<PAGE> 1
As filed with the Securities and Exchange Commission on May 1, 1997
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. 22 and/or [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 23
THE KENT FUNDS
--------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
((614) 470-8000)
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath LLP
1345 Chestnut Street, Philadelphia, PA 19107
--------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
- ---
on (date) pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)(1)
- ---
- --- on (date) 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 of indefinite registration of its shares
pursuant to Rule 24f-2 under the Investment Company Act of 1940. A Rule 24f-2
Notice for Registrant's fiscal year ended December 31, 1996 was filed on
February 28, 1997.
<PAGE> 2
<TABLE>
<CAPTION>
THE KENT FUNDS
CROSS REFERENCE SHEET
Pursuant to 495(a) under the Securities Act of 1933.
Items in
Part A of
Form N-1A Prospectus Caption
- --------- ------------------
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Highlights
Financial Information
Item 3. Condensed Financial Financial Information
Information
Item 4. General Description of Cover Page
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 The Trust
Fund Performance
Item 6. Capital Stock and Other Structure and Management
Securities of the Funds
Dividends, Distributions
and Taxes
Additional Information
Item 7. Purchase of Securities Purchase of Shares
Being Offered Expense Information
Item 8. Redemption or Repurchase Redemptions (Sales) of
Shares
Item 9. Pending Legal Proceedings Not applicable
</TABLE>
<PAGE> 3
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
PROSPECTUS
INSTITUTIONAL/INVESTMENT SHARES
May 1, 1997
The Kent Money Market Fund
The Kent Government Money Market Fund
The Kent Michigan Municipal Money Market Fund
[LOGO - MONEY MARKET FUNDS]
<PAGE> 4
THE KENT FUNDS
Prospectus
Dated May 1, 1997
THIS PROSPECTUS RELATES TO THE FOLLOWING MONEY MARKET FUNDS (THE "FUNDS"):
THE KENT MONEY MARKET FUND seeks current income while preserving capital and
maintaining liquidity.
THE KENT GOVERNMENT MONEY MARKET FUND seeks current income from short-term
United States Government securities while preserving capital and maintaining
liquidity.
THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND seeks current income, exempt from
Federal 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, 1997 with the Securities and Exchange Commission, which, as
supplemented from time to time, 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
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. 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. 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 MICHIGAN MUNICIPAL MONEY MARKET FUND MAY INVEST A SIGNIFICANT PORTION
OF ITS ASSETS IN THE SECURITIES OF A SINGLE ISSUER. AS A RESULT, AN INVESTMENT
IN THE FUND MAY ENTAIL MORE RISKS THAN AN INVESTMENT IN ANOTHER TYPE OF MONEY
MARKET FUND.
THE KENT FUNDS
P.O. Box 182201
Columbus, Ohio 43218-2201
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.
1
<PAGE> 5
TABLE OF CONTENTS
HIGHLIGHTS
What are the key facts regarding the Funds?....................................3
FINANCIAL INFORMATION
What are the Funds' fees and expenses?.........................................5
FINANCIAL HIGHLIGHTS...........................................................6
FUND CHOICES
What Funds are offered?.......................................................10
What instruments do the Funds invest in?......................................11
What are the risks of investing in the Funds?.................................15
PERFORMANCE
How is the Funds' performance calculated?.....................................16
Where can I obtain performance data?..........................................16
EXPENSE INFORMATION
What are the Funds' expenses?.................................................17
PURCHASES OF SHARES
Who may want to invest in the Funds?..........................................18
When can I purchase shares?...................................................18
What is the minimum required investment?......................................18
How can I purchase shares?....................................................18
What price do I pay for shares?...............................................21
REDEMPTIONS (SALES) OF SHARES
When can I redeem shares?.....................................................22
How can I redeem shares?......................................................22
What price do I receive for shares?...........................................23
When will I receive redemption money?.........................................23
STRUCTURE AND MANAGEMENT OF THE FUNDS
How are the Funds structured?.................................................24
Who manages and services the Funds?...........................................24
What are my rights as a Fund shareholder?.....................................25
DIVIDENDS, DISTRIBUTIONS AND TAXES
When will I receive distributions from the Funds?.............................26
How will distributions be made?...............................................26
What are the tax implications of my investments in the Funds?.................26
ADDITIONAL INFORMATION
Where do I get additional information about my account and the Funds?.........28
2
<PAGE> 6
HIGHLIGHTS
-------------------------------------------------------------------------
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is an open-end management investment company
(commonly known as a mutual fund) 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, Government 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"). OKFC is a financial
services company with total assets as of December 31, 1996 of approximately
$12.3 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 fourteen mutual funds should your investment goals
change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by BISYS Fund Services ("BISYS" or the
"Distributor") 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 the Distributor, or
by completing an application and mailing it directly to the Trust 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. Institu-
3
<PAGE> 7
tional Shares purchasers should call the Trust 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 is 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?"
4
<PAGE> 8
FINANCIAL INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' FEES AND EXPENSES?
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" for more information regarding such costs and expenses.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GOVERNMENT MONEY MICHIGAN
MONEY MARKET MARKET FUND MUNICIPAL MONEY
FUND MARKET FUND
----------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------------------
- - - - - -
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)(1)
- -------------------------------------------------------------------------------------------
Management Fees 0.40% 0.40% 0.40% 0.40% 0.40% 0.40%
- -------------------------------------------------------------------------------------------
12b-1 Fees(2) None None None None None None
- -------------------------------------------------------------------------------------------
Other Expenses 0.12% 0.12% 0.20% 0.20% 0.14% 0.14%
(after fee waivers)(3)
- -------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.52% 0.52% 0.60% 0.60% 0.54% 0.54%
(after fee waivers)(3)
- - - - - -
</TABLE>
(1) The expense ratios for the Money Market Fund and the Michigan Municipal
Money Market Fund are based on amounts incurred for the fiscal year ended
December 31, 1996. The expense ratios for the Government Money Market Fund are
estimates for the Fund's fiscal year ending December 31, 1997, after giving
effect to waivers of expenses by the Fund's administrator. 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 0.25% (on an
annualized basis) in connection with the sale of Investment Shares, none of the
Funds currently intends to pay such fees.
(3) Before waivers, Other Expenses and Total Fund Operating Expenses for the
Money Market Fund, Government Money Market Fund and Michigan Municipal Money
Market Fund would be 0.22% and 0.62%, 0.30% and 0.70%, and 0.24% and 0.64%,
respectively, for both the Investment Shares and the Institutional Shares of
each Fund.
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:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
GOVERNMENT MONEY MICHIGAN
MONEY MARKET MARKET FUND MUNICIPAL MONEY
FUND MARKET FUND
----------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------------------
One Year $5 $5 $6 $6 $6 $6
- -------------------------------------------------------------------------------------------
Three Years $17 $17 $19 $19 $17 $17
- -------------------------------------------------------------------------------------------
Five Years $29 $29 $33 $33 $30 $30
- -------------------------------------------------------------------------------------------
Ten Years $65 $65 $75 $75 $68 $68
- - - - - -
</TABLE>
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.
5
<PAGE> 9
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 SAI, which can be obtained without charge by
calling 1-800-633-KENT (5368). These tables should be read in conjunction with
the Funds' financial statements and the related notes.
MONEY MARKET FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
----------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.05 0.05 0.04 0.03 --
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.05 0.05 0.04 0.03 --
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.05) (0.05) (0.04) (0.03) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.05) (0.05) (0.04) (0.03) --
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================================
TOTAL RETURN 5.06% 5.56% 3.71% 2.67% 0.27%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $804 $1,227 $369 $593 $11
Ratios to average net assets:
Net investment income including
reimbursement/waiver 4.94% 5.41% 3.58% 2.63% 3.30%*
Net investment income (loss) excluding
reimbursement/waiver 4.84% 5.33% 3.53% (1.24)% 3.25%*
Operating expenses including
reimbursement/waiver 0.52% 0.55% 0.63% 0.63% 0.63%*
Operating expenses excluding
reimbursement/waiver 0.62% 0.62% 0.68% 4.49% 0.68%*
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
(1) The Investment Class date of initial public investment was December 9, 1992.
6
<PAGE> 10
MONEY MARKET FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -------------------------------------------------------------------------------------------------------------------
Year ended December 31,
---------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(1)
- -------------------------------------------------------------------------------------------------------------------
<S> <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
- ------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.05 0.05 0.04 0.03 0.03 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.05 0.05 0.04 0.03 0.03 0.06 0.01
- ------------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.05) (0.05) (0.04) (0.03) (0.03) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------
Total Distributions: (0.05) (0.05) (0.04) (0.03) (0.03) (0.06) (0.01)
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
value -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================================================================
TOTAL RETURN 5.06% 5.58% 3.75% 2.68% 3.40% 5.65% 0.60% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $483,919 $424,815 $323,539 $359,624 $220,508 $28 $23
Ratios to average net assets:
Net investment income including
reimbursement/waiver 4.95% 5.45% 3.65% 2.65% 3.23% 5.53% 7.27% *
Net investment income excluding
reimbursement/waiver 4.85% 5.37% 3.59% 2.57% 2.92% 5.21% 6.84% *
Operating expenses including
reimbursement/waiver 0.52% 0.55% 0.60% 0.60% 0.60% 0.60% 0.60% *
Operating expenses excluding
reimbursement/waiver 0.62% 0.63% 0.65% 0.68% 0.91% 0.92% 1.02% *
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
(1) The Institutional Class commenced operations on December 3, 1990.
7
<PAGE> 11
MICHIGAN MUNICIPAL MONEY MARKET FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------
1996 1995 1994 1993 1992(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.03 0.03 0.02 0.02 ***
- ----------------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.03 0.03 0.02 0.02 --
- ----------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.03) (0.03) (0.02) (0.02) --
- ----------------------------------------------------------------------------------------------------------------
Total Distributions: (0.03) (0.03) (0.02) (0.02) --
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
================================================================================================================
TOTAL RETURN 3.11% 3.48% 2.38% 1.98% 0.03% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $782 $1,603 $379 $149 ****
Ratios to average net assets:
Net investment income including
reimbursement/waiver 3.06% 3.48% 2.47% 2.01% 2.92% *
Net investment income (loss) excluding
reimbursement/waiver 2.96% 3.39% 2.37% (1.13)% 2.92% *
Operating expenses including
reimbursement/waiver 0.54% 0.54% 0.63% 0.63% 0.00% *
Operating expenses excluding
reimbursement/waiver 0.64% 0.62% 0.73% 3.77% 0.00% *
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
**** Amount is less than $1,000.
(1) The Investment Class date of initial public investment was December 15,
1992.
8
<PAGE> 12
MICHIGAN MUNICIPAL MONEY MARKET FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992 1991(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment income 0.03 0.03 0.02 0.02 0.03 0.02
- ----------------------------------------------------------------------------------------------------------
Total from Investment
Operations: 0.03 0.03 0.02 0.02 0.03 0.02
- ----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.03) (0.03) (0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------------------------------------------------------------------
Total Distributions: (0.03) (0.03) (0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value
-- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================================================
TOTAL RETURN 3.11% 3.50% 2.40% 2.00% 2.63% 2.37%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period
(000's) $155,424 $145,215 $128,164 $183,366 $72,906 $49,618
Ratios to average net assets:
Net investment income including
reimbursement/waiver 3.06% 3.45% 2.33% 1.96% 2.56% 4.03%*
Net investment income excluding
reimbursement/waiver 2.96% 3.36% 2.23% 1.87% 2.29% 3.93%*
Operating expenses including
reimbursement/waiver 0.54% 0.56% 0.60% 0.60% 0.60% 0.60%*
Operating expenses excluding
reimbursement/waiver 0.64% 0.65% 0.70% 0.69% 0.86% 0.77%*
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
(1) The Institutional Class commenced operations on June 3, 1991.
9
<PAGE> 13
FUND CHOICES
----------------------------------------------------------------------------
WHAT FUNDS ARE OFFERED?
The Trust currently offers the three 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.
Each Fund's investment objective is 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. The Fund may also invest in
short-term obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
GOVERNMENT MONEY MARKET FUND
OBJECTIVE: The Fund seeks current income from short-term United States
Government securities while preserving capital and maintaining liquidity.
PRINCIPAL INVESTMENTS: Under ordinary circumstances, the Fund intends to invests
at least 65% of its total assets in U.S. Treasury bills, notes and other
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and repurchase agreements with respect to such securities.
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 policy 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, the interest on which is, in the
opinion of counsel to the issuer of such obligations, exempt from Federal income
taxes. Under normal conditions, the Fund intends to invest at least 65% of its
total assets in municipal obligations issued by the State of Michigan or its
political subdivisions, authorities or corporations ("Michigan Municipal
Obligations").
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
10
<PAGE> 14
are permissible investments for the Money Market Fund and the Government 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 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
either (i) have short-term debt ratings when purchased in the two highest rating
categories by at least two 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 dollar-weighted 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, commercial paper, U.S.
Government securities, stripped securities, zero coupon obligations, variable
and floating rate securities, mortgage-backed securities and asset-backed
securities.
COMMERCIAL PAPER issues include securities issued by corporations without
registration under the Securities Act of 1933 (the "1933 Act") in reliance on
the exemption in Section 3(a)(3), and commercial paper issued in reliance on the
so-called "private placement" exemption in Section 4(2) ("SECTION 4(2) PAPER").
Section 4(2) paper is restricted as to disposition under the Federal securities
laws in that any resale must similarly be made in an exempt transaction. Section
4(2) paper is normally resold to other institutional investors through or with
the assistance of investment dealers which make a market in Section 4(2) paper,
thus providing liquidity.
Each Fund may invest in U.S. GOVERNMENT SECURITIES, which are obligations issued
or guaranteed by the U.S. Government or its agencies and instrumentalities.
Obligations of certain agencies and instrumentalities of the U.S. Government are
backed by the full faith and credit of the United States. Others are backed by
the right of the issuer to borrow from the U.S. Treasury or are backed only by
the credit of the agency or instrumentality issuing the obligation.
11
<PAGE> 15
The Funds may also purchase "STRIPPED" U.S. TREASURY OBLIGATIONS offered under
the Separate Trading of Registered Interest and Principal Securities ("STRIPS")
program or Coupon Under Bank-Entry Safekeeping ("CUBES") program or other
stripped securities issued directly by agencies or instrumentalities of the U.S.
Government. STRIPS and CUBES represent either future interest or principal
payments and are direct obligations of the U.S. Government that clear through
the Federal Reserve System. The Money Market Fund and Government Money Market
Fund may also purchase U.S. Treasury and agency securities that are stripped by
brokerage firms and custodian banks and sold under proprietary names. These
stripped securities are resold in custodial receipt programs with a number of
different names (such as TIGRs and CATS) and are not considered U.S. Government
securities for purposes of the Investment Company Act of 1940. Stripped
securities are issued at a discount to their "face value" and may exhibit
greater price volatility than ordinary debt securities because of the manner in
which their principal and interest are returned to investors.
The Michigan Municipal Money Market 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.
The Michigan Municipal Money Market Fund may also 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. The acquisition of a stand-by commitment may increase the
cost, and thereby reduce the yield, of the Municipal Obligation to which such
commitment relates.
BANK OBLIGATIONS which may be acquired by the Funds include bankers'
acceptances, certificates of deposit, notes and time deposits issued by domestic
or foreign banks. 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.
Each Fund may purchase VARIABLE AND FLOATING RATE INSTRUMENTS which may have a
stated maturity in excess of 13 months but will, in any event, permit a Fund to
demand payment of the principal of the instrument at least once every 13 months
upon not more than thirty days' notice (except for certain instruments issued or
guaranteed by the U.S. Government or an agency or instrumentality thereof).
Each Fund may invest in MORTGAGE-RELATED SECURITIES issued by the U.S.
Government or its agencies or instrumentalities or issued by private companies.
In periods of falling interest rates, the rate of mortgage prepayments tends to
increase. During these periods, the rein-
12
<PAGE> 16
vestment of prepayment proceeds by a Fund will generally be at lower rates than
the rates on the prepaid obligations.
Each Fund may purchase ASSET-BACKED SECURITIES, which are securities backed by
installment contracts, credit card receivables or other assets. The average life
of asset-backed securities varies with the maturities of the underlying
instruments, and may be less than the original maturity of the assets underlying
the securities as a result of prepayments.
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 seven 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 or emergency 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. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price of the securities the Fund is obligated to repurchase.
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. These notes 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. 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 seven
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 would 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 one 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 are
considered illiquid.
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.
13
<PAGE> 17
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 assets 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 becomes
insolvent or declares bankruptcy.
Each Fund may agree to purchase securities on a "WHEN ISSUED" basis and may
purchase or sell securities on a "FORWARD COMMITMENT" basis. These transactions
involve a commitment by a Fund to purchase or sell particular securities with
payment or delivery taking place at a future date, sometimes a month or more
after the date of the agreement. The value of the securities may change between
the time the price is set and the time the price is paid. 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" (as defined in the SAI) 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, a Fund cannot invest more
than 5% of its total assets in any one issuer (other than the U.S.
Government, its agencies and instrumentalities). In addition, a Fund cannot
invest more than 25% of its 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 prevent
the Funds from significantly leveraging their assets.
3. Each Fund may not invest more than 10% 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.
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 and the Government Money Market Fund will limit their 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 their respective total assets at the time of purchase, except for 25%
of their total assets, which may be invested in any one issuer for a
14
<PAGE> 18
period of up to three business days. The Funds are also permitted to invest in
excess of 25% of their respective 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 be
no assurance that a Fund will achieve its investment objective because 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, 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.
The obligations of foreign issuers may involve certain risks in addition to
those of domestic issuers, including higher transactions costs, less complete
financial information, less stringent regulatory requirements and less market
liquidity.
The amount of information regarding the financial condition of issuers of
Municipal Obligations may be less extensive than the information for public
corporations, and the secondary market for Municipal Obligations may be less
liquid than that for taxable obligations. Accordingly, the ability of the
Michigan Municipal Money Market Fund to buy and sell Municipal Obligations may,
at any particular time and with respect to any particular securities, be
limited. In addition, Municipal Obligations purchased by the Michigan Municipal
Money Market Fund include obligations backed by letters of credit and other
forms of credit enhancement issued by domestic and foreign banks, as well as
other financial institutions. Changes in the credit quality of these
institutions could cause loss to the Michigan Municipal Money Market Fund.
The Michigan Municipal Money Market Fund is concentrated in securities issued by
the State of Michigan and entities within the State of Michigan and, therefore,
an investment in this Fund may be riskier than an investment in other types of
money market funds. Likewise, 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 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 $1.0 billion should help the State
weather any potential economic recession.
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.
15
<PAGE> 19
PERFORMANCE
----------------------------------------------------------------------------
HOW IS THE FUNDS' PERFORMANCE CALCULATED?
Each 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. "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. "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 also report their yields in comparison to
the Consumer Price Index, an indication of inflation reported by the U.S.
Government, a 91-day U.S. Treasury Bill or a relevant index.
----------------------------------------------------------------------------
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).
16
<PAGE> 20
EXPENSE INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' EXPENSES?
A pro rata portion of certain expenses of the Trust are allocated to each Fund
and to each class of shares 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. BISYS is entitled
to receive, for its administration services, an annual fee equal to 0.185% of
the aggregate net assets of the Trust up to $5 billion; 0.165% of the Trust's
aggregate net assets between $5 and $7.5 billion; and 0.135% of the Trust's
aggregate net assets over $7.5 billion; provided, however, that such annual fee
shall be subject to an annual minimum of $45,000 per fund that is applicable to
certain funds of the Trust.
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,
calculated daily and paid monthly, equal to 0.40% of the Fund's average daily
net assets. For the fiscal year ended December 31, 1996, the Money Market Fund
and the Michigan Municipal Money Market Fund each paid or accrued to Old Kent an
advisory fee at an annual rate of 0.40% of their average daily net assets. 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 Trust's Distribution Plan. The
Distribution Plan provides 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 Funds would find another organization to
provide such services and no shareholder should suffer any financial loss. The
Funds do not reimburse the Distributor for any distribution expenses in excess
of the payments received by the Distributor under the Distribution Plan or for
its overhead expenses. None of the Funds currently charges any fees under the
Distribution Plan.
17
<PAGE> 21
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 portfolios of the Trust, 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
which are unable to benefit from the Fund's tax-exempt dividends. In addition,
the Michigan Municipal Money Market Fund may not be an appropriate investment
for entities which are substantial users of the facilities financed by
industrial development bonds or related persons thereof. Such investors may wish
to consider instead an investment in one of the other Funds.
----------------------------------------------------------------------------
WHEN CAN I PURCHASE SHARES?
Shares can be purchased on any day that both the New York Stock Exchange (the
"NYSE") and Bankers Trust Company, the Funds' custodian (the "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 the Distributor can sell you
Investment Shares of the Funds. Please note that such brokers may charge you
fees for their services.
18
<PAGE> 22
BY MAIL. You may open an account by mailing a completed application and a check
(payable to the applicable Fund) to: THE KENT FUNDS, P.O. Box 182201, Columbus,
Ohio 43218-2201.
BY TELEPHONE. You may 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. You should call 1-800-633-KENT (5368) for complete
wire instructions. You should be aware that banks may charge fees for sending
wires. The Distributor has the right to charge fees for receiving wires,
although it does not currently do so.
BY AUTOMATED CLEARING HOUSE. Subsequent purchases of Investment Shares can be
made via Automated Clearing House. Call 1-800-633-KENT (5368) to request the
forms necessary to establish Automated Clearing House purchases.
THROUGH AN AUTOMATIC INVESTMENT PLAN.
1. Call 1-800-633-KENT (5368) to establish an Automatic Investment Plan.
2. Invest at least $1,000 in an Investment Share account.
3. On the fifth 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, P.O. Box 182201, Columbus, Ohio 43218-2201 at least five days before a
scheduled investment.
THROUGH DIRECT DEPOSIT. You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks. Call 1-800-633-KENT
(5368) to receive the necessary form.
THROUGH A TAX-SHELTERED PLAN. Investment Shares of the Money Market Fund or the
Government Money Market Fund may be purchased through IRAs and Rollover IRAs,
which are available through the Trust. For details and application forms, call
1-800-633-KENT (5368) or write to: THE KENT FUNDS, P.O. Box 182201, Columbus,
Ohio 43218-2201.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the following steps:
1. To open an account, call 1-800-633-KENT (5368) to obtain an account or wire
identification number and to place a purchase order.
2. Wire federal funds 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 the Trust receives the purchase proceeds and (ii) banks may
charge for wiring federal funds to
19
<PAGE> 23
the Trust. 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 shares of 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?" To effect an exchange:
1. Call 1-800-633-KENT (5368) or write to: THE KENT FUNDS, P.O. Box 182201,
Columbus, Ohio 43218-2201 to obtain a prospectus for the new fund prior to
the exchange.
2. Call or write as indicated in 1. above to place an order to exchange shares.
Purchases of shares of a new fund must meet the minimum purchase requirement
of that fund. If the order to exchange shares is placed prior to or at 12:00
noon Eastern Time on any business day, the order will be executed on the day
received, and if the order is placed after 12:00 noon Eastern Time, the order
will not be executed until the next business day.
3. 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 Trust to
change the option.
IMPORTANT INFORMATION ABOUT EXCHANGES. IF SHARES OF A FUND ARE PURCHASED BY
CHECK, SUCH SHARES CANNOT BE EXCHANGED UNTIL SUCH CHECK HAS BEEN COLLECTED. THIS
COULD TAKE 10 DAYS OR MORE. THE TRUST MAY DISALLOW EXCHANGES OF SHARES IF A
SHAREHOLDER HAS MADE MORE THAN FIVE EXCHANGES BETWEEN INVESTMENT PORTFOLIOS
OFFERED BY THE TRUST IN A YEAR, OR MORE THAN THREE EXCHANGES IN A CALENDAR
QUARTER. ALTHOUGH UNLIKELY, THE TRUST MAY REJECT ANY EXCHANGES OR CHANGE OR
TERMINATE RIGHTS TO EXCHANGE SHARES. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN
STATES WHERE SHARES OF THE NEW FUND MAY BE SOLD.
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.
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. The Distributor may require additional documents prior to
accepting a purchase, redemption or exchange.
SHAREHOLDER SERVICES. FOR FURTHER INFORMATION ON ALL SHAREHOLDER SERVICES, CALL
1-800-633-KENT (5368) OR WRITE TO: THE KENT FUNDS, P.O. BOX 182201, COLUMBUS,
OHIO 43218-2201.
20
<PAGE> 24
----------------------------------------------------------------------------
WHAT PRICE DO I PAY FOR SHARES?
Shares are sold at the "net asset value next determined" by the Funds. 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 ("NAV"). Except in certain limited circumstances, at 12:00 noon
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 12:00 noon
on the day a purchase order for shares is received, if the purchase order is
received prior to or at 12:00 noon, and is the net asset value calculated at
12:00 noon on the next business day, if the purchase order is received after
12:00 noon. 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, as adjusted for amortization
of premium or discount, rather than at current market value. Material deviations
in the difference between amortized cost and market value of the Funds' assets
will be addressed by the Board of Trustees.
21
<PAGE> 25
REDEMPTIONS (SALES) OF SHARES
----------------------------------------------------------------------------
WHEN CAN I REDEEM SHARES?
You can redeem shares on any day that both the NYSE and the Custodian are open
for business. Shares will not be redeemed by a Fund unless all required
documents have been received by the Trust. 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
Investment Shares may be redeemed in several ways.
BY MAIL. You may mail your redemption notice to: THE KENT FUNDS, P.O. Box
182201, Columbus, Ohio 43218-2201. 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 Trust 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 OR OTHER ENTITY APPROVED BY THE TRUST, UNLESS THE AMOUNT REDEEMED
IS LESS THAN $50,000 AND THE ACCOUNT ADDRESS HAS BEEN THE SAME FOR AT LEAST 90
DAYS. THE TRUST 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 application.
THROUGH A BROKER. Investment Shares can be redeemed through a broker. The
broker should send the redemption notice and any other required documents to
the Trust, which will send the proceeds to the broker or directly to you, at
your option. The Trust 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
22
<PAGE> 26
be mailed or sent by electronic funds transfer to the bank listed on your
account application.
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 TRUST
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 WILL EMPLOY
PROCEDURES DESIGNED TO PROVIDE REASONABLE ASSURANCE THAT INSTRUCTIONS BY
TELEPHONE ARE GENUINE. SUCH PROCEDURES WILL INCLUDE THE REQUIREMENT THAT
PERSONAL IDENTIFICATION BE PROVIDED BEFORE ACCEPTING A TELEPHONE REDEMPTION.
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 seven 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 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 10 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.
23
<PAGE> 27
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 14 portfolios, each of which offers two 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, 1996 of approximately $12.3 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 the Funds 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.
Commencing on June 1, 1997, Old Kent is expected to also provide certain
administrative services to the Funds pursuant to a Sub-Administration Agreement
between Old Kent and BISYS. BISYS has agreed to pay Old Kent a fee, calculated
daily and paid monthly, at an annual rate of up to 0.05% of each Fund's average
daily net assets. The fees paid to Old Kent by BISYS for such administrative
services come out of BISYS' administration fee and are not an additional charge
to the Funds.
ADMINISTRATOR. BISYS 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. BISYS Fund Services, Inc., an affiliate of BISYS,
acts as the fund accountant, transfer agent and dividend paying agent of the
Funds. BISYS and BISYS Fund Services, Inc. are each located at 3435 Stelzer
Road, Columbus, Ohio 43219.
24
<PAGE> 28
DISTRIBUTOR. BISYS is also the distributor of the Funds' shares. BISYS 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. BISYS 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, BISYS may similarly provide
financial assistance in connection with preapproved 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.
----------------------------------------------------------------------------
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 Trust 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 Trust's obligations. If a shareholder were required to
pay a debt of a Fund, however, the Trust has committed to reimburse the
shareholder in full from its assets.
25
<PAGE> 29
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. The Funds do not expect 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.
Dividends of investment company income by the Money Market Fund and the
Government Money Market Fund will be taxable to you as ordinary income, unless
you are exempt from Federal income taxes. In general, a Fund's investment
company taxable income will be its taxable income (including interest and
short-term capital gains, if any) 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. 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. 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.
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. 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.
26
<PAGE> 30
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.
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.
Interest on indebtedness incurred by you to purchase or carry shares of the
Michigan Municipal Money Market Fund generally is not deductible for Federal
income tax purposes.
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.
27
<PAGE> 31
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
For more information, call 1-800-633-KENT (5368) or write to the Funds at:
THE KENT FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
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.
28
<PAGE> 32
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
<TABLE>
<S> <C>
INVESTMENT ADVISER: DISTRIBUTOR:
Old Kent Bank BISYS Fund Services
Grand Rapids, Michigan 49503 3435 Stelzer Road
Columbus, OH 43219-3035
</TABLE>
This investment is not an obligation of or guaranteed
[FDIC LOGO] by any bank, is not FDIC insured, and involves investment
risks including the possible loss of principal.
KKF-0390 5/97
<PAGE> 33
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
PROSPECTUS
INSTITUTIONAL/INVESTMENT SHARES
May 1, 1997
The Kent Growth and Income Fund
The Kent Small Company Growth Fund
The Kent International Growth Fund
The Kent Index Equity Fund
[STOCK FUNDS LOGO]
<PAGE> 34
THE KENT FUNDS
Prospectus
Dated May 1, 1997
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 principally 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 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 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 INDEX EQUITY FUND seeks investment results which mirror 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, 1997 with the Securities and Exchange Commission, which, as
supplemented from time to time, 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
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
P.O. Box 182201
Columbus, Ohio 43218-2201
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.
1
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<S> <C>
HIGHLIGHTS
What are the key facts regarding the Funds?.............................. 3
FINANCIAL INFORMATION
What are the Funds' fees and expenses?................................... 5
FINANCIAL HIGHLIGHTS..................................................... 6
FUND CHOICES
What Funds are offered?.................................................. 14
What instruments do the Funds invest in?................................. 15
What are the risks of investing in the Funds?............................ 18
PERFORMANCE
How is the Funds' performance calculated?................................ 20
Where can I obtain performance data?..................................... 20
EXPENSE INFORMATION
What are the Funds' expenses?............................................ 21
PURCHASES OF SHARES
Who may want to invest in the Funds?..................................... 22
When can I purchase shares?.............................................. 22
What is the minimum required investment?................................. 22
How can I purchase shares?............................................... 22
What price do I pay for shares?.......................................... 25
REDEMPTIONS (SALES) OF SHARES
When can I redeem shares?................................................ 26
How can I redeem shares?................................................. 26
What price do I receive for shares?...................................... 27
When will I receive redemption money?.................................... 27
STRUCTURE AND MANAGEMENT OF THE FUNDS
How are the Funds structured?............................................ 28
Who manages and services the Funds?...................................... 28
What are my rights as a Fund shareholder?................................ 29
DIVIDENDS, DISTRIBUTIONS AND TAXES
When will I receive distributions from the Funds?........................ 30
How will distributions be made?.......................................... 30
What are the tax implications of my investments in the Funds?............ 30
ADDITIONAL INFORMATION
Where do I get additional information about my account and the Funds?.... 31
</TABLE>
2
<PAGE> 36
HIGHLIGHTS
----------------------------------------------------------------------------
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is an open-end management investment company
(commonly known as a mutual fund) 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 Government 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, 1996 of approximately
$12.3 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 fourteen mutual funds should your investment goals
change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by BISYS Fund Services ("BISYS" or the
"Distributor") 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 the Distributor, or
by completing an application and mailing it directly to the Trust 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.
3
<PAGE> 37
The Trust may waive the minimum purchase requirements in certain instances.
Institutional Shares purchasers should call the Trust 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. The Growth and Income Fund and International Growth Fund 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?"
4
<PAGE> 38
FINANCIAL INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' FEES AND EXPENSES?
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" for more information regarding such costs and expenses.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX EQUITY
INCOME FUND GROWTH FUND GROWTH FUND FUND
----------------------------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares Shares Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------
Maximum Sales Charge on None None None None None None None None
Purchases
- ----------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)(1)
- -----------------------------------------------------------------------------------------------------------
Management Fees 0.70% 0.70% 0.70% 0.70% 0.75% 0.75% 0.30% 0.30%
- -----------------------------------------------------------------------------------------------------------
12b-1 Fees(2) 0.25% None 0.25% None 0.25% None 0.25% None
- -----------------------------------------------------------------------------------------------------------
Other Expenses 0.25% 0.25% 0.26% 0.26% 0.34% 0.34% 0.19% 0.19%
(after fee waivers)(3)
- -----------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING 1.20% 0.95% 1.21% 0.96% 1.34% 1.09% 0.74% 0.49%
EXPENSES
(after fee waivers)(3)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1996, restated, in the case of the Growth and Income
Fund, to reflect current 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.
(2) As a result of the payment of 12b-1 fees, long-term Investment class
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of the National Association of Securities
Dealers, Inc.
(3) In the case of the Index Equity Fund, a voluntary waiver of a portion of the
Fund's administration fee has been reflected. Absent such waiver, Other Expenses
and Total Fund Operating Expenses would be 0.29% and 0.84%, respectively, for
the Fund's Investment Shares and 0.29% and 0.59%, respectively, for its
Institutional Shares.
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:
<TABLE>
GROWTH AND SMALL COMPANY INTERNATIONAL INDEX EQUITY
INCOME FUND GROWTH FUND GROWTH FUND FUND
-------------------------------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One Year $12 $10 $12 $10 $14 $11 $8 $5
- -------------------------------------------------------------------------------------------------------------
Three Years $38 $30 $38 $31 $42 $35 $24 $16
- -------------------------------------------------------------------------------------------------------------
Five Years $66 $53 $66 $53 $73 $60 $41 $27
- -------------------------------------------------------------------------------------------------------------
Ten Years $145 $117 $147 $118 $161 $133 $92 $62
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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.
5
<PAGE> 39
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 SAI. These tables should be read in conjunction
with the Funds' financial statements and the related notes. Additional
information concerning the performance of the Funds is contained in their annual
report. Both the SAI and the Funds' annual report can be obtained without charge
by calling 1-800-633-KENT (5368).
GROWTH AND INCOME FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.19 $10.46 $10.87 $10.29 $10.23
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.26 0.30 0.32 0.27 ***
Net realized and unrealized gain (loss) on
investments 2.15 3.26 (0.27) 0.93 0.06
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.41 3.56 0.05 1.20 0.06
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.26) (0.30) (0.31) (0.23) --
In excess of net investment income (0.02) -- *** (0.05) --
Net realized gains on investments (1.51) (0.53) (0.15) (0.20) --
In excess of net realized gains -- -- -- (0.14) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (1.79) (0.83) (0.46) (0.62) --
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.62 2.73 (0.41) 0.58 0.06
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.81 $13.19 $10.46 $10.87 $10.29
===========================================================================================================
TOTAL RETURN(2) 19.14% 34.61% 0.50% 11.81% 0.59 **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $15,063 $11,079 $8,005 $4,607 $102
Ratios to average net assets:
Net investment income (loss) 1.77% 2.48% 3.03% 2.43% (0.88)% *
Operating expenses 1.09% 1.18% 0.98% 1.22% 0.33% **
Portfolio turnover rate 39% 58% 28% 54% 0%
Average commission rate paid(3) $0.0539 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 1, 1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
6
<PAGE> 40
GROWTH AND INCOME FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.25 $10.50 $10.91 $10.31 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.30 0.33 0.31 0.27 0.06
Net realized and unrealized
gain (loss) on investments 2.16 3.28 (0.26) 0.95 0.31
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.46 3.61 0.05 1.22 0.37
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.30) (0.33) (0.31) (0.27) (0.06)
In excess of net investment income -- -- *** (0.01) ***
Net realized gains on investments (1.51) (0.53) (0.15) (0.34) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (1.81) (0.86) (0.46) (0.62) (0.06)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.65 2.75 (0.41) 0.60 0.31
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.90 $13.25 $10.50 $10.91 $10.31
===========================================================================================================
TOTAL RETURN 19.47% 34.91% 0.51% 11.98% 3.68% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $500,857 $401,371 $308,825 $180,864 $76,449
Ratios to average net assets:
Net investment income 2.18% 2.73% 3.04% 2.61% 3.51% *
Operating expenses 0.95% 0.94% 0.98% 1.03% 0.19% **
Portfolio turnover rate 39% 58% 28% 54% 0%
Average commission rate paid(2) $0.0539 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
7
<PAGE> 41
SMALL COMPANY GROWTH FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.81 $11.98 $12.49 $10.86 $10.65
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.07 0.07 0.10 0.08 ***
Net realized and unrealized
gain (loss) on investments 2.54 2.64 (0.11) 1.74 0.21
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.61 2.71 (0.01) 1.82 0.21
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.08) (0.07) (0.08) (0.06) --
In excess of net investment income (0.01) -- (0.01) (0.03) --
Net realized gains on investments (0.72) (0.81) (0.41) (0.10) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.81) (0.88) (0.50) (0.19) --
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 1.80 1.83 (0.51) 1.63 0.21
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.61 $13.81 $11.98 $12.49 $10.86
===========================================================================================================
TOTAL RETURN(2) 19.16% 23.47% (0.08)% 16.84% 1.97% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $14,436 $10,955 $8,433 $5,345 $84
Ratios to average net assets:
Net investment income (loss) 0.53% 0.59% 0.79% 0.59% (1.50)% *
Operating expenses 1.21% 1.20% 0.98% 1.25% 0.27% **
Portfolio turnover rate 16% 30% 20% 14% 1%
Average commission rate paid(3) $0.0481 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 4, 1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
8
<PAGE> 42
SMALL COMPANY GROWTH FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.82 $11.99 $12.50 $10.85 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.12 0.10 0.10 0.08 0.02
Net realized and unrealized
gain (loss) on investments 2.55 2.64 (0.10) 1.76 0.86
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.67 2.74 -- 1.84 0.88
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.12) (0.10) (0.09) (0.08) (0.02)
In excess of net investment income -- -- (0.01) (0.01) (0.01)
Net realized gains on investments (0.72) (0.81) (0.41) (0.10) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.84) (0.91) (0.51) (0.19) (0.03)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 1.83 1.83 (0.51) 1.65 0.85
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $15.65 $13.82 $11.99 $12.50 $10.85
===========================================================================================================
TOTAL RETURN 19.56% 23.75% (0.06)% 17.04% 8.75% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000s) $544,081 $450,072 $304,179 $252,401 $95,999
Ratios to average net assets:
Net investment income 0.78% 0.83% 0.79% 0.74% 1.35% *
Operating expenses 0.96% 0.97% 0.98% 1.06% 0.18% **
Portfolio turnover rate 16% 30% 20% 14% 1%
Average commission rate paid(2) $0.0481 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
9
<PAGE> 43
INTERNATIONAL GROWTH FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.13 $13.00 $12.81 $10.03 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.12 0.14 0.14 0.13 ***
Net realized and unrealized
gain (loss) on investments 0.66 1.50 0.56 2.85 0.03
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.78 1.64 0.70 2.98 0.03
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.08) (0.09) (0.07) (0.02) --
In excess of net investment income -- (0.11) (0.03) (0.09) --
Net realized gains on investments (0.14) (0.31) (0.41) (0.05) --
In excess of net realized gains -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.22) (0.51) (0.51) (0.20) --
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.56 1.13 0.19 2.78 0.03
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.69 $14.13 $13.00 $12.81 $10.03
===========================================================================================================
TOTAL RETURN(2) 5.57% 12.86% 5.51% 29.67% 0.30% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $8,799 $7,548 $6,539 $3,202 $ 15
Ratios to average net assets:
Net investment income (loss) 0.74% 1.11% 0.81% 0.32% (1.34)% *
Operating expenses 1.34% 1.40% 1.25% 1.43% 0.20% **
Portfolio turnover rate 13% 6% 20% 5% 0%
Average commission rate paid(3) $0.0219 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 4, 1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
10
<PAGE> 44
INTERNATIONAL GROWTH FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.18 $13.06 $12.84 $10.01 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.13 0.13 0.12 0.09 ***
Net realized and unrealized
gain (loss) on investments 0.70 1.54 0.61 2.95 0.02
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.83 1.67 0.73 3.04 0.02
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.10) (0.13) (0.07) (0.08) --
In excess of net investment income (0.02) (0.11) (0.03) (0.04) (0.01)
Net realized gains on investments (0.13) (0.31) (0.41) (0.08) --
In excess of net realized gains (0.01) -- -- (0.01) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.26) (0.55) (0.51) (0.21) (0.01)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 0.57 1.12 0.22 2.83 0.01
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.75 $14.18 $13.06 $12.84 $10.01
===========================================================================================================
TOTAL RETURN 5.87% 13.00% 5.73% 30.32% 0.20% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $387,799 $286,545 $178,186 $157,716 $81,105
Ratios to average net assets:
Net investment income (loss) 0.97% 1.35% 0.87% 0.86% (0.28)%*
Operating expenses 1.09% 1.17% 1.22% 1.33% 0.14% **
Portfolio turnover rate 13% 6% 20% 5% 0%
Average commission rate paid(2) $0.0219 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Institutional Class commenced operations on December 4, 1992.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
11
<PAGE> 45
INDEX EQUITY FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.57 $10.70 $11.07 $10.44 $10.28
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.22 0.23 0.26 0.22 ***
Net realized and unrealized
gain (loss) on investments 2.48 3.44 (0.17) 0.72 0.16
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.70 3.67 0.09 0.94 0.16
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.22) (0.23) (0.26) (0.20) --
In excess of net investment income (0.01) -- -- (0.03) --
Net realized gains on investments (0.32) (1.57) (0.20) (0.06) --
In excess of net realized gains -- -- -- (0.02) --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.55) (1.80) (0.46) (0.31) --
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 2.15 1.87 (0.37) 0.63 0.16
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.72 $12.57 $10.70 $11.07 $10.44
===========================================================================================================
TOTAL RETURN(2) 21.92% 35.81% 0.75% 9.09% 1.56% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $9,925 $6,612 $4,736 $3,776 $ 89
Ratios to average net assets:
Net investment income including
reimbursement/waiver 1.67% 1.86% 2.30% 2.04% 1.03% *
Net investment income excluding
reimbursement/waiver 1.57% 1.85% 2.30% 2.04% 1.03% *
Operating expenses including
reimbursement/waiver 0.74% 0.80% 0.60% 0.86% 0.12% **
Operating expenses excluding
reimbursement/waiver 0.84% 0.81% 0.60% 0.86% 0.12% **
Portfolio turnover rate 2% 3% 50% 1% 0%
Average commission rate paid(3) $0.0496 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was November 25,
1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
12
<PAGE> 46
INDEX EQUITY FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.56 $10.68 $11.04 $10.41 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.26 0.26 0.25 0.23 0.05
Net realized and unrealized
gain(loss) on investments 2.47 3.44 (0.15) 0.71 0.41
- -----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 2.73 3.70 0.10 0.94 0.46
- -----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.26) (0.25) (0.26) (0.23) (0.05)
In excess of net investment income -- -- -- *** ***
Net realized gains on investments (0.28) (1.57) (0.20) (0.08) --
In excess of net realized gains (0.04) -- -- -- --
- -----------------------------------------------------------------------------------------------------------
Total Distributions: (0.58) (1.82) (0.46) (0.31) (0.05)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value 2.15 1.88 (0.36) 0.63 0.41
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $14.71 $12.56 $10.68 $11.04 $10.41
===========================================================================================================
TOTAL RETURN 22.18% 36.23% 0.86% 9.11% 4.55% **
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $243,438 $183,877 $245,550 $233,451 $153,431
Ratios to average net assets:
Net investment income including
reimbursement/waiver 1.91% 2.14% 2.32% 2.18% 2.65% *
Net investment income excluding
reimbursement/waiver 1.81% 2.14% 2.32% 2.18% 2.65% *
Operating expenses including
reimbursement/waiver 0.49% 0.56% 0.58% 0.65% 0.13% **
Operating expenses excluding
reimbursement/waiver 0.59% 0.56% 0.58% 0.65% 0.13% **
Portfolio turnover rate 2% 3% 50% 1% 0%
Average commission rate paid(2) $0.0496 -- -- -- --
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by the total number of portfolio
shares purchased and sold for which commissions were charged. Disclosure is
not required for prior periods.
13
<PAGE> 47
FUND CHOICES
----------------------------------------------------------------------------
WHAT FUNDS ARE OFFERED?
The Trust currently offers the four stock funds described below. Each Fund's
investment objective is 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 intends 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 companies that meet the above
criteria. Old Kent may elect to exclude an eligible 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.
14
<PAGE> 48
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 500 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 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 will invest primarily in COMMON STOCK. The value of shares of common
stock will fluctuate due to many factors, including the past and predicted
earnings of the issuer,
15
<PAGE> 49
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 common
stockholders 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 or guaranteed by the U.S. Government and its
agencies or instrumentalities. When Old Kent determines that market conditions
are appropriate, each Fund other than Index Equity 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 seven 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 or emergency 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. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price of the securities the Fund is obligated to repurchase.
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 assets 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 becomes
insolvent or 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
16
<PAGE> 50
time the price is paid. 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 International 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 on outstanding options exceed 5% of the Fund's net
assets and will not write options on more than 25% of the value of its net
assets.
The Funds may also purchase FUTURES CONTRACTS, which are contracts in which a
Fund agrees, at maturity, to take or 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 unless immediately after
any such transaction the aggregate amount of margin deposits on its existing
futures positions plus premiums paid for related options is less 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, index or financial
indicator. 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
17
<PAGE> 51
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" (as defined in the
SAI) 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, a Fund cannot invest more
than 5% of its total assets in any one issuer (other than the U.S.
Government, its agencies and instrumentalities). In addition, a Fund cannot
invest more than 25% of its 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 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 prevent
the Funds from significantly leveraging their 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.
----------------------------------------------------------------------------
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 containing 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.
18
<PAGE> 52
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.
19
<PAGE> 53
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 Investment Shares and
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 a Fund over a stated period
of time and takes into account reinvested dividends. Although cumulative total
return most closely reflects the actual performance of a Fund, a shareholder who
opts to receive dividends in cash 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 such amount, taking into account reinvested dividends.
Investment Shares have higher fees and expenses than Institutional Shares, so
the total return of Investment Shares will be lower than that of 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 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 also
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).
20
<PAGE> 54
EXPENSE INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' EXPENSES?
A pro rata portion of certain expenses of the Trust are allocated to each Fund
and to each class of shares 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. BISYS is entitled
to receive, for its administration services, an annual fee equal to 0.185% of
the aggregate net assets of the Trust up to $5 billion; 0.165% of the Trust's
aggregate net assets between $5 and $7.5 billion; and 0.135% of the Trust's
aggregate net assets over $7.5 billion; provided, however, that such annual fee
shall be subject to an annual minimum of $45,000 per fund that is applicable to
certain funds of the Trust.
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, 1996, an annual advisory fee at
the following rates, calculated daily and paid monthly, 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 Trust's Distribution Plan. The
Distribution Plan provides 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 Funds would find another organization to
provide such services and no shareholder should suffer any financial loss. The
Funds do not reimburse the Distributor for any distribution expenses in excess
of the payments received by the Distributor under the Distribution Plan or for
its overhead expenses.
21
<PAGE> 55
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 fluctuations in the market
in exchange for potentially greater returns over the long term. Investors who
have a short time horizon for their investments may wish to invest in other
portfolios of the Trust which are 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 (the "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 the 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, P.O. Box 182201, Columbus,
Ohio 43218-2201.
BY TELEPHONE. You may 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. You should call 1-800-633-KENT (5368) for complete
wire instructions. You should be aware that banks may charge fees for sending
wires. The
22
<PAGE> 56
Distributor has the right to charge fees for receiving wires, although it does
not currently do so.
BY AUTOMATED CLEARING HOUSE. Subsequent purchases of Investment Shares can be
made via Automated Clearing House. Call 1-800-633-KENT (5368) to request the
forms necessary to establish Automated Clearing House purchases.
THROUGH AN AUTOMATIC INVESTMENT PLAN.
1. Call 1-800-633-KENT (5368) to establish an Automatic Investment Plan.
2. Invest at least $1,000 in an Investment Share account.
3. On the fifth 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, P.O. Box 182201, Columbus, Ohio 43218-2201 at least five days before a
scheduled investment.
THROUGH DIRECT DEPOSIT. You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks. Call 1-800-633-KENT
(5368) to receive the necessary form.
THROUGH A TAX-SHELTERED PLAN. Investment Shares of the Funds may be purchased
through IRAs and Rollover IRAs, which are available through the Trust. For
details and application forms, call 1-800-633-KENT (5368) or write to: THE KENT
FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the following steps:
1. To open an account, call 1-800-633-KENT (5368) to obtain an account or wire
identification number and to place a purchase order.
2. Wire federal funds 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 the Trust receives the purchase proceeds and (ii) banks may
charge for wiring federal funds to the Trust. 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 shares of 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?" To effect an exchange:
23
<PAGE> 57
1. Call 1-800-633-KENT (5368) or write to: THE KENT FUNDS, P.O. Box 182201,
Columbus, Ohio 43218-2201 to obtain a prospectus for the new fund prior to
the exchange.
2. Call or write as indicated in 1. above to place an order to exchange shares.
Purchases of shares of a new fund 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 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 Time, the order
will not be executed until the next business day.
3. 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 Trust to
change the option.
IMPORTANT INFORMATION ABOUT EXCHANGES. IF SHARES OF A FUND ARE PURCHASED BY
CHECK, SUCH SHARES CANNOT BE EXCHANGED UNTIL SUCH CHECK HAS BEEN COLLECTED. THIS
COULD TAKE 10 DAYS OR MORE. THE TRUST MAY DISALLOW EXCHANGES OF SHARES IF A
SHAREHOLDER HAS MADE MORE THAN FIVE EXCHANGES BETWEEN INVESTMENT PORTFOLIOS
OFFERED BY THE TRUST IN A YEAR, OR MORE THAN THREE EXCHANGES IN A CALENDAR
QUARTER. ALTHOUGH UNLIKELY, THE TRUST MAY REJECT ANY EXCHANGES OR CHANGE OR
TERMINATE RIGHTS TO EXCHANGE SHARES. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN
STATES WHERE SHARES OF THE NEW FUND MAY BE SOLD.
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.
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. The Distributor may require additional documents prior to
accepting a purchase, redemption or exchange.
SHAREHOLDER SERVICES. FOR FURTHER INFORMATION ON ALL SHAREHOLDER SERVICES, CALL
1-800-633-KENT (5368) OR WRITE TO: THE KENT FUNDS, P.O. BOX 182201, COLUMBUS,
OHIO 43218-2201.
24
<PAGE> 58
----------------------------------------------------------------------------
WHAT PRICE DO I PAY FOR SHARES?
Shares are sold at the "net asset value next determined" by the Funds. 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 ("NAV"). 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.
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 value of securities.
25
<PAGE> 59
REDEMPTIONS (SALES) OF SHARES
----------------------------------------------------------------------------
WHEN CAN I REDEEM SHARES?
You can redeem shares on any day that both the NYSE and the Custodian are open
for business. Shares will not be redeemed by a Fund unless all required
documents have been received by the Trust. 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
Investment Shares may be redeemed in several ways.
BY MAIL. You may mail your redemption notice to: THE KENT FUNDS, P.O. Box
182201, Columbus, Ohio 43218-2201. 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 Trust 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 OR OTHER ENTITY APPROVED BY THE TRUST, UNLESS THE AMOUNT REDEEMED
IS LESS THAN $50,000 AND THE ACCOUNT ADDRESS HAS BEEN THE SAME FOR AT LEAST 90
DAYS. THE TRUST 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 application.
THROUGH A BROKER. Investment Shares can be redeemed through a broker. The
broker should send the redemption notice and any other required documents to
the Trust, which will send the proceeds to the broker or directly to you, at
your option. The Trust 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 application.
26
<PAGE> 60
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 TRUST
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 WILL EMPLOY
PROCEDURES DESIGNED TO PROVIDE REASONABLE ASSURANCE THAT INSTRUCTIONS BY
TELEPHONE ARE GENUINE. SUCH PROCEDURES WILL INCLUDE THE REQUIREMENT THAT
PERSONAL IDENTIFICATION BE PROVIDED BEFORE ACCEPTING A TELEPHONE REDEMPTION.
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 seven 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 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 10 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.
27
<PAGE> 61
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 14 portfolios, each of which offers two 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, 1996 of approximately $12.3 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 21 years of investment experience and
has served in various management positions with Old Kent for the past ten 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 nine 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
co-portfolio manager for each Fund. Mr. Eder has over four 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 the
International Growth Fund and the Index Equity Fund since January, 1995. He has
been co-portfolio manager of the Growth and Income Fund and the Small Company
Growth Fund since August, 1996.
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 the Funds sold by the broker-dealer. The broker-dealers may
be affiliated with the Trust or
28
<PAGE> 62
its service providers or their affiliates, subject to any limitations imposed by
applicable securities laws and regulations.
Commencing on June 1, 1997, Old Kent is expected to also provide certain
administrative services to the Funds pursuant to a Sub-Administration Agreement
between Old Kent and BISYS. BISYS has agreed to pay Old Kent a fee, calculated
daily and paid monthly, at an annual rate of up to 0.05% of each Fund's average
daily net assets. The fees paid to Old Kent by BISYS for such administrative
services come out of BISYS' administration fee and are not an additional charge
to the Funds.
ADMINISTRATOR. BISYS 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. BISYS Fund Services, Inc., an affiliate of BISYS,
acts as the fund accountant, transfer agent and dividend paying agent of the
Funds. BISYS and BISYS Fund Services, Inc. are each located at 3435 Stelzer
Road, Columbus, Ohio 43219.
DISTRIBUTOR. BISYS is also the distributor of the Funds' shares. BISYS 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. BISYS 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, BISYS may similarly provide
financial assistance in connection with preapproved 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.
----------------------------------------------------------------------------
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 Trust 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 Trust's obligations. If a shareholder were required to
pay a debt of a Fund, however, the Trust has committed to reimburse the
shareholder in full from its assets.
29
<PAGE> 63
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 (with the exception of the International Growth Fund which
pays such dividends annually). Each Fund will distribute realized long-term
capital gains, if any, at least 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, they generally will not be required to pay
Federal income taxes on their income and capital gains. Dividends of investment
company income by each Fund will be taxable to you as ordinary income, unless
you are exempt from Federal income taxes. In general, a Fund's investment
company taxable income will be its taxable income (including interest and
short-term capital gains, if any) 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. 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
capital loss to the extent of the earlier distribution.
30
<PAGE> 64
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 from foreign securities earned by the
Growth and Income Fund and International Growth Fund may be subject to foreign
withholding or other taxes. In certain circumstances, the International Growth
Fund may choose to treat certain foreign taxes paid by it as paid by its
shareholders, in which case you may either credit such taxes against your income
tax liabilities or deduct such taxes from your taxable income.
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 1-800-633-KENT (5368) or write to the Funds at: THE
KENT FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
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.
31
<PAGE> 65
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
<TABLE>
<S> <C>
INVESTMENT ADVISER: DISTRIBUTOR:
Old Kent Bank BISYS Fund Services
Grand Rapids, Michigan 49503 3435 Stelzer Road
Columbus, OH 43219-3035
</TABLE>
This investment is not an obligation of or guaranteed
by any bank, is not FDIC insured, and involves investment
[FDIC LOGO] risks including the possible loss of principal.
KKF-0393 5/97
<PAGE> 66
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
PROSPECTUS
INSTITUTIONAL/INVESTMENT SHARES
May 1, 1997
The Kent Short Term Bond Fund
The Kent Intermediate Bond Fund
The Kent Income Fund
[LOGO-Bond.eps]
<PAGE> 67
THE KENT FUNDS
Prospectus
Dated May 1, 1997
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 Fund maintains a dollar-weighted average
maturity between one and three years.
THE KENT INTERMEDIATE BOND FUND seeks current income, consistent with the
preservation of capital, through investments in a broad range of investment
quality debt securities. The Fund maintains a dollar-weighted average maturity
between three and ten years.
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. The Fund maintains a dollar-weighted average maturity
between seven and twenty 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, 1997 with the Securities and Exchange Commission, which, as
supplemented from time to time, 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
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
P.O. Box 182201
Columbus, Ohio 43218-2201
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.
1
<PAGE> 68
TABLE OF CONTENTS
HIGHLIGHTS
What are the key facts regarding the Funds?....................................3
FINANCIAL INFORMATION
What are the Funds' fees and expenses?.........................................5
FINANCIAL HIGHLIGHTS...........................................................6
FUND CHOICES
What Funds are offered?.......................................................11
What instruments do the Funds invest in?......................................12
What are the risks of investing in the Funds?.................................14
PERFORMANCE
How is the Funds' performance calculated?.....................................15
Where can I obtain performance data?..........................................15
EXPENSE INFORMATION
What are the Funds' expenses?.................................................16
PURCHASES OF SHARES
Who may want to invest in the Funds?..........................................17
When can I purchase shares?...................................................17
What is the minimum required investment?......................................17
How can I purchase shares?....................................................17
What price do I pay for shares?...............................................20
REDEMPTIONS (SALES) OF SHARES
When can I redeem shares?.....................................................21
How can I redeem shares?......................................................21
What price do I receive for shares?...........................................22
When will I receive redemption money?.........................................22
STRUCTURE AND MANAGEMENT OF THE FUNDS
How are the Funds structured?.................................................23
Who manages and services the Funds?...........................................23
What are my rights as a Fund shareholder?.....................................24
DIVIDENDS, DISTRIBUTIONS AND TAXES
When will I receive distributions from the Funds?.............................25
How will distributions be made?...............................................25
What are the tax implications of my investments in the Funds?.................25
ADDITIONAL INFORMATION
Where do I get additional information about my account and the Funds?.........26
2
<PAGE> 69
HIGHLIGHTS
-------------------------------------------------------------------------
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is an open-end management investment company
(commonly known as a mutual fund) 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 Government 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, 1996 of approximately
$12.3 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 fourteen mutual funds should your investment goals
change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by BISYS Fund Services ("BISYS" or the
"Distributor") 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 the Distributor, or
by completing an application and mailing it directly to the Trust 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 the Trust
toll-free at 1-800-633-KENT (5368) for
3
<PAGE> 70
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 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?"
4
<PAGE> 71
FINANCIAL INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' FEES AND EXPENSES?
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" for more information regarding such costs and expenses.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SHORT TERM INTERMEDIATE INCOME
BOND FUND BOND FUND FUND
----------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares
=============================================================================================
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases None None None None None None
=============================================================================================
ANNUAL FUND OPERATING EXPENSES(1)
(as a % of average net assets)
- ---------------------------------------------------------------------------------------------
Management Fees 0.50% 0.50% 0.55% 0.55% 0.60% 0.60%
- ---------------------------------------------------------------------------------------------
12b-1 Fees(2) 0.15% None 0.25% None 0.25% None
- ---------------------------------------------------------------------------------------------
Other Expenses 0.22% 0.22% 0.22% 0.22% 0.23% 0.23%
- ---------------------------------------------------------------------------------------------
TOTAL FUND OPERATING EXPENSES 0.87% 0.72% 1.02% 0.77% 1.08% 0.83%
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1996, restated in the case of the Short Term Bond Fund,
to reflect current 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.
(2) Investment Shares may pay 12b-1 fees of up to 0.25% (on an annualized
basis). As a result of the payment of 12b-1 fees, long-term Investment class
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of the National Association of Securities
Dealers, Inc.
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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SHORT TERM INTERMEDIATE INCOME
BOND FUND BOND FUND FUND
----------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
One Year $9 $7 $10 $8 $11 $8
- ---------------------------------------------------------------------------------------------
Three Years $28 $23 $32 $25 $34 $26
- ---------------------------------------------------------------------------------------------
Five Years $48 $40 $56 $43 $60 $46
- ---------------------------------------------------------------------------------------------
Ten Years $107 $89 $125 $95 $132 $103
- ---------------------------------------------------------------------------------------------
</TABLE>
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.
5
<PAGE> 72
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 SAI. These tables should be read in conjunction
with the Funds' financial statements and the related notes. Additional
information concerning the performance of the Funds is contained in their annual
report. Both the SAI and the Funds' annual report can be obtained without charge
by calling 1-800-633-KENT (5368).
SHORT TERM BOND FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------
Year ended December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.95 $9.52 $9.91 $10.02 $9.99
- -------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.59 0.52 0.47 0.38 0.02
Net realized and unrealized
gain (loss) on investments (0.20) 0.44 (0.37) (0.08) 0.01
- ------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.39 0.96 0.10 0.30 0.03
- ------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.54) (0.53) (0.48) (0.41) --
In excess of net investment income (0.06) -- (0.01) -- --
- -----------------------------------------------------------------------------------------------------
Total Distributions: (0.60) (0.53) (0.49) (0.41) --
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.21) 0.43 (0.39) (0.11) 0.03
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.74 $9.95 $9.52 $9.91 $10.02
====================================================================================================
TOTAL RETURN(2) 4.06% 10.30% 1.01% 3.04% 0.30%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $1,667 $1,634 $1,649 $1,427 $111
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.02% 5.40% 4.79% 3.91% 3.31%*
Net investment income excluding
reimbursement/waiver 5.91% + + + +
Operating expenses including
reimbursement/waiver 0.85% 0.91% 0.74% 1.24% 0.12%**
Operating expenses excluding
reimbursement/waiver 0.96% + + + +
Portfolio turnover rate 32% 75% 56% 50% 5%
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
+ During the period, there were no waivers or reimbursements.
(1) The Investment Class date of initial public investment was December 4, 1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
6
<PAGE> 73
SHORT TERM BOND FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.96 $9.52 $9.91 $9.99 $10.00
- ----------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.61 0.55 0.48 0.42 0.07
Net realized and unrealized
gain (loss) on investments (0.21) 0.43 (0.38) (0.09) (0.01)
- ---------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.40 0.98 0.10 0.33 0.06
- ---------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.61) (0.54) (0.49) (0.41) (0.07)
In excess of net investment income -- -- *** -- ***
- --------------------------------------------------------------------------------------------------
Total Distributions: (0.61) (0.54) (0.49) (0.41) (0.07)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
value (0.21) 0.44 (0.39) (0.08) (0.01)
- --------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.75 $9.96 $9.52 $9.91 $9.99
==================================================================================================
TOTAL RETURN 4.22% 10.53% 1.03% 3.36% 0.53%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $235,430 $310,680 $176,765 $255,892 $186,124
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.17% 5.60% 4.75% 4.24% 4.05%*
Net investment income excluding
reimbursement/waiver 6.17% + + + +
Operating expenses including
reimbursement/waiver 0.70% 0.77% 0.73% 0.81% 0.14%**
Operating expenses excluding
reimbursement/waiver 0.70% + + + +
Portfolio turnover rate 32% 75% 56% 50% 5 %
- -------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
+ During the period, there were no waivers or reimbursements.
(1) The Institutional Class commenced operations on November 2, 1992.
7
<PAGE> 74
INTERMEDIATE BOND FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------------
Year ended December 31,
---------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.14 $9.32 $10.19 $10.03 $9.98
- -----------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.58 0.61 0.57 0.47 0.03
Net realized and unrealized
gain (loss) on investments (0.32) 0.82 (0.87) 0.34 0.02
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.26 1.43 (0.30) 0.81 0.05
- -----------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.57) (0.61) (0.54) (0.46) --
In excess of net investment income (0.05) -- (0.01) (0.05) --
Net realized gains on investments -- -- (0.02) (0.14) --
- -----------------------------------------------------------------------------------------------------
Total Distributions: (0.62) (0.61) (0.57) (0.65) --
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.36) 0.82 (0.87) 0.16 0.05
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.78 $10.14 $9.32 $10.19 $10.03
=====================================================================================================
TOTAL RETURN(2) 2.76% 15.76% (3.01)% 8.19% 0.50%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $7,327 $6,862 $9,196 $4,966 $174
Ratios to average net assets:
Net investment income including
reimbursement/waiver 5.92% 6.24% 5.94% 4.75% 4.94%*
Net investment income excluding
reimbursement/waiver 5.91% + + + +
Operating expenses including
reimbursement/waiver 1.02% 1.01% 0.81% 1.13% 0.16%**
Operating expenses excluding
reimbursement/waiver 1.03% + + + +
Portfolio turnover rate 135% 166% 124% 126% 1%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
+ During the period, there were no waivers or reimbursements.
(1) The Investment Class date of initial public investment was November 25,
1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
8
<PAGE> 75
INTERMEDIATE BOND FUND (CONTINUED)
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.12 $9.29 $10.18 $10.00 $10.00
- -----------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.60 0.65 0.56 0.51 0.08
Net realized and unrealized
gain (loss) on investments (0.32) 0.81 (0.88) 0.32 ***
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.28 1.46 (0.32) 0.83 0.08
- -----------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.61) (0.63) (0.54) (0.51) (0.08)
In excess of net investment income (0.03) -- (0.01) *** ***
Net realized gains on investments -- -- (0.02) (0.14) --
- -----------------------------------------------------------------------------------------------------
Total Distributions: (0.64) (0.63) (0.57) (0.65) (0.08)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset
value (0.36) 0.83 (0.89) 0.18 --
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.76 $10.12 $9.29 $10.18 $10.00
=====================================================================================================
TOTAL RETURN 3.01% 16.18% (3.19)% 8.42% 0.83%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $769,395 $854,801 $977,865 $434,264 $203,129
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.18% 6.50% 6.03% 5.03% 5.32%*
Net investment income excluding
reimbursement/waiver 6.17% + + + +
Operating expenses including
reimbursement/waiver 0.77% 0.77% 0.80% 0.85% 0.15%**
Operating expenses excluding
reimbursement/waiver 0.78% + + + +
Portfolio turnover rate 135% 166% 124% 126% 1%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
+ During the period, there were no waivers or reimbursements.
(1) The Institutional Class commenced operations on November 2, 1992.
9
<PAGE> 76
INCOME FUND
(For a share outstanding throughout each period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INSTITUTIONAL SHARES
SHARES
- -----------------------------------------------------------------------------------------------------
Year ended Year ended December
December 31, 31,
---------------- --------------------
1996 1995(1) 1996 1995(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.82 $10.00 $10.84 $10.00
- -----------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.66 0.52 0.66 0.55
Net realized and unrealized gain (loss) on
investments (0.56) 0.91 (0.56) 0.92
- -----------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.10 1.43 0.10 1.47
- -----------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.64) (0.52) (0.65) (0.54)
In excess of net investment income (0.09) -- (0.10) --
Net realized gain on investments (0.03) (0.09) (0.03) (0.09)
- -----------------------------------------------------------------------------------------------------
Total Distributions: (0.76) (0.61) (0.78) (0.63)
- -----------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.66) 0.82 (0.68) 0.84
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.16 $10.82 $10.16 $10.84
=====================================================================================================
TOTAL RETURN(3) 1.16% 14.63%** 1.19% 15.05%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $2,722 $1,961 $240,060 $126,056
Ratios to average net assets:
Net investment income including
reimbursement/waiver 6.31% 6.40%* 6.57% 6.65%*
Net investment income excluding
reimbursement/waiver 6.31% + 6.57% +
Operating expenses including
reimbursement/waiver 1.08% 1.14%* 0.83% 0.91%*
Operating expenses excluding
reimbursement/waiver 1.08% + 0.83% +
Portfolio turnover rate 102% 50% 102% 50%
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** Not Annualized.
+ During the period, there were no waivers or reimbursements.
(1) The Investment Class date of initial public investment was March 22, 1995.
(2) The Institutional Class commenced operations on March 20, 1995.
(3) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
10
<PAGE> 77
FUND CHOICES
----------------------------------------------------------------------------
WHAT FUNDS ARE OFFERED?
The Trust currently offers the three fixed income funds described below.
OBJECTIVES AND MATURITIES
Each Fund's investment objective is considered "fundamental" and may not be
changed by a Fund without the approval of its shareholders. Each Fund seeks
preservation of capital as a secondary goal.
SHORT TERM BOND FUND
OBJECTIVE: Seeks current income by investing primarily in a limited range of
investment quality fixed income securities.
MATURITY: Expected to hold securities with remaining maturities of five years or
less. Will maintain a dollar-weighted average portfolio maturity between one and
three years.
INTERMEDIATE BOND FUND
OBJECTIVE: Seeks current income by investing primarily in a broad range of
investment quality debt securities.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between
three and ten years.
INCOME FUND
OBJECTIVE: Seeks a high level of current income by investing in a broad range of
investment quality debt securities.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between
seven and twenty years.
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 certain 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
11
<PAGE> 78
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 other factors, including, without limitation, current yield,
preservation of capital, 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
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 ten 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 amount of indebtedness to vary in addition to providing for periodic
adjustments in the interest rate. 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
12
<PAGE> 79
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.
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
S&P or Moody's, and short-term securities issued 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. 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 seven 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 or emergency 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. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price of the securities the Fund is obligated to repurchase.
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 assets 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 becomes
insolvent or 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" (as defined in the
SAI) 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.
13
<PAGE> 80
1. With respect to 75% of each Fund's total assets, a Fund cannot invest more
than 5% of its total assets in any one issuer (other than the U.S.
Government, its agencies and instrumentalities). In addition, a Fund cannot
invest more than 25% of its 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 prevent
the Funds from significantly leveraging their 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.
----------------------------------------------------------------------------
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. 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; however, such diversification does not eliminate all risks. 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.
14
<PAGE> 81
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 Investment Shares and
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 a Fund over a stated period
of time and takes into account reinvested dividends. Although cumulative total
return most closely reflects the actual performance of a Fund, a shareholder who
opts to receive dividends in cash 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 such amount, taking into account reinvested dividends.
Each Fund may also publish its CURRENT YIELD, which is the net investment income
generated by a share of the Fund during a 30-day period divided by the maximum
offering price on the 30th day.
Investment Shares 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.
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, Merrill Lynch Bond indices and Lehman Brothers Bond
indices. These indices show the value of selected portfolios of securities
(assuming reinvestment of interest and dividends) which are not managed by a
portfolio manager. The Funds may also 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).
15
<PAGE> 82
EXPENSE INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' EXPENSES?
A pro rata portion of certain expenses of the Trust are allocated to each Fund
and to each class of shares 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. BISYS is entitled
to receive, for its administration services, an annual fee equal to 0.185% of
the aggregate net assets of the Trust up to $5 billion; 0.165% of the Trust's
aggregate net assets between $5 and $7.5 billion; and 0.135% of the Trust's
aggregate net assets over $7.5 billion; provided, however, that such annual fee
shall be subject to an annual minimum of $45,000 per fund that is applicable to
certain funds of the Trust.
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, 1996, an annual advisory fee at
the following rates, calculated daily and paid monthly, 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 Trust's Distribution Plan. The
Distribution Plan provides 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 Funds would find another organization to
provide such services and no shareholder should suffer any financial loss. The
Funds do not reimburse the Distributor for any distribution expenses in excess
of the payments received by the Distributor under the Distribution Plan or for
its overhead expenses.
16
<PAGE> 83
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 seek current
income but desire potentially higher returns than more conservative fixed rate
investments or money market funds. When you choose among the Funds, you should
consider both the expected yield of the Funds and potential changes in each
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.
----------------------------------------------------------------------------
WHEN CAN I PURCHASE SHARES?
Shares can be purchased on any day that both the New York Stock Exchange (the
"NYSE") and Bankers Trust Company, the Funds' custodian (the "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 the 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, P.O. Box 182201,
Columbus, Ohio 43218-2201.
- - BY TELEPHONE. You may 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.
17
<PAGE> 84
- - BY FEDERAL FUNDS WIRE. Subsequent purchases of Investment Shares can be
made via a federal funds wire. You should call 1-800-633-KENT (5368) for
complete wire instructions. You should be aware that banks may charge fees
for sending wires. The Distributor has the right to charge fees for receiving
wires, although it does not currently do so.
- - BY AUTOMATED CLEARING HOUSE. Subsequent purchases of Investment Shares can be
made via Automated Clearing House. Call 1-800-633-KENT (5368) to request the
cessary to establish Automated Clearing House purchases.
- - THROUGH AN AUTOMATIC INVESTMENT PLAN.
1. Call 1-800-633-KENT (5368) to establish an Automatic Investment Plan.
2. Invest at least $1,000 in an Investment Share account.
3. On the fifth 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, P.O. Box 182201, Columbus, Ohio 43218-2201 at least five days before a
scheduled investment.
- - THROUGH DIRECT DEPOSIT. You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks. Call 1-800-633-KENT
(5368) to receive the necessary form.
- - THROUGH A TAX-SHELTERED PLAN. Investment Shares of the Funds may be purchased
through IRAs and Rollover IRAs, which are available through the Trust. For
details and application forms, call 1-800-633-KENT (5368) or write to: THE
KENT FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the following steps:
1. To open an account, call 1-800-633-KENT (5368) to obtain an account or wire
identification number and to place a purchase order.
2. Wire federal funds 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 the Trust receives the purchase proceeds and (ii) banks may
charge for wiring federal funds to the Trust. 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 shares of 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 re-
18
<PAGE> 85
deemed, 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?" To effect an
exchange:
1. Call 1-800-633-KENT (5368) or write to: THE KENT FUNDS, P.O. Box 182201,
Columbus, Ohio 43218-2201 to obtain a prospectus for the new fund prior to
the exchange.
2. Call or write as indicated in 1. above to place an order to exchange shares.
Purchases of shares of a new fund 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 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 Time, the order
will not be executed until the next business day.
3. 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 Trust to
change the option.
IMPORTANT INFORMATION ABOUT EXCHANGES. IF SHARES OF A FUND ARE PURCHASED BY
CHECK, SUCH SHARES CANNOT BE EXCHANGED UNTIL SUCH CHECK HAS BEEN COLLECTED. THIS
COULD TAKE 10 DAYS OR MORE. THE TRUST MAY DISALLOW EXCHANGES OF SHARES IF A
SHAREHOLDER HAS MADE MORE THAN FIVE EXCHANGES BETWEEN INVESTMENT PORTFOLIOS
OFFERED BY THE TRUST IN A YEAR, OR MORE THAN THREE EXCHANGES IN A CALENDAR
QUARTER. ALTHOUGH UNLIKELY, THE TRUST MAY REJECT ANY EXCHANGES OR CHANGE OR
TERMINATE RIGHTS TO EXCHANGE SHARES. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN
STATES WHERE SHARES OF THE NEW FUND MAY BE SOLD.
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.
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. The Distributor may require additional documents prior to
accepting a purchase, redemption or exchange.
SHAREHOLDER SERVICES. FOR FURTHER INFORMATION ON ALL SHAREHOLDER SERVICES, CALL
1-800-633-KENT (5368) OR WRITE TO: THE KENT FUNDS, P.O. BOX 182201, COLUMBUS,
OHIO 43218-2201.
19
<PAGE> 86
----------------------------------------------------------------------------
WHAT PRICE DO I PAY FOR SHARES?
Shares are sold at the "net asset value next determined" by the Funds. 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 ("NAV"). 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.
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 value of securities.
20
<PAGE> 87
REDEMPTIONS (SALES) OF SHARES
----------------------------------------------------------------------------
WHEN CAN I REDEEM SHARES?
