<PAGE> 1
- ---------------------------------------
SEMI-ANNUAL REPORT
- ---------------------------------------
- --------------------------------------- [Picture]
JUNE 30, 1996
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- ---------------------------------------
YOUR FOUNDATION FOR INVESTMENT STRENGTH
- ---------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
The
THE KENT INTERMEDIATE TAX-FREE FUND
Kent
THE KENT TAX-FREE INCOME FUND
Funds[Registration Mark]
THE KENT MICHIGAN MUNICIPAL BOND FUND
<PAGE> 2
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MESSAGE TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Kent Fund Shareholder:
Enclosed is the semi-annual report for The Kent Tax-Free Bond Funds
for the six months ended June 30, 1996. Inside, you'll find a Market Overview
that describes the economic and market conditions that we believe affected
the Funds' performances during this time. There are also Portfolio Reviews
for each Fund that explain how the Fund managers adjusted their portfolios in
the prevailing investment environment and what the managers expect in the
months to come.
During the period, the Kent Funds concentrated on providing
shareholders good value and attractive potential for growth while managing
risks. If you have any questions about your investments after reading this
report, please call 1-800-633-KENT (1-800-633-5368) to speak to a Kent Funds
Specialist. We remain committed to providing you with useful information that
can help you make the most of your investments.
Sincerely,
The Kent Funds
1
<PAGE> 3
INVESTMENT ADVISER
Old Kent Bank
Grand Rapids, MI 49503
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
This report is submitted for the general information of shareholders of The
Kent Limited Term Tax-Free Fund, The Kent Intermediate Tax-Free Fund, The
Kent Tax-Free Income Fund, and The Kent Michigan Municipal Bond Fund. It is
not authorized for distribution to prospective investors unless accompanied
or preceded by an effective prospectus for the funds, which contains more
information concerning the funds' investment policies, as well as fees and
expenses and other pertinent information. Read the prospectus carefully
before investing.
The performance indices used for comparison in this report, including the
Lehman Brothers 1-Year General Obligations Municipal Bond Index, the Lehman
Brothers 3-Year General Obligations Municipal Bond Index, the Lehman Brothers
5-Year General Obligations Municipal Bond Index, the Lehman Brothers
Municipal Bond Index and the Lehman Brothers Long-Term Municipal Bond Index
are unmanaged indices. Unlike actual mutual fund performance, performance of
an index does not reflect any management fees, other expenses or sales
charges. A direct investment in an unmanaged index is not possible.
2
<PAGE> 4
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TAX-FREE BOND MARKET OVERVIEW
- --------------------------------------------------------------------------------
Following a strong advance in 1995, the fixed-income market changed
course in the first half of 1996. During that time, commodity prices rose
sharply and the economy picked up steam. Although many investors realized
commodity prices gained largely on temporary dislocations in the oil market
and poor weather conditions at planting time, rather than on increases in
underlying inflation, they grew concerned when the price hikes took place
while the economy was strengthening.
Some investors worry that the economy's growth rate cannot exceed
2% without rekindling inflation. After the Federal Reserve cut short-term
interest rates to 5.25% on January 31st, the reports of unexpectedly strong
gains in employment, retail sales and housing activity led many investors to
believe that the Federal Reserve would have to raise interest rates to keep
inflation under control.
As the current business expansion passed its five-year anniversary
during the first half of 1996, the unemployment rate fell below 5.5%, and
capacity utilization reached 83%. Investors raised bond yields in an attempt
to keep the economy from overheating. Yields on Treasury securities rose 54
basis points for one-year issues, 114 basis points for 10-year issues and 103
basis points for 30-year issues. Yields on municipal securities increased
more modestly, however, rising about 50 basis points overall.
SPECIAL PRICING SUPPORTS
The somewhat better performance of municipal issues was due to
several factors. First, municipal bonds were "cheap" relative to taxable
income securities at the beginning of 1996. This was due primarily to
investor uncertainty over the future of various "flat tax" proposals that
would have ended the tax advantages municipal securities enjoy. On January
17th, the Kemp Commission released its long-awaited report on the feasibility
of a flat tax and was noticeably vague on specific recommendations. The
municipal market viewed this as a favorable sign, allowing tax-free yields
to decline for the remainder of January and into February.
The second positive influence on the performance of the municipal
market has been a change in the balance between market supply and demand. The
municipal market is now dominated by the individual investor, through either
direct purchases or tax-free bond funds. Insurance companies, especially
property and casualty firms, were also net buyers of municipal bonds, which
offered yields that were attractive relative to taxable issues at a time when
these firms had strong earnings that they could shelter from taxes.
Meanwhile, the supply of new municipal issues has begun to decline.
Much like individual homeowners who typically do not refinance home mortgages
when mortgage rates rise, municipalities are finding that it's economically
unfeasible to refund many previously issued municipal bonds at current
yields.
The actual rise in municipal yields during the past four months
created an opportunity to increase the average maturities of investments in
The Kent Tax-Free Bond Funds. Even though municipal securities continue to be
"rich" compared to yields on taxable securities, absolute yield levels for
municipal bonds are much better than six months ago. We expect this
relationship to continue in the months to come.
NEW OPPORTUNITIES
Approximately $60 billion in municipal bonds matured or were called
in by their issuers during June and July. A high percentage of this money
likely will be reinvested in the municipal market in the near term and
provide additional support for municipal securities.
As in the Treasury market, the tradeoff between risk and reward for
municipal bond investors has become increasingly attractive. We find strong
appeal in a market where an overreaction to economic reports has caused
prices to decline sharply in a short amount of time. We view bond yields as
especially attractive after inflation. Although inflation-adjusted yields are
not as high as they were late in 1994, they are much larger than at the end
of 1995.
In the second half of 1996, we expect the higher level of bond
yields to slow the economy, which could help keep inflation at bay. When
investors see that economic growth and inflation remain moderate, prices for
municipal bonds will start to improve. With this in mind, we are keeping the
average maturities of investments in The Kent Tax-Free Bond Funds somewhat
longer than the average maturities of their benchmarks.
Because a change in market psychology like we've seen in recent
months can cause investors to ignore fundamentals and force prices to make
exaggerated moves, we would take advantage of any further increases in yields
on municipal securities to further lengthen the average maturities of The
Kent Tax-Free Bond Funds.
JOSEPH T. KEATING
Chief Investment Officer
ALLAN J. MEYERS,
Director of Fixed Income
3
<PAGE> 5
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PORTFOLIO REVIEWS
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
BY ALLAN J. MEYERS,
CO-PORTFOLIO MANAGER, AND
MICHAEL J. MARTIN,
CO-PORTFOLIO MANAGER
As bond yields in the first half of 1996 increased, we lengthened
the average maturity of investments in The Kent Limited Term Tax-Free Fund to
increase the potential for capital gains when bond yields subsequently
decline. For the six months ended June 30, 1996, the Fund's Institutional and
Investment Shares had total returns of 0.71% and 0.75%, respectively, before
the deduction of sales charges. That compares to a total return for the
Lehman Brothers Three-Year General Obligations Municipal Bond Index of 1.48%.
EXTENDING MATURITIES
When 1996 began, the Fund's portfolio had an average maturity of
3.2 years. Once bond yields started climbing in March, we added longer-term
issues to the portfolio to increase the potential for capital gains and take
advantage of the higher yields that were available. By the end of June, the
portfolio had an average maturity of 3.7 years.
During this time the average yield for a five-year, AAA-rated
general obligation municipal security rose from 4.10% to 4.65%. For taxpayers
in the 31% tax bracket, this represented an increase in taxable equivalent
yields from 5.94% to 6.73%.
We continued to emphasize municipals with credit ratings of AAA or
AA and maturities of 3 to 6 years.
- --------------------------------------------------------------------------------
THE KENT LIMITED TERM TAX-FREE FUND
DISTRIBUTION OF NET ASSETS
AS OF JUNE 30, 1996
- -----------------------------------
[Pie Chart with the information below]
Cash Equivalents &
Net Other Assets & Liabilities 5.69%
Other Regions 6.32%
South 24.44%
Pacific 2.57%
East 17.48%
Mountain 6.75%
North Central 36.75%
- --------------------------------------------------------------------------------
LOOKING AHEAD
If bond yields edge lower in coming months, and bond prices rise,
the Fund could enjoy strong returns from the recent lengthening of its
average maturity. Should bond yields rise even further in the second half of
the year, we would use this as an opportunity to make additional investments
in longer-term issues. As always, we will seek to emphasize securities with
strong credit quality.
- --------------------------------------------------------------------------------
<TABLE>
THE KENT LIMITED TERM TAX-FREE FUND
<CAPTION>
TAX EQUIVALENT YIELDS AS OF JUNE 30, 1996
- -----------------------------------------
TAX BRACKET INSTITUTIONAL CLASS INVESTMENT CLASS
- ---------------------------------------------------------------------------
<S> <C> <C>
28% 5.46% 5.04%
31% 5.70% 5.26%
36% 6.14% 5.67%
39.6% 6.51% 6.01%
<FN>
+ Based on an SEC 30-day yield at 6/30/96 of 3.93% for the Institutional Class
and 3.63% for the Investment Class. SEC 30-day yield is computed based on net
income during the 30-day period ended June 30, 1996. Yield calculations
represent past performance and will fluctuate.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
4
<PAGE> 6
Tax Free Funds
-----------------
PORTFOLIO REVIEWS
-----------------
<TABLE>
THE KENT LIMITED TERM TAX-FREE FUND
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF JUNE 30, 1996
- ------------------------------------------
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 11/1/94) (inception: 9/1/94)
-------------------------------------------------
<S> <C> <C>
One Year -0.10% 4.09%
Life of Fund 2.90% 4.48%
<FN>
* Reflects deduction of 4.00% sales charge.
</FN>
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS ONE-YEAR GENERAL OBLIGATIONS MUNICIPAL BOND INDEX
AND THE LEHMAN BROTHERS THREE-YEAR GENERAL OBLIGATIONS MUNICIPAL BOND INDEX
- ------------------------------------------------------------------------------
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROS. LEHMAN BROS. KENT FUNDS
ONE YEAR GENERAL OBLIGATIONS THREE YEAR GENERAL OBLIGATIONS (INSTITUTIONAL)
MUNICIPAL BOND INDEX MUNICIPAL BOND INDEX
<S> <C> <C> <C>
09/03/94 10,000 10,000 10,000
06/30/96 10,841 11,086 10,835
</TABLE>
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROS. LEHMAN BROS. KENT FUNDS
ONE YEAR GENERAL OBLIGATIONS THREE YEAR GENERAL OBLIGATIONS (INVESTMENT)
MUNICIPAL BOND INDEX MUNICIPAL BOND INDEX
<S> <C> <C> <C>
11/01/94 10,000 10,000 9,600
06/30/96 10,867 11,085 10,488
</TABLE>
Past performance is no guarantee of future performance. The investment return
and principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Performance for each class will
differ based on differences in sales charges and expenses for each class of
shares. Return figures and investment values are quoted after deducting class
expenses and sales charges (if applicable). Investment class shares are sold
with a maximum front-end sales charge of 4.00%. The Lehman Brothers One-Year
General Obligations Municipal Bond Index and the Lehman Brothers Three-Year
General Obligations Municipal Bond Index are unmanaged indices of debt
instruments issued by municipalities. Total Returns is based on changes in Net
Asset Value assuming reinvestment of all dividends and capital gains
distributions.
5
<PAGE> 7
- --------------------------------------------------------------------------------
PORTFOLIO REVIEWS
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND
BY ALLAN J. MEYERS,
PORTFOLIO MANAGER
In the first half of 1996 we took several steps to help the Kent
Intermediate Tax-Free Fund make the most of any future declines in bond
yields. For the six months ended June 30, 1996, the Fund's Institutional and
Investment Shares had total returns of -0.40% and -0.51%, respectively,
before the deduction of sales charges. Over the same time, the Lehman
Brothers Five-Year General Obligations Municipal Bond Index returned 0.76%.
BOOSTING SENSITIVITY
TO INTEREST RATES
At the start of the period the average maturity of the Fund's
investments was 7.4 years. By the end of June, we had increased the average
maturity to 8.5 years. In addition to increasing the potential for capital
gains in an environment of falling bond yields, we believe this strategy
helped the Fund lock in higher yields for a longer time.
We further increased the Fund's sensitivity to interest rates by
reducing positions in housing and student loan bonds with other municipal
issues. Due to the fear that these bonds may be called away when yields fall,
municipal bonds that fund these loans generally rise less in price during a
rally. Where possible, we emphasized municipal bonds that could not be called
in by their issuers. We believe that these securities also tend to outperform
in a rally and could further enhance the Fund's total return potential.
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE TAX-FREE FUND
DISTRIBUTION OF NET ASSETS
AT JUNE 30, 1996
- -----------------------------------
[Pie Chart with the information below]
Cash Equivalents &
Net Other Assets & Liabilities 3.26%
Other Regions 5.70%
South 21.96%
Pacific 17.15%
East 14.79%
North Central 33.15%
Mountain 3.99%
- --------------------------------------------------------------------------------
FUTURE STRATEGIES
We believe the Fund is well-positioned for the second half of 1996.
If bond yields fall, and bond prices rise, the Fund could benefit from its
focus on issues with longer maturities and protection against calls. With
this in mind, we expect to use any further declines in prices to add to such
investments. As long as the yields between municipal securities with lower
credit ratings remain near the yields of higher-quality municipal securities,
we will seek to keep investments in lower-quality issues to a minimum.
- --------------------------------------------------------------------------------
<TABLE>
THE KENT INTERMEDIATE TAX-FREE FUND
<CAPTION>
TAX EQUIVALENT YIELDS AS OF JUNE 30, 1996
- -----------------------------------------
TAX BRACKET INSTITUTIONAL CLASS INVESTMENT CLASS
-----------------------------------------------------------------
<S> <C> <C>
28% 6.17% 5.58%
31% 6.44% 5.83%
36% 6.94% 6.28%
39.6% 7.35% 6.66%
<FN>
+ Based on an SEC 30-day yield at 6/30/96 of 4.44% for the Institutional Class
and 4.02% for the Investment Class. SEC 30-day yield is computed based on net
income during the 30-day period ended June 30, 1996. Yield calculations
represent past performance and will fluctuate.
</FN>
</TABLE>
6
<PAGE> 8
Tax Free Funds
-----------------
PORTFOLIO REVIEWS
-----------------
<TABLE>
THE KENT INTERMEDIATE TAX-FREE FUND
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF JUNE 30, 1996
- ------------------------------------------
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 12/18/92) (inception: 12/16/92)
----------------------------------------------------
<S> <C> <C>
One Year 0.31% 4.76%
Three Years 2.67% 4.20%
Life of Fund 3.66% 5.02%
<FN>
* Reflects deduction of 4.00% sales charge.
