF KEYSTONE FINANCIAL,
INC. AND PROVIDES INVESTMENT ADVISORY AND OTHER SERVICES TO THE FUNDS AND
RECEIVES FEES FOR THOSE SERVICES. THIS MATERIAL IS AUTHORIZED FOR DISTRIBUTION
ONLY WHEN PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE FUNDS ARE DISTRIBUTED BY
BISYS FUND SERVICES. MUTUAL FUNDS ARE NOT FDIC INSURED. THERE IS NO BANK
GUARANTEE, AND THEY MAY LOSE VALUE.
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<PAGE> 2
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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Dear KeyPremier Fund Shareholder:
We are pleased to send you this semi-annual report for the six months ended
December 31, 1997--a period that was marked by unusual volatility in the
financial markets and an economic slowdown in Asia, but one that ultimately
produced satisfactory results for many U.S. investors.
A quick glance at year-end numbers shows that both stocks and bonds provided
better-than-average total returns. From July 1 to December 31, 1997, all of the
major domestic stock indices posted solid advances, with the Standard & Poor's
500 Index (large capitalization stocks) gaining 10.58% and the Russell 2000
Index (small-capitalization stocks) rising 11.04%. In fact, the Dow Jones
Industrial Average ended 1997 with a 22% gain for the year, marking the first
time in history that the blue-chip average rose more than 20% for three
consecutive years.
Sharply lower interest rates lifted the prices of fixed-income securities. Total
returns for the year were well above historical levels.
A FIERCE FOREIGN UNDERTOW LURKED BENEATH THE SURFACE
By now, you've undoubtedly heard about the wave of deflation, currency
devaluations, bankruptcies and declining stock market prices that have swept
across much of Southeast Asia. These events have impacted Thailand, Indonesia,
South Korea and Malaysia, and even threatened Japan--the world's second-largest
economy. In an effort to raise cash, those nations have supplied the United
States with a surge of cheap products, while cutting back dramatically on their
purchase of goods produced by American companies. The problems in Asia are
expected to slow the U.S.'s economic growth, as measured by the Gross Domestic
Product (GDP), by as much as a full percentage point in 1998, and perhaps reduce
the earnings growth of many
multinational corporations.
The aforementioned events caused the stock market to be extremely volatile in
the second half of 1997. With investors unable to conclusively assess the Asian
impact, uncertainty was injected into the market. This uncertainty resulted in
making 1997 a memorable year for investors. Extending a recovery that began in
the spring, the stock market pushed steadily higher, with the Dow reaching an
all-time high of 8,259 on August 6. However, a gradual weakness promptly set in,
and stocks drifted lower before falling a startling 554 points on October 27.
Fortunately, even more volatility, this time on the upside, was in store. Led by
large-cap issues--which had powered the market for much of the preceding three
years--stocks finished the year close to their best levels, with the Dow ending
the year within 4% of its record high. (And, as we write this letter in
mid-February, the Dow and the S&P 500 have both risen to new heights.)
The stock market's volatility in the past six months highlights the benefits of
our buy-and-hold approach to equity investment. Our experience tells us that it
is extremely difficult to accurately time the market. Our expertise is not in
determining whether the overall stock market is undervalued or overvalued, but
rather in buying individual stocks for the long term. As a result, the
KeyPremier equity funds remained fully invested throughout this volatile period.
This discipline allowed us to participate in the market's rebound and post solid
performance results for the six-month period.
BONDS WERE THE SILVER LINING
U.S. fixed-income securities benefited from the concerns generated by the crisis
in Asia. When investors around the world sought a safe haven for their money,
they looked to the U.S. Treasury market. This "flight to quality" drove down
bond yields--the yield on 30-year bonds, for example, fell a full 50 basis
points (0.50%) during the last quarter of 1997.
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<PAGE> 3
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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Inflation remained tame throughout the period; for all of 1997, the Consumer
Price Index rose just 1.7%. With the 30-year Treasury bond yielding 5.92% at the
end of 1997, investors enjoyed a "real yield" (yield minus inflation) in excess
of 4%, high by historical standards.
WILL THE PAST PROVE TO BE PROLOGUE?
We have just concluded a most eventful year, one that leaves us with many
unanswered questions. Can the International Monetary Fund help the former "Asian
tigers" right themselves without additional damage, or will these slower growth
economies impede other countries' growth, including the United States? Will
inflation and interest rates remain low, fostering a hospitable environment for
stocks and bonds, or are we about to see an end to an economic climate that has
helped increase wealth in this country?
What is our outlook for 1998? While it is possible that the Asian slowdown could
have a continuing effect in the U.S., we do not believe it is likely that our
own economic expansion, now moving into its eighth year, will be crippled. The
economy continues to add jobs at an impressive rate; inflation shows few signs
of heating up; and increased worker productivity is proving to be this country's
economic salvation. While earnings growth may slow in certain sectors,
especially those that depend on Asia for a significant share of revenues, other
industries may benefit from the increasingly cheaper prices they have to pay for
work performed by foreign labor.
With this in mind, our 1998 outlook for equity and fixed-income markets is
positive. We expect the stock market to post a more normalized return of 10%-12%
in 1998. As for the fixed-income markets, we think it is likely that the Fed
will leave interest rates unchanged in the near term, and perhaps even lower
them. The implications of a meltdown in Asia are a serious concern, and the Fed
is unlikely to risk causing a worldwide crisis by raising interest rates and
damaging the international economic structure. For now, the Fed will probably be
content to wait and see how much of a true impact Asia will have on the U.S.
economy.
We thank you for your continued support.
Sincerely,
/s/ Robert P. Andres
Robert P. Andres
Managing Principal
Martindale Andres & Company
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<PAGE> 4
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER AGGRESSIVE GROWTH FUND(+)
Q. HOW DID THE FUND PERFORM IN THE MOST RECENT PERIOD?
A. As of December 31, 1997, the Fund posted a six-month total return of 6.50%
(without sales load).(1) This compares to a six-month gain of 7.34% for the
Russell 2000 Index of small-company U.S. stocks,(2) and 10.63% for the
Lipper Mid Cap Growth Fund Index.(3)
Q. WHAT WERE THE ESSENTIAL FACTORS AFFECTING THE FUND'S RESULTS?
A. We might describe the second half of 1997 as a "split personality" for
small- and mid-cap stocks. For several years now, smaller stocks have been
unable to keep pace with the large-cap stocks. This summer, they began to
play catch-up as capital poured in from investors. In the fourth quarter,
they reversed course (the Russell 2000 retreated 3%) when the problems in
Asia finally spilled over to the Western markets. More specifically, the
Fund's performance was impacted by a heavy commitment to technology stocks
(42.7% of net assets at 12/31/97), the sector most influenced by the
uncertainty.*
Q. HOW DO YOU SELECT THE STOCKS IN THE PORTFOLIO?
A. As "bottom up," long-term investors, our selection criteria stresses
understanding the company's mission, management and unique
competitive positioning. We look for companies emerging as world class in
their own right, then look to invest at a valuation level that is at a
discount to the company's growth rate. In keeping with this approach, we
held on to most of our technology stocks in the fourth quarter, despite the
dismal results.
A good example of a nontechnology stock that fits our criteria is Bush
Industries (1.75% of the Fund's portfolio). This consumer cyclicals business
provides ready-to-assemble furniture to the mass merchandisers of the world.
Another is Willis Lease Finance Corp. (0.4%), which has a very strong
competitive position within its industry. The company leases aircraft
engines and sells engine parts to major air carriers such as Delta
Airlines.*
Q. WHAT IS YOUR OUTLOOK FOR THE SMALL-CAP MARKET?
A. We are more optimistic about the future of smaller stocks than that of
large-caps. For three years, investors have driven the prices of large-cap
stocks to very high levels. Additionally, the pressure on the earnings of
large multinational corporations is greater than that of small companies
that tend to derive the majority of their revenues within the United States.
At some point, we expect a change in investor psychology that will reward
the smaller, faster growing companies with higher stock prices.
* Portfolio composition is subject to change.
+ Small-cap funds typically carry additional risks since smaller companies
generally have higher risk of failure. Historically, stocks of smaller
companies have experienced a greater degree of market volatility than stocks
on average.
(1) The six-month return, with the maximum sales charge of 4.50%, was 1.73%. The
total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception
date. In such instances, and without waiver of fees, total return would have
been lower.
(2) The Russell 2000 Index is representative of the broad U.S. market of
small-capitalization stocks. The index is unmanaged and does not reflect the
deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of fees for these value-added services.
(3) Lipper indexes are based on the performance of the largest funds within a
given investment objective and do not include multiple share classes of
similar funds. Returns for these indexes are net of fees. Source: Lipper
Analytical Services, Inc., December 1997.
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MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER ESTABLISHED GROWTH FUND
Q. HOW DID THE ESTABLISHED GROWTH FUND PERFORM DURING THE SECOND HALF OF 1997?
A. The Fund finished the six months ended December 31, 1997, with a total
return of 10.56% (without sales load).(1) The average growth and income
fund, as measured by Lipper Analytical Services, Inc., gained 9.86% during
the same period.(2) The Standard & Poor's 500, a broad index of
large-company common stocks, rose 10.57%.(3)
Q. WHAT TRANSPIRED IN THE U.S. STOCK MARKET DURING THIS PERIOD?
A. To borrow a phrase of Yogi Berra's, it was "deja vu all over again." The
year began with a handful of large-cap stocks leading the expansion in the
stock market. For instance, the five largest stocks in the S&P 500 increased
more than 34%, while the broader index increased only 17.45% from 12/31/96
through 6/30/97. During this early period, investors favored value stocks.
Performance in the market broadened to smaller stocks and growth stocks
between May and early fall, then switched back to the most liquid, large-cap
value names during the final quarter. This "flight-to-quality" was the
result of currency problems that first upset the markets of Asia and then
markets in this hemisphere. The effect on various market sectors was quite
un-
even, though. Technology stocks were battered, while consumer noncyclicals
held up much better.
Q. HOW DID THIS INFLUENCE THE FUND?
A. Our goal is to keep the portfolio diversified among 40 to 60 stocks and many
sectors. During the most recent period, this meant we were underweighted in
some of the strongest areas of the market, such as consumer staples (19.2%
of the Fund's portfolio) and financial services stocks (15.5%) and
overweighted in technology (19.3%). As bottom-up managers, though, we are
less concerned with such weightings than with the characteristics of the
individual companies we select.*
Strong performers during the period included pharmaceuticals and health-care
holdings such as Schering-Plough Corp. (the largest holding at 4.4% of net
assets as of 12/31), Johnson & Johnson Inc. (1.1%) and United Healthcare
(1.9%). To these, we added Centocor, Inc. (0.5%), a Malvern, Penn.,
biotechnology company whose fertile research and development effort we
believe should produce favorable long-term results.
Again, the Fund's technology stocks were among its strongest and weakest
contributors. Companies in the service end of technology, such as Automatic
Data Processing Systems (2.6%), generally posted gains. Manufacturers like
Silicon Graphics (0.5%) and Seagate Technology (0.4%) proved a drag on
performance.
To a lesser extent, the Fund's cash level, which was as high as 5% at times,
also contributed to its underperformance. However, the volatility in the
last quarter of the year provided us opportunities to reduce the Fund's cash
level to less than 1.5%.
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MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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Q. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET AND THE FUND?
A. We must admit that we underestimated the power of this bull market. Yet, we
continue to believe that it is unrealistic to expect 20% to 30% returns year
after year, particularly among large-cap stocks. We look for more down-to-
earth results (perhaps 10%-12%) going forward. Without the "rising tide that
lifts all boats," it will be even more important in the future to identify
and own those equities that have potential to consistently deliver growth in
earnings per share.
* Portfolio composition is subject to change.
(1) The six-month return, with the maximum sales charge of 4.50%, was 5.63%. The
total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception
date. In such instances, and without waiver of fees, total return would have
been lower.
