<PAGE>
- -------------------------------------------
ANNUAL REPORT
- -------------------------------------------
- -------------------------------------------
DECEMBER 31, 1995 K-159-Taxable Bond Funds
- ------------------------------------------- Front Cover -
A Logo for the Funds
- ------------------------------------------- representing a Roman
YOUR FOUNDATION FOR INVESTMENT STRENGTH column appears on the
- ------------------------------------------- page.
The THE KENT SHORT TERM BOND FUND
Kent THE KENT INTERMEDIATE BOND FUND
Funds/(R)/ THE KENT INCOME FUND
<PAGE>
- ----------------------------------------
MESSAGE TO SHAREHOLDERS
- ----------------------------------------
Dear Kent Fund Shareholder:
The 1995 annual report to shareholders of The Kent Funds includes a new
feature - a "Market Overview" from Kent Fund portfolio managers that explains
how and why fixed-income markets performed as they did in 1995. It also explains
the strategy followed by the portfolio managers to increase your returns while
keeping risk low. In addition, you will continue to find information about the
performance of individual funds. Individual fund reports have been streamlined
so that they are easier to read and more convenient to use.
While we have changed the format of our annual report to keep investors
better informed, we have not altered our investment goal of providing investors
with good value and opportunities for growth with minimal risk.
This report provides a great deal of information about The Kent Funds, but
you may still have questions. Please call us at 1-800-633-KENT (1-800-633-5368).
A Kent Funds Specialist is available to assist you. We are always pleased to
answer questions from shareholders.
Sincerely,
The Kent Funds
<PAGE>
----------------------------------------
TAXABLE BOND MARKET OVERVIEW
----------------------------------------
Bond prices rebounded strongly in 1995 from the weak levels of 1994. Having
made significant investments in long-term bonds when their prices were very
attractive, the Kent taxable bond funds made the most of the rally and delivered
outstanding returns in 1995.
THE KENT TAXABLE BOND FUNDS
The sharp rise in interest rates that battered the bond market in 1994
presented value-oriented investors with an outstanding opportunity to purchase
fixed-income securities. The Kent taxable bond funds responded by aggressively
purchasing longer maturity fixed-income securities late in 1994. These purchases
were well timed, as the yield on 30-year Treasury bonds peaked at 8.19% in
November 1994. This lengthening of the average maturity served the Funds well in
1995, as the bond market rallied to post one of its best performances ever.
The Federal Reserve Board (the "Fed") set the stage for the 1995 bond
market rally in 1994 by increasing short-term interest rates in an attempt to
slow economic growth and achieve a "soft landing" for the economy. In 1995,
interest rates reversed direction and declined across the yield curve. The yield
on two-year Treasury notes fell from 7.70% at the end of 1994 to 5.15% at the
end of 1995. The yield on 10-year Treasury notes also declined dramatically,
from 7.83% at the end of 1994 to 5.57% at the end of 1995.
INVESTORS WERE HEARTENED BY THE POSSIBLE PASSAGE OF LEGISLATION TO BALANCE THE
FEDERAL BUDGET. WITH INFLATIONARY PRESSURES REMAINING LOW, INVESTORS BELIEVED
PASSAGE OF THE LEGISLATION WOULD ALLOW THE FED TO REDUCE INTEREST RATES AGAIN.
The driving force behind the sharp decline in interest rates was the belief
by investors that the economy was slowing and that inflationary pressures would
not increase. Interest rates began to decline during the first quarter of 1995
as signs emerged that the hoped-for slowdown in economic activity was taking
place. The announcement that growth in the nation's Gross Domestic Product
dropped from 5.1% in the fourth quarter of 1994 to 2.7% in the first quarter of
1995 began to convince investors that the Fed would soon have to reduce short-
term interest rates to prevent the economy from sliding into a recession.
The yield on 30-year Treasury bonds fell from its peak of 8.19% in November
1994 to 6.66% in June 1995, as the bond market continued to rally strongly. But
the Fed's July lowering of the Federal Funds rate, from 6.00% to 5.75%
temporarily halted the rally. Fearing that lower rates could fuel inflationary
growth, the bond market reacted negatively and the market sold off. By the end
of July, the yield on Treasury bonds rose to almost 7.00%. The increase in bond
yields was short lived. Interest rates began falling again in August and
continued to fall through the end of the year. The economy grew at a moderate
pace and inflation remained subdued during the second half of 1995.
Investors were heartened by the possible passage of legislation to balance
the Federal budget. With inflationary pressures remaining low, investors
believed passage of the legislation would allow the Fed to reduce interest rates
again. By the end of 1995, the yield on a 30-year Treasury bond had declined to
5.95%.
-----
1
-----
<PAGE>
- ----------------------------------------
TAXABLE BOND MARKET OVERVIEW
- ----------------------------------------
INVESTMENT STRATEGIES
The Kent taxable bond funds began 1995 with average maturities that were
much longer than the average maturities of bonds in their respective indexes.
Aggressive investing in high-quality issues with longer maturities greatly
enhanced the Funds' potential for generating capital gains.
As interest rates declined during 1995, the real interest rate available in
the bond market -- the nominal yield on a bond minus the rate of inflation --
fell from the very high levels seen at the end of 1994. As the chart below
reveals, the real yield on 30-year Treasury bonds fell to 4.0% by the end of
December 1995. While still attractive from a longer-term perspective, this real
yield is almost a full percentage point below the average real yield since 1980
and well below the 5.5% real yield that existed in late 1994. In response to the
lower yield, the average maturity of the Funds was reduced.
During 1995, we increased the weighting of U.S. Government securities in
the Kent taxable bond funds and reduced positions in corporate securities. The
yield spread -- the additional income an investor receives for purchasing a
corporate security, rather than a "risk free" government security -- contracted
to an extremely low level by the third quarter of 1995. With yield spreads at
historically narrow levels, investors were not being sufficiently compensated
for the risks inherent in owning corporate securities. If spreads widen to more
attractive levels in 1996, we will selectively increase the Funds' exposure to
corporate issues.
- --------------------------------------------------------------------------------
Real Long Term Treasury Bond Yields -- January 1, 1956 to December 29, 1995
Mountain chart representing the Real Long Term Treasury Bond
Yields from 1/1/56 through 12/31/95 appears on this page
<TABLE>
<S> <C>
1956 1.394
1.866
1957 1.873
1.288
1958 1.08
1.685
1959 1.895
2.1
1960 1.772
1.59
1961 1.922
2.455
1962 2.587
2.62
1963 2.678
2.868
1964 2.969
3.025
1965 3.001
3.154
1966 3.4
2.8
1967 3.099
3.555
1968 2.7
3.3
1969 3.277
3.413
1970 3.536
2.304
1971 1.95
1.428
1972 1.34
1.37
1973 3.02
2.87
1974 3.393
2.22
1975 1.57
0.96
1976 0.85
-0.11
1977 -0.1
0.39
1978 1.2
1.91
1979 2.29
5.6
1980 2.71
4.42
1981 5.78
7.2
1982 4.83
2.23
1983 3.36
4.89
1984 7.52
6.23
1985 6.93
5.69
1986 4.26
4.75
1987 5.67
6.96
1988 6
5.87
1989 4.75
4.57
1990 5.3
4.49
1991 4.25
3.55
1992 4.14
3.85
1993 3.37
2.86
1994 4.83
5.51
1995 4.4
3.95
</TABLE>
- --------------------------------------------------------------------------------
- -----
2 (2)
- -----
<PAGE>
----------------------------------------
PORTFOLIO REVIEWS
----------------------------------------
THE KENT SHORT TERM BOND FUND
BY ALLAN J. MEYERS,
PORTFOLIO MANAGER
The Kent Short Term Bond Fund was able to take full advantage of the
decline in interest rates during 1995. Late in 1994, the Fund lengthened the
average maturity of its portfolio from 2.2 years to nearly 2.5 years through the
purchase of four- and five-year U.S. Treasury notes at yields of 6.80% to 7.50%.
For the 12 months ended December 31, 1995, the Fund's total returns were
10.53% for Institutional Shares, and 10.30% for Investment Shares before the
deduction of sales charges. For the same period, the total return for the Lehman
Brothers One- to Three-Year Government Bond Index was 10.86%, the 91-Day
Treasury Bill was 5.60% and the Consumer Price Index was 2.50%.