You can redeem shares on any day that both the NYSE and the Custodian are open
for business. Shares will not be redeemed by a Fund unless all required
documents have been received by the Trust. 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
Investment Shares may be redeemed in several ways.
- - BY MAIL. You may mail your redemption notice to: THE KENT FUNDS, P.O. Box
182201, Columbus, Ohio 43218-2201. 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 Trust 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 OR OTHER ENTITY APPROVED BY THE TRUST, UNLESS THE AMOUNT REDEEMED
IS LESS THAN $50,000 AND THE ACCOUNT ADDRESS HAS BEEN THE SAME FOR AT LEAST 90
DAYS. THE TRUST 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 application.
- - THROUGH A BROKER. Investment Shares can be redeemed through a broker. The
broker should send the redemption notice and any other required documents to
the Trust, which will send the proceeds to the broker or directly to you, at
your option. The Trust 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
21
<PAGE> 88
be mailed or sent by electronic funds transfer to the bank listed on your
account application.
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 TRUST
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 WILL EMPLOY
PROCEDURES DESIGNED TO PROVIDE REASONABLE ASSURANCE THAT INSTRUCTIONS BY
TELEPHONE ARE GENUINE. SUCH PROCEDURES WILL INCLUDE THE REQUIREMENT THAT
PERSONAL IDENTIFICATION BE PROVIDED BEFORE ACCEPTING A TELEPHONE REDEMPTION.
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 seven 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 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 10 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.
22
<PAGE> 89
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 14 portfolios, each of which offers two 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, 1996 of approximately $12.3 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 21 years of investment experience and
has served in various management positions with Old Kent for the past ten years.
Allan J. Meyers, a Vice President in the Investment Management Group, is
Director of fixed income funds. Mr. Meyers has over 13 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 he
is the portfolio manager of the Intermediate Bond and the Income Funds, which he
has managed since inception, and he is the portfolio manager for the Short Term
Bond Fund, which he has managed since November 1996. Mr. Stapley has over ten
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 the Funds 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.
23
<PAGE> 90
Commencing on June 1, 1997, Old Kent is expected to also provide certain
administrative services to the Funds pursuant to a Sub-Administration Agreement
between Old Kent and BISYS. BISYS has agreed to pay Old Kent a fee, calculated
daily and paid monthly, at an annual rate of up to 0.05% of each Fund's average
daily net assets. The fees paid to Old Kent by BISYS for such administrative
services come out of BISYS' administration fee and are not an additional charge
to the Funds.
ADMINISTRATOR. BISYS 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. BISYS Fund Services, Inc., an affiliate of BISYS,
acts as the fund accountant, transfer agent and dividend paying agent of the
Funds. BISYS and BISYS Fund Services, Inc. are each located at 3435 Stelzer
Road, Columbus, Ohio 43219.
DISTRIBUTOR. BISYS is also the distributor of the Funds' shares. BISYS 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. BISYS 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, BISYS may similarly provide
financial assistance in connection with preapproved 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.
----------------------------------------------------------------------------
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 Trust 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 Trust's obligations. If a shareholder were required to
pay a debt of a Fund, however, the Trust has committed to reimburse the
shareholder in full from its assets.
24
<PAGE> 91
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, at least 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, they generally will not be required to pay
Federal income taxes on their income and capital gains. Dividends of investment
company income by each Fund will be taxable to you as ordinary income, unless
you are exempt from Federal income taxes. In general, a Fund's investment
company taxable income will be its taxable income (including interest and
short-term capital gains, if any) 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. 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. 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
capital 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
25
<PAGE> 92
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 1-800-633-KENT (5368) or write to the Funds at: THE
KENT FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
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.
26
<PAGE> 93
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
<TABLE>
<S> <C>
INVESTMENT ADVISER: DISTRIBUTOR:
Old Kent Bank BISYS Fund Services
Grand Rapids, Michigan 49503 3435 Stelzer Road
Columbus, OH 43219-3035
</TABLE>
This investment is not an obligation of or guaranteed by any
[FDIC LOGO] bank, is not FDIC insured, and involves investment risks
including the possible loss of principal.
KKF-0391 5/97
<PAGE> 94
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
PROSPECTUS
INSTITUTIONAL/INVESTMENT SHARES
May 1, 1997
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
[TAX ADVANTAGED FUNDS LOGO]
<PAGE> 95
THE KENT FUNDS
Prospectus
Dated May 1, 1997
THIS PROSPECTUS RELATES TO THE FOLLOWING TAX-ADVANTAGED FUNDS (THE "FUNDS"):
THE KENT LIMITED TERM TAX-FREE FUND seeks current income exempt from Federal
income tax, while preserving capital. The Fund maintains a dollar-weighted
average maturity between one and three years.
THE KENT INTERMEDIATE TAX-FREE FUND seeks current income exempt from Federal
income tax, while preserving capital. The Fund maintains a dollar-weighted
average maturity between three and ten years.
THE KENT TAX-FREE INCOME FUND seeks to provide as high a level of current income
exempt from Federal income tax as is consistent with prudent investing, while
preserving capital. The Fund maintains a dollar-weighted average maturity
between ten and twenty-five years.
THE KENT MICHIGAN MUNICIPAL BOND FUND seeks current income exempt from Federal
and Michigan state personal income taxes, while preserving capital. The Fund
maintains a dollar-weighted average maturity of between three and five 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, 1997 with the Securities and Exchange Commission, which, as
supplemented from time to time, 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
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
P.O. Box 182201
Columbus, Ohio 43218-2201
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.
1
<PAGE> 96
TABLE OF CONTENTS
HIGHLIGHTS
What are the key facts regarding the Funds?....................................3
FINANCIAL INFORMATION
What are the Funds' fees and expenses?.........................................5
FINANCIAL HIGHLIGHTS...........................................................6
FUND CHOICES
What Funds are offered?.......................................................11
What instruments do the Funds invest in?......................................13
What are the risks of investing in the Funds?.................................15
PERFORMANCE
How is the Funds' performance calculated?.....................................16
Where can I obtain performance data?..........................................16
EXPENSE INFORMATION
What are the Funds' expenses?.................................................17
PURCHASES OF SHARES
Who may want to invest in the Funds?..........................................18
When can I purchase shares?...................................................18
What is the minimum required investment?......................................18
How can I purchase shares?....................................................18
What price do I pay for shares?...............................................21
REDEMPTIONS (SALES) OF SHARES
When can I redeem shares?.....................................................22
How can I redeem shares?......................................................22
What price do I receive for shares?...........................................23
When will I receive redemption money?.........................................23
STRUCTURE AND MANAGEMENT OF THE FUNDS
How are the Funds structured?.................................................24
Who manages and services the Funds?...........................................24
What are my rights as a Fund shareholder?.....................................25
DIVIDENDS, DISTRIBUTIONS AND TAXES
When will I receive distributions from the Funds?.............................26
How will distributions be made?...............................................26
What are the tax implications of my investments in the Funds?.................26
ADDITIONAL INFORMATION
Where do I get additional information about my account and the Funds?.........28
2
<PAGE> 97
HIGHLIGHTS
----------------------------------------------------------------------------
WHAT ARE THE KEY FACTS REGARDING THE FUNDS?
Q: What are The Kent Funds?
A: The Kent Funds (the "Trust") is an open-end management investment company
(commonly known as a mutual fund) 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 Government 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, 1996 of approximately
$12.3 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 fourteen mutual funds should your investment goals
change.
Q: How does someone buy and redeem shares?
A: The Funds are distributed by BISYS Fund Services ("BISYS" or the
"Distributor") 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 the Distributor, or
by completing an application and mailing it directly to the Trust 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
the Trust toll-free at 1-800-633-KENT (5368) for instructions on how to open an
account. See "Purchases of
3
<PAGE> 98
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 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 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?"
4
<PAGE> 99
FINANCIAL INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' FEES AND EXPENSES?
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" for more information regarding such costs and expenses.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
LIMITED TERM INTERMEDIATE TAX-FREE MICHIGAN MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
--------------------------------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares Shares Shares
===========================================================================================================
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge on None None None None None None None None
Purchases
===========================================================================================================
ANNUAL FUND OPERATING EXPENSES(1)
(as a % of average net assets)
- -----------------------------------------------------------------------------------------------------------
Management Fees 0.45% 0.45% 0.50% 0.50% 0.55% 0.55% 0.45% 0.45%
- -----------------------------------------------------------------------------------------------------------
12b-1 Fees(2) 0.15% None 0.25% None 0.25% None 0.15% None
- -----------------------------------------------------------------------------------------------------------
Other Expenses 0.30% 0.30% 0.23% 0.23% 0.27% 0.27% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------
TOTAL FUND OPERATING 0.90% 0.75% 0.98% 0.73% 1.07% 0.82% 0.85% 0.70%
EXPENSES
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Expense ratios for each Fund are based on amounts incurred for the fiscal
year ended December 31, 1996, restated in the case of the Limited Term Tax-Free
Fund, to reflect current 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.
(2) Investment Shares may pay 12b-1 fees of up to 0.25% (on an annualized
basis). As a result of the payment of 12b-1 fees, long-term Investment class
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of the National Association of Securities
Dealers, Inc.
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:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
LIMITED TERM INTERMEDIATE TAX-FREE MICHIGAN MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
---------------------------------------------------------------------------------
Invest- Institu- Invest- Institu- Invest- Institu- Invest- Institu-
ment tional ment tional ment tional ment tional
Shares Shares Shares Shares Shares Shares Shares Shares
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One Year $9 $8 $10 $7 $11 $8 $9 $7
- ------------------------------------------------------------------------------------------------------------
Three Years $29 $24 $31 $23 $34 $26 $27 $22
- ------------------------------------------------------------------------------------------------------------
Five Years $50 $42 $54 $41 $59 $46 $47 $39
- ------------------------------------------------------------------------------------------------------------
Ten Years $111 $93 $120 $91 $131 $101 $105 $87
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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.
5
<PAGE> 100
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 SAI. These tables should be read in conjunction
with the Funds' financial statements and the related notes. Additional
information concerning the performance of the Funds is contained in their annual
report. Both the SAI and the Funds' annual report can be obtained without charge
by calling 1-800-633-KENT (5368).
<TABLE>
<CAPTION>
LIMITED TERM TAX-FREE FUND
(For a share outstanding throughout each period)
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
Year ended December 31, Year ended December 31,
----------------------------- --------------------------------
1996 1995 1994(1) 1996 1995 1994(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.24 $9.81 $9.87 $10.22 $9.80 $10.00
- ---------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.37 0.37 0.06 0.39 0.39 0.13
Net realized and unrealized
gain (loss) on investments (0.02) 0.44 (0.06) (0.04) 0.42 (0.21)
- ---------------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.35 0.81 -- 0.35 0.81 (0.08)
- ---------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.35) (0.38) (0.06) (0.40) (0.39) (0.12)
In excess of net investment income (0.03) -- -- *** -- --
Net realized gains on investments (0.01) -- -- (0.01) -- --
- ---------------------------------------------------------------------------------------------------------------
Total Distributions: (0.39) (0.38) (0.06) (0.41) (0.39) (0.12)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value (0.04) 0.43 (0.06) (0.06) 0.42 (0.20)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.20 $10.24 $9.81 $10.16 $10.22 $9.80
===============================================================================================================
TOTAL RETURN(3) 3.51% 8.40% 0.03% ** 3.54% 8.43% (0.77)%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $106 $54 $7 $41,472 $55,347 $43,497
Ratios to average net assets:
Net investment income including
reimbursement/waiver 3.69% 3.69% 3.86% * 3.84% 3.87% 3.81%*
Net investment income excluding
reimbursement/waiver 3.59% 3.69% 3.75% * 3.84% 3.82% 3.64%*
Operating expenses including
reimbursement/waiver 0.87% 0.84% 0.87% * 0.75% 0.69% 0.79%*
Operating expense excluding
reimbursement/waiver 0.97% 0.85% 0.98% * 0.75% 0.74% 0.96%*
Portfolio turnover rate 32% 51% 10% 32% 51% 10%
- ---------------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was November 1, 1994.
(2) The Institutional Class commenced operations on September 1, 1994.
(3) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
</TABLE>
6
<PAGE> 101
INTERMEDIATE TAX-FREE FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- ----------------------------------------------------------------------------------------------------------------
Year ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $9.74 $10.45 $10.04 $10.00
- ----------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.42 0.42 0.40 0.36 ***
Net realized and unrealized
gain (loss) on investments (0.09) 0.79 (0.71) 0.46 0.04
- ----------------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.33 1.21 (0.31) 0.82 0.04
- ----------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.41) (0.42) (0.39) (0.33) --
In excess of net investment income (0.02) (0.01) (0.01) (0.03) --
Net realized gains on investments -- -- -- (0.05) --
- ----------------------------------------------------------------------------------------------------------------
Total Distributions: (0.43) (0.43) (0.40) (0.41) --
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.10) 0.78 (0.71) 0.41 0.04
- ----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.42 $10.52 $9.74 $10.45 $10.04
================================================================================================================
TOTAL RETURN(2) 3.17% 12.66% (3.03)% 8.29% 0.40%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $3,368 $3,807 $4,505 $3,307 $92
Ratios to average net assets:
Net investment income including
reimbursement/waiver 4.09% 4.13% 3.99% 3.44% 1.37%*
Net investment income excluding
reimbursement/waiver 4.09% 4.13% 3.99% 3.44% 1.37%*
Operating expenses including
reimbursement/waiver 0.98% 0.97% 0.79% 1.08% 0.10%**
Operating expenses excluding
reimbursement/waiver 0.98% 0.97% 0.79% 1.08% 0.10%**
Portfolio turnover rate 35% 6% 36% 14% 0%
- ----------------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 18,
1992.
(2) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
</TABLE>
7
<PAGE> 102
INTERMEDIATE TAX-FREE FUND (CONTINUED)
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------
Year ended December 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992(1)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $9.74 $10.45 $10.02 $10.00
- --------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.44 0.45 0.40 0.37 0.01
Net realized and unrealized
gain (loss) on investments (0.08) 0.79 (0.71) 0.47 0.03
- --------------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.36 1.24 (0.31) 0.84 0.04
- --------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.46) (0.45) (0.39) (0.36) (0.01)
In excess of net investment income *** (0.01) (0.01) -- (0.01)
Net realized gains on investments -- -- -- (0.05) --
- --------------------------------------------------------------------------------------------------------------
Total Distributions: (0.46) (0.46) (0.40) (0.41) (0.02)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.10) 0.78 (0.71) 0.43 0.02
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.42 $10.52 $9.74 $10.45 $10.02
==============================================================================================================
TOTAL RETURN 3.41% 12.90% (3.00)% 8.51% 0.40%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $285,674 $283,733 $380,715 $135,862 $36,938
Ratios to average net assets:
Net investment income including
reimbursement/waiver 4.34% 4.39% 4.07% 3.62% 1.77%*
Net investment income excluding
reimbursement/waiver 4.34% 4.39% 4.07% 3.62% 1.77%*
Operating expenses including
reimbursement/waiver 0.73% 0.72% 0.78% 0.84% 0.11%**
Operating expenses excluding
reimbursement/waiver 0.73% 0.72% 0.78% 0.84% 0.11%**
Portfolio turnover rate 35% 6% 36% 14% 0%
- --------------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Institutional Class commenced operations on December 16, 1992.
</TABLE>
8
<PAGE> 103
TAX-FREE INCOME FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------------
Year ended Year ended December
December 31, 31,
----------------- --------------------
1996 1995(1) 1996 1995(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.52 $10.00 $10.49 $10.00
- ----------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income 0.41 0.31 0.46 0.36
Net realized and unrealized
gain (loss) on investments (0.05) 0.51 (0.06) 0.49
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations: 0.36 0.82 0.40 0.85
- ----------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.43) (0.30) (0.46) (0.36)
Net realized gains on investments (0.12) -- (0.16) --
In excess of net realized gains (0.04) -- -- --
- ----------------------------------------------------------------------------------------------------------
Total Distributions: (0.59) (0.30) (0.62) (0.36)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in net asset value (0.23) 0.52 (0.22) 0.49
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.29 $10.52 $10.27 $10.49
==========================================================================================================
TOTAL RETURN(3) 3.53% 8.34% ** 3.92% 8.64%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $936 $529 $109,948 $121,855
Ratios to average net assets:
Net investment income including
reimbursement/waiver 4.14% 4.25% * 4.38% 4.44%*
Net investment income excluding
reimbursement/waiver 4.14% 4.03% * 4.38% 4.26%*
Operating expenses including
reimbursement/waiver 1.07% 0.95% * 0.82% 0.73%*
Operating expenses excluding
reimbursement/waiver 1.07% 1.17% * 0.82% 0.91%*
Portfolio turnover rate 40% 10% 40% 10%
- ----------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** Not Annualized.
(1) The Investment Class date of initial public investment was March 31, 1995.
(2) The Institutional Class commenced operations on March 20, 1995.
(3) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
</TABLE>
9
<PAGE> 104
MICHIGAN MUNICIPAL BOND FUND
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------------------
Year ended December 31, Year ended December 31,
--------------------------------- ----------------------------------------
1996 1995 1994 1993(1) 1996 1995 1994 1993(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.11 $9.72 $10.08 $10.02 $10.12 $9.72 $10.06 $10.00
- ---------------------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net investment income 0.38 0.37 0.35 0.21 0.39 0.39 0.37 0.23
Net realized and unrealized
gain (loss) on investments (0.05) 0.40 (0.34) 0.07 (0.04) 0.39 (0.34) 0.07
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment
Operations: 0.33 0.77 0.01 0.28 0.35 0.78 0.03 0.30
- ---------------------------------------------------------------------------------------------------------------------
Less Distributions from:
Net investment income (0.35) (0.37) (0.34) (0.21) (0.39) (0.37) (0.36) (0.22)
In excess of net investment
income (0.02) (0.01) (0.03) *** -- (0.01) (0.01) (0.01)
Net realized gains on investments -- -- -- (0.01) -- -- -- (0.01)
In excess of net realized gains -- -- -- -- -- -- -- ***
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions: (0.37) (0.38) (0.37) (0.22) (0.39) (0.38) (0.37) (0.24)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
asset value (0.04) 0.39 (0.36) 0.06 (0.04) 0.40 (0.34) 0.06
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.07 $10.11 $9.72 $10.08 $10.08 $10.12 9.72 $10.06
=====================================================================================================================
TOTAL RETURN(3) 3.36% 8.01% 0.16% 2.85%** 3.51% 8.20% 0.36% 3.06%**
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of period (000's) $2,422 $1,900 $1,980 $283 $152,623 $185,466 $118,485 $74,647
Ratios to average net assets:
Net investment income including
reimbursement/waiver 3.68% 3.68% 3.80% 3.43%* 3.83% 3.81% 3.74% 3.34%*
Net investment income excluding
reimbursement/waiver 3.58% 3.67% 3.61% 2.60%* 3.83% 3.80% 3.50% 2.74%*
Operating expenses including
reimbursement/waiver 0.85% 0.83% 0.49% 0.25%* 0.70% 0.69% 0.49% 0.24%*
Operating expenses excluding
reimbursement/waiver 0.95% 0.85% 0.68% 1.08%* 0.70% 0.70% 0.74% 0.84%*
Portfolio turnover rate 24% 42% 27% 10% 24% 42% 27% 10%
- ---------------------------------------------------------------------------------------------------------------------
<FN>
* Annualized.
** Not Annualized.
*** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was on May 11, 1993.
(2) The Institutional Class commenced operations on May 3, 1993.
(3) Calculation does not include sales charge that was previously applicable for
Investment Shares. Such sales charge was discontinued as of May 1, 1997.
</TABLE>
10
<PAGE> 105
FUND CHOICES
----------------------------------------------------------------------------
WHAT FUNDS ARE OFFERED?
The Trust currently offers the four tax-free funds described below.
OBJECTIVES AND MATURITIES
Each Fund's investment objective is considered "fundamental" and may not be
changed by a Fund without the approval of its shareholders.
LIMITED TERM TAX-FREE FUND
OBJECTIVE: Seeks current income, exempt from Federal income tax, while
preserving capital.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between one
and three years. No obligation will have a remaining maturity of more than ten
years.
INTERMEDIATE TAX-FREE FUND
OBJECTIVE: Seeks current income, exempt from Federal income tax, while
preserving capital.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between
three and ten years. There is no limit on the maturity of any individual
security in the portfolio.
TAX-FREE INCOME FUND
OBJECTIVE: Seeks to provide as high a level of interest income exempt from
Federal income tax as is consistent with prudent investing, while preserving
capital.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between ten
and twenty-five years. There is no limit on the maturity of any individual
security in the portfolio.
MICHIGAN MUNICIPAL BOND FUND
OBJECTIVE: Seeks current income, exempt from Federal income and State of
Michigan personal income taxes, while preserving capital.
MATURITY: Will maintain a dollar-weighted average portfolio maturity between
three and five years. No obligation will have a remaining maturity of more than
ten 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 cannot 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 alterna-
11
<PAGE> 106
tive 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. "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.
The amount of information regarding the financial condition of issuers of
municipal obligations may be less extensive than the information for public
corporations, and the secondary market for municipal obligations may be less
liquid than that for taxable obligations. Accordingly, the ability of a Fund to
buy and sell municipal obligations may, at any particular time and with respect
to any particular securities, be limited. In addition, municipal obligations
purchased by the Funds include obligations backed by letters of credit and other
forms of credit enhancement issued by domestic and foreign banks, as well as
other financial institutions. Changes in the credit quality of these
institutions could cause loss to a Fund and affect its share price.
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") (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 municipal obligations, Old Kent will consider the NRSRO ratings
assigned to such securities. In making its investment decisions, Old Kent will
also consider many other factors, including, without limitation, current yield,
preservation of capital, 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
12
<PAGE> 107
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 the interest rates paid thereunder.
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.
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
S&P or Moody's, and short-term securities issued 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. 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 seven 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 or emergency 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. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price of the securities the Fund is obligated to repurchase.
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
13
<PAGE> 108
cash or liquid assets 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 becomes insolvent or declares bankruptcy.
The Funds may also purchase FUTURES CONTRACTS, which are contracts in which a
Fund agrees, at maturity, to take or 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 unless immediately after any such
transaction the aggregate amount of margin deposits on its existing futures
positions plus premiums paid for related options is less 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, index or financial
indicator. 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. 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% of its total assets 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" (as defined in the SAI) 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, a Fund cannot invest more
than 5% of its total assets in any one issuer (other than the U.S.
Government, its agencies and instrumentalities). In addition, a Fund cannot
invest more than 25% of its 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.
14
<PAGE> 109
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 prevent the Funds
from significantly leveraging their 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.
----------------------------------------------------------------------------
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. Investing in
the Funds may be less risky than investing in individual municipal bonds due to
the diversification of investing in a portfolio containing many different
municipal bonds; however, such diversification does not eliminate all risks. The
Funds invest mostly in municipal 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 for 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. 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 the 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 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 $1.0 billion should help the State
weather any potential economic recession.
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.
15
<PAGE> 110
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 Investment Shares and
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 a Fund over a stated period
of time and takes into account reinvested dividends. Although cumulative total
return most closely reflects the actual performance of a Fund, a shareholder who
opts to receive dividends in cash 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 such amount, taking into account reinvested dividends.
Each Fund may also publish its CURRENT YIELD, which is the net investment income
generated by a share of the Fund during a 30-day period divided by the maximum
offering price on the 30th day.
In addition, each Fund may advertise its "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 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.
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, Merrill Lynch Bond indices and Lehman Brothers Bond
indices. These indices show the value of selected portfolios of securities
(assuming reinvestment of interest and dividends) which are not managed by a
portfolio manager. The Funds may also 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).
16
<PAGE> 111
EXPENSE INFORMATION
----------------------------------------------------------------------------
WHAT ARE THE FUNDS' EXPENSES?
A pro rata portion of certain expenses of the Trust are allocated to each Fund
and to each class of shares 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. BISYS is entitled
to receive, for its administration services, an annual fee equal to 0.185% of
the aggregate net assets of the Trust up to $5 billion; 0.165% of the Trust's
aggregate net assets between $5 and $7.5 billion; and 0.135% of the Trust's
aggregate net assets over $7.5 billion; provided, however, that such annual fee
shall be subject to an annual minimum of $45,000 per fund that is applicable to
certain funds of the Trust.
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, 1996, an annual advisory fee at
the following rates, calculated daily and paid monthly, 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%. 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 Trust's Distribution Plan. The
Distribution Plan provides 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 Funds would find another organization to
provide such services and no shareholder should suffer any financial loss. The
Funds do not reimburse the Distributor for any distribution expenses in excess
of the payments received by the Distributor under the Distribution Plan or for
its overhead expenses.
17
<PAGE> 112
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 tax-free income funds), are designed for investors who seek
tax-exempt current income but desire potentially higher returns than more
conservative fixed rate investments or money market funds. When you choose among
the Funds, you should consider both the expected yield of the Funds and
potential changes in each 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.
Shares of the Funds 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 New York Stock Exchange (the
"NYSE") and Bankers Trust Company, the Funds' custodian (the "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.
----------------------------------------------------------------------------
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 the 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, P.O. Box 182201,
Columbus, Ohio 43218-2201.
18
<PAGE> 113
- - BY TELEPHONE. You may 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. You should call 1-800-633-KENT (5368) for complete
wire instructions. You should be aware that banks may charge fees for sending
wires. The Distributor has the right to charge fees for receiving wires,
although it does not currently do so.
- - BY AUTOMATED CLEARING HOUSE. Subsequent purchases of Investment Shares can be
made via Automated Clearing House. Call 1-800-633-KENT (5368) to request the
forms necessary to establish Automated Clearing House purchases.
- - THROUGH AN AUTOMATIC INVESTMENT PLAN.
1. Call 1-800-633-KENT (5368) to establish an Automatic Investment Plan.
2.Invest at least $1,000 in an Investment Share account.
3.On the fifth 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, P.O. Box 182201, Columbus, Ohio 43218-2201 at least five days before a
scheduled investment.
- - THROUGH DIRECT DEPOSIT. You may authorize direct deposit of your payroll,
Social Security or Supplemental Security Income checks. Call 1-800-633-KENT
(5368) to receive the necessary form.
INSTITUTIONAL SHARES
You can purchase Institutional Shares by taking the following steps:
1. To open an account, call 1-800-633-KENT (5368) to obtain an account or wire
identification number and to place a purchase order.
2. Wire federal funds 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 the Trust receives the purchase proceeds and (ii) banks may
charge for wiring federal funds to the Trust. 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 shares of 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 re-
19
<PAGE> 114
deemed, 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?" To effect an
exchange:
1. Call 1-800-633-KENT (5368) or write to: THE KENT FUNDS, P.O. Box 182201,
Columbus, Ohio 43218-2201 to obtain a prospectus for the new fund prior to
the exchange.
2. Call or write as indicated in 1. above to place an order to exchange shares.
Purchases of shares of a new fund 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 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 Time, the order
will not be executed until the next business day.
3. 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 Trust to
change the option.
IMPORTANT INFORMATION ABOUT EXCHANGES. IF SHARES OF A FUND ARE PURCHASED BY
CHECK, SUCH SHARES CANNOT BE EXCHANGED UNTIL SUCH CHECK HAS BEEN COLLECTED. THIS
COULD TAKE 10 DAYS OR MORE. THE TRUST MAY DISALLOW EXCHANGES OF SHARES IF A
SHAREHOLDER HAS MADE MORE THAN FIVE EXCHANGES BETWEEN INVESTMENT PORTFOLIOS
OFFERED BY THE TRUST IN A YEAR, OR MORE THAN THREE EXCHANGES IN A CALENDAR
QUARTER. ALTHOUGH UNLIKELY, THE TRUST MAY REJECT ANY EXCHANGES OR CHANGE OR
TERMINATE RIGHTS TO EXCHANGE SHARES. THE EXCHANGE PRIVILEGE IS AVAILABLE ONLY IN
STATES WHERE SHARES OF THE NEW FUND MAY BE SOLD.
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 and other fiduciary or
agency accounts.
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. The Distributor may require additional documents prior to
accepting a purchase, redemption or exchange.
SHAREHOLDER SERVICES. FOR FURTHER INFORMATION ON ALL SHAREHOLDER SERVICES, CALL
1-800-633-KENT (5368) OR WRITE TO: THE KENT FUNDS, P.O. BOX 182201, COLUMBUS,
OHIO 43218-2201.
20
<PAGE> 115
----------------------------------------------------------------------------
WHAT PRICE DO I PAY FOR SHARES?
Shares are sold at the "net asset value next determined" by the Funds. 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 ("NAV"). 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.
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 value of securities.
21
<PAGE> 116
REDEMPTIONS (SALES) OF SHARES
----------------------------------------------------------------------------
WHEN CAN I REDEEM SHARES?
You can redeem shares on any day that both the NYSE and the Custodian are open
for business. Shares will not be redeemed by a Fund unless all required
documents have been received by the Trust. 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
Investment Shares may be redeemed in several ways.
- - BY MAIL. You may mail your redemption notice to: THE KENT FUNDS, P.O. Box
182201, Columbus, Ohio 43218-2201. 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 Trust 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 OR OTHER ENTITY APPROVED BY THE TRUST, UNLESS THE AMOUNT REDEEMED
IS LESS THAN $50,000 AND THE ACCOUNT ADDRESS HAS BEEN THE SAME FOR AT LEAST 90
DAYS. THE TRUST 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 application.
- - THROUGH A BROKER. Investment Shares can be redeemed through a broker. The
broker should send the redemption notice and any other required documents to
the Trust, which will send the proceeds to the broker or directly to you, at
your option. The Trust 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
22
<PAGE> 117
be mailed or sent by electronic funds transfer to the bank listed on your
account application.
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 TRUST
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 WILL EMPLOY
PROCEDURES DESIGNED TO PROVIDE REASONABLE ASSURANCE THAT INSTRUCTIONS BY
TELEPHONE ARE GENUINE. SUCH PROCEDURES WILL INCLUDE THE REQUIREMENT THAT
PERSONAL IDENTIFICATION BE PROVIDED BEFORE ACCEPTING A TELEPHONE REDEMPTION.
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 seven 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 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 10 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.
23
<PAGE> 118
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 14 portfolios, each of which offers two 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, 1996 of approximately $12.3 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 21 years of investment experience and
has served in various management positions with Old Kent for the past ten years.
Allan J. Meyers, a Vice President in the Investment Management Group, is
Director of fixed income funds and the portfolio manager of each Fund. He has
managed the Funds since their inception. Mr. Meyers has over 13 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
co-managed since January 1995. Mr. Martin has over seven 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 the Funds 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.
24
<PAGE> 119
Commencing on June 1, 1997, Old Kent is expected to also provide certain
administrative services to the Funds pursuant to a Sub-Administration Agreement
between Old Kent and BISYS. BISYS has agreed to pay Old Kent a fee, calculated
daily and paid monthly, at an annual rate of up to 0.05% of each Fund's average
daily net assets. The fees paid to Old Kent by BISYS for such administrative
services come out of BISYS' administration fee and are not an additional charge
to the Funds.
ADMINISTRATOR. BISYS 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. BISYS Fund Services, Inc., an affiliate of BISYS,
acts as the fund accountant, transfer agent and dividend paying agent of the
Funds. BISYS and BISYS Fund Services, Inc. are each located at 3435 Stelzer
Road, Columbus, Ohio 43219.
DISTRIBUTOR. BISYS is also the distributor of the Funds' shares. BISYS 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. BISYS 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, BISYS 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.
----------------------------------------------------------------------------
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 Trust 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 Trust's obligations. If a shareholder were required to
pay a debt of a Fund, however, the Trust has committed to reimburse the
shareholder in full from its assets.
25
<PAGE> 120
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, at least 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.
----------------------------------------------------------------------------
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. 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. 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 and may also be
subject to state and local taxes. Dividends of investment company income by each
Fund will be taxable to you as ordinary income, unless you are exempt from
Federal income taxes. In general, a Fund's investment company taxable income
will be its taxable income (including interest and short-term capital gains, if
any) 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. 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 additional shares. 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.
Interest on indebtedness incurred by you to purchase or carry shares of a Fund
generally will not be deductible for Federal income tax purposes.
26
<PAGE> 121
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 an exempt-interest dividend,
any loss you realize on the sale of those shares will be disallowed to the
extent of the exempt-interest dividend.
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
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.
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.
27
<PAGE> 122
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
WHERE DO I GET ADDITIONAL INFORMATION ABOUT MY ACCOUNT AND THE FUNDS?
For more information, call 1-800-633-KENT (5368) or write to the Funds at: THE
KENT FUNDS, P.O. Box 182201, Columbus, Ohio 43218-2201.
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.
28
<PAGE> 123
T H E
[KENT FUNDS LOGO]
Your Foundation for Investment Strength.
<TABLE>
<S> <C>
INVESTMENT ADVISER: DISTRIBUTOR:
Old Kent Bank BISYS Fund Services
Grand Rapids, Michigan 49503 3435 Stelzer Road
Columbus, OH 43219-3035
</TABLE>
This investment is not an obligation of or guaranteed by
[FDIC LOGO] any bank, is not FDIC insured, and involves investment
risks including the possible loss of principal.
KKF-0392 5/97
<PAGE> 124
<TABLE>
<CAPTION>
Items in Statement of
Part B of Additional
Form N-1A Information
- ---------- -----------
<S> <C> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and The Trust
History
Item 13. Investment Objectives and The Trust
Policies Investment Policies
Investment Restrictions
Securities Transactions
Appendix C
Item 14. Management of the Registrant Trustees and Officers
Item 15. Control Persons and Additional Information
Principal Holders of
Securities
Item 16. Investment Advisory and Investment Adviser
and Other Services Administrator
Distributor
Transfer Agent
Custodian, Auditors and
Counsel
Distribution Plans
Item 17. Brokerage Allocation and Securities Transactions
Other Practices Distribution Plans
Item 18. Capital Stock and Other The Trust
Securities Declaration of Trust
Item 19. Purchase, Redemption and Valuation of Securities
Pricing of Securities Additional Purchase
Being Offered and Redemption Information
Item 20. Tax Status Dividends and Taxes
Item 21. Underwriters Distributor
Item 22. Calculation of Performance Standardized Total Return
Data and Yield Quotations
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE> 125
THE KENT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FOR
INVESTMENT AND INSTITUTIONAL SHARES
OF
THE KENT MONEY MARKET FUND
THE KENT GOVERNMENT 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, 1997
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 Institutional Shares of the foregoing Funds dated May 1,
1997, as amended or supplemented from time to time. A copy of the prospectuses
may be obtained by writing to The Kent Funds, P.O. Box 182201, Columbus, Ohio
43218-2201 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
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. 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.
1
<PAGE> 126
TABLE OF CONTENTS
The Trust..................................................................3
Investment Policies........................................................3
Investment Restrictions...................................................22
Securities Transactions...................................................24
Valuation of Securities...................................................26
Trustees and Officers.....................................................29
Expenses..................................................................31
Investment Adviser........................................................31
Administrator.............................................................34
Distributor...............................................................35
Transfer Agent............................................................35
Custodian, Auditors and Counsel...........................................36
Distribution Plan.........................................................36
Additional Purchase and Redemption Information............................37
Dividends and Taxes.......................................................38
Declaration of Trust......................................................42
Standardized Total Return and Yield Quotations............................44
Advertising Information...................................................49
Additional Information....................................................50
Appendix A...............................................................A-1
Appendix B...............................................................B-1
Appendix C...............................................................C-1
Financial Statements
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 ITS DISTRIBUTOR IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE> 127
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 fourteen 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 Government 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 contained 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
To the extent described in the Funds' prospectuses, 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
3
<PAGE> 128
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 record keeping 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.
4
<PAGE> 129
GUARANTEED INVESTMENT CONTRACTS (The Income Funds and Money Market Fund only)
The Income Funds and Money Market Fund 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 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). 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
collateral obligations. Repurchase agreements are considered to be loans by a
Fund under the Investment Company Act of 1940, as amended (the "1940 Act").
REVERSE REPURCHASE AGREEMENTS
A Fund may borrow funds for temporary or emergency 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.
5
<PAGE> 130
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 regularly scheduled interest rate adjustment or the time a Fund
can recover payment of principal as specified in the instrument. Variable rate
U.S. Government obligations and certain variable rate instruments having a
nominal maturity of 397 days or less when purchased, however, will be deemed to
have maturities equal to the period remaining until the next interest rate
adjustment. Variable and floating rate instruments purchased by the Money Market
Funds may carry nominal maturities in excess of those Funds' maturity
limitations if such instruments carry demand features that comply with
conditions established by the Securities and Exchange Commission. In order to be
purchased by a Money Market Fund, these instruments must permit a Fund to demand
payment of the principal of the instrument at least once every 397 days upon not
more than 30 days' notice.
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.
LOAN PARTICIPATION NOTES (MONEY MARKET FUNDS ONLY)
The Money Market Funds may purchase 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
participation 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 participation purchased by
a Fund may be regarded as illiquid.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS
To the extent described in the prospectuses, each Fund may purchase
securities on a when-issued basis or purchase or sell securities on a forward
commitment (sometimes called delayed delivery) basis.
6
<PAGE> 131
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 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, Tennessee
Valley Authority, Resolution Funding Corporation, 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,
7
<PAGE> 132
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)
To the extent described in their prospectuses, 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
8
<PAGE> 133
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." 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 (except the
Michigan Municipal Money Market Fund) 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.
Although a "stripped" security may not pay interest to holders prior to
maturity, federal income tax regulations require a Fund to recognize as interest
income a portion of the security's discount each year. This income must then be
distributed to shareholders along with other income earned by the Fund. To the
extent that any shareholders in a Fund elect to receive their dividends in cash
rather than reinvest such dividends in additional Fund shares, cash to make
these distributions will have to be provided from the assets of the Fund or
other sources such as proceeds of sales of Fund shares and/or sales of portfolio
securities. In such cases, the Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income may ultimately be reduced as a result.
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
9
<PAGE> 134
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.
10
<PAGE> 135
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 involve 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. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
CERTAIN DERIVATIVE SECURITIES (The Income Funds and Municipal Bond 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
11
<PAGE> 136
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 Municipal Bond Funds are therefore based on the opinion of
counsel to the sponsors of the security.
MUNICIPAL OBLIGATIONS (The Tax-Free 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 taxing 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
12
<PAGE> 137
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 Tax-Free 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 Tax-Free Funds only)
The Tax-Free 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,
13
<PAGE> 138
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 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. 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. As noted above, all of the Funds
may invest in certain obligations of foreign banks and foreign branches of
domestic banks.
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
14
<PAGE> 139
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.
15
<PAGE> 140
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 different
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)
16
<PAGE> 141
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 Equity and Municipal Bond Funds only)
The Equity and Municipal Bond 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. The prospectuses
specifically set forth the types of options used by each Fund. 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.
17
<PAGE> 142
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.
18
<PAGE> 143
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 Equity and Municipal Bond Funds only)
The Equity and Municipal Bond 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) the
willingness of dealers to undertake to make a market in the security; and (d)
the nature of the security and the nature
19
<PAGE> 144
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
A Fund may lend its 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
20
<PAGE> 145
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.
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.
21
<PAGE> 146
CALCULATION OF PORTFOLIO TURNOVER RATE
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 also 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. Because the Money Market Funds invest only in short-term investments,
their portfolio turnover rate is expected to be zero for regulatory reporting
purposes.
MISCELLANEOUS
The Funds are not restricted by policy with regard to portfolio
turnover and will make changes in their investment portfolios 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.
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 shares (as defined in "Declaration of Trust--Voting Rights"). If 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
22
<PAGE> 147
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 Funds) 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;
23
<PAGE> 148
(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 investment 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 and the Government Money Market Fund, may be invested in any
one issuer for a period of up to three business days. In addition, no 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.
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 received 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
24
<PAGE> 149
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. 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
transaction 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 the overall responsibilities of Old Kent to the Funds. 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 Agreement
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 newly issued 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 of certain securities directly from an issuer in
order to take advantage of the lower purchase price available to members of such
a group.
Neither Old Kent 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. 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.
25
<PAGE> 150
For the fiscal years ended December 31, 1994, 1995 and 1996, the
following Funds paid commission in the amounts indicated: $328,237, $557,711 and
$478,044, respectively, for the Growth and Income Fund; $674,963, $1,001,650 and
$453,811, respectively, for the Small Company Growth Fund; $125,856, $192,985
and $211,929, respectively, for the International Growth Fund; $296,953,
$139,571 and $34,687, respectively, for the Index Equity Fund; and $9,075, $0
and $0, respectively, for the Intermediate Tax-Free Fund. The Tax-Free Income
Fund paid commissions in the amount of $2,500 for the fiscal year ended December
31, 1996. 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, the Trust's 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.
As of December 31, 1996, the Money Market Fund owned debt securities of
Donaldson, Lufkin & Jenrette in the amount of $35,000,000; Growth and Income
Fund owned equity securities of J.P. Morgan & Co. in the amount of $4,130,000;
Index Equity Fund owned equity securities of Merrill Lynch & Co., Inc. in the
amount of $587,000 and equity securities of Morgan Stanley Group, Inc. in the
amount of $383,000; Short Term Bond Fund owned debt securities of Goldman Sachs
Group, L.P. in the amount of $4,974,000 and debt securities of Morgan Stanley
Group, L.P. in the amount of $5,978,000; Intermediate Bond Fund owned debt
securities of Morgan Stanley Group, Inc. in the amount of $5,016,000 and debt
securities of Smith Barney Holdings, Inc. in the amount of $12,913,000; and
Income Fund owned debt securities of Lehman Brothers Holdings, Inc. in the
amount of $2,154,000. As of December 31, 1996, no other Fund owned securities of
the Trust's regular broker dealers.
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
26
<PAGE> 151
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 the
dollar-weighted 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.
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. 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.
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
27
<PAGE> 152
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;
(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 debt securities 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 combined with
accrued interest, approximates market value and which reflects fair value as
determined by the Board of Trustees; and
28
<PAGE> 153
(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 Old Kent not to be representative of the market value of such
security.
In valuing each Fund's assets, the Trust's fund accountant 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 3435 Stelzer Road, Columbus, Ohio 43219.
ANNE T. COUGHLAN, Trustee, 40; she is Associate Professor of
Marketing; Kellogg Graduate School of Management, Northwestern University.
JOSEPH F. DAMORE, Trustee, 44; 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.
* WALTER B. GRIMM, Trustee, Chairman and President, 51; he is Senior
Vice President of Client Services for BISYS Fund Services and was formerly
President of Leigh Investments.
JAMES F. RAINEY, Trustee, 57; he is Associate Dean for Academic
Affairs in The Eli Broad Graduate School of Management at Michigan State
University.
RONALD F. VANSTEELAND, Trustee, 56; 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.
R. JEFFREY YOUNG, Vice President and Assistant Secretary, 32; he is
Director of Client Services for BISYS Fund Services and was formerly employed
by The Heebink Group.
THOMAS E. LINE, Treasurer, 29; he is Vice President of Financial
Administration for BISYS Fund Services and was formerly employed by KPMG Peat
Marwick LLP.
ROBERT L. TUCH, Secretary, 45; he is Vice President - Legal Services
for BISYS Fund Services.
W. BRUCE MCCONNEL, III, Assistant Secretary, 57; he is a partner in
the law firm of Drinker Biddle & Reath.
GEORGE O. MARTINEZ, Assistant Secretary, 38; he is Senior Vice
President and Director of Legal and Compliance Services for BISYS Fund Services
and was formerly Vice President and Associate General Counsel with Alliance
Capital Management.
29
<PAGE> 154
ALAINA V. METZ, Assistant Secretary, 30; she is Chief Administrator of
the Blue Sky Department for BISYS Fund Services and was formerly employed by
Alliance Capital Management.
- -----------------------------------
* This Trustee is an interested person of the Trust as defined under the 1940
Act.
During the fiscal year ended December 31, 1996, 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 BISYS and its affiliates, of which
Messrs. Grimm, Young, Line, Tuch and Martinez and Ms. Metz are also employees,
receives fees from the Trust for administrative, fund accounting and transfer
agency services. Drinker Biddle & Reath LLP, of which Mr. McConnel is a partner,
receives legal fees as counsel to the Trust. Each Trustee earns an annual fee of
$8,000 and an additional fee of $1,000 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, 1996. The Board of Trustees has established
The Kent Funds Deferred Compensation Plan (the "Deferred Compensation Plan")
pursuant to which the Trustees may elect to defer receipt of the compensation
payable to them by the Trust. Under the terms of the Deferred Compensation Plan,
amounts deferred by the Trustees are credited with the earnings on certain
investment options which may include one or more of the Funds. Trustees receive
payment of their deferred compensation and any related earnings upon ceasing to
be a Trustee of the Trust. Such payment is made at the election of the Trustee,
either in a lump sum or in annual installments over two to fifteen years. The
Trust's obligation to pay the Trustee's deferred compensation is a general
unsecured obligation.
<TABLE>
<CAPTION>
Total Compensation
from the Trust and
Name of Person Aggregate Compensation Fund Complex Paid
and Position from the Trust to Trustees
-------------- ---------------------- -----------------
<S> <C> <C>
Anne T. Coughlan, Trustee $11,750* $11,750
Joseph F. Damore, Trustee $11,750 $11,750
Walter B. Grimm, Trustee $0 $0
James F. Rainey, Trustee $11,750* $11,750
Ronald F. VanSteeland, Trustee $11,750 $11,750
<FN>
* During the fiscal year ended December 31, 1996, Ms. Coughlan deferred
$5,500 and Mr. Rainey deferred $2,750 of their compensation pursuant to
the Deferred Compensation Plan.
</TABLE>
As of May 1, 1997, the Trustees and officers of the Trust as a group
beneficially owned less than 1% of the Trust's outstanding shares.
30
<PAGE> 155
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, 1996, 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 229 banking
offices in Michigan and Illinois as of December 31, 1996. Old Kent offers a
broad range of financial services, including commercial and consumer loans,
corporate and personal trust services, demand and time deposit accounts, letters
of credit and international financial services.
Old Kent is a subsidiary of Old Kent Financial Corporation, a bank
holding company headquartered in Grand Rapids, Michigan, with approximately
$12.3 billion in total consolidated assets as of December 31, 1996. Through
offices in numerous states, 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, portfolio 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.
31
<PAGE> 156
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%; the Government 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, 1994, 1995 and 1996, Old Kent
earned the following advisory fees for each Fund: $1,855,551, $2,427,434 and
$3,202,775, respectively, for the Growth and Income Fund; $2,025,868, $2,210,891
and $3,613,394, respectively, for the Small Company Growth Fund; $1,427,820,
$1,483,705 and $2,465,291, respectively, for the International Growth Fund;
$906,077, $834,175 and $654,709, respectively, for the Index Equity Fund;
$1,013,799, $1,454,445 and $1,421,272, respectively, for the Short Term Bond
Fund; $3,870,183, $4,765,284 and $4,537,199, respectively, for the Intermediate
Bond Fund; $1,436,354, $1,582,089 and $1,458,010, respectively, for the
Intermediate Tax-Free Fund; $1,370,798, $2,056,213 and $1,747,159, respectively,
for the Money Market Fund; $551,177, $590,771 and $653,417, respectively, for
the Michigan Municipal Money Market Fund; and $501,175, $738,023 and $772,339,
respectively, for the Michigan Municipal Bond Fund. For the fiscal period ended
December 31, 1994 and the fiscal years ended December 31, 1995 and 1996, Old
Kent earned $72,787, $219,989 and $225,891, respectively, in advisory fees for
the Limited Term Tax-Free Fund. For the fiscal period ended December 31, 1995
and the fiscal year ended December 31, 1996, Old Kent earned $442,275 and
$595,616, respectively, in advisory fees for the Tax-Free Income Fund and
$632,086 and $1,209,526, respectively, for the Income Fund.
For the fiscal years ended December 31, 1994 and 1995, Old Kent waived
a portion of its advisory fees for the Money Market Fund, Michigan Municipal
Money Market Fund and Michigan Municipal Bond Fund. Net of such waivers, Old
Kent received $1,166,047 and $1,903,848, respectively, for the Money Market
Fund; $410,048 and $535,921, respectively, for the Michigan Municipal Money
Market Fund; and $226,335 and $717,968, respectively, for the Michigan Municipal
Bond Fund. 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 April 30,
1996. 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
32
<PAGE> 157
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.
SUB-ADMINISTRATION AGREEMENT
Commencing on June 1, 1997, Old Kent is expected to also provide
certain administrative services to the Funds pursuant to a Sub-Administration
Agreement between Old Kent and BISYS. BISYS has agreed to pay Old Kent a fee,
calculated daily and paid monthly, at an annual rate of up to 0.05% of each
Fund's average daily net assets. The fees paid to Old Kent by BISYS for such
administrative services come out of BISYS' administration fee and are not an
additional charge to the Funds.
THE GLASS-STEAGALL ACT AND OTHER APPLICABLE LAWS
The Glass-Steagall Act, among other things, 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.
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
described in the prospectuses 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
33
<PAGE> 158
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.
ADMINISTRATOR
BISYS Fund Services Limited Partnership, 3435 Stelzer Road, Columbus,
Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc., serves as the
Administrator of the Trust under an Administration Agreement dated August 5,
1996. BISYS provides management and administrative services and, in general,
supervises the operation of each Fund (other than investment advisory
operations). The initial term of the Administration Agreement ends on July 31,
1998. Thereafter, the agreement may be renewed for successive one-year periods.
By the terms of the Administration Agreement, BISYS 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. BISYS 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.
As compensation for the services and facilities provided to the Funds
pursuant to the Administration Agreement, BISYS 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 - 18.5 basis
points; between $5.0 and $7.5 billion - 16.5 basis points; and over $7.5 billion
- - 13.5 basis points; provided, however, that such annual fee shall be subject to
an annual minimum fee of $45,000 per fund that is applicable to certain Funds of
the Trust. All expenses (other than those specifically referred to as being
borne by BISYS in the Administration Agreement) incurred by BISYS in connection
with the operation of the Trust are borne by the Funds. To the extent that BISYS
incurs any such expenses or provides certain additional services to the Trust,
the Funds promptly will reimburse BISYS therefor.
BISYS Fund Services, Inc., a wholly-owned subsidiary of The BISYS
Group, Inc., serves as the Trust's Fund Accountant pursuant to a Fund Accounting
Agreement, dated August 5, 1996.
34
<PAGE> 159
Under the Fund Accounting Agreement, BISYS Fund Services, Inc. prices each
Fund's shares, calculates each Fund's net asset value, and maintains the general
ledger accounting records for each Fund. For these services, BISYS Fund
Services, Inc. is entitled to receive a fee computed daily at the annual rate of
1.5 basis points of the Trust's average daily net assets. The initial term of
the Fund Accounting Agreement ends on July 31, 1998. Thereafter, the agreement
may be renewed for successive one-year periods.
For the fiscal periods ended December 31, 1994, 1995 and 1996, the
Trust paid the following administrative fees to BISYS and the Trust's former
administrators: $530,158, $693,553 and $896,290, respectively, for the Growth
and Income Fund; $578,819, $631,683 and $1,011,600, respectively, for the Small
Company Growth Fund; $380,752, $395,655 and $643,425, respectively, for the
International Growth Fund; $604,052, $422,784 and $212,487, respectively, for
the Index Equity Fund; $395,519, $581,778 and $558,367, respectively, for the
Short Term Bond Fund; $1,407,339, $1,732,831 and $1,618,455, respectively, for
the Intermediate Bond Fund; $574,541, $632,836 and $571,869, respectively, for
the Intermediate Tax-Free Fund; $685,398, $772,894 and $425,618, respectively,
for the Money Market Fund; $275,108, $220,170 and $159,777, respectively, for
the Michigan Municipal Money Market Fund; and $222,744, $328,010 and $337,467,
respectively, for the Michigan Municipal Bond Fund. For the fiscal period ended
December 31, 1994 and the fiscal years ended December 31, 1995 and 1996, the
Limited Term Tax-Free Fund paid $32,350, $97,773 and $95,629, respectively, in
administrative fees. For the fiscal period ended December 31, 1995 and the
fiscal year ended December 31, 1996, the Tax-Free Income Fund paid $160,827 and
$227,178, respectively; and the Income Fund paid $210,695 and $393,938,
respectively, in administrative fees.
DISTRIBUTOR
The Trust has entered into a Distribution Agreement dated August 5,
1996 with BISYS. Unless otherwise terminated, the Distribution Agreement will
continue in effect until August 5, 1997 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. Shares of the Funds are sold on a
continuous basis by BISYS as agent for the Trust, and BISYS has agreed to use
its best efforts to solicit orders for the sale of shares of the Funds.
For the fiscal years ended 1994, 1995 and 1996, the Trust paid BISYS
and the Trust's former distributor total underwriting commissions of $662,081,
$457,249 and $527,141, respectively. This entire amount was re-allocated to
broker-dealers which had selling agreements with the distributor.
TRANSFER AGENT
BISYS Fund Services, Inc. also serves as the Trust's transfer agent and
dividend disbursing agent pursuant to a Transfer Agency Agreement. Under the
Transfer Agency Agreement, BISYS Fund Services, Inc. processes purchases and
redemptions of each Fund's shares and maintains each Fund's shareholder transfer
and accounting records, such as the history of purchases, redemptions, dividend
distributions, and similar transactions in a shareholder's account.
35
<PAGE> 160
CUSTODIAN, AUDITORS AND COUNSEL
Bankers Trust Company, 16 Wall Street, 4th Floor, New York, New York
10005 is custodian of all securities and cash of the Trust.
KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215,
Certified Public Accountants, are the independent auditors for the Trust.
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, PA
19107, serves as counsel to the Trust.
DISTRIBUTION PLAN
THIS SECTION RELATES ONLY TO THE INVESTMENT SHARES OF THE FUNDS. THE
INSTITUTIONAL SHARES HAVE NOT ADOPTED A DISTRIBUTION PLAN.
As described in the prospectuses, the Trust has adopted with respect to
its Investment Shares a Distribution Plan (the "Plan") 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. The
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 the 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 pursuant to the
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 Plan 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 Plan 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 Plan 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 Plan was most recently approved by the Board of Trustees as a whole and by
the Independent Trustees on November 22, 1996. In compliance with Rule 12b-1,
the Trustees requested and evaluated information they thought necessary to an
informed determination of whether the Plan 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. The 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
36
<PAGE> 161
vote of the outstanding Investment Shares of the affected Fund. The 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 Plan is 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, 1996 the following payments were
made under the Plan: Growth and Income Fund, $32,309; Small Company Growth Fund,
$32,104; International Growth Fund, $20,815; Index Equity Fund, $20,946;
Intermediate Bond Fund, $18,017; Intermediate Tax-Free Fund, $8,726; Income
Fund, $5,672; Tax-Free Income Fund, $1,900; Michigan Municipal Bond Fund,
$3,241; Limited Term Tax-Free Fund, $97; and Short Term Bond Fund, $2,317. 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 Plan 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 Plan 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 Plan for
the Money Market Fund, the Government 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.
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
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.
37
<PAGE> 162
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. In order to
qualify as a regulated investment company, each Fund must comply with certain
requirements in the Code. Each Fund is required to distribute annually an amount
equal to at least the sum of 90% of its investment company income and 90% of its
net tax-exempt interest income (the "Distribution Requirement"). 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
38
<PAGE> 163
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"), if
any, 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 marginal 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%.
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.
39
<PAGE> 164
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, 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.
If a Tax-Free Fund holds certain so-called "private activity bonds,"
shareholders will be required to include as an item of tax preference for
purposes of the Federal alternative minimum tax that portion of the dividends
paid by the Fund derived from interest received on such bonds. In addition,
corporate shareholders will have to take into account all exempt-interest
dividends paid by the Tax-Free Funds in determining certain adjustments for the
Federal alternative minimum tax and the environmental tax.
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
40
<PAGE> 165
for Federal income tax purposes as sold for their fair market value on the last
business day of such year, a process known as "mark-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 mark-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 arms' 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 held by the Growth
and Income Fund and International Growth Fund, 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
41
<PAGE> 166
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 mark-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
mark-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 fourteen 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.
42
<PAGE> 167
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.
The term "majority of the outstanding shares" of a Fund means the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund.
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, unless 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 outstanding shares. Trustees may also
voluntarily resign from office.
43
<PAGE> 168
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 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 return, 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 declared 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, 1996, the yields of the Institutional Shares of the Money Market Fund and
the Michigan Municipal Money Market Fund were 5.02% and 3.47%, 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 5.02% and 3.47%,
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, 1996, the
effective yields of the Institutional Shares of the Money Market Fund and the
Michigan Municipal Money Market Fund were 5.14% and 3.53%, 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 5.14% and 3.53%,
respectively. These yield figures reflect waivers of certain expenses.
44
<PAGE> 169
Each Money Market Fund may also quote from time to time its total
return in accordance with Securities and Exchange Commission Regulations.
ALL FUNDS
A 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 (exponent)
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.
Based on the foregoing calculation, the average annual total returns for the
Funds for the periods ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception
---- -------- ---------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 12/09/92 5.06% 4.14%
- --------------------------------------------------------------------------------------------------
Michigan Municipal Money Market Fund 12/15/92 3.11% 2.66%
- --------------------------------------------------------------------------------------------------
Growth and Income Fund 12/01/92 19.14% 15.66%
- --------------------------------------------------------------------------------------------------
Small Company Growth Fund 12/04/92 19.16% 14.73%
- --------------------------------------------------------------------------------------------------
International Growth Fund 12/04/92 5.57% 12.81%
- --------------------------------------------------------------------------------------------------
Index Equity Fund 11/25/92 21.92% 16.22%
- --------------------------------------------------------------------------------------------------
Short Term Bond Fund 12/04/92 4.06% 4.53%
- --------------------------------------------------------------------------------------------------
Intermediate Bond Fund 11/25/92 2.76% 5.68%
- --------------------------------------------------------------------------------------------------
Income Fund 03/17/95 1.16% 8.59%
- --------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 170
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
INVESTMENT SHARES
- -----------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception
---- -------- ---------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Limited Term Tax-Free Fund 11/01/94 3.51% 5.47%
- -----------------------------------------------------------------------------------------------
Intermediate Tax-Free Fund 12/18/92 3.17% 5.18%
- -----------------------------------------------------------------------------------------------
Tax-Free Income Fund 04/01/95 3.53% 6.76%
- -----------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund 05/11/93 3.36% 3.91%
- -----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- -----------------------------------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception Five Year
---- -------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund 12/03/90 5.06% 4.37% 4.07%
- -----------------------------------------------------------------------------------------------------------------------
Michigan Municipal Money Market Fund 06/03/91 3.11% 2.85% 2.70%
- -----------------------------------------------------------------------------------------------------------------------
Growth and Income Fund 11/02/92 19.47% 16.37% n/a
- -----------------------------------------------------------------------------------------------------------------------
Small Company Growth Fund 11/02/92 19.56% 16.39% n/a
- -----------------------------------------------------------------------------------------------------------------------
International Growth Fund 12/04/92 5.87% 13.07% n/a
- -----------------------------------------------------------------------------------------------------------------------
Index Equity Fund 11/02/92 22.18% 16.83% n/a
- -----------------------------------------------------------------------------------------------------------------------
Short Term Bond Fund 11/02/92 4.22% 4.68% n/a
- -----------------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund 11/02/92 3.01% 5.84% n/a
- -----------------------------------------------------------------------------------------------------------------------
Income Fund 03/17/95 1.19% 8.83% n/a
- -----------------------------------------------------------------------------------------------------------------------
Limited Term Tax-Free Fund 09/01/94 3.54% 4.73% n/a
- -----------------------------------------------------------------------------------------------------------------------
Intermediate Tax-Free Fund 12/16/92 3.41% 5.35% n/a
- -----------------------------------------------------------------------------------------------------------------------
Tax-Free Income Fund 03/17/95 3.92% 6.99% n/a
- -----------------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund 05/03/93 3.51% 4.09% n/a
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
A 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
46
<PAGE> 171
Based on the foregoing calculation, the aggregate total returns for the Funds
for the periods ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INVESTMENT SHARES
- --------------------------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception
---- -------- ---------
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 12/09/92 5.06% 17.92%
- --------------------------------------------------------------------------------------------------------------
Michigan Municipal Money Market Fund 12/15/92 3.11% 11.20%
- --------------------------------------------------------------------------------------------------------------
Growth and Income Fund 12/01/92 19.14% 81.24%
- --------------------------------------------------------------------------------------------------------------
Small Company Growth Fund 12/04/92 19.16% 75.18%
- --------------------------------------------------------------------------------------------------------------
International Growth Fund 12/04/92 5.57% 63.50%
- --------------------------------------------------------------------------------------------------------------
Index Equity Fund 11/25/92 21.92% 85.31%
- --------------------------------------------------------------------------------------------------------------
Short Term Bond Fund 12/04/92 4.06% 19.82%
- --------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund 11/25/92 2.76% 25.44%
- --------------------------------------------------------------------------------------------------------------
Income Fund 03/17/95 1.16% 15.97%
- --------------------------------------------------------------------------------------------------------------
Limited Term Tax-Free Fund 11/01/94 3.51% 12.24%
- --------------------------------------------------------------------------------------------------------------
Intermediate Tax-Free Fund 12/18/92 3.17% 22.66%
- --------------------------------------------------------------------------------------------------------------
Tax-Free Income Fund 04/01/95 3.53% 12.17%
- --------------------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund 05/11/93 3.36% 15.00%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception
---- -------- ---------
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Money Market Fund 12/03/90 5.06% 29.76%
- --------------------------------------------------------------------------------------------------------------
Michigan Municipal Money Market Fund 06/03/91 3.11% 16.97%
- --------------------------------------------------------------------------------------------------------------
Growth and Income Fund 11/02/92 19.47% 88.09%
- --------------------------------------------------------------------------------------------------------------
Small Company Growth Fund 11/02/92 19.56% 88.25%
- --------------------------------------------------------------------------------------------------------------
International Growth Fund 12/04/92 5.87% 65.07%
- --------------------------------------------------------------------------------------------------------------
Index Equity Fund 11/02/92 22.18% 91.19%
- --------------------------------------------------------------------------------------------------------------
Short Term Bond Fund 11/02/92 4.22% 20.98%
- --------------------------------------------------------------------------------------------------------------
Intermediate Bond Fund 11/02/92 3.01% 26.68%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 172
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
- ----------------------------------------------------------------------------------------------------
Inception Since
Date One Year Inception
---- -------- ---------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income Fund 03/17/95 1.19% 16.43%
- ----------------------------------------------------------------------------------------------------
Limited Term Tax-Free Fund 09/01/94 3.54% 11.40%
- ----------------------------------------------------------------------------------------------------
Intermediate Tax-Free Fund 12/16/92 3.41% 23.49%
- ----------------------------------------------------------------------------------------------------
Tax-Free Income Fund 03/17/95 3.92% 12.90%
- ----------------------------------------------------------------------------------------------------
Michigan Municipal Bond Fund 05/03/93 3.51% 15.83%
- ----------------------------------------------------------------------------------------------------
</TABLE>
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.
A 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) to the 6th power - 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, 1996, the yields for the Investment Shares of the Income Funds and
Municipal Bond were as follows: Short Term Bond Fund, 4.92%; Intermediate Bond
Fund, 5.05%; Income Fund, 5.56%; Limited Term Tax-Free Fund, 3.71%; Intermediate
Tax-Free Fund, 3.76%; Tax-Free Income Fund, 3.97%; and Michigan Municipal Bond
Fund, 3.84%. 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, 5.28%;
Intermediate Bond Fund, 5.52%; Income Fund, 6.06%; Limited Term Tax-Free Fund,
4.04%; Intermediate Tax-Free Fund, 4.16%; Tax-Free Income Fund, 4.42%; and
Michigan Municipal Bond Fund, 4.17%.
48
<PAGE> 173
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. For the 30-day period ended
December 31, 1996, the tax equivalent yields, assuming a 39.6% tax rate for the
Investment Shares of the Tax-Free Funds were as follows: Limited Term Tax-Free
Fund, 6.14%; Intermediate Tax-Free Fund, 6.23%; Tax-Free Income Fund, 6.57%; and
Michigan Municipal Bond Fund, 6.36%. For the same period, the yields on the
Institutional Shares of the Tax-Free Funds were as follows: Limited Term
Tax-Free Fund, 6.69%; Intermediate Tax-Free Fund, 6.89%; Tax-Free Income Fund,
7.32%; and Michigan Municipal Bond Fund, 6.90%.
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 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
49
<PAGE> 174
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.
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 Funds as of April 4, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS FUND CLASS PERCENTAGE OF
OWNERSHIP
<S> <C> <C> <C>
Trent & Co. (C) The Kent Money Market Institutional 92%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. The Kent Michigan Institutional 96%
Attn: Kent Fund Trader Municipal Money Market
4420 44th St., Suite A Fund
Kentwood, MI 49512
Trent & Co. (C) The Kent Short Term Institutional 32%
Cash Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Short Term Institutional 66%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Intermediate Institutional 47%
Cash Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Intermediate Institutional 53%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
</TABLE>
50
<PAGE> 175
<TABLE>
<S> <C> <C> <C>
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Intermediate Institutional 99%
Cash Account Tax-Free Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Michigan Institutional 98%
Cash Account Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Growth and Institutional 40%
Reinvestment Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Growth and Institutional 56%
Cash Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Small Company Institutional 45%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Small Company Institutional 51%
Cash Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent International Institutional 43%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent International Institutional 56%
Cash Account Growth Fund
Attn: Kent Fund Trader
</TABLE>
51
<PAGE> 176
<TABLE>
<S> <C> <C> <C>
4420 44th St., Suite A
Kentwood, MI 49512
Corelink Financial, Inc. The Kent Index Equity Institutional 12%
P.O. Box 4054 Fund
Concord, CA 94524
Trent & Co. (C) The Kent Index Equity Institutional 31%
Cash Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Index Equity Institutional 57%
Reinvestment Account Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Limited Term Institutional 98%
Cash Account Tax-Free Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Tax-Free Institutional 99%
Cash Account Income Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Income Fund Institutional 17%
Reinvestment Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (C) The Kent Income Fund Institutional 83%
Cash Account
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Dale Lee Russ The Kent Money Investment 6%
IRA Market Fund
2114 E. Michillinda
Twin Lake, MI 49457
</TABLE>
52
<PAGE> 177
<TABLE>
<S> <C> <C> <C>
Larry M. Debryune The Kent Money Investment 7%
Joy E. Debryune Market Fund
JTWROS
4270 Redbush Dr. SW
Grandville, MI 49418
BHC Securities Inc. The Kent Money Investment 8%
And Twelve Hundred Market Fund
And One Commerce Square
Attn: Cash Sweeps Dept.
2005 Market St.
Philadelphia, PA 19103
Andrew Creasor The Kent Michigan Investment 6%
3403 Greenwood Lane Municipal Money
St Charles, IL 60174 Market Fund
Judith A. Kernell The Kent Michigan Investment 11%
Sara E. Kontz Municipal Money
JTWROS Market Fund
5195 Pine Hill Circle
Howell, MI 48843
BHC Securities Inc. The Kent Michigan Investment 12%
And Twelve Hundred Municipal Money
And One Commerce Square Market Fund
Attn: Cash Sweeps Dept.
2005 Market St.
Philadelphia, PA 19103
Eric S. Burgoon The Kent Michigan Investment 13%
3873 Clearview St. NE Municipal Money
Grand Rapids, MI 49546 Market Fund
Lyle T. Cerda The Kent Michigan Investment 14%
1129 Buckingham SW Municipal Money
Wyoming, MI 49509 Market Fund
Kathleen B Perlberg Trust The Kent Michigan Investment 18%
Kathleen B Perlberg TTEE Municipal Money
UAD 6/13/93 Market Fund
3036 Hideaway Beach Drive
Brighton, MI 48116
John B. Hogan The Kent Short Term Investment 5%
IRA Bond Fund
371 Gull Lake Drive South
Richland, MI 49083
</TABLE>
53
<PAGE> 178
<TABLE>
<S> <C> <C> <C>
Pershing The Kent Short Term Investment 6%
FBO Hillcrest Memorial Bond Fund
Gardens
Merchandise Trust
One Pershing Plaza
Jersey City, NJ 07399
Carol D. Kunold The Kent Short Term Investment 8%
5342 Studebaker Circle Bond Fund
San Jose, CA 95135
BHC Securities Inc. The Kent Short Term Investment 13%
Trade House Account Bond Fund
Attn Mutual Funds Dept.
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103
Trent & Co. (R) The Kent Intermediate Investment 6%
Reinvestment Account Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
John M. Crouse Trustee The Kent Intermediate Investment 6%
For John M. Crouse Tax-Free Fund
U/A Dtd. 6/27/85
222 Harbour Drive
Commodore Club 510
Naples, FL 33940
Old Kent Bank Southeast The Kent Intermediate Investment 8%
Trst. Edward E. Vollenweider Tax-Free Fund
U/A Dtd. 11-10-89
9936 Hawthorn Glen Drive
Grosse Ile, MI 48183
Northern Trust Co. The Kent Intermediate Investment 8%
FBO Richard U. Light Tax-Free Fund
Irrev. S. Tr.
U/A D 062140
P.O. Box 92956
Chicago, IL 60675
Northern Trust Co. The Kent Intermediate Investment 12%
FBO Christopher U. Light Tax-Free Fund
Rev. Tr.
DTD 010976
</TABLE>
54
<PAGE> 179
<TABLE>
<S> <C> <C> <C>
P.O. Box 92956
Chicago, IL 60675
Old Kent Bank Southeast The Kent Michigan Investment 5%
Trust Edward E Vollenweider Municipal Bond Fund
U/A Dtd. 11-10-89
9936 Hawthorn Glen Drive
Grosse Ile, MI 48183
Trent & Co. (C) The Kent Michigan Investment 7%
Cash Account Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Trent & Co. (R) The Kent Michigan Investment 9%
Reinvestment Account Municipal Bond Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
Northern Trust Co. The Kent Michigan Investment 19%
FBO Richard U. Light Municipal Bond Fund
Irrev. S. Tr.
U/A D 062140
P.O. Box 92956
Chicago, IL 60675
Northern Trust Co. The Kent Michigan Investment 27%
FBO Christopher U. Light Municipal Bond Fund
Rev. Tr.
DTD 010976
P.O. Box 92956
Chicago, IL 60675
BHC Securities Inc. The Kent Growth and Investment 8%
Trade House Account Income Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
Trent & Co. (R) The Kent International Investment 5%
Reinvestment Account Growth Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
</TABLE>
55
<PAGE> 180
<TABLE>
<S> <C> <C> <C>
Trent & Co. (R) The Kent Index Investment 6%
Reinvestment Account Equity Fund
Attn: Kent Fund Trader
4420 44th St., Suite A
Kentwood, MI 49512
BHC Securities Inc. The Kent Index Investment 9%
Trade House Account Equity Fund
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
Susan J. Torroll The Kent Limited Term Investment 15%
Joseph T. Torroll Tax-Free Fund
JTWROS
1251 Hailshaw Court
Wheaton, IL 60187
Charles J. Cebuhar The Kent Limited Term Investment 20%
3605 Tamarack Trail Tax-Free Fund
Crystal Lake, IL 60012
Rose M Black The Kent Limited Term Investment 28%
Rose M Black Trust Tax-Free Fund
Dtd. 06/14/1995
1208 Baker St.
Kalamazoo, MI 49001
Paine Webber for Credit to The Kent Limited Term Investment 33%
FBO William A. Woodworth Tax-Free Fund
701 Poydras St.
1 Schell Square, Plaza 150
New Orleans, LA 70139
Luanne Lonnee The Kent Tax-Free Investment 6%
2445 Shehan Income Fund
Pinckney, MI 48169
James Lonnee The Kent Tax-Free Investment 6%
3710 Sheridan Rd. Income Fund
Pekin, IL 61554
Gregory Lonnee The Kent Tax-Free Investment 6%
18729 Sioux Drive Income Fund
Spring Lake, MI 49456
E. Condit Newcomer Trust The Kent Tax-Free Investment 6%
</TABLE>
56
<PAGE> 181
<TABLE>
<S> <C> <C> <C>
E Condit Newcomer Trustee Income Fund
4/7/94
2089 Corunna Avenue
Owosso, MI 48867
Rose M. Black The Kent Tax-Free Investment 7%
Rose M. Black Trust Income Fund
Dtd. 06/14/1995
1208 Baker St.
Kalamazoo, MI 49001
Lisa A. Boehm The Kent Tax-Free Investment 7%
668 Hill Avenue Income Fund
Elgin, IL 60120
Old Kent Bank Central The Kent Tax-Free Investment 7%
FBO Jerry S. Voight Income Fund
U/A Dtd. 01/28/91
Attn: Russ Thomas
123 N. Washington
Jerry S. Voight Trust
Owosso, MI 48867
Doris Anderson The Kent Tax-Free Investment 7%
Glen F. Anderson Income Fund
POA Dtd. 12/3/93
813 W. Indiana St.
St Charles, IL 60174
Pershing The Kent Tax-Free Investment 9%
FBO Leonard Krawczyk Income Fund
One Pershing Plaza
Jersey City, NJ 07399
BHC Securities Inc. The Kent Income Fund Investment 10%
Trade House Account
Attn: Mutual Fund Department
One Commerce Square
2005 Market St., Suite 1200
Philadelphia, PA 19103
</TABLE>
Except as otherwise stated in the Trust's prospectuses, statement 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.
57
<PAGE> 182
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" - The highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
"A-2" - Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
"A-3" - Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
"B" - Issues are regarded as having only a speculative capacity for
timely payment.
"C" - This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
"D" - Issues are 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" - Issuers or related supporting institutions 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" - Issuers or related supporting institutions 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" - Issuers or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market
A-1
<PAGE> 183
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" - Issuers 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 "D-1,"
"D-2" and "D-3." Duff & Phelps employs three designations, "D-1+," "D-1" and
"D-1-," within the highest rating category. The following summarizes the rating
categories used by Duff & Phelps for commercial paper:
"D-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.
"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-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.
"D-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.
"D-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.
"D-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
generally 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" ratings.
A-2
<PAGE> 184
"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 are 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 which possess a particularly strong credit feature
are supported by the highest capacity for timely repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a good capacity for timely
repayment.
"A3" - Obligations are supported by a satisfactory capacity for timely
repayment.
A-3
<PAGE> 185
"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.
A-4
<PAGE> 186
"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 that 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 absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
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.
A-5
<PAGE> 187
"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.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
Note: Those bonds in the "Aa," "A," "Baa," "Ba" and "B" groups which
Moody's believes possess the strongest investment attributes are designated by
the symbols "Aa1," "A1," "Baa1," "Ba1" and "B1."
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.
A-6
<PAGE> 188
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.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "BBB" 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, such that 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
other categories.
A-7
<PAGE> 189
"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 below
"AAA" 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 extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to 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.
A-8
<PAGE> 190
"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.
A-9
<PAGE> 191
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 the
Governor's Executive Budget for fiscal year 1997-98 issued February 6, 1997, and
from official statements relating to securities offerings of the State and its
political subdivisions available as of the date of this Statement of Additional
Information. 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.