(2) Lipper indexes are based on the performance of the largest funds within a
given investment objective and do not include multiple share class of
similar funds. Returns for these indexes are net of fees. Source: Lipper
Analytical Services, Inc., December 1997.
(3) The S&P 500 is unmanaged and is generally representative of the broad U.S
market of large-capitalization stocks. The index does not reflect the
deduction of fees associated with a mutual fund, such as investment
management and fund accounting fees. The Fund's performance reflects the
deduction of fees for these value-added services.
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<PAGE> 7
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER INTERMEDIATE TERM INCOME FUND
Q. HOW WOULD YOU DESCRIBE THIS FUND AND ITS PERFORMANCE?
A. This Fund owns primarily investment-grade taxable bonds with intermediate
maturities (i.e., three to ten years). It seeks to provide current income
and the potential for modest growth of capital over time. For the six months
ended December 31, 1997, the Fund delivered a total return of 5.80% (without
sales load),(1) compared to a six-month average total return of 5.60% for
the Lipper Intermediate Investment Grade Debt Funds Index.(2)
Q. HOW DO YOU ATTEMPT TO CAPTURE INCOME AND GROWTH IN THE FUND?
A. We build the Fund's portfolio from a variety of higher quality securities,
changing the mix from time to time to reflect the relative attractiveness of
various market sectors. For instance, as the fiscal year ended in June, the
mortgage sector looked weak, and we switched a sizable amount from that area
to corporate securities (38% of net assets at 12/31/97). Record levels of
new supply helped to bring prices down and yields up as the year
progressed.*
In addition to this active management of sectors, we pay close attention to
the direction of interest rates and the sensitivity of the portfolio to
interest rates at any given time.
Q. WHAT HAPPENED WITH INTEREST RATES, AND HOW DID THAT AFFECT THE FUND?
A. We entered the third quarter of 1997 fully prepared for the Federal Reserve
to raise interest rates or take no action. Since rising rates make prices
fall, we focused on owning shorter term securities, which are affected less
than long-term securities by such a change.
In fact, the Federal Reserve took no action, and investor psychology changed
in the fall. In addition, problems in the Asian stock markets prompted
investors to seek out high-quality investments. The result was an influx of
capital into the U.S. Treasury market, where yields declined and prices
rose. In sympathy with the Asian crisis, prices on U.S. corporate bonds
dropped. The Treasuries and agencies in the portfolio benefited, while our
investment in corporate securities dampened performance.
We actually saw the downturn as an opportunity to buy some high-quality,
short-term corporate issues, such as Chrysler (2.78% of Portfolio's assets),
Commercial Credit (1.82%) and Associates Corp. (1.82%). At the same time, we
became more bullish about the bond market. We eliminated some of our
high-coupon mortgage-backed securities due to the prepayment risk. We also
purchased long-term Treasuries, adjusting the Fund's average maturity to
8.68 years (vs. 9.66 years at June 30, 1997). Its duration was approximately
5.9 years as of December 1997.*
Q. WHAT IS YOUR OUTLOOK FOR INTEREST RATES AND FIXED-INCOME SECURITIES?
A. It would appear that the Federal Reserve will not raise interest rates in
the near future. The debacle in the Far East has tempered securities markets
worldwide and raised speculation about disinflation. While that may be an
overreaction, for the time being it should create uncertainty in the bond
market. Interest rates are likely to trade within a narrow range, while
showing considerable short-term volatility.
* Portfolio composition is subject to change.
(1 )The six-month return, with the maximum sales charge of 3.00%, was 1.05%. The
total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception
date. In such instances, and without waiver of fees, total return would have
been lower.
(2 )Lipper indexes are based on the performance of the largest funds within a
given investment objective and do not include multiple share classes of
similar funds. Returns for these indexes are net of fees. Source: Lipper
Analytical Services, Inc., December 1997.
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<PAGE> 8
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED DECEMBER 31, 1997?
A. The Fund produced a six-month total return of 3.96% (without sales load).(1)
This compares to a 4.62% total return for the Lipper Intermediate
Pennsylvania Fund Average, a composite of 12 mutual funds that invest in
securities issued by the State of Pennsylvania and its
municipalities.(2)
Q. HOW WOULD YOU CHARACTERIZE THIS MOST RECENT PERIOD OF OPERATIONS FOR THE
FUND?
A. During the past six months, we completed our repositioning of the Fund by
placing a greater importance on income and stability of principal. Our goal
was to structure the portfolio for higher current income without sacrificing
its high credit quality. We achieved this goal (the average credit rating of
77% of the securities in the portfolio are equivalent to AAA) while
maintaining an intermediate-term duration of 9.4 years as of 12/31/97.*
Q. WHY DID YOU EXTEND THE DURATION?
A. During the October to December quarter, bond yields declined. This was
prompted by three factors. First, expectations of increased inflation in the
United States subsided. Second, the Federal Reserve made it abundantly
apparent that it would take action if inflation were to accelerate. Third, a
currency crisis in Southeast Asia sent investors in search of high-quality,
safe investments. The inflows of capital to U.S. Treasuries and other
high-quality issues raised demand and prices while lowering yields.
The longer a bond's maturity, the more it may benefit from a fall in rates
like the one we saw in the fourth quarter. Therefore, we added to the
portfolio longer term bonds and bonds that we could purchase at a discount.
While the latter had lower coupons than other bonds in the portfolio and
lowered the Fund's average coupon slightly, they also can be good
investments to own when rates decline.
Q. WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET?
A. We expect the situation in Asia to continue to impact the markets there and
elsewhere for a matter of months. This should dampen any inflationary
pressures in the United States and prevent the Federal Reserve from raising
short-term interest rates until later in the year. In fact, we would not be
surprised to see the rates on long-term Treasury securities fall below 5%.
In light of this, we will maintain our present longer duration, which we
believe should help us to achieve a respectable total return and a
competitive current yield.
* Portfolio composition is subject to change.
(1) The six-month return, with the maximum sales charge of 4.50%, was -0.67%.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception
date. In such instances, and without waiver of fees, total return would have
been lower.
(2) Lipper indexes are based on the performance of the largest funds within a
given investment objective and do not include multiple share classes of
similar funds. Returns for these indexes are net of fees. Source: Lipper
Analytical Services, Inc., December 1997.
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<PAGE> 9
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER LIMITED DURATION GOVERNMENT SECURITIES FUND
Q. HOW DID THIS NEW KEYPREMIER FIXED-INCOME FUND PERFORM DURING ITS INITIAL SIX
MONTHS?
A. From its introduction on July 1, 1997, through December 31, 1997, the Fund
earned a total return of 2.80% (without sales load).(1)
Q. WHAT WERE THE ESSENTIAL EVENTS IN THE SHORT- AND INTERMEDIATE-TERM GOVERNMENT
SECURITIES
MARKETS?
A. Fears of a rapidly growing economy and higher inflation forced short-term
yields higher during the first half of the year, resulting in a relatively
flat yield curve (i.e., narrowing the difference in yields between short-
and
intermediate-term securities).
The economy remained healthy, but inflation did not increase (largely due to
productivity gains that held down costs). By late in the third quarter, the
bond market began a rally that was subsequently bolstered by the Asian
monetary crisis. A flight to quality issues, especially shorter term U.S.
Treasury securities, pushed prices of these securities up (and yields down)
to levels not seen in nearly three decades. At year-end the U.S. Treasury
yield stood at 4.91%.
Q. HOW DID YOU INVEST THE FUND'S ASSETS DURING THIS INITIAL PERIOD?
A. The portfolio is essentially an asymmetrical "barbell," with a very large
investment in government and agency securities with maturities of five years
or less, and a much smaller investment in ten-plus-year securities. The
average maturity of the Fund at 12/31/97 was
1.31 years.*
We avoided the medium-term securities because their yields were similar to
short-term yields. For instance, two-year securities were paying 5.34% at
year-end, while five-year issues were yielding only six basis points more,
or 5.40%. The yield differential did not provide enough incentive to assume
the incremental risk, especially in light of our outlook.
Q. WHAT IS YOUR OUTLOOK?
A. We are not convinced that yields on short- and intermediate-term government
issues can decline much further than the current levels. Our economy remains
strong, and corporate profits continue to be robust. In our view, this may
lead to higher wages, raising the specter of higher inflation. This, in
turn, could send rates higher, not lower. In that case, our emphasis on
short-term securities will insulate the Fund from falling prices.
* Portfolio composition is subject to change.
(1) The six-month return, with the maximum sales charge of 3.00%, was -0.29%.
The total return set forth may reflect the waiver of a portion of the fund's
advisory or administrative fees for certain periods since the inception
date. In such instances, and without waiver of fees, total return would have
been lower.
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<PAGE> 10
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER U.S. TREASURY OBLIGATIONS MONEY MARKET FUND(1)
Q. HOW DID THE U.S. TREASURY OBLIGATIONS MONEY MARKET FUND FARE DURING ITS FIRST
SIX MONTHS OF OPERATIONS?
A. From its introduction on July 1, 1997, through December 31, 1997, the Fund
gained a total of 2.41%.(2) The Fund's 7 day and 7 day effective yields as
of 12/31/97 were 4.91% and 4.76%, respectively.(3)
Q. WHAT OCCURRED IN THE U.S. TREASURY MARKETS DURING THE PERIOD?
A. The major event of the past six months was an unexpected rise in demand for
U.S. Treasury securities that pushed prices up and yields down across the
entire maturity spectrum. The primary cause was investors fleeing volatility
in the foreign (and, to a lesser extent, domestic) stock markets in search
of high-quality investments. U.S. Treasury securities are considered among
the world's most secure investments.
Q. HOW DID YOU INVEST THE FUND'S ASSETS DURING THIS INITIAL PERIOD?
A. More than three quarters of assets were invested in U.S. Treasury securities
with maturities of eight to 30 days. For the remainder, we focused on U.S.
Treasury-collateralized repurchase agreements, which were delivering yields
as high or higher than the longer term Treasury securities. As of December
31, the average maturity of the portfolio was 17 days.*
Q. WHAT IS YOUR OUTLOOK?
A. Now we feel somewhat cautious. Like many others, we expect that the
financial issues in Asia will continue to create volatility in the world's
stock markets for awhile. As long as this is the case, rates on Treasuries
should remain low. Over the longer term, we look for higher wages in the
United States, which could lead investors to expect higher inflation.
Whether the higher inflation materializes or not, the anticipation of it
could well drive rates to higher levels in the long term.
* Portfolio composition is subject to change.
(1) An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.
(2) Total return figures include reinvestment of dividends and capital gains.
Past performance is no guarantee of future results.
(3) Yields will fluctuate, and there can be no assurance that the Fund will be
able to maintain a stable net asset value of $1.00 per share.
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<PAGE> 11
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
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KEYPREMIER PRIME MONEY MARKET FUND(1)
Q. HOW DID THE PRIME MONEY MARKET FUND PERFORM DURING THE PAST SIX MONTHS?
A. For the six months ended December 31, 1997, the Fund posted a total return
of 2.58%,(2) compared to an average total return of 4.90% for the Lipper
Money Market Fund Index. The Fund's 7 day and 7 day effective yields as of
12/31/97 were 5.33% and 5.47%, respectively.(3)
Q. WHAT OCCURRED IN THE SHORT-TERM FIXED INCOME MARKETS DURING THE PERIOD?
A. As the six-month period began, short-term securities were trading in a
relatively narrow range between approximately 5.5% to 6.0%. This picture
changed in the fourth quarter after volatility in the foreign capital
markets ignited a "flight to quality." Demand for U.S. Treasury securities,
which are considered among the world's safest, highest quality investments,
rose dramatically in November and December, resulting in higher prices and
lower yields in our domestic fixed-income markets. At year-end, the yield on
one-year Treasuries had moved down to 6.77%, a level not seen since the late
1960s.
