<PAGE> 1
KeyPremier Funds
- --------------------------------------------------------------------------------
Dear Shareholder:
The KeyPremier Funds are pleased to present their 1998 Annual Report.
Large-company stocks continued to perform well during the recent period,
boosting the performance of the KeyPremier Established Growth Fund.
Small-company domestic stocks trailed the overall market once again, and the
KeyPremier Aggressive Growth Fund turned in a modest total return. U.S. Treasury
bonds performed well as interest rates declined and investors in search of
quality and stability invested large amounts in U.S. fixed-income securities.
That flight to quality was fueled in large part by concerns about economic
problems in Asian countries.
As the period ended, the KeyPremier Emerging Growth Fund, which will focus on
shares of micro-cap companies, was launched on July 1, 1998. The Fund's
micro-cap focus provides exposure to an asset class that has produced the best
long-term equity returns; however, past history is not a guarantee of future
results. It will broaden the shareholders' investment choices and will take
advantage of Martindale Andres & Company's experience and expertise in the
small-capitalization segment.
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 the firm's investment decisions during the past 12
months, as well as his outlook for future market conditions. You also will find
remarks about each of the individual Funds from their respective portfolio
managers.
The discussions should help you understand the approach each manager has taken
to pursue the Fund's objectives. You will also find a schedule of fund
investments, with financial highlights and statements. Please read the
information, which is designed to help you understand the role each Fund can
play in your overall portfolio.
Thank you for your investment in the KeyPremier Funds. Please feel free to
contact the Funds at (800) 766-3960 with 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 AND ARE NOT INSURED BY
ANY OTHER GOVERNMENT AGENCY OR BY THE U.S. GOVERNMENT. THERE IS NO BANK
GUARANTEE, AND SHARES IN THE FUNDS MAY LOSE VALUE.
- --------------------------------------------------------------------------------
-1-
<PAGE> 2
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
Dear KeyPremier Fund Shareholder:
We are pleased to send you this annual report for the 12 months ended June 30,
1998. During the past year, the stock market continued to post extraordinary
results, while the fixed-income markets posted solid results in a favorable
inflation and interest rate environment.
The Standard & Poor's 500 Index of large-company stocks gained 30.17% during the
12-month period ended June 30, 1998, while the Russell 2000 Index of
small-company stocks rose 16.51%. The financial crisis that began last summer in
Asia led to market uncertainty during the period, as investors tried to gauge
the impact that region's troubles would have on domestic corporate earnings.
Investors' fears were allayed during the first quarter of 1998, as there were
few indications that Asia's problems would significantly affect the U.S. market.
In the second quarter of 1998, however, several companies downgraded their
earnings expectations as fears about Asia's crisis resurfaced; as a result, the
Russell 2000 fell 4.2% during the second quarter, while the S&P 500 rose 3.3%.
During the second quarter of 1998, large-company stocks continued a nearly
three-and-a-half-year trend of relatively superior performance. Uncertainty
about the impact of the Asian financial crisis on U.S. corporate earnings caused
investors to seek safety in high-quality, liquid issues, pushing share prices
higher for a select group of large-cap stocks. Financial services stocks
benefited from the strong economy and consolidation activity in that sector,
while consumer noncyclical and utility stocks benefited from the shift to more
defensive-oriented sectors.
Fixed-income securities performed well, as low inflation, a strong economy and
demand for U.S. Treasuries in the wake of the Asian financial crisis helped push
bond yields lower and prices higher. Short-term and long-term bonds outperformed
intermediate-term bonds. Short-term bonds benefited as investors sought
liquidity, and long-term issues benefited from investors' beliefs that inflation
and interest rates would decline over the long term.
Going forward, we feel that small-company stocks present especially good value
relative to large-company stocks. On average, the companies that make up the
Russell 2000 have earnings growth of 20% and a price-to-earnings ratio (P/E) of
17; that compares to an average growth rate of 8% and P/E of 24 for the stocks
in the S&P 500.
While the coming months may be characterized by some uncertainty for the stock
market, we feel confident that long-term drivers such as inflows from baby
boomers' retirement savings and a benign inflationary environment will continue
to generate solid stock market returns. Going forward, we will watch closely to
see if the Asian financial crisis affects corporate earnings in this country.
In that type of uncertain environment, shareholders may benefit from Martindale
Andres' long-term, stock-by-stock approach. Rather than betting on the direction
of the overall market, we buy individual companies trading at attractive prices.
That strategy allows us to carefully evaluate the risk/reward ratio for each
company, which may benefit shareholders when market conditions fluctuate.
In the bond markets, the Federal Reserve Board is faced with a dilemma. Credit
and money supply are expanding at well above long-term noninflationary rates;
however, interest rates have fallen below the overnight rate of 5.5% for all but
the 30-year Treasury bond. This could imply that investors anticipate an
imminent decline in the overnight borrowing rate, which, we believe, is
unlikely, due to the fact that credit is expanding so rapidly. It will be very
important to see if the economy's growth rate slowed in the second quarter of
1998. In our view, that will, in large part, determine the investment
environment in the coming period.
- --------------------------------------------------------------------------------
-2-
<PAGE> 3
MESSAGE FROM THE INVESTMENT ADVISER KeyPremier Funds
- --------------------------------------------------------------------------------
Finally, investors should be aware that the stock market's returns over the last
three years have been considerably higher than historical averages, however,
this is not an indication of future results. Investors should also keep in mind
that a well-diversified portfolio and a long-term approach may be the most
effective ways to grow savings to help meet financial goals--no matter what the
markets do in the short term. We thank you for your confidence in the KeyPremier
Funds and look forward to helping you achieve your investment goals.
Sincerely,
/s/ Robert P. Andres
Robert P. Andres
Managing Principal
Martindale Andres & Company, Inc.
- --------------------------------------------------------------------------------
-3-
<PAGE> 4
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER AGGRESSIVE GROWTH FUND(+)
Q. HOW DID THE FUND PERFORM DURING THE 12 MONTHS THROUGH JUNE 30, 1998?
A. The Fund posted an annual total return of 12.72% (without the maximum sales
charge). Its benchmark, the Russell 2000 Index, an unmanaged index of
small-company stocks, gained 16.51% during the same period.
Q. HOW DID THE ENVIRONMENT FOR SMALL-COMPANY STOCKS DURING THE PAST YEAR AFFECT
THE FUND?
A. The largest capitalization companies continued to outperform the rest of the
market. This happened despite the fact that large companies' earnings have
been slowing down at a faster pace than those of small companies. That
large-cap outperformance largely was due to the crisis in Asia, which
resulted in a flight to high-quality, liquid issues of large companies.
Small-cap financial services stocks performed well during the period;
however, the Fund was not heavily invested in that sector. In general, the
gains in that sector were fueled by the potential for bank takeovers, not by
earnings growth prospects, and such stocks, therefore, did not fit the
Fund's stock selection criteria.
Q. WHERE DID YOU FIND OPPORTUNITIES DURING THE PERIOD?
A. We found opportunities among individual stocks in a variety of industries.
DeVry, Inc. (3.8% of the portfolio's net assets) performed very well; the
firm provides educational programs for people seeking job training. Whole
Foods Market, Inc. (2.1%) performed well during the period, as did
Affiliated Computer (3.4%), a software maker. The Fund had held shares in
Computer Data Systems, with which Affiliated Computer merged during the past
12 month period.*
On the negative side, the Fund was affected by Interneuron Pharmaceutical's
(0.2%) failure
to win FDA approval for a stroke-recovery drug. Respironics Inc. (1.3%),
which makes a product to address sleep apnea, was hurt by uncertainty
regarding changes in Medicaid and Medicare payments. The Fund's stake in
Trigen Energy Corp. (1.1%) was hurt by mild weather that reduced demand for
its energy products.*
During the period, there were significant cash flows into the Fund. We used
that cash to invest in shares of companies that, we believe, offer good
growth prospects. They included Mosaix Inc. (0.7%), a computer software
company; VISX Inc. (1.1%), a medical equipment and supplies firm;
Worthington Foods (1.0%), a food product company; and Syncor International
(1.7%), which operates a national chain of nuclear pharmacies. We eliminated
the Fund's positions in Pittston Minerals, a coal company, and Liposome Co.
Inc., a biotechnology company.*
Q. DID YOU EMPLOY OTHER STRATEGIES TO BOOST RETURNS?
A. As always, the Fund maintained a low turnover rate and was sensitive to the
tax implications of transactions. We expect the end result should be better
after-tax returns for our shareholders.
Q. WHAT IS YOUR OUTLOOK FOR SMALL-COMPANY STOCKS GOING FORWARD, AND HOW WILL YOU
MANAGE THE FUND WITH THAT IN MIND?
A. We expect that technology will reemerge as a leading growth sector, and the
Fund will be well positioned to take advantage of that. Earnings growth of
small companies has been faster than that of large companies for five
consecutive quarters; at the same time, those small firms' stocks have
underperformed large-company stocks. We expect to see that change at some
point. We believe small- and mid-cap stocks likely will lead the market in
the next 12 to 18 months.
That said, the stock market's strong gains might have fueled excessive
expectations on the part of some investors. Shareholders in the Fund should
bear in mind the potential for short-term corrections that could affect
every sector of the market, including shares of large and small firms. We
will endeavor to take advantage of such setbacks to seek good values for the
Fund's portfolio while maintaining our long-term focus as investors.
+ Small-cap funds typically carry additional risks since smaller companies
generally have a higher risk of failure. Historically, stocks of smaller
companies have experienced a greater degree of market volatility than stocks
on average.
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-4-
<PAGE> 5
KeyPremier Funds
- --------------------------------------------------------------------------------
THE KEYPREMIER AGGRESSIVE GROWTH FUND(+)
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1998
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO LOAD LOAD*
- --------------------------------------------------
<S> <C> <C>
Quarter ended 6/30/98** - 4.20% - 8.50%
One Year 12.72% 7.68%
Two Years 14.14% 11.54%
Three Years 17.91% 16.12%
Life of Fund (Inception 2/3/97) 18.62% 17.24%
</TABLE>
LOGO
*Reflects 4.50% sales charge.
**Aggregate return.
GROWTH OF $10,000 INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
KeyPremier
Aggressive
Measurement Period Growth Russell
(Fiscal Year Covered) Fund 2000 Index
<S> <C> <C>
07/01/94 9550 10000
07/31/94 10428 10164
08/31/94 10507 10731
09/30/94 10441 10694
10/31/94 10490 10651
11/30/94 9935 10221
12/31/94 10147 10494
01/31/95 10180 10362
02/28/95 10474 10793
03/31/95 10899 10978
04/30/95 10735 11222
05/31/95 11078 11415
06/30/95 11520 12007
07/31/95 12794 12699
08/31/95 13007 12961
09/30/95 13121 13193
10/31/95 12582 12603
11/30/95 12810 13132
12/31/95 12876 13479
01/31/96 13252 13464
02/29/96 13611 13884
03/31/96 13578 14166
04/30/96 14395 14924
05/31/96 15114 15512
06/30/96 14493 14875
07/31/96 13088 13576
08/31/96 13807 14364
09/30/96 14183 14925
10/31/96 14134 14695
11/30/96 15196 15301
12/31/96 15392 15702
01/31/97 16340 16016
02/28/97 15784 15627
03/31/97 14670 14890
04/30/97 14654 14931
05/31/97 16355 16593
06/30/97 16752 17304
07/31/97 18339 18109
08/31/97 18715 18523
09/30/97 19615 19879
10/31/97 17930 19006
11/30/97 17668 18883
12/31/97 17841 19213
01/31/98 18054 18910
02/28/98 19594 20308
03/31/98 19726 21146
04/30/98 19842 21263
05/31/98 18884 20117
06/30/98 18884 20160
</TABLE>
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.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
The Russell 2000 Index is an unmanaged index that is generally 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 also
reflects the deduction of fees for these services.
+ The quoted performance of the KeyPremier Aggressive Growth Fund includes
performance of certain collective trust fund ("Commingled") accounts advised
by Martindale Andres & Company, Inc., for periods dating back to 7/1/94 and
prior to the Aggressive Growth Fund's commencement of operations on 2/3/97, as
adjusted to reflect the expenses associated with the Fund. The Commingled
accounts were not registered with the Securities and Exchange Commission and,
therefore, were not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled accounts had been registered, the
Commingled accounts' performance may have been adversely affected.
- --------------------------------------------------------------------------------
-5-
<PAGE> 6
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER ESTABLISHED GROWTH FUND
Q. HOW DID THE FUND PERFORM DURING THE PAST YEAR?
A. The Fund finished the 12-month period ended June 30, 1998, with a total
return of 27.92%, (without the maximum sales charge). For the same period,
the Standard & Poor's 500 Index returned 30.17%.
Q. HOW DID THE STOCK MARKET ENVIRONMENT AFFECT THE FUND?
A. Shares of the largest companies substantially outperformed all other
segments of the market, despite the fact that the earnings growth of the
stocks in the Standard & Poor's Composite Index of 500 stocks was declining.
Given the Fund's large-cap focus, the Fund posted a solid return versus the
S&P 500 Index.
Large-company shares have performed well, partially because of huge cash
flows coming into the U.S. market. In our view, those cash flows have made
it a challenge for money managers to deploy assets, so the managers have put
their money in the largest and most liquid stocks as a matter of
convenience. Moreover, the growth of index funds has led to more money going
into the large-company shares that make up the S&P 500.
Takeovers also helped the Fund's performance during the period. For example,
Signet Banking and Core States were both acquired by First Union (1.6% of
the portfolio's net assets); the Fund held shares in both of the acquired
firms.*
Q. HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. The Fund's strategy is to be fully invested for the long term, with low
turnover and high tax sensitivity. As a result, we ride out most temporary
influences. The Fund was underweighted relative to its benchmark, the S&P
500, in technology and energy stocks, which helped its performance. On the
negative side, the Fund underweighted utility and financial services
companies, both of which performed well during the period.
Stock selection plays an important role in the Fund's performance. During the
last year, we made an investment in Netscape (1.5%), which we started buying
at less than $20 per share. That stock recently has more than doubled, due
to talks related to strategic alliances with major media companies. We also
added to Genesis Health Ventures (1.9%), a long-term care company, and
Republic Industries (0.6%), which is a Wayne Heizenga company designed to
consolidate automobile dealerships.*
Other stocks that performed well for the Fund include American Home Products
(1.1%), Schering-Plough (pharmaceuticals; 5.3%), Procter & Gamble (3.1%),
the Williams Companies (a gas transmission firm with interests in
fiber-optic cable; 2.6%) and The Gap (1.7%).*
Q. WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET GOING FORWARD, AND HOW WILL YOU
MANAGE THE FUND IN THAT ENVIRONMENT?