1996 ECONOMIC REVIEW AND 1997 ECONOMIC OUTLOOK
The State's economy is principally dependent on manufacturing
(particularly automobiles, office equipment and other durable goods), tourism
and agriculture and historically has been highly cyclical. However it has been
undergoing certain basic changes in its underlying structure and these changes
continued in 1996. 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 somewhat less susceptible to cyclical swings and
somewhat more resilient when national downturns occur.
Total wage and salary employment is estimated to have grown by 1.6% in
1996. The rate of unemployment is estimated to have been 4.7% in 1996, below the
national average for the third consecutive year. Personal income grew at an
estimated 4.2% annual rate in 1996, down from 6.5% reported for 1995. Michigan
unemployment is expected to grow by a moderate 1.5% in 1997. The unemployment
rate in 1997 is expected to increase to 5.0% but personal income is also
expected to increase by 5.0% in 1997. The inflation rate, as measured by the
Detroit Consumer Price Index, is expected to be at approximately 2.5% in 1997.
As a result, inflation adjusted purchasing power is expected to grow 2.5% in
1997.
1996-97 STATE OF MICHIGAN BUDGET AND PRIOR RESULTS
During the past five years, 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 State General Fund budget
surpluses, most of which were transferred to the State's Counter-Cyclical Budget
and Economic Stabilization Fund. The balance of that Fund as of September 30,
1996 is estimated to have been in excess of $1.1 billion.
The State budget for the 1996-97 fiscal year, which began October 1,
1996, has been adopted by the Legislature. This budget projects State General
Fund/General Purpose revenues of approximately $8.244 billion, a decline of
approximately $60 million from the prior year. 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
Kindergarten through Twelfth Grade 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
B-1
<PAGE> 192
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 STATE OF MICHIGAN REVENUES FOR FISCAL 1996-97
General Fund - General Purpose consensus revenue is estimated at $8.244
million, a slight decline from fiscal year 1995-96.
Personal Income Tax - Net income tax collections are estimated at
$4,251.4 million, a 3.5% increase over fiscal year 1995-96.
Single Business Taxes - Gross single business tax collections are
projected to amount to $2,318.0 million, a slight increase over fiscal year
1995-96.
Sales Tax - Gross sales tax collections are forecasted to total
$5,407.0 million, of which the amount available for General Fund Purposes is
estimated to be approximately $93.0 million.
Use Tax - Gross use tax collections are forecasted to be $705.9
million.
STATE CONSTITUTIONAL PROVISIONS AFFECTING REVENUES AND EXPENDITURES
The State Constitution provides that proposed expenditures and revenues
of any State 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. 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
originally 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 through 1991-92. As the results of
litigation, the State
B-2
<PAGE> 193
agreed to reclassify certain expenditures, beginning with fiscal year 1992-93,
and has recalculated the required percentage of spending paid to local
government units to be 48.97%.
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, 1996, the State had
approximately $685 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, 1996, approximately $6,270 million in principal amount of
"qualified" bonds of local school districts was outstanding.
As of February 3, 1997, the ratings on State of Michigan general
obligation bonds were "Aa" by Moody's, "AA" by S&P and "AA" by Fitch Investors
Services. 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
B-3
<PAGE> 194
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.
LITIGATION
The State is a party to various legal proceedings seeking damages or
injunctive or other relief. In addition to routine litigation, certain of these
proceedings could, if unfavorably resolved from the point of view of the State,
substantially affect State programs or finances. As of early 1997, these
lawsuits involved programs generally in the areas of corrections, tax
collection, commerce, and proceedings by school districts claiming failure of
the State to fund certain mandated services, other budgetary reductions to
school districts and governmental units, and court funding. The ultimate
disposition of these proceedings was not determinable as of early 1997.
PROPERTY TAX AND SCHOOL FINANCE REFORM
The State Constitution limits the extent to which municipalities or
political subdivisions may levy taxes upon real and personal property through a
process that regulates assessments.
On March 15, 1994, Michigan voters approved a property tax and school
finance reform measure known as Proposal A. Under Proposal A, as approved,
effective May 1, 1994, the State sales and use tax increased from 4% to 6%, the
State income tax decreased from 4.6% to 4.4%, the cigarette tax increased from
$.25 to $.75 per pack and an additional tax of 16% of the wholesale price began
to be imposed on certain other tobacco products. A .75% real estate transfer tax
became effective January 1, 1995. Beginning in 1994, a state property tax of 6
mills began to be imposed on all real and personal property currently subject to
the general property tax. All local school boards are authorized, with voter
approval, to levy up to the lesser of 18 mills or the number of mills levied in
1993 for school operating purposes on nonhomestead property and nonqualified
agricultural property. Proposal A contains additional provisions regarding the
ability of local school districts to levy taxes, as well as a limit on
assessment increases for each parcel of property. Proposal A contains additional
provisions regarding the ability of local school districts to levy taxes, as
well as a limit on assessment increases for each parcel of property, beginning
in 1995. Such increases for each parcel of property are limited to the lesser of
5% or the rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash value.
Under Proposal A, much of the additional revenue generated by the new taxes will
be dedicated to the State School Aid Fund.
Proposal A shifted significant portions of the cost of local school
operations from local school districts to the State and raised additional State
revenues to fund these additional State expenses. These additional revenues will
be included within the State's constitutional revenue limitations and may impact
the State's ability to raise additional revenues in the future.
B-4
<PAGE> 195
APPENDIX C
As stated in the Prospectuses, certain of the Funds may enter into
futures contracts and options. 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 might use interest rate futures
as a defense, or hedge, against anticipated interest rate changes. 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 a Fund, through using 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 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
and the Chicago Mercantile Exchange. The
C-1
<PAGE> 196
Funds will 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. A Fund may trade in any interest rate futures contract for
which there exists a public market, including, without limitation, the foregoing
instruments.
II. Index Futures Contracts
-----------------------
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 its portfolio will decline prior to the time of sale.
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 a 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.
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.
C-2
<PAGE> 197
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-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 a
Fund has purchased a futures contract and the price of the futures 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. One risk arises because of the imperfect correlation between movements in
the price of the future 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 future 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 future. If the price of the future moves more than the
price of the hedged instruments, the Fund involved will experience either a loss
or gain on the future 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 future 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 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
C-3
<PAGE> 198
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 offsetting 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 normally 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.
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 also 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
C-4
<PAGE> 199
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.
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 a 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 and related options will be in
accordance with generally accepted accounting principles.
C-5
<PAGE> 200
The Kent MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
BANK NOTES -- 1.0%
$ 5,000,000 Bank of New York, 5.63%,
3/3/97......................... $ 4,999,269
-------------
TOTAL BANK NOTES............... 4,999,269
-------------
(amortized cost $4,999,269)
YANKEE CERTIFICATES OF DEPOSIT -- 16.1%
5,000,000 ABN Amro Bank, 5.68%, 4/17/97.. 4,997,768
5,000,000 Bank of Nova Scotia, 5.36%,
1/6/97......................... 5,000,000
5,000,000 Bank of Nova Scotia, 5.36%,
2/18/97........................ 5,000,000
5,000,000 Banque National de Paris,
5.62%, 2/10/97................. 5,000,121
5,000,000 Banque National de Paris,
5.52%, 6/27/97................. 5,000,000
5,000,000 Bayerische Landesbank, 5.37%,
2/3/97......................... 5,000,080
5,000,000 Canadian Imperial Bank of Com-
merce, 5.42%, 1/8/97........... 5,000,056
5,000,000 Commerzbank Group, 5.37%,
1/9/97......................... 5,000,010
7,000,000 Commerzbank Group, 5.52%,
3/14/97........................ 6,995,550
6,000,000 Societe Generale, 5.52%,
1/10/97........................ 6,000,101
5,000,000 Societe Generale, 5.57%,
4/3/97......................... 5,001,781
5,000,000 Societe Generale, 5.60%,
4/3/97......................... 5,002,110
5,000,000 Swiss Bank Corp., 5.75%,
3/4/97......................... 5,001,085
5,000,000 Swiss Bank Corp., 5.71%,
3/19/97........................ 5,002,587
5,000,000 Sumitomo Bank, Ltd., 5.87%,
1/29/97........................ 5,000,039
-------------
TOTAL YANKEE CERTIFICATES OF
DEPOSIT........................ 78,001,288
-------------
(amortized cost $78,001,288)
BANKER'S ACCEPTANCES -- 17.9%
5,000,000 Bank of Nova Scotia, 5.27%,
4/28/97........................ 4,914,442
3,000,000 Chase Manhattan Bank, N.A.,
5.29%, 1/10/97................. 2,996,031
4,947,775 Chase Manhattan Bank, N.A.,
5.28%, 1/13/97................. 4,939,067
5,000,000 Chase Manhattan Bank, N.A.,
5.27%, 1/27/97................. 4,980,970
5,000,000 Chase Manhattan Bank, N.A.,
5.28%, 2/27/97................. 4,958,200
10,000,000 Corestates Bank, 5.40%,
3/25/97........................ 9,875,500
5,000,000 First National Bank of Chicago,
5.26%, 1/3/97.................. 4,998,539
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
BANKER'S ACCEPTANCES (CONTINUED)
$ 5,000,000 First National Bank of Chicago,
5.26%, 4/1/97.................. 4,934,250
5,100,000 Mellon Bank, N.A.,
5.31%,1/3/97................... $ 5,098,496
5,000,000 Mellon Bank, N.A., 5.31%,
1/9/97......................... 4,994,100
5,000,000 Mellon Bank, N.A., 5.34%,
6/13/97........................ 4,879,108
7,672,826 National City Bank, 5.26%,
3/5/97......................... 7,602,198
6,000,000 Republic National Bank of New
York, 5.35%, 2/28/97........... 5,948,283
5,500,000 Wachovia Bank of Georgia, N.A.,
5.29%, 1/17/97................. 5,487,069
5,000,000 Wachovia Bank of Georgia, N.A.,
5.38%, 2/14/97................. 4,967,122
5,000,000 Wachovia Bank of North Caro-
lina, 5.32%, 3/17/97........... 4,944,584
-------------
TOTAL BANKER'S ACCEPTANCES..... 86,517,959
-------------
(amortized cost $86,517,959)
COMMERCIAL PAPER -- 49.2%
5,000,000 ABN Amro North America
Finance Inc.,
5.44%, 2/28/97................. 4,956,178
5,000,000 Ameritech Corp., 5.27%,
1/10/97........................ 4,993,412
5,000,000 Ameritech Corp., 5.29%,
3/4/97......................... 4,954,447
5,000,000 BellSouth Telecommunications,
5.31%, 1/30/97................. 4,978,612
5,000,000 BellSouth Telecommunications,
5.30%, 3/26/97................. 4,938,167
5,000,000 Budget Funding Corp., 5.32%,
1/7/97......................... 4,995,567
5,000,000 Budget Funding Corp., 5.33%,
1/14/97........................ 4,990,376
5,000,000 Daimler Benz N.A. Corp., 5.42%,
1/15/97........................ 4,989,461
5,000,000 Daimler Benz N.A. Corp., 5.31%,
1/17/97........................ 4,988,200
5,000,000 Daimler Benz N.A. Corp., 5.39%,
2/5/97......................... 4,973,799
5,000,000 Daimler Benz N.A. Corp., 5.30%,
3/3/97......................... 4,955,097
5,500,000 Eli Lilly & Co., 5.57%,
2/24/97........................ 5,454,047
5,000,000 Ford Motor Credit Co., 5.36%,
1/28/97........................ 4,979,900
5,000,000 Ford Motor Credit Co., 5.47%,
3/17/97........................ 4,942,917
5,000,000 General Electric Capital Corp.,
5.33%, 1/22/97................. 4,984,454
5,000,000 General Electric Capital Corp.,
5.31%, 1/23/97................. 4,983,775
</TABLE>
Continued
5
<PAGE> 201
The Kent MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
COMMERCIAL PAPER (CONTINUED)
$ 5,000,000 General Electric Capital Corp.,
5.29%, 3/10/97................. $ 4,950,039
5,000,000 General Electric Capital Corp.,
5.50%, 5/30/97................. 4,886,181
5,000,000 General Motors Acceptance
Corp., 5.50%, 1/2/97........... 4,999,236
5,000,000 General Motors Acceptance
Corp., 5.35%, 1/15/97.......... 4,989,597
5,000,000 General Motors Acceptance
Corp., 5.33%, 1/27/97.......... 4,980,753
5,000,000 General Motors Acceptance
Corp., 5.34%, 6/16/97.......... 4,876,883
5,000,000 General Motors Acceptance
Corp., 5.42%, 6/26/97.......... 4,867,511
5,000,000 H.J. Heinz Co., 5.40%,
1/13/97........................ 4,991,000
5,000,000 H.J. Heinz Co., 5.50%,
2/6/97......................... 4,972,500
5,000,000 Household Finance Corp., 5.31%,
1/7/97......................... 4,995,575
5,000,000 Household Finance Corp., 5.30%,
1/13/97........................ 4,991,167
5,000,000 Household Finance Corp., 5.37%,
1/16/97........................ 4,988,812
5,000,000 Household Finance Corp., 5.33%,
1/24/97........................ 4,982,974
5,000,000 John Deere Capital Corp.,
5.29%, 1/6/97.................. 4,996,326
5,000,000 John Deere Capital Corp.,
5.30%, 1/14/97................. 4,990,431
5,000,000 John Deere Capital Corp.,
5.29%, 1/16/97................. 4,988,979
5,000,000 John Deere Capital Corp.,
5.27%, 5/2/97.................. 4,911,435
5,000,000 Michigan Consolidated Gas Co.,
5.40%, 2/3/97.................. 4,975,250
5,000,000 Michigan Consolidated Gas Co.,
5.35%, 2/4/97.................. 4,974,736
5,000,000 Michigan Consolidated Gas Co.,
5.32%, 2/6/97.................. 4,973,400
5,000,000 National Australia Funding
(Delaware), 5.28%, 1/6/97...... 4,996,320
5,000,000 National Australia Funding
(Delaware), 5.30%, 1/6/97...... 4,996,333
5,000,000 Pitney Bowes Credit Corp.,
5.58%, 2/19/97................. 4,962,025
5,000,000 Sandoz Corp., 5.31%, 1/21/97... 4,985,250
5,000,000 Sandoz Corp., 5.30%, 1/31/97... 4,977,917
4,400,000 Schering Corp., 5.27%,
5/13/97........................ 4,314,977
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ------------ -------------
COMMERCIAL PAPER (CONTINUED)
$ 5,000,000 UBS Finance, 8.00%, 1/2/97..... $ 4,998,889
5,000,000 Weyerhaeuser Co., 5.29%,
1/29/97........................ 4,979,428
5,000,000 Weyerhaeuser Co., 5.30%,
2/6/97......................... 4,973,500
5,000,000 Weyerhaeuser Co., 5.30%,
2/7/97......................... 4,972,764
5,000,000 Xerox Corp., 5.31%, 1/13/97.... 4,991,150
5,000,000 Xerox Credit Corp., 5.30%,
1/13/97........................ 4,991,167
-------------
TOTAL COMMERCIAL PAPER......... 238,480,914
-------------
(amortized cost $238,480,914)
DEMAND NOTES -- 7.5%
5,000,000 Allstate Financial Corp.,
Funding Agreement, 5.51%*,
1/2/97(b)...................... 5,000,000
7,500,000 Commonwealth Life Insurance
Co., 5.64%*, 1/2/97(b)......... 7,500,000
5,000,000 Kerasotes Theaters, Inc., Se-
ries 96-A, 5.67%*, 1/2/97 (LC
First of America Bank-Illinois,
N.A.).......................... 5,000,000
3,000,000 La Mirada, CA, Industrial
Development Authority, 5.70%*,
1/2/97 (LC First National Bank,
Chicago)....................... 3,000,000
5,000,000 Labelle Capital Funding L.L.C.,
5.82%*, 1/2/97 (LC First of
America Bank-Michigan)......... 5,000,000
5,000,000 Sheperd Capital L.L.C., 5.82%*,
1/2/97 (LC Comerica Bank)...... 5,000,000
6,000,000 Zeigler Realty, L.L.C., 5.82%*,
1/2/97 (LC First of America
Bank-Michigan)................. 6,000,000
-------------
TOTAL DEMAND NOTES 36,500,000
-------------
(amortized cost $36,500,000)
INVESTMENT COMPANY -- 1.2%
<CAPTION>
SHARES
- ------------
<S> <C> <C>
5,772,341 Dreyfus Cash Management Money
Market Fund.................... 5,772,341
-------------
TOTAL INVESTMENT COMPANY....... 5,772,341
-------------
(cost $5,772,341)
TOTAL INVESTMENTS, AT VALUE.................. 450,271,771
-------------
(amortized cost $450,271,771)
</TABLE>
Continued
6
<PAGE> 202
The Kent MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 7.2%
$ 35,000,000 Donaldson, Lufkin & Jenrette,
6.25%, dated 12/31/96, due
1/2/97, (collateralized by
$34,324,000 U.S. Treasury Note,
6.375%, 7/15/99, market value
$35,789,624)................... $ 35,000,000
-------------
TOTAL REPURCHASE AGREEMENT..... 35,000,000
-------------
(cost $35,000,000)
TOTAL -- 100.1%.............................. 485,271,771
(amortized cost $485,271,771) (a)
LIABILITIES IN EXCESS OF OTHER ASSETS --
(0.1%)....................................... (549,062)
-------------
NET ASSETS -- 100.0%......................... $484,722,709
=============
- ---------------------------------------
<FN>
Percentages indicated are based on net assets of $484,722,709.
* Variable rate security. Rate presented represents rate in effect at December
31, 1996. Maturity date reflects next rate change date.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Illiquid security
LC Letter of Credit
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 203
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL SECURITIES -- 87.1%
MICHIGAN -- 79.5%
$ $485,000 Alcona Community Schools,
4.10%, 5/1/97 (Insured by
FGIC)........................... $ 485,229
1,725,000 Chippewa Valley Schools, GO,
8.10%, 5/1/97................... 1,750,380
215,000 Clinton Township, Economic
Development Corp., Limited
Obligation Revenue, Pointe
Village Square Project (AMT),
3.95%*, 2/1/97 (LC Resolution
Trust Co.)...................... 215,000
2,550,000 Detroit, Series A, GO,
Prerefunded 4/1/97 @ 102,
8.63%, 4/1/07................... 2,631,737
625,000 Eaton Rapids Public Schools, GO,
7.38%, 5/1/97 (Insured by
MBIA)........................... 632,082
460,000 Farmington Hills, Economic
Development Corp., Limited
Obligation Revenue, Brookfield
Building Associates,
4.15%*, 1/2/97 (LC Comerica
Bank)........................... 460,000
415,000 Farmington Hills, Economic
Development Corp., Limited
Obligation Revenue, Marketing
Displays Project (AMT), 3.75%*,
3/1/97 (LC Comerica Bank)....... 415,000
1,855,000 Genesse County, Economic
Development Corp., Grand Blanc
Convalescent Center,
3.80%*, 5/1/97 (LC Citizens
Commercial & Savings Bank)...... 1,855,000
1,000,000 Grand Rapids Water Supply,
Prerefunded 1/1/98 @ 102, 7.88%,
1/1/18.......................... 1,059,734
3,000,000 Holland, Economic Development
Corp., Thrifty Holland, Inc.,
3.65%*, 1/2/97 (LC Industrial
Bank of Japan).................. 3,000,000
1,180,000 Johannesburg -- Lewiston Area
Schools,
5.25%, 4/1/97................... 1,182,802
695,000 Kenowa Hills Public Schools, GO,
5.13%, 5/1/97................... 697,715
3,000,000 Kent Hospital Finance Authority,
Butterworth Hospital, Series A,
4.00%*, 1/2/97 (LC Rabobank
Nederland)...................... 3,000,000
1,855,000 Leelanau County, Economic
Development Corp., Limited
Obligation Revenue, American
Community Mutual Insurance Co.,
3.80%*, 6/15/97 (LC First of
America)........................ 1,855,000
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 410,000 Livonia, Economic Development
Corp., American Community Mutual
Insurance Co.,
3.80%*, 5/15/97 (LC First of
America)........................ $ 410,000
2,000,000 Meridian, Economic Development
Corp., Hannah Research &
Technology Center, 3.70%*,
1/15/97 (LC Barclays Bank PLC).. 2,000,000
2,200,000 Michigan Municipal Bond
Authority, Series A,
4.50%, 7/3/97................... 2,206,230
1,000,000 Michigan Municipal Bond
Authority, School State Aid
Notes, Series 1996B,
4.50%, 7/25/97.................. 1,002,971
1,500,000 Michigan State Hospital Finance
Authority Revenue, Oakwood
Hospital Obligation Group,
Series A,
4.00%, 11/1/97 (Insured by
FGIC)........................... 1,504,219
500,000 Michigan State Housing
Development Authority, Pine
Ridge,
4.10%*, 1/2/97 (LC National
Westminster).................... 500,000
1,000,000 Michigan State Housing
Development Authority, Revenue,
Shoal Creek,
4.10%*, 1/2/97 (LC National
Westminster).................... 1,000,000
350,000 Michigan State Housing Rental
Revenue, Series C,
4.15%*, 1/2/97 (LC Credit
Suisse)......................... 350,000
3,300,000 Michigan State Job Development
Authority, BASF Wyandotte Corp.,
3.30%*, 1/2/97 (LC Credit
Suisse)......................... 3,300,000
1,200,000 Michigan State Job Development
Authority, Hitachi Metals,
3.75%*, 1/2/97 (LC Sanwa Bank,
Ltd.)........................... 1,200,000
5,100,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Dow
Chemical Co. Project, (AMT),
5.10%*, 1/2/97.................. 5,100,000
3,500,000 Michigan State Strategic Fund-
Reserve 1, Limited Obligation
Revenue, Detroit Edison,
5.25%*, 1/2/97 (LC Barclays Bank
PLC)............................ 3,500,000
</TABLE>
Continued
8
<PAGE> 204
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 215,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Kazoo Inc. Project (AMT),
3.95%*, 3/15/97 (LC First of
America)........................ $ 215,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Donnelly Corp. Project, Series B
(AMT),
3.80%*, 4/1/97 (LC ABN AMRO
Bank)........................... 2,500,000
1,460,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Plascore, Inc. (AMT),
4.40%*, 1/2/97 (LC First
Michigan Bank).................. 1,460,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Waltec American Forgings (AMT),
4.35%*, 1/2/97.................. 2,000,000
995,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Molmec, Inc. (AMT),
4.40%*, 1/2/97 (LC Comerica
Bank)........................... 995,000
1,160,000 Michigan State Strategic Fund,
Limited Obligation Revenue, B.K.
Hardwoods Ltd. Project,
Series A (AMT),
4.40%*, 1/2/97 (LC First
Michigan Bank).................. 1,160,000
4,975,000 Michigan State Strategic Fund,
Limited Obligation Revenue, JB
Labs, Inc. (AMT),
4.40%*, 1/2/97 (LC First
Michigan Bank).................. 4,975,000
540,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Tom
Miller, Inc., (AMT),
4.25%*, 1/2/97 (LC First Union
National)....................... 540,000
2,800,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
United Waste System (AMT),
4.25%*, 1/2/97 (LC Bank of
America)........................ 2,800,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Cincinnati Milacron, Inc.
Project, (AMT),
4.25%*, 1/2/97 (LC PNC Bank).... 2,500,000
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 4,200,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
United Fixtures Co. Project,
(AMT),
4.40%*, 1/8/97 (LC LaSalle
National Bank).................. $ 4,200,000
500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Tenibac Graphion, (AMT),
4.35%*, 1/2/97 (LC NBD)......... 500,000
1,045,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Stephenson Land Co. Project
(AMT),
4.30%*, 1/2/97 (LC Comerica
Bank)........................... 1,045,000
1,600,000 Michigan State Strategic Fund,
Limited Obligation, Rochester
Gear Project (AMT),
4.35%*, 1/2/97 (LC Comerica
Bank)........................... 1,600,000
5,100,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Karona, Inc. Project, (AMT)
4.35%*, 1/2/97 (LC First of
America)........................ 5,098,008
4,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Pelzer (H.P.), Inc., (AMT),
4.35%*, 1/2/97 (LC NBD)......... 4,000,000
2,750,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Advanced Tooling System, (AMT),
4.40%*, 1/2/97 (LC First
Michigan Bank).................. 2,750,000
1,200,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Jet
Enterprises, (AMT),
4.35%*, 1/2/97 (LC NBD)......... 1,200,000
750,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Patten Monument Project, (AMT),
4.40%*, 1/2/97 (LC First
Michigan Bank).................. 750,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
(AMT), Knight Industries &
Associates, Inc. Project,
4.35%*, 1/2/97 (LC NBD)......... 2,000,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Horizon Devco LLC Project,
(AMT), 4.35%*, 1/2/97 (LC NBD).. 2,000,000
</TABLE>
Continued
9
<PAGE> 205
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 3,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Ort
Tool & Die Corp. (AMT),
4.40%*, 1/2/97 (LC National City
Bank)........................... $ 3,000,000
1,750,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Omni
Technical Services, Inc. (AMT),
4.35%*, 1/2/97 (LC First of
America)........................ 1,750,000
2,000,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Solid Waste Disposal, Grayling
Generating Project (AMT),
4.25%*, 1/2/97 (LC Barclays Bank
PLC)............................ 2,000,000
1,700,000 Michigan State Strategic Fund,
Industrial Revenue, Kinder Care
Centers, Series E (AMT),
4.55%*, 1/2/97.................. 1,700,000
250,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Series B-1 (AMT), 4.40%*, 1/2/97
(LC Comerica Bank).............. 250,000
2,820,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Mans
Project (AMT), 4.30%*, 1/2/97
(LC Comerica Bank).............. 2,820,000
1,785,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Kay
Screen Printing, Inc., Series B
(AMT), 4.35%*, 1/2/97 (LC
Comerica Bank).................. 1,785,000
2,500,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Donnelly Corp. Project, Series A
(AMT), 4.60%*, 1/2/97 (LC Bank
of Tokyo, Ltd.)................. 2,500,000
1,700,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Pilot Industries, Inc. Project
(AMT),
4.50%*, 1/2/97 (LC NBD)......... 1,700,000
2,050,000 Michigan State Strategic Fund,
PCR, Consumers Power Project,
4.25%*, 1/2/97 (LC Union Bank of
Switzerland).................... 2,050,000
690,000 Michigan State Trunk Line,
Series B,
6.25%, 11/1/97 (Insured by
FGIC)........................... 703,678
1,000,000 Michigan State Trunk Line,
Series B,
4.50%, 11/15/97 (Insured by
FGIC)........................... 1,005,883
1,075,000 Michigan State University
Revenues, Series A,
4.70%, 8/15/97.................. 1,082,003
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 500,000 Midland County, Economic
Development Corp., Limited
Obligation Revenue, Series A,
Dow Chemical Project (AMT),
5.30%*, 1/2/97.................. $ 500,000
675,000 Oakland County, Economic
Development Corp., Orchard Maple
Project,
3.75%*, 1/15/97, (LC First of
America)........................ 675,000
340,000 Rochester Hills, Economic
Development Corp., BRG
Association Project,
3.90%*, 12/1/97 (LC Comerica
Bank)........................... 340,000
850,000 Royal Oak Hospital Finance
Authority, William Beaumont
Hospital,
4.50%, 1/1/97................... 850,000
3,700,000 Royal Oak Hospital Finance
Authority, William Beaumont
Hospital,
4.95%*, 1/2/97.................. 3,700,000
1,040,000 St. Clair Shores, Economic
Development Corp. Borman's
Inc.(AMT),
3.95%*, 4/15/97 (LC Michigan
National Bank).................. 1,040,000
1,600,000 University of Michigan, Hospital
Revenue, Series A,
5.10%*, 1/2/97.................. 1,600,000
1,200,000 University of Michigan, Hospital
Revenue, Series A,
5.10%*, 1/2/97.................. 1,200,000
1,940,000 Warren, Economic Development
Corp., CMX Corp. Project (AMT),
3.70%*, 3/15/97 (LC First of
America)........................ 1,940,000
1,295,000 Warren, Economic Development
Corp., Cross Country Inns (AMT),
3.75%*, 5/1/97 (LC Huntington
National Bank).................. 1,295,000
1,000,000 Washtenaw Community College, GO,
Prerefunded 4/1/97 @ 102,
6.20%, 4/1/03................... 1,026,916
1,010,000 Wayne County Airport (Detroit
Airport), Series A, (AMT)
4.25%*, 1/2/97 (LC Bayerische
Landesbank)..................... 1,010,000
1,000,000 Wayne County Airport (Detroit
Airport), Series B, (AMT)
4.10%*, 1/2/97 (LC Bayerische
Landesbank)..................... 1,000,000
-------------
124,124,587
-------------
</TABLE>
Continued
10
<PAGE> 206
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
PUERTO RICO -- 7.6%
$ 2,000,000 Commonwealth of Puerto Rico, Tax
& Revenue Anticipation Notes,
Series 97 -- A,
4.00%, 7/30/97.................. $ 2,006,454
3,000,000 Puerto Rico Industrial, Medical
& Environmental Pollution
Control, Facilities Financing
Authority, Abbott Labs Project,
3.41%, 3/1/97................... 3,000,000
4,200,000 Puerto Rico Industrial, Medical
& Environmental Pollution
Control, Facilities Financing
Authority, Merck & Co., Series
A,
4.00%, 12/1/97.................. 4,200,000
2,750,000 Puerto Rico Industrial, Medical
& Environmental Pollution
Control, Facilities Financing
Authority, Reynolds Metals,
3.80%*, 9/1/97 (LC ABN AMRO
Bank)........................... 2,750,000
-------------
11,956,454
-------------
TOTAL MUNICIPAL SECURITIES...... 136,081,041
-------------
(amortized cost $136,081,041)
MUNICIPAL COMMERCIAL PAPER -- 11.3%
2,100,000 Cornell Township, Economic
Development Corp., Industrial
Development Revenue,
Mead-Escanaba Paper Co.,
3.40%, 1/28/97 (LC Credit
Suisse)......................... 2,100,000
1,000,000 Cornell Township, Economic
Development Corp., Industrial
Development Revenue,
Mead-Escanaba Paper Co.,
3.40%, 1/28/97 (LC Credit
Suisse)......................... 1,000,000
1,400,000 Delta County, Economic
Development Corp., Environmental
Improvement, Mead-Escanaba
Paper Co., Series B,
3.40%, 3/11/97 (LC Union Bank of
Switzerland).................... 1,400,000
1,200,000 Delta County, Economic
Development Corp., Environmental
Improvement, Mead-Escanaba
Paper Co., Series A,
3.45%, 3/10/97 (LC Swiss
Bank)........................... 1,200,000
1,500,000 Delta County, Economic
Development Corp., Environmental
Improvement, Mead-Escanaba Paper
Co., Series A,
3.45%, 2/11/97 (LC Swiss
Bank)........................... 1,500,000
<CAPTION>
AMORTIZED
PRINCIPAL COST
AMOUNT (NOTE 2)
- ----------- -------------
<S> <C> <C>
MUNICIPAL COMMERCIAL PAPER (CONTINUED)
PUERTO RICO (CONTINUED)
$ 5,000,000 Michigan State Building
Authority,
3.50%, 5/1/97 (LC Canadian
Imperial Bank of Canada)........ $ 5,000,000
3,450,000 Michigan State Housing
Development Authority,
Multi-Family Revenue, GNMA,
Series A (AMT),
3.50%, 2/3/97 (LC Credit
Suisse)......................... 3,450,000
2,034,000 Michigan State Underground
Storage Tank, Financial
Assurance Authority,
3.55%, 2/5/97 (LC Canadian
Imperial Bank of Canada)........ 2,034,000
-------------
TOTAL MUNICIPAL COMMERCIAL
PAPER........................... 17,684,000
-------------
(amortized cost $17,684,000)
MUNICIPAL PUT BONDS -- 1.2%
510,000 Michigan State Strategic Fund,
John A. Biewer Co. (AMT),
3.80%, 2/1/97 (LC Michigan
National Bank).................. 510,000
765,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Tawas Bay Associates Project
(AMT),
3.80%, 6/1/97................... 765,000
575,000 Warren, Economic Development
Corp., Limited Obligation
Revenue, Elias Brothers (AMT),
4.05%, 6/1/97 (LC Resolution
Trust Corp.).................... 575,000
-------------
TOTAL MUNICIPAL PUT BONDS....... 1,850,000
-------------
(amortized cost $1,850,000)
INVESTMENT COMPANIES -- 0.1%
<CAPTION>
SHARES
- -----------
<S> <C> <C>
1 Dreyfus Tax Exempt Cash
Management Fund................. 1
1 Federated Tax Exempt Money
Market Fund..................... 1
174,337 Reich & Tang Tax Exempt Proceeds
Fund............................ 174,337
-------------
TOTAL INVESTMENT COMPANIES...... 174,339
-------------
(cost $174,339)
</TABLE>
Continued
11
<PAGE> 207
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMORTIZED
COST
(NOTE 2)
-------------
<S> <C> <C>
TOTAL INVESTMENTS -- 99.7%................... $ 155,789,380
(amortized cost $155,789,380)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES --
0.3%....................................... 416,560
-------------
NET ASSETS -- 100.0%......................... $ 156,205,940
=============
- ---------------------------------------
<FN>
Percentages indicated are based on net assets of $156,205,940.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Represents variable rate security. Rate presented represents rate at
December 31, 1996. Maturity date reflects next rate change date.
AMT Alternative Minimum Tax Paper
FGIC Financial Guaranty Insurance Corp.
GNMA Government National Mortgage Association
GO General Obligation
LC Letter of Credit
MBIA Municipal Bond Insurance Association
NBD National Bank of Detroit
PCR Pollution Control Revenue
PLC Public Limited Company
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 208
The Kent STATEMENTS OF ASSETS AND LIABILITIES
Funds DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY MICHIGAN MUNICIPAL
MARKET MONEY MARKET
FUND FUND
------------ ------------------
<S> <C> <C>
ASSETS:
Investments (Note 2):
Investments in securities (amortized cost $450,271,771 and $155,789,380,
respectively)................................................................ $450,271,771 $155,789,380
Repurchase agreements (cost $35,000,000 and $0, respectively)................. 35,000,000 --
------------ ------------
Total investments at value............................................... 485,271,771 155,789,380
Interest and dividends receivable............................................... 1,626,705 912,321
Prepaid expenses................................................................ 1,735 309
------------ ------------
Total Assets............................................................. 486,900,211 156,702,010
------------ ------------
LIABILITIES:
Dividends payable............................................................... 2,054,776 433,361
Advisory fee payable (Note 3)................................................... 21,848 6,895
Payable to administrator (Note 3)............................................... 30,903 10,225
Payable to transfer agent (Note 3).............................................. 21,426 8,414
Payable to custodian............................................................ 13,926 5,757
Accrued expenses and other liabilities.......................................... 34,623 31,418
------------ ------------
Total Liabilities........................................................ 2,177,502 496,070
------------ ------------
NET ASSETS........................................................................ $484,722,709 $156,205,940
============ ============
NET ASSETS CONSIST OF:
Paid-in capital................................................................. $484,710,515 $156,205,159
Accumulated undistributed net investment income................................. 13,072 --
Accumulated net realized gains (losses) on investments sold..................... (878) 781
------------ ------------
TOTAL NET ASSETS......................................................... $484,722,709 $156,205,940
============ ============
INSTITUTIONAL SHARES:
Net Assets...................................................................... $483,918,506 $155,424,287
Shares Outstanding.............................................................. 483,911,518 155,401,227
Net Asset Value, offering and redemption price per share........................ $ 1.00 $ 1.00
============ ============
INVESTMENT SHARES:
Net Assets...................................................................... $ 804,203 $ 781,653
Shares Outstanding.............................................................. 804,189 781,614
Net Asset Value, offering and redemption price per share........................ $ 1.00 $ 1.00
============ ============
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 209
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
MONEY MICHIGAN MUNICIPAL
MARKET MONEY MARKET
FUND FUND
----------- ------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 2):
Interest....................................................................... $23,809,865 $5,790,970
Dividends...................................................................... 83,779 94,797
----------- ----------
Total Investment Income...................................................... 23,893,644 5,885,767
----------- ----------
EXPENSES:
Investment advisory fees (Note 3).............................................. 1,747,159 653,417
Administration fees (Note 3)................................................... 872,967 326,500
Custodian fees................................................................. 33,455 14,737
Legal and audit fees (Note 3).................................................. 23,101 15,461
Transfer agent fees (Note 3)................................................... 43,727 20,661
Other expenses................................................................. 2,954 23,365
----------- ----------
Total Expenses before waivers................................................ 2,723,363 1,054,141
Less: Waivers (Note 3)....................................................... (447,349) (166,723)
----------- ----------
Net Expenses................................................................... 2,276,014 887,418
----------- ----------
NET INVESTMENT INCOME............................................................ 21,617,630 4,998,349
----------- ----------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2):............................. (27) 251
----------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................. $21,617,603 $4,998,600
=========== ==========
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 210
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL
MONEY MARKET FUND MONEY MARKET FUND
------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF YEAR..................... $ 426,042,320 $ 323,908,424 $ 146,818,028 $ 128,542,814
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................. 21,617,630 27,990,784 4,998,349 5,096,533
Net realized gains (losses) on investments sold... (27) 129 251 530
------------- ------------- ------------- -------------
Net increase in net assets resulting from
operations...................................... 21,617,603 27,990,913 4,998,600 5,097,063
------------- ------------- ------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM (NOTE 2):
INSTITUTIONAL:
Net investment income............................. (21,564,398) (27,928,222) (4,966,358) (5,073,047)
------------- ------------- ------------- -------------
INVESTMENT:
Net investment income............................. (53,232) (62,562) (31,991) (23,486)
------------- ------------- ------------- -------------
Total Dividends to shareholders................. (21,617,630) (27,990,784) (4,998,349) (5,096,533)
------------- ------------- ------------- -------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares issued....................... 845,431,796 869,845,458 258,441,230 193,538,800
Reinvestment of distributions..................... 587,156 465,013 28,579 23,230
Cost of shares redeemed........................... (787,338,536) (768,176,704) (249,082,148) (175,287,346)
------------- ------------- ------------- -------------
TOTAL NET INCREASE FROM SHARE TRANSACTIONS.......... 58,680,416 102,133,767 9,387,661 18,274,684
------------- ------------- ------------- -------------
Net increase in net assets........................ 58,680,389 102,133,896 9,387,912 18,275,214
------------- ------------- ------------- -------------
NET ASSETS AT END OF YEAR (INCLUDING LINE A)........ $ 484,722,709 $ 426,042,320 $ 156,205,940 $ 146,818,028
============= ============= ============= =============
(A) Accumulated undistributed net investment
income............................................ $ 13,072 $ 13,072 $ -- $ --
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 211
The Kent
Funds NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. As of the
date of this report, the Trust offered thirteen managed investment portfolios.
The accompanying financial statements and financial highlights are those of The
Kent Money Market Fund and The Kent Michigan Municipal Money Market Fund
(individually, a "Portfolio", collectively, the "Portfolios") only.
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Portfolios with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues thirteen series of shares with two
separate classes in each series: Investment Shares and Institutional Shares.
Each class of shares is entitled upon liquidation of a series to a pro rata
share in the net assets of that class of such series. Each share in each series
or class has identical voting, dividend, liquidation and other rights, except in
matters affecting only a particular series or class, in which case only shares
of the affected series or class are entitled to vote. Class specific expenses,
if any, are currently limited to expenses directly attributable to the
Investment Shares under the Distribution Plan, shareholder services fees and
certain printing and postage expenses incurred as they relate to a particular
class of shares.
The investment objective of the Money Market Fund is to seek current income
from short-term securities while preserving capital and maintaining liquidity.
The Michigan Municipal Money Market Fund's investment
objective is to seek current income, exempt from federal and State of Michigan
personal income taxes, from short-term securities while preserving capital and
maintaining liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Securities in the Portfolios are valued utilizing the
amortized cost valuation method permitted in accordance with Rule 2a-7 under the
1940 Act, which approximates market value. This method involves valuing a
portfolio security initially at its cost on the date of purchase and thereafter
assuming a constant amortization to maturity of the difference between the
principal amount due at maturity and initial cost. In addition, the Portfolios
may not (a) purchase any instrument with a remaining maturity greater than
thirteen months unless such instrument is subject to a demand feature, or (b)
maintain a dollar-weighted average maturity which exceeds 90 days.
REPURCHASE AGREEMENTS: The Trust's custodian and other banks acting in a
sub-custodian capacity, take possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to determine that the value, including accrued
interest, exceeds the repurchase price. In the event of the seller's default of
the obligation to repurchase, the Portfolios have the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of the default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
are recorded on the basis of identified cost. Interest income, including
accretion of discounts and amortization of premiums, is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare dividends
daily from net investment income and pay such dividends monthly. Net investment
income for this purpose consists of interest accrued, discount earned (including
both original issue and market discount), and dividends earned less amortization
of any market premium and accrued expenses. Net realized capital gains, if any,
are distributed at least annually.
16
<PAGE> 212
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL INCOME TAXES: For federal income tax purposes, each Portfolio is
treated as a separate entity for the purpose of determining its qualification as
a regulated investment company under the Internal Revenue Code (the "Code"). It
is the policy of each Portfolio to meet the requirements of the Code applicable
to regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
At December 31, 1996, the Money Market Fund had the following capital loss
carryovers which expire in the years indicated:
<TABLE>
<CAPTION>
AMOUNT YEAR
- ------ -----
<S> <C>
$433......................................... 1999
224......................................... 2002
194......................................... 2003
27......................................... 2004
- ----
$878
</TABLE>
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one series of the
Trust are allocated among the respective series based upon relative net assets
or another appropriate basis. In addition, investors in Investment Shares will
pay the expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
3. RELATED PARTY TRANSACTIONS
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a member of the Michigan State Banking
Association and the principal subsidiary of Old Kent Financial Corporation. The
Investment Adviser is entitled to receive a fee, computed daily and paid
monthly, at the annual rate of 0.40% of the average daily net assets of each of
the Money Market Fund and the Michigan Municipal Money Market Fund.
Effective August 5, 1996, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") assumed the duties as Administrator and Distributor for
the Trust from First Data Investor Services Group, Inc. ("First Data") and 440
Financial Distributors, Inc. ("440 Distributors"), an indirect wholly-owned
subsidiary of First Data respectively. Also, effective August 5, 1996, and
October 7, 1996, respectively, BISYS Fund Services, Inc. assumed the duties as
Fund Accountant and Transfer Agent for the Trust from First Data. BISYS and
BISYS Fund Services, Inc. are both wholly owned subsidiaries of The BISYS Group,
Inc. The Administrator is entitled to receive a fee, computed daily and paid
monthly, at the annual rate of 0.185% of the average daily net assets of the
Trust up to $5 billion; 0.165% of the average daily net assets of the Trust in
excess of $5 billion up to $7.5 billion; and 0.135% of the average daily net
assets of the Trust in excess of $7.5 billion. Fund Accounting fees are computed
daily and paid monthly at the annual rate of 0.015% of the average daily net
assets of the Trust and are included as part of the fees paid to the
Administrator.
Transfer agent fees for each Portfolio for the year ended December 31, 1996
are as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
SHARES SHARES
------------- ----------
<S> <C> <C>
FUND
- ----
Money Market Fund............ $43,628 $ 99
Michigan Municipal
Money Market Fund.......... 20,532 129
</TABLE>
The current and previous Administrators have voluntarily reduced their fees
for the Portfolios. Total administrative fees waived for the year ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
SHARES SHARES
------------- ----------
<S> <C> <C>
FUND
Money Market Fund........ $ 446,253 $1,096
Michigan Municipal
Money Market Fund...... 165,662 1,061
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Portfolios for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Portfolios pursuant to Rule 12b-1 of the 1940 Act. The
Plan provides for payments to the Distributor of up to 0.25% of the average
daily net assets of the Investment Shares for each of the Portfolios for
providing distribution services. For the year ended December 31, 1996, no
payments were made pursuant to the Plan by either Portfolio.
17
<PAGE> 213
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath. A
partner of that firm serves as an Assistant Secretary of the Trust.
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
MICHIGAN MUNICIPAL
MONEY MARKET FUND MONEY MARKET FUND
------------------------------- -------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued................................... $ 844,257,954 $ 866,868,069 $ 258,305,060 $ 191,689,616
Reinvestment of distributions................... 540,797 406,420 -- --
Shares redeemed................................. (785,695,077) (765,999,260) (248,095,918) (174,639,291)
------------- ------------- ------------- -------------
Net increase from Institutional Share
transactions............................... $ 59,103,674 $ 101,275,229 $ 10,209,142 $ 17,050,325
------------- ------------- ------------- -------------
INVESTMENT:
Shares issued................................... $ 1,173,842 $ 2,977,389 $ 136,170 $ 1,849,184
Reinvestment of distributions................... 46,359 58,593 28,579 23,230
Shares redeemed................................. (1,643,459) (2,177,444) (986,230) (648,055)
------------- ------------- ------------- -------------
Net increase (decrease) from Investment Share
transactions............................... $ (423,258) $ 858,538 $ (821,481) $ 1,224,359
------------- ------------- ------------- -------------
Total net increase from share transactions.......... $ 58,680,416 $ 102,133,767 $ 9,387,661 $ 18,274,684
============= ============= ============= =============
SHARE AMOUNTS
INSTITUTIONAL:
Shares issued................................... 844,257,954 866,868,069 258,305,060 191,689,615
Reinvestment of distributions................... 540,797 406,420 -- --
Shares redeemed................................. (785,695,077) (765,999,260) (248,095,918) (174,639,291)
------------- ------------- ------------- -------------
Net increase from Institutional Share
transactions............................... 59,103,674 101,275,229 10,209,142 17,050,324
------------- ------------- ------------- -------------
INVESTMENT:
Shares issued................................... 1,173,842 2,977,389 136,170 1,849,181
Reinvestment of distributions................... 46,359 58,593 28,579 23,230
Shares redeemed................................. (1,643,459) (2,177,444) (986,230) (648,055)
------------- ------------- ------------- -------------
Net increase (decrease) from Investment Share
transactions............................... (423,258) 858,538 (821,481) 1,224,356
------------- ------------- ------------- -------------
Total net increase from share transactions.......... 58,680,416 102,133,767 9,387,661 18,274,680
============= ============= ============= =============
</TABLE>
5. CONCENTRATION OF CREDIT RISK
The Michigan Municipal Money Market Fund invests primarily in debt obligations
issued by the State of Michigan and its respective political subdivisions,
agencies and public authorities to obtain funds for various public purposes. The
Portfolio is more susceptible to economic and political factors adversely
affecting issuers of Michigan specific municipal securities than are municipal
bond funds that are not concentrated in these issuers to the same extent.
6. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
During the year ended December 31, 1996, the Michigan Municipal Money Market
Fund declared tax-exempt income distributions of $4,997,568.
18
<PAGE> 214
The Kent MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income.................................... 0.05 0.05 0.04 0.03 0.03
-------- -------- -------- -------- --------
Less Dividends from:
Net investment income.................................... (0.05) (0.05) (0.04) (0.03) (0.03)
-------- -------- -------- -------- --------
Net change in net asset value.............................. -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return............................................... 5.06% 5.58% 3.75% 2.68% 3.40%
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $483,919 $424,815 $323,539 $359,624 $220,508
Ratio of expenses to average net assets................ 0.52% 0.55% 0.60% 0.60% 0.60%
Ratio of net investment income to average net assets... 4.95% 5.45% 3.65% 2.65% 3.23%
Ratio of expenses to average net assets*............... 0.62% 0.63% 0.65% 0.68% 0.91%
Ratio of net investment income to average net
assets*.............................................. 4.85% 5.37% 3.59% 2.57% 2.92%
- ------------------------------------------------------------------------
<FN>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 215
The Kent MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992(1)
------ ------ ----- ----- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................................. $ 1.00 $ 1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ -----
Income from Investment Operations:
Net investment income............................................... 0.05 0.05 0.04 0.03 --
------ ------ ------ ------ -----
Less Dividends from:
Net investment income............................................... (0.05) (0.05) (0.04) (0.03) --
------ ------ ------ ------ -----
Net change in net asset value......................................... -- -- -- -- --
------ ------ ------ ------ -----
Net asset value, end of period........................................ $ 1.00 $ 1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== =====
Total return.......................................................... 5.06% 5.56% 3.71% 2.67% 0.27%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)................................... $ 804 $1,227 $ 369 $ 593 $ 11
Ratio of expenses to average net assets........................... 0.52% 0.55% 0.63% 0.63% 0.63%+
Ratio of net investment income to average net assets.............. 4.94% 5.41% 3.58% 2.63% 3.30%+
Ratio of expenses to average net assets*.......................... 0.62% 0.62% 0.68% 4.49% 0.68%+
Ratio of net investment income (loss) to average net assets*...... 4.84% 5.33% 3.53% (1.24%) 3.25%+
- ------------------------------------------------------------------------
<FN>
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as indicated.
(1) The Investment Class date of initial public investment was December 9, 1992.
</TABLE>
See Notes to Financial Statements.
20
<PAGE> 216
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.03 0.03 0.02 0.02 0.03
-------- -------- -------- -------- --------
Less Dividends from:
Net investment income..................................... (0.03) (0.03) (0.02) (0.02) (0.03)
-------- -------- -------- -------- --------
Net change in net asset value............................... -- -- -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period.............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return................................................ 3.11% 3.50% 2.40% 2.00% 2.63%
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $155,424 $145,215 $128,164 $183,366 $72,906
Ratio of expenses to average net assets................. 0.54% 0.56% 0.60% 0.60% 0.60%
Ratio of net investment income to average net assets.... 3.06% 3.45% 2.33% 1.96% 2.56%
Ratio of expenses to average net assets*................ 0.64% 0.65% 0.70% 0.69% 0.86%
Ratio of net investment income to average net assets*... 2.96% 3.36% 2.23% 1.87% 2.29%
- ------------------------------------------------------------------------
<FN>
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 217
The Kent MICHIGAN MUNICIPAL MONEY MARKET FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992(1)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
------ ------ ------ ------ -----
Income from Investment Operations:
Net investment income............................................. 0.03 0.03 0.02 0.02 **
------ ------ ------ ------ -----
Less Dividends from:
Net investment income............................................. (0.03) (0.03) (0.02) (0.02) --
------ ------ ------ ------ -----
Net change in net asset value....................................... -- -- -- -- --
------ ------ ------ ------ -----
Net asset value, end of period...................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
====== ====== ====== ====== =====
Total return........................................................ 3.11% 3.48% 2.38% 1.98% 0.03%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)................................. $ 782 $1,603 $ 379 $ 149 $ ***
Ratio of expenses to average net assets......................... 0.54% 0.54% 0.63% 0.63% 0.00%+
Ratio of net investment income to average net assets............ 3.06% 3.48% 2.47% 2.01% 2.92%+
Ratio of expenses to average net assets*........................ 0.64% 0.62% 0.73% 3.77% 0.00%+
Ratio of net investment income (loss) to average net assets*.... 2.96% 3.39% 2.37% (1.13%) 2.92%+
- ------------------------------------------------------------------------
<FN>
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as indicated.
** Amount is less than $0.005.
*** Amount is less than $1,000.
(1) The Investment Class date of initial public investment was December 15, 1992.
</TABLE>
See Notes to Financial Statements.
22
<PAGE> 218
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE KENT FUNDS:
We have audited the accompanying statements of assets and liabilities of The
Kent Funds -- Money Market Fund and Michigan Municipal Money Market Fund,
including the portfolios of investments, as of December 31, 1996, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of The Kent
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1996, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds at December 31, 1996, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
<PAGE> 219
THE KENT GROWTH AND INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS -- 99.3%
AEROSPACE/DEFENSE EQUIPMENT -- 1.5%
166,100 Raytheon Co...................... $ 7,993,563
-------------
AEROSPACE & DEFENSE -- 1.4%
24,187 Boeing Co........................ 2,572,892
33,820 Lockheed Martin Corp............. 3,094,530
20,000 Northrop Grumman Corp............ 1,655,000
4,000 Newport News Shipbuilding,
Inc.*............................ 60,000
-------------
7,382,422
-------------
APPLIANCES -- HOUSEHOLD -- 0.7%
90,000 Maytag Corp...................... 1,777,500
35,500 Whirlpool Corp................... 1,655,188
-------------
3,432,688
-------------
AUTOMOTIVE -- DOMESTIC -- 1.2%
115,600 General Motors Corp.............. 6,444,700
-------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.3%
61,700 Navistar International Corp.*.... 563,013
20,000 TRW, Inc......................... 990,000
-------------
1,553,013
-------------
AUTO/TRUCK -- REPLACEMENT PARTS -- 0.3%
35,300 Genuine Parts Co................. 1,570,850
-------------
BANKS -- MAJOR REGIONAL -- 4.6%
41,300 Banc One Corp.................... 1,775,900
27,400 Boatmen's Bancshares, Inc........ 1,767,300
48,000 Corestates Financial Corp........ 2,490,000
15,000 First Union Corp................. 1,110,000
30,400 KeyCorp.......................... 1,535,200
34,600 Mellon Bank Corp................. 2,456,600
47,500 National City Corp............... 2,131,563
70,700 Norwest Corp..................... 3,075,450
88,700 PNC Bank Corp.................... 3,337,338
10,000 Republic NY Corp................. 816,250
60,000 Wachovia Corp.................... 3,390,000
-------------
23,885,601
-------------
BANKS -- MONEY CENTER -- 2.1%
74,300 Bankers Trust New York Corp...... 6,408,375
42,300 J.P. Morgan & Co................. 4,129,537
-------------
10,537,912
-------------
BEVERAGES -- ALCOHOLIC -- 1.9%
124,700 Anheuser-Busch Cos., Inc......... 4,988,000
120,600 Seagram Co., Ltd................. 4,673,250
-------------
9,661,250
-------------
BUILDING PRODUCTS -- RETAIL/WHOLSALE -- 1.2%
120,600 Home Depot, Inc.................. 6,045,075
-------------
BUILDING PRODUCTS -- WOOD -- 0.3%
29,600 Weyerhaeuser Co.................. 1,402,300
-------------
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.1%
22,300 Pulte Corp....................... 685,725
-------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUSINESS INFORMATION -- 1.1%
33,766 ACNielsen Corp.*................. $ 510,711
81,300 Cognizant Corp................... 2,682,900
101,300 Dun & Bradstreet Corp............ 2,405,875
-------------
5,599,486
-------------
CABLE TELEVISION -- 0.2%
87,700 Tele-Communications, Inc., Class
A*............................... 1,145,581
-------------
CHEMICALS -- DIVERSIFIED -- 0.8%
9,600 Dow Chemical Co.................. 752,400
55,900 PPG Industries, Inc.............. 3,137,388
-------------
3,889,788
-------------
CHEMICALS -- SPECIALTY -- 0.2%
10,000 Air Products & Chemicals, Inc.... 691,250
10,000 Great Lakes Chemical Corp........ 467,500
-------------
1,158,750
-------------
COMPUTERS -- LOCAL AREA NETWORK -- 0.5%
278,900 Novell, Inc.*.................... 2,640,834
-------------
COMPUTERS -- MINI -- 0.6%
84,200 Digital Equipment Corp.*......... 3,062,775
-------------
COMPUTERS -- SERVICES -- 1.0%
118,100 Automatic Data Processing,
Inc.............................. 5,063,538
-------------
COMPUTERS -- SOFTWARE -- 0.9%
55,200 Microsoft Corp.*................. 4,560,900
-------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.6%
101,400 American Greetings Corp., Class
A................................ 2,877,225
-------------
CONTAINERS -- METAL & GLASS -- 0.2%
40,000 Ball Corp........................ 1,040,000
-------------
DIVERSIFIED OPERATIONS -- 5.6%
90,000 General Electric Co.............. 8,898,750
13,280 Imation Corp.*................... 373,500
112,800 Minnesota Mining & Manufacturing
Co............................... 9,348,300
99,700 Rockwell International Corp.*.... 6,069,237
30,000 Tenneco, Inc.*................... 1,353,750
29,600 Textron, Inc..................... 2,789,800
-------------
28,833,337
-------------
ELECTRONIC COMPONENTS --
SEMICONDUCTORS -- 1.0%
41,000 Intel Corp....................... 5,368,438
-------------
ELECTRONIC -- CONNECTORS -- 0.3%
33,400 Thomas & Betts Corp.............. 1,482,125
-------------
FINANCIAL -- INVESTMENT BROKERS -- 0.6%
70,000 Salomon, Inc..................... 3,298,750
-------------
FINANCIAL -- LEASING COMPANY -- 0.2%
30,000 Ryder Systems, Inc............... 843,750
-------------
</TABLE>
Continued
13
<PAGE> 220
THE KENT GROWTH AND INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- SAVINGS & LOAN -- 0.3%
40,000 H.F. Ahmanson & Co............... $ 1,300,000
-------------
FOOD ITEMS -- WHOLESALE -- 0.9%
119,400 Fleming Cos., Inc................ 2,059,650
92,200 Supervalu, Inc................... 2,616,175
-------------
4,675,825
-------------
FOOD -- CANNED -- 0.5%
33,000 Campbell Soup Co................. 2,648,250
-------------
FOOD -- FLOUR & GRAIN -- 0.9%
205,448 Archer-Daniels-Midland Co........ 4,519,856
-------------
FOOD -- DIVERSIFIED -- 5.0%
43,300 ConAgra, Inc..................... 2,154,175
74,500 CPC International, Inc........... 5,773,750
71,100 General Mills, Inc............... 4,505,963
57,700 Kellogg Co....................... 3,786,562
34,100 Quaker Oats Co................... 1,300,062
60,000 Sara Lee Corp.................... 2,235,000
35,900 Unilever NV, ADR................. 6,291,475
-------------
26,046,987
-------------
GLASS PRODUCTS -- 0.3%
30,600 Corning, Inc..................... 1,415,250
-------------
INSURANCE -- BROKERS -- 0.7%
44,500 Alexander & Alexander Services,
Inc.............................. 773,187
27,700 Marsh & McLennan Co.............. 2,880,800
-------------
3,653,987
-------------
INSURANCE -- LIFE -- 0.4%
10,000 Torchmark Corp................... 505,000
53,200 U.S. Life Corp................... 1,768,900
-------------
2,273,900
-------------
INSURANCE -- MULTI-LINE -- 0.8%
38,400 Aetna, Inc....................... 3,072,000
8,100 Cigna Corp....................... 1,106,662
-------------
4,178,662
-------------
INSURANCE -- PROPERTY & CASUALTY -- 1.4%
18,300 General Re Corp.................. 2,886,825
31,300 Lincoln National Corp............ 1,643,250
20,000 SAFECO Corp...................... 788,750
90,000 USF&G Corp....................... 1,878,750
-------------
7,197,575
-------------
INSTRUMENTS -- CONTROL -- 0.4%
43,000 General Signal Corp.............. 1,838,250
-------------
INSTRUMENTS -- SCIENTIFIC -- 0.3%
80,000 EG&G, Inc........................ 1,610,000
-------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.2%
40,000 Cincinnati Milacron, Inc......... 875,000
-------------
MACHINERY -- ELECTRICAL -- 0.2%
13,000 W.W. Grainger, Inc............... 1,043,250
-------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MACHINERY -- FARM -- 0.1%
15,700 Briggs & Stratton Corp........... $ 690,800
-------------
MACHINERY -- GENERAL INDUSTRIAL -- 0.4%
55,100 Cooper Industries, Inc........... 2,321,088
-------------
MEDICAL INSTRUMENTS -- 0.1%
40,000 Biomet, Inc.*.................... 605,000
-------------
MEDICAL PRODUCTS -- 0.9%
74,600 Allergan, Inc.................... 2,657,625
52,000 Baxter International, Inc........ 2,132,000
-------------
4,789,625
-------------
MEDICAL -- DRUGS -- 4.1%
90,000 Abbott Laboratories.............. 4,567,500
30,000 Alza Corp.*...................... 776,250
133,800 Bristol-Myers Squibb Co.......... 14,550,750
17,100 Schering-Plough Corp............. 1,107,225
-------------
21,001,725
-------------
MEDICAL -- HEALTH MAINTENANCE
ORGANIZATION -- 0.2%
50,000 Humana, Inc.*.................... 956,250
-------------
MEDICAL/DENTAL SUPPLIES -- 1.1%
84,200 Bausch & Lomb, Inc............... 2,947,000
91,800 C.R. Bard, Inc................... 2,570,400
-------------
5,517,400
-------------
METAL -- GOLD -- 0.7%
44,400 Barrick Gold Corp................ 1,276,500
120,700 Echo Bay Mines Ltd............... 799,637
35,608 Newmont Mining Corp.............. 1,593,458
-------------
3,669,595
-------------
METAL -- MISCELLANEOUS -- 0.3%
55,700 Cyprus Amax Minerals Co.......... 1,301,987
-------------
METAL -- NON FERROUS -- 0.7%
20,000 Asarco, Inc...................... 497,500
18,500 Phelps Dodge Corp................ 1,248,750
35,000 Reynolds Metals Co............... 1,973,125
-------------
3,719,375
-------------
METAL -- PROCESSING & FABRICATION -- 0.2%
22,400 Timken Co........................ 1,027,600
-------------
MOTION PICTURES & SERVICES -- 0.4%
60,000 King World Productions, Inc.*.... 2,212,500
-------------
OFFICE AUTOMATION & EQUIPMENT -- 1.3%
50,000 Pitney Bowes, Inc................ 2,725,000
71,900 Xerox Corp....................... 3,783,737
-------------
6,508,737
-------------
OFFICE SUPPLIES & FORMS -- 0.5%
134,200 Moore Corp., Ltd................. 2,734,325
-------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.3%
95,400 McDermott International, Inc..... 1,586,025
-------------
</TABLE>
Continued
14
<PAGE> 221
THE KENT GROWTH AND INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL REFINING & MARKETING -- 0.6%
25,000 Ashland, Inc..................... $ 1,096,875
91,100 Sun Co., Inc..................... 2,220,562
-------------
3,317,437
-------------
OIL & GAS -- DRILLING -- 0.2%
10,000 Schlumberger Ltd................. 998,750
-------------
OIL -- INTERNATIONAL INTEGRATED -- 4.5%
64,800 Chevron Corp..................... 4,212,000
121,600 Exxon Corp....................... 11,916,800
69,900 Texaco, Inc...................... 6,858,938
-------------
22,987,738
-------------
OIL -- PRODUCTION/PIPELINE -- 0.0%
1,860 El Paso Natural Gas.............. 93,930
-------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.5%
15,000 Helmerich & Payne, Inc........... 781,875
78,100 Orxy Energy Co.*................. 1,932,975
-------------
2,714,850
-------------
OIL -- U.S. INTEGRATED -- 7.2%
50,000 Amerada Hess Corp................ 2,893,750
138,600 Amoco Corp....................... 11,157,300
48,700 Atlantic Richfield Co............ 6,452,750
15,000 Kerr-McGee Corp.................. 1,080,000
62,400 Pennzoil Co...................... 3,525,600
120,300 Phillips Petroleum Co............ 5,323,275
75,000 Unocal Corp...................... 3,046,875
160,000 USX-Marathon Group............... 3,820,000
-------------
37,299,550
-------------
PAPER & RELATED PRODUCTS -- 2.5%
202,700 International Paper Co........... 8,184,012
25,000 Mead Corp........................ 1,453,125
72,900 Union Camp Corp.................. 3,480,975
-------------
13,118,112
-------------
PHOTOGRAPHY EQUIPMENT & SUPPLIES -- 0.4%
52,000 Polaroid Corp.................... 2,262,000
-------------
POLLUTION CONTROL -- 0.1%
40,000 Safety-Kleen Corp................ 655,000
-------------
PUBLISHING -- BOOKS -- 0.2%
18,000 McGraw-Hill Cos., Inc............ 830,250
-------------
PUBLISHING -- NEWSPAPERS -- 1.7%
10,000 Dow Jones & Co., Inc............. 338,750
96,100 Gannett, Inc..................... 7,195,487
27,900 New York Times Co., Class A...... 1,060,200
-------------
8,594,437
-------------
RETAIL -- APPAREL/SHOES -- 0.5%
136,700 Limited, Inc..................... 2,511,862
-------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- DISCOUNT -- 2.6%
595,600 Wal-Mart Stores, Inc............. $ 13,624,350
-------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.3%
30,400 J.C. Penney, Inc................. 1,482,000
-------------
RETAIL -- RESTAURANTS -- 0.2%
20,000 Luby's Cafeteria, Inc............ 397,500
20,000 Wendy's International, Inc....... 410,000
-------------
807,500
-------------
SHOES & RELATED APPAREL -- 0.4%
51,200 Reebok International Ltd......... 2,150,400
-------------
STEEL -- PRODUCERS -- 0.6%
90,800 Inland Steel Industries, Inc..... 1,816,000
46,000 USX-U.S. Steel Group, Inc........ 1,443,250
-------------
3,259,250
-------------
TELECOMMUNICATION EQUIPMENT -- 2.5%
100,000 General Instrument Corp.*........ 2,162,500
23,000 Harris Corp...................... 1,578,375
118,100 Motorola, Inc.................... 7,248,388
135,000 Scientific-Atlanta, Inc.......... 2,025,000
6,770 TCI Satellite Entertainment,
Inc., Class A*................... 66,854
-------------
13,081,117
-------------
TEXTILE -- APPAREL -- 0.4%
49,900 Russell Corp..................... 1,484,525
10,000 V.F. Corp........................ 675,000
-------------
2,159,525
-------------
TOBACCO -- 2.7%
69,800 American Brands, Inc............. 3,463,825
45,500 Philip Morris Cos., Inc.......... 5,124,438
167,400 U.S.T., Inc...................... 5,419,575
-------------
14,007,838
-------------
TOOLS -- HAND HELD -- 0.2%
22,500 Snap-On, Inc..................... 801,562
-------------
TOYS/GAME/HOBBY -- 0.2%
20,000 Hasbro, Inc...................... 777,500
-------------
TRANSPORTATION -- AIRLINE -- 0.5%
28,800 AMR Corp.*....................... 2,538,000
-------------
TRANSPORTATION -- RAILROAD -- 2.3%
45,000 CSX Corp......................... 1,901,250
68,400 Norfolk Southern Corp............ 5,985,000
64,600 Union Pacific Corp............... 3,884,075
-------------
11,770,325
-------------
TRANSPORTATION -- TRUCKING -- 0.1%
49,200 Yellow Corp.*.................... 707,250
-------------
</TABLE>
Continued
15
<PAGE> 222
THE KENT GROWTH AND INCOME FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- -------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- ELECTRIC POWER -- 10.4%
103,600 American Electric Power, Inc..... $ 4,260,550
107,700 Baltimore Gas & Electric Co...... 2,880,975
136,000 Consolidated Edison Co. of New
York, Inc........................ 3,978,000
96,200 Detroit Edison Co................ 3,114,475
46,700 Dominion Resources Inc. of
Virginia......................... 1,797,950
318,100 Edison International............. 6,322,238
55,000 Entergy Corp..................... 1,526,250
45,000 FPL Group, Inc................... 2,070,000
20,000 General Public Utilities Corp.... 672,500
19,400 Houston Industries, Inc.......... 438,925
45,000 Niagara Mohawk Power Corp.*...... 444,375
38,500 Northern States Power Co......... 1,766,188
98,000 Ohio Edison Co................... 2,229,500
154,200 Pacific Gas & Electric Co........ 3,238,200
165,700 PacifiCorp....................... 3,396,850
147,700 Peco Energy Corp................. 3,729,425
171,900 Public Service Enterprise Group,
Inc.............................. 4,684,275
94,200 Texas Utilities Co............... 3,838,650
79,800 Union Electric Co................ 3,072,300
-------------
53,461,626
-------------
UTILITIES -- GAS DISTRIBUTION -- 0.4%
20,000 Eastern Enterprises.............. 707,500
10,400 Nicor, Inc....................... 371,800
33,700 ONEOK, Inc....................... 1,011,000
-------------
2,090,300
-------------
UTILITIES -- TELEPHONE -- 4.1%
40,000 Alltel Corp...................... 1,255,000
318,000 AT&T Corp........................ 13,833,000
33,100 NYNEX Corp....................... 1,592,937
120,400 Pacific Telesis Group............ 4,424,700
-------------
21,105,637
-------------
TOTAL COMMON STOCKS.............. 512,587,296
(cost $418,402,013)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMERCIAL PAPER -- 0.5%
FINANCE -- 0.5%
$2,374,251 Ford Motor Credit Co., 6.00%,
1/2/97........................... $ 2,374,251
------------
TOTAL COMMERCIAL PAPER........... 2,374,251
(cost $2,374,251)
TOTAL INVESTMENTS -- 99.8%................... 514,961,547
(cost $420,776,264)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.2%........................ 958,706
------------
TOTAL NET ASSETS -- 100.0%................... $515,920,253
=============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $515,920,253.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $295,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $100,128,687
Unrealized depreciation............... (6,238,404)
------------
Net unrealized appreciation........... $ 93,890,283
============
</TABLE>
* Non-income producing security.
ADR American Depository Receipt
See Notes to Financial Statements.