</FN>
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS THREE-YEAR GENERAL OBLIGATIONS MUNICIPAL BOND INDEX
AND THE LEHMAN BROTHERS FIVE-YEAR GENERAL OBLIGATIONS MUNICIPAL BOND INDEX
- ----------------------------------------------------------------------------
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROTHERS LEHMAN BROTHERS KENT FUNDS
THREE YEAR GENERAL OBLIGATIONS FIVE YEAR GENERAL OBLIGATIONS (INSTITUTIONAL)
MUNICIPAL BOND INDEX MUNICIPAL BOND INDEX
<S> <C> <C> <C>
12/31/92 10,000 10,000 10,000
06/30/96 11,673 11,887 11,894
</TABLE>
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROTHERS LEHMAN BROTHERS KENT FUNDS
THREE YEAR GENERAL OBLIGATIONS FIVE YEAR GENERAL OBLIGATIONS (INVESTMENT)
MUNICIPAL BOND INDEX MUNICIPAL BOND INDEX
<S> <C> <C> <C>
12/31/92 10,000 10,000 9,600
06/30/96 11,678 11,887 11,355
</TABLE>
Past performance is no guarantee of future performance. The investment return
and principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Performance for each class will
differ based on differences in sales charges and expenses for each class of
shares. Return figures and investment values are quoted after deducting class
expenses and sales charges (if applicable). Investment class shares are sold
with a maximum front-end sales charge of 4.00%. The Lehman Brothers
Three-Year General Obligations Municipal Bond Index and the Lehman Brothers
Five-Year General Obligations Municipal Bond Index are unmanaged indices of
debt instruments issued by municipalities. Total Returns are based on changes
in Net Asset Value assuming reinvestment of all dividends and capital gains
distributions.
7
<PAGE> 9
- --------------------------------------------------------------------------------
PORTFOLIO REVIEWS
- --------------------------------------------------------------------------------
THE KENT TAX-FREE INCOME FUND
BY ALLAN J. MEYERS,
PORTFOLIO MANAGER
In the first half of 1996 we lengthened the average maturity of The
Kent Tax-Free Income Fund as bond yields rose sharply across the maturity
spectrum. Should bond yields fall in the second half of the year, as we
expect, the Fund could enjoy strong returns from these longer-term
investments.
For the six months ended June 30, 1996, total returns for the
Fund's Institutional and Investment Shares were -0.65% and -0.86%,
respectively, before the deduction of sales charges. That compares with a
total return of -0.45% for the Lehman Brothers Municipal Bond Index.
INCREASING YIELDS
AND POTENTIAL GAINS
The average maturity of the Fund's investments stood at 12.6 years
when 1996 began. Early in the year -- while interest rates were still falling,
and talk of tax reform was on the wane -- we took profits in longer-term
issues and purchased bonds with shorter maturities. By February, these
actions had reduced the Fund's average maturity to 10.3 years.
Later, as rising bond yields made municipal bonds more attractive,
we added longer-maturity issues to the portfolio -- increasing the average
maturity to 13.3 years by the end of June. Besides locking in the higher
yields for more time, the longer-term municipal securities could offer the
potential for strong capital gains once yields reverse course and begin to
fall.
We further increased the Fund's sensitivity to interest rates by
reducing positions in housing and student loan bonds. When bond yields fall,
student loan and housing revenue bonds tend to underperform other tax-favored
bonds as bond prices rally. Because municipal bonds that cannot be called in by
their issuers tend to outperform in a rally, we gave greater attention to these
types of issues as we lengthened the Fund's average maturity.
- --------------------------------------------------------------------------------
THE KENT TAX-FREE INCOME FUND
DISTRIBUTION OF NET ASSETS
AS OF JUNE 30, 1996
- --------------------------
[Pie Chart with the information below]
Other 3.91%
Cash EquivalentS &
Net Other Assets & Liabilities 4.13%
Pacific 13.29%
South 19.78%
East 11.22%
North Central 39.99%
Mountain 7.68%
- --------------------------------------------------------------------------------
GOING FORWARD
We believe such strategies could provide the Fund with attractive
returns in coming months, if economic growth and inflation remain moderate,
allowing bond yields to decline. Should bond yields rise even further in the
second half of the year, we may seek to use this as an opportunity to add
other long-term issues as their prices grow more attractive. Many of these
may be lower-coupon bonds selling at discounted prices. Such issues tend to
outperform when bond yields fall.
- --------------------------------------------------------------------------------
<TABLE>
THE KENT TAX-FREE INCOME FUND
<CAPTION>
TAX EQUIVALENT YIELDS AS OF JUNE 30, 1996
- -----------------------------------------
TAX BRACKET INSTITUTIONAL CLASS INVESTMENT CLASS
--------------------------------------------------------------------
<S> <C> <C>
28% 6.38% 5.79%
31% 6.65% 6.04%
36% 7.17% 6.52%
39.6% 7.60% 6.90%
<FN>
+ Based on an SEC 30-day yield at 6/30/96 of 4.59% for the Institutional Class
And 4.17% for the Investment Class. SEC30-day Yield is computed based on net
income during the 30-day period ended June 30, 1996. Yield calculations
represent past performance and will fluctuate.
</FN>
</TABLE>
8
<PAGE> 10
Tax Free Funds
-----------------
PORTFOLIO REVIEWS
-----------------
<TABLE>
THE KENT TAX-FREE INCOME FUND
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF JUNE 30, 1996
- ------------------------------------------
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 3/31/95) (inception: 3/20/95)
----------------------------------------------
<S> <C> <C>
One Year 1.21% 5.69%
Life of Fund 2.48% 6.10%
<FN>
* Reflects deduction of 4.00% sales charge.
</FN>
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON WITH THE LEHMAN BROTHERS MUNICIPAL BOND
- --------------------------------------------------------------------------------
INDEX
- -----
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROTHERS KENT FUNDS
MUNICIPAL BOND INDEX (INSTITUTIONAL)
<S> <C> <C>
03/20/95 10,000 10,000
06/30/96 10,920 10,794
</TABLE>
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROTHERS KENT FUNDS
MUNICIPAL BOND INDEX (INVESTMENT)
<S> <C> <C>
04/01/95 10,000 9,600
06/30/96 10,920 10,311
</TABLE>
Past performance is no guarantee of future performance. The investment return
and principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Performance for each class will
differ based on differences in sales charges and expenses for each class of
shares. Return figures and investment values are quoted after deducting class
expenses and sales charges (if applicable). Investment class shares are sold
with a maximum front-end sales charge of 4.00%. The Lehman Brothers Municipal
Bond Index is an unmanaged index of general obligation municipal debt
instruments. Total Returns are based on changes in Net Asset Value assuming
reinvestment of all dividends and capital gains distributions.
9
<PAGE> 11
- --------------------------------------------------------------------------------
PORTFOLIO REVIEWS
- --------------------------------------------------------------------------------
THE KENT MICHIGAN MUNICIPAL BOND FUND
BY ALLAN J. MEYERS,
CO-PORTFOLIO MANAGER, AND
MICHAEL J. MARTIN,
CO-PORTFOLIO MANAGER
Unlike other parts of the country, Michigan had a relatively good
supply of municipal bonds during the first half of 1996. As rising bond
yields made bond prices increasingly attractive, this provided many
investment opportunities for The Kent Michigan Municipal Bond Fund.
For the six months ended June 30, 1996, the Fund's Institutional
and Investment Shares had total returns of 0.64% and 0.58%, respectively,
before the deduction of sales charges. Over the same time, the Lehman
Brothers Three-Year General Obligations Municipal Bond Index had a return of
1.48%.
NEW OPPORTUNITIES
As bond yields rose, we added longer-term investments to lock in
higher yields for the Fund and improve the potential for capital gains once
yields fell again. At the end of June, the Fund's average maturity stood at
3.8 years, compared to 3.1 years when 1996 began.
In addition to strong supply, the Michigan municipal market enjoyed
the entrance of several new issuers who offered attractive investments with
high credit quality. Among these were the Michigan Underground Storage Tank
Authority, which funds the cleanup of discarded fuel tanks, and the Michigan
State Revolving Loan Fund, which aids the cleanup of Michigan's water supply.
We added securities from both of these issuers during the period.
- --------------------------------------------------------------------------------
THE KENT MICHIGAN MUNICIPAL BOND FUND
DISTRIBUTION OF NET ASSETS
AS OF JUNE 30, 1996
- --------------------------
[Pie Chart with the information below]
Cash Equivalents &
Net Other Assets & Liabilities 2.52%
Municipal Securities 97.48%
- --------------------------------------------------------------------------------
MARKET OUTLOOK
We feel the lengthening of the Fund's average maturity could help it
perform especially well in the second half of 1996. If economic growth
remains moderate and inflation is stable, bond yields should start to come
down. As that happens, the prices of longer-term securities could rebound
more strongly than the prices of shorter-term issues do. In the meantime, we
believe the Fund should enjoy yields that are quite strong relative to
current levels of inflation.
If bond yields continue to rise, we may seek to take the
opportunity to increase the average maturity of the Fund even further. We
anticipate that we will continue to emphasize high-quality Michigan municipal
issues with maturities of 8 to 10 years.
- --------------------------------------------------------------------------------
<TABLE>
THE KENT MICHIGAN MUNICIPAL BOND FUND
<CAPTION>
TAX EQUIVALENT YIELDS AS OF JUNE 30, 1996
- -----------------------------------------
TAX BRACKET INSTITUTIONAL CLASS INVESTMENT CLASS
---------------------------------------------------------------
<S> <C> <C>
28% 5.53% 5.11%
31% 5.77% 5.33%
36% 6.22% 5.75%
39.6% 6.59% 6.09%
<FN>
+ Based on an SEC 30-day yield at 6/30/96 of 3.98% for the Institutional Class
and 3.68% for the Investment Class. SEC 30-day yield is computed based on net
income during the 30-day period ended June 30, 1996. Yield calculations
represent past performance and will fluctuate.
</FN>
</TABLE>
10
<PAGE> 12
Tax Free Funds
-----------------
PORTFOLIO REVIEWS
-----------------
<TABLE>
THE KENT MICHIGAN MUNICIPAL BOND FUND
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF JUNE 30, 1996
- ------------------------------------------
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 5/11/93) (inception: 5/3/93)
-----------------------------------------------
<S> <C> <C>
One Year -0.28% 4.10%
Three Years 2.31% 3.80%
Life of Fund 2.31% 3.83%
<FN>
* Reflects deduction of 4.00% sales charge.
</FN>
</TABLE>
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS THREE-YEAR GENERAL OBLIGATIONS MUNICIPAL BOND INDEX
- ----------------------------------------------------------------------------
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROS. KENT FUNDS
THREE YEAR GENERAL (INSTITUTIONAL)
OBLIGATIONS BOND INDEX
<S> <C> <C>
05/03/93 10,000 10,000
06/30/96 11,400 11,262
</TABLE>
[Line Chart]
<TABLE>
<CAPTION>
LEHMAN BROS. KENT FUNDS
THREE YEAR GENERAL (INVESTMENT)
OBLIGATIONS BOND INDEX
<S> <C> <C>
05/11/93 10,000 9,600
06/30/96 11,400 10,743
</TABLE>
Past performance is no guarantee of future performance. The investment return
and principal value will fluctuate so that your shares, when redeemed, may be
worth more or less than the original cost. Performance for each class will
differ based on differences in sales charges and expenses for each class of
shares. Return figures and investment values are quoted after deducting class
expenses and sales charges (if applicable). Investment class shares are sold
with a maximum front-end sales charge of 4.00%. The Lehman Brothers Three-Year
General Obligations Municipal Bond Index is an unmanaged index of debt
obligations issued by municipalities. Total Returns are based on changes in Net
Asset Value assuming reinvestment of dividends and capital gains distributions.
11
<PAGE> 13
Shares of the Fund are not deposits or obligations of, or guaranteed
or endorsed by, Old Kent Bank or any of its affiliates. Shares of the
funds are not federally insured by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
[Logo] agency. Investment return and principal value will vary as a result of
market conditions or other factors so that shares of the funds, when
redeemed may be worth more or less than their original cost. An
investment in the funds involves investment risks, including the
possible loss of principal.
<PAGE> 14
LIMITED TERM TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------- --------
<S> <C> <C>
MUNICIPAL SECURITIES - 94.31%
ALASKA - 2.14%
$ 500,000 Alaska State Housing Finance Corp.
Series A
4.35%, 06/01/98
Insured: MBIA ............................. $ 498,750
530,000 Alaska State Housing Finance Corp.