A. Large companies' earnings growth is slowing, and their stocks have been
strong performers--a combination that makes the shares less attractive
relative to other sectors of the stock market. We believe that shares of the
very largest companies may soon lose ground compared to small- and mid-cap
stocks. Thus, we will look for opportunities among shares of smaller
companies. As always, we will continue to manage the Fund with tax
consequences in mind as we seek to provide shareholders with higher
after-tax returns.
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-6-
<PAGE> 7
KeyPremier Funds
- --------------------------------------------------------------------------------
THE KEYPREMIER ESTABLISHED GROWTH FUND(+)
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1998
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO LOAD LOAD*
- --------------------------------------------------
<S> <C> <C>
Quarter ended 6/30/98** 3.29% - 1.34%
One Year 27.92% 22.21%
Two Years 27.78% 24.90%
Three Years 27.41% 25.45%
Life of Fund (Inception 12/3/96) 30.20% 28.49%
</TABLE>
LOGO
*Reflects 4.50% sales charge.
**Aggregate return.
GROWTH OF $10,000 INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Standard
KeyPremier & Poor's
Established Composite
Measurement Period Growth Index of
(Fiscal Year Covered) Fund 500 Stocks
<S> <C> <C>
01/01/95 9550 10000
01/31/95 9849 10260
02/28/95 10351 10658
03/31/95 10974
04/30/95 10920 11293
05/31/95 11321 11739
06/30/95 11605 12015
07/31/95 12224 12415
08/31/95 12492 12448
09/30/95 13010 12970
10/31/95 12960 12925
11/30/95 13512 13493
12/31/95 13478 13743
01/31/96 14030 14216
02/29/96 14030 14352
03/31/96 14331 14490
04/30/96 14298 14703
05/31/96 14682 15082
06/30/96 14699 15144
07/31/96 13880 14470
08/31/96 14415 14777
09/30/96 15268 15607
10/31/96 15502 16035
11/30/96 16722 17252
12/31/96 16433 16914
01/31/97 17052 17964
02/28/97 17019 18110
03/31/97 16480 17357
04/30/97 16934 18393
05/31/97 18161 19522
06/30/97 18763 20393
07/31/97 20398 22012
08/31/97 19539 20788
09/30/97 20378 21927
10/31/97 19432 21194
11/30/97 20091 22176
12/31/97 20745 22557
01/31/98 20953 22807
02/28/98 22229 24452
03/31/98 23241 25704
04/30/98 23513 25963
05/31/98 23220 25517
06/30/98 24002 26553
</TABLE>
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.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
The S&P 500 Index is an unmanaged index that is generally representative of the
U.S. stock market. 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 services.
+ The quoted performance of the KeyPremier Established Growth Fund includes
performance of certain collective trust fund ("Commingled") accounts advised
by Martindale Andres & Company, Inc., for periods dating back to 1/1/95 and
prior to the Established Growth Fund's commencement of operations on 12/2/96,
as adjusted to reflect the expenses associated with the Fund. The Commingled
accounts were not registered with the Securities and Exchange Commission and,
therefore, were not subject to the investment restrictions imposed by law on
registered mutual funds. If the Commingled accounts had been registered, the
Commingled accounts' performance may have been adversely affected.
- --------------------------------------------------------------------------------
-7-
<PAGE> 8
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER INTERMEDIATE TERM INCOME FUND
Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK DURING THE 12 MONTHS
THROUGH JUNE 30, 1998?
A. The Fund produced a total return of 9.95%, (without the maximum sales
charge) for the 12-month period, compared to 10.54% for the Lehman Brothers
Aggregate Bond Index and 9.42% for the Lipper Intermediate Investment Grade
Debt Funds Average.
Q. WHAT WERE THE CONDITIONS IN THE TAXABLE BOND MARKET DURING THE PERIOD?
A. During the first half of the recent 12-month period, the domestic economy
was in good shape, with strong consumer spending and good industrial
production. A tight labor market caused some concerns about wage inflation,
but inflation figures remained favorable. The Asian financial crisis caused
many investors to seek quality and safety in U.S. Treasuries, which resulted
in lower yields and higher prices on those issues.
During the first quarter of 1998, we expected that the Asian financial
crisis would slow U.S. industrial production, manufacturing and exports.
That did not occur on a large scale, however, and rates stayed about flat
for the first quarter. Then, in the second quarter, the situation in Asia
deteriorated, and interest rates on U.S. Treasuries fell as investors sought
out high-quality issues.
On balance, then, the domestic economy has been strong, while the Asian
crisis has been the driving force in pushing down rates. For the 12 months
ended June 30, 1998, rates on the long bond fell about 1.15 points, with the
yield on the 30-year Treasury bond ending the second quarter of 1998 at
5.58%.
Q. HOW DID THE VARIOUS SECTORS OF THE BOND MARKET PERFORM?
A. Corporate bonds were relatively weak performers as investors shifted money
into high-quality Treasury issues in the wake of the Asian financial crisis.
Even high-quality corporate bonds issued by U.S. companies performed poorly
relative to Treasuries. That relative weakness in the corporate market also
reflected an abundant supply of corporate bonds, as many companies issued
new debt to take advantage of low interest rates. Corporate issues did begin
to perform better late in the period, however.
Q. HOW DID YOU ALLOCATE THE FUND'S PORTFOLIO AMONG DIFFERENT SECTORS IN THAT
ENVIRONMENT?
A. We increased our weighting in corporate bonds to take advantage of their
relatively attractive yields in cases where we believe those yields do not
reflect fundamental problems with the issuers. At the end of the period, the
Fund had 49% of its assets invested in corporate bonds, compared to 20% for
its benchmark, the Lehman Brothers Aggregate Bond Index. The Fund held
relatively neutral weightings in mortgage-backed securities as well as
agencies and asset-backed securities. The Fund is underweighted in
Treasuries, which we believe offer less long-term value than corporate
securities in the recent environment. Overall, however, the average credit
rating of the Fund's portfolio remains AA+.*
Q. HOW DID YOU MANAGE THE FUND'S AVERAGE MATURITY?
A. The Fund started the period with an average maturity of 6.9 years and ended
the period with an average maturity of 8.9 years. That extension reflects
our feeling that certain factors, including the Asian financial crisis and
the General Motors strike, may slow U.S. economic growth, causing rates to
decline.
Q. WHAT IS YOUR OUTLOOK FOR THE BOND MARKET GOING FORWARD, AND HOW WILL YOU
MANAGE THE FUND?
A. The factors are in place to allow bonds to perform very well. The Federal
Reserve may not raise rates, due to Asia's increasing impact on our economy.
After 5.4% annualized growth for the first quarter of 1998, we expect to see
growth of around 2% going forward. The Fund's average maturity is 25% longer
than its benchmark, which reflects our bullish outlook.
We will continue to overweight corporate bonds. We feel that they represent
good value, as they currently offer yields 80, 90 or even 100 basis points
higher than yields on Treasuries of comparable maturities. We currently
intend to avoid securities issued by companies with exposure to Asia. We
plan to keep the average credit rating of the Fund's portfolio high, at AA+,
while we look for opportunities to maintain a high level of current income
for shareholders.
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-8-
<PAGE> 9
KeyPremier Funds
- --------------------------------------------------------------------------------
THE KEYPREMIER INTERMEDIATE TERM INCOME FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1998
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO LOAD LOAD*
- --------------------------------------------------
<S> <C> <C>
Quarter ended 6/30/98** 2.54% - 2.06%
One Year 9.95% 5.01%
Life of Fund (Inception 12/2/96) 7.14% 4.07%
</TABLE>
LOGO
*Reflects 4.50% sales charge.
**Aggregate return.
GROWTH OF $10,000 INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Lipper
Intermediate
KeyPremier Investment
Intermediate Lehman Grade
Term Aggregate Debt
Measurement Period Income Bond Funds
(Fiscal Year Covered) Fund Index Average
<S> <C> <C> <C>
12/02/96 9550 10000 10000
12/31/96 9518 9907 9916
01/31/97 9486 9938 9940
02/28/97 9454 9963 9964
03/31/97 9422 9852 9857
04/30/97 9523 10000 9986
05/31/97 9593 10095 10074
06/30/97 9684 10215 10188
07/31/97 9975 10491 10455
08/31/97 9856 10402 10360
09/30/97 9972 10555 10507
10/31/97 10105 10709 10629
11/30/97 10136 10758 10661
12/31/97 10247 10866 10758
01/31/98 10376 11006 10899
02/28/98 10351 10997 10883
03/31/98 10383 11034 10921
04/30/98 10436 11091 10968
05/31/98 10551 11197 11066
06/30/98 10648 11292 11148
</TABLE>
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.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
The Lehman Brothers Aggregate Bond Index is an unmanaged index that is composed
of the following Lehman indices: the L.B. Government/Corporate Index, the L.B.
Mortgage-Backed Securities Index and the Asset-Backed Securities Index. 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 services.
The Lipper Intermediate Investment Grade Debt Funds Average is an unmanaged
index that is representative of intermediate bond funds.
- --------------------------------------------------------------------------------
-9-
<PAGE> 10
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND(+)
Q. WHAT WERE THE CONDITIONS IN THE PENNSYLVANIA MUNICIPAL BOND MARKET DURING THE
12 MONTHS ENDED JUNE 30, 1998?
A. Yields on ten-year AAA-rated Pennsylvania general obligation bonds declined
from 4.80% to 4.40% during the period, a decline of 40 basis points. That
decline reflected the generally positive conditions in the bond market,
which included continued low inflation and modest economic growth. The bond
market also benefited during the period from expectations that the economic
crisis in Asia could act as a brake on economic growth in this country.
Treasury bonds outperformed municipal issues, in part because the Asian
financial crisis encouraged investors to put their money in the
highest-quality investments. Thus, yields on ten-year Treasuries declined a
full 1.05 percentage points.
The Fund produced a total return of 5.89% (without the maximum sales charge)
during the period. That compares to a 6.60% total return for the Lehman
Brothers Pennsylvania 1-12-Year Municipal Bond Index.
Q. HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. We completed our repositioning of the Fund by placing a greater importance
on seeking income and stability of principal to help meet shareholders'
income goals. We succeeded in boosting the Fund's distribution yield from
4.08% at the beginning of the 12-month period to 5.23% on June 30, 1998.
Our strategy for accomplishing that goal included several changes in the
portfolio's structure. In particular, we extended the average maturity of
the Fund from 5.81 years on June 30, 1997, to 9.43 years on June 30, 1998. A
longer average maturity boosts the yield of the portfolio and makes it more
responsive to changes in interest rates. For example, longer maturity bonds
tend to benefit more from a decline in rates such as the one that occurred
during the recent period. Thus, the strategy of increasing the Fund's
average maturity also helped improve shareholders' total return during the
period.
Q. WHAT OTHER CHANGES DID YOU MAKE IN THE PORTFOLIO TO HELP BOOST SHAREHOLDERS'
CURRENT INCOME?
A. We increased the Fund's exposure in revenue bonds that offered more
attractive yields than general obligation issues. In particular, the
abundant supply of new issues created opportunities in hospital and housing
sectors.
We also shifted out of several positions that created moderate amortization
expenses, and invested in discount or par bonds, This enabled the Fund to
produce a higher level of income and yield.
Q. DID THE FUND'S CREDIT QUALITY CHANGE AS A RESULT OF ITS STRATEGY?
A. Our goal was to maintain the Fund's high credit quality, and we did so. The
portfolio's average credit rating remained AAA. Given the Fund's objectives,
we believe that lower-quality issues, at this time, do not offer sufficient
yield spreads to compensate for their higher risk to shareholders.
Q. WHAT IS YOUR OUTLOOK FOR THE PENNSYLVANIA MUNICIPAL MARKET?
A. In our view, Pennsylvania municipal issues have become more attractive
relative to Treasuries. Ten-year AAA Pennsylvania general obligation bonds
now provide roughly 81% of the yield on Treasuries of comparable maturities,
versus only 74% at the beginning of the recent period. Meanwhile, the
outlook for continued low inflation is good, which should benefit the
general bond market. In that environment, we will seek to maintain the
Fund's relatively long average maturity.*
It also seems likely that the supply of new issues in the Pennsylvania
municipal market may continue to be high, generating opportunities to buy
new issues at attractive yields. We will seek to take advantage of those
opportunities to invest in high-quality securities that may generate a high
level of current income and total return for shareholders.
+ The Fund's income may be subject to certain state and local taxes and,
depending on your tax status, the federal alternative minimum tax.
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-10-
<PAGE> 11
KeyPremier Funds
- --------------------------------------------------------------------------------
THE KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1998
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO LOAD LOAD*
- ----------------------------------------------------
<S> <C> <C>
Quarter ended 6/30/98** 1.20% - 3.36%
One Year 5.89% 1.17%
Life of Fund (Inception 10/1/96) 5.67% 2.93%
</TABLE>
LOGO
*Reflects 4.50% sales charge.
**Aggregate return.
GROWTH OF $10,000 INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Lehman Lipper
Brothers 5 Intermediate
KeyPremier Year Pennslyvania Lehman
Pennslyvania Municipal Municipal Brothers
Measurement Period Municipal Bond Funds Pennsylvania
(Fiscal Year Covered) Bond Fund Index Average 1-12 Year
<S> <C> <C> <C> <C>
10/1/96 9550 10000 10000 10000
10/31/96 10120 10087 10000
11/30/96 9808 10218 10145
12/31/96 9774 10199 10232 10292
1/31/97 9786 10233 10273
2/28/97 9853 10308 10309
3/31/97 9745 10196 10198 10385
4/30/97 9769 10240 10384
5/31/97 9870 10366 10437
6/30/97 9931 10444 10527 10559
7/31/97 10099 10628 10643
8/31/97 9999 10574 10844
9/30/97 10105 10668 10835 10844
10/31/97 10153 10724 10951
11/30/97 10189 10757 11014
12/31/97 10325 10849 11132 11044
1/31/98 10402 10948 11164
2/28/98 10394 10965 11262
3/31/98 10391 10975 11239 11277
4/30/98 10355 10929 11286
5/31/98 10470 11060 11251
6/30/98 10516 11098 11390 11382
</TABLE>
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.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
The Fund has changed its benchmark from the Lehman Brothers 5-Year Municipal
Bond Index, as reported in the June 30, 1997 Annual Report to Shareholders, to
the Lehman Brothers Pennsylvania 1-12-Year Municipal Bond Index. The change was
made because the Investment Adviser believes that the Lehman Brothers
Pennsylvania 1-12-Year Municipal Bond Index is a more appropriate benchmark
against which to measure the fund's performance.