Q. WHAT WAS YOUR INVESTMENT STRATEGY IN MANAGING THE PRIME MONEY MARKET FUND?
A. We entered the period with a very short average maturity (just eight days)
in the expectation that the Federal Reserve would not act to raise the
federal funds rate. Had that occurred, this defensive positioning would have
helped protect the Fund from falling prices. Later, we extended the average
maturity in anticipation of two things. First, we saw clear signs
inflationary pressures would remain under control during the second half of
the year. Second, we believed the problems in the Far East would spread and
create a demand for "safe-haven" securities.
On December 31, 1997, the average maturity stood at 31 days. More than 97% of
assets were invested in U.S. Government and agency obligations or repurchase
agreements collateralized by U.S. Government obligations.
Q. WHAT DID THE PRIME MONEY MARKET FUND EXPERIENCE DURING THE LATTER HALF OF
1997?
A. As the year wound down, earlier worries about "exuberant" stock prices and
higher inflation shifted to talk of possible deflation. The monetary and
market crises that began in Thailand last summer did cause the world economy
to slow down significantly.
While we do not argue with the possibility of deflation, we also do not
believe that interest rates can only go lower. Once the markets have fully
factored in the Southeast Asian situation, wage pressures here at home could
well lead to expectations of higher inflation. In addition, in the
securities markets, it is investors' expectations that generally drive
prices and yields.
For these reasons, we are somewhat cautious about the longer term scenario
and we do not see any benefit in further extending maturities in the near
term. In addition, U.S. Government-collateralized repurchase agreements are
currently providing higher yields than three-month government and agency
securities. This gives us little incentive to assume the additional risk
associated with the longer term issues.
(1) An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. Yields will fluctuate, and there can be no assurance that the
Fund will be able to maintain a stable net asset value of $1.00 per share.
(2) Lipper indexes are based on the performance of the largest funds within a
given investment objective and do not include multiple share classes of
similar funds. Returns for these indexes are net of fees. Source: Lipper
Analytical Services, Inc., December 1997.
(3) Total return figures include change in share price and reinvestment of
dividends and capital gains. Past performance is no guarantee of future
results.
- --------------------------------------------------------------------------------
-11-
<PAGE> 12
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 13
Statements of Operations
PAGE 15
Statements of Changes in Net Assets
PAGE 17
Schedules of Portfolio Investments
PAGE 20
Notes to Financial Statements
PAGE 31
Financial Highlights
PAGE 37
12
<PAGE> 13
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA ESTABLISHED INTERMEDIATE
MONEY MARKET MUNICIPAL GROWTH TERM INCOME
FUND BOND FUND FUND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $109,434,650;
$114,314,012; $115,828,796; and
$212,153,900, respectively)................ $109,434,650 $117,507,520 $214,482,821 $216,282,413
Repurchase agreements (cost $38,950,000; $0;
$0, respectively).......................... 38,950,000 -- -- --
------------ ------------ ------------ ------------
Total Investments.......................... 148,384,650 117,507,520 214,482,821 216,282,413
Cash......................................... 43,517 -- -- --
Interest and dividends receivable............ 181,797 1,602,664 211,221 3,163,669
Receivable for investments sold.............. -- -- -- 12,285,625
Receivable for capital shares issued......... 5,000 -- 10,000 14,000
Unamortized organization costs............... 16,352 17,745 22,690 29,618
Prepaid expenses and other assets............ 13,598 18,143 20,424 32,443
------------ ------------ ------------ ------------
Total Assets............................... 148,644,914 119,146,072 214,747,156 231,807,768
------------ ------------ ------------ ------------
LIABILITIES:
Dividends payable............................ 660,553 655,242 457,669 1,127,311
Payable for capital shares redeemed.......... 840 -- 681 4,256
Accrued expenses and other payables:
Investment advisory fees................... 25,229 30,190 71,499 58,504
Administration fees........................ 2,347 1,873 3,281 3,643
Custodian fees............................. 7,937 4,601 2,611 8,657
Accounting fees............................ 612 674 1,030 1,032
Trustees' fees............................. 490 1,029 3,302 2,789
Legal fees................................. 13,616 15,009 7,715 4,066
Audit fees................................. 4,481 5,520 6,249 7,375
Transfer agent fees........................ 477 1,208 -- 1,284
Other Liabilities.......................... 1,136 1,345 1,641 1,561
------------ ------------ ------------ ------------
Total Liabilities.......................... 717,718 716,691 555,678 1,220,478
------------ ------------ ------------ ------------
NET ASSETS:
Capital...................................... 147,923,749 115,331,544 115,534,972 227,725,888
Undistributed (distributions in excess of)
net investment income...................... 3,084 (6,713) 2,466 63,008
Net unrealized appreciation (depreciation) on
investments................................ -- 3,327,715 98,654,025 4,128,513
Accumulated undistributed net realized gains
(losses) on investment transactions........ 363 (223,165) 15 (1,330,119)
------------ ------------ ------------ ------------
Net Assets................................. $147,927,196 $118,429,381 $214,191,478 $230,587,290
============ ============ ============ ============
Outstanding units of beneficial interest
(shares)................................... 147,926,702 11,334,659 17,564,710 23,020,712
============ ============ ============ ============
Net asset value -- redemption price per
share...................................... $ 1.00 $ 10.45 $ 12.19 $ 10.02
============ ============ ============ ============
Maximum Sales Charge......................... NA 4.50% 4.50% 4.50%
============ ============ ============ ============
Maximum Offering Price (100%/(100%-Maximum
Sales Charge) of net asset value adjusted
to nearest cent) per share(a).............. $ 1.00 $ 10.94 $ 12.76 $ 10.49
============ ============ ============ ============
</TABLE>
- ---------------
(a) Maximum offering price and redemption price are the same for the Money
Market Fund and the U.S. Treasury Obligations Money Market Fund.
NA Not Applicable
See notes to financial statements.
13
<PAGE> 14
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. TREASURY
AGGRESSIVE LIMITED DURATION OBLIGATIONS
GROWTH GOVERNMENT SECURITIES MONEY MARKET
FUND FUND FUND
------------ --------------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $77,952,326; $33,775,862; and
$20,937,035, respectively)............................. $118,751,512 $33,791,927 $20,937,035
Repurchase agreements ($0; $0; and $6,225,000,
respectively).......................................... -- -- 6,225,000
------------ ----------- -----------
Total Investments...................................... 118,751,512 33,791,927 27,162,035
Cash..................................................... -- 1,087,818 395
Interest and dividends receivable........................ 101,073 328,699 1,089
Receivable from brokers for investments sold............. 143,000 -- --
Receivable for capital shares issued..................... 31,136 -- --
Unamortized organization costs........................... 2,723 -- 7,170
Prepaid expenses and other assets........................ 11,883 6,778 7,074
------------ ----------- -----------
Total Assets........................................... 119,041,327 35,215,222 27,177,763
------------ ----------- -----------
LIABILITIES:
Dividends payable........................................ 9,326 172,167 108,915
Payable for investments purchased........................ 174,188 -- --
Accrued expenses and other payables:
Investment advisory fees............................... 49,245 -- --
Administration fees.................................... 1,809 552 423
Custodian fees......................................... 7,063 -- --
Accounting fees........................................ 413 490 428
Trustees' fees......................................... 1,147 384 227
Organizational costs................................... -- 2,448 --
Legal fees............................................. 10,314 8,463 9,084
Audit fees............................................. 2,005 5,128 5,018
Printing............................................... 1,810 -- --
Transfer agent fees.................................... -- 3,059 2,584
Registration and filing fees........................... -- 8,717 6,885
Other liabilities...................................... 1,828 163 326
------------ ----------- -----------
Total Liabilities...................................... 259,148 201,571 133,890
------------ ----------- -----------
NET ASSETS:
Capital.................................................. 77,470,172 35,014,350 27,044,149
Undistributed net investment income...................... (11,787) (6,141) --
Distribution in excess of net realized gains on
investments............................................ -- -- --
Net unrealized appreciation (depreciation) on
investments............................................ 40,799,186 16,064 --
Accumulated undistributed net realized gains (losses) on
investment transactions................................ 524,607 (10,623) (276)
------------ ----------- -----------
Net Assets............................................. $118,782,178 $35,013,650 $27,043,873
============ =========== ===========
Outstanding units of beneficial interest (shares)........ 11,022,641 3,504,351 27,044,149
============ =========== ===========
Net asset value -- redemption price per share............ $ 10.78 $ 9.99 $ 1.00
============ =========== ===========
Maximum Sales Charge..................................... 4.50% 3.00% NA
============ =========== ===========
Maximum Offering Price (100%/(100%-Maximum Sales Charge)
of net asset value adjusted to nearest cent) per
share(a)............................................... $ 11.29 $ 10.30 $ 1.00
============ =========== ===========
</TABLE>
- ---------------
(a) Maximum offering price and redemption price are the same for the Money
Market Fund.
See notes to financial statements.
14
<PAGE> 15
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA ESTABLISHED INTERMEDIATE
MONEY MARKET MUNICIPAL BOND GROWTH TERM INCOME
FUND FUND FUND FUND
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $3,443,823 $2,850,752 $ -- $ 7,400,629
Dividend income.......................... 10,078 34,106 1,603,449 272,437
---------- ---------- ----------- -----------
Total Income........................... 3,453,901 2,884,858 1,603,449 7,673,066
---------- ---------- ----------- -----------
EXPENSES:
Investment advisory fees................. 244,978 362,787 781,955 668,939
Administration fees...................... 70,431 69,534 119,900 128,213
Administrative services fees............. 153,112 151,161 260,652 278,724
Custodian fees........................... 22,060 9,797 13,418 25,630
Accounting fees.......................... 18,551 21,849 32,234 35,230
Legal fees............................... 16,020 16,198 12,444 9,770
Audit fees............................... 4,950 5,104 5,270 3,638
Organization costs....................... 2,410 2,576 2,600 3,238
Trustees' fees and expenses.............. 2,578 2,844 2,394 4,302
Transfer agent fees...................... 11,456 12,204 13,152 14,874
Registration and filing fees............. 18,476 21,100 36,930 35,874
Printing costs........................... 8,604 4,806 4,662 8,536
Other expenses........................... 2,079 2,569 3,761 4,502
---------- ---------- ----------- -----------
Total Expenses........................... 575,705 682,529 1,289,372 1,221,470
Less: Expenses voluntarily reduced..... (275,206) (332,554) (625,564) (613,193)
Expenses paid by third parties... (5,960) (5,509) -- --
---------- ---------- ----------- -----------
Net Expenses............................. 294,538 344,465 663,808 608,277
---------- ---------- ----------- -----------
Net Investment Income.................... 3,159,363 2,540,393 939,641 7,064,789
---------- ---------- ----------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) on investment
transactions........................... 363 284,722 508,955 1,790,665
Change in unrealized
appreciation/depreciation on
investments............................ -- 1,827,958 19,128,739 3,450,419
---------- ---------- ----------- -----------
Net realized/unrealized gains (losses) on
investments............................ 363 2,112,680 19,637,694 5,241,084
---------- ---------- ----------- -----------
Change in net assets resulting from
operations............................. $3,159,726 $4,653,073 $20,577,335 $12,305,873
========== ========== =========== ===========
</TABLE>
See notes to financial statements.