Series A
4.60%, 12/01/00
Insured: MBIA .............................. 528,013
----------
1,026,763
----------
CALIFORNIA - 2.57%
1,000,000 University of California
Multiple Purpose Projects, Series B
9.00%, 09/01/03
Insured: MBIA .............................. 1,236,250
----------
CONNECTICUT - 2.14%
1,000,000 Connecticut State, Series C, GO
5.38%, 08/15/02 ............................ 1,028,750
----------
GEORGIA - 3.33%
1,500,000 Georgia State, Series B, GO
5.95%, 03/01/03 ............................ 1,599,375
----------
ILLINOIS - 8.66%
500,000 Chicago Metropolitan Water Reclamation District
Capital Improvement, GO
6.20%, 01/01/98 ............................ 513,125
1,000,000 Chicago Metropolitan Water Reclamation District
Working Cash Fund, GO
5.90%, 12/01/04 ............................ 1,057,500
1,000,000 Illinois Educational Facilities Authority
Loyola University, Series A
6.30%, 07/01/98
Insured: MBIA .............................. 1,035,000
1,000,000 Illinois State Sales Tax, Series O
5.90%, 06/15/01 ............................ 1,042,500
500,000 University of Illinois
Auxiliary Facilities System
5.50%, 10/01/01
Insured: MBIA .............................. 514,375
----------
4,162,500
----------
INDIANA - 5.16%
1,500,000 Indiana University Revenue
Student Fees, Series J
4.35%, 08/01/00 ............................ 1,477,500
1,000,000 Indianapolis Local Public Improvement Bond
Bank Transportation Revenue
4.75%, 07/01/97 ............................ 1,004,040
----------
2,481,540
----------
IOWA - 2.19%
$ 1,050,000 Davenport, Series A, GO
4.13%, 12/01/97 ............................ $1,052,625
----------
KENTUCKY - 2.14%
1,000,000 Kentucky State Property & Buildings
Commission, Project No. 53
5.80%, 10/01/98 ............................ 1,028,750
----------
LOUISIANA - 2.19%
1,000,000 Louisiana State Gas & Fuels Tax, Series A
7.00%, 11/15/98
Insured: FGIC .............................. 1,055,000
----------
MARYLAND - 6.53%
1,000,000 Baltimore County
Consolidated Public Improvement, GO
5.70%, 07/01/99 ............................ 1,036,250
1,000,000 Washington Suburban Sanitary District
General Construction, GO
Prerefunded 12/01/97
7.50%, 12/01/10 ............................ 1,067,500
1,000,000 Washington Suburban Sanitary District
Sewerage Disposal, First Series, GO
6.13%, 06/01/98 ............................ 1,033,750
----------
3,137,500
----------
MASSACHUSETTS - 2.09%
1,000,000 Massachusetts State, Series B, GO
5.10%, 11/01/02 ............................ 1,006,250
----------
MICHIGAN - 12.06%
1,235,000 Detroit, GO
Prerefunded 04/01/01
8.00%, 04/01/11 ............................ 1,420,250
1,000,000 Detroit, Self-Insurance, Series A, GO
5.20%, 05/01/98 ............................ 1,001,250
1,600,000 Michigan State Hospital Finance Authority
Sisters of Mercy Health Corp., Series F
4.60%, 08/15/02
Insured: MBIA .............................. 1,564,000
300,000 Michigan State Hospital Finance Authority
Genesys Health System, Series A
6.10%, 10/01/96 ............................ 300,687
500,000 Michigan State Hospital Finance Authority
Genesys Health System, Series A
6.40%, 10/01/97 ............................ 505,625
1,000,000 Michigan State Housing Development Authority
Rental Housing Revenue, Series A
5.15%, 10/01/00
Insured: MBIA .............................. 1,008,750
----------
5,800,562
----------
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 15
LIMITED TERM TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------- --------
MINNESOTA - 2.04%
<S> <C> <C>
$ 1,000,000 University of Minnesota
Auction-Based/Inverse Floater
4.80%, 08/15/03 ............................ $ 982,500
----------
NEVADA - 2.38%
1,090,000 Las Vegas, GO
6.75%, 08/01/98
Insured: MBIA .............................. 1,144,500
----------
NEW JERSEY - 4.61%
1,000,000 Cherry Hill Township, GO
8.25%, 06/01/99 ............................ 1,103,750
1,000,000 New Jersey Economic Development
Authority, Series A
Market Transition Facility Revenue
Senior Lien
7.00%, 07/01/03
Insured: MBIA .............................. 1,110,000
----------
2,213,750
----------
OKLAHOMA - 4.52%
1,000,000 Oklahoma County Independent
School No. 89, GO
5.40%, 02/01/99 ............................ 1,022,500
1,115,000 Tulsa Industrial Authority
University of Tulsa, Series A
5.50%, 10/01/00
Insured: MBIA .............................. 1,152,631
----------
2,175,131
----------
PENNSYLVANIA - 2.11%
1,000,000 Pennsylvania State, First Series, GO
5.00%, 05/01/99 ............................ 1,012,500
----------
TEXAS - 12.22%
1,000,000 Harris County Flood Control District
Series C, GO
Prerefunded 11/01/99
6.50%, 11/01/10
Insured: MBIA .............................. 1,061,250
1,000,000 Houston Independent School District, GO
Public Property Finance Contractual Obligation
6.25%, 07/15/99 ............................ 1,048,750
1,500,000 Houston Water & Sewer System
Junior Lien, Series C
4.75%, 12/01/97
Insured: MBIA .............................. 1,515,000
1,000,000 Pasadena Independent School District, GO
Prerefunded 08/15/01
6.75%, 08/15/05
Insured: FGIC .............................. 1,087,500
$ 1,100,000 Texas State Public Finance Authority
Building Revenue, Series A
6.00%, 08/01/02
Insured: AMBAC ............................. $1,160,500
----------
5,873,000
----------
UTAH - 2.26%
1,000,000 Intermountain Power Agency Utah Power
Series A
Prerefunded 07/01/99
7.00%, 07/01/21 ............................ 1,088,750
----------
VIRGINIA - 2.28%
1,000,000 Lynchburg, GO
Prerefunded 04/01/00
7.00%, 04/01/09 ............................ 1,096,250
----------
WEST VIRGINIA - 2.28%
1,000,000 West Virginia State Hospital Finance Authority
Cabell Huntington Hospital, Inc., Series B
Prerefunded 01/01/99
7.70%, 01/01/19 ............................ 1,093,750
----------
WISCONSIN - 2.12%
1,000,000 Green Bay, Series A, GO
5.10%, 04/01/00 ............................ 1,017,500
----------
WYOMING - 2.11%
1,000,000 Campbell County School District
No. 01 Gillette, GO
5.15%, 06/01/02 ............................ 1,012,500
----------
OTHER TERRITORIES - 4.18%
1,000,000 District of Columbia, Series C, GO
5.10%, 12/01/99
Insured: MBIA .............................. 1,007,500
1,000,000 Puerto Rico Electric Power Authority
Series W
4.25%, 07/01/97 ............................ 1,002,890
----------
2,010,390
----------
TOTAL MUNICIPAL SECURITIES ................. 45,336,386
(Cost $45,114,314) ----------
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 16
LIMITED TERM TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ --------
<S> <C>
INVESTMENT COMPANY - 4.12%
1,980,993 Dreyfus Tax Exempt Cash
Management Fund ........... $ 1,980,993
-----------
TOTAL INVESTMENT COMPANY .. 1,980,993
(Cost $1,980,993)
TOTAL INVESTMENTS - 98.43% .............. 47,317,379
(Cost $47,095,307)**
NET OTHER ASSETS AND LIABILITIES - 1.57% 753,638
-----------
NET ASSETS - 100.00% .................... $48,071,017
===========
</TABLE>
- -------------------------------------------------------------------------------
** Aggregate cost for Federal tax purposes.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Corp.
GO General Obligation
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
15
<PAGE> 17
INTERMEDIATE TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
MUNICIPAL SECURITIES - 96.74%
ALASKA - 3.14%
$ 1,520,000 Alaska Municipal Bond Bank Authority
Series A, GO
4.75%, 10/01/99 ................... $ 1,520,000
1,000,000 Anchorage, GO
6.30%, 07/01/99
Insured: MBIA ..................... 1,049,993
1,000,000 Anchorage Electric Utility
Revenue Bond, Senior Lien
5.50%, 12/01/03
Insured: MBIA ..................... 1,012,500
5,000,000 North Slope Boro, Series B, GO
7.50%, 06/30/01
Insured: CGIC ..................... 5,550,000
-----------
9,132,493
-----------
ARIZONA - 4.77%
5,000,000 Arizona State Transportation Board
Excise Tax Revenue, Series A
Maricopa County Regional Area Road
5.60%, 07/01/03
Insured: AMBAC .................... 5,193,750
1,925,000 Pima County Community College District
Project of 1995, Series A, GO
5.50%, 07/01/13 ................... 1,891,313
1,500,000 Pima County Unified School District
No. 1 Tucson
Series B, GO, ETM
6.80%, 07/01/00 ................... 1,616,250
5,000,000 Salt River Project Agricultural Improvement
and Power District Electric System, Series A
5.63%, 01/01/06 ................... 5,162,500
-----------
13,863,813
-----------
CALIFORNIA - 8.53%
3,400,000 California State, GO
6.60%, 02/01/10 ................... 3,718,750
4,000,000 California State Public Works
Board Lease Revenue
University of California Projects, Series A
Prerefunded 12/01/02
6.60%, 12/01/22 ................... 4,450,000
2,250,000 Metropolitan Water District
Southern California
Waterworks Revenue, Series B
5.50%, 07/01/03
Insured: MBIA ..................... 2,325,938
3,000,000 Orange County, Series A
6.00%, 06/01/10
Insured: MBIA ..................... 3,063,750
2,000,000 Riverside County Transportation Commission
Sales Tax Revenue, Series A
5.60%, 06/01/05
Insured: AMBAC .................... 2,067,500
$ 1,000,000 San Francisco City & County School District
Facilities Improvements, Series C, GO
6.00%, 06/15/01
Insured: FGIC ..................... $ 1,055,000
2,000,000 Turlock Irrigation District, Series A
6.00%, 01/01/06
Insured: MBIA ..................... 2,115,000
4,850,000 University of California
Multiple Purpose Projects, Series B
9.00%, 09/01/03
Insured: MBIA ..................... 5,995,813
-----------
24,791,751
-----------
COLORADO - 2.46%
4,000,000 Arapahoe County School District No. 005
Cherry Creek, Series A, GO
5.25%, 12/15/02 ................... 4,090,000
1,000,000 Colorado Springs Utilities, Series A
6.50%, 11/15/03 ................... 1,083,750
2,000,000 Jefferson County School District No. 001
Series A, GO
4.00%, 12/15/98 ................... 1,957,500
-----------
7,131,250
-----------
FLORIDA - 4.33%
1,000,000 Broward County School District, GO
5.20%, 02/15/03 ................... 1,010,000
1,000,000 Dade County Water & Sewer System
5.50%, 10/01/25
Insured: FGIC ..................... 950,000
3,000,000 Florida State, GO
Broward County Expressway Authority
Series A
5.90%, 07/01/97 ................... 3,060,240
2,000,000 Florida State Board of Education
Capital Outlay
Series A, GO, ETM
7.25%, 06/01/97 ................... 2,062,020
1,140,000 Gainesville Utilities System, Series A
Prerefunded 10/01/02
6.50%, 10/01/22 ................... 1,254,000
2,000,000 Lakeland Electric & Water Revenue
5.90%, 10/01/07 ................... 2,095,000
1,000,000 Tampa Guaranteed Entitlement Revenue
6.60%, 10/01/00
Insured: AMBAC .................... 1,078,750
1,000,000 Tampa Utility Tax & Special Revenue
6.30%, 10/01/00
Insured: AMBAC .................... 1,067,500
-----------
12,577,510
-----------
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 18
INTERMEDIATE TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C> <C>
GEORGIA - 4.27%
$ 2,670,000 Atlanta Airport Facilities, Series B
5.50%, 01/01/03 .......................... $ 2,723,400
4,000,000 Georgia State, Series F, GO
6.50%, 12/01/01 .......................... 4,365,000
4,000,000 Georgia State, Series B, GO
5.95%, 03/01/08 .......................... 4,240,000
1,000,000 Georgia State Tollway Authority
Georgia 400 Project
6.25%, 07/01/00 .......................... 1,063,750
-----------
12,392,150
-----------
HAWAII - 1.17%
1,000,000 Honolulu City & County, Series D, GO
6.50%, 12/01/00, ETM ..................... 1,075,000
1,025,000 Honolulu City & County, Series A, GO
5.60%, 01/01/05 .......................... 1,062,156
1,150,000 Maui County, Series A, GO
6.80%, 12/01/03 .......................... 1,259,250
-----------
3,396,406
-----------
ILLINOIS - 7.08%
2,000,000 Chicago Metropolitan Water
Reclamation District
Capital Improvement, GO
6.80%, 01/01/03 .......................... 2,150,000
3,000,000 Chicago Metropolitan Water
Reclamation District
Capital Improvement, GO
5.50%, 12/01/10 .......................... 2,970,000
2,000,000 Chicago School Finance Authority
Series A, GO
4.90%, 06/01/05
Insured: MBIA ............................ 1,950,000
5,000,000 Cook County, Series B, GO
5.40%, 11/15/08
Insured: MBIA ............................ 4,906,250
4,270,000 Du Page & Will Counties Community
Schools, District No. 204, GO
4.95%, 12/30/01
Insured: FGIC ............................ 4,318,038
3,135,000 Northwest Suburban Municipal
Joint Action Water Agency,
Water Supply System, Series A
5.25%, 05/01/04
Insured: MBIA ............................ 3,111,488
1,145,000 University of Illinois
Auxiliary Facilities System
5.50%, 10/01/05
Insured: MBIA ............................ 1,163,606
-----------
20,569,382
-----------
INDIANA - 3.73%
$ 2,400,000 Hamilton Southeastern Consolidated School
Building Corp., First Mortgage
6.65%, 07/01/05
Insured: AMBAC ........................... $ 2,556,000
2,000,000 Indiana Municipal Power Supply System
Series B
5.88%, 01/01/10
Insured: MBIA ............................ 2,050,000
3,000,000 Indiana Municipal Power Supply System
Series B
6.00%, 01/01/13
Insured: MBIA ............................ 3,078,750
1,000,000 Indiana Transportation Finance Authority
Highway Revenue, Series A
5.75%, 06/01/12
Insured: AMBAC ........................... 1,012,500
1,000,000 Purdue University
Dormitory System, Series A
6.40%, 07/01/99
Insured: AMBAC ........................... 1,047,500
1,000,000 Purdue University
Student Fee, Series D
6.50%, 07/01/03 .......................... 1,075,000
-----------
10,819,750
-----------
KENTUCKY - 0.36%
1,000,000 Kentucky State Property & Buildings
Project No. 51
Prerefunded 08/01/05
6.00%, 08/01/10 .......................... 1,053,750
-----------
LOUISIANA - 1.39%
4,000,000 Louisiana State, Series A, GO
5.30%, 08/01/04
Insured: MBIA ............................ 4,030,000
-----------
MASSACHUSETTS - 2.66%
3,750,000 Massachusetts State Special Obligation Revenue
Series A
5.25%, 06/01/08
Insured: AMBAC ........................... 3,679,688
4,000,000 Massachusetts State Turnpike Authority
Series A, BAN
5.00%, 06/01/99 .......................... 4,053,000
-----------
7,732,688
-----------
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 19
INTERMEDIATE TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C> <C>
MICHIGAN - 17.66%
$ 4,000,000 Battle Creek Downtown Development
Authority, Tax Increment Revenue
7.30%, 05/01/10 ......................... $ 4,415,000
2,100,000 Caledonia Community Schools, GO
Prerefunded 05/01/02
6.70%, 05/01/22
Insured: AMBAC .......................... 2,325,750
2,000,000 Delta County Economic Development
Corp.Environmental Improvement
Mead-Escanaba, Series D
3.60%, 12/01/23
LOC: Credit Suisse ...................... 2,000,000
3,000,000 Detroit, GO
Revenue Bonds, Distributable State Aid
5.70%, 05/01/01
Insured: AMBAC .......................... 3,112,500
3,000,000 Detroit Sewerage Disposal, Series B
6.00%, 07/01/09
Insured: MBIA ........................... 3,153,750
1,750,000 Detroit Water Supply System
5.70%, 07/01/00
Insured: FGIC ........................... 1,809,063
6,000,000 Detroit Water Supply System
Permanent Linked Bonds
5.25%, 07/01/13
Insured: FGIC ........................... 5,700,000
2,840,000 Grand Ledge Public Schools District, GO
5.35%, 05/01/10
Insured: MBIA ........................... 2,772,550
1,700,000 Greater Detroit Resource Recovery
Authority, Series A
5.50%, 12/13/04
Insured: AMBAC .......................... 1,731,875
2,000,000 Kalamazoo Hospital Finance Authority
Refunding & Improvement
Bronson Methodist
5.35%, 05/15/06
Insured: MBIA ........................... 2,005,000
1,675,000 Lanse Creuse Public Schools, GO
5.30%, 05/01/07 ......................... 1,654,063
1,475,000 Michigan State
Environmental Protection
Prerefunded 11/15/99
7.10%, 11/15/09 ......................... 1,616,969
2,000,000 Michigan State Comprehensive
Transportation, Series B
5.50%, 05/15/02 ......................... 2,055,000
1,450,000 Michigan State Hospital Finance Authority
St. John Hospital & Medical Center
5.00%, 05/15/06