<PAGE> 223
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 99.0%
ADVERTISING -- 0.7%
45,000 Catalina Marketing Corp.*........ $ 2,480,625
63,500 True North Communications,
Inc.............................. 1,389,062
------------
3,869,687
------------
AEROSPACE/DEFENSE EQUIPMENT -- 1.6%
43,400 AAR Corp......................... 1,312,850
52,800 Aviall, Inc.*.................... 488,400
48,700 Banner Aerospace, Inc.*.......... 420,038
13,600 Curtiss-Wright Corp.............. 685,100
20,900 ECC International Corp.*......... 172,425
16,200 EDO Corp......................... 115,425
44,000 Fairchild Corp., Class A*........ 649,000
47,400 Hexcel Corp.*.................... 770,250
59,275 Rohr Industries, Inc.*........... 1,341,097
45,600 Thiokol Corp..................... 2,040,600
48,000 UNC, Inc.*....................... 576,000
7,200 Whitehall Corp.*................. 309,600
24,600 Whittaker Corp.*................. 310,575
------------
9,191,360
------------
AEROSPACE/DEFENSE -- 0.6%
28,600 Alliant Techsystems, Inc.*....... 1,573,000
37,800 Logicon, Inc..................... 1,379,700
34,700 Talley Industries, Inc.*......... 255,912
------------
3,208,612
------------
AGRICULTURAL OPERATIONS -- 0.0%
27,900 Orange Co., Inc. 216,225
------------
APPLIANCES -- HOUSEHOLD -- 0.4%
109,000 Fedders Corp..................... 681,250
20,000 National Presto Industries,
Inc.............................. 747,500
65,200 Royal Appliance Manufacturing
Co.*............................. 448,250
20,500 Toastmaster, Inc................. 76,875
------------
1,953,875
------------
AUDIO/VIDEO PRODUCTION -- 0.7%
40,180 Harman International Industries,
Inc.............................. 2,235,012
157,269 Zenith Electronics Corp.*........ 1,710,300
------------
3,945,312
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 1.3%
58,300 Arvin Industries, Inc............ 1,442,925
47,000 Brilliance China Automotive
Holdings, Ltd.................... 211,500
94,400 China Yuchai International,
Ltd.............................. 448,400
67,100 Detroit Diesel Corp.*............ 1,543,300
8,600 Raytech Corp.*................... 37,625
54,800 Smith (A.O.) Corp. .............. 1,637,150
21,200 Sparton Corp.*................... 164,300
45,500 Standard Products Co............. 1,160,250
60,875 Titan Wheel International,
Inc.............................. 776,156
------------
7,421,606
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUTO/TRUCK -- REPLACEMENT -- 0.5%
39,300 SPX Corp......................... $ 1,522,875
35,700 Standard Motor Products, Inc. 495,338
24,750 Wynn's International, Inc........ 782,719
------------
2,800,932
------------
BANKS -- MAJOR REGIONAL -- 0.0%
10,546 First Banks America, Inc.*....... 106,778
------------
BANKS -- NORTHEAST -- 0.6%
60,500 First Commonwealth Financial
Corp............................. 1,126,812
59,800 North Fork Bancorp, Inc.......... 2,130,375
17,100 Sterling Bancorp................. 252,225
------------
3,509,412
------------
BANKS -- SOUTHEAST -- 0.7%
37,500 Centura Banks, Inc............... 1,673,437
35,400 Colonial Bancgroup, Inc.......... 1,416,000
45,000 F & M National Corp.............. 961,875
------------
4,051,312
------------
BANKS -- WEST -- 0.4%
113,100 City National Corp............... 2,445,787
------------
BUILDING -- 1.6%
62,500 Calmat Co........................ 1,171,875
62,400 Centex Construction Products,
Inc.............................. 1,123,200
40,800 Dravo Corp.*..................... 576,300
16,000 Giant Group, Ltd.*............... 134,000
32,700 Lone Star Industries, Inc........ 1,205,812
42,100 Medusa Corp...................... 1,447,188
14,800 Puerto Rican Cement Co., Inc..... 462,500
47,000 Southdown, Inc................... 1,462,875
28,600 Texas Industries, Inc............ 1,447,875
------------
9,031,625
------------
BUILDING -- HEAVY CONSTRUCTION -- 0.4%
23,300 Dycom Industries, Inc.*.......... 215,525
77,300 Morrison Knudsen Corp.*.......... 695,700
8,634 MYR Group, Inc................... 111,163
37,700 Stone & Webster, Inc............. 1,187,550
------------
2,209,938
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.2%
51,400 ABM Industries, Inc.............. 950,900
------------
BUILDING -- MOBILE/MANUFACTURING & RECREATIONAL
VEHICALS -- 0.9%
30,500 Cavalier Homes, Inc.............. 350,750
77,000 Champion Enterprises, Inc.*...... 1,501,500
40,600 Coachmen Industries, Inc......... 1,152,025
28,500 Skyline Corp..................... 705,375
24,100 Thor Industries, Inc............. 608,525
68,900 Winnebago Industries, Inc. 499,525
------------
4,817,700
------------
</TABLE>
Continued
17
<PAGE> 224
THE KENT MALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- RESIDENTIAL/COMMERCIAL -- 1.0%
19,800 AMREP Corp.*..................... $ 76,725
21,000 Beazer Homes USA, Inc.*.......... 388,500
19,000 Continental Home Holding Corp.... 403,750
87,800 Kaufman & Broad Home Corp........ 1,130,425
23,900 M/I Schottenstein Homes, Inc.*... 262,900
52,900 MDC Holdings, Inc................ 456,263
152,500 Presley Cos., Class A*........... 171,563
42,900 Ryland Group Inc................. 589,875
81,400 Standard-Pacific Corp............ 468,050
83,900 Toll Brothers, Inc.*............. 1,636,050
20,800 Washington Homes, Inc.*.......... 93,600
------------
5,677,701
------------
BUILDING & CONSTRUCTION --
MISCELLANEOUS -- 0.8%
10,800 Ameron International Corp........ 557,550
36,300 Amre, Inc.*...................... 58,987
27,200 Congoleum Corp., Class A*........ 377,400
23,600 Elcor Corp....................... 504,450
19,400 Eljer Industries, Inc.*.......... 458,325
54,600 Falcon Building Products, Inc.,
Class A*......................... 805,350
11,600 International Aluminum Corp...... 295,800
32,800 Nortek, Inc.*.................... 656,000
39,300 Ply-Gem Industries, Inc.......... 486,338
44,000 Robertson-Ceco Corp.*............ 346,500
31,900 Waxman Industries, Inc.*......... 155,512
------------
4,702,212
------------
BUILDING PRODUCTS --
AIR CONDITIONING/HEAT -- 0.2%
24,100 Mestek, Inc.*.................... 397,650
25,575 Watsco, Inc...................... 738,478
------------
1,136,128
------------
BUILDING PRODUCTS -- DOORS & TRUSSES -- 0.2%
23,400 Morgan Productions, Ltd.*........ 172,575
100,500 Premdor, Inc.*................... 917,062
13,400 Thackeray Corp.*................. 36,850
------------
1,126,487
------------
BUILDING PRODUCTS -- LIGHTING/FIXTURES -- 0.1%
18,800 Catalina Lighting, Inc.*......... 91,650
27,500 Thomas Industries, Inc........... 574,062
------------
665,712
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.4%
18,500 Hughes Supply, Inc............... 797,813
108,100 Payless Cashways, Inc.*.......... 216,200
69,700 Rexel, Inc.*..................... 1,106,488
------------
2,120,501
------------
BROADCAST -- RADIO/TELEVISION -- 0.0%
12,000 Gray Communications Systems,
Inc.............................. 226,500
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUSINESS INFORMATION -- 0.5%
14,900 Duff & Phelps Corp............... $ 359,462
47,800 Metromail Corp.*................. 872,350
56,200 Primark Corp.*................... 1,390,950
------------
2,622,762
------------
BUSINESS SERVICES -- 0.9%
56,600 Advo, Inc........................ 792,400
8,400 Caribiner International, Inc.*... 462,300
29,700 Fair Issac & Co., Inc............ 1,162,012
50,000 Franklin Quest Co.*.............. 1,050,000
29,200 Interim Services, Inc.*.......... 1,036,600
15,200 Union Corp.*..................... 347,700
------------
4,851,012
------------
CABLE TELEVISION -- 0.5%
53,500 Bet Holdings, Inc., Class A*..... 1,538,125
93,125 International Family
Entertainment, Class B*.......... 1,443,437
------------
2,981,562
------------
CHEMICALS -- DIVERSIFIED -- 0.6%
54,000 Chemfirst, Inc.*................. 1,215,000
54,700 General Chemical Group, Inc...... 1,292,287
50,900 Rexene Corp...................... 693,513
------------
3,200,800
------------
CHEMICALS -- FIBER -- 0.0%
28,613 Schawk, Inc., Class A............ 250,364
------------
CHEMICALS -- PLASTICS -- 0.6%
55,700 Geon Co.......................... 1,093,113
63,500 Spartech Corp.................... 706,437
34,945 Tredegar Industries, Inc......... 1,402,168
------------
3,201,718
------------
CHEMICALS -- SPECIALTY -- 1.2%
37,800 Arcadian Corp.................... 1,001,700
42,100 Bush Boake Allen, Inc.*.......... 1,120,913
26,800 Chemed Corp...................... 978,200
24,000 Learonal, Inc.................... 552,000
61,300 Lilly Industries, Inc., Class
A................................ 1,118,725
29,100 McWhorter Technologies, Inc.*.... 665,662
108,100 NL Industries, Inc............... 1,175,587
18,500 Oil-Dri Corp..................... 277,500
------------
6,890,287
------------
COAL -- 0.6%
45,600 Ashland Coal, Inc................ 1,265,400
22,800 Pittston Co., Minerals Group..... 350,550
18,300 Westmoreland Coal Co.*........... 18,300
77,100 Zeigler Coal Holding Co. ........ 1,648,012
------------
3,282,262
------------
COMPUTERS -- GRAPHICS -- 0.1%
242,900 Chyron Corp.*.................... 698,337
------------
COMPUTERS -- LOCAL AREA NETWORKS -- 0.2%
47,900 BBN Corp.*....................... 1,077,750
------------
</TABLE>
Continued
18
<PAGE> 225
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS -- MEMORY DEVICES -- 0.3%
62,200 Applied Magnetics Corp.*......... $ 1,858,225
------------
COMPUTERS -- MICRO -- 0.3%
28,800 Ameriquest Technologies, Inc.*... 32,400
105,700 Data General Corp.*.............. 1,532,650
35,100 Datapoint Corp.*................. 39,488
10,750 EA Industries, Inc.*............. 18,812
------------
1,623,350
------------
COMPUTERS -- OPTICAL RECOGNITION -- 0.2%
50,500 Banctec, Inc.*................... 1,041,562
------------
COMPUTERS -- PERIPHERAL EQUIPMENT -- 0.1%
20,900 Par Technology Corp.*............ 289,987
28,900 QMS, Inc.*....................... 151,725
------------
441,712
------------
COMPUTERS -- SERVICES -- 0.2%
28,000 Computer Task Group, Inc......... 1,207,500
------------
COMPUTERS -- SOFTWARE -- 0.6%
46,300 Bell & Howell Co.*............... 1,099,625
132,600 Computervision Corp.*............ 1,226,550
67,700 SPS Transaction Services,
Inc.*............................ 1,032,425
------------
3,358,600
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.5%
46,100 Department 56, Inc.*............. 1,140,975
49,900 Ekco Group, Inc.................. 218,312
10,200 General Housewares Corp.......... 99,450
60,600 Mikasa, Inc.*.................... 621,150
30,000 Oneida, Ltd...................... 540,000
26,300 Scott's Liquid Gold, Inc.*....... 42,738
------------
2,662,625
------------
CONTAINERS -- METAL & GLASS -- 0.3%
34,700 United States Can Corp.*......... 585,562
43,700 Zero Corp........................ 874,000
------------
1,459,562
------------
CONTAINERS -- PAPER & PLASTIC -- 0.4%
31,500 ACX Technologies, Inc.*.......... 626,063
44,700 Aptargroup, Inc.................. 1,575,675
8,700 Continental Can Co., Inc.*....... 122,888
10,500 Sun Coast Industries, Inc.*...... 28,875
------------
2,353,501
------------
COSMETICS & TOILETRIES -- 0.5%
25,900 Alberto Culver Co., Class A...... 1,068,375
137,800 Playtex Products, Inc.*.......... 1,102,400
45,400 Windmere-Durable Holding, Inc.... 584,525
------------
2,755,300
------------
DIVERSIFIED OPERATIONS -- 2.2%
24,800 Allied Products Corp............. 737,800
27,400 Bairnco Corp..................... 181,525
35,300 Carlisle Cos., Inc............... 2,135,650
40,300 Clarcor, Inc..................... 891,637
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED OPERATIONS (CONTINUED)
29,100 Core Industries, Inc............. $ 480,150
15,900 Craig Corp.*..................... 228,563
10,400 Dynamics Corp. of America........ 293,800
90,800 Gencorp, Inc..................... 1,645,750
78,400 Griffon Corp.*................... 960,400
35,100 LSB Industries, Inc.............. 157,950
31,300 Manitowoc Co., Inc............... 1,267,650
115,700 Metromedia International Group,
Inc.*............................ 1,142,538
17,900 Nashua Corp.*.................... 214,800
37,900 Standex International Corp....... 1,170,162
7,500 TCC Industries, Inc.*............ 12,187
81,300 Triarc Cos., Inc.*............... 934,950
------------
12,455,512
------------
ELECTRONIC COMPONENTS --
SEMICONDUCTORS -- 0.7%
69,100 Dallas Semi-Conductors........... 1,589,300
31,200 Unitrode Corp.*.................. 916,500
22,100 Watkins-Johnson Co............... 541,450
42,000 Zilog, Inc.*..................... 1,097,250
------------
4,144,500
------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.4%
21,900 Fluke Corp....................... 977,287
54,600 Genrad, Inc.*.................... 1,269,450
------------
2,246,737
------------
ELECTRONIC PARTS -- DISTRIBUTION -- 0.9%
19,715 Bell Industries, Inc.*........... 421,408
54,400 Kent Electronics Corp.*.......... 1,400,800
45,300 Marshall Industries*............. 1,387,313
20,501 Sterling Electronics*............ 274,204
33,800 Wyle Electronics................. 1,335,100
------------
4,818,825
------------
ELECTRONIC PRODUCTS -- MISCELLANEOUS -- 0.5%
13,400 Acme Electric Corp.*............. 90,450
32,200 Aeroflex, Inc.*.................. 152,950
19,400 American Precision Industries.... 388,000
21,300 Franklin Electric Publishers,
Inc.*............................ 258,263
15,800 Hubbell, Inc., Class A........... 600,400
26,300 Kollmorgen Corp.................. 289,300
67,100 Magnetek, Inc.*.................. 863,912
15,500 SL Industries, Inc............... 120,125
21,000 Three Five Systems, Inc.*........ 270,375
------------
3,033,775
------------
ELECTRONIC -- CONNECTORS -- 0.3%
34,195 Thomas & Betts Corp.............. 1,517,403
------------
ELECTRONIC -- MILITARY -- 0.1%
13,800 Aydin Corp.*..................... 129,375
30,400 Esco Electronics Corp............ 304,000
33,100 United Industrial Corp........... 194,462
------------
627,837
------------
</TABLE>
Continued
19
<PAGE> 226
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ELECTRONIC -- MISCELLANEOUS COMPONENTS -- 1.2%
67,300 BMC Industries, Inc.............. $ 2,119,950
14,000 CTS Corp......................... 598,500
51,000 DDL Electronics, Inc.*........... 47,812
44,400 Oak Industries, Inc.*............ 1,021,200
47,500 OEA, Inc......................... 2,173,125
31,400 Park Electrochemical Corp........ 714,350
------------
6,674,937
------------
ENERGY -- ALTERNATIVE SOURCES -- 0.2%
31,000 Trigen Energy Corp............... 891,250
------------
ENGINEERING -- RESEARCH & DEVELOPMENT
SERVICES -- 0.4%
50,100 CDI Corp.*....................... 1,421,588
17,800 Corrpro Cos., Inc.*.............. 169,100
27,100 General Physics Corp............. 108,400
24,900 GRC International, Inc.*......... 202,313
24,190 URS Corp.*....................... 217,710
------------
2,119,111
------------
FERTILIZERS -- 0.3%
63,636 Mississippi Chemical Corp........ 1,527,264
------------
FINANCIAL -- CONSUMER LOANS -- 0.5%
73,300 Olympic Financial Ltd.*.......... 1,053,687
45,400 Student Loan Corp................ 1,691,150
------------
2,744,837
------------
FINANCIAL -- INVESTMENT BANKERS -- 1.8%
22,600 Advest Group, Inc.*.............. 242,950
32,750 Inter-Regional Financial Group,
Inc.............................. 1,154,438
16,700 Interstate/Johnson Lane, Inc..... 227,538
12,600 Jefferies Group, Inc............. 508,725
41,800 Legg Mason, Inc.................. 1,609,300
23,900 McDonald & Co. Investments,
Inc.............................. 830,525
56,350 Morgan Keegan, Inc............... 964,993
47,800 Piper Jaffray Cos., Inc.......... 746,875
60,980 Quick & Reilly Group, Inc........ 1,821,777
56,225 Raymond James Financial, Inc..... 1,693,778
17,400 Rodman & Renshaw Capital
Group*........................... 19,575
34,400 Sherwood Group, Inc.*............ 356,900
11,886 Stifel Financial Corp............ 104,003
------------
10,281,377
------------
FINANCIAL -- INVESTMENT FUNDS -- 0.2%
29,500 Petroleum & Resources............ 1,025,125
------------
FINANCIAL -- INVESTMENT MANAGEMENT
COMPANIES -- 0.6%
24,000 Atalanta Sosnoff Capital Corp.... 210,000
157,400 Goldcorp, Inc., Class A.......... 1,337,900
54,000 Insignia Financial Group, Inc.,
Class A*......................... 1,215,000
46,400 Phoenix Duff & Phelps Corp....... 330,600
------------
3,093,500
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- LEASING COMPANIES -- 0.7%
29,300 DVI, Inc.*....................... $ 380,900
46,900 Interpool, Inc................... 1,096,288
77,430 National Auto Credit, Inc.*...... 929,160
16,500 PS Group Holdings, Inc........... 222,750
116,500 Rollins Truck Leasing Corp....... 1,470,812
------------
4,099,910
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 0.1%
13,600 Hallwood Group, Inc.*............ 215,900
17,100 Stewart Information Services
Corp............................. 354,825
27,400 Transmedia Network, Inc.......... 133,575
------------
704,300
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 0.5%
56,000 CMAC Investment Corp............. 2,058,000
40,900 North American Mortgage Co....... 807,775
------------
2,865,775
------------
FINANCIAL -- SMALL BUSINESS INVESTMENT CO. &
COMMERCIAL -- 0.6%
51,000 PEC Israel Economic Corp.*....... 854,250
71,000 Safeguard Scientifics, Inc.*..... 2,254,250
------------
3,108,500
------------
FINANCIAL -- SAVINGS & LOAN -- 2.2%
46,200 Coast Savings Financial, Inc.*... 1,692,075
32,700 Commercial Federal Corp.......... 1,569,600
69,172 Downey Financial Corp............ 1,357,500
19,926 First Republic Bancorp, Inc.*.... 333,761
41,250 Firstbank Puerto Rico............ 1,072,500
28,800 Firstfed Financial Corp.*........ 633,600
101,700 Glendale Federal Bank*........... 2,364,525
32,300 New York Bancorp, Inc............ 1,251,625
16,100 PonceBank........................ 402,500
67,773 Westcorp......................... 1,482,534
------------
12,160,220
------------
FOOD -- FLOUR & GRAIN -- 0.2%
48,900 International Multi-Foods
Corp............................. 886,312
------------
FOOD -- MEAT PRODUCTS -- 0.5%
11,767 Diana Corp.*..................... 323,592
81,800 Hudson Foods, Inc., Class A...... 1,554,200
75,000 Pilgrim's Pride Corp............. 646,875
27,400 Rymer Foods, Inc.*............... 9,419
------------
2,534,086
------------
FOOD -- MISCELLANEOUS/DIVERSIFIED -- 0.5%
29,151 Chock Full O'Nuts Corp.*......... 145,755
21,500 Earthgrains Co................... 1,123,375
78,800 Smucker (J.M.) Co., Class B...... 1,260,800
------------
2,529,930
------------
FOOD -- SUGAR & REFRIGERATED -- 0.2%
71,300 Savannah Foods & Industries,
Inc.............................. 962,550
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
40,225 Rykoff-Sexton, Inc............... 638,572
------------
</TABLE>
Continued
20
<PAGE> 227
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FURNITURE -- 0.4%
34,887 Bush Industries, Inc............. $ 671,575
15,600 Chromcraft Revington, Inc.*...... 432,900
45,700 O'Sullivan Industries*........... 639,800
36,250 Rowe Furniture Corp.............. 290,000
24,100 Shelby Williams Industries,
Inc.............................. 295,225
------------
2,329,500
------------
GLASS PRODUCTS -- 0.2%
10,300 Kerr Group, Inc.*................ 24,462
40,800 Libbey, Inc...................... 1,137,300
------------
1,161,762
------------
HOTELS & MOTELS -- 0.9%
17,200 Hammons (John Q.) Hotels,
Inc.*............................ 146,200
53,300 Marcus Corp...................... 1,132,625
77,800 Prime Hospitality Corp.*......... 1,254,525
66,500 Red Roof Inns, Inc.*............. 1,030,750
48,900 Wyndham Hotel Corp.*............. 1,204,163
------------
4,768,263
------------
INDUSTRIAL -- AUTOMOTIVE/ROBOTICS -- 0.3%
18,100 Esterline Technologies Corp.*.... 472,862
62,900 Gerber Scientific, Inc........... 935,638
------------
1,408,500
------------
INSURANCE -- ACCIDENT & HEALTH -- 0.9%
45,900 Capitol American Financial
Corp............................. 1,669,613
55,200 Penncorp Financial Group, Inc.... 1,987,200
27,300 Pioneer Financial Services,
Inc.............................. 682,500
21,350 RLI Corp......................... 712,556
16,100 Westbridge Capital Corp.*........ 156,975
------------
5,208,844
------------
INSURANCE -- BROKERS -- 0.6%
37,900 Acordia, Inc..................... 1,099,100
40,400 Arthur J. Gallagher & Co......... 1,252,400
35,900 Blanch (E.W.) Holdings, Inc...... 722,488
36,900 Hilb, Rogal & Hamilton Co........ 488,925
------------
3,562,913
------------
INSURANCE -- LIFE -- 1.9%
107,400 American Annuity Group, Inc...... 1,517,025
37,200 American Heritage Life Investment
Corp............................. 976,500
27,600 Amvestors Financial Corp......... 407,100
38,600 Delphi Financial Group*.......... 1,138,700
59,600 John Alden Financial Corp........ 1,102,600
38,500 Life Re Corp..................... 1,487,063
42,600 Reinsurance Group of America,
Inc.............................. 2,007,525
23,300 Security-Connecticut Corp........ 818,412
33,300 Washington National Corp......... 915,750
------------
10,370,675
------------
INSURANCE -- MULTI-LINE -- 0.9%
44,000 Enhance Financial Services
Group............................ 1,606,000
43,700 FBL Financial Group Inc., Class
A................................ 1,087,038
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- MULTI-LINE (CONTINUED)
39,809 Fidelity National Financial,
Inc.............................. $ 602,111
45,600 Mutual Risk Management Ltd....... 1,687,200
------------
4,982,349
------------
INSURANCE -- PROPERTY & CASUALTY -- 3.7%
40,400 Acceptance Insurance Cos.*....... 797,900
19,100 American Eagle Group, Inc........ 90,725
23,500 Avemco Corp...................... 367,188
37,400 Capital Re Corp.................. 1,743,775
41,900 Capsure Holdings Corp............ 476,613
24,500 China Tire Holdings, Ltd......... 238,875
51,200 Crawford & Co., Class A.......... 1,107,200
31,100 Executive Risk, Inc.............. 1,150,700
30,800 First American Financial Corp.... 1,266,650
62,715 Fremont General Corp............. 1,944,165
36,190 Frontier Insurance Group, Inc.... 1,384,268
40,667 Guaranty National Corp........... 681,172
70,000 HCC Insurance Holdings, Inc...... 1,680,000
42,700 Integon Corp..................... 757,925
26,300 MMI Cos., Inc.................... 841,600
30,600 NYMAGIC, Inc..................... 550,800
33,500 Orion Capital Corp............... 2,047,688
49,900 Sphere Drake Holdings, Ltd....... 442,862
21,056 Titan Holdings, Inc.............. 347,424
43,750 Vesta Insurance Group, Inc....... 1,372,656
47,900 Zenith National Insurance Co..... 1,311,262
------------
20,601,448
------------
INSTRUMENTS -- CONTROL -- 0.5%
64,700 BW/IP Holdings, Inc.............. 1,067,550
46,400 IMO Delaval, Inc.*............... 145,000
42,700 Measurex Corp.................... 1,024,800
32,600 Pacific Scientific Co............ 366,750
------------
2,604,100
------------
LEISURE & RECREATION PRODUCTS -- 0.8%
90,800 Alliance Entertainment Co.*...... 170,250
24,700 Coastcast Corp.*................. 358,150
36,500 Huffy Corp....................... 524,688
45,030 K2, Inc.......................... 1,238,325
54,500 Outboard Marine Corp............. 899,250
135,400 Roadmaster Industries, Inc....... 169,250
68,000 Sturm, Ruger & Co., Inc.......... 1,317,500
------------
4,677,413
------------
LEISURE & RECREATION SERVICES -- 0.3%
30,300 Carmike Cinemas, Inc., Class
A*............................... 768,863
308,800 Cineplex Odeon Corp.*............ 424,600
21,200 GC Cos., Inc.*................... 734,050
------------
1,927,513
------------
LEISURE & RECREATION -- GAMING -- 0.8%
104,000 Aztar Corp.*..................... 728,000
132,100 Boyd Gaming Corp.*............... 1,089,825
75,450 Grand Casinos, Inc.*............. 1,018,575
25,500 Harveys Casinos Resorts.......... 430,313
25,300 Jackpot Enterprises, Inc......... 246,675
</TABLE>
Continued
21
<PAGE> 228
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
LEISURE & RECREATION -- GAMING (CONTINUED)
42,700 Showboat, Inc.................... $ 736,575
26,400 Trump Hotels & Casino Resorts,
Inc.*............................ 316,800
------------
4,566,763
------------
LINEN SUPPLY & RELATED -- 0.3%
24,800 Angelica Corp.................... 474,300
55,500 Unifirst Corp.................... 1,179,375
------------
1,653,675
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.4%
36,500 Applied Power, Inc., Class A..... 1,446,313
23,600 Brown & Sharpe Manufacturing Co.,
Class A*......................... 330,400
14,100 Gleason Corp..................... 467,062
10,100 Monarch Machine Tool Co.......... 83,325
------------
2,327,100
------------
MACHINERY -- CONSTRUCTION/MINING -- 0.3%
14,100 Christiana Cos., Inc.*........... 363,075
55,400 CMI Corp., Class A............... 242,375
42,050 Commercial Intertech Corp........ 572,931
28,700 Terex Corp.*..................... 290,588
------------
1,468,969
------------
MACHINERY -- ELECTRIC UTILITIES -- 0.1%
35,857 Kuhlman Corp..................... 694,729
------------
MACHINERY -- ELECTRICAL -- 0.3%
67,310 Baldor Electric Co............... 1,657,509
------------
MACHINERY -- FARM -- 0.1%
26,000 Alamo Group Inc.................. 445,250
------------
MACHINERY -- GENERAL INDUSTRIAL -- 1.5%
27,000 Chart Industries, Inc............ 462,375
61,700 Global Industrial Technologies,
Inc.*............................ 1,365,112
46,925 Graco, Inc....................... 1,149,663
43,350 Idex Corp........................ 1,728,581
23,700 Katy Industries, Inc............. 343,650
15,700 Kysor Industrial Corp............ 512,213
75,433 Paxar Corp.*..................... 1,301,219
11,570 Portec, Inc...................... 114,254
24,400 Scotsman Industries, Inc......... 576,450
10,100 Sequa Corp., Class B*............ 505,000
7,400 Twin Disc, Inc................... 160,025
------------
8,218,542
------------
MACHINERY -- MATERIAL HANDLING -- 0.2%
62,600 Interlake Corp.*................. 219,100
21,600 Nacco Industries, Class A........ 1,155,600
------------
1,374,700
------------
MEDICAL INSTRUMENTS -- 0.5%
72,900 Acuson Corp.*.................... 1,776,938
43,260 Elscint, Ltd.*................... 270,375
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL INSTRUMENTS (CONTINUED)
38,300 Graham Field Health Products,
Inc.*............................ $ 330,337
33,100 OEC Medical Systems, Inc.*....... 496,500
------------
2,874,150
------------
MEDICAL PRODUCTS -- 0.5%
43,700 BEC Group, Inc.*................. 229,425
62,600 Haemonetics Corp.*............... 1,181,575
21,900 Maxxim Medical, Inc.*............ 273,750
83,900 Owens & Minor, Inc............... 859,975
------------
2,544,725
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
29,200 Biowhittaker, Inc.*.............. 233,600
35,500 Diagnostic Products Corp......... 918,563
36,089 Molecular Biosystems, Inc.*...... 234,579
------------
1,386,742
------------
MEDICAL -- DRUGS -- 0.3%
73,423 ICN Pharmaceuticals, Inc......... 1,440,926
------------
MEDICAL -- GENERIC DRUGS -- 0.2%
58,900 Alpharma, Inc., Class A.......... 839,325
49,400 Pharmaceutical Resources,
Inc.*............................ 172,900
------------
1,012,225
------------
MEDICAL -- HEALTH MAINTENANCE ORGANIZATION --
0.6%
29,600 PHP Healthcare Corp.*............ 758,500
50,800 Rightchoice Managed Care, Inc.,
Class A*......................... 539,750
37,400 Sierra Health Services, Inc.*.... 920,975
17,800 United American Healthcare*...... 104,575
34,200 United Wisconsin Services,
Inc.............................. 897,750
------------
3,221,550
------------
MEDICAL -- HOSPITALS -- 0.9%
64,400 Coastal Healthcare Group*........ 225,400
7,200 Comprehensive Care Corp.*........ 87,300
36,400 Healthplan Services Corp.*....... 768,950
29,400 Pediatrix Medical Group, Inc.*... 1,084,125
110,100 Transitional Hospitals Corp.*.... 1,059,713
62,600 Universal Health Services*....... 1,791,925
------------
5,017,413
------------
MEDICAL -- NURSING HOMES -- 1.0%
14,400 Advocat, Inc.*................... 104,400
62,470 Grancare, Inc.*.................. 1,116,651
47,700 Integrated Health Services,
Inc.............................. 1,162,688
48,400 Living Centers of America,
Inc.*............................ 1,343,100
67,050 Multicare Cos., Inc.*............ 1,357,762
45,200 Regency Health Services, Inc.*... 435,050
------------
5,519,651
------------
MEDICAL -- OUTPATIENT/HOME CARE -- 0.8%
109,200 Coram Healthcare Corp.*.......... 546,000
55,500 Genesis Health Ventures, Inc.*... 1,727,437
31,000 Health Images, Inc............... 515,375
</TABLE>
Continued
22
<PAGE> 229
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL -- OUTPATIENT/HOME CARE (CONTINUED)
16,676 Hospital Staffing Services,
Inc.*............................ $ 41,690
165,100 NovaCare, Inc.*.................. 1,816,100
------------
4,646,602
------------
MEDICAL -- WHOLESALE DRUG -- 0.1%
30,500 Bindley Western Industries,
Inc.............................. 590,938
45,000 Foxmeyer Health Corp.*........... 73,125
------------
664,063
------------
MEDICAL/DENTAL SUPPLIES -- 1.0%
47,400 American Medical Response,
Inc.*............................ 1,540,500
73,600 Ballard Medical Products......... 1,370,800
31,700 Cooper Cos., Inc.*............... 546,825
18,800 Isomedix, Inc.*.................. 244,400
51,000 Sunrise Medical, Inc.*........... 809,625
45,200 West Co., Inc.................... 1,276,900
------------
5,789,050
------------
METAL -- GOLD -- 0.7%
93,000 Agnico-Eagle Mines, Ltd.......... 1,302,000
155,400 Amax Gold, Inc.*................. 990,675
46,200 Atlas Corp.*..................... 31,763
337,000 Campbell Resources, Inc.*........ 315,938
71,600 Glamis Gold, Ltd................. 501,200
130,700 Hecla Mining Co.*................ 735,187
73,100 Northgate Exploration, Ltd.*..... 50,256
------------
3,927,019
------------
METAL -- IRON -- 0.4%
32,200 Cleveland Cliffs, Inc............ 1,461,075
107,300 National Steel Corp.*............ 992,525
------------
2,453,600
------------
METAL -- MISCELLANEOUS -- 0.3%
43,100 Brush Wellman, Inc............... 705,763
43,000 Nord Resources Corp.*............ 188,125
20,000 Tremont Corp.*................... 722,500
23,206 Zemex Corp....................... 162,442
------------
1,778,830
------------
METAL -- NON-FERROUS -- 0.3%
131,400 Kaiser Aluminum Corp.*........... 1,527,525
------------
METAL -- SILVER -- 0.2%
55,600 Coeur D'Alene Mines Corp......... 840,950
515,872 Sunshine Mining & Refining
Co.*............................. 483,630
------------
1,324,580
------------
METAL PRODUCTS -- DISTRIBUTION -- 0.3%
31,950 Bearings, Inc. (c)............... 890,606
27,900 Reliance Steel & Aluminum Co..... 976,500
------------
1,867,106
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
METAL PRODUCTS -- FASTENERS -- 0.2%
14,800 Hi-Shear Industries, Inc.*....... $ 38,850
15,900 SPS Technologies, Inc.*.......... 1,021,575
13,700 Transtechnology Corp............. 268,863
------------
1,329,288
------------
METAL -- PROCESSING & FABRICATION -- 1.6%
23,400 Amcast Industrial Corp........... 579,150
26,000 Ampco-Pittsburgh Corp............ 312,000
27,300 Chase Brass & Copper Co.,
Inc.*............................ 542,587
40,733 Commercial Metals Co............. 1,227,082
23,300 Fansteel, Inc.*.................. 145,625
24,300 Huntco, Inc., Class A............ 358,425
41,900 Kaydon Corp...................... 1,974,538
43,900 Mueller Industries, Inc.*........ 1,690,150
20,300 Sinter Metals, Inc., Class A*.... 603,925
53,700 Tyler Corp.*..................... 100,687
35,800 Wolverine Tube, Inc.*............ 1,261,950
------------
8,796,119
------------
OFFICE SUPPLIES & FORMS -- 0.7%
44,500 American Business Products....... 1,118,063
29,100 CSS Industries, Inc.*............ 756,600
44,700 Ennis Business Forms, Inc........ 502,875
43,400 Hunt Manufacturing Co............ 786,625
40,700 New England Business Service,
Inc.............................. 875,050
------------
4,039,213
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.4%
32,800 Daniel Industries, Inc........... 483,800
82,700 Varco International, Inc.*....... 1,912,438
------------
2,396,238
------------
OIL REFINING & MARKETING -- 0.7%
34,400 Getty Petroleum Corp............. 559,000
30,600 Giant Industries, Inc............ 428,400
86,000 Quaker State Corp................ 1,214,750
67,400 Tesoro Petroleum Corp.*.......... 943,600
21,600 Tokheim Corp.*................... 175,500
21,900 World Fuel Services Corp......... 487,275
------------
3,808,525
------------
OIL & GAS -- DRILLING -- 0.3%
152,700 Parker Drilling Co.*............. 1,469,738
80,220 Zapata Corp.*.................... 340,935
------------
1,810,673
------------
OIL -- FIELD SERVICES -- 0.6%
63,000 Oceaneering International,
Inc.*............................ 1,000,125
39,500 RPC Energy Services, Inc.*....... 592,500
25,600 Seitel, Inc.*.................... 1,024,000
56,800 Unit Corp.*...................... 560,900
------------
3,177,525
------------
</TABLE>
Continued
23
<PAGE> 230
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- PRODUCTION/PIPELINE -- 0.5%
79,900 Aquila Gas Pipeline Corp......... $ 1,268,413
91,300 Kaneb Services, Inc.*............ 296,725
70,000 Western Gas Resources, Inc....... 1,347,500
------------
2,912,638
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 3.0%
59,400 Berry Petroleum Co., Class A..... 853,875
61,900 Cabot Oil & Gas Corp., Class A... 1,060,037
50,000 Cross Timers Oil Co.............. 1,256,250
49,000 Goodrich Petroleum Corp.*........ 33,687
29,500 HS Resources, Inc.*.............. 486,750
31,200 KCS Energy, Inc.................. 1,115,400
75,600 Louis Dreyfus Natural Gas*....... 1,294,650
173,600 Mesa, Inc.*...................... 911,400
86,000 Newfield Exploration Co.*........ 2,236,000
32,000 Nuevo Energy Co.*................ 1,664,000
85,100 Snyder Oil Corp.................. 1,478,613
32,100 Stone Energy Corp.*.............. 958,988
33,960 Swift Energy Co.*................ 1,014,555
51,900 Vintage Petroleum, Inc........... 1,790,550
73,700 Wainoco Oil Corp.*............... 230,313
25,440 Wilshire Oil Co. of Texas........ 133,560
24,300 Wiser Oil Co..................... 479,925
------------
16,998,553
------------
OIL -- U.S. INTEGRATED -- 0.1%
13,300 Howell Corp...................... 196,175
25,700 USX-Delhi Group.................. 407,988
------------
604,163
------------
PAPER & RELATED PRODUCTS -- 0.4%
31,500 Paragon Trade Brands, Inc.*...... 945,000
36,300 Pope & Talbot, Inc............... 576,263
28,600 Republic Gypsum Co............... 446,875
------------
1,968,138
------------
PHOTOGRAPHY EQUIPMENT & SUPPLIES -- 0.1%
37,700 CPI Corp......................... 631,475
------------
POLLUTION CONTROL -- 1.6%
108,100 Allwaste, Inc.*.................. 554,012
81,000 American Waste Services, Inc.,
Class A*......................... 192,375
109,900 Calgon Carbon Corp............... 1,346,275
61,300 Dames & Moore, Inc............... 896,512
18,000 Environmental Elements Co.*...... 42,750
57,600 ICF Kaiser International,
Inc.*............................ 115,200
32,000 Imco Recycling, Inc.............. 468,000
24,275 International Technology
Corp.*........................... 206,338
26,300 Ionics, Inc.*.................... 1,262,400
18,300 Kimmins Environmental Service
Corp.*........................... 61,763
47,100 Lydall, Inc.*.................... 1,059,750
69,600 Mid-American Waste*.............. 28,275
72,600 OHM Corp.*....................... 617,100
34,700 Osmonics, Inc.*.................. 763,400
164,100 Rollins Environmental Service*... 287,175
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
POLLUTION CONTROL (CONTINUED)
19,300 TRC Cos., Inc.*.................. $ 86,850
44,700 Wahlco Environmental Systems*.... 16,763
33,500 Zurn Industries, Inc............. 875,187
------------
8,880,125
------------
PRECIOUS METALS -- JEWELRY -- 0.1%
19,000 Artra Group, Inc.*............... 121,125
38,100 Handy & Harman................... 666,750
------------
787,875
------------
PRINTING -- COMMERCIAL -- 0.1%
51,800 American Banknote Corp.*......... 239,575
------------
PROTECTION -- SAFETY -- 0.7%
63,200 Borg-Warner Security Corp.*...... 679,400
69,000 Checkpoint Systems, Inc.*........ 1,707,750
52,700 Wackenhut Corrections Corp.*..... 1,054,000
32,725 Wackenhut Corp., Class A......... 564,506
------------
4,005,656
------------
PUBLISHING -- BOOKS -- 0.3%
44,600 Nelson (Thomas), Inc............. 663,425
37,100 Wiley (John) & Sons, Class A..... 1,196,475
------------
1,859,900
------------
PUBLISHING -- NEWSPAPERS -- 0.7%
70,600 Harte-Hanks Communication,
Inc.............................. 1,959,150
47,233 Pulitzer Publishing Co........... 2,190,430
------------
4,149,580
------------
PUBLISHING -- PERIODICALS -- 0.2%
114,100 American Media, Inc., Class A*... 670,338
54,200 Playboy Enterprises, Inc.*....... 528,450
------------
1,198,788
------------
REAL ESTATE OPERATIONS -- 0.2%
23,900 Grubb & Ellis Co.*............... 107,550
45,300 Webb (Del) Corp.................. 741,788
------------
849,338
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.2%
45,000 Discount Auto Parts, Inc.*....... 1,051,875
29,100 Hi-Lo Automotive, Inc.*.......... 72,750
------------
1,124,625
------------
RETAIL -- APPAREL/SHOES -- 0.9%
62,700 Ann Taylor Stores Corp.*......... 1,097,250
110,400 Burlington Coat Factory Warehouse
Corp.*........................... 1,435,200
133,300 CML Group........................ 449,888
35,600 Cole (Kenneth) Productions, Inc.,
Class A*......................... 551,800
24,100 Frederick's of Hollywood, Inc.,
Class B.......................... 99,412
28,300 Gottschalks, Inc.*............... 148,575
89,400 Hartmarx Corp.*.................. 502,875
</TABLE>
Continued
24
<PAGE> 231
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- APPAREL/SHOES (CONTINUED)
71,800 Starter Corp.*................... $ 412,850
47,900 Syms Corp.*...................... 407,150
------------
5,105,000
------------
RETAIL -- CATALOG -- 0.0%
14,800 Luria (L.) & Son, Inc.*.......... 38,850
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.2%
91,000 Handleman Co..................... 773,500
30,000 Intertan, Inc.*.................. 146,250
24,400 Rex Stores Corp.*................ 198,250
------------
1,118,000
------------
RETAIL -- DISCOUNT -- 1.2%
13,500 Alexander's, Inc.*............... 1,068,187
29,900 Bradlees, Inc.*.................. 26,162
45,900 Caldor Corp.*.................... 51,638
73,900 Duty Free International, Inc..... 1,071,550
35,000 Hills Stores Co.*................ 210,000
66,800 Mac Frugal's Bargains -- Close-
Outs, Inc.*...................... 1,745,150
87,000 Shopko Stores, Inc............... 1,305,000
54,700 Smart & Final, Inc............... 1,182,888
47,100 Venture Stores, Inc.*............ 141,300
------------
6,801,875
------------
RETAIL -- HOME FURNISHINGS -- 0.9%
101,400 Bombay Co., Inc.*................ 468,975
39,000 Ethan Allen Interiors, Inc....... 1,501,500
80,200 Levitz Furniture, Inc.*.......... 250,625
99,040 Pier One Imports, Inc............ 1,745,580
25,200 Rhodes, Inc.*.................... 195,300
29,600 Syratech Corp.*.................. 932,400
------------
5,094,380
------------
RETAIL -- JEWELRY -- 0.3%
118,800 Claire's Stores, Inc............. 1,544,400
------------
RETAIL -- MAIL ORDER -- 0.3%
43,100 National Media Corp.*............ 301,700
18,250 Sport Supply Group, Inc.......... 100,375
40,400 Stanhome, Inc.................... 1,070,600
------------
1,472,675
------------
RETAIL -- MISCELLANEOUS/DIVERSIFIED -- 1.9%
77,200 AmeriCredit Corp.*............... 1,582,600
78,000 Cash America Intl., Inc.......... 663,000
28,300 Cole National Corp., Class A*.... 742,875
50,000 Fabri-Centers of America, Inc.,
Class A*......................... 806,250
126,800 Furniture Brands
International*................... 1,775,200
63,125 General Host Corp................ 165,703
58,500 Hancock Fabrics, Inc............. 606,937
67,500 Jenny Craig, Inc.*............... 599,063
14,600 Martin Lawrence Limited Editions,
Inc.*............................ 146
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- MISCELLANEOUS/DIVERSIFIED (CONTINUED)
93,000 Musicland Stores Corp.*.......... $ 139,500
58,550 Russ Berrie & Co., Inc........... 1,053,900
53,700 Sports & Recreation Inc.*........ 416,175
32,800 Tandycrafts, Inc.*............... 196,800
79,050 The Sports Authority, Inc.*...... 1,719,338
------------
10,467,487
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.2%
44,500 Carson Pirie Scott & Co.*........ 1,123,625
------------
RETAIL -- RESTAURANTS -- 1.2%
22,300 Chart House Enterprises, Inc.*... 111,500
48,600 CKE Restaurants, Inc............. 1,749,600
19,400 Cooker Restaurant Corp........... 225,525
105,500 Foodmaker, Inc.*................. 936,313
50,500 Luby's Cafeteria, Inc............ 1,003,687
17,300 Morton's Restaurant Group,
Inc.*............................ 291,937
28,300 Piccadilly Cafeterias, Inc....... 261,775
53,300 Sbarro, Inc...................... 1,359,150
75,100 Sizzler International, Inc.*..... 215,913
15,300 Spaghetti Warehouse, Inc.*....... 80,325
68,500 TCBY Enterprises, Inc............ 274,000
33,775 UNO Restaurant Corp.*............ 223,759
15,500 Volunteer Capital Corp.*......... 127,875
------------
6,861,359
------------
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
86,100 Value City Department Stores,
Inc.*............................ 904,050
------------
RETAIL -- SUPERMARKET -- 0.1%
41,483 Carr-Gottstein Foods Co.*........ 155,561
29,300 Penn Traffic Co.*................ 106,213
------------
261,774
------------
RUBBER & PLASTICS -- 0.1%
24,000 Furon Co......................... 510,000
36,100 Lamson & Sessions Co.*........... 261,725
------------
771,725
------------
SCHOOLS -- 0.6%
27,100 Berlitz International, Inc.*..... 562,325
68,400 ITT Educational Services,
Inc.*............................ 1,581,750
86,800 National Education Corp.*........ 1,323,700
------------
3,467,775
------------
SHOES & RELATED APPAREL -- 1.1%
25,175 Barry (R.G.) Corp.*.............. 276,925
48,700 Brown Group, Inc................. 894,863
45,300 Converse, Inc.*.................. 770,100
11,900 Fuqua Enterprises, Inc.*......... 288,575
66,200 Genesco, Inc.*................... 612,350
62,200 L.A. Gear, Inc.*................. 116,625
29,900 Timberland Co., Class A*......... 1,136,200
61,987 Wolverine World Wide, Inc........ 1,797,623
------------
5,893,261
------------
</TABLE>
Continued
25
<PAGE> 232
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SOAP & CLEANING -- 0.5%
53,100 Church & Dwight Co., Inc......... $ 1,214,663
21,600 NCH Corp......................... 1,301,400
------------
2,516,063
------------
STEEL -- PIPES & TUBES -- 0.2%
37,500 NS Group, Inc.*.................. 168,750
36,700 Quanex Corp...................... 1,004,663
------------
1,173,413
------------
STEEL -- PRODUCERS -- 1.1%
247,700 Armco, Inc.*..................... 1,021,763
77,600 Birmingham Steel Corp............ 1,474,400
77,900 Chaparral Steel Co............... 944,537
19,500 Cold Metal Products, Inc.*....... 119,438
41,400 Geneva Steel Co., Class A*....... 124,200
58,800 Rouge Steel Co................... 1,242,150
113,700 Weirton Steel Corp.*............. 397,950
68,600 WHX Corp.*....................... 608,825
------------
5,933,263
------------
STEEL -- SPECIALTY -- 1.1%
39,900 Carpenter Technology............. 1,461,337
83,900 J & L Specialty Steel, Inc....... 954,363
40,100 Lukens, Inc...................... 807,013
41,500 Material Sciences Corp.*......... 747,000
52,600 Oregon Steel Mills, Inc.......... 881,050
41,730 RMI Titanium Co.*................ 1,173,656
------------
6,024,419
------------
TELECOMMUNICATION EQUIPMENT -- 0.6%
56,000 General Datacomm Industries,
Inc.*............................ 588,000
20,685 Intellicall, Inc.*............... 118,939
56,100 Network Equipment Technologies,
Inc.*............................ 925,650
23,100 Plantronics, Inc.*............... 1,039,500
17,800 Tech-Sym Corp.*.................. 529,550
37,900 Titan Corp.*..................... 127,912
------------
3,329,551
------------
TEXTILE -- APPAREL -- 1.3%
55,300 Authentic Fitness Corp........... 663,600
71,400 Chaus (Bernard), Inc.*........... 116,025
26,500 Chic by H.I.S., Inc.*............ 125,875
66,500 Delta Woodside Industries,
Inc.............................. 423,937
27,600 Farah, Inc.*..................... 213,900
17,600 He-Ro Group, Ltd.*............... 12,100
57,650 Kellwood Co...................... 1,153,000
5,400 Munsingwear, Inc.*............... 48,600
18,600 Oneita Industries, Inc.*......... 32,550
23,900 Oxford Industries, Inc........... 573,600
73,300 Phillips Van Heusen.............. 1,053,688
40,900 Salant Corp.*.................... 132,925
31,000 Signal Apparel Co., Inc.*........ 93,000
41,600 St. John Knits, Inc.............. 1,809,600
81,000 Tultex Corp.*.................... 567,000
39,200 Worldtex, Inc.*.................. 347,900
------------
7,367,300
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TEXTILE -- HOME FURNISHINGS -- 0.2%
21,700 Crown Crafts, Inc................ $ 217,000
24,300 Fieldcrest Cannon, Inc.*......... 388,800
28,900 Pillowtex Corp................... 520,200
------------
1,126,000
------------
TEXTILE -- PRODUCTS -- 0.9%
19,400 Belding Heminway Co., Inc.*...... 46,075
174,500 Collins & Aikman Corp.*.......... 1,090,625
74,300 Cone Mills Corp.*................ 585,113
38,500 Dyersburg Corp................... 269,500
31,900 Galey & Lord, Inc.*.............. 474,512
38,300 Guilford Mills, Inc.............. 1,019,737
28,625 Johnston Industries, Inc......... 207,531
76,500 Polymer Group Inc.*.............. 1,061,438
23,500 Texfi Industries, Inc.*.......... 55,813
------------
4,810,344
------------
TOBACCO -- 0.8%
50,300 Brooke Group, Ltd................ 251,500
12,000 Culbro Corp.*.................... 778,500
89,900 Dimon, Inc....................... 2,078,937
34,200 Schweitzer-Mauduit
International.................... 1,081,575
25,234 Standard Commercial Corp......... 510,988
------------
4,701,500
------------
TOOLS -- HAND HELD -- 0.3%
19,200 Starrett (L.S.) Co., Class A..... 544,800
33,400 Toro Co.......................... 1,219,100
------------
1,763,900
------------
TOYS/GAME/HOBBY -- 0.3%
27,400 Galoob (Lewis) Toys, Inc.*....... 383,600
94,400 Tyco Toys, Inc.*................. 1,109,200
------------
1,492,800
------------
TRANSPORTATION -- AIR FREIGHT -- 0.4%
57,300 Airborne Freight Corp............ 1,339,387
51,200 Pittston Burlington Group........ 1,024,000
------------
2,363,387
------------
TRANSPORTATION -- AIRLINE -- 0.2%
36,900 Alaska Airgroup, Inc.*........... 774,900
41,400 Worldcorp, Inc.*................. 181,125
------------
956,025
------------
TRANSPORTATION -- EQUIPMENT & LEASING -- 0.3%
96,000 Fruehauf Trailer Corp.*.......... 11,520
38,300 Greenbrier Cos., Inc............. 397,362
102,300 Westinghouse Air Brake Co........ 1,291,537
------------
1,700,419
------------
TRANSPORTATION -- SHIPPING -- 0.7%
17,950 International Shipholding
Corp............................. 332,075
31,800 Maritrans, Inc................... 194,775
84,400 OMI Corp.*....................... 738,500
30,000 Sea Containers, Ltd., Class B.... 468,750
47,200 Teekay Shipping Corp............. 1,545,800
47,400 Todd Shipyards Corp.*............ 308,100
------------
3,588,000
------------
</TABLE>
Continued
26
<PAGE> 233
THE KENT SMALL COMPANY GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- TRUCKING -- 0.0%
23,900 Matlack Systems, Inc.*........... $ 164,312
------------
UTILITIES -- ELECTRIC POWER -- 2.5%
19,800 Bangor Hydro-Electric Co......... 183,150
39,200 Black Hills Corp................. 1,102,500
44,100 Central Hudson Gas & Electric
Corp............................. 1,383,638
88,200 Central Maine Power Co........... 1,025,325
31,500 Central Vermont Public Service
Corp............................. 378,000
32,500 CILCORP, Inc..................... 1,190,313
54,000 Commonwealth Energy System....... 1,269,000
41,400 Empire District Electric Co...... 776,250
13,100 Green Mountain Power Corp........ 312,763
26,000 Interstate Power Co.............. 754,000
24,200 Northwestern Public Service
Co............................... 828,850
37,100 Orange & Rockland Utilities...... 1,330,962
21,000 St. Joseph Light & Power Co...... 322,875
29,700 TNP Enterprises, Inc............. 813,037
81,320 Tucson Electric Power Co.*....... 1,351,945
32,700 United Illuminating Co........... 1,025,962
------------
14,048,570
------------
UTILITIES -- GAS DISTRIBUTION -- 3.1%
43,250 Atmos Energy Corp................ 1,032,594
36,400 Bay State Gas Co................. 1,028,300
24,850 Cascade Natural Gas Corp......... 422,450
10,100 Chesapeake Utilities Corp........ 170,438
24,200 Connecticut Energy Corp.......... 514,250
27,000 Connecticut Natural Gas Corp..... 688,500
29,500 Energen Corp..................... 892,375
8,700 Energynorth, Inc................. 189,225
57,100 Indiana Energy, Inc.............. 1,391,812
47,500 Laclede Gas Co................... 1,145,937
44,900 New Jersey Resources Corp........ 1,313,325
17,700 North Carolina Natural Gas....... 511,087
24,800 NUI Corp. 561,100
14,500 Pennsylvania Enterprises, Inc.... 636,187
51,100 Public Service Co. of North
Carolina......................... 932,575
29,100 South Jersey Industries, Inc..... 709,313
46,305 Southern Union Co.*.............. 1,018,710
66,500 Southwest Gas Corp............... 1,280,125
67,000 Southwestern Energy Co........... 1,013,375
65,600 Washington Energy Co............. 1,353,000
28,300 Yankee Energy System, Inc........ 604,912
------------
17,409,590
------------
UTILITIES -- WATER SUPPLY -- 0.8%
18,600 Aquarion Co...................... 518,475
16,900 California Water Service Co...... 709,800
20,400 E'town Corp...................... 645,150
49,650 Philadelphia Suburban Corp....... 986,794
21,200 Southern California Water........ 461,100
86,200 United Water Resources, Inc...... 1,336,100
------------
4,657,419
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
WIRE & CABLE PRODUCTS -- 0.3%
17,800 Barnes Group, Inc................ $ 1,068,000
22,800 Insteel Industries, Inc.......... 202,350
24,680 Keystone Consolidated
Industries*...................... 203,610
14,500 National-Standard Co.*........... 108,750
------------
1,582,710
------------
TOTAL COMMON STOCKS.............. 553,106,743
------------
(Cost $446,652,911)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATION -- 0.2%
$1,135,000 U.S. Treasury Bill,
5.08%**, 6/26/97 (b)............ $ 1,106,648
------------
TOTAL U.S. GOVERNMENT
OBLIGATION...................... 1,106,648
------------
(Cost $1,107,478)
COMMERCIAL PAPER -- 0.8%
FINANCE -- 0.8%
4,137,213 Ford Motor Credit, 6.00%,
1/2/97.......................... 4,137,213
------------
TOTAL COMMERCIAL PAPER.......... 4,137,213
(Cost $4,137,213)
TOTAL INVESTMENTS............................ 558,350,604
(Cost $451,897,602)(a) -- 100.0%
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.0%........................ 165,992
------------
NET ASSETS -- 100.00%........................ $558,516,596
=============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $558,516,596.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $74,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................... $144,148,085
Unrealized depreciation....................
(37,769,083)
------------
Net unrealized appreciation................
$106,379,002
=============
</TABLE>
(b) Security has been deposited as initial margin on open futures contract.
(c) Name change to Applied Industrial Technology, Inc. effective 1/2/97.
* Non-income producing securities.
** Annualized yield at time of purchase.
At December 31, 1996, the Fund's open future contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ------------------- ---------- ----------
<S> <C> <C> <C>
20 Russell 2000 Index, $3,585,200 $3,627,500
3/21/97
</TABLE>
See Notes to Financial Statements.
<PAGE> 234
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 96.2%
AUSTRALIA -- 2.5%
38,993 Amcor Ltd........................ $ 250,550
18,100 Australian Gas Light Co., Ltd.... 102,932
10,658 Australian National Industries
Ltd.............................. 10,581
72,270 Boral Ltd........................ 205,495
13,819 Brambles Industries Ltd.......... 269,456
137,916 Broken Hill Proprietary Co.,
Ltd.............................. 1,962,965
16,999 Burns, Philp & Co., Ltd.......... 30,243
31,309 Coca-Cola Amatil Ltd............. 334,466
67,737 Coles Myer Ltd................... 278,686
21,036 CRA Ltd.......................... 329,982
31,100 Crown Ltd.*...................... 64,964
61,118 CSR Ltd.......................... 213,590
6,153 Email Ltd........................ 19,890
7,100 Faulding (F.H.) & Co., Ltd....... 47,990
122,736 Foster's Brewing Group Ltd....... 248,583
45,016 General Property Trust Units..... 87,598
37,200 Gio Australia Holdings Ltd....... 95,139
78,403 Goodman Fielder Ltd.............. 97,144
15,900 Great Central Mines Ltd.......... 45,211
24,600 Hardie (James) Industries Ltd.... 77,373
18,470 ICI Australia Ltd................ 200,244
16,200 Leighton Holdings Ltd............ 69,481
15,184 Lend Lease Corp., Ltd............ 294,263
102,215 M.I.M. Holdings Ltd.............. 142,885
98,214 National Australia Bank Ltd...... 1,154,503
15,077 Newcrest Mining Ltd.............. 59,875
135,619 News Corp., Ltd.................. 715,234
95,800 Normandy Mining Ltd.............. 132,396
44,461 North Ltd........................ 129,953
63,900 Pacific Dunlop Ltd............... 162,409
55,488 Pioneer International Ltd........ 165,269
11,700 Plutonic Resources Ltd........... 54,363
17,750 QBE Insurance Group Ltd.......... 93,470
40,855 QCT Resources Ltd................ 55,164
13,239 RGC Ltd.......................... 58,780
8,400 Rothmans Holdings Ltd............ 54,041
33,592 Santos Ltd....................... 136,071
11,644 Smith (Howard) Ltd............... 95,720
37,032 Southcorp Holdings Ltd........... 117,651
2,000 Stockland Trust Group............ 5,163
34,300 Sydney Harbour Casino Holdings
Ltd.*............................ 52,851
18,800 TABCORP Holdings Ltd............. 89,592
70,086 Westfield Trust Units............ 132,485
128,412 Westpac Banking Corp., Ltd....... 730,262
76,193 WMC Ltd.......................... 479,897
------------
10,154,860
------------
AUSTRIA -- 1.6%
18,750 Bank Austria AG.................. 1,383,823
100 Bank Austria AG, Participating
Certificates..................... 3,229
3,400 Boehler-Uddeholm AG.............. 243,092
9,320 Creditanstalt-Bankverein......... 630,245
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
AUSTRIA (CONTINUED)
2,280 EA-Generali AG................... $ 673,091
6,500 Flughafen Wien AG................ 331,010
500 Oesterreichische
Brau-Beteiligungs AG............. 33,904
10,069 Oesterreichische
Elektrizitaetswirtschafts AG --
Class A.......................... 752,885
8,740 OMV AG........................... 984,501
75 Radex-Heraklith
Industriebeteiligungs AG......... 2,373
100 Steyr-Daimler-Puch AG*........... 1,596
4,900 VA Technologie AG................ 768,257
2,133 Wienerberger Baustoffindustrie
AG............................... 413,237
------------
6,221,243
------------
BELGIUM -- 0.8%
1,625 Cimenteries CBR Cementbedrijven.. 147,590
3,400 Delhaize-Le Lion SA.............. 201,766
3,100 Electrabel SA.................... 732,925
2,000 Fortis AG........................ 320,484
683 Generale de Banque SA............ 244,585
1,300 Groupe Bruxelles Lambert SA...... 167,184
652 Kredietbank NV................... 213,471
1,097 PetroFina SA..................... 348,808
850 Royale Belge..................... 175,274
450 Solvay SA........................ 275,189
568 Tractebel........................ 264,201
1,422 Union Miniere Group*............. 96,248
------------
3,187,725
------------
DENMARK -- 2.2%
28 Aarhus Oliefabrik AS -- Class
A................................ 1,448
9 Aarhus Oliefabrik AS -- Class
B................................ 467
6,360 Carlsberg AS -- Class A.......... 429,110
5,205 Carlsberg AS -- Class B.......... 351,182
10,095 Danisco AS....................... 612,658
10,147 Den Danske Bank.................. 817,071
39 D/S 1912 -- Class B.............. 1,001,626
29 D/S Svendborg AS -- Class B...... 1,086,472
1,643 FLS Industries AS -- Class B..... 210,287
42 GN Store Nord AS................. 4,094
2,190 ISS International Service System
AS, Series B..................... 57,545
1,185 Korn-OG Foderstof Kompagniet AS.. 47,989
134 Lauritzen (J.) Holding AS --
Class B*......................... 15,674
111 NKT Holding AS................... 6,586
7,423 Novo Nordisk AS -- Class B....... 1,396,789
6,974 Ostasiatiske Kompagni AS*........ 151,328
84 Radiometer AS -- Class B......... 4,984
320 SAS Danmark AS................... 3,960
327 Sophus Berendsen AS -- Class A... 42,130
3,506 Sophus Berendsen AS -- Class B... 450,515
</TABLE>
Continued
28
<PAGE> 235
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DENMARK (CONTINUED)
556 Superfos AS...................... $ 70,220
26,100 Tele Danmark AS -- Class B....... 1,437,978
9,693 Unidanmark AS -- Class A......... 501,172
------------
8,701,285
------------
FINLAND -- 0.4%
800 Amer Group Ltd................... 16,490
1,300 Cultor OY, Series 2.............. 66,847
1,500 Instrumentarium Group, Series
B................................ 54,350
500 Kone Corp. -- Class B............ 55,109
14,606 Merita Ltd. -- Class A*.......... 45,317
4,100 Metra OY -- Class B.............. 229,507
11,600 Nokia AB -- Class A.............. 671,485
800 Pohjola Insurance Group, Series
B................................ 17,965
750 Stockmann AB -- Class B.......... 44,749
14,560 UPM-Kymmene Corp.*............... 304,846
------------
1,506,665
------------
FRANCE -- 8.2%
2,550 Accor SA......................... 322,261
14,537 Alcatel Alsthom.................. 1,165,480
17,400 AXA SA........................... 1,104,499
16,500 Banque Nationale de Paris........ 637,309
1,466 Bouygues......................... 151,711
1,900 Canal Plus....................... 418,833
3,480 Carrefour SA..................... 2,259,872
498 Chargeurs International SA*...... 24,619
500 Club Mediterranee SA............. 32,392
1,972 Compagnie Bancaire SA............ 232,904
7,733 Compagnie de Saint Gobain........ 1,091,808
13,017 Compagnie de Suez SA............. 552,355
9,864 Compagnie Financiere de
Paribas -- Class A............... 665,792
50 Compagnie Generale de Geophysique
SA*.............................. 3,462
11,018 Compagnie Generale des Eaux...... 1,362,749
320 Comptoirs Modernes............... 172,350
500 CPR (Compagnie Parisenne de
Reescompte)...................... 39,798
816 Credit National.................. 46,900
1,050 Dollfus-Mieg & Cie............... 25,408
24,567 Elf Aquitane SA.................. 2,231,887
2,000 Eridania Beghin-Say SA........... 321,232
500 Essilor International............ 151,479
4,000 Etablissements Economiques du
Casino Guichard-Perrachon........ 185,891
1,050 Finextel......................... 16,198
6,521 Groupe Danone.................... 906,890
525 Groupe Saint Louis............... 130,474
200 GTM ENTREPOSE SA................. 9,233
5,075 Havas SA......................... 355,336
1,195 Imetal SA........................ 176,075
7,421 Lafarge SA....................... 444,369
5,400 Lagardere SCA.................... 147,913
6,473 L'Air Liquide.................... 1,008,539
2,200 Legrand SA....................... 374,091
6,009 L'OREAL.......................... 2,258,546
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
7,820 LVMH (Moet Hennessy Louis
Vuitton)......................... $ 2,179,602
5,833 Lyonnaise des Eaux SA............ 541,815
9,200 Michelin -- Class B Registered... 495,682
3,050 Moulinex*........................ 70,108
1,350 Nord-Est SA...................... 33,525
498 Pathe SA*........................ 119,741
3,500 Pernod Ricard.................... 193,220
1,748 Pinault-Printemps-Redoute SA..... 691,973
1,300 Primagaz Cie..................... 152,787
1,450 Promodes......................... 408,609
3,962 PSA Peugeot...................... 445,071
29,600 Rhone-Poulenc -- Class A......... 1,007,214
200 Sagem SA......................... 120,414
9,323 Sanofi SA........................ 925,353
10,700 Schneider SA..................... 493,760
2,600 SEFIMEG.......................... 188,046
3,200 SEITA............................ 133,571
1,600 Sidel SA......................... 109,873
918 Simco SA......................... 79,991
2,200 Societe BIC SA................... 329,234
192 Societe Eurafrance SA............ 82,802
8,189 Societe Generale................. 883,682
510 Sodexho SA....................... 283,511
9,425 Thomson CSF...................... 305,118
21,800 Total SA -- Class B.............. 1,769,584
800 Unibail.......................... 79,404
27,600 Union des Assurances de Paris.... 687,513
572 Union Immobiliere de France...... 46,596
19,300 Usinor Sacilor................... 280,289
5,538 Valeo SA......................... 340,883
------------
32,507,626
------------
GERMANY -- 9.8%
4,100 Adidas AG........................ 353,836
2,040 AGIV AG*......................... 29,784
2,060 Allianz AG Holding............... 3,702,658
178 AMB Aachener & Muenchener
Beteiligungs AG, Bearer.......... 115,501
366 AMB Aachener & Muenchener
Beteiligungs AG, Registered...... 261,240
55,480 BASF AG.......................... 2,124,003
64,140 Bayer AG......................... 2,599,130
23,320 Bayerische Hypotheken-und
Weschel-Bank AG.................. 702,123
23,980 Bayerische Vereinsbank AG........ 970,958
7,860 Beiersdorf AG, Series ABC........ 389,147
2,970 Bilfinger & Berger Bau AG........ 110,235
4,870 Continental AG................... 88,008
46,770 Daimler-Benz AG*................. 3,201,743
732 Degussa AG....................... 332,488
45,460 Deutsche Bank AG................. 2,117,973
34,680 Deutsche Lufthansa AG............ 467,618
185,000 Deutsche Telekom AG*............. 3,853,394
1,630 Douglas Holding AG............... 65,576
40,460 Dresdner Bank AG................. 1,207,676
2,480 Fag Kugelfischer Georg Schaefer
AG............................... 33,874
</TABLE>
Continued
29
<PAGE> 236
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
3,700 Heidelberger Zement AG........... $ 298,188
4,730 Hochtief AG...................... 185,688
791 Karstadt AG...................... 262,793
3,830 Kloeckner-Humboldt-Deutz AG*..... 18,142
765 Linde AG......................... 464,130
761 MAN AG........................... 183,447
3,280 Mannesmann AG.................... 1,409,385
15,600 Merck KGaA....................... 560,285
8,239 Metro AG*........................ 644,211
726 Muenchener Rueckversicherungs-
Gesellschaft AG.................. 1,759,519
1,331 Preussag AG...................... 300,555
796 PWA Papierwerke Waldhof-
Aschaffenburg AG................. 104,852
30,650 RWE AG........................... 1,280,805
5,500 SAP AG........................... 751,245
6,200 Schering AG...................... 522,598
50,970 Siemens AG....................... 2,362,115
2,834 Thyssen AG....................... 501,845
44,390 VEBA AG.......................... 2,549,148
2,312 Viag AG.......................... 903,882
2,493 Volkswagen AG.................... 1,031,262
------------
38,821,060
------------
HONG KONG -- 1.7%
79,182 Bank of East Asia Ltd............ 352,148
86,000 Cathay Pacific Airways........... 135,643
74,000 Cheung Kong Holdings Ltd......... 657,725
61,400 China Light & Power Co., Ltd..... 273,065
57,800 Hang Seng Bank Ltd............... 702,418
4,600 Hong Kong Aircraft Engineering
Co., Ltd......................... 14,154
320,800 Hong Kong Telecommunications
Ltd.............................. 516,349
139,375 Hong Kong & China Gas Co., Ltd... 269,380
20,000 Hong Kong & Shanghai Hotels
Ltd.............................. 37,750
130,000 Hopewell Holdings Ltd............ 84,034
119,000 Hutchison Whampoa Ltd............ 934,616
34,000 Hysan Development Co., Ltd....... 135,385
26,000 Johnson Electric Holdings Ltd.... 71,933
7,200 Lai Sun Garment International
Ltd.............................. 11,449
11,000 Miramar Hotel & Investment
Ltd.............................. 22,043
59,000 New World Development Co., Ltd... 398,546
595 Regal Hotels International....... 208
32,258 Shun Tak Holdings Ltd............ 21,478
130,000 South China Morning Post Holdings
Ltd.*............................ 107,563
72,100 Sun Hung Kai Properties Ltd...... 883,190
47,000 Swire Pacific Ltd. -- Class A.... 448,126
33,270 Tai Cheung Holdings Ltd.......... 31,399
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HONG KONG (CONTINUED)
16,000 Television Broadcasts Ltd........ $ 63,917
71,000 Wharf Holdings Ltd............... 354,312
17,496 Wing Lung Bank................... 118,751
------------
6,645,582
------------
ITALY -- 3.5%
81,563 Assicurazioni Generali........... 1,542,214
139,600 Banca Commerciale Italiana....... 253,401
54,694 Banco Ambrosiano Veneto SpA...... 131,294
38,900 Banco Ambrosiano Veneto SpA di
Risp, (Non-convertible).......... 72,658
18,400 Banco Popolare di Milano......... 93,180
15,400 Benetton Group SpA............... 194,361
11,300 Burgo (Cartiere) SpA............. 52,022
1,900 Cementir SpA..................... 1,213
198,000 Credito Italiano SpA............. 216,947
56,000 Edison SpA....................... 353,568
723,800 Ente Nazionale Idrocarburi SpA
(ENI)............................ 3,705,875
249,280 Fiat SpA......................... 752,512
63,400 Fiat SpA di Risp,
(Non-convertible)................ 110,914
7,900 Impregilo SpA*................... 6,131
69,700 Istituto Bancario San Paolo di
Torino........................... 426,314
45,500 Istituto Mobiliare Italiano
SpA.............................. 389,017
303,500 Istituto Nazionale delle
Assicurazioni.................... 394,420
14,350 Italcementi SpA.................. 80,220
900 Italcementi SpA di Risp, (Non-
convertible)..................... 2,199
58,500 Italgas SpA...................... 243,734
14,000 La Rinascente SpA................ 81,026
38,500 Magneti Marelli SpA.............. 47,729
42,075 Mediobanca SpA................... 226,494
11,400 Mondadori (Arnoldo) Editore SpA.. 92,595
348,762 Montedison SpA*.................. 237,172
1,600 Montedison SpA di Risp, (Non-
convertible)*.................... 1,017
300,800 Olivetti Group SpA*.............. 105,839
100,700 Parmalat Finanziaria SpA......... 153,649
129,800 Pirelli SpA...................... 240,307
20,900 Pirelli SpA di Risp, (Non-
convertible)..................... 30,721
29,062 Riunione Adriatica di Sicurta
SpA.............................. 270,455
10,923 Riunione Adriatica di Sicurta SpA
di Risp, (Non-convertible)....... 57,830
9,900 Sasib SpA........................ 30,927
19,400 Sirti SpA........................ 117,382
35,600 Snia BPD SpA..................... 36,759
900 Snia BPD SpA di Risp, (Non-
convertible)..................... 666
10,800 Societa Assicuratrice Industriale
(SAI) SpA........................ 99,441
534,160 Telecom Italia Mobile SpA........ 1,347,257
</TABLE>
Continued
30
<PAGE> 237
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
ITALY (CONTINUED)
138,260 Telecom Italia Mobile SpA di
Risp, (Non-convertible).......... $ 196,865
525,260 Telecom Italia SpA............... 1,361,081
138,260 Telecom Italia SpA di Risp, (Non-
convertible)..................... 269,155
------------
14,026,561
------------
JAPAN -- 32.8%
10,000 Acom Co., Ltd.................... 425,605
5,400 Advantest Corp................... 252,623
48,000 Ajinomoto Co., Inc............... 487,981
12,000 Alps Electric Co................. 130,266
27,000 Amada Co., Ltd................... 209,356
22,000 Aoki Corp.*...................... 45,679
5,000 Aoyama Trading Co., Ltd.......... 132,679
3,100 Arabian Oil Co., Ltd.*........... 114,845
176,000 Asahi Bank Ltd................... 1,561,816
32,000 Asahi Breweries Ltd.............. 330,835
109,000 Asahi Chemical Industry Co.,
Ltd.............................. 616,042
88,000 Asahi Glass Co., Ltd............. 826,398
44,000 Ashikaga Bank Ltd................ 211,907
2,000 Autobacs Seven Co., Ltd.......... 141,122
353,200 Bank of Tokyo -- Mitsubishi...... 6,542,431
85,000 Bank of Yokohama Ltd............. 549,237
60,000 Bridgestone Corp................. 1,137,245
14,000 Brother Industries Ltd........... 60,308
64,000 Canon, Inc....................... 1,411,562
19,000 Casio Computer Co., Ltd.......... 146,670
58,000 Chiba Bank Ltd................... 394,762
41,000 Chichibu Onoda Cement Corp....... 174,145
10,000 Chiyoda Corp..................... 64,702
17,000 Chugai Pharmaceutical Co.,
Ltd.............................. 142,069
22,000 Citizen Watch Co., Ltd........... 157,319
51,000 Cosmo Oil Co., Ltd............... 244,740
9,000 Credit Saison Co., Ltd........... 200,827
3,000 CSK Corp......................... 78,573
19,000 Daicel Chemical Industries
Ltd.............................. 88,886
42,000 Daido Steel Co., Ltd............. 155,596
53,000 Daiei, Inc....................... 404,110
5,000 Daifuku Co., Ltd................. 62,893
19,000 Daiichi Pharmaceutical Co........ 304,471
18,000 Daikin Industries Ltd............ 159,731
14,000 Daimaru, Inc..................... 74,662
56,000 Dainippon Ink & Chemicals,
Inc.............................. 206,979
56,000 Dainippon Printing Co., Ltd...... 979,409
8,000 Dainippon Screen Manufacturing
Co., Ltd......................... 58,930
7,000 Daito Trust Construction Co.,
Ltd.............................. 77,798
38,000 Daiwa House Industry Co., Ltd.... 487,809
7,000 Daiwa Kosho Lease Co., Ltd....... 53,674
101,000 Daiwa Securities Co., Ltd........ 896,269
27,000 Denki Kagaku Kogyo KK............ 66,296
65,000 Denso Corp....................... 1,562,419
20,000 Ebara Corp....................... 260,188
19,650 Eisai Co., Ltd................... 385,991
17,100 Fanuc Co., Ltd................... 546,575
219,000 Fuji Bank........................ 3,188,679
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
38,000 Fuji Photo Film Co., Ltd......... $ 1,250,625
24,000 Fujikura Ltd..................... 191,884
25,000 Fujita Corp...................... 71,724
8,000 Fujita Kanko, Inc................ 148,186
139,000 Fujitsu Ltd...................... 1,293,357
46,000 Furukawa Electric Co............. 217,576
38,000 Gunma Bank....................... 330,663
12,000 Gunze Ltd........................ 62,135
61,000 Hankyu Corp...................... 302,188
13,000 Hankyu Department Stores......... 128,802
32,000 Haseko Corp.*.................... 85,466
13,000 Higo Bank........................ 86,577
2,000 Hirose Electric.................. 115,620
252,000 Hitachi Ltd...................... 2,344,792
71,000 Hitachi Zosen Corp............... 275,265
49,000 Hokuriku Bank.................... 239,786
73,000 Honda Motor Co., Ltd............. 2,081,761
5,000 House Foods Industry............. 80,555
8,000 Hoya Corp........................ 313,604
17,000 Inax............................. 125,665
192,000 Industrial Bank of Japan......... 3,324,890
15,000 Isetan Co........................ 193,849
107,000 Itochu Corp...................... 573,395
12,000 Itoham Foods..................... 74,231
31,000 ITO-Yokado Co., Ltd.............. 1,346,084
134,000 Japan Airlines*.................. 710,002
78,000 Japan Energy Corp................ 211,683
9,000 JGC Corp......................... 67,382
66,200 Joyo Bank........................ 398,101
23,000 JUSCO Co......................... 778,754
72,000 Kajima Corp...................... 513,621
13,000 Kamigumi Co., Ltd................ 85,121
9,000 Kandenko Co., Ltd................ 85,293
26,000 Kanebo Ltd.*..................... 53,537
18,000 Kaneka Corp...................... 91,962
72,900 Kansai Electric Power Co, Inc.... 1,507,366
45,000 Kao Corp......................... 523,391
104,000 Kawasaki Heavy Industries........ 429,189
30,000 Kawasaki Kisen Kaisha Ltd.*...... 68,235
246,000 Kawasaki Steel Corp.............. 705,764
36,000 Keihin Electric Express
Railway.......................... 164,694
10,000 Kikkoman......................... 59,016
19,000 Kinden Corp...................... 240,631
122,000 Kinki Nippon Railway............. 759,938
79,000 Kirin Brewery Co., Ltd........... 775,911
3,000 Kissei Pharmaceutical Co......... 59,447
9,000 Kokuyo Co., Ltd.................. 221,763
74,000 Komatsu Ltd...................... 605,669
4,000 Komori Corp...................... 84,776
25,000 Konica Corp...................... 165,417
10,000 Koyo Seiko Co., Ltd.............. 82,709
106,000 Kubota Corp...................... 510,502
35,000 Kumagai Gumi Co., Ltd............ 86,543
24,000 Kuraray Co., Ltd................. 221,246
9,000 Kurita Water Industries.......... 181,442
13,000 Kyocera Corp..................... 808,650
31,000 Kyowa Hakko Kogyo Co., Ltd....... 236,099
</TABLE>
Continued
31
<PAGE> 238
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
15,000 Lion Corp........................ $ 74,309
5,000 Maeda Road Construction.......... 57,724
11,000 Makita Corp...................... 153,528
113,000 Marubeni Corp.................... 484,828
27,000 Marui Co., Ltd................... 486,172
159,000 Matsushita Electric Industrial
Co., Ltd......................... 2,589,041
15,000 Meiji Milk Products Co., Ltd..... 76,247
27,000 Meiji Seika...................... 139,804
31,000 Minebea Co., Ltd................. 258,534
165,000 Mitsubishi Chemical Corp......... 533,083
118,000 Mitsubishi Corp.................. 1,219,953
162,000 Mitsubishi Electric Corp......... 963,039
98,000 Mitsubishi Estate Co., Ltd....... 1,004,738
35,000 Mitsubishi Gas Chemical Co....... 125,743
255,000 Mitsubishi Heavy Industries
Ltd.............................. 2,021,194
12,000 Mitsubishi Logistics Corp........ 155,079
85,000 Mitsubishi Material Corp......... 342,724
32,000 Mitsubishi Oil Co., Ltd.......... 191,057
17,000 Mitsubishi Paper Mills........... 66,348
44,000 Mitsubishi Rayon Co., Ltd........ 162,626
98,000 Mitsubishi Trust & Banking Co.... 1,308,693
53,000 Mitsui Engineering & Shipbuilding
Co., Ltd.*....................... 107,762
61,000 Mitsui Fudosan................... 609,632
51,000 Mitsui Marine & Fire Insurance
Co., Ltd......................... 273,740
26,000 Mitsui Mining & Smelting......... 88,481
79,000 Mitsui OSK Lines, Ltd.*.......... 188,533
55,000 Mitsui Toatsu Chemicals.......... 167,270
90,000 Mitsui Trust & Banking Co........ 701,732
117,000 Mitsui & Co...................... 947,532
34,000 Mitsukoshi Ltd................... 240,786
5,000 Mori Seiki....................... 68,924
17,000 Murata Manufacturing Co., Ltd.... 563,884
20,000 Mycal Corp....................... 289,480
1,000 Nagase & Co...................... 8,279
57,000 Nagoya Railroad Co............... 218,532
35,000 Nankai Electric Railway.......... 188,464
117,000 NEC Corp......................... 1,411,217
77,000 New Oji Paper Co................. 486,267
24,000 NGK Insulators Ltd............... 227,449
15,000 NGK Spark Plug Co................ 164,125
32,000 Nichido Fire & Marine Insurance
Co., Ltd......................... 181,959
16,000 Nichirei Corp.................... 77,608
17,000 Nihon Cement Co., Ltd............ 86,560
26,000 Nikon Corp....................... 322,564
6,000 Nippon Comsys Co................. 68,235
81,000 Nippon Express Co., Ltd.......... 554,097
40,000 Nippon Fire & Marine Insurance... 180,925
38,000 Nippon Light Metal Co............ 155,837
16,000 Nippon Meat Packers, Inc......... 206,772
92,000 Nippon Oil Co., Ltd.............. 471,612
71,000 Nippon Paper Industries Co....... 330,318
1,000 Nippon Sharyo Ltd................ 7,151
22,000 Nippon Sheet Glass Co., Ltd...... 77,901
VALUE
SHARES (NOTE 2)
- ---------- ------------
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
17,000 Nippon Shinpan Co................ $ 95,201
10,000 Nippon Shokubai KK Co............ 74,093
523,000 Nippon Steel Co.................. 1,541,018
88,000 Nippon Yusen Kabushiki Kaisha.... 397,277
19,000 Nishimatsu Construction.......... 165,331
190,000 Nissan Motor Co., Ltd............ 1,100,026
16,000 Nisshinbo Industries............. 124,339
9,000 Nissin Food Products............. 191,522
10,000 Nitto Denko Corp................. 146,463
267,000 NKK Corp.*....................... 600,388
148,000 Nomura Securities Co., Ltd....... 2,218,661
8,000 Noritake Co., Ltd................ 66,580
40,000 NSK Ltd.......................... 241,923
33,000 NTN Corp......................... 179,116
56,000 Obayashi Corp.................... 377,289
52,000 Odakyu Electric Railway.......... 311,364
7,000 Okuma Corp.*..................... 55,725
13,000 Okumura Corp..................... 78,849
18,000 Olympus Optical Co., Ltd......... 170,587
19,000 Omron Corp....................... 356,854
12,000 Onward Kashiyama Co., Ltd........ 168,519
24,000 Orient Corp...................... 128,819
4,000 Orix Corp........................ 166,107
191,000 Osaka Gas Co..................... 521,642
1,100 Oyo Corp......................... 47,670
18,000 Penta-Ocean Construction Co.,
Ltd.............................. 80,021
12,000 Pioneer Electronic Corp.......... 228,483
8,000 QP Corp.......................... 64,789
8,000 Rohm Co.......................... 523,822
259,000 Sakura Bank Ltd.................. 1,847,609
13,000 Sankyo Aluminum Industry Co...... 51,073
33,000 Sankyo Co., Ltd.................. 932,541
12,000 Sanwa Shutter Corp............... 89,429
147,000 Sanyo Electric Co................ 607,909
24,000 Sapporo Breweries................ 198,501
13,000 Sato Kogyo....................... 45,248
8,000 Secom............................ 483,157
6,700 Sega Enterprises................. 225,123
8,000 Seino Transportation............. 88,223
15,000 Seiyu Ltd........................ 147,325
41,000 Sekisui Chemical Co.............. 413,285
53,000 Sekisui House Ltd................ 538,813
27,000 77 Bank.......................... 220,987
85,000 Sharp Corp....................... 1,208,323
2,000 Shimachu......................... 51,176
10,000 Shimano, Inc..................... 169,725
59,000 Shimizu Corp..................... 439,692
25,000 Shin-Etsu Chemical Co............ 454,467
25,000 Shionogi & Co.................... 178,125
29,000 Shiseido Co., Ltd................ 334,798
60,000 Shizuoka Bank.................... 635,823
74,000 Showa Denko KK*.................. 169,587
5,000 Skylark Co., Ltd................. 76,247
4,000 SMC Corp......................... 268,459
23,000 Snow Brand Milk Products......... 129,792
27,200 Sony Corp........................ 1,778,651
238,000 Sumitomo Bank.................... 3,424,313
</TABLE>
Continued
32
<PAGE> 239
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
122,000 Sumitomo Chemical Co............. $ 482,450
80,000 Sumitomo Corp.................... 629,275
53,000 Sumitomo Electric Industries..... 739,726
12,000 Sumitomo Forestry Co............. 145,774
63,000 Sumitomo Heavy Industries,
Ltd.*............................ 191,057
50,000 Sumitomo Marine & Fire
Insurance........................ 310,158
238,000 Sumitomo Metal Industries........ 584,389
40,000 Sumitomo Metal Mining Co......... 269,148
23,000 Sumitomo Osaka Cement Co., Ltd... 75,894
76,000 Taisei Corp...................... 392,866
25,000 Taisho Pharmaceutical Co......... 588,007
11,000 Takara Shuzo Co., Ltd............ 77,238
7,000 Takara Standard.................. 58,198
21,000 Takashimaya Co................... 251,486
66,000 Takeda Chemical Industries....... 1,381,752
69,000 Teijin Ltd....................... 300,801
14,000 Teikoko Oil Ltd.................. 75,868
64,000 Tobu Railway Co., Ltd............ 312,639
700 Toho Co.......................... 101,318
37,500 Tohoku Electric Power............ 743,086
153,000 Tokai Bank....................... 1,594,986
117,000 Tokio Marine & Fire Insurance
Co............................... 1,098,733
12,000 Tokyo Broadcasting System........ 182,993
11,000 Tokyo Dome Corp.................. 191,436
102,000 Tokyo Electric Power............. 2,232,101
10,000 Tokyo Electron Ltd............... 305,850
213,000 Tokyo Gas Co., Ltd............... 576,221
11,000 Tokyo Steel Manufacturing........ 156,371
5,000 Tokyo Style Co................... 69,785
22,000 Tokyotokeiba..................... 71,078
82,000 Tokyu Corp....................... 464,857
52,000 Toppan Printing Co., Ltd......... 649,608
106,000 Toray Industries, Inc............ 652,968
42,000 Tosoh Corp.*..................... 143,655
16,000 Tostem Corp...................... 441,113
24,000 Toto Ltd......................... 272,939
14,000 Toyo Seikan Kaisha............... 336,521
49,000 Toyobo Ltd....................... 146,911
20,000 Toyoda Automatic Loom Works...... 373,912
286,000 Toyota Motor Corp................ 8,205,221
59,000 Ube Industries Ltd............... 166,727
3,000 Uni-Charm........................ 73,404
25,000 Unitika Ltd.*.................... 53,847
13,000 Uny Co., Ltd..................... 237,443
8,000 Wacoal Corp...................... 88,223
14,000 Yamaguchi Bank................... 205,049
13,000 Yamaha Corp...................... 220,643
91,000 Yamaichi Securities Co., Ltd..... 403,765
24,000 Yamanouchi Pharmaceutical Co.,
Ltd.............................. 492,117
26,000 Yamato Transport Co., Ltd........ 268,803
VALUE
SHARES (NOTE 2)
- ---------- ------------
COMMON STOCKS (CONTINUED)
JAPAN (CONTINUED)
15,000 Yamazaki Baking Co............... $ 239,080
83,000 Yasuda Trust & Banking........... 351,107
18,000 Yokogawa Electric Corp........... 155,079
------------
130,118,290
------------
MALAYSIA -- 1.0%
16,000 AMMB Holdings Berhad............. 134,310
180,000 Amsteel Corp. Berhad............. 133,993
130,000 Golden Hope Plantations Berhad... 221,342
22,500 Highlands & Lowlands Berhad...... 37,597
63,000 Kuala Lumpur Kepong Berhad....... 159,651
45,500 Malayan Banking Berhad........... 504,453
92,400 Malaysia Mining Corp. Berhad..... 106,833
58,000 Multi-Purpose Holdings Berhad.... 112,532
13,500 Perlis Plantations Berhad........ 41,962
22,000 Perusahaan Otomobil Nasional
Berhad........................... 139,378
44,000 Resorts World Berhad............. 200,356
10,300 Rothmans of Pall Mall (Malaysia)
Berhad........................... 108,077
51,000 Selangor Properties Berhad....... 55,937
11,500 Shell Refining Co. (Malaysia)
Berhad........................... 33,696
93,040 Sime Darby Berhad................ 366,559
80,000 Telekom Malaysia Berhad.......... 712,729
123,000 Tenega Nasional Berhad........... 589,308
32,326 United Engineers (Malaysia)
Berhad........................... 291,836
7,000 YTL Corp. Berhad................. 37,695
------------
3,988,244
------------
NETHERLANDS -- 3.3%
15,871 ABN Amro Holding NV.............. 1,031,313
4,383 Akzo Nobel NV.................... 598,003
1,880 Assurantieconcern Stad Rotterdam
anno 1720 NV..................... 74,229
38,430 Elsevier NV...................... 648,744
2,936 Getronics NV..................... 79,606
2,670 Heineken NV...................... 472,029
1,920 IHC Caland NV.................... 109,557
34,677 ING Groep NV..................... 1,246,958
3,862 KLM Royal Dutch Air Lines NV..... 108,510
6,349 Koninklijke Ahold N.V............ 396,414
5,120 Koninklijke KNP BT NV............ 111,591
1,262 Koninklijke Nederlandsche
Hoogovens en Staalfabrieken NV... 52,531
1,100 Koninklijke Pakhoed NV........... 34,340
22,761 Koninklijke Royal PTT Nederland
NV............................... 867,155
968 Oce-Van Der Grinten NV........... 104,985
16,840 Philips Electronics NV........... 681,491
25,847 Royal Dutch Petroleum Co......... 4,526,154
</TABLE>
Continued
33
<PAGE> 240
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
NETHERLANDS (CONTINUED)
249 Stork NV......................... $ 8,767
7,731 Unilever NV CVA.................. 1,365,869
3,179 Wolters Kluwer NV CVA............ 421,787
------------
12,940,033
------------
NEW ZEALAND -- 0.2%
109,100 Brierley Investments Ltd......... 100,979
48,581 Carter Holt Harvey Ltd........... 110,181
400 Ceramco Corp., Ltd............... 382
5,100 Fisher & Paykel Industries
Ltd.............................. 19,998
14,111 Fletcher Challenge Building...... 43,369
14,111 Fletcher Challenge Energy........ 40,877
15,481 Fletcher Challenge Forests....... 25,923
28,222 Fletcher Challenge Paper......... 58,025
8,200 Lion Nathan Ltd.................. 19,640
56,765 Telecom Corp. of New Zealand
Ltd.............................. 289,569
------------
708,943
------------
NORWAY -- 1.7%
10,500 Aker ASA, Series A............... 233,502
14,100 Bergesen d.y. ASA -- Class A..... 344,475
1,400 Bergesen d.y. ASA -- Class B..... 33,326
61,300 Christiania Bank Og
Kreditkasse...................... 193,921
1,000 Dyno Industrier ASA.............. 25,370
15,650 Hafslund ASA, Series A........... 115,193
10,326 Hafslund ASA, Series B........... 70,669
8,950 Kvaerner ASA, Series A........... 435,209
2,200 Leif Hoegh & Co. ASA............. 46,512
60,850 Norsk Hydro ASA.................. 3,287,706
3,200 Norske Skogindustrier ASA --
Class A.......................... 106,744
16,050 Nycomed ASA, Series A*........... 245,072
10,326 Nycomed ASA, Series B*........... 158,479
10,500 Orkla ASA, Series A.............. 731,750
8,300 Petroleum Geo-Services ASA*...... 323,661
73,500 Storebrand ASA*.................. 425,895
1,200 Unitor ASA....................... 15,410
------------
6,792,894
------------
SINGAPORE -- 1.0%
53,600 City Developments Ltd............ 482,807
11,000 DBS Land Ltd..................... 40,499
12,750 Development Bank of Singapore
Ltd.............................. 172,270
12,000 Fraser & Neave Ltd............... 123,533
29,600 Haw Par Brothers International
Ltd.............................. 67,291
11,000 Inchcape Berhad.................. 38,218
2,000 Jurong Shipyard Ltd.............. 10,080
6,000 Keppel Corp., Ltd................ 46,754
60,750 NatSteel Ltd..................... 138,106
59,000 Neptune Orient Lines Ltd......... 51,036
26,582 Oversea-Chinese Banking Corp.,
Ltd.............................. 330,655
1,000 Overseas Union Enterprise Ltd.... 5,004
1,100 Shangri-La Hotel Ltd............. 3,759
91,000 Singapore Airlines Ltd........... 826,197
6,000 Singapore Press Holdings Ltd..... 56,190
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SINGAPORE (CONTINUED)
10,320 Singapore Press Holdings Ltd.