15
<PAGE> 16
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. TREASURY
AGGRESSIVE LIMITED DURATION OBLIGATIONS
GROWTH GOVERNMENT SECURITIES MONEY MARKET
FUND FUND(A) FUND(A)
---------- --------------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................... $ -- $1,077,541 $ 663,974
Dividend income.................................... 447,514 23,043 3,353
---------- ---------- -----------
Total Income..................................... 447,514 1,100,584 667,327
---------- ---------- -----------
EXPENSES:
Investment advisory fees........................... 599,936 107,642 50,247
Administration fees................................ 68,993 20,631 14,446
Administrative services fees....................... 149,984 44,851 31,404
Custodian fees..................................... 13,656 2,870 4,564
Accounting fees.................................... 19,690 16,072 15,410
Legal fees......................................... 10,224 10,118 10,118
Audit fees......................................... 5,396 5,128 5,018
Organization costs................................. 2,172 11,366 1,748
Trustees' fees and expenses........................ 1,936 846 576
Transfer agent fees................................ 12,066 14,006 13,374
Registration and filing fees....................... 15,870 8,728 6,894
Printing costs..................................... 6,194 6,862 7,816
Other expenses..................................... 1,642 558 460
---------- ---------- -----------
Total Expenses..................................... 907,759 249,678 162,075
Less: Expenses voluntarily reduced............... (449,952) (152,493) (81,591)
---------- ---------- -----------
Net Expenses....................................... 457,807 97,185 80,484
---------- ---------- -----------
Net Investment Income (Loss)....................... (10,293) 1,003,399 586,843
---------- ---------- -----------
REALIZED/UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment
transactions..................................... 785,803 4,169 (276)
Change in unrealized appreciation/depreciation on
investments...................................... 5,939,439 (19,752) --
---------- ---------- -----------
Net realized/unrealized gains (losses) on
investments...................................... 6,725,242 (15,583) (276)
---------- ---------- -----------
Change in net assets resulting from operations..... $6,714,949 $ 987,816 $ 586,567
========== ========== ===========
</TABLE>
- ---------------
(a) Commencement of the Funds began July 1, 1997 and July 1, 1997, respectively.
See notes to financial statements.
16
<PAGE> 17
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PRIME MONEY PENNSYLVANIA
MARKET FUND MUNICIPAL BOND FUND
---------------------------------- ---------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED FOR THE ENDED FOR THE
DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED
1997 JUNE 30, 1997 JUNE 30,
(UNAUDITED) 1997(A) (UNAUDITED) 1997(A)
------------------ ------------- ------------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................. $ 3,159,363 $ 3,548,971 $ 2,540,393 $ 3,780,631
Net realized gains (losses) on
investments transactions............ 363 151 284,722 (500,308)
Net change in unrealized
appreciation/depreciation on
investments......................... -- -- 1,827,958 1,013,284
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 3,159,726 3,549,122 4,653,073 4,293,607
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (3,159,363) (3,548,971) (2,803,774) (3,525,784)
In excess of net investment income.... -- -- -- (7,490)
From net realized gains on
investments......................... -- -- -- --
------------- ------------- ------------ ------------
Change in net assets from shareholder
distributions......................... (3,159,363) (3,548,971) (2,803,774) (3,533,274)
------------- ------------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........... 158,401,181 277,292,433 8,094,629 138,218,349
Dividends reinvested.................. 273,311 97,461 42,136 22,466
Cost of shares redeemed............... (106,598,017) (181,539,687) (14,751,142) (15,806,689)
------------- ------------- ------------ ------------
Change in net assets from capital
transactions.......................... 52,076,475 95,850,207 (6,614,377) 122,434,126
------------- ------------- ------------ ------------
Change in net assets.................... 52,076,838 95,850,358 (4,765,078) 123,194,459
NET ASSETS:
Beginning of period................... 95,850,358 -- 123,194,459 --
------------- ------------- ------------ ------------
End of period......................... $ 147,927,196 $ 95,850,358 $118,429,381 $123,194,459
============= ============= ============ ============
SHARE TRANSACTIONS:
Issued................................ 158,401,181 277,292,433 780,420 13,502,154
Reinvested............................ 273,332 97,461 4,069 4,069 2,191
Redeemed.............................. (106,598,017) (181,539,687) (1,424,256) (1,529,919)
------------- ------------- ------------ ------------
Change in shares........................ 52,076,496 95,850,207 (639,767) 11,974,426
============= ============= ============ ============
</TABLE>
- ---------------
(a) Commencement of the Funds began October 7, 1996 and October 1, 1996,
respectively.
See notes to financial statements.
17
<PAGE> 18
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
INTERMEDIATE TERM
ESTABLISHED GROWTH INCOME FUND
---------------------------------- ---------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED ENDED FOR THE
DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED
1997 JUNE 30, 1997 JUNE 30,
(UNAUDITED) 1997(A) (UNAUDITED) 1997(A)
------------------ ------------- ------------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................. $ 939,641 $ 1,367,711 $ 7,064,789 $ 7,316,278
Net realized gains (losses) on
investments transactions............ 508,955 551,283 1,790,665 (3,180,967)
Net change in unrealized
appreciation/depreciation on
investments......................... 19,128,739 19,134,379 3,450,419 (1,083,860)
------------- ------------- ------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 20,577,335 21,053,373 12,305,873 3,051,451
------------- ------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (941,515) (1,367,711) (6,944,689) (7,316,278)
In excess of net investment income.... -- -- -- --
From net realized gains on
investments......................... (1,060,223) -- -- --
------------- ------------- ------------ ------------
Change in net assets from shareholder
distributions......................... (2,001,738) (1,367,711) (6,944,689) (7,316,278)
------------- ------------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........... 20,027,652 184,221,521 33,185,534 233,118,215
Dividends reinvested.................. 58,452 6,152 96,000 47,928
Cost of shares redeemed............... (15,384,463) (12,999,095) (15,914,310) (21,042,434)
------------- ------------- ------------ ------------
Change in net assets from capital
transactions.......................... 4,701,641 171,228,578 17,367,224 212,123,709
------------- ------------- ------------ ------------
Change in net assets.................... 23,277,238 190,914,240 22,728,408 207,858,882
NET ASSETS:
Beginning of period................... 190,914,240 -- 207,858,882 --
------------- ------------- ------------ ------------
End of period......................... $ 214,191,478 $ 190,914,240 $230,587,290 $207,858,882
============= ============= ============ ============
SHARE TRANSACTIONS:
Issued................................ 1,698,394 18,435,219 3,340,760 23,412,762
Reinvested............................ 4,904 628 9,681 4,916
Redeemed.............................. (1,291,417) (1,283,018) (1,599,287) (2,148,120)
------------- ------------- ------------ ------------
Change in shares........................ 411,881 17,152,829 1,751,154 21,269,558
============= ============= ============ ============
</TABLE>
- ---------------
(a) Commencement of the Funds began December 2, 1996 and December 2, 1996,
respectively.
See notes to financial statements.
18
<PAGE> 19
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
LIMITED DURATION U.S. TREASURY
AGGRESSIVE GOVERNMENT OBLIGATIONS MONEY
GROWTH FUND SECURITIES FUND MARKET FUND
----------------------------------- ------------------ ------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED FOR THE PERIOD ENDED ENDED
DECEMBER 31, ENDED DECEMBER 31, DECEMBER 31,
1997 JUNE 30, 1997(A) 1997(A)
(UNAUDITED) 1997(A) (UNAUDITED) (UNAUDITED)
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.............. $ (10,293) $ 108,559 $ 1,003,399 $ 586,843
Net realized gains (losses) on
investments transactions......... 785,803 1,071,938 4,169 (276)
Net change in unrealized
appreciation/ depreciation on
investments...................... 5,939,439 2,060,746 (19,752) --
----------- ------------ ----------- ------------
Net increase (decrease) in net assets
resulting from operations.......... 6,714,949 3,241,243 987,816 586,567
----------- ------------ ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......... (9,326) (108,559) (1,009,539) (586,843)
From net realized gains on
investments...................... (1,333,135) -- (14,793) --
----------- ------------ ----------- ------------
Change in net assets from shareholder
distributions...................... (1,342,461) (108,559) (1,024,332) (586,843)
----------- ------------ ----------- ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued........ 16,593,580 107,127,261 41,898,520 50,286,418
Dividends reinvested............... 58,062 1,009 2,032 80,297
Cost of shares redeemed............ (8,499,772) (5,003,134) (6,850,386) (23,322,566)
----------- ------------ ----------- ------------
Change in net assets from capital
transactions....................... 8,151,870 102,125,136 35,050,166 27,044,149
----------- ------------ ----------- ------------
Change in net assets................. 13,524,358 105,257,820 35,013,650 27,043,873
NET ASSETS:
Beginning of period................ 105,257,820 -- -- --
----------- ------------ ----------- ------------
End of period...................... 118,782,178 $105,257,820 $35,013,650 $ 27,043,873
=========== ============ =========== ============
SHARE TRANSACTIONS:
Issued............................. 1,489,363 10,794,978 4,188,630 50,286,418
Reinvested......................... 5,542 113 203 80,297
Redeemed........................... (752,567) (514,788) (684,483) (23,322,566)
----------- ------------ ----------- ------------
Change in shares..................... 742,338 10,280,303 3,504,350 27,044,149
=========== ============ =========== ============
</TABLE>
- ---------------
(a) Commencement of the Funds began February 3, 1997, July 1, 1997, and July 1,
1997, respectively.
See notes to financial statements.
19
<PAGE> 20
THE SESSIONS GROUP
KEYPREMIER PRIME MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR SHARES OR
PRINCIPAL SECURITY AMORTIZED PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST AMOUNT DESCRIPTION COST
- ----------- ------------------------------ ------------ ----------- ------------------------------ ------------
<C> <S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (4.6%):
Financial Services (1.9%):
$ 2,744,594 Capital Equipment Receivable
Trust, 5.79%, 12/15/98...... $ 2,744,594
------------
Private Placement (2.7%):
4,000,000 Asset Backed Securities
Investment Trust 1997 C,
5.69%, 1/15/98**(b)......... 4,000,000
------------
Total Asset Backed Securities......... 6,744,594
------------
U.S. GOVERNMENT AGENCIES (64.0%):
Federal Agricultural Mortgage Corporation (6.7%):
10,000,000 5.61%, 3/16/98................ 9,884,683
------------
Federal Home Loan Bank (9.4%):
9,000,000 5.75%, 1/21/98................ 8,971,250
5,000,000 5.65%, 2/13/98................ 4,966,257
------------
13,937,507
------------
Federal Home Loan Mortgage Corporation (35.7%):
10,000,000 5.74%, 1/22/98................ 9,966,459
22,000,000 5.74%, 1/23/98................ 21,923,490
7,000,000 5.71%, 1/30/98................ 6,967,802
5,000,000 5.66%, 2/12/98................ 4,966,983
5,000,000 5.66%, 2/13/98................ 4,966,197
4,000,000 5.63%, 2/18/98................ 3,969,973
------------
52,760,904
------------
Federal National Mortgage Association (12.2%):
1,200,000 4.45%, 1/20/98................ 1,198,998
5,000,000 5.70%, 1/21/98................ 4,984,167
10,000,000 5.66%, 2/18/98................ 9,924,533
2,000,000 5.71%, 3/18/98................ 1,999,706
------------
18,107,404
------------
Total U.S. Government Agencies........ 94,690,498
------------
U.S. GOVERNMENT AGENCIES, CONTINUED
Corporate Obligations (5.4%):
$ 3,000,000 Bank of America, 5.65%*,
1/16/98..................... $ 2,999,558
5,000,000 Bankers Trust Corp., 6.20%*,
1/2/98...................... 5,000,000
------------
Total Corporate Obligations........... 7,999,558
------------
REPURCHASE AGREEMENTS (26.3%):
23,950,000 Lehman Brothers, dated
12/31/97, 6.55%, matures
1/2/98, Proceeds at maturity
$23,958,715 (Collateralized
by $24,440,000 Federal Home
Loan Mortgage Corporation,
0.00%, 2/1/14-12/2/19,
market value =
$24,433,849)................ 23,950,000
15,000,000 Merrill Lynch Securities Inc.,
dated 12/31/97, 6.50%,
matures 1/2/98, Proceed at
maturity $15,005,417
(Collateralized by
$17,297,545 Government
National Mortgage
Association, 6.00%-9.00%,
11/15/10-11/15/27, market
value = $15,304,386)........ 15,000,000
Total Repurchase Agreements........... 38,950,000
------------
Total Investments (Amortized Cost
$148,384,650)(a) -- 100.3%.......... 148,384,650
Liabilities in excess of other assets
(0.3)%.................................. (457,454)
------------
TOTAL NET ASSETS -- 100.0%............ $147,927,196
============
</TABLE>
- ---------------
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Represents a restricted security, purchased under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended.