The Lehman Brothers 5-Year Municipal Bond Index is an unmanaged index that is
generally representative of municipal bonds with maturities between four and six
years. The Lehman Brothers Pennsylvania 1-12-Year Municipal Bond Index consists
of bonds issued within the Commonwealth of Pennsylvania with a dated date of
01/01/91 or later. Included are nominal maturities of 1-12 years with an issue
size of $50 million and greater and maturity sizes of $3 million or more. 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 services.
The Lipper Intermediate Pennsylvania Municipal Funds Average consists of Funds
which invest at least 65% of its assets in municipal debt issues that are exempt
from taxation in Pennsylvania (double tax-exempt) or a city in Pennsylvania
(triple tax-exempt).
- --------------------------------------------------------------------------------
-11-
<PAGE> 12
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER LIMITED DURATION GOVERNMENT SECURITIES FUND
Q. HOW DID THE LIMITED DURATION GOVERNMENT SECURITIES FUND PERFORM DURING THE
12-MONTH PERIOD ENDED JUNE 30, 1998?
A. The Fund's total return during the period was 5.39% (without the maximum
sales charge). That compares to a 6.79% total return for the Fund's
benchmark, the Lehman Brothers 1-3-Year Government Bond Index.
Q. WHAT WERE THE CONDITIONS IN THE FIXED-INCOME MARKETS DURING THE PERIOD?
A. Demand for high-quality U.S. Treasury securities was strong in the wake of
the Asian economic crisis. As a result, yields on Treasuries declined during
most of the period, boosting Treasury bond prices. Later in the period,
yields on longer-term securities declined to levels approaching those of
short-term securities, so that there was little difference between
short-term rates and long-term rates. In some cases, short-term securities
offered higher yields than longer-term issues, resulting in an inverted
yield curve.
Q. HOW DID YOU POSITION THE FUND IN THAT ENVIRONMENT?
A. The Fund's average maturity began the period at 1.31 years and finished it
at 2.27 years. We kept that average maturity slightly shorter than or equal
to that of the Fund's benchmark throughout the period, reflecting our
concerns that strong domestic economic growth and low unemployment could
lead to higher inflation. And, in our view, with the yield curve so flat,
the minimal extra yields on longer-term issues were not attractive enough to
compensate for the additional risk those securities carried. Finally, with
interest rates at low levels, a relatively short average maturity could
allow us to take advantage of any increase in rates.
We continued to structure the Fund using a "barbell" approach, investing a
significant portion of the Fund in government and government agency issues
with maturities of five years or less, and a smaller portion in securities
that mature in ten or more years. That approach helped boost the Fund's
total return and yield during the period.
Q. HOW WERE THE FUND'S ASSETS ALLOCATED AMONG SECTORS DURING THE PERIOD?
A. As a short-intermediate government fund, we invested approximately 60% of
the Fund's assets in Treasury securities, with the remaining 40% in
government agency issues. We increased our allocation to agency issues when
we found high-quality securities trading at attractive prices. We also owned
old high-coupon mortgage-backed securities with maturities of around five to
15 years. Homeowners who had those mortgages are usually less likely to
refinance than people who took out mortgages one to three years ago. Thus,
the Fund avoided some prepayment risk.*
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET GOING FORWARD?
A. Continued fallout from the Asian economic crisis likely may reduce domestic
economic growth, helping to keep inflation low and prevent the need for the
Federal Reserve to increase short-term interest rates. However, we do not
expect a severe economic slowdown that would cause the Fed to lower rates.
The result could be a well-balanced mix of strong economic growth, low
inflation and low unemployment.
Q. HOW WILL YOU MANAGE THE FUND GOING FORWARD?
A. We likely will maintain the Fund's "barbell" structure as long as interest
rates are low and the yield curve is flat. We will continue to position the
Fund somewhat defensively, with a relatively short average maturity in case
the current environment of strong economic growth and low unemployment
causes inflation and interest rates to rise. As long as the yield curve
remains flat and inflation stays in check, we believe there is little yield
advantage in extending the Fund's maturity. We also will continue to look
for securities that may offer attractive yields to shareholders.
* Portfolio composition is subject to change.
- --------------------------------------------------------------------------------
-12-
<PAGE> 13
KeyPremier Funds
- --------------------------------------------------------------------------------
THE KEYPREMIER LIMITED DURATION GOVERNMENT SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURNS AS OF JUNE 30, 1998
---------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO LOAD LOAD*
- --------------------------------------------------
<S> <C> <C>
Quarter ended 6/30/98** 1.36% - 1.70%
One Year 5.39% 2.22%
Two Years 5.27% 3.70%
Life of Fund (Inception 7/1/97) 5.10% 3.89%
</TABLE>
LOGO
*Reflects 4.50% sales charge.
**Aggregate return.
GROWTH OF $10,000 INVESTMENT COMPARISON
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Lehman
KeyPremier Brothers
Limited 1-3 Year
Duration Government
Government Treasury
Measurement Period Securities Bond
(Fiscal Year Covered) Fund Index
<S> <C> <C>
10/31/95 9700 10000
11/30/95 10097 10085
12/31/95 10162 10161
01/31/96 10249 10247
02/29/96 10206 10207
03/31/96 10217 10200
04/30/96 10227 10210
05/31/96 10270 10233
06/30/96 10303 10307
07/31/96 10347 10347
08/31/96 10379 10386
09/30/96 10444 10480
10/31/96 10498 10599
11/30/96 10553 10677
12/31/96 10574 10679
01/31/97 10618 10731
02/28/97 10650 10756
03/31/97 10661 10748
04/30/97 10726 10836
05/31/97 10780 10912
06/30/97 10834 10987
07/31/97 10584 11107
08/31/97 10587 11118
09/30/97 10647 11202
10/31/97 10706 11285
11/30/97 10741 11313
12/31/97 10798 11389
01/31/98 10881 11499
02/28/98 10893 11509
03/31/98 10881 11554
04/30/98 10980 11609
05/31/98 11036 11671
06/30/98 11070 11730
</TABLE>
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.
The performance data quoted represents past performance and is not an indication
of future results. The investment return and net asset value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
The Lehman Brothers 1-3 Year Government Bond Index is, a total return index
consisting of all U.S. Government agency, Treasury securities and all investment
grade corporate debt securities with maturities of one to three years. 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 services.
The quoted performance of the KeyPremier Limited Duration Government Securities
Fund includes performance of certain collective trust fund ("Commingled")
accounts advised by Martindale Andres & Company, Inc., for periods dating back
to 10/31/95 and prior to the Limited Duration Government Securities Fund's
commencement of operations on 7/1/97, as adjusted to reflect the expenses
associated with the Fund. The Commingled accounts were not registered with the
Securities and Exchange Commission and, therefore, were not subject to the
investment restrictions imposed by law on registered mutual funds. If the
Commingled accounts had been registered, the Commingled accounts' performance
may have been adversely affected.
- --------------------------------------------------------------------------------
-13-
<PAGE> 14
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER U.S. TREASURY OBLIGATIONS MONEY MARKET FUND(1)
Q. HOW DID THE U.S. TREASURY OBLIGATIONS MONEY MARKET FUND PERFORM DURING THE
RECENT PERIOD?
A. The Fund's total return for the 6 months ended June 30, 1998, was 2.31%.(2)
The Fund's 7-day and 7-day-effective yields were 4.78% and 4.90%,
respectively, on June 30, 1998.(3) This was slightly below the average
Treasury Money Market return of 2.38%, as measured by Lipper Analytical
Services.
Q. WHAT OCCURRED IN THE U.S. TREASURY MARKETS DURING THE PERIOD?
A. Treasury yields declined during the period, causing their prices to rise.
There was strong investor demand for high-quality securities such as
Treasuries in the wake of the economic crisis throughout Southeast Asia, and
yields declined to very low levels as a result. For example, the three-
month Treasury bill recently yielded one-half of one percentage point less
than the federal funds rate.
Q. HOW DID YOU POSITION THE FUND TO ADDRESS THOSE MARKET CONDITIONS?
A. The Fund's average weighted maturity was short relative to the average
maturities of most comparable money market funds. The yields on longer-term
securities were not high enough to justify those securities' additional
risk. We maintained a large position in overnight securities such as U.S.
Treasury-collateralized repurchase agreements, which offered higher yields
than regular short-term Treasury issues.
However, we did extend the Fund's average weighted maturity at various times
when we identified attractive values and saw opportunities to boost the
Fund's yield without taking undue risk. For example, we temporarily extended
the average weighted maturity in February when we purchased a type of
Treasury bill known as a cash management bill. Those securities mature
shortly after income taxes are due, and are designed to tide over the
Treasury until income tax revenues come in. The Fund's average weighted
maturity fell once again as those issues matured in mid-April. In the spring
we took a position in private export funding corporation issues, which
offered better yields than Treasuries. These securities are issued in the
United States for the purpose of funding exports to foreign countries but
are guaranteed by the full faith and credit of the U.S. government.
Q. WHAT IS YOUR OUTLOOK GOING FORWARD?
A. We believe economic growth likely will slow in the coming months, due in
part to continued effects of the Asian crisis. We expect that decline to
help keep inflation low and Federal Reserve policy neutral. The sluggishness
of many Asian economies has allowed the U.S. to export its inflation to
those markets, keeping a well-balanced mix of strong economic growth, low
inflation and low unemployment in the U.S.
Q. WHAT WILL YOUR STRATEGY BE IN THAT ENVIRONMENT?
A. The Fund's average weighted maturity will remain relatively short until we
identify anomalies in the market that create opportunities to pick up extra
yield. We favor the approach of keeping a large portion of the portfolio in
overnight securities. That way, we can easily use that money to purchase
securities when opportunities arise, instead of having to sell securities to
raise money.
(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.
- --------------------------------------------------------------------------------
-14-
<PAGE> 15
KeyPremier Funds
- --------------------------------------------------------------------------------
KEYPREMIER PRIME MONEY MARKET FUND(1)
Q. HOW DID THE PRIME MONEY MARKET FUND PERFORM DURING THE 12 MONTHS ENDED JUNE
30, 1998?
A. The Fund posted a total return of 5.19% during the period, compared to a
4.96% total return for the average of the 298 money market funds measured by
Lipper Analytical Services.(2) The Fund's return over the past 12 months has
been in the top quartile of all money market funds as tracked by Lipper
Analytical Services.(3) The Fund's 7-day and 7-day effective yields on June
30, 1998, were 5.09% and 5.22%, respectively.(4)
Q. WHAT WERE THE CONDITIONS IN THE MONEY MARKETS DURING THE PERIOD?
A. Signs of rapid economic growth that investors feared could trigger a rate
increase by the Federal Reserve were countered by evidence that the Asian
financial crisis could slow our economy. As a result, short-term rates
remained relatively stable during the period.
That said, this was an unusual period. Rapidly expanding credit creation and
low inflation tended to reduce long-term rates, at a time when short-term
interest rates were quite high relative to inflation. As a result,
longer-term interest rates declined to levels close to those of overnight
issues. In other words, there was little difference between rates on very
short-term securities and the rate on the 30-year Treasury bond. In some
cases, overnight securities offered higher yields than longer-term issues,
resulting in an inverted yield curve.
Q. HOW DID YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. In general, we kept the Fund's average weighted maturity roughly half as
long as that of the typical money market fund. For example, the average
weighted maturity of the Fund's holdings on June 30, 1998, was 38 days. One
reason: With the yield curve so flat, the minimal extra yield on longer-term
issues was not enough to compensate for the additional risk inherent in such
securities.
Another advantage of maintaining a relatively short average weighted
maturity is that the interest earned on the Fund compounds more frequently
than if the Fund's average weighted maturity was longer. That, in turn, may
help boost the Fund's yield. For example, nearly 50% of the portfolio was
invested in overnight securities during the period, allowing us to reinvest
the daily interest and pick up extra yield for the Fund.
Finally, with short-term interest rates at low levels, our strategy of
maintaining a short average weighted maturity could have given us the
flexibility to lock in additional yield if interest rates had risen.
Q. IN WHAT SECTORS OF THE MARKET DID YOU FIND OPPORTUNITIES DURING THE PERIOD?
A. The Fund's holdings during the period consisted mainly of commercial paper
and repurchase agreements, which offered attractive yields relative to other
types of securities. The remainder of the portfolio was divided among
government securities such as agency discount notes and agency coupons.
With short-term interest rates relatively stable, we looked for
opportunities to purchase select longer-term securities when they offered
attractive values and the potential to boost the Fund's yield. For example,
we found opportunities in variable rate securities with rates that reset at
90 days. We also held floating rate securities with yields that fluctuate
with the prime rate.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET GOING FORWARD?
A. We expect economic growth to slow somewhat in the coming months, which
should help keep inflation in check and prevent any need for the Federal
Reserve to raise short-term interest rates. At the same time, we do not
anticipate such a significant economic slowdown that the Fed would need to
lower rates. The sluggishness of many Asian economies has allowed the U.S.
to export its inflation to those markets, keeping a well-balanced mix of
strong economic growth, low inflation and low unemployment in the U.S.
Q. HOW WILL YOU MANAGE THE FUND IN THAT ENVIRONMENT?
A. We will continue to maintain a shorter average weighted maturity, at least
until longer-term issues offer better yields for their risk. We also will
continue to look for opportunities to increase the Fund's yield in various
sectors of the money markets.
(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) The KeyPremier Prime Money Market Fund ranked 57th of 298 money market funds
by Lipper Analytical Services, Inc. for the one year period ended 6/30/98.
The Lipper ranking is based on total return and does not reflect the effect
of a sales charge.
(4) 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.