Insured: AMBAC .......................... 1,410,125
1,000,000 Michigan State Housing Development
Authority, Shoal Creek
3.40%, 10/01/07
LOC: National Westminster ............... 1,000,000
$ 3,000,000 Michigan State South Central Power
Agency, Power Supply System
5.70%, 11/01/04
Insured: MBIA ........................... $ 3,127,500
1,000,000 Michigan State South Central Power
Agency, Power Supply System
5.80%, 11/01/05
Insured: MBIA ........................... 1,047,500
2,300,000 Michigan State Strategic Fund Limited
Ford Motor Co. Project, Series A
7.10%, 02/01/06 ......................... 2,624,875
2,500,000 Michigan State Trunk Line, Series A
5.50%, 10/01/02 ......................... 2,571,875
2,000,000 Northville Public Schools
Series A, GO
7.00%, 05/01/08 ......................... 2,137,500
2,000,000 University of Michigan Hospital, Series A
3.55%, 12/01/27 ......................... 2,000,000
1,000,000 Western Michigan University, GO
5.40%, 11/15/01
Insured: FGIC ........................... 1,038,750
-----------
51,309,645
-----------
MINNESOTA - 1.25%
1,000,000 Minneapolis Community Development
Agency, Tax Increment Revenue
7.00%, 09/01/00
Insured: MBIA ........................... 1,092,500
2,810,000 North St. Paul Maplewood Independent
School District No. 622
Series A, GO
5.13%, 02/01/25 ......................... 2,543,050
-----------
3,635,550
-----------
NEVADA - 0.95%
2,500,000 Clark County School District Group 2, GO
Prerefunded 05/01/00
7.20%, 05/01/01
Insured: FGIC ........................... 2,759,375
-----------
NEW JERSEY - 3.53%
6,000,000 New Jersey Economic Development
Authority Market Transition
Facility Revenue, Senior Lien
Series A
7.00%, 07/01/04
Insured: MBIA ........................... 6,712,500
1,375,000 New Jersey State, Series D, GO
5.25%, 02/15/01 ......................... 1,407,656
2,000,000 New Jersey State Transportation Trust
Fund Authority
Transportation System, Series A
6.00%, 12/15/06
Insured: MBIA ........................... 2,127,500
-----------
10,247,656
-----------
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 20
INTERMEDIATE TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C> <C>
NEW YORK - 1.40%
$ 1,130,000 Metropolitan Transportation Authority
Series M
5.50%, 07/01/08
Insured: FGIC .............................. $ 1,139,888
3,000,000 Triborough Bridge & Tunnel Authority
General Purpose, Series Y
5.50%, 01/01/17 ........................... 2,928,750
-----------
4,068,638
-----------
NORTH CAROLINA - 0.70%
2,000,000 North Carolina Municipal Power
Agency No. 1
Catawba Electric Revenue
5.90%, 01/01/03 ........................... 2,035,000
-----------
OHIO - 0.77%
2,125,000 Columbus, GO
Sewer Improvement
6.30%, 09/15/99 ........................... 2,244,531
-----------
OKLAHOMA - 1.36%
1,825,000 Grand River Dam Authority
Prerefunded 06/01/97
7.20%, 06/01/98 ........................... 1,869,220
2,000,000 Tulsa Industrial Authority
University of Tulsa, Series A
6.00%, 10/01/16
Insured: MBIA ............................. 2,065,000
-----------
3,934,220
-----------
PENNSYLVANIA - 4.01%
4,395,000 Chartiers Valley Joint School District Authority
School Revenue
6.15%, 03/01/07 ........................... 4,554,319
5,000,000 Pennsylvania Intergovernmental
Co-op Authority
Special Tax Revenue
City of Philadelphia Funding Program
Prerefunded 06/15/02
6.80%, 06/15/12 ........................... 5,487,500
1,475,000 Pennsylvania State, Series A, GO
Prerefunded 05/01/00
7.00%, 05/01/05 ........................... 1,607,750
-----------
11,649,569
-----------
RHODE ISLAND - 3.19%
1,000,000 Providence. GO
6.70%, 01/15/02
Insured: MBIA ............................. 1,076,250
2,000,000 Rhode Island Depositors Economic
Protection Corp., Series A, SP OB
6.15%, 08/01/99
Insured: MBIA ............................. 2,085,000
$ 1,000,000 Rhode Island Depositors Economic
Protection Corp., Series B, SP OB
5.20%, 08/01/03
Insured: MBIA ............................. $ 1,007,500
5,250,000 Rhode Island State Public Buildings
Authority
State Projects Revenue, Series A
5.25%, 02/01/08
Insured: AMBAC ............................ 5,112,188
-----------
9,280,938
-----------
TENNESSEE - 0.45%
1,230,000 Tennessee State, Series B, GO
6.20%, 06/01/01 ........................... 1,313,025
-----------
TEXAS - 8.36%
1,000,000 Austin Independent School District, GO
6.20%, 08/01/99 ........................... 1,050,000
2,245,000 Dallas Independent School District
Unrefunded Balance, GO
5.40%, 08/15/03 ........................... 2,298,319
1,055,000 Hays Consolidated Independent School District
6.00%, 09/01/02 ........................... 1,126,213
1,190,000 Hays Consolidated Independent School District
6.00%, 09/01/04 ........................... 1,274,788
1,000,000 Houston Water & Sewer System
Prior Lien, Series A
7.00%, 12/01/01
Insured: AMBAC ............................ 1,098,750
1,500,000 Houston Water & Sewer System
Junior Lien, Series C
5.75%, 12/01/03
Insured: MBIA ............................. 1,565,625
1,050,000 Round Rock Independent School District, GO
5.25%, 02/15/05 ........................... 1,055,250
2,800,000 Texas Municipal Power Agency
5.60%, 09/01/01
Insured: MBIA ............................. 2,898,000
4,450,000 Texas State, Series A, GO
5.70%, 10/01/03 ........................... 4,650,250
5,595,000 Texas State, GO
Texas Public Finance Authority, Series A
6.50%, 10/1/04 ............................ 6,140,513
1,015,000 University of Texas
Unrefunded Balance, Series A
6.60%, 08/15/02 ........................... 1,110,156
-----------
24,267,864
-----------
UTAH - 0.58%
1,690,000 Davis County Solid Waste
Management & Recovery
Special Service District
4.90%, 06/15/97 ........................... 1,682,530
-----------
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 21
INTERMEDIATE TAX-FREE FUND
THE KENT PORTFOLIO OF INVESTMENTS (CONTINUED)
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- --------- --------
<S> <C> <C>
VIRGINIA - 1.70%
$ 2,000,000 Norfolk, GO
5.40%, 06/01/12 ............................. $ 1,957,500
3,000,000 Norfolk, GO
5.20%, 06/01/08 ............................. 2,966,250
-------------
4,923,750
-------------
WASHINGTON - 3.85%
8,000,000 Washington State, Series A, GO
5.50%, 09/01/05 ............................. 8,150,000
850,000 Washington State, Series III-H, GO
Motor Vehicle Fuel Tax
5.75%, 09/01/12 ............................. 855,313
2,000,000 Washington State Public Power Supply System
Nuclear Project No.1 Revenue, Series C
7.25%, 07/01/00
Insured: FGIC ............................... 2,172,500
-------------
11,177,813
-------------
WEST VIRGINIA - 0.40%
1,095,000 West Virginia School Building Authority
Capital Improvement, Series A
6.70%, 07/01/00
Insured: MBIA ............................... 1,173,019
-------------
WISCONSIN - 1.30%
1,025,000 Milwaukee Metropolitan Sewer District
Series A, GO
6.60%, 10/01/99 ............................. 1,085,219
1,500,000 Milwaukee Metropolitan Sewer District
Series A, GO
6.70%, 10/01/00 ............................. 1,610,625
1,000,000 Wisconsin Public Power Supply System
Series A
7.00%, 07/01/01
Insured: AMBAC .............................. 1,093,750
-------------
3,789,594
-------------
OTHER TERRITORIES - 1.39%
$ 2,000,000 Puerto Rico Commonwealth
Highway & Transportation Authority
Highway Revenue, Series X
4.90%, 07/01/01 ............................. $ 2,000,000
2,000,000 Puerto Rico Electric Power Authority
Series W
5.00%, 07/01/98 ............................. 2,025,000
-------------
4,025,000
-------------
TOTAL MUNICIPAL SECURITIES .................. 281,008,660
(Cost $275,384,324) -------------
<CAPTION>
SHARES
- ------
INVESTMENT COMPANY - 1.55%
<S> <C> <C>
4,513,723 Dreyfus Tax Exempt Cash
Management Fund ............................. 4,513,723
-------------
TOTAL INVESTMENT COMPANY .................... 4,513,723
(Cost $4,513,723) -------------
TOTAL INVESTMENTS - 98.29% ................................ 285,522,383
(Cost $279,898,047)** -------------
NET OTHER ASSETS AND LIABILITIES - 1.71% .................. 4,963,056
-------------
NET ASSETS - 100.00% ...................................... $ 290,485,439
=============
</TABLE>
- --------------------------------------------
** Aggregate cost for Federal tax purposes.
AMBAC American Municipal Bond Assurance Corp.
BAN Bond Anticipation Note
CGIC Capital Guarantee Insurance Corp.
ETM Escrowed to Maturity
FGIC Financial Guarantee Insurance Corp.
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
SP OB Special Obligation
See Notes to Financial Statements.
20
<PAGE> 22
THE KENT TAX-FREE INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
MUNICIPAL SECURITIES - 95.87%
CALIFORNIA - 11.33%
$ 1,400,000 California State, GO
7.00%, 06/01/05.................................... $ 1,576,750
2,000,000 California State
6.25%, 09/01/12.................................... 2,124,999
1,570,000 California State Public Works
Board Lease Revenue
University of California Projects, Series A
Prerefunded 12/01/02
6.60%, 12/01/22.................................... 1,746,625
3,000,000 Northern California Power Agency
Geothermal Project, Series A
5.50%, 07/01/05
Insured: AMBAC..................................... 3,078,750
2,000,000 Orange County, Series A
6.00%, 06/01/10
Insured: MBIA...................................... 2,042,500
1,380,000 Turloc K Irrigation District, Series A
6.00%, 01/01/07
Insured: MBIA...................................... 1,454,175
-----------
12,023,799
-----------
COLORADO - 1.92%
2,000,000 Denver City and County Airport, Series C
6.75%, 11/15/22.................................... 2,035,000
-----------
FLORIDA - 3.63%
1,000,000 Dade County Water & Sewer System
5.50%, 10/01/25
Insured: FGIC...................................... 950,000
1,355,000 Florida State Board of Education
Capital Outlay
Public Education, Series E, GO
5.10%, 06/01/12.................................... 1,273,700
1,400,000 Port Everglades Authority
Port Improvement, ETM
7.13%, 11/01/16.................................... 1,634,500
-----------
3,858,200
-----------
GEORGIA - 1.00%
1,000,000 Georgia State, Series B, GO
5.95%, 03/01/08.................................... 1,060,000
-----------
HAWAII - 2.97%
1,000,000 Honolulu City & County, Series A, GO
5.75%, 04/01/10.................................... 1,017,500
2,000,000 Maui County, GO
6.00%, 12/15/07
Insured: FGIC...................................... 2,132,500
-----------
3,150,000
-----------
ILLINOIS - 8.59%
$ 2,000,000 Chicago Metropolitan Water
Reclamation District
Capital Improvement, GO
5.50%, 12/01/10.................................... $ 1,980,000
1,000,000 Chicago Public Building Commission
Series A, ETM
7.00%, 01/01/20
Insured: MBIA...................................... 1,158,750
2,000,000 Chicago School Finance Authority
Series A, GO
4.90%, 06/01/05
Insured: MBIA...................................... 1,950,000
2,000,000 Du Page & Will Counties
Community School
District No. 204, GO
4.95%, 12/30/01
Insured: FGIC...................................... 2,022,500
1,000,000 Illinois State Sales Tax, Series S
5.00%, 06/15/08.................................... 943,750
1,000,000 Will County Forest Preserve District, GO
5.90%, 12/01/03
Insured: AMBAC..................................... 1,051,250
-----------
9,106,250
-----------
INDIANA - 5.94%
2,000,000 Indiana Municipal Power Supply Agency
Series B
6.00%, 01/01/13
Insured: MBIA...................................... 2,052,500
2,250,000 Indiana State Office Building
Commission Capital Complex
Government Center Parking Facilities
Series A
4.80%, 07/01/03
Insured: AMBAC..................................... 2,210,625
1,000,000 Indiana Transportation Finance Authority
Highway Revenue, Series A
5.75%, 06/01/12
Insured: AMBAC..................................... 1,012,500
1,000,000 Marion County Hospital Authority
Community Hospital Indianapolis Project, ETM
6.00%, 05/01/06.................................... 1,028,750
-----------
6,304,375
-----------
IOWA - 2.10%
2,055,000 Iowa Finance Authority Private College Revenue
Drake University Project
6.50%, 12/01/11
Insured: MBIA...................................... 2,227,106
-----------
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 23
THE KENT TAX-FREE INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
KENTUCKY - 1.04%
$ 1,000,000 Kentucky State Turnpike Authority
Economic Development Road Revenue
Revitalization Project
6.50%, 07/01/07
Insured: AMBAC..................................... $ 1,103,750
-----------
LOUISIANA - 3.09%
3,000,000 Louisiana State Gas & Fuels Tax, Series A
7.25%, 11/15/00.................................... 3,281,250
-----------
MARYLAND - 1.91%
2,000,000 Prince Georges County, GO
Consolidated Public Improvement
5.00%, 01/01/02
Insured: MBIA...................................... 2,022,500
-----------
MASSACHUSETTS - 3.56%
1,000,000 Massachusetts State, Series B, GO
5.40%, 11/01/06.................................... 1,007,500
1,000,000 Massachusetts State Industrial
Finance Agency
Resource Recovery Revenue
Refusetech, Inc. Project, Series A
5.25%, 07/01/99
Insured: FSA....................................... 1,018,750
2,000,000 Massachusetts State Water
Resource Authority, Series B
5.00%, 12/01/25
Insured: MBIA...................................... 1,745,000
-----------
3,771,250
-----------
MICHIGAN - 20.13%
2,000,000 Battle Creek Downtown
Development Authority
Tax Increment Revenue
7.30%, 05/01/10.................................... 2,207,500
1,300,000 Berkley City School District, GO
7.00%, 01/01/07
Insured: FGIC...................................... 1,472,250
2,000,000 Detroit Sewerage Disposal, Series B
6.00%, 07/01/09
Insured: MBIA...................................... 2,102,500
1,000,000 Detroit Water Supply System, Series B
5.10%, 07/01/07
Insured: MBIA...................................... 981,250
930,000 Kent County Airport Facility
Kent County International Airport
5.50%, 01/01/07.................................... 948,600
2,365,000 Michigan State Hospital Finance Authority
Detroit Medical Center, Series B
5.00%, 08/15/06
Insured: AMBAC..................................... 2,291,094
2,000,000 Michigan State Hospital Finance Authority
Henry Ford Health, Series A
5.25%, 11/15/20.................................... 1,792,500
$ 2,000,000 Michigan State Hospital Finance Authority
Sisters of Mercy, Series P
5.25%, 08/15/21
Insured: MBIA...................................... $ 1,822,500
1,300,000 Michigan State Housing
Development Authority
Rental Housing Revenue, Series A
5.15%, 04/01/02
Insured: AMBAC..................................... 1,313,000
1,000,000 Michigan State South Central
Power Agency
Power Supply System
5.80%, 11/01/05
Insured: MBIA...................................... 1,047,500
2,000,000 Michigan State University
General, Series A
5.50%, 08/15/22.................................... 1,877,500
2,000,000 Rockford Public Schools, GO
5.88%, 05/01/12.................................... 2,007,500
1,400,000 University of Michigan
Student Fee, Series A
6.00%, 04/01/07.................................... 1,480,500
-----------
21,344,194
-----------
MINNESOTA - 1.28%
1,500,000 North St. Paul Maplewood Independent
District No. 622, Series A, GO
5.125%, 02/01/25................................... 1,357,500
-----------
NEVADA - 3.98%
1,805,000 Clark County School District, GO
5.75%, 06/15/10
Insured: FGIC...................................... 1,807,256
2,000,000 Nevada State, GO
Nevada Municipal Bond Bank, Series A
8.00%, 11/01/05.................................... 2,415,000
-----------
4,222,256
-----------
NEW JERSEY - 3.09%
1,500,000 New Jersey Economic
Development Authority
Market Transition Facility Revenue
Senior Lien
7.00%, 07/01/04
Insured: MBIA...................................... 1,678,125
1,500,000 New Jersey State Transportation
Trust Fund Authority
Transportation System, Series A
6.00%, 12/15/06
Insured: MBIA...................................... 1,595,625
-----------
3,273,750
-----------
</TABLE>
See Notes to Financial Statements.