As interest rates declined, the Fund's average maturity was allowed to
decrease, falling to 1.9 years by June 30, 1995. In early July, the Federal
Reserve Board reduced the Federal Funds rate from 6.00% to 5.75%. Instead of
following the lead of the Federal Funds rate, interest rates increased because
of fear that inflation was reviving. Rates on two-year Treasury notes, which
were as low as 5.61% in June, increased to over 6.00% in early August. During
this period of weakness, the Fund's average maturity was increased to a range of
2.1 to 2.3 years for the balance of 1995. During the bond market weakness in
July, the Fund also purchased corporate bonds. While the additional income
available from corporate bonds relative to comparable maturity U.S. Treasury
securities had been at historically
- --------------------------------------------------------------------------------
THE KENT SHORT TERM BOND FUND
DISTRIBUTION OF NET ASSETS
AS OF DECEMBER 31, 1995
- -----------------------
Pie chart representing the investments owned by the Short Term Bond
Fund as of 12/31/95 appears on this page
Corporate Notes and Bonds 32.50%
Cash Equivalents & Net Other Assets & Liabilities 2.07%
US Government & Agency Obligations 65.43%
- --------------------------------------------------------------------------------
low levels, the temporary increase in yields experienced in July presented an
opportunity to enhance income. The corporate issues purchased all mature in 1997
and 1998. They include Household Finance Corp., ATT Capital Corp., Sears
Roebuck & Co., Bank-America Corp., American General Finance Corp. and New
England Education Loan Marketing Corporation. Overall, portfolio quality
continued to have an average AAA rating, with two-thirds of the portfolio
invested in U.S. government securities and one-third in corporate bonds.
OUTLOOK
With an average maturity of 2.3 years, which is slightly longer than the
average maturity of the benchmark index, the Fund is well positioned for 1996.
We believe that the prospects are good for further easing of interest rates
during the next six months. Any unexpected rise in interest rates would be used
as an opportunity for a modest increase in the average maturity of the Fund.
- --------------------------------------------------------------------------------
THE KENT SHORT TERM BOND FUND
SEC 30-DAY YIELDS AS OF DECEMBER 31, 1995
- -----------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS INSTITUTIONAL CLASS
-------------------------------------------------------------------
<S> <C>
4.53% 4.88%
</TABLE>
- --------------------------------------------------------------------------------
-----
3 (1)
-----
<PAGE>
- ----------------------------------------
PORTFOLIO REVIEWS
- ----------------------------------------
- --------------------------------------------------------------------------------
THE KENT SHORT TERM BOND FUND
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1995
- ----------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 12/4/92) (inception: 11/2/92)
-----------------------------------------------------------------------
<S> <C> <C>
One Year 5.85% 10.53%
Three Years 3.35% 4.79%
Life of Fund 3.31% 4.83%
</TABLE>
* Reflects 4.00% sales charge.
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS 1 - 3 YEAR GOVERNMENT BOND INDEX, CONSUMER PRICE INDEX,
- --------------------------------------------------------------------------------
AND 91-DAY TREASURY BILL
- ------------------------
Page 4
A mountain chart comparing the growth of $10,000 invested in
institutional and investment shares of the Short Term Bond Fund and
the Lehman Brothers 1-3 Year Government Bond Index, the Consumer
Price Index and the 91-Day Treasury Bill Municipal Bond Index appears
here:
<TABLE>
<CAPTION>
Institutional Shares
Start End
<S> <C> <C>
Fund $10,000 $11,608
Lehman Brothers 1-3
Year Government
Bond Index 10,000 11,866
Consumer Price Index 10,000 10,823
91 Day US Treasury Bill 10,000 11,355
Investment Shares
Start End
Fund $9,600 $11,054
Lehman Brothers 1-3
Year Government
Bond Index 10,000 11,627
Consumer Price Index 10,000 10,816
91 Day US Treasury Bill 10,000 11,328
</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
[GRAPH APPEARS HERE] 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 Fund has begun using the Lehman Brothers One- to
Three-Year Government Bond Index as its performance
benchmark index because the composition and maturity
range of the index is more closely aligned with the
Fund.The Lehman Brothers 1- to 3-Year Government
Bond Index is an unmanaged index of U.S. Treasury
issues and publicly issued debt of U.S. Government
agencies with maturities of one to three years. The
91-day Treasury Bill return tracks the investment
returns paid on U.S. Treasury bills maturing in 91-
days. The Consumer Price Index is an unmanaged index
measuring price increases in a standardized "market
basket" of consumer products. Total Returns reflect
reinvestment of all dividends and capital gains
distributions.
- --------------------------------------------------------------------------------
- -----
4 (1)
- -----
<PAGE>
----------------------------------------
PORTFOLIO REVIEWS
----------------------------------------
THE KENT INTERMEDIATE BOND FUND
BY MITCHELL L. STAPLEY,
PORTFOLIO MANAGER
The Kent Intermediate Bond Fund was very well positioned for the dramatic
decline in interest rates that took place in 1995. Late in 1994, when rising
interest rates pushed the yield on 30-year Treasury bonds up to 8.19%, the
Fund's average maturity was extended to 6.8 years. That was 66% longer than the
4.1-year average maturity of the Fund's benchmark index -- the Lehman Brothers
Government/Corporate Intermediate Bond Index. Benefitting from the sharp decline
in interest rates that took place in 1995, the Fund delivered outstanding
returns for the year.
For the 12 months ended December 31, 1995, the Fund's total returns were
16.18% for Institutional Shares, and 15.76% for Investment Shares before the
deduction of sales charges. For the same period the total return for the Lehman
Brothers Government/Corporate Intermediate Bond Index was 15.30%
The structure of the Fund played an important role in the Fund's
outstanding performance. The Fund started the year with a "barbell" structure,
where the Fund had large holdings of both short-term securities and securities
with maturities of 10 years and longer. Through the first half of the year, as
interest rates declined sharply, longer maturity securities were sold and
intermediate maturity securities were purchased, locking in the sharp capital
appreciation realized by the longer-term securities. The Fund's new
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE BOND FUND
DISTRIBUTION OF NET ASSETS
AS OF DECEMBER 31, 1995
- -----------------------
Page 5
Pie chart representing the investments owned by the Intermediate
Bond Fund as of 12/31/95 appears on this page
Corporate Notes and Bonds 14.38%
Cash Equivalents & Net Other Assets & Liabilities 6.74%
U.S. Government & Agency Obligations 78.88%
- --------------------------------------------------------------------------------
"laddered" structure helped the Fund benefit from the sharp decline in shorter-
term interest rates that took place in 1995.
The Fund was very selective in its purchase of corporate debt securities
during 1995. The corporate bond market was very "rich" from a historical
perspective. The Fund took advantage of the corporate bond market's strength by
reducing the Fund's holdings of lower-rated (BAA/BBB) securities.
The average maturity of the Kent Intermediate Bond Fund at the end of 1995
was 4.7 years--slightly longer than the 4.2 year average maturity of the Fund's
benchmark index at year end.
By the end of 1995, the average rating of bonds in the portfolio was AAA.
The high quality of the Fund's holdings will help its performance when the yield
spread on corporate bonds once again widens. If corporate bond spreads widen
significantly in 1996, the Fund will consider purchasing selected investment-
grade corporate notes to enhance the yield of the Fund.
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE BOND FUND
SEC 30-DAY YIELDS AS OF DECEMBER 31, 1995
- -----------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS INSTITUTIONAL CLASS
------------------------------------------------------------------
<S> <C>
4.52% 4.96%
</TABLE>
- --------------------------------------------------------------------------------
-----
5 (1)
-----
<PAGE>
- ----------------------------------------
PORTFOLIO REVIEWS
- ----------------------------------------
The sharp decline in interest rates that took place in 1995 greatly reduced
the very attractive valuations that were available in fixed-income markets at
the end of 1994.
Outlook
If interest rates rise during 1996, assuming inflation remains subdued,
then the Fund will again lengthen its average maturity to take advantage of the
higher interest rates.
- --------------------------------------------------------------------------------
THE KENT INTERMEDIATE BOND FUND
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1995
- ----------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 11/25/92) (inception: 11/2/92)
- -------------------------------------------------------------------------
<S> <C> <C>
One Year 11.11% 16.18%
Three Years 5.32% 6.69%
Life of Fund 5.11% 6.76%
</TABLE>
* Reflects 4.00% sales charge.
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS GOVERNMENT/CORPORATE INTERMEDIATE BOND INDEX
- ---------------------------------------------------------------------
Page 6
A mountain chart comparing the growth of $10,000 invested in
institutional and investment shares of the Intermediate Bond Fund
and the Lehman Brothers Government/Corporate Bond Index appears
here:
<TABLE>
<CAPTION>
Institutional Shares
Start End
<S> <C> <C>
Fund $10,000 $12,299
Lehman Brothers
Government/Corporate
Bond Index 10,000 12,511
Investment Shares
Fund $9,600 $11,720
Lehman Brothers
Government/Corporate
Bond Index 10,000 12,501
</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 Government/Corporate Intermediate
Bond Index is an unmanaged index comprised of U.S.
