As filed with the Securities and Exchange Commission on
March 6, 1996
Securities Act File No. 33-8398
Investment Company Act File No. 811-4824
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933[X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 19 and/or [X]
REGISTRATION STATEMENT UNDER THE INVESTENT COMPANY
ACT OF 1940 [X]
Amendment No. 20
THE KENT FUNDS
(Exact name of Registrant as Specified in Charter)
290 Donald Lynch Boulevard, Marlboro, Massachusetts 01752
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(508) 624-5000
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
1345 Chestnut Street, Philadelphia, PA 19107
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)(1)
X _ on May 1, 1996 pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ on (date) pursuant to paragraph (a)(2) of rule 485
The Registrant has filed a Declaration pursuant to Rule 24f-
2 under the Investment Company Act of 1940. A Rule 24f-2
Notice for Registrants fiscal year ended December 31, 1995,
was filed on February 29, 1995.
THE KENT FUNDS
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
under the Securities Act of 1933
N-1A Location
Item No. Prospectus
Item 1. Cover Page Cover
Page
Item 2. Synopsis Financial
Information
Item 3. Condensed Financial
Information Financial
Information
Item 4. General Description of
Registrant Fund Choices;
Structure and
Management of
the Funds
Item 5. Management of the Fund Structure and
Management of
the Funds;
Expense
Information
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities Structure and
Management of
the Funds;
Dividends,
Distributions
and Taxes;
Additional
Information
Item 7. Purchase of Securities
Being Offered Purchases of
Shares; Expense
Information
Item 8. Redemption or Repurchase Redemption
(Sales) of
Shares
Item 9. Pending Legal Proceedings Not Applicable
N-1A
Item Statement of Additional
No. Information
Item 10. Cover Page Cover
Page
Item 11. Table of Contents Table of
Contents
Item 12. General Information and
and History Not Applicable
Item 13. Investment Objectives and
Policies The Trust;
Investment
Policies;
Investment
Restrictions;
Securities
Transactions;
Appendix C
Item 14. Management of the Fund Trustees and
Officers
Item 15. Control Persons and Principal
Holders of Securities Trustees and
Officers;
Additional
Information
Item 16. Investment Advisory and
Other Services Investment
Adviser;
Administrator;
Distributor;
Transfer Agent;
Custodian,
Auditors and
Counsel;
Distribution
Plans
Item 17. Brokerage Allocation
and Other Practices Securities
Transactions;
Distribution Plans
Item 18. Capital Stock and Other
Securities The Trust;
Declaration
of Trust
Item 19. Purchase, Redemption and
Pricing of Securities Valuation of
Securities;
Being Offered
Additional
Purchase and
Redemption
Information
Item 20. Tax Status Dividends and
Taxes
Item 21. Underwriters Distributor
Item 22. Calculation of PerformanceStandardized
Data Total Return
and Yield
Quotations
Item 23 Financial Statements Financial
Statements
Part C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of this
Registration Statement
THE KENT FUNDS
Prospectus
Dated May 1, 1996
THIS PROSPECTUS RELATES TO THE FOLLOWING FIXED INCOME FUNDS
(THE "FUNDS"):
THE KENT SHORT
TERM BOND FUND
SEEKS CURRENT INCOME,
CONSISTENT WITH THE
PRESERVATION OF CAPITAL,
THROUGH INVESTMENTS IN A
LIMITED RANGE OF
INVESTMENT QUALITY FIXED
INCOME SECURITIES.
THE KENT
INTERMEDIATE BOND
FUND
SEEKS CURRENT INCOME,
CONSISTENT WITH THE
PRESERVATION OF CAPITAL,
THROUGH INVESTMENTS IN A
BROAD RANGE OF INVESTMENT
QUALITY FIXED INCOME
SECURITIES.
THE KENT INCOME FUND
SEEKS A HIGH LEVEL OF CURRENT INCOME, CONSISTENT WITH THE PRESERVATION OF
CAPITAL,
THROUGH INVESTMENTS IN A BROAD RANGE OF INVESTMENT QUALITY DEBT SECURITIES.
________________________________
This Prospectus contains information that a prospective investor
should know before investing. Investors should read and retain
this Prospectus for future reference. The Kent Funds has filed a
Statement of Additional Information ("SAI") dated May 1, 1996 with
the Securities and Exchange Commission, which is incorporated by
reference into this Prospectus. For a free copy of the SAI, or for
other information about the Funds, write to the address or call the
telephone number listed below.
Shares of the Funds are not bank deposits or obligations of, or
guaranteed or endorsed by, the Funds' investment adviser or any of
its affiliates, and are not federally insured by, guaranteed by,
obligations of or otherwise supported by the U.S. Government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other governmental agency. An investment in mutual fund
shares involves risk, including the possible loss of principal.
Old Kent Bank receives fees from the Funds for advisory and certain
other services.
__________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Kent Funds
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Call Toll-Free For Shareholder Services:
1-800-633-KENT (5368)
TABLE OF CONTENTS
PAGE
HIGHLIGHTS
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
FINANCIAL INFORMATION
WHAT ARE THE FUNDS' KEY FINANCIAL HIGHLIGHTS?
FUND
CHOICES
WHAT FUNDS ARE OFFERED?
(FUND INVESTMENT OBJECTIVES AND POLICIES)
WHAT INSTRUMENTS DO THE FUNDS INVEST IN?
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
PERFORMANCE
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
WHERE CAN I OBTAIN PERFORMANCE DATA?
EXPENSE INFORMATION
WHAT ARE THE FUNDS' EXPENSES?
WHO MAY WANT TO INVEST IN THE FUNDS?
WHEN CAN I PURCHASE SHARES?
WHAT IS THE MINIMUM REQUIRED INVESTMENT?
HOW CAN I PURCHASE SHARES?
WHAT PRICE DO I PAY FOR SHARES?
PURCHASES OF SHARES
WHEN CAN I REDEEM SHARES?
HOW CAN I REDEEM SHARES?
WHAT PRICE DO I RECEIVE FOR SHARES?
WHEN WILL I RECEIVE REDEMPTION MONEY?
REDEMPTIONS (SALES) OF SHARES
HOW ARE THE FUNDS STRUCTURED?
WHO MANAGES AND SERVICES THE FUNDS?
WHAT ARE MY RIGHTS AS A FUND SHAREHOLDER?
STRUCTURE AND MANAGEMENT OF THE FUNDS
WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
HOW WILL DISTRIBUTIONS BE MADE?
WHAT ARE THE TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
DIVIDENDS, DISTRIBUTIONS AND TAXES
ADDITIONAL INFORMATION
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
HIGHLIGHTS
What Are the Key Facts Regarding the Funds?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is a family of
open-end management investment companies (commonly
known as mutual funds) that offers investors the
opportunity to invest in different investment
portfolios, each having separate investment objectives
and policies. This prospectus describes the Trust's
Short Term Bond Fund, Intermediate Bond Fund and
Income Fund. See "Fund Choices - What Funds are
Offered?" The Trust also offers the following
investment portfolios by separate prospectuses: The
Kent Money Market Fund, The Kent Michigan Municipal
Money Market Fund, The Kent Growth and Income Fund,
The Kent Small Company Growth Fund, The Kent
International Growth Fund, The Kent Index Equity Fund,
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. To
obtain a prospectus for any Kent Fund, please call 1-
800-633-KENT (5368).
Q: Who advises the Funds?
A: The Funds are managed by Old Kent Bank ("Old
Kent"), an indirect wholly-owned subsidiary of Old
Kent Financial Corporation ("OKFC"). OKFC is a
financial services company with total assets as of
December 31, 1995 of approximately $12 billion. See
"Structure and Management of the Funds - Who Manages
and Services the Funds?"
Q: What advantages do the Funds offer?
A: The Funds offer investors the opportunity to
invest in a variety of professionally managed
diversified investment portfolios without having to
become involved with the detailed accounting and
safekeeping procedures normally associated with direct
investments in securities. The Funds also offer the
economic advantages of block trading in portfolio
securities and the availability of a family of
thirteen mutual funds should your investment goals
change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by 440 Financial
Distributors, Inc. ("440 Distributors") and are sold
in two classes: Investment Shares and Institutional
Shares. Investment Shares can be purchased from any
broker-dealer or financial institution which has
entered into a dealer agreement with 440 Distributors,
or by completing an application and mailing it
directly to 440 Distributors with a check, payable to
the appropriate Fund, for $1,000 or more, or $100 or
more for Individual Retirement Accounts ("IRAs").
Institutional Shares are offered to financial and
other institutions for the benefit of fiduciary,
agency or custodial accounts. The minimum initial
aggregate investment for Institutional Shares is
$100,000. The Trust may waive the minimum purchase
requirements in certain instances. Institutional
Shares purchasers should call First Data Investor
Services Group, Inc. ("First Data"), the Trust's
Transfer Agent and Administrator, toll-free at 1-800-
633-KENT (5368) for instructions on how to open an
account. See "Purchases of Shares."
For information on how to redeem your shares, see
"Redemptions (Sales) of Shares."
Q: When are dividends paid?
A: Dividends of each Fund's net investment income
are declared and paid monthly. Net realized capital
gains of the Funds are distributed at least annually.
See "Dividends, Distributions and Taxes."
Q: What shareholder privileges are offered by the
Trust?
A: Investors may exchange shares of a Fund having a
value of at least $100 for shares of the same class of
any other investment portfolio offered by the Trust in
which the investor has an existing account. The Trust
offers IRAs, which can be established by contacting
the Trust's Distributor. The Trust also offers an
Automatic Investment Program which allows investors to
automatically invest in Investment Shares on a monthly
basis. See "Purchases of Shares - How Can I Purchase
Shares?"
Q: What are the potential risks presented by the
Funds' investment practices?
A: Investing in the Funds involves the risks common
to any investment in securities. The net asset value
("NAV") of each Fund's shares will fluctuate with
changes in the market value of its portfolio
securities. The market value of fixed income
securities, which will constitute substantially all of
each Fund's investments, will generally vary inversely
with changes in prevailing interest rates. Longer
term bond funds are generally more sensitive to
interest rate changes than shorter term bond funds.
The Funds will invest in investment grade securities
or unrated securities deemed to be of comparable
quality by Old Kent. Debt obligations rated in the
lowest of the top four investment grade categories are
considered to have speculative characteristics. The
Funds may also invest up to 15% of their net assets in
illiquid securities. For a complete description of
the risks associated with each Fund, see "Fund Choices
- - What Funds are Offered?" and " - What Are the Risks
of Investing in the Funds?"
FINANCIAL INFORMATION
What Are the Funds' Key Financial Highlights?
Fee Table
The purpose of the fee table is to assist you in
understanding the various costs and expenses that an
investor in each Fund will bear directly or
indirectly. See "Expense Information" and "Purchases
of Shares" for more information regarding such costs
and expenses.
SHORT TERM
BOND FUND
Investment Institutional
Shares Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.50% 0.50%
12b-1 Fees(3) 0.15% None
Other Expenses 0.26% 0.26%
TOTAL FUND OPERATING EXPENSES 0.91% 0.76%
INTERMEDIATE BOND
FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.55% 0.55%
12b-1 Fees(3) 0.25% None
Other Expenses 0.21% 0.21%
TOTAL FUND OPERATING EXPENSES 1.01% 0.76%
INCOME FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.60% 0.60%
12b-1 Fees(3) 0.25% None
Other Expenses 0.24% 0.24%
TOTAL FUND OPERATING EXPENSES 1.09% 0.84%
EXAMPLE: You would pay the following expenses on a $1,000
investment, assuming (i) 5% annual return and (ii) redemption at the end
of each period:
SHORT TERM BOND FUND
Investment Shares Institutional Shares
One Year $ 49 $ 8
Three Years $ 68 $24
Five Years $ 88 $41
Ten Years $146 $92
INTERMEDIATE BOND FUND
Investment Shares Institutional Shares
One Year $ 50 $ 8
Three Years $ 71 $24
Five Years $ 93 $41
Ten Years $157 $92
INCOME FUND
Investment Shares Institutional Shares
One Year $ 51 $ 8
Three Years $ 73 $ 26
Five Years $ 97 $ 46
Ten Years $166 $102
Amounts shown in the example should not be considered a
representation of past or future investment return or expenses;
actual investment return and expenses may be greater or lesser
than those shown.
_________________________________________
(1)The sales charge applied to the purchase of a Fund's Investment Shares
declines as the amount invested increases. See "Purchases of Shares - What
Price Do I Pay For Shares?"
(2)Expense ratios for the Short Term Bond Fund and Intermediate Bond Fund
are based on amounts incurred for the fiscal year ended December 31, 1995.
Because the Income Fund only commenced operations on March 20, 1995, its
expense ratios are based on estimates for the current fiscal year. Sweep,
trustee, agency, custody and certain other fees charged by Old Kent and its
affiliates to their customers who own shares of the Funds are not reflected
in the
fee table.
(3)Investment Shares may pay 12b-1 fees of up to .25% (on an annualized
basis). As a result of the payment of sales charges and 12b-1 and certain
other
related fees discussed below, long term Investment Class shareholders may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD").
Financial Highlights
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP,
independent auditors, whose report, together with the financial statements of
the Funds,
appears in the Funds' annual report, which can be obtained free of charge by
calling 1-
800-633-KENT (5368). This table should be read in conjunction with the
financial
statements and related notes.
<TABLE>
<CAPTION>
Short Term Bond Fund
(For a share outstanding throughout each period)
Investment Shares Institutional Shares
December 4, 1992 November 2, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.52 $9.91 $10.02 $9.99 $9.52 $9.91 $9.99 $10.00
Income From Investment Operations:
Net investment income 0.52 0.47 0.38 0.02 0.55 0.48 0.42 0.07
Net realized and unrealized gain (loss) on investments 0.44 (0.37) (0.08) 0.01 0.43 (0.38)
(0.09) (0.01)
Total from Investment Operations: 0.96 0.10 0.30 0.03 0.98 0.10 0.33 0.06
Less Distributions from:
Net investment income (0.53) (0.48) (0.41) --- (0.54) (0.49) (0.41) (0.07)
In excess of net investment income --- (0.01) --- --- ---
*** --- ***
Total Distributions: (0.53) (0.49) (0.41) --- (0.54) (0.49) (0.41) (0.07)
Net increase (decrease) in net asset value 0.43 (0.39) (0.11) 0.03 0.44 (0.39) (0.08)
(0.01)
Net Asset Value, End of Period $9.95 $9.52 $9.91 $10.02 $9.96 $9.52 $9.91 $9.99
Total Return for period indicated (a) 10.30% 1.01% 3.04% 0.30% 10.53% 1.03% 3.36%
0.53%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income 5.40% 4.79% 3.91% 3.31% (b) 5.60% 4.75% 4.24% 4.05%
(b)
Operating expenses 0.91% 0.74% 1.24% 0.12% (c) 0.77% 0.73% 0.81% 0.14% (c)
Portfolio Turnover Rate 75% 56% 50% 5% 75% 56% 50% 5%
Net Assets, End of Period (thousands) $1,634 $1,649 $1,427 $111 $310,680
$176,765 $255,892 $186,124
Additional financial and performance information is contained in the Funds' annual report,
which can be obtained without charge by calling
1-800-633-KENT (5368)
<FN>
(a) Calculation does not include sales charge for Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report, together with the financial
statements of the Funds, appears in the Funds' annual report, which can be
obtained free of charge by calling 1-800-633-KENT (5368). This table should
be read in conjunction with the financial statements and related notes.
Intermediate Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CATION>
Investment Shares Institutional Shares
November 25, 1992 November 2, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.32 $10.19 $10.03 $9.98 $9.29 $10.18 $10.00
$10.00
Income From Investment Operations:
Net investment income 0.61 0.57 0.47 0.03 0.65 0.56 0.51 0.08
Net realized and unrealized gain (loss) on 0.82 (0.87) 0.34 0.02 0 81 (0.88)
0.32 ***
investments
Total from Investment Operations: 1.43 (0.30) 0.81 0.05 1.46 (0.32)
0.83 0.08
Less Distributions from:
Net investment income (0.61) (0.54) (0.46) --- (0.63) (0.54) (0.51) (0.08)
In excess of net investment income --- (0.01) (0.05) --- --- (0.01) ***
***
Net realized gain on investments --- (0.02) (0.14) --- ---
(0.02) (0.14) ---
Total Distributions: (0.61) (0.57) (0.65) --- (0.63) (0.57) (0.65) (0.08)
Net increase (decrease) in net asset value 0.82 (0.87) 0.16 0.05 0.83 (0.89)
0.18 ---
Net Asset Value, End of Period $10.14 $9.32 $10.19 $10.03 $10.12 $9.29 $10.18 $10.00
Total Return for period indicated (a) 15.76% (3.01)% 8.19% 0.50% 16.18%
(3.19)% 8.42% 0.83%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income 6.24% 5.94% 4.75% 4.94% (b) 6.50% 6.03% 5.03% 5.32% (b)
Operating expenses 1.01% 0.81% 1.13% 0.16% (c) 0.77% 0.80% 0.85% 0.15% (c)
Portfolio Turnover Rate 166% 124% 126% 1% 166% 124% 126% 1%
Net Assets, End of Period (thousands) $6,862 $9,196 $4,966 $174 $854,801
$977,865 $434,264 $203,129
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report, together with the financial
statements of the Funds,appears in the Funds' annual report, which can be
obtained free of charge by calling 1-800-633-KENT (5368).
This table should be read in conjunction with the financial statements and
related notes.
Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
March 22, 1995 March 20,1995
(Date of Initial (Commencement
Public Investment) of Operations)
to December 31, to December 31,
1995 1995
<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
Income From Investment Operations:
Net investment income 0.52 0.55
Net realized and unrealized gain (loss) on investments 0.91
0.92
Total from Investment Operations: 1.43 1.47
Less Distributions from:
Net investment income (0.52) (0.54)
Net realized gain on investments (0.09) (0.09)
Total Distributions: (0.61) (0.63)
Net increase (decrease) in net asset value 0.82 0.84
Net Asset Value, End of Period $10.82 $10.84
Total Return for period indicated (a) 14.63% 15.05%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income 6.40% (b) 6.65% (b)
Operating expenses 1.14% (b) 0.91% (b)
Portfolio Turnover Rate 50% 50%
Net Assets, End of Period (thousands) $1,961
$126,056
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
</FN>
</TABLE>
FUND CHOICES
What Funds Are Offered?
The Trust currently offers the 3 fixed income funds
described below.
OBJECTIVES AND MATURITIES
The following investment objectives are considered
"fundamental" and may be changed by a Fund only with the
approval of its shareholders. Each Fund seeks preservation
of capital as a secondary goal.
FUND INVESTMENT
OBJECTIVE MATURITY
Short Term Seeks current income Expected to hold
Bond Fund by investing primarily securities with
in a limited range of remaining maturities
investment quality fixed of five years or less.
income securities. Will maintain a dollar-
weighted average
portfolio maturity of
between 1 and 3 years.
Intermediate
Bond Fund Seeks current income by Will maintain a dollar-
investing primarily in a weighted average portfolio
broad range of investment maturity of between 3 and
quality debt securities 10 years.
Income Fund Seeks a high level of Will maintain a dollar-
current income by weighted average portfolio
investing in a broad maturity of between 7 and
range of investment 20 years.
quality debt securities.
INVESTMENT POLICIES
Under ordinary circumstances, each Fund intends to invest at
least 65% of its total assets in DEBT SECURITIES. Debt
securities are issued in exchange for money borrowed. Debt
securities, other than securities known as zero coupon
bonds, pay interest at set times, at either a fixed (set)
rate or a variable (changing) rate. Debt securities
purchased by the Funds may include corporate debt
obligations, U.S. Government securities, stripped
securities, variable and floating rate securities, mortgage-
backed securities, custodial receipts for Treasury
certificates, zero-coupon bonds, asset-backed securities,
equipment trust certificates and so-called "derivative
securities." Each Fund may also invest a portion of its
assets in bonds convertible into common stock.
Debt securities in which the Funds may invest will be rated
in one of the four highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") (for
example, BBB or higher by Standard & Poor's Ratings Group
("S&P"), or Baa or higher by Moody's Investors Service, Inc.
("Moody's")) or, if unrated, will be deemed to be of
comparable quality by Old Kent. Obligations rated in the
fourth highest rating category are considered to have
speculative characteristics. See Appendix A to the SAI for
a description of applicable S&P, Moody's and other NRSRO
ratings.
When a Fund buys debt securities, Old Kent will consider the
NRSRO ratings assigned to such securities. In making its
investment decisions, Old Kent will also consider many
factors other than current yield, including the preservation
of capital, the potential for realizing capital
appreciation, maturity and yield to maturity. Each Fund
will adjust its investments in particular securities or in
types of securities in response to Old Kent's appraisal of
changing economic conditions and trends. A Fund may sell
one security and purchase another security of comparable
quality and maturity to take advantage of what Old Kent
believes to be short-term differentials in market values or
yield disparities. Subsequent to its purchase by a Fund, a
security rated in one of the top four rating categories may
cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. Old Kent
will consider such an event in determining whether the Fund
should continue to hold the security.
What Instruments Do the Funds Invest In?
The Funds may also invest in the securities and use the
investment techniques described below. Each of these
securities and techniques is described in more detail under
"Investment Policies" in the SAI.
Each Fund may purchase U.S. GOVERNMENT OBLIGATIONS, which are
obligations issued by, or guaranteed by, the U.S. Government
or its agencies or instrumentalities. Such instruments
include U.S. Treasury notes, which have initial maturities
of one to ten years, U.S. Treasury bonds, which generally
have initial maturities of greater than 10 years, and
obligations of the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Government National
Mortgage Association and many other U.S. Government agencies
and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of
the Government National Mortgage Association, are supported
by the full faith and credit of the U.S. Treasury; others,
such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the
Student Loan Marketing Association, are supported only by
the credit of the instrumentality. No assurance can be
given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law.
The Funds will purchase CORPORATE DEBT SECURITIES, which include
corporate bonds, debentures, notes and other similar
corporate debt instruments.
The Funds may purchase rated and unrated VARIABLE AND
FLOATING RATE INSTRUMENTS. These instruments may include
variable amount master demand notes that permit the
indebtedness to vary in addition to providing for periodic
adjustments in the interest rate. A Fund may purchase
variable and floating rate instruments with stated
maturities in excess of its maturity limitations provided
that the Fund may demand payment of the principal of the
instrument at least once within the applicable maturity
limitation on not more than thirty days' notice (unless the
instrument is issued or guaranteed by the U.S. Government or
an agency or instrumentality thereof). Unrated instruments
will be determined by Old Kent to be of comparable quality
at the time of purchase to rated instruments eligible for
purchase by the Funds. The absence of an active secondary
market with respect to particular variable and floating rate
instruments could make it difficult for a Fund to dispose of
the instruments if the issuer defaulted on its payment
obligation or during periods that the Fund is not entitled
to exercise demand rights, and a Fund could, for these or
other reasons, suffer a loss with respect to such
instruments.
When Old Kent determines that market conditions are
appropriate, each Fund may, for temporary defensive
purposes, invest up to 100% of its assets in MONEY MARKET
INSTRUMENTS, which are high-quality, short-term instruments
including, among other things, commercial paper, bankers'
acceptances, negotiable certificates of deposit, short-term
corporate obligations which are rated A or better by S&P or
Moody's and short-term securities issued by, or guaranteed
by, the U.S. Government and its agencies or
instrumentalities. Each Fund may also shorten its dollar-
weighted average maturity below its normal range if such
action is deemed appropriate by Old Kent for temporary
defensive purposes. If a Fund is investing defensively, it
will not be pursuing its investment objective.
The Funds may enter into REPURCHASE AGREEMENTS. Under a
repurchase agreement, a Fund agrees to purchase securities
from a seller and the seller agrees to repurchase the
securities at a later time, typically within 7 days, at a
set price. The seller agrees to set aside collateral equal
to the price it has to pay during the term of the agreement.
This ensures that the Fund will receive the purchase price
at the time it is due, unless the seller defaults or
declares bankruptcy, in which event the Fund will bear the
risk of possible loss due to adverse market action or delays
in liquidating the underlying obligation. The Funds will
not enter into repurchase agreements with Old Kent or its
affiliates. Each Fund may also borrow money for temporary
purposes by entering into REVERSE REPURCHASE AGREEMENTS.
Under these agreements, a Fund sells portfolio securities to
financial institutions and agrees to buy them back later at
an agreed upon time and price.
The Funds may buy shares of registered MONEY MARKET INVESTMENT
COMPANIES. The Funds will bear a portion of the expenses of
any investment company whose shares they purchase, including
operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to
the Fund's own expenses.
The Funds may LEND SECURITIES to broker-dealers and other
financially sound institutional investors who will pay the
Funds for the use of the securities. The borrower must set
aside cash or liquid high-grade debt securities equal to the
value of the securities borrowed at all times during the
term of the loan. Loans may not exceed one-third of the
value of a Fund's total assets. Risks involved with such
transactions include possible delay in recovering the loaned
securities and possible loss of the securities or the
collateral if the borrower declares bankruptcy.
The investment policies discussed above are not
"fundamental" policies and may be changed by the Board of
Trustees without shareholder approval. However, the Funds
also have in place certain fundamental investment
limitations that cannot be changed for a Fund without the
approval of a majority of that Fund's outstanding shares.
Some of these limitations are summarized below. A complete
list of the fundamental investment limitations for the Funds
is contained in the SAI.
1. With respect to 75% of each Fund's total assets, the
Funds cannot invest more than 5% of their respective total
assets in any one issuer (other than the U.S. Government,
its agencies and instrumentalities). In addition, the Funds
cannot invest more than 25% of their respective total assets
in a single industry. These restrictions require the Funds
to be more diversified in order to lower the risk to a Fund
of an economic setback for any one issuer or in any one
industry.
2. Each Fund may only borrow money for temporary or
emergency purposes, and such borrowing is limited to an
amount not greater than one-third of the Fund's net assets,
provided that while borrowings from banks exceed 5% of a
Fund's net assets, any such borrowings will be repaid before
additional investments are made. The limits on the amount
each Fund can borrow prevents the Fund from significantly
leveraging its assets.
3. Each Fund may not invest more than 15% of its net assets
in illiquid securities. Typically, there is no ready market
for such securities, which inhibits a Fund's ability to sell
the securities and to obtain values for the securities.
What Are the Risks of Investing in the Funds?
Investing in the Funds may be less risky than investing in
individual debt instruments due to the diversification of
investing in a portfolio containing many different debt
instruments. The Funds invest mostly in debt instruments,
whose values typically rise when interest rates fall and
fall when interest rates rise. Bonds with shorter
maturities (time period until repayment) tend to be less
affected by interest rate changes, but generally offer lower
yields than bonds with longer maturities. Current yield
levels should not be considered representative of yields for
any future time. Securities with variable interest rates
and derivative securities may exhibit greater price
variations than ordinary securities.
By itself, no Fund constitutes a balanced investment
program. There is no guarantee that any Fund will achieve
its investment objective since there is uncertainty in every
investment. When you sell your shares in the Funds, they
may be worth more or less than the amount you paid.
PERFORMANCE
How is the Funds' Performance Calculated?
There are various ways in which the Funds may calculate and
report their performance. Performance is calculated
separately for the Investment Shares and the Institutional
Shares.
One method is to show a Fund's total return. CUMULATIVE TOTAL
RETURN is the percentage change in the value of $1,000
invested in the Fund over a stated period of time and takes
into account reinvested dividends and the payment of the
maximum sales charge (4%) on Investment Shares. Although
cumulative total return most closely reflects the actual
performance of a Fund, a shareholder who opts to receive
dividends in cash, or an Investment class shareholder who
paid a sales charge lower than 4%, will have a different
return than the reported performance. AVERAGE ANNUAL TOTAL
RETURN refers to the average annual compounded rates of
return over a specified period on an investment in shares of
a Fund determined by comparing the initial amount invested
to the ending redeemable value of that amount, taking into
account reinvested dividends and the payment of the maximum
sales charge (4%) on Investment Shares.
The Funds may also publish their CURRENT YIELD, which is the
net investment income generated by a share of a Fund during
a 30-day period divided by the maximum offering price on the
30th day. "Maximum offering price" includes the sales
charge for Investment Shares.
Investment Shares may be purchased with a sales load and may
have higher fees and expenses than Institutional Shares, so
the yield and total return of Investment Shares will be
lower than that of Institutional Shares. The Funds may
sometimes publish total returns that do not take into
account sales charges and such returns will be higher than
returns which include sales charges. You should be aware
that (i) past performance does not indicate how a Fund will
perform in the future and (ii) each Fund's return and NAV
will fluctuate, so you cannot necessarily use a Fund's
performance data to compare it to investments in
certificates of deposit, savings accounts or other
investments that provide a fixed or guaranteed yield.
Each Fund may compare its performance to that of other
mutual funds, such as the performance of similar funds
prepared by Lipper Analytical Services, Inc. or information
reported in national financial publications (such as Money
Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times) or in local or regional publications. Each
Fund may also compare its total return to indices such as
the S&P 500, the Merrill Lynch Bond indices, and Lehman
Brothers Bond indices. These indices show the value of
selected portfolios of stocks (assuming reinvestment of
dividends) which are not managed by a portfolio manager.
The Funds may report how they are performing in comparison
to the Consumer Price Index, an indication of inflation
reported by the U.S. government.
Where Can I Obtain Performance Data?
The Wall Street Journal and certain local newspapers report
information on the performance of mutual funds. In
addition, performance information is contained in the Funds'
annual report dated December 31 of each year (the Trust's
fiscal year end) and semi-annual report dated June 30 of
each year, which will automatically be mailed to
shareholders. To obtain copies of financial reports or
performance information, call 1-800-633-KENT (5368).
EXPENSE INFORMATION
What Are the Funds' Expenses?
A pro rata portion of the Trust are allocated to the Fund
you own and to the particular class of shares you own and
will be reflected in the value of your shares. Such
expenses are not paid directly by shareholders.
TRUST EXPENSES. Expenses charged at the Trust level include
fees paid to Trustees, legal counsel and auditors and
administration fees. First Data is entitled to receive, for
its administration services, an annual fee equal to 0.20% of
the aggregate net assets of all funds in the Trust up to $5
billion; 0.18% of the Trust's aggregate net assets between
$5 and $7.5 billion; and 0.15% of the Trust's aggregate net
assets over $7.5 billion.
FUND EXPENSES. Most expenses will be charged at the Fund
level, including investment advisory fees, Securities and
Exchange Commission registration fees, transfer agency fees,
custody fees, brokerage commissions, interest charges and
taxes. Old Kent is entitled to receive from each Fund, and
received from each Fund during the fiscal year ended
December 31, 1995, an annual advisory fee at the following
rates based on each Fund's average daily net assets: Short
Term Bond Fund, 0.50%; Intermediate Bond Fund, 0.55%; and
Income Fund, 0.60%. Old Kent may rebate advisory fees to
certain institutional customers in accordance with Federal
and state law.
CLASS EXPENSES. Expenses allocated at the class level
include printing and mailing expenses and expenses payable
under the Funds' Distribution Plans. The Distribution Plans
provide that each Fund may spend, in one year, up to 0.25%
of the average daily net assets of the Fund's Investment
Shares to finance sales activities of the Investment Shares,
including marketing and advertising shares, maintaining
account records, issuing confirmation statements and
providing sub-accounting. Banks, broker-dealers and other
organizations may also receive payments for providing
support and/or distribution services to the Funds'
shareholders who are their customers. Federal banking law
currently limits the securities activities of banks. If a
bank was not allowed to provide support and/or distribution
services, the Fund would find another organization to
provide such services and no shareholder should suffer any
financial loss. The Funds do not reimburse 440
Distributors, the Funds' distributor, for any distribution
expenses in excess of the payments received by 440
Distributors under the Distribution Plan or for its overhead
expenses.
PURCHASES OF SHARES
Who May Want to Invest in the Funds?
Investment Shares may be purchased by individual investors
and Institutional Shares may be purchased only by financial
and other institutions for the benefit of fiduciary, agency
or custodial accounts. The Funds, which are bond funds
(also known as fixed income funds), are designed for
investors who desire potentially higher returns than more
conservative fixed rate investments or money market funds
and who seek current income. When you choose among the
Funds, you should consider both the expected yield of the
Fund and potential price changes in the Fund's share price.
The yield and potential price changes of a Fund's shares
depend on the quality and maturity of the obligations in its
portfolio, as well as on other market conditions (see
"Performance - How Is the Funds' Performance Calculated?").
When Can I Purchase Shares?
Shares can be purchased on any day that both the NYSE and
Bankers Trust Company, the Funds' custodian, are open for
business.
What is the Minimum Required Investment?
An investor must initially invest at least $1,000 ($100 for
IRAs) in Investment Shares and at least $10,000 in
Institutional Shares. Subsequent investments may be made in
any amount. The investment minimums may be waived for
purchases by employees of Old Kent, participants in tax-
sheltered plans and certain qualified retirement accounts.
How Can I Purchase Shares?
INVESTMENT SHARES
For your convenience, the Funds offer a wide variety of
methods to purchase Investment Shares.
* Through a Broker. Any broker authorized by 440
Distributors, the Funds' distributor, can sell you
Investment Shares of the Funds. Please note that such
brokers may charge you fees for their services.
* By Mail. You may open an account by mailing a
completed application and a check (payable to the applicable
Fund) to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
* By Telephone. You should call 1-800-633 KENT (5368)
to open an account and electronically transfer money to the
account, followed by a completed application.
* By Check. Subsequent purchases of Investment Shares
can be made by mailing a check to the address listed above.
* By Federal Funds Wire. Subsequent purchases of
Investment Shares can be made via a federal funds wire sent
to Fleet Bank for credit to a particular Fund. You should
call 1-800-633-KENT (5368) for complete wire instructions.
You should be aware that banks may charge fees for sending
wires. 440 Distributors has the right to charge fees for
receiving wires, although it does not currently do so.
* By Electronic Funds Transfer (For subsequent purchases
only). Call 1-800-633-KENT (5368) to request a purchase to
be made or for the forms to establish Electronic Fund
Transfer
* Through an Automatic Investment Plan
* Call 1-800-633-KENT (5368) to establish an Automatic
Investment Plan.
* Invest at least $1,000 in an Investment Share account.
* On the 5th day of each month, your checking account
will be debited (minimum of $50) and Investment Shares will
be purchased and held in your account.
To change the amount invested each month in Investment
Shares, or to stop the Automatic Investment Plan, call 1-
800-633-KENT, or write to: The Kent Funds, c/o 440
Distributors, 4400 Computer Drive, P.O. Box 5107, Westboro,
MA 01581-5107 at least 5 days before a scheduled investment.
* Through Direct Deposit
You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks.
* Through a Tax-Sheltered Plan
Investment Shares of the Funds may be purchased
through IRAs and Rollover IRAs, which are available through
the Distributor. For details and application forms, call
The Kent Funds at 1-800-633-KENT (5368) or write The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the
following steps:
* To open an account, call 1-800-633-KENT (5368) to
obtain an account or wire identification number.
* Place a purchase order for shares by telephoning the
number above.
* Wire federal funds to Fleet Bank no later than the day
after the purchase order is placed.
You should note that (i) a purchase of Institutional Shares
will not be completed until Fleet Bank receives the purchase
price and (ii) banks may charge for wiring federal funds to
Fleet Bank. You may obtain information on how to wire funds
from any national bank and certain state banks.
EXCHANGE PRIVILEGE
You may acquire Investment or Institutional Shares of a Fund
(the "new fund") by exchanging shares of another investment
portfolio offered by the Trust (the "old fund") for shares
of the new fund. Shares of the new fund will be of the same
class as the old fund. In effect, you would be redeeming
(reselling to the fund) shares of the old fund and
purchasing shares of the new fund. To determine the price
at which shares are redeemed, see "What Price Do I Receive
for Shares?" and to determine the price at which shares are
purchased, see "What Price Do I Pay for Shares?"
* Call 1-800-633-KENT (5368) or write to: The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107 to obtain a prospectus for the
new fund prior to the exchange.
* Call or write as indicated in * above to place an
order to exchange shares. Purchases of new funds must meet
the minimum purchase requirement of that fund. If the order
to exchange shares is placed prior to or at 4:00 p.m.
Eastern Standard Time on any business day, the order will be
executed on the day received, and if the order is placed
after 4:00 p.m. Eastern Standard Time, the order will not be
executed until the next business day.
* If a shareholder does not have an account with the new
fund, a new account will be established with the same
reinvestment options for distributions as the account for
the old fund, unless the shareholder writes to the new fund
to change the option.
Important Information About Exchanges
If shares of a Fund are purchased by check, such shares cannot be exchanged
for 15 days. The Trust may disallow exchanges of shares if a shareholder has
made more than 5 exchanges between investment portfolios offered by the Trust
in a year, or more than 3 exchanges in a calendar quarter. Although unlikely,
the Trust may reject any exchanges or the Funds may change or terminate
rights to exchange shares. The exchange privilege is available only in states
where shares of the new fund may be sold.
No sales charge is imposed when Investment Shares on which a
shareholder previously paid a sales charge are exchanged for
Investment Shares of another investment portfolio. However,
a sales charge will be imposed on exchanges of Investment
Shares purchased without a sales charge (i.e., money market
portfolio shares) for Investment Shares of a Fund which
imposes a sales charge. In order to make an exchange,
shareholders will be required to maintain the applicable
minimum account balance in each investment portfolio of the
Trust in which shares are owned.
Institutional Shares of a Fund may be exchanged for
Investment Shares of the same Fund when the Institutional
Shares are distributed to the underlying beneficial owners
of trust accounts, 401(k) plans and other fiduciary or
agency accounts. No sales charge is imposed in connection
with such an exchange.
_________________________________________
Investors should note that each Fund has the right to stop
offering its shares, to reject purchase orders and to
suspend the exchange privilege, although such actions are
unlikely. 440 Distributors may require additional documents
prior to accepting a purchase, redemption or exchange.
Shareholder Services
For further information on all shareholder services, call
The Kent Funds
toll-free at 1-800-633-KENT (5368)
or write to
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
What Price Do I Pay For Shares?
Investment Shares are sold at the "net asset value next
determined" by the Fund plus any "applicable sales charge"
and Institutional Shares are sold at the "net asset value
next determined" by the Fund. These terms are explained
below. You should be aware that broker-dealers (other than
the Funds' distributor) may charge investors additional fees
if shares are purchased through them.
NET ASSET VALUE. Except in certain limited circumstances,
at 4:00 p.m. on each day the NYSE is open for trading each
Fund determines its NAV. NAV is calculated separately for
the Investment Shares and Institutional Shares of each Fund.
The "net asset value next determined" is the NAV calculated
at 4:00 p.m. on the day a purchase order for shares is
received, if the purchase order is received prior to or at
4:00 p.m., and is the net asset value calculated at 4:00
p.m. on the next business day, if the purchase order is
received after 4:00 p.m. The NAV is calculated by totaling
the value of all of the assets of a Fund allocated to a
particular class of shares, subtracting the Fund's
liabilities and expenses allocated to that class, and
dividing the result by the number of shares of that class
outstanding. When market quotations are readily available,
the Funds' assets are valued at market value. Debt
instruments with maturities of 60 days or less are valued at
amortized cost, unless the Board of Trustees determines that
this does not result in a fair value. All other assets are
valued at fair value as determined by or under the direction
of the Board of Trustees. The Funds may use pricing
services to help determine the fair value of securities.
APPLICABLE SALES CHARGE. Except in the circumstances
described below, a sales charge must be paid at the time of
purchase of Investment Shares. The more Investment Shares
an investor purchases, the lower the percentage of the sales
charge will be, as the table below indicates.
AMOUNT OF PURCHASE AS A % OF OFFERING AS A % OF NET
PRICE* AMOUNT
INVESTED**
Under $100,000 4.00% 4.17%
$100,000 - $249,999 3.00% 3.10%
$250,000 - $499,999 2.00% 2.04%
$500,000 - $999,999 1.00% 1.01%
$1,000,000 and over 0.75% 0.76%
*Maximum reallowance to dealers.
**Rounded to the nearest one-hundredth
percent.
For instance, if you wish to invest $275,000 in a Fund, you
would pay to the Fund $275,000 plus $5,610 (2.04% of
$275,000).
Certain investors may reduce the percentage of sales charge
they pay for Investment Shares by purchasing shares of more
than one investment portfolio of the Trust ("Portfolio") at
the same time, by purchasing additional shares of Portfolios
in the future or by agreeing to invest a certain amount in
the Portfolios during a 13-month period, as described below.
Call the Trust at 1-800-633-KENT (5368) to determine if you
qualify for such reductions.
Concurrent Purchases. If you purchase Investment Shares of
more than one Portfolio that is subject to a sales load at
the same time, you may be able to total the amount being
invested in all Portfolios at that time to determine the
sales charge payable. For example, if you concurrently
invested $100,000 in the Intermediate Bond Fund and $50,000
in the Income Fund, the sales charge assessed would be 3% of
$150,000, or $4,500.
Rights of Accumulation. If you buy additional Investment
Shares of a Fund, then you may be able to total the amount
of money currently being invested and the current value of
previously purchased shares of a Portfolio (other than the
Money Market Fund or the Michigan Municipal Money Market
Fund) still held to determine the amount of sales charge
payable. For example, if you had previously purchased
10,000 shares of the Income Fund and still held 5,000 shares
of that Fund on a day when you purchased an additional
20,000 shares of the Fund and the Fund's NAV was $10 per
share, you would pay a sales charge of 2% (the applicable
rate on a $250,000 purchase) on the $200,000 worth of new
shares being purchased, or $4,000. To take advantage of the
rights of accumulation, you must contact 440 Distributors at
1-800-633-KENT (5368) at the time of purchase. The Trust
may change or terminate rights of accumulation at any time.
Letter of Intent. If you intend to make several investments
in one or more Portfolios over time, you may wish to
complete the Letter of Intent section of your new account
application. By doing
so, you agree to invest a certain amount in one or more of
the Portfolios over a 13-month period. Each investment in a
Portfolio during the 13 months would then be subject to the
sales charge applicable to the total amount to be invested
under the Letter of Intent in Portfolios that charge a sales
load. For example, if you stated in your application your
intent to invest $275,000 in one or more Portfolios that
charge a sales load but you only invested $75,000 at the
time you completed your application, then you would pay a
sales charge of 2% of $75,000, or $1,500, which is half of
the 4% sales charge that you would otherwise have paid on
such investment. The Letter of Intent may be back-dated up
to 90 days so that any investments made in any of the
Portfolios (other than in the Money Market Fund and the
Michigan Municipal Money Market Fund) during the preceding
90-day period can be applied toward fulfillment of the
Letter of Intent (although there will be no refund of sales
charges paid during the 90-day period). You should inform
440 Distributors that you have a Letter of Intent each time
you make an investment.
You are not obligated to purchase the amount specified in
the Letter of Intent. If you purchase less than the amount
specified, however, you must pay the difference between the
sales charge paid and the sales charge applicable to the
purchases actually made. Shares representing 5% of the
dollar amount specified in the Letter of Intent will be held
in escrow. Such shares will not be available for
redemption, transfer or pledge until the Letter of Intent is
completed or the higher sales charge paid. If the intended
investment is not completed and you do not pay the
difference between the sales charge paid and the sales
charge applicable to the purchases actually made within 20
days after written request by 440 Distributors or its
dealer, 440 Distributors will redeem an appropriate number
of escrowed shares and release the balance of escrowed
shares to you. You are entitled to all income and capital
gains distributions paid with respect to the escrowed
shares.
Other. Sales charges may be waived entirely for investors
who transfer balances from mutual fund companies other than
the Trust during certain promotional periods announced by
440 Distributors. In addition, sales charges will not be
payable by (1) current full-time and part-time employees,
retired employees and Directors of OKFC and its
subsidiaries; (2) Trustees of the Trust; (3) registered
representatives of firms which have dealer or broker
agreements with 440 Distributors relating to Investment
Shares; and (4) spouses and dependent children of the
individuals listed in (1) - (3) above; (5) OKFC or one of
its subsidiaries, acting on behalf of fiduciary customer
accounts and any other account maintained by a trust
department; (6) employees of First Data and 440
Distributors; and (7) participants in certain qualified
retirement plans.
For further information about sales charge reductions and
waivers and the programs described above, call toll-free at
1-800-633-KENT (5368) or write to
The Kent Funds, c/o 440 Distributors,
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
REDEMPTIONS (SALES) OF SHARES
When Can I Redeem Shares?
You can redeem shares on any day that the NYSE is open for
trading. Shares will not be redeemed by a Fund unless all
required documents have been received by 440 Distributors.
A Fund may temporarily stop redeeming shares when the NYSE
is closed or trading on the NYSE is restricted, when an
emergency exists and the Fund cannot sell its assets or
accurately determine
the value of its assets or if the Securities and Exchange
Commission orders the Fund to stop redemptions. If you
intend to redeem shares worth more than $1,000,000, you
should notify the Fund at least one day in advance.
How Can I Redeem Shares?
INVESTMENT SHARES
* By Mail. You may mail your redemption notice to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
The redemption notice should state the amount of money or
number of shares to be redeemed, and the account name and
number. If a stock certificate has been issued to you, you
must endorse (sign the back of) the stock certificate and
return it to the Fund together with the written redemption
notice.
Important Information Regarding Stock Certificates and
Redemption Notices for Investment Shares
Signatures on all redemption notices and stock certificates
must be guaranteed by a U.S. stock exchange member, a U.S.
commercial bank or trust company and other entities approved
by 440 Distributors, unless the amount redeemed is less than
$50,000 and the account address has been the same for at
least 90 days. The Funds can change the above requirements
or require additional documents at any time.
* By Telephone. You can redeem up to $50,000 worth of
Investment Shares by calling 1-800-633-KENT (5368). If
the amount redeemed is less than $2,500, then a check will
be mailed to you and if equal to or greater than $2,500,
then the proceeds will be mailed or sent by wire or
electronic funds transfer to the bank listed on your
account.
* Through a Broker. Investment Shares can be redeemed
through a broker. The broker should send the redemption
notice and any other required documents to 440 Distributors,
which will send the proceeds to the broker or directly to
you, at your option, within 3 days after receiving proper
documents. 440 Distributors does not charge a fee for this
service, but the broker might.
* Through an Automatic Withdrawal Plan. Under the Plan,
a shareholder with an account worth at least $10,000 may
redeem, either monthly or quarterly, fixed dollar amounts of
Investment Shares. Each payment must be at least $100 and
can be no more than 1.5% per month, or 4.5% per quarter, of
the value of the shareholder's Investment Shares when the
Automatic Withdrawal Plan was opened. The proceeds can be
mailed or sent by electronic funds transfer to the bank
listed on your account.
INSTITUTIONAL SHARES
You can redeem Institutional Shares by mail, by telephone or
through a broker by following the procedures described for
Investment Shares. Redemption proceeds will be wired in
federal funds only to the commercial bank and account number
listed on your account application. To change the bank
account, you should call the Funds at 1-800-633-KENT (5368)
and request the appropriate form.
GENERAL REDEMPTION INFORMATION
During periods of unusual market activity it may be
difficult to reach the Funds by telephone. In such cases,
shareholders should follow the procedures for redeeming by
mail or through a broker. Neither the Trust nor any of its
service providers will be liable for following telephone
instructions reasonably believed to be genuine unless it
acts with willful misfeasance, bad faith or gross
negligence. In this regard the Trust and its transfer agent
require personal identification before accepting a telephone
redemption. To the extent that the Trust fails to use
reasonable procedures as a basis for its belief that
telephone instructions are genuine, it and/or its service
providers may be liable for instructions that prove to be
fraudulent and unauthorized.
Each Fund reserves the right to redeem an account if its
value falls below $1,000 ($100 for IRA accounts) for
Investment Shares and $100,000 for Institutional Shares as a
result of redemptions (but not as a result of a decline in
net asset value). A shareholder will be notified in writing
and allowed 60 days to increase the value of the account to
the minimum investment level.
What Price Do I Receive for Shares?
You will receive the NAV next determined for each share you
wish to redeem. See "Purchases of Shares - What Price Do I
Pay for Shares?" for an explanation of how the NAV next
determined is calculated.
When Will I Receive Redemption Money?
Redemption proceeds are typically sent to shareholders
within 3 business days after a request for redemption is
made. You should be sure that you submit all proper
documents for redemption; otherwise, the payment of
redemption proceeds may be delayed. You may call the Funds
at 1-800-633-KENT (5368) to be sure that you have proper
documents for redemption. If you purchase shares with a
check and try to redeem shares a short time later, the Fund
may delay paying redemption proceeds until the check has
been collected, although the amount to be paid for the
shares will be calculated when the redemption notice is
received. The delay could take 15 days or more. To avoid a
delay in receiving redemption proceeds, you should purchase
shares through a bank wire or electronic funds transfer.
Information on wires can be obtained from all national and
many state banks.
STRUCTURE AND MANAGEMENT OF THE FUNDS
How Are the Funds Structured?
The Trust is an open-end management investment company,
which is a mutual fund that sells and redeems shares every
day that it is open for business. The Trust was organized
on May 9, 1986 as a Massachusetts business trust. The Trust
is governed by a Board of Trustees. The Trustees are
responsible for the overall management of the Trust and
retain and supervise the Funds' Adviser, Administrator,
Distributor, Transfer Agent and Custodian. Currently, the
Trust has thirteen portfolios, each of which offers 2
classes of shares.
Who Manages and Services the Funds?
INVESTMENT ADVISER. The Funds are advised by Old Kent, an
indirect wholly-owned subsidiary of OKFC, which is a
financial services company with total assets as of December
31, 1995 of approximately $12 billion. Old Kent provides
investment advice to the Funds under a contract with the
Funds.
Old Kent's Investment Department employs an experienced
staff of professional investment analysts, portfolio
managers and traders, and uses several proprietary computer-
based systems in conjunction with fundamental analysis to
identify investment opportunities. Old Kent has provided
investment advisory services to individual and corporate
trust accounts for over 100 years. Old Kent is located at
One Vandenberg Center, Grand Rapids, MI 49503. Through
offices in Michigan, Florida and Illinois, OKFC and its
subsidiaries provide a broad range of financial services to
individuals and businesses. Old Kent currently has the
right to vote a majority of the Trust's outstanding shares
on behalf of its underlying customer accounts and therefore
it is considered to be a controlling person of the Trust.
Old Kent has committed several portfolio managers to the
day-to-day management of the Funds. Joseph T. Keating, a
Senior Vice President in the Investment Management Group, is
responsible for developing and implementing the Funds'
investment policies. Mr. Keating has over 20 years of
investment experience and has served in various management
positions with Old Kent for the past 9 years. Allan J.
Meyers, a Vice President in the Investment Management Group,
is Director of fixed income funds and the portfolio manager
of the Short Term Bond Fund. He has managed the Fund since
its inception. Mr. Meyers has over 12 years of investment
experience with Old Kent. Mitchell L. Stapley, a Vice
President in the Investment Management Group, is responsible
for fixed income investments and the portfolio manager of
the Intermediate Bond and the Income Funds, which he has
managed since inception. Mr. Stapley has over 9 years of
investment experience with Old Kent.
Old Kent selects broker-dealers to execute portfolio
transactions for the Funds based on best price and execution
terms. Old Kent may consider as a factor the number of
shares of a Fund sold by the broker-dealer. The broker-
dealers may be affiliated with the Trust or its service
providers or their affiliates subject to any limitations
imposed by applicable securities laws and regulations.
ADMINISTRATOR. First Data provides management and
administrative services to the Funds, including providing
office space, equipment and clerical personnel to the Funds
and supervising custodial, auditing, valuation, bookkeeping,
legal and dividend dispersing services. First Data also
acts as the transfer agent and dividend paying agent of the
Funds. First Data is located at One Exchange Place, Boston,
Massachusetts 02109.
DISTRIBUTOR. 440 Distributors is the distributor of the
Funds' shares and is paid a sales charge on the sale of
Investment Shares, described under "Purchases of Shares -
What Price Do I Pay For Shares?" The Distributor may
reallow all or a portion of the sales charge to a broker-
dealer. The second column under the table labeled
"Applicable Sales Charge" shows the maximum amount of the
reallowance. The Distributor may, from time to time,
provide promotional incentives to certain dealers whose
representatives have sold or are expected to sell
significant amounts of Investment Shares. The Distributor
may provide written information to dealers with whom it has
dealer agreements that relate to sales incentive campaigns
conducted by such dealers for their representatives. In
addition, the Distributor may similarly provide financial
assistance in connection with pre-approved seminars,
conferences and advertising. No such programs or additional
compensation will be offered to the extent that they are
prohibited by the laws of any state or any self-regulatory
agency, such as the NASD. Dealers to whom substantially the
entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities
Act of 1933.
What Are My Rights as a Fund Shareholder?
As a shareholder of a Fund, you have the right to vote on
certain matters affecting the Fund, such as elections of
Trustees and approval of advisory contracts and distribution
arrangements. The Funds will not have annual shareholder
meetings, but special meetings may be held at the request of
investors holding 10% of the shares for the purpose of
removing a Trustee. You are entitled to one vote for each
share you hold and a fractional vote for each fraction of a
share you hold. You will be asked to vote only on matters
affecting the Trust as a whole and your particular Fund and
class of shares, and not on matters only affecting other
Funds or classes of shares. You should be aware that under
Massachusetts law it is possible that a shareholder may be
personally liable for the Fund's obligations. If a
shareholder were required to pay a debt of a Fund, however,
the Fund has committed to reimburse the shareholder in full
from its assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
When Will I Receive Distributions From the Funds?
Each Fund will distribute substantially all of its net
investment income and long-term capital gains to
shareholders each year. Each Fund will declare and pay
dividends monthly. Each Fund will distribute realized long-
term capital gains, if any, once a year. You should be
aware that each time a distribution is made from a Fund, the
Fund's net asset value is reduced by the amount of the
distribution. Therefore, if you buy shares just before a
distribution is made, you will pay full price for the shares
and then receive a portion of the price back as a taxable
distribution.
How Will Distributions Be Made?
Dividend and capital gains distributions will be paid in
additional shares of the Funds. If you wish to receive
distributions in cash, notify the Fund at 1-800-633-KENT
(5368) and a check will be mailed to you each time a
distribution is made. Your distributions may also be sent
by electronic funds transfer directly to your designated
bank account. Shareholders in IRA accounts and participants
in certain tax-qualified plans cannot receive distributions
in cash.
What Are the Tax Implications of My Investments in the
Funds?
Income dividends by each Fund will be taxable to you as
ordinary income, unless you are exempt from Federal income
taxes. Capital gains distributions will be taxed to you as
long-term capital gains (regardless of how long you have
held the shares). Please note that the above tax treatment
applies regardless of whether you receive your distributions
in cash or in additional shares. Federal income taxes for
distributions to an IRA or to a qualified retirement plan
are deferred. Income dividends will qualify for the
dividends received deduction for corporations to the extent
of the total qualifying dividends received by the
distributing Fund from domestic corporations for the year.
Any distribution that is declared in October, November or
December but not actually paid until January of the
following year will be taxable in the year declared. When
you redeem, transfer or exchange shares, you may have a
taxable gain or loss depending on whether the price you
receive for the shares has a value higher or lower than your
tax basis in the shares. If you hold shares for six months
or less, and during that time you received a capital gain
dividend, any loss you realize on the sale of those shares
will be treated as a long-term loss to the extent of the
earlier distribution. You will receive from each Fund in
which you are a shareholder shortly after the end of each
year a statement of the amount and nature of distributions
made to you during the year. You will also receive a
confirmation statement shortly after disposing of shares
showing the amount and value of the disposition.
Because the Funds each intend to qualify as a "regulated
investment company" under the Internal Revenue Code, they
generally will not be required to pay Federal income taxes
on their income and capital gains.
You should note that in certain cases (i) the Funds will be
required to withhold 31% of dividends or sale proceeds
otherwise due to you and (ii) in addition to Federal taxes,
state and local taxes may apply to transactions in shares.
This section contains a brief summary of the tax
implications of ownership of the Funds' shares. A lengthier
description of taxes is contained in the SAI. You should
consult your tax adviser regarding the impact of owning the
Funds' shares on your own personal tax situation, including
the applicability of any state and local taxes.
ADDITIONAL INFORMATION
Where Do I Get Additional Information About My Account and
the Funds?
For more information, call the Funds at 1-800-633-KENT
(5368) or write to the Funds at:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Except as otherwise stated in this prospectus or required by
law, the Trust reserves the right to change the terms of any
offer stated in this prospectus without shareholder
approval, including the right to charge certain fees for
services provided. No person has been authorized to give
any information or to make any representation not contained
in this prospectus, or in the SAI, in connection with the
offering made by this prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Funds or their Distributor.
This prospectus does not constitute an offering by the Funds
or by their Distributor in any jurisdiction in which such
offering may not lawfully be made.
THE KENT FUNDS
Prospectus
Dated May 1, 1996
THIS PROSPECTUS RELATES TO THE FOLLOWING EQUITY FUNDS (THE
"FUNDS"):
THE KENT GROWTH AND
INCOME FUND
SEEKS LONG-TERM CAPITAL
GROWTH WITH CURRENT INCOME
AS A SECONDARY OBJECTIVE.
THE FUND PRIMARILY INVESTS
IN COMMON STOCK OF U.S.
COMPANIES WITH A NET
CAPITALIZATION OF AT LEAST
$100 MILLION WHICH ARE
LISTED ON THE NEW YORK STOCK
EXCHANGE ("NYSE").
THE KENT
INTERNATIONAL
GROWTH FUND
SEEKS LONG-TERM CAPITAL
APPRECIATION. THE FUND
PRINCIPALLY INVESTS IN
EQUITY SECURITIES OF ISSUERS
LOCATED IN AT LEAST THREE
FOREIGN COUNTRIES.
THE KENT SMALL
COMPANY
GROWTH FUND
SEEKS LONG-TERM CAPITAL
APPRECIATION. THE FUND
PRINCIPALLY INVESTS IN
COMPANIES WHOSE SECURITIES
ARE TRADED IN THE U.S.
SECURITIES MARKETS AND WHOSE
MARKET CAPITALIZATIONS ARE
LESS THAN $1 BILLION.
THE KENT INDEX
EQUITY FUND
SEEKS INVESTMENT RESULTS
WHICH REPLICATE THE CAPITAL
PERFORMANCE AND DIVIDEND
INCOME OF THE STANDARD &
POOR'S 500 COMPOSITE STOCK
PRICE INDEX ("S&P 500").
________________________________
This Prospectus contains information that a prospective investor
should know before investing. Investors should read and retain
this Prospectus for future reference. The Kent Funds has filed
a Statement of Additional Information ("SAI") dated May 1, 1996
with the Securities and Exchange Commission, which is
incorporated by reference into this Prospectus. For a free copy
of the SAI, or for other information about the Funds, write to
the address or call the telephone number listed below.
Shares of the Funds are not bank deposits or obligations of, or
guaranteed or endorsed by, the Funds' investment adviser or any
of its affiliates, and are not federally insured by, guaranteed
by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other governmental agency. An
investment in mutual fund shares involves risk, including the
possible loss of principal. Old Kent Bank receives fees from
the Funds for advisory and certain other services.
__________________________________________________
The Kent Funds
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Call Toll-Free For Shareholder Services:
1-800-633-KENT (5368)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
HIGHLIGHTS
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
FINANCIAL INFORMATION
WHAT ARE THE FUNDS' KEY FINANCIAL HIGHLIGHTS?
FUND
CHOICES
WHAT FUNDS ARE OFFERED?
(FUND INVESTMENT OBJECTIVES AND POLICIES)
WHAT INSTRUMENTS DOES EACH FUND INVEST IN?
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
PERFORMANCE
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
WHERE CAN I OBTAIN PERFORMANCE DATA?
EXPENSE INFORMATION
WHAT ARE THE FUNDS' EXPENSES?
WHO MAY WANT TO INVEST IN THE FUNDS?
WHEN CAN I PURCHASE SHARES?
WHAT IS THE MINIMUM REQUIRED INVESTMENT?
HOW CAN I PURCHASE SHARES?
WHAT PRICE DO I PAY FOR SHARES?
PURCHASES OF SHARES
WHEN CAN I REDEEM SHARES?
HOW CAN I REDEEM SHARES?
WHAT PRICE DO I RECEIVE FOR SHARES?