* Floating Rate Certificates are securities with interest rates that change
whenever a specific interest rate changes. The interest rate is based on an
index of market interest rates or other index. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect on December 31,
1997. The date presented represents the next rate change date.
** Variable Rate Certificates are securities with interest rates that change
periodically and are payable on different dates ranging from daily, weekly,
monthly, quarterly, or semi-annually. The rate reflected on the Schedule of
Portfolio Investments is the rate in effect on December 31, 1997. The date
presented represents the next rate change date.
See notes to financial statements.
20
<PAGE> 21
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS (98.2%):
Pennsylvania (98.2%):
$1,100,000 Allegheny County, Pennsylvania Pittsburgh Airport Revenue,
5.25%, 1/1/16, MBIA, AMT.................................. $ 1,098,625
1,525,000 Allegheny Hospital, Pennsylvania, 5.00%, 7/1/09, MBIA....... 1,555,500
1,000,000 Altoona, Pennsylvania City Authority Water Revenue, 5.10%,
11/1/12, FGIC............................................. 1,010,000
1,330,000 Berks County, Pennsylvania Municipal Authority, 7.10%,
5/15/22, Prerefunded 5/15/04 @ 100, FGIC.................. 1,534,488
1,000,000 Bethel Park, Pennsylvania School District, 5.40%, 8/1/00,
Callable 8/1/99 @ 100, FGIC............................... 1,021,250
1,000,000 Bethlehem, Pennsylvania Area School District, 4.85%, 9/1/10,
FGIC...................................................... 1,007,500
1,000,000 Bethlehem, Pennsylvania Area School District, Series A,
6.50%, 9/1/00, AMBAC...................................... 1,061,250
2,065,000 Bethlehem, Pennsylvania Water Authority, Series A, 6.30%,
11/15/15, Prerefunded 11/15/02 @ 100, MBIA................ 2,248,269
2,080,000 Blair County, Pennsylvania Hospital Health Care Bond
Secured, 5.30%, 8/15/17, MBIA............................. 2,111,200
1,000,000 Bucks County, Pennsylvania Technical School Authority,
5.38%, 8/15/15, AMBAC..................................... 1,018,750
1,000,000 Bucks County, Pennsylvania, Series A, 6.00%, 3/1/01......... 1,057,500
1,900,000 Central Dauphin, Pennsylvania School District, 6.00%,
6/1/01.................................................... 2,016,375
1,875,000 Chester County, Pennsylvania, 5.60%, 12/15/08, Callable
12/15/03 @ 100............................................ 1,968,750
4,000,000 Ephrata Pennsylvania Area School District, Series A, 6.80%,
4/15/11, Prerefunded 4/15/01 @ 100, FGIC.................. 4,325,000
2,000,000 Geisinger, Pennsylvania Health Systems Authority, Series B,
7.38%, 7/1/02, Callable 7/1/99 @ 102...................... 2,130,000
1,000,000 Hempfield, Pennsylvania School District, Lancaster County,
6.40%, 8/15/05, Prerefunded 8/15/02 @ 100, FGIC........... 1,087,500
500,000 Lycoming County, Pennsylvania Hospital Authority, Series B,
7.40%, 7/1/99............................................. 523,750
1,000,000 Northampton County, Pennsylvania Higher Education Authority,
Lehigh University, 6.00%, 9/1/01.......................... 1,061,250
2,155,000 Northampton County, Pennsylvania Higher Education Authority,
Lehigh University, 6.90%, 10/15/06, Callable 10/15/01 @
102, MBIA................................................. 2,394,744
2,000,000 Pennsylvania Housing Finance Agency, Rental Housing, 5.40%,
1/1/00, FNMA.............................................. 2,052,500
500,000 Pennsylvania Housing Financial Agency Single Family Mortgage
Series 36, 5.45%, 10/1/14................................. 506,875
2,000,000 Pennsylvania Infrastructure Investment Authority, 6.00%,
9/1/03, MBIA.............................................. 2,170,000
4,425,000 Pennsylvania Intergovernmental Cooperation Authority, 7.00%,
6/15/14, Prerefunded 6/15/05 @ 100, FGIC.................. 5,166,188
4,000,000 Pennsylvania Manor School District Pennsylvania, 5.20%,
6/1/16, FGIC.............................................. 4,030,000
2,075,000 Pennsylvania Second Service-Referendum & Projects, 5.60%,
6/15/14, MBIA............................................. 2,176,156
1,375,000 Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue, Series A, 6.80%, 12/1/00, FGIC...... 1,471,250
1,000,000 Pennsylvania State Higher Education Facilities Authority,
Drexel University, 7.00%, 5/1/02, Prerefunded 5/1/00 @
100, MBIA................................................. 1,065,000
3,925,000 Pennsylvania State Higher Education Facilities Authority,
Series A, 5.35%, 1/1/08, Callable 1/1/06 @ 101............ 4,160,500
1,750,000 Pennsylvania State Higher Education Facilities Authority,
Series D, 7.15%, 6/15/15, Prerefunded 6/15/00 @ 100,
MBIA...................................................... 1,874,688
2,000,000 Pennsylvania State Higher Education Facilities Authority,
Thomas Jefferson University, Series A, 5.90%, 8/15/00..... 2,097,500
260,000 Pennsylvania State Higher Education Facilities Authority,
Thomas Jefferson University, Series A, 6.88%, 7/1/99...... 269,425
2,000,000 Pennsylvania State Higher Education, Duquesne University,
Series A, 7.00%, 4/1/10, MBIA............................. 2,170,000
</TABLE>
Continued
21
<PAGE> 22
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Pennsylvania, Continued:
$1,500,000 Pennsylvania State Industrial Development Authority,
Economic Development, 5.00%, 7/1/00, AMBAC................ $ 1,531,875
3,515,000 Pennsylvania State Referendum, 5.38%, 11/15/03, FGIC........ 3,721,506
1,000,000 Pennsylvania State Turnpike, Series J, 6.40%, 12/1/00,
FGIC...................................................... 1,063,750
1,000,000 Pennsylvania State Turnpike, Series P, 5.20%, 12/1/00....... 1,031,250
3,500,000 Pennsylvania State, Series A, 6.70%, 1/1/02, Prerefunded
1/1/01 @ 101.5, MBIA...................................... 3,801,875
2,000,000 Philadelphia, Pennsylvania Airport Revenue, Philadelphia
Airport System, Series B, 5.00%, 6/15/05, FGIC, AMT....... 2,060,000
1,000,000 Philadelphia, Pennsylvania Gas Works, 14th Series, 5.50%,
7/1/04, FSA............................................... 1,065,000
1,000,000 Philadelphia, Pennsylvania Hospitals & Higher Education
Facilities Authority, Children's Hospital Series A, 6.50%,
2/15/21, Prerefunded 2/15/02 @ 102........................ 1,101,250
7,160,000 Philadelphia, Pennsylvania Hospitals & Higher Facility
Authority Revenue, 5.00%, 5/15/11......................... 7,159,999
7,000,000 Philadelphia, Pennsylvania School District Series B, 5.50%,
9/1/15, AMBAC............................................. 7,236,249
5,000,000 Philadelphia, Pennsylvania Water & Waste Revenue, 5.00%,
8/1/13.................................................... 5,000,000
1,000,000 Philadelphia, Pennsylvania Water & Wastewater, 6.25%,
8/1/02, MBIA.............................................. 1,082,500
1,000,000 Pittsburgh, Pennsylvania Water & Sewer Authority, Series A,
6.00%, 9/1/16, Prerefunded 9/1/01 @ 100, FGIC............. 1,062,500
1,700,000 Sayre, Pennsylvania Health Care Facilities Authority, Series
A, 6.60%, 3/1/01, AMBAC................................... 1,819,000
4,000,000 Tredyffrin Township, Pennsylvania, 5.25%, 11/15/17.......... 4,050,000
2,200,000 Union City, Pennsylvania Higher Education Facilities
Financing Authority, Bucknell University, 5.75%, 4/1/00,
MBIA...................................................... 2,277,000
4,000,000 University Of Pittsburgh, Pennsylvania Referendum Series B,
5.00%, 6/1/17, MBIA....................................... 3,970,000
1,500,000 Washington County, Pennsylvania Hospital Authority, 5.88%,
12/15/13, AMBAC........................................... 1,580,625
1,000,000 West Shore, Pennsylvania School District, 6.40%, 9/1/01,
Partially Prerefunded 9/1/98 @ 100, FGIC.................. $ 1,015,570
3,000,000 Westmoreland County, Pennsylvania, 6.70%, 8/1/09,
Prerefunded 8/1/01 @ 100, AMBAC........................... 3,251,250
1,850,000 York County, Pennsylvania Industrial Development Authority,
6.25%, 7/1/02............................................. 2,000,313
------------
116,323,295
------------
Total Municipal Bonds....................................... 116,323,295
============
INVESTMENT COMPANIES (1.0%):
835,982 Federated Pennsylvania Municipal Cash Fund.................. 835,982
348,243 Federated Pennsylvania Municipal Cash Trust Service
Shares.................................................... 348,243
------------
Total Investment Companies........................................... 1,184,225
------------
Total Investments (Cost $114,314,012)(a) -- 99.2%.................... 117,507,520
Other assets in excess of liabilities 0.8%........................... 921,861
------------
Total Net Assets -- 100.0%........................................... $118,429,381
============
</TABLE>
- ---------
Percentages indicated are based on net assets of $123,194,459.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $3,255,047
Unrealized depreciation......................... 61,539
----------
Net unrealized appreciation..................... $3,193,508
==========
</TABLE>
See notes to financial statements.
22
<PAGE> 23
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C>
AMBAC -- AMBAC Indemnity Corp.
FGIC -- Insured by the Financial Guaranty Insurance Corp.
MBIA -- Insured by the Municipal Bond Insurance Assoc.
FNMA -- Federal National Mortgage Association.
FSA -- Financial Security Assurance Corp.
Interest on securities subject to Federal Alternative
AMT -- Minimum Tax.
</TABLE>
See notes to financial statements.