- --------------------------------------------------------------------------------
-15-
<PAGE> 16
TABLE OF CONTENTS
Statements of Assets and Liabilities
PAGE 17
Statements of Operations
PAGE 19
Statements of Changes in Net Assets
PAGE 21
Schedules of Portfolio Investments
PAGE 24
Notes to Financial Statements
PAGE 37
Financial Highlights
PAGE 44
-16-
<PAGE> 17
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<CAPTION>
AGGRESSIVE ESTABLISHED INTERMEDIATE PENNSYLVANIA
GROWTH GROWTH TERM INCOME MUNICIPAL
FUND FUND FUND BOND FUND
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (cost $90,392,302;
$122,248,153; $268,695,937;
$115,435,199, respectively)............. $135,624,827 $258,207,494 $273,103,381 $117,400,450
Cash...................................... -- 3,754 -- --
Interest and dividends receivable......... 106,673 247,877 4,120,267 1,858,538
Receivable for capital shares issued...... 5,557 868,595 -- --
Unamortized organization costs............ 3,157 22,495 32,379 15,505
------------ ------------ ------------ ------------
Total Assets............................ 135,740,214 259,350,215 277,256,027 119,274,493
------------ ------------ ------------ ------------
LIABILITIES:
Dividends payable......................... -- 338,347 1,452,389 528,450
Payable for capital shares redeemed....... 2,893 5,630 103,378 --
Accrued expenses and other payables:
Investment advisory fees payables....... 65,610 104,675 67,566 29,318
Administration fees payables............ 2,103 4,079 4,355 1,877
Administrative services fees payables... 16,610 31,962 11,549 4,955
Other Liabilities....................... 41,403 53,245 52,051 24,743
------------ ------------ ------------ ------------
Total Liabilities....................... 128,619 537,938 1,691,288 589,343
------------ ------------ ------------ ------------
NET ASSETS:
Capital................................... 87,150,821 117,103,473 270,605,349 116,233,895
Accumulated undistributed net investment
income (loss)........................... (1,834) 1,232 1,734 134,109
Accumulated undistributed net realized
gains on investments.................... 3,230,083 5,748,231 550,212 351,895
Net unrealized appreciation of
investments............................. 45,232,525 135,959,341 4,407,444 1,965,251
------------ ------------ ------------ ------------
Net Assets.............................. $135,611,595 $258,812,277 $275,564,739 $118,685,150
============ ============ ============ ============
Outstanding units of beneficial interest
(shares).............................. 11,883,402 18,408,485 27,287,489 11,422,485
============ ============ ============ ============
Net asset value -- redemption price per
share................................. $ 11.41 $ 14.06 $ 10.10 $ 10.39
============ ============ ============ ============
Maximum Sales Charge.................... 4.50% 4.50% 4.50% 4.50%
============ ============ ============ ============
Maximum Offering Price (100%/(100%-
Maximum Sales Charge) of net asset
value adjusted to nearest cent) per
share................................. $ 11.95 $ 14.72 $ 10.58 $ 10.88
============ ============ ============ ============
</TABLE>
See notes to financial statements.
-17-
<PAGE> 18
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
LIMITED DURATION U.S. TREASURY
GOVERNMENT OBLIGATIONS PRIME
SECURITIES MONEY MARKET MONEY MARKET
FUND FUND FUND
---------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (cost $25,773,907; $14,995,044;
$174,824,021, respectively).......................... $25,696,381 $14,995,044 $174,824,021
Repurchase agreements (cost $3,501,056; $8,381,612;
$43,737,727, respectively)........................... 3,501,056 8,381,612 43,737,727
----------- ----------- ------------
Total Investments.................................. 29,197,437 23,376,656 218,561,748
Interest and dividends receivable...................... 361,516 260,470 277,412
Receivable for capital shares issued................... -- -- 1,409
Unamortized organization costs......................... 7,064 7,093 16,347
----------- ----------- ------------
Total Assets....................................... 29,566,017 23,644,219 218,856,916
----------- ----------- ------------
LIABILITIES:
Dividends payable...................................... 150,968 90,126 900,714
Accrued expenses and other payables:
Investment advisory fees payables.................... 7,241 3,807 35,624
Administration fees payables......................... 465 375 3,436
Administrative services fees payables................ -- -- 7,463
Other Liabilities.................................... 47,354 30,250 48,855
----------- ----------- ------------
Total Liabilities.................................. 206,028 124,558 996,092
----------- ----------- ------------
NET ASSETS:
Capital................................................ 29,418,844 23,518,365 217,857,293
Accumulated undistributed net investment income........ 4,809 1,890 3,531
Accumulated undistributed net realized gains (loss) on
investments.......................................... 13,862 (594) --
Net unrealized depreciation of investments............. (77,526) -- --
=========== =========== ============
Net Assets......................................... $29,359,989 $23,519,661 $217,860,824
=========== =========== ============
Outstanding units of beneficial interest (shares)...... 2,946,468 23,520,255 217,860,282
=========== =========== ============
Net asset value--redemption price per share............ $ 9.96 $ 1.00 $ 1.00
=========== =========== ============
Maximum Sales Charge................................. 3.00% -- --
=========== =========== ============
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value adjusted to nearest
cent)
per share.......................................... $ 10.27 $ 1.00(a) $ 1.00(a)
=========== =========== ============
</TABLE>
- ---------------
(a) Maximum offering price and redemption price are the same for the Prime Money
Market Fund and the U.S. Treasury Obligations Money Market Fund.
See notes to financial statements.
-18-
<PAGE> 19
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
AGGRESSIVE ESTABLISHED INTERMEDIATE PENNSYLVANIA
GROWTH GROWTH TERM INCOME MUNICIPAL
FUND FUND FUND BOND FUND
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income............................ $ -- $ -- $15,878,364 $6,171,986
Dividend income............................ 929,835 3,325,302 450,764 53,709
----------- ----------- ----------- ----------
Total Income............................ 929,835 3,325,302 16,329,128 6,225,695
----------- ----------- ----------- ----------
EXPENSES:
Investment advisory fees................... 1,254,636 1,680,122 1,431,762 715,423
Administration fees........................ 144,284 257,620 274,422 137,123
Administrative services fees............... 85,108 159,450 158,641 70,068
Accounting fees............................ 41,513 70,172 75,419 43,737
Transfer agent fees........................ 36,487 38,056 27,809 22,799
Custodian fees............................. 23,981 35,279 67,978 9,868
Printing costs............................. 22,000 34,008 39,843 19,808
Registration and filing fees............... 32,294 65,301 78,629 34,019
Other expenses............................. 34,431 44,740 44,283 46,965
----------- ----------- ----------- ----------
Total Expenses............................. 1,674,734 2,384,748 2,198,786 1,099,810
Less: Expenses voluntarily reduced...... (627,977) (784,764) (840,882) (413,125)
Expenses paid by third parties.... (1,447) -- -- --
----------- ----------- ----------- ----------
Net Expenses............................... 1,045,310 1,599,984 1,357,904 686,685
----------- ----------- ----------- ----------
Net Investment Income (Loss)............... (115,475) 1,725,318 14,971,224 5,539,010
----------- ----------- ----------- ----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment
transactions............................ 3,491,283 6,257,171 3,610,376 859,782
Net change in unrealized appreciation of
investments............................. 10,372,778 47,023,379 3,699,969 465,494
----------- ----------- ----------- ----------
Net realized/unrealized gains on
investments............................. 13,864,061 53,280,550 7,310,345 1,325,276
----------- ----------- ----------- ----------
Change in net assets resulting from
operations.............................. $13,748,586 $55,005,868 $22,281,569 $6,864,286
=========== =========== =========== ==========
</TABLE>
See notes to financial statements.
-19-
<PAGE> 20
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
LIMITED DURATION U.S. TREASURY
GOVERNMENT OBLIGATIONS PRIME
SECURITIES MONEY MARKET MONEY MARKET
FUND* FUND* FUND
---------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................... $2,032,660 $1,308,222 $8,761,265
Dividend income.................................... 31,043 5,353 10,650
---------- ---------- ----------
Total Income.................................... 2,063,703 1,313,575 8,771,915
---------- ---------- ----------
EXPENSES:
Investment advisory fees........................... 198,771 98,397 623,575
Administration fees................................ 38,098 28,247 179,279
Administrative services fees....................... 18,070 15,500 131,318
Accounting fees.................................... 32,239 30,875 47,847
Transfer agent fees................................ 22,498 21,952 26,793
Custodian fees..................................... 17,063 14,499 44,259
Printing costs..................................... 18,590 15,564 36,948
Registration and filing fees....................... 16,048 13,204 47,546
Other expenses..................................... 30,646 23,670 42,759
---------- ---------- ----------
Total Expenses..................................... 392,023 261,908 1,180,324
Less: Expenses voluntarily reduced.............. (171,276) (87,881) (407,377)
Expenses paid by third parties............ (4,319) (352) (18,017)
---------- ---------- ----------
Net Expenses....................................... 216,428 173,675 754,930
---------- ---------- ----------
Net Investment Income.............................. 1,847,275 1,139,900 8,016,985
---------- ---------- ----------
REALIZED/UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investment transactions...... 30,849 (594) 447
Net change in unrealized depreciation of
investments..................................... (113,342) -- --
---------- ---------- ----------
Net realized/unrealized gains (losses) on
investments..................................... (82,493) (594) 447
---------- ---------- ----------
Change in net assets resulting from operations..... $1,764,782 $1,139,306 $8,017,432
========== ========== ==========
</TABLE>
- ---------------
* Commencement of operations of the Funds was July 1, 1997.
See notes to financial statements.
-20-
<PAGE> 21
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGGRESSIVE ESTABLISHED
GROWTH FUND GROWTH FUND
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997* 1998 1997*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss).................... $ (115,475) $ 108,559 $ 1,725,318 $ 1,367,711
Net realized gains on investment transactions... 3,491,283 1,071,938 6,257,171 551,283
Net change in unrealized appreciation of
investments................................... 10,372,778 2,060,746 47,023,379 19,134,379
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.................................... 13,748,586 3,241,243 55,005,868 21,053,373
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income...................... -- (108,559) (1,728,426) (1,367,711)
In excess of net investment income.............. (9,326) -- -- --
From net realized gains on investments.......... (1,333,135) -- (1,060,223) --
------------ ------------ ------------ ------------
Change in net assets from shareholder
distributions................................. (1,342,461) (108,559) (2,788,649) (1,367,711)
CAPITAL TRANSACTIONS:
Proceeds from shares issued..................... 35,793,962 107,127,261 50,547,690 184,221,521
Dividends reinvested............................ 58,474 1,009 90,582 6,152
Cost of shares redeemed......................... (17,904,786) (5,003,134) (34,957,454) (12,999,095)
------------ ------------ ------------ ------------
Change in net assets from capital
transactions.................................. 17,947,650 102,125,136 15,680,818 171,228,578
------------ ------------ ------------ ------------
Change in net assets............................ 30,353,775 105,257,820 67,898,037 190,914,240
NET ASSETS:
Beginning of period............................. 105,257,820 -- 190,914,240 --
------------ ------------ ------------ ------------
End of period................................... $135,611,595 $105,257,820 $258,812,277 $190,914,240
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued.......................................... 3,165,205 10,794,978 4,017,497 18,435,219
Reinvested...................................... 5,580 113 7,397 628
Redeemed........................................ (1,567,686) (514,788) (2,769,238) (1,283,018)
------------ ------------ ------------ ------------
Change in shares.................................. 1,603,099 10,280,303 1,255,656 17,152,829
============ ============ ============ ============
</TABLE>
- ---------------
* Commencement of operations of the Funds were February 3, 1997 and December 2,
1996 respectively.
See notes to financial statements.
-21-
<PAGE> 22
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
INTERMEDIATE TERM PENNSYLVANIA MUNICIPAL
INCOME FUND BOND FUND
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997* 1998 1997*
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income........................... $ 14,971,224 $ 7,316,278 $ 5,539,010 $ 3,780,631
Net realized gains (loss) on investment
transactions.................................. 3,610,376 (3,180,967) 859,782 (500,308)
Net change in unrealized appreciation
(depreciation) of investments................. 3,699,969 (1,083,860) 465,494 1,013,284
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations.................................... 22,281,569 3,051,451 6,864,286 4,293,607
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income...................... (14,851,779) (7,316,278) (5,661,569) (3,525,784)
From net realized gains on investments.......... -- -- -- (7,490)
------------ ------------ ------------ ------------
Change in net assets from shareholder
distributions................................. (14,851,779) (7,316,278) (5,661,569) (3,533,274)
CAPITAL TRANSACTIONS:
Proceeds from shares issued..................... 90,900,761 233,118,215 15,598,673 138,218,349
Dividends reinvested............................ 214,237 47,928 98,698 22,466
Cost of shares redeemed......................... (30,838,931) (21,042,434) (21,409,397) (15,806,689)
------------ ------------ ------------ ------------
Change in net assets from capital
transactions.................................. 60,276,067 212,123,709 (5,712,026) 122,434,126
------------ ------------ ------------ ------------
Change in net assets............................ 67,705,857 207,858,882 (4,509,309) 123,194,459
NET ASSETS:
Beginning of period............................. 207,858,882 -- 123,194,459 --
------------ ------------ ------------ ------------
End of period................................... $275,564,739 $207,858,882 $118,685,150 $123,194,459
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued.......................................... 9,078,840 23,412,762 1,499,902 13,502,154
Reinvested...................................... 21,445 4,916 9,497 2,191
Redeemed........................................ (3,082,354) (2,148,120) (2,061,340) (1,529,919)
------------ ------------ ------------ ------------
Change in shares.................................. 6,017,931 21,269,558 (551,941) 11,974,426
============ ============ ============ ============
</TABLE>
- ---------------
* Commencement of operations of the Funds were December 2, 1996 and October 1,
1996, respectively.
See notes to financial statements.