(Foreign)........................ $ 203,623
471,000 Singapore Telecommunications
Ltd.............................. 1,111,152
7,000 Straits Trading Co., Ltd......... 17,014
8,000 United Industrial Corp., Ltd..... 6,749
7,350 United Overseas Bank Ltd......... 81,969
52,000 United Overseas Land Ltd......... 79,181
------------
3,892,087
------------
SPAIN -- 2.2%
300 Acerinox SA...................... 43,267
7,927 Autopistas Concesionaria
Espanola SA...................... 109,086
17,547 Banco Bilbao Vizcaya SA.......... 945,642
9,271 Banco Central
Hispanoamericano SA.............. 237,700
12,432 Banco Santander SA............... 794,233
9,500 Corporacion Bancaria de Espana
SA............................... 424,332
675 Corporacion Financiera Alba...... 68,084
800 Corporacion Mapfre............... 48,649
3,400 Dragados & Construcciones SA..... 52,278
400 Ebro Agricolas, Compania de
Alimentacion SA.................. 7,027
1,650 El Aguila SA*.................... 7,903
100 Empresa Nacional de Celulosas
SA............................... 1,195
20,570 Empresa Nacional de
Electricidad SA.................. 1,461,209
700 Ercros SA*....................... 431
752 Fomento de Construcciones y
Contratas SA..................... 69,953
2,856 Gas Natural SDG SA............... 663,088
73,724 Iberdrola SA..................... 1,042,876
236 Inmobiliaria Metropolitana Vasco
Central SA....................... 8,663
200 Inmobiliaria Urbis SA*........... 800
820 Portland Valderrivas SA.......... 55,097
500 Prosegur, CIA de Seguridad SA.... 4,613
23,798 Repsol SA........................ 911,121
2,498 Sarrio SA........................ 8,219
1,106 Tabacalera SA, Series A.......... 47,531
74,575 Telefonica de Espana............. 1,728,569
9,566 Union Electrica Fenosa SA........ 102,591
5,400 Uralita SA....................... 42,137
2,361 Vallehermoso SA.................. 51,095
1,221 Viscofan Industria Navarra de
Envolturas Celulosicas SA........ 17,835
------------
8,955,224
------------
SWEDEN -- 1.6%
3,900 ABB AB, Series A................. 439,805
2,850 ABB AB, Series B................. 322,231
28,650 Astra AB, Series A............... 1,414,033
5,000 Astra AB, Series B............... 240,919
8,250 Atlas Copco AB, Series A......... 199,362
500 Atlas Copco AB, Series B......... 12,156
3,700 Electrolux AB, Series B.......... 214,586
300 Esselte AB, Series B............. 6,634
</TABLE>
Continued
34
<PAGE> 241
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWEDEN (CONTINUED)
4,400 Scancem AB -- Class A............ $ 161,101
12,000 Skandia Forsakrings AB........... 339,190
100 Skanska AB, Series B............. 4,416
9,300 SKF AB, Series A................. 213,158
10,100 SKF AB, Series B................. 238,890
14,500 Stora Kopparbergs Bergslags
Aktiebolag, Series A............. 199,619
3,250 Stora Kopparbergs Bergslags
Aktiebolag, Series B............. 44,266
3,800 Svenska Cellusoa AB, Series B.... 77,079
6,300 Svenska Handlesbanken -- Class
B................................ 173,462
54,600 Telefonaktiebolaget LM Ericsson,
Series B......................... 1,687,252
7,960 Trelleborg AB, Series B.......... 105,503
19,000 Volvo AB, Series B............... 418,789
------------
6,512,451
------------
SWITZERLAND -- 4.5%
450 ABB AG, Bearer Shares............ 558,009
390 Adecco SA........................ 97,546
643 Adecco SA -- SICO................ 160,825
40 Alusuisse-Lonza Holding AG,
Bearer........................... 31,191
225 Alusuisse-Lonza Holding AG,
Registered....................... 178,797
11,220 CS Holding AG, Registered........ 1,148,973
5 Danzas Holding AG, Participating
Certificates..................... 1,043
30 Fischer (Georg) AG, Bearer....... 31,056
65 Grands Magasins Jelmoli SA,
Bearer*.......................... 35,823
325 Grands Magasins Jelmoli SA,
Registered*...................... 34,371
436 Holderbank Financiere Glarus
AG............................... 310,426
2,360 Nestle SA, Registered............ 2,525,707
461 Novartis AG, Bearer*............. 526,180
3,709 Novartis AG, Registered*......... 4,234,295
420 Roche Holding AG................. 3,257,788
82 Roche Holding AG, Bearer......... 922,157
15 Schindler Holding AG,
Participating Certificates....... 16,254
1,167 Schweizerische
Bankgesellschaft -- Class B...... 1,019,490
715 Schweizerische
Rueckversicherungs-Gesellschaft,
Registered....................... 760,944
4,380 Schweizerische Bankverein,
Registered....................... 830,187
81 SGS Societe Generale de
Surveillance Holding SA.......... 198,470
25 Sulzer AG, Participating
Certificates..................... 13,331
157 Sulzer AG, Registered............ 90,384
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
SWITZERLAND (CONTINUED)
220 Swissair AG, Registered*......... $ 177,446
260 Valora Holding AG................ 49,571
2,350 Zurich Versicherungsgesellschaft,
Registered....................... 651,066
------------
17,861,330
------------
UNITED KINGDOM -- 17.2%
91,937 Abbey National PLC............... 1,203,588
10,902 AMEC PLC......................... 17,257
1,100 Amstrad PLC...................... 2,758
17,957 Anglian Water PLC................ 181,306
12,736 Argos PLC........................ 167,496
43,404 Arjo Wiggins Appleton PLC........ 132,956
57,800 Associated British Foods PLC..... 479,234
100,206 Barclays PLC..................... 1,715,683
171 Barratt Developments PLC......... 739
67,527 Bass PLC......................... 948,739
202,501 B.A.T. Industries PLC............ 1,678,986
19,014 BBA Group PLC.................... 115,187
24,878 BICC Group PLC................... 117,929
25,870 Blue Circle Industries PLC....... 157,163
30,948 BOC Group PLC.................... 462,617
58,068 Boots Co., PLC................... 598,715
24,797 Bowthorpe PLC.................... 191,807
37,736 BPB PLC.......................... 247,655
27,566 British Aerospace PLC............ 603,823
61,802 British Airways PLC.............. 640,388
287,216 British Gas PLC.................. 1,103,446
28,409 British Land Co., PLC............ 251,346
368,321 British Petroleum Co., PLC....... 4,415,306
112,200 British Sky Broadcasting Group
PLC.............................. 1,002,281
94,916 British Steel PLC................ 260,700
411,966 British Telecommunications PLC... 2,781,215
261,939 BTR PLC.......................... 1,273,048
171 Burmah Castrol PLC............... 3,222
160,216 Cable & Wireless PLC............. 1,331,133
63,796 Cadbury Schweppes PLC............ 537,683
13,652 Calor Group PLC.................. 69,270
63,237 Caradon PLC...................... 258,640
43,042 Carlton Communications PLC....... 378,969
31,787 Chubb Security PLC............... 177,607
35,426 Coats Viyella PLC................ 80,631
800 Cobham PLC....................... 8,385
43,173 Commercial Union PLC............. 504,983
21,004 Courtaulds PLC................... 141,440
3,534 Courtaulds Textiles PLC.......... 13,668
4,808 De La Rue PLC.................... 47,105
6,722 Delta PLC........................ 44,000
9,988 East Midlands Electricity PLC.... 113,750
32,398 Electrocomponents PLC............ 256,145
27,619 EMI Group PLC.................... 652,249
23,334 English China Clays PLC.......... 76,868
21,296 FKI PLC.......................... 73,617
185,160 General Electric Co., PLC........ 1,210,422
15,117 GKN PLC.......................... 258,956
229,738 Glaxo Wellcome PLC............... 3,727,069
59,878 Granada Group PLC................ 882,773
</TABLE>
Continued
35
<PAGE> 242
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
137,200 Grand Metropolitan PLC........... $ 1,077,688
2,100 Great Portland Estates PLC....... 7,493
68,616 Great Universal Stores PLC....... 718,626
142 Guardian Royal Exchange PLC...... 679
126,161 Guinness PLC..................... 987,740
34,821 Hammerson PLC.................... 239,847
333,519 Hanson PLC....................... 465,162
15,900 Harrisons & Crosfield PLC........ 36,325
27,842 Hepworth PLC..................... 120,783
56,381 HSBC Holdings PLC................ 1,260,092
117,250 HSBC Holdings PLC................ 2,552,267
18,984 IMI PLC.......................... 121,990
51,551 Imperial Chemical Industries
PLC.............................. 677,965
1,400 Imperial Tobacco Group PLC*...... 9,032
10,804 Johnson Matthey PLC.............. 101,689
43,079 Kingfisher PLC................... 465,549
42,863 Ladbroke Group PLC............... 169,442
3,446 Laird Group PLC.................. 23,471
34,945 Land Securities PLC.............. 444,922
40,782 LASMO PLC........................ 166,101
80,107 Legal & General Group PLC........ 510,650
3,101 Lex Service PLC.................. 16,875
338,618 Lloyds TSB Group PLC............. 2,494,649
6,952 London Electricity PLC........... 80,959
40,060 Lonrho PLC....................... 85,351
35,924 LucasVarity PLC*................. 137,093
184,526 Marks & Spencer PLC.............. 1,550,477
8,306 Marley PLC....................... 17,981
13,249 MEPC PLC......................... 98,174
13,726 Mercury Asset Management Group
PLC.............................. 292,089
9,189 Meyer International PLC.......... 56,846
40,669 National Grid Group PLC.......... 136,062
73,066 National Power PLC............... 611,435
11,226 Next PLC......................... 109,023
5,532 Northern Electric PLC............ 61,488
13,207 Ocean Group PLC.................. 109,729
36,473 Pearson PLC...................... 467,810
29,178 Peninsular & Oriental Steam
Navigation Co.................... 294,601
30,100 Pilkington PLC................... 80,613
19,582 Provident Financial PLC.......... 168,391
125,304 Prudential Corp., PLC............ 1,053,937
16,186 Racal Electronic PLC............. 71,325
50,900 Rank Group PLC................... 381,521
17,647 Redland PLC...................... 110,680
36,298 Reed International PLC........... 684,216
110,855 Reuters Holdings PLC............. 1,425,642
24,358 Rexam PLC........................ 150,270
6,254 RMC Group PLC.................... 106,757
77,521 Rolls-Royce PLC.................. 341,604
51,737 Royal Bank of Scotland Group
PLC.............................. 498,909
97,720 Royal & Sun Alliance Insurance
Group PLC........................ 743,330
69,900 RTZ Corp., PLC, Registered....... 1,120,240
VALUE
SHARES (NOTE 2)
- ---------- ------------
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
77,228 Rugby Group PLC.................. $ 125,552
69,423 Safeway PLC...................... 479,967
120,023 Sainsbury (J) PLC................ 796,934
11,679 Schroders PLC.................... 302,792
74,183 Scottish Power PLC............... 446,862
39,461 Scottish & Newcastle PLC......... 463,591
83,403 Sears PLC........................ 135,591
16,318 Sedgwick Group PLC............... 36,721
23,972 Slough Estates PLC............... 114,250
180,196 SmithKline Beecham PLC........... 2,496,251
12,464 Smiths Industries PLC............ 170,850
13,330 Southern Electric PLC............ 181,581
25,910 St. James's Place Capital PLC.... 43,675
39,582 T & N PLC........................ 117,523
51,452 Tarmac PLC....................... 86,289
23,280 Tate & Lyle PLC.................. 188,837
55,683 Taylor Woodrow PLC............... 146,747
142,679 Tesco PLC........................ 865,571
17,099 Thames Water PLC................. 179,227
26,219 Thorn PLC*....................... 112,844
30,233 TI Group PLC..................... 301,114
23,478 Transport Development Group PLC.. 75,735
9,334 Unigate PLC...................... 66,369
53,287 Unilever PLC..................... 1,291,707
32,669 United Biscuits (Holdings) PLC... 117,404
20,014 United Utilities PLC............. 212,692
11,415 Vickers PLC...................... 49,813
200,168 Vodafone Group PLC............... 844,380
23,173 Williams Holdings PLC............ 136,218
28,271 Willis Corroon Group PLC......... 67,974
31,929 Wilson Connolly Holdings PLC..... 90,429
30,094 Wimpey (George) PLC.............. 65,147
29,792 Wolseley PLC..................... 235,542
61,869 Zeneca Group PLC................. 1,744,314
------------
68,106,036
------------
TOTAL COMMON STOCKS.............. 381,648,139
------------
(cost $319,395,879)
PREFERRED STOCKS -- 0.5%
AUSTRALIA -- 0.1%
61,727 News Corp., Ltd., Limited Voting
Shares........................... 274,551
------------
AUSTRIA -- 0.1%
100 Bank Austria AG.................. 3,875
4,833 Creditanstalt-Bankverein......... 222,934
------------
226,809
------------
GERMANY -- 0.3%
168 MAN AG, Non-Voting............... 33,772
19,640 RWE AG........................... 656,320
3,800 Sap AG, Non-Voting............... 522,247
527 Volkswagen AG.................... 167,903
------------
1,380,242
------------
</TABLE>
Continued
36
<PAGE> 243
THE KENT INTERNATIONAL GROWTH FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
PREFERRED STOCKS (CONTINUED)
ITALY -- 0.0%
82,200 Fiat SpA......................... $ 135,423
------------
TOTAL PREFERRED STOCKS........... 2,017,025
------------
(cost $1,842,163)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<S> <C> <C>
COMMERCIAL PAPER -- 3.2%
UNITED STATES -- 3.2%
$12,598,436 Ford Motor Credit Co., 6.00%,
1/2/97......................... 12,598,436
------------
TOTAL COMMERCIAL PAPER......... 12,598,436
------------
(cost $12,598,436)
TOTAL INVESTMENTS -- 99.9%................... 396,263,600
(cost $333,836,478)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%........................ 334,265
------------
NET ASSETS -- 100.00%........................ $396,597,865
=============
</TABLE>
- ---------------
Percentages indicated are based on net assets of $396,597,865.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of
approximately $189,000. Cost for federal income tax purposes differs from
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............... $ 80,570,288
Unrealized depreciation............... (18,332,166)
------------
Net unrealized appreciation........... $ 62,238,122
============
</TABLE>
*Non-income producing security.
At December 31, 1996, the International Growth Fund's open forward foreign
currency exchange contracts were as follows:
<TABLE>
<CAPTION>
DELIVERY CONTRACT CONTRACT CONTRACT MARKET UNREALIZED
CURRENCY DATE PRICE** AMOUNT** VALUE VALUE APPRECIATION
- ------------------------------- ------------- ---------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Long Contracts:
Italian Lira................. 1/2/97 1,527.63 1,064,588,491 $ 696,889 $ 700,157 $3,268
Malaysian Ringgit............ 1/2/97 2.5258 1,343,370 531,859 531,921 62
---------- ---------- ------
Total Long Contracts......... $1,228,748 $1,232,078 $3,330
========== ========== ======
</TABLE>
** Contract price is in local currency.
Continued
37
<PAGE> 244
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS -- 97.5%
ADVERTISING -- 0.1%
3,600 Interpublic Group of Companies,
Inc.............................. $ 171,000
------------
AEROSPACE/DEFENSE EQUIPMENT -- 0.2%
10,400 Raytheon Co...................... 500,500
------------
AEROSPACE & DEFENSE -- 1.3%
15,386 Boeing Co........................ 1,636,686
2,800 General Dynamics Corp............ 197,400
8,494 Lockheed Martin Corp............. 777,201
9,300 McDonnell Douglas Corp........... 595,200
2,500 Northrop Grumman Corp............ 206,875
------------
3,413,362
------------
AGRICULTURAL OPERATIONS -- 0.1%
3,600 Pioneer Hi-Bred International,
Inc.............................. 252,000
------------
APPLIANCES -- HOUSEHOLD -- 0.1%
4,600 Maytag Corp...................... 90,850
3,300 Whirlpool Corp................... 153,862
------------
244,712
------------
AUTOMOTIVE -- DOMESTIC -- 1.8%
32,038 Chrysler Corp.................... 1,057,254
52,100 Ford Motor Co.................... 1,660,687
33,200 General Motors Corp.............. 1,850,900
------------
4,568,841
------------
AUTO/TRUCK -- ORIGINAL EQUIPMENT -- 0.3%
4,500 Dana Corp........................ 146,812
3,400 Eaton Corp....................... 237,150
3,220 Navistar International Corp.*.... 29,383
1,725 PACCAR, Inc...................... 117,300
5,600 TRW, Inc......................... 277,200
------------
807,845
------------
AUTO/TRUCK -- REPLACEMENT -- 0.1%
2,700 Echlin, Inc...................... 85,387
5,250 Genuine Parts Co................. 233,625
------------
319,012
------------
BANKS -- MAJOR REGIONAL -- 4.9%
18,744 Banc One Corp.................... 805,992
6,700 Bank of Boston Corp.............. 430,475
17,200 Bank of New York Co., Inc........ 580,500
8,600 Barnett Banks, Inc............... 353,675
6,800 Boatmen's Bancshares, Inc........ 438,600
4,900 Comerica, Inc.................... 256,637
9,800 Corestates Financial Corp........ 508,375
5,900 First Bank System, Inc........... 402,675
14,053 First Chicago NBD Corp........... 755,349
12,425 First Union Corp................. 919,450
11,507 Fleet Financial Group, Inc....... 573,912
9,900 KeyCorp.......................... 499,950
5,650 Mellon Bank Corp................. 401,150
9,700 National City Corp............... 435,287
12,657 NationsBank Corp................. 1,237,222
16,300 Norwest Corp..................... 709,050
15,000 PNC Bank Corp.................... 564,375
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BANKS -- MAJOR REGIONAL (CONTINUED)
2,400 Republic New York Corp........... $ 195,900
9,800 SunTrust Banks, Inc.............. 482,650
6,600 U.S. Bancorp..................... 296,588
7,300 Wachovia Corp.................... 412,450
4,100 Wells Fargo & Co................. 1,105,975
------------
12,366,237
------------
BANKS -- MIDWEST -- 0.1%
4,700 Fifth Third Bancorp.............. 295,219
------------
BANKS -- MONEY CENTER -- 2.6%
15,724 BankAmerica Corp................. 1,568,469
3,600 Bankers Trust New York Corp...... 310,500
19,258 Chase Manhattan Corp............. 1,718,776
20,700 Citicorp......................... 2,132,100
8,200 J.P. Morgan & Co................. 800,525
------------
6,530,370
------------
BEVERAGES -- ALCOHOLIC -- 0.7%
1,700 Adolph Coors Co., Class B........ 32,300
21,970 Anheuser-Busch Cos., Inc......... 878,800
3,000 Brown-Forman Corp., Class B...... 137,250
16,400 Seagram Co., Ltd................. 635,500
------------
1,683,850
------------
BEVERAGES -- SOFT DRINKS -- 3.1%
109,300 Coca-Cola Co..................... 5,751,912
68,300 PepsiCo, Inc..................... 1,997,775
------------
7,749,687
------------
BUILDING PRODUCTS -- RETAIL/WHOLESALE -- 0.5%
21,121 Home Depot, Inc.................. 1,058,690
7,600 Lowe's Cos., Inc................. 269,800
------------
1,328,490
------------
BUILDING PRODUCTS -- WOOD -- 0.2%
4,800 Louisiana-Pacific Corp........... 101,400
8,750 Weyerhaeuser Co.................. 414,531
------------
515,931
------------
BUILDING & CONSTRUCTION -- MISCELLANEOUS --
0.2%
1,800 Armstrong World Industries,
Inc.............................. 125,100
7,100 Masco Corp....................... 255,600
2,300 Owens Corning.................... 98,037
------------
478,737
------------
BUILDING -- HEAVY CONSTRUCTION -- 0.1%
3,700 Fluor Corp....................... 232,175
1,800 Foster Wheeler Corp.............. 66,825
------------
299,000
------------
BUILDING -- MAINTENANCE & SERVICE -- 0.0%
2,900 Ecolab, Inc...................... 109,112
------------
BUILDING -- MOBILE/MANUFACTURING & RECREATIONAL
VEHICLES -- 0.0%
1,600 Fleetwood Enterprises, Inc....... 44,000
------------
</TABLE>
Continued
38
<PAGE> 245
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
BUILDING -- RESIDENTIAL/COMMERCIAL -- 0.0%
1,200 Centex Corp...................... $ 45,150
1,740 Kaufman & Broad Home Corp........ 22,402
1,200 Pulte Corp....................... 36,900
------------
104,452
------------
BUSINESS INFORMATION -- 0.2%
7,565 Cognizant Corp................... 249,645
7,465 Dun & Bradstreet Corp............ 177,294
------------
426,939
------------
BUSINESS SERVICES -- 0.1%
4,600 H&R Block, Inc................... 133,400
------------
CABLE TELEVISION -- 0.5%
14,300 Comcast Corp., Class A........... 254,719
29,200 Tele-Communications, Inc., Class
A*............................... 381,425
27,400 U.S. West, Inc., Media Group*.... 506,900
------------
1,143,044
------------
CHEMICALS -- DIVERSIFIED -- 2.2%
2,400 B.F. Goodrich Co................. 97,200
10,700 Dow Chemical Co.................. 838,613
24,700 E.I. DuPont de Nemours & Co...... 2,331,063
4,500 Hercules, Inc.................... 194,625
25,800 Monsanto Co...................... 1,002,975
8,100 PPG Industries, Inc.............. 454,612
2,800 Rohm & Haas Co................... 228,550
5,600 Union Carbide Corp............... 228,900
3,900 W.R. Grace & Co.................. 201,825
------------
5,578,363
------------
CHEMICALS -- PLASTIC -- 0.1%
3,400 Eastman Chemical Co.............. 187,850
------------
CHEMICALS -- SPECIALTY -- 0.6%
4,900 Air Products & Chemicals, Inc.... 338,712
6,337 Engelhard Corp................... 121,195
2,800 Great Lakes Chemical Corp........ 130,900
6,300 Morton International, Inc........ 256,725
3,000 Nalco Chemical Co................ 108,375
6,900 Praxair, Inc..................... 318,263
2,200 Sigma-Aldrich Corp............... 137,363
------------
1,411,533
------------
COMPUTERS -- GRAPHICS -- 0.0%
2,100 Intergraph Corp.*................ 21,525
------------
COMPUTERS -- LOCAL AREA NETWORKS -- 1.2%
7,600 3COM Corp.*...................... 557,650
8,500 Bay Networks, Inc.*.............. 177,437
6,900 Cabletron Systems, Inc.*......... 229,425
28,500 Cisco Systems, Inc.*............. 1,813,313
15,100 Novell, Inc.*.................... 142,978
------------
2,920,803
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COMPUTERS -- MAINFRAME -- 1.4%
5,300 Amdahl Corp.*.................... $ 64,262
22,700 International Business Machines
Corp............................. 3,427,700
7,700 Unisys Corp.*.................... 51,975
------------
3,543,937
------------
COMPUTERS -- MEMORY DEVICES -- 0.3%
10,200 EMC Corp.*....................... 337,875
9,400 Seagate Technology, Inc.*........ 371,300
------------
709,175
------------
COMPUTERS -- MICRO -- 0.6%
5,500 Apple Computer, Inc.*............ 114,812
11,900 Compaq Computer Corp.*........... 883,575
1,700 Data General Corp.*.............. 24,650
9,900 Dell Computer Corp.*............. 525,938
------------
1,548,975
------------
COMPUTERS -- MINI -- 1.3%
6,800 Digital Equipment Corp.*......... 247,350
44,700 Hewlett-Packard Co............... 2,246,175
7,700 Silicon Graphics, Inc.*.......... 196,350
16,100 Sun Microsystems, Inc.*.......... 413,569
5,200 Tandem Computers, Inc.*.......... 71,500
------------
3,174,944
------------
COMPUTERS -- SERVICES -- 0.7%
12,800 Automatic Data Processing,
Inc.............................. 548,800
3,000 Ceridian Corp.*.................. 121,500
3,300 Computer Sciences Corp.*......... 271,013
19,700 First Data Corp.................. 719,050
1,000 Shared Medical Systems Corp...... 49,250
------------
1,709,613
------------
COMPUTERS -- SOFTWARE -- 2.5%
2,000 Autodesk, Inc.................... 56,000
16,012 Computer Associates
International, Inc............... 796,597
52,500 Microsoft Corp.*................. 4,337,812
28,850 Oracle Corp.*.................... 1,204,488
------------
6,394,897
------------
CONSUMER PRODUCTS -- MISCELLANEOUS -- 0.3%
3,300 American Greetings Corp., Class
A................................ 93,638
1,695 Jostens, Inc..................... 35,807
7,000 Newell Co........................ 220,500
6,600 Rubbermaid, Inc.................. 150,150
2,700 Tupperware Corp.................. 144,787
------------
644,882
------------
CONTAINERS -- METAL & GLASS -- 0.1%
1,300 Ball Corp........................ 33,800
5,600 Crown Cork & Seal Co., Inc....... 304,500
------------
338,300
------------
CONTAINERS -- PAPER & PLASTIC -- 0.0%
2,300 Bemis Co., Inc................... 84,813
------------
COSMETICS & TOILETRIES -- 0.8%
1,200 Alberto-Culver Co., Class B...... 57,600
5,800 Avon Products, Inc............... 331,325
</TABLE>
Continued
39
<PAGE> 246
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
COSMETICS & TOILETRIES (CONTINUED)
19,632 Gillette Co...................... $ 1,526,388
4,900 International Flavors &
Fragrances, Inc.................. 220,500
------------
2,135,813
------------
DIVERSIFIED OPERATIONS -- 5.0%
7,620 Allegheny Teledyne, Inc.......... 175,260
12,400 AlliedSignal, Inc................ 830,800
1,950 Crane Co......................... 56,550
1,600 FMC Corp.*....................... 112,200
72,300 General Electric Co.............. 7,148,663
5,200 ITT Industries, Inc.............. 127,400
1,800 Johnson Controls, Inc............ 149,175
18,400 Minnesota Mining & Manufacturing
Co............................... 1,524,900
2,100 National Service Industries,
Inc.............................. 78,488
9,600 Rockwell International Corp.*.... 584,400
7,500 Tenneco, Inc.*................... 338,437
3,600 Textron, Inc..................... 339,300
10,600 United Technologies Corp......... 699,600
18,500 Westinghouse Electric Corp....... 367,687
4,600 Whitman Corp..................... 105,225
------------
12,638,085
------------
ELECTRICAL COMPONENTS -- SEMICONDUCTORS -- 2.5%
6,000 Advanced Micro Devices, Inc.*.... 154,500
7,900 Applied Materials, Inc.*......... 283,906
36,100 Intel Corp....................... 4,726,844
5,700 LSI Logic Corp.*................. 152,475
9,200 Micron Technology, Inc........... 267,950
6,100 National Semiconductor Corp.*.... 148,688
8,300 Texas Instruments, Inc........... 529,125
------------
6,263,488
------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.0%
1,400 Tektronix, Inc................... 71,750
------------
ELECTRONIC PRODUCTS -- MISCELLANEOUS -- 0.1%
2,000 Raychem Corp..................... 160,250
------------
ELECTRONIC -- CONNECTORS -- 0.2%
9,636 AMP, Inc......................... 369,781
2,300 Thomas & Betts Corp.............. 102,063
------------
471,844
------------
ENGINES -- INTERNAL COMBUSTION -- 0.0%
1,700 Cummins Engine Co., Inc.......... 78,200
------------
FINANCIAL -- CONSUMER LOANS -- 0.4%
2,400 Beneficial Corp.................. 152,100
4,300 Household International, Inc..... 396,675
9,750 MBNA Corp........................ 404,625
------------
953,400
------------
FINANCIAL -- INVESTMENT BANKERS -- 0.5%
7,200 Merrill Lynch & Co., Inc......... 586,800
6,700 Morgan Stanley Group, Inc........ 382,737
4,800 Salomon, Inc..................... 226,200
------------
1,195,737
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL -- LEASING COMPANY -- 0.0%
3,600 Ryder Systems, Inc............... $ 101,250
------------
FINANCIAL -- MISCELLANEOUS SERVICES -- 0.6%
20,800 American Express Co.............. 1,175,200
7,033 Dean Witter Discover & Co........ 465,936
------------
1,641,136
------------
FINANCIAL -- MORTGAGE & RELATED
SERVICES -- 1.1%
7,900 Federal Home Loan Mortgage
Corp............................. 869,988
48,000 Federal National Mortgage
Assoc............................ 1,788,000
6,000 Green Tree Financial Corp........ 231,750
------------
2,889,738
------------
FINANCIAL -- SAVINGS & LOAN -- 0.2%
2,500 Golden West Financial Corp....... 157,812
6,100 Great Western Financial Corp..... 176,900
4,600 H.F. Ahmanson & Co............... 149,500
------------
484,212
------------
FOOD ITEMS -- WHOLESALE -- 0.1%
1,700 Fleming Cos., Inc................ 29,325
3,000 Supervalu, Inc................... 85,125
7,900 Sysco Corp....................... 257,738
------------
372,188
------------
FOOD -- CANNED -- 0.6%
10,300 Campbell Soup Co................. 826,575
16,200 H.J. Heinz Co.................... 579,150
------------
1,405,725
------------
FOOD -- CONFECTIONARY -- 0.2%
6,700 Hershey Foods Corp............... 293,125
5,100 Wm. Wrigley Jr. Co............... 286,875
------------
580,000
------------
FOOD -- FLOUR & GRAIN -- 0.2%
23,903 Archer-Daniels-Midland Co........ 525,866
------------
FOOD -- DIVERSIFIED -- 1.8%
10,625 ConAgra, Inc..................... 528,594
6,300 CPC International, Inc........... 488,250
6,900 General Mills, Inc............... 437,287
9,300 Kellogg Co....................... 610,313
6,000 Quaker Oats Co................... 228,750
4,680 Ralston Purina Group............. 343,395
21,300 Sara Lee Corp.................... 793,425
7,000 Unilever NV, ADR................. 1,226,750
------------
4,656,764
------------
FUNERAL SERVICES & RELATED -- 0.1%
10,400 Service Corp. International...... 291,200
------------
GLASS PRODUCTS -- 0.2%
10,100 Corning, Inc..................... 467,125
------------
HOTELS & MOTELS -- 0.4%
8,600 Hilton Hotels Corp............... 224,675
5,700 HFS, Inc.*....................... 340,575
5,100 ITT Corp.*....................... 221,213
5,600 Marriott International, Inc...... 309,400
------------
1,095,863
------------
</TABLE>
Continued
40
<PAGE> 247
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
INSURANCE -- ACCIDENT & HEALTH -- 0.1%
4,800 Aon Corp......................... $ 298,200
------------
INSURANCE -- BROKERS -- 0.1%
2,000 Alexander & Alexander Services,
Inc.............................. 34,750
3,200 Marsh & McLennan Cos., Inc....... 332,800
------------
367,550
------------
INSURANCE -- LIFE -- 0.6%
8,900 American General Corp............ 363,787
3,150 Jefferson-Pilot Corp............. 178,369
4,100 Providian Corp................... 210,638
3,100 Torchmark Corp................... 156,550
2,882 Transamerica Corp................ 227,678
3,200 UNUM Corp........................ 231,200
1,525 U.S. Life Corp................... 50,706
------------
1,418,928
------------
INSURANCE -- MULTI-LINE -- 1.4%
6,570 Aetna, Inc....................... 525,600
3,300 Cigna Corp....................... 450,862
5,200 ITT Hartford Group, Inc.......... 351,000
5,100 Loews Corp....................... 480,675
1,900 MBIA, Inc........................ 192,375
2,600 MGIC Investment Corp............. 197,600
28,178 Travelers Group, Inc............. 1,278,577
------------
3,476,689
------------
INSURANCE -- PROPERTY & CASUALTY -- 2.0%
19,499 Allstate Corp.................... 1,128,505
20,680 American International Group,
Inc.............................. 2,238,610
7,600 Chubb Corp....................... 408,500
3,600 General Re Corp.................. 567,900
4,600 Lincoln National Corp............ 241,500
5,500 SAFECO Corp...................... 216,906
3,600 St. Paul Cos., Inc............... 211,050
5,100 USF&G Corp....................... 106,463
------------
5,119,434
------------
INSTRUMENTS -- CONTROL -- 0.2%
2,222 General Signal Corp.............. 94,990
5,600 Honeywell, Inc................... 368,200
------------
463,190
------------
INSTRUMENTS -- SCIENTIFIC -- 0.1%
2,300 EG&G, Inc........................ 46,288
1,900 Millipore Corp................... 78,613
1,900 Perkin-Elmer Corp................ 111,862
------------
236,763
------------
LEISURE & RECREATION PRODUCTS -- 0.0%
4,300 Brunswick Corp................... 103,200
------------
LEISURE & RECREATION/GAMING -- 0.0%
4,500 Harrah's Entertainment, Inc.*.... 89,438
------------
MACHINE TOOLS & RELATED PRODUCTS -- 0.0%
1,800 Cincinnati Milacron, Inc......... 39,375
1,500 Giddings & Lewis, Inc............ 19,313
------------
58,688
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MACHINERY -- CONSTRUCTION/MINING -- 0.3%
8,400 Caterpillar, Inc................. $ 632,100
4,800 Ingersoll-Rand Co................ 213,600
------------
845,700
------------
MACHINERY -- ELECTRICAL -- 0.5%
9,900 Emerson Electric Co.............. 957,825
2,300 W.W. Grainger, Inc............... 184,575
------------
1,142,400
------------
MACHINERY -- FARM -- 0.3%
1,300 Briggs & Stratton Corp........... 57,200
3,200 Case Corp........................ 174,400
11,400 Deere & Co....................... 463,125
------------
694,725
------------
MACHINERY -- GENERAL INDUSTRIAL -- 0.5%
4,700 Cooper Industries, Inc........... 197,987
4,900 Dover Corp....................... 246,225
2,122 Harnischfeger Industries, Inc.... 102,121
5,400 Illinois Tool Works, Inc......... 431,325
3,250 Parker-Hannifin Corp............. 125,938
1,200 TRINOVA Corp..................... 43,650
------------
1,147,246
------------
MACHINERY -- MATERIAL HANDLING -- 0.0%
400 NACCO Industries, Inc., Class
A................................ 21,400
------------
MEDICAL INSTRUMENTS -- 0.4%
5,100 Biomet, Inc...................... 77,138
10,500 Medtronic, Inc................... 714,000
3,600 St. Jude Medical, Inc.*.......... 153,450
2,800 U.S. Surgical Corp............... 110,250
------------
1,054,838
------------
MEDICAL PRODUCTS -- 0.5%
2,900 Allergan, Inc.................... 103,312
12,000 Baxter International, Inc........ 492,000
7,800 Boston Scientific Corp.*......... 468,000
1,500 Guidant Corp..................... 85,500
3,200 Mallinckrodt, Inc................ 141,200
------------
1,290,012
------------
MEDICAL -- BIOMEDICAL/GENETIC -- 0.2%
11,600 Amgen, Inc.*..................... 630,750
------------
MEDICAL -- DRUGS -- 6.7%
34,100 Abbott Laboratories.............. 1,730,575
3,700 Alza Corp.*...................... 95,738
28,100 American Home Products Corp...... 1,647,362
22,000 Bristol-Myers Squibb Co.......... 2,392,500
24,200 Eli Lilly & Co................... 1,766,600
53,000 Merck & Co, Inc.................. 4,200,250
28,300 Pfizer, Inc...................... 2,345,363
22,330 Pharmacia & Upjohn, Inc.......... 884,826
16,200 Schering-Plough Corp............. 1,048,950
11,900 Warner-Lambert Co................ 892,500
------------
17,004,664
------------
</TABLE>
Continued
41
<PAGE> 248
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
MEDICAL -- HEALTH MEDICAL ORGANIZATIONS -- 0.2%
7,100 Humana, Inc.*.................... $ 135,787
8,100 United Healthcare Corp........... 364,500
------------
500,287
------------
MEDICAL -- HOSPITAL -- 0.6%
29,449 Columbia/HCA Healthcare Corp..... 1,200,047
9,500 Tenet Healthcare Corp.*.......... 207,812
------------
1,407,859
------------
MEDICAL -- NURSING HOMES -- 0.1%
4,400 Beverly Enterprises, Inc.*....... 56,100
2,800 Manor Care, Inc.................. 75,600
------------
131,700
------------
MEDICAL/DENTAL SUPPLIES -- 1.3%
2,500 Bausch & Lomb, Inc............... 87,500
5,500 Becton, Dickinson & Co........... 238,563
2,500 C.R. Bard, Inc................... 70,000
58,500 Johnson & Johnson................ 2,910,375
------------
3,306,438
------------
MEDIA CONGLOMERATES -- 1.4%
24,960 Time Warner, Inc................. 936,000
15,500 Viacom, Inc., Class B*........... 540,562
29,800 Walt Disney Co................... 2,074,825
------------
3,551,387
------------
METAL -- GOLD -- 0.5%
15,700 Barrick Gold Corp................ 451,375
9,900 Battle Mountain Gold Co.......... 68,062
6,100 Echo Bay Mines Ltd............... 40,413
6,400 Homestake Mining Co.............. 91,200
4,409 Newmont Mining Corp.............. 197,303
10,500 Placer Dome, Inc................. 228,375
5,762 Santa Fe Pacific Gold Corp....... 88,591
------------
1,165,319
------------
METAL -- MISCELLANEOUS -- 0.1%
4,100 Cyprus Amax Minerals Co.......... 95,837
7,400 Inco, Ltd........................ 235,875
------------
331,712
------------
METAL -- NON-FERROUS -- 0.6%
9,950 Alcan Aluminum Ltd............... 334,569
7,600 Aluminum Co. of America.......... 484,500
1,900 Asarco, Inc...................... 47,262
8,500 Freeport-McMoRan Copper & Gold,
Inc., Class B.................... 253,938
2,800 Phelps Dodge Corp................ 189,000
2,800 Reynolds Metals Co............... 157,850
------------
1,467,119
------------
METAL -- PROCESSING & FABRICATION -- 0.1%
1,400 Timken Co........................ 64,225
4,025 Worthington Industries, Inc...... 72,953
------------
137,178
------------
MOTION PICTURES & SERVICES -- 0.0%
1,650 King World Productions, Inc.*.... 60,844
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OFFICE AUTOMATION & EQUIPMENT -- 0.4%
6,500 Pitney Bowes, Inc................ $ 354,250
14,267 Xerox Corp....................... 750,801
------------
1,105,051
------------
OFFICE SUPPLIES & FORMS -- 0.3%
5,744 Alco Standard Corp............... 296,534
4,600 Avery-Dennison Corp.............. 162,725
3,600 Deluxe Corp...................... 117,900
1,400 John H. Harland Co............... 46,200
4,400 Moore Corp., Ltd................. 89,650
------------
713,009
------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.2%
6,400 Baker Hughes, Inc................ 220,800
7,700 Dresser Industries, Inc.......... 238,700
2,400 McDermott International, Inc..... 39,900
------------
499,400
------------
OIL REFINING & MARKETING -- 0.1%
2,800 Ashland, Inc..................... 122,850
3,274 Sun Co., Inc..................... 79,804
------------
202,654
------------
OIL & GAS -- DRILLING -- 0.5%
3,800 Rowan Cos., Inc.*................ 85,975
10,800 Schlumberger Ltd................. 1,078,650
------------
1,164,625
------------
OIL-FIELD SERVICES -- 0.2%
5,500 Halliburton Co................... 331,375
2,400 Western Atlas, Inc.*............. 170,100
------------
501,475
------------
OIL -- INTERNATIONAL INTEGRATED -- 5.7%
28,700 Chevron Corp..................... 1,865,500
54,600 Exxon Corp....................... 5,350,800
17,300 Mobil Corp....................... 2,114,925
23,600 Royal Dutch Petroleum Co., ADR... 4,029,700
11,600 Texaco, Inc...................... 1,138,250
------------
14,499,175
------------
OIL -- PRODUCTION/PIPELINE -- 0.7%
4,650 Coastal Corp..................... 227,269
2,400 Columbia Gas System, Inc......... 152,700
11,200 Enron Corp....................... 483,000
3,100 ENSERCH Corp..................... 71,300
6,600 PanEnergy Corp................... 297,000
3,800 Sonat, Inc....................... 195,700
6,900 Williams Cos., Inc............... 258,750
------------
1,685,719
------------
OIL -- U.S. EXPLORATION & PRODUCTION -- 0.3%
5,500 Burlington Resources, Inc........ 277,062
1,100 Helmerich & Payne, Inc........... 57,337
4,600 Oryx Energy Co.*................. 113,850
3,972 Santa Fe Energy Resources,
Inc.*............................ 55,112
11,023 Union Pacific Resources Group,
Inc.............................. 322,423
------------
825,784
------------
</TABLE>
Continued
42
<PAGE> 249
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
OIL -- U.S. INTEGRATED -- 1.9%
4,100 Amerada Hess Corp................ $ 237,287
21,800 Amoco Corp....................... 1,754,900
7,100 Atlantic Richfield Co............ 940,750
2,200 Kerr-McGee Corp.................. 158,400
1,500 Louisiana Land & Exploration
Co............................... 80,437
14,500 Occidental Petroleum Corp........ 338,938
2,000 Pennzoil Co...................... 113,000
11,600 Phillips Petroleum Co............ 513,300
11,000 Unocal Corp...................... 446,875
12,600 USX-Marathon Group............... 300,825
------------
4,884,712
------------
PAINTS & RELATED PRODUCTS -- 0.1%
3,800 Sherwin-Williams Co.............. 212,800
------------
PAPER & RELATED PRODUCTS -- 1.3%
2,108 Boise Cascade Corp............... 66,929
4,200 Champion International Corp...... 181,650
4,000 Georgia Pacific Corp............. 288,000
13,224 International Paper Co........... 533,919
3,800 James River Corp. of Virginia.... 125,875
12,370 Kimberly-Clark Corp.............. 1,178,242
2,300 Mead Corp........................ 133,688
1,300 Potlatch Corp.................... 55,900
4,346 Stone Container Corp............. 64,647
2,400 Temple-Inland, Inc............... 129,900
3,100 Union Camp Corp.................. 148,025
4,450 Westvaco Corp.................... 127,937
2,400 Willamette Industries, Inc....... 167,100
------------
3,201,812
------------
PHOTOGRAPHY EQUIPMENT & SUPPLIES -- 0.5%
14,600 Eastman Kodak Co................. 1,171,650
1,989 Polaroid Corp.................... 86,522
------------
1,258,172
------------
POLLUTION CONTROL -- 0.5%
9,300 Browning-Ferris Industries,
Inc.............................. 244,125
13,800 Laidlaw, Inc., Class B........... 158,700
5,099 Pall Corp........................ 130,025
2,600 Safety-Kleen Corp................ 42,575
21,300 WMX Technologies, Inc............ 694,912
------------
1,270,337
------------
PRINTING -- COMMERCIAL -- 0.1%
6,600 R.R. Donnelley & Sons Co......... 207,075
------------
PROTECTION -- SAFETY -- 0.1%
6,900 Tyco International Ltd........... 364,838
------------
PUBLISHING -- BOOKS -- 0.1%
4,400 McGraw-Hill Cos., Inc............ 202,950
------------
PUBLISHING -- NEWSPAPERS -- 0.5%
4,200 Dow Jones & Co., Inc............. 142,275
6,200 Gannett, Inc..................... 464,225
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING -- NEWSPAPERS (CONTINUED)
4,200 Knight-Ridder, Inc............... $ 160,650
4,300 New York Times Co., Class A...... 163,400
4,300 Times Mirror Co., Class A........ 213,925
2,700 Tribune Co....................... 212,962
------------
1,357,437
------------
PUBLISHING -- PERIODICALS -- 0.0%
1,200 Meredith Corp.................... 63,300
------------
RETAIL/WHOLESALE -- AUTO PARTS -- 0.0%
2,700 Pep Boys-Manny, Moe & Jack....... 83,025
------------
RETAIL/WHOLESALE -- COMPUTERS -- 0.0%
2,564 Tandy Corp....................... 112,816
------------
RETAIL -- APPAREL/SHOES -- 0.4%
4,600 Charming Shoppes, Inc.*.......... 23,288
4,600 CVS Corp......................... 190,325
12,500 Gap, Inc......................... 376,562
11,878 Limited, Inc..................... 218,258
3,600 Nordstrom, Inc................... 127,575
3,400 TJX Cos., Inc.................... 161,075
------------
1,097,083
------------
RETAIL -- CONSUMER ELECTRONICS -- 0.1%
4,300 Circuit City Stores, Inc......... 129,537
------------
RETAIL -- DISCOUNT -- 1.3%
21,300 Kmart Corp.*..................... 220,987
8,650 Price/Costco, Inc.*.............. 217,331
12,050 Toys 'R' Us, Inc.*............... 361,500
100,800 Wal-Mart Stores, Inc............. 2,305,800
5,900 Woolworth Corp.*................. 129,063
------------
3,234,681
------------
RETAIL -- DRUG STORE -- 0.3%
900 Longs Drug Stores Corp........... 44,213
5,400 Rite Aid Corp.................... 214,650
10,800 Walgreen Co...................... 432,000
------------
690,863
------------
RETAIL -- MAIL ORDER -- 0.2%
17,300 CUC International, Inc.*......... 410,875
------------
RETAIL -- MAJOR DEPARTMENT STORES -- 0.9%
9,500 Dayton-Hudson Corp............... 372,875
3,116 Harcourt General, Inc............ 143,725
10,100 J.C. Penney, Inc................. 492,375
11,100 May Department Stores Co......... 518,925
17,175 Sears, Roebuck & Co.............. 792,197
------------
2,320,097
------------
RETAIL -- RESTAURANTS -- 0.6%
6,900 Darden Restaurants, Inc.......... 60,375
30,700 McDonald's Corp.................. 1,389,175
5,700 Wendy's International, Inc....... 116,850
------------
1,566,400
------------
</TABLE>
Continued
43
<PAGE> 250
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- REGIONAL DEPARTMENT STORES -- 0.2%
5,000 Dillard Department Stores,
Inc.............................. $ 154,375
9,100 Federated Department Stores,
Inc.*............................ 310,537
1,600 Mercantile Stores Co., Inc....... 79,000
------------
543,912
------------
RETAIL -- SUPERMARKETS -- 0.5%
11,100 Albertson's, Inc................. 395,437
6,400 American Stores Co............... 261,600
2,600 Giant Food Inc., Class A......... 89,700
1,700 Great Atlantic & Pacific Tea Co.,
Inc.............................. 54,188
5,500 Kroger Co.*...................... 255,750
6,600 Winn-Dixie Stores, Inc........... 208,725
------------
1,265,400
------------
RUBBER -- TIRES -- 0.2%
3,600 Cooper Tire & Rubber Co.......... 71,100
6,800 Goodyear Tire & Rubber Co........ 349,350
------------
420,450
------------
SHOES & RELATED APPAREL -- 0.3%
12,700 Nike, Inc., Class B.............. 758,825
2,400 Reebok International Ltd......... 100,800
2,200 Stride Rite Corp................. 22,000
------------
881,625
------------
SOAP & CLEANING PREPARATIONS -- 1.6%
2,300 Clorox Co........................ 230,863
6,500 Colgate-Palmolive Co............. 599,625
30,000 Procter & Gamble Co.............. 3,225,000
------------
4,055,488
------------
STEEL -- PRODUCERS -- 0.2%
4,700 Armco, Inc.*..................... 19,387
4,900 Bethlehem Steel Corp.*........... 44,100
2,200 Inland Steel Industries, Inc..... 44,000
3,900 Nucor Corp....................... 198,900
3,740 USX-U.S. Steel Group, Inc........ 117,343
------------
423,730
------------
TELECOMMUNICATION EQUIPMENT -- 1.7%
2,637 Andrew Corp.*.................... 139,926
5,200 DSC Communications Corp.*........ 92,950
6,000 General Instrument Corp.*........ 129,750
1,700 Harris Corp...................... 116,663
28,023 Lucent Technologies, Inc......... 1,296,064
26,100 Motorola, Inc.................... 1,601,887
11,400 Northern Telecom Ltd............. 705,375
3,400 Scientific-Atlanta, Inc.......... 51,000
7,900 Tellabs, Inc.*................... 297,237
------------
4,430,852
------------
TELECOMMUNICATION -- CELLULAR -- 0.2%
22,000 AirTouch Communications, Inc.*... 555,500
------------
TEXTILE -- APPAREL -- 0.2%
3,400 Fruit of the Loom, Inc., Class
A*............................... 128,775
3,200 Liz Claiborne, Inc............... 123,600
1,700 Russell Corp..................... 50,575
2,800 VF Corp.......................... 189,000
------------
491,950
------------
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
TEXTILES -- HOME FURNISHINGS -- 0.0%
900 Springs Industries, Inc. Class
A................................ $ 38,700
------------
TOBACCO -- 1.8%
7,500 American Brands, Inc............. 372,187
35,800 Philip Morris Cos., Inc.......... 4,031,975
8,200 U.S.T., Inc...................... 265,475
------------
4,669,637
------------
TOOLS -- HAND HELD -- 0.1%
3,900 Black & Decker Corp.............. 117,488
2,650 Snap-On, Inc..................... 94,406
3,900 The Stanley Works................ 105,300
------------
317,194
------------
TOYS/GAME/HOBBY -- 0.2%
3,800 Hasbro, Inc...................... 147,725
11,947 Mattel, Inc...................... 331,529
------------
479,254
------------
TRANSPORTATION -- AIR FREIGHT -- 0.1%
5,000 Federal Express Corp.*........... 222,500
------------
TRANSPORTATION -- AIRLINE -- 0.3%
4,000 AMR Corp.*....................... 352,500
3,300 Delta Air Lines, Inc............. 233,888
6,400 Southwest Airlines Co............ 141,600
2,800 USAir Group, Inc.*............... 65,450
------------
793,438
------------
TRANSPORTATION -- RAILROAD -- 1.0%
6,700 Burlington Northern Santa Fe
Corp............................. 578,713
3,503 Conrail, Inc..................... 348,986
9,508 CSX Corp......................... 401,713
5,500 Norfolk Southern Corp............ 481,250
10,800 Union Pacific Corp............... 649,350
------------
2,460,012
------------
TRANSPORTATION -- TRUCKING -- 0.0%
1,700 Caliber System, Inc.............. 32,725
------------
UTILITIES -- ELECTRIC POWER -- 2.8%
8,200 American Electric Power Co....... 337,225
6,500 Baltimore Gas & Electric Co...... 173,875
6,700 Carolina Power & Light Co........ 244,550
9,300 Central & South West Corp........ 238,312
6,935 CINergy Corp..................... 231,456
10,300 Consolidated Edison Co. of New
York, Inc........................ 301,275
6,400 Detroit Edison Co................ 207,200
7,950 Dominion Resources, Inc.......... 306,075
8,900 Duke Power Co.................... 411,625
19,000 Edison International............. 377,625
10,100 Entergy Corp..................... 280,275
8,000 FPL Group, Inc................... 368,000
5,300 General Public Utilities Corp.... 178,212
11,100 Houston Industries, Inc.......... 251,137
</TABLE>
Continued
44
<PAGE> 251
THE KENT INDEX EQUITY FUND
FUNDS PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ---------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES -- ELECTRIC POWER (CONTINUED)
6,300 Niagara Mohawk Power Corp.*...... $ 62,213
3,000 Northern States Power Co......... 137,625
6,700 Ohio Edison Co................... 152,425
18,100 Pacific Gas & Electric Co........ 380,100
12,900 PacifiCorp....................... 264,450
9,800 Peco Energy Co................... 247,450
7,100 PP&L Resources, Inc.............. 163,300
10,500 Public Service Enterprise Group,
Inc.............................. 286,125
29,600 Southern Co...................... 669,700
9,900 Texas Utilities Co............... 403,425
9,500 Unicom Corp...................... 257,688
4,500 Union Electric Co................ 173,250
------------
7,104,593
------------
UTILITIES -- GAS DISTRIBUTION -- 0.3%
4,200 Consolidated Natural Gas Co...... 232,050
900 Eastern Enterprises.............. 31,837
2,200 Nicor, Inc....................... 78,650
6,000 NorAm Energy Corp................ 92,250
1,200 ONEOK, Inc....................... 36,000
3,700 Pacific Enterprises.............. 112,388
1,500 People's Energy Corp............. 50,813
------------
633,988
------------
UTILITIES -- TELEPHONE -- 6.2%
8,300 Alltel Corp...................... 260,413
24,100 Ameritech Corp................... 1,461,062
71,156 AT&T Corp........................ 3,095,286
19,200 Bell Atlantic Corp............... 1,243,200
43,700 BellSouth Corp................... 1,764,387
42,300 GTE Corp......................... 1,924,650
30,100 MCI Communications Corp.......... 983,894
19,300 NYNEX Corp....................... 928,812
18,800 Pacific Telesis Group............ 690,900
26,500 SBC Communications, Inc.......... 1,371,375
18,900 Sprint Corp...................... 753,638
21,000 U.S. West, Inc................... 677,250
18,000 Worldcom, Inc.*.................. 469,125
------------
15,623,992
------------
TOTAL COMMON STOCKS.............. 247,069,284
(cost $162,869,407)
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ---------- ------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATION -- 0.3%
$705,000 U.S. Treasury Bill,
5.08%**, 6/26/97 (b)............. $ 687,389
------------
TOTAL U.S. GOVERNMENT
OBLIGATION....................... 687,389
(cost $687,905)
COMMERCIAL PAPER -- 2.1%
$5,354,434 Ford Motor Credit Co., 6.00%,
1/2/97........................... 5,354,434
------------
TOTAL COMMERCIAL PAPER........... 5,354,434
(cost $5,354,434)
TOTAL INVESTMENTS -- 99.9% ... 253,111,107
(cost $168,911,746)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%........................ 251,356
------------
NET ASSETS -- 100.0%......................... $253,362,463
============
- ----------
Percentages indicated are based on net assets of
$253,362,463.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax purposes
by the amount of losses recognized for financial
reporting in excess of federal income tax reporting of
approximately $839,000. Cost for federal income tax
purposes differs from value by net unrealized
appreciation of securities as follows:
Unrealized appreciation ... $ 86,024,712
Unrealized depreciation ... (2,664,351)
------------
Net unrealized appreciation ... $ 83,360,361
============
(b) Security has been deposited as initial
margin on open future contracts.
* Non-income producing security.
** Annualized yield at time of purchase.
ADR American Depository Receipt
</TABLE>
At December 31, 1996, the Fund's open future contracts were as follows:
<TABLE>
<CAPTION>
# OF OPENING CURRENT MARKET
CONTRACTS CONTRACT TYPE POSITION VALUE
- --------- ------------- ---------- ----------
<S> <C> <C> <C>
S & P 500
13 March 1997 $4,833,055 $4,839,250
</TABLE>
See Notes to Financial Statements
45
<PAGE> 252
THE KENT STATEMENTS OF ASSETS AND LIABILITIES
FUNDS DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROWTH SMALL
AND COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost................................. $420,776,264 $451,897,602 $ 333,836,478 $168,911,746
Net unrealized appreciation......................... 94,185,283 106,453,002 62,427,122 84,199,361
------------ ------------ ------------ ------------
Total investments at value........................ 514,961,547 558,350,604 396,263,600 253,111,107
Foreign currency at value (cost $894,580)............. -- -- 894,919 --
Receivable for investments sold....................... -- -- -- 54,970
Interest and dividends receivable..................... 1,176,840 455,718 467,170 421,317
Tax reclaim receivable................................ -- -- 483,045 --
Unrealized gains on forward foreign currency exchange
contracts........................................... -- -- 3,330 --
Prepaid expenses (Note 2)............................. -- 1,344 858 --
------------ ------------ ------------ ------------
Total Assets...................................... 516,138,387 558,807,666 398,112,922 253,587,394
------------ ------------ ------------ ------------
LIABILITIES:
Payable for investments purchased..................... -- 39,132 1,232,078 --
Payable for capital shares redeemed................... -- 257 30,776 --
Net payable for variation margin on future
contracts........................................... -- 26,530 -- 93,700
Advisory fees payable (Note 3)........................ 40,114 42,437 32,038 8,497
Distribution fees payable (Investment Shares) (Note
3).................................................. 3,143 2,972 1,839 2,098
Payable to administrator (Note 3)..................... 75,499 82,654 56,739 16,114
Payable to transfer agent (Note 3).................... 32,013 30,175 10,633 25,664
Payable to custodian.................................. 10,047 19,200 121,274 9,343
Accrued expenses and other liabilities................ 57,318 47,713 29,680 69,515
------------ ------------ ------------ ------------
Total Liabilities................................. 218,134 291,070 1,515,057 224,931
------------ ------------ ------------ ------------
NET ASSETS.............................................. $515,920,253 $558,516,596 $ 396,597,865 $253,362,463
============ ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital....................................... $416,316,045 $438,010,682 $ 335,104,648 $169,963,979
Undistributed (distributions in excess of) net
investment income................................... 9,008 21,461 (637,883) (733)
Accumulated net realized gains (losses) on
investments, foreign currency and futures contracts
sold................................................ 5,409,917 13,989,151 (293,774) (806,339)
Net unrealized appreciation of investments............ 94,185,283 106,453,002 62,427,122 84,199,361
Net unrealized depreciation of foreign currency and
forward foreign currency exchange contracts......... -- -- (2,248) --
Net unrealized appreciation of futures contracts...... -- 42,300 -- 6,195
------------ ------------ ------------ ------------
TOTAL NET ASSETS........................................ $515,920,253 $558,516,596 $ 396,597,865 $253,362,463
============ ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets............................................ $500,856,886 $544,080,907 $ 387,798,521 $243,437,579
Shares Outstanding.................................... 36,032,375 34,776,451 26,286,311 16,551,211
Net Asset Value, offering and redemption price per
share............................................... $ 13.90 $ 15.65 $ 14.75 $ 14.71
============ ============ ============ ============
INVESTMENT SHARES:
Net Assets............................................ $ 15,063,367 $ 14,435,689 $ 8,799,344 $ 9,924,884
Shares Outstanding.................................... 1,090,608 924,573 599,004 674,264
Net Asset Value and redemption price per share........ $ 13.81 $ 15.61 $ 14.69 $ 14.72
============ ============ ============ ============
Maximum Sales Charge -- Investment Shares............. 4.00% 4.00% 4.00% 4.00%
============ ============ ============ ============
Maximum Offering Price Per Share (100%/(100%-Maximum
Sales Charge) of net asset value adjusted to nearest
cent) (Investment Shares)........................... $ 14.39 $ 16.26 $ 15.30 $ 15.33
============ ============ ============ ============
<FN>
See Notes to Financial Statements.
</TABLE>
46
<PAGE> 253
THE KENT STATEMENTS OF OPERATIONS
FUNDS FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
GROWTH SMALL
AND COMPANY INTERNATIONAL INDEX
INCOME FUND GROWTH FUND GROWTH FUND EQUITY FUND
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 2):
Dividends................................................. $14,285,964 $ 8,841,723 $ 8,015,441 $ 5,181,285
Interest.................................................. 28,842 63,764 22,589 34,417
Less: Net foreign taxes withheld.......................... (10,190) -- (1,271,144) (10,113)
----------- ----------- ----------- -----------
Total Investment Income................................. 14,304,616 8,905,487 6,766,886 5,205,589
----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fees (Note 3)......................... 3,202,775 3,613,394 2,465,291 654,709
Administration fees (Note 3).............................. 907,073 1,023,402 651,538 436,103
Custodian fees............................................ 26,048 78,258 294,414 31,798
Legal and audit fees (Note 3)............................. 31,552 33,838 26,326 18,380
Transfer agent fees (Note 3).............................. 107,816 77,530 63,724 97,203
Distribution fees (Investment Shares) (Note 3)............ 32,309 32,104 20,815 20,946
Other expenses............................................ 54,847 92,372 83,206 36,658
----------- ----------- ----------- -----------
Total expenses before waivers........................... 4,362,420 4,950,898 3,605,314 1,295,797
Less: waivers (Note 3).................................. (10,783) (11,802) (8,113) (223,616)
----------- ----------- ----------- -----------
Net Expenses............................................ 4,351,637 4,939,096 3,597,201 1,072,181
----------- ----------- ----------- -----------
NET INVESTMENT INCOME....................................... 9,952,979 3,966,391 3,169,685 4,133,408
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS (NOTE 2):
Net realized gains on investments......................... 39,233,025 32,298,684 3,376,665 1,057,376
Net realized gains on futures contracts................... 2,415,000 3,527,985 -- 1,498,615
Net realized losses on foreign currency and forward
foreign currency exchange contracts..................... -- -- (45,781) --
Net change in unrealized appreciation/depreciation of
investments............................................. 30,902,403 53,847,793 11,900,956 37,969,480
Net change in unrealized appreciation/depreciation of
foreign currency and forward foreign currency exchange
contracts............................................... -- -- (8,886) --
Net change in unrealized appreciation/depreciation of
futures contracts....................................... -- 87,425 -- 49,520
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAINS
ON INVESTMENTS............................................ 72,550,428 89,761,887 15,222,954 40,574,991
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................. $82,503,407 $93,728,278 $18,392,639 $44,708,399
=========== =========== ============ ===========
<FN>
See Notes to Financial Statements.