22
<PAGE> 24
THE KENT TAX-FREE INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
OKLAHOMA - 1.95%
$ 1,000,000 Grand River Dam Authority
5.75%, 06/01/08
Insured: FSA...................................... $ 1,035,000
1,000,000 Tulsa Industrial Authority
University of Tulsa, Series A
6.00%, 10/01/16
Insured: MBIA..................................... 1,032,500
------------
2,067,500
------------
PENNSYLVANIA - 1.77%
2,000,000 Pennsylvania State, First Series, GO
5.38%, 05/15/16
Insured: FGIC..................................... 1,877,500
------------
RHODE ISLAND - 0.89%
1,000,000 Convention Center Authority, Series B
5.00%, 05/15/09
Insured: MBIA..................................... 945,000
------------
SOUTH CAROLINA - 2.53%
1,200,000 Myrtle Beach Water & Sewer
4.90%, 03/01/02
Insured: MBIA..................................... 1,191,000
1,500,000 Myrtle Beach Water & Sewer
5.00%, 03/01/03
Insured: MBIA..................................... 1,486,875
------------
2,677,875
------------
TENNESSEE - 1.16%
1,225,000 Tennessee Housing Development Agency
Mortgage Finance, Series C
5.95%, 07/01/09
Insured: MBIA..................................... 1,234,188
------------
TEXAS - 6.19%
$ 1,000,000 Brownsville Utility System
6.25%, 09/01/11
Insured: AMBAC.................................... $ 1,063,750
1,000,000 Harris County
Certificates of Obligation
6.00%, 12/15/11................................... 1,040,000
2,000,000 Texas City IDC Marine Terminal Revenue
Arco Pipeline Co. Project
7.38%, 10/01/20................................... 2,370,000
2,000,000 Texas State, Series A, GO
5.70%, 10/01/03................................... 2,090,000
------------
6,563,750
------------
UTAH - 1.78%
2,175,000 Intermountain Power Agency
Utah Power Supply, Series D
5.00%, 07/01/23................................... 1,884,094
------------
VIRGINIA - 1.14%
1,230,000 Norfolk, GO
5.40%, 06/01/12................................... 1,203,863
------------
WASHINGTON - 1.96%
1,000,000 Douglas County Public Utility
District No. 001
Electric Distribution System
5.90%, 01/01/11
Insured: MBIA..................................... 1,003,750
1,000,000 Washington State
Motor Vehicle Fuel Tax, R-92D, GO
6.25%, 09/01/07................................... 1,075,000
------------
2,078,750
------------
OTHER TERRITORIES - 0.94%
1,000,000 Puerto Rico Commonwealth
Highway & Transportation Authority
Highway Revenue, Series X
4.90%, 07/01/01................................... 1,000,000
------------
TOTAL MUNICIPAL SECURITIES........................ 101,673,700
(Cost $101,036,117) ------------
</TABLE>
See Notes to Financial Statements.
23
<PAGE> 25
THE KENT TAX-FREE INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- --------
<S> <C>
INVESTMENT COMPANY - 2.32%
2,456,256 Dreyfus Tax Exempt Cash
Management Fund................................... $ 2,456,256
------------
TOTAL INVESTMENT COMPANY.......................... 2,456,256
(Cost $2,456,256) ------------
TOTAL INVESTMENTS - 98.19%...................................... 104,129,956
(Cost $103,492,373)** ------------
NET OTHER ASSETS AND LIABILITIES - 1.81%........................ 1,923,249
------------
NET ASSETS - 100.00%............................................ $106,053,205
============
</TABLE>
- ---------------------------------------
** Aggregate cost for Federal tax purposes.
AMBAC American Municipal Bond Assurance Corp.
ETM Escrowed to Maturity
FGIC Financial Guarantee Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
IDC Industrial Development Corp.
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
24
<PAGE> 26
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
MUNICIPAL SECURITIES - 97.48%
MICHIGAN - 92.64%
$ 2,280,000 Allegheny Sanitary Sewer System
5.45%, 11/01/02.................................... $ 2,257,200
1,220,000 Auburn Hills Local Development Authority
Tax Increment Revenue, Series A
6.75%, 11/01/97
LOC: Dai-Ichi Kangyo............................... 1,250,489
2,000,000 Battle Creek Downtown Development
Authority, Tax Increment Revenue
6.90%, 05/01/04.................................... 2,160,000
695,000 Bay City School District, GO
5.30%, 05/01/97.................................... 703,688
745,000 Bay City School District, GO
5.50%, 05/01/98.................................... 760,831
500,000 Central Michigan University
6.70%, 10/01/97.................................... 514,375
1,000,000 Chippewa Valley Schools, GO
Prerefunded 05/01/01
6.38%, 05/01/05
Insured: FGIC...................................... 1,081,250
1,175,000 Chippewa Valley Schools, GO
Prerefunded 05/01/01
6.38%, 05/01/21
Insured: FGIC...................................... 1,270,469
1,445,000 Chippewa Valley Schools
Series A, GO
5.60%, 05/01/99.................................... 1,488,350
1,700,000 Clintondale Community Schools, GO
4.65%, 05/01/03.................................... 1,653,250
1,075,000 Dearborn Sewer Disposal System
7.00%, 04/01/99
Insured: MBIA...................................... 1,138,156
965,000 Dearborn Sewer Disposal System
6.90%, 04/01/02
Insured: MBIA...................................... 1,050,644
2,000,000 Dearborn School District, GO
Prerefunded 05/01/00
6.63%, 05/01/09
Insured: MBIA...................................... 2,170,000
1,000,000 Dearborn School District, GO
Prerefunded 05/01/00
6.38%, 05/01/10
Insured: MBIA...................................... 1,076,250
2,500,000 Detroit, GO
Prerefunded 05/01/99
7.20%, 05/01/09
Insured: AMBAC..................................... 2,728,125
580,000 Detroit, GO
Distributable State Aid, Revenue
5.60%, 05/01/00
Insured: AMBAC..................................... 598,850
2,090,000 Detroit Convention Facility
Cobo Hall Expansion Project
3.75%, 09/30/96.................................... 2,087,994
2,000,000 Detroit Convention Facility
Cobo Hall Expansion Project
4.00%, 09/30/97.................................... 1,987,500
$ 550,000 Detroit Sewer Disposal
7.40%, 07/01/96
Insured: FGIC...................................... $ 550,149
2,800,000 Detroit Sewer Disposal, Series A
4.85%, 07/01/01
Insured: FGIC...................................... 2,800,000
720,000 Detroit Water Supply System
4.30%, 07/01/00
Insured: FGIC...................................... 708,300
2,000,000 East China Township School District, GO
6.00%, 05/01/02.................................... 2,080,000
1,000,000 Eastern Michigan University, GO
5.80%, 06/01/01
Insured: AMBAC..................................... 1,040,000
720,000 Eastern Michigan University, GO
3.95%, 06/01/98
Insured: AMBAC..................................... 712,800
405,000 Farmington Hills EDC
Botsford Continuing Care, Series A
4.90%, 02/15/02
Insured: MBIA...................................... 402,469
425,000 Farmington Hills EDC
Botsford Continuing Care, Series A
5.00%, 02/15/03
Insured: MBIA...................................... 422,344
445,000 Farmington Hills EDC
Botsford Continuing Care, Series A
5.10%, 02/15/04
Insured: MBIA...................................... 440,550
470,000 Farmington Hills EDC
Botsford Continuing Care, Series A
5.20%, 02/15/05
Insured: MBIA...................................... 465,300
480,000 Ferris State College, SP OB
7.50%, 08/15/03.................................... 478,800
1,635,000 Flint Hospital Building Authority
Hurley Medical Center, Series A
7.00%, 07/01/96.................................... 1,635,000
1,915,000 Flint Hospital Building Authority
Hurley Medical Center, Series A
7.00%, 07/01/97.................................... 1,947,038
1,000,000 Grand Haven Area Public Schools, GO
5.45%, 05/01/04
Insured: MBIA...................................... 1,026,250
990,000 Grand Rapids Water Supply System
7.40%, 01/01/97.................................... 1,007,771
500,000 Grand Rapids Water Supply System
6.60%, 01/01/97
Insured: FGIC...................................... 505,855
900,000 Grand Traverse County Hospital
Finance Authority
Munson Healthcare, Series A
4.60%, 07/01/96
Insured: AMBAC..................................... 900,045
1,250,000 Greater Detroit Resource Recovery Authority
Series B
5.00%, 12/13/02
Insured: AMBAC..................................... 1,248,438
</TABLE>
See Notes to Financial Statements.
25
<PAGE> 27
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
$ 680,000 Hartland Consolidated School District, GO
4.80%, 05/01/99.................................... $ 683,400
1,500,000 Haslett Public School District, GO
Prerefunded 05/01/00
7.50%, 05/01/20.................................... 1,657,500
1,000,000 Holland Electric
Prerefunded 07/01/99
6.40%, 07/01/02.................................... 1,055,000
1,100,000 Holland Electric
Prerefunded 07/01/99
6.50%, 07/01/03.................................... 1,161,875
675,000 Hudsonville Public Schools, Series B, GO
4.50%, 05/01/98
Insured: FGIC...................................... 678,375
500,000 Hudsonville Public Schools, Series B, GO
4.60%, 05/01/99
Insured: FGIC...................................... 503,125
1,250,000 Huron Valley School District, GO
Prerefunded 05/01/01
7.10%, 05/01/08
Insured: FGIC...................................... 1,395,313
470,000 Iron Mountain City School District, GO
3.60%, 05/01/97
Insured: AMBAC..................................... 468,350
485,000 Iron Mountain City School District, GO
3.90%, 05/01/98
Insured: AMBAC..................................... 481,363
1,810,000 Kalamazoo Hospital Finance Authority
Refunding & Improvement
Bronson Methodist
4.95%, 05/15/02
Insured: MBIA...................................... 1,812,263
1,000,000 Kalamazoo Hospital Finance Authority
Refunding & Improvement
Bronson Methodist
5.25%, 05/15/05
Insured: MBIA...................................... 1,006,250
1,295,000 Kenowa Hills Public Schools, GO
5.50%, 05/01/05.................................... 1,330,613
500,000 Kent County Airport Facility
Kent County International Airport
5.25%, 01/01/04.................................... 505,625
505,000 Kent County Airport Facility
Kent County International Airport
5.30%, 01/01/05.................................... 511,313
500,000 Kent Hospital Finance Authority
Butterworth Hospital, Series A
6.50%, 01/15/97.................................... 505,385
500,000 Kent Hospital Finance Authority
Butterworth Hospital, Series A
6.60%, 01/15/98.................................... 515,000
1,150,000 Kent Hospital Finance Authority
Butterworth Hospital, Series A
4.90%, 01/15/05.................................... 1,106,875
2,195,000 Kent Hospital Finance Authority
Pine Rest Christian Hospital
5.40%, 11/01/98
Insured: FGIC...................................... 2,241,644
$ 2,000,000 Lake Orion Community School District, GO
6.20%, 05/01/04
Insured: AMBAC..................................... $ 2,152,500
850,000 Lanse Creuse Public Schools, GO
Prerefunded 05/01/97
7.70%, 05/01/04.................................... 892,806
1,000,000 Lansing Water Supply &
Electric Utility System
Series A
6.50%, 07/01/96.................................... 1,000,000
2,250,000 Michigan Higher Education
Student Loan Authority
Series XII-E
6.00%, 10/01/97
Insured: AMBAC..................................... 2,297,813
1,000,000 Michigan Higher Education
Student Loan Authority
Series XII-G
4.45%, 10/01/99
Insured: AMBAC..................................... 995,000
1,020,000 Michigan Municipal Bond Authority
Local Government Loan Program
Qualified School
6.35%, 05/15/01.................................... 1,093,950
1,000,000 Michigan Municipal Bond Authority
Local Government Loan Program, Series B
6.90%, 05/01/99
Insured: FGIC...................................... 1,058,750
1,000,000 Michigan Municipal Bond Authority
Local Government, Wayne County
Group 12B
6.90%, 12/01/96
Insured: MBIA...................................... 1,013,480
1,000,000 Michigan Municipal Bond Authority
Pooled Projects, Series B
5.10%, 10/01/04.................................... 1,001,250
1,000,000 Michigan Municipal Bond Authority
State Revolving Fund
5.50%, 10/01/99.................................... 1,035,000
2,000,000 Michigan Public Power Agency
Belle River Project, Series A
5.30%, 01/01/00.................................... 2,035,000
750,000 Michigan Public Power Agency
Belle River Project, Series A
5.70%, 01/01/03.................................... 777,188
3,000,000 Michigan State
Environmental Protection Program, GO
Prerefunded 11/01/02
6.25%, 11/01/08.................................... 3,255,000
1,000,000 Michigan State Building Authority
Equipment Program, Series A
4.45%, 10/01/97.................................... 1,002,500
1,000,000 Michigan State Building Authority
Series II
6.10%, 10/01/01.................................... 1,061,250
3,000,000 Michigan State Comprehensive
Transportation, Series B
5.63%, 05/15/03.................................... 3,116,250
</TABLE>
See Notes to Financial Statements.
26
<PAGE> 28
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
$ 745,000 Michigan State Hospital Finance Authority
Crittenton Hospital, Series A
6.50%, 12/01/96.................................... $ 751,362
1,200,000 Michigan State Hospital Finance Authority
McLaren Obligation Group, Series A
3.80%, 10/15/96.................................... 1,197,420
2,000,000 Michigan State Hospital Finance Authority
McLaren Obligation Group, Series A
4.10%, 10/15/97.................................... 2,000,000
1,000,000 Michigan State Hospital Finance Authority
Mercy Memorial Hospital
4.00%, 06/01/99
Insured: MBIA...................................... 985,000
1,500,000 Michigan State Hospital Finance Authority
Oakwood Hospital Obligation Group
Series A
4.00%, 11/01/97
Insured: FGIC...................................... 1,498,125
1,000,000 Michigan State Hospital Finance Authority
Oakwood Hospital Obligation Group
Prerefunded 07/01/00
6.95%, 07/01/02
Insured: FGIC...................................... 1,100,000
500,000 Michigan State Hospital Finance Authority
Pontiac Osteopathic, Series A
4.65%, 02/01/97.................................... 498,350
1,060,000 Michigan State Hospital Finance Authority
Sisters of Mercy Health Corp., Series J
7.15%, 02/15/99.................................... 1,114,325
2,800,000 Michigan State Hospital Finance Authority
Sisters of Mercy Health Corp., Series J
Prerefunded 02/15/01
7.38%, 02/15/11.................................... 3,146,500
1,000,000 Michigan State Hospital Finance Authority
Sisters of Mercy Health Corp., Series P
4.60%, 08/15/02
Insured: MBIA...................................... 977,500
1,150,000 Michigan State Hospital Finance Authority
St. John Hospital & Medical Center
4.50%, 05/15/01
Insured: AMBAC..................................... 1,134,188
1,000,000 Michigan State Hospital Finance Authority
St. John Hospital & Medical Center
5.00%, 05/15/05
Insured: AMBAC..................................... 985,000
475,000 Michigan State Housing
Development Authority
Mercy Bellbrook Project
4.40%, 04/01/98
Insured: MBIA...................................... 475,594
1,000,000 Michigan State Housing
Development Authority
Rental Housing Revenue, Series A
5.75%, 10/01/96.................................... 1,001,530
2,680,000 Michigan State Housing
Development Authority
Rental Housing Revenue, Series A
5.25%, 10/01/01
Insured: MBIA...................................... 2,710,150
$ 910,000 Michigan State Strategic Fund
Industrial Development Revenue
Grand Rapids Hotel Co. Project
5.25%, 12/01/15 (A)................................ $ 908,863
400,000 Michigan State Strategic Fund
Limited Obligation Revenue
Collins & Aikman Corp. Project
6.00%, 08/01/96
LOC: NBD Bank...................................... 400,476
620,000 Michigan State Strategic Fund
Limited Obligation Revenue
Environmental Research Institute
5.00%, 08/15/96.................................... 620,601
420,000 Michigan State Strategic Fund
Limited Obligation Revenue
Lutheran Social Services Project
4.25%, 09/01/97
LOC: First of America.............................. 418,950
415,000 Michigan State Strategic Fund
Limited Obligation Revenue
Lutheran Social Services Project
4.40%, 09/01/98
LOC: First of America.............................. 413,444
480,000 Michigan State Strategic Fund
Limited Obligation Revenue
Lutheran Social Services Project
4.55%, 09/01/99
LOC: First of America.............................. 477,000
1,000,000 Michigan State Trunk Line, Series B
4.50%, 11/15/97
Insured: FGIC...................................... 1,006,250
2,000,000 Michigan State Underground Storage Tank
Financial Assurance Authority, Series I
5.00%, 05/01/00
Insured: AMBAC..................................... 2,017,500
1,270,000 Michigan State Underground Storage Tank
Financial Assurance Authority, Series I
6.00%, 05/01/06
Insured: AMBAC..................................... 1,341,438
1,010,000 Michigan State University, Series A
4.45%, 08/15/96.................................... 1,010,737
1,075,000 Michigan State University, Series A
4.70%, 08/15/97.................................... 1,083,063
1,200,000 Michigan State University, Series A, GO
5.50%, 02/15/99
Insured: AMBAC..................................... 1,230,000
1,100,000 Michigan State University, Series A, GO
5.50%, 02/15/00
Insured: AMBAC..................................... 1,131,625
1,000,000 Mount Clemens Community
School District, GO
Prerefunded 05/01/02
6.60%, 05/01/20
Insured: MBIA...................................... 1,102,500
1,660,000 Oakland County EDC
Boardwalk Shopping Center
4.75%, 01/01/09 (A)................................ 1,657,925
615,000 Oakland County EDC
Sugar Tree Shopping Center
4.82%, 01/01/14 (A)................................ 607,313
</TABLE>
See Notes to Financial Statements.