23
<PAGE> 24
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (98.6%):
Aerospace/Defense--Equipment (1.8%):
60,000 Textron, Inc.................. $ 3,750,000
------------
Automotive Parts (3.0%):
34,000 Autoliv, Inc.................. 1,113,500
24,000 Eaton Corp.................... 2,142,000
90,000 Echlin, Inc................... 3,256,875
------------
6,512,375
------------
Banks (4.9%):
68,200 First Union Corp.............. 3,495,250
72,000 Fleet Financial Group, Inc.... 5,395,500
40,000 Norwest Corp.................. 1,545,000
------------
10,435,750
------------
Beverages (2.9%):
94,000 Coca-Cola Co.................. 6,262,750
------------
Chemicals (3.1%):
65,000 Hercules, Inc................. 3,254,063
------------
100,000 Morton International, Inc..... 3,437,500
------------
6,691,563
------------
Computer Networks (1.8%):
40,000 Seagate Technology, Inc.(b)... 770,000
80,000 Silicon Graphics, Inc.(b)..... 995,000
50,000 Sun Microsystems, Inc.(b)..... 1,993,750
------------
3,758,750
------------
Computer Software (7.5%):
90,000 Automatic Data Processing,
Inc......................... 5,523,750
165,000 Computer Associates
International, Inc.......... 8,724,374
70,000 Netscape Communications
Corp.(b).................... 1,706,250
------------
15,954,374
------------
Computers--Main & Mini (1.4%):
52,000 Compaq Computer Corp.......... 2,934,750
------------
Cosmetics/Personal Care (3.4%):
90,000 Procter & Gamble Co........... 7,183,125
------------
Diversified/Conglomerate (3.2%):
94,000 General Electric Co........... 6,897,250
------------
Electronic Components (1.0%):
85,000 Micron Technology, Inc........ 2,210,000
------------
Environmental Services (0.5%):
50,000 Republic Industries,
Inc.(b)..................... 1,165,625
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Financial Services (10.4%):
62,000 Capital One Financial Corp.... $ 3,359,625
120,000 Federal National Mortgage
Assoc....................... 6,847,500
160,000 Green Tree Financial Corp..... 4,190,000
130,000 Morgan Stanley Dean Witter
Discover & Co............... 7,686,249
------------
22,083,374
------------
Food Processing & Packaging (2.3%):
152,000 ConAgra, Inc.................. 4,987,500
------------
Furniture & Furnishings (3.7%):
50,000 Armstrong World Industries,
Inc......................... 3,737,500
75,000 Lancaster Colony Corp......... 4,228,125
------------
7,965,625
------------
Health Care--Drugs (0.5%):
30,000 Centocor, Inc.(b)............. 997,500
------------
Heating & Air Conditioning Equipment (1.0%):
45,000 Tecumseh Products Co., Class
B........................... 2,199,375
------------
Insurance (0.4%):
13,000 Aetna, Inc.................... 917,313
------------
Medical--Hospital Management Services (1.8%):
150,000 Genesis Health Ventures,
Inc.(b)..................... 3,956,250
------------
Medical Instruments (4.1%):
168,000 Medtronic, Inc................ 8,788,500
------------
Medical--Health Management Organization (1.9%):
80,000 United Health Care Corp....... 3,975,000
------------
Mining (2.9%):
75,000 Potash Corp. of Saskatchewan,
Inc......................... 6,225,000
------------
Motor Vehicles (1.6%):
100,000 Chrysler Corp................. 3,518,750
------------
Oil & Gas (4.0%):
74,000 Coastal Corp.................. 4,583,375
55,000 Mobil Corp.................... 3,970,313
------------
8,553,688
------------
Pharmaceuticals (7.0%):
28,000 American Home Products
Corp........................ 2,142,000
60,000 Astra AB, Class A............. 1,031,250
36,000 Johnson & Johnson............. 2,371,500
150,000 Schering-Plough Corp.......... 9,318,749
------------
14,863,499
------------
</TABLE>
Continued
24
<PAGE> 25
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Restaurants (1.7%):
155,000 Wendy's International, Inc.... $ 3,729,688
------------
Retail--Apparel (1.2%):
75,000 Gap, Inc...................... 2,657,813
------------
Telecommunications (2.4%):
110,000 Loral Space & Communications
Ltd.(b)..................... 2,358,125
50,000 Motorola, Inc................. 2,853,125
------------
5,211,250
------------
Textile (3.8%):
200,000 Unifi, Inc.................... 8,137,500
------------
Tools (3.2%):
110,000 Danaher Corp.................. 6,943,750
------------
Utilities--Electric (3.3%):
100,000 Baltimore Gas & Electric
Co.......................... 3,406,250
88,000 Consolidated Edison Co. of New
York........................ 3,608,000
------------
7,014,250
------------
Utilities--Gas & Pipeline (4.3%):
75,000 Sonat, Inc.................... 3,431,250
200,000 Williams Cos., Inc............ 5,675,000
------------
9,106,250
------------
Utilities--Telecommunications (1.8%):
67,000 Sprint Corp................... 3,927,875
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Wholesale (0.8%):
60,000 Ikon Office Solutions......... $ 1,687,500
------------
Total Common Stocks................. 211,203,562
------------
PREFERRED STOCKS (0.1%):
Insurance (0.1%):
4,419 Aetna Services, Inc........... 315,959
------------
Total Preferred Stocks.............. 315,959
------------
INVESTMENT COMPANIES (1.4%):
328,299 Federated Government
Obligation Fund............. 328,299
313,097 Federated Prime Obligation
Fund........................ 313,097
1,402,158 Key Premier Prime Money Market
Fund........................ 1,402,158
919,746 Key Premier U.S. Treasury
Obligations Money Market
Fund........................ 919,746
------------
Total Investment Companies.......... 2,963,300
------------
Total Investments
(Cost--$115,328,796)(a)--100.1%... 214,482,821
------------
Liabilities in excess of other
assets (0.1)%......................... (291,343)
------------
TOTAL NET ASSETS--100.0%............ $214,191,478
============
</TABLE>
- ---------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $103,016,580
Unrealized depreciation......................... 4,362,555
------------
Net unrealized appreciation..................... $ 98,654,025
============
</TABLE>
(b) Represents Non-income producing securities
See notes to financial statements.
25
<PAGE> 26
THE SESSIONS GROUP
KEYPREMIER INTERMEDIATE TERM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SHARES
OR OR
PRINCIPAL SECURITY MARKET PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------ ----------- ------------------------------ ------------
<C> <S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (2.0%):
$ 4,500,000 IMC Home Equity Loan Trust,
Series 97-1, Class A-3,
6.82%, 10/25/11............. $ 4,571,775
------------
Total Asset Backed Securities......... 4,571,775
------------
CORPORATE BONDS (38.0%):
Automotive (2.2%):
5,000,000 General Motors Acceptance
Corp., 6.70%, 4/30/01....... 5,068,750
------------
Banks (13.8%):
7,500,000 Bank of Montreal, 7.80%,
4/1/07...................... 8,165,625
4,250,000 Bank One Dayton, 6.63%,
4/15/03..................... 4,303,125
6,000,000 First Union Corp., 6.55%,
10/15/35.................... 6,112,500
2,000,000 First USA Bank, 5.75%,
1/15/99..................... 1,995,000
5,000,000 Morgan (J.P.), 6.13%,
10/2/00..................... 5,006,250
6,000,000 Wachovia, 6.61%, 10/1/25...... 6,157,500
------------
31,740,000
------------
Financial Services (16.5%):
10,000,000 Associates Corp N.A., 6.68%,
9/17/99..................... 10,100,000
6,000,000 Chrysler Financial Corp.,
6.28%, 6/21/99.............. 6,022,500
4,000,000 Commercial Credit Co., 5.90%,
9/1/03...................... 3,935,000
4,000,000 Commercial Credit Co., 7.75%,
3/1/05...................... 4,300,000
6,000,000 Dow Capital, 9.20%, 6/1/10.... 7,335,000
6,000,000 Goldman Sachs GP., 7.25%,
10/1/05 (b)................. 6,292,500
------------
37,985,000
------------
Industrials (2.6%):
6,000,000 Weyerhaeuser Co., 6.95%,
10/1/27..................... 6,067,500
------------
Telecommunications (2.9%):
6,000,000 Motorola, Inc., 7.50%,
5/15/25..................... 6,720,000
------------
Total Corporate Bonds................. 87,581,250
------------
U.S. GOVERNMENT AGENCIES (29.8%):
Federal Home Loan Bank (0.6%):
1,500,000 6.34%, 5/5/03................. 1,498,815
------------
Federal Home Loan Mortgage Corporation (6.1%):
4,000,140 7.50%, 11/1/11, Pool #
E00458...................... 4,103,944
5,928,508 7.00%, 9/1/17, Pool # C90186.. 5,982,160
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corporation, continued:
$ 3,996,922 6.50%, 11/1/27,
Gold Pool # D84133.......... $ 3,950,718
------------
14,036,822
------------
Federal National Mortgage Association (14.4%):
8,855,091 6.50%, 3/1/11, Pool # 303787.. 8,863,238
7,600,000 7.00%, 11/25/21............... 7,687,856
3,000,000 Medium Term Note, 8.28%,
1/10/25..................... 3,753,360
5,798,466 7.50%, 1/1/27, Pool # 356381.. 5,931,772
6,993,381 7.00%, 11/1/27, Pool #
395783...................... 7,043,594
------------
33,279,820
------------
Government National Mortgage Association (8.7%):
4,795,348 7.00%, 10/15/24, Pool
#780385..................... 4,851,597
14,775,458 7.50%, 7/15/27, Pool #
439599...................... 15,139,821
------------
19,991,418
------------
Total U.S. Government Agencies........ 68,806,875
------------
U.S. TREASURY OBLIGATIONS (22.7%):
U.S. Treasury Notes (22.7%):
12,000,000 8.88%, 2/15/99................ 12,415,320
11,000,000 7.75%, 2/15/01................ 11,628,540
8,000,000 6.25%, 4/30/01................ 8,123,600
5,000,000 8.13%, 8/15/19................ 6,252,600
11,000,000 8.13%, 5/15/21................ 13,859,890
------------
Total U.S. Treasury Obligations....... 52,279,950
------------
INVESTMENT COMPANIES (1.3%):
1,399,063 Federated Government
Obligation Fund............. 1,399,063
451,005 Federated Prime Obligation
Fund........................ 451,005
1 Federated Treasury Fund....... 1
271,282 Key Premier Prime Money Market
Fund........................ 271,282
921,212 Key Premier U.S. Treasury
Obligations Money Market
Fund........................ 921,212
------------
Total Investment Companies............ 3,042,563
------------
Total Investments
(Cost $212,153,900)(a)--93.8%....... 216,282,413
Other assets in excess of liabilities
6.2%.................................... 14,304,877
------------
TOTAL NET ASSETS -- 100.0%............ $230,587,290
============
</TABLE>
- ---------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $4,271,725
Unrealized depreciation......................... 143,212
----------
Net unrealized appreciation..................... $4,128,513
==========
</TABLE>
(b) Represents a restricted security, purchased under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended.
See notes to financial statements.