-22-
<PAGE> 23
THE SESSIONS GROUP
KEYPREMIER FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
U.S. TREASURY
LIMITED DURATION OBLIGATIONS
GOVERNMENT MONEY PRIME
SECURITIES FUND MARKET FUND MONEY MARKET FUND
---------------- ---------------- -----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998* 1998* 1998 1997*
---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.................... $ 1,847,275 $ 1,139,900 $ 8,016,985 $ 3,548,971
Net realized gains (loss) on investment
transactions........................... 30,849 (594) 447 151
Net change in unrealized depreciation of
investments............................ (113,342) -- -- --
----------- ------------ ------------- -------------
Net increase in net assets resulting from
operations............................. 1,764,782 1,139,306 8,017,432 3,549,122
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............... (1,846,910) (1,139,900) (8,016,985) (3,548,971)
From net realized gains on investments... (14,793) -- -- --
----------- ------------ ------------- -------------
Change in net assets from shareholder
distributions.......................... (1,861,703) (1,139,900) (8,016,985) (3,548,971)
CAPITAL TRANSACTIONS:
Proceeds from shares issued.............. 46,256,425 67,930,284 394,707,150 277,292,433
Dividends reinvested..................... 8,280 226,366 919,724 97,461
Cost of shares redeemed.................. (16,807,795) (44,636,395) (273,616,855) (181,539,687)
----------- ------------ ------------- -------------
Change in net assets from capital
transactions........................... 29,456,910 23,520,255 122,010,019 95,850,207
----------- ------------ ------------- -------------
Change in net assets..................... 29,359,989 23,519,661 122,010,466 95,850,358
NET ASSETS:
Beginning of period...................... -- -- 95,850,358 --
----------- ------------ ------------- -------------
End of period............................ $29,359,989 $ 23,519,661 $ 217,860,824 $ 95,850,358
=========== ============ ============= =============
SHARE TRANSACTIONS:
Issued................................... 4,624,486 67,930,284 394,707,185 277,292,433
Reinvested............................... 829 226,366 919,745 97,461
Redeemed................................. (1,678,847) (44,636,395) (273,616,855) (181,539,687)
----------- ------------ ------------- -------------
Change in shares........................... 2,946,468 23,520,255 122,010,075 95,850,207
=========== ============ ============= =============
</TABLE>
- ---------------
* Commencement of operations of the Funds were July 1, 1997, July 1, 1997 and
October 7, 1996 respectively.
See notes to financial statements.
-23-
<PAGE> 24
THE SESSIONS GROUP
KEYPREMIER AGGRESSIVE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (93.1%):
Aerospace/Defense--Equipment (5.6%):
74,000 Cordant Technologies, Inc..... $ 3,413,250
40,000 Northrop Grumman Corp......... 4,125,000
------------
7,538,250
------------
Automotive Parts (3.7%):
144,000 Gentex Corp.(b)............... 2,610,000
100,000 Mascotech, Inc................ 2,400,000
------------
5,010,000
------------
Banks (2.3%):
66,000 First American
Corp.--Tennessee............ 3,176,250
------------
Biotechnology (0.3%):
100,000 Interneuron Pharmaceuticals,
Inc.(b)..................... 362,500
------------
Chemicals (4.2%):
130,000 Airgas, Inc.(b)............... 1,868,750
80,000 Lesco, Inc.................... 1,500,000
60,000 Valspar Corp.................. 2,377,500
------------
5,746,250
------------
Communication--Equipment (0.1%):
50,000 Transcrypt International,
Inc.(b)..................... 168,500
------------
Computer Networks (2.1%):
250,000 Computer Network Tech
Corp.(b).................... 1,156,250
70,000 Seagate Technology, Inc.(b)... 1,666,875
------------
2,823,125
------------
Computer Software (12.7%):
120,000 Affiliated Computer Services,
Inc.(b)..................... 4,620,000
50,000 Ansys, Inc.(b)................ 493,750
32,400 Applied Graphics
Technologies(b)............. 1,482,300
170,000 Compuware Corp.(b)............ 8,691,249
35,000 Dialogic Corp.(b)............. 1,041,250
100,000 Mosaix, Inc.(b)............... 981,250
------------
17,309,799
------------
Computers (3.2%):
160,000 Hutchinson Technology,
Inc.(b)..................... 4,360,000
------------
Construction Materials (1.5%):
50,000 Fleetwood Enterprises, Inc.... 2,000,000
------------
Educational Services (3.9%):
240,000 Devry, Inc.(b)................ 5,265,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electrical Equipment (1.4%):
60,000 C-Cube Microsystems,
Inc.(b)..................... $ 1,113,750
70,000 Cirrus Logic, Inc.(b)......... 778,750
------------
1,892,500
------------
Financial Services (1.0%):
60,000 Willis Lease Finance
Corp.(b).................... 1,372,500
------------
Financial--Securities Brokers (3.8%):
64,000 Legg Mason, Inc............... 3,684,000
55,000 United Asset Management
Corp........................ 1,440,313
------------
5,124,313
------------
Food & Related (3.4%):
50,000 U.S. Foodservice(b)........... 1,753,125
48,000 Whole Foods Market, Inc.(b)... 2,904,000
------------
4,657,125
------------
Furniture & Furnishings (3.0%):
80,000 Bush Industries, Inc.......... 1,740,000
92,000 Leggett & Platt, Inc.......... 2,300,000
------------
4,040,000
------------
Homebuilders--Mobile Homes (0.8%):
85,000 Winnebago Industries, Inc..... 1,062,500
------------
Hotel Management & Related Services (1.1%):
70,000 La Quinta Inns, Inc........... 1,478,750
------------
Household Products (1.5%):
35,000 Premark International, Inc.... 1,128,750
30,000 Tupperware Corp............... 843,750
------------
1,972,500
------------
Insurance (1.1%):
32,000 Arthur J. Gallagher &
Company..................... 1,432,000
------------
Leisure (0.5%):
40,000 K2, Inc....................... 705,000
------------
Machinery & Equipment (2.1%):
110,000 Flow International Corp.(b)... 1,278,750
175,000 PSC, Inc.(b).................. 1,585,938
------------
2,864,688
------------
Medical--Biotechnology (0.8%):
164,000 Integra Lifesciences
Corp.(b).................... 1,148,000
------------
Medical--Hospital Management Services (3.3%):
50,000 Cerner Corp.(b)............... 1,415,625
125,000 Genesis Health Ventures,
Inc.(b)..................... 3,125,000
------------
4,540,625
------------
</TABLE>
Continued
-24-
<PAGE> 25
THE SESSIONS GROUP
KEYPREMIER AGGRESSIVE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Medical Equipment & Supplies (7.6%):
100,000 Mentor Corp. Minnesota........ $ 2,424,999
120,000 Respironics, Inc.(b).......... 1,867,500
60,000 St Jude Medical, Inc.(b)...... 2,208,750
135,000 Syncor International
Corp.(b).................... 2,328,750
25,000 Visx, Inc.(b)................. 1,487,500
------------
10,317,499
------------
Medical--Health Management Organization (1.4%):
30,000 United Health Care Corp....... 1,905,000
------------
Oil & Gas (3.3%):
50,000 Forest Oil Corp.(b)........... 715,625
100,000 Lomak Petroleum, Inc.......... 1,043,750
100,000 Patina Oil & Gas.............. 700,000
55,000 Triton Energy Ltd.(b)......... 1,962,813
------------
4,422,188
------------
Retail--General Merchandise (1.7%):
70,000 Fingerhut Companies, Inc...... 2,310,000
------------
Technology Equipment (4.3%):
80,000 CFM Technologies, Inc.(b)..... 1,160,000
100,000 Credence Systems Corp.(b)..... 1,900,000
120,000 Integrated Circuit Systems,
Inc.(b)..................... 1,995,000
40,000 Lam Research Corp.(b)......... 765,000
------------
5,820,000
------------
Telecommunication--Equipment (3.5%):
120,000 Digi International, Inc.(b)... 2,430,000
60,000 ECI Telecommunications,
Ltd......................... 2,272,500
------------
4,702,500
------------
Telecommunications (0.6%):
80,000 Glenayre Technologies,
Inc.(b)..................... 860,000
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Telecommunications--Services and Equipment (1.8%):
100,000 Picturetel Corp.(b)........... $ 925,000
70,000 Transaction Network Services,
Inc.(b)..................... 1,474,375
------------
2,399,375
------------
Textile (3.4%):
80,000 Lydall, Inc.(b)............... 1,165,000
100,000 Unifi, Inc.................... 3,425,000
------------
4,590,000
------------
Utilities--Electric (1.1%):
113,000 Trigen Energy Corp............ 1,518,438
------------
Wholesale--Food Products (1.0%):
65,000 Worthington Foods, Inc........ 1,360,938
------------
Total Common Stocks................. 126,256,113
------------
INVESTMENT COMPANIES (6.9%):
672,021 Federated Government
Obligation Fund............. 672,021
5,072,523 Federated Prime Obligation
Fund........................ 5,072,523
2,885,788 KeyPremier Prime Money Market
Fund........................ 2,885,788
738,382 KeyPremier U.S. Treasury
Obligations Money Market.... 738,382
------------
Total Investment Companies.......... 9,368,714
------------
Total Investments
(Cost $90,392,302)(a)--100.0%..... 135,624,827
Liabilities in excess of other
assets--0.0%.......................... (13,232)
------------
TOTAL NET ASSETS--100.0%............ $135,611,595
============
</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......................... $55,073,942
Unrealized depreciation......................... (9,841,417)
-----------
Net unrealized appreciation..................... $45,232,525
===========
</TABLE>
(b) Represents non-income producing securities
See notes to financial statements.
-25-
<PAGE> 26
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (96.8%):
Aerospace/Defense--Equipment (1.9%):
7,000 Boeing Co..................... $ 311,938
60,000 Textron, Inc.................. 4,301,250
4,600 United Technologies Corp...... 425,500
------------
5,038,688
------------
Agriculture (0.2%):
10,000 Monsanto Corp................. 558,750
------------
Automotive Parts (2.1%):
34,000 Autoliv, Inc.................. 1,079,500
24,000 Eaton Corp.................... 1,866,000
50,000 Echlin, Inc................... 2,453,125
------------
5,398,625
------------
Banks (4.8%):
7,000 Allied Irish Banks PLC, ADR... 600,688
74,480 First Union Corp.............. 4,338,460
72,000 Fleet Financial Group, Inc.... 6,011,999
40,000 Norwest Corp.................. 1,495,000
------------
12,446,147
------------
Beverages (3.3%):
101,000 Coca-Cola Co.................. 8,635,500
------------
Biotechnology (0.7%):
50,000 Centocor, Inc.(b)............. 1,812,500
------------
Chemicals (2.0%):
65,000 Hercules, Inc................. 2,673,125
100,000 Morton International, Inc..... 2,500,000
------------
5,173,125
------------
Computer Networks (1.7%):
40,000 Seagate Technology, Inc.(b)... 952,500
100,000 Silicon Graphics, Inc.(b)..... 1,212,500
50,000 Sun Microsystems, Inc.(b)..... 2,171,875
------------
4,336,875
------------
Computer Software (7.6%):
90,000 Automatic Data Processing,
Inc......................... 6,558,750
165,000 Computer Associates
International, Inc.......... 9,167,812
150,000 Netscape Communications Corp.
(b)......................... 4,059,375
------------
19,785,937
------------
Computers--Main & Mini (1.1%):
100,000 Compaq Computer Corp.......... 2,837,500
------------
Cosmetics/Personal Care (3.2%):
90,000 Procter & Gamble Co........... 8,195,625
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Diversified/Conglomerate (4.6%):
7,000 Du Pont E.I. de Nemours &
Co.......................... $ 522,375
107,000 General Electric Co........... 9,736,999
70,000 Republic Industries, Inc.
(b)......................... 1,750,000
------------
12,009,374
------------
Electronic Components (0.8%):
85,000 Micron Technology, Inc........ 2,109,063
------------
Financial Services (10.5%):
62,000 Capital One Financial Corp.... 7,699,625
120,000 Fannie Mae.................... 7,290,000
130,000 Morgan Stanley Dean Witter
Discover & Co............... 11,878,749
------------
26,868,374
------------
Food Processing & Packaging (2.0%):
6,000 Bestfoods..................... 348,375
152,000 ConAgra, Inc.................. 4,816,500
------------
5,164,875
------------
Furniture & Furnishings (2.9%):
50,000 Armstrong World Industries,
Inc......................... 3,368,750
112,500 Lancaster Colony Corp......... 4,260,938
------------
7,629,688
------------
Insurance (0.4%):
13,000 Aetna, Inc.................... 989,625
------------
Manufacturing (1.3%):
4,000 Minnesota Mining and
Manufacturing Co............ 328,750
7,000 PPG Industries, Inc........... 486,938
46,000 Tecumseh Products Co., Class
B........................... 2,633,500
------------
3,449,188
------------
Medical--Hospital Management Services (1.9%):
200,000 Genesis Health Ventures, Inc.
(b)......................... 5,000,000
------------
Medical Instruments (3.9%):
160,000 Medtronic, Inc................ 10,200,000
------------
Medical--Health Management Organization (2.0%):
80,000 United Health Care Corp....... 5,080,000
------------
Mining (2.2%):
75,000 Potash Corp. of Saskatchewan,
Inc......................... 5,667,188
------------
Motor Vehicles (2.2%):
100,000 Chrysler Corp................. 5,637,500
------------
</TABLE>
Continued
-26-
<PAGE> 27
THE SESSIONS GROUP
KEYPREMIER ESTABLISHED GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oil & Gas (4.1%):
74,000 Coastal Corp.................. $ 5,166,125
5,000 Exxon Corp.................... 356,563
65,000 Mobil Corp.................... 4,980,625
------------
10,503,313
------------
Pharmaceuticals (9.0%):
56,000 American Home Products
Corp........................ 2,898,000
60,000 Astra AB, Class A............. 1,230,000
36,000 Johnson & Johnson............. 2,655,000
8,000 Merck & Co., Inc.............. 1,070,000
150,000 Schering-Plough Corp.......... 13,743,749
21,000 Warner Lambert Co............. 1,456,875
------------
23,053,624
------------
Restaurants (1.4%):
155,000 Wendy's International, Inc.... 3,642,500
------------
Retail--Apparel (1.8%):
75,000 Gap, Inc...................... 4,621,875
------------
Telecommunications (4.5%):
10,000 Alltel Corporation............ 465,000
6,500 General Telephone Electric
Corp........................ 361,563
110,000 Loral Space & Communications
Ltd. (b).................... 3,107,500
50,000 Motorola, Inc................. 2,628,125
71,000 Sprint Corp................... 5,005,500
------------
11,567,688
------------
Textile (2.8%):
210,000 Unifi, Inc.................... 7,192,500
------------
Tools (3.1%):
220,000 Danaher Corp.................. 8,071,250
------------
Transportation (0.2%):
5,000 Burlington Northern Santa Fe
Corp........................ 490,938
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Electric (2.9%):
109,000 Baltimore Gas & Electric
Co.......................... $ 3,385,813
88,000 Consolidated Edison Co. of New
York........................ 4,053,500
------------
7,439,313
------------
Utilities--Gas & Pipeline (3.7%):
75,000 Sonat, Inc.................... 2,896,875
200,000 Williams Cos., Inc............ 6,750,000
------------
9,646,875
------------
Total Common Stocks.................. 250,254,023
------------
PREFERRED STOCKS (0.1%):
Insurance (0.1%):
4,419 Aetna Services, Inc........... 331,977
------------
Total Preferred Stocks............... 331,977
------------
INVESTMENT COMPANIES (2.9%):
336,825 Federated Government
Obligation Fund............. 336,825
2,054,106 Federated Prime Obligation
Fund........................ 2,054,106
4,677,316 KeyPremier Prime Money Market
Fund........................ 4,677,316
553,247 KeyPremier U.S. Treasury
Obligations Money Market
Fund........................ 553,247
------------
Total Investment Companies........... 7,621,494
------------
Total Investments
(Cost $122,248,153)(a)--99.8%...... 258,207,494
Other assets in excess of
liabilities--0.2%...................... 604,783
------------
TOTAL NET ASSETS--100.0%............. $258,812,277
============
</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......................... $139,689,256
Unrealized depreciation......................... (3,729,915)
------------
Net unrealized appreciation..................... $135,959,341
============
</TABLE>
(b) Represents non-income producing securities
ADR -- American Depository Receipt
See notes to financial statements.