27
<PAGE> 29
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------
<S> <C>
$ 3,000,000 Okemos Public School District, Series I, GO
Prerefunded 05/01/01
6.90%, 05/01/11.................................... $ 3,315,000
3,200,000 Plymouth-Canton Community School District
Series B, GO
Prerefunded 05/01/01
6.80%, 05/01/17.................................... 3,500,000
415,000 Reeths-Puffer Schools, GO
6.75%, 05/01/97
Insured: FGIC...................................... 423,690
275,000 Reeths-Puffer Schools, GO
6.75%, 05/01/98
Insured: FGIC...................................... 286,344
630,000 Reeths-Puffer Schools, GO
6.75%, 05/01/99
Insured: FGIC...................................... 669,375
725,000 Reeths-Puffer Schools, GO
6.75%, 05/01/00
Insured: FGIC...................................... 779,375
735,000 Reeths-Puffer Schools, GO
6.75%, 05/01/01
Insured: FGIC...................................... 797,475
750,000 Reeths-Puffer Schools, GO
6.25%, 05/01/02
Insured: FGIC...................................... 803,438
1,600,000 Rochester Community School District
Prerefunded 05/01/98
7.25%, 05/01/03.................................... 1,702,000
2,000,000 Rockford Public Schools, GO
Prerefunded 05/01/00
7.38%, 05/01/19.................................... 2,202,500
1,000,000 South Lyon Community Schools, GO
Prerefunded 05/01/98
7.80%, 05/01/14.................................... 1,082,500
1,200,000 Southfield Public Schools, GO
3.90%, 05/01/98
Insured: FGIC...................................... 1,191,000
1,095,000 Southfield Public Schools, GO
4.00%, 05/01/99
Insured: FGIC...................................... 1,079,944
1,200,000 St. Joseph Hospital Finance Authority
Mercy Memorial Medical Center Obligation
3.95%, 01/01/97
Insured: AMBAC..................................... 1,198,884
860,000 Traverse City Area Public Schools, GO
4.15%, 05/01/00
Insured: FGIC...................................... 843,875
1,000,000 Traverse City Area Public Schools, GO
Series II
Prerefunded 05/01/01
7.00%, 05/01/03.................................... 1,106,250
630,000 University of Michigan
Intercollegiate Athletic
3.80%, 06/01/97.................................... 629,364
2,600,000 University of Michigan Hospital, Series A
3.55%, 12/01/27 (A)................................ 2,600,000
$ 2,000,000 Walled Lake Consolidated School District
Series II, GO
Prerefunded 05/01/00
7.10%, 05/01/05.................................... $ 2,200,000
2,035,000 Walled Lake Consolidated
School District, GO
4.70%, 05/01/01.................................... 2,037,544
2,235,000 Walled Lake Consolidated
School District, GO
4.80%, 05/01/02.................................... 2,212,650
945,000 Warren Consolidated School District, GO
ETM
6.00%, 05/01/01.................................... 993,431
1,000,000 Warren Consolidated School District, GO
Prerefunded 05/01/02
6.63%, 05/01/21.................................... 1,101,250
1,025,000 Washtenaw Community College, GO
4.70%, 04/01/03
Insured: FGIC...................................... 1,004,500
450,000 Wayne County Downriver System
Sewer Disposal, GO
3.75%, 05/01/97.................................... 447,332
550,000 Wayne County Downriver System
Sewer Disposal, GO
3.75%, 05/01/98.................................... 535,563
550,000 Wayne County Downriver System
Sewer Disposal, GO
3.75%, 05/01/99.................................... 522,500
550,000 Wayne County Downriver System
Sewer Disposal, GO
3.75%, 05/01/00.................................... 508,750
1,750,000 Western Michigan University
Series A
Prerefunded 07/15/01
6.50%, 07/15/21
Insured: AMBAC..................................... 1,914,063
1,000,000 Wyandotte Electric
6.20%, 10/01/03
Insured: MBIA...................................... 1,063,750
------------
159,510,612
------------
OTHER TERRITORIES - 4.84%
3,000,000 Puerto Rico Commonwealth
Highway & Transportation
Authority Highway Revenue, Series X
4.90%, 07/01/01.................................... 3,000,000
4,000,000 Puerto Rico Electric Power Authority
Series W
5.00%, 07/01/98.................................... 4,050,000
1,300,000 Puerto Rico Individual Medical &
Environmental Pollution Control
Facilities Financing Authority
Intel Corp, Series A
4.00%, 09/01/98 (A)................................ 1,287,000
------------
8,337,000
------------
TOTAL MUNICIPAL SECURITIES......................... 167,847,612
(Cost $167,476,884) ============
</TABLE>
See Notes to Financial Statements.
28
<PAGE> 30
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
-------- --------
<S> <C>
INVESTMENT COMPANY - 1.35%
2,316,667 Dreyfus Tax Exempt
Cash Management Fund............................... $ 2,316,667
------------
TOTAL INVESTMENT COMPANY........................... 2,316,667
------------
(Cost $2.316,667)
TOTAL INVESTMENTS - 98.83%....................................... 170,164,279
(Cost $169,793,551)** ------------
NET OTHER ASSETS AND LIABILITIES - 1.17%......................... 2,015,448
------------
NET ASSETS - 100.00%............................................. $172,179,727
============
</TABLE>
- -------------------------------------------
** Aggregate cost for Federal tax purposes.
(A) Variable rate demand notes are payable upon not more than one,
seven or thirty business days notice. Put bonds and notes have
demand features which mature within one year. The interest rate
shown reflects the rate in effect at June 30, 1996.
AMBAC American Municipal Bond Assurance Corp.
EDC Economic Development Corp.
FGIC Financial Guarantee Insurance Corp.
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
SP OB Special Obligation
See Notes to Financial Statements.
29
<PAGE> 31
THE KENT STATEMENTS OF ASSETS AND LIABILITIES
FUNDS JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
LIMITED INTERMEDIATE TAX-FREE MICHIGAN
TERM TAX-FREE TAX-FREE INCOME MUNICIPAL
FUND FUND FUND BOND FUND
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost ..................... $ 47,095,307 $ 279,898,047 $ 103,492,373 $ 169,793,551
Net unrealized appreciation
(depreciation) ......................... 222,072 5,624,336 637,583 370,728
------------- ------------- ------------- -------------
Total investments at value ............ 47,317,379 285,522,383 104,129,956 170,164,279
Cash ...................................... 1,024,314 293,183 50,199 1,594
Receivable for fund shares sold ........... 27,214 431,612 256,922 88,610
Receivable from Investment Adviser (Note 3) 6,677 5,547 93,939 --
Interest and dividend receivables ......... 725,034 4,374,309 1,576,691 2,399,673
Deferred organizational expense (Note 2) .. -- -- 4,932 --
------------- ------------- ------------- -------------
Total Assets ............................ 49,100,618 290,627,034 106,112,639 172,654,156
------------- ------------- ------------- -------------
LIABILITIES:
Payable for investment securities purchased 1,000,000 -- -- --
Payable for Trust shares repurchased ...... 5,042 71,279 32,062 424,098
Advisory fee payable (Note 3) ............. 2,374 15,922 6,344 11,823
Payable to administrator and
transfer agent (Note 3) .............. -- -- 3,943 572
Accrued expenses and other payables ....... 22,185 54,394 17,085 37,936
------------- ------------- ------------- -------------
Total Liabilities ....................... 1,029,601 141,595 59,434 474,429
------------- ------------- ------------- -------------
NET ASSETS .................................. $ 48,071,017 $ 290,485,439 $ 106,053,205 $ 172,179,727
============= ============= ============= =============
NET ASSETS CONSIST OF:
Paid-in-capital ........................... $ 47,736,226 $ 285,906,883 $ 103,831,417 $ 171,822,496
Undistributed (overdistributed) net
investment income ....................... 36,027 (1,385) 11,877 112,935
Accumulated net realized gain (loss) on
investments sold ........................ 76,692 (1,044,395) 1,572,328 (126,432)
Net unrealized appreciation (depreciation)
of investments .......................... 222,072 5,624,336 637,583 370,728
------------- ------------- ------------- -------------
TOTAL NET ASSETS ............................. $ 48,071,017 $ 290,485,439 $ 106,053,205 $ 172,179,727
============= ============= ============= =============
INSTITUTIONAL SHARES:
Net Assets ................................ $ 48,018,887 $ 287,072,146 $ 105,310,993 $ 169,890,659
Shares Outstanding ........................ 4,752,066 27,983,598 10,348,160 16,982,359
Net Asset Value, offering and redemption
price per share ......................... $ 10.10 $ 10.26 $ 10.18 $ 10.00
============= ============= ============= =============
INVESTMENT SHARES:
Net Assets ................................ $ 52,130 $ 3,413,293 $ 742,212 $ 2,289,068
Shares Outstanding ........................ 5,147 332,675 72,748 229,042
Net Asset Value and redemption
price per share ......................... $ 10.13 $ 10.26 $ 10.20 $ 9.99
============= ============= ============= =============
Maximum offering price per share
Investment Class (NAV/0.96) ........... $ 10.55 $ 10.69 $ 10.63 $ 10.41
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 32
THE KENT STATEMENTS OF OPERATIONS
FUNDS FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
LIMITED INTERMEDIATE TAX-FREE MICHIGAN
TERM TAX-FREE TAX-FREE INCOME MUNICIPAL
FUND FUND FUND BOND FUND
------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 2):
Interest ................................... $ 1,138,285 $ 7,337,183 $ 2,736,222 $ 3,869,682
Dividends .................................. 14,238 64,721 41,385 65,425
----------- ----------- ----------- -----------
Total Investment Income .................. 1,152,523 7,401,904 2,777,607 3,935,107
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee (Note 3) ........... 113,640 727,528 294,923 394,625
Administration fee (Note 3) ................ 50,507 291,011 107,245 175,388
Custodian fee (Note 3) ..................... 3,640 6,827 4,587 5,808
Fund accounting fee (Note 3) ............... 2,286 7,266 3,953 7,518
Legal fee (Note 3) ......................... 910 4,608 1,823 3,412
Audit fee .................................. 3,092 4,588 3,248 3,092
Shareholder services (Notes 3 & 4) ......... 7,584 8,190 7,505 7,695
Trustees' fees and expenses (Note 3) ....... 1,843 1,843 1,607 1,843
Amortization of organization costs (Note 2) -- -- 659 --
Distribution fee (Note 3) .................. 38 4,713 854 1,571
Printing expense (Note 4) .................. 2,215 3,573 638 2,453
Registration fees .......................... 2,764 4,033 8,654 7,805
Miscellaneous .............................. 1,820 4,286 1,079 1,753
----------- ----------- ----------- -----------
Total Expenses .......................... 190,339 1,068,466 436,775 612,963
----------- ----------- ----------- -----------
NET INVESTMENT INCOME ......................... 962,184 6,333,438 2,340,832 3,322,144
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold 67,483 484,843 1,570,389 52,459
Net change in unrealized appreciation
(depreciation) of investments ............ (645,307) (7,982,318) (4,328,246) (2,164,111)
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS .................... (577,824) (7,497,475) (2,757,857) (2,111,652)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS .................................... $ 384,360 $(1,164,037) $ (417,025) $ 1,210,492
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 33
THE KENT
FUNDS STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED TERM
TAX-FREE FUND
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------- -----------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD....................... $ 55,401,190 $ 43,503,375
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income ............................... 962,184 1,889,876
Net realized gain (loss) on investments sold......... 67,483 145,910
Net change in unrealized appreciation
(depreciation) of investments .................... (645,307) 1,744,380
------------- -----------------
Net increase (decrease) in net assets resulting
from operations .................................. 384,360 3,780,166
------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 2 & 5):
INSTITUTIONAL:
Net investment income ............................... (949,901) (1,911,674)
In excess of net investment income................... -- --
Net realized gain on investments .................... -- --
------------- -----------------
Total Distributions .............................. (949,901) (1,911,674)
------------- -----------------
INVESTMENT:
Net investment income ............................... (947) (1,582)
In excess of net investment income................... -- --
Net realized gain on investments .................... -- --
------------- -----------------
Total Distributions............................... (947) (1,582)
------------- -----------------
Total Distributions to shareholders............... (950,848) (1,913,256)
------------- -----------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS(2)...... (6,763,685) 10,030,905
------------- -----------------
Net increase (decrease) in net assets............. (7,330,173) 11,897,815
------------- -----------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A).......... $ 48,071,017 $ 55,401,190
============= =================
(A) Accumulated undistributed (overdistributed)
net investment income............................... $ 36,027 $ 24,691
============= =================
</TABLE>
- -------------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
(2) For detail on share transactions by class, see Statement of Changes in
Net Assets - Capital Stock Activity on pages 33 and 34.
See Notes to Financial Statements.