</TABLE>
47
<PAGE> 254
THE KENT
FUNDS STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD...................... $412,450,592 $316,830,050 $461,027,443 $312,611,638
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income................................ 9,952,979 9,437,219 3,966,391 2,613,616
Net realized gains on investments.................... 39,233,025 29,158,461 32,298,684 13,578,009
Net realized gains on futures contracts.............. 2,415,000 86,350 3,527,985 1,119,425
Net change in unrealized appreciation/depreciation of
investments........................................ 30,902,403 64,996,671 53,847,793 50,415,105
Net change in unrealized appreciation/depreciation of
futures contracts.................................. -- -- 87,425 (45,125)
------------- ------------ ------------ ------------
Net increase in net assets resulting from
operations......................................... 82,503,407 103,678,701 93,728,278 67,681,030
------------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
INSTITUTIONAL:
Net investment income................................ (9,772,575) (9,117,562) (3,891,501) (2,536,986)
Net realized gains................................... (49,510,778) (15,389,908) (24,783,337) (21,377,049)
------------- ------------ ------------ ------------
Total Distributions -- Institutional Shares........ (59,283,353) (24,507,470) (28,674,838) (23,914,035)
------------- ------------ ------------ ------------
INVESTMENT:
Net investment income................................ (246,918) (225,735) (70,033) (52,489)
In excess of net investment income................... (18,400) -- (7,537) --
Net realized gains................................... (1,458,817) (419,285) (629,504) (575,105)
------------- ------------ ------------ ------------
Total Distributions -- Investment Shares........... (1,724,135) (645,020) (707,074) (627,594)
------------- ------------ ------------ ------------
Total Distributions to shareholders................ (61,007,488) (25,152,490) (29,381,912) (24,541,629)
------------- ------------ ------------ ------------
FUND SHARE TRANSACTIONS (NOTE 4):
Shares issued........................................ 153,847,838 138,196,829 135,473,783 218,014,323
Reinvestment of distributions........................ 27,411,595 11,234,369 14,891,206 13,605,763
Shares redeemed...................................... (99,285,691) (132,336,867) (117,222,202) (126,343,682)
------------- ------------ ------------ -------------
NET INCREASE FROM SHARE TRANSACTIONS................... 81,973,742 17,094,331 33,142,787 105,276,404
------------- ------------ ------------ ------------
Net increase in net assets........................... 103,469,661 95,620,542 97,489,153 148,415,805
------------- ------------ ------------ ------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)......... $515,920,253 $412,450,592 $558,516,596 $461,027,443
============ ============ ============ ============
(A) Accumulated undistributed net investment income.... $ 9,008 $ 93,922 $ 21,461 $ 24,141
============= ============ ============ ============
<FN>
See Notes to Financial Statements.
</TABLE>
48
<PAGE> 255
THE KENT STATEMENTS OF CHANGES IN NET ASSETS
FUNDS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD..................... $294,093,096 $184,724,501 $190,488,589 $250,286,380
------------ ------------ ------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income............................... 3,169,685 2,660,778 4,133,408 4,499,422
Net realized gains on investments................... 3,376,665 2,507,398 1,057,376 15,892,396
Net realized gains on futures contracts............. -- -- 1,498,615 1,921,920
Net realized gains (losses) on foreign currency and
foreign currency contracts........................ (45,781) 1,799,288
Net change in unrealized appreciation/depreciation
of investments.................................... 11,900,956 20,329,631 37,969,480 44,492,052
Net change in unrealized appreciation/depreciation
of futures contracts.............................. -- -- 49,520 (43,325)
Net change in unrealized appreciation/depreciation
of foreign currency and forward currency exchange
contracts......................................... (8,886) (15,164) -- --
------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations........................................ 18,392,639 27,281,931 44,708,399 66,762,465
------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTE 2):
INSTITUTIONAL:
Net investment income............................... (2,589,632) (2,613,863) (3,996,731) (4,347,671)
In excess of net investment income.................. (504,939) (2,246,651) -- --
Net realized gains.................................. (3,325,497) (4,858,921) (4,383,680) (25,081,995)
In excess of realized gains......................... (161,046) -- (668,004) --
------------ ------------ ------------ ------------
Total Distributions -- Institutional Shares....... (6,581,114) (9,719,435) (9,048,415) (29,429,666)
------------ ------------ ------------ ------------
INVESTMENT:
Net investment income............................... (49,833) (46,915) (137,968) (99,887)
In excess of net investment income.................. -- (59,182) (5,705) --
Net realized gains.................................. (82,522) (150,827) (199,306) (698,289)
------------ ------------ ------------ ------------
Total Distributions -- Investment Shares.......... (132,355) (256,924) (342,979) (798,176)
------------ ------------ ------------ ------------
Total Distributions to shareholders............... (6,713,469) (9,976,359) (9,391,394) (30,227,842)
------------ ------------ ------------ ------------
FUND SHARE TRANSACTIONS (NOTE 4):
Shares issued....................................... 139,625,382 153,567,406 72,390,118 58,690,104
Reinvestment of distributions....................... 3,275,693 5,007,653 6,280,152 18,776,943
Shares redeemed..................................... (52,075,476) (66,512,036) (51,113,401) (173,799,461)
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS....... 90,825,599 92,063,023 27,556,869 (96,332,414)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets............... 102,504,769 109,368,595 62,873,874 (59,797,791)
------------ ------------ ------------ ------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)........ $396,597,865 $294,093,096 $253,362,463 $190,488,589
============ ============ ============ ============
(A) Accumulated undistributed (distributions in excess
of) net investment income........................... $ (637,883) $ (506,545) $ (733) $ 51,864
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
49
<PAGE> 256
THE KENT
FUNDS NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. As of the
date of this report, the Trust offered thirteen managed investment portfolios.
The accompanying financial statements and financial highlights are those of The
Kent Growth and Income Fund, The Kent Small Company Growth Fund, The Kent
International Growth Fund, and The Kent Index Equity Fund (individually, a
"Portfolio", collectively the "Portfolios") only.
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Portfolios with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues thirteen series of shares with two
separate classes in each series, Investment Shares and Institutional Shares.
Each class of shares is entitled upon liquidation of a series to a pro rata
share in the net assets of that class of such series. Each share in each series
or class has identical voting, dividend, liquidation and other rights, except in
matters affecting only a particular series or class, in which case only shares
of the affected series or class are entitled to vote. Class specific expenses,
if any, are currently limited to expenses directly attributable to the
Investment Shares under a Distribution Plan, shareholder services fees and
certain printing and postage expenses incurred as they relate to a particular
class of shares.
The investment objective of the Growth and Income Fund is long-term capital
growth with current income as a secondary goal. The Small Company Growth Fund's
investment objective is to seek long-term capital appreciation by investing in
equity securities of small companies. The investment objective of the
International Growth Fund is to seek long-term growth of capital and additional
diversification for U.S. investors by investing in a varied portfolio of foreign
equity securities. The Index Equity Fund's investment objective is to seek
investment results which mirror the capital performance and dividend income of
the Standard & Poor's 500 Composite Stock Price Index.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Listed securities are valued at the last sales price on
the principal exchange where such securities are traded. Listed securities for
which last sales prices are not available are valued at the last bid price.
Unlisted securities are valued at the mean of the current bid and asked prices
in the principal market where such securities trade. Short-term obligations that
mature in 60 days or less are valued at amortized cost, which constitutes fair
value and approximates market value. All other securities and other assets are
appraised at their fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of the Board
of Trustees.
FOREIGN CURRENCY TRANSLATION: Investments and other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based upon current exchange rates. Realized gains and losses on
foreign investments and foreign income and expenses are converted into U.S.
dollars based upon exchange rates prevailing on the respective dates of such
transactions. That portion of unrealized gains or losses on investments due to
fluctuations in foreign currency exchange rates is not separately disclosed.
Foreign currency-denominated receivables and payables are "marked-to-market"
using the current exchange rate. The fluctuation between the original exchange
rate and the current exchange rate is recorded as unrealized currency gain or
loss. Upon receipt of payment, a Portfolio realizes a gain or loss on foreign
currency amounting to the difference between the original value and the ending
value of the receivable or payable. Foreign currency gains and losses related to
dividend receivables are reported as part of dividend income.
FUTURES CONTRACTS: Each Portfolio may invest in futures contracts. To the
extent that a Portfolio enters into futures contracts on an index or group of
securities the Portfolio exposes itself to an indeterminate liability and will
be required to pay or receive a sum of money
50
<PAGE> 257
THE KENT
FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
measured by the change in the market value of the index or group of securities.
Upon entering into a futures contract the Portfolio is required to deposit
either cash or securities in an amount ("initial margin") equal to a certain
percentage of the contract value with a broker. Subsequent payments ("variation
margin") equal to changes in the daily settlement price or last sale on the
exchanges where they trade are paid or received each day and are recorded as a
gain or loss on futures contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The International Growth Fund may
enter into forward foreign currency exchange contracts. The purpose of these
contracts is to hedge against fluctuation in the value of the underlying
currency of certain portfolio investments. A forward foreign currency exchange
contract is an agreement to purchase or sell a specified currency at a specified
price on a future date. Risks associated with the contract include changes in
the value of the foreign currency relative to the U.S. dollar and/or the
counterparty's potential inability to perform under the contract.
The forward foreign currency exchange contracts are valued daily using the
current exchange rate of the underlying currency with any fluctuations recorded
as unrealized gains or losses. Realized gains or losses are recognized when
entering a closing or offsetting forward foreign currency exchange contract with
the same settlement date and broker.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses from securities and
currency transactions are recorded on the basis of identified cost. Interest
income is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date.
The International Growth Fund, upon the purchase or sale of a security
denominated in a foreign currency, may enter into foreign currency exchange
contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of foreign currency involved in the underlying security transaction to
hedge the portfolio against currency fluctuations during the settlement period.
In such cases, the Portfolio has not realized currency gains or losses between
the trade and settlement dates on these security transactions.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare and
distribute dividends from net investment income monthly, with the exception of
the International Growth Fund which declares and pays dividends annually. Net
realized capital gains, if any, are distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL INCOME TAXES: For federal income tax purposes, each Portfolio is
treated as a separate entity for the purpose of determining its qualification as
a regulated investment company under the Internal Revenue Code (the "Code"). It
is the policy of each Portfolio to meet the requirements of the Code applicable
to regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required. Withholding taxes on foreign dividends have
been paid or provided for in accordance with the applicable country's tax rules
and rates.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one series of the
Trust are allocated among the respective series based upon relative net assets
or another appropriate basis. In addition, investors in Investment Shares will
pay the expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
51
<PAGE> 258
THE KENT
FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. RELATED PARTY TRANSACTIONS
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a member of the Michigan State Banking
Association and the principal subsidiary of Old Kent Financial Corporation. The
Investment Adviser is entitled to receive a fee, computed daily and paid
monthly, at the annual rate of 0.70% of the average daily net assets of the
Growth and Income Fund and Small Company Growth Fund, 0.75% of the average daily
net assets of the International Growth Fund and 0.30% of the average daily net
assets of the Index Equity Fund.
Effective August 5, 1996, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") assumed the duties as Administrator and Distributor for
the Trust from First Data Investor Services Group, Inc. ("First Data") and 440
Financial Distributors, Inc. an indirect wholly-owned subsidiary of First Data,
respectively. Also, effective August 5, 1996 and October 7, 1996, respectively,
BISYS Fund Services, Inc. assumed the duties as Fund Accountant and Transfer
Agent for the Trust from First Data. BISYS and BISYS Fund Services, Inc. are
both wholly owned subsidiaries of The BISYS Group, Inc. The Administrator is
entitled to receive a fee, computed daily and paid monthly, at the annual rate
of 0.185% of the average daily net assets of the Trust up to $5 billion; 0.165%
of the average daily net assets of the Trust in excess of $5 billion up to $7.5
billion; and 0.135% of the average daily net assets of the Trust in excess of
$7.5 billion. Fund Accounting fees are computed daily and paid monthly at the
annual rate of 0.015% of the average daily net assets of the Trust and are
included as part of the fees paid to the Administrator.
Transfer agent fees for each Portfolio for the year ended December 31, 1996
are as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- ------------------------------ ------------- ----------
<S> <C> <C>
Growth and Income Fund........ $ 104,746 $3,070
Small Company Growth Fund..... 75,603 1,927
International Growth Fund..... 62,056 1,668
Index Equity Fund............. 93,421 3,782
</TABLE>
The current and previous Administrators have voluntarily reduced their fees
for the Portfolios. Total administrative fees waived for the year ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- ------------------------------ ------------- ----------
<S> <C> <C>
Growth and Income Fund........ $ 10,469 $ 314
Small Company Growth Fund..... 11,505 297
International Growth Fund..... 7,930 183
Index Equity Fund............. 214,980 8,636
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Portfolios for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Portfolios pursuant to Rule 12b-1 of the 1940 Act. The
Plan provides for payments to the Distributor of up to 0.25% of the average
daily net assets of the Investment Shares of the Portfolios.
Distribution fees for each Portfolio for the year ended December 31, 1996 are
as follows:
<TABLE>
<CAPTION>
FUND INVESTMENT SHARES
- ----------------------------------- -----------------
<S> <C>
Growth and Income Fund............. $32,309
Small Company Growth Fund.......... 32,104
International Growth Fund.......... 20,815
Index Equity Fund.................. 20,946
</TABLE>
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath. A
partner of that firm serves as an Assistant Secretary of the Trust.
52
<PAGE> 259
THE KENT NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUNDS
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND SMALL COMPANY GROWTH FUND
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued......................................... $150,224,731 $135,405,690 $132,474,283 $214,950,302
Reinvestment of distributions......................... 25,727,424 10,602,239 14,200,151 12,988,002
Shares redeemed....................................... (97,365,654) (130,005,699) (115,454,666) (123,856,962)
------------ ------------ ------------ ------------
Net increase from Institutional Share
transactions...................................... $ 78,586,501 $ 16,002,230 $ 31,219,768 $104,081,342
============ ============ ============ ============
INVESTMENT:
Shares issued......................................... $ 3,623,107 $ 2,791,139 $ 2,999,500 $ 3,064,021
Reinvestment of distributions......................... 1,684,171 632,130 691,055 617,761
Shares redeemed....................................... (1,920,037) (2,331,168) (1,767,536) (2,486,720)
------------ ------------ ------------ ------------
Net increase from Investment Share transactions..... $ 3,387,241 $ 1,092,101 $ 1,923,019 $ 1,195,062
============ ============ ============ ============
Net increase from share transactions................ $ 81,973,742 $ 17,094,331 $ 33,142,787 $105,276,404
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued......................................... 10,889,808 10,940,374 8,964,612 15,959,355
Reinvestment of distributions......................... 1,890,610 836,269 937,802 1,016,738
Shares redeemed....................................... (7,034,231) (10,901,212) (7,693,348) (9,782,762)
------------ ------------ ------------ ------------
Net increase from Institutional Share
transactions...................................... 5,746,187 875,431 2,209,066 7,193,331
============ ============ ============ ============
INVESTMENT:
Shares issued......................................... 265,482 231,715 203,920 236,573
Reinvestment of distributions......................... 124,536 49,928 45,725 48,614
Shares redeemed....................................... (139,590) (207,110) (118,619) (195,767)
------------ ------------ ------------ ------------
Net increase from Investment Share transactions..... 250,428 74,533 131,026 89,420
============ ============ ============ ============
Net increase from share transactions................ 5,996,615 949,964 2,340,092 7,282,751
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
53
<PAGE> 260
THE KENT NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FUNDS
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH FUND INDEX EQUITY FUND
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------------------------ -------------------------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued........................................ $137,648,487 $151,546,595 $ 69,650,513 $ 56,866,010
Reinvestment of distributions........................ 3,147,652 4,756,128 5,950,954 18,021,509
Shares redeemed...................................... (50,898,479) (64,667,292) (50,001,044) (172,291,970)
------------ ------------ ------------ -------------
Net increase (decrease) from Institutional Share
transactions..................................... $ 89,897,660 $ 91,635,431 $ 25,600,423 $ (97,404,451)
============ ============ ============ =============
INVESTMENT:
Shares issued........................................ $ 1,976,895 $ 2,020,811 $ 2,739,605 $ 1,824,094
Reinvestment of distributions........................ 128,041 251,525 329,198 755,434
Shares redeemed...................................... (1,176,997) (1,844,744) (1,112,357) (1,507,491)
------------ ------------ ------------ -------------
Net increase from Investment Share transactions.... $ 927,939 $ 427,592 $ 1,956,446 $ 1,072,037
============ ============ ============ =============
Net increase (decrease) from share transactions.... $ 90,825,599 $ 92,063,023 $ 27,556,869 $ (96,332,414)
============ ============ ============ =============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued........................................ 9,359,272 11,200,281 5,172,550 4,734,274
Reinvestment of distributions........................ 215,585 346,491 434,418 1,508,630
Shares redeemed...................................... (3,491,780) (4,991,387) (3,699,843) (14,594,583)
------------ ------------ ------------ -------------
Net increase (decrease) from Institutional Share
transactions..................................... 6,083,077 6,555,385 1,907,125 (8,351,679)
============ ============ ============ =============
INVESTMENT:
Shares issued........................................ 137,013 153,600 205,672 149,481
Reinvestment of distributions........................ 8,820 18,673 24,012 62,301
Shares redeemed...................................... (81,019) (141,025) (81,276) (128,627)
------------ ------------ ------------ -------------
Net increase from Investment Share transactions.... 64,814 31,248 148,408 83,155
============ ============ ============ =============
Net increase (decrease) from share transactions.... 6,147,891 6,586,633 2,055,533 (8,268,524)
============ ============ ============ =============
</TABLE>
See Notes to Financial Statements.
54
<PAGE> 261
THE KENT
FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------------------ ------------ ------------
<S> <C> <C>
Growth and Income
Fund.................. $212,771,808 $172,450,396
Small Company Growth
Fund.................. 108,061,586 79,382,408
International Growth
Fund.................. 140,594,308 41,180,383
Index Equity Fund....... 28,300,325 4,117,798
</TABLE>
6. FOREIGN SECURITIES
The Growth and Income Fund and the International Growth Fund can purchase
securities of foreign issuers. Investing in securities of foreign issuers
involves special risks not typically associated with investing in securities of
U.S. issuers.
The risks include devaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign issuers and their
markets may be less liquid and their prices more volatile than those of
securities of comparable U.S. issuers.
7. FEDERAL INCOME TAX INFORMATION (UNAUDITED)
During the year ended December 31, 1996, the following Portfolios declared
long-term capital gain distributions in the following amounts:
<TABLE>
<CAPTION>
FUND AMOUNT
- --------------------------------------- -----------
<S> <C>
Growth and Income Fund................. $38,779,536
Small Company Growth Fund.............. 16,865,229
International Growth Fund.............. 3,240,886
Index Equity Fund...................... 4,624,058
</TABLE>
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
The International Growth Fund had deferred losses of $81,562 which will be
treated as arising on the first day of the fiscal year ending December 31, 1997.
For the taxable year ended December 31, 1996, the following percentages of
income dividends paid by the following Portfolios qualify for the dividends
received deduction available to corporations:
<TABLE>
<CAPTION>
QUALIFIED
FUND DIVIDEND INCOME
- ------------------------------------ ---------------
<S> <C>
Growth and Income Fund.............. 59.7%
Small Company Growth Fund........... 52.6
Index Equity Fund................... 96.0
</TABLE>
See Notes to Financial Statements.
55
<PAGE> 262
THE KENT
FUNDS
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 13.25 $ 10.50 $ 10.91 $ 10.31 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.30 0.33 0.31 0.27 0.06
Net realized and unrealized gains (losses) on
securities and futures contracts.................... 2.16 3.28 (0.26) 0.95 0.31
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 2.46 3.61 0.05 1.22 0.37
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.30) (0.33) (0.31) (0.27) (0.06)
In excess of net investment income.................... -- -- ** (0.01) **
Net realized gains on securities and futures
contracts........................................... (1.51) (0.53) (0.15) (0.34) --
-------- -------- -------- -------- --------
Total Dividends and Distributions................... (1.81) (0.86) (0.46) (0.62) (0.06)
-------- -------- -------- -------- --------
Net change in net asset value........................... 0.65 2.75 (0.41) 0.60 0.31
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 13.90 $ 13.25 $ 10.50 $ 10.91 $ 10.31
======== ======== ======== ======== ========
Total return............................................ 19.47% 34.91% 0.51% 11.98% 3.68%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $500,857 $401,371 $308,825 $180,864 $ 76,449
Ratio of expenses to average net assets............... 0.95% 0.94% 0.98% 1.03% 0.19%++
Ratio of net investment income to average net
assets.............................................. 2.18% 2.73% 3.04% 2.61% 3.51%+
Ratio of expenses to average net assets............... 0.95%* +++ +++ +++ +++
Ratio of net investment income to average net
assets.............................................. 2.18%* +++ +++ +++ +++
Portfolio turnover rate(2)............................ 39% 58% 28% 54% 0%
Average commission rate paid(3)....................... $ 0.0539 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
56
<PAGE> 263
THE KENT
FUNDS
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 13.19 $ 10.46 $ 10.87 $ 10.29 $ 10.23
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.26 0.30 0.32 0.27 **
Net realized and unrealized gains (losses) on
securities and futures contracts.................... 2.15 3.26 (0.27) 0.93 0.06
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 2.41 3.56 0.05 1.20 0.06
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.26) (0.30) (0.31) (0.23) --
In excess of net investment income.................... (0.02) -- ** (0.05) --
Net realized gains on securities and futures
contracts........................................... (1.51) (0.53) (0.15) (0.20) --
In excess of net realized gains....................... -- -- -- (0.14) --
-------- -------- -------- -------- --------
Total Dividends and Distributions................... (1.79) (0.83) (0.46) (0.62) --
-------- -------- -------- -------- --------
Net change in net asset value........................... 0.62 2.73 (0.41) 0.58 0.06
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 13.81 $ 13.19 $ 10.46 $ 10.87 $ 10.29
======== ======== ======== ======== ========
Total return(2)......................................... 19.14% 34.61% 0.50% 11.81% 0.59%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 15,063 $ 11,079 $ 8,005 $ 4,607 $ 102
Ratio of expenses to average net assets............... 1.09% 1.18% 0.98% 1.22% 0.33%++
Ratio of net investment income (loss) to average net
assets.............................................. 1.77% 2.48% 3.03% 2.43% (0.88%)+
Ratio of expenses to average net assets............... 1.09%* +++ +++ +++ +++
Ratio of net investment income to average net
assets.............................................. 1.77%* +++ +++ +++ +++
Portfolio turnover rate(3)............................ 39% 58% 28% 54% 0%
Average commission rate paid(4)....................... $ 0.0539 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 1,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(4) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
57
<PAGE> 264
THE KENT
FUNDS
SMALL COMPANY GROWTH FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 13.82 $ 11.99 $ 12.50 $ 10.85 $ 10.00
-------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income.................................. 0.12 0.10 0.10 0.08 0.02
Net realized and unrealized gains (losses) on
securities and futures contracts..................... 2.55 2.64 (0.10) 1.76 0.86
-------- -------- -------- -------- -------
Total Income from Investment Operations.............. 2.67 2.74 -- 1.84 0.88
-------- -------- -------- -------- -------
Less Dividends and Distributions from:
Net investment income.................................. (0.12) (0.10) (0.09) (0.08) (0.02)
In excess of net investment income..................... -- -- (0.01) (0.01) (0.01)
Net realized gains on securities and futures
contracts............................................ (0.72) (0.81) (0.41) (0.10) --
-------- -------- -------- -------- -------
Total Dividends and Distributions.................... (0.84) (0.91) (0.51) (0.19) (0.03)
-------- -------- -------- -------- -------
Net change in net asset value............................ 1.83 1.83 (0.51) 1.65 0.85
-------- -------- -------- -------- -------
Net asset value, end of period........................... $ 15.65 $ 13.82 $ 11.99 $ 12.50 $ 10.85
======== ======== ======== ======== =======
Total return............................................. 19.56% 23.75% (0.06) 17.04% 8.75%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)........................ $544,081 $450,072 $304,179 $252,401 $95,999
Ratio of expenses to average net assets................ 0.96% 0.97% 0.98% 1.06% 0.18%++
Ratio of net investment income to average net assets... 0.78% 0.83% 0.79% 0.74% 1.35%+
Ratio of expenses to average net assets................ 0.96%* +++ +++ +++ +++
Ratio of net investment income to average net assets... 0.78%* +++ +++ +++ +++
Portfolio turnover rate(2)............................. 16% 30% 20% 14% 1%
Average commission rate paid(3)........................ $ 0.0481 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
58
<PAGE> 265
THE KENT
FUNDS
SMALL COMPANY GROWTH FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992(1)
------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 13.81 $ 11.98 $12.49 $10.86 $10.65
------- ------- ------ ------ ------
Income (Loss) from Investment Operations:
Net investment income......................................... 0.07 0.07 0.10 0.08 **
Net realized and unrealized gains (losses) on securities and
futures contracts........................................... 2.54 2.64 (0.11) 1.74 0.21
------- ------- ------ ------ ------
Total Income (Loss) from Investment Operations.............. 2.61 2.71 (0.01) 1.82 0.21
------- ------- ------ ------ ------
Less Dividends and Distributions from:
Net investment income......................................... (0.08) (0.07) (0.08) (0.06) --
In excess of net investment income............................ (0.01) -- (0.01) (0.03) --
Net realized gains on securities and futures contracts........ (0.72) (0.81) (0.41) (0.10) --
------- ------- ------ ------ ------
Total Dividends and Distributions........................... (0.81) (0.88) (0.50) (0.19) --
------- ------- ------ ------ ------
Net change in net asset value................................... 1.80 1.83 (0.51) 1.63 0.21
------- ------- ------ ------ ------
Net asset value, end of period.................................. $ 15.61 $ 13.81 $11.98 $12.49 $10.86
======= ======= ====== ====== ======
Total return(2)................................................. 19.16% 23.47% (0.08%) 16.84% 1.97%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)............................... $14,436 $10,955 $8,433 $5,345 $ 84
Ratio of expenses to average net assets....................... 1.21% 1.20% 0.98% 1.25% 0.27%++
Ratio of net investment income to average net assets.......... 0.53% 0.59% 0.79% 0.59% (1.50%)+
Ratio of expenses to average net assets....................... 1.21%* +++ +++ +++ +++
Ratio of net investment income to average net assets.......... 0.53%* +++ +++ +++ +++
Portfolio turnover rate(3).................................... 16% 30% 20% 14% 1%
Average commission rate paid(4)............................... $0.0481 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
* Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 4,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(4) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
59
<PAGE> 266
THE KENT
FUNDS
INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 14.18 $ 13.06 $ 12.84 $ 10.01 $ 10.00
-------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income................................. 0.13 0.13 0.12 0.09 **
Net realized and unrealized gains (losses) on
securities and foreign currency..................... 0.70 1.54 0.61 2.95 0.02
-------- -------- -------- -------- -------
Total Income from Investment Operations................. 0.83 1.67 0.73 3.04 0.02
-------- -------- -------- -------- -------
Less Dividends and Distributions from:
Net investment income................................. (0.10) (0.13) (0.07) (0.08) --
In excess of net investment income.................... (0.02) (0.11) (0.03) (0.04) (0.01)
Net realized gains on securities and foreign
currency............................................ (0.13) (0.31) (0.41) (0.08) --
In excess of net realized gains....................... (0.01) -- -- (0.01) --
-------- -------- -------- -------- -------
Total Dividends and Distributions................... (0.26) (0.55) (0.51) (0.21) (0.01)
-------- -------- -------- -------- -------
Net change in net asset value........................... 0.57 1.12 0.22 2.83 0.01
-------- -------- -------- -------- -------
Net asset value, end of period.......................... $ 14.75 $ 14.18 $ 13.06 $ 12.84 $ 10.01
======== ======== ======== ======== =======
Total return............................................ 5.87% 13.00% 5.73% 30.32% 0.20%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $387,799 $286,545 $178,186 $157,716 $ 81,105
Ratio of expenses to average net assets............... 1.09% 1.17% 1.22% 1.33% 0.14%++
Ratio of net investment income to average net
assets.............................................. 0.97% 1.35% 0.87% 0.86% (0.28%)+
Ratio of expenses to average net assets............... 1.09%* +++ +++ +++ +++
Ratio of net investment income to average net
assets.............................................. 0.97%* +++ +++ +++ +++
Portfolio turnover rate(2)............................ 13% 6% 20% 5% 0%
Average commission rate paid(3)....................... $ 0.0219 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on December 4, 1992.
(2) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
60
<PAGE> 267
THE KENT
FUNDS
INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 14.13 $ 13.00 $ 12.81 $ 10.03 $ 10.00
-------- -------- -------- -------- -------
Income from Investment Operations:
Net investment income................................. 0.12 0.14 0.14 0.13 **
Net realized and unrealized gains on securities and
foreign currency.................................... 0.66 1.50 0.56 2.85 0.03
-------- -------- -------- -------- -------
Total Income from Investment Operations............. 0.78 1.64 0.70 2.98 0.03
-------- -------- -------- -------- -------
Less Dividends and Distributions from:
Net investment income................................. (0.08) (0.09) (0.07) (0.02) --
In excess of net investment income.................... -- (0.11) (0.03) (0.09) --
Net realized gains on securities and foreign
currency............................................ (0.14) (0.31) (0.41) (0.05) --
In excess of net realized gains....................... -- -- -- (0.04) --
-------- -------- -------- -------- -------
Total Dividends and Distributions................... (0.22) (0.51) (0.51) (0.20) --
-------- -------- -------- -------- -------
Net change in net asset value........................... 0.56 1.13 0.19 2.78 0.03
-------- -------- -------- -------- -------
Net asset value, end of period.......................... $ 14.69 $ 14.13 $ 13.00 $ 12.81 $ 10.03
======== ======== ======== ======== =======
Total return(2)......................................... 5.57% 12.86% 5.51% 29.67% 0.30%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $ 8,799 $ 7,548 $ 6,539 $ 3,202 $ 15
Ratio of expenses to average net assets............... 1.34% 1.40% 1.25% 1.43% 0.20%++
Ratio of net investment income to average net
assets.............................................. 0.74% 1.11% 0.81% 0.32% (1.34%)+
Ratio of expenses to average net assets............... 1.34%* +++ +++ +++ +++
Ratio of net investment income to average net
assets.............................................. 0.74%* +++ +++ +++ +++
Portfolio turnover rate(3)............................ 13% 6% 20% 5% 0%
Average commission rate paid(4)....................... $ 0.0219 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 4,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(4) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
61
<PAGE> 268
THE KENT
FUNDS
INDEX EQUITY FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 12.56 $ 10.68 $ 11.04 $ 10.41 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................. 0.26 0.26 0.25 0.23 0.05
Net realized and unrealized gains (losses) on
securities and futures contracts.................... 2.47 3.44 (0.15) 0.71 0.41
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 2.73 3.70 0.10 0.94 0.46
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income................................. (0.26) (0.25) (0.26) (0.23) (0.05)
In excess of net investment income.................... -- -- -- ** **
Net realized gains on securities and future
contracts........................................... (0.28) (1.57) (0.20) (0.08) --
In excess of net realized gains....................... (0.04) -- -- -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions................... (0.58) (1.82) (0.46) (0.31) (0.05)
-------- -------- -------- -------- --------
Net change in net asset value........................... 2.15 1.88 (0.36) 0.63 0.41
-------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 14.71 $ 12.56 $ 10.68 $ 11.04 $ 10.41
======== ======== ======== ======== ========
Total return............................................ 22.18% 36.23% 0.86% 9.11% 4.55%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................... $243,438 $183,877 $245,550 $233,451 $153,431
Ratio of expenses to average net assets............... 0.49% 0.56% 0.58% 0.65% 0.13%++
Ratio of net investment income to average net
assets.............................................. 1.91% 2.14% 2.32% 2.18% 2.65%+
Ratio of expenses to average net assets*.............. 0.59% 0.56% 0.58% 0.65% 0.13%++
Ratio of net investment income to average net
assets*............................................. 1.81% 2.14% 2.32% 2.18% 2.65%+
Portfolio turnover rate(2)............................ 2% 3% 50% 1% 0%
Average commission rate paid(3)....................... $ 0.0496 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(3) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
62
<PAGE> 269
THE KENT
FUNDS
INDEX EQUITY FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992(1)
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 12.57 $10.70 $11.07 $10.44 $ 10.28
------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income......................................... 0.22 0.23 0.26 0.22 **
Net realized and unrealized gains (losses) on securities and
futures contracts........................................... 2.48 3.44 (0.17) 0.72 0.16
------ ------ ------ ------ ------
Total Income from Investment Operations......................... 2.70 3.67 0.09 0.94 0.16
------ ------ ------ ------ ------
Less Dividends and Distributions from:
Net investment income......................................... (0.22) (0.23) (0.26) (0.20) --
In excess of net investment income............................ (0.01) -- -- (0.03) --
Net realized gains on securities and futures contracts........ (0.32) (1.57) (0.20) (0.06) --
In excess of net realized gains............................... -- -- -- (0.02) --
------ ------ ------ ------ ------
Total Dividends and Distributions........................... (0.55) (1.80) (0.46) (0.31) --
------ ------ ------ ------ ------
Net change in net asset value................................... 2.15 1.87 (0.37) 0.63 0.16
------ ------ ------ ------ ------
Net asset value, end of period.................................. $ 14.72 $12.57 $10.70 $11.07 $ 10.44
====== ====== ====== ====== ======
Total return(2)................................................. 21.92% 35.81% 0.75% 9.09% 1.56%++
Net Assets, end of Period (000's)............................... $ 9,925 $6,612 $4,736 $3,776 $ 89
Ratio of expenses to average net assets....................... 0.74% 0.80% 0.60% 0.86% 0.12%++
Ratio of net investment income to average net assets.......... 1.67% 1.86% 2.30% 2.04% 1.03%+
Ratio of expenses to average net assets*...................... 0.84% 0.81% 0.60% 0.86% 0.12%++
Ratio of net investment income to average net assets*......... 1.57% 1.85% 2.30% 2.04% 1.03%+
Portfolio turnover rate(3).................................... 2% 3% 50% 1% 0%
Average commission rate paid(4)............................... $0.0496 -- -- -- --
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was November 25,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the fund as a whole
without distinguishing between the classes of shares issued.
(4) The average commission represents the total dollar amount of commissions
paid on portfolio transactions divided by total number of portfolio shares
purchased and sold for which commissions were charged. Disclosure is not
required for prior periods.
</TABLE>
See Notes to Financial Statements.
63
<PAGE> 270
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
The Kent Funds:
We have audited the accompanying statements of assets and liabilities of The
Kent Funds -- Growth and Income Fund, Small Company Growth Fund, International
Growth Fund, and Index Equity Fund, including the portfolios of investments, as
of December 31, 1996, and the related statements of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of The Kent Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1996, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds at December 31, 1996, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
<PAGE> 271
The Kent SHORT TERM BOND FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 49.8%
U.S. TREASURY NOTES -- 49.8%
$ 5,000,000 5.13%, 4/30/98................. $ 4,961,700
16,200,000 7.13%, 10/15/98................ 16,544,250
25,000,000 8.88%, 11/15/98................ 26,304,750
43,000,000 7.50%, 10/31/99................ 44,599,170
12,500,000 5.63%, 2/28/01................. 12,252,000
5,000,000 6.63%, 7/31/01................. 5,079,700
8,000,000 7.50%, 11/15/01................ 8,421,280
-------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 118,162,850
-------------
(cost $118,540,527)
U.S. GOVERNMENT AGENCY OBLIGATION -- 2.1%
FEDERAL HOME LOAN MORTGAGE
CORP. -- 2.1%
5,000,000 4.65%*, 3/11/97................ 4,951,900
-------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION..................... 4,951,900
-------------
(cost $5,000,000)
CORPORATE NOTES AND BONDS -- 46.2%
BANKING -- 4.3%
5,000,000 Chase Manhattan Corp.,
7.50%, 12/1/97................. 5,062,200
5,000,000 National Bank of Detroit,
Medium Term Note,
6.45%, 7/10/97................. 5,022,800
-------------
10,085,000
-------------
BROKERS -- 4.7%
6,000,000 Morgan Stanley Group, Inc.,
Medium Term Note,
6.50%, 3/30/01................. 5,978,040
5,000,000 Salomon, Inc., Medium Term
Note,
8.71%, 2/17/98................. 5,141,250
-------------
11,119,290
-------------
COMPUTER HARDWARE MANUFACTURING -- 2.1%
5,000,000 International Business Machines
Corp.,
6.38%, 11/1/97................. 5,018,050
-------------
ENTERTAINMENT -- 2.1%
5,000,000 Walt Disney Co., Series A,
Global Bond,
6.38%, 3/30/01................. 4,978,000
-------------
FINANCE -- 19.6%
5,329,000 Associates Corp. N.A.,
5.25%, 3/30/00................. 5,144,990
6,000,000 AT&T Capital Corp.,
7.39%, 4/15/97................. 6,028,260
5,000,000 Ford Motor Credit Corp.,
7.13%, 12/1/97................. 5,050,350
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS (CONTINUED)
FINANCE (CONTINUED)
$ 5,000,000 General Motors Acceptance
Corp., Medium Term Note,
6.75%, 4/29/97................. $ 5,016,750
5,000,000 General Motors Acceptance
Corp., Medium Term Note,
8.25%, 1/23/98................. 5,120,900
5,000,000 Goldman Sachs Group, L.P.,
6.10%, 4/15/98 (b)............. 4,973,700
5,000,000 Household Finance Corp., Medium
Term Note,
6.85%, 7/21/97................. 5,026,700
5,000,000 New England Education Loan
Marketing Corp., Medium Term
Note,
6.13%, 7/17/98................. 4,987,500
5,000,000 Norwest Corp., Medium Term
Note,
7.13%, 9/9/99.................. 5,103,600
-------------
46,452,750
-------------
INSURANCE -- 2.1%
5,000,000 Travelers Group, Inc.,
5.75%, 4/15/98................. 4,973,700
-------------
PHARMACEUTICALS -- 2.2%
5,000,000 American Home Products Corp.,
7.70%, 2/15/00................. 5,184,650
-------------
RETAIL -- 2.4%
5,500,000 Sears Roebuck & Co.,
8.45%, 11/1/98................. 5,708,835
-------------
TELECOMMUNICATIONS -- 2.5%
6,000,000 Southwestern Bell Telephone
Co., Medium Term Note,
6.13%, 3/12/01................. 5,910,720
-------------
TRANSPORTATION -- 2.1%
5,000,000 Ryder System, Inc., Medium Term
Note,
7.88%, 11/24/97................ 5,077,400
-------------
UTILITIES -- 2.1%
5,000,000 Georgia Power Co., First
Mortgage,
6.13%, 9/1/99.................. 4,971,900
-------------
TOTAL CORPORATE NOTES AND
BONDS.......................... 109,480,295
-------------
(cost $109,906,325)
COMMERCIAL PAPER -- 0.4%
FINANCE -- 0.4%
967,762 Ford Motor Credit Corp.,
6.00%, 1/2/97.................. 967,762
-------------
TOTAL COMMERCIAL PAPER......... 967,762
-------------
(cost $967,762)
</TABLE>
Continued
13
<PAGE> 272
The Kent SHORT TERM BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
(NOTE 2)
-------------
<S> <C>
TOTAL INVESTMENTS -- 98.5%................... $ 233,562,807
(cost $234,414,614)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES --
1.5%....................................... 3,534,103
-------------
NET ASSETS -- 100.0%......................... $ 237,096,910
=============
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of
$237,096,910.
(a) Represents cost for federal income tax purposes and
differs from value by net unrealized depreciation of
securities as follows:
Unrealized appreciation............ $ 1,270,773
Unrealized depreciation............ (2,122,580)
-----------
Net unrealized depreciation........ $ (851,807)
============
(b) 144a security which is restricted as to resale to
institutional investors.
* Variable rate security. Rate presented represents
rate in effect at December 31, 1996. Maturity date
reflects next rate change date.
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 273
The Kent INTERMEDIATE BOND FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 75.7%
U.S. TREASURY NOTES -- 69.8%
$ 34,000,000 5.25%, 7/31/98................. $ 33,718,480
20,000,000 8.88%, 11/15/98................ 21,043,800
35,000,000 6.38%, 5/15/99................. 35,300,650
38,000,000 7.50%, 10/31/99................ 39,413,220
76,250,000 7.75%, 1/31/00................. 79,788,762
30,000,000 6.88%, 3/31/00................. 30,675,000
24,000,000 8.75%, 8/15/00................. 26,010,000
33,500,000 6.25%, 8/31/00................. 33,625,625
47,000,000 6.38%, 3/31/01................. 47,315,840
40,000,000 7.50%, 11/15/01................ 42,106,400
65,000,000 6.25%, 2/15/03................. 64,918,750
32,000,000 7.88%, 11/15/04................ 34,920,000
6,465,000 6.50%, 5/15/05................. 6,508,445
26,210,000 7.00%, 7/15/06................. 27,229,831
19,710,000 6.50%, 10/15/06................ 19,817,814
------------
542,392,617
------------
U.S TREASURY BONDS -- 5.9%
30,000,000 9.13%, 5/15/09................. 34,551,600
10,000,000 7.50%, 11/15/16................ 10,825,000
------------
45,376,600
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 587,769,217
------------
(cost $594,399,216)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 4.3%
FEDERAL HOME LOAN BANK -- 0.6%
5,000,000 6.49%, 1/8/04.................. 4,983,250
------------
FEDERAL HOME LOAN MORTGAGE
CORP. -- 2.5%
5,000,000 4.65%*, 3/11/97................ 4,951,900
10,410,000 8.12%, 1/31/05................. 11,330,660
3,000,000 7.22%, 6/14/06................. 3,100,320
------------
19,382,880
------------
FEDERAL NATIONAL MORTGAGE ASSOC. -- 1.2%
9,100,000 6.15%, 7/25/16................. 9,045,946
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 33,412,076
------------
(cost $33,754,514)
COMMERCIAL PAPER -- 0.1%
FINANCE -- 0.1%
804,948 Ford Motor Credit Corp., 6.00%,
1/2/97......................... 804,948
------------
TOTAL COMMERCIAL PAPER......... 804,948
------------
(cost $804,948)
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
CORPORATE NOTES AND BONDS -- 18.8%
BANKING -- 6.6%
$ 6,000,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. $ 6,246,840
7,000,000 Chemical Bank, 7.00%, 6/1/05... 6,985,300
8,000,000 Midland Bank PLC, 6.95%,
3/15/11........................ 7,718,320
5,000,000 NCNB Corp., 9.38%, 9/15/09..... 5,856,300
8,000,000 Royal Bank of Scotland, 6.38%,
2/1/11......................... 7,347,440
7,000,000 Societe Generale New York,
9.88%, 7/15/03................. 8,076,390
9,350,000 Societe Generale New York,
7.40%, 6/1/06.................. 9,512,130
------------
51,742,720
------------
BROKERS -- 3.6%
5,000,000 Morgan Stanley Group, Inc.,
Medium Term Note, Series C,
6.70%, 5/1/01.................. 5,015,850
5,000,000 Salomon, Inc., Medium Term
Note, 6.22%*, 2/15/99.......... 5,010,250
5,000,000 Salomon, Inc., 7.25%, 5/1/01... 5,047,300
5,000,000 Smith Barney Holdings, Inc.,
6.63%, 11/15/03................ 4,923,450
8,000,000 Smith Barney Holdings, Inc.,
7.13%, 10/1/06................. 7,990,000
------------
27,986,850
------------
FINANCIAL SERVICES -- 7.1%
10,000,000 CIT Group Holdings, Medium Term
Note, 6.25%, 10/25/99.......... 9,980,300
10,000,000 Ford Capital, Guaranteed Notes,
9.88%, 5/15/02................. 11,374,000
8,400,000 Ford Motor Credit Corp., Medium
Term Note, 9.03%, 12/30/09,
Callable 12/30/04 @ 100........ 9,370,704
5,000,000 General Electric Capital Corp.,
6.66%*, 5/1/18, Callable 5/1/00
@ 100.......................... 5,031,300
4,000,000 Household Finance Corp., 6.88%,
3/1/03......................... 4,020,360
10,000,000 New England Education, Loan
Marketing Corp., Medium Term
Note, 6.13%, 7/17/98........... 9,975,000
5,000,000 Sears Roebuck Acceptance Corp.,
Medium Term Note, 6.86%,
8/6/01......................... 5,040,200
------------
54,791,864
------------
</TABLE>
Continued
15
<PAGE> 274
The Kent INTERMEDIATE BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ ------------
<S> <C> <C>
CORPORATE NOTES AND BONDS (CONTINUED)
HUMAN RESOURCES -- 0.7%
$ 5,500,000 Olsten Corp., 7.00%, 3/15/06... $ 5,461,775
------------
TELECOMMUNICATIONS -- 0.8%
6,000,000 Bell Canada, 7.75%, 4/1/06..... 6,292,140
------------
TOTAL CORPORATE NOTES AND BONDS
(cost $144,750,685)............ 146,275,349
------------
TOTAL INVESTMENTS -- 98.9%................... 768,261,590
(cost $773,709,363)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES --
1.1%....................................... 8,461,248
------------
NET ASSETS -- 100.0%......................... $776,722,838
============
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of $776,722,838.
(a) Represents cost for financial reporting purposes and
differs from cost basis for federal income tax
purposes by the amount of losses recognized for
financial reporting in excess of federal income tax
reporting of approximately $687,000. Cost for federal
income tax purposes differs from value by net
unrealized depreciation of securities as follows:
Unrealized appreciation.......... $ 4,518,491
Unrealized depreciation.......... (10,653,264)
------------
Net unrealized depreciation...... $ (6,134,773)
============
* Variable rate security. Rate presented represents rate
in effect at December 31, 1996. Maturity date reflects
next rate change date.
PLC Public Limited Company
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 275
The Kent INCOME FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS -- 62.6%
U.S. TREASURY BONDS -- 62.6%
$30,000,000 11.88%, 11/15/03............... $ 39,135,900
25,000,000 10.38%, 11/15/12............... 32,195,250
41,800,000 9.25%, 2/15/16................. 53,066,354
10,350,000 7.25%, 5/15/16................. 10,928,979
7,500,000 8.75%, 8/15/20................. 9,234,375
7,000,000 7.13%, 2/15/23................. 7,308,420
-------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS.................... 151,869,278
-------------
(cost $151,160,825)
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.2%
FEDERAL HOME LOAN MORTGAGE
CORP. -- 1.1%
2,500,000 7.22%, 6/14/06................. 2,583,600
-------------
FEDERAL NATIONAL MORTGAGE
ASSOC. -- 2.1%
5,000,000 7.40%, 7/1/04.................. 5,239,850
-------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS.................... 7,823,450
-------------
(cost $7,520,354)
COMMERCIAL PAPER -- 0.2%
FINANCE -- 0.2%
478,449 Ford Motor Credit Corp.,
6.00%, 1/2/97.................. 478,449
-------------
TOTAL COMMERCIAL PAPER......... 478,449
-------------
(cost $478,449)
CORPORATE NOTES AND BONDS -- 30.9%
BANKING -- 14.7%
2,700,000 Bank of Montreal-Chicago,
7.80%, 4/1/07.................. 2,811,078
2,000,000 Bank of New York,
8.50%, 12/15/04................ 2,184,060
2,000,000 BankAmerica Corp.,
7.20%, 4/15/06................. 2,019,580
2,000,000 Chase Manhattan Corp.,
7.13%, 3/1/05.................. 2,014,820
2,000,000 Fleet Financial Group,
8.63%, 1/15/07................. 2,206,680
2,000,000 Midland Bank PLC,
7.63%, 6/15/06................. 2,070,920
2,000,000 Midland Bank PLC,
6.95%, 3/15/11................. 1,929,580
3,000,000 National City Bank of
Cleveland,
7.25%, 7/15/10................. 3,007,050
3,000,000 NCNB Corp.,
10.20%, 7/15/15................ 3,795,570
2,250,000 PNC Bank, N.A.,
7.88%, 4/15/05................. 2,354,175
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS (CONTINUED)
BANKING (CONTINUED)
$2,000,000 Republic New York Corp.,
7.00%, 3/22/11................. $ 1,965,860
3,000,000 Royal Bank of Scotland,
6.38%, 2/1/11.................. 2,755,290
4,600,000 Societe Generale New York,
7.40%, 6/1/06.................. 4,679,764
2,000,000 Swiss Bank Corp. -- New York,
7.38%, 7/15/15................. 1,991,440
-------------
35,785,867
-------------
BROKERS -- 1.7%
2,000,000 Lehman Brothers Holdings, Inc.,
8.75%, 3/15/05................. 2,154,120
2,000,000 Salomon, Inc.,
6.75%, 2/15/03................. 1,958,820
-------------
4,112,940
-------------
CHEMICALS -- 1.3%
3,000,000 Engelhard Corp.,
7.38%, 8/1/06.................. 3,089,850
-------------
FINANCIAL SERVICES -- 4.5%
2,000,000 Discover Credit,
9.26%, 3/20/12................. 2,370,000
2,000,000 Ford Motor Credit Corp.,
9.03%, 12/30/09, Callable
12/30/04 @ 100................. 2,231,120
2,000,000 General Motors Acceptance
Corp.,
9.13%, 7/15/01................. 2,186,500
4,000,000 St. Paul Cos., Inc.,
7.25%, 8/9/07.................. 4,080,280
-------------
10,867,900
-------------
GAS TRANSMISSION -- 1.0%
2,500,000 Enserch Corp.,
7.13%, 6/15/05................. 2,487,800
-------------
HUMAN RESOURCES -- 0.6%
1,500,000 Olsten Corp.,
7.00%, 3/15/06................. 1,489,575
-------------
INSURANCE -- 1.7%
2,000,000 Geico Corp.,
7.50%, 4/15/05................. 2,067,760
2,000,000 Travelers Group, Inc.,
7.88%, 5/15/25................. 2,088,980
-------------
4,156,740
-------------
OIL & GAS -- 2.5%
5,000,000 Phillips Petroleum Co.,
9.38%, 2/15/11................. 5,971,750
-------------
RETAIL STORES -- 2.1%
5,000,000 Fred Meyer, Inc., Lease Trust,
8.50%, 7/15/17 (b)............. 5,166,500
-------------
</TABLE>
Continued
17
<PAGE> 276
The Kent INCOME FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ------------ -------------
<S> <C> <C>
CORPORATE NOTES AND BONDS (CONTINUED)
UTILITIES -- 0.8%
$2,000,000 Pacific Gas & Electric,
6.25%, 3/1/04.................. $ 1,918,380
-------------
TOTAL CORPORATE NOTES AND
BONDS.......................... 75,047,302
-------------
(cost $73,925,490)
FOREIGN GOVERNMENT AGENCY -- 0.5%
CANADA -- 0.5%
1,000,000 Hydro-Quebec,
9.41%, 3/23/00................. 1,081,880
-------------
TOTAL FOREIGN GOVERNMENT
AGENCY......................... 1,081,880
-------------
(cost $1,059,483)
MUNICIPAL SECURITY -- 0.8%
CALIFORNIA -- 0.8%
2,000,000 San Bernardino County Financing
Authority,
Pension Obligation Revenue,
6.99%, 8/1/10,
(Insured by MBIA).............. 1,995,000
-------------
TOTAL MUNICIPAL SECURITY....... 1,995,000
-------------
(cost $2,030,920)
TOTAL INVESTMENTS -- 98.2%................... 238,295,359
(cost $236,175,521)(a)
OTHER ASSETS IN EXCESS OF LIABILITIES --
1.8%....................................... 4,486,356
-------------
NET ASSETS -- 100.0%......................... $ 242,781,715
=============
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of
$242,781,715.
(a) Represents cost for federal income tax purposes and
differs from value by net unrealized appreciation of
securities as follows:
Unrealized appreciation............ $ 3,752,698
Unrealized depreciation............ (1,632,860)
-----------
Net unrealized appreciation........ $ 2,119,838
============
(b) 144a security which is restricted as to resale to
institutional investors.
MBIA -- Municipal Bond Insurance Association
PLC -- Public Limited Company
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 277
The Kent STATEMENTS OF ASSETS AND LIABILITIES
Funds DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT TERM
BOND INTERMEDIATE
FUND BOND FUND INCOME FUND
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.................................................. $234,414,614 $773,709,363 $236,175,521
Net unrealized appreciation (depreciation)........................... (851,807) (5,447,773) 2,119,838
------------ ------------ ------------
Total investments at value......................................... 233,562,807 768,261,590 238,295,359
Interest and dividends receivable...................................... 3,628,157 13,741,603 4,592,584
Unamortized organizational costs (Note 2).............................. -- -- 6,024
Prepaid expenses....................................................... 1,563 2,223 --
------------ ------------ ------------
Total Assets......................................................... 237,192,527 782,005,416 242,893,967
------------ ------------ ------------
LIABILITIES:
Payable for investments purchased...................................... -- 5,000,000 --
Advisory fees payable (Note 3)......................................... 12,946 47,973 16,025
Payable to administrator (Note 3)...................................... 36,430 120,027 36,186
Payable to transfer agent (Note 3)..................................... 16,608 39,857 11,758
Printing fees payable.................................................. 4,851 12,085 6,901
Registration & filing fees payable..................................... -- -- 18,318
Accrued expenses and other liabilities................................. 24,782 62,636 23,064
------------ ------------ ------------
Total Liabilities.................................................... 95,617 5,282,578 112,252
------------ ------------ ------------
NET ASSETS............................................................... $237,096,910 $776,722,838 $242,781,715
============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $243,035,195 $789,079,580 $239,174,252
Accumulated undistributed net investment income........................ 108,998 131,834 49,689
Accumulated net realized gains (losses) on investments sold............ (5,195,476) (7,040,803) 1,437,936
Net unrealized appreciation/depreciation of investments................ (851,807) (5,447,773) 2,119,838
------------ ------------ ------------
TOTAL NET ASSETS......................................................... $237,096,910 $776,722,838 $242,781,715
============ ============ ============
INSTITUTIONAL SHARES:
Net Assets............................................................. $235,430,128 $769,395,499 $240,059,997
Shares Outstanding..................................................... 24,151,394 78,822,775 23,623,536
Net Asset Value, offering and redemption price per share............... $ 9.75 $ 9.76 $ 10.16
============ ============ ============
INVESTMENT SHARES:
Net Assets............................................................. $ 1,666,782 $ 7,327,339 $ 2,721,718
Shares Outstanding..................................................... 171,112 749,163 267,927
Net Asset Value and redemption price per share......................... $ 9.74 $ 9.78 $ 10.16
============ ============ ============
Maximum Sales Charge -- Investment Shares.............................. 4.00% 4.00% 4.00%
============ ============ ============
Maximum Offering Price Per Share -- Investment Shares
(100%/(100%-Maximum Sales Charge) of net asset value
adjusted to nearest cent)............................................ $ 10.15 $ 10.19 $ 10.58
============ ============ ============
</TABLE>
See Notes to Financial Statements.
19
<PAGE> 278
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SHORT TERM
BOND INTERMEDIATE
FUND BOND FUND INCOME FUND
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME (NOTE 2):
Interest.............................................................. $19,169,228 $ 55,874,467 $14,688,283
Dividends............................................................. 249,655 1,250,117 234,655
Other income.......................................................... 49,300 -- --
----------- ------------ -----------
Total Investment Income............................................. 19,468,183 57,124,584 14,922,938
----------- ------------ -----------
EXPENSES:
Investment advisory fees (Note 3)..................................... 1,421,272 4,537,199 1,209,526
Administration fees (Note 3).......................................... 563,561 1,635,571 399,104
Custodian fees........................................................ 13,952 30,360 13,946
Legal and audit fees (Note 3)......................................... 11,500 41,331 23,288
Transfer agent fees (Note 3).......................................... 32,649 76,868 25,309
Distribution fees (Note 3)............................................ 3,861 18,017 5,672
Amortization of organization costs (Note 2)........................... -- -- 1,855
Other expenses........................................................ -- 56,522 1,358
----------- ------------ -----------
Total Expenses before waivers....................................... 2,046,795 6,395,868 1,680,058
Less: Waivers (Note 3).............................................. (6,738) (17,116) (5,166)
----------- ------------ -----------
Net Expenses.......................................................... 2,040,057 6,378,752 1,674,892
----------- ------------ -----------
NET INVESTMENT INCOME................................................... 17,428,126 50,745,832 13,248,046
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 2):
Net realized gains (losses) on investments sold....................... (937,245) (7,025,161) 2,157,485
Net change in unrealized appreciation/depreciation of investments..... (5,032,357) (20,975,605) (7,015,717)
----------- ------------ -----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS....................... (5,969,602) (28,000,766) (4,858,232)
----------- ------------ -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................... $11,458,524 $ 22,745,066 $ 8,389,814
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
20
<PAGE> 279
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
---------------------------- ----------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995(1)
------------- ------------ ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF
PERIOD.......................... $ 312,313,894 $178,414,322 $ 861,662,351 $ 987,061,853 $ 128,017,408 $ --
------------- ------------ ------------- ------------- ------------- ------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income........... 17,428,126 16,283,239 50,745,832 56,284,701 13,248,046 6,998,828
Net realized gains (losses) on
investments sold.............. (937,245) (169,677) (7,025,161) 26,073,254 2,157,485 3,044,746
Net change in unrealized
appreciation/depreciation of
investments................... (5,032,357) 9,890,799 (20,975,605) 51,247,235 (7,015,717) 9,135,555
------------- ------------ ------------- ------------- ------------- ------------
Net increase in net assets
resulting from operations..... 11,458,524 26,004,361 22,745,066 133,605,190 8,389,814 19,179,129
------------- ------------ ------------- ------------- ------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM (NOTE 2):
INSTITUTIONAL:
Net investment income........... (17,416,111) (16,005,158) (51,337,391) (54,864,816) (13,204,524) (6,835,136)
In excess of net investment
income........................ -- -- (2,304,413) -- (1,956,281) --
Net realized gains on
investments................... -- -- -- -- (717,482) (1,002,058)
------------- ------------ ------------- ------------- ------------- ------------
Total Dividends and
Distributions -- Institutional
Shares...................... (17,416,111) (16,005,158) (53,641,804) (54,864,816) (15,878,287) (7,837,194)
------------- ------------ ------------- ------------- ------------- ------------
INVESTMENT:
Net investment income........... (85,476) (86,567) (422,949) (405,376) (143,574) (63,640)
In excess of net investment
income........................ (9,055) -- (38,057) -- (20,998) --
Net realized gains on
investments................... -- -- -- -- (2,063) (15,724)
------------- ------------ ------------- ------------- ------------- ------------
Total Dividends and
Distributions -- Investment
Shares...................... (94,531) (86,567) (461,006) (405,376) (166,635) (79,364)
------------- ------------ ------------- ------------- ------------- ------------
Total Dividends and
Distributions to
shareholders................ (17,510,642) (16,091,725) (54,102,810) (55,270,192) (16,044,922) (7,916,558)
------------- ------------ ------------- ------------- ------------- ------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from shares issued..... 71,401,214 323,161,029 200,094,674 247,279,350 155,448,604 190,561,586
Reinvestment of distributions... 11,174,796 10,720,840 29,128,985 27,999,029 2,778,971 1,295,537
Cost of shares redeemed......... (151,740,876) (209,894,933) (282,805,428) (479,012,879) (35,808,160) (75,102,286)
------------- ------------ ------------- ------------- ------------- ------------
TOTAL NET INCREASE (DECREASE) FROM
SHARE TRANSACTIONS.............. (69,164,866) 123,986,936 (53,581,769) (203,734,500) 122,419,415 116,754,837
------------- ------------ ------------- ------------- ------------- ------------
Net increase (decrease) in net
assets........................ (75,216,984) 133,899,572 (84,939,513) (125,399,502) 114,764,307 128,017,408
------------- ------------ ------------- ------------- ------------- ------------
NET ASSETS AT END OF PERIOD
(INCLUDING LINE A).............. $ 237,096,910 $312,313,894 $ 776,722,838 $ 861,662,351 $ 242,781,715 $128,017,408
============= ============ ============== ============= ============= ============
(A) Accumulated undistributed net
investment income............... $ 108,998 $ 191,514 $ 131,834 $ 1,014,509 $ 49,689 $ 100,052
============= ============ ============== ============= ============= ============
<FN>
- ------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
</TABLE>
See Notes to Financial Statements.
21
<PAGE> 280
The Kent
Funds NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. As of the
date of this report, the Trust offered thirteen managed investment portfolios.
The accompanying financial statements and financial highlights are those of The
Kent Short Term Bond Fund, The Kent Intermediate Bond Fund and The Kent Income
Fund (individually, a "Portfolio", collectively, the "Portfolios") only.
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Portfolios with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues thirteen series of shares with two
separate classes in each series, Investment Shares and Institutional Shares.
Each class of shares is entitled upon liquidation of a series to a pro rata
share in the net assets of that class of such series. Each share in each series
or class has identical voting, dividend, liquidation and other rights, except in
matters affecting only a particular series or class, in which case only shares
of the affected series or class are entitled to vote. Class specific expenses,
if any, are currently limited to expenses directly attributable to the
Investment Shares under the Distribution Plan, shareholder services fees and
certain printing and postage expenses incurred as they relate to a particular
class of shares.
The investment objective of the Short Term Bond Fund is to seek current income
by investing primarily in a limited range of investment quality fixed income
securities. The Intermediate Bond Fund's investment objective is to seek current
income by investing primarily in a broad range of investment quality debt
securities. The investment objective of the Income Fund is to seek a high level
of current income by investing in a broad range of investment quality debt
securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Corporate debt securities, municipal securities and debt
securities of the U.S. government and its agencies (other than short-term
investments maturing in 60 days or less) are valued on the basis of valuations
provided by dealers or by an independent pricing service approved by the Board
of Trustees. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which constitutes fair value and approximates market value. All
other securities and other assets are appraised at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
are recorded on the basis of identified cost. Interest income, including
accretion of discounts, is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare and
distribute dividends from net investment income monthly. Net investment income
for this purpose consists of interest accrued, discount earned (including both
original issue and market discount) and dividends earned less accrued expenses.
Net realized capital gains, if any, are distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL INCOME TAXES: For federal income tax purposes, each Portfolio is treated
as a separate entity for the purpose of determining its qualification as a
regulated investment company under the Internal Revenue Code (the "Code"). It is
the policy of each Portfolio to meet the requirements of the Code applicable to
regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
22
<PAGE> 281
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
At December 31, 1996, the following Portfolios had capital loss carryforwards
which will expire during the years indicated:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR
- -------------------------------- ---------- ----
<S> <C> <C>
Short Term Bond Fund............ $ 656,100 2001
3,015,994 2002
467,881 2003
438,260 2004
----------
$4,578,235
==========
Intermediate Bond Fund.......... $6,353,600 2004
==========
</TABLE>
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one series of the
Trust are allocated among the respective series based upon relative net assets
or another appropriate basis. In addition, investors in Investment Shares will
pay the expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
ORGANIZATION COSTS: The Kent Income Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under federal and state securities laws. All
such costs are amortized using the straight-line method over a period of five
years beginning with the Portfolio's commencement of operations. In the event
that any of the initial shares purchased by the Portfolio's sponsor are redeemed
during such period by any holder thereof, the Portfolio will be reimbursed by
such holder for any unamortized organization costs in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
3. RELATED PARTY TRANSACTIONS
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a member of the Michigan State Banking
Association and the principal subsidiary of Old Kent Financial Corporation. The
Investment Adviser is entitled to receive a fee, computed daily and paid
monthly, at the annual rate of 0.50% of the average daily net assets of the
Short Term Bond Fund, 0.55% of the average daily net assets of the Intermediate
Bond Fund and 0.60% of the average daily net assets of the Income Fund.
Effective August 5, 1996, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") assumed the duties as Administrator and Distributor for
the Trust from First Data Investor Services Group, Inc. ("First Data") and 440
Financial Distributors, Inc., an indirect wholly owned subsidiary of First Data,
respectively. Also, effective August 5, 1996 and October 7, 1996, respectively,
BISYS Fund Services, Inc. assumed the duties as Fund Accountant and Transfer
Agent for the Trust from First Data. BISYS and BISYS Fund Services, Inc. are
both wholly owned subsidiaries of The BISYS Group, Inc. The Administrator is
entitled to receive a fee, computed daily and paid monthly, at the annual rate
of 0.185% of the average daily net assets of the Trust up to $5 billion; 0.165%
of the average daily net assets of the Trust in excess of $5 billion up to $7.5
billion; and 0.135% of the average daily net assets of the Trust in excess of
$7.5 billion. Fund Accounting fees are computed daily and paid monthly at the
annual rate of 0.015% of the average daily net assets of the Trust and are
included as part of the fees paid to the Administrator.
Transfer agent fees for each Portfolio for the year ended December 31, 1996
are as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- --------------------------- ------------- ----------
<S> <C> <C>
Short Term Bond Fund....... $32,464 $185
Intermediate Bond Fund..... 76,182 686
Income Fund................ 25,024 285
</TABLE>
23
<PAGE> 282
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The current and previous Administrators have voluntarily reduced their fees
for the Portfolios. Total administration fees waived for the year ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- --------------------------- ------------- ----------
<S> <C> <C>
Short Term Bond Fund....... $ 5,159 $ 35
Intermediate Bond Fund..... 16,960 156
Income Fund................ 5,111 55
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Portfolios for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Portfolios pursuant to Rule 12b-1 of the 1940 Act. The
Plan provides for payments to the Distributor of up to 0.25% of the average
daily net assets of the Investment Shares of the Portfolios. Currently, the
Short Term Bond Fund makes payments at the rate of only 0.15% of the average
daily net assets of its Investment Shares pursuant to the Plan. For the year
ended December 31, 1996, the Distributor had waived a total of $1,544 of
distribution fees for the Short Term Bond Fund.
Gross distribution fees for each Portfolio for the year ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
FUND INVESTMENT SHARES
- ----------------------------------- -----------------
<S> <C>
Short Term Bond Fund............... $ 3,861
Intermediate Bond Fund............. 18,017
Income Fund........................ 5,672
</TABLE>
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath. A
partner of that firm serves as an Assistant Secretary of the Trust.
24
<PAGE> 283
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
SHORT TERM INTERMEDIATE
BOND FUND BOND FUND INCOME FUND
----------------------------- ----------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995(1)
------------- ------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued................. $ 71,054,235 $ 322,116,358 $ 198,301,060 $ 245,393,454 $154,129,760 $188,610,553
Reinvestment of
distributions............... 11,089,747 10,643,869 28,757,725 27,671,824 2,631,559 1,224,206
Shares redeemed............... (151,375,676) (208,678,578) (281,359,682) (473,921,393) (35,226,634) (74,962,453)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Institutional Share
transactions............. $ (69,231,694) $ 124,081,649 $ (54,300,897) $(200,856,115) $121,534,685 $114,872,306
============= ============= ============= ============= ============ ============
INVESTMENT:
Shares issued................. $ 346,979 $ 1,044,671 $ 1,793,614 $ 1,885,896 $ 1,318,844 $ 1,951,033
Reinvestment of
distributions............... 85,049 76,971 371,260 327,205 147,412 71,331
Shares redeemed............... (365,200) (1,216,355) (1,445,746) (5,091,486) (581,526) (139,833)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Investment Share
transactions............. $ 66,828 $ (94,713) $ 719,128 $ (2,878,385) $ 884,730 $ 1,882,531
============= ============= ============= ============= ============ ============
Total net increase (decrease) from
Share transactions.............. $ (69,164,866) $ 123,986,936 $ (53,581,769) $(203,734,500) $122,419,415 $116,754,837
============= ============= ============= ============= ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued................. 7,222,192 32,658,819 20,156,864 24,970,345 15,175,279 18,576,033
Reinvestment of
distributions............... 1,133,650 1,085,057 2,949,495 2,819,915 259,124 116,628
Shares redeemed............... (15,396,719) (21,120,973) (28,751,972) (48,530,997) (3,437,207) (7,066,321)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Institutional Share
transactions............. (7,040,877) 12,622,903 (5,645,613) (20,740,737) 11,997,196 11,626,340
============= ============= ============= ============= ============ ============
INVESTMENT:
Shares issued................. 35,323 106,935 182,449 192,685 129,967 187,592
Reinvestment of
distributions............... 8,703 7,878 38,010 33,253 14,507 6,743
Shares redeemed............... (37,044) (123,971) (148,005) (536,288) (57,824) (13,058)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) from
Investment Share
transactions............. 6,982 (9,158) 72,454 (310,350) 86,650 181,277
============= ============= ============= ============= ============ ============
Total net increase (decrease) from
Share transactions.............. (7,033,895) 12,613,745 (5,573,159) (21,051,087) 12,083,846 11,807,617
============= ============= ============= ============= ============ ============
<FN>
- ------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
</TABLE>
25
<PAGE> 284
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------- -------------- --------------
<S> <C> <C>
Short Term Bond Fund... $ 86,687,429 $ 154,134,058
Intermediate Bond
Fund................. 1,044,698,353 1,048,061,020
Income Fund............ 317,210,138 197,212,919
</TABLE>
6. FEDERAL INCOME TAXES (UNAUDITED)
During the year ended December 31, 1996, the Income Fund declared long-term
capital distributions in the amount of $641,432.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following year. The
Short Term Bond Fund and Income Fund had deferred losses of $617,241 and $2,737,
respectively, which will be treated as arising on the first day of the fiscal
year ending December 31, 1997.