-27-
<PAGE> 28
THE SESSIONS GROUP
KEYPREMIER INTERMEDIATE TERM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
ASSET BACKED SECURITIES (1.7%):
4,500,000 IMC Home Equity Loan Trust,
Series 97-1, Class A-3,
6.82% 10/25/11.............. $ 4,592,160
------------
Total Asset Backed Securities........ 4,592,160
------------
CORPORATE BONDS (52.6%):
Automotive (1.8%):
5,000,000 General Motors Corp., 6.25%,
5/1/05...................... 5,018,750
------------
Banks (10.0%):
2,500,000 Amsouth Bank of Alabama,
6.45%, 2/1/18............... 2,515,625
6,000,000 First of America Bank, 7.75%,
7/15/04..................... 6,510,000
6,000,000 First Union Corp., 6.55%,
10/15/35.................... 6,225,000
6,000,000 Key Bank N.A., 6.50%,
4/15/08..................... 6,097,500
6,000,000 Wachovia Corp., 6.61%,
10/1/25..................... 6,262,500
------------
27,610,625
------------
Clothing (2.2%):
6,000,000 Tommy Hilfiger USA, Inc.,
6.50%, 6/1/03............... 5,970,000
------------
Entertainment (2.6%):
6,000,000 Time Warner Entertainment,
8.375%, 3/15/23............. 7,102,500
------------
Financial Services (21.9%):
5,000,000 Abbey National First Capital,
8.20%, 10/15/04............. 5,506,250
10,050,000 American Express Master Trust,
Series 1994-3, Class A,
7.85%....................... 11,054,196
5,000,000 8/15/05 Associates Corp N.A.,
6.375%, 7/15/02............. 5,050,000
5,000,000 Associates Corp N.A., 6.5%,
7/15/02..................... 5,068,750
2,000,000 Cincinnati Financial Corp.,
6.90%, 5/15/28.............. 2,045,000
4,000,000 Commercial Credit Co., 7.75%,
3/1/05...................... 4,330,000
6,000,000 Dow Capital BV, 9.20%,
6/1/10...................... 7,402,500
6,000,000 International Lease Financial
Corp., 5.90%, 4/15/02....... 5,970,000
8,000,000 Lehman Brothers Holdings,
6.50%, 7/18/00.............. 8,070,000
6,000,000 Spieker Properties LP, 7.35%,
12/01/17.................... 6,187,500
------------
60,684,196
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Industrials (5.6%):
2,000,000 Beckman Instruments, Inc.,
7.05%, 6/1/26............... $ 2,120,000
6,000,000 Coca-Cola Put Asset Trust,
6.00%, 3/15/01(b)........... 5,992,500
7,000,000 Lowe's Companies, Inc.,
6.875%, 2/15/28............. 7,262,500
------------
15,375,000
------------
Pharmaceuticals (3.0%):
8,000,000 Eli Lilly & Co., 6.57%,
01/01/16.................... 8,250,000
------------
Telecommunications (2.5%):
6,000,000 Motorola, Inc., 7.5%,
5/15/25..................... 6,862,500
------------
Utilities--Electric (3.0%):
6,000,000 Public Service--Electric &
Gas, 6.50%, 5/1/04.......... 6,150,000
1,900,000 Toledo Edison, 9.50%,
4/1/01...................... 2,033,000
------------
8,183,000
------------
Total Corporate Bonds................ 145,056,571
------------
U.S. GOVERNMENT AGENCIES/
MORTGAGE BACKED SECURITIES (26.0%):
Freddie Mac (5.7%):
7,758,221 6.00%, 12/1/12, Pool #
E00526...................... 7,686,923
4,219,882 6.50%, 3/1/18, Pool #
C90209...................... 4,205,408
3,892,684 6.50%, 11/1/27, Gold Pool #
D84133...................... 3,879,527
------------
15,771,858
------------
Fannie Mae (6.1%):
7,000,000 Medium Term Note, 6.0%,
1/14/05..................... 7,017,290
10,000,000 Zero Coupon, 2/1/19........... 2,967,400
6,837,658 7.00%, 11/1/27, Pool #
395783...................... 6,933,795
------------
16,918,485
------------
Government National Mortgage Association (14.2%):
7,928,858 6.25%, 3/20/22................ 7,919,422
4,520,436 7.00%, 10/15/24, Pool #
780385...................... 4,607,907
13,912,888 7.50%, 7/15/27, Pool #
439599...................... 14,292,849
4,245,912 6.75%, 5/15/28, Pool #
474256...................... 4,275,081
8,080,000 6.0%, 6/15/28, Pool #
462800...................... 7,893,110
------------
38,988,369
------------
Total U.S. Government Agencies/
Mortgage Backed Securities......... 71,678,712
------------
</TABLE>
Continued
-28-
<PAGE> 29
THE SESSIONS GROUP
KEYPREMIER INTERMEDIATE TERM INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (16.5%):
10,000,000 8.875%, 2/15/99............... $ 10,204,400
11,000,000 7.75%, 2/15/01................ 11,584,540
2,000,000 6.25%, 4/30/01................ 2,036,540
6,000,000 11.625%, 11/15/02............. 7,393,320
11,000,000 8.125%, 5/15/21............... 14,309,570
------------
Total U.S. Treasury Obligations...... 45,528,370
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ ------------
<C> <S> <C>
INVESTMENT COMPANIES (2.3%):
1,092,559 Federated Government
Obligation Fund............. $ 1,092,559
2,283,669 Federated Prime Obligation
Fund........................ 2,283,669
2,795,172 KeyPremier Prime Money Market
Fund........................ 2,795,172
76,168 KeyPremier U.S. Treasury
Obligations Money Market
Fund........................ 76,168
------------
Total Investment Companies........... 6,247,568
------------
Total Investments
(Cost $268,695,937)(a)--99.1%...... 273,103,381
Other assets in excess of
liabilities--0.9%...................... 2,461,358
------------
TOTAL NET ASSETS--100.0%............. $275,564,739
============
</TABLE>
- ---------
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $5,038,081
Unrealized depreciation......................... (630,637)
----------
Net unrealized appreciation..................... $4,407,444
==========
</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.
-29-
<PAGE> 30
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS (86.6%):
Pennsylvania (86.6%):
$1,525,000 Allegheny Hospital, Pennsylvania, 5.00%, 7/1/09, Callable
7/1/07 @ 102, MBIA........................................ $ 1,565,031
1,000,000 Altoona, Pennsylvania City Authority Water Revenue, 5.10%,
11/1/12, Callable 11/1/07 @ 100, FGIC..................... 1,013,750
1,330,000 Berks County, Pennsylvania Municipal Authority, 7.10%,
5/15/22, Prerefunded 5/15/04 @ 100, FGIC.................. 1,527,838
1,000,000 Bethel Park, Pennsylvania School District, 5.40%, 8/1/00,
Callable 8/1/99 @ 100, FGIC............................... 1,014,790
1,000,000 Bethlehem, Pennsylvania Area School District, 4.85%, 9/1/10,
Callable 9/1/07 @ 100, FGIC............................... 1,010,000
1,000,000 Bethlehem, Pennsylvania Area School District, Series A,
6.50%, 9/1/00, AMBAC...................................... 1,052,500
2,065,000 Bethlehem, Pennsylvania Water Authority, Series A, 6.30%,
11/15/15, Prerefunded 11/15/02
@ 100, MBIA............................................... 2,243,106
2,080,000 Blair County, Pennsylvania Hospital Health Care Bond,
Secured, 5.30%, 8/15/17, Callable 8/15/07
@ 102, MBIA............................................... 2,108,600
1,000,000 Bucks County, Pennsylvania Technical School Authority,
5.38%, 8/15/15, Callable 2/15/06
@ 100, AMBAC.............................................. 1,021,250
1,000,000 Bucks County, Pennsylvania, Series A, 6.00%, 3/1/01......... 1,048,750
1,900,000 Central Dauphin, Pennsylvania School District, 6.00%,
6/1/01.................................................... 1,997,375
250,000 Dauphin County, Pennsylvania General Authority Health
Center, 5.90%, 1/1/00..................................... 255,313
3,000,000 Ephrata, Pennsylvania Area School District, Series A, 6.80%,
4/15/11, Prerefunded 4/15/01
@ 100, FGIC............................................... 3,213,750
1,000,000 Hempfield, Pennsylvania School District, Lancaster County,
6.40%, 8/15/05, Prerefunded 8/15/02 @ 100, FGIC........... 1,083,750
500,000 Lycoming County, Pennsylvania Hospital Authority, Series B,
7.40%, 7/1/99............................................. 517,745
1,000,000 Northampton County, Pennsylvania Higher Education Authority,
Lehigh University, 6.00%, 9/1/01.......................... 1,052,500
2,155,000 Northampton County, Pennsylvania Higher Education Authority,
Lehigh University, 6.90%, 10/15/06, Callable 10/15/01 @
102, MBIA................................................. 2,359,725
2,000,000 Pennsylvania Housing Finance Agency, Rental Housing, 5.40%,
1/1/00, FNMA.............................................. 2,040,000
500,000 Pennsylvania Housing Financial Agency, Single Family
Mortgage, Series 36, 5.45%, 10/1/14, Callable 10/1/03 @
102....................................................... 508,750
2,000,000 Pennsylvania Infrastructure Investment Authority, 6.00%,
9/1/03, MBIA.............................................. 2,160,000
2,000,000 Pennsylvania Intergovernmental Cooperation Authority, 7.00%,
6/15/14, Prerefunded 6/15/05
@ 100, FGIC............................................... 2,327,500
4,000,000 Pennsylvania Manor School District Pennsylvania, 5.20%,
6/1/16, Callable 6/01/06 @ 100, FGIC...................... 4,030,000
2,075,000 Pennsylvania Second Service-Referendum & Projects, 5.60%,
6/15/14, Callable 6/15/04
@ 101.5, MBIA............................................. 2,176,156
1,375,000 Pennsylvania State Higher Education Assistance Agency,
Student Loan Revenue, Series A, 6.80%,
12/1/00, FGIC............................................. 1,455,781
575,000 Pennsylvania State Higher Education Facilities Authority,
5.90%, 8/15/00............................................ 597,281
1,000,000 Pennsylvania State Higher Education Facilities Authority,
Drexel University, 7.00%, 5/1/02, Prerefunded 5/1/00 @
100, MBIA................................................. 1,053,750
3,925,000 Pennsylvania State Higher Education Facilities Authority,
Series A, 5.35%, 1/1/08,
Callable 1/1/06 @ 101..................................... 4,145,781
1,750,000 Pennsylvania State Higher Education Facilities Authority,
Series D, 7.15%, 6/15/15, Prerefunded 6/15/00 @ 100,
MBIA...................................................... 1,852,813
260,000 Pennsylvania State Higher Education Facilities Authority,
Thomas Jefferson University, Series A,
6.88%, 7/1/99............................................. 266,773
</TABLE>
Continued
-30-
<PAGE> 31
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------ ------------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Pennsylvania, Continued:
$1,425,000 Pennsylvania State Higher Education Facilities Authority,
Thomas Jefferson University, Series A,
5.90%, 8/15/00............................................ $ 1,478,438
3,560,000 Pennsylvania State Higher Education Facilities Authority,
University of Pennsylvania, 4.50%, 7/15/15, Callable
7/15/08 @ 100............................................. 3,333,050
3,740,000 Pennsylvania State Higher Education Facilities Authority,
University of Pennsylvania, 4.50%, 7/15/16, Callable
7/15/08 @ 100............................................. 3,473,525
2,000,000 Pennsylvania State Higher Education, Duquesne University,
Series A, 7.00%, 4/1/10, Callable 4/1/01 @ 100, MBIA...... 2,135,000
1,500,000 Pennsylvania State Industrial Development Authority,
Economic Development, 5.00%,
7/1/00, AMBAC............................................. 1,528,125
1,655,000 Pennsylvania State Public School Building Authority Revenue,
School District of York, Series A, 4.75%, 2/15/14,
Callable 2/15/08 @ 100, FGIC.............................. 1,609,488
1,735,000 Pennsylvania State Public School Building Authority Revenue,
School District of York, Series A, 4.80%, 2/15/15,
Callable 2/15/08 @ 100, FGIC.............................. 1,689,456
1,820,000 Pennsylvania State Public School Building Authority Revenue,
School District of York, Series A, 4.85%, 2/15/16,
Callable 2/15/08 @ 100, FGIC.............................. 1,776,775
1,000,000 Pennsylvania State Turnpike, Series J, 6.40%, 12/1/00,...... 1,055,000
2,000,000 Pennsylvania State, Series A, 6.70%, 1/1/02, Prerefunded
1/1/01 @ 101.5, MBIA...................................... 2,152,500
1,000,000 Philadelphia, Pennsylvania Gas Works, 14th Series, 5.50%,
7/1/04, FSA............................................... 1,061,250
7,160,000 Philadelphia, Pennsylvania Hospitals & Higher Education
Facilities Authority Revenue, 5.00%, 5/15/11, Callable
5/15/08 @ 101............................................. 7,186,850
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........................ 1,096,250
7,000,000 Philadelphia, Pennsylvania School District Series B, 5.50%,
9/1/15, Callable 9/01/05 @ 102, AMBAC..................... 7,306,249
5,000,000 Philadelphia, Pennsylvania Water & Waste Revenue, 5.00%,
8/1/13, Callable 8/01/07 @ 102............................ 5,012,500
1,000,000 Philadelphia, Pennsylvania Water & Wastewater, 6.25%,
8/1/02, MBIA.............................................. 1,077,500
1,000,000 Pittsburgh, Pennsylvania Water & Sewer Authority, Series A,
6.00%, 9/1/16, Prerefunded 9/1/01
@ 100, FGIC............................................... 1,057,500
1,265,000 Pottsville Hospital & Warne Clinic, 5.25%, 7/1/10........... 1,263,419
500,000 Pottsville Hospital & Warne Clinic, 5.50%, 7/1/18, Callable
7/1/08 @ 100.............................................. 494,375
1,700,000 Sayre, Pennsylvania Health Care Facilities Authority, Series
A, 6.60%, 3/1/01, AMBAC................................... 1,802,000
3,800,000 Tredyffrin Township, Pennsylvania, 5.25%, 11/15/17, Callable
11/15/06 @ 100............................................ 3,847,500
1,500,000 Washington County, Pennsylvania Hospital Authority, 5.88%,
12/15/13, Callable 12/15/02
@ 102, AMBAC.............................................. 1,586,250
1,000,000 West Shore, Pennsylvania School District, 6.40%, 9/1/01,
Partially Prerefunded 9/1/98 @ 100, FGIC.................. 1,004,210
1,850,000 York County, Pennsylvania Industrial Development Authority,
6.25%, 7/1/02............................................. 1,981,812
------------
102,709,380
------------
Total Municipal Bonds....................................... 102,709,380
============
U.S. TREASURY OBLIGATIONS (11.0%):
U.S. Treasury Notes (11.0%):
10,000,000 15.75%, 11/15/01............................................ 13,113,900
------------
Total U.S. Treasury Obligations............................. 13,113,900
============
</TABLE>
Continued
-31-
<PAGE> 32
THE SESSIONS GROUP
KEYPREMIER PENNSYLVANIA MUNICIPAL BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------------------------------------ ------------
<C> <S> <C>
INVESTMENT COMPANIES (1.3%):
$ 874,273 Federated Pennsylvania Municipal Cash Fund.................. $ 874,273
702,897 Federated Pennsylvania Municipal Cash Trust Service......... 702,897
------------
Total Investment Companies........................................... 1,577,170
------------
Total Investments (Cost $115,435,199)(a)--98.9%...................... 117,400,450
Other assets in excess of liabilities--1.1%.............................. 1,284,700
------------
TOTAL NET ASSETS--100.0%.................................... $118,685,150
============
</TABLE>
- ---------
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $2,509,808
Unrealized depreciation......................... (544,557)
----------
Net unrealized appreciation..................... $1,965,251
==========
</TABLE>
<TABLE>
<S> <C>
AMBAC -- AMBAC Indemnity Corp.