32
<PAGE> 34
THE KENT
FUNDS
<TABLE>
<CAPTION>
INTERMEDIATE TAX-FREE MICHIGAN MUNICIPAL
TAX-FREE FUND INCOME FUND BOND FUND
- ------------------------------------- ---------------------------------- ----------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED PERIOD ENDED ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995 (UNAUDITED) 1995(1) (UNAUDITED) 1995
- --------------- -------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ 287,540,348 $ 385,220,246 $ 122,384,290 $ -- $ 187,365,585 $ 120,464,659
- --------------- -------------- --------------- -------------- --------------- --------------
6,333,438 13,878,695 2,340,832 3,573,032 3,322,144 6,244,604
484,843 1,348,408 1,570,389 148,330 52,459 180,555
(7,982,318) 25,697,939 (4,328,246) 4,965,829 (2,164,111) 5,672,314
- --------------- -------------- --------------- -------------- --------------- --------------
(1,164,037) 40,925,042 (417,025) 8,687,191 1,210,492 12,097,473
- --------------- -------------- --------------- -------------- --------------- --------------
(6,390,519) (13,398,449) (2,343,574) (3,541,310) (3,171,602) (6,043,639)
-- (282,467) -- -- -- (157,669)
-- -- (135,242) -- -- --
- --------------- -------------- --------------- -------------- --------------- --------------
(6,390,519) (13,680,916) (2,478,816) (3,541,310) (3,171,602) (6,201,308)
- --------------- -------------- --------------- -------------- --------------- --------------
(77,624) (157,954) (14,670) (12,658) (37,607) (68,092)
-- (3,790) -- -- -- (1,615)
-- -- (924) -- -- --
- --------------- -------------- --------------- -------------- --------------- --------------
(77,624) (161,744) (15,594) (12,658) (37,607) (69,707)
- --------------- -------------- --------------- -------------- --------------- --------------
(6,468,143) (13,842,660) (2,494,410) (3,553,968) (3,209,209) (6,271,015)
- --------------- -------------- --------------- -------------- --------------- --------------
10,577,271 (124,762,280) (13,419,650) 117,251,067 (13,187,141) 61,074,468
- --------------- -------------- --------------- -------------- --------------- --------------
2,945,091 (97,679,898) (16,331,085) 122,384,290 (15,185,858) 66,900,926
- --------------- -------------- --------------- -------------- --------------- --------------
$ 290,485,439 $ 287,540,348 $ 106,053,205 $ 122,384,290 $ 172,179,727 $ 187,365,585
=============== ============== =============== ============== =============== ==============
$ (1,385) $ 133,320 $ 11,877 $ 29,289 $ 112,935 $ --
=============== ============== =============== ============== =============== ==============
</TABLE>
See Notes to Financial Statements.
33
<PAGE> 35
THE KENT STATEMENTS OF CHANGES IN NET ASSETS
FUNDS CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
LIMITED TERM TAX-FREE FUND INTERMEDIATE TAX-FREE FUND
------------------------------------- -------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
JUNE 30, 1996 ENDED JUNE 30, 1996 ENDED
(UNAUDITED) DECEMBER 31, 1995 (UNAUDITED) DECEMBER 31, 1995
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.................... $ 4,333,829 $ 31,715,093 $ 43,877,742 $ 56,260,448
Reinvestment of distributions.... 1,678 1,677 24,488 25,763
Shares redeemed.................. (11,098,045) (21,731,961) (33,028,280) (180,059,789)
---------------- ----------------- ---------------- -----------------
Net increase (decrease) from
Institutional shares
transactions.................... $ (6,762,538) $ 9,984,809 $ 10,873,950 $ (123,773,578)
================ ================= ================ =================
INVESTMENT:
Shares issued.................... $ -- $ 55,976 $ 391,381 $ 558,623
Reinvestment of distributions.... 947 1,583 39,895 78,263
Shares redeemed.................. (2,094) (11,463) (727,955) (1,625,588)
---------------- ----------------- ---------------- -----------------
Net increase (decrease) from
Investment shares transactions.. $ (1,147) $ 46,096 $ (296,679) $ (988,702)
================ ================= ================ =================
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued.................... 425,962 3,132,279 4,189,586 5,509,613
Reinvestment of distributions.... 165 166 2,370 2,519
Shares redeemed.................. (1,090,343) (2,152,975) (3,186,123) (17,626,244)
---------------- ----------------- ---------------- -----------------
Net increase (decrease) from
Institutional shares
transactions.................... (664,216) 979,470 1,005,833 (12,114,112)
================ ================= ================ =================
INVESTMENT:
Shares issued.................... -- 5,537 37,764 54,764
Reinvestment of distributions.... 93 156 3,858 7,646
Shares redeemed.................. (204) (1,120) (70,873) (162,915)
---------------- ----------------- ---------------- -----------------
Net increase (decrease) from
Investment shares transactions.. (111) 4,573 (29,251) (100,505)
================ ================= ================ =================
</TABLE>
See Notes to Financial Statements.
34
<PAGE> 36
THE KENT STATEMENTS OF CHANGES IN NET ASSETS-
FUNDS CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL
TAX-FREE INCOME FUND BOND FUND
------------------------------------- -------------------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED YEAR
JUNE 30, 1996 ENDED JUNE 30, 1996 ENDED
(UNAUDITED) DECEMBER 31, 1995(1) (UNAUDITED) DECEMBER 31, 1995
---------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued.................... $ 20,536,717 $ 134,004,667 $ 16,624,788 $ 116,065,628
Reinvestment of distributions.... 13,871 13,880 25,902 46,344
Shares redeemed.................. (34,204,664) (17,275,708) (30,250,873) (54,884,598)
---------------- ------------------ ---------------- -----------------
Net increase (decrease) from
Institutional shares
transactions.................... $ (13,654,076) $ 116,742,839 $ (13,600,183) $ 61,227,374
================ ================== ================ =================
INVESTMENT:
Shares issued.................... $ 265,139 $ 530,148 $ 567,304 $ 372,427
Reinvestment of distributions.... 15,206 12,658 13,652 31,264
Shares redeemed.................. (45,919) (34,578) (167,914) (556,597)
---------------- ------------------ ---------------- -----------------
Net increase (decrease) from
Investment shares transactions.. $ 234,426 $ 508,228 $ 413,042 $ (152,906)
================ ================== ================ =================
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued.................... 2,000,088 13,298,723 1,653,089 11,603,278
Reinvestment of distributions.... 1,353 1,362 2,577 4,643
Shares redeemed.................. (3,264,340) (1,689,026) (3,001,976) (5,467,888)
---------------- ------------------ ---------------- -----------------
Net increase (decrease) from
Institutional shares
transactions.................... (1,262,899) 11,611,059 (1,346,310) 6,140,033
================ ================== ================ =================
INVESTMENT:
Shares issued.................... 25,438 52,334 56,521 37,453
Reinvestment of distributions.... 1,477 1,235 1,362 3,149
Shares redeemed.................. (4,420) (3,316) (16,674) (56,394)
---------------- ------------------ ---------------- -----------------
Net increase (decrease) from
Investment shares transactions.. 22,495 50,253 41,209 (15,792)
================ ================== ================ =================
</TABLE>
- ---------------------------------------
(1) The Institutional Class of The Tax-Free Income Fund commenced
operations on March 20, 1995. The Investment Class date of initial
public investment was March 31, 1995.
See Notes to Financial Statements.
35
<PAGE> 37
THE KENT LIMITED TERM TAX-FREE
FUNDS FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996 PERIOD ENDED DECEMBER 31,
------------- -------------------------
(UNAUDITED) 1995 1994(1)
------------- --------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of period ........................ $ 10.22 $ 9.80 $ 10.00
------------- --------- ----------
Income from Investment Operations:
Net investment income ..................................... 0.19 0.39 0.13
Net realized and unrealized gain (loss) on investments .... (0.12) 0.42 (0.21)
------------- --------- ----------
Total from Investment Operations: ...................... 0.07 0.81 (0.08)
------------- --------- ----------
Less Distribution From:
Net investment income ..................................... (0.19) (0.39) (0.12)
In excess of net investment income ........................ -- -- --
Net realized gain on investments .......................... -- -- --
------------- --------- ----------
Total Distributions: ................................... (0.19) (0.39) (0.12)
------------- --------- ----------
Net increase (decrease) in net asset value ................... (0.12) 0.42 (0.20)
------------- --------- ----------
Net Asset Value, End of period ............................... $ 10.10 $ 10.22 $ 9.80
============= ========= ==========
Total Return for period indicated ............................ 0.71%** 8.43% (0.77)%
Ratios/Supplemental Data:
Net Assets, End of period (000's) ............................ 48,019 $ 55,347 $ 43,497
Ratios to average net assets:
Net investment income including reimbursement/waiver ...... 3.81%* 3.87% 3.81%*
Net investment income excluding reimbursement/waiver ...... 3.81%* 3.82% 3.64%*
Operating expenses including reimbursement/waiver ......... 0.75%* 0.69% 0.79%*
Operating expenses excluding reimbursement/waiver ......... 0.75%* 0.74% 0.96%*
Portfolio Turnover Rate ...................................... 21% 51% 10%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized.
** Not Annualized.
(1) The Institutional Class commenced operations on September 1, 1994.
See Notes to Financial Statements.
36
<PAGE> 38
THE KENT
FUNDS
INVESTMENT SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 --------------------------
(UNAUDITED) 1995 1994(2)
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of period ......................... $ 10.24 $ 9.81 $ 9.87
------------ ------------ ------------
Income from Investment Operations:
Net investment income ..................................... 0.22 0.37 0.06
Net realized and unrealized gain (loss) on investments .... (0.14) 0.44 (0.06)
------------ ------------ ------------
Total from Investment Operations: ...................... 0.08 0.81 --
------------ ------------ ------------
Less Distributions from:
Net investment income ..................................... (0.19) (0.38) (0.06)
In excess of net investment income......................... -- -- --
Net realized gain on investments .......................... -- -- --
------------ ------------ ------------
Total Distributions: ................................... (0.19) (0.38) (0.06)
------------ ------------ ------------
Net increase (decrease) in net asset value ................... (0.11) 0.43 (0.06)
------------ ------------ ------------
Net Asset Value, End of period ............................... $ 10.13 $ 10.24 $ 9.81
============ ============ ============
Total Return for period indicated (A) ....................... 0.75%** 8.40% 0.03%
Ratios/Supplemental Data:
Net Assets, End of period (000's) ............................ $ 52 $ 54 $ 7
Ratios to average net assets:
Net investment income including reimbursement/waiver ...... 3.67%* 3.69% 3.86%*
Net investment income excluding reimbursement/waiver....... 3.67%* 3.69% 3.75%*
Operating expenses including reimbursement/waiver ......... 0.91%* 0.84% 0.87%*
Operating expenses excluding reimbursement/waiver.......... 0.91%* 0.85% 0.98%*
Portfolio Turnover Rate ...................................... 21% 51% 10%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
(2) The Investment Class date of initial public investment was November 1,
1994.
(A) Calculation does not include sales charge for Investment shares.
See Notes to Financial Statements.
37
<PAGE> 39
THE KENT INTERMEDIATE TAX-FREE FUND
FUNDS FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 --------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992(1)
------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period ..................$ 10.52 $ 9.74 $ 10.45 $ 10.02 $ 10.00
------------- --------- --------- --------- -----------
Income from Investment Operations:
Net investment income............................... 0.22 0.45 0.40 0.37 0.01
Net realized and unrealized gain (loss) on
investments....................................... (0.25) 0.79 (0.71) 0.47 0.03
------------- --------- --------- --------- -----------
Total from Investment Operations: ............... (0.03) 1.24 (0.31) 0.84 0.04
------------- --------- --------- --------- -----------
Less Distributions from:
Net investment income .............................. (0.23) (0.45) (0.39) (0.36) (0.01)
In excess of net investment income.................. -- (0.01) (0.01) -- (0.01)
Net realized gain on investments ................... -- -- -- (0.05) --
------------- --------- --------- --------- -----------
Total Distributions: ............................ (0.23) (0.46) (0.40) (0.41) (0.02)
------------- --------- --------- --------- -----------
Net increase (decrease) in net asset value ............ (0.26) 0.78 (0.71) 0.43 0.02
------------- --------- --------- --------- -----------
Net Asset Value, End of period ........................$ 10.26 $ 10.52 $ 9.74 $ 10.45 $ 10.02
============= ========= ========= ========= ===========
Total Return for period indicated...................... (0.40)%** 12.90% (3.00)% 8.51% 0.40%
Ratios/Supplemental Data:
Net Assets, End of period (000's) .....................$ 287,072 $ 283,733 $ 380,715 $ 135,862 $ 36,938
Ratios to average net assets:
Net investment income including reimbursement/waiver 4.36%* 4.39% 4.07% 3.62% 1.77%*
Net investment income excluding reimbursement/waiver 4.36%* 4.39% 4.07% 3.62% 1.77%*
Operating expenses including reimbursement/waiver .. 0.73%* 0.72% 0.78% 0.84% 0.11%**
Operating expenses excluding reimbursement/waiver .. 0.73%* 0.72% 0.78% 0.84% 0.11%**
Portfolio Turnover Rate ............................... 31% 6% 36% 14% 0%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
(1) The Institutional Class commenced operations on December 16, 1992.
See Notes to Financial Statements.
38
<PAGE> 40
THE KENT
FUNDS
INVESTMENT SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 --------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992(1)
------------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period .................. $ 10.52 $ 9.74 $ 10.45 $ 10.04 $ 10.00
------------- --------- --------- --------- -----------
Income from Investment Operations:
Net investment income............................... 0.21 0.42 0.40 0.36 ***
Net realized and unrealized gain (loss) on
investments....................................... (0.25) 0.79 (0.71) 0.46 0.04
------------- --------- --------- --------- -----------
Total from Investment Operations: (0.04) 1.21 (0.31) 0.82 0.04
------------- --------- --------- --------- -----------
Less Distributions from:
Net investment income .............................. (0.22) (0.42) (0.39) (0.33) --
In excess of net investment income.................. -- (0.01) (0.01) (0.03) --
Net realized gain on investments ................... -- -- -- (0.05) --
------------- --------- --------- --------- -----------
Total Distributions: (0.22) (0.43) (0.40) (0.41) --
------------- --------- --------- --------- -----------
Net increase (decrease) in net asset value ............ (0.26) 0.78 (0.71) 0.41 0.04
------------- --------- --------- --------- -----------
Net Asset Value, End of period ........................ $ 10.26 $ 10.52 $ 9.74 $ 10.45 $ 10.04
============= ========= ========= ========= ===========
Total Return for period indicated (A).................. (0.51)%** 12.66% (3.03)% 8.29% 0.40%
Ratios/Supplemental Data:
Net Assets, End of period (000's) .................... $ 3,413 $ 3,807 $ 4,505 $ 3,307 $ 92
Ratios to average net assets:
Net investment income including reimbursement/waiver 4.10%* 4.13% 3.99% 3.44% 1.37%*
Net investment income excluding reimbursement/waiver 4.10%* 4.13% 3.99% 3.44% 1.37%*
Operating expenses including reimbursement/waiver .. 0.98%* 0.97% 0.79% 1.08% 0.10%**
Operating expenses excluding reimbursement/waiver .. 0.98%* 0.97% 0.79% 1.08% 0.10%**
Portfolio Turnover Rate ............................... 31% 6% 36% 14% 0%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
*** The amount is less than $0.005
(1) The Investment Class date of initial public investment was December 18,
1992.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
39
<PAGE> 41
THE KENT TAX-FREE INCOME FUND
FUNDS FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES INVESTMENT SHARES
--------------------------- ------------------------------
SIX MONTHS SIX MONTHS
ENDED PERIOD ENDED ENDED PERIOD ENDED
JUNE 30, 1996 DECEMBER 31, JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995(1) (UNAUDITED) 1995(2)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period .................... $ 10.49 $ 10.00 $ 10.52 $ 10.00
------------- ------------- ------------- -------------
Income from Investment Operations:
Net investment income ................................ 0.23 0.36 0.20 0.31
Net realized and unrealized gain (loss) on investments (0.30) 0.49 (0.29) 0.51
------------- ------------- ------------- -------------
Total from Investment Operations: ................. (0.07) 0.85 (0.09) 0.82
------------- ------------- ------------- -------------
Less Distributions from:
Net investment income ................................ (0.23) (0.36) (0.22) (0.30)
Net realized gain on investments ..................... (0.01) -- (0.01) --
------------- ------------- ------------- -------------
Total Distributions................................ (0.24) (0.36) (0.23) (0.30)
------------- ------------- ------------- -------------
Net increase (decrease) in net asset value .............. (0.31) 0.49 (0.32) 0.52
------------- ------------- ------------- -------------
Net Asset Value, End of period .......................... $ 10.18 $ 10.49 $ 10.20 $ 10.52
============= ============= ============= =============
Total Return for period indicated (A) ................... (0.65)%** 8.64% (0.86)%** 8.34%
Ratios/Supplemental Data:
Net Assets, End of period (000's) ....................... $ 105,311 $ 121,855 $ 742 $ 529
Ratios to average net assets:
Net investment income including reimbursement/waiver.. 4.37%* 4.44%* 4.15%* 4.25%*
Net investment income excluding reimbursement/waiver.. 4.37%* 4.26%* 4.15%* 4.03%*
Operating expenses including reimbursement/waiver..... 0.81%* 0.73%* 1.07%* 0.95%*
Operating expenses excluding reimbursement/waiver..... 0.81%* 0.91%* 1.07%* 1.17%*
Portfolio Turnover Rate ................................. 67% 10% 67% 10%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
(1) The Institutional Class commenced operations on March 20, 1995.