WHEN WILL I RECEIVE REDEMPTION MONEY?
REDEMPTIONS (SALES) OF SHARES
HOW ARE THE FUNDS STRUCTURED?
WHO MANAGES AND SERVICES THE FUNDS?
WHAT ARE MY RIGHTS AS A FUND SHAREHOLDER?
STRUCTURE AND MANAGEMENT OF THE FUNDS
WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
HOW WILL DISTRIBUTIONS BE MADE?
WHAT ARE THE TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
DIVIDENDS, DISTRIBUTIONS AND TAXES
ADDITIONAL INFORMATION
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
HIGHLIGHTS
What Are the Key Facts Regarding the
Funds?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is a family of open-end
management investment companies (commonly known as mutual
funds) that offers investors the opportunity to invest in
different investment portfolios, each having separate
investment objectives and policies. This prospectus
describes the Trust's Growth and Income Fund, Small Company
Growth Fund, International Growth Fund and Index Equity
Fund. See "Fund Choices - What Funds Are Offered?" The
Trust also offers the following investment portfolios by
separate prospectuses: The Kent Money Market Fund, The Kent
Michigan Municipal Money Market Fund, The Kent Short Term
Bond Fund, The Kent Intermediate Bond Fund, The Kent Income
Fund, 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. To obtain a
prospectus for any Kent Fund, please call 1-800-633-KENT
(5368).
Q: Who advises the Funds?
A: The Funds are managed by Old Kent Bank ("Old Kent"),
an indirect wholly-owned subsidiary of Old Kent Financial
Corporation ("OKFC"). OKFC is a financial services company
with total assets as of December 31, 1995 of approximately
$12 billion. See "Structure and Management of the Funds -
Who Manages and Services the Funds?"
Q: What advantages do the Funds offer?
A: The Funds offer investors the opportunity to invest in
a variety of professionally managed diversified investment
portfolios without having to become involved with the
detailed accounting and safekeeping procedures normally
associated with direct investments in securities. The Funds
also offer the economic advantages of block trading in
portfolio securities and the availability of a family of
thirteen mutual funds should your investment goals change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by 440 Financial
Distributors, Inc. ("440 Distributors") and are sold in two
classes: Investment Shares and Institutional Shares.
Investment Shares can be purchased from any broker-dealer or
financial institution which has entered into a dealer
agreement with 440 Distributors, or by completing an
application and mailing it directly to 440 Distributors with
a check, payable to the appropriate Fund, for $1,000 or
more, or $100 or more for Individual Retirement Accounts
("IRAs"). Institutional Shares are offered to financial and
other institutions for the benefit of fiduciary, agency or
custodial accounts. The minimum initial aggregate
investment for Institutional Shares is $100,000. The Trust
may waive the minimum purchase requirements in certain
instances. Institutional Shares purchasers should call
First Data Investor Services Group, Inc. ("First Data"), the
Trust's Transfer Agent and Administrator, toll-free at 1-
800-633-KENT (5368) for instructions on how to open an
account. See "Purchases of Shares."
For information on how to redeem your shares, see
"Redemptions (Sales) of Shares."
Q: When are dividends paid?
A: Dividends of each Fund's net investment income are
declared and paid monthly, except for the International
Growth Fund, which declares and pays dividends of its net
investment income annually. Net realized capital gains of
the Funds are distributed at least annually. See
"Dividends, Distributions and Taxes."
Q: What shareholder privileges are offered by the Trust?
A: Investors may exchange shares of a Fund having a value
of at least $100 for shares of the same class of any other
investment portfolio offered by the Trust in which the
investor has an existing account. The Trust offers IRAs,
which can be established by contacting the Trust's
Distributor. The Trust also offers an Automatic Investment
Program which allows investors to automatically invest in
Investment Shares on a monthly basis. See "Purchases of
Shares - How Can I Purchase Shares?"
Q: What are the potential risks presented by the Funds'
investment practices?
A: Investing in the Funds involves the risks common to
any investment in securities. The net asset value ("NAV")
of each Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The International
Growth Fund will primarily invest in foreign securities
which may be subject to certain risks in addition to those
inherent in U.S. investments, including the possible
imposition of exchange control regulation, freezes on
convertibility of currency and adverse changes in foreign
currency exchange rates. The Growth and Income Fund may
also invest a portion of its assets in foreign securities.
The Small Company Growth Fund will primarily invest in the
stocks of smaller companies which tend to present increased
risk and are subject to greater price volatility. Each of
the other Funds may also invest from time to time in
securities issued by smaller companies. The Funds may also
invest up to 15% of their net assets in illiquid securities.
For a complete description of the risks associated with each
Fund, see "Fund Choices - What Funds are Offered?" and " -
What Are the Risks of Investing in the Funds?"
FINANCIAL INFORMATION
What Are the Funds' Key Financial Highlights?
Fee Table
The purpose of the fee table is to assist you in understanding
the various costs and expenses that an investor in each Fund
will bear directly or indirectly. See "Expense Information" and
"Purchases of Shares" for more information regarding such costs
and expenses.
GROWTH AND INCOME FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% 0.70%
(as a % of offering price
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.70% 0.70%
12b-1 Fees(3) 0.25% None
Other Expenses 0.25% 0.25%
(after fee waivers)(4)
TOTAL FUND OPERATING EXPENSES 1.20% 0.95%
(after fee waivers)(4)
SMALL COMPANY GROWTH
FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.70% 0.70%
12b-1 Fees(3) 0.25% None
Other Expenses 0.25% 0.25%
(after fee waivers)(4)
TOTAL FUND OPERATING EXPENSES 1.20% 0.95%
(after fee waivers)(4)
INTERNATIONAL GROWTH FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.75% 0.75%
12b-1 Fees(3) 0.25% None
Other Expenses (after fee waivers)(4) 0.40% 0.40%
TOTAL FUND OPERATING EXPENSES 1.40% 1.15%
(after fee waivers)(4)
INDEX EQUITY FUND
Investment Shares Institutional Shares
Maximum Sales Charge on Purchase(1)
(as a % of offering price) 4.00% None
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.30% 0.30%
12b-1 Fees(3) 0.25% None
Other Expenses 0.16% 0.16%
(after fee waivers)(4)
TOTAL FUND OPERATING EXPENSES 0.71% 0.46%
(after fee waivers)(4)
EXAMPLE: You would pay the following expenses on a
$1,000 investment, assuming (i) 5% annual return and (ii)
redemption at the end of each period:
GROWTH AND INCOME FUND
Investment Shares Institutional Shares
One Year $ 52 $ 10
Three Years $ 77 $ 30
Five Year $ 103 $ 53
Ten Years $180 $117
SMALL COMPANY GROWTH FUND
Investment Shares Institutional Shares
One Year $ 52 $ 10
Three Years $ 77 $ 30
Five Years $103 $ 53
Ten Years $180 $117
INTERNATIONAL GROWTH FUND
Investment Shares Institutional Shares
One Year $ 54 $ 12
Three Years $ 83 $ 37
Five Years $114 $ 63
Ten Year $201 $140
INDEX EQUITY FUND
Investment Shares institutional Shares
One Year $ 47 $ 5
Three Years $ 62 $15
Five Years $ 78 $26
Ten Years $129 $58
Amounts shown in the example should not be considered a representation of
past or future investment return or expenses; actual investment return and
expenses may be greater or lesser than those shown.
_________________________________________
(1)The sales charge applied to the purchase of a Fund's Investment
Shares declines as the amount invested increases. See "Purchases of
Shares - What Price Do I Pay For Shares?"
(2)Expense ratios are based on amounts incurred for the fiscal year ended
December 31, 1995, restated, in the case of Index Equity Fund, to reflect
current waivers, fees and expenses. Sweep, trustee, agency, custody and
certain other fees charged by Old Kent and its affiliates to their
customers who own shares of the Funds are not reflected in the fee table.
(3)Investment Shares may pay 12b-1 fees of up to .25% (on an annualized
basis). As a result of the payment of sales charges and 12b-1 and certain
other related fees discussed below, long term Investment Class shareholders
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by the National Association of Securities Dealers, Inc.
("NASD").
(4)In the case of Index Equity Fund, reflects a voluntary waiver of a portion
of the Fund's administration fees. This waiver will not be changed for at
least one year from the date of this prospectus. Absent such waiver,
Other Expenses and Total Fund Operating Expenses would be 0.26% and 0.81%,
respectively, for the Index Equity Fund Investment Shares and 0.26% and
0.56%, respectively, for the Institutional Shares.
Financial Highlights
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT(5368). This table should be read in
conjunction with the financial statements and related notes.
<TABLE>
<CAPTION>
Growth and Income Fund
(For a share outstanding throughout each period)
Investment Shares Institutional Shares
December 1, 1992 November 2, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31,Years Ended December31,to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.46 $10.87 $10.29 $10.23 $10.50 $10.91 $10.31 $10.00
Income from Investment Operations:
Net investment income 0.30 0.32 0.27 *** 0.33 0.31 0.27 0.06
Net realized and unrealized gain (loss) on investments 3.26 (0.27) 0.93 0.06 3.28 (0.26) 0.95 0.31
Total from Investment Operations: 3.56 0.05 1.20 0.06 3.61 0.05 1.22 0.37
Less Distributions from:
Net investment income (0.30) (0.31) (0.23) --- (0.33) (0.31) (0.27) (0.06)
In excess of net investment income --- *** (0.05) --- --- *** (0.01) ***
Net realized gains on investments (0.53) (0.15) (0.20) --- (0.53) (0.15) (0.34) ---
In excess of net realized gains on investments --- --- (0.14) ---
--- --- --- ---
Total Distributions (0.83) (0.46) (0.62) --- (0.86) (0.46) (0.62) (0.06)
Net increase (decrease) in net asset value 2.73 (0.41) 0.58 0.06 2.75 (0.41) 0.60 0.31
Net Asset Value, End of Period $13.19 $10.46 $10.87 $10.29 $13.25 $10.50 $10.91 $10.31
Total Return for period indicated (a) 34.61% 0.50% 11.81% 0.59% 34.91% 0.51% 11.98% 3.68%
Ratios/Supplemental Data:
Ratios to average net assets:
Net investment income (loss) 2.48% 3.03% 2.43% (0.88)% (b) 2.73% 3.04% 2.61% 3.51%
(b)
Operating expenses 1.18% 0.98% 1.22% 0.33% (c) 0.94% 0.98% 1.03% 0.19% (c)
Portfolio Turnover Rate 58% 28% 54% 0% 58% 28% 54% 0%
Net Assets, End of period (thousands) $11,079 $8,005 $4,607 $102 $401,371 $308,825
$180,864 $76,449
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling
1-800-633-KENT (5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT(5368). This table should be read
in conjunction with the financial statements and related notes.
Small Company Growth Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
December 4, 1992 November 2, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December
31, 1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.98 $12.49 $10.86 $10.65 $11.99 $12.50
<C> <C>
$10.85 $10.00
Income From Investment Operations:
Net investment income 0.07 0.10 0.08 *** 0.10 0.10 0.08 0.02
Net realized and unrealized gain (loss) on investments 2.64 (0.11) 1.74 0.21
2.64 (0.10) 1.76 0.86
Total from Investment Operations: 2.71 (0.01) 1.82 0.21 2.74 ---
1.84 0.88
Less Distributions from:
Net investment income (0.07) (0.08) (0.06) --- (0.10) (0.09) (0.08) (0.02)
In excess of net investment income --- (0.01) (0.03) --- --- (0.01)
(0.01) (0.01)
Net Realized Gains (0.81) (0.41) (0.10) --- (0.81) (0.41) (0.10)
---
Total Distributions (0.88) (0.50) (0.19) --- (0.91) (0.51) (0.19) (0.03)
Net increase (decrease) in net asset value 1.83 (0.51) 1.63 0.21 1.83
(0.51) 1.65 0.85
Net Asset Value, End of Period $13.81 $11.98 $12.49 $10.86 $13.82 $11.99 $12.50
$10.85
Total Return for period indicated (a) 23.47% (0.08)% 16.84% 1.97% 23.75%
(0.06)% 17.04% 8.75%
Ratios/Supplemental Data:
Ratios to average net assets:
Net investment income 0.59% 0.79% 0.59% (1.50)% (b) 0.83% 0.79% 0.74%
1.35% (b)
Operating expenses 1.20% 0.98% 1.25% 0.27% (c) 0.97% 0.98% 1.06% 0.18% (c)
Portfolio Turnover Rate 30% 20% 14% 1% 30% 20% 14% 1%
Net Assets, End of period (thousands) $10,955 $8,433 $5,345 $84 $450,072
$304,179 $252,401 $95,999
Additional financial and performance information is contained in the Funds' annual
report, which can be obtained without charge by calling 1-800-633-KENT (5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT(5368). This table should be read
in conjunction with the financial statements and related notes.
International Growth Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
December 4, 1992 December 4, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.00 $12.81 $10.03 $10.00 $13.06 $12.84 $10.01 $10.00
Income From Investment Operations:
Net investment income 0.14 0.14 0.13 *** 0.13 0.12 0.09 ***
Net realized and unrealized gain (loss) on investments,
foreign currency and futures contracts 1.50 0.56 2.85 0.03 1.54 0.61 2.95 0.02
Total from investment operations 1.64 0.70 2.98 0.03 1.67 0.73 3.04 0.02
Less Distributions from:
Net investment income (0.09) (0.07) (0.02) --- (0.13) (0.07) (0.08) ---
In excess of net investment income (0.11) (0.03) (0.09) --- (0.11) (0.03) (0.04) (0.01)
Net realized gains (0.31) (0.41) (0.05) --- (0.31) (0.41) (0.08) ---
In excess of net realized gains on investments --- --- (0.04) ---
--- --- (0.01) ---
Total Distributions (0.51) (0.51) (0.20) --- (0.55) (0.51) (0.21) (0.01)
Net increase (decrease) in net asset value 1.13 0.19 2.78 0.03 1.12 0.22 2.83 0.01
Net Asset Value, End of Period $14.13 $13.00 $12.81 $10.03 $14.18 $13.06 $12.84 $10.01
Total Return for period indicated (a) 12.86% 5.51% 29.67% 0.30% 13.00% 5.73% 30.32% 0.20%
Ratios/Supplemental Data:
Ratios to average net assets:
Net investment income (loss) 1.11% 0.81% 0.32% (1.34)% (b) 1.35% 0.87% 0.86%
(0.28)% (b)
Operating expenses 1.40% 1.25% 1.43% 0.20% (c) 1.17% 1.22% 1.33% 0.14% (c)
Portfolio Turnover Rate 6% 20% 5% 0% 6% 20% 5% 0%
Net Assets, End of period (thousands) $7,548 $6,539 $3,202 $15 $286,545 $178,186
$157,716 $81,105
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT(5368). This table should be read in
conjunction with the financial statements and related notes.
Index Equity Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
November 25, 1992 November 2, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.70 $11.07 $10.44 $10.28 $10.68 $11.04 $10.41 $10.00
Income From Investment Operations:
Net investment income 0.23 0.26 0.22 *** 0.26 0.25 0.23 0.05
Net realized and unrealized gain (loss) on investments
and futures contracts 3.44 (0.17) 0.72 0.16 3.44 (0.15) 0.71 0.41
Total from investment operations 3.67 0.09 0.94 0.16 3.70 0.10 0.94 0.46
Less Distributions from:
Net investment income (0.23) (0.26) (0.20) --- (0.25) (0.26) (0.23) (0.05)
In excess of net investment income --- --- (0.03) --- --- --- ***
***
Net realized gains (1.57) (0.20) (0.06) --- (1.57) (0.20) (0.08) ---
In excess of net realized gains on investments --- --- (0.02) ---
--- --- --- ---
Total Distributions (1.80) (0.46) (0.31) --- (1.82) (0.46) (0.31) (0.05)
Net increase (decrease) in net asset value 1.87 (0.37) 0.63 0.16 1.88
(0.36) 0.63 0.41
Net Asset Value, End of Period $12.57 $10.70 $11.07 $10.44 $12.56 $10.68 $11.04 $10.41
Total Return for period indicated (a) 35.81% 0.75% 9.09% 1.56% 36.23% 0.86% 9.11% 4.55%
Ratios/Supplemental Data:
Ratios to average net assets:
Net investment income (d) 1.86% 2.30% 2.04% 1.03% (b) 2.14% 2.32% 2.18% 2.65% (b)
Operating expenses (d) 0.80% 0.60% 0.86% 0.12% (c) 0.56% 0.58% 0.65% 0.13% (c)
Portfolio Turnover Rate 3% 50% 1% 0% 3% 50% 1% 0%
Net Assets, End of Period (thousands) $6,612 $4,736 $3,776 $89 $183,877 $245,550
$233,451 $153,431
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
(d) "Net investment income" and "Operating expenses" reflect fee waivers
by the Fund's administrator. Before the fee waivers, the annualized ratios
of "Net investment income" and "Operating expenses" for the fiscal year
ended December 31, 1995 would have been the same for the Institutional
Shares and 1.86% and 0.80%, respectively, for the Investment Shares.
*** Amount is less than $0.005.
</FN>
</TABLE>
FUND CHOICES
What Funds are Offered?
The Trust currently offers the 4 stock funds described
below. The investment objectives described below are
considered "fundamental" and may not be changed by a Fund
without the approval of its shareholders.
GROWTH AND INCOME FUND
OBJECTIVE: The Fund's primary objective is long-term
capital growth with current income as a secondary goal.
PRINCIPAL INVESTMENTS: Under ordinary circumstances, the
Fund plans to invest at least 65% of its total assets in
U.S. companies with at least $100 million in net
capitalization which are listed on the NYSE or American
Stock Exchange or are traded over-the-counter. The Fund
intends to invest in companies which Old Kent believes have
potential primarily for capital growth and secondarily for
income, and which may potentially provide a return greater
than the S&P 500. Up to 10% of the Fund's assets may also
be invested in foreign securities and American Depository
Receipts ("ADRs"). A portion of the Fund's assets may be
invested in preferred stock or bonds convertible into common
stock. The Fund will purchase only convertible bonds having
a rating in one of the four highest rating categories by a
nationally recognized statistical rating organization or
those which, if not rated, are of comparable quality as
determined by Old Kent. Bonds in the fourth highest rating
category may have speculative characteristics. See Appendix
A to the SAI for more information regarding the quality and
rating of convertible bonds acquired by the Fund. The Fund
expects current income mainly from stock dividends and
interest on convertible bonds.
SMALL COMPANY GROWTH FUND
OBJECTIVE: The Fund seeks long-term capital appreciation by
investing in equity securities of small companies.
PRINCIPAL INVESTMENTS: Under ordinary circumstances, the
Fund intends to invest at least 65% of its total assets in a
diverse group of small U.S. companies, which are companies
whose market capitalizations are less than $1 billion. The
Fund intends to purchase common stock issued by each NYSE
company that meets the above criteria. The amount of each
NYSE company's common stock purchased will be based on the
company's capitalization relative to all of the other
eligible NYSE companies. Old Kent may elect to exclude an
eligible NYSE company from the Fund's portfolio if it
believes the company is in financial difficulty. Old Kent
will consider selling a stock if the issuer's market
capitalization increases to the point that it is ranked in
the top half of all NYSE companies. The Fund may also
purchase stocks which are listed on other U.S. securities
exchanges or which are traded over-the-counter.
INTERNATIONAL GROWTH FUND
OBJECTIVE: The Fund seeks long-term growth of capital and
additional diversification for U.S. investors by investing
in a varied portfolio of foreign equity securities.
PRINCIPAL INVESTMENTS: The Fund will invest mostly in
common and preferred stocks. Under ordinary circumstances,
the Fund intends to invest at least 65% of its total assets
in at least 3 countries other than the U.S., including (but
not limited to) Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Italy, Japan, Malaysia,
the Netherlands, New Zealand, Norway, Singapore, Spain,
Sweden, Switzerland and the United Kingdom. The Fund uses
the Morgan Stanley Europe, Australia and Far East Index (the
"EAFE Index") as its benchmark for performance. Old Kent
believes that the EAFE Index is generally representative of
the performance of the common stocks of large companies in
industrialized countries traded outside of the United States
taken as a whole. Stocks are included in the EAFE Index
based on national and industry representation and are
weighted according to their relative market values. In
allocating the Fund's portfolio between different countries,
Old Kent will consider a country's Gross Domestic Product
compared with that of other industrialized countries (other
than the United States), as well as a country's weighting in
the EAFE Index, and will from time to time shift the
allocation of the Fund's assets from countries that it
considers overvalued to countries that it considers
undervalued. The Fund may also invest in ADRs and enter
into currency and other futures contracts and related
options for hedging purposes.
INDEX EQUITY FUND
OBJECTIVE: The Fund seeks investment results which mirror
the capital performance and dividend income of the S&P 500.
PRINCIPAL INVESTMENTS: The Fund invests in common stock
issued by the companies comprising the S&P 500 in
approximately the same proportions as which such companies
comprise the S&P 500. Because of the difficulty and
expense of executing relatively small stock transactions,
the Fund may not always be invested in the less heavily
weighted S&P stocks, or may be invested in stocks in
different proportions than the S&P 500, especially when the
Fund has a low level of assets. Old Kent will generally try
to match the industry composition of the S&P 500 exactly.
The Fund also will try to achieve a correlation between the
performance of its portfolio and that of the S&P 500 of at
least 0.95 (not accounting for expenses). A correlation of
1.0 would mean that the Fund's NAV (including the value of
its dividends and capital gains distributions) increases or
decreases in exact proportion to changes in the S&P 500.
Several factors may affect the Fund's ability to exactly
track the S&P 500's performance, including the timing of
purchases and redemptions, changes in securities markets and
the level of the Fund's assets.
What Instruments Does Each Fund Invest In?
The Funds may also invest in the securities and use the
investment techniques described below. Each of these
securities and techniques is described in more detail under
"Investment Policies" in the SAI.
Each Fund will invest primarily in COMMON STOCK. Many of the
common stocks the Funds (other than Growth and Income Fund)
will buy will not pay dividends; instead, the company's
earnings will be invested back in the company. The value of
shares of common stock will fluctuate due to many factors,
including the past and predicted earnings of the issuer, the
quality of the issuer's management, general market
conditions, the forecasts for the issuer's industry and the
value of the issuer's assets. Common stockholders only have
rights to value in the company after all debts have been
paid and payments to preferred shareholders have been made,
and they could lose their entire investment in a company
that encounters financial difficulty.
Each Fund may invest in MONEY MARKET INSTRUMENTS, which are
high-quality, short-term instruments including, among other
things, commercial paper, bankers' acceptances and
negotiable certificates of deposit of banks or savings and
loan associations, short-term corporate obligations which
are rated A or better by Standard & Poor's Rating Group or
Moody's Investors Service, Inc.; and short-term securities
issued by, or guaranteed by, the U.S. Government and its
agencies or instrumentalities. When Old Kent determines
that market conditions are appropriate, each Fund may, for
temporary defensive purposes, invest up to 100% of its
assets in money market instruments. If a Fund is investing
defensively, it will not be pursuing its investment
objective. It is not expected that the Funds will invest to
a significant extent, or on a routine basis, in U.S.
Government securities.
The Funds may enter into REPURCHASE AGREEMENTS. Under a
repurchase agreement, a Fund agrees to purchase securities
from a seller and the seller agrees to repurchase the
securities at a later time, typically within 7 days, at a
set price. The seller agrees to set aside collateral equal
to the price it has to pay during the term of the agreement.
This ensures that the Fund will receive the purchase price
at the time it is due, unless the seller defaults or
declares bankruptcy, in which event the Fund will bear the
risk of possible loss due to adverse market action or delays
in liquidating the underlying obligation. The Funds will
not enter into repurchase agreements with Old Kent or its
affiliates.
Each Fund may also borrow money for temporary purposes by
entering into REVERSE REPURCHASE AGREEMENTS. Under these
agreements, a Fund sells portfolio securities to financial
institutions and agrees to buy them back later at an agreed
upon time and price.
The Funds may LEND SECURITIES to broker-dealers and other
financially sound institutional investors who will pay the
Funds for the use of the securities. The borrower must set
aside cash or liquid high-grade debt securities equal to the
value of the securities borrowed at all times during the
term of the loan. Loans may not exceed one-third of the
value of a Fund's total assets. Risks involved with such
transactions include possible delay in recovering the loaned
securities and possible loss of the securities or the
collateral if the borrower declares bankruptcy.
The Funds may purchase AMERICAN DEPOSITORY RECEIPTS, which are
receipts, usually issued by a U.S. bank or trust company,
which represent ownership of underlying foreign securities
held on deposit. Many of the risks associated with foreign
securities, which are mentioned below, may also apply to
ADRs.
Each Fund may agree to PURCHASE SECURITIES FOR FUTURE DELIVERY,
sometimes a month or more after the date of the agreement.
Although the price to be paid by the Fund is set at the time
of the agreement, the Fund usually does not pay for the
securities until they are received. The value of the
securities may change between the time the price is set and
the time the price is paid. When a Fund purchases
securities for future delivery, the Trust's custodian will
maintain a segregated account containing cash, U.S.
Government securities or other liquid high-grade debt
securities. The Funds do not intend to purchase securities
for future delivery for speculative purposes.
The Funds may also purchase WARRANTS, which are rights to
purchase securities at a specific price over a specific
period of time.
Each Fund may buy OPTIONS giving it the right to require a
buyer to buy securities held by the Fund (put options) or
buy options giving it the right to require a seller to sell
securities to the Fund (call options) during a set time
period at a set price. A Fund may also sell (write) options
giving a buyer the right to require the Fund to buy
securities from the buyer (put options) and options giving a
buyer the right to require the Fund to sell securities to
the buyer (call options). These options will relate to
stock indices, individual securities and, with respect to
the Intentional Growth Fund, foreign currencies. These
options will be used only for hedging purposes; that is, to
try to reduce potential losses to the Fund due to currency
or market value fluctuations or other factors. A Fund will
not purchase put or call options where the aggregate
premiums or outstanding options exceed 5% of the Fund's net
assets and will not write options on more than 25% of its
net assets.
The Funds may also purchase FUTURES CONTRACTS, which are
contracts in which a Fund agrees, at maturity, to make
delivery of certain securities, the cash value of a
specified stock index or, in the case of the International
Growth Fund, a stated quantity of foreign currency. The
Funds may also purchase and sell put and call options on
futures contracts traded on an exchange or board of trade.
Futures may be used for hedging purposes or to provide
liquid assets. A Fund will not enter into a futures
contract if the purchase will cause the aggregate amount of
margin deposits on existing futures positions plus premiums
paid to establish such positions to be more than 5% of the
Fund's net assets.
Options and futures are types of derivative instruments,
which are instruments that derive their value from a
different underlying security. Options and futures trading
activities are very specialized and may entail higher than
ordinary investment risks. Such risks include that the
value of the securities to be bought or sold under the
option or futures contract or the currency exchange rate
being hedged against does not move in the direction
predicted by Old Kent, causing a potential loss to a Fund.
The risks of options and futures are described in more
detail in the SAI.
The Funds may buy shares of registered MONEY MARKET INVESTMENT
COMPANIES. The Funds will bear a portion of the expenses of
any investment company whose shares they purchase, including
operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to
the Fund's own expenses.
The International Growth Fund may try to offset the impact
of changes in currency exchange rates by entering into
CURRENCY HEDGES such as forward currency exchange contracts
and currency swaps. A forward currency exchange contract is
an obligation of the Fund to purchase or sell a specific
currency or currencies at a future date at a set price.
Such contracts may decrease the loss to the Fund due to a
drop in the value of a foreign currency, but they also limit
gains if the value of the foreign currency increases. The
Fund may engage in cross-hedging by using forward contracts
in one foreign currency to hedge against fluctuations in the
value of securities denominated in a different currency if
Old Kent believes there is a pattern of correlation between
the two currencies. The Fund may also enter into forward
currency exchange contracts relating to a "basket"
consisting of specified amounts of more than one currency.
This particular type of contract will be used to hedge
against fluctuations in more than one currency through the
purchase of a single forward currency exchange contract. It
is possible that the composition of the "basket" will not
match exactly the Fund's exposure to each of the currencies
in the basket. In a currency swap, the International Growth
Fund will exchange with another party the right to make or
receive payments in certain foreign currencies.
The investment policies discussed above are not
"fundamental" policies and may be changed by the Board of
Trustees without shareholder approval. However, the Funds
also have in place certain fundamental investment
limitations that cannot be changed for a Fund without the
approval of a majority of that Fund's outstanding shares.
Some of these limitations are summarized below. A complete
list of the fundamental investment limitations for the Funds
is contained in the SAI
1. With respect to 75% of each Fund's total assets, the
Funds cannot invest more than 5% of their respective total
assets in any one issuer (other than the U.S. Government,
its agencies and instrumentalities). In addition, the Funds
cannot invest more than 25% of their respective total assets
in a single industry nor can they hold more than 10% of the
voting securities of any issuer. These restrictions require
the Funds to be more diversified in order to lower the risk
to a Fund of an economic setback for any one issuer or in
any one industry.
2. Each Fund may only borrow money for temporary or
emergency purposes, and such borrowing is limited to an
amount not greater than one-third of the Fund's net assets,
provided that when borrowings from banks exceed 5% of a
Fund's net assets, any such borrowings will be repaid before
additional investments are made. The limits on the amount
each Fund can borrow prevents the Fund from significantly
leveraging its assets.
3. Each Fund may not invest more than 15% of its net
assets in illiquid securities. Typically, there is no ready
market for such securities, which inhibits a Fund's ability
to sell the securities and to obtain values for the
securities.
What Are the Risks of Investing in the
Funds?
Investing in the Funds may be less risky than investing in
individual stocks due to the diversification of investing in
a portfolio of many different stocks; however, such
diversification does not eliminate all risks. Because the
Funds invest mostly in stocks, rises and falls in the stock
market in general as well as the particular stocks held by
the Funds, can affect the Funds' performance. Your
investment in the Funds is not guaranteed. The NAV of the
Funds will change daily and you might not recoup the amount
you invest in the Funds. The Funds are not meant to provide
a vehicle for playing short-term swings in the stock market.
Consistent with a long-term investment approach, investors
in a Fund should be prepared and able to maintain their
investments during periods of adverse market conditions. By
itself, no Fund constitutes a balanced investment program
and there is no guarantee that any Fund will achieve its
investment objective since there is uncertainty in every
investment.
Small Company Growth Fund. Old Kent believes that smaller
companies can provide greater growth potential and
potentially higher returns than larger, older firms.
Investing in smaller companies, however, is riskier than
investing in larger companies. The stock of smaller
companies may trade infrequently and in lower volume, making
it more difficult for the Fund to sell the stocks of smaller
companies when it chooses. Smaller companies may have
limited product lines, markets, financial resources and
distribution channels, which makes them more sensitive to
changing economic conditions. Stocks of smaller companies
historically have had larger fluctuations in price than
stocks of larger companies included in the S&P 500.
International Growth Fund. Investing in the International
Growth Fund, with its internationally varied portfolio, may
involve more risk than investing in a U.S. equity fund for
the following reasons: (1) there may be less public
information available about foreign companies than is
available about U.S. companies; (2) foreign companies are
not generally subject to the uniform accounting, auditing
and financial reporting standards and practices applicable
to U.S. companies; (3) foreign stock markets have less
volume than the U.S. market, and the securities of some
foreign companies are less liquid and more volatile than the
securities of comparable U.S. companies; (4) there may be
less government regulation of stock exchanges, brokers,
listed companies and banks in foreign countries than in the
U.S.; (5) the Fund may incur fees on currency exchanges when
it changes investments from one country to another; (6) the
Fund's foreign investments could be affected by
expropriation, confiscatory taxation, nationalization of
bank deposits, establishment of exchange controls, political
or social instability or diplomatic developments; (7)
fluctuations in foreign exchange rates will affect the value
of the Fund's portfolio securities, the value of dividends
and interest earned, gains and losses realized on the sale
of securities, net investment income and unrealized
appreciation or depreciation of investments; and (8)
possible imposition of dividend or interest withholding by a
foreign country. The Fund may at times invest more than 25%
of its assets in a particular foreign country. A
concentration of investments in any one country will cause
the Fund's performance to be particularly vulnerable to the
political and economic climate of that country.
PERFORMANCE
How is the Funds' Performance Calculated?
There are various ways in which the Funds may calculate and
report their performance. Performance is calculated
separately for the Investment Shares and the Institutional
Shares.
One method is to show a Fund's total return. CUMULATIVE TOTAL
RETURN is the percentage change in the value of $1,000
invested in the Fund over a stated period of time and takes
into account reinvested dividends and the payment of the
maximum sales charge (4%) on Investment Shares. Although
cumulative total return most closely reflects the actual
performance of a Fund, a shareholder who opts to receive
dividends in cash, or an Investment class shareholder who
paid a sales charge lower than 4%, will have a different
return than the reported performance. AVERAGE ANNUAL TOTAL
RETURN refers to the average annual compounded rates of
return over a specified period on an investment in shares of
a Fund, determined by comparing the initial amount invested
to the ending redeemable value of that amount, taking into
account reinvested dividends and the payment of the maximum
sales charge (4%) on Investment Shares.
Investment Shares may be purchased with a sales load and may
have higher fees and expenses than Institutional Shares, so
the total return of Investment Shares will be lower than
that of Institutional Shares. The Funds may sometimes
publish total returns that do not take into account sales
charges and such returns will be higher than returns which
include sales charges. You should be aware that (i) past
performance does not indicate how a Fund will perform in the
future and (ii) each Fund's return and NAV will fluctuate,
so you cannot necessarily use a Fund's performance data to
compare it to investments in certificates of deposit,
savings accounts or other investments that provide a fixed
or guaranteed yield.
Each Fund may compare its performance to that of other
mutual funds, such as the performance of similar funds
prepared by Lipper Analytical Services, Inc. or information
reported in national financial publications (such as Money
Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times) or in local or regional publications. Each
Fund may also compare its total return to indices such as
the S&P 500, the Russell 2000 Index and the EAFE Index.
These indices show the value of selected portfolios of
stocks (assuming reinvestment of dividends) which are not
managed by a portfolio manager. The Funds may report how
they are performing in comparison to the Consumer Price
Index, an indication of inflation reported by the U.S.
government.
Where Can I Obtain Performance Data?
The Wall Street Journal and certain local newspapers report
information on the performance of mutual funds. In
addition, performance information is contained in the Funds'
annual report dated December 31 of each year (the Trust's
fiscal year end) and semi-annual report dated June 30 of
each year, which will automatically be mailed to
shareholders. To obtain copies of financial reports or
performance information, call 1-800-633-KENT (5368).
EXPENSE INFORMATION
What Are the Funds' Expenses?
A pro rata portion of certain expenses allocated to the
Trust, to the Fund you own and to the particular class of
shares you own will be reflected in the value of your
shares. Such expenses are not paid directly by
shareholders.
TRUST EXPENSES. Expenses charged at the Trust level include
fees paid to Trustees, legal counsel and auditors and
administration fees. First Data is entitled to receive, for
its administration services, an annual fee equal to 0.20% of
the aggregate net assets of all funds in the Trust up to $5
billion; 0.18% of the Trust's aggregate net assets between
$5 and $7.5 billion; and 0.15% of the Trust's aggregate net
assets over $7.5 billion.
FUND EXPENSES. Most expenses will be charged at the Fund
level, including investment advisory fees, Securities and
Exchange Commission registration fees, transfer agency fees,
custody fees, brokerage commissions, interest charges and
taxes. Old Kent is entitled to receive from each Fund, and
received from each Fund during the fiscal year ended
December 31, 1995, an annual advisory fee at the following
rates based on each Fund's average daily net assets: Growth
and Income Fund, 0.70%; Small Company Growth Fund, 0.70%;
International Growth Fund, 0.75%; and Index Equity Fund,
0.30%. The advisory fee payable by the International Growth
Fund is higher than most mutual funds, but comparable to
other global and international funds. Old Kent may rebate
advisory fees to certain institutional customers in
accordance with Federal and state law.
CLASS EXPENSES. Expenses allocated at the class level
include printing and mailing expenses and expenses payable
under the Funds' Distribution Plans. The Distribution Plans
provide that each Fund may spend, in one year, up to 0.25%
of the average daily net assets of the Fund's Investment
Shares to finance sales activities of the Investment Shares,
including marketing and advertising shares, maintaining
account records, issuing confirmation statements and
providing sub-accounting. Banks, broker-dealers and other
organizations may also receive payments for providing
support and/or distribution services to the Funds'
shareholders who are their customers. Federal banking law
currently limits the securities activities of banks. If a
bank was not allowed to provide support and/or distribution
services, the Fund would find another organization to
provide such services and no shareholder should suffer any
financial loss. The Funds do not reimburse 440
Distributors, the Funds' distributor, for any distribution
expenses in excess of the payments received by 440
Distributors under the Distribution Plan or for its overhead
expenses.
PURCHASES OF SHARES
Who May Want to Invest in the Funds?
Investment Shares may be purchased by individual investors
and Institutional Shares may be purchased only by financial
and other institutions for the benefit of fiduciary, agency
or custodial accounts. The Funds, which are equity funds,
are designed for investors who desire potentially high
capital appreciation with moderate to low income and who can
accept short-term variations in return for potentially
greater returns over the long term. Investors who have a
short time horizon for their investments may wish to invest
in other Kent Funds designed for short-term investors.
When Can I Purchase Shares?
Shares can be purchased on any day that both the NYSE and
Bankers Trust Company, the Funds' custodian, are open for
business.
What is the Minimum Required Investment?
An investor must initially invest at least $1,000 ($100 for
IRAs) in Investment Shares and at least $100,000 in
Institutional Shares. Subsequent investments may be made in
any amount. The investment minimums may be waived for
purchases by employees of Old Kent, participants in tax-
sheltered plans and certain qualified retirement accounts.
How Can I Purchase Shares?
INVESTMENT SHARES
For your convenience, the Funds offer a wide variety of
methods to purchase Investment Shares.
* Through a Broker. Any broker authorized by 440
Distributors, the Funds' distributor, can sell you
Investment Shares of the Funds. Please note that such
brokers may charge you fees for their services.
* By Mail. You may open an account by mailing a
completed application and a check (payable to the applicable
Fund) to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
* By Telephone. You should call 1-800-633 KENT (5368)
to open an account and electronically transfer money to the
account, followed by a completed application.
* By Check. Subsequent purchases of Investment Shares
can be made by mailing a check to the address listed above.
* By Federal Funds Wire. Subsequent purchases of
Investment Shares can be made via a federal funds wire sent
to Fleet Bank for credit to a particular Fund. You should
call 1-800-633-KENT (5368) for complete wire instructions.
You should be aware that banks may charge fees for sending
wires. 440 Distributors has the right to charge fees for
receiving wires, although it does not currently do so.
* By Electronic Funds Transfer (For subsequent purchases
only). Call 1-800-633-KENT (5368) to request a purchase to
be made or for the forms to establish electronic funds
transfers.
* Through an Automatic Investment Plan
* Call 1-800-633-KENT (5368) to establish an Automatic
Investment Plan.
* Invest at least $1,000 in an Investment Share account.
* On the 5th day of each month, your checking account
will be debited (minimum of $50) and Investment Shares will
be purchased and held in your account.
To change the amount invested each month in Investment
Shares, or to stop the Automatic Investment Plan, call 1-
800-633-KENT, or write to: The Kent Funds, c/o 440
Distributors, 4400 Computer Drive, P.O. Box 5107, Westboro,
MA 01581-5107 at least 5 days before a scheduled investment.
* Through Direct Deposit
You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks.
* Through a Tax-Sheltered Plan
Investment Shares of the Funds may be purchased
through IRAs and Rollover IRAs, which are available through
the Distributor. For details and application forms, call
The Kent Funds at 1-800-633-KENT (5368) or write The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the
following steps:
* To open an account, call 1-800-633-KENT (5368) to
obtain an account or wire identification number.
* Place a purchase order for shares by telephoning the
number above.
* Wire federal funds to Fleet Bank no later than the day
after the purchase order is placed.
You should note that (i) a purchase of Institutional Shares
will not be completed until Fleet Bank receives the purchase
price and (ii) banks may charge for wiring federal funds to
Fleet Bank. You may obtain information on how to wire funds
from any national bank and certain state banks.
EXCHANGE PRIVILEGE
You may acquire Investment or Institutional Shares of a Fund
(the new fund) by exchanging shares of another investment
portfolio offered by the Trust (the old fund) for shares of
the new fund. Shares of the new fund will be of the same
class as the old fund. In effect, you would be redeeming
(reselling to the fund) shares of the old fund and
purchasing shares of the new fund. To determine the price
at which shares are redeemed, see "What Price Do I Receive
for Shares?" and to determine the price at which shares are
purchased, see "What Price Do I Pay for Shares?"
* Call 1-800-633-KENT (5368) or write to: The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107 to obtain a prospectus for the
new fund prior to the exchange.
* Call or write as indicated in * above to place an
order to exchange shares. Purchases of new funds must meet
the minimum purchase requirement of that fund. If the order
to exchange shares is placed prior to or at 4:00 p.m.
Eastern Standard Time on any business day, the order will be
executed on the day received, and if the order is placed
after 4:00 p.m. Eastern Standard Time, the order will not be
executed until the next business day.
* If a shareholder does not have an account with the new
fund, a new account will be established with the same
reinvestment options for distributions as the account for
the old fund, unless the shareholder writes to the new fund
to change the option.
Important Information About Exchanges
If shares of a Fund are purchased by check, such shares
cannot be exchanged for 15 days. The Trust may disallow
exchanges of shares if a shareholder has made more than 5
exchanges between investment portfolios offered by the Trust
in a year, or more than 3 exchanges in a calendar quarter.
Although unlikely, the Trust may reject any exchanges or the
Funds may change or terminate rights to exchange shares.
The exchange privilege is available only in states where
shares of the new fund may be sold.
No sales charge is imposed when Investment Shares on which a
shareholder previously paid a sales charge are exchanged for
Investment Shares of another investment portfolio. However,
a sales charge will be imposed on exchanges of Investment
Shares purchased without a sales charge (i.e., money market
portfolio shares) for Investment Shares of a Fund which
imposes a sales charge. In order to make an exchange,
shareholders will be required to maintain the applicable
minimum account balance in each investment portfolio of the
Trust in which shares are owned.
Institutional Shares of a Fund may be exchanged for
Investment Shares of the same Fund when the Institutional
Shares are distributed to the underlying beneficial owners
of trust accounts, 401(k) plans and other fiduciary or
agency accounts. No sales charge is imposed in connection
with such an exchange.
____________________________
Investors should note that each Fund has the right to stop
offering its shares, to reject purchase orders and to
suspend the exchange privilege, although such actions are
unlikely. 440 Distributors may require additional documents
prior to accepting a purchase, redemption or exchange.
Shareholder Services
For further information on all shareholder services, call
The Kent Funds toll-free at
1-800-KENT (5368)
or write to
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
What Price Do I Pay For Shares?
Investment Shares are sold at the "net asset value next
determined" by the Fund plus any "applicable sales charge"
and Institutional Shares are sold at the "net asset value
next determined" by the Fund. These terms are explained
below. You should be aware that broker-dealers (other than
the Funds' distributor) may charge investors additional fees
if shares are purchased through them.
NET ASSET VALUE. Except in certain limited circumstances,
at 4:00 p.m. on each day the NYSE is open for trading each
Fund determines its NAV. NAV is calculated separately for
the Investment Shares and Institutional Shares of each Fund.
The "net asset value next determined" is the NAV calculated
at 4:00 p.m. on the day a purchase order for shares is
received, if the purchase order is received prior to or at
4:00 p.m., and is the net asset value calculated at 4:00
p.m. on the next business day, if the purchase order is
received after 4:00 p.m. The NAV is calculated by totaling
the value of all of the assets of a Fund allocated to a
particular class of shares, subtracting the Fund's
liabilities and expenses allocated to that class, and
dividing the result by the number of shares of that class
outstanding. When market quotations are readily available,
the Funds' assets are valued at market value. Debt
instruments with maturities of 60 days or less are valued at
amortized cost, unless the Board of Trustees determines that
this does not result in a fair value. All other assets are
valued at fair value as determined by or under the direction
of the Board of Trustees. The Funds may use pricing
services to help determine the fair value of securities.
APPLICABLE SALES CHARGE. Except in the circumstances
described below, a sales charge must be paid at the time of
purchase of Investment Shares. The more Investment Shares
an investor purchases, the lower the percentage of the sales
charge will be, as the table below indicates.
AMOUNT OF PURCHASE AS A % OF OFFERING AS A % OF NET AMOUNT
PRICE* INVESTED*
Under $100,000 4.00% 4.17%
$100,000 - $249,999 3.00% 3.09%
$250,000 - $499,999 2.00% 2.04%
$500,000 - $999,999 1.00% 1.01%
$1,000,000 and over 0.75% 0.76%
*Maximum reallowance to dealers.
**Rounded to the nearest one-hundredth percent.
For instance, if you wish to invest $275,000 in a Fund, you
would pay to the Fund $275,000 plus $5,610 (2.04% of
$275,000).
Certain investors may reduce the percentage of sales charge
they pay for Investment Shares by purchasing shares of more
than one investment portfolio of the Trust ("Portfolio") at
the same time, by purchasing additional shares of Portfolios
in the future or by agreeing to invest a certain amount in
Portfolios during a 13-month period, as described below.
Call the Trust at 1-800-633-KENT (5368) to determine if you
qualify for such reductions.
Concurrent Purchases. If you purchase Investment Shares of
more than one Portfolio that is subject to a sales load at
the same time, you may be able to total the amount being
invested in all Portfolios at that time to determine the
sales charge payable. For example, if you concurrently
invested $100,000 in the Index Equity Fund and $50,000 in
the Growth and Income Fund, the sales charge assessed would
be 3% of $150,000, or $4,500.
Rights of Accumulation. If you buy additional Investment
Shares of a Fund, then you may be able to total the amount
of money currently being invested and the current value of
previously purchased shares of a Portfolio (other than the
Money Market Fund or the Michigan Municipal Money Market
Fund) still held to determine the amount of sales charge
payable. For example, if you had previously purchased
10,000 shares of the Growth and Income Fund and still held
5,000 shares of that Fund on a day when you purchased an
additional 20,000 shares of the Fund and the Fund's NAV was
$10 per share, you would pay a sales charge of 2% (the
applicable rate on a $250,000 purchase) on the $200,000
worth of new shares being purchased, or $4,000. To take
advantage of the rights of accumulation, you must contact
440 Distributors at 1-800-633-KENT (5368) at the time of
purchase. The Trust may change or terminate rights of
accumulation at any time.
Letter of Intent. If you intend to make several investments
in one or more Portfolios over time, you may wish to
complete the Letter of Intent section of your new account
application. By doing so, you agree to invest a certain
amount in one or more Portfolios over a 13-month period.
Each investment in a Portfolio during the 13 months would
then be subject to the sales charge applicable to the total
amount to be invested under the Letter of Intent in
Portfolios that charge a sales load. For example, if you
stated in your application your intent to invest $275,000 in
one or more Portfolios that charge a sales load but you only
invested $75,000 at the time you completed your application,
then you would pay a sales charge of 2% of $75,000, or
$1,500, which is half of the 4% sales charge that you would
otherwise have paid on such investment. The Letter of
Intent may be back-dated up to 90 days so that any
investments made in any of the Portfolios (other than in the
Money Market Fund and the Michigan Money Market Fund) during
the preceding 90-day period can be applied toward
fulfillment of the Letter of Intent (although there will be
no refund of sales charges paid during the 90-day period).
You should inform 440 Distributors that you have a Letter of
Intent each time you make an investment.
You are not obligated to purchase the amount specified in
the Letter of Intent. If you purchase less than the amount
specified, however, you must pay the difference between the
sales charge paid and the sales charge applicable to the
purchases actually made. Shares representing 5% of the
dollar amount specified in the Letter of Intent will be held
in escrow. Such shares will not be available for
redemption, transfer or pledge until the Letter of Intent is
completed or the higher sales charge paid. If the intended
investment is not completed and you do not pay the
difference between the sales charge paid and the sales
charge applicable to the purchases actually made within 20
days after written request by 440 Distributors or its
dealer, 440 Distributors will redeem an appropriate number
of escrowed shares and release the balance of escrowed
shares to you. You are entitled to all income and capital
gains distributions paid with respect to the escrowed
shares.
Other. Sales charges may be waived entirely for investors
who transfer balances from mutual fund companies other than
the Trust during certain promotional periods announced by
440 Distributors. In addition, sales charges will not be
payable by (1) current full-time and part-time employees,
retired employees and Directors of OKFC and its
subsidiaries; (2) Trustees of the Trust; (3) registered
representatives of firms which have dealer or broker
agreements with 440 Distributors relating to Investment
Shares; and (4) spouses and dependent children of the
individuals listed in (1) - (3) above; (5) OKFC or one of
its subsidiaries, acting on behalf of fiduciary customer
accounts and any other account maintained by a trust
department; (6) employees of First Data and 440
Distributors; and (7) participants in certain qualified
retirement plans.
For further information about sales charge reductions and
waivers and the programs described above, call toll-free at
1-800-633-KENT (5368) or write to
The Kent Funds, c/o 440 Distributors,
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
REDEMPTIONS (SALES) OF SHARES
When Can I Redeem Shares?
You can redeem shares on any day that the NYSE is open for
trading. Shares will not be redeemed by a Fund unless all
required documents have been received by 440 Distributors.
A Fund may temporarily stop redeeming shares when the NYSE
is closed or trading on the NYSE is restricted, when an
emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets or if the
Securities and Exchange Commission orders the Fund to stop
redemptions. If you intend to redeem shares worth more than
$1,000,000, you should notify the Fund at least one day in
advance.
How Can I Redeem Shares?
INVESTMENT SHARES
* By Mail. You may mail your redemption notice to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
The redemption notice should state the amount of money or
number of shares to be redeemed, and the account name and
number. If a stock certificate has been issued to you, you
must endorse (sign the back of) the stock certificate and
return it to the Fund together with the written redemption
notice.
Important Information Regarding Stock Certificates and
Redemption Notices for Investment Shares
Signatures on all redemption notices and stock certificates
must be guaranteed by a U.S. stock exchange member, a U.S.
commercial bank or trust company and other entities approved
by 440 Distributors, unless the amount redeemed is less than
$50,000 and the account address has been the same for at
least 90 days. The Funds can change the above requirements
or require additional documents at any time.
* By Telephone. You can redeem up to $50,000 worth of
Investment Shares by calling 1-800-633-KENT (5368). If the
amount redeemed is less than $2,500, then a check will be
mailed to you and if equal to or greater than $2,500, then
the proceeds will be mailed or sent by wire or electronic
funds transfer to the bank listed on your account.
* Through a Broker. Investment Shares can be redeemed
through a broker. The broker should send the redemption
notice and any other required documents to 440 Distributors,
which will send the proceeds to the broker or directly to
you, at your option, within 3 days after receiving proper
documents. 440 Distributors does not charge a fee for this
service, but the broker might.
* Through an Automatic Withdrawal Plan. Under the Plan,
a shareholder with an account worth at least $10,000 may
redeem, either monthly or quarterly, fixed dollar amounts of
Investment Shares. Each payment must be at least $100 and
can be no more than 1.5% per month, or 4.5% per quarter, of
the value of the shareholder's Investment Shares when the
Automatic Withdrawal Plan was opened. The proceeds can be
mailed or sent by electronic funds transfer to the bank
listed on your account.
INSTITUTIONAL SHARES
You can redeem Institutional Shares by mail, by telephone or
through a broker by following the procedures described for
Investment Shares. Redemption proceeds will be wired in
federal funds only to the commercial bank and account number
listed on your account application. To change the bank
account, you should call the Funds at 1-800-633-KENT (5368)
and request the appropriate form.
GENERAL REDEMPTION INFORMATION
During periods of unusual market activity it may be
difficult to reach the Funds by telephone. In such cases,
shareholders should follow the procedures for redeeming by
mail or through a broker. Neither the Trust nor any of its
service providers will be liable for following telephone
instructions reasonably believed to be genuine unless it
acts with willful misfeasance, bad faith or gross
negligence. In this regard the Trust and its transfer agent
require personal identification before accepting a telephone
redemption. To the extent that the Trust fails to use
reasonable procedures as a basis for its belief that
telephone instructions are genuine, it and/or its service
providers may be liable for instructions that prove to be
fraudulent and unauthorized.
Each Fund reserves the right to redeem an account if its
value falls below $1,000 ($100 for IRA accounts) for
Investment Shares and $100,000 for Institutional Shares as a
result of redemptions (but not as a result of a decline in
net asset value). A shareholder will be notified in writing
and allowed 60 days to increase the value of the account to
the minimum investment level.
What Price Do I Receive for Shares?
You will receive the NAV next determined for each share you
wish to redeem. See "Purchases of Shares - What Price Do I
Pay for Shares?" for an explanation of how the NAV next
determined is calculated.
When Will I Receive Redemption Money?
Redemption proceeds are typically sent to shareholders
within 3 business days after a request for redemption is
made. You should be sure that you submit all proper
documents for redemption; otherwise, the payment of
redemption proceeds may be delayed. You may call the Funds
at 1-800-633-KENT (5368) to be sure that you have proper
documents for redemption. If you purchase shares with a
check and try to redeem shares a short time later, the Fund
may delay paying redemption proceeds until the check has
been collected, although the amount to be paid for the
shares will be calculated when the redemption notice is
received. The delay could take 15 days or more. To avoid a
delay in receiving redemption proceeds, you should purchase
shares through a bank wire or electronic funds transfer.
Information on wires can be obtained from all national and
many state banks.
STRUCTURE AND MANAGEMENT OF THE FUNDS
How Are The Funds Structured?
The Trust is an open-end management investment company,
which is a mutual fund that sells and redeems shares every
day that it is open for business. The Trust was organized
on May 9, 1986 as a Massachusetts business trust. The Trust
is governed by a Board of Trustees. The Trustees are
responsible for the overall management of the Trust and
retain and supervise the Funds' Adviser, Administrator,
Distributor, Transfer Agent and Custodian. Currently, the
Trust has thirteen portfolios, each of which offers 2
classes of shares.
Who Manages and Services the Funds?
INVESTMENT ADVISER. The Funds are advised by Old Kent, an
indirect wholly-owned subsidiary of OKFC, which is a
financial services company with total assets as of December
31, 1995 of approximately $12 billion. Old Kent provides
investment advice to the Funds under a contract with the
Funds.
Old Kent's Investment Department employs an experienced
staff of professional investment analysts, portfolio
managers and traders, and uses several proprietary computer-
based systems in conjunction with fundamental analysis to
identify investment opportunities. Old Kent has provided
investment advisory services to individual and corporate
trust accounts for over 100 years. Old Kent is located at
One Vandenberg Center, Grand Rapids, MI 49503. Through
offices in Michigan, Florida and Illinois, OKFC and its
subsidiaries provide a broad range of financial services to
individuals and businesses. Old Kent currently has the
right to vote a majority of the Trust's outstanding shares
on behalf of its underlying customer accounts and therefore
it is considered to be a controlling person of the Trust.
Old Kent has committed several portfolio managers to the
day-to-day management of the Funds. Joseph T. Keating, a
Senior Vice President in the Investment Management Group, is
responsible for developing and implementing the Funds'
investment policies. Mr. Keating has over 20 years of
investment experience and has served in various management
positions with Old Kent for the past 9 years. Michael A.
Petersen, a Vice President in the Investment Management
Group, is responsible for investment strategy for the Funds
and is co-portfolio manager for each Fund. Mr. Petersen has
over 8 years of investment experience with Old Kent. Mr.
Petersen has managed all of the Funds since their inception.
David C. Eder, an Investment Officer in the Investment
Management Group, is responsible for investment strategy for
the Funds and is co-portfolio manager for each Fund. Mr.
Eder has over 3 years of investment experience with Old Kent
and, prior to his current position, worked as a Programmer
Analyst for Old Kent. He has been co-portfolio manager of
each Fund since January, 1995. Andrew H. Fabiano, an
Investment Officer in the Investment Management Group, is
the co-portfolio manager for the Small Company Growth Fund
and the Growth and Income Fund. Mr. Fabiano has over 3
years investment experience with Old Kent and, prior to his
current position, was a student receiving his master's
degree at Michigan State University and undergraduate degree
at Grand Valley University. He has been co-portfolio
manager of each Fund since January, 1995.
Old Kent selects broker-dealers to execute portfolio
transactions for the Funds based on best price and execution
terms. Old Kent may consider as a factor the number of
shares of a Fund sold by the broker-dealer. The broker-
dealers may be affiliated with the Trust or its service
providers or their affiliates subject to any limitations
imposed by applicable securities laws and regulations.
ADMINISTRATOR. First Data provides management and
administrative services to the Funds, including providing
office space, equipment and clerical personnel to the Funds,
supervising custodial, auditing, valuation, bookkeeping,
legal and dividend dispersing services. First Data also
acts as the transfer agent and dividend paying agent of the
Funds. First Data is located at One Exchange Place, Boston,
Massachusetts 02109.
DISTRIBUTOR. 440 Distributors is the distributor of the
Funds' shares and is paid a sales charge on the sale of
Investment Shares, described under "Purchases of Shares -
What Price Do I Pay For Shares?" The Distributor may
reallow all or a portion of the sales charge to a broker-
dealer. The second column under the table labeled
"Applicable Sales Charge" shows the maximum amount of the
reallowance. The Distributor may, from time to time,
provide promotional incentives to certain dealers whose
representatives have sold or are expected to sell
significant amounts of Investment Shares. The Distributor
may provide written information to dealers with whom it has
dealer agreements that relate to sales incentive campaigns
conducted by such dealers for their representatives. In
addition, the Distributor may similarly provide financial
assistance in connection with pre-approved seminars,
conferences and advertising. No such programs or additional
compensation will be offered to the extent that they are
prohibited by the laws of any state or any self-regulatory
agency, such as the NASD. Dealers to whom substantially the
entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities
Act of 1933.
What Are My Rights as a Fund Shareholder?
As a shareholder of a Fund, you have the right to vote on
certain matters affecting the Fund, such as elections of
Trustees and approval of advisory contracts and distribution
arrangements. The Funds will not have annual shareholder
meetings, but special meetings may be held at the request of
investors holding 10% of the shares for the purpose of
removing a Trustee. You are entitled to one vote for each
share you hold and a fractional vote for each fraction of a
share you hold. You will be asked to vote only on matters
affecting the Trust as a whole and your particular Fund and
class of shares, and not on matters only affecting other
Funds or classes of shares. You should be aware that under
Massachusetts law it is possible that a shareholder may be
personally liable for the Fund's obligations. If a
shareholder were required to pay a debt of a Fund, however,
the Fund has committed to reimburse the shareholder in full
from its assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
When Will I Receive Distributions From the
Funds?
A Fund's net income from dividends and interest and any net
realized short-term capital gains are paid to shareholders
as income dividends on a monthly basis (with the exception
of the International Growth Fund which pays such dividends
annually). Net realized long-term capital gains are paid to
shareholders as capital gain dividends.
Each Fund will distribute substantially all of its net
investment income and long-term capital gains to
shareholders each year. You should be aware that each time
a distribution is made from a Fund, the Fund's net asset
value is reduced by the amount of the distribution.
Therefore, if you buy shares just before a distribution is
made, you will pay full price for the shares and then
receive a portion of the price back as a taxable
distribution.
How Will Distributions Be Made?
Dividend and capital gains distributions will be paid in
additional shares of the Funds. If you wish to receive
distributions in cash, notify the Fund at 1-800-633-KENT
(5368) and a check will be mailed to you each time a
distribution is made. Your distributions may also be sent
by electronic funds transfer directly to your designated
bank account. Shareholders in IRA accounts and participants
in certain tax-qualified plans cannot receive distributions
in cash.
What Are the Tax Implications of My
Investments in the Funds?
Income dividends by each Fund will be taxable to you as
ordinary income, unless you are exempt from Federal income
taxes. Capital gains distributions will be taxed to you as
long-term capital gains (regardless of how long you have
held the shares). Please note that the above tax treatment
applies regardless of whether you receive your distributions
in cash or in additional shares. Federal income taxes for
distributions to an IRA or to a qualified retirement plan
are deferred. Income dividends will qualify for the
dividends received deduction for corporations to the extent
of the total qualifying dividends received by the
distributing Fund from domestic corporations for the year.