26
<PAGE> 27
THE SESSIONS GROUP
KEYPREMIER AGGRESSIVE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (95.6%):
Aerospace/Defense--Equipment (4.2%):
43,000 Northrop Grumman Corp......... $ 4,945,000
------------
Automotive Parts (2.9%):
72,000 Gentex Corp.(b)............... 1,935,000
80,000 Mascotech, Inc................ 1,470,000
------------
3,405,000
------------
Banks (2.8%):
66,000 First American Corp.--
Tennessee................... 3,283,500
------------
Chemicals (4.3%):
128,000 Airgas, Inc.(b)............... 1,792,000
70,000 Lesco, Inc.................... 1,461,250
60,000 Valspar Corp.................. 1,912,500
------------
5,165,750
------------
Communication--Equipment (0.8%):
40,000 Transcrypt International,
Inc.(b)..................... 995,000
------------
Computer Networks (1.7%):
200,000 Computer Network Tech
Corp.(b).................... 700,000
70,000 Seagate Technology, Inc.(b)... 1,347,500
------------
2,047,500
------------
Computer Software (11.2%):
123,130 Affiliated Computer Services,
Inc.(b)..................... 3,239,858
200,000 Compuware Corp.(b)............ 6,399,999
35,000 Dialogic Corp.(b)............. 1,531,250
150,000 PSC, Inc.(b).................. 1,978,125
------------
13,149,232
------------
Computers (2.9%):
160,000 Hutchinson Technology,
Inc.(b)..................... 3,500,000
------------
Construction Materials (1.8%):
50,000 Fleetwood Enterprises, Inc.... 2,121,875
------------
Defense (2.5%):
37,000 Thiokol Corp.................. 3,006,250
------------
Educational Services (3.2%):
120,000 Devry, Inc.(b)................ 3,825,000
------------
Electrical Equipment (1.0%):
50,000 C-Cube Microsystems, Inc.(b).. 815,625
40,000 Cirrus Logic, Inc.(b)......... 425,000
------------
1,240,625
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electronic Instruments (3.0%):
60,000 CFM Technologies, Inc.(b)..... $ 922,500
90,000 Credence Systems Corp.(b)..... 2,666,250
------------
3,588,750
Financial Services (0.4%):
25,000 Willis Lease Finance
Corp.(b).................... 437,500
------------
Financial--Securities Brokers (4.1%):
64,000 Legg Mason, Inc............... 3,580,000
55,000 United Asset Management
Corp.(b).................... 1,344,063
------------
4,924,063
------------
Food & Related (2.1%):
48,000 Whole Foods Market, Inc.(b)... 2,454,000
------------
Furniture & Furnishings (3.4%):
80,000 Bush Industries, Inc.......... 2,080,000
46,000 Leggett & Platt, Inc.......... 1,926,250
------------
4,006,250
------------
Homebuilders--Mobile Homes (0.6%):
85,000 Winnebago Industries, Inc..... 754,375
------------
Hotel Management & Related Services (1.4%):
85,000 La Quinta Inns, Inc........... 1,641,563
------------
Household Products (1.6%):
35,000 Premark International, Inc.... 1,015,000
30,000 Tupperware Corp............... 836,250
------------
1,851,250
------------
Insurance (1.5%):
30,000 Arthur J. Gallagher &
Company..................... 1,033,125
35,000 K2, Inc....................... 796,250
------------
1,829,375
------------
Machinery & Equipment (0.8%):
100,000 Flow International Corp.(b)... 937,500
------------
Medical--Biotechnology (1.6%):
292,000 Integra Lifesciences
Corp.(b).................... 1,295,750
25,000 Visx, Inc.(b)................. 553,125
------------
1,848,875
------------
Medical--Hospital Management Services (3.2%):
45,000 Cerner Corp.(b)............... 950,625
110,000 Genesis Health Ventures,
Inc.(b)..................... 2,901,250
------------
3,851,875
------------
</TABLE>
Continued
27
<PAGE> 28
THE SESSIONS GROUP
KEYPREMIER AGGRESSIVE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Medical Equipment & Supplies (6.6%):
20,000 Arrow International, Inc...... $ 740,000
90,000 Mentor Corp. Minnesota........ 3,285,000
40,000 Respironics, Inc.(b).......... 895,000
60,000 St Jude Medical, Inc.......... 1,830,000
70,000 Syncor International
Corp.(b).................... 1,128,750
------------
7,878,750
------------
Medical--Health Management Organization (1.3%):
30,000 United Health Care Corp....... 1,490,625
------------
Oil & Gas (3.8%):
50,000 Forest Oil Corp.(b)........... 825,000
100,000 Lomak Petroleum, Inc.......... 1,625,000
75,000 Patina Oil & Gas.............. 576,563
50,000 Triton Energy Ltd............. 1,459,375
------------
4,485,938
------------
Pharmaceuticals (0.5%):
60,000 Interneuron Pharmaceuticals,
Inc.(b)..................... 570,000
------------
Retail--General Merchandise (1.3%):
70,000 Fingerhut Companies, Inc...... 1,496,250
------------
Services (2.1%):
54,000 Devon Group, Inc.(b).......... 2,484,000
------------
Special Industry--Equipment (3.1%):
90,000 Integrated Circuit Systems,
Inc.(b)..................... 2,565,000
40,000 Lam Research Corp.(b)......... 1,170,000
------------
3,735,000
------------
Telecommunication--Equipment (3.0%):
120,000 Digi International, Inc.(b)... 2,040,000
60,000 ECI Telecommunications Ltd.... 1,530,000
------------
3,570,000
------------
Telecommunications (1.4%):
80,000 Glenayre Technologies,
Inc.(b)..................... 790,000
100,000 Mosaix, Inc.(b)............... 881,250
------------
1,671,250
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Telecommunications--Services and Equipment (0.7%):
50,000 Transaction Network Services,
Inc.(b)..................... $ 862,500
------------
Textile (4.7%):
80,000 Lydall, Inc.(b)............... 1,560,000
100,000 Unifi, Inc.................... 4,068,750
------------
5,628,750
------------
Utilities--Electric (1.7%):
100,000 Trigen Energy Corp............ 1,975,000
------------
Utilities--Telephone (0.5%):
100,000 Picturetel Corp.(b)........... 650,000
------------
Wholesale--Food Products (1.9%):
50,000 JP Foodservice, Inc.(b)....... 1,846,875
30,000 Worthington Foods, Inc........ 420,000
------------
Total Common Stocks................... 113,575,046
INVESTMENT COMPANIES (4.4%):
920,474 Federated Government
Obligation Fund............. 920,474
319,064 Federated Prime Obligation
Fund........................ 319,064
3,017,182 Key Premier Prime Money Market
Fund........................ 3,017,182
919,746 Key Premier U.S. Treasury
Obligations Money Market
Fund........................ 919,746
------------
Total Investment Companies............ 5,176,466
------------
Total Investments
(Cost $77,952,326)(a)--100.0%....... 118,751,512
Other assets in excess of liabilities
0.0%.................................... 30,667
------------
TOTAL NET ASSETS--100.0%.............. $118,782,179
============
</TABLE>
- ---------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $48,600,784
Unrealized depreciation......................... 7,801,598
-----------
Net unrealized appreciation..................... $40,799,186
===========
</TABLE>
(b) Represents non-income producing securities.
See notes to financial statements.
28
<PAGE> 29
THE SESSIONS GROUP
KEYPREMIER LIMITED DURATION GOVERNMENT SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES SHARES
OR OR
PRINCIPAL SECURITY MARKET PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE AMOUNT DESCRIPTION VALUE
- ----------- ------------------------------ ----------- ---------- ------------------------------ -----------
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (28.3%):
Federal Home Loan Mortgage Corporation (9.4%):
$ 3,113,550 9.00%, 4/1/16................. $ 3,295,724
-----------
Federal National Mortgage Association
(18.9%):
5,000,000 5.25%, 3/25/98................ 4,994,849
1,500,000 5.24%, 7/15/98................ 1,497,675
86 10.00%, 10/1/00............... 91
129,793 7.95%, 3/25/20................ 129,601
-----------
6,622,216
-----------
Total U.S. Government Agencies........ 9,917,940
-----------
U.S. TREASURY OBLIGATIONS (61.2%):
U.S. Treasury Notes (61.2%):
1,000,000 5.63%, 1/31/98................ 1,000,140
9,400,000 5.75%, 12/31/98............... 9,414,288
1,000,000 5.88%, 3/31/99................ 1,002,680
10,000,000 5.75%, 9/30/99................ 10,013,701
-----------
Total U.S. Treasury Obligations....... 21,430,809
-----------
INVESTMENT COMPANIES (7.0%):
$ 806,250 Key Premier U.S. Treasury
Obligations Money Market
Fund........................ $ 806,250
1,636,928 Federated Government
Obligation Fund............. 1,636,928
-----------
Total Investment Companies............ 2,443,178
-----------
Total Investments
(Cost $33,775,862)(a)--96.5%........ 33,791,927
Other assets in excess of liabilities
3.5%.................................... 1,221,723
-----------
TOTAL NET ASSETS--100.0%.............. $35,013,650
===========
</TABLE>
- ---------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $49,898
Unrealized depreciation......................... 33,833
-------
Net unrealized appreciation..................... $16,065
=======
</TABLE>
See notes to financial statements.
29
<PAGE> 30
THE SESSIONS GROUP
KEYPREMIER U.T. TREASURY OBLIGATIONS MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ----------- ------------------------------ -----------
<C> <S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCIES (77.4%):
U.S. Treasury Bills (77.4%):
$21,000,000 1/22/98....................... $20,937,035
-----------
Total U.S. Government Agencies 20,937,035
-----------
REPURCHASE AGREEMENTS (23.0%):
6,225,000 Lehman Brothers, dated
12/31/97, 6.30%, matures
1/2/98, Proceeds at maturity
$6,227,179 (Collateralized
by $15,760,000 U.S. Treasury
Strips, 2/15/13, Market
Value = $6,351,122)......... 6,225,000
Total Repurchase Agreements........... 6,225,000
-----------
Total Investments (Amortized Cost
$27,162,035)(a)--100.4%............. 27,162,035
Liabilities in excess of other assets
(0.4)%................................ (118,162)
-----------
TOTAL NET ASSETS -- 100.0%........ $27,043,873
===========
</TABLE>
- ---------
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
30
<PAGE> 31
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
1. ORGANIZATION:
The Sessions Group (the "Group") was organized on April 25, 1988 as an Ohio
business trust, and is registered under the Investment Company Act of 1940
as amended, (the "1940 Act"), as an open-end management investment company.
The Group is authorized to issue an unlimited number of shares that are
units of beneficial interest, without par value. The Group offers shares of
a number of different series or portfolios, including the following series
for which Martindale Andres & Company, Inc., a wholly owned subsidiary of
Keystone Financial Inc., serves as investment adviser: KeyPremier Prime
Money Market Fund, KeyPremier Pennsylvania Municipal Bond Fund, KeyPremier
Established Growth Fund, KeyPremier Intermediate Term Income Fund,
KeyPremier Aggressive Growth Fund, KeyPremier Limited Duration Government
Securities Fund, and KeyPremier U.S. Treasury Obligations Money Market Fund
(individually, a "Fund" and collectively, the "Funds").
The investment objective of the Prime Money Market Fund is to seek current
income with liquidity and stability of principal. The investment objectives
of the Pennsylvania Municipal Bond Fund are to seek income which is exempt
from federal income tax and Pennsylvania state income tax, although such
income may be subject to the federal alternative minimum tax when received
by certain shareholders, and preservation of capital. The investment
objective for the Established Growth Fund is growth of capital with some
current income as a secondary objective. The investment objective of the
Intermediate Term Income Fund is current income with long-term growth of
capital as a secondary objective. The investment objective of the
Aggressive Growth Fund is growth of capital. The investment objective of
the Limited Duration Government Securities Fund is current income with
preservation of capital as a secondary objective. The investment objective
of the U.S. Treasury Obligations Money Market Fund is to seek current
income with liquidity and stability of principal.
Shares of the Funds may be sold to customers of Martindale Andres & Company
Inc. by the Group's distributor, BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services (the "Distributor") and its affiliates, and all
accounts of correspondent banks of Keystone Financial, Inc. and to the
general public.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
Continued
31
<PAGE> 32
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
SECURITIES VALUATION:
Investments of the Prime Money Market Fund and U.S. Treasury Obligations
Money Market Fund are valued at amortized cost, which approximates
market value. Under the amortized cost method, discount or premium is
amortized on a constant basis to the maturity of the security. In
addition, the Fund may not a) purchase any instrument with a remaining
maturity greater than 397 calendar days unless such investment is
subject to a demand feature, or b) maintain a dollar-weighted average
portfolio maturity which exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, commercial
paper, municipal securities and U.S. Government securities of the Funds
(collectively, "the variable net asset value funds"), are valued based
upon the current available prices in the principal market in which such
securities are normally traded. Investments in investment companies are
valued at their net asset values as reported by such companies. Other
securities for which quotations are not readily available are valued at
their fair value under procedures established by the Group's Board of
Trustees. The differences between the cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the amortization of
premium or discount. Dividend income is recorded on the ex-dividend
date. Gains or losses realized on sales of securities are determined on
the basis of identified costs.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions
such as banks and broker-dealers which Martindale Andres & Company, Inc.
deems creditworthy under guidelines approved by the Board of Trustees,
subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price generally
equals the price paid by each Fund plus interest negotiated on the basis
of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. The seller, under a repurchase
agreement, is required to maintain the value of collateral held pursuant
to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are
transferred to an account of the fund at a bank custodian.
REVERSE REPURCHASE AGREEMENTS:
The Funds may borrow for temporary purposes by entering into reverse
repurchase agreements. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase them at a mutually agreed-upon
date and price.
Continued
32
<PAGE> 33
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
At the time a Fund enters into a reverse repurchase agreement, the Fund
identifies cash and liquid securities as segregated in its records
having a value equal to the repurchase price (including accrued
interest), and will continually monitor the account to ensure such
equivalent value is maintained at all times.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
and distributable net realized capital gains, if any, are declared and
distributed at least annually for the Prime Money Market Fund and the
U.S. Treasury Obligations Money Market Fund. Dividends from net
investment income are declared and paid monthly and distributable net
realized capital gains, if any, are declared and distributed annually
for the Pennsylvania Municipal Bond, Intermediate Term Income, and
Limited Duration Government Securities Funds. Dividends from net
investment income are declared and paid quarterly and distributable net
realized capital gains, if any, are declared and distributed annually
for the Established Growth and Aggressive Growth Funds.
Dividends from net investment income and net realized capital gains are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences
are primarily due to differing treatments for net operating losses,
expiring capital loss carry forwards, and deferral of certain losses.
ORGANIZATION COSTS:
All expenses in connection with each Fund's organization and
registration under the 1940 Act and the Securities Act of 1933 were paid
by that Fund. Such expenses are amortized over a period of five years
commencing with the date of the initial public offering.