Treasury issues and publicly issued debt of U.S.
Government agencies and all publicly issued, fixed
rate, nonconvertible investment grade dollar
denominated, SEC-registered corporate debt. Total
Returns reflect reinvestment of all dividends and
capital gains distributions.
- --------------------------------------------------------------------------------
- -----
6 (2)
- -----
<PAGE>
----------------------------------------
PORTFOLIO REVIEW
----------------------------------------
THE KENT INCOME FUND
BY MITCHELL L. STAPLEY,
PORTFOLIO MANAGER
Launched late in March 1995, The Kent Income Fund generated impressive
returns for investors by the end of the year. The Fund's asset size, which was
just over $100 million at inception, grew to more than $128 million by year end.
Since inception, the Fund's total returns were 15.05% for Institutional
Shares, and 14.63% for Investment Shares before the deduction of sales charges.
From March 31, through December 31, 1995, the total return for the Lehman
Brothers Government/Corporate Bond Index was 13.6% and the Lehman Brothers Long
Government/Corporate Bond Index was 21.9%. Because Lehman bond indexes only
measure returns at month end periods, an exact correlation with the inception
date of the Fund cannot be provided.
With an average maturity of 9.8 years, the Fund has the longest average
maturity of any of the Kent taxable bond funds, allowing investors to enjoy both
a high level of current income and the potential for capital appreciation. Over
time, the Fund's return should fall between that of its two benchmark indexes.
The corporate bond market was very "rich" from a historical perspective
through most of 1995, so the Fund was selective in its corporate purchases,
concentrating on high-quality financial institutions with strong consumer and
corporate franchises, such as Bank of Montreal, BankAmerica Corp., and Swiss
Bank Corp.
The Fund maintained a very high-
- --------------------------------------------------------------------------------
THE KENT INCOME FUND
DISTRIBUTION OF NET ASSETS
AS OF DECEMBER 31, 1995
- -----------------------
Page 7
Pie chart representing the investments owned by the Income Fund as
of 12/31/95 appears on this page
Corporate Notes and Bonds 38.37%
Cash Equivalents & Net Other Assets & Liabilities 4.23%
U.S. Government & Agency Obligations 54.90%
Other Bonds 2.50%
- --------------------------------------------------------------------------------
quality portfolio during 1995, ending the year with a dollar-weighted average
quality rating of AA1. The emphasis on quality was rewarded during the fourth
quarter of 1995 as slow Christmas sales caused some lower-rated (BAA/BBB)
corporate credits to underperform other sectors of the corporate debt market.
The Fund also purchased U.S. Treasury and U.S. Government agency debt in
response to the richness of the corporate debt market.
OUTLOOK
We would consider a significant widening of the spread between the yields
on corporate bonds and U.S. Government obligations as an opportunity to increase
our exposure to the corporate bond market. An increase in interest rates, as
long as inflation remains subdued, would create a potential opportunity to
lengthen the average maturity of the Fund. With a maturity range of 7 to 20
years, a decline in interest rates would allow the Fund to increase its average
maturity and increase its yield.
- --------------------------------------------------------------------------------
THE KENT INCOME FUND
SEC 30-DAY YIELDS AS OF DECEMBER 31, 1995
- -----------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS INSTITUTIONAL CLASS
--------------------------------------------------------------------
<S> <C>
4.93% 5.40%
</TABLE>
- --------------------------------------------------------------------------------
-----
7 (1)
-----
<PAGE>
- ----------------------------------------
PORTFOLIO REVIEWS
- ----------------------------------------
- --------------------------------------------------------------------------------
THE KENT INCOME FUND
TOTAL RETURNS AS OF DECEMBER 31, 1995
- -------------------------------------
<TABLE>
<CAPTION>
INVESTMENT CLASS* INSTITUTIONAL CLASS
(inception: 3/22/95) (inception: 3/20/95)
-----------------------------------------------------------------------
<S> <C> <C>
Life of Fund 10.01% 15.05%
</TABLE>
* Reflects 4.00% sales charge.
GROWTH OF $10,000 INVESTMENT COMPARISON
WITH THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
AND THE LEHMAN BROTHERS LONG GOVERNMENT/CORPORATE BOND INDEX
- ------------------------------------------------------------
Page 8
A mountain chart comparing the growth of $10,000 invested in
institutional and investment shares of the Income Fund and the
Lehman Brothers Government/Corporate Bond Index and the
Lehman Brothers Long Government/Corporate Bond Index appears
here:
<TABLE>
<CAPTION>
Institutional Shares
Start End
<S> <C> <C>
Fund $10,000 $11,505
Lehman Brothers
Government/Corporate
Bond Index 10,000 11,360
Lehman Brothers
Government/Corporate
Bond Index 10,000 12,190
Investment Shares
Fund $9,600 $11,005
Lehman Brothers
Government/Corporate
Bond Index 10,000 11,360
Lehman Brothers
Government/Corporate
Bond Index 10,000 12,190
</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 Government/Corporate Bond Index
and The Lehman Brothers Long Government/Corporate
Bond Index are unmanaged indexes comprised of U.S.
Treasury issues, debt of U.S. government agencies,
corporate debt guaranteed by the U.S. government and
all publicly issued, fixed rate, nonconvertible
investment grade dollar denominated, SEC-registered
corporate debt. Total Returns reflect the
reinvestment of dividends and capital gains
distributions.
- --------------------------------------------------------------------------------
- -----
8 (1)
- -----
<PAGE>
- ------------
SHORT TERM BOND FUND
The Kent PORTFOLIO OF INVESTMENTS
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 65.43%
U.S. TREASURY NOTES - 62.28%
$ 5,000,000 5.13%, 03/31/96........................................................ $ 4,998,450
5,000,000 7.00%, 09/30/96........................................................ 5,061,700
15,000,000 6.63%, 03/31/97........................................................ 15,248,400
15,000,000 6.13%, 05/31/97........................................................ 15,182,850
10,000,000 5.63%, 06/30/97........................................................ 10,062,500
10,000,000 5.50%, 09/30/97........................................................ 10,051,600
26,000,000 7.38%, 11/15/97........................................................ 26,983,060
17,000,000 7.13%, 10/15/98........................................................ 17,818,040
25,000,000 8.88%, 11/15/98........................................................ 27,371,000
15,000,000 6.50%, 04/30/99........................................................ 15,548,400
43,000,000 7.50%, 10/31/99........................................................ 46,164,370
------------
194,490,370
------------
FEDERAL HOME LOAN MORTGAGE CORP. - 3.15%
5,000,000 5.04%, 05/17/96 (A).................................................... 4,950,000
5,000,000 4.65%, 03/11/98 (A).................................................... 4,897,600
------------
9,847,600
------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS................................................. 204,337,970
(Cost $ 201,283,031) ------------
CORPORATE NOTES AND BONDS - 32.50%
FINANCE - 22.02%
5,000,000 American General Finance
Corp., Senior Note
7.38%, 11/15/96........................................................ 5,071,400
5,329,000 Associates Corp. N.A., Senior Note
5.25%, 03/30/00........................................................ 5,232,225
6,975,000 BankAmerica Corp., Senior Note
7.50%, 03/15/97........................................................ 7,131,868
5,000,000 Chase Manhattan Corp.
7.50%, 12/01/97........................................................ 5,169,650
5,000,000 Ford Motor Credit Co.
7.13%, 12/01/97........................................................ 5,127,100
5,000,000 General Motors Acceptance
Corp., MTN
6.75%, 04/29/97........................................................ 5,075,200
5,000,000 General Motors Acceptance
Corp., MTN
8.25%, 01/23/98........................................................ 5,254,900
5,000,000 Goldman Sachs Group, LP (B)
6.10%, 04/15/98........................................................ 5,007,600
$ 5,000,000 Household Finance Corp., MTN,
Senior Note
6.85%, 07/21/97........................................................ $ 5,098,100
5,000,000 National Bank of Detroit, MTN
6.45%, 07/10/97........................................................ 5,078,900
5,000,000 New England Education Loan
Marketing Corp., MTN
6.13%, 07/17/98........................................................ 5,049,350
5,000,000 Norwest Corp., MTN
7.13%, 09/09/99........................................................ 5,224,050
5,000,000 Salomon Brothers, MTN, Senior Note
8.71%, 02/17/98........................................................ 5,239,250
------------
68,759,593
------------
MANUFACTURING - 3.34%
5,000,000 American Home Products Corp.