Any distribution that is declared in October, November or
December but not actually paid until January of the
following year will be taxable in the year declared. When
you redeem, transfer or exchange shares, you may have a
taxable gain or loss depending on whether the price you
receive for the shares has a value higher or lower than your
tax basis in the shares. If you hold shares for six months
or less, and during that time you received a capital gain
dividend, any loss you realize on the sale of those shares
will be treated as a long-term loss to the extent of the
earlier distribution. You will receive from each Fund in
which you are a shareholder shortly after the end of each
year a statement of the amount and nature of distributions
made to you during the year. You will also receive a
confirmation statement shortly after disposing of shares
showing the amount and value of the disposition.
Dividends and certain interest income earned by the Growth
and Income Fund and International Growth Fund from foreign
securities may be subject to foreign withholding or other
taxes. In certain circumstances, International Growth Fund
may choose to treat certain foreign taxes paid by it as paid
to its shareholders, in which case you may either credit
such taxes against your income tax liabilities or deduct
such taxes from your taxable income.
Because the Funds each intend to qualify as a "regulated
investment company" under the Internal Revenue Code, they
generally will not be required to pay Federal income taxes
on their income and capital gains.
You should note that in certain cases (i) the Funds will be
required to withhold 31% of dividends or sale proceeds
otherwise due to you and (ii) in addition to Federal taxes,
state and local taxes may apply to transactions in shares.
This section contains a brief summary of the tax
implications of ownership of the Funds' shares. A lengthier
description of taxes is contained in the SAI. You should
consult your tax adviser regarding the impact of owning the
Funds' shares on your own personal tax situation, including
the applicability of any state and local taxes.
ADDITIONAL INFORMATION
Where Do I Get Additional Information
About My Account and the Funds?
For more information, call the Funds at 1-800-633-KENT
(5368) or write to the Funds at:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Except as otherwise stated in this prospectus or required by
law, the Trust reserves the right to change the terms of any
offer stated in this prospectus without shareholder
approval, including the right to charge certain fees for
services provided. No person has been authorized to give
any information or to make any representation not contained
in this prospectus, or in the SAI, in connection with the
offering made by this prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Funds or their Distributor.
This prospectus does not constitute an offering by the Funds
or by their Distributor in any jurisdiction in which such
offering may not lawfully be made.
THE KENT FUNDS
Prospectus
Dated May 1, 1996
THIS PROSPECTUS RELATES TO THE FOLLOWING MONEY MARKET FUNDS
(THE "FUNDS"):
THE KENT MONEY MARKET
FUND
THE KENT MICHIGAN
MUNICIPAL
MONEY MARKET FUND
SEEKS CURRENT INCOME
WHILE PRESERVING
CAPITAL AND
MAINTAINING LIQUIDITY.
SEEKS CURRENT INCOME,
EXEMPT FROM FEDERAL
INCOME AND MICHIGAN
STATE PERSONAL INCOME
TAXES, WHILE PRESERVING
CAPITAL AND MAINTAINING
LIQUIDITY.
________________________________
This Prospectus contains information that a prospective
investor should know before investing. Investors should
read and retain this Prospectus for future reference. The
Kent Funds has filed a Statement of Additional Information
("SAI") dated May 1, 1996 with the Securities and Exchange
Commission, which is incorporated by reference into this
prospectus. For a free copy of the SAI, or for other
information about the Funds, write to the address or call
the telephone number listed below.
Shares of the Funds are not bank deposits or obligations of,
or guaranteed or endorsed by, the Funds' investment adviser
or any of its affiliates, and are not federally insured by,
guaranteed by, obligations of or otherwise supported by the
U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency.
An investment in mutual fund shares involves risk, including
the possible loss of principal. Old Kent Bank receives fees
from the Funds for advisory and certain other services.
Shares of the Funds are neither insured nor guaranteed by
the U.S. Government. While each Fund intends to maintain a
stable net asset value per share of $1.00, there is no
guarantee that it will be able to do so.
__________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Kent Funds
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Call Toll-Free For Shareholder Services:
1-800-633-KENT (5368)
TABLE OF CONTENTS
PAGE
HIGHLIGHTS
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
FINANCIAL INFORMATION
WHAT ARE THE FUNDS' KEY FINANCIAL HIGHLIGHTS?
FUND
CHOICES
WHAT FUNDS ARE OFFERED?
(FUND INVESTMENT OBJECTIVES AND POLICIES)
WHAT INSTRUMENTS DO THE FUNDS INVEST IN?
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
PERFORMANCE
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
WHERE CAN I OBTAIN PERFORMANCE DATA?
EXPENSE INFORMATION
WHAT ARE THE FUNDS' EXPENSES?
WHO MAY WANT TO INVEST IN THE FUNDS?
WHEN CAN I PURCHASE SHARES?
WHAT IS THE MINIMUM REQUIRED INVESTMENT?
HOW CAN I PURCHASE SHARES?
WHAT PRICE DO I PAY FOR SHARES?
PURCHASES OF SHARES
WHEN CAN I REDEEM SHARES?
HOW CAN I REDEEM SHARES?
WHAT PRICE DO I RECEIVE FOR SHARES?
WHEN WILL I RECEIVE REDEMPTION MONEY?
REDEMPTIONS (SALES) OF SHARES
HOW ARE THE FUNDS STRUCTURED?
WHO MANAGES AND SERVICES THE FUNDS?
WHAT ARE MY RIGHTS AS A FUND SHAREHOLDER?
STRUCTURE AND MANAGEMENT OF THE FUNDS
WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
HOW WILL DISTRIBUTIONS BE MADE?
WHAT ARE THE TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
DIVIDENDS, DISTRIBUTIONS AND TAXES
ADDITIONAL INFORMATION
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
HIGHLIGHTS
What Are the Key Facts Regarding the Funds?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is a family of open-end
management investment companies (commonly known as mutual
funds) that offers investors the opportunity to invest in
different investment portfolios, each having separate
investment objectives and policies. This prospectus describes
the Trust's Money Market Fund and Michigan Municipal Money
Market Fund. See "Fund Choices - What Funds are Offered?" The
Trust also offers the following investment portfolios by
separate prospectuses: The Kent Short Term Bond Fund, The Kent
Intermediate Bond Fund, The Kent Income Fund, The Kent Growth
and Income Fund, The Kent Small Company Growth Fund, The Kent
International Growth Fund, The Kent Index Equity Fund, 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. To obtain a prospectus for any Kent Fund,
please call 1-800-633-KENT (5368).
Q: Who advises the Funds?
A: The Funds are managed by Old Kent Bank ("Old Kent"), an
indirect wholly-owned subsidiary of Old Kent Financial
Corporation ("OKFC"). Old Kent Financial Corporation is a
financial services company with total assets as of December 31,
1995 of approximately $12 billion. See "Structure and
Management of the Funds - Who Manages and Services the Funds?"
Q: What advantages do the Funds offer?
A: The Funds offer investors the opportunity to invest in a
variety of professionally managed diversified investment
portfolios without having to become involved with the detailed
accounting and safekeeping procedures normally associated with
direct investments in securities. The Funds also offer the
economic advantages of block trading in portfolio securities
and the availability of a family of thirteen mutual funds
should your investment goals change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by 440 Financial Distributors,
Inc. ("440 Distributors") and are sold in two classes:
Investment Shares and Institutional Shares. Investment Shares
can be purchased from any broker-dealer or financial
institution which has entered into a dealer agreement with 440
Distributors, or by completing an application and mailing it
directly to 440 Distributors with a check, payable to the
appropriate Fund, for $1,000 or more, or $100 or more for
Individual Retirement Accounts ("IRAs"). Institutional Shares
are offered to financial and other institutions for the benefit
of fiduciary, agency or custodial accounts. The minimum
initial aggregate investment for Institutional Shares is
$100,000. The Trust may waive the minimum purchase
requirements in certain instances. Institutional Shares
purchasers should call First Data Investor Services Group, Inc.
("First Data"), the Trust's Transfer Agent and Administrator,
toll-free at 1-800-633-KENT (5368) for instructions on how to
open an account. See "Purchases of Shares."
For information on how to redeem your shares, see "Redemptions
(Sales) of Shares."
Q: When are dividends paid?
A: Dividends of each Fund's net investment income are
declared daily and paid monthly. Net realized capital gains of
the Funds are distributed at least annually. See "Dividends,
Distributions and Taxes."
Q: What shareholder privileges are offered by the Trust?
A: Investors may exchange shares of a Fund having a value of
at least $100 for shares of the same class of any other
investment portfolio offered by the Trust in which the investor
has an existing account. The Trust offers IRAs, which can be
established by contacting the Trust's Distributor. The Trust
also offers an Automatic Investment Program which allows
investors to automatically invest in Investment Shares on a
monthly basis. See "Purchases of Shares - How Can I Purchase
Shares?"
Q: What are the potential risks presented by the Funds'
investment practices?
A: Investing in the Funds involves the risks common to any
investment in securities. Although each Fund seeks to maintain
a stable net asset value per share of $1.00, there is no
assurance that it will be able to do so. The Michigan
Municipal Money Market Fund's performance will be closely tied
to the economic and political conditions in the State of
Michigan. For a complete description of the risks associated
with each Fund, see "Fund Choices - What Funds are Offered?"
and " - What Are the Risks of Investing in the Funds?"
FINANCIAL INFORMATION
What Are the Funds' Key Financial Highlights?
Fee Table
The purpose of the fee table is to assist you in understanding
the various costs and expenses that an investor in each Fund
will bear directly or indirectly. See "Expense Information"
and "Purchases of Shares" regarding such costs and expenses.
MONEY MARKET FUND
Investment Shares Institutional Shares
ANNUAL FUND OPERATING EXPENSES(1)
(as a % of average net assets)
Management Fees 0.40% 0.40%
12b-1 Fees(2) None None
Other Expenses 0.12% 0.12%
(after fee waivers)(3)
TOTAL FUND OPERATING EXPENSES 0.52% 0.52%
(after fee waivers)(3)
MICHIGAN MUNICIPAL MONEY MARKET FUND
Investment Shares Institutional Shares
ANNUAL FUND OPERATING EXPENSES(1)
(as a % of average net assets)
Management Fees 0.40% 0.40%
12b-1 Fees(2) None None
Other Expenses 0.12% 0.12%
(after fee waivers)(3)
TOTAL FUND OPERATING EXPENSES 0.52% 0.52%
(after fee waivers)(3)
EXAMPLE: You would pay the following expenses on a $1,000 investment,
assuming (i) 5% annual return and (ii) redemption at the end of each
period:
MONEY MARKET FUND
Investment Shares Institutional Shares
One Year $ 5 $ 5
Three Years $16 $16
Five Years $28 $28
Ten Year $64 $64
MICHIGAN MUNICIPAL MONEY MARKET FUND
Investment Shares Institutional Shares
One Year $ 5 $ 5
Three Years $16 $16
Five Years $28 $28
Ten Year $64 $64
Amounts shown in the example should not be considered a representation of
past or future investment return or expenses; actual investment return and
expenses may be greater or lesser than those shown.
_________________________________________
(1) Expense ratios are based on amounts incurred for the fiscal year ended
December 31, 1995, restated to reflect current waivers and reimbursements of
certain expenses. Sweep, trustee, agency, custody and certain other fees
charged by Old Kent and its affiliates to their customers who own shares of
the Funds are not reflected in the fee table.
(2) Although each Fund is authorized to pay 12b-1 fees of up to .25%
(on an annualized basis) in connection with the sale of Investment Shares,
neither Fund currently intends to pay such fees.
(3) Before waivers, Other Expenses and Total Fund Operating Expenses
would be 0.22% and 0.62%, respectively, for the Investment Shares and
the Institutional Shares of both Funds.
Financial Highlights
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT (5368). This table should be
read in conjunction with the financial statements and related notes.
Money Market Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
December 9, 1992 December 3, 1990
(Date ofInitial (Commencement
Public Investment) of Operations) to
Years Ended December 31, to December 31, Years Ended December 31, December 31,
1995 1994 1993 1992 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income From Investment Operations:
Net investment income 0.05 0.04 0.03 --- 0.05 0.04 0.03 0.03 0.06 0.01
Less Distributions from:
Net investment income (0.05) (0.04) (0.03) --- (0.05) (0.04) (0.03) (0.03) (0.06)
(0.01)
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Return for period indicated ^ 5.56% 3.71% 2.67% 0.27% 5.58% 3.75% 2.68% 3.40% 5.65%
0.60%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income ^(b) 5.41% 3.58% 2.63% 3.30% ^(a) 5.45% 3.65% 2.65% 3.23% 5.53%
7.27% (a)
Operating expenses ^(b) 0.55% 0.63% 0.63% 0.63% ^(a) 0.55% 0.60% 0.60% 0.60% 0.60% 0.60% (a)
Net Assets, End of Period (thousands) $1,227 $369 $593 $11 $424,815 $323,539
$359,624 $220,508 $28 $23
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Annualized.
(b) "Operating expenses" and "Net investment income" reflect expense
reimbursements and/or fee waivers. Before the expense reimbursements and fee
waivers, the ^ratio of "Operating expenses" to average net assets for the
years ended December 31, 1995, 1994 and 1993 and the period ended December
31, 1992 would have been 0.62%, 0.68%, 4.49% and 0.68% (annualized),
respectively, for the Investment Shares, and for the years ended
December 31, 1995, 1994, 1993, 1992, 1991 and the period ended December 31,
1990 would have been 0.63%, 0.65%, 0.68%, 0.91%, 0.92% and 1.02% (annualized),
respectively, for the Institutional Shares. Before the expense
reimbursements and fee waivers, the ^ ratio of "Net investment income" to
average net assets for the years ended December 31, 1995, 1994 and 1993 and
the period ended December 31, 1992 would have been 5.33%, 3.53%, (1.24)% and
3.25% (annualized), respectively, for the Investment Shares, and for the
years ended December 31, 1995, 1994, 1993, 1992, 1991 and the period ended
December 31, 1990 would have been 5.37%, 3.59%, 2.57%, 2.92%, 5.21% and 6.84%
(annualized), respectively, for the Institutional Shares.
</FN>
</TABLE>
The Financial Highlights presented below are derived from the Financial
Statements of the Funds which have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report, together with the financial statements
of the Funds, appears in the Funds' annual report, which can be obtained
free of charge by calling 1-800-633-KENT (5368). This table should be read
in conjunction with the financial statements and related notes.
Michigan Municipal Money Market Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
December 15, 1992 June 3, 1991
(Date of Initial (Commencement
Public Investment) of Operations
Years Ended December 31, to December 31,Years Ended December 31,
to December 31,)
1995 1994 1993 1992 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
<C>
$1.00
Income From Investment Operations:
Net investment income 0.03 0.02 0.02 *** 0.03 0.02 0.02 0.03 0.02
Less Distributions from:
Net investment income (0.03) (0.02) (0.02) --- (0.03) (0.02) (0.02) (0.03)
(0.02)
Net Asset Value, End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total Return for period indicated ^ 3.48% 2.38% 1.98% 0.03% 3.50% 2.40% 2.00%
2.63% 2.37%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income (b) 3.48% 2.47% 2.01% 2.92% ^(a) 3.45% 2.33% 1.96% 2.56% ^
4.03% (a)
Operating expenses (b) 0.54% 0.63% 0.63% 0.00% ^(a) 0.56% 0.60% 0.60% 0.60% ^ 0.60% (a)
Net Assets, End of Period (thousands) $1,603 $379 $149 $0 $145,215 $128,164
$183,366 $72,906 $49,618
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling1-800-633-KENT
(5368)
<FN>
(a) Annualized.
*** Amount is less than $0.005.
(b) "Operating expenses" and "Net investment income" reflect expense
reimbursements and/or fee waivers. Before the expense reimbursements and fee
waivers, the ^ ratio of "Operating expenses" to average net assets
for the years ended December 31, 1995, 1994 and 1993 and the period ended
December 31, 1992 would have been 0.62%, 0.73%, 3.77% and 0.00% (annualized),
respectively, for the Investment Shares, and for the years ended
December 31, 1995, 1994, 1993 and 1992 and the period ended December 31, 1991
would have been 0.65%, 0.70%, 0.69%, 0.86% and 0.77% (annualized),
respectively, for the Institutional Shares. Before the expense
reimbursements and fee waivers, the ratio of "Net investment income" to
average net assets for the years ended December 31, 1995, 1994 and 1993 and
the period ended December 31, 1992 would have been 3.39%, 2.37%,
(1.13)% and 2.92% (annualized), respectively, for the Investment Shares, and
for the years ended December 31, 1995, 1994, 1993 and 1992 and the period
ended December 31, 1991 would have been 3.36%, 2.23%, 1.87%, 2.29%
and 3.93% (annualized), respectively, for the Institutional Shares.
</FN>
</TABLE>
FUND CHOICES
What Funds Are Offered?
The Trust currently offers the two money market funds
described below. Money market funds typically seek to
maintain a stable net asset value of $1.00 per share,
although there is no guarantee that their net asset value
will not vary. The investment objectives described below
are considered "fundamental" and may not be changed by a
Fund without the approval of its shareholders.
MONEY MARKET FUND
OBJECTIVE: The Fund seeks current
income from short-term
securities while preserving
capital and maintaining liquidity.
PRINCIPAL INVESTMENTS: The Fund invests in a broad range of
government, bank and commercial obligations. These
instruments primarily include obligations of banks having
total assets in excess of $1 billion at the time of purchase
and commercial paper that matures in 13 months or less.
These instruments are described in more detail under "What
Instruments Do the Funds Invest In?" The Fund may also
invest in short-term obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Not
all U.S. Government securities are backed by the full faith
and credit of the United States.
MICHIGAN MUNICIPAL MONEY MARKET FUND
OBJECTIVE: The Fund seeks current
income, exempt from
Federal and State of Michigan
personal income taxes, from short-
term
securities while preserving
capital and maintaining liquidity.
PRINCIPAL INVESTMENTS: At least 80% of the Fund's net
assets will be invested in federally tax-exempt obligations
("Municipal Obligations") except during periods of unusual
market conditions. This is a fundamental policy, which
means it cannot be changed without shareholder approval.
Municipal Obligations consist of municipal bonds, notes and
commercial paper issued by states, territories or
possessions of the United States, the District of Columbia
and their political subdivisions, agencies and
instrumentalities. Under normal conditions, at least 65% of
the Fund's total assets will be invested in municipal
obligations issued by the State of Michigan or its political
subdivisions, authorities or corporations ("Michigan
Municipal Obligations").
The Fund will principally invest in municipal bonds, which
are issued by state or local governments typically for
general funding or to finance specific projects. "General
Obligation" securities are backed by the full faith, credit
and taxing power of the municipality. "Revenue" securities
are backed only by the revenues from a particular facility
or facilities or other specific revenue sources. "Private
Activity Bonds," which are revenue securities issued by
industrial development authorities, are issued to finance
privately-owned facilities and are backed by private
entities. The credit quality of Private Activity Bonds is
usually related to the creditworthiness of the private
entity using the facility involved. "Moral Obligation
Securities," which are typically issued by special purpose
public authorities, are backed by a reserve fund which the
issuer may draw on if it is unable to pay its debt service
obligations, but the issuer and the state or municipality
which created the issuer have no legal obligation to restore
the reserve fund. A municipal obligation's credit may be
enhanced by a letter of credit issued by a bank and the
payment of principal and interest may be insured by an
insurance company.
The Fund may enter into "Stand-By Commitments" under which a
dealer agrees when requested by the Fund to purchase a
Municipal Obligation from the Fund at a set price. Stand-by
commitments will be used to provide portfolio liquidity and
the Fund does not intend to use them for trading purposes.
From time to time on a temporary defensive basis due to
market conditions, the Fund may hold uninvested cash
reserves or invest in short-term taxable money market
obligations that are permissible investments of the Money
Market Fund (except guaranteed investment contracts and
custodial receipts), in such proportions as, in the opinion
of Old Kent, prevailing market or economic conditions
warrant. Taxable obligations acquired by the Fund will not
exceed 20% of the Fund's net assets at the time of purchase
under normal market conditions.
What Instruments Do The Funds Invest In?
The Funds may also invest in the securities and use the
investment techniques described below. Each of these
securities and investment techniques is described in more
detail under "Investment Policies" in the SAI.
The Funds will only purchase U.S. dollar-denominated
"ELIGIBLE SECURITIES" (as defined by the Securities and
Exchange Commission), which are securities that (i) have
short-term debt ratings when purchased in the two highest
rating categories by at least 2 nationally recognized
statistical rating organizations ("NRSROs"), (ii) are
comparable in priority and security to another security
issued by an issuer which has such ratings, or (iii) are
unrated, but are deemed by Old Kent to be of comparable
quality pursuant to guidelines approved by the Board of
Trustees. Appendix A to the SAI contains a description of
NRSRO ratings. The average maturity of each Fund's
portfolio will not exceed 90 days and with certain
exceptions, the Funds will not purchase any securities which
mature in more than 397 days from the date of purchase. All
securities purchased by the Funds will be determined by Old
Kent, under guidelines established by the Board of Trustees,
to present minimal credit risks.
Each Fund intends to typically invest its assets in DEBT
SECURITIES. Debt securities are issued in exchange for money
borrowed. Debt securities, other than securities known as
zero coupon bonds, pay interest at set times, at either a
fixed (set) rate or a variable (changing) rate. Debt
securities purchased by the Funds may include corporate debt
obligations, U.S. Government securities, stripped
securities, variable and floating rate securities, mortgage-
backed securities and asset-backed securities. The Money
Market Fund may also invest in custodial receipts for
Treasury certificates.
From time to time the Funds may acquire COMMERCIAL PAPER,
which includes short-term promissory notes which are not
secured by collateral, variable rate master demand notes and
instruments issued by governmental agencies and
instrumentalities. Commercial paper acquired by the
Michigan Municipal Money Market Fund will be tax-exempt.
BANK OBLIGATIONS which may be acquired by the Funds include
bankers' acceptances, certificates of deposit and time
deposits. Bankers' acceptances evidence the obligation of a
bank to pay a draft drawn on the bank by a customer.
Certificates of deposit are certificates obligating a bank
to repay funds deposited with it for a specified period of
time at a specified interest rate.
The Funds may enter into REPURCHASE AGREEMENTS. Under a
repurchase agreement, a Fund agrees to purchase securities
from a seller and the seller agrees to repurchase the
securities at a later time, typically within 7 days, at a
set price. The seller agrees to set aside collateral equal
to the price it has to pay during the term of the agreement.
This ensures that the Fund will receive the purchase price
at the time it is due, unless the seller defaults or
declares bankruptcy, in which event the Fund will bear the
risk of possible loss due to adverse market action or delays
in liquidating the underlying obligation. The Funds will
not enter into repurchase agreements with Old Kent or its
affiliates. Each Fund may also borrow money for temporary
purposes by entering into REVERSE REPURCHASE AGREEMENTS.
Under these agreements, a Fund sells portfolio securities to
financial institutions and agrees to buy them back later at
an agreed upon time and price.
Each Fund may buy VARIABLE AND FLOATING RATE MASTER DEMAND NOTES,
which permit daily or weekly changes in the amount lent by
the Fund and provide for adjustments from time to time in
the interest rates. The notes may or may not be backed by
bank letters of credit. This type of note are direct
lending arrangements between the Fund and a borrower; and
therefore, the notes generally are not traded and there is
no market in which to sell them to third parties.
Therefore, a Fund could suffer a loss if, for example, the
borrower defaults on the note. This type of note will be
subject to a Fund's limitations on illiquid investments if
the Fund cannot demand payment of the principal amount of
the note within 7 days.
The Money Market Fund may acquire GUARANTEED INVESTMENT CONTRACTS
("GICs"). Under a GIC, the Fund gives cash to an insurance
company which credits the Fund with the amount given plus
interest based on a certain index, which interest is
guaranteed to be not less than a certain minimum rate. An
active secondary market for GICs does not exist; therefore,
GICs are considered to be illiquid investments and will be
purchased only if after the purchase 10% or less of the
Fund's net assets will be invested in illiquid securities.
LOAN PARTICIPATION NOTES, which represent participation in a
loan by a commercial bank to a corporation, may be purchased
by the Money Market Fund. The notes must have a remaining
maturity of 1 year or less and the bank issuing the notes
must have assets of at least $1 billion. The Fund bears the
risks that the corporate borrower or lending bank will
become insolvent. The secondary market for loan
participations is very limited and loan participations will
be considered illiquid.
Each Fund may purchase U.S. GOVERNMENT OBLIGATIONS, which are
obligations issued by, or guaranteed by, the U.S. Government
or its agencies or instrumentalities. Such instruments
include U.S. Treasury notes, which have initial maturities
of one to ten years, U.S. Treasury bonds, which generally
have initial maturities of greater than 10 years, and
obligations of the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Government National
Mortgage Association and many other U.S. Government agencies
and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of
the Government National Mortgage Association, are supported
by the full faith and credit of the U.S. Treasury; others,
such as those of the Export-Import Bank of the United
States, are supported by the right of the issuer to borrow
from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase
the agency's obligations; still others, such as those of the
Student Loan Marketing Association, are supported only by
the credit of the instrumentality. No assurance can be
given that the U.S. Government would provide financial
support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law.
The Funds may purchase RULE 144A SECURITIES. Rule 144A allows
for a broader institutional trading market for securities
which otherwise would be restricted on resale by allowing
resales to certain qualified institutional buyers. Old Kent
will monitor the liquidity of Rule 144A securities under the
supervision of the Board of Trustees.
The Funds may buy shares of registered MONEY MARKET INVESTMENT
COMPANIES. The Funds will bear a portion of the expenses of
any investment company whose shares they purchase, including
operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to
the Fund's own expenses.
The Funds may LEND SECURITIES to broker-dealers and other
financially sound institutional investors who will pay the
Funds for the use of the securities. The borrower must set
aside cash or illiquid high-grade debt securities equal to
the value of the securities borrowed at all times during the
term of the loan. Loans may not exceed one-third of the
value of a Fund's total assets. Risks involved with such
transactions include possible delay in recovering the loaned
securities and possible loss of the securities or the
collateral if the borrower declares bankruptcy.
Each Fund may agree to PURCHASE SECURITIES FOR FUTURE
DELIVERY, sometimes a month or more after the date of the
agreement. Although the price to be paid by the Fund is set
at the time of the agreement, the Fund usually does not pay
for the securities until they are received. The value of
the securities may change between the time the price is set
and the time the price is paid. When a Fund purchases
securities for future delivery, the Trust's custodian will
maintain a segregated account containing cash, U.S.
Government securities or other liquid high-grade debt
securities. The Funds do not intend to purchase securities
for future delivery for speculative purposes.
Except for the Michigan Municipal Money Market Fund's policy
to invest at least 80% of its net assets in federally tax-
exempt obligations, the investment policies discussed above
are not "fundamental" policies and may be changed by the
Board of Trustees without shareholder approval. However,
the Funds also have in place certain fundamental investment
limitations that cannot be changed for a Fund without the
approval of a majority of that Fund's outstanding shares.
Some of these limitations are summarized below. A complete
list of the fundamental investment limitations for the Funds
is contained in the SAI.
1. With respect to 75% of each Fund's total assets, the
Funds cannot invest more than 5% of their respective total
assets in any one issuer (other than the U.S. Government,
its agencies and instrumentalities). In addition, the Funds
cannot invest more than 25% of their respective total assets
in a single industry. These restrictions require the Funds
to be more diversified in order to lower the risk to a Fund
of an economic setback for any one issuer or in any one
industry.
2. Each Fund may only borrow money for temporary or
emergency purposes, and such borrowing is limited to an
amount not greater than one-third of the Fund's net assets,
provided that while borrowings from banks exceed 5% of a
Fund's net assets, any such borrowings will be repaid before
additional investments are made. The limits on the amount
each Fund can borrow prevents the Fund from significantly
leveraging its assets.
3. Each Fund may not invest more than 10% of its assets in
illiquid securities. Typically, there is no ready market
for such securities, which inhibits a Fund's ability to sell
the securities and to obtain values for the securities.
As a matter of non-fundamental policy, in order to comply
with Securities and Exchange Commission regulations relating
to money market funds, the Money Market Fund will limit its
investments in securities of any one issuer (other than U.S.
Government securities and repurchase agreements
collateralized by the same) to not more than 5% of the value
of its total assets at the time of purchase, except for 25%
of its total assets, which may be invested in any one issuer
for a period of up to three business days. The Funds are
also permitted to invest in excess of 25% of their total
assets in obligations of the U.S. banks and domestic
branches of foreign banks that are subject to the same
regulations as U.S. banks.
What Are the Risks of Investing in the Funds?
Although each Fund seeks to maintain a stable net asset
value per share of $1.00, there is no assurance that they
will be able to do so. There can also, of course, be no
assurance that a Fund will achieve its investment objective
since there is uncertainty in every investment.
The Funds invest mostly in debt instruments, whose values
typically rise when interest rates fall and fall when
interest rates rise. The Funds buy bonds with shorter
maturities (time period until repayment), which tend to be
less affected by interest rate changes, but generally offer
lower yields than bonds with longer maturities. Current
yield levels should not be considered representative of
yields for any future time.
Since the Michigan Municipal Money Market Fund invests
mostly in Michigan Municipal Obligations, the Fund's
performance is closely tied to conditions in the State of
Michigan. The economy of Michigan is principally dependent
on three sectors -- manufacturing (particularly durable
goods, automotive products and office equipment), tourism
and agriculture. Michigan encountered financial
difficulties during the late 1980s, largely as a result of
poor conditions in the automotive industry, but recovered
from the prolonged downturn in production levels in this
sector in the early 1990s. Structural changes in the
automotive industry have given the Michigan economy greater
financial stability. The state's finances continue to be in
excellent condition, and a Budget Stabilization Fund that
exceeds $1 billion should help the state weather any
potential economic recession. At the end of 1995, however,
after several years of rapid growth, the Michigan economy
was evidencing a slight downturn. Personal income and
employment levels were not growing as rapidly as they had
for the past several years.
The market value and the marketability of bonds issued by
local units of government in the State may be affected
adversely by the same factors that affect Michigan's economy
generally. The ability of the State and its local units of
government to pay the principal of and interest on their
bonds may also be affected by such factors and by certain
constitutional, statutory and charter limitations. For
additional information on the specific risks associated with
the Michigan Municipal Money Market Fund, see Appendix B to
the SAI.
PERFORMANCE
How is the Funds' Performance Calculated?
The Money Market Fund and the Michigan Municipal Money
Market Fund may advertise "yield" and "effective yield" and
the Michigan Municipal Money Market Fund may advertise "tax
equivalent" yield. All yield figures are based on
historical earnings and are not intended to indicate future
performance. Yields are calculated separately for each
class of shares. The yield refers to the income generated
by a class of shares over a specified seven-day period.
This income is then annualized. That is, the amount of
income generated by the shares during that week is assumed
to be generated each week over a 52-week period and is shown
as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned
is assumed to be reinvested. The effective yield will be
slightly higher than the yield because of the compounding
effect of this assumed reinvestment. Tax equivalent yield
is generally the yield divided by a factor equal to one
minus a stated income tax rate and reflects the yield a
taxable investment would have to achieve in order to equal
on an after-tax basis a tax-exempt yield. Because
Investment Shares may be subject to higher expenses and Rule
12b-1 fees, the yields on Investment Shares may be lower
than those on Institutional Shares.
You should be aware that (i) past performance does not
indicate how a Fund will perform in the future and (ii) each
Fund's yield will fluctuate, so you cannot necessarily use a
Fund's performance data to compare it to investments in
certificates of deposit, savings accounts or other
investments that provide a fixed or guaranteed yield.
Each Fund may compare its performance to that of other
mutual funds, such as the performance of similar funds
prepared by Lipper Analytical Services, Inc. or information
reported in national financial publications (such as Money
Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times) or in local or regional publications. The
Funds may report their yields in comparison to the Consumer
Price Index, an indication of inflation reported by the U.S.
government, or a 91-day U.S. Treasury Bill.
Where Can I Obtain Performance Data?
The Wall Street Journal and certain local newspapers report
information on the performance of mutual funds. In
addition, performance information is contained in the Funds'
annual report dated December 31 of each year (the Trust's
fiscal year end) and semi-annual report dated June 30 of
each year, which will automatically be mailed to
shareholders. To obtain copies of financial reports or
performance information, call 1-800-633-KENT (5368).
EXPENSE INFORMATION
What Are the Funds' Expenses?
A pro rata portion of expenses of the Trust are allocated to
the Fund you own and to the particular class of shares you
own will be reflected in the value of your shares. Such
expenses are not paid directly by shareholders.
TRUST EXPENSES. Expenses charged at the Trust level include
fees paid to Trustees, legal counsel and auditors and
administration fees. First Data is entitled to receive, for
its administration services, an annual fee equal to 0.20% of
the aggregate net assets of all funds in the Trust up to $5
billion; 0.18% of the Trust's aggregate net assets between
$5 and $7.5 billion; and 0.15% of the Trust's aggregate net
assets over $7.5 billion.
FUND EXPENSES. Most expenses will be charged at the Fund
level, including investment advisory fees, Securities and
Exchange Commission registration fees, transfer agency fees,
custody fees, brokerage commissions, interest charges and
taxes. Old Kent is entitled to receive from each Fund an
annual advisory fee equal to 0.40% of its average daily net
assets. For the fiscal year ended December 31, 1995, the
Money Market Fund and the Michigan Municipal Money Market
Fund paid or accrued to Old Kent an advisory fee, calculated
daily and payable monthly, at an annual rate of 0.32% and
0.31%, respectively, of the average daily net assets of the
Funds. Old Kent may rebate advisory fees to certain
institutional customers in accordance with Federal and state
law.
CLASS EXPENSES. Expenses allocated at the class level
include printing and mailing expenses and expenses payable
under the Funds' Distribution Plans. The Distribution Plans
provide that each Fund may spend, in one year, up to 0.25%
of the average daily net assets of the Fund's Investment
Shares to finance sales activities of the Investment Shares,
including marketing and advertising shares, maintaining
account records, issuing confirmation statements and
providing sub-accounting. Banks, broker-dealers and other
organizations may also receive payments for providing
support and/or distribution services to the Funds'
shareholders who are their customers. Federal banking law
currently limits the securities activities of banks. If a
bank was not allowed to provide support and/or distribution
services, the Fund would find another organization to
provide such services and no shareholder should suffer any
financial loss. The Funds do not reimburse 440
Distributors, the Funds' distributor, for any distribution
expenses in excess of the payments received by 440
Distributors under the Distribution Plan or for its overhead
expenses. Neither Fund currently intends to charge any fees
under the Plans.
PURCHASES OF SHARES
Who May Want to Invest in the Funds?
Investment Shares may be purchased by individual investors
and Institutional Shares may be purchased only by financial
and other institutions for the benefit of fiduciary, agency
or custodial accounts. The Funds, which are money market
funds, are designed for investors who primarily seek to
preserve their capital. The instruments in which the Funds
invest may not earn as high a level of current income as
longer term or lower quality securities, which generally
have less liquidity, greater market risk and more price
fluctuation. Investors who desire higher returns and can
risk a potential loss of capital may wish to invest in the
other Kent Funds, which have fluctuating net asset values
and typically higher returns than the Funds.
Shares of the Michigan Municipal Money Market Fund would not
be suitable for tax-exempt institutions and may not be
suitable for certain retirement plans and for entities which
are substantial users of the facilities financed by
industrial development bonds. Such investors may wish to
consider instead an investment in the Money Market Fund.
When Can I Purchase Shares?
Shares can be purchased on any day that both the NYSE and
Bankers Trust Company, the Funds' custodian, are open for
business.
What is the Minimum Required Investment?
An investor must initially invest at least $1,000 ($100 for
IRAs) in Investment Shares and at least $100,000 in
Institutional Shares. Subsequent investments may be made in
any amount. The investment minimums may be waived for
purchases by employees of Old Kent, participants in tax-
sheltered plans and certain qualified retirement accounts.
How Can I Purchase Shares?
INVESTMENT SHARES
For your convenience, the Funds offer a wide variety of
methods to purchase Investment Shares.
* Through a Broker. Any broker authorized by 440
Distributors, the Funds' distributor, can sell you
Investment Shares of the Funds. Please note that such
brokers may charge you fees for their services.
* By Mail. You may open an account by mailing a
completed application and a check (payable to the applicable
Fund) to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
* By Telephone. You should call 1-800-633-KENT (5368)
to open an account and electronically transfer money to the
account, followed by a completed application.
* By Check. Subsequent purchases of Investment Shares
can be made by mailing a check to the address listed above.
* By Federal Funds Wire. Subsequent purchases of
Investment Shares can be made via a federal funds wire sent
to Fleet Bank for credit to a particular Fund. You should
call 1-800-633-KENT (5368) for complete wire instructions.
You should be aware that banks may charge fees for sending
wires. 440 Distributors has the right to charge fees for
receiving wires, although it does not currently do so.
* By Electronic Funds Transfer (For subsequent purchases
only). Call 1-800-633-KENT to request a purchase to be made
or for the forms to establish Electronic Fund Transfer.
* Through an Automatic Investment Plan
* Call 1-800-633-KENT (5368) to establish an Automatic
Investment Plan.
* Invest at least $1,000 in an Investment Share account.
* On the 5th day of each month, your checking account
will be debited (minimum of $50) and Investment Shares will
be purchased and held in your account.
To change the amount invested each month in Investment
Shares, or to stop the Automatic Investment Plan, call 1-
800-633-KENT or write to: The Kent Funds, c/o 440
Distributors, 4400 Computer Drive, P.O. Box 5107, Westboro,
MA 01581-5107 at least 5 days before a scheduled investment.
* Through Direct Deposit
You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks.
* Through a Tax-Sheltered Plan
Investment Shares of the Money Market Fund may be
purchased through IRAs and Rollover IRAs, which are
available through the Distributor. For details and
application forms, call The Kent Funds at 1-800-633-KENT
(5368) or write The Kent Funds, c/o 440 Distributors, 4400
Computer Drive, P.O. Box 5107, Westboro, MA 01581-5107.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the
following steps:
* To open an account, call 1-800-633-KENT (5368) to
obtain an account or wire identification number.
* Place a purchase order for shares by telephoning the
number above.
* Wire federal funds to Fleet Bank, no later than the
day after the purchase order is placed.
You should note that (i) a purchase of Institutional Shares
will not be completed until Fleet Bank receives the purchase
price and (ii) banks may charge for wiring federal funds to
Fleet Bank. You may obtain information on how to wire funds
from any national bank and certain state banks.
EXCHANGE PRIVILEGE
You may acquire Investment or Institutional Shares of a Fund
(the "new fund") by exchanging shares of another investment
portfolio offered by the Trust (the "old fund") for shares
of the new fund. Shares of the new fund will be of the same
class as the old fund. In effect, you would be redeeming
(reselling to the fund) shares of the old fund and
purchasing shares of the new fund. To determine the price
at which shares are redeemed, see "What Price Do I Receive
for Shares?" and to determine the price at which shares are
purchased, see "What Price Do I Pay for Shares?"
* Call 1-800-633-KENT (5368) or write to: The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107 to obtain a prospectus for the
new fund prior to the exchange.
* Call or write as indicated in * above to place an
order to exchange shares. Purchases of new funds must meet
the minimum purchase requirement of that fund. If the order
to exchange shares is placed prior to or at 4:00 p.m.
Eastern Standard Time on any business day, the order will be
executed on the day received, and if the order is placed
after 4:00 p.m. Eastern Standard Time, the order will not be
executed until the next business day.
* If a shareholder does not have an account with the new
fund, a new account will be established with the same
reinvestment options for distributions as the account for
the old fund, unless the shareholder writes to the new fund
to change the option.
Important Information About Exchanges
If shares of a Fund are purchased by check, such shares cannot be exchanged
for 15 days. The Trust may disallow exchanges of shares if a shareholder has
made more than 5 exchanges between investment portfolios offered by the Trust
in a year, or more than 3 exchanges in a calendar quarter. Although unlikely,
the Trust may reject any exchanges or the Funds may change or terminate
rights to exchange shares. The exchange privilege is available only in states
where shares of the new fund may be sold.
No sales charge is imposed when Investment Shares on which a
shareholder previously paid a sales charge are exchanged for
Investment Shares of another investment portfolio. However,
a sales charge will be imposed on exchanges of Investment
Shares purchased without a sales charge (e.g. shares of the
Funds) for Investment Shares of a Fund which imposes a sales
charge. In order to make an exchange, shareholders will be
required to maintain the applicable minimum account balance
in each investment portfolio of the Trust in which shares
are owned.
Institutional Shares of a Fund may be exchanged for
Investment Shares of the same Fund when the Institutional
Shares are distributed to the underlying beneficial owners
of trust accounts, 401(k) plans and other fiduciary or
agency accounts. No sales charge is imposed in connection
with such an exchange.
_________________________________________
Investors should note that each Fund has the right to stop
offering its shares, to reject purchase orders and to
suspend the exchange privilege, although such actions are
unlikely. 440 Distributors may require additional documents
prior to accepting a purchase, redemption or exchange.
Shareholder Services
For further information on all shareholder services, call
The Kent Funds toll-free at 1-800-633-KENT (5368)
or write to
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
What Price Do I Pay For Shares?
Shares are sold at the "net asset value next determined" by
the Fund. This term is explained below. You should be
aware that broker-dealers (other than the Funds'
distributor) may charge investors additional fees if shares
are purchased through them.
NET ASSET VALUE. Except in certain limited circumstances,
at 4:00 p.m. on each day the NYSE is open for trading each
Fund determines its NAV. NAV is calculated separately for
the Investment Shares and Institutional Shares of each Fund.
The "net asset value next determined" is the NAV calculated
at 4:00 p.m. on the day a purchase order for shares is
received, if the purchase order is received prior to or at
4:00 p.m., and is the net asset value calculated at 4:00
p.m. on the next business day, if the purchase order is
received after 4:00 p.m. The NAV is calculated by totaling
the value of all of the assets of a Fund allocated to a
particular class of shares, subtracting the Fund's
liabilities and expenses allocated to that class, and
dividing the result by the number of shares of that class
outstanding. The Funds' assets are valued on the basis of
amortized cost, meaning that instruments are valued at their
acquisition cost rather than at current market value.
Material deviations in the difference between amortized cost
and market value will be addressed by the Board of Trustees.
For further information about sales charge reductions and
waivers and the programs described above, call toll-free at
1-800-633-KENT (5368) or write to
The Kent Funds, c/o 440 Distributors, 4400 Computer Drive
P.O. Box 5107, Westboro, MA 01581-5107
REDEMPTIONS (SALES) OF SHARES
When Can I Redeem Shares?
You can redeem shares on any day that the NYSE is open for
trading. Shares will not be redeemed by a Fund unless all
required documents have been received by 440 Distributors.
A Fund may temporarily stop redeeming shares when the NYSE
is closed or trading on the NYSE is restricted, when an
emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets or if the
Securities and Exchange Commission orders the Fund to stop
redemptions. If you intend to redeem shares worth more than
$1,000,000, you should notify the Fund at least one day in
advance.
How Can I Redeem Shares?
INVESTMENT SHARES
* By Mail. You may mail your redemption notice to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
The redemption notice should state the amount of money or
number of shares to be redeemed, and the account name and
number. If a stock certificate has been issued to you, you
must endorse (sign the back of) the stock certificate and
return it to the Fund together with the written redemption
notice.
Important Information Regarding Stock Certificates and
Redemption Notices for Investment Shares
Signatures on all redemption notices and stock certificates
must be guaranteed by a U.S. stock exchange member, a U.S.
commercial bank or trust company and other entities approved
by 440 Distributors, unless the amount redeemed is less than
$50,000 and the account address has been the same for at
least 90 days. The Funds can change the above requirements
or require additional documents at any time.
* By Telephone. You can redeem up to $50,000 worth of
Investment Shares by calling 1-800-633-KENT (5368). If the
amount redeemed is less than $2,500, then a check will be
mailed to you and if equal to or greater than $2,500, then
the proceeds will be mailed or sent by wire or electronic
funds transfer to the bank listed on your account.
* Through a Broker. Investment Shares can be redeemed
through a broker. The broker should send the redemption
notice and any other required documents to 440 Distributors,
which will send the proceeds to the broker or directly to
you, as your option, within 3 days after receiving proper
documents. 440 Distributors does not charge a fee for this
service, but the broker might.
* Through an Automatic Withdrawal Plan. Under the Plan,
a shareholder with an account worth at least $10,000 may
redeem, either monthly or quarterly, fixed dollar amounts of
Investment Shares. Each payment must be at least $100 and
can be no more than 1.5% per month, or 4.5% per quarter, of
the value of the shareholder's Investment Shares when the
Automatic Withdrawal Plan was opened. The proceeds can be
mailed or sent by electronic funds transfer to the bank
listed on y our account.
INSTITUTIONAL SHARES
You can redeem Institutional Shares by mail, by telephone or
through a broker by following the procedures described for
Investment Shares. Redemption proceeds will be wired in
federal funds only to the commercial bank and account number
listed on your account application. To change the bank
account, you should call the Funds at 1-800-633-KENT (5368)
and request the appropriate form.
GENERAL REDEMPTION INFORMATION
During periods of unusual market activity it may be
difficult to reach the Funds by telephone. In such cases,
shareholders should follow the procedures for redeeming by
mail or through a broker. Neither the Trust nor any of its
service providers will be liable for following telephone
instructions reasonably believed to be genuine unless it
acts with willful misfeasance, bad faith or gross
negligence. In this regard the Trust and its transfer agent
require personal identification before accepting a telephone
redemption. To the extent that the Trust fails to use
reasonable procedures as a basis for its belief that
telephone instructions are genuine, it and/or its service
providers may be liable for instructions that prove to be
fraudulent and unauthorized.
Each Fund reserves the right to redeem an account if its
value falls below $1,000 ($100 for IRA accounts) for
Investment Shares and $100,000 for Institutional Shares as a
result of redemptions (but not as a result of a decline in
net asset value). A shareholder will be notified in writing
and allowed 60 days to increase the value of the account to
the minimum investment level.
What Price Do I Receive for Shares?
You will receive the NAV next determined for each share you
wish to redeem. See "Purchases of Shares - What Price Do I
Pay for Shares?" for an explanation of how the NAV next
determined is calculated.
When Will I Receive Redemption Money?
Redemption proceeds are typically sent to shareholders
within 3 business days after a request for redemption is
made. You should be sure that you submit all proper
documents for redemption; otherwise, the payment of
redemption proceeds may be delayed. You may call the Funds
at 1-800-633-KENT (5368) to be sure that you have proper
documents for redemption. If you purchase shares with a
check and try to redeem shares a short time later, the Fund
may delay paying redemption proceeds until the check has
been collected, although the amount to be paid for the
shares will be calculated when the redemption notice is
received. The delay could take 15 days or more. To avoid a
delay in receiving redemption proceeds, you should purchase
shares through a bank wire or electronic funds transfer.
Information on wires can be obtained from all national and
many state banks.
STRUCTURE AND MANAGEMENT OF THE FUNDS
How Are The Funds Structured?
The Trust is an open-end management investment company,
which is a mutual fund that sells and redeems shares every
day that it is open for business. The Trust was organized
on May 9, 1986 as a Massachusetts business trust. The Trust
is governed by a Board of Trustees. The Trustees are
responsible for the overall management of the Trust and
retain and supervise the Funds' Adviser, Administrator,
Distributor, Transfer Agent and Custodian. Currently, the
Trust has thirteen portfolios, each of which offers 2
classes of shares.
Who Manages and Services the Funds?
INVESTMENT ADVISER. The Funds are advised by Old Kent, an
indirect wholly-owned subsidiary of OKFC, which is a
financial services company with total assets as of December
31, 1995 of approximately $12 billion. Old Kent provides
investment advice to the Funds under a contract with the
Funds.
Old Kent's Investment Department employs an experienced
staff of professional investment analysts, portfolio
managers and traders, and uses several proprietary computer-
based systems in conjunction with fundamental analysis to
identify investment opportunities. Old Kent has provided
investment advisory services to individual and corporate
trust accounts for over 100 years. Old Kent is located at
One Vandenberg Center, Grand Rapids, MI 49503. Through
offices in Michigan, Florida and Illinois, OKFC and its
subsidiaries provide a broad range of financial services to
individuals and businesses. Old Kent currently has the
right to vote a majority of the Trust's outstanding shares
on behalf of its underlying customer accounts and therefore
it is considered to be a controlling person of the Trust.
Old Kent selects broker-dealers to execute portfolio
transactions for the Funds based on best price and execution
terms. Old Kent may consider as a factor the number of
shares of a Fund sold by the broker-dealer. The broker-
dealers may be affiliated with the Trust or its service
providers or their affiliates, subject to any limitations
imposed by applicable securities laws and regulations.
ADMINISTRATOR. First Data provides management and
administrative services to the Funds, including providing
office space, equipment and clerical personnel to the Funds,
supervising custodial, auditing, valuation, bookkeeping,
legal and dividend dispersing services. First Data also
acts as the transfer agent and dividend paying agent of the
Funds. First Data is located at One Exchange Place, Boston,
Massachusetts 02109.
DISTRIBUTOR. 440 Distributors is the distributor of the
Funds' shares. The Distributor may, from time to time,
provide promotional incentives to certain dealers whose
representatives have sold or are expected to sell
significant amounts of Investment Shares. The Distributor
may provide written information to dealers with whom it has
dealer agreements that relate to sales incentive campaigns
conducted by such dealers for their representatives. In
addition, the Distributor may similarly provide financial
assistance in connection with pre-approved seminars,
conferences and advertising. No such programs or additional
compensation will be offered to the extent that they are
prohibited by the laws of any state or any self-regulatory
agency, such as the NASD. Dealers to whom substantially the
entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities
Act of 1933.
What Are My Rights as a Fund Shareholder?
As a shareholder of a Fund, you have the right to vote on
certain matters affecting the Fund, such as elections of
Trustees and approval of advisory contracts and distribution
arrangements. The Funds will not have annual shareholder
meetings, but special meetings may be held at the request of
investors holding 10% of the shares for the purpose of
removing a Trustee. You are entitled to one vote for each
share you hold and a fractional vote for each fraction of a
share you hold. You will be asked to vote only on matters
affecting the Trust as a whole and your particular Fund and
class of shares, and not on matters only affecting other
Funds or classes of shares. You should be aware that under
Massachusetts law it is possible that a shareholder may be
personally liable for the Fund's obligations. If a
shareholder were required to pay a debt of a Fund, however,
the Fund has committed to reimburse the shareholder in full
from its assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
When Will I Receive Distributions From the Funds?
Each Fund will distribute substantially all of its net
investment income and long-term capital gains to
shareholders each year. Each Fund will declare dividends
daily and pay dividends monthly. Neither Fund expects to
realize or distribute long-term capital gains.
How Will Distributions Be Made?
Dividend and capital gains distributions will be paid in
additional shares of the Funds. If you wish to receive
distributions in cash, notify the Fund at 1-800-633-KENT
(5368) and a check will be mailed to you each time a
distribution is made. Your distributions may also be sent
by electronic funds transfer directly to your designated
bank account. Shareholders in IRA accounts and participants
in certain tax-qualified plans cannot receive distributions
in cash.
What Are The Tax Implications of My Investments in the
Funds?
Because the Funds each intend to qualify as a "regulated
investment company" under the Internal Revenue Code (the
"Code"), they generally will not be required to pay Federal
income taxes on their income and capital gains. Income
dividends by the Money Market Fund will be taxable to you as
ordinary income, unless you are exempt from Federal income
taxes. This tax treatment applies regardless of whether you
receive your distributions in cash or in additional shares.
Neither Fund expects to realize capital gains or make
capital gains distributions.
The Michigan Municipal Money Market Fund intends to
distribute monthly its net tax-exempt income (such
distributions are known as "exempt-interest dividends") and
any investment company taxable income. Exempt-interest
dividends may be treated by you as items of interest
excludable from your gross income under Section 103(a) of
the Code unless under the circumstances applicable to you
the exclusion would be disallowed. See the SAI under
"Dividends and Taxes." Shareholders receiving Social
Security benefits should note that all exempt-interest
dividends will be taken into account in determining the
taxability of such benefits. In general, a Fund's
investment company taxable income will be its taxable income
(including interest and short-term capital gains) subject to
certain adjustments and excluding the excess of any net
long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. To the
extent, if any, dividends paid to you are derived from
taxable income or from net long-term capital gains, such
dividends will not be exempt from Federal income tax,
whether they are paid in cash or reinvested in additional
shares, and may also be subject to state and local taxes.
The exemption of interest on municipal bonds for Federal
income tax purposes does not necessarily result in exemption
under the income, corporate or personal property tax laws of
any state or city. Generally, individual shareholders of
the Michigan Municipal Money Market Fund are afforded tax-
exempt treatment at the state and local levels for
distributions derived from interest on municipal securities
of their state of residency.
Dividends paid by the Michigan Municipal Money Market Fund
that are derived from interest attributable to tax-exempt
Michigan Municipal Obligations will be exempt from Michigan
state and local taxes, even though the dividends may not be
exempt for Federal income tax purposes. The Fund is unable
to predict in advance the portion of its dividends that will
be derived from interest on Michigan Municipal Obligations,
but will notify shareholders each year as to the interest
derived from Michigan Municipal Obligations.
Distributions of taxable income and taxable capital gains by
the Michigan Municipal Money Market Fund are taxable for
Michigan taxation purposes when received by you, except that
distributions which are reinvested by you in shares of the
Fund are exempt from the Michigan intangibles tax. Except
as noted above with respect to Michigan income taxation,
distributions of net income may be taxable to investors as
dividend income under other state or local laws even though
a substantial portion of such distributions may be derived
from interest on tax-exempt obligations which, if realized
directly, would be exempt from such income taxes.
Federal income taxes for distributions to an IRA or to a
qualified retirement plan are deferred. Any distribution
that is declared in October, November or December but not
actually paid until January of the following year will be
taxable in the year declared. When you redeem, transfer or
exchange shares, you may have a taxable gain or loss
depending on whether the price you receive for the shares
has a value higher or lower than your tax basis in the
shares. If you hold shares for six months or less, and
during that time you received a capital gain dividend, any
loss you realize on the sale of those shares will be treated
as a long-term loss to the extent of the earlier
distribution. You will receive from each Fund in which you
are a shareholder shortly after the end of each year a
statement of the amount and nature of distributions made to
you during the year. You will also receive a confirmation
statement shortly after disposing of shares showing the
amount and value of the disposition.
You should note that in certain cases (i) the Funds will be
required to withhold 31% of dividends or sale proceeds
otherwise due to you and (ii) in addition to Federal taxes,
state and local taxes may apply to transactions in shares.
This section contains a brief summary of the tax
implications of ownership of the Funds' shares. A lengthier
description of taxes is contained in the SAI. You should
consult your tax adviser regarding the impact of owning the
Funds' shares on your own personal tax situation, including
the applicability of any state and local taxes.
ADDITIONAL INFORMATION
Where Do I Get Additional Information About My Account and
the Funds?
For more information, call the Funds at 1-800-633-KENT
(5368) or write to the Funds at:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Except as otherwise stated in this prospectus or required by
law, the Trust reserves the right to change the terms of any
offer stated in this prospectus without shareholder
approval, including the right to charge certain fees for
services provided. No person has been authorized to give
any information or to make any representation not contained
in this prospectus, or in the SAI, in connection with the
offering made by this prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Funds or their Distributor.
This prospectus does not constitute an offering by the Funds
or by their Distributor in any jurisdiction in which such
offering may not lawfully be made.
THE KENT FUNDS
Prospectus
Dated May 1, 1996
THIS PROSPECTUS RELATES TO THE FOLLOWING TAX-ADVANTAGED
FUNDS
(THE "FUNDS"):
THE KENT LIMITED TERM
TAX-FREE FUND
SEEKS CURRENT INCOME
EXEMPT FROM
THE KENT INTERMEDIATE
TAX-FREE FUND
FEDERAL INCOME TAX, WHILE
PRESERVING CAPITAL. THE
FUND MAINTAINS A DOLLAR-
WEIGHTED AVERAGE MATURITY
OF BETWEEN 1 1/2 AND 5
YEARS.
SEEKS CURRENT INCOME
EXEMPT FROM FEDERAL
INCOME TAX, WHILE
PRESERVING CAPITAL.
THE FUND MAINTAINS A
DOLLAR-WEIGHTED
AVERAGE MATURITY OF
BETWEEN 3 AND 10
YEARS.
THE KENT TAX-FREE INCOME
FUND
SEEKS TO PROVIDE AS HIGH
A LEVEL OF
THE KENT MICHIGAN
MUNICIPAL BOND FUND
CURRENT INCOME EXEMPT
FROM FEDERAL INCOME TAX
AS IS CONSISTENT WITH
PRUDENT INVESTING, WHILE
SEEKING TO PRESERVE
CAPITAL. THE FUND
MAINTAINS A DOLLAR-
WEIGHTED AVERAGE MATURITY
OF BETWEEN 10 AND 25
YEARS.
SEEKS CURRENT INCOME
EXEMPT FROM FEDERAL
INCOME AND STATE OF
MICHIGAN PERSONAL
INCOME TAXES, WHILE
PRESERVING CAPITAL.
THE FUND MAINTAINS A
DOLLAR-WEIGHTED
AVERAGE MATURITY OF
BETWEEN 1 AND 5
YEARS.
________________________________
This Prospectus contains information that a prospective
investor should know before investing. Investors should
read and retain this Prospectus for future reference. The
Kent Funds has filed a Statement of Additional Information
("SAI") dated May 1, 1996 with the Securities and Exchange
Commission, which is incorporated by reference into this
Prospectus. For a free copy of the SAI, or for other
information about the Funds, write to the address or call
the telephone number listed below.
Shares of the Funds are not bank deposits or obligations of,
or guaranteed or endorsed by, the Funds' investment adviser
or any of its affiliates, and are not federally insured by,
guaranteed by, obligations of or otherwise supported by the
U.S. Government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other governmental agency.
An investment in mutual fund shares involves risk, including
the possible loss of principal. Old Kent Bank receives fees
from the Funds for advisory and certain other services.
__________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Kent Funds
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Call Toll-Free For Shareholder Services:
1-800-633-KENT (5368)
TABLE OF CONTENTS
PAGE
HIGHLIGHTS
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
FINANCIAL INFORMATION
WHAT ARE THE FUNDS' KEY FINANCIAL HIGHLIGHTS?
FUND
CHOICES
WHAT FUNDS ARE OFFERED?
(FUND INVESTMENT OBJECTIVES AND POLICIES)
WHAT INSTRUMENTS DO THE FUNDS INVEST IN?
WHAT ARE THE RISKS OF INVESTING IN THE FUNDS?
PERFORMANCE
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
WHERE CAN I OBTAIN PERFORMANCE DATA?
EXPENSE INFORMATION
WHAT ARE THE FUNDS' EXPENSES?
PURCHASES OF SHARES
WHO MAY WANT TO INVEST IN THE FUNDS?
WHEN CAN I PURCHASE SHARES?
WHAT IS THE MINIMUM REQUIRED INVESTMENT?
HOW CAN I PURCHASE SHARES?
WHAT PRICE DO I PAY FOR SHARES?
REDEMPTIONS (SALES) OF SHARES
WHEN CAN I REDEEM SHARES?
HOW CAN I REDEEM SHARES?
WHAT PRICE DO I RECEIVE FOR SHARES?
WHEN WILL I RECEIVE REDEMPTION MONEY?
STRUCTURE AND MANAGEMENT OF THE FUNDS
HOW ARE THE FUNDS STRUCTURED?
WHO MANAGES AND SERVICES THE FUNDS?
WHAT ARE MY RIGHTS AS A FUND SHAREHOLDER?
DIVIDENDS, DISTRIBUTIONS AND TAXES
WHEN WILL I RECEIVE DISTRIBUTIONS FROM THE FUNDS?
HOW WILL DISTRIBUTIONS BE MADE?
WHAT ARE THE TAX IMPLICATIONS OF MY INVESTMENTS IN THE FUNDS?