(2) The Investment Class date of initial public investment was March 31,
1995.
(A) Calculation does not include sales charge for the Investment Shares. 40
See Notes to Financial Statements.
40
<PAGE> 42
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUND FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 ---------------------------------------------
(UNAUDITED) 1995 1994 1993(1)
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period .................... $ 10.12 $ 9.72 $ 10.06 $ 10.00
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income ................................ 0.19 0.39 0.37 0.23
Net realized and unrealized gain (loss) on investments (0.13) 0.39 (0.34) 0.07
------------- ------------ ------------ ------------
Total from Investment Operations: 0.06 0.78 0.03 0.30
------------- ------------ ------------ ------------
Less Distributions from:
Net investment income ................................ (0.18) (0.37) (0.36) (0.22)
In excess of net investment income ................... -- (0.01) (0.01) (0.01)
Net realized gain on investments...................... -- -- -- (0.01)
In excess of net realized gain on investments......... -- -- -- ***
------------- ------------ ------------ ------------
Total Distributions................................ (0.18) (0.38) (0.37) (0.24)
------------- ------------ ------------ ------------
Net increase (decrease) in net asset value .............. (0.12) 0.40 (0.34) 0.06
------------- ------------ ------------ ------------
Net Asset Value, End of period .......................... $ 10.00 $ 10.12 $ 9.72 $ 10.06
============= ============ ============ ============
Total Return for period indicated (A) ................... 0.64%** 8.20% 0.36% 3.06%
Ratios/Supplemental Data:
Net Assets, End of period (000's) ....................... $ 169,891 $ 185,466 $ 118,485 $ 74,647
Ratios to average net assets:
Net investment income including reimbursement/waiver.. 3.79%* 3.81% 3.74% 3.34%*
Net investment income excluding reimbursement/waiver.. 3.79%* 3.80% 3.50% 3.61%*
Operating expenses including reimbursement/waiver..... 0.70%* 0.69% 0.49% 0.24%*
Operating expenses excluding reimbursement/waiver..... 0.70%* 0.70% 0.74% 0.68%*
Portfolio Turnover Rate ................................. 21% 42% 27% 10%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
*** Amount is less than $0.005
(1) The Institutional Class commenced operations on May 3, 1993.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
41
<PAGE> 43
THE KENT MICHIGAN MUNICIPAL BOND FUND
FUNDS FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
INVESTMENT SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED DECEMBER 31,
JUNE 30, 1996 --------------------------------------------
(UNAUDITED) 1995 1994 1993(1)
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period .................... $ 10.11 $ 9.72 $ 10.08 $ 10.02
------------- ------------ ------------ ------------
Income from Investment Operations:
Net investment income ................................ 0.18 0.37 0.35 0.21
Net realized and unrealized gain (loss) on investments (0.12) 0.40 (0.34) 0.07
------------- ------------ ------------ ------------
0.06 0.77 0.01 0.28
------------- ------------ ------------ ------------
Less Distributions from:
Net investment income ................................ (0.18) (0.37) (0.34) (0.21)
In excess of net investment income ................... -- (0.01) (0.03) ***
Net realized gain on investments...................... -- -- -- (0.01)
In excess of net realized gain on investments......... -- -- -- --
------------- ------------ ------------ ------------
Total Distributions................................ (0.18) (0.38) (0.37) (0.22)
------------- ------------ ------------ ------------
Net increase (decrease) in net asset value............... (0.12) 0.39 (0.36) 0.06
------------- ------------ ------------ ------------
Net Asset Value, End of period........................... $ 9.99 $ 10.11 $ 9.72 $ 10.08
============= ============ ============ ============
Total Return for period indicated (A) ................... 0.58%** 8.01% 0.16% 2.85%
Ratios/Supplemental Data:
Net Assets, End of period (000's) ....................... 2,289 $ 1,900 $ 1,980 $ 283
Ratios to average net assets:
Net investment income including reimbursement/waiver.. 3.65%* 3.68% 3.80% 3.43%*
Net investment income excluding reimbursement/waiver.. 3.65%* 3.67% 2.74% 2.60%*
Operating expenses including reimbursement/waiver..... 0.85%* 0.83% 0.49% 0.25%*
Operating expenses excluding reimbursement/waiver..... 0.85%* 0.85% 0.84% 1.08%*
Portfolio Turnover Rate ................................. 21% 42% 27% 10%
</TABLE>
- -------------------------------------------------------------------------------
* Annualized
** Not Annualized
*** Amount is less than $0.005
(1) The Investment Class date of initial public investment was May 11,
1993.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
42
<PAGE> 44
THE KENT NOTES TO FINANCIAL STATEMENTS
FUNDS (UNAUDITED)
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. As of the date of this
report, the Trust offered thirteen managed investment portfolios. The
accompanying financial statements and financial highlights are those of the
Limited Term Tax-Free Fund (formerly the Limited Maturity Tax Exempt Bond Fund),
Intermediate Tax-Free Fund (formerly the Medium Term Tax Exempt Bond Fund),
Tax-Free Income Fund and Michigan Municipal Bond Fund (formerly the Michigan
Municipal Limited Maturity Bond Fund) (individually, a "Portfolio",
collectively, the "Portfolios") only. The Trust offers two classes of shares:
Investment and Institutional. The Investment Shares are offered with a 4.00%
sales load.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Portfolios in the preparation of the
financial statements.
PORTFOLIO VALUATION: Corporate debt securities, municipal securities and debt
securities of the U.S. government and its agencies (other than short-term
investments maturing in 60 days or less) are valued on the basis of valuations
provided by dealers or by an independent pricing service approved by the Board
of Trustees. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which constitutes fair value and approximates market value. All
other securities and other assets are appraised at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
are recorded on the basis of identified cost. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare and
distribute dividends from net investment income monthly. Net investment income
for this purpose consists of interest accrued and discount earned (including
both original issue and market discount), less amortization of any market
premium on municipal securities and accrued expenses. Net realized capital
gains, if any, are distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL TAXES: The Trust treats each Portfolio as a separate entity for Federal
income tax purposes. Each Portfolio intends to continue to qualify each year as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Portfolio will not be subject to
Federal income taxes to the extent that it distributes all of its taxable or
tax-exempt income. In addition, by distributing during each calendar year
substantially all of its net investment income and capital gains, each Portfolio
will not be subject to a Federal excise tax. Therefore, no Federal income tax
provision is required.
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one investment
portfolio of the Trust are allocated among the respective portfolios. In
addition, investors in Investment Shares will pay the expenses directly
attributable to the Investment Shares as a class, and investors in Institutional
Shares will pay the expenses directly attributable to the Institutional Shares
as a class.
ORGANIZATIONAL COSTS: The Kent Tax-Free Income Fund bears all costs in
connection with its organization, including the fees and expenses of registering
and qualifying its initial shares for distribution under Federal and state
securities laws. All such costs are amortized using the straight-line method
over a period of five years beginning with the Portfolio's commencement of
operations. In the event that any of the initial shares purchased by the
Portfolio's sponsor are
43
<PAGE> 45
THE KENT NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUNDS (UNAUDITED)
redeemed during such period, the Portfolio will be reimbursed by such holder for
any unamortized organization costs in the same proportion as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption.
3. INVESTMENT ADVISORY, ADMINISTRATION, DISTRIBUTION AND OTHER FEES
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a Michigan State Banking Association and the
principal subsidiary of Old Kent Financial Corporation. The Investment Adviser
is entitled to receive a fee, computed daily and paid monthly, at the annual
rate of 0.45% of the average daily net assets of each of the Limited Term
Tax-Free Fund and the Michigan Municipal Bond Fund, 0.50% of the average daily
net assets of the Intermediate Tax-Free Fund and 0.55% of the average daily net
assets of the Tax-Free Income Fund.
Effective March 31, 1995, First Data Investor Services Group, Inc. ("FDISG"),
formerly known as The Shareholder Services Group, Inc. doing business as 440
Financial, a wholly-owned subsidiary of First Data Corporation ("First Data"),
serves as the Trust's administrator and transfer agent. FDISG (the
"Administrator"), receives a fee computed daily and paid monthly, at the annual
rate of 0.20% for up to $5.0 billion, 0.18% for $5.0 to $7.5 billion and 0.15%
for over $7.5 billion of the Trust's aggregate net assets. In addition, FDISG
also receives a separate fee from each Portfolio for certain transfer agent
("shareholder services fees") and fund accounting services. Prior to March 31,
1995, the administration, fund accounting and transfer agency services described
above were provided by 440 Financial Group of Worcester, Inc., a wholly-owned
subsidiary of State Mutual Life Assurance Company of America ("State Mutual")
for the same annual fees. On March 31, 1995, FDISG acquired substantially all
the assets of 440 Financial Group of Worcester, Inc.
Each Portfolio has adopted a distribution plan (the "Plans") on behalf of the
Investment Shares pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The Plans provide for payments to 440 Financial Distributors, Inc. (the
"Distributor"), an indirect wholly-owned subsidiary of First Data, of up to
0.25% of the average daily net assets of the Investment Shares of the
Portfolios. Currently, the Limited Term Tax-Free Fund and Michigan Municipal
Bond Fund make payments at the rate of only 0.15% of the average daily net
assets of their Investment Shares pursuant to the Plans.
The Distributor acts as the exclusive distributor of the Trust's shares.
Prior to March 31, 1995, the Distributor was an indirect wholly-owned subsidiary
of State Mutual.
Certain officers of the Trust are also officers of the current Administrator
and/or the Distributor. Such officers receive no compensation from the Trust for
serving in their respective roles.
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath. A
partner of that firm serves as Secretary of the Trust.
Bankers Trust Company acts as the Trust's custodian. Prior to October 25,
1995, the Trust's custodian was The Chase Manhattan Bank, N.A., a wholly-owned
subsidiary of The Chase Manhattan Corporation.
4. CLASS LEVEL EXPENSES
Each of the Portfolios has established two classes of shares, Investment
Shares and Institutional Shares. Each share in each Portfolio, regardless of
class, represents an equal pro rata interest in a Portfolio and has identical
voting, dividend, liquidation and other rights, except in matters affecting only
a particular Portfolio or class, in which case only shares of the affected
Portfolio or class are entitled to vote. Each class may bear class specific
expenses.
44
<PAGE> 46
THE KENT NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUNDS (UNAUDITED)
Class specific expenses, if any, are currently limited to expenses directly
attributable to the Investment Shares under the Plans, shareholder services fees
and certain printing and postage expenses incurred as they relate to a
particular class of shares. Shareholder services fees were borne by each of the
Investment and Institutional Shares for each Portfolio for the six months ended
June 30, 1996 as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
------------- ----------
<S> <C> <C>
Limited Term Tax Free ........................... $7,577 $ 7
Intermediate Tax Free ........................... 8,084 106
Tax Free Income ................................. 7,456 49
Michigan Municipal Bond.......................... 7,603 92
</TABLE>
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of shares of beneficial interest without par value. It allows
for the creation of one or more classes of shares within each series, each of
which, regardless of class designation, represents an equal proportionate
interest in the Portfolios with each other share of that series. The Portfolios
may issue more than one series of shares investing in portfolios of securities.
The Trust currently issues thirteen series of shares with two separate classes
in each series, Investment Shares and Institutional Shares. Each class of shares
is entitled upon liquidation of the Portfolios to a pro rata share in the net
assets of the class of such series.
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the six months ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------- ----------- -----------
<S> <C> <C>
LimitedTerm Tax-Free ............................. $10,109,983 $18,416,212
Intermediate Tax-Free ............................ 96,143,240 89,287,018
Tax-Free Income .................................. 68,864,056 83,599,344
Michigan Municipal Bond .......................... 33,964,775 48,217,428
</TABLE>
At June 30, 1996, aggregate gross unrealized appreciation in which there was
an excess of value over tax cost, and aggregate gross unrealized depreciation in
which there was an excess of tax cost over value for all securities were as
follows:
<TABLE>
<CAPTION>
TAX BASIS
---------
UNREALIZED UNREALIZED
FUND APPRECIATION DEPRECIATION
------------ ------------
<S> <C> <C>
Limited Term Tax-Free......................... $ 335,855 $ (113,783)
Intermediate Tax-Free......................... 7,011,391 (1,387,055)
Tax-Free Income............................... 1,344,943 (707,360)
Michigan Municipal Bond....................... 1,200,157 (829,429)
</TABLE>
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
FUND (DEPRECIATION)
- ---- --------------
<S> <C>
Limited Term Tax-Free......................... $ 222,072
Intermediate Tax-Free......................... 5,624,336
Tax-Free Income............................... 637,583
Michigan Municipal Bond....................... 370,728
</TABLE>
As of December 31, 1995, the following Portfolios had capital loss carryforwards
which will expire in the year indicated:
<TABLE>
<CAPTION>
FUND 2002 2003
- ---- ---- ----
<S> <C> <C>
Intermediate Tax-Free ............................... $245,080 $1,065,189
Michigan Municipal Bond ............................. 47,669 131,222
</TABLE>
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
deferred loss for the Intermediate Tax-Free Fund of $218,969 will be treated as
arising on the first day of the fiscal year ended December 31, 1996.
7. CONCENTRATION OF CREDIT
The Michigan Municipal Bond Fund invests primarily in debt obligations issued
by the State of Michigan and its respective political subdivisions, agencies and
public authorities to obtain funds for various public purposes. The Portfolio is
more susceptible to economic and political factors adversely affecting issuers
of Michigan specific municipal bonds than funds that are not concentrated in
these issuers to the same extent.
45
<PAGE> 47
Tax Free Funds
THE KENT NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUNDS (UNAUDITED)
8. SUBSEQUENT EVENT
As approved by the Board of Trustees of the Trust on May 31, 1996,
effective August 5, 1996, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") will assume the duties as administrator and distributor
for the Trust from FDISG and 440 Financial Distributors, Inc. respectively.
Also effective August 5, 1996, BISYS Fund Services, Inc. will assume the duties
as Fund Accountant to the Trust from FDISG. BISYS Fund Services, Inc. will
assume the duties of Transfer Agent from FDISG effective October 6, 1996.>>>
46
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<PAGE> 49
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<PAGE> 50
THE BULK RATE
KENT FUNDS(R) US POSTAGE
PAID
4400 Computer Drive PERMIT No. 54201
PO Box 5108 BOSTON, MA
Westboro, MA 01581-5108
K-019 (8/96)