FGIC -- Insured by the Financial Guaranty Insurance Corp.
MBIA -- Insured by the Municipal Bond Insurance Assoc.
FSA -- Financial Security Assurance Corp.
</TABLE>
See notes to financial statements.
-32-
<PAGE> 33
THE SESSIONS GROUP
KEYPREMIER LIMITED DURATION GOVERNMENT SECURITIES FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (16.2%):
Freddie Mac (10.4%):
$2,858,285 9.00%, 4/1/16................. $ 3,047,646
-----------
Fannie Mae (0.0%):
48 10.00%, 10/1/00............... 51
-----------
Government National Mortgage Association (5.8%):
154,734 8.50%, 2/15/17, Pool
#203632..................... 165,614
67,384 8.50%, 4/15/17, Pool
#189291..................... 72,122
382,461 8.50%, 7/15/21, Pool
#306066..................... 409,234
556,619 8.50%, 7/15/21, Pool
#307983..................... 595,232
446,238 8.50%, 1/15/23, Pool
#341948..................... 474,543
-----------
1,716,745
-----------
Total U.S. Government Agencies....... 4,764,442
-----------
U.S. TREASURY OBLIGATIONS (47.9%):
U.S. Treasury Bonds (3.6%):
1,000,000 6.125%, 11/15/27.............. 1,071,510
-----------
U.S. Treasury Notes (44.3%):
3,000,000 5.75%, 12/31/98............... 3,006,240
1,000,000 5.88%, 3/31/99................ 1,002,980
9,000,000 5.38%, 1/31/00................ 8,978,490
-----------
12,987,710
-----------
Total U.S. Treasury Obligations...... 14,059,220
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT GUARANTEED SECURITIES (23.4%):
Israel Aid (6.2%)
$1,825,000 4.88%, 9/15/98................ $ 1,822,719
-----------
Private Export Funding Company (17.2%):
5,000,000 9.10%, 10/30/98............... 5,050,000
-----------
Total U.S. Government Guaranteed
Securities............................. 6,872,719
-----------
REPURCHASE AGREEMENTS (11.9%):
3,501,056 Lehman Brothers, dated
6/30/98, 5.70%, matures
7/1/98, Proceeds at maturity
$3,501,610 (Collateralized
by $9,225,000 FICO Strip,
3/7/14, Market Value =
$3,572,289)................. 3,501,056
-----------
Total Repurchase Agreements.......... 3,501,056
-----------
Total Investments
(Cost $29,274,963)(a)--99.4%....... 29,197,437
Other assets in excess of liabilities
0.6%................................... 162,552
-----------
TOTAL NET ASSETS--100.0%............. $29,359,989
===========
</TABLE>
- ---------
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................... $ 22,368
Unrealized depreciation......................... (99,894)
--------
Net unrealized depreciation..................... $(77,526)
========
</TABLE>
See notes to financial statements.
-33-
<PAGE> 34
THE SESSIONS GROUP
KEYPREMIER U.S. TREASURY OBLIGATIONS MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. TREASURY SECURITIES (33.8%):
U.S. Treasury Bills (16.7%):
$4,000,000 5.04%, 10/22/98............... $ 3,936,783
-----------
U.S. Treasury Notes (17.1%):
4,000,000 9.25%, 8/15/98................ 4,018,442
-----------
Total U.S. Treasury Securities....... 7,955,225
-----------
U.S. GOVERNMENT GUARANTEED SECURITIES (29.9%):
Israel Aid (12.7%):
3,000,000 4.88%, 9/15/98................ 2,994,946
-----------
Private Export Funding Company (17.2%):
4,000,000 9.10%, 10/30/98............... 4,044,873
-----------
Total U.S. Government Guaranteed
Securities....................... 7,039,819
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ---------- ------------------------------ -----------
<C> <S> <C>
U.S. TREASURY COLLATERALIZED REPURCHASE AGREEMENTS
(35.7%):
$4,535,612 Lehman Brothers, dated
6/30/98, 5.50%, matures
7/1/98, Proceeds at maturity
$4,536,305 (Collateralized
by $8,380,000
U.S. Treasury STRIPS,
2/15/08-8/15/13, Market
Value = $4,627,281)......... $ 4,535,612
3,846,000 Merrill Lynch Securities Inc.,
dated 6/30/98, 5.60%,
matures 7/1/98, Proceeds at
maturity $3,862,255
(Collateralized by
$3,900,000 U.S. Treasury
Notes, 10/31/99, Market
Value = $3,937,569)......... 3,846,000
-----------
Total U.S. Treasury Collateralized
Repurchase Agreements.............. 8,381,612
-----------
Total Investments
(Amortized Cost
$23,376,656)(a)--99.4%................... 23,376,656
Other assets in excess of
liabilities--0.6%...................... 143,005
-----------
TOTAL NET ASSETS--100.0%............. $23,519,661
===========
</TABLE>
- ---------
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements.
-34-
<PAGE> 35
THE SESSIONS GROUP
KEYPREMIER PRIME MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ----------- ------------------------------ ------------
<C> <S> <C>
CERTIFICATE OF DEPOSIT (8.3%):
Financial Services (8.3%):
$ 5,000,000 Bankers Trust Corp.,* 5.82%,
7/14/98..................... $ 5,000,000
3,000,000 Bankers Trust,** 5.58%,
2/19/99..................... 2,998,705
10,000,000 Wilmington Trust, 5.6%,
9/18/98..................... 10,000,000
------------
Total Certificate of Deposit.......... 17,998,705
------------
COMMERCIAL PAPER (54.0%):
Agriculture (4.6%):
10,000,000 Cargill, 6.10%, 7/1/98........ 10,000,000
------------
Automotive (3.0%):
6,600,000 Daimler-Benz, 5.55%,
7/13/98..................... 6,587,790
------------
Entertainment (4.6%):
10,000,000 Walt Disney Co., 6.05%,
7/1/98...................... 10,000,000
------------
Financial Services (13.7%):
10,000,000 Budget Funding, 5.58%,
7/29/98..................... 9,956,600
10,000,000 IBM Credit Corp., 5.53%,
7/8/98...................... 9,988,681
10,000,000 MetLife Funding, 5.58%,
7/6/98...................... 9,992,251
------------
29,937,532
------------
Food Processing & Packaging (4.6%):
10,000,000 General Mills, 6.0%, 7/1/98... 10,000,000
------------
Insurance (4.5%):
10,000,000 General Re-Insurance, 5.5%,
9/18/98..................... 9,879,306
------------
Natural Resources (4.5%):
10,000,000 Natural Rural, 5.50%,
9/11/98..................... 9,890,000
------------
Telecommunications (4.6%):
10,000,000 Bell Atlantic, 5.54%,
7/30/98..................... 9,955,372
------------
Utilities (9.9%):
5,467,000 Dayton Power and Light, 5.53%,
8/3/98...................... 5,439,287
10,750,000 General Electric, 5.53%,
9/18/98..................... 10,619,546
5,500,000 Idaho Power Co, 5.55%,
7/14/98..................... 5,488,977
------------
21,547,810
------------
Total Commercial Paper................ 117,797,810
------------
ASSET BACKED SECURITIES (0.7%):
Financial Services (0.7%):
1,444,342 Capital Equipment Receivable
Trust, 5.79%, 12/15/98...... 1,445,013
------------
Total Asset Backed Securities......... 1,445,013
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
- ----------- ------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS (9.4%):
Financial Services (5.7%):
$ 2,500,000 Chrysler Financial Corp.,**
5.63%, 3/12/99.............. $ 2,500,342
10,000,000 PNC Bank N.A.,** 5.54%,
6/11/99..................... 9,993,384
------------
12,493,726
------------
Retail (3.7%):
8,000,000 Southland Corp., 5.50%,
7/15/98..................... 7,982,889
------------
Total Corporate Bonds................. 20,476,615
------------
U.S. GOVERNMENT AGENCIES (7.9%):
Federal Agricultural Mortgage Corporation--Discount
(4.2%):
9,023,000 5.47%, 7/13/98................ 9,006,548
------------
Federal Home Loan Bank (2.3%):
5,000,000 5.63%, 3/2/99................. 5,000,000
------------
Fannie Mae (0.5%):
1,100,000 5.32%, 7/1/98................. 1,100,000
------------
Student Loan Marketing Association (0.9%):
2,000,000 Sallie Mae,* 5.32%, 8/20/98... 1,999,330
------------
Total U.S. Government Agencies........ 17,105,878
------------
REPURCHASE AGREEMENTS (20.0%):
36,821,727 Lehman Brothers, dated
6/30/98, 5.75%, matures
7/1/98, Proceeds at maturity
$36,827,609 (Collateralized
by $72,699,000 Tennessee
Valley Authority, 0.00%,
10/5/03-5/1/24, market value
= $37,559,085).............. 36,821,727
6,916,000 Merrill Lynch Securities Inc.,
dated 6/30/98, 5.65%,
matures 7/1/98, Proceed at
maturity $6,917,085
(Collateralized by
$6,695,000 Federal National
Mortgage Association,
6.35%-6.89%,
6/10/05-4/25/06, market
value = $7,057,256)......... 6,916,000
------------
Total Repurchase Agreements........... 43,737,727
------------
Total Investments (Amortized Cost
$218,561,748)(a)--100.3%............ 218,561,748
Liabilities in excess of other
assets--(0.3)%.......................... (700,924)
------------
TOTAL NET ASSETS--100.0%.............. $217,860,824
============
</TABLE>
Continued
-35-
<PAGE> 36
THE SESSIONS GROUP
KEYPREMIER PRIME MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1998
- ---------
(a) Cost for federal income tax and financial reporting purposes are the same.
* Floating Rate Certificates are securities with interest rates that change
whenever a specific interest rate changes. The interest rate is based on an
index of market interest rates or other index. The rate reflected on the
Schedule of Portfolio Investments is the rate in effect on June 30, 1998.
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 June 30, 1998. The date
presented represents the next rate change date.
See notes to financial statements.
-36-
<PAGE> 37
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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: the KeyPremier
Aggressive Growth Fund, the KeyPremier Established Growth Fund, the
KeyPremier Intermediate Term Income Fund, the KeyPremier Pennsylvania
Municipal Bond Fund, the KeyPremier Limited Duration Government Securities
Fund, the KeyPremier U.S. Treasury Obligations Money Market Fund, and the
KeyPremier Prime Money Market Fund (collectively, the "Funds" and
individually, a "Fund").
The Funds' investment objectives are as follows:
<TABLE>
<CAPTION>
COMMENCEMENT
FUND OF OPERATIONS OBJECTIVE
---- ------------- ---------
<S> <C> <C>
Aggressive Growth Fund February 3, 1997 Growth of capital
Established Growth Fund December 2, 1996 Growth of capital with some current
income as a secondary objective
Intermediate Term Income Fund December 2, 1996 Current income with long-term growth of
capital as a secondary objective
Pennsylvania Municipal Bond October 1, 1996 Income which is exempt from federal
Fund income tax and Pennsylvania state
income tax and preservation of capital
Limited Duration Government July 1, 1997 Current income with preservation of
Securities Fund capital as a secondary objective
U.S. Treasury Obligations Money July 1, 1997 Current income with liquidity and
Market Fund stability of principal
Prime Money Market Fund October 7, 1996 Current income with liquidity and
stability of principal
</TABLE>
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.