ADDITIONAL INFORMATION
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
HIGHLIGHTS
What Are the Key Facts Regarding the Funds?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is a family of open-end
management investment companies (commonly known as mutual
funds) that offers investors the opportunity to invest in
different investment portfolios, each having separate
investment objectives and policies. This prospectus
describes the Trust's Limited Term Tax-Free Fund,
Intermediate Tax-Free Fund, Tax-Free Income Fund and
Michigan Municipal Bond Fund. See "Fund Choices - What
Funds are Offered?" The Trust also offers the following
investment portfolios by separate prospectuses: The Kent
Money Market Fund, The Kent Michigan Municipal Money Market
Fund, The Kent Growth and Income Fund, The Kent Small
Company Growth Fund, The Kent International Growth Fund, The
Kent Index Equity Fund, The Kent Short Term Bond Fund, The
Kent Intermediate Bond Fund and The Kent Income Fund. To
obtain a prospectus for any Kent Fund, please call 1-800-
633-KENT (5368).
Q: Who advises the Funds?
A: The Funds are managed by Old Kent Bank ("Old Kent"),
an indirect wholly-owned subsidiary of Old Kent Financial
Corporation ("OKFC"). OKFC is a financial services company
with total assets as of December 31, 1995 of approximately
$12 billion. See "Structure and Management of the Funds -
Who Manages and Services the Funds?"
Q: What advantages do the Funds offer?
A: The Funds offer investors the opportunity to invest in
a variety of professionally managed diversified investment
portfolios without having to become involved with the
detailed accounting and safekeeping procedures normally
associated with direct investments in securities. The Funds
also offer the economic advantages of block trading in
portfolio securities and the availability of a family of
thirteen mutual funds should your investment goals change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by 440 Financial
Distributors, Inc. ("440 Distributors") and are sold in two
classes: Investment Shares and Institutional Shares.
Investment Shares can be purchased from any broker-dealer or
financial institution which has entered into a dealer
agreement with 440 Distributors, or by completing an
application and mailing it directly to 440 Distributors with
a check, payable to the appropriate Fund, for $1,000 or
more. Institutional Shares are offered to financial and
other institutions for the benefit of fiduciary, agency or
custodial accounts. The minimum initial aggregate
investment for Institutional Shares is $100,000. The Trust
may waive the minimum purchase requirements in certain
instances. Institutional Shares purchasers should call
First Data Investor Services Group, Inc. ("First Data"), the
Trust's Transfer Agent and Administrator, toll-free at 1-
800-633-KENT (5368) for instructions on how to open an
account. See "Purchases of Shares."
For information on how to redeem your shares, see
"Redemptions (Sales) of Shares."
Q: When are dividends paid?
A: Dividends of each Fund's net investment income are
declared and paid monthly. Net realized capital gains of
the Funds are distributed at least annually. See
"Dividends, Distributions and Taxes."
Q: What shareholder privileges are offered by the Trust?
A: Investors may exchange shares of a Fund having a value
of at least $100 for shares of the same class of any other
investment portfolio offered by the Trust in which the
investor has an existing account. The Trust offers IRAs,
which can be established by contacting the Trust's
Distributor. The Trust also offers an Automatic Investment
Program which allows investors to automatically invest in
Investment Shares on a monthly basis. See "Purchases of
Shares - How Can I Purchase Shares?"
Q: What are the potential risks presented by the Funds'
investment practices?
A: Investing in the Funds involves the risks common to
any investment in securities. The net asset value ("NAV")
of each Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The market value
of fixed income securities, which will constitute
substantially all of each Fund's investments, will generally
vary inversely with changes in prevailing interest rates.
Longer term bond funds are generally more sensitive to
interest rate changes than shorter term bond funds. The
Funds will invest in investment grade securities or unrated
securities deemed to be of comparable quality by Old Kent.
Debt obligations rated in the lowest of the top four
investment grade categories are considered to have
speculative characteristics. The Michigan Municipal Bond
Fund's performance is closely tied to the economic and
political conditions in the State of Michigan. The Funds
may also invest up to 15% of their net assets in illiquid
securities. For a complete description of the risks
associated with each Fund, see "Fund Choices - What Funds
are Offered?" and " - What Are the Risks of Investing in the
Funds?"
FINANCIAL INFORMATION
What Are the Funds' Key Financial Highlights?
Fee Table
The purpose of the fee table is to assist you in
understanding the various costs and expenses that an
investor in each Fund will bear directly or indirectly. See
"Expense Information" and "Purchases of Shares" for more
information regarding such costs and expenses.
LIMITED TERM TAX-FREE FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase (1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.45% 0.45%
12b-1 Fees(3) 0.15% None
Other Expenses 0.28% 0.28%
TOTAL FUND OPERATING EXPENSES 0.84% 0.69%
INTERMEDIATE TAX-FREE FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.50% 0.50%
12b-1 Fees(3) 0.25% None
Other Expenses 0.22% 0.22%
TOTAL FUND OPERATING EXPENSES 0.97% 0.72%
TAX-FREE INCOME FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees 0.55% 0.55%
12b-1 Fees(3) 0.25% None
Other Expenses 0.24% 0.24%
TOTAL FUND OPERATING EXPENSES 1.04% 0.79%
MICHIGAN MUNICIPAL BOND FUND
Investment Shares Institutional Shares
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge on Purchase(1) 4.00% None
(as a % of offering price)
ANNUAL FUND OPERATING EXPENSES(2)
(as a % of average net assets)
Management Fees(3) 0.45% 0.45%
12b-1 Fees(3) 0.15% None
Other Expenses 0.26% 0.26%
TOTAL FUND OPERATING EXPENSES 0.83% 0.69%
EXAMPLE: You would pay the following expenses on a $1,000
investment, assuming
(i) 5% annual return and (ii) redemption at the end of each period:
LIMITED TERM TAX-FREE FUND
Investment Shares Institutional Shares
One Year $ 49 $ 7
Three Years $ 67 $23
Five Years $ 87 $41
Ten Years $144 $91
INTERMEDIATE TAX-FREE FUND
Investment Shares Institutional Shares
One Year $ 49 $ 7
Three Years $ 70 $23
Five Years $ 91 $40
Ten Years $154 $89
TAX-FREE INCOME FUND
Investment Shares Institutional Shares
One Year $ 50 $ 8
Three Years $ 72 $25
Five Years $ 95 $44
Ten Years $162 $98
MICHIGAN MUNICIPAL BOND FUND
Investment Shares Institutional Shares
One Year $ 48 $ 7
Three Years $ 66 $23
Five Years $ 86 $40
Ten Years $142 $88
Amounts shown in the example should not be considered a representation
of past or future investment return or expenses; actual investment return
and expenses may be greater or lesser than those shown.
_________________________________________________________________
(1)The sales charge applied to the purchase of a Fund's Investment Shares
declines as the amount invested increases. See "Purchases of Shares -
What Price Do I Pay For Shares?"
(2)Expense ratios for each Fund other than the Tax-Free Income Fund are
based on amounts incurred for the fiscal year ended December 31, 1995.
Because the Tax-Free Income Fund only commenced operations on March 20,
1995, its expense ratios are based on estimates for the current fiscal year.
Sweep, trustee, agency,custody and certain other fees charged by Old Kent
and its affiliates to their customers who own shares of the Funds are not
reflected in the fee table.
(3)Investment Shares may pay 12b-1 fees of up to .25% (on an annualized
basis). As a result of the payment of sales charges and 12b-1 and certain
other related fees discussed below, long term Investment Class shareholders
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by the National Association of Securities Dealers, Inc.
("NASD").
Financial Highlights
The Financial Highlights presented below have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report, together with the
financial statements of the Funds, appears in the Funds' annual report,
which can be obtained free of charge by calling 1-800-633-KENT (5368).
This table should be read in conjunction with the financial statements and
related notes.
Limited Term Tax-Free Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
November 1, 1994 September 1, 1994
(Date of Initial (Commencement
Public Investment) of Operations)
Year Ended December 31, 1995 to December 31, 1994 Year Ended December 31, 1995 to December 31,
1994
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.81 $9.87 $9.80 $10.00
Income From Investment Operations:
Net investment income 0.37 0.06 0.39 0.13
Net realized and unrealized gain (loss) on investments 0.44 (0.06) 0.42
(0.21)
Total from Investment Operations: 0.81 ---
0.81 (0.08)
Less Distributions from:
Net investment income (0.38) (0.06) (0.39) (0.12)
Net increase (decrease) in net asset value 0.43 (0.06) 0.42
(0.20)
Net Asset Value, End of Period $10.24 $9.81 $10.22
$9.80
Total Return for period indicated (a) 8.40% 0.03% 8.43%
(0.77)%
Ratios/Supplemental Data:
Ratios to average net assets:
Net investment income (c) 3.69% 3.86% (b) 3.87% 3.81%
(b)
Operating expenses (c) 0.84% 0.87% (b) 0.69% 0.79% (b)
Portfolio Turnover Rate 51% 10% 51% 10%
Net Assets, End of Period (thousands) $54 $7 $55,347
$43,497
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) "Operating expenses" and "Net investment income" reflect expense
reimbursements and/or fee waivers. Before the expense reimbursements and
fee waivers, the ratio of"Net investment income" to average net assets for
the year ended December 31, 1995 and the period ended December 31, 1994
would have been 3.69% and 3.75% (annualized), respectively, for the
Investment Shares, and 3.82% and 3.64% (annualized), respectively, for the
Institutional Shares. Before the expense reimbursements and fee waivers,
the ratio of "Operating expenses" to average net assets for the
year ended December 31, 1995 and the period ended December 31, 1994 would
have been 0.85% and 0.98% (annualized), respectively, for the Investment
Shares, and 0.74% and 0.96% (annualized), respectively, for the
Institutional Shares.
</FN>
</TABLE
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report, together with the financial
statements of the Funds, appears in the Funds' annual report, which can be
obtained free of charge by calling 1-800-633-KENT. This table should be
read in conjunction with the financial statements and related notes.
Intermediate Tax-Free Fund
(For a share outstanding throughout each period)
</TABLE>
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
December 18, 1992 December 16, 1992
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31 , to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1992 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.74 $10.45 $10.04 $10.00 $9.74 $10.45 $10.02 $10.00
Income From Investment Operations:
Net investment income 0.42 0.40 0.36 *** 0.45 0.40 0.37 0.01
Net realized and unrealized gain (loss) on investments 0.79 (0.71) 0.46 0.04 0.79 (0.71)
0.47 0.03
Total from Investment Operations: 1.21 (0.31) 0.82 0.04 1.24 (0.31) 0.84 0.04
Less Distributions from:
Net investment income (0.42) (0.39) (0.33) --- (0.45) (0.39) (0.36) (0.01)
In excess of net investment income (0.01) (0.01) (0.03) --- (0.01) (0.01) --- (0.01)
Net realized gain on investments.................... --- ---
(0.05) --- --- --- (0.05)
---
Total Distributions: (0.43) (0.40) (0.41) --- (0.46) (0.40) (0.41) (0.02)
Net increase (decrease) in net asset value 0.78 (0.71) 0.41 0.04 0.78 (0.71) 0.43
0.02
Net Asset Value, End of Period $10.52 $9.74 $10.45 $10.04 $10.52 $9.74 $10.45 $10.02
Total Return for period indicated (a) 12.66% (3.03)% 8.29% 0.40% 12.90%
(3.00)% 8.51% 0.40%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income 4.13% 3.99% 3.44% 1.37% (b) 4.39% 4.07% 3.62% 1.77%
(b)
Operating expenses 0.97% 0.79% 1.08% 0.10% (c) 0.72% 0.78% 0.84% 0.11% (c)
Portfolio Turnover Rate 6% 36% 14% 0% 6% 36% 14% 0%
Net Assets, End of Period (thousands) $3,807 $4,505 $3,307 $92 $283,733
$380,715 $135,862 $36,938
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling 1-800-633-KENT
(5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) Not Annualized.
*** Amount is less than $0.005.
</FN>
</TABLE>
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report, together with the financial
statements of the Funds, appears in the Funds' annual report, which can be
obtained free of charge by calling 1-800-633-KENT (5368). This table should
be read in conjunction with the financial statements and related notes.
Tax-Free Income Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
March 31, 1995 March 20, 1995
(Date of Initial (Commencement
Public Investment) of Operations)
to December 31, to December 31,
1995 1995
<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
Income From Investment Operations:
Net investment income 0.31 0.36
Net realized and unrealized gain on investments 0.51
0.49
Total from Investment Operations: 0.82 0.85
Less Distributions from:
Net investment income (0.30) (0.36)
Net increase (decrease) in net asset value 0.52 0.49
Net Asset Value, End of Period $10.52 $10.49
Total Return for period indicated (a) 8.34% 8.64%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net Investment Income (c) 4.25% (b) 4.44% (b)
Operating Expenses (c) 0.95% (b) 0.73% (b)
Portfolio Turnover Rate 10% 10%
Net Assets, End of Period (thousands) $529 $121,855
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling
1-800-633-KENT (5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) "Net investment income" and "Operating expenses" reflect expense
reimbursements and/or fee waivers. Before the expense reimbursements
and fee waivers, the annualized ratios of "Operating expenses" and "Net
investment income" to average net assets for the period ended December 31,
1995 would have been 4.03% and 1.17%, respectively, for the Investment Shares
and 4.26% and 0.91%, respectively, for the Institutional Shares.
</FN>
</TABLE>
The Financial Highlights presented below have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report, together with the financial
statements of the Funds, appears in the Funds' annual report, which can be
obtained free of charge by calling 1-800-633-KENT (5368). This table should
be read in conjunction with the financial statements and related notes.
Michigan Municipal Bond Fund
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Investment Shares Institutional Shares
May 11, 1993 May 3, 1993
(Date of Initial (Commencement
Public Investment) of Operations)
Years Ended December 31, to December 31, Years Ended December 31, to December 31,
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.72 $10.08 $10.02 $9.72 $10.06 $10.00
Income From Investment Operations:
Net investment income 0.37 0.35 0.21 0.39 0.37 0.23
Net realized and unrealized gain (loss) on investments 0.40 (0.34) 0.07 0.39
(0.34) 0.07
Total from Investment Operations: 0.77 0.01 0.28 0.78 0.03
0.30
Less Distributions from:
Net investment income (0.37) (0.34) (0.21) (0.37) (0.36) (0.22)
In excess of net investment income (0.01) (0.03) *** (0.01) (0.01)
(0.01)
Net realized gain on investments --- --- (0.01) --- --- (0.01)
In excess of net realized gain on investments --- --- --- ---
--- ***
Total Distributions: (0.38) (0.37) (0.22) (0.38) (0.37) (0.24)
Net increase (decrease) in net asset value 0.39 (0.38) 0.06 0.40 (0.34)
0.06
Net Asset Value, End of Period $10.11 $9.72 $10.08 $10.12 $9.72 $10.06
Total Return for period indicated (a) 8.01% 0.16% 2.85% 8.20% 0.36%
3.06%
Ratios/Supplemental Data:
Ratios to Average Net Assets:
Net investment income (c) 3.68% 3.80% 3.43% (b) 3.81% 3.74% 3.34%
(b)
Operating expenses (c) 0.83% 0.49% 0.25% (b) 0.69% 0.49% 0.24%
(b)
Portfolio Turnover Rate 42% 27% 10% 42% 27% 10%
Net Assets, End of Period (thousands) $1,900 $1,980 $283 $185,466
$118,485 $74,647
Additional financial and performance information is contained in the Funds'
annual report, which can be obtained without charge by calling
1-800-633-KENT (5368)
<FN>
(a) Calculation does not include sales charge for the Investment Shares.
(b) Annualized.
(c) "Operating expenses" and "Net investment income" reflect expense
reimbursements and/or fee waivers. Before the expense reimbursements and
fee waivers, the ^ ratio of "Operating expenses" to average net assets for
the years ended December 31, 1995 and 1994 and the period ended
December 31, 1993 would have been 0.85%, 0.84% and 1.08% (annualized),
respectively, for the Investment Shares, and 0.70%, 0.74% and 0.68%
(annualized), respectively, for the Institutional Shares. Before the
expense reimbursements and fee waivers, the ratio of "Net investment income"
to average net assets for the years ended December 31, 1995 and 1994 and
the period ended December 31, 1993 would have been 3.67%, 2.74% and 2.60%
(annualized), respectively, for the Investment Shares, and 3.80%, 3.50%
and 3.61% (annualized), respectively, for the Institutional Shares.
*** Amount is less than $0.005.
</FN>
</TABLE>
FUND CHOICES
What Funds Are Offered?
The Trust currently offers the 4 tax-free funds described
below.
OBJECTIVES AND MATURITIES
The following investment objectives are considered
"fundamental" and may be changed by a Fund only with the
approval of its shareholders.
FUND INVESTMENT OBJECTIVE MATURITY
Limited Term Seeks current income, Will maintain a dollar-
Tax-Free Fund exempt from Federal weighted average portfolio
income tax, while maturity of between 1 1/2
preserving capital. and 5 years. No obligation
will have a remaining maturity
of more than 10 years
Intermediate Seeks current income, Will maintain a dollar-
Tax-Free Fund exempt from Federal weighted average portfolio
income tax, while maturity of between 3 and
preserving capital. 10 years. There is no
limit on the maturity of
any individual security
in the portfolio.
Tax-Free Seeks to provide as high Will maintain a dollar-
Income Fund a level of interest income weighted average portfolio
exempt from Federal income maturity of between 10
taxes as is consistent with and 25 years. There is
prudent investing, while no limit on the maturity
preserving capital. of any individual security
in the portfolio.
Michigan Municipal Seeks current income, Will maintain a dollar-
Bond Fund exempt from Federal weighted average portfolio
income and State of maturity of between 1 and
Michigan personal income 5 years. No obligation
taxes, while preserving will have a remainging
capital. maturity of more than
10 years.
INVESTMENT POLICIES
Each Fund intends to invest at least 80% of its net assets
in federally TAX-EXEMPT OBLIGATIONS, except during periods of
unusual market conditions. This policy is a fundamental
policy which can't be changed by a Fund without the approval
of its shareholders. In calculating the 80% limitation for
all Funds other than Michigan Municipal Bond Fund, a
security whose interest is treated as a specific tax
preference item under the Federal alternative minimum tax is
considered taxable. Tax-exempt obligations consist of
municipal bonds, notes and commercial paper issued by
states, territories or possessions of the United States, the
District of Columbia and their political subdivisions,
agencies and instrumentalities, the interest on which is, in
the opinion of counsel to the issuer of such obligations,
exempt from Federal income taxes. Under normal
circumstances, at least 65% of the Michigan Municipal Bond
Fund's total assets will be invested in municipal
obligations issued by the State of Michigan or its political
subdivisions, authorities or corporations.
The Funds will principally invest in MUNICIPAL BONDS, which are
issued by state or local governments typically for general
funding or to finance specific projects. "General
Obligation" securities are backed by the full faith, credit
and taxing power of the municipality. "Revenue" securities
are backed only by the revenues from a particular facility
or facilities or other specific revenue sources. "Private
Activity Bonds," which are revenue securities issued by
industrial development authorities, are issued to finance
privately-owned facilities and are backed by private
entities. The credit quality of Private Activity Bonds is
usually related to the creditworthiness of the private
entity using the facility involved. A municipal
obligation's credit may be enhanced by a letter of credit
issued by a bank and the payment of principal and interest
may be insured by an insurance company.
Municipal obligations in which the Funds may invest will be
rated in one of the four highest rating categories by a
nationally recognized statistical rating organization
("NRSRO") or, if unrated, will be deemed to be of comparable
quality by Old Kent. Obligations rated in the fourth
highest rating category are considered to have speculative
characteristics. See Appendix A to the SAI for a
description of NRSRO ratings.
When a Fund buys municipal obligations, Old Kent will
consider the NRSRO ratings assigned to such securities. In
making its investment decisions, Old Kent will also consider
many factors other than current yield, including the
preservation of capital, the potential for realizing capital
appreciation, maturity and yield to maturity. Each Fund
will adjust its investments in particular securities or in
types of securities in response to Old Kent's appraisal of
changing economic conditions and trends. A Fund may sell
one security and purchase another security of comparable
quality and maturity to take advantage of what Old Kent
believes to be short-term differentials in market values or
yield disparities. Subsequent to its purchase by a Fund, a
security rated in one of the top four rating categories may
cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. Old Kent
will consider such an event in determining whether the Fund
should continue to hold the security.
What Instruments Do the Funds Invest In?
The Funds may also invest in the securities and use the
investment techniques described below. Each of these
securities and techniques is described in more detail under
"Investment Policies" in the SAI.
Each Fund may buy VARIABLE AND FLOATING RATE INSTRUMENTS. These
instruments provide for adjustment from time to time in
interest rates. Some of these instruments are not traded
and there is no market in which to sell them to third
parties; therefore, the Fund may not be able to sell the
instruments when it wishes to sell.
When Old Kent determines that market conditions are
appropriate, each Fund may, for temporary defensive
purposes, invest up to 100% of its assets in MONEY MARKET
INSTRUMENTS, which are high-quality, short-term instruments
including, among other things, commercial paper, bankers'
acceptances, negotiable certificates of deposit, short-term
corporate obligations which are rated A or better by
Standard & Poor's Rating Group or Moody's Investors Service,
Inc., and short-term securities issued by, or guaranteed by,
the U.S. Government and its agencies or instrumentalities.
Each Fund may also shorten its dollar-weighted average
maturity below its normal range if such action is deemed
appropriate by Old Kent for temporary defensive purposes.
If a Fund is investing defensively, it will not be pursuing
its investment objectives.
The Funds may buy shares of registered MONEY MARKET INVESTMENT
COMPANIES. The Funds will bear a portion of the expenses of
any investment company whose shares they purchase, including
operating costs and investment advisory, distribution and
administration fees. These expenses would be in addition to
the Fund's own expenses.
The Funds may LEND SECURITIES to broker-dealers and other
financially sound institutional investors who will pay the
Funds for the use of the securities. The borrower must set
aside cash or liquid high-grade debt securities equal to the
value of the securities borrowed at all times during the
term of the loan. Loans may not exceed one-third of the
value of a Fund's total assets. Risks involved in such
transactions include possible delay in recovering the loaned
securities and possible loss of the securities or the
collateral if the borrower declares bankruptcy.
The Funds may also purchase FUTURES CONTRACTS, which are
contracts in which a Fund agrees, at maturity, to make
delivery of certain securities, financial instruments or the
cash value of a specified bond index. Futures may be used
by the Funds for hedging purposes or to provide liquid
assets. A Fund will not enter into a futures contract if
the purchase will cause the aggregate amount of margin
deposits on existing futures positions plus premiums paid to
establish such positions to be more than 5% of the Fund's
net assets. Futures are a type of derivative instrument,
which are instruments that derive their value from a
different underlying security. Futures trading activity is
very specialized and may entail higher than ordinary
investment risks. Such risks include that the value of the
securities to be bought or sold under the futures contract
or the interest rate being hedged against does not move in
the direction predicted by Old Kent, causing a potential
loss to a Fund. The risks of futures are described in more
detail in the SAI.
Each Fund may agree to PURCHASE SECURITIES FOR FUTURE DELIVERY,
sometimes a month or more after the date of the agreement.
Although the price to be paid by the Fund is set at the time
of the agreement, the Fund usually does not pay for the
securities until they are received. The value of the
securities may change between the time the price is set and
the time the price is paid. When a Fund purchases
securities for future delivery, the Trust's custodian will
maintain a segregated account containing cash, U.S.
Government securities or other liquid high-grade debt
securities. The Funds do not intend to purchase securities
for future delivery for speculative purposes.
Each Fund may purchase other types of tax-exempt instruments
which may become available in the future provided Old Kent
believes that their quality is equivalent to the Fund's
quality standards. Each Fund's ability to achieve its
investment objective depends to a great extent on the
ability of the various issuers of the obligations purchased
by the Funds to meet their scheduled payments of principal
and interest.
The Michigan Municipal Bond Fund may invest up to 35% of its
total assets under ordinary circumstances, and up to 100%
for temporary defensive purposes, in Municipal Bonds, whose
income is exempt from Federal income tax but not exempt from
Michigan personal income taxes.
Except for each Fund's policy to invest at least 80% of its
net assets in federally tax-exempt obligations, the
investment policies discussed above are not "fundamental"
policies and may be changed by the Board of Trustees without
shareholder approval. However, the Funds also have in place
certain fundamental investment limitations that cannot be
changed for a Fund without the approval of a majority of
that Fund's outstanding shares. Some of these limitations
are summarized below. A complete list of the fundamental
investment limitations for the Funds is contained in the
SAI.
1. With respect to 75% of each Fund's total assets, the
Funds cannot invest more than 5% of their respective total
assets in any one issuer (other than the U.S. Government,
its agencies and instrumentalities). In addition, the Funds
cannot invest more than 25% of their respective total assets
in a single industry. These restrictions require the Funds
to be more diversified in order to lower the risk to a Fund
of an economic setback for any one issuer or in any one
industry.
2. Each Fund may only borrow money for temporary or
emergency purposes, and such borrowing is limited to an
amount not exceeding one-third of the Fund's net assets,
provided that while borrowings from banks exceed 5% of a
Fund's net assets, any such borrowings will be repaid before
additional investments are made. The limits on the amount
each Fund can borrow prevents the Fund from significantly
leveraging its assets.
3. Each Fund may not invest more than 15% of its net assets
in illiquid securities. Typically, there is no ready market
for such securities, which inhibits a Fund's ability to sell
the securities and to obtain values for the securities.
What Are the Risks of Investing in the Funds?
The value of each Fund's shares, like the value of most
securities, will rise and fall in response to changes in
economic conditions, interest rates and the market's
perception of the underlying securities held by the Fund.
The Funds invest mostly in tax-free bonds, whose values
typically rise when interest rates fall and fall when
interest rates rise. Bonds with shorter maturities (time
period until repayment) tend to be less affected by interest
rate changes, but generally offer lower yields than bonds
with longer maturities. Current yield levels should not be
considered representative of yields at any future time.
Securities with variable interest rates and derivative
securities, such as futures, may exhibit greater price
variations than ordinary securities.
By itself, no Fund constitutes a balanced investment program
and none is designed for investors seeking capital
appreciation or maximum tax-exempt income irrespective of
fluctuations in principal or marketability. There is no
guarantee that any Fund will achieve its investment
objective since there is uncertainty in every investment.
When you sell your shares in the Funds, they may be worth
more or less than the amount you paid.
The performance of Michigan Municipal Bond Fund is closely
tied to conditions within the State of Michigan. The
economy of Michigan is principally dependent on three
sectors -- manufacturing (particularly durable goods,
automotive products and office equipment), tourism and
agriculture. Michigan encountered financial difficulties
during the late 1980s, largely as a result of poor
conditions in the automotive industry, but recovered from
the prolonged downturn in production levels in this sector
in the early 1990s. Structural changes in the automotive
industry have given the Michigan economy greater financial
stability. The state's finances continue to be in excellent
condition, and a Budget Stabilization Fund that exceeds $1
billion should help the state weather any potential economic
recession. At the end of 1995, however, after several years
of rapid growth, the Michigan economy was evidencing a
slight downturn. Personal income and employment levels were
not growing as rapidly as they had for the past several
years.
The market value and the marketability of bonds issued by
local units of government in the State may be affected
adversely by the same factors that affect Michigan's economy
generally. The ability of the State and its local units of
government to pay the principal of and interest on their
bonds may also be affected by such factors and by certain
constitutional, statutory and charter limitations. For
additional information on the specific risks associated with
the Michigan Municipal Bond Fund, see Appendix B to the SAI.
PERFORMANCE
How is the Funds' Performance Calculated?
There are various ways in which the Funds may calculate and
report their performance. Performance is calculated
separately for the Investment Shares and the Institutional
Shares.
One method is to show a Fund's total return. CUMULATIVE TOTAL
RETURN is the percentage change in the value of $1,000
invested in the Fund over a stated period of time and takes
into account reinvested dividends and the payment of the
maximum sales charge (4%) on Investment Shares. Although
cumulative total return most closely reflects the actual
performance of a Fund, a shareholder who opts to receive
dividends in cash, or an Investment class shareholder who
paid a sales charge lower than 4%, will have a different
return than the reported performance. AVERAGE ANNUAL TOTAL
RETURN refers to the average annual compounded rates of
return over a specified period on an investment in shares of
a Fund determined by comparing the initial amount invested
to the ending redeemable value of that amount, taking into
account reinvested dividends and the payment of the maximum
sales charge (4%) on Investment Shares.
The Funds may also publish their CURRENT YIELD, which is the
net investment income generated by a share of a Fund during
a 30-day period divided by the maximum offering price on the
30th day. "Maximum offering price" includes the sales
charge for Investment Shares.
In addition, each Fund may advertise "tax equivalent yield."
Tax equivalent yield is, in general, the yield divided by a
factor equal to one minus a stated income tax rate and
reflects the yield a taxable investment would have to
achieve in order to equal on an after-tax basis a tax-exempt
yield.
Investment Shares may be purchased with a sales load and may
have higher fees and expenses than Institutional Shares, so
the yield and total return of Investment Shares will be
lower than that of Institutional Shares. The Funds may
sometimes publish total returns that do not take into
account sales charges and such returns will be higher than
returns which include sales charges. You should be aware
that (i) past performance does not indicate how a Fund will
perform in the future and (ii) each Fund's return and NAV
will fluctuate, so you cannot necessarily use a Fund's
performance data to compare it to investments in
certificates of deposit, savings accounts or other
investments that provide a fixed or guaranteed yield.
Each Fund may compare its performance to that of other
mutual funds, such as the performance of similar funds
prepared by Lipper Analytical Services, Inc. or information
reported in national financial publications (such as Money
Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times) or in local or regional publications. Each
Fund may also compare its total return to indices such as
the S&P 500, the Merrill Lynch Bond indices and Lehman
Brothers Bond indices. These indices show the value of
selected portfolios of securities (assuming reinvestment of
dividends) which are not managed by a portfolio manager.
The Funds may report how they are performing in comparison
to the Consumer Price Index, an indication of inflation
reported by the U.S. government.
Where Can I Obtain Performance Data?
The Wall Street Journal and certain local newspapers report
information on the performance of mutual funds. In
addition, performance information is contained in the Funds'
annual report dated December 31 of each year (the Trust's
fiscal year end) and semi-annual report dated June 30 of
each year, which will automatically be mailed to
shareholders. To obtain copies of financial reports or
performance information, call 1-800-633-KENT (5368).
EXPENSE INFORMATION
What Are the Funds' Expenses?
A pro rata portion of certain expenses of the Trust are
allocated to the Fund you own and to the particular class of
shares you own and will be reflected in the value of your
shares. Such expenses are not paid directly by
shareholders.
TRUST EXPENSES. Expenses charged at the Trust level include
fees paid to Trustees, legal counsel and auditors and
administration fees. First Data is entitled to receive, for
its administration services, an annual fee equal to 0.20% of
the aggregate net assets of all funds in the Trust up to $5
billion; 0.18% of the Trust's aggregate net assets between
$5 and $7.5 billion; and 0.15% of the Trust's aggregate net
assets over $7.5 billion.
FUND EXPENSES. Most expenses will be charged at the Fund
level, including investment advisory fees, Securities and
Exchange Commission registration fees, transfer agency fees,
custody fees, brokerage commissions, interest charges and
taxes. Old Kent is entitled to receive from each Fund an
annual advisory fee at the following rates based on each
Fund's average daily net assets: Limited Term Tax-Free
Fund, 0.45%; Intermediate Tax-Free Fund, 0.50%; Tax-Free
Income Fund, 0.55%; and Michigan Municipal Bond Fund, 0.45%.
For the fiscal year ended December 31, 1995, the Limited
Term Tax-Free Bond, Intermediate Tax-Free Fund, Tax-Free
Income Fund and Michigan Municipal Bond Fund paid or accrued
to Old Kent an advisory fee, calculated daily and payable
monthly, at an annual rate of 0.41%, 0.50%, 0.37% and 0.44%,
respectively, of the average daily net assets of the Funds.
Old Kent may rebate advisory fees to certain institutional
customers in accordance with Federal and state law.
CLASS EXPENSES. Expenses allocated at the class level
include printing and mailing expenses and expenses payable
under the Funds' Distribution Plans. The Distribution Plans
provide that each Fund may spend, in one year, up to 0.25%
of the average daily net assets of the Fund's Investment
Shares to finance sales activities of the Investment Shares,
including marketing and advertising shares, maintaining
account records, issuing confirmation statements and
providing sub-accounting. Banks, broker-dealers and other
organizations may also receive payments for providing
support and/or distribution services to the Funds'
shareholders who are their customers. Federal banking law
currently limits the securities activities of banks. If a
bank was not allowed to provide support and/or distribution
services, the Fund would find another organization to
provide such services and no shareholder should suffer any
financial loss. The Funds do not reimburse 440
Distributors, the Funds' distributor, for any distribution
expenses in excess of the payments received by 440
Distributors under the Distribution Plan or for its overhead
expenses.
PURCHASES OF SHARES
Who May Want to Invest in the Funds?
Investment Shares may be purchased by individual investors
and Institutional Shares may be purchased only by financial
and other institutions for the benefit of fiduciary, agency
or custodial accounts. The Funds, which are tax-free bond
funds (also known as fixed income funds), are designed for
investors who desire potentially higher returns than more
conservative fixed rate investments or money market funds
and who seek current income. Investors who have a long time
horizon for their investments may wish to invest in other
Kent Funds designed for long-term investors. When you
choose among the Funds, you should consider both the
expected yield of the Fund and potential price changes in
the Fund's share price. The yield and potential price
changes of a Fund's shares depend on the quality and
maturity of the obligations in its portfolio, as well as on
other market conditions (see "Performance - How Is the
Funds' Performance Calculated?").
Shares of the Limited Term Tax-Free Fund, the Intermediate
Tax-Free Fund, the Tax-Free Income Fund and the Michigan
Municipal Bond Fund would not be suitable for tax-exempt
institutions and may not be suitable for certain retirement
plans which are unable to benefit from each Fund's federally
tax-exempt dividends. In addition, the Funds may not be an
appropriate investment for entities which are "substantial
users" of facilities financed by industrial development
bonds or related persons thereof.
When Can I Purchase Shares?
Shares can be purchased on any day that both the NYSE and
Bankers Trust Company, the Funds' custodian, are open for
business.
What is the Minimum Required Investment?
An investor must initially invest at least $1,000 in
Investment Shares and at least $100,000 in Institutional
Shares. Subsequent investments may be made in any amount.
The investment minimums may be waived for purchases by
employees of Old Kent, participants in tax-sheltered plans
and certain qualified retirement accounts.
How Can I Purchase Shares?
INVESTMENT SHARES
For your convenience, the Funds offer a wide variety of
methods to purchase Investment Shares.
* Through a Broker. Any broker authorized by 440
Distributors, the Funds' distributor, can sell you
Investment Shares of the Funds. Please note that such
brokers may charge you fees for their services.
* By Mail. You may open an account by mailing a
completed application and a check (payable to the applicable
Fund) to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
* By Telephone. You should call 1-800-633 KENT (5368)
to open an account and electronically transfer money to the
account, followed by a completed application.
* By Check. Subsequent purchases of Investment Shares
can be made by mailing a check to the address listed above.
* By Federal Funds Wire. Subsequent purchases of
Investment Shares can be made via a federal funds wire sent
to Fleet Bank for credit to a particular Fund. You should
call 1-800-633-KENT (5368) for complete wire instructions.
You should be aware that banks may charge fees for sending
wires. 440 Distributors has the right to charge fees for
receiving wires, although it does not currently do so.
* By Electronic Funds Transfer (For subsequent purchases
only). Call 1-800-633-KENT (5368) to request a purchase to
be made or to obtain the forms to establish electronic funds
transfer.
* Through an Automatic Investment Plan
* Call 1-800-633-KENT (5368) to establish an Automatic
Investment Plan.
* Invest at least $1,000 in an Investment Share account.
* On the 5th day of each month, your checking account
will be debited (minimum of $50) and Investment Shares will
be purchased and held in your account.
To change the amount invested each month in Investment
Shares, or to stop the Automatic Investment Plan, call 1-
800-633-KENT (5368) or write to: The Kent Funds, c/o 440
Distributors, 4400 Computer Drive, P.O. Box 5107, Westboro,
MA 01581-5107 at least 5 days before a scheduled investment.
* Through Direct Deposit
You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the
following steps:
* To open an account, call 1-800-633-KENT (5368) to
obtain an account or wire identification number.
* Place a purchase order for shares by telephoning the
number above.
* Wire federal funds to Fleet Bank no later than the day
after the purchase order is placed.
You should note that (i) a purchase of Institutional Shares
will not be completed until Fleet Bank receives the purchase
price and (ii) banks may charge for wiring federal funds to
Fleet Bank. You may obtain information on how to wire funds
from any national bank and certain state banks.
EXCHANGE PRIVILEGE
You may acquire Investment or Institutional Shares of a Fund
(the "new fund") by exchanging shares of another investment
portfolio offered by the Trust (the "old fund") for shares
of the new fund. Shares of the new fund will be of the same
class as the old fund. In effect, you would be redeeming
(reselling to the fund) shares of the old fund and
purchasing shares of the new fund. To determine the price
at which shares are redeemed, see "What Price Do I Receive
for Shares?" and to determine the price at which shares are
purchased, see "What Price Do I Pay for Shares?"
* Call 1-800-633-KENT (5368) or write to: The Kent
Funds, c/o 440 Distributors, 4400 Computer Drive, P.O. Box
5107, Westboro, MA 01581-5107 to obtain a prospectus for the
new fund prior to the exchange.
* Call or write as indicated in * above to place an
order to exchange shares. Purchases of new funds must meet
the minimum purchase requirement of that fund. If the order
to exchange shares is placed prior to or at 4:00 p.m.
Eastern Standard Time on any business day, the order will be
executed on the day received, and if the order is placed
after 4:00 p.m. Eastern Standard Time, the order will not be
executed until the next business day.
* If a shareholder does not have an account with the new
fund, a new account will be established with the same
reinvestment options for distributions as the account for
the old fund, unless the shareholder writes to the new fund
to change the option.
Important Information About Exchanges
If shares of a Fund are purchased by check, such shares cannot be exchanged
for 15 days. The Trust may disallow exchanges of shares if a shareholder has
made more than 5 exchanges between investment portfolios offered by the Trust
in a year, or more than 3 exchanges in a calendar quarter. Although unlikely,
the Trust may reject any exchanges or the Funds may change or terminate
rights to exchange shares. The exchange privilege is available only in states
where shares of the new fund may be sold.
No sales charge is imposed when Investment Shares on which a
shareholder previously paid a sales charge are exchanged for
Investment Shares of another investment portfolio. However,
a sales charge will be imposed on exchanges of Investment
Shares purchased without a sales charge (i.e., money market
portfolio shares) for Investment Shares of a Fund which
imposes a sales charge. In order to make an exchange,
shareholders will be required to maintain the applicable
minimum account balance in each investment portfolio of the
Trust in which shares are owned.
Institutional Shares of a Fund may be exchanged for
Investment Shares of the same Fund when the Institutional
Shares are distributed to the underlying beneficial owners
of trust accounts, 401(k) plans and other fiduciary or
agency accounts. No sales charge is imposed in connection
with such an exchange.
Investors should note that each Fund has the right to stop
offering its shares, to reject purchase orders and to
suspend the exchange privilege, although such actions are
unlikely. 440 Distributors may require additional documents
prior to accepting a purchase, redemption or exchange.
Shareholder Services
For further information on all shareholder services, call
The Kent Funds toll-free at
1-800-633-KENT (5368)
or write to
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
What Price Do I Pay For Shares?
Investment Shares are sold at the "net asset value next
determined" by the Fund plus any "applicable sales charge"
and Institutional Shares are sold at the "net asset value
next determined" by the Fund. These terms are explained
below. You should be aware that broker-dealers (other than
the Funds' distributor) may charge investors additional fees
if shares are purchased through them.
NET ASSET VALUE. Except in certain limited circumstances,
at 4:00 p.m. on each day the NYSE is open for trading each
Fund determines its NAV. The NAV is calculated separately
for the Investment Shares and Institutional Shares of each
Fund. The "net asset value next determined" is the NAV
calculated at 4:00 p.m. on the day a purchase order for
shares is received, if the purchase order is received prior
to or at 4:00 p.m., and is the net asset value calculated at
4:00 p.m. on the next business day, if the purchase order is
received after 4:00 p.m. The NAV is calculated by totaling
the value of all of the assets of a Fund allocated to a
particular class of shares, subtracting the Fund's
liabilities and expenses allocated to that class, and
dividing the result by the number of shares of that class
outstanding. When market quotations are readily available,
the Funds' assets are valued at market value. Debt
instruments with maturities of 60 days or less are valued at
amortized cost, unless the Board of Trustees determines that
this does not result in a fair value. All other assets are
valued at fair value as determined by or under the direction
of the Board of Trustees. The Funds may use pricing
services to help determine the fair value of securities.
APPLICABLE SALES CHARGE. Except in the circumstances
described below, a sales charge must be paid at the time of
purchase of Investment Shares. The more Investment Shares
an investor purchases, the lower the percentage of the sales
charge will be, as the table below indicates.
AMOUNT OF PURCHASE AS A % OF OFFERING AS A % OF NET
PRICE* AMOUNT INVESTED**
Under $100,000 4.00% 4.17%
$100,000 - $249,999 3.00% 3.09%
$250,000 - $499,999 2.00% 2.04%
$500,000 - $999,999 1.00% 1.01%
$1,000,000 and over 0.75% 0.76%
*Maximum reallowance to dealers.
**Rounded to the nearest one-hundredth percent.
For instance, if you wish to invest $275,000 in a Fund, you
would pay to the Fund $275,000 plus $5,610 (2.04% of
$275,000).
Certain investors may reduce the percentage of sales charge
they pay for Investment Shares by purchasing shares of more
than one investment portfolio of the Trust ("Portfolio") at
the same time, by purchasing additional shares of Portfolios
in the future or by agreeing to invest a certain amount in
the Portfolios during a 13-month period, as described below.
Call the Trust at 1-800-633-KENT (5368) to determine if you
qualify for such reductions.
Concurrent Purchases. If you purchase Investment Shares of
more than one Portfolio that is subject to a sale load at
the same time, you may be able to total the amount being
invested in all Portfolios at that time to determine the
sales charge payable. For example, if you concurrently
invested $100,000 in the Intermediate Tax-Free Fund and
$50,000 in the Tax-Free Income Fund, the sales charge
assessed would be 3% of $150,000, or $4,500.
Rights of Accumulation. If you buy additional Investment
Shares of a Fund, then you may be able to total the amount
of money currently being invested and the current value of
previously purchased shares of a Portfolio (other than the
Money Market Fund or the Michigan Municipal Money Market
Fund) still held to determine the amount of sales charge
payable. For example, if you had previously purchased
10,000 shares of the Tax-Free Income Fund and still held
5,000 shares of that Fund on a day when you purchased an
additional 20,000 shares of the Fund and the Fund's NAV was
$10 per share, you would pay a sales charge of 2% (the
applicable rate on a $250,000 purchase) on the $200,000
worth of new shares being purchased, or $4,000. To take
advantage of the rights of accumulation, you must contact
440 Distributors at 1-800-633-KENT (5368) at the time of
purchase. The Trust may change or terminate rights of
accumulation at any time.
Letter of Intent. If you intend to make several investments
in one or more Portfolios over time, you may wish to
complete the Letter of Intent section of your new account
application. By doing so, you agree to invest a certain
amount in one or more of the Portfolios over a 13-month
period. Each investment in a Portfolio during the 13 months
would then be subject to the sales charge applicable to the
total amount to be invested under the Letter of Intent in
Portfolios that charge a sales load. For example, if you
stated in your application your intent to invest $275,000 in
one or more Portfolios that charge a sales load but you only
invested $75,000 at the time you completed your application,
then you would pay a sales charge of 2% of $75,000, or
$1,500, which is half of the 4% sales charge that you would
otherwise have paid on such investment. The Letter of
Intent may be back-dated up to 90 days so that any
investments made in any of the Portfolios (other than in the
Money Market Fund and the Michigan Municipal Money Market
Fund) during the preceding 90-day period can be applied
toward fulfillment of the Letter of Intent (although there
will be no refund of sales charges paid during the 90-day
period). You should inform 440 Distributors that you have a
Letter of Intent each time you make an investment.
You are not obligated to purchase the amount specified in
the Letter of Intent. If you purchase less than the amount
specified, however, you must pay the difference between the
sales charge paid and the sales charge applicable to the
purchases actually made. Shares representing 5% of the
dollar amount specified in the Letter of Intent will be held
in escrow. Such shares will not be available for
redemption, transfer or pledge until the Letter of Intent is
completed or the higher sales charge paid. If the intended
investment is not completed and you do not pay the
difference between the sales charge paid and the sales
charge applicable to the purchases actually made within 20
days after written request by 440 Distributors or its
dealer, 440 Distributors will redeem an appropriate number
of escrowed shares and release the balance of escrowed
shares to you. You are entitled to all income and capital
gains distributions paid with respect to the escrowed
shares.
Other. Sales charges may be waived entirely for investors
who transfer balances from mutual fund companies other than
the Trust during certain promotional periods announced by
440 Distributors. In addition, sales charges will not be
payable by (1) current full-time and part-time employees,
retired employees and Directors of OKFC and its
subsidiaries; (2) Trustees of the Trust; (3) registered
representatives of firms which have dealer or broker
agreements with 440 Distributors relating to Investment
Shares; and (4) spouses and dependent children of the
individuals listed in (1) - (3) above; (5) OKFC or one of
its subsidiaries, acting on behalf of fiduciary customer
accounts and any other account maintained by a trust
department; (6) employees of First Data and 440
Distributors; and (7) participants in certain qualified
retirement plans
For further information about sales charge reductions and
waivers and the programs described above, call toll-free at
1-800-633-KENT (5368) or write to
The Kent Funds, c/o 440 Distributors, 4400 Computer Drive,
P.O. Box 5107, Westboro, MA 01581-5107
REDEMPTIONS (SALES) OF SHARES
When Can I Redeem Shares?
You can redeem shares on any day that the NYSE is open for
trading. Shares will not be redeemed by a Fund unless all
required documents have been received by 440 Distributors.
A Fund may temporarily stop redeeming shares when the NYSE
is closed or trading on the NYSE is restricted, when an
emergency exists and the Fund cannot sell its assets or
accurately determine the value of its assets or if the
Securities and Exchange Commission orders the Fund to stop
redemptions. If you intend to redeem shares worth more than
$1,000,000, you should notify the Fund at least one day in
advance.
How Can I Redeem Shares?
INVESTMENT SHARES
* By Mail. You may mail your redemption notice to:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
The redemption notice should state the amount of money or
number of shares to be redeemed, and the account name and
number. If a stock certificate has been issued to you, you
must endorse (sign the back of) the stock certificate and
return it to the Fund together with the written redemption
notice.
Important Information Regarding Stock Certificates and
Redemption Notices for Investment Shares
Signatures on all redemption notices and stock certificates
must be guaranteed by a U.S. stock exchange member, a U.S.
commercial bank or trust company and other entities approved
by 440 Distributors, unless the amount redeemed is less than
$50,000 and the account address has been the same for at
least 90 days. The Funds can change the above requirements
or require additional documents at any time.
* By Telephone. You can redeem up to $50,000 worth of
Investment Shares by calling 1-800-633-KENT (5368). If
the amount redeemed is less than $2,500, then a check will
be mailed to you and if equal to or greater than $2,500,
then the proceeds will be mailed or sent by wire or
electronic funds transfer to the bank listed on your
account.
* Through a Broker. Investment Shares can be redeemed
through a broker. The broker should send the redemption
notice and any other required documents to 440 Distributors,
which will send the proceeds to the broker or directly to
you, at your option, within 3 days after receiving proper
documents. 440 Distributors does not charge a fee for this
service, but the broker might.
* Through an Automatic Withdrawal Plan. Under the Plan,
a shareholder with an account worth at least $10,000 may
redeem, either monthly or quarterly, fixed dollar amounts of
Investment Shares. Each payment must be at least $100 and
can be no more than 1.5% per month, or 4.5% per quarter, of
the value of the shareholder's Investment Shares when the
Automatic Withdrawal Plan was opened. The proceeds can be
mailed or sent by electronic funds transfer to the bank
listed on your account.
INSTITUTIONAL SHARES
You can redeem Institutional Shares by mail, by telephone or
through a broker by following the procedures described for
Investment Shares. Redemption proceeds will be wired in
federal funds only to the commercial bank and account number
listed on your account application. To change the bank
account, you should call the Funds at 1-800-633-KENT (5368)
and request the proper form.
GENERAL REDEMPTION INFORMATION
During periods of unusual market activity it may be
difficult to reach the Funds by telephone. In such cases,
shareholders should follow the procedures for redeeming by
mail or through a broker. Neither the Trust nor any of its
service providers will be liable for following telephone
instructions reasonably believed to be genuine unless it
acts with willful misfeasance, bad faith or gross
negligence. In this regard the Trust and its transfer agent
require personal identification before accepting a telephone
redemption. To the extent that the Trust fails to use
reasonable procedures as a basis for its belief that
telephone instructions are genuine, it and/or its service
providers may be liable for instructions that prove to be
fraudulent and unauthorized.
Each Fund reserves the right to redeem an account if its
value falls below $1,000 for Investment Shares and $100,000
for Institutional Shares as a result of redemptions (but not
as a result of a decline in net asset value). A shareholder
will be notified in writing and allowed 60 days to increase
the value of the account to the minimum investment level.
What Price Do I Receive for Shares?
You will receive the NAV next determined for each share you
wish to redeem. See "Purchases of Shares - What Price Do I
Pay for Shares?" for an explanation of how the NAV next
determined is calculated.
When Will I Receive Redemption Money?
Redemption proceeds are typically sent to shareholders
within 3 business days after a request for redemption is
made. You should be sure that you submit all proper
documents for redemption; otherwise, the payment of
redemption proceeds may be delayed. You may call the Funds
at 1-800-633-KENT (5368) to be sure that you have proper
documents for redemption. If you purchase shares with a
check and try to redeem shares a short time later, the Fund
may delay paying redemption proceeds until the check has
been collected, although the amount to be paid for the
shares will be calculated when the redemption notice is
received. The delay could take 15 days or more. To avoid a
delay in receiving redemption proceeds, you should purchase
shares through a bank wire or electronic funds transfer.
Information on wires can be obtained from all national and
many state banks.
STRUCTURE AND MANAGEMENT OF THE FUNDS
How Are the Funds Structured?
The Trust is an open-end management investment company,
which is a mutual fund that sells and redeems shares every
day that it is open for business. The Trust was organized
on May 9, 1986 as a Massachusetts business trust. The Trust
is governed by a Board of Trustees. The Trustees are
responsible for the overall management of the Trust and
retain and supervise the Funds' Adviser, Administrator,
Distributor, Transfer Agent and Custodian. Currently, the
Trust has thirteen portfolios, each of which offers 2
classes of shares.
Who Manages and Services the Funds?
INVESTMENT ADVISER. The Funds are advised by Old Kent, an
indirect wholly-owned subsidiary of OKFC, which is a
financial services company with total assets as of December
31, 1995 of approximately $12 billion. Old Kent provides
investment advice to the Funds under a contract with the
Funds.
Old Kent's Investment Department employs an experienced
staff of professional investment analysts, portfolio
managers and traders, and uses several proprietary computer-
based systems in conjunction with fundamental analysis to
identify investment opportunities. Old Kent has provided
investment advisory services to individual and corporate
trust accounts for over 100 years. Old Kent is located at
One Vandenberg Center, Grand Rapids, MI 49503. Through
offices in Michigan, Florida and Illinois, OKFC and its
subsidiaries provide a broad range of financial services to
individuals and businesses. Old Kent currently has the
right to vote a majority of the Trust's outstanding shares
on behalf of its underlying customer accounts and therefore
it is considered to be a controlling person of the Trust.
Old Kent has committed several portfolio managers to the
day-to-day management of the Funds. Joseph T. Keating, a
Senior Vice President in the Investment Management Group, is
responsible for developing and implementing the Funds'
investment policies. Mr. Keating has over 20 years of
investment experience and has served in various management
positions with Old Kent for the past 9 years. Allan J.
Meyers, a Vice President in the Investment Management Group,
is Director of fixed income funds and the portfolio manager
of the Intermediate Tax-Free Fund and the Tax-Free Income
Fund. He has managed the Funds since their inception. Mr.
Meyers has over 12 years of investment experience with Old
Kent. Michael J. Martin, an Assistant Vice President in the
Investment Management Group, is responsible for security
analysis of short-term tax-free obligations and is a co-
portfolio manager of the Limited Term Tax-Free Fund and the
Michigan Municipal Bond Fund, which he has managed since
January 1995. Mr. Martin has over 6 years of experience
with Old Kent.
Old Kent selects broker-dealers to execute portfolio
transactions for the Funds based on best price and execution
terms. Old Kent may consider as a factor the number of
shares of a Fund sold by the broker-dealer. The broker-
dealers may be affiliated with the Trust or its service
providers or their affiliates subject to any limitations
imposed by applicable securities laws and regulations.
ADMINISTRATOR. First Data provides management and
administrative services to the Funds, including providing
office space, equipment and clerical personnel to the Funds
and supervising custodial, auditing, valuation, bookkeeping,
legal and dividend dispersing services. First Data also
acts as the transfer agent and dividend paying agent of the
Funds. First Data is located at One Exchange Place, Boston,
Massachusetts 02109.
DISTRIBUTOR. 440 Distributors is the distributor of the
Funds' shares and is paid a sales charge on the sale of
Investment Shares, described under "Purchases of Shares -
What Price Do I Pay For Shares?" The Distributor may
reallow all or a portion of the sales charge to a broker-
dealer. The second column under the table labeled
"Applicable Sales Charge" shows the maximum amount of the
reallowance. The Distributor may, from time to time,
provide promotional incentives to certain dealers whose
representatives have sold or are expected to sell
significant amounts of Investment Shares. The Distributor
may provide written information to dealers with whom it has
dealer agreements that relate to sales incentive campaigns
conducted by such dealers for their representatives. In
addition, the Distributor may similarly provide financial
assistance in connection with pre-approved seminars,
conferences and advertising. No such programs or additional
compensation will be offered to the extent that they are
prohibited by the laws of any state or any self-regulatory
agency, such as the NASD. Dealers to whom substantially the
entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities
Act of 1933.
What Are My Rights as a Fund Shareholder?
As a shareholder of a Fund, you have the right to vote on
certain matters affecting the Fund, such as elections of
Trustees and approval of advisory contracts and distribution
arrangements. The Funds will not have annual shareholder
meetings, but special meetings may be held at the request of
investors holding 10% of the shares for the purpose of
removing a Trustee. You are entitled to one vote for each
share you hold and a fractional vote for each fraction of a
share you hold. You will be asked to vote only on matters
affecting the Trust as a whole and your particular Fund and
class of shares, and not on matters only affecting other
Funds or classes of shares. You should be aware that under
Massachusetts law it is possible that a shareholder may be
personally liable for the Fund's obligations. If a
shareholder were required to pay a debt of a Fund, however,
the Fund has committed to reimburse the shareholder in full
from its assets.
DIVIDENDS, DISTRIBUTIONS AND TAXES
When Will I Receive Distributions From the Funds?
Each Fund will distribute substantially all of its net
investment income and long-term capital gains to
shareholders each year. Each Fund will declare and pay
dividends monthly. Each Fund will distribute realized long-
term capital gains, if any, once a year. You should be
aware that each time a distribution is made from a Fund, the
Fund's net asset value is reduced by the amount of the
distribution. Therefore, if you buy shares just before a
distribution is made, you will pay full price for the shares
and then receive a portion of the price back as a taxable
distribution.
How Will Distributions Be Made?
Dividend and capital gains distributions will be paid in
additional shares of the Funds. If you wish to receive
distributions in cash, notify the Fund at 1-800-633-KENT
(5368) and a check will be mailed to you each time a
distribution is made. Your distributions may also be sent
by electronic funds transfer directly to your designated
bank account. Shareholders in IRA accounts and participants
in certain tax-qualified plans cannot receive distributions
in cash.
What Are the Tax Implications of My Investments in the
Funds?
Because the Funds each intend to qualify as a "regulated
investment company" under the Internal Revenue Code (the
"Code"), they generally will not be required to pay Federal
income taxes on their income and capital gains. Income
dividends by each Fund will be taxable to you as ordinary
income, unless you are exempt from Federal income taxes.
Capital gains distributions will be taxed to you as long-
term capital gains (regardless of how long you have held the
shares). Each Fund intends to distribute monthly its net
tax-exempt income (such distributions are known as "exempt-
interest dividends") and any investment company taxable
income. Exempt-interest dividends may be treated by you as
items of interest excludable from your gross income under
Section 103(a) of the Code unless under the circumstances
applicable to you the exclusion would be disallowed. See
the SAI under "Dividends and Taxes." Shareholders receiving
Social Security benefits should note that all exempt-
interest dividends will be taken into account in determining
the taxability of such benefits. In general, a Fund's
investment company taxable income will be its taxable income
(including interest and short-term capital gains) subject to
certain adjustments and excluding the excess of any net
long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. To the
extent, if any, dividends paid to you are derived from
taxable income or from net long-term capital gains, such
dividends will not be exempt from Federal income tax,
whether they are paid in cash or reinvested in additional
shares, and may also be subject to state and local taxes.
A percentage of the interest on indebtedness incurred by you
to purchase or carry shares of a Fund will not be deductible
for Federal income tax purposes to the extent of the portion
of the interest expense relating to exempt-interest
dividends.
Please note that the above tax treatment applies regardless
of whether you receive your distributions in cash or in
additional shares. Federal income taxes for distributions
to an IRA or to a qualified retirement plan are deferred.
Income dividends will qualify for the dividends received
deduction for corporations to the extent of the total
qualifying dividends received by the distributing Fund from
domestic corporations for the year.
Any distribution that is declared in October, November or
December but not actually paid until January of the
following year will be taxable in the year declared. When
you redeem, transfer or exchange shares, you may have a
taxable gain or loss depending on whether the price you
receive for the shares has a value higher or lower than your
tax basis in the shares. If you hold shares for six months
or less, and during that time you received a capital gain
dividend, any loss you realize on the sale of those shares
will be treated as a long-term loss to the extent of the
earlier distribution. You will receive from each Fund in
which you are a shareholder shortly after the end of each
year a statement of the amount and nature of distributions
made to you during the year. You will also receive a
confirmation statement shortly after disposing of shares
showing the amount and value of the disposition.
You should note that in certain cases (i) the Funds will be
required to withhold 31% of dividends or sale proceeds
otherwise due to you and (ii) in addition to Federal taxes,
state and local taxes may apply to transactions in shares.
The exemption of interest on municipal bonds for Federal
income tax purposes does not necessarily result in exemption
under the income, corporate or personal property tax laws of
any state or city. Generally, you are afforded tax-exempt
treatment at the state and local levels for distributions
derived from interest on municipal securities of your state
of residency.
Dividends paid by the Michigan Municipal Bond Fund that are
derived from interest attributable to tax-exempt Michigan
Municipal Obligations will be exempt from Michigan state and
local taxes, even though the dividends may not be exempt for
Federal income tax purposes. The Fund is unable to predict
in advance the portion of its dividends that will be derived
from interest on Michigan Municipal Obligations, but will
notify shareholders each year as to the interest derived
from Michigan Municipal Obligations.
Distributions of taxable income and taxable capital gains by
the Michigan Municipal Bond Fund are taxable for Michigan
taxation purposes when received by a shareholder, except
that distributions which are reinvested by a shareholder in
shares of the Fund are exempt from the Michigan intangibles
tax. Except as noted above with respect to Michigan income
taxation, distributions of net income may be taxable to
investors as dividend income under other state or local laws
even though a substantial portion of such distributions may
be derived from interest on tax-exempt obligations which, if
realized directly, would be exempt from such income taxes.
This section contains a brief summary of the tax
implications of ownership of the Funds' shares. A lengthier
description of taxes is contained in the SAI. You should
consult your tax adviser regarding the impact of owning the
Funds' shares on your own personal tax situation, including
the applicability of any state and local taxes.
ADDITIONAL INFORMATION
Where Do I Get Additional Information About My Account and
the Funds?