7.70%, 02/15/00........................................................ 5,349,950
5,000,000 Amgen, Inc., MTN
7.36%, 03/04/97........................................................ 5,090,350
------------
10,440,300
------------
TELEPHONE & TELECOMMUNICATIONS - 1.96%
6,000,000 American Telephone &
Telecommunications Capital Corp., MTN
7.39%, 04/15/97........................................................ 6,138,720
------------
INDUSTRIAL - 1.88%
5,500,000 Sears Roebuck & Co.
8.45%, 11/01/98........................................................ 5,871,855
------------
TRANSPORTATION - 1.67%
5,000,000 Ryder System Inc., MTN
7.88%, 11/24/97........................................................ 5,204,800
------------
COMPUTER HARDWARE - 1.63%
5,000,000 International Business Machines Corp.
6.38%, 11/01/97........................................................ 5,079,150
------------
TOTAL CORPORATE NOTES AND BONDS........................................ 101,494,418
(Cost $ 100,368,807) ------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- ------------
SHORT TERM BOND FUND
The Kent PORTFOLIO OF INVESTMENTS (CONTINUED)
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
COMMERCIAL PAPER - 0.79%
$ 2,468,531 General Motors Acceptance Corp.
6.05%, 01/02/96........................................................ $ 2,468,531
------------
TOTAL COMMERCIAL PAPER................................................................. 2,468,531
(Cost $ 2,468,531) ------------
TOTAL INVESTMENTS - 98.72%............................................................. 308,300,919
(Cost $ 304,120,369) ** ------------
NET OTHER ASSETS AND LIABILITIES - 1.28%............................................... 4,012,975
------------
NET ASSETS - 100.00%................................................................... $312,313,894
============
</TABLE>
- ----------------------------------------
** Aggregate cost for Federal tax purposes is $304,120,369.
(A) Variable rate - the interest rate shown reflects the rate in effect at
December 31, 1995.
(B) Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold, in transactions exempt from
registration, to qualified institutional buyers. At December 31, 1995, these
securities amounted to $ 5,007,600, or 1.60% of net assets.
MTN Medium Term Note
See Notes to Financial Statements.
10
<PAGE>
- ------------
INTERMEDIATE BOND FUND
The Kent PORTFOLIO OF INVESTMENTS
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 78.88%
U.S. TREASURY NOTES - 61.87%
$ 5,000,000 7.38%, 05/15/96........................................................ $ 5,038,300
17,300,000 8.50%, 04/15/97........................................................ 17,994,768
50,000,000 6.13%, 05/31/97........................................................ 50,609,500
50,000,000 8.75%, 10/15/97........................................................ 52,992,000
29,700,000 8.13%, 02/15/98........................................................ 31,407,750
33,050,000 7.88%, 04/15/98........................................................ 34,898,817
30,000,000 9.00%, 05/15/98........................................................ 32,484,300
20,000,000 8.88%, 11/15/98........................................................ 21,896,800
48,210,000 9.13%, 05/15/99........................................................ 53,799,467
32,290,000 6.75%, 05/31/99........................................................ 33,727,874
38,000,000 7.50%, 10/31/99........................................................ 40,796,420
5,000,000 7.75%, 11/30/99........................................................ 5,417,950
55,250,000 7.75%, 01/31/00........................................................ 60,015,313
10,000,000 6.88%, 03/31/00........................................................ 10,564,100
28,000,000 8.00%, 05/15/01........................................................ 31,342,360
15,000,000 7.50%, 11/15/01........................................................ 16,521,150
29,000,000 7.88%, 11/15/04........................................................ 33,567,500
------------
533,074,369
------------
U.S. TREASURY BONDS - 13.42%
30,000,000 10.75%, 05/15/03....................................................... 39,342,300
29,000,000 11.88%, 11/15/03....................................................... 40,513,869
23,200,000 12.00%, 08/15/13....................................................... 35,746,096
------------
115,602,265
------------
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
FEDERAL HOME LOAN MORTGAGE CORP. - 2.53%
$ 5,000,000 5.04%, 05/17/96 (A).................................................... $ 4,950,000
5,000,000 4.65%, 03/11/98 (A).................................................... 4,897,600
10,410,000 8.12%, 01/31/05........................................................ 11,973,166
------------
21,820,766
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.06%
9,100,000 6.15%, 07/25/16, REMIC................................................. 9,102,821
------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS................................................. 679,600,221
(Cost $ 670,697,327) ------------
CORPORATE NOTES AND BONDS - 14.38%
FINANCE - 12.99%
6,000,000 Bank of Montreal,
Subordinated Note
7.80%, 04/01/07........................................................ 6,678,180
6,800,000 Chase Manhattan Corp.,
Subordinated Note
9.75%, 11/01/01........................................................ 7,965,452
5,000,000 CIT Group Holdings, Inc.
6.75%, 04/30/98........................................................ 5,127,950
10,000,000 Dean Witter Discover & Co., MTN
6.14%, 02/16/96 (A).................................................... 10,000,000
10,000,000 Ford Capital, Guaranteed Notes
9.88%, 05/15/02........................................................ 11,950,200
8,400,000 Ford Motor Credit Co., MTN
9.03%, 12/30/09........................................................ 9,988,440
5,000,000 General Electric Capital Corp.
8.65%, 05/01/18 (A).................................................... 5,046,550
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- ------------
INTERMEDIATE BOND FUND
The Kent PORTFOLIO OF INVESTMENTS (CONTINUED)
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
FINANCE (CONTINUED)
$ 5,000,000 Great Western Financial Corp.
6.38%, 07/01/00........................................................ $ 5,072,150
3,000,000 Household Finance Corp.,
Senior Note
7.13%, 04/30/99........................................................ 3,116,940
8,000,000 Midland Bank Plc,
Subordinated Note
8.63%, 12/15/04........................................................ 9,210,800
5,000,000 NCNB Corp., Subordinated Note
9.38%, 09/15/09........................................................ 6,187,500
10,000,000 New England Education Loan
Marketing Corp., MTN
6.13%, 07/17/98........................................................ 10,098,700
5,000,000 Salomon, Inc., GTN
6.39%, 02/15/99 (A).................................................... 4,887,500
8,000,000 Smith Barney Holdings, Inc.
6.50%, 10/15/02........................................................ 8,139,120
7,000,000 Societe Generale, Subordinated Note
9.88%, 07/15/03........................................................ 8,480,010
------------
111,949,492
------------
TELEPHONE AND TELECOMMUNICATIONS - 1.39%
$ 6,000,000 Bell Canada
7.75%, 04/01/06........................................................ $ 6,636,780
5,000,000 GTE Corp.
8.85%, 03/01/98........................................................ 5,330,750
------------
11,967,530
------------
TOTAL CORPORATE NOTES AND BONDS........................................ 123,917,022
(Cost $ 117,292,084) ------------
REPURCHASE AGREEMENT - 4.64%
40,000,000 Donaldson, Lufkin & Jenrette
5.80%, Due 01/02/96, Dated 12/29/95
Maturity Value $ 40,025,778
(Collaterized by U.S. Treasury Note 7.88%,
Due 2001; Total Par Value $ 35,606,000;
Market Value $ 39,750,761)............................................. 40,000,000
------------
TOTAL REPURCHASE AGREEMENT............................................. 40,000,000
(Cost $ 40,000,000) ------------
COMMERCIAL PAPER - 0.78%
6,743,950 General Motors Acceptance Corp.
6.05%, 01/02/96........................................................ 6,743,950
------------
TOTAL COMMERCIAL PAPER................................................. 6,743,950
(Cost $ 6,743,950) ------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- ------------
INTERMEDIATE BOND FUND
The Kent PORTFOLIO OF INVESTMENTS (CONTINUED)
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<S> <C>
TOTAL INVESTMENTS - 98.68%............................................................. $850,261,193
------------
(Cost $ 834,733,361) **
NET OTHER ASSETS AND LIABILITIES - 1.32%............................................... 11,401,158
------------
NET ASSETS - 100.00%................................................................... $861,662,351
============
</TABLE>
- ----------------------------------------
** Aggregate cost for Federal tax purposes is $834,733,689.
(A) Variable rate - the interest rate shown reflects the rate in effect at
December 31, 1995.
REMIC Real Estate Mortgage Investment Conduit
MTN Medium Term Note
GTN General Term Note
See Notes to Financial Statements.