Continued
-37-
<PAGE> 38
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from those
estimates.
SECURITIES VALUATION:
Investments of the U.S. Treasury Obligations Money Market Fund and Prime
Money Market Fund (collectively, "the money market funds"), are valued,
in accordance with Rule 2a-7, 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.
Investments in common and preferred stocks, corporate bonds, commercial
paper, municipal securities and U.S. Government securities of the
Aggressive Growth Fund, Established Growth Fund, Intermediate Term
Income Fund, Pennsylvania Municipal Bond Fund, and Limited Duration
Government Securities Fund (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 Trustee, including the use of
approved independent pricing services. The differences between the cost
and market values of investments held by the variable net asset value
funds are reflected as either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the amortization of
premium or discount. Dividend income is recorded on the ex-dividend
date. Gains or losses realized on sales of securities are determined by
comparing the identified cost of the security lot sold with the net
sales proceeds.
REPURCHASE AGREEMENTS:
The Funds may acquire repurchase agreements from financial institutions
such as banks and broker-dealers which 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
Continued
-38-
<PAGE> 39
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
accrued interest). Securities subject to repurchase agreements are held
by the Funds' custodian or another qualified custodian.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
and distributable net realized capital gains, if any, are declared and
distributed at least annually for the money market funds. 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 Intermediate Term Income, Pennsylvania Municipal Bond,
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 Aggressive Growth and Established 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.
As of June 30, 1998, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to
paid-in-capital:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET REALIZED
UNDISTRIBUTED NET GAIN/(LOSS) ON
INVESTMENT INCOME INVESTMENTS
----------------- --------------
<S> <C> <C>
Aggressive Growth........... $ 115,134 $ (3)
Intermediate Income......... $ (60,619) $ 60,620
Limited Duration Government
Securities................ $ 4,444 $ (2,194)
U.S. Treasury Obligation
Money Market.............. $ 1,890 $ --
Prime Money Market.......... $ 447 $ (447)
</TABLE>
FEDERAL INCOME TAXES:
It is the policy of each Fund to qualify or continue to qualify as a
regulated investment company by complying with the provisions available
to certain investment companies, as defined in applicable sections of
the Internal Revenue Code, and to make distributions of net investment
income and net realized capital gains sufficient to relieve it from all,
or substantially all, federal income taxes.
Continued
-39-
<PAGE> 40
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following
fiscal year. The following Fund had deferred losses, which will be
treated as arising on the first day of the fiscal year ending June 30,
1999:
<TABLE>
<CAPTION>
CAPITAL LOSS
FUND DEFERRED
- ---- ------------
<S> <C>
U.S. Treasury Obligation Money Market.......... $594
</TABLE>
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.
OTHER:
The Funds may maintain a cash balance with their custodian and receive a
reduction of their custody fees and expenses for the amount of interest
earned on such uninvested cash balances. For financial reporting
purposes for the year ended June 30, 1998, custodian fees and expenses
and expenses paid by third parties were increased by the following
amount for the following funds:
<TABLE>
<S> <C>
Aggressive Growth Fund........................... $ 1,447
Limited Duration Government Fund................. $ 4,319
U.S. Treasury Obligation Money Market Fund....... $ 352
Prime Money Market Fund.......................... $18,017
</TABLE>
There was no effect on net investment income. The Funds could have
invested such cash amounts in an income-producing asset if they had not
agreed to a reduction of fees or expenses under the expense offset
arrangement with their custodian.
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 year ended June
30, 1998, are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Aggressive Growth Fund...... $ 21,553,728 $ 9,013,893
Established Growth Fund..... $ 16,692,678 $ 12,192,974
Intermediate Term Income
Fund...................... $561,965,509 $494,012,764
Pennsylvania Municipal Bond
Fund...................... $ 73,543,901 $ 80,518,644
Limited Duration Bond
Fund...................... $115,586,713 $114,376,256
</TABLE>
Continued
-40-
<PAGE> 41
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
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. Pursuant to the administration agreement, the Funds
pay BISYS a monthly fee for its services at an annual rate of 0.115% of the
aggregate average daily net assets of the Funds. 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 year ended June 30, 1998, BISYS
received $56,594 from commissions earned on sales of shares of the variable
net asset value funds, of which $2,114 was reallowed to broker-dealers
affiliated with Keystone Financial, Inc.
Fees may be voluntarily reduced to assist the Funds in maintaining
competitive expense ratios.
The variable net asset value funds can and do invest a portion of their
assets in the money market funds.
Continued
-41-
<PAGE> 42
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
Information regarding these transactions is as follows for the year ended
June 30, 1998:
<TABLE>
<CAPTION>
INTERMEDIATE PENNSYLVANIA
AGGRESSIVE ESTABLISHED TERM MUNICIPAL
GROWTH GROWTH INCOME BOND
FUND FUND FUND FUND
---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ 1.00% .75% .60% .60%
Voluntary fee reductions.................... $593,310 $720,420 $715,881 $357,712
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)........ .25% .25% .25% .25%
Voluntary fee reductions.................... $ 34,667 $ 64,344 $125,001 $ 55,413
FUND ACCOUNTANT FEES........................ $ 41,513 $ 70,172 $ 75,419 $ 43,737
TRANSFER AGENT FEES......................... $ 36,487 $ 38,056 $ 27,809 $ 22,799
</TABLE>
<TABLE>
<CAPTION>
LIMITED DURATION U.S. TREASURY
GOVERNMENT OBLIGATIONS
SECURITIES MONEY MARKET PRIME MONEY
FUND FUND MARKET FUND
---------------- ------------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets).......... .60% .40% .40%
Voluntary fee reductions...................... $153,207 $74,397 $311,790
ADMINISTRATIVE SERVICES FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets).......... .25% .25% .25%
Voluntary fee reductions...................... $ 18,069 $13,484 $ 95,587
FUND ACCOUNTANT FEES.......................... $ 32,239 $30,875 $ 47,847
TRANSFER AGENT FEES........................... $ 22,498 $21,952 $ 26,793
</TABLE>
Continued
-42-
<PAGE> 43
THE SESSIONS GROUP
KEYPREMIER FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1998
5. ACQUISITION OF COMMON COLLECTIVE TRUST FUNDS:
On July 1, 1997, March 1, 1998 and March 1, 1998, respectively, the Limited
Duration Government Securities, the Established Growth and Intermediate
Term Income Funds 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 share and unrealized appreciation as of the dates of
conversion:
<TABLE>
<CAPTION>
LIMITED INTERMEDIATE
DURATION ESTABLISHED TERM
GOVERNMENT GROWTH INCOME
SECURITIES FUND FUND FUND
--------------- ----------- ------------
<S> <C> <C> <C>
Shares..................... 3,467,684 937,007 312,665
Net Assets................. $34,676,843 $12,237,310 $3,132,904
Net Asset Value............ $ 10.00 $ 13.06 $ 13.06
Unrealized Appreciation.... $ 35,816 $ 9,410,676 $ 29,381
</TABLE>
6. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
During the year ended June 30, 1998, the following Portfolios declared
long-term capital gain distributions in the following amounts:
<TABLE>
<CAPTION>
FUND AMOUNT
- ---- ----------
<S> <C>
Aggressive Growth.................................. $1,181,987
Established Growth................................. $1,060,223
</TABLE>
For corporate shareholders 100.00% of the total ordinary income
distributions paid during the fiscal year ended June 30, 1998 for the
Aggressive Growth Fund and the Established Growth Fund qualifies for the
corporate dividends received deduction.
-43-
<PAGE> 44
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND ESTABLISHED GROWTH FUND
-------------------------- --------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997(a) 1998 1997(a)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $ 10.24 $ 10.00 $ 11.13 $ 10.00
-------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income (loss).......... (0.01) 0.01 0.10 0.08
Net realized and unrealized gain on
investments........................ 1.30 0.24 2.99 1.13
-------- -------- -------- --------
Total from Investment Activities... 1.29 0.25 3.09 1.21
-------- -------- -------- --------
DISTRIBUTIONS FROM:
Net investment income................. -- (0.01) (0.10) (0.08)
Net realized gains.................... (0.12) -- (0.06) --
-------- -------- -------- --------
Total Distributions................ (0.12) (0.01) (0.16) (0.08)
-------- -------- -------- --------
Net change in net asset value per
share.............................. 1.17 0.24 2.93 1.13
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.......... $ 11.41 $ 10.24 $ 14.06 $ 11.13
======== ======== ======== ========
Total Return (excluding sales charge)... 12.72% 2.52%(b) 27.92% 12.20%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (in
thousands)............................ $135,612 $105,258 $258,812 $190,914
Ratio of expenses to average net
assets................................ 0.83% 0.66%(c) 0.71% 0.44%(c)
Ratio of net investment income (loss) to
average net assets.................... (0.09%) 0.28%(c) 0.77% 1.39%(c)
Ratio of expenses to average net
assets*............................... 1.33% 1.35%(c) 1.06% 1.01%(c)
Ratio of net investment income (loss) to
average net assets*................... (0.59%) (0.41%)(c) 0.42% 0.82%(c)
Portfolio Turnover...................... 8% 2% 6% 1%
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratio would have been as indicated.
(a) Commencement of operations of the Funds were February 3, 1997 and December
2, 1996, respectively.
(b) Not Annualized
(c) Annualized
-44-
<PAGE> 45
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERMEDIATE TERM INCOME PENNSYLVANIA MUNICIPAL
FUND BOND FUND
------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997(a) 1998 1997(a)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....... $ 9.77 $ 10.00 $ 10.29 $ 10.21
-------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income.................... 0.62 0.36 0.49 0.34
Net realized and unrealized gain (loss)
on investments........................ 0.33 (0.23) 0.11 0.06
-------- -------- -------- --------
Total from Investment Activities...... 0.95 0.13 0.60 0.40
-------- -------- -------- --------
DISTRIBUTIONS FROM:
Net investment income.................... (0.62) (0.36) (0.50) (0.32)
Net realized gains....................... -- -- -- --
-------- -------- -------- --------
Total Distributions................... (0.62) (0.36) (0.50) (0.32)
-------- -------- -------- --------
Net change in net asset value per
share................................. 0.33 (0.23) 0.10 0.08
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............. $ 10.10 $ 9.77 $ 10.39 $ 10.29
======== ======== ======== ========
Total Return (excluding sales charge)...... 9.95% 1.40%(b) 5.89% 3.98%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (in
thousands)............................... $275,565 $207,859 $118,685 $123,194
Ratio of expenses to average net assets.... 0.57% 0.37%(c) 0.58% 0.37%(c)
Ratio of net investment income to average
net assets............................... 6.27% 6.45%(c) 4.65% 4.46%(c)
Ratio of expenses to average net assets*... 0.92% 0.84%(c) 0.92% 0.86%(c)
Ratio of net investment income to average
net assets*.............................. 5.92% 5.98%(c) 4.31% 3.97%(c)
Portfolio Turnover......................... 218% 329% 62% 98%
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratio would have been as indicated.
(a) Commencement of operations of the Funds were December 2, 1996 and October 1,
1996, respectively.
(b) Not Annualized
(c) Annualized
-45-
<PAGE> 46
THE SESSIONS GROUP
KEYPREMIER FUNDS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LIMITED
DURATION U.S. TREASURY
GOVERNMENT OBLIGATIONS
SECURITIES MONEY
FUND MARKET FUND PRIME MONEY MARKET FUND
------------ ------------- --------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998(a) 1998(a) 1998 1997(a)
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 10.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- -------
INVESTMENT ACTIVITIES:
Net investment income................ 0.56 0.05 0.05 0.04
Net realized and unrealized gain on
investments....................... (0.04) -- -- --
------- ------- -------- -------
Total from Investment
Activities...................... 0.52 0.05 0.05 0.04
------- ------- -------- -------
DISTRIBUTIONS FROM:
Net investment income................ (0.56) (0.05) (0.05) (0.04)
Net realized gains................... -- -- -- --
------- ------- -------- -------
Total Distributions............... (0.56) (0.05) (0.05) (0.04)
------- ------- -------- -------
Net change in net asset value per
share............................. (0.04) -- -- --
------- ------- -------- -------
NET ASSET VALUE, END OF PERIOD......... $ 9.96 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== =======
Total Return (excluding sales
charge).............................. 5.39% 4.78% 5.19% 3.73%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, at end of period (in
thousands)........................... $29,360 $23,520 $217,861 $95,850
Ratio of expenses to average net
assets............................... 0.65% 0.71% 0.48% 0.36%(c)
Ratio of net investment income to
average net assets................... 5.58% 4.64% 5.14% 5.02%(c)
Ratio of expenses to average net
assets*.............................. 1.18% 1.07% 0.76% 0.70%(c)
Ratio of net investment income to
average net assets*.................. 5.05% 4.28% 4.86% 4.68%(c)
Portfolio Turnover..................... 482% NA NA NA
</TABLE>
- ---------------
* During the period certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratio would have been as indicated.
(a) Commencement of operations of the Funds were July 1, 1997, July 1, 1997, and
October 7, 1996, respectively.
(b) Not Annualized
(c) Annualized
-46-
<PAGE> 47
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
The Sessions Group --
KeyPremier Funds:
We have audited the accompanying statements of assets and liabilities of The
Sessions Group -- KeyPremier Funds (comprised of the KeyPremier Aggressive
Growth Fund, KeyPremier Established Growth Fund, KeyPremier Intermediate Term
Income Fund, KeyPremier Pennsylvania Municipal Bond Fund, KeyPremier Limited
Duration Government Securities Fund, KeyPremier U.S. Treasury Obligations Money
Market Fund, and KeyPremier Prime Money Market Fund, collectively the Funds),
including the schedules of portfolio investments as of June 30, 1998, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of June
30, 1998 by confirmation with the custodian and brokers and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Sessions Group -- KeyPremier Funds at
June 30, 1998, the results of their operations, the changes in their net assets
and the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
August 14, 1998
-47-
<PAGE> 48
KEYPREMIER FUNDS(SM)
Investment Advisor
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
[PHOTOS]
NEW KeyPremier Funds
SOLUTIONS
[PHOTOS]
ANNUAL REPORT
JUNE 30,1998
KEYPREMIER FUNDS(SM)
8/98