For more information, call the Funds at 1-800-633-KENT
(5368) or write to the Funds at:
The Kent Funds
c/o 440 Distributors
4400 Computer Drive
P.O. Box 5107
Westboro, MA 01581-5107
Except as otherwise stated in this prospectus or required by
law, the Trust reserves the right to change the terms of any
offer stated in this prospectus without shareholder
approval, including the right to charge certain fees for
services provided. No person has been authorized to give
any information or to make any representation not contained
in this prospectus, or in the SAI, in connection with the
offering made by this prospectus and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Funds or their Distributor.
This prospectus does not constitute an offering by the Funds
or by their Distributor in any jurisdiction in which such
offering may not lawfully be made.
THE KENT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
for
Investment and Institutional Shares
of
The Kent Money Market Fund
The Kent Michigan Municipal Money Market Fund
The Kent Growth and Income Fund
The Kent Small Company Growth Fund
The Kent International Growth Fund
The Kent Index Equity Fund
The Kent Short Term Bond Fund
The Kent Intermediate Bond Fund
The Kent Income Fund
The Kent Limited Term Tax-Free Fund
The Kent Intermediate Tax-Free Fund
The Kent Tax-Free Income Fund
The Kent Michigan Municipal Bond Fund
May 1, 1996
This Statement of Additional Information ("SAI") is not a
prospectus but relates to, and should be read in conjunction
with, the prospectuses for the Investment Shares and the
Institutional Shares of the foregoing Funds dated May 1,
1996, as amended or supplemented from time to time. A copy
of the prospectuses may be obtained by writing to 440
Financial Distributors, Inc., 4400 Computer Drive, P.O. Box
5107, Westboro, Massachusetts 01581-5107 or by calling
1-800-633-KENT (5368). Capitalized terms not otherwise
defined herein have the same meaning as in the prospectuses.
Shares of the Funds are not bank deposits or obligations
of, or guaranteed or endorsed by, Old Kent Bank or any of
its affiliates, and are not federally insured by, guaranteed
by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other governmental agency. An
investment in mutual fund shares involves investment risk,
including possible loss of principal. Each Money Market
Fund seeks to maintain a net asset value of $1.00 per share,
although there can be no assurance that it will be able to
do so.
TABLE OF CONTENTS
The Trust 3
Investment Policies 3
Investment Restrictions 23
Securities Transactions 25
Valuation of Securities 27
Trustees and Officers 30
Expenses 31
Investment Adviser 32
Administrator 35
Distributor 36
Transfer Agent 36
Custodian, Auditors and Counsel 37
Distribution Plans 37
Additional Purchase and Redemption Information 38
Dividends and Taxes 40
Declaration of Trust 45
Standardized Total Return and Yield Quotations 46
Advertising Information 49
Financial Statements 49
Additional Information 50
Appendix A A-1
Appendix B B-1
Appendix C C-1
No person has been authorized to give any information or to
make any representation not contained in this SAI, or in the
prospectuses related hereto, in connection with the offering
made by the prospectuses and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Trust or its Distributor.
This SAI and the prospectuses do not constitute an offering
by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.
THE TRUST
The Kent Funds (the "Trust") is an open-end management
investment company, commonly known as a mutual fund, which
was organized on May 9, 1986 as a Massachusetts business
trust. The original name of the Trust was "Master Municipal
Trust." The Trust changed its name to "The Kent Funds" on
May 1, 1990. The Trust consists of thirteen separate
investment portfolios, each of which is diversified and has
a distinct investment objective and distinct investment
policies (individually, a "Fund," and collectively, the
"Funds"). Each of the Funds has established two classes of
shares, Investment Shares and Institutional Shares. This
SAI relates to the Investment and Institutional Shares of
The Kent Money Market Fund, The Kent Michigan Municipal
Money Market Fund (collectively, the "Money Market Funds"),
The Kent Growth and Income Fund, The Kent Small Company
Growth Fund, The Kent International Growth Fund, The Kent
Index Equity Fund (collectively, the "Equity Funds"), The
Kent Short Term Bond Fund, The Kent Intermediate Bond Fund,
The Kent Income Fund (collectively, the "Income Funds"), 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 (collectively, the "Municipal
Bond Funds"). The Equity Funds, Income Funds and Municipal
Bond Funds are sometimes collectively referred to as the
"Non-Money Market Funds." The Municipal Bond Funds and The
Kent Michigan Municipal Money Market Fund are sometimes
collectively referred to as the "Tax-Free Funds." Each Fund
is advised by Old Kent Bank ("Old Kent" or the "Investment
Adviser").
Important information about the Trust and the
Investment and Institutional Shares of the Funds is con-
tained in the Funds' prospectuses. This SAI provides
additional information about the Trust and the Investment
and Institutional Shares of the Funds that may be of
interest to some investors.
INVESTMENT POLICIES
The following information supplements the description of
each Fund's investment objective and policies as set forth
in its respective prospectus. The investment policies
discussed below are applicable to all the Funds unless
otherwise noted.
Money Market Instruments
The Funds may invest from time to time in "money
market instruments," a term that includes, among other
things, bank obligations, commercial paper, variable amount
master demand notes and corporate bonds with remaining
maturities of thirteen months or less. Variable amount
master demand notes are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic
adjustments in the interest rate. Although such notes are
not normally traded and there may be no secondary market in
the notes, the Funds may demand payment of the principal of
the instrument at any time. If an issuer of a variable
amount master demand note defaulted on its payment
obligation, the Funds might be unable to dispose of the note
because of the absence of a secondary market and might, for
this or other reasons, suffer a loss to the extent of the
default.
Commercial paper represents short-term unsecured
promissory notes issued in bearer form by banks or bank
holding companies, corporations and finance companies.
Investments by the Funds in taxable commercial paper will
consist of issues that are rated A-1 by Standard & Poor's
Ratings Group ("S&P") or Prime-1 by Moody's Investors
Service, Inc. ("Moody's"). In addition, the Funds may
acquire unrated commercial paper and corporate bonds that
are determined by Old Kent at the time of purchase to be of
comparable quality to rated instruments that may be acquired
by the Funds. Commercial paper may include variable and
floating rate instruments.
Certificates of deposit are negotiable certificates
issued against funds deposited in a commercial bank for a
definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay
for specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally agrees to
pay the face value of the instrument on maturity. Fixed
time deposits are bank obligations payable at a stated
maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor,
but may be subject to early withdrawal penalties that vary
depending upon market conditions and the remaining maturity
of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time
deposit to a third party, although there is no market for
such deposits. Bank notes and bankers' acceptances rank
junior to deposit liabilities of the bank and pari passu
with other senior, unsecured obligations of the bank. Bank
notes are classified as "other borrowings" on a bank's
balance sheet, while deposit notes and certificates of
deposit are classified as deposits. Bank notes are not
insured by the Federal Deposit Insurance Corporation or any
other insurer. Deposit notes are insured by the Federal
Deposit Insurance Corporation only to the extent of $100,000
per depositor per bank.
The Funds may invest a portion of their assets in the
obligations of foreign banks and foreign branches of
domestic banks. Such obligations include Eurodollar
Certificates of Deposit ("ECDs") which are U.S.
dollar-denominated certificates of deposit issued by offices
of foreign and domestic banks located outside the United
States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S.
bank or a foreign bank; Canadian Time Deposits ("CTDs")
which are essentially the same as ETDs except they are
issued by Canadian offices of major Canadian banks; Schedule
Bs, which are obligations issued by Canadian branches of
foreign or domestic banks; Yankee Certificates of Deposit
("Yankee CDs") which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a foreign
bank and held in the United States; and Yankee Bankers'
Acceptances ("Yankee BAs") which are U.S.
dollar-denominated bankers' acceptances issued by a U.S.
branch of a foreign bank and held in the United States.
Although the Funds will invest in obligations of
foreign banks or foreign branches of U.S. banks only when
Old Kent deems the instrument to present minimal credit
risk, such investments nevertheless entail risks that are
different from those of investments in domestic obligations
of U.S. banks. These additional risks include future
political and economic developments, the possible imposition
of withholding taxes on interest income, possible seizure or
nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other
foreign governmental restrictions which might adversely
affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks
and U.S. branches of foreign banks may be subject to less
stringent reserve requirements and to different accounting,
auditing, reporting, and recordkeeping standards than those
applicable to domestic branches of U.S. banks. All
investments in bank obligations are limited to the
obligations of financial institutions having more than $1
billion in total assets at the time of purchase.
Guaranteed Investment Contracts (The Income Funds, Municipal
Bond Funds and Money Market Fund only)
The above-referenced Funds may make limited investments
in guaranteed investment contracts ("GICs") issued by highly
rated U.S. insurance companies. A GIC is normally a general
obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes
part of the general assets of the insurance company, and the
contract is paid from the company's general assets. The
Income Funds, Municipal Bond Funds and Money Market Fund
will only purchase GICs from insurance companies which, at
the time of purchase, have total assets of $1 billion or
more and meet quality and credit standards established by
Old Kent pursuant to guidelines approved by the Board of
Trustees. Generally, GICs are not assignable or
transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not
currently exist. Therefore, GICs will normally be
considered illiquid investments, and will be subject to a
Fund's limitation on illiquid investments.
Repurchase Agreements
Each Fund may agree to purchase portfolio securities
from financial institutions subject to the seller's
agreement to repurchase them at a mutually agreed upon date
and price ("repurchase agreements"). The Funds will enter
into such repurchase agreements only with financial
institutions that are deemed to be creditworthy by Old Kent,
pursuant to guidelines established by the Trust's Board of
Trustees. During the term of any repurchase agreement, Old
Kent will continue to monitor the creditworthiness of the
seller. The Funds will not enter into repurchase agreements
with Old Kent or its affiliates. Although the securities
subject to a repurchase agreement may bear maturities
exceeding one year, settlement for the repurchase agreement
will never be more than one year after a Fund's acquisition
of the securities and normally will be within a shorter
period of time. Repurchase agreements with deemed
maturities in excess of seven days are considered illiquid
investments, and will be subject to a Fund's limitation on
illiquid investments. Securities subject to repurchase
agreements are held either by the Trust's custodian or in
the Federal Reserve/Treasury Book-Entry System. The seller
under a repurchase agreement will be required to maintain
the value of the securities subject to the agreement in an
amount exceeding the repurchase price (including accrued
interest) and securities subject to repurchase agreements
are maintained by the Trust's custodian in segregated
accounts in accordance with the Investment Company Act of
1940, as amended (the "1940 Act"). Default by the seller
would, however, expose a Fund to possible loss because of
adverse market action or delay in connection with the
disposition of the underlying obligations. Repurchase
agreements are considered to be loans by a Fund under the
1940 Act.
Reverse Repurchase Agreements
A Fund may borrow funds for temporary purposes by selling
portfolio securities to financial institutions such as banks
and broker/dealers and agreeing to repurchase them at a
mutually specified date and price ("reverse repurchase
agreements"). Reverse repurchase agreements involve the
risk that the market value of the securities sold by a Fund
may decline below the repurchase price. A Fund will pay
interest on amounts obtained pursuant to a reverse
repurchase agreement. While reverse repurchase agreements
are outstanding, a Fund will maintain in a segregated
account cash, U.S. Government securities or other liquid
high-grade debt securities of an amount at least equal to
the market value of the securities, plus accrued interest,
subject to the agreement. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
Variable and Floating Rate Instruments (The Income Funds,
Municipal Bond Funds and Money Market Funds only)
The above-referenced Funds may purchase rated and
unrated variable and floating rate instruments. When
purchasing such instruments for the Funds, Old Kent will
consider the earning power, cash flows and other liquidity
ratios of the issuers and guarantors of such instruments
and, if the instruments are subject to demand features, will
monitor their financial status to meet payment on demand.
In determining weighted average portfolio maturity, an
instrument will usually be deemed to have a maturity equal
to the longer of the period remaining until the next
interest rate adjustment or the time a Fund can recover
payment of principal as specified in the instrument.
Variable rate U.S. Government obligations held by the Funds,
however, will be deemed to have maturities equal to the
period remaining until the next interest rate adjustment.
Where necessary to ensure that a variable or floating rate
instrument is of the minimum required credit quality for a
Fund, the issuer's obligation to pay the principal of the
instrument will be backed by an unconditional bank letter or
line of credit, guarantee or commitment to lend. Unrated
instruments will be determined by Old Kent to be of
comparable quality at the time of purchase to rated
instruments eligible for purchase by the Funds.
The absence of an active secondary market with respect
to particular variable and floating rate instruments could
make it difficult for a Fund to dispose of the instruments
if the issuer defaulted on its payment obligation or during
periods that the Fund is not entitled to exercise demand
rights, and a Fund could, for these or other reasons, suffer
a loss with respect to such instruments. Variable and
floating rate instruments (including inverse floaters) will
be subject to a Fund's limitation on illiquid investments
when the Fund may not demand payment of the principal amount
within seven days and a reliable trading market is absent.
Loan Participation Notes
A loan participation note represents participation in
a corporate loan of a commercial bank with a remaining
maturity of one year or less. Such loans must be to
corporations in whose obligations the Funds may invest. Any
participation purchased by a Fund must be issued by a bank
in the United States with total assets exceeding $1 billion.
Because the issuing bank does not guarantee the
participations in any way, they are subject to the credit
risks generally associated with the underlying corporate
borrower. In addition, because it may be necessary under
the terms of the loan participation for a Fund to assert
through the issuing bank such rights as may exist against
the corporate borrower if the underlying corporate borrower
fails to pay principal and interest when due, a Fund may be
subject to delays, expenses and risks that are greater than
those that would have been involved if the Fund had
purchased a direct obligation of such borrower. Moreover,
under the terms of the loan participation a Fund may be
regarded as a creditor of the issuing bank (rather than the
underlying corporate borrower), so that the Fund may also be
subject to the risk that the issuing bank may become
insolvent. The secondary market, if any, for loan
participations is extremely limited and any such
participations purchased by a Fund may be regarded as
illiquid.
Forward Commitments, When-Issued Securities and Delayed-
Delivery Transactions
Each Fund may purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment
(sometimes called delayed delivery) basis. These
transactions involve a commitment by the Fund to purchase or
sell securities at a future date. The price of the
underlying securities (usually expressed in terms of yield)
and the date when the securities will be delivered and paid
for (the settlement date) are fixed at the time the
transaction is negotiated. When-issued purchases and
forward commitment transactions are normally negotiated
directly with the other party.
A Fund will purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis
only with the intention of completing the transaction and
actually purchasing or selling the securities. If deemed
advisable as a matter of investment strategy, however, a
Fund may dispose of or negotiate a commitment after entering
into it. A Fund also may sell securities it has committed
to purchase before those securities are delivered to the
Fund on the settlement date.
Securities purchased or sold on a when-issued, delayed
delivery or forward commitment basis involve a risk of loss
if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the
settlement date. When a Fund engages in when-issued,
delayed-delivery and forward commitment transactions, it
relies on the other party to consummate the trade. Failure
of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price considered
to be advantageous.
When a Fund purchases securities on a when-issued, delayed-
delivery or forward commitment basis, the Trust's custodian
will maintain in a segregated account cash, U.S. Government
securities or other liquid high-grade debt securities having
a value (determined daily) at least equal to the amount of
the Fund's purchase commitments. In the case of a forward
commitment to sell portfolio securities, the custodian will
hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These
procedures are designed to ensure that the Fund will
maintain sufficient assets at all times to cover its
obligations under when-issued, forward commitment and
delayed-delivery transactions. Because a Fund sets aside
liquid assets to satisfy its purchase commitments in the
manner described, its liquidity and ability to manage its
portfolio might be affected in the event its purchase
commitments exceed 25% of the value of its assets. For
purposes of determining a Fund's average dollar-weighted
maturity, the maturity of when-issued, delayed-delivery or
forward commitment securities will be calculated from the
commitment date.
United States Government Obligations
Examples of the types of U.S. Government obligations that
may be acquired by the Funds include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of
Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States,
Small Business Administration, Federal National Mortgage
Association ("FNMA"), Government National Mortgage
Association ("GNMA"), General Services Administration,
Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, and Maritime
Administration. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of
the GNMA, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Export-Import
Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of
the FNMA, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations;
still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not
obligated to do so by law.
Zero Coupon Obligations (The Income Funds and Money
Market Funds only)
The Income Funds and Money Market Funds may acquire
zero coupon obligations, which have greater price volatility
than coupon obligations and which will not result in the
payment of interest until maturity, provided that the
greater price volatility of any such zero coupon obligation
is not inconsistent with the Fund's investment objective.
The Funds will accrue income on such investments for tax and
accounting purposes, as required, and such income must be
distributed to shareholders. Because no cash is received at
the time of such accruals, a Fund may be required to
liquidate other portfolio securities to satisfy its
distribution obligations.
Stripped Obligations (The Income Funds and Money Market
Funds only)
The Income Funds and Money Market Funds may purchase
Treasury receipts and other "stripped" securities that
evidence ownership in either the future interest payments or
the future principal payments on U.S. Government and other
obligations. These participations, which may be issued by
the U.S. Government (or a U.S. Government agency or
instrumentality) or by private issuers such as banks and
other institutions, are issued at a discount to their "face
value," and may, with respect to the Income Funds, include
stripped mortgage-backed securities ("SMBS"). Stripped
securities, particularly SMBS, may exhibit greater price
volatility than ordinary debt securities because of the
manner in which their principal and interest are returned to
investors. The Funds also may purchase U.S. dollar-
denominated "stripped" securities that evidence ownership in
the future interest payments or principal payments on
obligations of foreign governments.
SMBS are usually structured with two or more classes
that receive different proportions of the interest and
principal distributions from a pool of mortgage-backed
obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class
receives all of the principal. However, in some cases, one
class will receive some of the interest and most of the
principal while the other class will receive most of the
interest and the remainder of the principal. If the
underlying obligations experience greater than anticipated
prepayments of principal, a Fund may fail to fully recoup
its initial investment. The market value of the class
consisting entirely of principal payments can be extremely
volatile in response to changes in interest rates. The
yields on a class of SMBS that receives all or most of the
interest are generally higher than prevailing market yields
on other mortgage-backed obligations because their cash flow
patterns are also volatile and there is a greater risk that
the initial investment will not be fully recouped.
SMBS which are not issued by the U.S. Government (or a
U.S. Government agency or instrumentality) are considered
illiquid. SMBS issued by the U.S. Government (or a U.S.
Government agency or instrumentality) may be considered
liquid under guidelines established by the Trust's Board of
Trustees if they can be disposed of promptly in the ordinary
course of business at a value reasonably close to that used
in the calculation of a Fund's per share net asset value.
Within the past several years, the Treasury Department has
facilitated transfers of ownership of stripped
securities by accounting separately for the beneficial
ownership of particular interest coupon and principal
payments on Treasury securities through the Federal Reserve
book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known
as "STRIPS" or "Separate Trading of Registered Interest and
Principal of Securities." The Income Funds and Money Market
Funds may purchase securities registered in the STRIPS
program. Under the STRIPS program, the Funds will be able
to have their beneficial ownership of stripped
securities recorded directly in the book-entry record-
keeping system in lieu of having to hold certificates or
other evidences of ownership of the underlying U.S. Treasury
securities.
In addition, the Income Funds and Money Market Funds may
acquire other U.S. Government obligations and their
unmatured interest coupons that have been separated
("stripped") by their holder, typically a custodian bank or
investment brokerage firm. Having separated the interest
coupons from the underlying principal of the U.S. Government
obligations, the holder will resell the stripped securities
in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs")
and "Certificate of Accrual on Treasury Securities"
("CATS"). The stripped coupons are sold separately from the
underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to
receive a future fixed payment on the security and does not
receive any rights to periodic interest (cash) payments.
The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in
the case of bearer securities (i.e., unregistered securities
which are ostensibly owned by the bearer or holder), in
trust on behalf of the owners. Counsel to the underwriters
of these certificates or other evidences of ownership of
U.S. Treasury securities have stated that, in their opinion,
purchasers of the stripped securities most likely will be
deemed the beneficial holders of the underlying U.S.
Government obligations for federal tax purposes. The Trust
is unaware of any binding legislative, judicial or
administrative authority on this issue. The staff of
the Securities and Exchange Commission believes that
participations in TIGRs, CATs and other similar trusts are
not U.S. Government securities.
Mortgage-Backed Securities (The Income Funds and Money
Market Funds only)
The Income Funds and Money Market Funds may invest
in mortgage-backed securities, including those representing
an undivided ownership interest in a pool of mortgages, such
as certificates of the GNMA and the FHLMC. These
certificates are in most cases pass-through instruments,
through which the holder receives a share of all interest
and principal payments from the mortgages underlying the
certificate, net of certain fees. The average life of a
mortgage-backed security varies with the underlying mortgage
instruments, which have maximum maturities of 40 years. The
average life is likely to be substantially less than the
original maturity of the mortgage pools underlying the
securities as the result of prepayments, mortgage
refinancings or foreclosure. Mortgage prepayment rates are
affected by factors including the level of interest rates,
general economic conditions, the location and age of the
mortgage and other social and demographic conditions. Such
prepayments are passed through to the registered holder with
the regular monthly payments of principal and interest and
have the effect of reducing future payments.
In periods of falling interest rates, the rate of
mortgage prepayments tends to increase. During such
periods, the reinvestment of prepayment proceeds by a Fund
will generally be at lower rates than the rates that were
carried by the obligations that have been prepaid. As a
result, the relationship between mortgage prepayments and
interest rates may give some high-yielding mortgage-related
securities less potential for growth in value than
conventional bonds with comparable maturities. In
calculating the average weighted maturity of each Fund, the
maturity of mortgage-backed and asset-backed securities will
be based on estimates of average life.
There are a number of important differences among the
agencies and instrumentalities of the U.S. Government that
issue mortgage-related securities and among the securities
that they issue. Mortgage-related securities guaranteed by
GNMA include GNMA Mortgage Pass-Through Certificates (also
known as "Ginnie Maes"), which are guaranteed as to the
timely payment of principal and interest by GNMA and backed
by the full faith and credit of the United States. GNMA is
a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA
certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under
its guarantee. Mortgage-backed securities issued by FNMA
include FNMA Guaranteed Mortgage Pass-Through Certificates
(also known as "Fannie Maes"), which are solely the
obligations of FNMA and are not backed by or entitled to the
full faith and credit of the United States, but are
supported by the right of the issuer to borrow from the
Treasury. FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and
interest by FNMA. Mortgage-related securities issued by
FHLMC include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "Pcs"). FHLMC is a
corporate instrumentality of the United States, created
pursuant to an Act of Congress, which is owned entirely by
Federal Home Loan Banks. Freddie Macs are not guaranteed
and do not constitute a debt or obligation of the United
States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is
guaranteed by FHLMC. FHLMC guarantees either ultimate
collection or timely payment of all principal payments on
the underlying mortgage loans. When FHLMC does not
guarantee timely payment of principal, FHLMC may remit the
amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying
mortgage, but in no event later than one year after it
becomes payable.
The Income Funds also may acquire collateralized
mortgage obligations ("CMOs"), which provide the holder with
a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities.
Issuers of CMOs ordinarily elect to be taxed as pass-through
entities known as real estate mortgage investment conduits
("REMICs"). CMOs are issued in multiple classes, each with
a specified fixed or floating interest rate and a final
distribution date. The relative payment rights of the
various CMO classes may be structured in a variety of ways.
There are risks inherent in the purchase of mortgage-backed
securities. For example, these securities are subject to a
risk that default in payment will occur on the underlying
mortgages. In addition to default risk, these securities
are subject to the risk that prepayment on the underlying
mortgages will occur earlier or later or at a lessor or
greater rate than expected. To the extent that Old Kent's
assumptions about prepayments are inaccurate, these
securities may expose the Funds to significantly greater
market risks than expected.
Asset-Backed Securities (The Income Funds and Money Market
Funds only)
The Income Funds and Money Market Funds may purchase asset-
backed securities, which are securities backed by
installment contracts, credit card receivables or other
assets. Asset-backed securities represent interests in
"pools" of assets in which payments of both interest and
principal on the securities are made monthly, thus in effect
"passing through" monthly payments made by the individual
borrowers on the assets that underlie the securities, net of
any fees paid to the issuer or guarantor of the securities.
The average life of asset-backed securities varies with the
maturities of the underlying instruments, and is likely to
be substantially less than the original maturity of the
assets underlying the securities as a result of prepayments.
For this and other reasons, an asset-backed security's
stated maturity may be shortened, and the security's total
return may be difficult to predict precisely.
Non-mortgage asset-backed securities invoke certain
risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of a
security interest in the underlying collateral. Credit card
receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal
consumer credit laws, many of which have given debtors the
right to set off certain amounts owed on the credit cards,
thereby reducing the balance due.
Certain Derivative Securities (The Income Funds,
Municipal Bond Funds and Money Market Funds only)
The above-referenced Funds may invest in structured
notes, bonds or other instruments with interest rates that
are determined by reference to changes in the value of other
interest rates, indices or financial indicators
("References") or the relative change in two or more
References. The Funds also may hold derivative instruments
that have interest rates that re-set inversely to changing
current market rates and/or have embedded interest rate
floors and caps that require the issuer to pay an adjusted
interest rate if market rates fall below or rise above a
specified rate. These instruments represent relatively
recent innovations in the bond markets, and the trading
market for these instruments is less developed than the
markets for traditional types of debt instruments. It is
uncertain how these instruments will perform under different
economic and interest-rate scenarios. Because certain of
these instruments are leveraged, their market values may be
more volatile than other types of bonds and may present
greater potential for capital gain or loss. On the other
hand, the embedded option features of other derivative
instruments could limit the amount of appreciation a Fund
can realize on its investment, could cause a Fund to hold a
security it might otherwise sell or could force the sale of
a security at inopportune times or for prices that do not
reflect current market value. The possibility of default by
the issuer or the issuer's credit provider may be greater
for these structured and derivative instruments than for
other types of instruments. In some cases it may be
difficult to determine the fair value of a structured or
derivative instrument because of a lack of reliable
objective information and an established secondary market
for some instruments may not exist. With respect to
purportedly tax-exempt derivative securities, in many cases
the Internal Revenue Service has not ruled on whether the
interest received on such securities is in fact free from
Federal income taxes. Purchases of such securities by the
Tax-Free Funds are therefore based on the opinion of counsel
to the sponsors of the security. The Money Market Funds
will only purchase derivative securities that qualify as
"Eligible Securities" under Rule 2a-7 of the 1940 Act.
Municipal Obligations (The Income Funds, Municipal Bond
Funds and Money Market Funds only)
The two principal classifications of Municipal
Obligations which may be held by the above-referenced Funds
are "general obligation" securities and "revenue"
securities. General obligation securities are secured by
the issuer's pledge of its full faith, credit and taking
power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a
particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility
being financed. Private activity bonds (e.g., bonds issued
by industrial development authorities) that are issued by or
on behalf of public authorities to finance various
privately-operated facilities are included within the term
"Municipal Obligations" if the interest paid thereon is
exempt from regular Federal income tax and not treated as a
specific tax preference item under the Federal alternative
minimum tax. Private activity bonds are in most cases
revenue securities and are not payable from the unrestricted
revenues of the issuer. The credit quality of private
activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
The Funds may also purchase "moral obligation"
securities, which are normally issued by special purpose
public authorities. If the issuer of moral obligation
securities is unable to meet its debt service obligations
from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal
obligation of the state or municipality which created the
issuer.
Opinions relating to the validity of Municipal Obligations
(including Michigan Municipal Obligations) and to the
exemption of interest thereon from regular Federal income
tax and, in the case of Michigan Municipal Obligations,
Michigan state personal income tax, are rendered by counsel
to the respective issuing authorities at the time of
issuance. Such opinions may contain various assumptions,
qualifications or exceptions that are reasonably acceptable
to Old Kent. Neither the Trust nor Old Kent will review the
proceedings relating to the issuance of Municipal
Obligations or the bases for such opinions.
An issuer's obligations under its Municipal Obligations are
subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors,
such as the Federal Bankruptcy Code, and laws, if any, which
may be enacted by federal or state legislatures extending
the time for payment of principal or interest, or both, or
imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy
taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on and principal of
its Municipal Obligations may be materially adversely
affected by litigation or other conditions.
From time to time proposals have been introduced before
Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on Municipal
Obligations. For example, under the Tax Reform Act of 1986
interest on certain private activity bonds must be included
in an investor's Federal alternative minimum taxable income,
and corporate investors must include all tax-exempt interest
in their Federal alternative minimum taxable income. The
Trust cannot predict what legislation, if any, may be
proposed in the future in Congress as regards the Federal
income tax status of interest on Municipal Obligations or
which proposals, if any, might be enacted. Such proposals,
if enacted, might materially adversely affect the
availability of Municipal Obligations and a Fund's liquidity
and value. In such an event the Board of Trustees would
reevaluate the Funds' investment objectives and policies and
consider changes in their structure or possible dissolution.
Certain of the Municipal Obligations held by a Fund may be
insured as to the timely payment of principal and interest.
The insurance policies will usually be obtained by the
issuer of the Municipal Obligations at the time of its
original issuance. In the event that the issuer defaults on
an interest or principal payment, the insurer will be
notified and will be required to make payment to the
bondholders. There is, however, no guarantee that the
insurer will meet its obligations. In addition, such
insurance will not protect against market fluctuations
caused by changes in interest rates and other factors. The
Tax-Free Funds may, from time to time, invest more than 25%
of their assets in Municipal Obligations covered by
insurance policies.
Information about the financial condition of issuers of
Municipal Obligations may be less available than information
about corporations that have class of securities registered
under the Securities Exchange Act of 1934.
The Income Funds and Municipal Bond Funds also may
purchase Municipal Obligations known as "certificates of
participation" which represent undivided proportional
interests in lease payments by a governmental or nonprofit
entity. The lease payments and other rights under the lease
provide for and secure the payments on the certificates.
Lease obligations may be limited by applicable municipal
charter provisions or the nature of the appropriation for
the lease. In particular, lease obligations may be subject
to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity
cannot be compelled to make such payments. Furthermore, a
lease may or may not provide that the certificate trustee
can accelerate lease obligations upon default. If the
trustee could not accelerate lease obligations upon default,
the trustee would only be able to enforce lease payments as
they became due. In the event of a default or failure of
appropriation, it is unlikely that the trustee would be able
to obtain an acceptable substitute source of payment.
Certificates of participation are generally subject to
redemption by the issuing municipal entity under specified
circumstances. If a specified event occurs, a certificate
is callable at par either at any interest payment date or,
in some cases, at any time. As a result, certificates of
participation are not as liquid or marketable as other types
of Municipal Obligations and are generally valued at par or
less than par in the open market. Municipal leases may be
considered liquid, however, under guidelines
established by the Trust's Board of Trustees. The
guidelines will provide for determination of the liquidity
and proper valuation of a municipal lease obligation based
on factors including the following: (1) the frequency of
trades and quotes for the obligation; (2) the number of
dealers willing to purchase or sell the security and the
number of other potential buyers; (3) the willingness of
dealers to undertake to make a market in the security; and
(4) the nature of the marketplace trades, including the time
needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer. Old Kent, under the
supervision of the Trust's Board of Trustees, will also
consider the continued marketability of a municipal lease
obligation based upon an analysis of the general credit
quality of the municipality issuing the obligation and the
essentiality to the municipality of the property covered by
the lease.
Standby Commitments (The Income Funds, Municipal Bond Funds
and Money Market Funds only)
The above-referenced Funds may enter into standby
commitments with respect to Municipal Obligations held by
them. Under a standby commitment, a dealer agrees to
purchase at a Fund's option a specified Municipal Obligation
at its amortized cost value to the Fund plus accrued
interest, if any. Standby commitments may be exercisable by
a Fund at any time before the maturity of the underlying
Municipal Obligations and may be sold, transferred or
assigned only with the instruments involved.
The Funds expect that standby commitments will generally be
available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the
Funds may pay for a standby commitment either separately in
cash or by paying a higher price for Municipal Obligations
which are acquired subject to the commitment (thus reducing
the yield to maturity otherwise available for the same
securities).
The Funds intend to enter into standby commitments only with
dealers, banks and broker-dealers which, in Old Kent's
opinion, present minimal credit risks. The Funds will
acquire standby commitments solely to facilitate portfolio
liquidity and do not intend to exercise their rights
thereunder for trading purposes. The acquisition of a
standby commitment will not affect the valuation of the
underlying Municipal Obligation which will continue to be
valued in accordance with the amortized cost method. The
actual standby commitment will be valued at zero in
determining net asset value. Accordingly, where a Fund pays
directly or indirectly for a standby commitment, its cost
will be reflected as an unrealized loss for the period
during which the commitment is held by the Fund and will be
reflected in realized gain or loss when the commitment is
exercised or expires.
Warrants (The Equity Funds only)
The Equity Funds may purchase warrants and similar rights,
which are privileges issued by corporations enabling the
owners to subscribe to and purchase a specified number of
shares of the corporation at a specified price during a
specified period of time. The purchase of warrants involves
the risk that a Fund could lose the purchase value of a
warrant if the right to subscribe to additional shares is
not exercised prior to the warrant's expiration. Also, the
purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price
of the related security may exceed the value of the
subscribed security's market price such as when there is no
movement in the level of the underlying security. A Fund
will not invest more than 5% of its total assets, taken at
market value, in warrants, or more than 2% of its total
assets, taken at market value, in warrants not listed on the
New York Stock Exchange ("NYSE"), American Stock Exchange or
a major foreign exchange. Warrants acquired by a Fund in
shares or attached to other securities are not subject to
this restriction.
Foreign Securities (The Growth and Income Fund,
International Growth Fund and Income Funds)
The International Growth Fund intends to invest
primarily in the securities of foreign issuers. In
addition, the Growth and Income Fund may invest a portion of
its assets in such securities. The Income Funds may invest
a portion of their assets in U.S. dollar-denominated
securities of foreign issuers. The Income Funds may also
invest in U.S. dollar-denominated obligations issued or
guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities.
These obligations may be issued by supranational entities,
including internal organizations (such as the European Coal
and Steel Community) designated or supported by governmental
entities to promote economic reconstruction or development
and internal banking institutions and related government
agencies.
Investment in foreign securities involves special
risks. The performance of investments in securities
denominated in a foreign currency will depend on the
strength of the foreign currency against the U.S. dollar and
the interest rate environment in the country issuing the
currency. Absent other events which could otherwise affect
the value of a foreign security (such as a change in the
political climate or an issuer's credit quality),
appreciation in the value of the foreign currency increases
the value of a foreign currency-denominated security in
terms of U.S. dollars. A rise in foreign interest rates or
decline in the value of the foreign currency relative to the
U.S. dollar generally can be expected to depress the value
of a foreign currency-denominated security.
There are other risks and costs involved in investing
in foreign securities which are in addition to the usual
risks inherent in domestic investments. Investment in
foreign securities involves higher costs than investment in
U.S. securities, including higher transaction and custody
costs as well as the imposition of additional taxes by
foreign governments. Foreign investments also involve risks
associated with the level of currency exchange rates, less
complete financial information about the issuers, less
market liquidity, more market volatility and political
instability. Future political and economic developments,
the possible imposition of withholding taxes on dividend
income, the possible seizure or nationalization of foreign
holdings, the possible establishment of exchange controls,
or the adoption of other governmental restrictions might
adversely affect an investment in foreign securities. With
respect to securities issued by foreign governments, such
governments may default on their obligations, may not
respect the integrity of such debt, may attempt to
renegotiate the debt at a lower rate, and may not honor
investments by United States entities or citizens.
Although the Growth and Income Fund and International
Growth Fund may invest in securities denominated in foreign
currencies, their portfolio securities and other assets are
valued in U.S. dollars. Currency exchange rates may
fluctuate significantly over short periods of time causing,
together with other factors, a Fund's net asset value to
fluctuate as well. Currency exchange rates generally are
determined by the forces of supply and demand in the foreign
exchange markets and the relative merits of investments in
different countries, actual or anticipated changes in
interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can
be affected unpredictably by the intervention or the failure
to intervene by U.S. or foreign governments or central
banks, or by currency controls or political developments in
the U.S. or abroad. The Funds are also subject to the
possible imposition of exchange control regulations or
freezes on convertibility of currencies.
Dividends and interest payable on a Fund's foreign
portfolio securities may be subject to foreign withholding
taxes. To the extent such taxes are not offset by credits
or deductions allowed to investors under U.S. Federal income
tax law, they may reduce the net return to the shareholders.
American Depository Receipts (The Equity Funds only)
The Equity Funds can invest in American Depository
Receipts ("ADRs"). ADRs are receipts typically issued by a
United States bank or trust company evidencing ownership of
underlying foreign securities and are denominated in U.S.
dollars. Some institutions issuing ADRs may not be
sponsored by the issuer. A non-sponsored depository may not
provide the same shareholder information that a sponsored
depository is required to provide under its contractual
arrangement with the issuer.
Exchange Rate-Related Securities (The International
Growth Fund only)
The International Growth Fund may invest in securities
for which the principal repayment at maturity, while paid in
U.S. dollars, is determined by reference to the exchange
rate between the U.S. dollar and the currency of one or more
foreign countries ("Exchange Rate-Related Securities"). The
interest payable on these securities is denominated in U.S.
dollars and is not subject to foreign currency risk and, in
most cases, is paid at rates higher than most other
similarly rated securities in recognition of the foreign
currency risk component of Exchange Rate-Related Securities.
Investments in Exchange Rate-Related Securities entail
certain risks. There is the possibility of significant
changes in rates of exchange between the U.S. dollar and any
foreign currency to which an Exchange Rate-Related Security
is linked. In addition, there is no assurance that
sufficient trading interest to create a liquid secondary
market will exist for a particular Exchange Rate-Related
Security due to conditions in the debt and foreign currency
markets. Illiquidity in the forward foreign exchange market
and the high volatility of the foreign exchange market may,
from time to time, combine to make it difficult to sell an
Exchange Rate-Related Security prior to maturity without
incurring a significant price loss.
Foreign Currency Transactions (The International Growth Fund
only)
In order to protect against a possible loss on investments
resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or
another foreign currency or for other reasons, the
International Growth Fund is authorized to enter into
forward currency exchange contracts. A forward currency
exchange contract is an obligation to purchase or sell a
specific currency, or a "basket" of currencies, at a future
date, which may be any fixed number of days from the date of
the contract agreed upon by the parties, at a price set at
the time of contract. Although the contracts may be used to
minimize the risk of loss due to a decline in the value of
the hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of
such currency increase. The Fund may also engage in cross-
hedging by using forward currency exchange contracts in one
currency to hedge against fluctuations in the value of
securities denominated in a difference currency if Old Kent
believes that there is a pattern of correlation between the
two currencies.
The Fund may enter into forward currency exchange
contracts in several circumstances. When entering into a
contract for the purchase or sale of a security, the Fund
may enter into a forward currency exchange contract for
the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or
sold and the date on which payment is made or received, in
the value of the foreign currency relative to the U.S.
dollar or other foreign currency.
When Old Kent anticipates that a particular foreign currency
may decline substantially relative to the U.S. dollar or
other leading currencies, in order to reduce risk, the Fund
may enter into a forward contract to sell, for a fixed
amount, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in
such foreign currency. Similarly, when the securities held
by the Fund create a short position in a foreign currency,
the Fund may enter into a forward contract to buy, for a
fixed amount, an amount of foreign currency approximating
the short position. With respect to any forward foreign
currency contract, it will not generally be possible to
match precisely the amount covered by that contract and the
value of the securities involved due to the changes in the
values of such securities resulting from market movements
between the date the forward contract is entered into and
the date it matures. While forward contracts may offer
protection from losses resulting from declines or
appreciation in the value of a particular foreign currency,
they also limit potential gains which might result from
changes in the value of such currency. The Fund will also
incur costs in connection with forward foreign currency
exchange contracts and conversions of foreign currencies and
U.S. dollars.
A separate account consisting of cash, U.S. Government
securities or other liquid high-grade debt securities, equal
to the amount of the Fund's assets that could be required to
consummate forward contracts will be established with the
Fund's custodian except to the extent the contracts are
otherwise "covered." For the purpose of determining the
adequacy of the securities in the account, the deposited
securities will be valued at market or fair value. If the
market or fair value of such securities declines, additional
cash or securities will be placed in the account daily so
that the value of the account will equal the amount of such
commitments by the Fund. A forward contract to sell a
foreign currency is "covered" if the Fund owns the currency
(or securities denominated in the currency) underlying the
contract, or holds a forward contract (or call option)
permitting the Fund to buy the same currency at a price no
higher than the Fund's price to sell the currency. A
forward contract to buy a foreign currency is "covered" if a
Fund holds a forward contract (or put option) permitting the
Fund to sell the same currency at a price as high as or
higher than the Fund's price to buy the currency.
Currency Swaps (The International Growth Fund only)
The International Growth Fund may also enter into currency
swaps, which involve the exchange of the rights of the Fund
and another party to make or receive payments in specific
currencies. The net amount of the excess, if any, of
the Fund's obligations over its entitlements with respect to
each currency swap will be accrued on a daily basis and an
amount of liquid assets, such as cash, U.S. Government
securities or other liquid high-grade debt securities,
having an aggregate net asset value at least equal to such
accrued excess will be maintained in segregated accounts by
the Trust's custodian. Inasmuch as these transactions
are entered into for good faith hedging purposes, the Funds
and Old Kent believe that such obligations do not constitute
senior securities as defined in the 1940 Act and,
accordingly, will not treat them as being subject to the
Fund's borrowing restrictions.
The Fund will not enter into a currency swap unless the
unsecured commercial paper, senior debt or the claims-paying
ability of the other party thereto is rated either A or A-1
or better by S&P or Moody's. If there is a default by the
other party to such transaction, the Fund will have
contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in
recent years with a large number of banks and investment
banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the
swap market has become relatively liquid in comparison with
markets for other similar instruments which are traded in
the Interbank market.
Options (The Non-Money Market Funds only)
The Non-Money Market Funds may buy put and call options and
write covered call and secured put options. Such options
may relate to particular securities, indices, financial
instruments or foreign currencies, and may or may not be
listed on a domestic or foreign securities exchange and may
or may not be issued by the Options Clearing Corporation.
Options trading is a highly specialized activity
which entails greater than ordinary investment risk.
Options may be more volatile than the underlying
instruments, and therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation
than an investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser
of the option the right to buy, and a writer the obligation
to sell, the underlying security at the stated exercise
price at any time prior to the expiration of the option,
regardless of the market price of the security. The premium
paid to the writer is in consideration for undertaking the
obligation under the option contract. A put option for a
particular security gives the purchaser the right to sell
the security at the stated exercise price at any time prior
to the expiration date of the option, regardless of the
market price of the security. Options on indices provide
the holder with the right to make or receive a cash
settlement upon exercise of the option. With respect to
options on indices, the amount of the settlement will equal
the difference between the closing price of the index at the
time of exercise and the exercise price of the option
expressed in dollars, times a specified multiple.
The Funds will write call options only if they are
"covered." In the case of a call option on a security or
currency, the option is "covered" if a Fund owns the
instrument underlying the call or has an absolute and
immediate right to acquire that instrument without
additional cash consideration (or, if additional cash
consideration is required, cash, U.S. Government securities
or other liquid high-grade debt securities, in such
amount are held in a segregated account by the Fund's
custodian) upon conversion or exchange of other securities
held by it. For a call option on an index, the option is
covered if a Fund maintains with its custodian a diversified
portfolio of securities comprising the index or liquid
assets equal to the contract value. A call option is also
covered if a Fund holds a call on the same instrument or
index as the call written where the exercise price of the
call held is (i) equal to or less than the exercise price of
the call written, or (ii) greater than the exercise price of
the call written provided the difference is maintained by
the Fund in liquid assets in a segregated account with its
custodian. The Funds will write put options only if they
are "secured" by liquid assets maintained in a segregated
account by the Funds' custodian in an amount not less than
the exercise price of the option at all times during the
option period.
A Fund's obligation to sell an instrument subject to a
covered call option written by it, or to purchase an
instrument subject to a secured put option written by it,
may be terminated prior to the expiration date of the option
by the Fund's execution of a closing purchase transaction,
which is effected by purchasing on an exchange an option of
the same series (i.e., same underlying instrument, exercise
price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an
option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to
prevent an underlying instrument from being called, to
permit the sale of the underlying instrument or to permit
the writing of a new option containing different terms on
such underlying instrument. The cost of such a liquidation
purchase plus transaction costs may be greater than the
premium received upon the original option, in which event
the Fund will have incurred a loss in the transaction.
There is no assurance that a liquid secondary market will
exist for any particular option. An option writer, unable
to effect a closing purchase transaction, will not be able
to sell the underlying instrument (in the case of a covered
call option) or liquidate the segregated account (in the
case of a secured put option) until the option expires or
the optioned instrument or currency is delivered upon
exercise with the result that the writer in such
circumstances will be subject to the risk of market decline
or appreciation in the instrument during such period.
When a Fund purchases an option, the premium paid by it is
recorded as an asset of the Fund. When a Fund writes an
option, an amount equal to the net premium (the premium less
the commission) received by a Fund is included in the
liability section of the Fund's statement of assets and
liabilities as a deferred credit. The amount of this asset
or deferred credit will be subsequently marked-to-market to
reflect the current value of the option purchased or
written. The current value of the traded option is the last
sale price or, in the absence of a sale, the current bid
price. If an option purchased by a Fund expires unexercised
the Fund realizes a loss equal to the premium paid. If a
Fund enters into a closing sale transaction on an option
purchased by it, the Fund will realize a gain if the premium
received by the Fund on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is
less. If an option written by a Fund expires on the
stipulated expiration date or if a Fund enters into a
closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds
the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated.
If an option written by a Fund is exercised, the proceeds of
the sale will be increased by the net premium originally
received and the Fund will realize a gain or loss.
There are several risks associated with transactions in
options. For example, there are significant differences
between the securities, currency and options markets that
could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for
particular options, whether traded over-the-counter or on an
exchange may be absent for reasons which include the
following: there may be insufficient trading interest in
certain options; restrictions may be imposed by an exchange
on opening transactions or closing transactions or both;
trading halts, suspensions or other restrictions may be
imposed with respect to particular classes or series of
options or underlying securities or currencies; unusual or
unforeseen circumstances may interrupt normal operations on
an exchange; the facilities of an exchange or the Options
Clearing Corporation may not at all times be adequate to
handle current trading value; or one or more exchanges
could, for economic or other reasons, decide or be compelled
at some future date to discontinue the trading of options
(or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or
series of options) would cease to exist, although
outstanding options that had been issued by the Options
Clearing Corporation as a result of trades on that exchange
would continue to be exercisable in accordance with their
terms.
Futures Contracts and Related Options (The Non-Money Market
Funds only)
The Non-Money Market Funds may purchase and sell futures
contracts and may purchase and sell call and put options on
futures contracts. For a detailed description of futures
contracts and related options, see Appendix C to this SAI.
Illiquid and Restricted Securities
The Funds will not invest more than 15% (10% in the
case of the Money Market Funds) of the value of their net
assets in securities that are illiquid because of
restrictions on transferability or other reasons.
Repurchase agreements with deemed maturities in excess of
seven days, time deposits maturing in more than seven days,
currency swaps, SMBSs issued by private issuers, unlisted
over-the-counter options, GICs and securities that are not
registered under the Securities Act of 1933 but that may be
purchased by institutional buyers under Rule 144A are
subject to this limit (unless such securities are variable
amount master demand notes with maturities of nine months or
less or unless the Board determines that a liquid trading
market exists).
Rule 144A allows for a broader institutional trading
market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe
harbor" from the registration requirements of the Securities
Act of 1933 for resales of certain securities to qualified
institutional buyers. Old Kent believes that the market for
certain restricted securities such as institutional
commercial paper may expand further as a result of this
regulation and the development of automated systems for the
trading, clearance and settlement of unregistered securities
of domestic and foreign issuers, such as the PORTAL System
sponsored by the National Association of Securities Dealers,
Inc.
Old Kent monitors the liquidity of restricted
securities in the Funds' portfolios under the supervision of
the Board of Trustees. In reaching liquidity decisions, Old
Kent will consider such factors as: (a) the frequency of
trades and quotes for the security; (b) the number of
dealers wishing to purchase or sell the security and the
number of other potential purchasers; (c) dealer
undertakings to make a market in the security; and (d) the
nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the
transfer). The use of Rule 144A transactions could have the
effect of increasing the level of illiquidity in the Funds
during any period that qualified institutional buyers become
uninterested in purchasing these restricted securities.
Securities Lending (The Income Funds, Equity Funds and Money
Market Funds only)
To increase return the above-referenced Funds may lend
their portfolio securities to broker-dealers and other
institutional investors pursuant to agreements requiring
that the loans be continuously secured by collateral equal
at all times in value to at least the market value of the
securities loaned. Such loans will not be made by a Fund
if, as a result, the aggregate of all outstanding loans of
the Fund exceeds one-third of the value of its total assets.
There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a
loss of rights in the collateral should the borrower of the
securities fail financially. However, loans are made only
to borrowers deemed by Old Kent to be of good standing and
when, in Old Kent's judgment, the income to be earned from
the loan justifies the attendant risks.
Collateral for loans of portfolio securities made by a Fund
may consist of cash, securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities,
irrevocable bank letters of credit or any other liquid high-
grade short-term instrument approved for use as
collateral by the Securities and Exchange Commission (or any
combination thereof). The borrower of securities will be
required to maintain the market value of the collateral at
not less than the market value of the loaned securities, and
such value will be monitored on a daily basis. When a Fund
lends its securities, it continues to receive dividends and
interest on the securities loaned and may simultaneously
earn interest on the investment of the cash collateral.
Although voting rights, or rights to consent, attendant to
securities on loan pass to the borrower, such loans will be
called so that the securities may be voted by a Fund if a
material event affecting the investment is to occur.
Convertible Securities (The Growth and Income Fund and
the Income Funds only)
Convertible securities entitle the holder to receive
interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible securities mature or
are redeemed, converted or exchanged. Prior to conversion,
convertible securities have characteristics similar to
ordinary debt securities in that they normally provide a
stable stream of income with generally higher yields than
those of common stock of the same or similar issuers.
Convertible securities rank senior to common stock in a
corporation's capital structure and therefore generally
entail less risk than the corporation's common stock,
although the extent to which such risk is reduced depends in
large measure upon the degree to which the convertible
security sells above its value as a fixed income security.
In selecting convertible securities for the above-
referenced Funds, Old Kent will consider, among other
factors, its evaluation of the creditworthiness of the
issuers of the securities; the interest or dividend income
generated by the securities; the potential for capital
appreciation of the securities and the underlying common
stocks; the prices of the securities relative to other
comparable securities and to the underlying common stocks;
whether the securities are entitled to the benefits of
sinking funds or other protective conditions;
diversification of the Funds' portfolios as to issuers; and
whether the securities are rated by a rating agency and, if
so, the ratings assigned.
The value of convertible securities is a function of their
investment value (determined by yield in comparison with the
yields of other securities of comparable maturity and
quality that do not have a conversion privilege) and their
conversion value (their worth, at market value, if converted
into the underlying common stock). The investment value of
convertible securities is influenced by changes in interest
rates, with investment value declining as interest rates
increase and increasing as interest rates decline, and by
the credit standing of the issuer and other factors. The
conversion value of convertible securities is determined by
the market price of the underlying common stock. If the
conversion value is low relative to the investment value,
the price of the convertible securities is governed
principally by their investment value. To the extent the
market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible
securities will be increasingly influenced by their
conversion value. In addition, convertible securities
generally sell at a premium over their conversion value
determined by the extent to which investors place value on
the right to acquire the underlying common stock while
holding fixed income securities.
Capital appreciation for the Funds may result from an
improvement in the credit standing of an issuer whose
securities are held in the Funds or from a general lowering
of interest rates, or a combination of both. Conversely, a
reduction in the credit standing of an issuer whose
securities are held by the Funds or a general increase in
interest rates may be expected to result in capital
depreciation to the Funds.
Investment Companies
The Funds may invest in securities issued by other
investment companies within the limits prescribed by the
1940 Act. As a shareholder of another investment company, a
Fund would bear, along with other shareholders, its pro rata
portion of the expenses of such other investment company,
including advisory fees. These expenses would be in
addition to the advisory and other expenses that a Fund
bears directly in connection with its own operations, and
may represent a duplication of fees to shareholders of a
Fund. Each Fund currently intends to limit its
investments in securities issued by other investment
companies so that immediately after a purchase of such
securities: (a) not more than 5% of the value of the Fund's
total assets will be invested in the securities of any one
investment company; (b) not more than 10% of the value of
its total assets will be invested in the aggregate in
securities of investment companies as a group; and (c) not
more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by all
the Funds as a whole.
Yields and Ratings
The yields on certain obligations, including the money
market instruments in which the Funds invest, are dependent
on a variety of factors, including general economic
conditions, conditions in the particular market for the
obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the
issue. The ratings of a nationally recognized statistical
rating organization ( an "NRSRO") represent its
opinion as to the quality of the obligations it undertakes
to rate. Ratings, however, are general and are not absolute
standards of quality. Consequently, obligations with the
same rating, maturity and interest rate may have different
market prices.
Calculation of Portfolio Turnover Rate (The Non-Money Market
Funds only)
The Funds will not normally engage in the trading of
securities for short-term profits, but a Fund may sell a
portfolio investment soon after it is purchased if Old Kent
believes that such a sale is consistent with the Fund's
investment objective. A high rate of portfolio turnover
involves correspondingly greater brokerage commission
expenses and other transaction costs, which must be borne
directly by a Fund and ultimately by its shareholders. High
portfolio turnover may result in the realization of
substantial net capital gains to a Fund. The portfolio
turnover rate for the Funds is calculated by dividing the
lesser of purchases or sales of portfolio investments for
the reporting period by the monthly average value of the
portfolio investments owned during the reporting period.
The calculation excludes all securities, including options,
whose maturities or expiration dates at the time of
acquisition are one year or less. Portfolio turnover may
vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements
for redemption of shares and by requirements which enable
the Funds to receive favorable tax treatment.
Miscellaneous
The Funds are not restricted by policy with regard to
portfolio turnover and will make changes in their investment
portfolio from time to time as business and economic
conditions as well as market prices may dictate. Securities
may be purchased on margin by the Funds only to obtain such
short-term credits as are necessary for the clearance of
purchases and sales of securities. The Funds will not
engage in selling securities short. The Non-Money Market
Funds may, however, make short sales against the box.
"Selling short against the box" involves selling a security
that a Fund owns for delivery at a specified date in the
future.
After its purchase by a Fund, a rated security may
cease to be rated or its rating may be reduced below the
minimum rating required for purchase by the Fund. Old Kent
will consider such an event in determining whether the Fund
should continue to hold the security. For a description of
applicable securities ratings, see Appendix A.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental
and may not be changed with respect to a Fund without the
vote of a majority of the Fund's outstanding voting shares.
Except with respect to Investment Restriction (7), a
percentage limitation is satisfied at the time of
investment, a later increase in such percentage resulting
from a change in the value of a Fund's assets will not
constitute a violation of the limitation. Unless otherwise
stated, each restriction applies to all Funds:
A Fund may not:
(1) Purchase any security (other than obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities) of any issuer if as a result more than 5%
of its total assets would be invested in securities of the
issuer, except that up to 25% of its total assets may be
invested without regard to this limit;
(2) Purchase securities on margin, except that it may
obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities;
(3) Borrow money , which includes entering into
reverse repurchase agreements, except that a Fund may enter
into reverse repurchase agreements or borrow money from
banks for temporary or emergency purposes in aggregate
amounts up to one-third of the value of the Fund's net
assets; provided that while borrowings from banks exceed 5%
of a Fund's net assets, any such borrowings and reverse
repurchase agreements will be repaid before additional
investments are made;
(4) Pledge more than 15% of its net assets to secure
indebtedness; the purchase or sale of securities on a "when
issued" basis, or collateral arrangements with respect to
the writing of options on securities, are not deemed to be a
pledge of assets;
(5) Issue senior securities; the purchase or sale of
securities on a "when issued" basis, or collateral
arrangements with respect to the writing of options on
securities, are not deemed to be the issuance of a senior
security;
(6) Make loans, except that a Fund may purchase or hold
debt securities consistent with its investment objective,
lend Fund securities valued at not more than 33 1/3%
of its total assets to brokers, dealers and financial
institutions, and enter into repurchase agreements;
(7) Invest more than 15% of its total assets (10% of total
assets for the Money Market Fund and Michigan Municipal
Money Market Fund) in (i) securities with legal or
contractual restrictions on resale; (ii) securities for
which market quotations are not readily available; and (iii)
repurchase agreements maturing in more than seven days;
(8) Invest more than 5% of its total assets in
securities of any company having a record, together with its
predecessors, of less than three years of continuous
operation except that the Small Company Growth Fund may
invest up to 10% of its total assets in such companies;
(9) Make short sales of securities or maintain a short
position unless at all times when a short position is open
it owns an equal amount of such securities or of securities
which, without payment of any further consideration, are
convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short;
(10) With respect to each Fund, other than the Tax-Free
Funds, purchase any security of any issuer if as a
result more than 25% of its total assets would be invested
in a single industry; except that there is no restriction
with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(11) With respect to the Tax-Free Funds, purchase
any security (other than obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) of
any issuer if as a result more than 25% of its total assets
would be invested in a single industry, including industrial
development bonds from the same facility or similar types of
facilities if backed solely by non-governmental users;
governmental issuers of municipal bonds are not regarded as
members of an industry, and the Michigan Municipal Bond Fund
and the Michigan Municipal Money Market Fund may invest more
than 25% of its assets in industrial development bonds.
(12) With respect to the Non-Money Market Funds, purchase
more than 3% of the total outstanding voting securities of
any one investment company, invest more than 5% of a Fund's
total assets in any one investment company , or
invest more than 10% of a Fund's total assets in the
securities of other investment companies in general, except
as part of a merger, consolidation, reorganization, purchase
of assets or similar transaction;
(13) With respect to the Money Market Funds, purchase more
than 3% of the total outstanding voting securities of any
one investment company or invest more than 10% of its total
assets in the securities of other investment companies;
(14) Purchase or sell commodities or commodity contracts or
real estate, except a Fund may purchase and sell securities
secured by real estate and securities of companies which
deal in real estate and may engage in currency or other
financial futures contracts and related options
transactions;
(15) Underwrite securities of other issuers, except that a
Fund may purchase securities from the issuer or others and
dispose of such securities in a manner consistent with its
investment objective; or
(16) With respect to the Equity Funds, purchase any
security (other than U.S. Government securities) of any
issuer if as a result the Fund would hold more than 10% of
the voting securities of the issuer.
With respect to Investment Restriction (7), the Funds
currently intend to limit investments in illiquid securities
to no more than 15% (10% for the Money Market Funds) of each
Fund's respective net assets. With respect to Investment
Restriction (11), examples of types of facilities using
industrial development bonds purchased by the Tax-Free Funds
include water treatment plants, educational and hospital
facilities.
In order to comply with Securities and Exchange Commission
regulations relating to money market funds, the Money Market
Funds will limit investments in the securities of any single
issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and
repurchase agreements collateralized by such securities) to
not more than 5% of the value of their total assets at the
time of purchase, except for 25% of the value of their total
assets which, in the case of the Michigan Municipal Money
Market Fund, may be invested without regard to the 5% limit,
and, in the case of the Money Market Fund, may be invested
in any one issuer for a period of up to three business days.
In addition, neither Money Market Fund will engage in
options or futures as provided in Investment Restrictions
(4), (5) and (14), nor will the Money Market Funds borrow
money, pursuant to Investment Restriction (3), in excess of
10% of their total assets. With respect to Investment
Restrictions (10) and (11), the Money Market Funds are
permitted to invest in excess of 25% of their total assets
in obligations of U.S. banks and domestic branches of
foreign banks that are subject to the same regulation as
U.S. banks.
In order to permit the sale of a Fund's shares in
certain states, the Trust may make commitments more
restrictive than the investment restrictions described
above. For example, in order to permit the sale of the
Funds' share in Ohio, the Trust has agreed that the Funds
may not purchase or retain securities of an issuer if
Trustees, Directors or officers of the Trust, Old Kent or
First Data Investor Services Group, Inc. ("First Data"),
each owning beneficially more than 1/2 of 1% of the secu-
rities of such issuer, own in the aggregate more than 5% of
the securities of such issuer, or if such persons or
management personnel of the Trust, Old Kent or First Data
have a substantial beneficial interest in the securities of
such issuer. In addition, portfolio securities of a Fund
may not be purchased from or sold or loaned to Old Kent,
First Data or any affiliate thereof or any of their
Trustees, Directors, officers or employees except pursuant
to an applicable regulatory exemption or exemptive order.