13
<PAGE>
- ------------
INCOME FUND
The Kent PORTFOLIO OF INVESTMENTS
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 54.90%
U.S. TREASURY BONDS - 48.83%
$ 19,300,000 11.63%, 11/15/02....................................................... $ 25,970,466
26,600,000 10.75%, 08/15/05....................................................... 36,546,006
------------
62,516,472
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.30%
5,000,000 7.40%, 07/01/04........................................................ 5,497,650
------------
U.S. TREASURY NOTE - 1.77%
2,000,000 7.50%, 02/15/05........................................................ 2,266,880
------------
TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS................................................. 70,281,002
(Cost $ 65,264,835) ------------
CORPORATE NOTES AND BONDS - 38.37%
FINANCE - 31.51%
2,700,000 Bank of Montreal
7.80%, 04/01/07........................................................ 3,005,181
2,000,000 Bank of New York
8.50%, 12/15/04........................................................ 2,300,600
2,000,000 BankAmerica Corp.
7.20%, 04/15/06........................................................ 2,130,620
2,000,000 Chemical Bank Corp.
7.13%, 03/01/05........................................................ 2,115,480
2,000,000 Donaldson, Lufkin & Jenrette, Inc.
6.88%, 11/01/05........................................................ 2,050,020
2,000,000 Fleet Financial Group, Inc.
8.63%, 01/15/07........................................................ 2,337,020
2,000,000 Ford Motor Credit Co., MTN
9.03%, 12/30/09........................................................ 2,378,200
2,000,000 Geico Corp.
7.50%, 04/15/05........................................................ 2,195,260
2,000,000 General Motors Acceptance Corp.
9.13%, 07/15/01........................................................ 2,280,160
2,000,000 Midland Bank Plc
8.63%, 12/15/04........................................................ 2,302,700
3,000,000 NCNB Corp.
10.20%, 07/15/15....................................................... 4,014,390
2,250,000 PNC Bank N.A.
7.88%, 04/15/05........................................................ 2,481,795
$ 2,000,000 Provident Bank
6.38%, 01/15/04........................................................ $ 1,975,360
4,000,000 St. Paul Cos., MTN
7.25%, 08/09/07........................................................ 4,364,960
2,000,000 Swiss Bank Corp.
7.38%, 07/15/15........................................................ 2,162,300
2,000,000 Travelers Group, Inc.
7.88%, 05/15/25........................................................ 2,238,900
------------
40,332,946
------------
MANUFACTURING - 3.24%
2,000,000 Praxair, Inc.
6.85%, 06/15/05........................................................ 2,083,920
2,000,000 Sysco Corp., Senior Note
6.50%, 06/15/05........................................................ 2,066,220
------------
4,150,140
------------
OIL AND GAS - 2.06%
2,500,000 Enserch Corp.
7.13%, 06/15/05........................................................ 2,635,150
------------
UTILITIES - 1.56%
2,000,000 Pacific Gas & Electric Co.
6.25%, 03/01/04........................................................ 2,003,240
------------
TOTAL CORPORATE NOTES AND BONDS........................................ 49,121,476
(Cost $ 45,111,425) ------------
MUNICIPAL SECURITY - 1.62%
CALIFORNIA - 1.62%
2,000,000 San Bernardino County
Authority Pension Obligation
Revenue
6.99%, 08/01/10........................................................ 2,067,500
------------
TOTAL MUNICIPAL SECURITY............................................... 2,067,500
(Cost $ 2,030,920) ------------
FOREIGN NOTE - 0.88%
1,000,000 Hydro-Quebec , MTN
9.41%, 03/23/00........................................................ 1,132,240
------------
TOTAL FOREIGN NOTE..................................................... 1,132,240
(Cost $ 1,059,483) ------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
- ------------
INCOME FUND
The Kent PORTFOLIO OF INVESTMENTS (continued)
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
- ------------ ------------
<C> <S> <C>
COMMERCIAL PAPER - 2.22%
$ 2,841,316 General Motors Acceptance Corp.
6.05%, 01/02/96........................................................ $ 2,841,316
------------
TOTAL COMMERCIAL PAPER................................................. 2,841,316
(Cost $ 2,841,316) ------------
TOTAL INVESTMENTS - 97.99%............................................................. 125,443,534
(Cost $ 116,307,979)** ------------
NET OTHER ASSETS AND LIABILITIES - 2.01%............................................... 2,573,874
------------
NET ASSETS - 100.00%................................................................... $128,017,408
============
</TABLE>
- ----------------------------------------
** Aggregate cost for Federal tax purposes is $116,307,979.
MTN Medium Term Note
See Notes to Financial Statements.
15
<PAGE>
- ------------
The Kent STATEMENTS OF ASSETS AND LIABILITIES
Funds DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
SHORT TERM
BOND INTERMEDIATE
FUND BOND FUND INCOME FUND
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost....................................... $ 304,120,369 $ 794,733,361 $ 116,307,979
Repurchase Agreements..................................... -- 40,000,000 --
Net unrealized appreciation (depreciation)................ 4,180,550 15,527,832 9,135,555
------------- ------------- -------------
Total investments at value.............................. 308,300,919 850,261,193 125,443,534
Cash........................................................ 281,250 820,800 90,301
Receivable for Trust shares sold............................ 20,043 253,322 196,704
Interest and dividend receivables........................... 4,113,581 11,922,376 2,369,748
Deferred organizational expenses (Note 2)................... -- -- 7,879
------------- ------------- -------------
Total Assets............................................ 312,715,793 863,257,691 128,108,166
------------- ------------- -------------
LIABILITIES:
Payable for Trust shares repurchased........................ 242,716 1,455,044 --
Advisory fee payable (Note 3)............................... 17,171 52,347 8,369
Payable to adminstrator and transfer agent (Note 3)......... 11,535 25,859 5,054
Accrued expenses and other payables......................... 130,477 62,090 77,335
------------- ------------- -------------
Total Liabilities....................................... 401,899 1,595,340 90,758
------------- ------------- -------------
NET ASSETS.................................................... $ 312,313,894 $ 861,662,351 $ 128,017,408
============= ============= =============
NET ASSETS CONSIST OF:
Paid-in-capital............................................. $ 312,200,061 $ 842,661,349 $ 116,754,837
Undistributed (overdistributed) net
investment income......................................... 191,514 1,014,509 100,052
Accumulated net realized gain (loss) on
investments sold.......................................... (4,258,231) 2,458,661 2,026,964
Net unrealized appreciation (depreciation)
of investments............................................ 4,180,550 15,527,832 9,135,555
------------- ------------- -------------
TOTAL NET ASSETS.............................................. $ 312,313,894 $ 861,662,351 $ 128,017,408
============= ============= =============
INSTITUTIONAL SHARES:
Net Assets.................................................. $ 310,680,337 $ 854,800,503 $ 126,056,385
Shares Outstanding.......................................... 31,192,271 84,468,388 11,626,340
Net Asset Value, offering and redemption
price per share........................................... $ 9.96 $ 10.12 $ 10.84
============= ============= =============
INVESTMENT SHARES:
Net Assets.................................................. $ 1,633,557 $ 6,861,848 $ 1,961,023
Shares Outstanding.......................................... 164,130 676,709 181,277
Net Asset Value and redemption
price per share........................................... $ 9.95 $ 10.14 $ 10.82
============= ============= =============
Maximum offering price per share -
Investment Class (NAV/0.96)............................... $ 10.36 $ 10.56 $ 11.27
============= ============= =============
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- ------------
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE PERIOD ENDED DECEMBER 31, 1995
- ------------
<TABLE>
<CAPTION>
SHORT TERM
BOND INTERMEDIATE INCOME
FUND BOND FUND FUND/(1)/
------------- ------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 2):
Interest.................................................... $ 17,585,707 $ 60,516,832 $ 7,590,800
Dividends................................................... 935,465 2,436,831 371,177
------------- ------------- -------------
Total Investment Income................................. 18,521,172 62,953,663 7,961,977
------------- ------------- -------------
EXPENSES:
Investment advisory fee (Note 3)............................ 1,454,445 4,765,284 632,086
Administration fee (Note 3)................................. 581,778 1,732,831 210,695
Custodian fee (Note 3)..................................... 9,413 22,866 6,037
Fund accounting fee (Note 3)................................ 4,625 8,907 2,675
Legal fee (Note 3).......................................... 19,471 34,163 4,809
Audit fee................................................... 18,991 6,480 6,098
Shareholder services (Notes 3 & 4).......................... 21,519 28,192 12,189
Trustees' fees and expenses (Note 3)........................ 3,194 3,194 1,007
Distribution fee (Note 3)................................... 2,392 16,281 2,460
Amortization of organization costs (Note 2)................. -- -- 1,441
Printing expense (Note 4)................................... 9,647 14,486 812
Registration fees........................................... 88,179 2,883 78,438
Miscellaneous............................................... 24,279 33,395 4,402
------------- ------------- -------------
Total Expenses.......................................... 2,237,933 6,668,962 963,149
------------- ------------- -------------
NET INVESTMENT INCOME......................................... 16,283,239 56,284,701 6,998,828
------------- ------------- -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments..................... (169,677) 26,073,254 3,044,746
Net change in unrealized appreciation
(depreciation) of investments............................. 9,890,799 51,247,235 9,135,555
------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS.................................... 9,721,122 77,320,489 12,180,301
------------- ------------- -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS.................................................... $ 26,004,361 $ 133,605,190 $ 19,179,129
============= ============= =============
</TABLE>
- ----------------------------------------
(1) The Fund commenced operations on March 20, 1995.