26
<PAGE> 285
The Kent SHORT TERM BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......................... $ 9.96 $ 9.52 $ 9.91 $ 9.99 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income...................................... 0.61 0.55 0.48 0.42 0.07
Net realized and unrealized gains (losses) on securities... (0.21) 0.43 (0.38) (0.09) (0.01)
-------- -------- -------- -------- --------
Total Income from Investment Operations.................. 0.40 0.98 0.10 0.33 0.06
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income...................................... (0.61) (0.54) (0.49) (0.41) (0.07)
In excess of net investment income......................... -- -- ** -- **
-------- -------- -------- -------- --------
Total Dividends and Distributions........................ (0.61) (0.54) (0.49) (0.41) (0.07)
-------- -------- -------- -------- --------
Net change in net asset value................................ (0.21) 0.44 (0.39) (0.08) (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period............................... $ 9.75 $ 9.96 $ 9.52 $ 9.91 $ 9.99
======== ======== ======== ======== ========
Total return................................................. 4.22% 10.53% 1.03% 3.36% 0.53%++
Ratios/Supplemental Data:
Net Assets, end of period (000's).......................... $235,430 $310,680 $176,765 $255,892 $186,124
Ratio of expenses to average net assets.................... 0.70% 0.77% 0.73% 0.81% 0.14%++
Ratio of net investment income to average net assets....... 6.17% 5.60% 4.75% 4.24% 4.05%+
Ratio of expenses to average net assets.................... 0.70%* +++ +++ +++ +++
Ratio of net investment income to average net assets....... 6.17%* +++ +++ +++ +++
Portfolio turnover rate(2)................................. 32% 75% 56% 50% 5%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
27
<PAGE> 286
The Kent SHORT TERM BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 9.95 $ 9.52 $ 9.91 $ 10.02 $ 9.99
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income..................................... 0.59 0.52 0.47 0.38 0.02
Net realized and unrealized gains (losses) on
securities.............................................. (0.20) 0.44 (0.37) (0.08) 0.01
-------- -------- -------- -------- --------
Total Income from Investment Operations................. 0.39 0.96 0.10 0.30 0.03
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income..................................... (0.54) (0.53) (0.48) (0.41) --
In excess of net investment income........................ (0.06) -- (0.01) -- --
Net realized gains on securities.......................... -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions....................... (0.60) (0.53) (0.49) (0.41) --
-------- -------- -------- -------- --------
Net change in net asset value............................... (0.21) 0.43 (0.39) (0.11) 0.03
-------- -------- -------- -------- --------
Net asset value, end of period.............................. $ 9.74 $ 9.95 $ 9.52 $ 9.91 $ 10.02
======== ======== ======== ======== ========
Total return(2)............................................. 4.06% 10.30% 1.01% 3.04% 0.30%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $ 1,667 $ 1,634 $ 1,649 $ 1,427 $ 111
Ratio of expenses to average net assets................... 0.85% 0.91% 0.74% 1.24% 0.12%++
Ratio of net investment income to average net assets...... 6.02% 5.40% 4.79% 3.91% 3.31%+
Ratio of expenses to average net assets................... 0.96%* +++ +++ +++ +++
Ratio of net investment income to average net assets...... 5.91%* +++ +++ +++ +++
Portfolio turnover rate(3)................................ 32% 75% 56% 50% 5%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Investment Class date of initial public investment was December 4, 1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
28
<PAGE> 287
The Kent INTERMEDIATE BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......................... $ 10.12 $ 9.29 $ 10.18 $ 10.00 $ 10.00
-------- -------- -------- -------- --------
Income (Loss) from Investment Operations:
Net investment income...................................... 0.60 0.65 0.56 0.51 0.08
Net realized and unrealized gains (losses) on securities... (0.32) 0.81 (0.88) 0.32 **
-------- -------- -------- -------- --------
Total Income (Loss) from Investment Operations........... 0.28 1.46 (0.32) 0.83 0.08
-------- -------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income...................................... (0.61) (0.63) (0.54) (0.51) (0.08)
In excess of net investment income......................... (0.03) -- (0.01) ** **
Net realized gains on securities........................... -- -- (0.02) (0.14) --
-------- -------- -------- -------- --------
Total Dividends and Distributions........................ (0.64) (0.63) (0.57) (0.65) (0.08)
-------- -------- -------- -------- --------
Net change in net asset value................................ (0.36) 0.83 (0.89) 0.18 --
-------- -------- -------- -------- --------
Net asset value, end of period............................... $ 9.76 $ 10.12 $ 9.29 $ 10.18 $ 10.00
======== ======== ======== ======== ========
Total return................................................. 3.01% 16.18% (3.19%) 8.42% 0.83%++
Ratios/Supplemental Data:
Net Assets, end of period (000's).......................... $769,395 $854,801 $977,865 $434,264 $203,129
Ratio of expenses to average net assets.................... 0.77% 0.77% 0.80% 0.85% 0.15%++
Ratio of net investment income to average net assets....... 6.18% 6.50% 6.03% 5.03% 5.32%+
Ratio of expenses to average net assets.................... 0.78%* +++ +++ +++ +++
Ratio of net investment income to average net assets....... 6.17%* +++ +++ +++ +++
Portfolio turnover rate(2)................................. 135% 166% 124% 126% 1%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on November 2, 1992.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 288
The Kent INTERMEDIATE BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 10.14 $ 9.32 $ 10.19 $ 10.03 $ 9.98
------ ------ ------ ------ ------
Income (Loss) from Investment Operations:
Net investment income..................................... 0.58 0.61 0.57 0.47 0.03
Net realized and unrealized gains (losses) on
securities.............................................. (0.32) 0.82 (0.87) 0.34 0.02
------ ------ ------ ------ ------
Total Income (Loss) from Investment Operations.......... 0.26 1.43 (0.30) 0.81 0.05
------ ------ ------ ------ ------
Less Dividends and Distributions from:
Net investment income..................................... (0.57) (0.61) (0.54) (0.46) --
In excess of net investment income........................ (0.05) -- (0.01) (0.05) --
Net realized gains on securities.......................... -- -- (0.02) (0.14) --
------ ------ ------ ------ ------
Total Dividends and Distributions....................... (0.62) (0.61) (0.57) (0.65) --
------ ------ ------ ------ ------
Net change in net asset value............................... (0.36) 0.82 (0.87) 0.16 0.05
------ ------ ------ ------ ------
Net asset value, end of period.............................. $ 9.78 $ 10.14 $ 9.32 $ 10.19 $ 10.03
====== ====== ====== ====== ======
Total return(2)............................................. 2.76% 15.76% (3.01%) 8.19% 0.50%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................... $ 7,327 $ 6,862 $ 9,196 $ 4,966 $ 174
Ratio of expenses to average net assets................... 1.02% 1.01% 0.81% 1.13% 0.16%++
Ratio of net investment income to average net assets...... 5.92% 6.24% 5.94% 4.75% 4.94%+
Ratio of expenses to average net assets................... 1.03%* +++ +++ +++ +++
Ratio of net investment income to average net assets...... 5.91%* +++ +++ +++ +++
Portfolio turnover rate(3)................................ 135% 166% 124% 126% 1%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Investment Class date of initial public investment was November 25,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 289
The Kent INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1995(1)
-------- --------
<S> <C> <C>
Net asset value, beginning of period........................................................ $ 10.84 $ 10.00
-------- --------
Income from Investment Operations:
Net investment income..................................................................... 0.66 0.55
Net realized and unrealized gains (losses) on securities.................................. (0.56) 0.92
-------- --------
Total Income from Investment Operations................................................. 0.10 1.47
-------- --------
Less Dividends and Distributions from:
Net investment income..................................................................... (0.65) (0.54)
In excess of net investment income........................................................ (0.10) --
Net realized gains on securities.......................................................... (0.03) (0.09)
-------- --------
Total Dividends and Distributions....................................................... (0.78) (0.63)
-------- --------
Net change in net asset value............................................................... (0.68) 0.84
-------- --------
Net asset value, end of period.............................................................. $ 10.16 $ 10.84
======== ========
Total return................................................................................ 1.19% 15.05%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)......................................................... $240,060 $126,056
Ratio of expenses to average net assets................................................... 0.83% 0.91%+
Ratio of net investment income to average net assets...................................... 6.57% 6.65%+
Ratio of expenses to average net assets................................................... 0.83%* +++
Ratio of net investment income to average net assets...................................... 6.57%* +++
Portfolio turnover rate(2)................................................................ 102% 50%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Institutional Class commenced operations on March 20, 1995.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 290
The Kent INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995(1)
------ ------
<S> <C> <C>
Net asset value, beginning of period............................................................. $10.82 $10.00
------ ------
Income from Investment Operations:
Net investment income.......................................................................... 0.66 0.52
Net realized and unrealized gains (losses) on securities....................................... (0.56) 0.91
------ ------
Total Income from Investment Operations...................................................... 0.10 1.43
------ ------
Less Dividends and Distributions from:
Net investment income.......................................................................... (0.64) (0.52)
In excess of net investment income............................................................. (0.09) --
Net realized gains on securities............................................................... (0.03) (0.09)
------ ------
Total Dividends and Distributions............................................................ (0.76) (0.61)
------ ------
Net change in net asset value.................................................................... (0.66) 0.82
------ ------
Net asset value, end of period................................................................... $10.16 $10.82
====== ======
Total return(2).................................................................................. 1.16% 14.63%++
Ratios/Supplemental Data:
Net Assets, end of period (000's).............................................................. $2,722 $1,961
Ratio of expenses to average net assets........................................................ 1.08% 1.14%+
Ratio of net investment income to average net assets........................................... 6.31% 6.40%+
Ratio of expenses to average net assets........................................................ 1.08%* +++
Ratio of net investment income to average net assets........................................... 6.31%* +++
Portfolio turnover rate(3)..................................................................... 102% 50%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
+++ During the period, there were no waivers and/or reimbursements.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Investment Class date of initial public investment was March 22, 1995.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 291
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
The Kent Funds:
We have audited the accompanying statements of assets and liabilities of The
Kent Funds -- Short Term Bond Fund, Intermediate Bond Fund and Income Fund,
including the portfolios of investments, as of December 31, 1996, and the
related statements of operations, statements of changes in net assets and the
financial highlights for each of the periods indicated herein. These financial
statements and the financial highlights are the responsibility of The Kent
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1996, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds at December 31, 1996, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
<PAGE> 292
The Kent LIMITED TERM TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL SECURITIES -- 97.6%
ALASKA -- 2.5%
$ 500,000 Alaska State Housing Finance
Corp., Series A,
4.35%, 6/1/98 (Insured by
MBIA)............................ $ 500,625
530,000 Alaska State Housing Finance
Corp., Series A,
4.60%, 12/1/00 (Insured by
MBIA)............................ 531,988
-----------
1,032,613
-----------
ARIZONA -- 2.7%
1,000,000 Arizona State University Revenue,
Prerefunded 7/1/01 @ 102,
7.10%, 7/1/16.................... 1,125,000
-----------
CALIFORNIA -- 3.0%
1,000,000 University of California,
Multiple Purpose Projects, Series
B,
9.00%, 9/1/03 (Insured by
MBIA)............................ 1,237,500
-----------
CONNECTICUT -- 2.5%
1,000,000 Connecticut State, Series C, GO,
5.38%, 8/15/02................... 1,043,750
-----------
DISTRICT OF COLUMBIA -- 2.4%
1,000,000 District of Columbia, GO,
5.10%, 12/1/99 (Insured by
MBIA)............................ 1,017,500
-----------
GEORGIA -- 3.9%
1,500,000 Georgia State, Series B, GO,
5.95%, 3/1/03.................... 1,616,250
-----------
ILLINOIS -- 11.3%
500,000 Chicago Metropolitan Water
Reclamation District, Capital
Improvement, GO,
6.20%, 1/1/98.................... 511,210
1,000,000 Chicago Metropolitan Water
Reclamation District, Working
Cash Fund, GO,
5.90%, 12/1/04................... 1,076,250
1,010,000 Cook County High School District
No. 227,
5.00%, 12/1/05................... 1,013,787
1,000,000 Illinois Educational Facilities
Authority Revenue, Loyola
University, Series A,
6.30%, 7/1/98 (Insured by
MBIA)............................ 1,035,000
1,000,000 Illinois State Sales Tax Revenue,
Series O,
5.90%, 6/15/01................... 1,047,500
-----------
4,683,747
-----------
KENTUCKY -- 2.5%
1,000,000 Kentucky State Property &
Buildings, Commission, Project
No. 53,
5.80%, 10/1/98................... 1,026,250
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
LOUISIANA -- 2.5%
$ 1,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A,
7.00%, 11/15/98 (Insured by
FGIC)............................ $ 1,048,750
-----------
MARYLAND -- 2.5%
1,000,000 Washington Suburban Sanitary
District, Sewerage Disposal,
First Series, GO,
6.13%, 6/1/98.................... 1,028,750
-----------
MASSACHUSETTS -- 2.5%
1,000,000 Massachusetts State, Series B,
GO,
5.10%, 11/1/02................... 1,028,750
-----------
MICHIGAN -- 13.3%
1,235,000 Detroit, GO, Prerefunded
4/1/01 @ 102,
8.00%, 4/1/11.................... 1,420,250
1,000,000 Detroit, Self-Insurance,
Series A, GO,
5.20%, 5/1/98.................... 1,003,750
500,000 Michigan State Hospital Finance
Authority, Genesys Health
Systems, Series A,
6.40%, 10/1/97................... 505,885
1,600,000 Michigan State Hospital Finance
Authority Revenue, Sisters of
Mercy Health Corp., Series P,
4.60%, 8/15/02 (Insured by
MBIA)............................ 1,588,000
1,000,000 Michigan State Housing
Development Authority, Rental
Housing Revenue,
5.15%, 10/1/00 (Insured by
MBIA)............................ 1,015,000
-----------
5,532,885
-----------
MINNESOTA -- 2.4%
1,000,000 University of Minnesota,
4.80%, 8/15/03................... 1,000,000
-----------
NEVADA -- 2.7%
1,090,000 Las Vegas, GO,
6.75%, 8/1/98 (Insured by
MBIA)............................ 1,134,962
-----------
NEW JERSEY -- 2.7%
1,000,000 New Jersey Economic Development
Authority, Series A, Market
Transition Facility Revenue,
7.00%, 7/1/03 (Insured by
MBIA)............................ 1,130,000
-----------
</TABLE>
Continued
13
<PAGE> 293
The Kent LIMITED TERM TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
OKLAHOMA -- 5.2%
$ 1,000,000 Oklahoma County Independent,
School District No. 89, GO,
5.40%, 2/1/99.................... $ 1,021,250
1,115,000 Tulsa Industrial Authority
Revenue, University of Tulsa,
Series A,
5.50%, 10/1/00 (Insured by
MBIA)............................ 1,155,419
-----------
2,176,669
-----------
PENNSYLVANIA -- 2.4%
1,000,000 Pennsylvania State,
First Series, GO,
5.00%, 5/1/99.................... 1,016,250
-----------
SOUTH DAKOTA -- 2.5%
1,050,000 Sioux Falls Sales Tax Revenue,
Series A,
4.50%, 11/15/01.................. 1,047,375
-----------
TEXAS -- 14.2%
1,000,000 Harris County Flood Control
District, Series C, GO,
Prerefunded 11/1/99 @ 100,
6.50%, 11/1/10 (Insured by
MBIA)............................ 1,058,750
1,000,000 Houston Independent School
District, GO, Public Property
Finance Contractual Obligation,
6.25%, 7/15/99................... 1,047,500
1,500,000 Houston Water & Sewer System
Revenue, Junior Lien, Series C,
4.75%, 12/1/97 (Insured by
MBIA)............................ 1,513,530
1,000,000 Pasadena Independent School
District, GO, Prerefunded
8/15/01 @ 100,
6.75%, 8/15/05 (Insured by
FGIC)............................ 1,092,500
1,100,000 Texas State Public Finance
Authority, Building Revenue,
Series A,
6.00%, 8/1/02 (Insured by
AMBAC)........................... 1,179,750
-----------
5,892,030
-----------
UTAH -- 2.6%
1,000,000 Intermountain Power Agency, Utah
Power Supply, Series A,
Prerefunded 7/1/99 @ 102,
7.00%, 7/1/21.................... 1,083,750
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- -----------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
VIRGINIA -- 3.7%
$ 1,500,000 Norfolk, GO,
5.13%, 6/1/01.................... $ 1,541,250
-----------
WEST VIRGINIA -- 2.6%
1,000,000 West Virginia State Hospital
Finance Authority, Revenue,
Cabell Huntington Hospital, Inc.,
Series B, Prerefunded
1/1/99 @ 102,
7.70%, 1/1/19.................... 1,085,000
-----------
WISCONSIN -- 2.5%
1,000,000 Green Bay, Series A, GO,
5.10%, 4/1/00.................... 1,025,000
-----------
WYOMING -- 2.5%
1,000,000 Campbell County School District,
No. 001 Gillette, GO,
5.15%, 6/1/02.................... 1,026,250
-----------
TOTAL MUNICIPAL SECURITIES....... 40,580,281
-----------
(cost $39,983,660)
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<S> <C> <C>
INVESTMENT COMPANY -- 1.0%
407,775 Dreyfus Tax-Exempt Cash
Management Fund.................. 407,775
-----------
TOTAL INVESTMENT COMPANY......... 407,775
-----------
(cost $407,775)
TOTAL INVESTMENTS -- 98.6%.................... 40,988,056
(cost $40,391,435)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.4%......................... 589,263
-----------
NET ASSETS -- 100.0%.......................... $41,577,319
===========
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of $41,577,319.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<CAPTION>
<S> <C> <C>
Unrealized appreciation............. $601,011
Unrealized depreciation............. (4,390)
--------
Net unrealized appreciation......... $596,621
========
AMBAC AMBAC Indemnity Corp.
FGIC Financial Guaranty Insurance Corp.
GO General Obligation
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 294
The Kent INTERMEDIATE TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------
VALUE
(NOTE 2)
------------
<S> <C> <C>
MUNICIPAL SECURITIES -- 98.2%
ALASKA -- 3.2%
$1,520,000 Alaska Municipal Bond Bank
Authority, Series A, GO, 4.75%,
10/1/99......................... $ 1,527,600
1,000,000 Anchorage, GO, 6.30%, 7/1/99
(Insured by MBIA)............... 1,047,500
1,000,000 Anchorage Electric Utility,
Revenue Bond, Senior Lien,
5.50%, 12/1/03, Callable 6/1/03
@ 102 (Insured by MBIA)......... 1,038,750
5,000,000 North Slope Boro, Series B, GO,
7.50%, 6/30/01 (Insured by
FSA)............................ 5,587,500
------------
9,201,350
------------
ARIZONA -- 4.2%
5,000,000 Arizona State Transportation
Board, Excise Tax Revenue,
Series A, Maricopa County
Regional Area Read, 5.60%,
7/1/03 (Insured by AMBAC)....... 5,262,500
1,500,000 Pima County Unified School
District, No. 1 Tucson, Series
B, GO, 6.80%, 7/1/00............ 1,620,000
5,000,000 Salt River Project Agricultural
Improvement and Power District
Electric System, Series A,
5.625%, 1/1/06.................. 5,299,400
------------
12,181,900
------------
CALIFORNIA -- 7.2%
3,400,000 California State, GO, 6.60%,
2/1/10.......................... 3,838,702
2,250,000 Metropolitan Water District,
Southern California Waterworks
Revenue, Series B, 5.50%, 7/1/03
(Insured by MBIA)............... 2,370,937
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
$3,000,000 Orange County, Series A,
Refunding Recovery Bonds, 6.00%,
6/1/10 (Insured by MBIA)........ $3,206,250
CALIFORNIA (CONTINUED)
2,000,000 Riverside County Transportation
Commission, Sales Tax Revenue,
Series A, 5.60%, 6/1/05 (Insured
by AMBAC)....................... 2,112,500
1,000,000 San Francisco City & County
School District, Facility
Improvements, Series C, GO,
6.00%, 6/15/01 (Insured by
FGIC)........................... 1,062,500
2,000,000 Turlock Irrigation District
Revenue, Series A, 6.00%, 1/1/06
(Insured by MBIA)............... 2,170,000
4,850,000 University of California
Revenue, Multiple Purpose
Projects, Series B, 9.00%,
9/1/03 (Insured by MBIA)........ 6,001,875
------------
20,762,764
------------
COLORADO -- 2.5%
4,000,000 Arapahoe County School District
No. 5, Cherry Creek, Series A,
GO, 5.25%, 12/15/02............. 4,145,000
1,000,000 Colorado Springs Utility
Revenue, Series A, 6.50%,
11/15/03........................ 1,088,750
2,000,000 Jefferson County School District
No. 1, Series A, GO, 4.00%,
12/15/98........................ 1,995,000
------------
7,228,750
------------
CONNECTICUT -- 1.5%
4,000,000 Connecticut State, Series A
6.00%, 5/15/02.................. 4,285,000
------------
</TABLE>
Continued
15
<PAGE> 295
The Kent INTERMEDIATE TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
FLORIDA -- 4.8%
$1,000,000 Broward County School District,
GO, 5.20%, 2/15/03.............. $ 1,022,500
1,000,000 Dade County Water & Sewer System
Revenue, 5.50%, 10/1/25,
Callable 10/1/05 @ 102 (Insured
by FGIC)........................ 981,250
3,000,000 Florida State, Series A, Broward
County Expressway Authority, GO
5.90%, 7/1/97................... 3,036,150
2,000,000 Florida State Board of Education
Capital Outlay, Series A, GO,
7.25%, 6/1/97................... 2,030,800
1,140,000 Gainesville Utilities System
Revenue, Series A, Prerefunded
10/1/02 @ 102, 6.50%, 10/1/22... 1,262,550
1,350,000 Jacksonville Excise Tax Revenue
Bonds, 4.75%, 10/1/01........... 1,360,125
2,000,000 Lakeland Electric & Water
Revenue, 5.90%, 10/1/07......... 2,140,000
1,000,000 Tampa Guaranteed Entitlement
Revenue, 6.60%, 10/1/00 (Insured
by AMBAC)....................... 1,075,000
1,000,000 Tampa Utility Tax & Special
Revenue, 6.30%, 10/1/00 (Insured
by AMBAC)....................... 1,065,000
------------
13,973,375
------------
GEORGIA -- 4.3%
2,670,000 Atlanta Airport Facilities
Revenue, Series B, (AMT), 5.50%,
1/1/03 (Insured by AMBAC)....... 2,763,450
4,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08................... 4,330,000
4,000,000 Georgia State, Series F, GO,
6.50%, 12/1/01.................. 4,385,000
1,000,000 Georgia State Tollway Authority
Revenue, Georgia 400 Project,
6.25%, 7/1/00................... 1,067,500
------------
12,545,950
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
HAWAII -- 1.2%
1,025,000 Honolulu City & County, Series
A, GO, 5.60%, 1/1/05............ $ 1,074,969
1,000,000 Honolulu City & County, Series
D, GO, 6.50%, 12/1/00........... 1,080,000
1,150,000 Maui County, Series A, GO,
Prerefunded 12/1/00 @ 101,
6.80%, 12/1/03 (Insured by
AMBAC).......................... 1,263,562
------------
3,418,531
------------
ILLINOIS -- 6.5%
2,000,000 Chicago Metropolitan Water,
Reclamation District, Capital
Improvement, GO, 6.80%,
1/1/03.......................... 2,152,500
$3,000,000 Chicago Metropolitan Water,
Reclamation District, Capital
Improvement, GO, 5.50%,
12/1/10......................... $ 3,033,750
2,000,000 Chicago School Finance
Authority, Series A, GO, 4.90%,
6/1/05 (Insured by MBIA)........ 1,987,500
4,270,000 DuPage & Will Counties Community
Schools, District No. 204, GO,
4.95%, 12/30/01 (Insured by
FGIC)........................... 4,344,725
4,000,000 Illinois Development Finance
Authority, Pollution Control
Revenue, Commonwealth Edison,
5.30%, 1/15/04 (Insured by
MBIA)........................... 4,085,000
3,135,000 Northwest Suburban Municipal
Joint Action, Water Agency,
Water Supply System, Series A,
5.25%, 5/1/04 (Insured by
MBIA)........................... 3,162,431
------------
18,765,906
------------
INDIANA -- 3.1%
2,000,000 Indiana Municipal Power Supply
System Revenue, Series B, 5.88%,
1/1/10 (Insured by MBIA)........ 2,112,500
3,000,000 Indiana Municipal Power Supply
System Revenue, Series B, 6.00%,
1/1/13 (Insured by MBIA)........ 3,150,000
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A, 5.75%, 6/1/12 (Insured
by AMBAC)....................... 1,033,750
</TABLE>
Continued
16
<PAGE> 296
INTERMEDIATE TAX-FREE FUND
The Kent PORTFOLIO OF INVESTMENTS (CONTINUED)
Funds DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
INDIANA (CONTINUED)
$1,000,000 Purdue University Dormitory
System Revenue, Series A, 6.40%,
7/1/99 (Insured by AMBAC)....... $ 1,046,250
1,000,000 Purdue University Student Fee
Revenue, Series D, 6.50%,
7/1/03.......................... 1,080,000
500,000 St. Joseph County Educational
Facilities Revenue, University
of Notre Dame, 6.50%, 3/1/26.... 565,625
------------
8,988,125
------------
KENTUCKY -- 0.4%
1,000,000 Kentucky State Property &
Buildings, Prerefunded 8/1/05 @
100, 6.00%, 8/1/10.............. 1,061,250
------------
LOUISIANA -- 1.4%
4,000,000 Louisiana State, Series A, GO,
5.30%, 8/1/04 (Insured by
MBIA)........................... 4,110,000
------------
MASSACHUSETTS -- 4.5%
5,000,000 Massachusetts Bay Transportation
Authority, Series A, 5.05,
3/1/02.......................... 5,106,250
3,750,000 Massachusetts State, Special
Obligation Revenue, Series A,
5.25%, 6/1/08 (Insured by
AMBAC).......................... 3,764,062
4,000,000 Massachusetts State Turnpike
Authority, Series A, Bond
Anticipation Note, 5.00%,
6/1/99.......................... 4,070,000
------------
12,940,312
------------
MICHIGAN -- 18.4%
4,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue, 7.30%,
5/1/10.......................... 4,465,000
2,100,000 Caledonia Community Schools, GO,
Prerefunded 5/1/02 @ 102, 6.70%,
5/1/22 (Insured by AMBAC)....... 2,344,125
3,000,000 Detroit, GO, Distributable State
Aid, 5.70%, 5/1/01 (Insured by
AMBAC).......................... 3,127,500
3,000,000 Detroit Sewage Disposal Revenue,
Series B, 6.00%, 7/1/09 (Insured
by MBIA)........................ 3,232,500
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$1,750,000 Detroit Water Supply System,
5.70%, 7/1/00 (Insured by
FGIC)........................... $ 1,822,188
6,000,000 Detroit Water Supply System,
Permanent Linked Bonds, 5.25%,
7/1/13 (Insured by FGIC)........ 5,835,000
2,840,000 Grand Ledge Public Schools
District, GO, 5.35%, 5/1/10
(Insured by MBIA)............... 2,840,000
1,700,000 Greater Detroit Resource
Recovery Authority, Series A,
5.50%, 12/13/04 (Insured by
AMBAC).......................... 1,776,500
2,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital, 5.35%, 5/15/06
(Insured by MBIA)............... 2,037,500
1,675,000 Lanse Creuse Public Schools, GO,
5.30%, 5/1/07................... 1,685,469
1,475,000 Michigan State Environmental
Protection, Prerefunded 11/15/99
@ 102, 7.10%, 11/15/09.......... 1,611,438
2,000,000 Michigan State Comprehensive
Transportation, Series B, 5.50%,
5/15/02......................... 2,075,000
1,450,000 Michigan State Hospital Finance
Authority Revenue, St. John
Hospital & Medical Center,
5.00%, 5/15/06 (Insured by
AMBAC).......................... 1,442,750
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue, 5.80%, 11/1/05
(Insured by MBIA)............... 1,065,000
2,300,000 Michigan State Strategic Fund,
Limited Obligation Revenue, Ford
Motor Co. Project, Series A,
7.10%, 2/1/06................... 2,670,875
2,500,000 Michigan State Trunk Line,
Series A, 5.50%, 10/1/02........ 2,600,000
1,340,000 Michigan State University,
Series A, 4.80%, 2/15/08........ 1,291,425
2,000,000 Northville Public Schools,
Series A, GO, 7.00%, 5/1/08..... 2,155,000
1,575,000 South Redford School District,
5.25%, 5/1/09 (Insured by
FGIC)........................... 1,569,094
</TABLE>
Continued
17
<PAGE> 297
INTERMEDIATE TAX-FREE FUND
The Kent PORTFOLIO OF INVESTMENTS (CONTINUED)
Funds DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$3,700,000 University of Michigan Hospital
Revenue, Series A, 5.10%*,
1/2/97.......................... $ 3,700,000
2,725,000 Walled Lake Consolidated School
District, 5.50%, 5/1/02......... 2,837,406
1,000,000 Western Michigan University
Revenue, GO, 5.40%, 11/15/01
(Insured by FGIC)............... 1,047,500
------------
53,231,270
------------
MINNESOTA -- 1.3%
1,000,000 Minneapolis Community
Development Agency, Tax
Increment Revenue, 7.00%, 9/1/00
(Insured by MBIA)............... 1,088,750
2,810,000 North St. Paul Maplewood,
Independent School District No.
622, Series A, GO, 5.13%,
2/1/25.......................... 2,634,375
------------
3,723,125
------------
NEVADA -- 1.0%
2,500,000 Clark County School District,
Group 2, GO, Prerefunded 5/1/00
@ 102, 7.20%, 5/1/01 (Insured by
FGIC)........................... 2,762,500
------------
NEW JERSEY -- 3.6%
1,375,000 New Jersey State, Series D, GO,
5.25%, 2/15/01.................. 1,421,406
6,000,000 New Jersey State Economic
Development Authority, Market
Transition Facility Revenue,
Senior Lien, Series A, 7.00%,
7/1/04 (Insured by MBIA)........ 6,855,000
2,000,000 New Jersey State Transportation
Trust Fund Authority,
Transportation System, Series A,
6.00%, 12/15/06 (Insured by
MBIA)........................... 2,167,500
------------
10,443,906
------------
NEW YORK -- 1.5%
1,130,000 Metropolitan Transportation
Authority, Series M, 5.50%,
7/1/08 (Insured by FGIC)........ 1,168,137
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
NEW YORK (CONTINUED)
$3,000,000 Triborough Bridge & Tunnel
Authority, General Purpose,
Series Y, 5.50%, 1/1/17......... $ 3,033,750
------------
4,201,887
------------
NORTH CAROLINA -- 0.7%
2,000,000 North Carolina Municipal Power,
Agency No. 1, Catawba Electric
Revenue, 5.90%, 1/1/03.......... 2,072,500
------------
OHIO -- 0.8%
2,125,000 Columbus, Sewer Improvement, GO,
6.30%, 9/15/99.................. 2,241,875
------------
OKLAHOMA -- 1.4%
1,825,000 Grand River Dam Authority
Revenue, Prerefunded 6/1/97 @
100, 7.20%, 6/1/98.............. 1,844,619
2,000,000 Tulsa Industrial Authority
Revenue, University of Tulsa,
Series A, 6.00%, 10/1/16
(Insured by MBIA)............... 2,127,500
------------
3,972,119
------------
PENNSYLVANIA -- 3.6%
4,000,000 Allegheny County, Refunding
Series C-45, 5.10%, 10/1/06
(Insured by FGIC)............... 4,080,000
4,375,000 Chartiers Valley Joint School
District Authority, School
Revenue, ETM, 6.15%, 3/1/07..... 4,730,469
1,475,000 Pennsylvania State, Series A,
GO, Prerefunded 5/1/00 @ 101.5,
7.00%, 5/1/05................... 1,613,281
------------
10,423,750
------------
PUERTO RICO -- 2.5%
3,055,000 Puerto Rico Commonwealth,
Aqueduct & Sewer Authority,
6.00%, 7/1/06................... 3,272,669
2,000,000 Puerto Rico Commonwealth,
Highway & Transportation
Authority, Highway Revenue,
Series X, 4.90%, 7/1/01......... 2,022,500
</TABLE>
Continued
18
<PAGE> 298
The Kent INTERMEDIATE TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
PUERTO RICO (CONTINUED)
$2,000,000 Puerto Rico Electric Power
Authority Revenue, Series W,
5.00%, 7/1/98................... $ 2,022,500
------------
7,317,669
------------
RHODE ISLAND -- 1.4%
1,000,000 Providence, GO, 6.70%, 1/15/02
(Insured by MBIA)............... 1,078,750
2,000,000 State Depositors Economic
Protection Corp., Series A,
Special Obligation, 6.15%,
8/1/99 (Insured by MBIA)........ 2,082,500
1,000,000 State Depositors Economic
Protection Corp., Series B,
Special Obligation, 5.20%,
8/1/03 (Insured by MBIA)........ 1,025,000
------------
4,186,250
------------
TENNESSEE -- 0.5%
1,230,000 Tennessee State, Series B, GO,
6.20%, 6/1/01................... 1,320,712
------------
TEXAS -- 9.5%
1,000,000 Austin Independent School
District, GO, 6.20%, 8/1/99..... 1,048,750
2,245,000 Dallas Independent School
District, GO, 5.40%, 8/15/03.... 2,340,413
1,055,000 Hays Consolidated Independent
School District, 6.00%,
9/1/02.......................... 1,138,081
1,190,000 Hays Consolidated Independent
School District, 6.00%,
9/1/04.......................... 1,291,150
1,000,000 Houston Water & Sewer System,
Prior Lien, Series A, 7.00%,
12/1/01 (Insured by AMBAC)...... 1,107,500
1,500,000 Houston Water & Sewer System,
Junior Lien, Series C, 5.75%,
12/1/03 (Insured by MBIA)....... 1,586,250
3,000,000 Lower Colorado River Authority,
4.90%, 1/1/07................... 2,977,500
1,050,000 Round Rock Independent School
District, GO, 5.25%, 2/15/05.... 1,077,562
2,800,000 Texas Municipal Power Agency,
5.60%, 9/1/01 (Insured by
MBIA)........................... 2,919,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
TEXAS (CONTINUED)
$4,450,000 Texas State, Series A, GO,
5.70%, 10/1/03.................. $4,728,125
5,595,000 Texas State Public Finance
Authority, Series A, 6.50%,
10/1/04......................... 6,245,419
1,015,000 University of Texas, Series A,
6.60%, 8/15/02.................. 1,121,575
------------
27,581,325
------------
UTAH -- 0.6%
1,690,000 Davis County Solid Waste
Management & Recovery, Special
Service District, 4.90%,
6/15/97......................... 1,690,693
------------
VIRGINIA -- 1.0%
3,000,000 Norfolk, GO, 5.20%, 6/1/08...... 3,018,750
------------
WASHINGTON -- 3.9%
8,000,000 Washington State, Series A, GO,
5.50%, 9/1/05................... 8,300,000
850,000 Washington State, Series III-H,
Motor Vehicle Fuel Tax, GO,
5.75%, 9/1/12................... 882,938
2,000,000 Washington State Public Power
Supply System, Nuclear Project
No. 1 Bond Revenue, Series C,
7.25%, 7/1/00 (Insured by
FGIC)........................... 2,170,000
------------
11,352,938
------------
WEST VIRGINIA -- 0.4%
1,095,000 West Virginia School Building
Authority Revenue, Capital
Improvement, Series A, 6.70%,
7/1/00 (Insured by MBIA)........ 1,173,019
------------
WISCONSIN -- 1.3%
1,025,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.60%,
10/1/99......................... 1,082,656
1,500,000 Milwaukee Metropolitan Sewer
District, Series A, GO, 6.70%,
10/1/00......................... 1,612,500
1,000,000 Wisconsin State Public Power
Supply System, Series A, 7.00%,
7/1/01 (Insured by AMBAC)....... 1,096,250
------------
3,791,406
------------
TOTAL MUNICIPAL SECURITIES...... 283,968,907
------------
(cost $274,158,372)
</TABLE>
Continued
19
<PAGE> 299
The Kent INTERMEDIATE TAX-FREE FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
INVESTMENT COMPANY -- 0.3%
713,880 Dreyfus Tax-Exempt Cash
Management Fund................. $ 713,880
------------
TOTAL INVESTMENT COMPANY........ 713,880
------------
(cost $713,880)
TOTAL INVESTMENTS -- 98.5%................... 284,682,787
(cost $274,872,252)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.5%.......................... 4,360,118
------------
NET ASSETS -- 100.0%......................... $289,042,905
============
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of $289,042,905.
* Variable rate security. Rate presented represents rate in effect at December
31, 1996. Maturity date reflects next rate change date.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<CAPTION>
<S> <C> <C>
Unrealized appreciation......... $10,144,475
Unrealized depreciation......... (333,940)
------------
Net unrealized appreciation..... $ 9,810,535
===========
AMBAC AMBAC Indemnity Corporation
AMT Alternative Minimum Tax Paper
ETM Escrowed to Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
20
<PAGE> 300
The Kent TAX-FREE INCOME FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES -- 97.5%
CALIFORNIA -- 11.1%
$2,000,000 California State, GO,
6.25%, 9/1/12................... $ 2,182,500
1,400,000 California State, GO,
7.00%, 6/1/05................... 1,601,250
1,570,000 California State Public Works
Board Lease Revenue, University
of California Projects, Series
A, Prerefunded 12/1/02 @ 102,
6.60%, 12/2/22.................. 1,768,213
3,000,000 Northern California Power Agency
Revenue, Geothermal Project,
Series A,
5.50%, 7/1/05 (Insured by
AMBAC).......................... 3,150,000
2,000,000 Orange County, Series A,
6.00%, 6/1/10 (Insured by
MBIA)........................... 2,137,500
1,380,000 Turlock Irrigation District
Revenue, Series A,
6.00%, 1/1/07 (Insured by
MBIA)........................... 1,495,575
------------
12,335,038
------------
COLORADO -- 1.9%
2,000,000 Denver City & County Airport
Revenue, Series C, (AMT),
6.75%, 11/15/22................. 2,115,000
------------
FLORIDA -- 3.5%
1,000,000 Dade County Water & Sewer System
Revenue,
5.50%, 10/1/25, Callable 10/1/05
@ 102 (Insured by FGIC)......... 981,250
1,355,000 Florida State Board of Education
Capital Outlay, Public
Education, Series E, GO,
5.10%, 6/1/12................... 1,314,350
1,400,000 Port Everglades Authority, Port
Improvement, ETM,
7.13%, 11/1/16.................. 1,643,250
------------
3,938,850
------------
GEORGIA -- 1.0%
1,000,000 Georgia State, Series B, GO,
5.95%, 3/1/08................... 1,082,500
------------
HAWAII -- 0.9%
1,000,000 Honolulu City & County, Series
A, GO,
5.75%, 4/1/10................... 1,047,500
------------
ILLINOIS -- 8.4%
2,000,000 Chicago Metropolitan Water
Reclamation District, Capital
Improvement, GO,
5.50%, 12/1/10.................. 2,022,500
1,000,000 Chicago Public Building
Commission, Series A,
7.00%, 1/1/20 (Insured by
MBIA)........................... 1,186,250
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
ILLINOIS (CONTINUED)
$2,000,000 Chicago School Finance
Authority, Series A, GO,
4.90%, 6/1/05 (Insured by
MBIA)........................... $ 1,987,500
2,000,000 Du Page & Will Counties,
Community School District No.
204, GO,
4.95%, 12/30/01 (Insured by
FGIC)........................... 2,035,000
1,000,000 Illinois State Sales Tax, Series
S,
5.00%, 6/15/08.................. 980,000
1,000,000 Will County Forest Preserve
District, GO,
5.90%, 12/1/03 (Insured by
AMBAC).......................... 1,063,750
------------
9,275,000
------------
INDIANA -- 5.8%
2,000,000 Indiana Municipal Power Supply
Agency, Series B,
6.00%, 1/1/13 (Insured by
MBIA)........................... 2,100,000
2,250,000 Indiana State Office Building
Commission, Capital Complex,
Government Center Parking
Facilities, Series A,
4.80%, 7/1/03 (Insured by
AMBAC).......................... 2,250,000
1,000,000 Indiana Transportation Finance
Authority, Highway Revenue,
Series A,
5.75%, 6/1/12 (Insured by
AMBAC).......................... 1,033,750
1,000,000 Marion County Hospital Authority
Revenue, Community Hospital,
Indianapolis Project,
6.00%, 5/1/06................... 1,063,750
------------
6,447,500
------------
IOWA -- 2.0%
2,055,000 Iowa Finance Authority Private
College Revenue, Drake
University Project,
6.50%, 12/1/11 (Insured by
MBIA)........................... 2,273,344
------------
LOUISIANA -- 2.9%
3,000,000 Louisiana State Gas & Fuels Tax
Revenue, Series A,
7.25%, 11/15/00................. 3,273,750
------------
MARYLAND -- 1.8%
2,000,000 Prince Georges County,
Consolidated Public Improvement,
GO,
5.00%, 1/1/02 (Insured by
MBIA)........................... 2,047,500
------------
</TABLE>
Continued
21
<PAGE> 301
The Kent TAX-FREE INCOME FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MASSACHUSETTS -- 3.5%
$1,000,000 Massachusetts State, Series B,
GO,
5.40%, 11/1/06.................. $ 1,036,250
1,000,000 Massachusetts State Industrial
Finance Agency, Resource
Recovery Revenue, Refusetech,
Inc. Project, Series A,
5.25%, 7/1/99 (Insured by
FSA)............................ 1,020,000
2,000,000 Massachusetts State Water,
Resource Authority, Series B,
5.00%, 12/1/25 (Insured by
MBIA)........................... 1,817,500
------------
3,873,750
------------
MICHIGAN -- 23.8%
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue,
7.30%, 5/1/10................... 2,232,500
1,300,000 Berkley City School District,
GO,
7.00%, 1/1/07 (Insured by
FGIC)........................... 1,499,875
2,000,000 Detroit Sewage Disposal Revenue,
Series B,
6.00%, 7/1/09 (Insured by
MBIA)........................... 2,155,000
1,000,000 Detroit Water Supply System,
Series B,
5.10%, 7/1/07 (Insured by
MBIA)........................... 995,000
930,000 Kent County Airport Facility,
Kent County International
Airport, (AMT),
5.50%, 1/1/07................... 964,875
1,000,000 Michigan State Hospital
Financial Authority,
5.50%, 1/1/16, Callable 1/1/07 @
102 (Insured by AMBAC).......... 981,250
2,365,000 Michigan State Hospital Finance
Authority, Detroit Medical
Center, Series B,
5.00%, 8/15/06 (Insured by
AMBAC).......................... 2,344,306
2,000,000 Michigan State Hospital Finance
Authority, Henry Ford Health,
Series A,
5.25%, 11/15/20 (Insured by
AMBAC).......................... 1,892,500
2,000,000 Michigan State Hospital Finance
Authority, Sisters of Mercy,
Series P,
5.25%, 8/15/21 (Insured by
MBIA)........................... 1,890,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$1,300,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
5.15%, 4/1/02 (Insured by
AMBAC).......................... $ 1,322,750
1,000,000 Michigan State South Central
Power Agency, Power Supply
System Revenue,
5.80%, 11/1/05 (Insured by
MBIA)........................... 1,065,000
2,000,000 Michigan State Trunk Line,
5.50%, 11/1/16.................. 1,970,000
2,000,000 Michigan State University
Revenue, General, Series A,
5.50%, 8/15/22.................. 1,930,000
1,000,000 Michigan Strategic Fund, Dow
Chemical, (AMT),
5.10%*, 1/2/97.................. 1,000,000
2,400,000 Midland County, Economic
Development Corp., Dow Chemical,
Series B,
4.15%*, 12/1/15................. 2,400,000
500,000 University of Michigan, Hospital
Revenue, Series A,
5.10%*, 1/2/97.................. 500,000
1,200,000 University of Michigan, Revenue,
5.10%*, 1/2/97.................. 1,200,000
------------
26,343,056
------------
MINNESOTA -- 1.3%
1,500,000 North St. Paul, Maplewood
Independent District No. 622,
Series A, GO,
5.13%, 2/1/25................... 1,406,250
------------
MISSOURI -- 0.5%
500,000 Missouri State Health &
Education Facilities, Lake of
Ozarks General Hospital,
6.50%, 2/15/21.................. 508,125
------------
NEBRASKA -- 1.0%
1,075,000 Omaha Public Power District,
5.10%, 2/1/08................... 1,083,063
------------
NEVADA -- 3.9%
1,805,000 Clark County School District,
GO,
5.75%, 6/15/10 (Insured by
FGIC)........................... 1,850,125
2,000,000 Nevada State, Nevada Municipal
Bond Bank, Series A, GO,
8.00%, 11/1/05.................. 2,450,000
------------
4,300,125
------------
</TABLE>
Continued
22
<PAGE> 302
The Kent TAX-FREE INCOME FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
NEW JERSEY -- 3.0%
$1,500,000 New Jersey Economic Development
Authority, Market Transition
Facility Revenue, Senior Lien,
7.00%, 7/1/04 (Insured by
MBIA)........................... $ 1,713,750
1,500,000 New Jersey State Transportation
Trust Fund Authority,
Transportation System, Series A,
6.00%, 12/15/06 (Insured by
MBIA)........................... 1,625,625
------------
3,339,375
------------
NEW YORK -- 1.2%
1,350,000 New York City Municipal Water &
Sewer Revenue,
5.50%, 6/15/24, Callable 6/15/06
@ 101........................... 1,290,938
------------
OKLAHOMA -- 1.9%
1,000,000 Grand River Dam Authority,
5.75%, 6/1/08 (Insured by
FSA)............................ 1,063,750
1,000,000 Tulsa Industrial Authority,
University of Tulsa, Series A,
6.00%, 10/1/16 (Insured by
MBIA)........................... 1,063,750
------------
2,127,500
------------
PENNSYLVANIA -- 1.8%
2,000,000 Pennsylvania State, First
Series, GO,
5.38%, 5/15/16 (Insured by
FGIC)........................... 1,950,000
------------
PUERTO RICO -- 0.9%
1,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority,
Highway Revenue, Series X,
4.90%, 7/1/01................... 1,011,250
------------
RHODE ISLAND -- 0.9%
1,000,000 Convention Center Authority,
Series B,
5.00%, 5/15/09 (Insured by
MBIA)........................... 977,500
------------
SOUTH CAROLINA -- 2.5%
1,200,000 Myrtle Beach Water & Sewer
Revenue,
4.90%, 3/1/02 (Insured by
MBIA)........................... 1,210,500
1,500,000 Myrtle Beach Water & Sewer
Revenue,
5.00%, 3/1/03 (Insured by
MBIA)........................... 1,515,000
------------
2,725,500
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
TENNESSEE -- 1.1%
$1,225,000 Tennessee Housing Development
Agency, Mortgage Finance, Series
C (AMT),
5.95%, 7/1/09 (Insured by
MBIA)........................... $ 1,251,031
------------
TEXAS -- 6.1%
1,000,000 Brownsville Utility System,
6.25%, 9/1/11 (Insured by
AMBAC).......................... 1,088,750
1,000,000 Harris County, Certificates of
Obligation,
6.00%, 12/15/11................. 1,073,750
2,000,000 Texas City Industrial
Development Corp., Marine
Terminal Revenue, Arco Pipeline
Co. Project,
7.375%, 10/1/20................. 2,465,000
2,000,000 Texas State, Series A, GO,
5.70%, 10/1/03.................. 2,125,000
------------
6,752,500
------------
UTAH -- 1.8%
2,175,000 Intermountain Power Agency, Utah
Power Supply, Series D,
5.00%, 7/1/23................... 1,976,531
------------
VIRGINIA -- 1.1%
1,230,000 Norfolk, State Aid, GO,
5.40%, 6/1/12................... 1,225,386
------------
WASHINGTON -- 1.9%
1,000,000 Douglas County Public Utility
District No. 001, Electric
Distribution System,
5.90%, 1/1/11 (Insured by
MBIA)........................... 1,021,250
1,000,000 Washington State, Motor Vehicle
Fuel Tax, R-92D, GO,
6.25%, 9/1/07................... 1,098,750
------------
2,120,000
------------
TOTAL MUNICIPAL SECURITIES...... 108,097,862
------------
(cost $105,019,317)
</TABLE>
Continued
23
<PAGE> 303
The Kent TAX-FREE INCOME FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
- ----------- ------------
<S> <C> <C>
INVESTMENT COMPANY -- 1.2%
$1,315,963 Dreyfus Tax-Exempt Cash
Management Fund................. $ 1,315,963
------------
TOTAL INVESTMENT COMPANY........ 1,315,963
------------
(cost $1,315,963)
TOTAL INVESTMENTS -- 98.7%................... 109,413,825
(cost $106,335,280)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.3%........................ 1,469,921
------------
NET ASSETS -- 100.0%......................... $110,883,746
=============
</TABLE>
[FN]
- ---------------------------------------
Percentages indicated are based on net assets of $110,883,746.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation......... $ 3,252,490
Unrealized depreciation......... (173,945)
------------
Net unrealized appreciation..... $ 3,078,545
============
</TABLE>
[FN]
* Variable rate security. Rate presented represents rate in effect at December
31, 1996. Maturity date reflects next rate change date.
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
ETM Escrowed To Maturity
FGIC Financial Guaranty Insurance Corp.
FSA Financial Security Assurance
GO General Obligation
MBIA Municipal Bond Insurance Association
See Notes to Financial Statements.
24
<PAGE> 304
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
MUNICIPAL SECURITIES -- 98.4%
MICHIGAN -- 93.0%
$ 1,990,000 Allegan Sanitary Sewer System
(AMT),
5.45%, 11/1/02.................. $ 1,997,463
1,220,000 Auburn Hills Local Development
Authority, Tax Increment
Revenue, Series A,
6.75%, 11/1/97 (LC: Dai-Ichi
Kangyo Bank Ltd.)............... 1,242,229
2,000,000 Battle Creek Downtown
Development Authority, Tax
Increment Revenue,
6.90%, 5/1/04................... 2,177,500
695,000 Bay City School District, GO,
5.30%, 5/1/97................... 699,413
745,000 Bay City School District, GO,
5.50%, 5/1/98................... 758,969
500,000 Central Michigan University,
6.70%, 10/1/97.................. 510,055
1,445,000 Chippewa Valley School District,
Series A, GO,
5.60%, 5/1/99................... 1,490,156
1,000,000 Chippewa Valley School District,
GO, Prerefunded 5/1/01 @ 101.5,
6.375%, 5/1/05 (Insured by FGIC)... 1,087,500
1,700,000 Clintondale Community School
District, GO,
4.65%, 5/1/03................... 1,680,875
2,000,000 Dearborn School District, GO,
Prerefunded 5/1/00 @ 102,
6.625%, 5/1/09 (Insured by MBIA)... 2,177,500
1,000,000 Dearborn School District, GO,
Prerefunded 5/1/00 @ 102,
6.375%, 5/1/10 (Insured by MBIA)... 1,081,250
1,075,000 Dearborn Sewage Disposal System,
7.00%, 4/1/99 (Insured by MBIA)... 1,132,780
965,000 Dearborn Sewage Disposal System,
6.90%, 4/1/02 (Insured by MBIA)... 1,059,088
1,000,000 Detroit, GO,
5.00%, 4/1/04................... 1,006,250
750,000 Detroit, GO,
5.05%, 4/1/06................... 799,688
580,000 Detroit, GO, Distributable State
Aid,
5.60%, 5/1/00 (Insured by
AMBAC).......................... 600,300
2,500,000 Detroit, GO, Prerefunded 5/1/99
@ 102,
7.20%, 5/1/09 (Insured by
AMBAC).......................... 2,712,500
2,000,000 Detroit Convention Facility,
Cobo Hall Expansion Project,
4.00%, 9/30/97.................. 1,999,320
2,800,000 Detroit Sewage Disposal, Series A,
4.85%, 7/1/01 (Insured by FGIC)... 2,835,000
720,000 Detroit Water Supply System,
4.30%, 7/1/00 (Insured by FGIC)... 716,400
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 2,000,000 East China Township School
District, GO,
6.00%, 5/1/02................... $ 2,102,500
720,000 Eastern Michigan University, GO,
3.95%, 6/1/98 (Insured by
AMBAC).......................... 718,200
1,000,000 Eastern Michigan University, GO,
5.80%, 6/1/01 (Insured by
AMBAC).......................... 1,051,250
405,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series A,
4.90%, 2/15/02 (Insured by MBIA)... 408,038
425,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series A,
5.00%, 2/15/03 (Insured by MBIA)... 428,718
445,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series A,
5.10%, 2/15/04 (Insured by MBIA)... 448,338
470,000 Farmington Hills Economic
Development Corp. Revenue,
Botsford Continuing Care, Series A,
5.20%, 2/15/05 (Insured by MBIA)... 473,525
275,000 Ferris State College, Special
Obligation,
7.50%, 8/15/03.................. 278,438
1,915,000 Flint Hospital Building
Authority, Hurley Medical
Center, Series A,
7.00%, 7/1/97................... 1,933,767
1,000,000 Grand Haven Area Public Schools,
GO,
5.45%, 5/1/04 (Insured by MBIA)... 1,043,750
500,000 Grand Rapids Water Supply
System,
6.60%, 1/1/97 (Insured by FGIC)... 500,000
990,000 Grand Rapids Water Supply
System,
7.40%, 1/1/97................... 990,000
1,250,000 Greater Detroit Resource
Recovery Authority Revenue,
Series B,
5.00%, 12/13/02 (Insured by
AMBAC).......................... 1,271,875
1,500,000 Haslett Public School District,
GO, Prerefunded 5/1/00 @ 101,
7.50%, 5/1/20................... 1,657,500
1,000,000 Holland Electric Revenue,
Prerefunded 7/1/99 @ 100,
6.40%, 7/1/02................... 1,052,500
1,100,000 Holland Electric Revenue,
Prerefunded 7/1/99 @ 100,
6.50%, 7/1/03................... 1,159,125
</TABLE>
Continued
25
<PAGE> 305
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 675,000 Hudsonville Public Schools,
Series B, GO,
4.50%, 5/1/98 (Insured by FGIC)... $ 679,219
500,000 Hudsonville Public Schools,
Series B, GO,
4.60%, 5/1/99 (Insured by FGIC)... 505,625
1,250,000 Huron Valley School District,
GO, Prerefunded 5/1/01 @ 102,
7.10%, 5/1/08 (Insured by FGIC)... 1,400,000
470,000 Iron Mountain City School
District, GO,
3.60%, 5/1/97 (Insured by
AMBAC).......................... 470,343
485,000 Iron Mountain City School
District, GO,
3.90%, 5/1/98 (Insured by
AMBAC).......................... 483,788
1,810,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital,
4.95%, 5/15/02 (Insured by MBIA)... 1,832,625
1,000,000 Kalamazoo Hospital Finance
Authority, Refunding &
Improvement, Bronson Methodist
Hospital,
5.25%, 5/15/05 (Insured by MBIA)... 1,020,000
1,295,000 Kenowa Hills Public Schools, GO,
5.50%, 5/1/05................... 1,354,894
500,000 Kent County Airport Facility,
Kent County International
Airport (AMT),
5.25%, 1/1/04................... 512,500
505,000 Kent County Airport Facility,
Kent County International
Airport (AMT),
5.30%, 1/1/05................... 519,518
500,000 Kent Hospital Finance Authority,
Butterworth Hospital, Series A,
6.50%, 1/15/97.................. 500,280
500,000 Kent Hospital Finance Authority,
Butterworth Hospital, Series A,
6.60%, 1/15/98.................. 511,655
1,150,000 Kent Hospital Finance Authority,
Butterworth Hospital, Series A,
4.90%, 1/15/05.................. 1,132,750
1,500,000 Kent Hospital Finance Authority,
Pine Rest Christian Hospital,
5.40%, 11/1/98 (Insured by
FGIC)........................... 1,531,875
2,000,000 Lake Orion Community School
District, GO,
6.20%, 5/1/04 (Insured by
AMBAC).......................... 2,177,500
850,000 Lanse Creuse Public Schools, GO,
7.70%, 5/1/04................... 878,236
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 2,250,000 Michigan Higher Education
Student Loan Authority, Series
XII-E (AMT),
6.00%, 10/1/97 (Insured by
AMBAC).......................... $ 2,281,320
1,000,000 Michigan Higher Education
Student Loan Authority, Series
XII-G (AMT),
4.45%, 10/1/99 (Insured by
AMBAC).......................... 1,000,000
1,000,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Series B,
6.90%, 5/1/99 (Insured by FGIC)... 1,055,000
1,020,000 Michigan Municipal Bond
Authority, Local Government Loan
Program, Qualified School,
6.35%, 5/15/01.................. 1,095,225
1,000,000 Michigan Municipal Bond
Authority, Pooled Projects,
Series B,
5.10%, 10/1/04.................. 1,018,750
1,000,000 Michigan Municipal Bond
Authority, State Revolving Fund,
5.50%, 10/1/99.................. 1,032,500
2,000,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.30%, 1/1/00................... 2,042,500
750,000 Michigan Public Power Agency,
Belle River Project, Series A,
5.70%, 1/1/03................... 785,625
1,000,000 Michigan State Building
Authority, Series II,
6.10%, 10/1/01.................. 1,065,000
3,000,000 Michigan State Comprehensive
Transportation, Series B,
5.625%, 5/15/03, Callable 7/1/02
@ 102........................... 3,153,750
3,000,000 Michigan State Environment
Protection Program, GO,
Prerefunded 11/1/02 @ 102,
6.25%, 11/1/08.................. 3,288,750
910,000 Michigan State Hospital Finance
Authority,
4.90%, 11/1/02.................. 922,512
2,000,000 Michigan State Hospital Finance
Authority, McLaren Obligation
Group, Series A,
4.10%, 10/15/97................. 2,005,200
1,000,000 Michigan State Hospital Finance
Authority, Mercy Memorial
Hospital,
4.00%, 6/1/99 (Insured by MBIA)... 993,750
</TABLE>
Continued
26
<PAGE> 306
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 1,000,000 Michigan State Hospital Finance
Authority, Oakwood Hospital
Obligation Group, Prerefunded
7/1/00 @ 102,
6.95%, 7/1/02 (Insured by FGIC)... $ 1,102,500
500,000 Michigan State Hospital Finance
Authority, Pontiac Osteopathic,
Series A,
4.65%, 2/1/97................... 499,950
1,060,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J,
7.15%, 2/15/99.................. 1,111,675
1,000,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series P,
4.60%, 8/15/02 (Insured by MBIA)... 992,500
2,800,000 Michigan State Hospital Finance
Authority, Sisters of Mercy
Health Corp., Series J,
Prerefunded 2/15/01 @ 102,
7.375%, 2/15/11................. 3,150,000
1,150,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center,
4.50%, 5/15/01 (Insured by
AMBAC).......................... 1,148,562
1,000,000 Michigan State Hospital Finance
Authority, St. John Hospital &
Medical Center,
5.00%, 5/15/05 (Insured by
AMBAC).......................... 1,005,000
475,000 Michigan State Housing
Development Authority, Mercy
Bellbrook Project,
4.40%, 4/1/98 (Insured by MBIA)... 476,188
2,680,000 Michigan State Housing
Development Authority, Rental
Housing Revenue, Series A,
(AMT),
5.25%, 10/1/01 (Insured by MBIA)... 2,726,900
885,000 Michigan State Strategic Fund,
Industrial Development Revenue,
Grand Rapids Motel Co. Project
(AMT),
5.25%*, 6/1/98.................. 887,213
420,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Lutheran Social Services
Project,
4.25%, 9/1/97 (LC: First of
America)........................ 420,248
415,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Lutheran Social Services
Project,
4.40%, 9/1/98 (LC: First of
America)........................ 415,518
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 480,000 Michigan State Strategic Fund,
Limited Obligation Revenue,
Lutheran Social Services
Project,
4.55%, 9/1/99 (LC: First of
America)........................ $ 481,200
2,000,000 Michigan State Underground
Storage Tank Financial Assurance
Authority, Series I,
5.00%, 5/1/00 (Insured by
AMBAC).......................... 2,040,000
1,270,000 Michigan State Underground
Storage Tank Financial Assurance
Authority, Series I,
6.00%, 5/1/06 (Insured by
AMBAC).......................... 1,376,362
1,200,000 Michigan State University,
Series A,
5.50%, 2/15/99 (Insured by
AMBAC).......................... 1,228,500
1,100,000 Michigan State University,
Series A,
5.50%, 2/15/00 (Insured by
AMBAC).......................... 1,133,000
1,000,000 Mount Clemens Community School
District, GO, Prerefunded 5/1/02
@ 102,
6.60%, 5/1/20 (Insured by MBIA)... 1,111,250
1,000,000 Oakland County, Community
College, Prerefunded 5/1/02
@ 100,
6.65%, 5/1/11................... 1,111,250
1,660,000 Oakland County Economic
Development Corp. Revenue,
Boardwalk Shopping Center,
Limited Obligation Revenue,
4.75%*, 6/30/98................. 1,664,150
615,000 Oakland County Economic
Development Corp. Revenue, Sugar
Tree Shopping Center, 4.75%*,
6/30/98......................... 611,925
3,000,000 Okemos Public School District,
Series I, GO,
6.90%, 5/1/11................... 3,330,000
3,200,000 Plymouth-Canton Community School
District, Series B, GO,
Prerefunded 5/1/01 @ 101,
6.80%, 5/1/17................... 3,512,000
415,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/97 (Insured by FGIC)... 419,553
275,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/98 (Insured by FGIC)... 283,938
630,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/99 (Insured by FGIC)... 667,013
725,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/00 (Insured by FGIC)... 779,375
735,000 Reeths-Puffer Schools, GO,
6.75%, 5/1/01 (Insured by FGIC)... 800,231
</TABLE>
Continued
27
<PAGE> 307
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 750,000 Reeths-Puffer Schools, GO,
6.25%, 5/1/02 (Insured by FGIC)... $ 810,000
1,600,000 Rochester Community School
District, Prerefunded 5/1/98
@ 101,
7.25%, 5/1/03................... 1,682,000
2,000,000 Rockford Public Schools, GO,
Prerefunded 5/1/00 @ 101,
7.375%, 5/1/19.................. 2,202,500
1,000,000 South Lyon Community Schools,
GO, Prerefunded 5/1/98 @ 102,
7.80%, 5/1/14................... 1,068,750
1,200,000 Southfield Public Schools, GO,
3.90%, 5/1/98 (Insured by FGIC)... 1,197,000
1,095,000 Southfield Public Schools, GO,
4.00%, 5/1/99 (Insured by FGIC)... 1,089,525
1,200,000 St. Joseph Hospital Finance
Authority, Mercy Memorial
Medical Center Obligation,
3.95%, 1/1/97 (Insured by
AMBAC).......................... 1,200,000
860,000 Traverse City Area Public
Schools, GO,
4.15%, 5/1/00 (Insured by FGIC)... 853,550
1,000,000 Traverse City Area Public
Schools, Series II, GO,
Prerefunded 5/1/01 @ 101.5,
7.00%, 5/1/03................... 1,110,000
630,000 University of Michigan,
Intercollegiate Athletic
Revenue,
3.80%, 6/1/97................... 630,542
2,035,000 Walled Lake Consolidated School
District, GO,
4.70%, 5/1/01................... 2,060,438
2,235,000 Walled Lake Consolidated School
District, GO,
4.80%, 5/1/02................... 2,265,730
2,000,000 Walled Lake Consolidated School
District, Series II, GO,
Prerefunded 5/1/00 @ 102,
7.10%, 5/1/05................... 2,202,500
945,000 Warren Consolidated School
District, GO,
6.00%, 5/1/01................... 1,000,519
1,000,000 Warren Consolidated School
District, GO, Prerefunded 5/1/02
@ 102,
6.625%, 5/1/21.................. 1,110,000
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
- ----------- ------------
<S> <C> <C>
MUNICIPAL SECURITIES (CONTINUED)
MICHIGAN (CONTINUED)
$ 1,025,000 Washtenaw Community
College, GO,
4.70%, 4/1/03 (Insured by FGIC)... $ 1,021,156
450,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/97.......................... 449,495
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/98.......................... 541,063
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/99.......................... 530,063
550,000 Wayne County Downriver System
Sewer Disposal, GO, 3.75%,
5/1/00.......................... 518,375
1,500,000 West Ottawa Public School
District,
4.70%, 5/1/02 (Insured by FGIC)... 1,503,750
1,750,000 Western Michigan University,
Series A, Prerefunded 7/15/01
@ 102,
6.50%, 7/15/21 (Insured by
AMBAC).......................... 1,925,000
1,000,000 Wyandotte Electric Revenue,
6.20%, 10/1/03 (Insured by MBIA)... 1,076,250
1,150,000 Ypsilanti School District,
4.50%, 5/1/00 (Insured by FGIC)... 1,154,313
------------
144,220,970
------------
PUERTO RICO -- 5.4%
3,000,000 Puerto Rico Commonwealth Highway
& Transportation Authority
Highway Revenue, Series X,
4.90%, 7/1/01................... 3,033,750
4,000,000 Puerto Rico Electric Power
Authority Revenue, Series W,
5.00%, 7/1/98................... 4,045,000
1,300,000 Puerto Rico Individual Medical &
Environment Pollution Control
Facilities Financing Authority,
Intel Corp., Series A,
4.00%*, 9/1/98.................. 1,296,750
------------
8,375,500
------------
TOTAL MUNICIPAL SECURITIES...... 152,596,470
------------
(Cost $150,856,786)
</TABLE>
Continued
28
<PAGE> 308
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds PORTFOLIO OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT COMPANIES -- 0.3%
1 Dreyfus Tax-Exempt Cash
Management Fund................. $ 1
450,657 Reich & Tang Daily Tax-Free
Fund............................ 450,657
------------
TOTAL INVESTMENT COMPANIES...... 450,658
------------
(Cost $450,658)
TOTAL INVESTMENTS -- 98.7%................... 153,047,128
(Cost $151,307,444)(a)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.3%........................ 1,997,042
------------
NET ASSETS -- 100.0%......................... $155,044,170
============
<FN>
- ---------------------------------------
Percentages indicated are based on net assets of $155,044,170.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<S> <C>
Unrealized appreciation......... $ 1,915,209
Unrealized depreciation......... (175,525)
------------
Net unrealized appreciation..... $ 1,739,684
=============
</TABLE>
* Variable rate security. Rate presented represents rate in effect at December
31, 1996. Maturity date reflects next rate change date.
<TABLE>
<C> <S> <C>
AMBAC AMBAC Indemnity Corp.
AMT Alternative Minimum Tax Paper
FGIC Financial Guarantee Insurance Corp.
GO General Obligation
LC Letter of Credit
MBIA Municipal Bond Insurance Association
</TABLE>
See Notes to Financial Statements.
29
<PAGE> 309
The Kent
Funds STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
LIMITED INTERMEDIATE TAX-FREE MICHIGAN
TERM TAX-FREE TAX-FREE INCOME MUNICIPAL
FUND FUND FUND BOND FUND
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost.......................................... $40,391,435 $274,872,252 $106,335,280 $151,307,444
Net unrealized appreciation.................................. 596,621 9,810,535 3,078,545 1,739,684
----------- ------------ ------------ ------------
Total investments at value............................... 40,988,056 284,682,787 109,413,825 153,047,128
Cash......................................................... -- -- 1,649 --
Interest and dividends receivable............................ 620,384 4,484,571 1,515,783 2,082,060
Deferred organizational expense (Note 2)..................... -- -- 4,216 --
Prepaid expenses (Note 2).................................... -- 443 -- --
----------- ------------ ------------ ------------
Total Assets............................................. 41,608,440 289,167,801 110,935,473 155,129,188
----------- ------------ ------------ ------------
LIABILITIES:
Advisory fees payable (Note 3)............................... 2,064 15,856 6,693 7,647
Payable to administrator (Note 3)............................ 6,703 43,112 16,542 24,286
Payable to transfer agent (Note 3)........................... 4,125 14,287 6,126 9,869
Distribution fees (Investment Shares)(Note 3)................ 12 656 175 285
Payable to custodian......................................... 3,008 5,276 5,160 5,363
Registration & filing fees payable........................... 1,157 15,000 3,241 9,714
Accrued expenses and other liabilities....................... 14,052 30,709 13,790 27,854
----------- ------------ ------------ ------------
Total Liabilities........................................ 31,121 124,896 51,727 85,018
----------- ------------ ------------ ------------
NET ASSETS..................................................... $41,577,319 $289,042,905 $110,883,746 $155,044,170
=========== ============ ============ ============
NET ASSETS CONSIST OF:
Paid-in capital.............................................. $40,957,086 $279,791,789 $107,745,686 $153,389,303
Accumulated undistributed net investment income.............. 7,011 44,748 8,405 22,437
Accumulated net realized gains (losses) on investments sold
and futures contracts...................................... 16,601 (604,167) 51,110 (107,254)
Net unrealized appreciation of investments................... 596,621 9,810,535 3,078,545 1,739,684
----------- ------------ ------------ ------------
TOTAL NET ASSETS......................................... $41,577,319 $289,042,905 $110,883,746 $155,044,170
=========== ============ ============ ============
INSTITUTIONAL SHARES:
Net Assets................................................... $41,471,587 $285,674,485 $109,947,537 $152,622,569
Shares Outstanding........................................... 4,080,067 27,404,331 10,708,823 15,140,896
Net Asset Value, offering and redemption price per share..... $ 10.16 $ 10.42 $ 10.27 $ 10.08
=========== ============ ============ ============
INVESTMENT SHARES:
Net Assets................................................... $ 105,732 $ 3,368,420 $ 936,209 $ 2,421,601
Shares Outstanding........................................... 10,370 323,136 90,957 240,448
Net Asset Value and redemption price per share............... $ 10.20 $ 10.42 $ 10.29 $ 10.07
=========== ============ ============ ============
Maximum Sales Charge -- Investment Shares.................... 4.00% 4.00% 4.00% 4.00%
=========== ============ ============ ============
Maximum Offering Price Per Share -- Investment Shares (100% /
(100% - Maximum Sales Charge) of net asset value adjusted
to nearest cent)........................................... $ 10.63 $ 10.85 $ 10.72 $ 10.49
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
30
<PAGE> 310
The Kent STATEMENTS OF OPERATIONS
Funds FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
LIMITED INTERMEDIATE TAX-FREE MICHIGAN
TERM TAX-FREE TAX-FREE INCOME MUNICIPAL
FUND FUND FUND BOND FUND
------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 2):
Interest................................................. $ 2,196,043 $14,596,294 $5,530,986 $7,644,608
Dividends................................................ 29,364 194,026 96,276 141,198
Other Income............................................. 2,163 -- -- --
---------- ----------- ---------- ----------
Total Investment Income................................ 2,227,570 14,790,320 5,627,262 7,785,806
---------- ----------- ---------- ----------
EXPENSES:
Investment advisory fees (Note 3)........................ 225,891 1,458,010 595,616 772,339
Administration fees (Note 3)............................. 96,582 578,025 229,540 341,697
Distribution fees (Investment Shares) (Note 3)........... 162 8,726 1,900 5,410
Custodian fees........................................... 9,270 19,393 13,891 12,220
Legal and audit fees (Note 3)............................ 18,463 28,114 21,286 22,679
Transfer agent fees (Note 3)............................. 16,674 32,922 17,389 24,316
Amortization of organization costs (Note 2).............. -- -- 1,376 --
Other expenses........................................... -- 28,163 11,515 35,791
---------- ----------- ---------- ----------
Total expenses before waivers.......................... 367,042 2,153,353 892,513 1,214,452
Less: waivers (Note 3)................................. (1,018) (6,156) (2,362) (6,399)
---------- ----------- ---------- ----------
Net Expenses........................................... 366,024 2,147,197 890,151 1,208,053
---------- ----------- ---------- ----------
NET INVESTMENT INCOME...................................... 1,861,546 12,643,123 4,737,111 6,577,753
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FUTURES CONTRACTS (NOTE 2):
Net realized gains on investments sold................... 82,971 1,079,288 1,968,582 86,964
Net realized losses on futures contracts................. -- -- (363,313) --
Net change in unrealized appreciation/depreciation of
investments............................................ (270,758) (3,796,119) (1,887,284) (795,155)
---------- ----------- ---------- ----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS AND
FUTURES CONTRACTS (NOTE 2):................................ (187,787) (2,716,831) (282,015) (708,191)
---------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ 1,673,759 $ 9,926,292 $4,455,096 $5,869,562
========== =========== ========== ==========
</TABLE>
See Notes to Financial Statements.
31
<PAGE> 311
The Kent
Funds STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE TAX-FREE MICHIGAN MUNICIPAL
TAX-FREE FUND TAX-FREE FUND INCOME FUND BOND FUND
-------------------------- --------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995(1) 1996 1995
------------ ------------ ------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS AT
BEGINNING OF
PERIOD........ $55,401,190 $43,503,375 $287,540,348 $ 385,220,246 $122,384,290 $ -- $187,365,585 $120,464,659
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS:
Net investment
income...... 1,861,546 1,889,876 12,643,123 13,878,695 4,737,111 3,573,032 6,577,753 6,244,604
Net realized
gains on
investments
sold........ 82,971 145,910 1,079,288 1,348,408 1,968,582 148,330 86,964 180,555
Net realized
losses on
futures
contracts... -- -- -- -- (363,313) -- -- --
Net change in
unrealized
appreciation/depreciation
of investments. (270,758) 1,744,380 (3,796,119) 25,697,939 (1,887,284) 4,965,829 (795,155) 5,672,314
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Net increase
in net
assets
resulting
from
operations... 1,673,759 3,780,166 9,926,292 40,925,042 4,455,096 8,687,191 5,869,562 12,097,473
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
FROM (NOTE 2):
INSTITUTIONAL:
Net investment
income...... (1,883,853) (1,911,674) (12,639,182) (13,398,449) (4,725,879) (3,541,310) (6,489,955) (6,043,639)
In excess of
net
investment
income...... (22,303) -- (101,729) (282,467) -- -- -- (157,669)
Net realized
gains on
investments. (45,972) -- -- -- (1,679,825) -- -- --
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total
Dividends
and
Distributions -- Institutional
Shares.... (1,952,128) (1,911,674) (12,740,911) (13,680,916) (6,405,704) (3,541,310) (6,489,955) (6,201,308)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
INVESTMENT:
Net investment
income...... (2,384) (1,582) (137,261) (157,954) (32,116) (12,658) (77,375) (68,092)
In excess of
net
investment
income...... (206) -- (7,740) (3,790) -- -- (3,313) (1,615)
Net realized
gains on
investments... (87) -- -- -- (9,292) -- -- --
In excess of
realized
gains on
investments... -- -- -- -- (3,147) -- -- --
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total
Dividends
and
Distributions -- Investment
Shares.... (2,677) (1,582) (145,001) (161,744) (44,555) (12,658) (80,688) (69,707)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total
Dividends
and
Distributions
to
shareholders.(1,954,805) (1,913,256) (12,885,912) (13,842,660) (6,450,259) (3,553,968) (6,570,643) (6,271,015)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
FUND SHARE
TRANSACTIONS
(NOTE 4):
Proceeds from
shares
issued...... 8,696,402 31,771,069 63,415,595 56,819,071 35,182,548 134,534,815 28,108,486 116,438,055
Reinvestment
of
distributions... 18,971 3,260 120,131 104,026 68,391 26,538 74,582 77,608
Cost of shares
redeemed.... (22,258,198) (21,743,424) (59,073,549) (181,685,377) (44,756,320) (17,310,286) (59,803,402) (55,441,195)
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Total net
increase
(decrease)
from share
transactions(13,542,825) 10,030,905 4,462,177 (124,762,280) (9,505,381) 117,251,067 (31,620,334) 61,074,468
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
Net increase
(decrease)
in net
assets.... (13,823,871) 11,897,815 1,502,557 (97,679,898) (11,500,544) 122,384,290 (32,321,415) 66,900,926
----------- ----------- ----------- ------------ ------------ ------------ ------------ ------------
NET ASSETS AT
END OF PERIOD
(INCLUDING
LINE A)....... $41,577,319 $55,401,190 $289,042,905 $ 287,540,348 110,883,746 $122,384,290 $155,044,170 $187,365,585
============ ============ ============ ============ ============ ============ ============ ============
(A) Accumulated
undistributed
net investment
income........ $ 7,011 $ 24,691 $ 44,748 $ 133,320 $ 8,405 $ 29,289 $ 22,437 $ --
=========== =========== =========== ============ ============ ============ ============ ============
<FN>
- ------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
</TABLE>
See Notes to Financial Statements.
32
<PAGE> 312
The Kent
Funds NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Kent Funds (the "Trust") was organized as a Massachusetts business trust
on May 9, 1986 and is registered under the Investment Company Act of 1940 (the
"1940 Act"), as amended, as an open-end management investment company. As of the
date of this report, the Trust offered thirteen managed investment portfolios.
The accompanying financial statements and financial highlights are those of The
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 (individually, a
"Portfolio", collectively, the "Portfolios") only.
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest without par value. It allows for the
creation of one or more classes of shares within each series, each of which,
regardless of class designation, represents an equal proportionate interest in
the Portfolios with each other share of that series.
The Trust may issue more than one series of shares investing in portfolios of
securities. The Trust currently issues thirteen series of shares with two
separate classes in each series, Investment Shares and Institutional Shares.
Each class of shares is entitled upon liquidation of a series to a pro rata
share in the net assets of that class of such series. Each share in each series
or class has identical voting, dividend, liquidation and other rights, except in
matters affecting only a particular series or class, in which case only shares
of the affected series or class are entitled to vote. Class specific expenses,
if any, are currently limited to expenses directly attributable to the
Investment Shares under a Distribution Plan, shareholder services fees and
certain printing and postage expenses incurred as they relate to a particular
class of shares.
The investment objective of the Limited Term Tax-Free Fund and the
Intermediate Tax-Free Fund is to seek current income, exempt from federal income
tax, while preserving capital. The Tax-Free Income Fund's investment objective
is to seek to provide as high a level of interest income exempt from federal
income tax as is consistent with prudent investing, while preserving capital.
The investment objective of the Michigan Municipal Bond Fund is to seek current
income, exempt from federal income and State of Michigan personal income taxes,
while preserving capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Portfolios in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual amounts could differ from those estimates.
PORTFOLIO VALUATION: Corporate debt securities, municipal securities and debt
securities of the U.S. government and its agencies (other than short-term
investments maturing in 60 days or less) are valued on the basis of valuations
provided by dealers or by an independent pricing service approved by the Board
of Trustees. Short-term obligations that mature in 60 days or less are valued at
amortized cost, which constitutes fair value and approximates market value. All
other securities and other assets are appraised at their fair value as
determined in good faith under consistently applied procedures established by
and under the general supervision of the Board of Trustees.
FUTURES CONTRACTS: Each Portfolio may invest in futures contracts. The
Portfolios generally enter into futures contracts to hedge against declines in
the value of their portfolios' securities. This investment involves, to varying
degrees, elements of market risk and risks in excess of the amount recognized in
the Statement of Assets and Liabilities. The face or contract amounts reflect
the extent of the involvement the Portfolios have in the particular classes of
instruments. Risks include an imperfect correlation between the movements in the
price of the instruments and the price of the underlying securities and interest
rates. Risks also may arise if there is an illiquid secondary market for the
instruments or due to the inability of counterparties to perform under the terms
of the contract.
Cash or securities are deposited with brokers in order to maintain a position.
Subsequent payments made or received daily by a Portfolio based on the change in
the market value of the position are recorded as unrealized gain or loss until
the contract is closed out at which time the gain or loss is realized.
Futures contracts are valued at the settlement price established each day by
the board of trade or exchange on which they are traded.
33
<PAGE> 313
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Net realized gains and losses on investments sold
are recorded on the basis of identified cost. Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Portfolios declare and
distribute dividends from net investment income monthly. Net investment income
for this purpose consists of interest accrued, discount earned (including
original issue), and dividends earned less amortization of any market premium on
municipal securities and accrued expenses. Net realized capital gains, if any,
are distributed at least annually.
The amounts of income and capital gains to be distributed are determined in
accordance with income tax regulations. Such amounts may vary from income and
capital gains recognized in accordance with generally accepted accounting
principles.
FEDERAL INCOME TAXES: For federal income tax purposes, each Portfolio is
treated as a separate entity for the purpose of determining its qualification as
a regulated investment company under the Internal Revenue Code (the "Code"). It
is the policy of each Portfolio to meet the requirements of the Code applicable
to regulated investment companies, including the requirement that it distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income tax provision is required.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported as
distributions of capital.
As of December 31, 1996, the following Portfolios had capital loss
carryforwards which will expire in the years indicated:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR
- --------------------------------- -------- ----
<S> <C> <C>
Intermediate Tax-Free Fund....... $604,167 2003
Michigan Municipal Bond Fund..... 107,254 2003
</TABLE>
EXPENSES: Expenses directly attributable to a Portfolio are charged to the
Portfolio, while expenses which are attributable to more than one series of the
Trust are allocated among the respective series based upon relative net assets
or another appropriate basis. In addition, investors in Investment Shares will
pay the expenses directly attributable to the Investment Shares as a class, and
investors in Institutional Shares will pay the expenses directly attributable to
the Institutional Shares as a class.
ORGANIZATIONAL COSTS: The Kent Tax-Free Income Fund bears all costs in
connection with its organization, including the fees and expenses of registering
and qualifying its initial shares for distribution under federal and state
securities laws. All such costs are amortized using the straight-line method
over a period of five years beginning with the Portfolio's commencement of
operations. In the event that any of the initial shares purchased by the
Portfolio's sponsor are redeemed during such period, the Portfolio will be
reimbursed by such holder for any unamortized organization costs in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
3. RELATED PARTY TRANSACTIONS
Old Kent Bank ("Investment Adviser") serves as the investment adviser to the
Trust. The Investment Adviser is a member of Michigan State Banking Association
and the principal subsidiary of Old Kent Financial Corporation. The Investment
Adviser is entitled to receive a fee, computed daily and paid monthly, at the
annual rate of 0.45% of the average daily net assets of each of the Limited Term
Tax-Free Fund and the Michigan Municipal Bond Fund, 0.50% of the average daily
net assets of the Intermediate Tax-Free Fund and 0.55% of the average daily net
assets of the Tax-Free Income Fund.