Also to permit the sale of shares in Ohio, the Trust has
agreed that the Funds which are eligible to purchase Rule
144A securities will treat such securities as "restricted"
securities regardless of any determination by the Board of
Trustees or Old Kent that such securities are liquid.
Should the Trust determine that a commitment to a particular
state is no longer in the best interests of a Fund, it will
revoke the commitment by terminating sales of such Fund's
shares in the state involved.
SECURITIES TRANSACTIONS
Old Kent, under policies established by the Board of
Trustees, selects broker-dealers to execute transactions for
the Funds. It is the policy of the Trust, in effecting
transactions in portfolio securities, to seek best price and
execution of orders. The determination of what may
constitute best price and execution in the execution of a
transaction by a broker involves a number of considerations,
including, without limitation, the overall direct net
economic result to a Fund, involving both price paid or re-
ceived and any commissions and other costs paid, the breadth
of the market where the transaction is executed, the
efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block
is involved, the availability of the broker to stand ready
to execute potentially difficult transactions in the future
and the financial strength and stability of the broker.
Such considerations are judgmental and are weighed by Old
Kent in determining the overall reasonableness of brokerage
commissions paid. In determining best price and execution
and selecting brokers to execute transactions, Old Kent may
consider brokerage and research services, such as analyses
and reports concerning issuers, industries, securities,
economic factors and trends, and other statistical and
factual information provided to a Fund or to any other
account over which Old Kent or its affiliates exercise
investment discretion. Old Kent is authorized to pay a
broker-dealer who provides such brokerage and research
services a commission for executing a Fund's transactions
which is in excess of the amount of commission another
broker-dealer would have charged for effecting that trans-
action if, but only if, Old Kent determines in good faith
that such commission was reasonable in relation to the value
of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction
or in terms of all of the accounts over which Old Kent
exercises investment discretion. Any such research and
other statistical and factual information provided by
brokers to a Fund or Old Kent is considered to be in
addition to and not in lieu of services required to be
performed by Old Kent under its Investment Advisory Agree-
ment with the Trust. The cost, value and specific
application of such information are indeterminable and hence
are not practicably allocable among the Trust and other
clients of Old Kent who may indirectly benefit from the
availability of such information. Similarly, the Trust may
indirectly benefit from information made available as a
result of transactions effected for such other clients.
Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of a transaction may
vary among different brokers. Transactions on foreign stock
exchanges involve payment for brokerage commissions which
are generally fixed. Over-the-counter issues, including
corporate debt and government securities, are normally
traded on a "net" basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the
issuer of an instrument. With respect to over-the-counter
transactions, Old Kent will normally deal directly with
dealers who make a market in the instruments involved except
in those circumstances where more favorable prices and
execution are available elsewhere. The cost of securities
purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities
are purchased from and sold to dealers include a dealer's
mark-up or mark-down.
Each Fund may participate, if and when practicable, in group
bidding for the purchase directly from an issuer of certain
securities for each Fund's portfolio in order to take
advantage of the lower purchase price available to members
of such a group.
Neither Old Kent, First Data nor the Funds intend to place
securities transactions with any particular broker-dealer or
group thereof. However, the Trust's Board of Trustees has
determined that each Fund may follow a policy of considering
sales of the Funds' shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to
the requirements of best price and execution described
above. The policy of each Fund with respect to brokerage is
and will be reviewed by the Trust's Board of Trustees from
time to time. Because of the possibility of further
regulatory developments affecting the securities exchanges
and brokerage practices generally, the foregoing practices
may be changed, modified or eliminated.
Old Kent expects that purchases and sales of securities for
the Equity Funds usually will be effected through brokerage
transactions for which commissions are payable. Purchases
from underwriters will include the underwriting commission
or concession, and purchases from dealers serving as market
makers will include a dealer's mark up or reflect a dealer's
mark down.
Old Kent expects that purchases and sales of municipal bonds
and other debt instruments for the Income Funds, Municipal
Bond Funds and Money Market Funds usually will be principal
transactions. Municipal bonds and other debt instruments
are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. There
usually will be no brokerage commissions paid by the Funds
for such purchases. Purchases from underwriters will
include the underwriting commission or concession and
purchases from dealers serving as market makers will include
the spread between the bid and asked prices.
For the fiscal years ended December 31, 1993, 1994 and 1995,
the following Funds paid commission in the amounts
indicated: $350,152, $328,237 and $557,711,
respectively, for the Growth and Income Fund; $514,051,
$674,963 and $1,001,650, respectively, for the Small Company
Growth Fund; $233,083, $125,856 and $192,985, respectively,
for the International Growth Fund; $73,543, $296,953 and
$139,571, respectively, for the Index Equity Fund; and $0,
$9,075 and $0, respectively, for the Intermediate Tax-
Free Fund. No other Fund paid brokerage commissions during
the last three fiscal years. No Fund paid any brokerage
commissions to an affiliated broker of the Trust.
Investment decisions for each Fund are made independently by
Old Kent from those of the other Funds and investment
accounts advised by Old Kent. It may frequently develop
that the same investment decision is made for more than one
Fund or account. Simultaneous transactions are inevitable
when the same security is suitable for the investment
objective of more than one Fund or account. When two or
more Funds or accounts are engaged in the purchase or sale
of the same security, the transaction is allocated as to
amount in accordance with a formula which Old Kent believes
is equitable to each Fund or account. It is recognized that
in some cases this system could have a detrimental effect on
the price or volume of the security as far as a particular
Fund is concerned. To the extent permitted by law, Old Kent
may aggregate the securities to be sold or purchased for a
Fund with those to be sold or purchased for another Fund or
account.
In no instances will securities held by a Fund be purchased
from or sold to Old Kent, 440 Financial Distributors,
Inc. ("440 Distributors" or the "Distributor") or any
of their affiliated persons, as defined in the 1940 Act,
except as may be permitted by any applicable regulatory
exemption or exemptive order.
VALUATION OF SECURITIES
Money Market Funds
As stated in their prospectus, the Money Market Funds seek
to maintain a net asset value of $1.00 per share and, in
this connection, value their instruments on the basis of
amortized cost pursuant to Rule 2a-7 under the 1940 Act.
This method values a security at its cost on the date of
purchase and thereafter assumes a constant amortization to
maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the
price a Fund would receive if the Fund sold the instrument.
During such periods the yield to investors in the Fund may
differ somewhat from that obtained in a similar entity which
uses available indications as to market value to value its
portfolio instruments. For example, if the use of amortized
cost resulted in a lower (higher) aggregate Fund value on a
particular day, a prospective investor in the Fund would be
able to obtain a somewhat higher (lower) yield and ownership
interest than would result from investment in such similar
entity and existing investors would receive less (more)
investment income and ownership interest. However, the
Trust expects that the procedures and limitations referred
to in the following paragraphs of this section will tend to
minimize the differences referred to above.
Under Rule 2a-7, the Trust's Board of Trustees, in
supervising the Money Market Funds' operations and
delegating special responsibilities involving portfolio
management to Old Kent, has established procedures that are
intended, taking into account current market conditions and
the Funds' investment objectives, to stabilize the net asset
value of each Money Market Fund, as computed for the
purposes of purchases and redemptions, at $1.00 per share.
The Trustees' procedures include periodic monitoring of the
difference between the amortized cost value per share and
the net asset value per share based upon available
indications of market value (the "Market Value Difference").
Available indications of market value consist of actual
market quotations or appropriate substitutes which reflect
current market conditions and include (a) quotations or
estimates of market value for individual portfolio
instruments and/or (b) values for individual portfolio
instruments derived from market quotations relating to
varying maturities of a class of money market instruments.
In the event the Market Value Difference exceeds 1/2 of 1%,
the Trustees' procedures provide that the Trustees will take
such steps as they consider appropriate (e.g., selling
portfolio instruments to shorten average portfolio maturity
or to realize capital gains or losses, reducing or
suspending shareholder income accruals, redeeming shares in
kind, or utilizing a net asset value per share based upon
available indications of market value which under such
circumstances would vary from $1.00) to eliminate or reduce
to the extent reasonably practicable any material dilution
or other unfair results to investors or existing
shareholders which might arise from Market Value
Differences. In particular, if losses were sustained by a
Fund, the number of outstanding shares might be reduced in
order to maintain a net asset value per share of $1.00.
Such reduction would be effected by having each shareholder
proportionately contribute to the Fund's capital the
necessary shares to restore such net asset value per share.
Each shareholder will be deemed to have agreed to such
contribution in these circumstances by investing in the
Fund.
The Funds limit their investments to instruments which Old
Kent has determined present minimal credit risk (pursuant to
guidelines established by the Board of Trustees) and which
are "Eligible Securities" as defined by Rule 2a-7. The
Funds are also required to maintain a dollar weighted
average portfolio maturity (not more than 90 days)
appropriate to its objective of maintaining a stable net
asset value of $1.00 per share, and this precludes the pur-
chase of any security with a remaining maturity of more than
397 days. Should the disposition of a security result in a
dollar weighted average portfolio maturity of more than 90
days, a Fund will invest its available cash in such a manner
as to reduce such maturity to 90 days or less as soon as
practicable. For the purpose of determining the dollar
weighted average, any instrument with a stated maturity of
six months or less which has a coupon (or yield) which is
subject to renegotiation at designated periods of time
(e.g., every 30 days), or any instrument having a coupon (or
yield) which fluctuates with the change in a predetermined
standard (e.g., the so-called "Prime Rate"), shall be deemed
to have a maturity equivalent to the time remaining to the
next date of renegotiation or the next date on which the
predetermined standard may change.
It is the normal practice of the Funds to hold securities to
maturity and realize par therefor, unless a sale or other
disposition is mandated by redemption requirements or other
extraordinary circumstances. Under the amortized cost
method of valuation traditionally employed by institutions
for valuation of money market instruments, neither the
amount of daily income nor the net asset value is affected
by any unrealized appreciation or depreciation of the Funds.
In periods of declining interest rates, the indicated daily
yield on shares of the Funds, computed by dividing its
annualized daily income by the net asset value computed as
above, may tend to be lower than similar computations made
by utilizing a method of valuation based upon market prices
and estimates. In periods of rising interest rates, the
daily yield of shares at the value computed as described
above may tend to be higher than a similar computation made
by utilizing a method of calculation based upon market
prices and estimates.
Non-Money Market Funds
Current values for the Non-Money Market Funds'
portfolio securities are determined as follows:
(1) Common stock, preferred stock and other equity
securities listed on the NYSE are valued on the basis of the
last sale price on the exchange. In the absence of any
sales, such securities are valued at the last bid price;
(2) Common stock, preferred stock and other equity
securities listed on other U.S. or foreign exchanges will be
valued as described in (1) above using quotations on the
exchange on which the security is primarily traded;
(3) Common stock, preferred stock and other equity
securities which are unlisted and quoted on the National
Market System (NMS) are valued at the last sale price,
provided a sale has occurred. In the absence of any sales,
such securities are valued at the high or "inside" bid,
which is the bid supplied by the National Association of
Securities Dealers on its NASDAQ system for securities
traded in the over-the-counter market;
(4) Common stock, preferred stock and other equity
securities which are quoted on the NASDAQ system but not
listed on NMS are valued at the high or "inside" bid;
(5) Common stock, preferred stock and other equity
securities which are not listed and not quoted on the NASDAQ
System and for which over-the-counter market quotations are
readily available are valued at the mean between the current
bid and asked prices for such securities;
(6) Non-U.S. common stock, preferred stock and other
equity securities which are not listed or are listed and
subject to restrictions on sale are valued at prices
supplied by a dealer selected by Old Kent or First Data;
(7) Bonds, debentures and other debt securities, whether
or not listed on any national securities exchange, are
valued at a price supplied by a pricing service or a bond
dealer selected by Old Kent;
(8) Short-term debt securities which when purchased have
maturities of sixty days or less are valued at amortized
cost (original purchase cost as adjusted for amortization of
premium or accretion of discount) which, when combined with
accrued interest, approximates market value and which
reflects fair value as determined by the Board of Trustees;
(9) Short-term money market instruments having maturities
of more than sixty days when purchased which are held on the
sixtieth day prior to maturity are thereafter
valued at amortized cost (market value on the sixtieth day
adjusted for amortization of premium or accretion of
discount) which when with accrued interest approximates
market and which reflects fair value as determined by the
Board of Trustees; and
(10) The following are valued at prices deemed in good
faith to be fair under procedures established by the Board
of Trustees: (a) securities, including restricted
securities, for which market quotations are not readily
available, and (b) any other security for which the
application of the above methods is deemed by First Data
not to be representative of the market value of such
security.
In valuing each Fund's assets, First Data will
"mark-to-market" the current value of a Fund's open futures
contracts and options. For valuation purposes, quotations
of securities denominated in foreign currencies are
converted to into U.S. dollars at the prevailing currency
exchange rate on the day of the conversion.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed
below. The address of all the Trustees and officers is 4400
Computer Drive, Westboro, Massachusetts 01581.
Anne T. Coughlan, Trustee, 39; she is Associate
Professor of Marketing; Kellogg Graduate School of
Management, Northwestern University.
Joseph F. Damore, Trustee, 43; he is President and
Chief Executive Officer of Sparrow Hospital and Health
System; formerly, Chairman of the Board of Trustees of
Americare Home Health Resources; Director of Mercy
Alternative; and former Director and Executive Vice
President, Sisters of Mercy Health Corporation.
James F. Rainey, Trustee, 56; he is Associate Dean
for Academic Affairs at Michigan State University.
*Ronald F. VanSteeland, Trustee, 55; he is Vice
President for Finance and Administration and Treasurer of
Grand Valley State University, Allendale, Michigan; and
Treasurer of Grand Valley State University Foundation.
*William E. Small, Trustee and President, 54;
he is an Executive Vice President of First Data and is a
former individual consultant.
Christopher S. Borden, Vice President, 34; he
is a Client Service Officer of First Data and was formerly
employed by Fidelity Investments.
Kevin Connaughton, Treasurer, 31; he is a Vice
President of Financial Administration of First Data.
W. Bruce McConnel, III, Secretary, 53; he is a partner in
the law firm of Drinker Biddle & Reath.
Patricia L. Bickimer, Assistant Secretary, 42; she
is a Vice President and Associate General Counsel of First
Data and is a former Vice President and Associate General
Counsel of The Boston Company Advisors, Inc. ("TBCA").
Julie A. Tedesco, Assistant Secretary, 38; she is a
Counsel at First Data and is a former Assistant Vice
President and Counsel of TBCA and former associate at
Hutchins, Wheeler & Dittmar.
____________________
*This Trustee is an interested person of the Trust as
defined under the 1940 Act.
During the fiscal year ended December 31, 1995, no officer,
director or employee of the Trust's service contractors, or
any of their parents or subsidiaries, received any direct
remuneration from the Trust for serving as a Trustee or
officer of the Trust, although First Data, of which
Messrs. Small, Borden and Connaughton and Mses. Bickimer and
Tedesco are also employees, receives fees from the Trust for
administrative services. Drinker Biddle & Reath, of which
Mr. McConnel is a partner, receives legal fees as counsel to
the Trust. Each Trustee (other than Mr. Small) earns an
annual fee of $8,000 and an additional fee of $750 for each
meeting attended, plus reimbursement of expenses incurred as
a Trustee.
Listed below is the compensation paid to each Trustee by the
Trust for the fiscal year ended December 31, 1995.
The Fund does not currently provide any pension or
retirement benefits for its Trustees or officers.
Total Compensation
from Registrant and
Name of Person Aggregate Compensation Fund Complex
Paid
and Position from Registrant to Trustees
Anne T. Coughlan, Trustee $8,200 $8,200
Joseph F. Damore, Trustee $8,200 $8,200
James F. Rainey, Trustee $8,200 $8,200
William E. Small, Trustee $0 $0
Ronald F. VanSteeland, Trustee $8,200 $8,200
As of February 6, 1996, the Trustees and
officers of the Trust as a group beneficially owned less
than 1% of the Trust's outstanding shares.
EXPENSES
Operating expenses borne by the Funds include taxes,
interest, fees and expenses of Trustees and officers,
Securities and Exchange Commission fees, state securities
qualification fees, advisory fees, administration fees,
charges of the Funds' custodians and shareholder services
agent, certain insurance premiums, outside auditing and
legal expenses, costs of preparing and printing prospectuses
for regulatory purposes and for distribution to existing
shareholders, costs of shareholder reports and meetings
and any extraordinary expenses. The Funds also pay for
brokerage fees, commissions and other transaction charges
(if any) in connection with the purchase and sale of
portfolio securities.
INVESTMENT ADVISER
Old Kent Bank
Old Kent Bank is the investment adviser to the Funds.
Old Kent's services as investment adviser are provided
through its Trust Management Services Department. As of
December 31, 1995, Old Kent's Trust Management Services
Department managed assets of approximately $6 billion.
The Trust is the first registered investment company for
which Old Kent has provided investment advisory services.
Old Kent is located at One Vandenberg Center, Grand Rapids,
MI 49503.
Old Kent is a Michigan banking corporation which, with its
affiliates, provided commercial and retail banking and trust
services through 220 banking offices in Michigan and
Illinois as of December 31, 1995. Old Kent offers a
broad range of financial services, including commercial and
consumer loans, corporate and personal trust services, de-
mand and time deposit accounts, letters of credit and inter-
national financial services.
Old Kent is a subsidiary of Old Kent Financial Corporation,
a bank holding company headquartered in Grand Rapids,
Michigan, with approximately $12 billion in total
consolidated assets as of December 31, 1995. Through
offices in Michigan and Illinois, Old Kent Financial
Corporation and its subsidiaries provide a broad range of
financial services to individuals and businesses.
Old Kent's Trust Management Services Department employs an
experienced staff of professional investment analysts, port-
folio managers and traders and uses several proprietary com-
puter-based systems in conjunction with fundamental analysis
to identify investment opportunities.
Investment Advisory Agreement
The overall supervision and management of the Funds rests
with the Trust's Board of Trustees. Pursuant to a
written Investment Advisory Agreement with the Trust, dated
October 12, 1990, as amended, Old Kent furnishes to the
Trust investment advice with respect to the Funds, makes all
investment decisions for the Funds, and places purchase and
sale orders for the Funds' securities. Old Kent is
responsible for all expenses incurred by it in connection
with its advisory activities, other than the cost of
securities and other investments purchased or sold for the
Funds, and any brokerage commissions or other transaction
charges that may be associated with such purchases and
sales.
For its services to each Fund, Old Kent is entitled to an
annual fee based on the average daily net asset value of
each Fund, payable monthly, at the following rates: the
Growth and Income Fund, 0.70%; the Small Company Growth
Fund, 0.70%; the International Growth Fund, 0.75%; the Index
Equity Fund, 0.30%; the Short Term Bond Fund, 0.50%; the
Intermediate Bond Fund, 0.55%; the Income Fund, 0.60%; the
Limited Term Tax-Free Fund, 0.45%; the Intermediate Tax-Free
Fund, 0.50%; the Tax-Free Income Fund, 0.55%; the Michigan
Municipal Bond Fund, 0.45%; the Money Market Fund, 0.40%;
and the Michigan Municipal Money Market Fund, 0.40%. Old
Kent may rebate its advisory fees to certain of its
institutional customers.
For the fiscal years ended December 31, 1993, 1994 and
1995, Old Kent earned the following advisory fees for each
Fund: $865,487, $1,855,551 and $2,427,434, respectively, for
the Growth and Income Fund; $1,035,875, $2,025,868 and
$2,210,891, respectively, for the Small Company Growth Fund;
$925,252, $1,427,820 and $1,483,705, respectively, for the
International Growth Fund; $584,959, $906,077 and $634,175,
respectively, for the Index Equity Fund; $1,105,332,
$1,013,799 and $1,454,445, respectively, for the Short Term
Bond Fund; $1,746,712, $3,870,183 and $4,765,284,
respectively, for the Intermediate Bond Fund; $414,650,
$1,436,354 and $1,582,089, respectively, for the
Intermediate Tax-Free Fund; $1,159,733, $1,370,798 and
$2,056,213, respectively, for the Money Market Fund; and
$386,605, $551,177 and $590,771, respectively, for the
Michigan Municipal Money Market Fund. For the fiscal period
ended December 31, 1993 and the fiscal years ended December
31, 1994 and December 31, 1995, Old Kent earned $102,162,
$501,175 and $738,023, respectively, in advisory fees for
the Michigan Municipal Bond Fund. For the fiscal period
ended December 31, 1994 and the fiscal year ended
December 31, 1995, Old Kent earned $72,787 and $219,989,
respectively, in advisory fees for the Limited Term Tax-Free
Fund. For the fiscal period ended December 31, 1995, Old
Kent earned $442,275 and $632,086 in advisory fees for the
Tax-Free Income Fund and Income Fund, respectively.
For the fiscal years ended December 31, 1993, 1994 and
1995, Old Kent waived a portion of its advisory fees for the
Money Market Fund and Michigan Municipal Money Market Fund.
Net of such waivers, Old Kent received $908,749, $1,166,047
and $1,903,848, respectively, for the Money Market Fund; and
$291,466, $410,048 and $535,921, respectively, for the
Michigan Municipal Money Market Fund. For the fiscal period
ended December 31, 1993 and the fiscal years ended December
31, 1994 and December 31, 1995, Old Kent waived a portion of
its advisory fees for the Michigan Municipal Bond Fund. Net
of such waivers, Old Kent received $0, $226,335 and
$717,968, respectively. For the fiscal period ended
December 31, 1994 and the fiscal year ended December 31,
1995, Old Kent waived a portion of its advisory fees for the
Limited Term Tax-Free Fund. Net of such waivers, Old Kent
received $44,959 and $199,200, respectively. For the fiscal
period ended December 31, 1995, Old Kent waived a portion of
its advisory fees for the Tax-Free Income Fund. Net of such
waivers, Old Kent received $293,807.
Under the Investment Advisory Agreement, Old Kent's
liability in connection with rendering services thereunder
is limited to situations involving a breach of its fiduciary
duty, its willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations and duties.
The Trustees of the Trust, including a majority of those
Trustees who are not parties to the Investment Advisory
Agreement or interested persons of any such party, most
recently approved the agreement, as amended, on May 5,
1995. The Agreement continues in effect from year to
year with respect to each Fund only if such continuance is
specifically approved at least annually by the Trustees of
the Trust, including the "non-interested" Trustees, or by
vote of a majority of the outstanding voting shares of such
Fund. The Investment Advisory Agreement will terminate
automatically upon its assignment and may be terminated with
respect to any Fund or Funds without penalty on 60-days'
written notice at the option of either party or by a vote of
the shareholders of such Fund or Funds.
The Glass-Steagall Act and Other Applicable Laws
The Glass-Steagall Act prohibits all entities which receive
deposits (such as Old Kent) from engaging in the business of
issuing, underwriting, selling or distributing securities.
In 1971, the United States Supreme Court held in
Investment Company Institute v. Camp that the Glass-
Steagall Act prohibits a national bank from operating a fund
for the collective investment of managed agency accounts.
Subsequently, the Board of Governors of the Federal Reserve
System (the "Board") issued a regulation and interpretation
authorizing bank holding companies and their non-bank
affiliates to serve as investment advisers to both open-end
and closed-end investment companies. The Board's
interpretation, however, provides that the Glass-Steagall
Act forbids a bank holding company or any non-bank affiliate
of a bank holding company from sponsoring, organizing or
controlling a registered, open-end investment company
continuously engaged in the issuance of its shares. In
1981, the United States Supreme Court held in
Board of
Governors of the Federal Reserve System v. Investment
Company Institute that the Board did not exceed its
authority under the Bank Holding Company Act when it adopted
its regulation and interpretation authorizing bank holding
companies and their non-bank affiliates to act as investment
advisers to registered closed-end investment companies. It
is believed that it would be consistent with these decisions
to interpret the Glass-Steagall Act as not prohibiting banks
from serving as investment advisers to open-end investment
companies. However, neither case addressed this specific
issue.
Old Kent has been advised by the Financial Institutions
Bureau of the Department of Commerce of the State of
Michigan, which is the bureau that regulates Michigan state
chartered banks, that it is the position of that Bureau that
a bank (such as Old Kent) which has been authorized to
exercise full trust powers is authorized under Michigan
banking laws to provide investment advice to an entity such
as a mutual fund.
Old Kent has been advised by its legal counsel that in the
opinion of such counsel, Old Kent may lawfully serve as
investment adviser to the Trust and perform the services for
the Trust required by the Investment Advisory Agreement de-
scribed in the prospectus and this SAI. Such counsel has,
however, cautioned that Old Kent's authority to serve in
this capacity has not been definitively established by any
state or federal law or regulation or any judicial decision
or regulatory interpretation that constitutes binding
authority with respect to the activities of Old Kent. In
addition, such counsel has cautioned that state and federal
laws and regulations relating to the permissible activities
of banks and bank holding companies may change and may be
subject to further judicial or administrative
interpretation, the result of which may be to cause Old Kent
to conclude that it would be unlawful or inadvisable to
continue its relationship with the Trust. If Old Kent
discontinues its services as investment adviser to the
Trust, it is expected that the Board of Trustees of the
Trust would select a new investment adviser and recommend
that the Trust's shareholders approve the new investment
adviser so recommended.
It is anticipated that Old Kent will effect purchases of
Trust shares from time to time upon the order of and as
agent for certain customers. State and federal law limit
the ability of a depository institution, such as Old Kent,
to underwrite, sell or distribute securities. However,
these laws permit, or are generally interpreted to permit,
the execution of purchase and sale transactions without
recourse upon the order and for the account of customers.
It is possible that future state or federal legislative or
administrative action or judicial or administrative
decisions or interpretations could prohibit or restrict the
proposed activities of Old Kent to such a degree that Old
Kent or the Trust might conclude that it would be necessary
or advisable to discontinue or materially alter the services
provided by Old Kent. Any such discontinuation or
alteration could cause the Trust's Board of Trustees to
change the Trust's method of operations or the market for
the Trust's shares or to merge or liquidate the Funds.
It is not anticipated, however, that any such change
would materially affect the net asset values per share of
the Funds or result in financial loss to any shareholder.
Directors and Principal Executive Officers
The Directors of Old Kent are Richard L. Antonini, William
P. Crawford, Robert L. Ellis, William Gonzales, Erina Hanka,
Robert L. Hooker, Fred P. Keller, Hendrik G. Meijer, Patrick
M. Quinn, Margaret Sellers Walker, Richard E. Tierney, David
J. Wagner (also Chairman of the Board and Chief Executive
Officer) and Robert L. Sadler (also President).
The principal executive officers of Old Kent are: David
J. Wagner, Chairman; Robert L. Sadler, President and Chief
Executive Officer; David Dams, Edward P. Farley and David
Kerstein, Executive Vice Presidents; Martin J. Allen, Jr.,
Senior Vice President and Secretary; and Philip M. Allen,
Richard L. Arasmith, Thomas M. Bobrowski, Paul Colombe,
James Habertein, Larry Hull, John Erikson, Joseph T.
Keating, Janet Nisbett, R. Joy Palmer, Dennis W. Piskor,
Thomas E. Powell and Daniel Terpsma, Senior Vice Presidents.
ADMINISTRATOR
First Data, 4400 Computer Drive, Westboro, Massachusetts
01581, a wholly-owned subsidiary of First Data Corp., is the
Administrator of the Trust under an Administration and Fund
Accounting Agreement (the "Administration Agreement") dated
March 31, 1995. First Data provides management and
administrative services and, in general, supervises the
operation of each Fund (other than investment advisory
operations).
By the terms of the Administration Agreement, First Data
is required to provide to the Funds management and
administrative services, as well as all necessary office
space, equipment and clerical personnel for managing and
administering the affairs of the Funds. First Data is
required to supervise the provision of custodial, auditing,
valuation, bookkeeping, legal, stock transfer and dividend
disbursing services and provide other management and
administrative services. The Administration Agreement
continues in effect from year to year with respect to each
Fund only if continuance is specifically approved at least
annually by the Board of Trustees and by the vote of a
majority of the "non-interested" Trustees, as that term is
defined in the 1940 Act.
As compensation for the services and facilities provided
to the Funds pursuant to the Administration Agreement, First
Data is entitled to receive an annual fee, payable monthly
as one twelfth of the annual fee, based on the Trust's
aggregate average daily net assets as follows: up to $5.0
billion - 20.0 basis points; between $5.0-$7.5 billion, 18.0
basis points; and over $7.5 billion-15.0 basis points. All
expenses (other than those specifically referred to as being
borne by First Data in the Administration Agreement) in-
curred by First Data in connection with the operation of the
Trust are borne by the Funds. To the extent that First Data
incurs any such expenses or provides certain additional
services to the Trust, the Funds promptly will reimburse
First Data therefore.
For the fiscal periods ended December 31, 1993, 1994 and
1995, the Trust paid the following administrative fees to
First Data and the Trust's former administrators: $247,281,
$530,158 and $693,553, respectively, for the Growth and
Income Fund; $295,948, $578,819 and $631,683, respectively,
for the Small Company Growth Fund; $246,587, $380,752 and
$395,655, respectively, for the International Growth Fund;
$389,973, $604,052 and $422,784, respectively, for the Index
Equity Fund; $442,133, $395,519 and $581,778, respectively,
for the Short Term Bond Fund; $635,228, $1,407,339 and
$1,732,831, respectively, for the Intermediate Bond Fund;
$165,860, $574,541 and $632,836, respectively, for the
Intermediate Tax-Free Fund; $579,865, $685,398 and $772,894,
respectively, for the Money Market Fund; and $193,330,
$275,108 and $220,170, respectively, for the Michigan
Municipal Money Market Fund. For the fiscal period ended
December 31, 1993 and the fiscal years ended December 31,
1994 and December 31, 1995, the Michigan Municipal Bond Fund
paid $51,081, $222,744 and $328,010, respectively, in
administrative fees. For the fiscal period ended December
31, 1994 and the fiscal year ended December 31, 1995, the
Limited Term Tax-Free Fund paid $32,350 and $97,773,
respectively, in administrative fees. For the fiscal period
ended December 31, 1995, the Tax-Free Income Fund and Income
Fund paid $160,827 and $210,695, respectively, in
administrative fees.
DISTRIBUTOR
The Trust has entered into a Distribution Agreement dated
March 31, 1995 with 440 Distributors, 4400 Computer
Drive, Westboro, Massachusetts 01581. Unless otherwise
terminated, the Distribution Agreement will continue in
effect until April 1, 1996 and will continue from year to
year thereafter, if approved at least annually at a meeting
called for that purpose by a majority of the Trustees and a
majority of the "non-interested" Trustees, as that term is
defined in the 1940 Act. 440 Distributors was organized in
January, 1993 and is currently a wholly-owned subsidiary of
First Data Corp. es of the Funds are sold on a
continuous basis by 440 Distributors as agent for the Trust,
and 440 Distributors has agreed to use the efforts it deems
appropriate to solicit orders for the sale of shares of the
Funds.
For the fiscal years ended 1993, 1994 and 1995, the
Trust paid 440 Distributors and the Trust's former
distributor total underwriting commissions of $601,000,
$662,081 and $457,249, respectively. This entire amount was
re-allocated to broker-dealers which had selling agreements
with the distributor.
TRANSFER AGENT
First Data serves the Trust's transfer agent and
dividend disbursing agent pursuant to a Transfer Agency
Agreement. Under the Transfer Agency Agreement, First Data
has agreed to: (i) issue and redeem shares of each
Fund; (ii) transmit all communications by each Fund to its
shareholders of record, including reports to shareholders,
dividend and distribution notices and proxy materials for
meetings of shareholders; (iii) respond to correspondence by
security brokers and others relating to its duties; (iv)
maintain shareholder accounts; and (v) make periodic reports
to the Board of Trustees concerning the Trust's operations.
CUSTODIAN, AUDITORS AND COUNSEL
Bankers Trust Company, New York, NY, is custodian of all
securities and cash of the Trust.
KPMG Peat Marwick LLP, 99 High Street, Boston, MA 02110,
Certified Public Accountants, are the independent
auditors for the Trust.
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia,
PA 19107, serves as counsel to the Trust.
DISTRIBUTION PLANS
This section relates only to the Investment Shares of the
Funds. The Institutional Shares have not adopted
Distribution Plans.
As described in the prospectuses, each of the Funds has
adopted with respect to its Investment Shares a Distribution
Plan (individually, a "Plan," and collectively, the "Plans")
pursuant to Rule 12b-1 under the 1940 Act which regulates
circumstances under which an investment company may bear
expenses associated with the distribution of its shares.
Each Plan provides that the Investment Shares of a Fund may
incur certain expenses which may not exceed a maximum amount
equal to 0.25% (on an annualized basis) of the average daily
net asset value of the Investment Shares.
All persons authorized to direct the disposition of monies
paid or payable by a Fund pursuant to a Plan or any related
agreement must provide to the Trust's Board of Trustees at
least quarterly a written report of the amounts so expended
and the purposes for which such expenditures were made.
Representatives, brokers, dealers or others receiving
payments from 440 Distributors pursuant to a Plan must
determine that such payments and the services provided in
connection with such payments are appropriate for such
persons and are not in violation of regulatory limitations
applicable to such persons.
The services under the Plans may include assistance in
advertising and marketing of Investment Shares, aggregating
and processing purchase, exchange and redemption requests
for Investment Shares, maintaining account records, issuing
confirmations of transactions and providing sub-accounting
with respect to Investment Shares.
As required by Rule 12b-1, the Plans and the related
Distribution and Servicing Agreements have been approved,
and are subject to annual approval, by a majority of the
Trust's Board of Trustees, and by a majority of the Trustees
who are not "interested" persons of the Trust (as defined by
the 1940 Act) and who have no direct or indirect interest in
the operation of the Plans and the agreements related
thereto ("Independent Trustees"), by a vote cast in person
at a meeting called for the purpose of voting on the Plan
and related agreements. The Plans were most recently
approved by the Board of Trustees as a whole and by the
Independent Trustees on November 3, 1995. In
compliance with Rule 12b-1, the Trustees requested and
evaluated information they thought necessary to an informed
determination of whether the Plans and related agreements
should be implemented, and concluded, in the exercise of
reasonable business judgment and in light of their fiduciary
duties, that there was a reasonable likelihood that the Plan
and the related agreements would benefit the Funds and their
shareholders. A Plan may not be amended in order to
increase materially the amount of distribution expenses
permitted under the Plan without such amendment being
approved by a majority vote of the outstanding Investment
Shares of the affected Fund. A Plan may be terminated at
any time by a majority vote of the Independent Trustees or
by a majority vote of the outstanding Investment Shares of
the affected Fund.
While the Plans are in effect, the selection and nomination
of Trustees who are not "interested persons" has been
committed to the discretion of the "non-interested" Trustees
then in office.
For the fiscal year ended December 31, 1995 the
following payments were made under the Plans: Growth and
Income Fund, $52,276; Small Company Growth Fund, $54,928;
International Growth Fund, $38,731; Index Equity Fund,
$31,192; Intermediate Bond Fund, $40,289; Intermediate Tax-
Free Fund, $23,935; Income Fund, $4,092; Tax-Free Income
Fund, $1,391; Michigan Municipal Bond Fund, $6,879; Limited
Term Tax-Free Fund, $126; and Short Term Bond Fund, $6,104.
All of such payments were made to broker-dealers and other
selling and/or servicing institutions. For the current
fiscal year, Investment Shares of the Growth and Income
Fund, Small Company Growth Fund, International Growth Fund,
Index Equity Fund, Intermediate Bond Fund, Intermediate Tax-
Free Fund, Income Fund and Tax-Free Income Fund will be
charged a fee pursuant to the Plans at an annual rate of
0.25% of their average Investment class net assets. For the
current fiscal year, Investment Shares of the Short Term
Bond Fund, Limited Term Tax-Free Fund and Michigan Municipal
Bond Fund will be charged a fee pursuant to the Plans at an
annual rate of 0.15% of their average Investment class net
assets. The Trust does not currently intend to charge a fee
under the Plans for the Money Market Fund or the Michigan
Municipal Money Market Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The prospectuses for the Funds describe those investors who
are eligible to purchase Investment Shares and those who are
eligible to purchase Institutional Shares.
An illustration of the computation of the offering price per
Investment Share of each Non-Money Market Fund is
provided below. The computations are based on the
value of each such Fund's Investment class net assets and
number of outstanding Investment Shares at the close of
business on December 31, 1995 (the end of the Trust's last
fiscal year).
Growth and Income Small Company International Growth
Fund Growth Fund Fund
Net Assets $11,079,424 $10,954,966 $7,548,199
Outstanding Share s840,180 793,547 534,190
Net Asset Value
Per Share $13.19 $13.81 $14.13
Sales Charge, 4.00% of
offering price (4.17%
of net asset value) per
share, or per Investment
Share $0.55 $0.58 $0.59
Offering price to
public $13.74 $14.39 $14.72
Index Equity Short Term Bond Intermediate Bond
Fund Fund Fund
Net Assets $6,611,727 $1,633,557 $6,861,848
Outstanding Shares 525,856 164,130 676,709
Net Asset Value Per Share $12.57 $9.95 $10.14
Sales Charge, 4.00% of
offering price (4.17%
of net asset value) per
share, or per Investment
Share $0.52 $0.41 $0.42
Offering price to
public $13.09 $10.36 $10.56
Limited Term Intermediate Tax- Michigan Municipal
Tax-Free Fund Free Fund Bond Fund
Net Assets $53,855 $3,806,729 $1,899,197
Outstanding Shares 5,258 361,926 187,833
Net Asset Value
Per Share $10.24 $10.52 $10.11
Sales Charge, 4.00%
of offering price
(4.17% of net asset
value) per share, or
per Investment
Share $0.43 $0.44 $0.42
Offering price to
public $10.67 $10.96 $10.53
Income Fund Tax-Free Income Fund
Net Assets $1,961,023 $528,756
Outstanding Shares 181,277 50,253
Net Asset ValuePer
Share $10.82 $10.52
Sales Charge, 4.00% of
offering price (4.17%
of net asset value) per
share, or per Investment
Share $0.45 $0.44
Offering price to public$11.27$10.96
A sales load will not be applicable to certain purchases of
Investment Shares as set forth in the prospectuses. These
exemptions to the imposition of a sales load are due to the
nature of the investors and/or the reduced sales effort that
will be needed in obtaining such investments.
In an exchange, shares in the Fund from which an investor is
withdrawing will be redeemed at the net asset value per
share next determined after the exchange request is
received. Shares of the Fund in which the investor is
investing will also normally be purchased at the net asset
value per share (plus any applicable sales load) next
determined after acceptance of the purchase order by the
Trust in accordance with its customary policies for
accepting investments.
Under the 1940 Act, the Trust may suspend the right of
redemption or postpone the date of payment for shares during
any period when (a) trading on the NYSE is
restricted by applicable rules and regulations of the
Securities and Exchange Commission; (b) the NYSE is closed
for other than customary weekend and holiday closings; (c)
the Securities and Exchange Commission has by order
permitted such suspension; or (d) an emergency exists as
determined by the Securities and Exchange Commission. (The
Trust may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the
foregoing conditions.)
In addition to the situation described in the prospectuses
under "How Can I Redeem Shares," the Trust may
redeem shares involuntarily if it appears appropriate to do
so in light of the Trust's responsibilities under the 1940
Act, to reimburse the Funds for any loss sustained by reason
of the failure of a shareholder to make full payment for
shares purchased by the shareholder, or to collect any
charge relating to a transaction effected for the benefit of
a shareholder which is applicable to Fund shares as provided
in the prospectuses from time to time.
A Fund may make payment for redemption in securities or
other property if it appears appropriate to do so in light
of the Fund's responsibilities under the 1940 Act. In the
event shares are redeemed for securities or other property,
shareholders may incur additional costs in connection with
the conversion thereof to cash. Redemption in kind is not
as liquid as a cash redemption. Shareholders who receive a
redemption in kind may receive less than the redemption
value of their shares upon sale of the securities or
property received, particularly where such securities are
sold prior to maturity.
The Trust has filed an election pursuant to Rule 18f-1 under
the 1940 Act which provides that each portfolio of the Trust
is obligated to redeem shares solely in cash up to $250,000
or 1% of such portfolio's net asset value, whichever is
less, for any one shareholder within a 90-day period. Any
redemption beyond this amount may be made in proceeds other
than cash.
DIVIDENDS AND TAXES
The following summarizes certain additional tax
considerations generally affecting the Funds and their
shareholders that are not described in the prospectuses. No
attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the
discussion here and in the prospectuses is not intended as a
substitute for careful tax planning. Potential investors
should consult their tax advisers with specific reference to
their own tax situations.
The discussion of Federal income tax consequences in the
prospectuses and this SAI is based on the Internal Revenue
Code of 1986, as amended (the "Code") and the laws and
regulations issued thereunder as in effect on the date of
this SAI. Future legislative or administrative changes or
court decisions may significantly change the conclusions
expressed herein, and any such changes or decisions may have
a retroactive effect with respect to the transactions
contemplated herein.
Federal - General Information
Each Fund will be treated as a separate corporate entity
under the Code and intends to elect to qualify as a
regulated investment company. Each Fund must
derive with respect to a taxable year at least 90% of its
gross income from dividends, interest, certain payments with
respect to securities loans and gains from the sale or other
disposition of stock, securities or foreign currencies, or
from other income derived with respect to its business of
investing in such stock, securities, or currencies (the
"Income Requirement"), and derive less than 30% of its gross
income from the sale or other disposition of securities and
certain other investments held for less than three months
(the "Short-Short Test"). Interest (including original
issue discount and "accrued market discount") received by a
Fund at maturity or on disposition of a security held for
less than three months will not be treated as gross income
derived from the sale or other disposition of securities for
this purpose.
In addition to the foregoing requirements, at the close of
each quarter of its taxable year, at least 50% of the value
of each Fund's assets must consist of cash and cash items,
U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to
which a Fund has not invested more than 5% of the value of
its total assets in securities of any one issuer and as to
which a Fund does not hold more than 10% of the outstanding
voting securities of any one issuer), and no more than 25%
of the value of each Fund's total assets may be invested in
the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment
companies), or in two or more issuers which such Fund
controls and which are engaged in the same or similar trades
or businesses.
Each Fund intends to distribute to shareholders any excess
of net long-term capital gain over net short-term capital
loss ("net capital gain") for each taxable year. Such gain
is distributed as a capital gain dividend and is taxable to
shareholders as long-term capital gain, regardless of the
length of time the shareholder has held the shares, whether
such gain was recognized by the Fund prior to the date on
which a shareholder acquired shares of the Fund, or whether
the distribution was paid in cash or reinvested in shares.
In addition, investors should be aware that any loss
realized upon the sale, exchange or redemption of shares
held for six months or less will be treated as a long-term
capital loss to the extent any capital gain dividends have
been paid with respect to such shares.
In the case of corporate shareholders, distributions of a
Fund for any taxable year generally qualify for the
dividends received deduction to the extent of the gross
amount of "qualifying dividends" from domestic corporations
received by the Fund for the year. A dividend usually will
be treated as a "qualifying dividend" if it has been
received from a domestic corporation. A portion of the
dividends paid by the Growth and Income Fund, Small Company
Growth Fund and Index Equity Fund may constitute "qualifying
dividends." The other Funds, however, are not expected to
pay qualifying dividends.
Ordinary income of individuals is taxable at a maximum
nominal rate of 39.6%, but because of limitations on
itemized deductions otherwise allowable and the phase-out of
personal exemptions, the maximum effective marginal rate of
tax for some taxpayers may be higher. An individual's
long-term capital gains will be taxable at a maximum nominal
rate of 28%. For corporations, long-term capital gains and
ordinary income are both taxable at a maximum nominal rate
of 35% (an effective marginal rate of 39% applies in the
case of corporations with taxable incomes between $100,000
and $335,000, and an effective marginal rate of 38% applies
in the case of corporations with taxable incomes between $15
million and $18,333,333).
If for any taxable year any Fund does not qualify as a
regulated investment company, all of its taxable income will
be subject to tax at regular corporate rates without any
deduction for distributions to shareholders. In such event,
all distributions (whether or not derived from exempt-
interest income) would be taxable as ordinary income to the
extent of such Fund's current and accumulated earnings and
profits and would be eligible for the dividends received
deduction in the case of corporate shareholders.
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that fail to currently distribute an
amount equal to specified percentages of their ordinary
taxable income and capital gain net income (excess of
capital gains over capital losses). Each Fund intends to
make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income each
calendar year to avoid liability for this excise tax.
Although each Fund expects to qualify as a "regulated
investment company" and to be relieved of all or
substantially all Federal income taxes, depending upon the
extent of its activities in states and localities in which
its offices are maintained, in which its agents or
independent contractors are located or in which it is
otherwise deemed to be conducting business, each Fund may be
subject to the tax laws of such states or localities.
Federal - Tax-Exempt Information
As described in the prospectuses relating to the Tax-Free
Funds, such Funds are designed to provide investors with
tax-exempt interest income. The Tax-Free Funds are not
intended to constitute a balanced investment program and are
not designed for investors seeking capital appreciation or
maximum tax-exempt income irrespective of fluctuations in
principal. Shares of the Tax-Free Funds would not be
suitable for tax-exempt institutions and may not be suitable
for retirement plans qualified under Section 401 of the
Code, H.R. 10 plans and individual retirement accounts
because such plans and accounts are generally tax-exempt
and, therefore, would not gain any additional benefit from
the Funds' dividends being tax-exempt. In addition, the
Tax-Free Funds may not be an appropriate investment for
persons or entities that are "substantial users" of
facilities financed by private activity bonds or "related
persons" thereof. "Substantial user" is defined under U.S.
Treasury Regulations to include a non-exempt person which
regularly uses a part of such facilities in its trade or
business and whose gross revenues derived with respect to
the facilities financed by the issuance of bonds are more
than 5% of the total revenues derived by all users of such
facilities, or which occupies more than 5% of the usable
area of such facilities or for which such facilities or a
part thereof were specifically constructed, reconstructed or
acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its
partners and an S corporation and its shareholders.
In order for the Tax-Free Funds to pay Federal exempt-
interest dividends with respect to any taxable year, at the
close of each taxable quarter at least 50% of the aggregate
value of the Fund must consist of tax-exempt obligations.
An exempt-interest dividend is any dividend or part thereof
(other than a capital gain dividend) paid by a Tax-Free Fund
and designated as an exempt-interest dividend in a written
notice mailed to shareholders not later than 60 days after
the close of the Fund's taxable year. However, the
aggregate amount of dividends so designated by a Tax-Free
Fund cannot exceed the excess of the amount of interest
exempt from tax under Section 103 of the Code received by
the Fund during the taxable year over any amounts disallowed
as deductions under Sections 265 and 171(a)(2) of the Code.
The percentage of total dividends paid by a Tax-Free Fund
with respect to any taxable year which qualifies as Federal
exempt-interest dividends will be the same for all
shareholders receiving dividends from the Fund with respect
to such year.
A percentage of the interest on indebtedness incurred by a
shareholder to purchase or carry Tax-Free Fund shares equal
to the percentage of the total non-capital gain dividends
distributed during the shareholder's taxable year that is
exempt-interest dividends, is not deductible for Federal
income tax purposes. If a shareholder holds Tax-Free Fund
shares for six months or less, any loss on the sale or
exchange of those shares will be disallowed to the extent of
the amount of exempt-interest dividends earned with respect
to the shares.
Taxation of Certain Financial Instruments
Special rules govern the Federal income tax treatment of
certain financial instruments that may be held by the Funds.
These rules may have a particular impact on the amount of
income or gain that the Funds must distribute to their
respective shareholders to comply with the Distribution
Requirement, on the income or gain qualifying under the
Income Requirement, and on their ability to comply with the
Short-Short Test described above.
Generally, futures contracts, options on futures contracts
and certain foreign currency contracts held by a Fund
(collectively, the "Instruments") at the close of its
taxable year are treated for Federal income tax purposes as
sold for their fair market value on the last business day of
such year, a process known as "marking-to-market." Forty
percent of any gain or loss resulting from such constructive
sales is treated as short-term capital gain or loss and 60%
of such gain or loss is treated as long-term capital gain or
loss without regard to the period the Fund holds the
Instruments ("the 40%-60% rule"). The amount of any capital
gain or loss actually realized by the Fund in a subsequent
sale or other disposition of those Instruments is adjusted
to reflect any capital gain or loss taken into account by
the Fund in a prior year as a result of the constructive
sale of the Instruments. Losses with respect to Instruments
that are regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific
securities held by the Fund are subject to certain loss
deferral rules which limit the amount of loss currently
deductible on either part of the straddle to the amount
thereof which exceeds the unrecognized gain (if any) with
respect to the other part of the straddle, and to certain
wash sales regulations. Under short sales rules, which are
also applicable, the holding period of the securities
forming part of the straddle will (if they have not been
held for the long-term holding period) be deemed not to
begin prior to termination of the straddle. With respect to
certain Instruments, deductions for interest and carrying
charges may not be allowed. Notwithstanding the rules
described above, with respect to Instruments that are part
of a "mixed straddle" and are properly identified as such, a
Fund may make an election which will exempt (in whole or in
part) those identified Instruments from the rules of Section
1256 of the Code including "the 40%-60% rule" and the mark-
to-market on gains and losses being treated for Federal
income tax purposes as sold on the last business day of the
Fund's taxable year, but gains and losses will be subject to
such short sales, wash sales and loss deferral rules and the
requirement to capitalize interest and carrying charges.
Under Temporary Regulations, a Fund would be allowed (in
lieu of the foregoing) to elect either (a) to offset gains
or losses from portions which are part of a mixed straddle
by separately identifying each mixed straddle to which such
treatment applies, or (b) to establish a mixed straddle
account for which gains and losses would be recognized and
offset on a periodic basis during the taxable year. Under
either election, "the 40%-60% rule" will apply to the net
gain or loss attributable to the Instruments, but in the
case of a mixed straddle account election, not more than 50%
of any net gain may be treated as long-term and no more than
40% of any net loss may be treated as short-term.
A foreign currency contract must meet the following
conditions in order to be subject to the marking-to-market
rules described above: (1) the contract must require
delivery of a foreign currency of a type in which regulated
futures contracts are traded or upon which the settlement
value of the contract depends; (2) the contract must be
entered into at arm's length at a price determined by
reference to the price in the Interbank market; and (3) the
contract must be traded in the Interbank market. The
Treasury Department has broad authority to issue regulations
under the provisions respecting foreign currency contracts.
As of the date of this SAI, the Treasury Department has not
issued any such regulations. Other foreign currency
contracts entered into by a Fund may result in the creation
of one or more straddles for Federal income tax purposes, in
which case certain loss deferral, short sales, and wash
sales rules and the requirement to capitalize interest and
carrying charges may apply.
Some of the non-U.S. dollar-denominated investments that the
Growth and Income Fund and International Growth Fund may
make, such as foreign debt securities and foreign currency
contracts, may be subject to the provisions of Subpart J of
the Code, which govern the Federal income tax treatment of
certain transactions denominated in terms of a currency
other than the U.S. dollar or determined by reference to the
value of one or more currencies other than the U.S dollar.
The types of transactions covered by these provisions
include the following: (1) the acquisition of, or becoming
the obligor under, a bond or other debt instrument
(including, to the extent provided in Treasury regulations,
preferred stock); (2) the accruing of certain trade
receivables and payables; and (3) the entering into or
acquisition of any forward contract, futures contract,
option and similar financial instrument. The disposition of
a currency other than the U.S. dollar by a U.S. taxpayer
also is treated as a transaction subject to the special
currency rules. However, regulated futures contracts and
nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for
their fair market value at year-end under the marking-to-
market rules, unless an election is made to have such
currency rules apply. With respect to transactions covered
by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the
underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain
or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options
that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with
Treasury regulations, certain transactions that are part of
a "Section 988 hedging transaction" (as defined in the Code
and Treasury regulations) may be integrated and treated as a
single transaction or otherwise treated consistently for
purposes of the Code. "Section 988 hedging transactions"
are not subject to the marking-to-market or loss deferral
rules under the Code. Gain or loss attributable to the
foreign currency component of transactions engaged in by the
Fund which are not subject to the special currency rules
(such as foreign equity investments other than certain
preferred stocks) is treated as capital gain or loss and is
not segregated from the gain or loss on the underlying
transaction.
Certain of the Funds may be subject to U.S. Federal income
tax on a portion of any "excess distribution" from or a gain
from the disposition of shares of a passive foreign
investment company.
DECLARATION OF TRUST
Description of Shares
The Trust's Restatement of Declaration of Trust authorizes
the issuance of an unlimited number of shares of beneficial
interest in one or more separate series, and the creation of
one or more classes of shares within each series. Each
share of a series represents an equal proportionate interest
in the Trust with each other share of that series. Each
series represents interests in a different investment
portfolio. The Trust currently offers thirteen series of
shares with two separate classes in each series; Investment
Shares and Institutional Shares. Each share of the Trust
has no par value and is entitled to such dividends and
distributions of the income earned on its respective series'
assets as are declared at the discretion of the Trustees.
Each class or series is entitled upon liquidation of such
class or series to a pro rata share in the net assets of
that class or series. Shareholders have no preemptive
rights. When issued for payment as described in the
prospectuses, shares will be legally issued, fully paid and
non-assessable.
The proceeds received by each Fund for each issue or sale of
its shares, and all net investment income, realized and
unrealized gain and proceeds thereof, subject only to the
rights of creditors, will be specifically allocated to and
constitute the underlying assets of that Fund. The
underlying assets of each Fund will be segregated on the
books of account, and will be charged with the liabilities
in respect to that Fund and with a share of the general
liabilities of the Trust. Expenses with respect to the
portfolios of the Trust are normally allocated in proportion
to the net asset value of the respective portfolios except
where allocations of direct expenses can otherwise be fairly
made.
Shareholder Liability
The Trust is an entity of the type commonly known as a
"Massachusetts Business Trust." Pursuant to certain
decisions of the Supreme Judicial Court of Massachusetts,
there is a possibility that shareholders of such a trust
may, under certain circumstances, be held personally liable
as partners for the obligations of the trust. However, even
if the Trust were held to be a partnership, the possibility
of the shareholders incurring financial loss for that reason
appears remote because the Trust's Restatement of
Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Trust and
requires that notice of such disclaimer be given in every
note, bond, contract or other undertaking entered into or
executed by the Trust or the Trustees. In addition, the
Restatement of Declaration of Trust provides for
indemnification out of the Trust property for any
shareholder held personally liable for the obligations of
the Trust.
Voting Rights
Rule 18f-2 under the 1940 Act provides that any matter
required by the provisions of the 1940 Act or applicable
state law, or otherwise, to be submitted to the holders of
the outstanding voting securities of an investment company
such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each investment
portfolio affected by such matter. Rule 18f-2 further
provides that an investment portfolio shall be deemed to be
affected by a matter unless the interests of each investment
portfolio in the matter are substantially identical or the
matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment
advisory agreement, a distribution plan subject to Rule 12b-
1, or any change in a fundamental investment policy would be
effectively acted upon with respect to an investment
portfolio only if approved by a majority of the outstanding
shares of that investment portfolio. However, the Rule also
provides that the ratification of the appointment of
independent accountants, the approval of principal
underwriting contracts and the election of Trustees may be
effectively acted upon by shareholders of the Trust voting
together in the aggregate without regard to a particular
investment portfolio.
Shares of the Trust have non-cumulative voting rights, which
means that the holders of more than 50% of the shares of the
Trust voting for the election of Trustees can elect 100% of
the Trustees to be elected at a meeting and, in such event,
the holders of the remaining less than 50% of the shares of
the Trust voting will not be able to elect any Trustees.
As a general matter, the Trust does not hold annual or other
meetings of shareholders. At such time, however, as less
than a majority of the Trustees holding office have been
elected by shareholders, the Trustees then in office will
call a shareholders meeting for the election of Trustees.
The Trustees shall continue to hold office indefinitely, un-
less otherwise required by law, and may appoint successor
Trustees. A Trustee may be removed from office: (1) at any
time by two-thirds vote of the Trustees; or (2) at a special
meeting of shareholders by a two-thirds vote of the out-
standing shares. Trustees may also voluntarily resign from
office.
Limitation of Trustees' Liability
The Restatement of Declaration of Trust provides that the
Trustees shall not be responsible or liable for any neglect
or wrongdoing of any officer, agent, employee or adviser of
the Trust, provided that they have exercised reasonable care
in the selection of such individuals. The Restatement of
Declaration of Trust also provides that a Trustee shall be
indemnified against all liabilities and expenses reasonably
incurred in connection with the defense or disposition of
any action, suit or other proceeding in which said Trustee
is involved by reason of being or having been a Trustee of
the Trust, except with respect to any matter as to which
such Trustee has been finally adjudicated not to have acted
in good faith in the reasonable belief that his or her
actions were in the best interest of the Trust. Nothing in
the Restatement of Declaration of Trust shall protect a
Trustee against any liability for his or her willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or
her office as Trustee.
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
Money Market Funds
The yields for the Investment Shares and the Institutional
Shares of the Money Market Funds as they may appear from
time to time in advertisements will be calculated by
determining the net change exclusive of capital changes (all
realized and unrealized gains and losses) in the value of a
hypothetical pre-existing account having a balance of one
share at the beginning of the period, dividing the net
change in account value by the value of the account at the
beginning of the base period to obtain the base period re-
turn, multiplying the base period return by (365/7) and
carrying the resulting yield figure to the nearest hundredth
of one percent. The determination of net change in account
value will reflect the value of additional shares purchased
with dividends from the original share and dividends de-
clared on both the original share and any such additional
shares and all fees charged to all shareholder accounts for
each class of shares in proportion to the length of the base
period and the average account size for each class. The 30-
day yield for each Fund is determined similarly. Based
on the foregoing formula, for the 7-day period ended
December 31, 1995, the yields of the Institutional Shares of
the Money Market Fund and the Michigan Municipal Money
Market Fund were 5.36% and 4.22%, respectively. For the
same period, the 7-day yields of the Investment Shares of
the Money Market Fund and the Michigan Municipal Money
Market Fund were 5.36% and 4.22%, respectively. The yield
figures reflect waivers of certain expenses.
If realized and unrealized gains and losses were included in
the yield calculation, the yield of a Fund might vary
materially from that reported in advertisements.
In addition to the yields for each class of shares of
the Money Market Funds, the effective yields for each class
may appear from time to time in advertisements. The
effective yield will be calculated by compounding the
unannualized base period return by adding 1 to the quotient,
raising the sum to a power equal to 365 divided by 7,
subtracting 1 from the result and carrying the resulting
effective yield figure to the nearest hundredth of one
percent. Based on the foregoing formula, for the period
ended December 31, 1995, the effective yields of the
Institutional Shares of the Money Market Fund and the
Michigan Municipal Money Market Fund were 5.50% and 4.31%,
respectively. For the same period, the effective yields of
the Investment Shares of the Money Market Fund and the
Michigan Municipal Money Market Fund were 5.50% and 4.31%,
respectively. These yield figures reflect waivers of
certain expenses.
Non-Money Market Funds
A Non-Money Market Fund calculates its "average annual total
return" by determining the average annual compounded rate of
return during specified periods that equates the initial
amount invested to the ending redeemable value of such
investment according to the following formula:
ERV 1/n
T = [(-------) - 1]
P
Where:
T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the
1, 5 or 10 year (or other) periods at the end of the
applicable period (or a fractional portion
thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
A Non-Money Market Fund calculates its "aggregate total
return" by determining the aggregate compounded rates of
return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of
such investment. The formula for calculating aggregate
total return is as follows:
ERV
Aggregate Total Return = [(-------) - 1]
P
The calculations are made assuming that (a) all dividends
and capital gain distributions are reinvested on the
reinvestment dates at the price per share existing on the
reinvestment date, and (b) all recurring fees charged to all
shareholder accounts are included. The ending redeemable
value (variable "ERV" in the formula) is determined by
assuming complete redemption of the hypothetical investment
after deduction of all nonrecurring charges at the end of
the measuring period.