See Notes to Financial Statements.
17
<PAGE>
- ------------
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
- ------------
<TABLE>
<CAPTION>
SHORT TERM BOND FUND
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD.......................... $ 178,414,322 $ 257,319,655
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income.................................... 16,283,239 9,627,902
Net realized gain (loss) on investments sold............. (169,677) (3,373,304)
Net change in unrealized appreciation
(depreciation) of investments.......................... 9,890,799 (4,342,883)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations........................................ 26,004,361 1,911,715
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 2 & 5):
Net investment income.................................... (16,091,725) (9,741,898)
In excess of net investment income....................... -- (83,228)
Net realized gain on investments......................... -- --
-------------- --------------
Total Distributions.................................... (16,091,725) (9,825,126)
-------------- --------------
SHARE TRANSACTIONS (NOTE 5):
INSTITUTIONAL SHARES:
Shares issued............................................ 322,116,358 154,692,467
Reinvestment of distributions............................ 10,643,869 7,490,401
Shares redeemed.......................................... (208,678,578) (233,458,918)
-------------- --------------
Net Institutional Share transactions................... 124,081,649 (71,276,050)
-------------- --------------
INVESTMENT SHARES:
Shares issued............................................ 1,044,671 1,164,392
Reinvestment of distributions............................ 76,971 72,360
Shares redeemed.......................................... (1,216,355) (952,624)
-------------- --------------
Net Investment Share transactions...................... (94,713) 284,128
-------------- --------------
Net increase (decrease) from share transactions.......... 123,986,936 (70,991,922)
-------------- --------------
Net increase (decrease) in net assets.................... 133,899,572 (78,905,333)
-------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)............. $ 312,313,894 $ 178,414,322
============== ==============
(A) Accumulated undistributed (overdistributed)
net investment income.................................. $ 191,514 $ (83,228)
============== ==============
</TABLE>
- ----------------------------------------
(1) The Fund commenced operations on March 20, 1995.
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND INCOME FUND
YEAR ENDED DECEMBER 31, PERIOD ENDED
-------------------------------------- ----------------------
1995 1994 DECEMBER 31, 1995/(1)/
-------------- -------------- ----------------------
<S> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD.......................... $ 987,061,853 $ 439,230,037 $ --
-------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income.................................... 56,284,701 42,420,422 6,998,828
Net realized gain (loss) on investments sold............. 26,073,254 (23,556,792) 3,044,746
Net change in unrealized appreciation
(depreciation) of investments.......................... 51,247,235 (36,003,303) 9,135,555
-------------- -------------- --------------
Net increase (decrease) in net assets resulting
from operations........................................ 133,605,190 (17,139,673) 19,179,129
-------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 2 & 5):
Net investment income.................................... (55,270,192) (41,903,538) (6,898,776)
In excess of net investment income....................... -- (649,785) --
Net realized gain on investments......................... -- (732,540) (1,017,782)
-------------- -------------- --------------
Total Distributions.................................... (55,270,192) (43,285,863) (7,916,558)
-------------- -------------- --------------
SHARE TRANSACTIONS (NOTE 5):
INSTITUTIONAL SHARES:
Shares issued............................................ 245,393,454 725,687,216 188,610,553
Reinvestment of distributions............................ 27,671,824 22,221,815 1,224,206
Shares redeemed.......................................... (473,921,393) (144,554,623) (74,962,453)
-------------- -------------- --------------
Net Institutional Share transactions................... (200,856,115) 603,354,408 114,872,306
-------------- -------------- --------------
INVESTMENT SHARES:
Shares issued............................................ 1,885,896 8,243,200 1,951,033
Reinvestment of distributions............................ 327,205 336,316 71,331
Shares redeemed.......................................... (5,091,486) (3,676,572) (139,833)
-------------- -------------- --------------
Net Investment Share transactions...................... (2,878,385) 4,902,944 1,882,531
-------------- -------------- --------------
Net increase (decrease) from share transactions.......... (203,734,500) 608,257,352 116,754,837
-------------- -------------- --------------
Net increase (decrease) in net assets.................... (125,399,502) 547,831,816 128,017,408
-------------- -------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)............. $ 861,662,351 $ 987,061,853 $ 128,017,408
============== ============== ==============
(A) Accumulated undistributed (overdistributed)
net investment income.................................. $ 1,014,509 $ (649,785) $ 100,052
============== ============== ==============
</TABLE>
19
<PAGE>
- ------------
SHORT TERM BOND FUND
The Kent FINANCIAL HIGHLIGHTS
Funds FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
- ------------
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992/(1)/
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period........................ $ 9.52 $ 9.91 $ 9.99 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.55 0.48 0.42 0.07
Net realized and unrealized gain (loss) on investments.... 0.43 (0.38) (0.09) (0.01)
-------- -------- -------- --------
Total from Investment Operations:..................... 0.98 0.10 0.33 0.06
-------- -------- -------- --------
Less Distributions from:
Net investment income..................................... (0.54) (0.49) (0.41) (0.07)
In excess of net investment income........................ -- *** -- ***
-------- -------- -------- --------
Total Distributions................................... (0.54) (0.49) (0.41) (0.07)
-------- -------- -------- --------
Net increase (decrease) in net asset value.................. 0.44 (0.39) (0.08) (0.01)
-------- -------- -------- --------
Net Asset Value, End of period.............................. $ 9.96 $ 9.52 $ 9.91 $ 9.99
======== ======== ======== ========
Total Return for period indicated (A)....................... 10.53% 1.03% 3.36% 0.53%
Ratios/Supplemental Data:
Net Assets, End of period (000's)........................... $310,680 $176,765 $255,892 $186,124
Ratios to average net assets:
Net investment income..................................... 5.60% 4.75% 4.24% 4.05% *
Operating expenses........................................ 0.77% 0.73% 0.81% 0.14% **
Portfolio Turnover Rate..................................... 75% 56% 50% 5%
</TABLE>
- ----------------------------------------
* Annualized
** Not annualized
*** Amount is less than $0.005
(1) The Institutional Class commenced operations on November 2, 1992.