EXPENSE OFFSET ARRANGEMENTS:
Each Fund has entered into an arrangement with its custodian whereby
credits realized as a result of uninvested cash balance were used to
reduce a portion of the Fund's expenses as follows:
<TABLE>
<S> <C>
Prime Money Market Fund $5,960
Pennsylvania Municipal Bond Fund 5,509
</TABLE>
Continued
33
<PAGE> 34
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of portfolio securities (excluding short-term
securities) for the variable net asset value funds for the period ended
December 31, 1997, are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Pennsylvania Municipal Bond Fund....................... $ 44,037,860 $ 49,403,873
Established Growth Fund................................ $ 9,118,447 $ 631,693
Intermediate Term Income Fund.......................... $334,916,650 $318,847,419
Aggressive Growth Fund................................. $ 11,569,789 $ 4,525,764
Limited Duration Government Securities................. $ 86,466,932 $ 86,810,153
</TABLE>
4. RELATED PARTY TRANSACTIONS:
Investment advisory services are provided to the Funds by Martindale Andres
& Company, Inc. Under the terms of the investment advisory agreement,
Martindale Andres & Company, Inc. is entitled to receive fees based on a
percentage of the average net assets of each Fund.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services, Inc.
("BISYS Services") are subsidiaries of The BISYS Group, Inc.
BISYS, with whom certain officers and trustees of the Group are affiliated,
serves the Funds as administrator and distributor. Such officers and
trustees are paid no fees directly by the Funds for serving as officers and
trustees of the Group. Under the terms of the administration agreement,
BISYS's fees are computed daily as a percentage of the average net assets
of each Fund. BISYS Services serves the Funds as transfer agent and mutual
fund accountant.
The Group has adopted an Administrative Services Plan, pursuant to which
each Fund is authorized to pay compensation to banks and other financial
institutions (each a "Service Organization"), which may include Martindale
Andres & Company, Inc., and its correspondent and affiliated banks and
BISYS, for providing ministerial, recordkeeping and/or administrative
support services to their customers who are the beneficial or record owners
of a Fund. The compensation which is paid monthly, under the Administrative
Services Plan is a fee computed daily at an annual rate of up to 0.25% of
the average daily net asset value of a Fund.
BISYS is also entitled to receive commissions on sales of shares of the
variable net asset value funds. For the sixth months ended December 31,
1997, BISYS received $59,440 from commissions earned on sales of shares of
the variable net asset value funds, of which $173 was reallowed to
broker-dealers affiliated with Keystone Financial, Inc.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
Continued
34
<PAGE> 35
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
The Funds can and do invest a portion of their assets in the Money Market
Funds.
Information regarding these transactions is as follows for the six months
ended December 31, 1997:
<TABLE>
<CAPTION>
PRIME PENNSYLVANIA INTERMEDIATE
MONEY MUNICIPAL ESTABLISHED TERM
MARKET BOND GROWTH INCOME
FUND FUND FUND FUND
-------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)......... .40% .60% .75% .60%
Voluntary fee reductions..................... $122,491 $181,393 $364,912 $334,469
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)......... .115% .115% .115% .115%
Voluntary fee reductions..................... -- -- -- --
ADMINISTRATION SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)......... .25% .25% .25% .25%
Voluntary fee reductions..................... $152,718 $151,161 $260,652 $278,724
FUND ACCOUNTANT FEES......................... $ 18,551 $ 21,849 $ 32,234 $ 35,230
TRANSFER AGENT FEES.......................... $ 11,456 $ 12,204 $ 13,152 $ 14,874
</TABLE>
Continued
35
<PAGE> 36
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. TREASURY
LIMITED DURATION OBLIGATIONS
AGGRESSIVE GOVERNMENT MONEY
GROWTH SECURITIES MARKET
FUND FUND FUND
---------- ---------------- -------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............... 1.00% .60% .40%
Voluntary fee reductions........................... $299,968 $107,642 $50,247
ADMINISTRATION FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............... .115% .115% .115%
Voluntary fee reductions........................... -- -- --
ADMINISTRATION SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............... .25% .25% .25%
Voluntary fee reductions........................... $149,984 $ 44,851 $31,344
FUND ACCOUNTANT FEES............................... $ 19,690 $ 16,072 $15,410
TRANSFER AGENT FEES................................ $ 12,066 $ 14,006 $13,374
</TABLE>
6. ACQUISITION OF COMMON COLLECTIVE TRUST FUNDS:
On July 1, 1997 the Limited Duration Government Securities Fund acquired
all of the assets of various common and collective trust funds maintained
by affiliates of Martindale Andres & Co., Inc. The following is a summary
of shares issued, net assets acquired, net asset value per shares and
unrealized appreciation as of the dates acquired:
<TABLE>
<CAPTION>
LIMITED DURATION
GOVERNMENT
SECURITIES
FUND
----------------
<S> <C>
Shares................................. 3,467,684
Net Assets............................. $34,676,843
Net Asset Value........................ $ 10.00
Unrealized
Appreciation/(Depreciation).......... $ 35,816
</TABLE>
36
<PAGE> 37
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PRIME MONEY MARKET FUND PENNSYLVANIA MUNICIPAL BOND FUND
---------------------------------- ----------------------------------
FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997
(UNAUDITED) (A) (UNAUDITED) (A)
----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 1.00 $ 1.00 $ 10.29 $ 10.21
-------- -------- -------- --------
Investment Activities
Net investment income......... 0.026 0.037 0.22 0.34
Net realized and unrealized
gains (losses) on
investments................ -- -- 0.18 0.06
-------- -------- -------- --------
Total from Investment
Activities............... 0.026 0.037 0.40 0.40
-------- -------- -------- --------
Distributions
Net investment income......... (0.026) (0.037) (0.24) (0.32
Net realized gains............ -- -- 0.00 --
-------- -------- -------- --------
Total Distributions........ (0.026) (0.037) (0.24) (0.32)
-------- -------- -------- --------
Net Asset Value, End of
Period........................ $ 1.00 $ 1.00 $ 10.45 $ 10.29
======== ======== ======== ========
Total Return (excludes sales
charge) (b)................... 2.58% 3.73% 3.96% 3.98%
Ratios/Supplemental Data:
Net Assets, at end of period
(000)......................... $147,927 $ 95,850 $118,429 $123,194
Ratio of expenses to average net
assets (c).................... 0.48% 0.36% 0.57% 0.37%
Ratio of net investment income
to average net assets (c)..... 5.16% 5.02% 4.20% 4.46%
Ratio of expenses to average net
assets* (c)................... 0.93% 0.70% 1.12% 0.86%
Ratio of net investment income
to average net assets* (c).... 4.71% 4.68% 3.65% 3.97%
Portfolio Turnover.............. NA NA 37% 98%
Average Broker Commission Paid
(d)........................... NA NA NA NA
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Commencement of the Funds began October 7, 1996 and October 1, 1996,
respectively.
(b) Not Annualized
(c) Annualized
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
NA Not Applicable
See notes to financial statements.
37
<PAGE> 38
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
ESTABLISHED GROWTH INTERMEDIATE TERM INCOME FUND
---------------------------------- ----------------------------------
FOR THE SIX FOR THE PERIOD FOR THE SIX FOR THE PERIOD
MONTHS ENDED ENDED MONTHS ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997 JUNE 30, 1997
(UNAUDITED) (A) (UNAUDITED) (A)
----------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 11.13 $ 10.00 $ 9.77 $ 10.00
-------- -------- -------- --------
Investment Activities
Net investment income......... 0.05 0.08 0.32 0.36
Net realized and unrealized
gains (losses) on
investments................ 1.12 1.13 0.24 (0.23)
-------- -------- -------- --------
Total from Investment
Activities............... 1.17 1.21 0.56 0.13
-------- -------- -------- --------
Distributions
Net investment income......... (0.05) (0.08) (0.31) (0.36)
Net realized gains............ (0.06) -- -- --
-------- -------- -------- --------
Total Distributions........ (0.11) (0.08) (0.31) (0.36)
-------- -------- -------- --------
Net Asset Value, End of
Period........................ $ 12.19 $ 11.13 $ 10.02 $ 9.77
======== ======== ======== ========
Total Return (excludes sales
charge) (b)................... 10.56% 12.20% 5.80% 1.40%
Ratios/Supplemental Data:
Net Assets, at end of period
(000)......................... $214,191 $190,914 $230,587 $207,859
Ratio of expenses to average net
assets (c).................... 0.64% 0.44% 0.55% 0.37%
Ratio of net investment income
to average net assets (c)..... 0.90% 1.39% 6.34% 6.45%
Ratio of expenses to average net
assets* (c)................... 1.24% 1.01% 1.10% 0.84%
Ratio of net investment income
to average net assets* (c).... 0.30% 0.82% 5.79% 5.98%
Portfolio Turnover.............. 0% 1% 153% 329%
Average Broker Commission Paid
(d)........................... $ 0.0600 $ 0.0748 NA NA
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Commencement of the Funds began December 2, 1996 and December 2, 1996,
respectively.
(b) Not Annualized
(c) Annualized
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
NA Not Applicable
See notes to financial statements.
38
<PAGE> 39
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
LIMITED DURATION U.S. TREASURY
GOVERNMENT OBLIGATION MONEY
AGGRESSIVE GROWTH FUND SECURITIES FUND MARKET FUND
---------------------------------- ----------------- -----------------
FOR THE SIX FOR THE FOR THE SIX FOR THE SIX
MONTHS ENDED PERIOD ENDED MONTHS ENDED MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1997 DECEMBER 31, 1997
(UNAUDITED) (A) (UNAUDITED)(A) (UNAUDITED)(A)
----------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period...................... $ 10.24 $ 10.00 $ 10.00 $ 1.00
-------- -------- -------- --------
Investment Activities Net
investment income........... -- 0.01 0.28 0.02
Net realized and unrealized
gains (losses) on
investments ............. 0.66 0.24 (0.01) --
-------- -------- -------- --------
Total from Investment
Activities............. 0.66 0.25 0.27 0.02
-------- -------- -------- --------
Distributions Net investment
income...................... -- (0.01) (0.28) (0.02)
Net realized gains.......... (0.12) -- -- --
-------- -------- -------- --------
Total Distributions...... (0.12) (0.01) (0.28) (0.02)
-------- -------- -------- --------
Net Asset Value, End of
Period...................... $ 10.78 10.24 $ 9.99 $ 1.00
======== ======== ======== ========
Total Return (excludes sales
charge) (b)................. 6.50% 2.52% 2.80% 2.41%
Ratios/Supplemental Data:
Net Assets, at end of period
(000)....................... $118,782 $105,258 $ 35,014 $ 27,044
Ratio of expenses to average
net assets (c).............. 0.76% 0.66% 0.54% 0.64%
Ratio of net investment income
(loss) to average net assets
(c)......................... (0.02)% 0.28% 5.59% 4.67%
Ratio of expenses to average
net assets* (c)............. 1.51% 1.35% 1.39% 1.29%
Ratio of net investment income
(loss) to average net
assets* (c)................. (0.77)% (0.41)% 4.74% 4.02%
Portfolio Turnover............ 4% 2% 331% 1%
Average Broker Commission Paid
(d)......................... $ 0.0600 $ 0.0708 NA NA
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Commencement of the Funds began February 3, 1997, July 1, 1997, and July 1,
1997, respectively.
(b) Not Annualized
(c) Annualized
(d) Represents the total dollar amount of commissions paid on portfolio
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
NA Not Applicable
See notes to financial statements.
39
<PAGE> 40
NEW KeyPremier Funds
SOLUTIONS
Semi-Annual Report
December 31, 1997
KeyPremier Funds(SM)
KeyPremier Funds(SM)
Investment Adviser
Martindale Andres & Company, Inc.
Four Falls Corporate Center, Suite 200
West Conshohocken, PA 19428
Distributor
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
For Additional Information Call:
1-800-766-3960
2/98