For the one-year period and the period from each Fund's
respective inception through December 31, 1995,
respectively, the average annual total returns, giving
effect to applicable sales loads, on the Investment Shares
of each Non-Money Market Fund were as follows: the Growth
and Income Fund, 29.18% and 13.08%; the Small Company Growth
Fund, 18.53% and 11.86%; the International Growth Fund,
8.36% and 13.77%; the Index Equity Fund, 30.33% and 12.98%;
the Short Term Bond Fund, 5.85% and 3.31%; the Intermediate
Bond Fund, 11.11% and 5.11%; the Intermediate Tax-Free Fund,
8.11% and 4.42%; the Michigan Municipal Bond Fund, 3.64% and
2.53%; and the Limited Term Tax-Free Fund, 4.05% and 3.51%.
For the same periods, the average annual total returns for
the one-year period and the period from each Fund's
inception through December 31, 1995 on the Non-Money Market
Funds' Institutional Shares were as follows: the Growth and
Income Fund, 34.91% and 15.44%; the Small Company Growth
Fund, 23.75% and 15.43%; the International Growth Fund,
13.00% and 15.57%; the Index Equity Fund, 36.23% and 15.23;
the Short Term Bond Fund, 10.53% and 4.83%; Intermediate
Bond Fund, 16.18% and 6.76%; the Intermediate Tax-Free Fund,
13.00% and 6.01%; the Michigan Municipal Bond Fund, 8.20%
and 4.31%; and the Limited Term Tax-Free Fund, 8.43% and
5.65%. From inception to December 31, 1995, the cumulative
total returns for the Investment Shares and the
Institutional Shares of Tax-Free Income Fund were 3.97% and
8.64%, respectively. From inception1 to December 31, 1995,
the cumulative total returns for the Investment Shares and
the Institutional Shares of the Income Fund were 10.01% and
15.05%, respectively.
A Non-Money Market Fund calculates its 30-day (or one month)
standard yield in accordance with the method prescribed by
the SEC for mutual funds:
a - b
Yield = 2 [ (------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of shares outstanding during the
period entitled to receive dividends; and
d = net asset value per share on the last day of the period.
Based on the foregoing calculations, for the 30-day
period ended December 31, 1995, the yields for the
Investment Shares of the Income Funds and Tax-Free Funds
were as follows: Short Term Bond Fund, 4.53%; Intermediate
Bond Fund, 4.52%; Income Fund, 4.93%; Limited Term Tax-Free
Fund, 3.21%; Intermediate Tax-Free Fund, 3.57%; Tax-Free
Income Fund, 4.14%; and Michigan Municipal Bond Fund, 3.28%.
For the same period, the yields on the Institutional Shares
of the Income Funds and Tax-Free Funds were as follows:
Short Term Bond Fund, 4.88%; Intermediate Bond Fund, 4.96%;
Income Fund, 5.40%; Limited Term Tax-Free Fund, 3.49%;
Intermediate Tax-Free Fund, 3.97%; Tax-Free Income Fund,
4.57%; and Michigan Municipal Bond Fund, 3.57%.
The Tax-Free Funds
The Investment Shares and the Institutional Shares of the
Tax-Free Funds may also advertise "tax equivalent yield."
Tax equivalent yield is, in general, the yield divided by a
factor equal to one minus a stated income tax rate and
reflects the yield a taxable investment would have to
achieve in order to equal on an after-tax basis a tax-exempt
yield. Based on the foregoing calculations, for the 30-
day period ended December 31, 1995, assuming a 36% marginal
tax bracket, the tax-equivalent yields for the Investment
Shares for the Tax-Free Funds were as follows: Limited Term
Tax-Free Fund, 5.02%; Intermediate Tax-Free Fund, 5.58%;
Tax-Free Income Fund, 6.47%; and Michigan Municipal Bond
Fund, 5.13%. For the same period, the tax-equivalent yields
on the Institutional Shares of the Tax-Free Funds were as
follows: Limited Term Tax-Free Fund, 5.45%; Intermediate
Tax-Free Fund, 6.20%; Tax-Free Income Fund, 7.14%; and
Michigan Municipal Bond Fund, 5.58%.
ADVERTISING INFORMATION
The Funds may from time to time include in advertisements,
sales literature, communications to shareholders and other
materials (collectively, "Materials") a total return figure
that more accurately compares a Fund's performance with
other measures of investment return than the total return
calculated as described above. For example, in comparing a
Fund's total return with data published by Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc. or
Weisenberger Investment Company Service, or with the
performance of an index, a Fund may calculate its aggregate
total return for the period of time specified in the
Materials by assuming the investment of $10,000 in shares of
a Fund and assuming the reinvestment of all dividends and
distributions. Percentage increases are determined by
subtracting the initial value of the investment from the
ending value and by dividing the remainder by the beginning
value. The Funds may not, for these purposes,
deduct from the initial value invested any amount
representing sales charges. A Fund will, however, disclose
the maximum sales charge and will also disclose that the
performance data does not reflect sales charges and that
inclusion of sale charges would reduce the performance
quoted.
The Funds may also from time to time include discussions or
illustrations of the effects of compounding in Materials.
"Compounding" refers to the fact that, if dividends or other
distributions on an investment in a Fund are paid in the
form of additional shares of the Fund, any future income or
capital appreciation of the Fund would increase the value,
not only of the original investment, but also of the
additional shares received through reinvestment. As a
result, the value of the investment in the Fund would
increase more quickly than if dividends or other
distributions had been paid in cash.
In addition, the Funds may also include in Materials
discussions and/or illustrations of the potential investment
goals of a prospective investor, investment management
strategies, techniques, policies or investment suitability
of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer,
automatic account rebalancing, the advantages and
disadvantages of investing in tax-deferred and taxable
investments), economic conditions, the relationship between
sectors of the economy and the economy as a whole, various
securities markets, the effects of inflation and historical
performance of various asset classes, including but not
limited to, stocks, bonds and Treasury securities. From
time to time, Materials may summarize the substance of
information contained in shareholder reports (including the
investment composition of a Fund), as well as the views of
the adviser as to current market, economic, trade and
interest rate trends, legislative, regulatory and monetary
developments, investment strategies and related matters
believed to be of relevance to a Fund. The Funds may also
include in Materials charts, graphs or drawings which
compare the investment objective, return potential, relative
stability and/or growth possibilities of the Funds and/or
other mutual funds, or illustrate the potential risks and
rewards of investment in various investment vehicles,
including but not limited to, stocks, bonds, Treasury
securities and shares of a Fund and/or other mutual funds.
Materials may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund and/or
other mutual funds, shareholder profiles and hypothetical
investor scenarios, timely information on financial
management, tax and retirement planning and investment
alternatives to certificates of deposit and other financial
instruments. Such Materials may include symbols, headlines
or other material which highlight or summarize the
information discussed in more detail therein.
FINANCIAL STATEMENTS
The Financial Statements included in the Funds' December 31, 1995 Annual
Reports to Shareholders are incorporated by reference into this SAI.
No other part of
the Annual Reports are incorporated herein. Copies of the Financial
Statements may be
obtained without charge by contacting 440 Distributors at the address and
telephone
number on the front page of this SAI.
ADDITIONAL INFORMATION
Set forth below are the record owners or, to the Trust's
knowledge, the beneficial owners of 5% or more of the
outstanding Investment and Institutional Shares of the
Equity Funds as of February 2, 1996.
Name and Address Fund Class Percentage of Ownership
Trent & Co. (C) The Kent Growth Institutional 59%
Cash Account and Income Fund
Attn: Ann Rumptz
1 Vandenbrg Center
Grand Rapids, MI 49503
Trent & Co. (R) The Kent Growth 38%
Reinvestment Account and Income Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Small Company 50%
Cash Account Growth Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (R) The Kent Small Company 48%
Reinvestment Account Growth Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (R) The Kent Index Equity 56%
Reinvestment Account Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Index Equity 36%
Cash Account Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Old Kent Bank The Kent Index Equity 8%
Smartmove Fund Institutional
c/o 440 Financial
As Agent
Barbara Kane C36
440 Lincoln Street
Worcester, MA 01653
Trent & Co. (C) The Kent International 52%
Cash Account Growth Fund Institutional
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (R) The Kent International
Reinvestment Account Growth Fund Institutional 47%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. - Brokerage The Kent Index Equity
Reinvestment Account Fund Investment 6%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. Brokerage The Kent International
Reinvestment Account Growth Fund Investment 5%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Set forth below are the record owners, or to the Trust's knowledge, the
beneficial owners of 5% or more of the outstanding Investment and
Institutional Shares of the Income Funds and Municipal Bond Funds as
of February 2, 1996.
Name and Address Fund Class Percentage of Ownership
Trent & Co. (R) The Kent Short Term
Cash Account Bond Fund Institutional 62%
Attn: Anne Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Short Term
Cash Account Bond Fund Institutional 37%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (R) The Kent Intermediate
Cash Account Bond Fund Institutional 49%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co (C) The Kent Intermediate
Cash Account Bond Fund Institutional 50%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Intermediate
Cash Account Tax-Free Fund Institutional 100%
Attn: Anne Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Limited Term
Cash Account Tax-Free Fund Institutional 100%
Attn: Anne Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Michigan
Cash Account Municipal Bond Fund
Attn: Anne Rumptz Institutional 99%
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. (C) The Kent Tax-Free
Cash Account Income Fund Institutional 100%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. - (R) The Kent Income Fund
Cash Account Institutional 84%
Attn: Anne Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. - (R) The Kent Income Fund
Reinvestment Account Institutional 16%
Attn: Anne Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. - Brokerage The Kent Short Term
Cash Account Bond Fund Investment 12%
Attn: Anne Rumptz
1 Vandenberg Center
Gand Rapids, MI 49503
Harold J. Buchmahl The Kent Short Term
604 S. 6th Ave. Bond Fund Investment 8%
Saint Charles, IL
Old Kent Bank & Trust The Kent Short Term
Cust. for the IRA Plan Bond Fund Investment 6%
John B. Hogan
371 Gull Lake Dr. South
Richland, MI 49083-9610
Trent & Co. - Brokerage The Kent Intermediate
Cash Account Bond Fund Investment 6%
Attn: Ann Rumptz
1 Vandenberg Center
Grand Rapids, MI 49503
Arametta L. Mitchell The Kent Intermediate
William F. Mitchell Co Tax-Free Fund Investment 13%
TTEES
U/A DTD 04/24/72
Arametta L. Mitchell Liv
Trust
900 W. Oliver Street
Owosso, MI 48867
The Northern Trust Co. The Kent Intermediate
FBO Christopher U. Light Tax-Free Fund Investment 10%
Rev. Tr. DTD 01/09/76
PO Box 92956
Chicago, IL 60675
The Northern Trust Co. The Kent Intermediate
FBO Richard U. Light Tax-Free Fund Investment 7%
Irrev. S. Tr.
U/AD 06/21/40
PO Box 92956
Chicago, IL 60675
Old Kent Bank South East The Kent Intermediate
FBO Edward E. Vollenweider Tax-Free Fund Investment 6%
U/A DTD 11/10/89
9936 Hawthorn Glen Drive
Grosse Ile, MI 48183
John M. Crouse The Kent Intermediate
TTEEU/A DTD 6/27/85 Tax-Free Fund Investment 5%
222 Harbour Drive
Commodore Club #510
Naples, FL 33940
William F. Mitchell TTEE The Kent Intermediate
U/A DTD 07/24/77 Tax-Free Fund Investment 5%
William F. Mitchell Liv. Trust
123 N. Chipman Street
Owosso, MI 48867
Rose M. Black Trust The Kent Limited Term
Rose M. Black Trustee Tax-Free Fund Investment 54%
Dtd 6/14/95
1208 Baker Street
Kalamazoo, MI 49001
Charles J. Cebuhar The Kent Limited Term
1310 Valley Lake Dr. Tax-Free Fund Investment 39%
Apt. 745
Shaumburg, IL 60195
Karla K. Morence The Kent Limited Term
Douglas E. Morence JTWROS Tax-Free Fund Investment 7%
320 W. M21
Owosso, MI 48867
The Northern Trust Co. The Kent Michigan
FBO Christopher U. Light Municipal Bond Fund
Rev. Tr. Investment 33%
DTD 01/09/76
PO Box 92956
Chicago, IL 60675
The Northern Trust Co. The Kent Michigan
FBO Richard U. Light Municipal Bond Fund
Irrev. S. Tr. Investment 22%
U/A D 06/21/40
PO Box 92956
Chicago, IL 60675
Trent & Co - Brokerage The Kent Michigan
Reinvestment Account Municipal Bond Fund
Attn: Ann Rumptz Investment 9%
1 Vandenberg Center
Grand Rapids, MI 49503
Trent & Co. - Brokerage The Kent Michigan
Cash Account Municipal Bond Fund
Attn: Ann Rumptz Investment 10%
1 Vandenberg Center
Grand Rapids, MI 49503
Old Kent Bank South East The Kent Michigan
FBO Edward E. Vollenweider Municipal Bond Fund
U/A DTD 11/10/89 Investment 6%
9936 Hawthorn Glen Drive
Grosse Ile, MI 48183
Pershing The Kent Michigan
FBO Leonard Krawczyk Municipal Bond Fund
A/C 4AV-051503 Investment 5%
One Pershing Plaza
Jersey City, NJ 07399
Mark Dellar The Kent Tax-Free
151 East Poplar Incoem Fund Investment 99%
Glendale Heights, IL 60139
Old Kent Bank Central The Kent Tax-Free
FBO Jerry S. Voight Income Fund Investment 10%
U/A Dtd 01/28/91
Jerry S. Voight Trust
Attn: Russ Thomas
123 N. Washington
Owosso, MI 48867
E. Condit Newcommer Trust The Kent Tax-Free
E. Condit Newcommer TTEE Income Fund Investment 9%
4/7/94
2089 Corunna Ave.
Owosso, MI 48867
Doris Anderson The Kent Tax-Free
Glen F. Anderson Income Fund Investment 18%
POA Dtd 12/3/93
815 W. Indiana St.
St. Charles, IL 60174
Rose M. Black Trust The Kent Tax-Free
Rose M. Black Trustee Income Fund Investment 9%
Dtd 06/14/95
1208 Baker Street
Kalamazoo, MI 49001
Pershing The Kent Tax-Free
FBO Leonard Krawczyk Income Fund Investment 12%
A/C 4AV-051503
One Pershing Plaza
Jersey City, NJ 07399
Lisa A. Boehm The Kent Tax-Free
668 Hill Ave. Income Fund Investment 10%
Elgin, IL 60120
Old Kent Bank & Trust The Kent Income Fund
Cust. for IRA Investment 31%
FBO Barbara J. Patterson
1416 Bjornson
Big Rapids, MI 49307
Evelyn D. Camburn The Kent Income Fund
37254 Heather Courtsooth Investment 28%
Westland, MI 48185
Old Kent Bank & Trust The Kent Income Fund
Cust. for IRA Investment 11%
FBO Richard J. Kassal
1115 So. Grace
Lombard, IL 60198
Old Kent Bank & Trust The Kent Income Fund
Cust. for IRA Investment 7%
FBO Mary J. Hall
22021 Leota Drive
Sand Lake, MI 49343
Set forth below are the record owners or, to the Trust's knowledge,
beneficial owners of 5% or more of the outstanding Institutional and
Investment Shares of the Money Market Funds as of February 2, 1996.
Name and Address Fund Class Percentage of Ownership
Trent & Co. (C) The Kent Money Market
Cash Account Fund Institutional 97%
Attn: Billie Blair
1 Vandenberg Center
Grand Rapids, MI 49503
Old Kent Bank & Trust Co. The Kent Michigan
Attn: Billie Blair Municipal Money Market
1 Vandenberg Center Fund Institutional 100%
Grand Rapids, MI 49503
Judith A. Kernell and The Kent Michigan
Sara E. Kontz JTWROS Municipal Money Market
5185 Pine Hill Circle Fund Investment 12%
Howell, MI 48843
Stanley J. Kasiewcz The Kent Michigan
1807 Harvest Lane Municipal Money Market
Bloomfield Hills, MI Fund Investment 34%
48302
Julie A. St. Amorr The Kent Michigan
Raymond S. Stowers Municipal Money Market Fund
David A. Stowers JTWROS Investment 16%
1746 Lee Ave.
Muskegon, MI 49444
Lyle T. Cerda The Kent Michigan
Ida Cerda JTWROS Municipal Money Market Fund
1129 Buckingham SW Investment 6%
Wyoming, MI 49509
Philip M. Allen The Kent Michigan
Mary S. Allen JT WROS Municipal Money Market
2092 Northridge N.E. Fund
Grand Rapids, MI 49505 Investment 10%
Larry M. Bebryune The Kent Money Market
Joy E. Bebryune JTWROS Fund Investment 6%
4270 Redbush Dr. SW
Grandville, MI 49418
Floyd F. Williams The Kent Money Market
Diane Williams JTWROS Fund Investment 14%
4535 Forest Lake CT SE
Kentwood, MI 49546
Except as otherwise stated in its prospectuses, statements
of additional information, or required by law, the Trust
reserves the right to change the terms of the offers stated
in its prospectuses or statement of additional information
without shareholder approval, including the right to impose
or change certain fees for services provided.
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-
term in the relevant market. The following summarizes the
rating categories used by S&P for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong
safety characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for
issues designated "A-1."
"A-3" - Issue has an adequate capacity for timely payment.
It is, however, somewhat more vulnerable to the adverse
effects of changes and circumstances than an obligation
carrying a higher designation.
"B" - Issue has only a speculative capacity for timely
payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not
having an original maturity in excess of 9 months. The
following summarizes the rating categories used by Moody's
for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following
characteristics: leading market positions in well
established industries; high rates of return on funds
employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and
high internal cash generation; and well established access
to a range of financial markets and assured sources of
alternate liquidity.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-
term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to
a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative
liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have
an acceptable capacity for repayment of short-term
promissory obligations. The effects of industry
characteristics and market composition may be more
pronounced. Variability in earnings and profitability may
result in changes in the level of debt protection
measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is
maintained.
"Not Prime" - Issuer does not fall within any of the Prime
rating categories.
The three rating categories of Duff & Phelps Credit
Rating Co. ("Duff & Phelps") for investment grade commercial
paper and short-term debt are "Duff 1," "Duff 2" and "Duff
3." Duff & Phelps employs three designations, "Duff 1+,"
"Duff 1" and "Duff 1-," within the highest rating category.
The following summarizes the rating categories used by Duff
& Phelps for commercial paper:
"Duff 1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.
"Duff 1" - Debt possesses very high certainty of timely
payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are
minor.
"Duff 1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very
small.
"Duff 2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are small.
"Duff 3" - Debt possesses satisfactory liquidity, and other
protection factors qualify issue as investment grade. Risk
factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
"Duff 4" - Debt possesses speculative investment
characteristics. Liquidity is not sufficient to ensure
against disruption in debt service. Operating factors and
market access may be subject to a high degree of variation.
"Duff 5" - Issuer has failed to meet scheduled principal
and/or interest payments.
Fitch Investors Service, Inc. ("Fitch") short-term ratings
apply to debt obligations that are payable on demand or have
original maturities of up to three years. The following
summarizes the rating categories used by Fitch for short-
term obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having
the strongest degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality.
Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated "F-
1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance
for timely payment, but the margin of safety is not as great
as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that
the degree of assurance for timely payment is adequate;
however, near-term adverse changes could cause these
securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a
minimal degree of assurance for timely payment and are
vulnerable to near-term adverse changes in financial and
economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter
of credit issued by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood
of an untimely or incomplete payment of principal or
interest of unsubordinated instruments having a maturity of
one year or less which is issued by United States commercial
banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings
used by Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's
highest rating category and indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
"TBW-2" - This designation indicates that while the degree
of safety regarding timely payment of principal and interest
is strong, the relative degree of safety is not as high as
for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more
susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
"TBW-4" - This designation indicates that the debt is
regarded as non-investment grade and therefore speculative.
IBCA, Inc. ("IBCA") assesses the investment quality of
unsecured debt with an original maturity of less than one
year which is issued by bank holding companies and their
principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1" - Obligations are supported by the highest capacity
for timely repayment. Where issues possess a particularly
strong credit feature, a rating of A1+ is assigned.
"A2" - Obligations are supported by a good capacity for
timely repayment.
"A3" - Obligations are supported by a satisfactory capacity
for timely repayment.
"B" - Obligations for which there is an uncertainty as to
the capacity to ensure timely repayment.
"C" - Obligations for which there is a high risk of default
or which are currently in default.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by S&P for
corporate and municipal debt:
"AAA" - This designation represents the highest rating
assigned by S&P to a debt obligation and indicates an
extremely strong capacity to pay interest and repay
principal.
"AA" - Debt is considered to have a very strong capacity to
pay interest and repay principal and differs from AAA issues
only in small degree.
"A" - Debt is considered to have a strong capacity to pay
interest and repay principal although such issues are
somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in
higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to
pay interest and repay principal. Whereas such issues
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-
rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on
balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance
with the terms of the obligation. "BB" indicates the lowest
degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to inadequate capacity
to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-"
rating.
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial
and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely
to have the capacity to pay interest and repay principal.
The "CCC" rating category is also used for debt subordinated
to senior debt that is assigned an actual or implied "B" or
"B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC"
rating.
"C" - This rating is typically applied to debt subordinated
to senior debt which is assigned an actual or implied "CCC-"
debt rating. The "C" rating may be used to cover a
situation where a bankruptcy petition has been filed, but
debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the
date due, even if the applicable grace period has not
expired, unless S&P believes such payments will be made
during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
"r" - This rating is attached to highlight derivative,
hybrid, and certain other obligations that S&P believes may
experience high volatility or high variability in expected
returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest
return is indexed to equities, commodities, or currencies;
certain swaps and options; and interest only and principal
only mortgage securities.
The following summarizes the ratings used by Moody's for
corporate and municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They
carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable
margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may
not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks
appear somewhat larger than in "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are
considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the
future.
"Baa" - Bonds considered medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking
or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics
as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest
and principal ("Ba" indicates some speculative elements; "B"
indicates a general lack of characteristics of desirable
investment; "Caa" represents a poor standing; "Ca"
represents obligations which are speculative in a high
degree; and "C" represents the lowest rated class of bonds).
"Caa," "Ca" and "C" bonds may be in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition
are rated conditionally. These are bonds secured by (a)
earnings of projects under construction, (b) earnings of
projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments
to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of
condition.
Moody's applies numerical modifiers 1, 2 and 3 in each
generic classification from "Aa" to "B" in its bond rating
system. The modifier 1 indicates that the issuer ranks in
the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3
indicates that the issuer ranks at the lower end of its
generic rating category.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
"A" - Debt possesses protection factors which are average
but adequate. However, risk factors are more variable and
greater in periods of economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for
prudent investment. Considerable variability in risk is
present during economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one
of these ratings is considered to be below investment grade.
Although below investment grade, debt rated "BB" is deemed
likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and
has considerable uncertainty as to timely payment of
principal, interest or preferred dividends. Debt rated "DD"
is a defaulted debt obligation, and the rating "DP"
represents preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by
the addition of a plus (+) or minus (-) sign to show
relative standing within these major categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as
strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
"A" - Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" - Bonds
that possess one of these ratings are considered by Fitch to
be speculative investments. The ratings "BB" to "C"
represent Fitch's assessment of the likelihood of timely
payment of principal and interest in accordance with the
terms of obligation for bond issues not in default. For
defaulted bonds, the rating "DDD" to "D" is an assessment of
the ultimate recovery value through reorganization or
liquidation.
To provide more detailed indications of credit quality, the
Fitch ratings from and including "AA" to "C" may be modified
by the addition of a plus (+) or minus (-) sign to show
relative standing within these major rating categories.
IBCA assesses the investment quality of unsecured debt with
an original maturity of more than one year which is issued
by bank holding companies and their principal bank
subsidiaries. The following summarizes the rating
categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest
expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial such that
adverse changes in business, economic or financial
conditions are unlikely to increase investment risk
substantially.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of
principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase
investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is strong, although adverse changes in
business, economic or financial conditions may lead to
increased investment risk.
"BBB" - Obligations for which there is currently a low
expectation of investment risk. Capacity for timely
repayment of principal and interest is adequate, although
adverse changes in business, economic or financial
conditions are more likely to lead to increased investment
risk than for obligations in higher categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned
one of these ratings where it is considered that speculative
characteristics are present. "BB" represents the lowest
degree of speculation and indicates a possibility of
investment risk developing. "C" represents the highest
degree of speculation and indicates that the obligations are
currently in default.
IBCA may append a rating of plus (+) or minus (-) to a
rating to denote relative status within major rating
categories.
Thomson BankWatch assesses the likelihood of an untimely
repayment of principal or interest over the term to maturity
of long term debt and preferred stock which are issued by
United States commercial banks, thrifts and non-bank banks;
non-United States banks; and broker-dealers. The following
summarizes the rating categories used by Thomson BankWatch
for long-term debt ratings:
"AAA" - This designation represents the highest category
assigned by Thomson BankWatch to long-term debt and
indicates that the ability to repay principal and interest
on a timely basis is very high.
"AA" - This designation indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest
category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's
lowest investment grade category and indicates an acceptable
capacity to repay principal and interest. Issues rated
"BBB" are, however, more vulnerable to adverse developments
(both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are
assigned by Thomson BankWatch to non-investment grade long-
term debt. Such issues are regarded as having speculative
characteristics regarding the likelihood of timely payment
of principal and interest. "BB" indicates the lowest degree
of speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is
in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates
where within the respective category the issue is placed.
Municipal Note Ratings
An S&P rating reflects the liquidity concerns and market
access risks unique to notes due in three years or less.
The following summarizes the ratings used by S&P for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit
speculative capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade
("MIG") and variable rate demand obligations are designated
Variable Moody's Investment Grade ("VMIG"). Such ratings
recognize the differences between short-term credit risk and
long-term risk. The following summarizes the ratings by
Moody's Investors Service, Inc. for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the
best quality, enjoying strong protection by established cash
flows, superior liquidity support or demonstrated broad-
based access to the market for refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of
high quality, with margins of protection ample although not
so large as in the preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of
favorable quality, with all security elements accounted for
but lacking the undeniable strength of the preceding grades.
Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well
established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of
adequate quality, carrying specific risk but having
protection commonly regarded as required of an investment
security and not distinctly or predominantly speculative.
"SG" - Loans bearing this designation are of speculative
quality and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
[To be Updated]
APPENDIX B
THE KENT MICHIGAN MUNICIPAL BOND FUND
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
Special Investment Considerations Relating
To Investing in Michigan Municipal Obligations
The following information constitutes only a brief summary,
does not purport to be a complete description, and is based
on information drawn from a Budget Status Report dated
December 14, 1994, prepared by the Senate Fiscal Agency of
the Michigan Legislature and from official statements
relating to securities offerings of the State available as
of the date of this SAI. While the Trust has not
independently verified such information, it has no reason to
believe that such information is not correct in all material
respects.
Economic Outlook
The State's economy has been undergoing certain basic
changes in its underlying structure. These changes reflect
a diversifying economy which is less reliant on the
automobile industry. As a result, the State anticipates
that its economy in the future will be less susceptible to
cyclical swings and more resilient when national downturns
occur. In 1995, the major employment gains are expected to
occur in the motor vehicle, construction, transportation,
communication, utilities and service industries. Total wage
and salary employment is projected to grow 2.5% in 1995.
The rate of unemployment is projected to average 5.8% in
both 1995 and 1996, below the national average. Personal
income is projected to grow at a 6.8% annual rate in 1995,
above the national rate of growth.
1994-95 Budget and Projected Results
The Governor's Executive Budget was submitted to the
Legislature in December 1993. Since fiscal 1992-93,
improvements in the Michigan economy have resulted in
increased revenue collections which, together with
restraints on the expenditure side of the budget, have
resulted in General Fund budget surpluses in fiscal 1992-93
of $282.6 million and in fiscal 1993-94 of an estimated
$434.6 million. Surpluses of approximately $100.0 million
are forecast for the State's General Fund for both fiscal
1994-95 and 1995-96. Among the budget uncertainties facing
the State during the next several years are whether the
recently-enacted school finance reform package will provide
adequate revenues to fund K-12 education in the future,
whether declining motor fuel tax revenues resulting from
more fuel-efficient vehicles will continue to provide
adequate funding to maintain the State's transportation
infrastructure, whether there will be adequate funds
available to address the State's need for more correctional
facilities, and the uncertainties presented by proposed
changes in Federal aid policies for state and local
governments.
Projected Revenues for Fiscal 1994-95
General Fund - General Purpose revenue is estimated at
$8,842.6 million, a 7.7% increase over fiscal year 1993-94,
reflecting increased tax revenues in substantially all areas
due to the improving economy of the state.
Personal Income Tax - Net income tax collections are
estimated at $4,516.2 million, a 9.2% increase over fiscal
year 1993-94.
Single Business and Insurance Taxes - Gross single business
tax collections are projected to amount to $2,071.4 million,
an increase of 4.6% over fiscal year 1993-94. The General
Fund - General Purpose shares of single business tax revenue
is estimated to be $1,866.4 million. The difference between
gross single business tax collections and General Fund -
General Purpose revenue represents payments to local units
of government.
Sales Tax - Gross sales tax collections are forecasted to
total $3,320 million, an increase of 6.5% over fiscal year
1993-94. The General Fund - General Purpose portion of the
sales tax is estimated at $715.7 million.
Use Tax - The General Fund - General Purpose portion of use
tax collections are forecasted to increase 6.9% to $614
million.
Appropriations for fiscal 1993-94
General Fund - General Purpose appropriations were $7,958.2
million, 1% above the level of 1992-93 expenditures.
Education and School Aid - General Purpose appropriations
for public elementary and secondary school aid, community
colleges, state universities and the State Department of
Education were $2,435.9 million, a decrease of 8.3% from
fiscal year 1992-93 expenditures.
Social Services - General Purpose appropriations for public
assistance, Medicaid and other Social Services programs were
$2,159.2 million, 5.6% above fiscal year 1992-93
expenditures.
Public and Mental Health - General Purpose appropriations
for public and mental health programs were $2,159.2 million,
5.6% above fiscal year 1992-93 expenditures.
State Constitutional Provisions Affecting Revenues and
Expenditures
The State Constitution provides that proposed expenditures
and revenues of any operating fund must be in balance and
that any prior year's surplus or deficit must be included in
the succeeding year's budget for that fund.
The State Constitution limits the amount of total State
revenues that can be raised from taxes and certain other
sources. State revenues (excluding federal aid and revenues
for payment of principal and interest on general obligation
bonds) in any fiscal year are limited to a fixed percentage
of State personal income in the prior calendar year or
average of the prior three calendar years, whichever is
greater, and this fixed percentage equals the percentage of
the 1978-79 fiscal year state government revenues to total
calendar 1977 State personal income (which was 9.49%).
If in any fiscal year revenues exceed the revenue limitation
by 1% or more, the entire amount of such excess must be
rebated in the following fiscal year's personal income tax
or single business tax. Any excess of less than 1% may be
transferred to the State's Budget Stabilization Fund, a cash
reserve intended to mitigate the adverse effects on the
State budget of downturns in the business cycle and to
reserve funds that can be available during periods of high
unemployment for State projects that will increase job
opportunities. The State may raise taxes in excess of the
limit for emergencies when deemed necessary by the Governor
and two-thirds of the members of each house of the
Legislature.
The State Constitution also provides that the proportion of
State spending paid to all units of local government to
total State spending may not be reduced below the proportion
in effect in the 1978-79 fiscal year. The State has
determined that portion to be 41.6%. If such spending does
not meet the required level in a given year, an additional
appropriation for local governmental units is required by
the following fiscal year; which means the year following
the determinations of the shortfall, according to an opinion
issued by the State's Attorney General. Spending for local
units met this requirement for fiscal years 1986-87, 1987-
88, 1988-89, 1989-90 and 1990-91.
The State Constitution also requires the State to finance
any new or expanded activity of local governments mandated
by State law. Any expenditures required by this provision
would be counted as State spending for local units of
government for the purpose of determining compliance with
the provision cited above.
State and State-Related Indebtedness
The State Constitution limits State general obligation debt
to (i) short-term debt for State operating purposes, (ii)
short- and long-term debt for the purpose of making loans to
school districts, and (iii) long-term debt for voter-
approved purposes.
Short-term debt for operating purposes is limited to an
amount not in excess of 15% of undedicated revenues received
during the preceding fiscal year and must be issued only to
meet obligations incurred pursuant to appropriation and
repaid during the fiscal year in which incurred. Such debt
does not require voter approval.
The amount of debt incurred by the State for the purpose of
making loans to school districts is recommended by the
Superintendent of Public Instruction, who certifies the
amounts necessary for loans to school districts for the
ensuing two calendar years. The bonds may be issued in
whatever amount required without voter approval. All other
general obligation bonds issued by the State must be
approved as to amount, purpose and method of repayment by a
two-thirds vote of each house of the Legislature and by a
majority vote of the public at a general election. There is
no limitation as to number or size of such general
obligation issues.
There are also various State authorities and special purpose
agencies created by the State which issue bonds secured by
specific revenues. Such debt is not a general obligation of
the State.
General Obligation Bonds and Notes and School Bond Loan Fund
The State has issued and outstanding general obligation full
faith and credit bonds for Water Resources, Environmental
Protection Program, Recreation Program and School Loan
purposes. As of September 30, 1994, the State had
approximately $386 million of general obligations bonds
outstanding.
The State may issue notes or bonds without voter approval
for the purposes of making loans to school districts. The
proceeds of such notes or bonds are deposited in the School
Bond Loan Fund maintained by the State Treasurer and used to
make loans to school districts for payment of debt on
qualified general obligations bonds issued by local school
districts. As of December 31, 1994, approximately $3,818
billion in principal amount of "qualified" bonds of local
school districts was outstanding.
As of September, 1994, the rating on State of Michigan
general obligation bonds was A by Moody's and AA by S&P.
There is no assurance that such ratings will continue for
any period of time or that such ratings will not be revised
or withdrawn. Because all or most of the Michigan Municipal
Obligations are revenue or general obligations of local
governments or authorities, rather than general obligations
of the State of Michigan itself, ratings on such Michigan
Municipal Obligations may be different from those given to
the State of Michigan.
APPENDIX C
As stated in the Prospectus, the Non-Money Market Funds may
enter into certain futures transactions. Such transactions
are described in this Appendix.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are
established in both the cash market and the futures market.
In the cash market, bonds are purchased and sold with
payment for the full purchase price of the bond being made
in cash, generally within five business days after the
trade. In the futures market, only a contract is made to
purchase or sell a bond in the future for a set price on a
certain date. Historically, the prices for bonds
established in the futures markets have tended to move
generally in the aggregate in concert with the cash market
prices and have maintained fairly predictable relationships.
Accordingly, a Fund may use interest rate futures contracts
as a defense, or hedge, against anticipated interest rate
changes and not for speculation. As described below, this
would include the use of futures contract sales to protect
against expected increases in interest rates and futures
contract purchases to offset the impact of interest rate
declines.
A Fund presently could accomplish a similar result to that
which it hopes to achieve through the use of futures
contracts by selling bonds with long maturities and
investing in bonds with short maturities when interest rates
are expected to increase, or conversely, selling short-term
bonds and investing in long-term bonds when interest rates
are expected to decline. However, because of the liquidity
that is often available in the futures market, the
protection is more likely to be achieved, perhaps at a lower
cost and without changing the rate of interest being earned
by the Fund, by using futures contracts.
Only the Income Funds and Municipal Bond Funds will utilize
interest rate futures contracts.
Description of Interest Rate Futures Contracts. An interest
rate futures contract sale would create an obligation by a
Fund, as seller, to deliver the specific type of financial
instrument called for in the contract at a specific future
time for a specified price. A futures contract purchase
would create an obligation by a Fund, as purchaser, to take
delivery of the specific type of financial instrument at a
specific future time at a specific price. The specific
securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date.
The determination would be in accordance with the rules of
the exchange on which the futures contract sale or purchase
was made.
Although interest rate futures contracts by their terms call
for actual delivery or acceptance of securities, in most
cases the contracts are closed out before the settlement
date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by the Fund
entering into a futures contract purchase for the same
aggregate amount of the specific type of financial
instrument and the same delivery date. If the price of the
sale exceeds the price of the offsetting purchase, the Fund
is immediately paid the difference and thus realizes a gain.
If the offsetting purchase price exceeds the sale price, the
Fund pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected
by the Fund entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Fund
realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges --
principally, the Chicago Board of Trade, the Chicago
Mercantile Exchange and the New York Futures Exchange. The
Funds would deal only in standardized contracts on
recognized exchanges. Each exchange guarantees performance
under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering
various financial instruments including long-term U.S.
Treasury Bonds and Notes; Government National Mortgage
Association (GNMA) modified pass-through mortgage backed
securities; three-month U.S. Treasury Bills; and ninety-day
commercial paper. The Funds may trade in any interest rate
futures contracts for which there exists a public market,
including, without limitation, the foregoing instruments.
II. Index Futures Contracts
General. A stock or bond index assigns relative values to
the stocks or bonds included in the index, which fluctuates
with changes in the market values of the stocks or bonds
included.
A Fund may sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that
might otherwise result from a market decline. A Fund may do
so either to hedge the value of its portfolio as a whole, or
to protect against declines, occurring prior to sales of
securities, in the value of the securities to be sold.
Conversely, a Fund will purchase index futures contracts in
anticipation of purchases of securities. A long futures
position may be terminated without a corresponding purchase
of securities.
In addition, a Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio
holdings. For example, in the event that a Fund expects to
narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a
more restricted index, such as an index comprised of
securities of a particular industry group. A Fund may also
sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of
the securities to be sold as part of the restructuring of
the portfolio will decline prior to the time of sale.
The Income Funds and Municipal Bond Funds will only utilize
bond index futures contracts and the Equity Funds will only
utilize equity index futures contracts.
III. Futures Contracts on Foreign Currencies
A futures contract on foreign currency creates a binding
obligation on one party to deliver, and a corresponding
obligation on another party to accept delivery of, a stated
quantity of foreign currency, for an amount fixed in U.S.
dollars. Foreign currency futures may be used by a Fund to
hedge against exposure to fluctuations in exchange rates
between the U.S. dollar and other currencies arising from
multinational transactions.
Only the International Growth Fund will utilize futures
contracts on foreign currencies.
IV. Margin Payments
Unlike purchase or sales of portfolio securities, no price
is paid or received by a Fund upon the purchase or sale of a
futures contract. Initially, a Fund will be required to
deposit with the broker or in a segregated account with the
Custodian an amount of cash or cash equivalents, known as
initial margin, based on the value of the contract. The
nature of initial margin in futures transactions is
different from that of margin in security transactions in
that futures contract margin does not involve the borrowing
of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance
bond or good faith deposit on the contract which is returned
to the Fund upon termination of the futures contract
assuming all contractual obligations have been satisfied.
Subsequent payments, called variation margin, to and from
the broker, will be made on a daily basis as the price of
the underlying instruments fluctuates making the long and
short positions in the futures contract more or less
valuable, a process known as marking-to-the-market. For
example, when a particular Fund has purchased a futures
contract and the price of the contract has risen in response
to a rise in the underlying instruments, that position will
have increased in value and the Fund will be entitled to
receive from the broker a variation margin payment equal to
that increase in value. Conversely, where the Fund has
purchased a futures contract and the price of the future
contract has declined in response to a decrease in the
underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin
payment to the broker. At any time prior to expiration of
the futures contract, Old Kent may elect to close the
position by taking an opposite position, subject to the
availability of a secondary market, which will operate to
terminate the Fund's position in the futures contract. A
final determination of variation margin is then made,
additional cash is required to be paid by or released to the
Fund, and the Fund realizes a loss or gain.
V. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of
futures by a Fund as a hedging device. One risk arises
because of the imperfect correlation between movements in
the price of the futures and movements in the price of the
instruments which are the subject of the hedge. The price
of the future may move more than or less than the price of
the instruments being hedged. If the price of the futures
moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective
but, if the price of the instruments being hedged has moved
in an unfavorable direction, the Fund would be in a better
position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable
direction, this advantage will be partially offset by the
loss on the futures. If the price of the futures moves more
than the price of the hedged instruments, the Fund involved
will experience either a loss or gain on the futures which
will not be completely offset by movements in the price of
the instruments which are the subject of the hedge. To
compensate for the imperfect correlation of movements in the
price of instruments being hedged and movements in the price
of futures contracts, a Fund may buy or sell futures
contracts in a greater dollar amount than the dollar amount
of instruments being hedged if the volatility over a
particular time period of the prices of such instruments has
been greater than the volatility over such time period of
the futures, or if otherwise deemed to be appropriate by Old
Kent. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of
the prices of the instruments being hedged is less than the
volatility over such time period of the futures contract
being used, or if otherwise deemed to be appropriate by Old
Kent. It is also possible that, where a Fund has sold
futures to hedge its portfolio against a decline in the
market, the market may advance and the value of instruments
held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a
decline in value in its portfolio securities.
When futures are purchased to hedge against a possible
increase in the price of securities or a currency before a
Fund is able to invest its cash (or cash equivalents) in an
orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest its cash
at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a
loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be
purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the futures and the instruments being hedged,
the price of futures may not correlate perfectly with
movement in the cash market due to certain market
distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second,
with respect to financial futures contracts, the liquidity
of the futures market depends on participants entering into
off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced
thus producing distortions. Third, from the point of view
of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price
distortion in the futures market, and because of the
imperfect correlation between the movements in the cash
market and movements in the price of futures, a correct
forecast of general market trends or interest rate movements
by the adviser may still not result in a successful hedging
transaction over a short time frame.
Positions in futures may be closed out only on an exchange
or board of trade which provides a secondary market for such
futures. Although the Funds intend to purchase or sell
futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of
trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to
close a futures investment position, and in the event of
adverse price movements, a Fund would continue to be
required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the
futures contract. However, as described above, there is no
guarantee that the price of the securities will in fact
correlate with the price movements in the futures contract
and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a
secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by
commodity exchanges which limit the amount of fluctuation in
a futures contract price during a single trading day. Once
the daily limit has been reached in the contract, no trades
may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house
equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of
normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover
excess variation margin payments.
Successful use of futures by a Fund is also subject to Old
Kent's ability to predict correctly movements in the
direction of the market. For example, if a particular Fund
has hedged against the possibility of a decline in the
market adversely affecting securities held by it and
securities prices increase instead, the Fund will lose part
or all of the benefit to the increased value of its
securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in
such situations, if the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising
market. A Fund may have to sell securities at a time when
it may be disadvantageous to do so.
VI. Options on Futures Contracts
A Fund may purchase and write options on the futures
contracts described above. A futures option gives the
holder, in return for the premium paid, the right to buy
(call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the
option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like
the buyer or seller of a futures contract, the holder, or
writer, of an option has the right to terminate its position
prior to the scheduled expiration of the option by selling,
or purchasing an option of the same series, at which time
the person entering into the closing transaction will
realize a gain or loss. A Fund will be required to deposit
initial margin and variation margin with respect to put and
call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above. Net
option premiums received will be included as initial margin
deposits. In anticipation of a decline in interest rates, a
Fund may purchase call options on futures contracts as a
substitute for the purchase of futures contracts to hedge
against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of
the securities held by a Fund is expected to decline as a
result of an increase in interest rates, the Fund might
purchase put options or sell call options on futures
contracts rather than sell futures contracts.
Investments in futures options involve some of the same
considerations that are involved in connection with
investments in futures contracts (for example, the existence
of a liquid secondary market). In addition, the purchase or
sale of an option also entails the risk that changes in the
value of the underlying futures contract will not correspond
to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less
risky than ownership of the futures contract or such
securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the
underlying futures contract. Compared to the purchase or
sale of futures contracts, however, the purchase of call or
put options on futures contracts may frequently involve less
potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract
involves risks similar to those risks relating to the sale
of futures contracts.
VII. Other Matters
Accounting for futures contracts will be in accordance with
generally accepted accounting principles.
THE KENT FUNDS
PART C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
Condensed Financial Highlights
Incorporated by Reference into Part B:
The following financial statements for the
fiscal year ended December 31, 1995 and the Report of
Independent Auditors dated February 9, 1996 are
incorporated by reference to the Registrant's Annual Report
for the fiscal year ended December 31, 1995:
Portfolio of Investments
Statements of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
Item 24(b) Exhibits:
(1) The form of Restated Declaration of Trust was filed
with the Registrant's Post-Effective Amendment No. 4 as
Exhibit 24(b)(1) and is incorporated by reference herein.
(2) A copy of the By-Laws was filed with Registrant's
Registration Statement as Exhibit 24(b)(2) and is
incorporated by reference herein. An amendment to the By-
Laws was filed with Registrant's Pre-Effective Amendment No.
1 as Exhibit 24 (b)(2) and is incorporated by reference
herein. A subsequent amendment to the By-Laws was filed
with Post-Effective Amendment No. 4 as Exhibit 24(b)(2) and
is incorporated by reference herein. An additional
amendment to the By-Laws was filed with Registrant's Post-
Effective Amendment No. 9 as Exhibit 24(b)(2) and is
incorporated by reference herein.
(3) Not applicable.
(4) Not applicable.
(5) A copy of the Investment Advisory Agreement between
Registrant and Old Kent Bank and Trust Company (now known as
Old Kent Bank) was filed with Registrant's Post-Effective
Amendment No. 4 as Exhibit 24(b)(5)(a). A copy of the First
Amendment to the Investment Advisory Agreement between
Registrant and Old Kent Bank and Trust Company was filed
with Registrant's Post-Effective Amendment No. 6 as Exhibit
24(b)(5)(a)(i) and is incorporated by reference herein. A
copy of the form of amended Schedule A to the First
Amendment to the Investment Advisory Agreement between
Registrant and Old Kent Bank and Trust Company relating to
The Kent Income Fund and The Kent Tax-Free Income Fund was
filed with Registrant's Post-Effective Amendment No. 14 as
Exhibit 24(b)(5)(ii) and is incorporated by reference
herein.
(6) A copy of the Distribution Agreement between
Registrant and 440 Financial Distributors, Inc., dated March
31, 1995, was filed with Registrant's Post-Effective
Amendment No. 16 as Exhibit 24(b)(6) and is incorporated by
reference herein.
(7) Not applicable.
(8) A copy of the Custody Agreement between Registrant and
Bankers Trust Company is filed herewith.
(9)(a) A copy of the Administration and Fund Accounting
Agreement between Registrant and The Shareholder Services
Group, Inc., d/b/a/ 440 Financial dated March 31, 1995, was
filed with Registrant's Post-Effective Amendment No. 16 as
Exhibit 24(b)(9)(a) and is incorporated by reference herein.
(9)(b) A copy of the Transfer Agency Agreement between
Registrant and The Shareholder Services Group, Inc., d/b/a/
440 Financial dated March 31, 1995, was filed with
Registrant's Post-Effective Amendment No. 16 as Exhibit
24(b)(9)(b) and is incorporated by reference herein.
(10) Opinion and Consent of Counsel as to the legality of
the securities being registered, indicating whether they
were legally issued, fully paid and nonassessable was filed
on or about February 29, 1996 under Rule 24f-2 as part of
Registrant's Rule 24f-2 Notice and is incorporated by
reference herein.
(11)(a) Powers of Attorney were filed with Registrant's
Post-Effective Amendment No. 17 as Exhibit 24(b) (11)(b) and
are incorporated by reference herein.
(11)(b) Opinion and Consent of Registrant's Independent
Auditors is filed herewith.
(12) Not applicable.
(13) A copy of the subscription agreement was filed with
the Registrant's Registration Statement as Exhibit 24(b)(13)
and is incorporated by reference herein.
(14) Not applicable.
(15) The forms of Registrant's Distribution Plans for The
Kent Money Market Fund and The Kent Michigan Municipal Money
Market Fund were filed with Post-Effective Amendment No. 4
as Exhibit 24(b)(15) and are incorporated by reference
herein. The forms of Registrant's Distribution Plans for
The Kent ValuePlus Equity Fund (now The Kent Growth and
Income Fund); The Kent International Equity Fund (now The
Kent International Growth Fund); The Kent Expanded Market
Equity Fund (now The Kent Small Company Growth Fund); The
Kent Index Equity Fund; The Kent Michigan Municipal Limited
Maturity Bond Fund (now The Kent Michigan Municipal Bond
Fund); The Kent Fixed Income Fund (now The Kent Intermediate
Bond Fund); The Kent Limited Maturity Fund (now The Kent
Short Term Bond Fund); and The Kent Medium Term Tax Exempt
Bond Fund (now The Kent Intermediate Tax-Free Fund) were
filed with Post-Effective Amendment No. 6 as Exhibit
24(b)(15) and are incorporated by reference herein. The
Distribution Plan for The Kent Limited Maturity Tax Exempt
Bond Fund (now The Kent Limited Term Tax-Free Fund) was
filed with Post-Effective Amendment No. 10 as Exhibit
24(b)(15) and is incorporated by reference herein. The
Distribution Plans for The Kent Income Fund and The Kent
Tax-Free Income Fund were filed with Post-Effective
Amendment No. 13 as Exhibit 24(b)(15) and are incorporated
by reference herein. A form of agreement with respect to
Investment Shares relating to each of the Distribution Plans
listed above was filed with Post-Effective Amendment No. 13
as Exhibit 24(b)(15)(i) and is incorporated by reference
herein.
(16) Schedules showing performance computations for The
Kent Money Market Fund, The Kent Michigan Municipal Money
Market Fund, The Kent Short Term Bond Fund (formerly The
Kent Limited Maturity Fund), The Kent Intermediate Bond Fund
(formerly The Kent Fixed Income Fund), The Kent Income Fund,
The Kent Limited Term Tax-Free Fund, The Kent Intermediate
Tax-Free Fund (formerly The Kent Medium Term Tax Exempt Bond
Fund), The Kent Tax-Free Income Fund, The Kent Michigan
Municipal Bond Fund (formerly The Kent Michigan Municipal
Limited Maturity Bond Fund), The Kent Growth and Income Fund
(formerly The Kent ValuePlus Equity Fund), The Kent Small
Company Growth Fund (formerly The Kent Expanded Market
Equity Fund), The Kent International Growth Fund (formerly
The Kent International Equity Fund) and The Kent Index
Equity Fund were filed with Registrant's Post-Effective
Amendment No. 17 as Exhibit 24(b) (16) and are incorporated
by reference herein.
(17) Financial Data Schedules for each series are filed
herewith.
(18) Rule 18f-3 Plan was filed with Registrant's Post-
Effective Amendment No. 17 as Exhibit 24(b)(18)(a) and is
incorporated by reference herein.
(19)(a) The Registrants Annual Report for The Kent
Growth and Income Fund, The Kent Small Company Growth Fund,
The Kent International Growth Fund and The Kent Index Equity
Fund are incorporated by reference to the Definitive N-30D
filed via EDGAR on February 26, 1996, Accession Number
0000950109-96-001056.
(19)(b) The Registrants Annual Report for The Kent
Money Market Fund and The Kent Michigan Municipal Money
Market Fund are incorporated by reference to the Definitive
N-30D filed via EDGAR on February 23, 1996, Accession Number
0000950109-96-001039.
(19)(c) The Registrants Annual Report for The Kent
Short Term Bond Fund, The Kent Intermediate Bond Fund and
The Kent Income Fund are incorporated by reference to the
Definitive N-30D filed via EDGAR on February 23, 1996,
Accession Number 0000950109-96-001049.
(19)(d) The Registrants Annual Report for 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 are incorporated by reference to the
Definitive N-30D filed via EDGAR on February 23, 1996,
Accession Number 0000950109-96-001047.
Item 25. Persons Controlled by or Under Common Control
with
Registrant
The Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities
Title of Series Number of
Record
Holders as of February 2, 1996
The Kent Money Market Fund
Shares of Beneficial Interest, 119
without par value
The Kent Michigan Municipal Money
Market Fund
Share of Beneficial Interest, 30
without par value
The Kent Limited Term Tax-Free Fund
Shares of Beneficial Interest, 6
without par value
The Kent Short Term Bond Fund
Shares of Beneficial Interest, 275
without par value
The Kent Intermediate Bond Fund
Shares of Beneficial Interest, 781
without par value
The Kent Intermediate Tax-Free Fund
Shares of Beneficial Interest 99
without par value
The Kent Michigan Municipal Bond Fund
Shares of Beneficial Interest, 31
without par value
The Kent Growth and Income Fund
Shares of Beneficial Interest, 1,978
without par value
The Kent Small Company Growth Fund
Shares of Beneficial Interest, without par value 2,372
The Kent International Growth Fund
Shares of Beneficial Interest, 1,868
without par value
The Kent Index Equity Fund
Shares of Beneficial Interest, 1,259
without par value
The Kent Income Fund
Shares of Beneficial Interest, 207
without par value
The Kent Tax-Free Income Fund
Shares of Beneficial Interest,
without par value 28
Item 27. Indemnification
See Article VIII of Section 3 of the Registrant's
Restated Declaration of Trust which was filed with Post-
Effective Amendment No. 4 as Exhibit 24(b)(1) and is
incorporated by reference herein.
Item 28. Business and Other Connections of Investment
Adviser
Directors and Principal Executive Officers
The Directors of Old Kent are Richard L. Antonini,
William P. Crawford, Robert L. Ellis, William Gonzales,
Erina Hanka, Robert L. Hooker, Fred P. Keller, Hendrik G.
Meijer, Patrick M. Quinn, Margaret Sellers Walker, Richard
E. Tierney, David J. Wagner (also Chairman of the Board and
Chief Executive Officer) and Robert L. Sadler (also
President).
The principal executive officers of Old Kent are:
David J. Wagner, Chairman; Robert L. Sadler, President and
Chief Executive Officer; David Dams, Edward P. Farley and
David Kerstein, Executive Vice Presidents; Martin J. Allen
Jr., Senior Vice President and Secretary; and Philip M.
Allen, Richard L. Arasmith, Thomas M. Bobrowski, Paul
Colombe, James Habertein, Larry Hull, John Erikson, Joseph
T. Keating, Janet Nisbett, R. Joy Palmer, Dennis W. Piskor,
Thomas E. Powell and Daniel Terpsma, Senior Vice Presidents.
POSITION WITH
NAME OLD KENT BANK OTHER BUSINESS
Richard L. Antonini Director
Chairman, President
and Chief
Executive Officer
Foremost
Corporation of
America
William P. Crawford Director
President and
Chief Executive
Officer of
Steelcase
Design
Partnership;
formerly,
President of
Stow & Davis
Robert L. Ellis Director
Retired
Robert L. Hooker Director President of
Great Lakes
Property
Inc.,
and
Interwheel,
Inc.
William G. Gonzales Director
President and
Chief Executive
Officer of
Butterworth
Hospital
Margaret Sellers-
Walker Director Public
Administration
Professor at
Grand Valley
State
University
John C. Camepa Director Consultant
at
Crowe Chizek
Fred P. Keller Director President of
Cascade
Engineering,
Inc., and
StarCade, Inc.;
Board Member
of Cascade
Associates
Hendrik G. Meijer Director Partner of
Morgan-Meijer
Communications;
Vice President
and Treasurer
of Flashes
Publishers,
Inc., and
Valley Media,
Inc.; Co-
Chairman of
Meijer, Inc.;
Treasurer of
Talking
Directories, Inc.
Patrick M. Quinn Director President
and Chief
Executive
Officer of
Spartan Stores,
Inc.
Richard E. Tierney Director Formerly,
President of
Smiths
Industries
David J. Wagner Chairman Trustee of
Blodgett
Memorial
Medical
Center, Grand
Valley
Foundation,
Grand Rapids
Foundation,
and Grand
Rapids
Chamber of
Commerce,
Autocam
Robert L. Sadler President,
Director
and Chief
Executive
Officer None
Marilyn J. Schlack Director President of
Kalamazoo
Valley
Community
Hospital
David Dams Executive
Vice President None
Edward P. Farley Executive Vice
President Director of
BHC Securities,
Inc.; Trustee of
St. Mary's
Hospital,
Ronald
McDonald
House and
University
Club Opera of
Grand Rapids
David Kerstein Executive Vice
President None
Martin J. Allen, Jr. Senior Vice
President and
Secretary Director of
Grand Rapids
Label Co.
Philip M. Allen Senior Vice
President Trustee of West
Michigan Shores Council
of Boy Scouts
of America
Richard Arasmith Senior Vice
President and
Branch Administrator None
Thomas Bobrowski Senior Vice President None
Larry Hull Senior Vice President None
Joseph T. Keating Senior Vice President
and Chief Investment
Officer Trustee of
Grace
Episcopal
Church
Endowment
Committee
James Haberlein Senior Vice President None
R. Jay Palmer Senior Vice President None
Daniel Terpsma Senior Vice President None
John Erickson Senior Vice President None
Janet Nisbett Senior Vice President None
Dennis W. Piskor Senior Vice President None
Paul Colombe Senior Vice President None
Thomas E. Powell Senior Vice President None
Allan J. Meyers Vice President and
Director of Fixed
Income Member of
Western
Michigan
Society
of Financial
Analysts;
formerly,
Director of
Western
Michigan
Society of
Financial
Analysts
Michael A. Petersen Vice President Member of
Western
Michigan
Society
of Financial
Analysts
Mitchell L. Stapley Vice President Member of The
Treasury
Management
Association of
Chicago
William A. Walker Vice President Trustee of
Trinity United
Methodist
Church
Item 29. Principal Underwriters
(a) In addition to The Kent Funds, 440 Financial
Distributors, Inc. (the "Distributor") currently acts as
distributor for The Galaxy Fund, The Galaxy VIP Fund, Galaxy
Fund II, BT Insurance Funds Trust and Armada Funds (formerly
known as NCC Funds). The Distributor is registered with the
Securities and Exchange Commission as a broker-dealer and is
a member of the National Association of Securities Dealers,
Inc. The Distributor is an indirect wholly-owned subsidiary
of First Data Corporation, 53 State Street, Mail Stop BOS
425, Boston, MA 02109.
(b) The information required by this Item 29(b) with
respect to each director, officer or partner of 440
Financial Distributors, Inc. is incorporated by reference to
Schedule A of Form BD filed by 440 Financial Distributors,
Inc. with the Securities and Exchange Commission pursuant to
the Securities Act of 1934 (File No. 8-45467).
(c) Not Applicable.
Item 30. Location of Accounts and Records
Each account, book or other document required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3
thereunder are maintained by Registrant at 440 Lincoln
Street, Worcester, Massachusetts 01653, except for
Registrant's minute books, which are maintained by Drinker
Biddle & Reath, 1345 Chestnut Street, Philadelphia,
Pennsylvania 19107.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not Applicable
(b) Registrant undertakes to furnish to each person
to whom a Prospectus is delivered with a copy of the
Registrant's latest Annual Report to shareholders, upon
request and without charge.
(c) Registrant hereby undertakes to call a meeting
of shareholders for the purpose of voting upon the question
of removal of a Trustee or Trustees of Registrant when
requested to do so by the holders of at least 10% of
Registrant's outstanding shares. Registrant undertakes
further, in connection with any such meeting, to comply with
the provisions of Section 16(c) of the Investment Company
Act of 1940, as amended, relating to communications with the
shareholders of certain common-law trusts.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the
City of Boston and Commonwealth of Massachusetts, on the
29th day of February, 1996.
THE KENT FUNDS
By: /s/William E. Small
William E. Small
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to the Registration Statement
has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
*
William E. Small President and Trustee February 29, 1996
/s/Louis J. Russo
Louis J. Russo Treasurer (Principal
Accounting and February 29, 1996
Financial Officer)
*
Anne T. Coughlan Trustee February 29, 1996
*
Joseph F. Damore Trustee February 29, 1996
*
James F. Rainey Trustee February 29, 1996
*
Ronald F. VanSteeland Trustee February 29, 1996
*By: /s/Elizabeth Russell
Elizabeth Russell
Attorney-in-Fact
*Elizabeth Russell, by signing her name hereto, does hereby
sign this document on behalf of each of the above-named
Trustees of the Trust pursuant to powers of attorney duly
executed by such persons.
EXHIBIT INDEX
Exhibit No. Description of Exhibit
8 A copy of the Custody Agreement
between Registrant and
Bankers Trust Company.
11(c) Opinion and Consent of Registrant's
Independent Auditors.