(2) The Investment Class date of initial public investment was December 4,
1992.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
20
<PAGE>
INVESTMENT SHARES
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992/(2)/
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period........................ $ 9.52 $ 9.91 $ 10.02 $ 9.99
-------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.52 0.47 0.38 0.02
Net realized and unrealized gain (loss) on investments.... 0.44 (0.37) (0.08) 0.01
-------- -------- -------- --------
Total from Investment Operations:..................... 0.96 0.10 0.30 0.03
-------- -------- -------- --------
Less Distributions from:
Net investment income..................................... (0.53) (0.48) (0.41) --
In excess of net investment income........................ -- (0.01) -- --
-------- -------- -------- --------
Total Distributions................................... (0.53) (0.49) (0.41) --
-------- -------- -------- --------
Net increase (decrease) in net asset value.................. 0.43 (0.39) (0.11) 0.03
-------- -------- -------- --------
Net Asset Value, End of period.............................. $ 9.95 $ 9.52 $ 9.91 $ 10.02
======== ======== ======== ========
Total Return for period indicated (A)....................... 10.30% 1.01% 3.04% 0.30%
Ratios/Supplemental Data:
Net Assets, End of period (000's)........................... $ 1,634 $ 1,649 $ 1,427 $ 111
Ratios to average net assets:
Net investment income..................................... 5.40% 4.79% 3.91% 3.31% *
Operating expenses........................................ 0.91% 0.74% 1.24% 0.12% **
Portfolio Turnover Rate..................................... 75% 56% 50% 5%
</TABLE>
21
<PAGE>
- ------------
INTERMEDIATE BOND FUND
The Kent FINANCIAL HIGHLIGHTS
Funds FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
- ------------
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
-------------------------------------------------------
1995 1994 1993 1992/(1)/
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period......................... $ 9.29 $ 10.18 $ 10.00 $ 10.00
--------- --------- --------- ---------
Income from Investment Operations:
Net investment income..................................... 0.65 0.56 0.51 0.08
Net realized and unrealized gain (loss) on investments.... 0.81 (0.88) 0.32 ***
--------- --------- --------- ---------
Total from Investment Operations:...................... 1.46 (0.32) 0.83 0.08
--------- --------- --------- ---------
Less Distributions from:
Net investment income..................................... (0.63) (0.54) (0.51) (0.08)
In excess of net investment income........................ -- (0.01) *** ***
Net realized gain on investments.......................... -- (0.02) (0.14) --
--------- --------- --------- ---------
Total Distributions:................................... (0.63) (0.57) (0.65) (0.08)
--------- --------- --------- ---------
Net increase (decrease) in net asset value................... 0.83 (0.89) 0.18 --
--------- --------- --------- ---------
Net Asset Value, End of period............................... $ 10.12 $ 9.29 $ 10.18 $ 10.00
========= ========= ========= =========
Total Return for period indicated (A)........................ 16.18% (3.19)% 8.42% 0.83%
Ratios/Supplemental Data:
Net Assets, End of period (000's)............................ $ 854,801 $ 977,865 $ 434,264 $ 203,129
Ratios to average net assets:
Net investment income..................................... 6.50% 6.03% 5.03% 5.32% *
Operating expenses........................................ 0.77% 0.80% 0.85% 0.15% **
Portfolio Turnover Rate...................................... 166% 124% 126% 1%
</TABLE>
- ----------------------------------------
* Annualized
** Not Annualized
*** Amount is less than $0.005
(1) The Institutional Class commenced operations on November 2, 1992.
(2) The Investment Class date of initial public investment was
November 25, 1992.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
22
<PAGE>
INVESTMENT SHARES
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
------------------------------------------------------
1995 1994 1993 1992/(2)/
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period......................... $ 9.32 $ 10.19 $ 10.03 $ 9.98
-------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.61 0.57 0.47 0.03
Net realized and unrealized gain (loss) on investments.... 0.82 (0.87) 0.34 0.02
-------- -------- -------- --------
Total from Investment Operations:...................... 1.43 (0.30) 0.81 0.05
-------- -------- -------- --------
Less Distributions from:
Net investment income..................................... (0.61) (0.54) (0.46) --
In excess of net investment income........................ -- (0.01) (0.05) --
Net realized gain on investments.......................... -- (0.02) (0.14) --
-------- -------- -------- --------
Total Distributions:................................... (0.61) (0.57) (0.65) --
-------- -------- -------- --------
Net increase (decrease) in net asset value................... 0.82 (0.87) 0.16 0.05
-------- -------- -------- --------
Net Asset Value, End of period............................... $ 10.14 $ 9.32 $ 10.19 $ 10.03
======== ======== ======== ========
Total Return for period indicated (A)........................ 15.76% (3.01)% 8.19% 0.50%
Ratios/Supplemental Data:
Net Assets, End of period (000's)............................ $ 6,862 $ 9,196 $ 4,966 $ 174
Ratios to average net assets:
Net investment income..................................... 6.24% 5.94% 4.75% 4.94% *
Operating expenses........................................ 1.01% 0.81% 1.13% 0.16% **
Portfolio Turnover Rate...................................... 166% 124% 126% 1%
</TABLE>
23
<PAGE>
- ------------
INCOME FUND
The Kent FINANCIAL HIGHLIGHTS
Funds FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
- ------------
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
SHARES SHARES
---------------------- ----------------------
PERIOD ENDED PERIOD ENDED
DECEMBER 31, 1995/(1)/ DECEMBER 31, 1995/(2)/
---------------------- ----------------------
<S> <C> <C>
Net Asset Value, Beginning of period........................... $ 10.00 $ 10.00
--------- ---------
Income from Investment Operations:
Net investment income....................................... 0.55 0.52
Net realized and unrealized gain (loss) on investments...... 0.92 0.91
--------- ---------
Total from Investment Operations:........................ 1.47 1.43
--------- ---------
Less Distributions from:
Net investment income....................................... (0.54) (0.52)
Net realized gain on investments............................ (0.09) (0.09)
--------- ---------
Total Distributions:..................................... (0.63) (0.61)
--------- ---------
Net increase (decrease) in net asset value..................... 0.84 0.82
--------- ---------
Net Asset Value, End of period................................. $ 10.84 $ 10.82
========= =========
Total Return for period indicated (A).......................... 15.05% 14.63%
Ratios/Supplemental Data:
Net Assets, End of period (000's).............................. $ 126,056 $ 1,961
Ratios to average net assets:
Net investment income....................................... 6.65%* 6.40%*
Operating expenses.......................................... 0.91%* 1.14%*
Portfolio Turnover Rate........................................ 50% 50%
</TABLE>
- ----------------------------------------
* Annualized
(1) The Institutional Class commenced operations on March 20, 1995.
(2) The Investment Class date of initial public investment was March 22, 1995.
(A) Calculation does not include sales charge for the Investment Shares.
See Notes to Financial Statements.
24
<PAGE>
- ------------
The Kent
Funds NOTES TO FINANCIAL STATEMENTS
- ------------
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
Short Term Bond Fund (formerly Limited Maturity Bond Fund), Intermediate Bond
Fund (formerly Fixed Income Bond Fund) and Income 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 its 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.
REPURCHASE AGREEMENTS: Each Portfolio may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Portfolio
takes possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Portfolio to resell, the obligation at an
agreed upon price and time, thereby determining the yield during the Portfolio's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Portfolio's holding period. The value
of the collateral is at least equal at all times to the total amount of the
repurchase obligations including interest. In the event of a counterparty
default, the Portfolio has the right to use the collateral to offset losses
incurred. There is potential loss to the Portfolio in the event the Portfolio is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the market value of the
underlying securities during the period while the Portfolio seeks to assure its
rights. The Portfolio's investment adviser, acting under the supervision of the
Trust's Board of Trustees, reviews the value of collateral and the
creditworthiness of those banks and dealers with which the Portfolio enters into
repurchase agreements to evaluate potential risks.
FUTURES CONTRACTS: Each Portfolio may invest in futures contracts. The
Portfolios generally enter into futures contracts to hedge against declines in
the
25
<PAGE>
- ------------
The Kent NOTES TO FINANCIAL STATEMENTS
Funds (CONTINUED)
- ------------
value of their portfolios' securities. This investment involves, to varying
degrees, elements of market risk and risks in excess of the amount recognized in
the Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the Portfolios have in the particular classes of
instruments. Risks include an imperfect correlation between the movements in the
price of the instruments and the price of the underlying securities and interest
rates. Risks also may arise if there is an illiquid secondary market for the
instruments or due to the inability of counterparties to perform under the terms
of the contract.
Cash or securities are deposited with brokers in order to maintain a
position. Subsequent payments made or received daily by a Portfolio based on the
change in the market value of the position are recorded as unrealized gain or
loss until the contract is closed out at which time the gain or loss is
realized.
Futures contracts are valued at the settlement price established each day
by the board of trade or exchange on which they are traded.
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, discount earned (including both
original issue and market discount), less amortization of any market premium on
municipal securities, dividends earned 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.
ORGANIZATION COSTS: The Kent 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 redeemed
during such period by any holder thereof, the Portfolio will be reimbursed by
such holder for any unamortized organization costs in the same proportion as the
number of initial
26
<PAGE>
- ------------
The Kent NOTES TO FINANCIAL STATEMENTS
Funds (CONTINUED)
- ------------
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 Trust pays the
Investment Adviser a fee, computed daily and paid monthly, at the annual rate of
0.50% of the average daily net assets of the Short Term Bond Fund, 0.55% of the
average daily net assets of the Intermediate Bond Fund and 0.60% of the average
daily net assets of the 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
services ("shareholder services fees"). 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.
Prior to April 1, 1994, Keystone Custodian Funds, Inc. ("Keystone") and
Keystone Investor Resource Center, Inc. served as administrator and transfer
agent, respectively. Fee rates paid to Keystone and Keystone Investor Resource
Center, Inc. were the same as those paid to FDISG.
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 Short Term Bond Fund makes payments at the rate of
only 0.15% the average daily net assets of its Investment Shares pursuant to its
Plan.
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. Prior to April 1, 1994, Fiduciary Investment Company, Inc.
acted as the distributor of the Trust's shares. Fee rates charged by the
Distributor are the same as those charged by Fiduciary Investment Company, Inc.