17 Financial Data Schedules for each
series.
The Investment Shares and the Institutional Shares of the Tax-Free Income
Fund commenced
operations on April, 1995 and March 20, 1995, respectively.
The Investment Shares and the
Institutional Shares of the Income Fund commenced operations on March 30, 1995.
Mutual Fund/Business Trust/Series
Exhibit No. 8
CUSTODIAN AGREEMENT
AGREEMENT dated as of October 25, 1995 between BANKERS
TRUST COMPANY (the "Custodian") and THE KENT FUNDS (the
"Customer").
WHEREAS, the Customer may be organized with one or
more series of shares, each of which shall represent an
interest in a separate portfolio of Securities and Cash
(each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being
hereafter referred to individually as a "Portfolio" and
collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian
as custodian on behalf of the Portfolios under the terms and
conditions set forth in this Agreement, and the Custodian
has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements herein contained, the parties
hereto agree as follows:
1. Employment of Custodian. The Customer hereby
employs the Custodian as custodian of all assets of each
Portfolio which are delivered to and accepted by the
Custodian or any Subcustodian (as that term is defined in
Section 4) (the "Property") pursuant to the terms and
conditions set forth herein. Without limitation, such
Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments
representing same or rights or obligations to receive,
purchase, deliver or sell same and other non-cash investment
property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency
("Cash"). The Custodian shall not be responsible for any
property of a Portfolio held or received by the Customer or
others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian
and Subcustodian Locations. Pursuant to Instructions, the
Customer shall direct the Custodian to (a) settle Securities
transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such
Securities is located, where such Securities are to be
presented for payment or where such Securities are acquired
and (b) maintain cash and cash equivalents in such countries
in amounts reasonably necessary to effect the Customer's
transactions in such Securities. Instructions to settle
Securities transactions in any country shall be deemed to
authorize the holding of such Securities and Cash in that
country.
3. Custody Account. The Custodian agrees to
establish and maintain one or more custody accounts on its
books each in the name of a Portfolio (each, an "Account")
for any and all Property from time to time received and
accepted by the Custodian or any Subcustodian for the
account of such Portfolio. Upon delivery by the Customer to
the Custodian of any Property belonging to a Portfolio, the
Customer shall, by Instructions (as hereinafter defined in
Section 14), specifically indicate which Portfolio such
Property belongs or if such Property belongs to more than
one Portfolio shall allocate such Property to the
appropriate Portfolio. The Custodian shall allocate such
Property to the Accounts in accordance with the
Instructions; provided that the Custodian shall have the
right, in its sole discretion, to refuse to accept any
Property that is not in proper form for deposit for any
reason. The Customer on behalf of each Portfolio,
acknowledges its responsibility as a principal for all of
its obligations to the Custodian arising under or in
connection with this Agreement, warrants its authority to
deposit in the appropriate Account any Property received
therefor by the Custodian or a Subcustodian and to give, and
authorize others to give, instructions relative thereto. The
Custodian may deliver securities of the same class in place
of those deposited in the Account.
The Custodian shall hold, keep safe and protect as
custodian for each Account, on behalf of the Customer, all
Property in such Account. All transactions, including, but
not limited to, foreign exchange transactions, involving the
Property shall be executed or settled solely in accordance
with Instructions (which shall specifically reference the
Account for which such transaction is being settled), except
that until the Custodian receives Instructions to the
contrary, the Custodian will:
(a) collect all interest and dividends and all other
income and payments, whether paid in cash or in kind, on the
Property, as the same become payable and credit the same to
the appropriate Account;
(b) present for payment all Securities held in an Account
which are called, redeemed or retired or otherwise become
payable and all coupons and other income items which call
for payment upon presentation to the extent that the
Custodian or Subcustodian is actually aware of such
opportunities and hold the cash received in such Account
pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary securities for those in definitive form and the
exchange of warrants, or other documents of entitlement to
securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than
ministerial exchanges described in (i) above) is received
for an Account, endeavor to receive Instructions, provided
that if such Instructions are not received in time for the
Custodian to take timely action, no action shall be taken
with respect thereto;
(d) whenever notification of a rights entitlement or a
fractional interest resulting from a rights issue, stock
dividend or stock split is received for an Account and such
rights entitlement or fractional interest bears an
expiration date, if after endeavoring to obtain Instructions
such Instructions are not received in time for the Custodian
to take timely action or if actual notice of such actions
was received too late to seek Instructions, sell in the
discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or
fractional interest and credit the Account with the net
proceeds of such sale;
(e) execute in the Customer's name for an Account,
whenever the Custodian deems it appropriate, such ownership
and other certificates as may be required to obtain the
payment of income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in
the nature of taxes imposed on interest, dividends or other
similar income on the Property in such Account by any
governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies,
the Custodian shall notify the Customer of the amount of the
shortfall and the Customer, at its option, may deposit
additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if
requested by the Custodian and required in connection with
the payment of any such taxes to cooperate with the
Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial
transactions involving the Securities described in (a) -
(f), including, without limitation, affiliates of the
Custodian or any Subcustodian.
4. Subcustodians and Securities Svstems. The
Customer authorizes and instructs the Custodian to hold the
Property in each Account in custody accounts which have been
established by the Custodian with (a) one of its U.S.
branches or another U.S. bank or trust company or branch
thereof located in the U.S. which is itself qualified under
the Investment Company Act of 1940, as amended ("1940 Act"),
to act as custodian (individually, a "U.S. Subcustodian"),
or a U.S. securities depository or clearing agency or system
in which the Custodian or a U.S. Subcustodian participates
(individually, a "U.S. Securities System") or (b) one of its
non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majorityowned subsidiary of a U.S. bank
or a non-U.S. bank or trust company, acting as custodian
(individually, a "non-U.S. Subcustodian"; U.S. Subcustodians
and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in
which the Custodian or any Subcustodian participates
(individually, a "non-U.S. Securities System"; U.S.
Securities System and non-U.S. Securities System,
collectively, Securities System"), provided that in each
case in which a U.S. Subcustodian or U.S. Securities System
is employed, each such Subcustodian or Securities System
shall have been approved by Instructions; provided further
that in each case in which a non-U.S. Subcustodian or
non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified
U.S. bank" as defined by Rule 17f-5 under the 1940 Act
("Rule 17f-5") or (ii) an "eligible foreign custodian"
within the meaning of Rule 1 7f-5 or such Subcustodian or
Securities System is the subject of an order granted by the
U.S. Securities and Exchange Commission ("SEC") exempting
such agent or the subcustody arrangements thereto from all
or part of the provisions of Rule 17f-5 and (b) the
agreement between the Custodian and such non-U.S.
Subcustodian has been approved by Instructions; it being
understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any
Subcustodian or Securities System has been proper under the
1940 Act or any rule or regulation thereunder.
Upon receipt of Instructions, the Custodian agrees to
cease the employment of any Subcustodian or Securities
System with respect to the Customer, and if desirable and
practicable, appoint a replacement subcustodian or
securities system in accordance with the provisions of this
Section. In addition, the Custodian may, at any time in its
discretion, upon written notification to the Customer,
terminate the employment of any Subcustodian or Securities
System.
Upon request of the Customer, the Custodian shall
deliver to the Customer annually a certificate stating: (a)
the identity of each non-U.S. Subcustodian and non-U.S.
Securities System then acting on behalf of the Custodian and
the name and address of the governmental agency or other
regulatory authority that supervises or regulates such
non-U.S Subcustodian and non-U.S. Securities System; (b) the
countries in which each non-U.S. Subcustodian or non-U.S.
Securities System is located; and (c) so long as Rule 17f-5
requires the Customer's Board of Trustees to directly
approve its foreign custody arrangements, such other
information relating to such non-U.S. Subcustodians and
non-U.S. Securities Systems as may reasonably be requested
by the Customer to ensure compliance with Rule 17f-5. So
long as Rule 17f-5 requires the Customer's Board of Trustees
to directly approve its foreign custody arrangements, the
Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and
non-U.S. Securities Systems similar in kind and scope as
that furnished to the Customer in connection with the
initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its
custodial activities, the Custodian has reason to believe
that any non-U.S. Subcustodian or non-U.S. Securities System
has ceased to be a qualified U.S. bank or an eligible
foreign custodian each within the meaning of Rule 1 7f-5 or
has ceased to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in
an Account which is maintained by the Custodian in the
custody of a Subcustodian employed pursuant to Section 4:
(a) The Custodian will identify on its books as belonging
to the Customer on behalf of a Portfolio, any Property held
by such Subcustodian.
(b) Any Property in the Account held by a Subcustodian
will be subject only to the instructions of the Custodian or
its agents.
(c) Property deposited with a Subcustodian will be
maintained in an account holding only assets for customers
of the Custodian.
(d) Any agreement the Custodian shall enter into with a
non-U.S. Subcustodian with respect to the holding of
Property shall require that (i) the Account will be
adequately indemnified or its losses adequately insured;
(ii) the Securities are not subject to any right, charge,
security interest, lien or claim of any kind in favor of
such Subcustodian or its creditors except a claim for
payment in accordance with such agreement for their safe
custody or administration and expenses related thereto,
(iii) beneficial ownership of such Securities be freely
transferable without the payment of money or value other
than for safe custody or administration and expenses related
thereto, (iv) adequate records will be maintained
identifying the Property held pursuant to such Agreement as
belonging to the Custodian, on behalf of its customers and
(v) to the extent permitted by applicable law, officers of
or auditors employed by, or other representatives of or
designated by, the Custodian, including the independent
public accountants of or designated by, the Customer be
given access to the books and records of such Subcustodian
relating to its actions under its agreement pertaining to
any Property held by it thereunder or confirmation of or
pertinent information contained in such books and records be
furnished to such persons designated by the Custodian.
6. Use of Securities System. With respect to
Property in the Account(s) which are maintained by the
Custodian or any Subcustodian in the custody of a Securities
System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be
required by its agreement with the Custodian to, identify on
its books such Property as being held for the account of the
Custodian or Subcustodian for its customers.
(b) Any Property held in a Securities System for the
account of the Custodian or a Subcustodian will be subject
only to the instructions of the Custodian or such
Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be
maintained in an account holding only assets for customers
of the Custodian or Subcustodian, as the case may be, unless
precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System.
7. Agents. The Custodian may at any time or times
in its sole discretion appoint (or remove) any other U.S.
bank or trust company which is itself qualified under the
1940 Act to act as custodian, as its agent to carry out such
of the provisions of this Agreement as the Custodian may
from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
8. Records. Ownership of Property. Statements.
Opinions of Independent Certified Public Accountants.
(a) The ownership of the Property whether Securities,
Cash and/or other property, and whether held by the
Custodian or a Subcustodian or in a Securities System as
authorized herein, shall be clearly recorded on the
Custodian's books as belonging to the appropriate Account
and not for the Custodian's own interest. The Custodian
shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions
for each Account. All accounts, books and records of the
Custodian relating thereto shall be open to inspection and
audit at all reasonable times during normal business hours
by any person designated by the Customer. All such accounts
shall be maintained and preserved in the form reasonably
requested by the Customer. The Custodian will supply to the
Customer from time to time, as mutually agreed upon, a
statement in respect to any Property in an Account held by
the Custodian or by a Subcustodian. In the absence of the
filing in writing with the Custodian by the Customer of
exceptions or objections to any such statement within sixty
(60) days of the mailing thereof, the Customer shall be
deemed to have approved such statement and in such case or
upon written approval of the Customer of any such statement,
such statement shall be presumed to be for all purposes
correct with respect to all information set forth therein.
(b) The Custodian shall take all reasonable action as
the Customer may request to obtain from year to year
favorable opinions from the Customer's independent certified
public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of
the Customer's Form N- I A and the Customer's Form N-SAR or
other periodic reports to the SEC and with respect to any
other requirements of the SEC.
(c) At the request of the Customer, the Custodian
shall deliver to the Customer a written report prepared by
the Custodian's independent certified public accountants
with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the
Custodian's accounting system, internal accounting control
and procedures for safeguarding Cash and Securities,
including Cash and Securities deposited and/or maintained in
a securities system or with a Subcustodian. Such report
shall be of sufficient scope and in sufficient detail as may
reasonably be required by the Customer and as may reasonably
be obtained by the Custodian.
(d) The Customer may elect to participate in any of
the electronic on-line service and communications systems
offered by the Custodian which can provide the Customer, on
a daily basis, with the ability to view on-line or to print
on hard copy various reports of Account activity and of
Securities and/or Cash being held in any Account. To the
extent that such service shall include market values of
Securities in an Account, the Customer hereby acknowledges
that the Custodian now obtains and may in the future obtain
information on such values from outside sources that the
Custodian considers to be reliable and the Customer agrees
that the Custodian (i) does not verify nor represent or
warrant either the reliability of such service nor the
accuracy or completeness of any such information furnished
or obtained by or through such service and (ii) shall be
without liability in selecting and utilizing such service or
furnishing any information derived therefrom.
9. Holding of Securities. Nominees. etc. Securities
in an Account which are held by the Custodian or any
Subcustodian may be held by such entity in the name of the
Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or
Subcustodian's nominee, or in bearer form. Securities that
are held by a Subcustodian or which are eligible for deposit
in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account
for the Custodian's or Subcustodian's customers, unless
prohibited by law, rule, or regulation. The Custodian or
Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates
of the same issue held by it as fiduciary or as a custodian.
In the event that any Securities in the name of the
Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee
are called for partial redemption by the issuer of such
Security, the Custodian may, subject to the rules or
regulations pertaining to allocation of any Securities
System in which such Securities have been deposited, allot,
or cause to be allotted, the called portion of the
respective beneficial holders of such class of security in
any manner the Custodian deems to be fair and equitable.
10. Proxies. etc. With respect to any proxies,
notices, reports or other communications relative to any of
the Securities in any Account, the Custodian shall perform
such services and only such services relative thereto as are
(i) set forth in Section 3 of this Agreement, (ii) described
in Exhibit B attached hereto (as such service therein
described may be in effect from time to time) (the "Proxy
Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and
responsibility of the Custodian in connection with the Proxy
Service referred to in (ii) of the immediately preceding
sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as
provided in (iii) of the immediately preceding sentence
shall be as set forth in the description of the Proxy
Service and as may be agreed upon by the Custodian and the
Customer in connection with the furnishing of any such
additional service and shall not be affected by any other
term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of
the Securities in an Account, execute any form of proxy to
vote thereon, or give any consent or take any action (except
as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in
complying with the requirements of the 1940 Act and the
rules and regulations thereunder, the Custodian shall, upon
receipt of Instructions, establish and maintain a segregated
account or accounts on its books for and on behalf of a
Portfolio.
12. Settlement Procedures. Securities will be
transferred, exchanged or delivered by the Custodian or a
Subcustodian upon receipt by the Custodian of Instructions
which include all information required by the Custodian.
Settlement and payment for Securities received for an
Account and delivery of Securities out of such Account may
be effected in accordance with the customary or established
securities trading or securities processing practices and
procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later
payment for such Securities from such purchaser or dealer,
as such practices and procedures may be modified or
supplemented in accordance with the standard operating
procedures of the Custodian in effect from time to time for
that jurisdiction or market. The Custodian shall not be
liable for any loss which results from effecting
transactions in accordance with the customary or established
securities trading or securities processing practices and
procedures in the applicable jurisdiction or market, so long
as the Custodian used reasonable care in effecting such
transactions.
Notwithstanding that the Custodian may settle
purchases and sales against, or credit income to, an
Account, on a contractual basis, as outlined in the
Investment Manager User Guide provided to the Customer by
the Custodian, the Custodian may, at its sole option,
reverse such credits or debits to the appropriate Account in
the event that the transaction does not settle, or the
income is not received in a timely manner, and the Customer
agrees to hold the Custodian harmless from any losses which
may result therefrom.
Except as otherwise may be agreed upon by the parties
hereto, the Custodian shall not be required to comply with
Instructions to settle the purchase of any Securities for an
Account unless there is sufficient Cash in such Account at
the time or to settle the sale of any Securities in such
Account unless such Securities are in deliverable form.
Notwithstanding the foregoing, if the purchase price of such
securities exceeds the amount of Cash in an Account at the
time of settlement of such purchase, the Custodian may, in
its sole discretion, but in no way shall have any obligation
to, permit an overdraft in such Account in the amount of the
difference solely for the purpose of facilitating the
settlement of such purchase of securities for prompt
delivery for such Account. The Customer agrees to
immediately repay the amount of any such overdraft in the
ordinary course of business and further agrees to indemnify
and hold the Custodian harmless from and against any and all
losses, costs, including, without limitation the cost of
funds, and expenses incurred in connection with such
overdraft. The Customer agrees that it will not use the
Account to facilitate the purchase of securities without
sufficient funds in the Account (which funds shall not
include the proceeds of the sale of the purchased
securities).
13. Permitted Transactions. The Customer agrees that
it will cause transactions to be made pursuant to this
Agreement only upon Instructions in accordance Section 14
and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities
at prices as confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or
otherwise become payable.
(c) In exchange for or upon conversion into other
securities alone or other securities and cash pursuant to
any plan or merger, consolidation, reorganization,
recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms
into other securities.
(e) Upon exercise of subscription, purchase or other
similar rights represented by Securities.
(f) For the payment of interest, taxes, management or
supervisory fees, distributions or operating expenses.
(g) In connection with any borrowings by the Customer
requiring a pledge of Securities, but only against receipt
of amounts borrowed.
(h) In connection with any loans, but only against receipt
of collateral as specified in Instructions which shall
reflect any restrictions applicable to the Customer.
(I) For the purpose of redeeming shares of the capital
stock of the Customer against delivery of the shares to be
redeemed to the Custodian, a Subcustodian or the Customer's
transfer agent.
(j) For the purpose of redeeming in kind shares of the
Customer against delivery of the shares to be redeemed to
the Custodian, a Subcustodian or the Customer's transfer
agent.
(k) For delivery in accordance with the provisions of any
agreement among the Customer, on behalf of a Portfolio, the
Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc., relating to
compliance with the rules of The Options Clearing
Corporation, the Commodities Futures Trading Commission and
of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions by the
Customer.
(l) For release of Securities to designated brokers under
covered call options, provided, however, that such
Securities shall be released only upon payment to the
Custodian of monies for the premium due and a receipt for
the Securities which are to be held in escrow. Upon exercise
of the option, or at expiration, the Custodian will receive
the Securities previously deposited from broker. The
Custodian will act strictly in accordance with Instructions
in the delivery of Securities to be held in escrow and will
have no responsibility or liability for any such Securities
which are not returned promptly when due other than to make
proper request for such return.
(m) For spot or forward foreign exchange transactions to
facilitate security trading or receipt of income from
Securities related transactions.
(n) Upon the termination of this Agreement as set forth in
Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no
obligation to verify the purpose for which a transaction is
being effected.
14. Instructions. The term "Instructions" means
instructions from the Customer in respect of any of the
Custodian's duties hereunder which have been received by the
Custodian at its address set forth in Section 21 below (i)
in writing (including, without limitation, facsimile
transmission) or by tested telex signed or given by such one
or more person or persons as the Customer shall have from
time to time authorized in writing to give the particular
class of Instructions in question and whose name and (if
applicable) signature and office address have been filed
with the Custodian, or (ii) which have been transmitted
electronically through an electronic on-line service and
communications system offered by the Custodian or other
electronic instruction system acceptable to the Custodian,
or (iii) a telephonic or oral communication by one or more
persons as the Customer shall have from time to time
authorized to give the particular class of Instructions in
question and whose name has been filed with the Custodian;
or (iv) upon receipt of such other form of instructions as
the Customer may from time to time authorize in writing and
which the Custodian has agreed in writing to accept.
Instructions in the form of oral communications shall be
confirmed by the Customer by tested telex or writing in the
manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral instructions prior to
the Custodian's receipt of such confirmation. Instructions
may relate to specific transactions or to types or classes
of transactions, and may be in the form of standing
instructions.
The Custodian shall have the right to assume in the
absence of notice to the contrary from the Customer that any
person whose name is on file with the Custodian pursuant to
this Section has been authorized by the Customer to give the
Instructions in question and that such authorization has not
been revoked. The Custodian may act upon and conclusively
rely on, without any liability to the Customer or any other
person or entity for any losses resulting therefrom, any
Instructions reasonably believed by it to be furnished by
the proper person or persons as provided above.
15. Standard of Care. The Custodian shall be
responsible for the performance of only such duties as are
set forth herein or contained in Instructions given to the
Custodian which are not contrary to the provisions of this
Agreement. The Custodian will use reasonable care with
respect to the safekeeping of Property in each Account and
in carrying out its obligations under this Agreement. So
long as and to the extent that it has exercised reasonable
care, the Custodian shall not be responsible for the title,
validity or genuineness of any Property or other property or
evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in
acting upon, and may conclusively rely on, without liability
for any loss resulting therefrom, any notice, request,
consent, certificate or other instrument reasonably believed
by it to be genuine and to be signed or furnished by the
proper party or parties, including, without limitation,
Instructions, and shall be indemnified by the Customer for
any losses, damages, costs and expenses (including, without
limitation, the reasonable fees and expenses of counsel)
incurred by the Custodian and arising out of action taken or
omitted with reasonable care by the Custodian hereunder or
under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian
to the same extent as if the Custodian committed such act
itself. With respect to a Securities System, the Custodian
shall only be responsible or liable for losses arising from
employment of such Securities System caused by the
Custodian's own failure to exercise reasonable care. In the
event of any loss to the Customer by reason of the failure
of the Custodian or a Subcustodian to utilize reasonable
care, the Custodian shall be liable to the Customer to the
extent of the Customer's actual damages at the time such
loss was discovered without reference to any special
conditions or circumstances. In no event shall the Custodian
be liable for any consequential or special damages. The
Custodian shall be entitled to rely, and may act, on advice
of counsel (who may be counsel for the Customer) on all
matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
In the event the Customer subscribes to an electronic
on-line service and communications system offered by the
Custodian, the Customer shall be fully responsible for the
security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the
initiation and application of continuing effective
safeguards with respect thereto and agree to defend and
indemnify the Custodian and hold the Custodian harmless from
and against any and all losses, damages, costs and expenses
(including the reasonable fees and expenses of counsel)
incurred by the Custodian as a result of any improper or
unauthorized use of such terminal by the Customer or by any
others.
All collections of funds or other property paid or
distributed in respect of Securities in an Account,
including funds involved in third-party foreign exchange
transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the
Custodian shall have no liability for any loss occasioned by
delay in the actual receipt of notice by the Custodian or by
a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect
of which the Custodian has agreed to take action as provided
in Section 3 hereof. The Custodian shall not be liable for
any loss resulting from, or caused by, or resulting from
acts of governmental authorities (whether de jure or de
facto), including, without limitation, nationalization,
expropriation, and the imposition of currency restrictions;
devaluations of or fluctuations in the value of currencies;
changes in laws and regulations applicable to the banking or
securities industry; market conditions that prevent the
orderly execution of securities transactions or affect the
value of Property; acts of war, terrorism, insurrection or
revolution; strikes or work stoppages; the inability of a
local clearing and settlement system to settle transactions
for reasons beyond the control of the Custodian; hurricane,
cyclone, earthquake, volcanic eruption, nuclear fusion,
fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of
any loss, damage or expense suffered by the Customer,
insofar as such loss, damage or expense arises from the
performance of the Custodian's duties hereunder by reason of
the Custodian's reliance upon records that were maintained
for the Customer by entities other than the Custodian prior
to the Custodian's employment under this Agreement.
The provisions of this Section shall survive
termination of this Agreement.
1 16. Investment Limitations and Legal or Contractual
Restrictions or Regulations. The Custodian shall not be
liable to the Customer and the Customer agrees to indemnify
the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its
nominees arising out of any violation of any investment
restriction or other restriction or limitation applicable to
the Customer or any Portfolio pursuant to any contract
(other than contracts to which the Custodian is a party) or
any law or regulation. The provisions of this Section shall
survive termination of this Agreement.
17. Fees and Expenses. The Customer agrees to pay to
the Custodian such compensation for its services pursuant to
this Agreement as may be mutually agreed upon in writing
from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the
performance of this Agreement, including (but without
limitation) legal fees as described herein and/or deemed
necessary in the judgment of the Custodian to keep safe or
protect the Property in the Account. The initial fee
schedule is attached hereto as Exhibit C. The Customer
hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other
governmental charges, and any expense related thereto, which
may be imposed, or assessed with respect to any Property in
an Account and also agrees to hold the Custodian, its
Subcustodians, and their respective nominees harmless from
any liability as a record holder of Property in such
Account. The provisions of this Section shall survive the
termination of this Agreement.
18. Tax Reclaims. With respect to withholding taxes
deducted and which may be deducted from any income received
from any Property in an Account, the Custodian shall perform
such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith
be subject to the standard of care set forth in such Exhibit
D. Such standard of care shall not be affected by any other
term of this Agreement.
l9. Amendment. Modifications. etc. No provision of
this Agreement may be amended, modified or waived except in
a writing signed by the parties hereto. No waiver of any
provision hereto shall be deemed a continuing waiver unless
it is so designated. No failure or delay on the part of
either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or
partial exercise of any power or right preclude any other or
further exercise thereof or the exercise of any other power
or right.
20. Termination. (a) Termination of Entire
Agreement. This Agreement may be terminated by the Customer
or the Custodian by ninety (90) days' written notice to the
other; provided that notice by the Customer shall specify
the names of the persons to whom the Custodian shall deliver
the Securities in each Account and to whom the Cash in such
Account shall be paid. If notice of termination is given by
the Custodian, the Customer shall, within ninety (90) days
following the giving of such notice, deliver to the
Custodian a written notice specifying the names of the
persons to whom the Custodian shall deliver the Securities
in each Account and to whom the Cash in such Account shall
be paid. In either case, the Custodian will deliver such
Securities and Cash to the persons so specified, after
deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 12, 17, and 23.
In addition, the Custodian may in its discretion withhold
from such delivery such Cash and Securities as may be
necessary to settle transactions pending at the time of such
delivery. The Customer grants to the Custodian a lien and
right of setoff against the Account and all Property held
therein from time to time in the full amount of the
foregoing obligations. If within ninety (90) days following
the giving of a notice of termination by the Custodian, the
Custodian does not receive from the Customer a written
notice specifying the names of the persons to whom the
Custodian shall deliver the Securities in each Account and
to whom the Cash in such Account shall be paid, the
Custodian, at its election, may deliver such Securities and
pay such Cash to a bank or trust company doing business in
the State of New York to be held and disposed of pursuant to
the provisions of this Agreement, or may continue to hold
such Securities and Cash until a written notice as aforesaid
is delivered to the Custodian, provided that the Custodian's
obligations shall be limited to safekeeping.
(b) Termination as to One or More Portfolios. This
Agreement may be terminated by the Customer or the Custodian
as to one or more Portfolios (but less than all of the
Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such
deleted Portfolios shall take effect ninety (90) days after
the date of such delivery, or such earlier time as mutually
agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a
termination of this Agreement only with respect to such
deleted Portfolio(s), shall be governed by the preceding
provisions of Section 20 as to the identification of a
successor custodian and the delivery of Cash and Securities
of the Portfolio(s) so deleted to such successor custodian,
and shall not affect the obligations of the Custodian and
the Customer hereunder with respect to the other Portfolios
set forth in Exhibit A, as amended from time to time.
21. Notices. Except as otherwise provided in this
Agreement, all requests, demands or other communications
between the parties or notices in connection herewith (a)
shall be in writing, hand delivered or sent by telex,
telegram, cable, facsimile or other means of electronic
communication agreed upon by the parties hereto addressed,
if to the Customer, to:
The Kent Funds
440 Lincoln Street
Worcester, MA 01653
Attn: Louis Russo
Phone: (508) 855-4214
Fax: (508) 853-3317
if to the Custodian, to:
Bankers Trust Company
16 Wall Street, 4th Floor
New York, NY 10005
Attn: Frank Fesette
Phone: (212) 618-2646
Fax: (212) 618-3052
or in either case to such other address as shall have been
furnished to the receiving party pursuant to the provisions
hereof and (b) shall! be deemed effective when received, or,
in the case of a telex, when sent to the proper number and
acknowledged by a proper answerback.
22. Several Obligations of the Portfolios. With
respect to any obligations of the Customer on behalf of each
Portfolio and each of its related Accounts arising out of
this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and
property of the Portfolio and such Accounts to which such
obligation relates as though the Customer had separately
contracted with the Custodian by separate written instrument
with respect to each Portfolio and its related Accounts.
23. Security for Payment. To secure payment of all
obligations due hereunder, the Customer hereby grants to
Custodian a continuing security interest in and right of
setoff against each Account and all Property held therein
from time to time in the full amount of such obligations;
provided that, if there is more than one Account and the
obligations secured pursuant to this Section can be
allocated to a specific Account or the Portfolio related to
such Account, such security interest and right of setoff
will be limited to Property held for that Account only and
its related Portfolio. Should the Customer fail to pay
promptly any amounts owed hereunder, Custodian shall be
entitled to use available Cash in the Account or applicable
Account, as the case may be, and to dispose of Securities in
the Account or such applicable Account as is necessary. In
any such case and without limiting the foregoing, Custodian
shall be entitled to take such other action(s) or exercise
such other options, powers and rights as Custodian now or
hereafter has as a secured creditor under the New York
Uniform Commercial Code or any other applicable law.
24. Representations and Warranties.
(a) The Customer hereby represents and warrants to
the Custodian that:
(i) the employment of the Custodian and the
allocation of fees, expenses and other charges to any
Account as herein provided, is not prohibited by law or any
governing documents or contracts to which the Customer is
subject;
(ii) the terms of this Agreement do not violate
any obligation by which the Customer is bound, whether
arising by contract, operation of law or otherwise;
(iii) this Agreement has been duly authorized by
appropriate action and when executed and delivered will be
binding upon the Customer and each Portfolio in accordance
with its terms; and
(iv) the Customer will deliver to the Custodian
such evidence of such authorization as the Custodian may
reasonably require, whether by way of a certified resolution
or otherwise.
(b) The Custodian hereby represents and warrants to
the Customer that:
(i) the terms of this Agreement do not violate
any obligation by which the Custodian is bound, whether
arising by contract, operation of law or otherwise;
(ii) this Agreement has been duly authorized by
appropriate action and when executed and delivered will be
binding upon the Custodian in accordance with its terms;
(iii) the Custodian will deliver to the Customer
such evidence of such authorization as the Customer may
reasonably require, whether by way of a certified resolution
or otherwise; and
(iv) Custodian is qualified as a custodian under
Section 26(a) of the 1940 Act and warrants that it will
remain so qualified or upon ceasing to be so qualified shall
promptly notify the Customer in writing.
25. Governing Law and Successors and Assigns. This
Agreement shall be governed by the law of the State of New
York and shall not be assignable by either party, but shall
bind the successors in interest of the Customer and the
Custodian.
26. Publicity. Customer shall furnish to Custodian
at its office referred to in Section 21 above, prior to any
distribution thereof, copies of any material prepared for
distribution to any persons who are not parties hereto that
refer in any way to the Custodian. Customer shall not
distribute or permit the distribution of such materials if
Custodian reasonably objects in writing within ten (10)
business days of receipt thereof (or such other time as may
be mutually agreed) after receipt thereof. The provisions of
this Section shall survive the termination of this
Agreement.
27. Representative Capacity and Binding Obligation.
A copy of the Declaration of Trust of the Customer is on
file with The Secretary of the Commonwealth of
Massachusetts, and notice is hereby given that this
Agreement is not executed on behalf of the Trustees of the
Customer as individuals, and the obligations of this
Agreement are not binding upon any of the Trustees, officers
or shareholders of the Customer individually but are binding
only upon the assets and property of the Portfolios.
The Custodian agrees that no shareholder, trustee or
of officer of the Customer may be held personally liable or
responsible for any obligations of the Customer arising out
of this Agreement.
28. Submission to Jurisdiction. Any suit, action or
proceeding arising out of this Agreement may be instituted
in any State or Federal court sitting in the City of New
York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive
jurisdiction of any such court in any such suit, action or
proceeding and waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the
laying of venue of any such suit, action or proceeding
brought in such a court and any claim that such suit, action
or proceeding was brought in an inconvenient forum.
29. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original. This Agreement shall become effective when one or
more counterparts have been signed and delivered by each of
the parties hereto.
30. Confidentiality. The parties hereto agree that
each shall treat confidentially the terms and conditions of
this Agreement and all information provided by each party to
the other regarding its business and operations. All
confidential information provided by a party hereto shall be
used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as
may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of
such providing party. The foregoing shall not be applicable
to any information that is publicly available when provided
or thereafter becomes publicly available other than through
a breach of this Agreement, or that is required or requested
to be disclosed by any bank or other regulatory examiner of
the Custodian, Customer, or any Subcustodian, any auditor of
the parties hereto, by judicial or administrative process or
otherwise by applicable law or regulation.
31. Severabilitv. If any provision of this Agreement
is determined to be invalid or unenforceable, such
determination shall not affect the validity or
enforceability of any other provision of this Agreement.
32. Headings. The headings of the paragraphs hereof
are included for convenience of reference only and do not
form a part of this Agreement.
THE KENT FUNDS
By: /s/ Thomas P. Cunningham
Name: Thomas P.Cunningham,
Title: Treasurer
BANKERS TRUST COMPANY
By: /s/ Joseph W. Sarbinowski
Name:Joseph W. Sarbinowski
Title:Vice President
EXHIBIT A
To Custodian Agreement dated as of October 25, 1995 between
Bankers Trust Company and The Kent Funds.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in
the first WHEREAS clause of the above-referred to Custodian
Agreement. Terms used herein as defined terms unless
otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Kent Growth and Income Fund
Kent Small Company Growth Fund
Kent International Growth Fund
Kent Index Equity Fund
Kent Short Term Bond Fund
Kent Intermediate Bond Fund
Kent Limited Term Tax-Free Fund
Kent Intermediate Tax-Free Fund
Kent Michigan Municipal Bond Fund
Kent Money Market Fund
Kent Michigan Municipal Money Market Fund
Kent Income Fund
Kent Tax-Free Income Fund
Dated as of: THE KENT FUNDS
By: /s/ Thomas P. Cunningham
Name: Thomas P. Cunningham
Title: Treasurer
BANKERS TRUST COMPANY
By: /s/ Joseph W. Sarbinowski
Name: Joseph W. Sarbinowski
Title: Vice President
EXHIBIT B
To Custodian Agreement dated as of October 25, 1995
between Bankers Trust Company and The Kent Funds.
PROXY SERVICE
The following is a description of the Proxy Service
referred to in Section 10 of the above referred to Custodian
Agreement. Terms used herein as defined terms shall have the
meanings ascribed to them therein l]unless otherwise defined
below.
The Custodian provides a service, described below, for
the transmission of corporate communications in connection
with shareholder meetings relating to Securities held in
Argentina, Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland,
Italy, Japan, Korea, Malaysia, Mexico, Netherlands, New
Zealand, Pakistan, Poland, Singapore, South Africa, Spain,
Sri Lanka, Sweden, United Kingdom, United States, and
Venezuela. For the United States and Canada, the term
"corporate communications" means the proxy statements or
meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries
other than the United States and Canada, the term "corporate
communications" means the meeting agenda only and does not
include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in
connection with such meeting. Non-meeting related corporate
communications are not included in the transmission service
to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and
translating meeting agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in
the English language, and if the language of such agenda is
in the official language of the country in which the related
security is held, the Custodian will as soon as practicable
after receipt of the original meeting agenda by a
Subcustodian provide an English translation prepared by that
Subcustodian
2) If an English translation of the meeting agenda is
furnished, the local language agenda will not be furnished
unless requested.
Translations will be free translations and neither the
Custodian nor any Subcustodian will be liable or held
responsible for the accuracy thereof or any direct or
indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be
taken based thereon.
If requested, the Custodian will, on a reasonable
efforts basis, endeavor to obtain any additional corporate
communication such as annual or interim reports, proxy
statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that
regard, upon receipt by the Custodian of notice from a
Subcustodian, the Custodian will provide a notice to the
Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place
effectively and efficiently. As voting procedures will vary
from market to market, attention to any required procedures
will be very important.
Upon timely receipt of voting instructions, the
Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not
timely received, the Custodian shall have no liability or
obligation to take any action.
For Securities held in markets other than those set
forth in the first paragraph, the Custodian will not furnish
the material described above or seek voting instructions.
However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a
reasonable efforts basis without any assurance that such
rights will be so exercised at such meeting.
If the Custodian or any Subcustodian incurs
extraordinary expenses in exercising voting rights related
to any Securities pursuant to appropriate instructions or
direction (e.g., by way of illustration only and not by way
of limitation, physical presence is required at a meeting
and/or travel expenses are incurred), such expenses will be
reimbursed out of the Account containing such Securities
unless other arrangements have been made for such
reimbursement.
It is the intent of the Custodian to expand the Proxy
Service to include jurisdictions which are not currently
included as set forth in the second paragraph hereof. The
Custodian will notify the Customer as to the inclusion of
additional countries or deletion of existing countries after
their inclusion or deletion and this Exhibit B will be
deemed to be automatically amended to include or delete such
countries as the case may be.
Dated as of: THE KENT FUNDS
By: /s/ Thomas P. Cunningham
Name: Thomas P. Cunningham
Title: Treasurer
BANKERS TRUST COMPANY
By: /s/ Joseph W. Sarbinowski
Name: Joseph W. Sarbinowski
Title: VicePresident
EXHIBIT D
To Custodian Agreement dated as of October 25, 1995
between Bankers Trust Company and The Kent Funds.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to
Custodian Agreement, the Custodian shall perform the
following services with respect to withholding taxes imposed
or which may be imposed on income from Property in any
Account. Terms used herein as defined terms shall unless
otherwise defined have the meanings ascribed to them in the
above referred to Custodian Agreement.
When withholding tax has been deducted with respect to
income from any Property in an Account, the Custodian will
actively pursue on a reasonable efforts basis the reclaim
process, provided that the Custodian shall not be required
to institute any legal or administrative proceeding against
any Subcustodian or other person. The Custodian will provide
fully detailed advices/vouchers to support reclaims
submitted to the local authorities by the Custodian or its
designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from
withholding at the source can be obtained in the future, the
Custodian will notify the Customer and advise what
documentation, if any, is required to obtain the exemption.
Upon receipt of such documentation from the Customer, the
Custodian will file for exemption on the Customer's behalf
and notify the Customer when it has been obtained.
In connection with providing the foregoing service,
the Custodian shall be entitled to apply categorical
treatment of the Customer according to the Customer's
nationality, the particulars of its organization and other
relevant details that shall be supplied by the Customer. It
shall be the duty of the Customer to inform the Custodian of
any change in the organization, domicile or other relevant
fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the
beneficiary of any special ruling or treatment not
applicable to the general nationality and category or entity
of which the Customer is a part under general laws and
treaty provisions. The Custodian may rely on any such
information provided by the Customer.
In connection with providing the foregoing service,
the Custodian may also rely on professional tax services
published by a major international accounting firm and/or
advice received from a Subcustodian in the jurisdictions in
question. In addition, the Custodian may seek the advice of
counsel or other professional tax advisers in such
jurisdictions. The Custodian is entitled to rely, and may
act, on information set forth in such services and on advice
received from a Subcustodian, counsel or other professional
tax advisers and shall be without liability to the Customer
for any action reasonably taken or omitted pursuant to
information contained in such services or such advice.
Dated as of: THE KENT FUNDS
By: /s/ Thomas P. Cunningham
Name: Thomas P. Cunningham
Title: Treasurer
BANKERS TRUST COMPANY
By: /s/ Joseph W. Sarbinowki
Name: Joseph W. Sarbinowski
Title: Vice President
Bankers Trust Company
Custody
Appendix A - Fee Schedule
Global
1. Annual Asset Fee (based on mkt value per annum)
TIER I 2 Basis Points
Cedel (Eurobonds)
Euroclear (Eurobonds)
TIER II 6 Basis Points
Canada
Germany
Italy ($50 transaction fee)
Japan
United Kingdom
TIER III 7 Basis Points
Australia Netherlands
Austria ($50 per New Zealand
transaction) ($50 per transaction)
Belgium Norway ($50 per
transaction)
Denmark ($50 per Switzerland
transaction)
France Sweden
Ireland
TIER IV 10 Basis Points
Hong Kong - ($60 per transaction)
Indonesia
Luxembourg
Malaysia
Mexico
Philippines
Singapore
South Africa
Spain
Thailand
Fee Schedule
Tier V
Country Annual Receive and Deliver
Asset Fee Transactions
Argentina 40 Basis Points $150
Brazil 40 Basis Points $100
Chile 30 Basis Points $100
Columbia 30 Basis Points $100
Finland 15 Basis Points $100
Greece 40 Basis Points 20 Basis Points
Israel 25 Basis Points $50
Pakistan 30 Basis Points $150
Peru 50 Basis Points $100
Portugal 15 Basis Points $100
Shenzen/Shanghai 30 Basis Points $100
South Korea 15 Basis Points $100
Sri Lanka 30 Basis Points $100
Taiwan 15 Basis Points $100
Turkey 30 Basis Points $100
Venezuela 30 Basis Points $100
2. Account Charge - $0 Per Account (Per Month)
3. Trades - Receive and Deliver Transactions
$30
For Tier I, II, III (unless noted)
Tier IV (unless noted)
$75
4. Front End System Free of Charge
Notes
1. Fees are billed monthly
2. Fees for the receipt of positions relating to the initial asset transition
will be
waived with the exception of the United Kingdom, Spain and Indonesia where
registration fees will be assessed.
3. Cash movements will be assessed at $25 per U.S. wire movement and $50 per
non U.S. wire movement. For FX trades concluded with BTCo., this charge
will be
waived.
4. Fees for investment in countries not listed will be negotiated
Date: April 7, 1993
BANKERS TRUST COMPANY
Appendix A
DOMESTIC CUSTODY FEE SCHEDULE
Activity Monthly Holding
Charge per issue
DTC $1.00
FBE $1.00
PTC $1.00
Physical $2.40
*Eurobonds Market Value 20 Basis Points
Blue Sheet $2.40
Private Placements $2.40
Activity Per Transaction
Reorg $4.50
DTC $4.50
FBE $6.00
PTC $6.00
Physical $15.00
Euroclear/Codel $30.00
Wires (P&I, Privates, etc.) $6.50
Activity Miscellaneous
Fed Wire In $7.50
Fed Wire Out $7.50
*2.0 basis points reflects an annualized charge.
Exhibit No. 11(c)
Consent of Independent Auditors
The Trustees
The Kent Funds
We consent to the use of our reports dated February 9, 1996
included herein and to the references to our firm under the
headings "Financial Highlights" in the prospectuses and
"CUSTODIAN, AUDITORS AND COUNSEL" in the statement of
additional information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
February 29, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 4
<NAME> THE KENT INDEX EQUITY FUND INSTIT. CLASS
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<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 145,189,404
<INVESTMENTS-AT-VALUE> 191,419,285
<RECEIVABLES> 425,254
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,844,539
<PAYABLE-FOR-SECURITIES> 60,075
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,295,875
<TOTAL-LIABILITIES> 1,355,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,407,110
<SHARES-COMMON-STOCK> 14,644,086
<SHARES-COMMON-PRIOR> 22,995,765
<ACCUMULATED-NII-CURRENT> 51,864
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,843,059
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 46,186,556
<NET-ASSETS> 183,876,862
<DIVIDEND-INCOME> 5,631,870
<INTEREST-INCOME> 56,069
<OTHER-INCOME> 0
<EXPENSES-NET> 1,188,517
<NET-INVESTMENT-INCOME> 4,499,422
<REALIZED-GAINS-CURRENT> 17,814,316
<APPREC-INCREASE-CURRENT> 44,448,727
<NET-CHANGE-FROM-OPS> 66,762,465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,347,671
<DISTRIBUTIONS-OF-GAINS> 25,081,995
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 56,866,010
<NUMBER-OF-SHARES-REDEEMED> 172,291,970
<SHARES-REINVESTED> 18,021,509
<NET-CHANGE-IN-ASSETS> (59,797,791)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9,809,027
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 634,175
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,206,079
<AVERAGE-NET-ASSETS> 206,110,341
<PER-SHARE-NAV-BEGIN> 10.68
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> 3.44
<PER-SHARE-DIVIDEND> .25
<PER-SHARE-DISTRIBUTIONS> 1.57
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.56
<EXPENSE-RATIO> .56
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<AVG-DEBT-PER-SHARE> 0
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<NAME> THE KENT INDEX EQUITY FUND INV. CLASS
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<INVESTMENTS-AT-COST> 145,189,404
<INVESTMENTS-AT-VALUE> 191,419,285
<RECEIVABLES> 425,254
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 191,844,539
<PAYABLE-FOR-SECURITIES> 60,075
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,295,875
<TOTAL-LIABILITIES> 1,355,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,407,110
<SHARES-COMMON-STOCK> 525,856
<SHARES-COMMON-PRIOR> 442,701
<ACCUMULATED-NII-CURRENT> 51,864
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,843,059
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 46,186,556
<NET-ASSETS> 6,611,727
<DIVIDEND-INCOME> 5,631,870
<INTEREST-INCOME> 56,069
<OTHER-INCOME> 0
<EXPENSES-NET> 1,188,517
<NET-INVESTMENT-INCOME> 4,499,422
<REALIZED-GAINS-CURRENT> 17,814,316
<APPREC-INCREASE-CURRENT> 44,448,727
<NET-CHANGE-FROM-OPS> 66,762,465
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 99,887
<DISTRIBUTIONS-OF-GAINS> 698,289
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,824,094
<NUMBER-OF-SHARES-REDEEMED> 1,507,491
<SHARES-REINVESTED> 755,434
<NET-CHANGE-IN-ASSETS> (59,797,791)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9,809,027
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 634,175
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,206,079
<AVERAGE-NET-ASSETS> 5,281,456
<PER-SHARE-NAV-BEGIN> 10.70
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> 3.44
<PER-SHARE-DIVIDEND> .23
<PER-SHARE-DISTRIBUTIONS> 1.57
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.57
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> KENT INCOME INST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 116,307,979
<INVESTMENTS-AT-VALUE> 125,443,534
<RECEIVABLES> 2,566,452
<ASSETS-OTHER> 90,301
<OTHER-ITEMS-ASSETS> 7,879
<TOTAL-ASSETS> 128,108,166
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90,758
<TOTAL-LIABILITIES> 90,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,754,837
<SHARES-COMMON-STOCK> 11,626,340
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 100,052
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,026,964
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,135,555
<NET-ASSETS> 126,056,385
<DIVIDEND-INCOME> 371,177
<INTEREST-INCOME> 7,590,800
<OTHER-INCOME> 0
<EXPENSES-NET> 963,149
<NET-INVESTMENT-INCOME> 6,998,828
<REALIZED-GAINS-CURRENT> 3,044,746
<APPREC-INCREASE-CURRENT> 9,135,555
<NET-CHANGE-FROM-OPS> 19,179,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,835,136
<DISTRIBUTIONS-OF-GAINS> 1,002,058
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 188,610,553
<NUMBER-OF-SHARES-REDEEMED> 74,962,453
<SHARES-REINVESTED> 1,224,206
<NET-CHANGE-IN-ASSETS> 128,017,408
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 632,086
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 963,149
<AVERAGE-NET-ASSETS> 132,727,136
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.92
<PER-SHARE-DIVIDEND> 0.54
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.84
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 116,307,979
<INVESTMENTS-AT-VALUE> 125,443,534
<RECEIVABLES> 2,566,452
<ASSETS-OTHER> 90,301
<OTHER-ITEMS-ASSETS> 7,879
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<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90,758
<TOTAL-LIABILITIES> 90,758
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116,754,837
<SHARES-COMMON-STOCK> 181,277
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 100,052
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,026,964
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,135,555
<NET-ASSETS> 1,961,023
<DIVIDEND-INCOME> 371,177
<INTEREST-INCOME> 7,590,800
<OTHER-INCOME> 0
<EXPENSES-NET> 963,149
<NET-INVESTMENT-INCOME> 6,998,828
<REALIZED-GAINS-CURRENT> 3,044,746
<APPREC-INCREASE-CURRENT> 9,135,555
<NET-CHANGE-FROM-OPS> 19,179,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 63,640
<DISTRIBUTIONS-OF-GAINS> 15,724
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,951,033
<NUMBER-OF-SHARES-REDEEMED> 139,833
<SHARES-REINVESTED> 71,331
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<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0.52
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> 1.14
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<SERIES>
<NUMBER> 3
<NAME> THE KENT GROWTH AND INCOME FUND INST. CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 354,037,056
<INVESTMENTS-AT-VALUE> 417,319,936
<RECEIVABLES> 1,043,296
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 418,363,232
<PAYABLE-FOR-SECURITIES> 3,816,650
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,095,990
<TOTAL-LIABILITIES> 5,912,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 334,342,303
<SHARES-COMMON-STOCK> 30,286,188
<SHARES-COMMON-PRIOR> 29,410,757
<ACCUMULATED-NII-CURRENT> 93,922
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,731,487
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,282,880
<NET-ASSETS> 401,371,168
<DIVIDEND-INCOME> 12,667,924
<INTEREST-INCOME> 35,130
<OTHER-INCOME> 0
<EXPENSES-NET> 3,265,835
<NET-INVESTMENT-INCOME> 9,437,219
<REALIZED-GAINS-CURRENT> 29,244,811
<APPREC-INCREASE-CURRENT> 64,996,671
<NET-CHANGE-FROM-OPS> 103,678,701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,117,562
<DISTRIBUTIONS-OF-GAINS> 15,389,908
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 135,405,690
<NUMBER-OF-SHARES-REDEEMED> 130,005,699
<SHARES-REINVESTED> 10,602,239
<NET-CHANGE-IN-ASSETS> 412,450,592
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,295,869
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,427,434
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,265,835
<AVERAGE-NET-ASSETS> 337,840,873
<PER-SHARE-NAV-BEGIN> 10.50
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> 3.28
<PER-SHARE-DIVIDEND> .33
<PER-SHARE-DISTRIBUTIONS> .53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.25
<EXPENSE-RATIO> .94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> THE KENT GROWTH AND INCOME FUND INV
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 354,037,056
<INVESTMENTS-AT-VALUE> 417,319,936
<RECEIVABLES> 1,043,296
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 418,363,232
<PAYABLE-FOR-SECURITIES> 3,816,650
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,095,990
<TOTAL-LIABILITIES> 5,912,640
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 334,342,303
<SHARES-COMMON-STOCK> 840,180
<SHARES-COMMON-PRIOR> 765,647
<ACCUMULATED-NII-CURRENT> 93,922
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 14,731,487
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,282,880
<NET-ASSETS> 11,079,424
<DIVIDEND-INCOME> 12,667,924
<INTEREST-INCOME> 35,130
<OTHER-INCOME> 0
<EXPENSES-NET> 3,265,835
<NET-INVESTMENT-INCOME> 9,437,219
<REALIZED-GAINS-CURRENT> 29,244,811
<APPREC-INCREASE-CURRENT> 64,996,671
<NET-CHANGE-FROM-OPS> 103,678,701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 225,735
<DISTRIBUTIONS-OF-GAINS> 419,285
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,791,139
<NUMBER-OF-SHARES-REDEEMED> 2,331,168
<SHARES-REINVESTED> 632,130
<NET-CHANGE-IN-ASSETS> 95,620,542
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,295,869
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,427,434
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,265,835
<AVERAGE-NET-ASSETS> 8,935,404
<PER-SHARE-NAV-BEGIN> 10.46
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 3.26
<PER-SHARE-DIVIDEND> .30
<PER-SHARE-DISTRIBUTIONS> .53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.19
<EXPENSE-RATIO> 1.18
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> KENT INTERMEDIATE BOND INV
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 834,733,361
<INVESTMENTS-AT-VALUE> 850,261,193
<RECEIVABLES> 12,175,698
<ASSETS-OTHER> 820,800
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 863,257,691
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,595,340
<TOTAL-LIABILITIES> 1,595,340
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 842,661,349
<SHARES-COMMON-STOCK> 676,709
<SHARES-COMMON-PRIOR> 987,059
<ACCUMULATED-NII-CURRENT> 1,014,509
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,458,661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,527,832
<NET-ASSETS> 6,861,848
<DIVIDEND-INCOME> 2,436,831
<INTEREST-INCOME> 60,516,832
<OTHER-INCOME> 0
<EXPENSES-NET> 6,668,962
<NET-INVESTMENT-INCOME> 56,284,701
<REALIZED-GAINS-CURRENT> 26,073,254
<APPREC-INCREASE-CURRENT> 51,247,235
<NET-CHANGE-FROM-OPS> 133,605,190
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 405,376
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,885,896
<NUMBER-OF-SHARES-REDEEMED> 5,091,486
<SHARES-REINVESTED> 327,205
<NET-CHANGE-IN-ASSETS> (125,399,502)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 649,785
<OVERDIST-NET-GAINS-PRIOR> 23,614,593
<GROSS-ADVISORY-FEES> 4,765,284
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,668,962
<AVERAGE-NET-ASSETS> 6,537,556
<PER-SHARE-NAV-BEGIN> 9.32
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.82
<PER-SHARE-DIVIDEND> 0.61
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.14
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> KENT INTERMEDIATE BOND INST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 834,733,361
<INVESTMENTS-AT-VALUE> 850,261,193
<RECEIVABLES> 12,175,698
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 863,257,691
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<OTHER-ITEMS-LIABILITIES> 1,595,340
<TOTAL-LIABILITIES> 1,595,340
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 842,661,349
<SHARES-COMMON-STOCK> 84,468,388
<SHARES-COMMON-PRIOR> 105,209,125
<ACCUMULATED-NII-CURRENT> 1,014,509
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<ACCUMULATED-NET-GAINS> 2,458,661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,527,832
<NET-ASSETS> 854,800,503
<DIVIDEND-INCOME> 2,436,831
<INTEREST-INCOME> 60,516,832
<OTHER-INCOME> 0
<EXPENSES-NET> 6,668,962
<NET-INVESTMENT-INCOME> 56,284,701
<REALIZED-GAINS-CURRENT> 26,073,254
<APPREC-INCREASE-CURRENT> 51,247,235
<NET-CHANGE-FROM-OPS> 133,605,190
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<NUMBER-OF-SHARES-SOLD> 245,393,454
<NUMBER-OF-SHARES-REDEEMED> 473,921,393
<SHARES-REINVESTED> 27,671,824
<NET-CHANGE-IN-ASSETS> (125,399,502)
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 649,785
<OVERDIST-NET-GAINS-PRIOR> 23,614,593
<GROSS-ADVISORY-FEES> 4,765,284
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,668,962
<AVERAGE-NET-ASSETS> 859,877,762
<PER-SHARE-NAV-BEGIN> 9.29
<PER-SHARE-NII> 0.65
<PER-SHARE-GAIN-APPREC> 0.81
<PER-SHARE-DIVIDEND> 0.63
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> THE KENT INTERNATIONAL GROWTH FUND INSTIT. CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 248,173,149
<INVESTMENTS-AT-VALUE> 298,699,315
<RECEIVABLES> 737,483
<ASSETS-OTHER> 8,990
<OTHER-ITEMS-ASSETS> 0
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 5,352,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 244,279,049
<SHARES-COMMON-STOCK> 20,203,234
<SHARES-COMMON-PRIOR> 13,647,849
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 506,545
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 212,212
<ACCUM-APPREC-OR-DEPREC> 50,532,804
<NET-ASSETS> 286,544,897
<DIVIDEND-INCOME> 4,398,909
<INTEREST-INCOME> 589,991
<OTHER-INCOME> 0
<EXPENSES-NET> 2,328,122
<NET-INVESTMENT-INCOME> 2,660,778
<REALIZED-GAINS-CURRENT> 4,306,686
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<DISTRIBUTIONS-OF-GAINS> 4,858,921
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<NUMBER-OF-SHARES-SOLD> 151,546,595
<NUMBER-OF-SHARES-REDEEMED> 64,667,292
<SHARES-REINVESTED> 4,756,128
<NET-CHANGE-IN-ASSETS> 109,368,595
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,483,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,328,122
<AVERAGE-NET-ASSETS> 191,360,317
<PER-SHARE-NAV-BEGIN> 13.06
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 1.54
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.18
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> THE KENT INTERNATIONAL GROWTH FUND INV. CLASS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 248,173,149
<INVESTMENTS-AT-VALUE> 298,699,315
<RECEIVABLES> 737,483
<ASSETS-OTHER> 8,990
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<TOTAL-LIABILITIES> 5,352,692
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 244,279,049
<SHARES-COMMON-STOCK> 534,190
<SHARES-COMMON-PRIOR> 502,942
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 212,212
<ACCUM-APPREC-OR-DEPREC> 50,532,804
<NET-ASSETS> 7,548,199
<DIVIDEND-INCOME> 4,398,909
<INTEREST-INCOME> 589,991
<OTHER-INCOME> 0
<EXPENSES-NET> 2,328,122
<NET-INVESTMENT-INCOME> 2,660,778
<REALIZED-GAINS-CURRENT> 4,306,686
<APPREC-INCREASE-CURRENT> 20,314,467
<NET-CHANGE-FROM-OPS> 27,281,931
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 106,097
<DISTRIBUTIONS-OF-GAINS> 150,827
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<NUMBER-OF-SHARES-SOLD> 2,020,811
<NUMBER-OF-SHARES-REDEEMED> 1,844,744
<SHARES-REINVESTED> 251,525
<NET-CHANGE-IN-ASSETS> 109,368,595
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,290,138
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,483,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,328,122
<AVERAGE-NET-ASSETS> 6,467,078
<PER-SHARE-NAV-BEGIN> 13.00
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 1.50
<PER-SHARE-DIVIDEND> .20
<PER-SHARE-DISTRIBUTIONS> .31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.13
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> KENT INTERMEDIATE TAX-FREE INST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 269,281,902
<INVESTMENTS-AT-VALUE> 282,888,556
<RECEIVABLES> 4,720,718
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 287,609,274
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,926
<TOTAL-LIABILITIES> 68,926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275,329,612
<SHARES-COMMON-STOCK> 26,977,765
<SHARES-COMMON-PRIOR> 39,091,877
<ACCUMULATED-NII-CURRENT> 133,320
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 1,529,238
<ACCUM-APPREC-OR-DEPREC> 13,606,654
<NET-ASSETS> 283,733,624
<DIVIDEND-INCOME> 216,807
<INTEREST-INCOME> 15,955,238
<OTHER-INCOME> 0
<EXPENSES-NET> 2,293,350
<NET-INVESTMENT-INCOME> 13,878,695
<REALIZED-GAINS-CURRENT> 1,348,408
<APPREC-INCREASE-CURRENT> 25,697,939
<NET-CHANGE-FROM-OPS> 40,925,042
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<DISTRIBUTIONS-OF-INCOME> 13,680,916
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 56,260,448
<NUMBER-OF-SHARES-REDEEMED> 180,059,789
<SHARES-REINVESTED> 25,763
<NET-CHANGE-IN-ASSETS> (97,679,898)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 322,292
<OVERDIST-NET-GAINS-PRIOR> 2,780,361
<GROSS-ADVISORY-FEES> 1,582,089
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,293,350
<AVERAGE-NET-ASSETS> 312,561,150
<PER-SHARE-NAV-BEGIN> 9.74
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 0.79
<PER-SHARE-DIVIDEND> 0.46
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> KENT INTERMEDIATE TAX-FREE INV
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 269,281,902
<INVESTMENTS-AT-VALUE> 282,888,556
<RECEIVABLES> 4,720,718
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 287,609,274
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68,926
<TOTAL-LIABILITIES> 68,926
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275,329,612
<SHARES-COMMON-STOCK> 361,926
<SHARES-COMMON-PRIOR> 462,431
<ACCUMULATED-NII-CURRENT> 13 0
<DISTRIBUTIONS-OF-INCOME> 12,658
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 530,148
<NUMBER-OF-SHARES-REDEEMED> 34,578
<SHARES-REINVESTED> 12,658
<NET-CHANGE-IN-ASSETS> 122,384,290
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 442,275
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 735,861
<AVERAGE-NET-ASSETS> 415,719
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.31
<PER-SHARE-GAIN-APPREC> 0.51
<PER-SHARE-DIVIDEND> 0.30
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.52
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