One trustee and certain officers of the Trust are also officers of the
current Administrator and/or the Distributor. Such Trustee and 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
27
<PAGE>
- ------------
The Kent NOTES TO FINANCIAL STATEMENTS
Funds (CONTINUED)
- ------------
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.
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
Institutional and Investment Shares of each Portfolio for the year ended
December 31, 1995, as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
------------- ----------
<S> <C> <C>
Short Term Bond............ $ 21,393 $ 126
Intermediate Bond.......... 27,975 217
Income..................... 12,077 112
</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. Transactions in capital shares and
distributions to shareholders are summarized below for each Portfolio.
TRANSACTIONS IN CAPITAL SHARES:
SHORT TERM BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------ ------------
INSTITUTIONAL SHARES
<S> <C> <C>
Shares issued.................................... 32,658,819 15,851,434
Reinvestment of distributions.................... 1,085,057 771,379
Shares redeemed.................................. (21,120,973) (23,863,316)
------------ ------------
Net increase (decrease)........................ 12,622,903 (7,240,503)
============ ============
<CAPTION>
INVESTMENT SHARES
<S> <C> <C>
Shares issued.................................... 106,935 119,293
Reinvestment of distributions.................... 7,878 7,463
Shares redeemed.................................. (123,971) (97,488)
------------ ------------
Net increase (decrease)........................ (9,158) 29,268
============ ============
</TABLE>
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------ ------------
INSTITUTIONAL SHARES
<S> <C> <C>
Shares issued.................................... 24,970,345 75,319,421
Reinvestment of distributions.................... 2,819,915 2,323,928
Shares redeemed.................................. (48,530,997) (15,109,254)
------------ ------------
Net increase (decrease)........................ (20,740,737) 62,534,095
============ ============
<CAPTION>
INVESTMENT SHARES
<S> <C> <C>
Shares issued.................................... 192,685 846,564
Reinvestment of distributions.................... 33,253 35,142
Shares redeemed.................................. (536,288) (382,089)
------------ ------------
Net increase (decrease)........................ (310,350) 499,617
============ ============
</TABLE>
28
<PAGE>
- ------------
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (continued)
- ------------
Income Fund
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995*
------------------
INSTITUTIONAL SHARES
<S> <C>
Shares issued.................................... 18,576,033
Reinvestment of distribution..................... 116,628
Shares redeemed.................................. (7,066,321)
------------
Net increase (decrease)........................ 11,626,340
============
<CAPTION>
INVESTMENT SHARES
<S> <C>
Shares issued.................................... 187,592
Reinvestment of distributions.................... 6,743
Shares redeemed.................................. (13,058)
------------
Net increase (decrease)........................ 181,277
============
</TABLE>
DISTRIBUTIONS TO SHAREHOLDERS:
SHORT TERM BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------ ------------
INSTITUTIONAL SHARES
<S> <C> <C>
Net investment income............................ $ 16,005,158 $ 9,664,647
In excess of net investment income............... -- 82,568
Net realized gains............................... -- --
------------ ------------
Total distributions............................ $ 16,005,158 $ 9,747,215
============ ============
<CAPTION>
INVESTMENT SHARES
<S> <C> <C>
Net investment income............................ $ 86,567 $ 77,251
In excess of net investment income............... -- 660
Net realized gains............................... -- --
------------ ------------
Total distributions............................ $ 86,567 $ 77,911
============ ============
</TABLE>
INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994
------------ ------------
INSTITUTIONAL SHARES
<S> <C> <C>
Net investment income............................ $ 54,864,816 $ 41,463,810
In excess of net investment income............... -- 642,966
Net realized gains............................... -- 721,766
------------ ------------
Total distributions.............................. $ 54,864,816 $ 42,828,542
============ ============
<CAPTION>
INVESTMENT SHARES
<S> <C> <C>
Net investment income............................ $ 405,376 $ 439,728
In excess of net investment income............... -- 6,819
Net realized gains............................... -- 10,774
------------ ------------
Total distributions.............................. $ 405,376 $ 457,321
============ ============
</TABLE>
INCOME FUND
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995*
------------------
INSTITUTIONAL SHARES
<S> <C>
Net investment income............................ $ 6,835,136
In excess of net investment income............... --
Net realized gains............................... 1,002,058
------------
Total distributions............................ $ 7,837,194
============
<CAPTION>
INVESTMENT SHARES
<S> <C>
Net investment income............................ $ 63,640
In excess of net investment income............... --
Net realized gains............................... 15,724
------------
Total distributions............................ $ 79,364
============
</TABLE>
- ----------------------------------------
* The Institutional Class of the Income Fund commenced operations on
March 20, 1995.
The Investment Class date of initial public investment was March 22, 1995.
29
<PAGE>
- ------------
The Kent NOTES TO FINANCIAL STATEMENTS
Funds (CONTINUED)
- ------------
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1995, were as follows:
<TABLE>
<CAPTION>
PURCHASES
---------
FUND GOVERNMENT OTHER
- ------------ -------------- -------------
<S> <C> <C>
Short Term Bond................. $ 216,440,938 $ 115,845,352
Intermediate Bond............... 1,095,248,218 158,238,504
Income.......................... 107,173,291 62,588,735
<CAPTION>
SALES
-----
FUND GOVERNMENT OTHER
- ------------ -------------- -------------
<S> <C> <C>
Short Term Bond................. $ 146,673,379 $ 49,166,150
Intermediate Bond............... 1,211,448,242 253,105,725
Income.......................... 44,420,582 15,077,800
</TABLE>
At December 31, 1995, 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>
Short Term Bond.................. $ 4,475,373 $ (294,823)
Intermediate Bond................ 18,095,300 (2,567,796)
Income........................... 9,135,555 --
<CAPTION>
NET UNREALIZED
APPRECIATION
FUND (DEPRECIATION)
- ------------ --------------
<S> <C>
Short Term Bond.................. $ 4,180,550
Intermediate Bond................ 15,527,504
Income........................... 9,135,555
</TABLE>
As of December 31, 1995, the following Portfolios had capital loss carryforwards
which will expire during the years indicated:
<TABLE>
<CAPTION>
FUND 2001 2002 2003
- ------------ ---- ---- ----
<S> <C> <C> <C>
Short Term Bond............. $ 656,101 $ 3,015,994 $ 467,880
</TABLE>
Under current tax law, captial loss realized after October 31 may be
referred and treated as occuring on the first day of the following fiscal year.
The defferred loss for the Short Term Bond Fund of $118,256 will be treated as
arising on the first day of the fiscal year ended December 31, 1996.
30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Trustees
The Kent Funds:
We have audited the accompanying statements of assets and liabilities (page 16)
of The Kent Short Term Bond Fund (formerly The Kent Limited Maturity Bond Fund),
The Kent Intermediate Bond Fund (formerly The Kent Fixed Income Bond Fund) and
The Kent Income Fund, portfolios of The Kent Funds, including the portfolios of
investments (pages 9 - 15), as of December 31, 1995, the related statements of
operations for the year or period then ended (page 17), the statements of
changes in net assets for each of the years or periods in the two-year period
then ended (pages 18 - 19), and the financial highlights for Institutional and
Investment shares for each of the years or periods in the four-year period then
ended (pages 20 - 24). These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Kent Short Term Bond Fund, The Kent Intermediate Bond Fund and The Kent Income
Fund as of December 31, 1995, the results of their operations for the year or
period then ended, the changes in their net assets for each of the years or
periods in the two-year period then ended, and the financial highlights for each
of the years or periods in the four-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 9, 1996
31
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INVESTMENT ADVISER
Old Kent Bank
Grand Rapids, MI 49503
DISTRIBUTOR
440 Financial Distributors, Inc.
290 Donald Lynch Boulevard
Marlboro, MA 01752
This report is submitted for the general information of shareholders of The
Kent Short Term Bond Fund, The Kent Intermediate Bond Fund and The Kent
Income 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 Government/Corporate Intermediate Bond Index, the Lehman
Brothers 1-3 Year Government Bond Index, the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Long
Government/Corporate Bond Index, the 91-Day Treasury Bill and the Consumer
Price Index are unmanaged indices and do not include the effects of annual
and operating expenses or sales charges experienced by the funds.
[FDIC SYMBOL APPEARS HERE]
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 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.
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BULK RATE
US POSTAGE
PAID
PERMIT NO. 54201
[KENT FUNDS LOGO APPEARS HERE] BOSTON, MA
4400 COMPUTER DRIVE
POBOX 5108
WESTBORO, MA 01581-5108
K-159 (12/95)