Effective August 5, 1996, BISYS Fund Services Limited Partnership d/b/a BISYS
Fund Services ("BISYS") assumed the duties as Administrator and Distributor for
the Trust from First Data Investor Services Group, Inc. ("First Data") and 440
Financial Distributors, Inc., an indirect wholly owned subsidiary of First Data,
respectively. Also,
34
<PAGE> 314
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
effective August 5, 1996, and October 7, 1996, respectively, BISYS Fund
Services, Inc. assumed the duties as Fund Accountant and Transfer Agent for the
Trust from First Data. BISYS and BISYS Fund Services, Inc. are both wholly owned
subsidiaries of The BISYS Group, Inc. The Administrator is entitled to receive a
fee, computed daily and paid monthly, at the annual rate of 0.185% of the
average daily net assets of the Trust up to $5 billion; 0.165% of the average
daily net assets of the Trust in excess of $5 billion up to $7.5 billion; and
0.135% of the average daily net assets of the Trust in excess of $7.5 billion.
Fund Accounting fees are computed daily and paid monthly at the annual rate of
0.015% of the average daily net assets of the Trust and are included as part of
the fees paid to the Administrator.
Transfer agent fees for each Portfolio for the year ended December 31, 1996
are as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- ----------------------------- ------------- ----------
<S> <C> <C>
Limited Term Tax-Free Fund... $16,651 $ 23
Intermediate Tax-Free Fund... 32,542 380
Tax-Free Income Fund......... 17,263 126
Michigan Municipal Bond
Fund....................... 24,004 312
</TABLE>
The current and previous Administrators have voluntarily reduced their fees
for the Portfolios. Total administration fees waived for the year ended December
31, 1996 were as follows:
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTMENT
FUND SHARES SHARES
- ----------------------------- ------------- ----------
<S> <C> <C>
Limited Term Tax-Free Fund... $ 951 $ 2
Intermediate Tax-Free Fund... 6,087 69
Tax-Free Income Fund......... 2,345 17
Michigan Municipal Bond
Fund....................... 4,172 58
</TABLE>
Certain officers of the Trust are affiliated with BISYS. Such officers receive
no direct payments or fees from the Portfolios for serving as officers.
The Trust has adopted a distribution plan (the "Plan") on behalf of the
Investment Shares of the Portfolios pursuant to Rule 12b-1 of the 1940 Act. The
Plan provides for payments to the Distributor of up to 0.25% of the average
daily net assets of the Investment Shares of the Portfolios. Currently, the
Limited Term Tax-Free Fund and Michigan Municipal Bond Fund each make payments
at the rate of only 0.15% of the average daily net assets of its Investment
Shares pursuant to the Plan. For the year ended December 31, 1996, the
Distributor had waived a total of $65 of distribution fees for the Limited Term
Tax-Free Fund and $2,169 of distribution fees for the Michigan Municipal Bond
Fund.
Gross distribution fees for each Portfolio for the year ended December 31,
1996 are as follows:
<TABLE>
<CAPTION>
FUND INVESTMENT SHARES
- ----------------------------------- -----------------
<S> <C>
Limited Term Tax-Free Fund......... $ 162
Intermediate Tax-Free Fund......... 8,726
Tax-Free Income Fund............... 1,900
Michigan Municipal Bond Fund....... 5,410
</TABLE>
Expenses for the Trust include legal fees paid to Drinker Biddle & Reath. A
partner of that firm serves as an Assistant Secretary of the Trust.
35
<PAGE> 315
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Portfolios are summarized below:
<TABLE>
<CAPTION>
LIMITED TERM INTERMEDIATE
TAX-FREE FUND TAX-FREE FUND
----------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued........................................ $ 8,644,704 $31,715,093 $62,493,861 $ 56,260,448
Reinvestment of distributions........................ 16,368 1,677 42,417 25,763
Shares redeemed...................................... (22,256,093) (21,731,961) (57,683,879) (180,059,789)
------------ ------------ ------------ -------------
Net increase (decrease) from Institutional Share
transactions....................................... $(13,595,021) $ 9,984,809 $ 4,852,399 $(123,773,578)
============ ============ ============ =============
INVESTMENT:
Shares issued........................................ $ 51,698 $ 55,976 $ 921,734 $ 558,623
Reinvestment of distributions........................ 2,603 1,583 77,714 78,263
Shares redeemed...................................... (2,105) (11,463) (1,389,670) (1,625,588)
------------ ------------ ------------ -------------
Net increase (decrease) from Investment Share
transactions....................................... $ 52,196 $ 46,096 $ (390,222) $ (988,702)
============ ============ ============ =============
Total net increase (decrease) from share
transactions..................................... $13,542,825 $10,030,905 $ 4,462,177 $(124,762,280)
============ ============ ============ =============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued........................................ 849,971 3,132,279 5,988,213 5,509,613
Reinvestment of distributions........................ 1,612 166 4,102 2,519
Shares redeemed...................................... (2,187,798) (2,152,975) (5,565,749) (17,626,244)
------------ ------------ ------------ -------------
Net increase (decrease) from Institutional Share
transactions....................................... (1,336,215) 979,470 426,566 (12,114,112)
============ ============ ============ =============
INVESTMENT:
Shares issued........................................ 5,061 5,537 89,120 54,764
Reinvestment of distributions........................ 256 156 7,510 7,646
Shares redeemed...................................... (205) (1,120) (135,420) (162,915)
------------ ------------ ------------ -------------
Net increase (decrease) from Investment Share
transactions....................................... 5,112 4,573 (38,790) (100,505)
============ ============ ============ =============
Total net increase (decrease) from share
transactions....................................... (1,331,103) 984,043 387,776 (12,214,617)
============ ============ ============ =============
<FN>
- ------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
</TABLE>
36
<PAGE> 316
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
TAX-FREE MICHIGAN MUNICIPAL
INCOME FUND BOND FUND
----------------------------- -----------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995(1) 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
INSTITUTIONAL:
Shares issued........................................ $34,651,840 $134,004,667 $27,099,860 $116,065,628
Reinvestment of distributions........................ 28,992 13,880 44,917 46,344
Shares redeemed...................................... (44,605,879) (17,275,708) (59,293,642) (54,884,598)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional Share
transactions....................................... $(9,925,047) $116,742,839 $(32,148,865) $61,227,374
============ ============ ============ ============
INVESTMENT:
Shares issued........................................ $ 530,708 $ 530,148 $ 1,008,626 $ 372,427
Reinvestment of distributions........................ 39,399 12,658 29,665 31,264
Shares redeemed...................................... (150,441) (34,578) (509,760) (556,597)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment Share
transactions....................................... $ 419,666 $ 508,228 $ 528,531 $ (152,906)
============ ============ ============ ============
Total net increase (decrease) from share
transactions..................................... $(9,505,381) $117,251,067 $(31,620,334) $61,074,468
============ ============ ============ ============
SHARE ACTIVITY
INSTITUTIONAL:
Shares issued........................................ 3,371,900 13,298,723 2,693,878 11,603,278
Reinvestment of distributions........................ 2,825 1,362 4,468 4,643
Shares redeemed...................................... (4,276,961) (1,689,026) (5,886,119) (5,467,888)
------------ ------------ ------------ ------------
Net increase (decrease) from Institutional Share
transactions....................................... (902,236) 11,611,059 (3,187,773) 6,140,033
============ ============ ============ ============
INVESTMENT:
Shares issued........................................ 51,428 52,334 100,489 37,453
Reinvestment of distributions........................ 3,826 1,235 2,956 3,149
Shares redeemed...................................... (14,550) (3,316) (50,830) (56,394)
------------ ------------ ------------ ------------
Net increase (decrease) from Investment Share
transactions....................................... 40,704 50,253 52,615 (15,792)
============ ============ ============ ============
Total net increase (decrease) from share
transactions....................................... (861,532) 11,661,312 (3,135,158) 6,124,241
============ ============ ============ ============
<FN>
- ------------------------------------------------------------------------
(1) The Fund commenced operations on March 20, 1995.
</TABLE>
37
<PAGE> 317
The Kent
Funds NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------------------ ------------ -----------
<S> <C> <C>
Limited Term Tax-Free
Fund.................. $ 14,828,823 $24,072,233
Intermediate Tax-Free
Fund.................. 108,093,710 98,603,776
Tax-Free Income Fund.... 41,215,389 55,972,648
Michigan Municipal Bond
Fund.................. 37,843,371 39,384,042
</TABLE>
6. CONCENTRATION OF CREDIT RISK
The Michigan Municipal Bond Fund invests primarily in debt obligations issued
by the State of Michigan and its respective political subdivisions, agencies and
public authorities to obtain funds for various public purposes. The Portfolio is
more susceptible to economic and political factors adversely affecting issuers
of Michigan specific municipal bonds than funds that are not concentrated in
these issuers to the same extent.
7. FEDERAL INCOME TAXES (UNAUDITED)
During the year ended December 31, 1996, the following Portfolios declared
tax-exempt income distributions in the following amounts:
<TABLE>
<CAPTION>
FUND AMOUNT
- --------------------------------------- -----------
<S> <C>
Limited Term Tax-Free Fund............. $ 1,883,991
Intermediate Tax-Free Fund............. 12,754,092
Tax-Free Income Fund................... 4,757,995
Michigan Municipal Bond Fund........... 6,557,694
</TABLE>
During the year ended December 31, 1996, the Limited Term Tax-Free Fund
declared long-term capital gain distributions in the amount of $36,850.
38
<PAGE> 318
The Kent LIMITED TERM TAX-FREE FUND
funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994(1)
------------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period......................................... $ 10.22 $ 9.80 $ 10.00
------- ------- -------
Income (Loss) from Investment Operations:
Net investment income...................................................... 0.39 0.39 0.13
Net realized and unrealized gains (losses) on securities................... (0.04) 0.42 (0.21)
------- ------- -------
Total Income (Loss) from Investment Operations........................... 0.35 0.81 (0.08)
------- ------- -------
Less Dividends and Distributions from:
Net investment income...................................................... (0.40) (0.39) (0.12)
In excess of net investment income......................................... ** -- --
Net realized gains on securities........................................... (0.01) -- --
------- ------- -------
Total Dividends and Distributions........................................ (0.41) (0.39) (0.12)
------- ------- -------
Net change in net asset value................................................ (0.06) 0.42 (0.20)
------- ------- -------
Net asset value, end of period............................................... $ 10.16 $ 10.22 $ 9.80
======= ======= =======
Total return................................................................. 3.54% 8.43% (0.77%)++
Ratios/Supplemental Data:
Net Assets, end of period (000's)............................................ $41,472 $55,347 $43,497
Ratio of expenses to average net assets.................................... 0.75% 0.69% 0.79%+
Ratio of net investment income to average net assets....................... 3.84% 3.87% 3.81%+
Ratio of expenses to average net assets*................................... 0.75% 0.74% 0.96%+
Ratio of net investment income to average net assets*...................... 3.84% 3.82% 3.64%+
Portfolio turnover rate(2)................................................. 32% 51% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on September 1, 1994.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
39
<PAGE> 319
The Kent LIMITED TERM TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994(1)
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period................................................. $10.24 $ 9.81 $9.87
------ ------ -----
Income from Investment Operations:
Net investment income.............................................................. 0.37 0.37 0.06
Net realized and unrealized gains (losses) on securities........................... (0.02) 0.44 (0.06)
------ ------ -----
Total from Investment Operations:................................................ 0.35 0.81 --
------ ------ -----
Less Dividends and Distributions from:
Net investment income.............................................................. (0.35) (0.38) (0.06)
In excess of net investment income................................................. (0.03) -- --
Net realized gains on securities................................................... (0.01) -- --
------ ------ -----
Total Dividends and Distributions:............................................... (0.39) (0.38) (0.06)
------ ------ -----
Net change in net asset value........................................................ (0.04) 0.43 (0.06)
------ ------ -----
Net asset value, end of period....................................................... $10.20 $10.24 $9.81
====== ====== =====
Total return(2)...................................................................... 3.51% 8.40% 0.03%++
Ratios/Supplemental Data:
Net Assets, end of period (000's).................................................. $ 106 $ 54 $ 7
Ratio of expenses to average net assets.......................................... 0.87% 0.84% 0.87%+
Ratio of net investment income to average net assets............................. 3.69% 3.69% 3.86%+
Ratio of expenses to average net assets*......................................... 0.97% 0.85% 0.98%+
Ratio of net investment income to average net assets*............................ 3.59% 3.69% 3.75%+
Portfolio Turnover Rate(3)....................................................... 32% 51% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Investment Class date of initial public investment was November 1, 1994.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
40
<PAGE> 320
The Kent INTERMEDIATE TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992(1)
------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 10.52 $ 9.74 $ 10.45 $ 10.02 $ 10.00
-------- -------- -------- -------- -------
Income (Loss) from Investment Operations:
Net investment income.............................. 0.44 0.45 0.40 0.37 0.01
Net realized and unrealized gains (losses) on
securities....................................... (0.08) 0.79 (0.71) 0.47 0.03
-------- -------- -------- -------- -------
Total Income (Loss) from Investment Operations... 0.36 1.24 (0.31) 0.84 0.04
-------- -------- -------- -------- -------
Less Dividends and Distributions from:
Net investment income.............................. (0.46) (0.45) (0.39) (0.36) (0.01)
In excess of net investment income................. ** (0.01) (0.01) -- (0.01)
Net realized gains on securities................... -- -- -- (0.05) --
-------- -------- -------- -------- -------
Total Dividends and Distributions................ (0.46) (0.46) (0.40) (0.41) (0.02)
-------- -------- -------- -------- -------
Net change in net asset value........................ (0.10) 0.78 (0.71) 0.43 0.02
-------- -------- -------- -------- -------
Net asset value, end of period....................... $ 10.42 $ 10.52 $ 9.74 $ 10.45 $ 10.02
======== ======== ======== ======== =======
Total return......................................... 3.41% 12.90% (3.00%) 8.51% 0.40%++
Ratios/Supplemental Data:
Net Assets, end of period (000's).................. $ 285,674 $283,733 $380,715 $135,862 $36,938
Ratio of expenses to average net assets............ 0.73% 0.72% 0.78% 0.84% 0.11%++
Ratio of net investment income to average net
assets........................................... 4.34% 4.39% 4.07% 3.62% 1.77%+
Ratio of expenses to average net assets*........... 0.73% 0.72% 0.78% 0.84% 0.11%++
Ratio of net investment income to average net
assets*.......................................... 4.34% 4.39% 4.07% 3.62% 1.77%+
Portfolio Turnover Rate(2)......................... 35% 6% 36% 14% 0%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on December 16, 1992.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
41
<PAGE> 321
The Kent INTERMEDIATE TAX-FREE FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1996 1995 1994 1993 1992(1)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............................. $10.52 $ 9.74 $10.45 $10.04 $10.00
------- ------- ------- ------- ------
Income (Loss) from Investment Operations:
Net investment income........................................... 0.42 0.42 0.40 0.36 **
Net realized and unrealized gains (losses) on securities........ (0.09) 0.79 (0.71) 0.46 0.04
------- ------- ------- ------- ------
Total Income (Loss) from Investment Operations................ 0.33 1.21 (0.31) 0.82 0.04
------- ------- ------- ------- ------
Less Dividends and Distributions from:
Net investment income........................................... (0.41) (0.42) (0.39) (0.33) --
In excess of net investment income.............................. (0.02) (0.01) (0.01) (0.03) --
Net realized gains on securities................................ -- -- -- (0.05) --
------- ------- ------- ------- ------
Total Dividends and Distributions............................. (0.43) (0.43) (0.40) (0.41) --
------- ------- ------- ------- ------
Net change in net asset value..................................... (0.10) 0.78 (0.71) 0.41 0.04
------- ------- ------- ------- ------
Net asset value, end of period.................................... $10.42 $10.52 $ 9.74 $10.45 $10.04
======== ======== ======== ======== =======
Total return(2)................................................... 3.17% 12.66% (3.03%) 8.29% 0.40%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)............................... $3,368 $3,807 $4,505 $3,307 $ 92
Ratio of expenses to average net assets......................... 0.98% 0.97% 0.79% 1.08% 0.10%++
Ratio of net investment income to average net assets............ 4.09% 4.13% 3.99% 3.44% 1.37%+
Ratio of expenses to average net assets*........................ 0.98% 0.97% 0.79% 1.08% 0.10%++
Ratio of net investment income to average net assets*........... 4.09% 4.13% 3.99% 3.44% 1.37%+
Portfolio Turnover Rate(3)...................................... 35% 6% 36% 14% 0%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not Annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was December 18,
1992.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
42
<PAGE> 322
The Kent TAX-FREE INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1995(1)
-------- --------
<S> <C> <C>
Net asset value, beginning of period............................................................ $ 10.49 $ 10.00
-------- --------
Income from Investment Operations:
Net investment income......................................................................... 0.46 0.36
Net realized and unrealized gains (losses) on securities and futures contracts................ (0.06) 0.49
-------- --------
Total Income from Investment Operations..................................................... 0.40 0.85
-------- --------
Less Dividends and Distributions from:
Net investment income......................................................................... (0.46) (0.36)
Net realized gains on securities and futures contracts........................................ (0.16) --
-------- --------
Total Dividends and Distributions........................................................... (0.62) (0.36)
-------- --------
Net change in net asset value................................................................... (0.22) 0.49
-------- --------
Net asset value, end of period.................................................................. $ 10.27 $ 10.49
======== ========
Total return.................................................................................... 3.92% 8.64%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)............................................................. $109,948 $121,855
Ratio of expenses to average net assets....................................................... 0.82% 0.73%+
Ratio of net investment income to average net assets.......................................... 4.38% 4.44%+
Ratio of expenses to average net assets*...................................................... 0.82% 0.91%+
Ratio of net investment income to average net assets*......................................... 4.38% 4.26%+
Portfolio turnover rate(2).................................................................... 40% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized
++ Not Annualized
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the ratios would have been as indicated.
(1) The Institutional Class commenced operations on March 20, 1995.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole without distinguishing between the classes of
shares issued.
</TABLE>
See Notes to Financial Statements.
43
<PAGE> 323
The Kent TAX-FREE INCOME FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1996 1995(1)
------ -------
<S> <C> <C>
Net asset value, beginning of period............................................................... $10.52 $10.00
------ ------
Income from Investment Operations:
Net investment income............................................................................ 0.41 0.31
Net realized and unrealized gains (losses) on securities and futures contracts................... (0.05) 0.51
------ ------
Total Income from Investment Operations........................................................ 0.36 0.82
------ ------
Less Dividends and Distributions from:
Net investment income............................................................................ (0.43) (0.30)
Net realized gains on securities and futures contracts........................................... (0.12) --
In excess of realized gains on securities and futures contracts.................................. (0.04) --
------ ------
Total Dividends and Distributions.............................................................. (0.59) (0.30)
------ ------
Net change in net asset value...................................................................... (0.23) 0.52
------ ------
Net asset value, end of period..................................................................... $10.29 $10.52
====== ======
Total return (2)................................................................................... 3.53% 8.34%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)................................................................ $ 936 $ 529
Ratio of expenses to average net assets.......................................................... 1.07% 0.95%+
Ratio of net investment income to average net assets............................................. 4.14% 4.25%+
Ratio of expenses to average net assets*......................................................... 1.07% 1.17%+
Ratio of net investment income to average net assets*............................................ 4.14% 4.03%+
Portfolio Turnover Rate(3)....................................................................... 40% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
(1) The Investment Class date of the initial public investment was March 31,
1995.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
44
<PAGE> 324
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993(1)
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............................ $ 10.12 $ 9.72 $ 10.06 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income......................................... 0.39 0.39 0.37 0.23
Net realized and unrealized gains (losses) on securities...... (0.04) 0.39 (0.34) 0.07
-------- -------- -------- --------
Total Income from Investment Operations..................... 0.35 0.78 0.03 0.30
-------- -------- -------- --------
Less Dividends and Distributions from:
Net investment income......................................... (0.39) (0.37) (0.36) (0.22)
In excess of net investment income............................ -- (0.01) (0.01) (0.01)
Net realized gains on securities.............................. -- -- -- (0.01)
In excess of net realized gains on securities................. -- -- -- **
-------- -------- -------- --------
Total Dividends and Distributions........................... (0.39) (0.38) (0.37) (0.24)
-------- -------- -------- --------
Net change in net asset value................................... (0.04) 0.40 (0.34) 0.06
-------- -------- -------- --------
Net asset value, end of period.................................. $ 10.08 $ 10.12 $ 9.72 $ 10.06
======== ======== ======== ========
Total return.................................................... 3.51% 8.20% 0.36% 3.06%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)............................. $ 152,623 $185,466 $118,485 $ 74,647
Ratio of expenses to average net assets....................... 0.70% 0.69% 0.49% 0.24%+
Ratio of net investment income to average net assets.......... 3.83% 3.81% 3.74% 3.34%+
Ratio of expenses to average net assets*...................... 0.70% 0.70% 0.74% 0.84%+
Ratio of net investment income to average net assets*......... 3.83% 3.80% 3.50% 2.74%+
Portfolio turnover rate(2).................................... 24% 42% 27% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Institutional Class commenced operations on May 3, 1993.
(2) Portfolio turnover is calculated on the basis of the Portfolio as a whole without distinguishing between the classes of
shares issued.
</TABLE>
See Notes to Financial Statements.
45
<PAGE> 325
The Kent MICHIGAN MUNICIPAL BOND FUND
Funds FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993(1)
------ ------ ------ -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period...................................... $10.11 $ 9.72 $10.08 $10.02
------ ------ ----- ------
Income from Investment Operations:
Net investment income................................................... 0.38 0.37 0.35 0.21
Net realized and unrealized gains (losses) on securities................ (0.05) 0.40 (0.34) 0.07
------ ------ ----- ------
Total Income from Investment Operations............................... 0.33 0.77 0.01 0.28
------ ------ ----- ------
Less Dividends and Distributions from:
Net investment income................................................... (0.35) (0.37) (0.34) (0.21)
In excess of net investment income...................................... (0.02) (0.01) (0.03) **
Net realized gains on securities........................................ -- -- -- (0.01)
------ ------ ----- ------
Total Dividends and Distributions..................................... (0.37) (0.38) (0.37) (0.22)
------ ------ ----- ------
Net change in net asset value............................................. (0.04) 0.39 (0.36) 0.06
------ ------ ----- ------
Net asset value, end of period............................................ $10.07 $10.11 $ 9.72 $10.08
====== ====== ===== ======
Total return(2)........................................................... 3.36% 8.01% 0.16% 2.85%++
Ratios/Supplemental Data:
Net Assets, end of period (000's)....................................... $2,422 $1,900 $1,980 $ 283
Ratio of expenses to average net assets................................. 0.85% 0.83% 0.49% 0.25%+
Ratio of net investment income to average net assets.................... 3.68% 3.68% 3.80% 3.43%+
Ratio of expenses to average net assets*................................ 0.95% 0.85% 0.68% 1.08%+
Ratio of net investment income to average net assets*................... 3.58% 3.67% 3.61% 2.60%+
Portfolio turnover rate(3).............................................. 24% 42% 27% 10%
<FN>
- ------------------------------------------------------------------------
+ Annualized.
++ Not annualized.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratios would have been as indicated.
** Amount is less than $0.005.
(1) The Investment Class date of initial public investment was May 11, 1993.
(2) Calculation does not include sales charge.
(3) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
See Notes to Financial Statements.
46
<PAGE> 326
INDEPENDENT AUDITORS' REPORT
THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
THE KENT FUNDS:
We have audited the accompanying statements of assets and liabilities of The
Kent Funds -- Limited Term Tax-Free Fund, Intermediate Tax-Free Fund, Tax-Free
Income Fund and Michigan Municipal Bond Fund, including the portfolios of
investments, as of December 31, 1996, and the related statements of operations,
statements of changes in net assets and the financial highlights for each of the
periods indicated herein. These financial statements and the financial
highlights are the responsibility of The Kent Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1996, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds at December 31, 1996, the results of their
operations, the changes in their net assets and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 21, 1997
<PAGE> 327
THE KENT FUNDS
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements:
(1) Financial Highlights for the fiscal year ended December 31,
1996 for each series of Registrant other than the Kent
Government Money Market Fund are included in Part A.
(2) Audited Financial Statements (including Schedules of
Investments, Statements of Assets and Liabilities, Statements
of Operations, Statements of Changes in Net Assets, Notes to
Financial Statements and Independent Auditor's Reports) for
the fiscal year ended December 31, 1996 for each series of
Registrant other than the Kent Government Money Market Fund
are included in Part B.
(b) Exhibits:
(1) The form of Restatement of Declaration of Trust of Registrant was
filed with Registrant's Post-Effective Amendment No. 4 as Exhibit
24(b)(1) and is incorporated by reference herein.
(2) The Amended and Restated By-Laws of Registrant 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) See Articles III, V and VIII of Registrant's Restatement of
Declaration of Trust and Article II of Registrant's Amended and
Restated By-Laws.
(5) 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) and is incorporated by reference herein.
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.
-1-
<PAGE> 328
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)(a)(ii) and is incorporated by reference
herein.
The form of notice to Old Kent Bank pursuant to the
First Amendment to the Investment Advisory Agreement
between Registrant and Old Kent Bank and Trust
Company relating to The Kent Government Money Market
Fund was filed with Registrant's Post-Effective
Amendment No. 21 as Exhibit 24(b)(5)(a)(iii) and is
incorporated by reference herein.
(6) The Distribution Agreement between Registrant and
BISYS Fund Services Limited Partnership dated August
5, 1996 was filed with Registrant's Post-Effective
Amendment No. 21 as Exhibit 24(b)(6)(a) and is
incorporated by reference herein.
The form of notice to BISYS Fund Services Limited
Partnership pursuant to the Distribution Agreement
between Registrant and BISYS Fund Services Limited
Partnership relating to The Kent Government Money
Market Fund was filed with Registrant's
Post-Effective Amendment No. 21 as Exhibit
24(b)(6)(b) and is incorporated by reference herein.
(7) The Kent Funds Deferred Compensation Plan and form
of Deferred Compensation Agreement relating to the
Deferred Compensation Plan were filed with
Registrant's Post-Effective Amendment No. 21 as
Exhibit 24(b)(7) and are incorporated by reference
herein.
(8) The Custody Agreement between Registrant and Bankers
Trust Company was filed with Registrant's
Post-Effective Amendment No. 18 as Exhibit 24(b)(8)
and is incorporated by reference herein.
(9)(a) The Administration Agreement between Registrant and
BISYS Fund Services Limited Partnership dated August
5, 1996 was filed with Registrant's Post-Effective
Amendment No. 21 as Exhibit 24(b)(9)(a) and is
incorporated by reference herein.
Form of notice to BISYS Fund Services Limited
Partnership pursuant to the Administration Agreement
between Registrant and BISYS Fund Services Limited
Partnership relating to The Kent Government Money
Market Fund was filed with Registrant's
Post-Effective Amendment No. 21 as Exhibit
24(b)(9)(a)(i) and is incorporated by reference
herein.
-2-
<PAGE> 329
(9)(b) The Fund Accounting Agreement between Registrant and
BISYS Fund Services, Inc. dated August 5, 1996 was
filed with Registrant's Post-Effective Amendment
No. 21 as Exhibit 24(b)(9)(b) and is incorporated by
reference herein.
Form of notice to BISYS Fund Services, Inc. pursuant
to the Fund Accounting Agreement between Registrant
and BISYS Fund Services, Inc. relating to The Kent
Government Money Market Fund was filed with
Registrant's Post-Effective Amendment No. 21 as
Exhibit 24(b)(9)(b)(1) and is incorporated by
reference herein.
(9)(c) The Transfer Agency Agreement between Registrant and
BISYS Fund Services, Inc. dated October 7, 1996 was
filed with Registrant's Post-Effective Amendment
No. 21 as Exhibit 24(b)(9)(c) and is incorporated
by reference herein.
Form of notice to BISYS Fund Services, Inc. pursuant
to the Transfer Agency Agreement between Registrant
and BISYS Fund Services, Inc. relating to The Kent
Government Money Market Fund was filed with
Registrant's Post-Effective Amendment No. 21 as
Exhibit 24(b)(9)(c)(i) 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 February 28, 1997 under
Rule 24f-2 as part of Registrant's Rule 24f-2 Notice
and is incorporated by reference herein.
(11)(a) Consent of KPMG Peat Marwick LLP is filed herewith
as Exhibit 24(b)(11)(a).
(11)(b) Consent of Drinker Biddle & Reath LLP is filed
herewith as Exhibit 24(b)(11)(b).
(12) Not applicable.
(13) The subscription agreement was filed with
Registrant's Registration Statement as Exhibit
24(b)(13) and is incorporated by reference herein.
(14) Not applicable.
(15) Registrant's Amended and Restated Master
Distribution Plan for Investment Shares and related
form of agreement were filed with Registrant's
Post-Effective Amendment No. 21 as Exhibit
24(b)(15)(a)
-3-
<PAGE> 330
and Exhibit 24(b)(15)(b), respectively, and are
incorporated by reference herein.
(16) Schedules showing performance computations 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 of
Registrant other than The Kent Government Money
Market Fund are filed herewith as Exhibit 24(b)(17).
(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.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Registrant is controlled by its Board of Trustees.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF SERIES HOLDERS AS OF APRIL 4, 1997
--------------- ---------------------------
INSTITUTIONAL INVESTMENT
CLASS CLASS
------------- ---------
<S> <C> <C>
The Kent Money Market Fund Shares of 6 113
Beneficial Interest, without par value
The Kent Michigan Municipal Money 4 25
Market Fund Shares of Beneficial Interest,
without par value
The Kent Limited Term Tax-Free Fund 3 6
Shares of Beneficial Interest, without par
value
The Kent Short Term Bond Fund Shares of 7 249
Beneficial Interest, without par value
The Kent Intermediate Bond Fund Shares 7 778
of Beneficial Interest, without par value
The Kent Intermediate Tax-Free Fund 4 90
Shares of Beneficial Interest, without par
value
</TABLE>
-4-
<PAGE> 331
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF SERIES HOLDERS AS OF APRIL 4, 1997
--------------- ---------------------------
INSTITUTIONAL INVESTMENT
CLASS CLASS
------------- -----------
<S> <C> <C>
The Kent Michigan Municipal Bond Fund 4 32
Shares of Beneficial Interest, without par
value
The Kent Income Fund Shares of Beneficial 5 306
Interest, without par value
The Kent Tax-Free Income Fund Shares of 4 35
Beneficial Interest, without par value
The Kent Growth and Income Fund Shares 7 2,223
of Beneficial Interest, without par value
The Kent Small Company Growth Fund 7 2,538
Shares of Beneficial Interest, without par
value
The Kent International Growth Fund Shares 7 1,932
of Beneficial Interest, without par value
The Kent Index Equity Fund Shares of 6 1,595
Beneficial Interest, without par value
</TABLE>
ITEM 27. INDEMNIFICATION
See Article VIII of Section 3 of Registrant's Restatement of the
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
<TABLE>
<CAPTION>
Position with
Name Old Kent Other Business
---- ------------ --------------
<S> <C> <C>
Richard L. Antonini Director Foremost Corp of America
Chairman, President & CEO
P.O. Box 2450
Grand Rapids, MI 49501
John Bissell Director Chairman
Bissell, Inc.
P.O. Box 1888
Grand Rapids, MI 49504
John D. Boyles Director Verspoor, Waaikes, Lalley & Slorsema, P.C.
1020 Trust Building
Grand Rapids, MI 49503
William P. Crawford Director President & CEO
Steelcase Design Partnership
P.O. Box 1967
CH 4E
Grand Rapids, MI 49501-1967
Dick De Vos Director President
Amway Corporation
7575 East Fulton
Ada, MI 49355
William G. Gonzalez Director President & CEO
Butterworth Hospital
100 Michigan N.E.
Grand Rapids, MI 49503
James P. Hackett Director President & CEO
Steelcase, Inc.
P.O. Box 1967
Location CH5C
Grand Rapids, MI 49501-1967
</TABLE>
-5-
<PAGE> 332
<TABLE>
<CAPTION>
Position with
Name Old Kent Other Business
---- ------------ --------------
<S> <C> <C>
Brina Hanka Director President
Suspa, Inc.
3970 Roger B. Chaffee Blvd. S.E.
Grand Rapids, MI 49548
Earl D. Holton Director President
Meijer, Inc.
2929 Walker N.W.
Grand Rapids, MI 49504
Robert L. Hooker Director Vice Chairman & CEO
Mazda Distributors Great Lakes
P.O. Box 2008
Grand Rapids, MI 49501
Michael J. Jandernoa Director Chairman & CEO
Perrigo Company
117 Water Street
Allegan, MI 49010
Fred P. Keller Director Chairman & CEO
Cascade Engineering, Inc.
3260 Patterson S.E.
Grand Rapids, MI 49512
John P. Keller Director President
Keller Group, Inc.
One Northfield Plaza, Suite 510
Northfield, IL 60093
Hendrik G. Meijer Director Co-Chairman
Meijer, Inc.
2929 Walker N.W.
Grand Rapids, MI 49504
</TABLE>
<PAGE> 333
<TABLE>
<CAPTION>
Position with
Name Old Kent Other Business
---- ------------ --------------
<S> <C> <C>
William U. Parfet Director Co-Chairman
MPI Research
54943 N. Main Street
Mattawan, MI 49071
Percy A. Pierce Director Professor, Electrical Engineering
Michigan State University
357 Engineering Building
East Lansing, MI 48827
Patrick M. Quinn Director President & CEO
Spartan Stores, Inc.
850-76th Street S.W.
Bryon Center, MI 49315
Marilyn J. Schlack Director Kalamazoo Valley Community College
6767 West O Avenue
P.O. Box 4070
Kalamazoo, MI 49003-4070
Perer F. Secchia Director Chairman of the Board
Universal Forest Products, Inc.
2801 E. Beltline N.E.
Grand Rapids, MI 49505
B.P. Sherwood, Ill Director NONE
Vice Chairman
David J. Wagner Director NONE
Chairman
President & CEO
Robert L. Sadler Director NONE
Vice Chairman-OKFC
President & CEO-OKB
</TABLE>
3
<PAGE> 334
<TABLE>
<CAPTION>
Position with
Name Old Kent Other Business
---- ------------ --------------
<S> <C> <C>
Kevin Kabat Sr. Executive Vice President NONE
Robert H. Warrington Sr. Executive Vice President NONE
David Dams Executive Vice President NONE
E. Philip Farley Executive Vice President NONE
Ralph W. Garlick Executive Vice President NONE
David Kerstein Executive Vice President NONE
Lynn Aleksov Senior Vice President NONE
Phill Allen Senior Vice President NONE
David Cohen Senior Vice President NONE
Paul Colombe Senior Vice President NONE
Gregory Daniels Senior Vice President NONE
John Erickson Senior Vice President NONE
Larry Hull Senior Vice President NONE
Joseph Keating Senior Vice President NONE
Larry Koops Senior Vice President NONE
Kenneth Krei Senior Vice President NONE
Richard Lievense Senior Vice President NONE
Timothy Maczka Senior Vice President NONE
</TABLE>
4
<PAGE> 335
<TABLE>
<CAPTION>
Position with
Name Old Kent Other Business
---- ------------ --------------
<S> <C> <C>
Larry Magnesen Senior Vice President NONE
Janet Nisbett Senior Vice President NONE
R. Jay Palmer Senior Vice President NONE
Dennis Piskor Senior Vice President NONE
Dennis Roudi Senior Vice President NONE
Charles Smeester Senior Vice President NONE
Daniel Terpsma Senior Vice President NONE
Daryl Waszak Senior Vice President NONE
Michael Whalen Senior Vice President NONE
Robert Young Senior Vice President NONE
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS
5
<PAGE> 336
(a) BISYS Fund Services Limited Partnership d/b/a BISYS Fund
Services acts as distributor and administrator for Registrant.
BISYS Fund Services also distributes the securities of:
American Performance Funds
AmSouth Mutual Funds
The ARCH Fund, Inc.
The BB&T Mutual Funds Group
The Coventry Group
Empire Builder Tax Free Bond Fund
First Choice Funds Trust
Fountain Square Funds
Hirtle Callaghan Trust
HSBC Family of Funds
The Infinity Mutual Funds, Inc.
Intrust Funds
The Kent Funds
Marketwatch Funds
Meyers Sheppard Investment Trust
Minerva Funds
MMA Praxis Mutual Funds
M.S.D&T. Funds
Pacific Capital Funds
Parkstone Group of Funds
The Parkstone Advantage Funds
Pegasus Funds
Qualivest Funds
The Republic Funds Trust
The Republic Advisors Funds Trust
The Riverfront Funds, Inc.
SBSF Funds, Inc. dba Key Mutual Funds
Sefton Funds
The Sessions Group
Summit Investment Trust
The Time Horizon Funds
The Victory Portfolios
(b) Partners of BISYS Fund Services Limited Partnership, as of
February 11, 1997, were as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
ADDRESSES BISYS FUND SERVICES REGISTRANT
- --------------------------- --------------------------- ---------------------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
</TABLE>
-6-
<PAGE> 337
<TABLE>
<S> <C> <C>
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation Sole Limited Partner None
3435 Stelzer Road
Columbus, Ohio 43219
</TABLE>
(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 BISYS Fund Services at 3435
Stelzer Road, Columbus, Ohio 43219, except for Registrant's minute books, which
are maintained by Drinker Biddle & Reath LLP, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant undertakes to file a Post-Effective Amendment relating to
The Kent Government Money Market Fund using financial statements, which need not
be certified, within four to six months from the effective date of
Post-Effective Amendment No. 21 to Registrant's 1933 Act Registration Statement.
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of Registrant's latest Annual Report to shareholders, upon
request and without charge.
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.
-7-
<PAGE> 338
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, in the State of
Ohio, on the 1st day of May, 1997.
THE KENT FUNDS
By:*/ Walter B. Grimm
-----------------------
Walter B. Grimm
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
*/ Walter B. Grimm President and Trustee May 1, 1997
- -----------------------------------
Walter B. Grimm
*/ Thomas E. Line Treasurer (Principal Accounting May 1, 1997
- ----------------------------------- and Financial Officer)
Thomas E. Line
*/ Anne T. Coughlan Trustee May 1, 1997
- -----------------------------------
Anne T. Coughlan
*/ Joseph F. Damore Trustee May 1, 1997
- -----------------------------------
Joseph F. Damore
*/ James F. Rainey Trustee May 1, 1997
- -----------------------------------
James F. Rainey
*/ Ronald F. Vansteeland Trustee May 1, 1997
- -----------------------------------
Ronald F. VanSteeland
</TABLE>
-8-
<PAGE> 339
*By: /s/ George O. Martinez
--------------------------
George O. Martinez
Attorney-in-Fact
* George O. Martinez, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named Trustees and Officers of
Registrant pursuant to powers of attorney duly executed by such
persons.
-9-
<PAGE> 340
CERTIFICATE OF SECRETARY
The following resolution was duly adopted by the Board of
Trustees of The Kent Funds on February 12, 1997, and remains in full force and
effect as of the date hereof:
RESOLVED, that the Trustees and officers of the Trust, who may
be required to execute any amendments to the Trust's Registration
Statement be, and each of them hereby is, authorized to execute a power
of attorney appointing W. Bruce McConnel, III and George O. Martinez,
and either of them, their true and lawful attorneys to execute in their
name, place and stead, in their capacity as trustee or officer, or
both, of the Trust any and all amendments to the Registration
Statement, and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange
Commission; and either of said attorneys shall have the power to act
thereunder with or without the other of said attorneys and shall have
full power of substitution and resubstitution; and either of said
attorneys shall have full power and authority to do in the name and on
behalf of said Trustees and officers, or any or all of them, in any and
all capacities, every act whatsoever requisite or necessary to be done
in the premises, as full and to intents and purposes, as each of said
Trustees or officers, or any or all of them, might or could do in
person, said acts of said attorneys, or either of them, being hereby
ratified and approved.
IN WITNESS WHEREOF, I have hereunto signed my name.
DATED: May 1, 1997 By: /s/ Robert L. Tuch
--------------------------------
Robert L. Tuch
Secretary
<PAGE> 341
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Anne T. Coughlan, hereby appoint W. Bruce McConnel, III and George
O. Martinez, and either of them, my true and lawful attorneys and agents, with
power of substitution and resubstitution, to perform any and all acts and things
and to execute any and all instruments which said attorneys and agents, or
either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ Anne T. Coughlan
------------------------------
Anne T. Coughlan
Date: February 12, 1997
<PAGE> 342
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Joseph F. Damore, hereby appoint W. Bruce McConnel, III and George
O. Martinez, and either of them, my true and lawful attorneys and agents, with
power of substitution and resubstitution, to perform any and all acts and things
and to execute any and all instruments which said attorneys and agents, or
either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ Joseph F. Damore
--------------------------------
Joseph F. Damore
Date: February 12, 1997
<PAGE> 343
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Walter B. Grimm, hereby appoint W. Bruce McConnel, III and George O.
Martinez, and either of them, my true and lawful attorneys and agents, with
power of substitution and resubstitution, to perform any and all acts and things
and to execute any and all instruments which said attorneys and agents, or
either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ Walter B. Grimm
------------------------------
Walter B. Grimm
Date: February 12, 1997
<PAGE> 344
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, James F. Rainey, hereby appoint W. Bruce McConnel, III and George O.
Martinez, and either of them, my true and lawful attorneys and agents, with
power of substitution and resubstitution, to perform any and all acts and things
and to execute any and all instruments which said attorneys and agents, or
either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ James F. Rainey
--------------------------------
James F. Rainey
Date: February 12, 1997
<PAGE> 345
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Ronald F. VanSteeland, hereby appoint W. Bruce McConnel, III and
George O. Martinez, and either of them, my true and lawful attorneys and agents,
with power of substitution and resubstitution, to perform any and all acts and
things and to execute any and all instruments which said attorneys and agents,
or either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ Ronald F. VanSteeland
----------------------------
Ronald F. VanSteeland
Date: February 12, 1997
<PAGE> 346
THE KENT FUNDS
POWER OF ATTORNEY
-----------------
I, Thomas Line, hereby appoint W. Bruce McConnel, III and George O.
Martinez, and either of them, my true and lawful attorneys and agents, with
power of substitution and resubstitution, to perform any and all acts and things
and to execute any and all instruments which said attorneys and agents, or
either of them, may deem necessary or advisable or which may be required to
enable The Kent Funds, a Massachusetts business trust (the "Fund"), to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Fund's Registration Statement pursuant to said Acts,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign in my name and on my behalf as a trustee and/or
officer of the Fund any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and I hereby ratify and confirm all that said attorneys and
agents, or either of them, shall do or cause to be done by virtue hereof.
/s/ Thomas Line
--------------------------
Thomas Line
Date: February 12, 1997
<PAGE> 347
EXHIBITS
PAGE
Exhibit 24(b)(11)(a) Consent of KPMG Peat Marwick LLP
Exhibit 24(b)(11)(b) Consent of Drinker Biddle & Reath
Exhibit 24(b)(17) Financial Data Schedules
<PAGE> 1
Exhibit 24(b)(11)(a)
Auditors' Consent
The Board of Trustees of
The Kent Funds:
We consent to the use of our reports included herein and dated February 21,
1997 for The Kent Funds - Money Market Fund, Michigan Municipal Money Market
Fund, Growth and Income Fund, Small Company Growth Fund, International Growth
Fund, Index Equity Fund, Short Term Bond Fund, Intermediate Bond Fund, Income
Fund, Limited Term Tax-Free Fund, Intermediate Tax-Free Fund, Tax-Free Income
Fund and Michigan Municipal Bond Fund - as of December 31, 1996 and for the
periods indicated therein, and to the references to our firm under the headings
"Financial Highlights" in the Prospectus and "Custodian, Auditors and Counsel"
in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
Columbus, Ohio
April 29, 1997
<PAGE> 1
Exhibit 24(b)(11)(b)
CONSENT OF COUNSEL
------------------
We hereby consent to use of our name and to the reference to
our firm under the caption "Custodian, Auditors and Counsel" in the Statement of
Additional Information that is included in Post-Effective Amendment No. 22 to
the Registration Statement (No. 33-8398) on Form N-1A under the Securities Act
of 1933, as amended, of The Kent Funds. This consent does not constitute a
consent under Section 7 of the Securities Act of 1933, and in consenting to the
use of our name and the references to our firm under such caption we have not
certified any part of the Registration Statement and do not otherwise come
within the categories of persons whose consent is required under Section 7 or
the rules and regulations of the Securities and Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
----------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
Date: May 1, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 01
<NAME> THE KENT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 485,271,771
<INVESTMENTS-AT-VALUE> 485,271,771
<RECEIVABLES> 1,626,705
<ASSETS-OTHER> 1,735
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 486,900,211
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,177,502
<TOTAL-LIABILITIES> 2,177,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 484,710,515
<SHARES-COMMON-STOCK> 483,911,518<F1>
<SHARES-COMMON-PRIOR> 424,807,844<F1>
<ACCUMULATED-NII-CURRENT> 13,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 878
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 484,722,709
<DIVIDEND-INCOME> 83,779
<INTEREST-INCOME> 23,809,865
<OTHER-INCOME> 0
<EXPENSES-NET> 2,276,014
<NET-INVESTMENT-INCOME> 21,617,630
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,617,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 21,564,398<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 844,257,954<F1>
<NUMBER-OF-SHARES-REDEEMED> 785,695,077<F1>
<SHARES-REINVESTED> 540,797<F1>
<NET-CHANGE-IN-ASSETS> 58,680,389
<ACCUMULATED-NII-PRIOR> 13,072
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 851
<GROSS-ADVISORY-FEES> 1,747,159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,723,363
<AVERAGE-NET-ASSETS> 435,974,103<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .05<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 011
<NAME> THE KENT MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 485,271,771
<INVESTMENTS-AT-VALUE> 485,271,771
<RECEIVABLES> 1,626,705
<ASSETS-OTHER> 1,735
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 486,900,211
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,177,502
<TOTAL-LIABILITIES> 2,177,502
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 484,710,515
<SHARES-COMMON-STOCK> 804,189<F1>
<SHARES-COMMON-PRIOR> 1,227,451<F1>
<ACCUMULATED-NII-CURRENT> 13,072
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 878
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 484,722,709
<DIVIDEND-INCOME> 83,779
<INTEREST-INCOME> 23,809,865
<OTHER-INCOME> 0
<EXPENSES-NET> 2,276,014
<NET-INVESTMENT-INCOME> 21,617,630
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 21,617,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53,232<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,173,842<F1>
<NUMBER-OF-SHARES-REDEEMED> 1,643,459<F1>
<SHARES-REINVESTED> 46,359<F1>
<NET-CHANGE-IN-ASSETS> 58,680,389
<ACCUMULATED-NII-PRIOR> 13,072
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 851
<GROSS-ADVISORY-FEES> 1,747,159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,723,363
<AVERAGE-NET-ASSETS> 1,076,597<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .05<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .05<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 02
<NAME> THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 155,789,380
<INVESTMENTS-AT-VALUE> 155,789,380
<RECEIVABLES> 912,321
<ASSETS-OTHER> 309
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,702,010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 496,070
<TOTAL-LIABILITIES> 496,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,205,159
<SHARES-COMMON-STOCK> 155,401,227<F1>
<SHARES-COMMON-PRIOR> 145,192,083<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 781
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 156,205,940
<DIVIDEND-INCOME> 94,797
<INTEREST-INCOME> 5,790,970
<OTHER-INCOME> 0
<EXPENSES-NET> 887,418
<NET-INVESTMENT-INCOME> 4,998,349
<REALIZED-GAINS-CURRENT> 251
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,998,600
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,966,358<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 258,305,060<F1>
<NUMBER-OF-SHARES-REDEEMED> 248,095,918<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> 9,387,912
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 530
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 653,417
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,054,141
<AVERAGE-NET-ASSETS> 162,359,057<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .03<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .03<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .54<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 021
<NAME> THE KENT MICHIGAN MUNICIPAL MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 155,789,380
<INVESTMENTS-AT-VALUE> 155,789,380
<RECEIVABLES> 912,321
<ASSETS-OTHER> 309
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,702,010
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 496,070
<TOTAL-LIABILITIES> 496,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 156,205,159
<SHARES-COMMON-STOCK> 781,614<F1>
<SHARES-COMMON-PRIOR> 1,603,095<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 781
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 156,205,940
<DIVIDEND-INCOME> 94,797
<INTEREST-INCOME> 5,790,970
<OTHER-INCOME> 0
<EXPENSES-NET> 887,418
<NET-INVESTMENT-INCOME> 4,998,349
<REALIZED-GAINS-CURRENT> 251
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,998,600
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,991<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 136,170<F1>
<NUMBER-OF-SHARES-REDEEMED> 986,230<F1>
<SHARES-REINVESTED> 28,579<F1>
<NET-CHANGE-IN-ASSETS> 9,387,912
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 530
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 653,417
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,054,141<F1>
<AVERAGE-NET-ASSETS> 1,046,468<F1>
<PER-SHARE-NAV-BEGIN> 1.00<F1>
<PER-SHARE-NII> .03<F1>
<PER-SHARE-GAIN-APPREC> 0<F1>
<PER-SHARE-DIVIDEND> .03<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 1.00<F1>
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 03
<NAME> THE KENT GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 420,776,264
<INVESTMENTS-AT-VALUE> 514,961,547
<RECEIVABLES> 1,176,840
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 516,138,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 218,134
<TOTAL-LIABILITIES> 218,134
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 416,316,045
<SHARES-COMMON-STOCK> 36,032,375<F1>
<SHARES-COMMON-PRIOR> 30,286,188<F1>
<ACCUMULATED-NII-CURRENT> 9,008
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,409,917
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 94,185,283
<NET-ASSETS> 515,920,253
<DIVIDEND-INCOME> 14,285,964
<INTEREST-INCOME> 28,842
<OTHER-INCOME> (10,190)
<EXPENSES-NET> 4,351,637
<NET-INVESTMENT-INCOME> 9,952,979
<REALIZED-GAINS-CURRENT> 41,648,025
<APPREC-INCREASE-CURRENT> 30,902,403
<NET-CHANGE-FROM-OPS> 82,503,407
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,772,575<F1>
<DISTRIBUTIONS-OF-GAINS> 49,510,778<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 10,889,808<F1>
<NUMBER-OF-SHARES-REDEEMED> 7,034,231<F1>
<SHARES-REINVESTED> 1,890,610<F1>
<NET-CHANGE-IN-ASSETS> 103,469,661
<ACCUMULATED-NII-PRIOR> 93,922
<ACCUMULATED-GAINS-PRIOR> 14,731,487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,202,775
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,362,420
<AVERAGE-NET-ASSETS> 444,521,685<F1>
<PER-SHARE-NAV-BEGIN> 13.25<F1>
<PER-SHARE-NII> .30<F1>
<PER-SHARE-GAIN-APPREC> 2.16<F1>
<PER-SHARE-DIVIDEND> .30<F1>
<PER-SHARE-DISTRIBUTIONS> 1.51<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 13.90<F1>
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 031
<NAME> THE KENT GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 420,776,264
<INVESTMENTS-AT-VALUE> 514,961,547
<RECEIVABLES> 1,176,840
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 516,138,387
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 218,134
<TOTAL-LIABILITIES> 218,134
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 416,316,045
<SHARES-COMMON-STOCK> 1,090,608<F1>
<SHARES-COMMON-PRIOR> 840,180<F1>
<ACCUMULATED-NII-CURRENT> 9,008
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5,409,917
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 94,185,263
<NET-ASSETS> 515,920,253
<DIVIDEND-INCOME> 14,285,964
<INTEREST-INCOME> 28,842
<OTHER-INCOME> (10,190)
<EXPENSES-NET> 4,351,637
<NET-INVESTMENT-INCOME> 9,952,979
<REALIZED-GAINS-CURRENT> 41,648,025
<APPREC-INCREASE-CURRENT> 30,902,403
<NET-CHANGE-FROM-OPS> 82,503,407
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 265,318<F1>
<DISTRIBUTIONS-OF-GAINS> 1,458,817<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 265,482<F1>
<NUMBER-OF-SHARES-REDEEMED> 139,590<F1>
<SHARES-REINVESTED> 124,536<F1>
<NET-CHANGE-IN-ASSETS> 103,469,661
<ACCUMULATED-NII-PRIOR> 93,922
<ACCUMULATED-GAINS-PRIOR> 14,731,487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,202,775
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,362,420
<AVERAGE-NET-ASSETS> 14,206,022<F1>
<PER-SHARE-NAV-BEGIN> 13.19<F1>
<PER-SHARE-NII> .26<F1>
<PER-SHARE-GAIN-APPREC> 2.15<F1>
<PER-SHARE-DIVIDEND> .28<F1>
<PER-SHARE-DISTRIBUTIONS> 1.51<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 13.81<F1>
<EXPENSE-RATIO> 1.09<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 04
<NAME> THE KENT INDEX EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 168,911,746
<INVESTMENTS-AT-VALUE> 253,111,107
<RECEIVABLES> 476,287
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,587,394
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224,931
<TOTAL-LIABILITIES> 224,931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,963,979
<SHARES-COMMON-STOCK> 16,551,211<F1>
<SHARES-COMMON-PRIOR> 14,644,086<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 733
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 806,339
<ACCUM-APPREC-OR-DEPREC> 84,205,556
<NET-ASSETS> 253,362,463
<DIVIDEND-INCOME> 5,181,285
<INTEREST-INCOME> 34,417
<OTHER-INCOME> (10,113)
<EXPENSES-NET> 1,072,181
<NET-INVESTMENT-INCOME> 4,133,408
<REALIZED-GAINS-CURRENT> 2,555,991
<APPREC-INCREASE-CURRENT> 38,019,000
<NET-CHANGE-FROM-OPS> 44,708,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,996,731<F1>
<DISTRIBUTIONS-OF-GAINS> 5,051,684<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 5,172,550<F1>
<NUMBER-OF-SHARES-REDEEMED> 3,699,843<F1>
<SHARES-REINVESTED> 434,418<F1>
<NET-CHANGE-IN-ASSETS> 62,873,874
<ACCUMULATED-NII-PRIOR> 51,864
<ACCUMULATED-GAINS-PRIOR> 1,843,059
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 654,709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,295,797
<AVERAGE-NET-ASSETS> 208,755,229<F1>
<PER-SHARE-NAV-BEGIN> 12.56<F1>
<PER-SHARE-NII> .26<F1>
<PER-SHARE-GAIN-APPREC> 2.47<F1>
<PER-SHARE-DIVIDEND> .26<F1>
<PER-SHARE-DISTRIBUTIONS> .32<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 14.71<F1>
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 041
<NAME> THE KENT INDEX EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 168,911,746
<INVESTMENTS-AT-VALUE> 253,111,107
<RECEIVABLES> 476,287
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,587,394
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 224,931
<TOTAL-LIABILITIES> 224,931
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169,963,979
<SHARES-COMMON-STOCK> 674,264<F1>
<SHARES-COMMON-PRIOR> 525,856<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 733
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 806,339
<ACCUM-APPREC-OR-DEPREC> 84,205,556
<NET-ASSETS> 253,362,463
<DIVIDEND-INCOME> 5,181,285
<INTEREST-INCOME> 34,417
<OTHER-INCOME> (10,113)
<EXPENSES-NET> 1,072,181
<NET-INVESTMENT-INCOME> 4,133,408
<REALIZED-GAINS-CURRENT> 2,555,991
<APPREC-INCREASE-CURRENT> 38,019,000
<NET-CHANGE-FROM-OPS> 44,708,399
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 143,673<F1>
<DISTRIBUTIONS-OF-GAINS> 199,306<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 205,672<F1>
<NUMBER-OF-SHARES-REDEEMED> 81,276<F1>
<SHARES-REINVESTED> 24,012<F1>
<NET-CHANGE-IN-ASSETS> 62,873,874
<ACCUMULATED-NII-PRIOR> 51,864
<ACCUMULATED-GAINS-PRIOR> 1,843,059
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 654,709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,295,797
<AVERAGE-NET-ASSETS> 8,363,135<F1>
<PER-SHARE-NAV-BEGIN> 12.57<F1>
<PER-SHARE-NII> .22<F1>
<PER-SHARE-GAIN-APPREC> 2.48<F1>
<PER-SHARE-DIVIDEND> .23<F1>
<PER-SHARE-DISTRIBUTIONS> .32<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 14.72<F1>
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 05
<NAME> THE KENT INTERNATIONAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 333,836,478
<INVESTMENTS-AT-VALUE> 396,263,600
<RECEIVABLES> 950,215
<ASSETS-OTHER> 899,107
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 398,112,922
<PAYABLE-FOR-SECURITIES> 1,232,078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282,979
<TOTAL-LIABILITIES> 1,515,057
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335,104,648
<SHARES-COMMON-STOCK> 26,286,311<F1>
<SHARES-COMMON-PRIOR> 20,203,234<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 637,883
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 293,774
<ACCUM-APPREC-OR-DEPREC> 62,424,874
<NET-ASSETS> 396,597,865
<DIVIDEND-INCOME> 8,015,441
<INTEREST-INCOME> 22,589
<OTHER-INCOME> (1,271,144)
<EXPENSES-NET> 3,597,201
<NET-INVESTMENT-INCOME> 3,169,685
<REALIZED-GAINS-CURRENT> 3,330,884
<APPREC-INCREASE-CURRENT> 11,892,070
<NET-CHANGE-FROM-OPS> 18,392,639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,094,571<F1>
<DISTRIBUTIONS-OF-GAINS> 3,486,543<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 9,359,272<F1>
<NUMBER-OF-SHARES-REDEEMED> 3,491,780<F1>
<SHARES-REINVESTED> 215,585<F1>
<NET-CHANGE-IN-ASSETS> 102,504,769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 506,545
<OVERDIST-NET-GAINS-PRIOR> 212,212
<GROSS-ADVISORY-FEES> 2,465,291
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,605,314
<AVERAGE-NET-ASSETS> 320,609,547<F1>
<PER-SHARE-NAV-BEGIN> 14.18<F1>
<PER-SHARE-NII> .13<F1>
<PER-SHARE-GAIN-APPREC> .70<F1>
<PER-SHARE-DIVIDEND> .12<F1>
<PER-SHARE-DISTRIBUTIONS> .14<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 14.75<F1>
<EXPENSE-RATIO> 1.09<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 051
<NAME> THE KENT INTERNATIONAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 333,836,478
<INVESTMENTS-AT-VALUE> 396,263,600
<RECEIVABLES> 950,215
<ASSETS-OTHER> 899,107
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 398,112,922
<PAYABLE-FOR-SECURITIES> 1,232,078
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282,979
<TOTAL-LIABILITIES> 1,515,057
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 335,104,648
<SHARES-COMMON-STOCK> 599,004<F1>
<SHARES-COMMON-PRIOR> 534,190<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 637,883
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 293,774
<ACCUM-APPREC-OR-DEPREC> 62,424,874
<NET-ASSETS> 396,597,865
<DIVIDEND-INCOME> 8,015,441
<INTEREST-INCOME> 22,589
<OTHER-INCOME> (1,271,144)
<EXPENSES-NET> 3,597,201
<NET-INVESTMENT-INCOME> 3,169,685
<REALIZED-GAINS-CURRENT> 3,330,884
<APPREC-INCREASE-CURRENT> 11,892,070
<NET-CHANGE-FROM-OPS> 18,392,639
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 49,833<F1>
<DISTRIBUTIONS-OF-GAINS> 82,522<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 137,013<F1>
<NUMBER-OF-SHARES-REDEEMED> 81,019<F1>
<SHARES-REINVESTED> 8,820<F1>
<NET-CHANGE-IN-ASSETS> 102,504,769
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 506,545
<OVERDIST-NET-GAINS-PRIOR> 212,212
<GROSS-ADVISORY-FEES> 2,465,291
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,605,314
<AVERAGE-NET-ASSETS> 8,374,404<F1>
<PER-SHARE-NAV-BEGIN> 14.13<F1>
<PER-SHARE-NII> .12<F1>
<PER-SHARE-GAIN-APPREC> .66<F1>
<PER-SHARE-DIVIDEND> .08<F1>
<PER-SHARE-DISTRIBUTIONS> .14<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 14.69<F1>
<EXPENSE-RATIO> 1.34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 06
<NAME> THE KENT SMALL COMPANY GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 451,897,602
<INVESTMENTS-AT-VALUE> 558,350,604
<RECEIVABLES> 455,718
<ASSETS-OTHER> 1,344
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 558,807,666
<PAYABLE-FOR-SECURITIES> 39,132
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251,938
<TOTAL-LIABILITIES> 291,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 438,010,682
<SHARES-COMMON-STOCK> 34,776,451<F1>
<SHARES-COMMON-PRIOR> 32,567,385<F1>
<ACCUMULATED-NII-CURRENT> 21,461
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,989,151
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106,495,302
<NET-ASSETS> 558,516,596
<DIVIDEND-INCOME> 8,841,723
<INTEREST-INCOME> 63,764
<OTHER-INCOME> 0
<EXPENSES-NET> 4,939,096
<NET-INVESTMENT-INCOME> 3,966,391
<REALIZED-GAINS-CURRENT> 35,826,669
<APPREC-INCREASE-CURRENT> 53,935,218
<NET-CHANGE-FROM-OPS> 93,728,278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,891,501<F1>
<DISTRIBUTIONS-OF-GAINS> 24,783,337<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 8,964,612<F1>
<NUMBER-OF-SHARES-REDEEMED> 7,693,348<F1>
<SHARES-REINVESTED> 937,802<F1>
<NET-CHANGE-IN-ASSETS> 97,489,153
<ACCUMULATED-NII-PRIOR> 24,141
<ACCUMULATED-GAINS-PRIOR> 3,575,323
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,613,394
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,950,898
<AVERAGE-NET-ASSETS> 498,550,605<F1>
<PER-SHARE-NAV-BEGIN> 13.82<F1>
<PER-SHARE-NII> .12<F1>
<PER-SHARE-GAIN-APPREC> 2.55<F1>
<PER-SHARE-DIVIDEND> .12<F1>
<PER-SHARE-DISTRIBUTIONS> .72<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 15.65<F1>
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 061
<NAME> THE KENT SMALL COMPANY GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 451,897,602
<INVESTMENTS-AT-VALUE> 558,350,604
<RECEIVABLES> 455,718
<ASSETS-OTHER> 1,344
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 558,807,666
<PAYABLE-FOR-SECURITIES> 39,132
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 251,938
<TOTAL-LIABILITIES> 291,070
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 438,010,682
<SHARES-COMMON-STOCK> 924,573<F1>
<SHARES-COMMON-PRIOR> 793,547<F1>
<ACCUMULATED-NII-CURRENT> 21,461
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,989,151
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 106,495,302
<NET-ASSETS> 558,516,596
<DIVIDEND-INCOME> 8,841,723
<INTEREST-INCOME> 63,764
<OTHER-INCOME> 0
<EXPENSES-NET> 4,939,096
<NET-INVESTMENT-INCOME> 3,966,391
<REALIZED-GAINS-CURRENT> 35,826,669
<APPREC-INCREASE-CURRENT> 53,935,218
<NET-CHANGE-FROM-OPS> 93,728,278
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 77,570<F1>
<DISTRIBUTIONS-OF-GAINS> 629,504<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 203,920<F1>
<NUMBER-OF-SHARES-REDEEMED> 118,619<F1>
<SHARES-REINVESTED> 45,725<F1>
<NET-CHANGE-IN-ASSETS> 97,489,153
<ACCUMULATED-NII-PRIOR> 24,141
<ACCUMULATED-GAINS-PRIOR> 3,575,323
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,613,394
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,950,898
<AVERAGE-NET-ASSETS> 12,791,348<F1>
<PER-SHARE-NAV-BEGIN> 13.81<F1>
<PER-SHARE-NII> .07<F1>
<PER-SHARE-GAIN-APPREC> 2.54<F1>
<PER-SHARE-DIVIDEND> .09<F1>
<PER-SHARE-DISTRIBUTIONS> .72<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 15.61<F1>
<EXPENSE-RATIO> 1.21<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 07
<NAME> THE KENT SHORT TERM BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 234,414,614
<INVESTMENTS-AT-VALUE> 233,562,807
<RECEIVABLES> 3,628,157
<ASSETS-OTHER> 1,563
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 237,192,527
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 95,617
<TOTAL-LIABILITIES> 95,617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,035,195
<SHARES-COMMON-STOCK> 24,151,394<F1>
<SHARES-COMMON-PRIOR> 31,192,271<F1>
<ACCUMULATED-NII-CURRENT> 108,998
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,195,476
<ACCUM-APPREC-OR-DEPREC> (851,807)
<NET-ASSETS> 237,096,910
<DIVIDEND-INCOME> 249,665
<INTEREST-INCOME> 19,169,228
<OTHER-INCOME> 49,300
<EXPENSES-NET> 2,040,057
<NET-INVESTMENT-INCOME> 17,428,126
<REALIZED-GAINS-CURRENT> (937,245)
<APPREC-INCREASE-CURRENT> (5,032,357)
<NET-CHANGE-FROM-OPS> 11,458,524
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,416,111<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 7,222,192<F1>
<NUMBER-OF-SHARES-REDEEMED> 15,396,719<F1>
<SHARES-REINVESTED> 1,133,650<F1>
<NET-CHANGE-IN-ASSETS> (75,216,984)
<ACCUMULATED-NII-PRIOR> 19,514
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,258,231
<GROSS-ADVISORY-FEES> 1,421,272
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,046,795
<AVERAGE-NET-ASSETS> 280,761,493<F1>
<PER-SHARE-NAV-BEGIN> 9.96<F1>
<PER-SHARE-NII> .61<F1>
<PER-SHARE-GAIN-APPREC> (.21)<F1>
<PER-SHARE-DIVIDEND> .61<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.75<F1>
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 071
<NAME> THE KENT SHORT TERM BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 234,414,614
<INVESTMENTS-AT-VALUE> 233,562,807
<RECEIVABLES> 3,628,157
<ASSETS-OTHER> 1,563
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 237,192,527
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 95,617
<TOTAL-LIABILITIES> 95,617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 243,035,195
<SHARES-COMMON-STOCK> 171,112<F1>
<SHARES-COMMON-PRIOR> 164,130<F1>
<ACCUMULATED-NII-CURRENT> 108,998
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5,195,476
<ACCUM-APPREC-OR-DEPREC> (851,807)
<NET-ASSETS> 237,096,910
<DIVIDEND-INCOME> 249,665
<INTEREST-INCOME> 19,169,228
<OTHER-INCOME> 49,300
<EXPENSES-NET> 2,040,057
<NET-INVESTMENT-INCOME> 17,428,126
<REALIZED-GAINS-CURRENT> (937,245)
<APPREC-INCREASE-CURRENT> (5,032,357)
<NET-CHANGE-FROM-OPS> 11,458,524
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 94,531<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 35,323<F1>
<NUMBER-OF-SHARES-REDEEMED> 37,044<F1>
<SHARES-REINVESTED> 8,703<F1>
<NET-CHANGE-IN-ASSETS> (75,216,984)
<ACCUMULATED-NII-PRIOR> 19,514
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 4,258,231
<GROSS-ADVISORY-FEES> 1,421,272
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,046,795
<AVERAGE-NET-ASSETS> 1,543,950<F1>
<PER-SHARE-NAV-BEGIN> 9.95<F1>
<PER-SHARE-NII> .59<F1>
<PER-SHARE-GAIN-APPREC> (.20)<F1>
<PER-SHARE-DIVIDEND> .60<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.74<F1>
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 08
<NAME> THE KENT INTERMEDIATE TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 274,872,252
<INVESTMENTS-AT-VALUE> 284,682,787
<RECEIVABLES> 4,484,571
<ASSETS-OTHER> 443
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 289,167,801
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,896
<TOTAL-LIABILITIES> 124,896
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 279,791,789
<SHARES-COMMON-STOCK> 27,404,331<F1>
<SHARES-COMMON-PRIOR> 26,977,765<F1>
<ACCUMULATED-NII-CURRENT> 44,748
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 604,167
<ACCUM-APPREC-OR-DEPREC> 9,810,535
<NET-ASSETS> 289,042,905
<DIVIDEND-INCOME> 194,026
<INTEREST-INCOME> 14,596,294
<OTHER-INCOME> 0
<EXPENSES-NET> 2,147,197
<NET-INVESTMENT-INCOME> 12,643,123
<REALIZED-GAINS-CURRENT> 1,079,288
<APPREC-INCREASE-CURRENT> (3,796,119)
<NET-CHANGE-FROM-OPS> 9,926,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,740,911<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 5,988,213<F1>
<NUMBER-OF-SHARES-REDEEMED> 5,565,749<F1>
<SHARES-REINVESTED> 4,102<F1>
<NET-CHANGE-IN-ASSETS> 1,502,557
<ACCUMULATED-NII-PRIOR> 133,320
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,529,238
<GROSS-ADVISORY-FEES> 1,458,010
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,153,353
<AVERAGE-NET-ASSETS> 288,132,429<F1>
<PER-SHARE-NAV-BEGIN> 10.52<F1>
<PER-SHARE-NII> .44<F1>
<PER-SHARE-GAIN-APPREC> (.08)<F1>
<PER-SHARE-DIVIDEND> .46<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.42<F1>
<EXPENSE-RATIO> .73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 081
<NAME> THE KENT INTERMEDIATE TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 274,872,252
<INVESTMENTS-AT-VALUE> 284,682,787
<RECEIVABLES> 4,484,571
<ASSETS-OTHER> 443
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 289,167,801
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 124,896
<TOTAL-LIABILITIES> 124,896
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 279,791,789
<SHARES-COMMON-STOCK> 323,136<F1>
<SHARES-COMMON-PRIOR> 361,926<F1>
<ACCUMULATED-NII-CURRENT> 44,748
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 604,167
<ACCUM-APPREC-OR-DEPREC> 9,810,535
<NET-ASSETS> 289,042,905
<DIVIDEND-INCOME> 194,026
<INTEREST-INCOME> 14,596,294
<OTHER-INCOME> 0
<EXPENSES-NET> 2,147,197
<NET-INVESTMENT-INCOME> 12,643,123
<REALIZED-GAINS-CURRENT> 1,079,288
<APPREC-INCREASE-CURRENT> (3,796,119)
<NET-CHANGE-FROM-OPS> 9,926,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 145,001<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 89,120<F1>
<NUMBER-OF-SHARES-REDEEMED> 135,420<F1>
<SHARES-REINVESTED> 7,510<F1>
<NET-CHANGE-IN-ASSETS> 1,502,557
<ACCUMULATED-NII-PRIOR> 133,320
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,529,238
<GROSS-ADVISORY-FEES> 1,458,010
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,153,353
<AVERAGE-NET-ASSETS> 3,505,115<F1>
<PER-SHARE-NAV-BEGIN> 10.52<F1>
<PER-SHARE-NII> .42<F1>
<PER-SHARE-GAIN-APPREC> (.09)<F1>
<PER-SHARE-DIVIDEND> .43<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.42<F1>
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 09
<NAME> THE KENT INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 773,709,363
<INVESTMENTS-AT-VALUE> 768,261,590
<RECEIVABLES> 13,741,603
<ASSETS-OTHER> 2,223
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 782,005,416
<PAYABLE-FOR-SECURITIES> 5,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282,578
<TOTAL-LIABILITIES> 5,282,578
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 789,079,580
<SHARES-COMMON-STOCK> 78,822,775<F1>
<SHARES-COMMON-PRIOR> 84,468,388<F1>
<ACCUMULATED-NII-CURRENT> 131,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,040,803
<ACCUM-APPREC-OR-DEPREC> 5,447,773
<NET-ASSETS> 776,722,838
<DIVIDEND-INCOME> 1,250,117
<INTEREST-INCOME> 55,874,467
<OTHER-INCOME> 0
<EXPENSES-NET> 6,378,752
<NET-INVESTMENT-INCOME> 50,745,832
<REALIZED-GAINS-CURRENT> 7,025,161
<APPREC-INCREASE-CURRENT> 20,975,605
<NET-CHANGE-FROM-OPS> 22,745,066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 53,641,804<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 20,156,864<F1>
<NUMBER-OF-SHARES-REDEEMED> 28,751,972<F1>
<SHARES-REINVESTED> 2,949,495<F1>
<NET-CHANGE-IN-ASSETS> 84,939,513
<ACCUMULATED-NII-PRIOR> 1,014,509
<ACCUMULATED-GAINS-PRIOR> 2,458,661
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,537,199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,395,868
<AVERAGE-NET-ASSETS> 814,425,427<F1>
<PER-SHARE-NAV-BEGIN> 10.12<F1>
<PER-SHARE-NII> .60<F1>
<PER-SHARE-GAIN-APPREC> (.32)<F1>
<PER-SHARE-DIVIDEND> .64<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.76<F1>
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 091
<NAME> THE KENT INTERMEDIATE BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 773,709,363
<INVESTMENTS-AT-VALUE> 768,261,590
<RECEIVABLES> 13,741,603
<ASSETS-OTHER> 2,223
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 782,005,416
<PAYABLE-FOR-SECURITIES> 5,000,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282,578
<TOTAL-LIABILITIES> 5,282,578
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 789,079,580
<SHARES-COMMON-STOCK> 749,163<F1>
<SHARES-COMMON-PRIOR> 676,709<F1>
<ACCUMULATED-NII-CURRENT> 131,834
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 7,040,803
<ACCUM-APPREC-OR-DEPREC> 5,447,773
<NET-ASSETS> 776,722,838
<DIVIDEND-INCOME> 1,250,117
<INTEREST-INCOME> 55,874,467
<OTHER-INCOME> 0
<EXPENSES-NET> 6,378,752
<NET-INVESTMENT-INCOME> 50,745,832
<REALIZED-GAINS-CURRENT> 7,025,161
<APPREC-INCREASE-CURRENT> 20,975,605
<NET-CHANGE-FROM-OPS> 22,745,066
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 461,006<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 182,449<F1>
<NUMBER-OF-SHARES-REDEEMED> 148,005<F1>
<SHARES-REINVESTED> 38,010<F1>
<NET-CHANGE-IN-ASSETS> 84,939,513
<ACCUMULATED-NII-PRIOR> 1,014,509
<ACCUMULATED-GAINS-PRIOR> 2,458,661
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,537,199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,395,868
<AVERAGE-NET-ASSETS> 7,222,455<F1>
<PER-SHARE-NAV-BEGIN> 10.14<F1>
<PER-SHARE-NII> .58<F1>
<PER-SHARE-GAIN-APPREC> (.32)<F1>
<PER-SHARE-DIVIDEND> .62<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.78<F1>
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 10
<NAME> THE KENT MICHIGAN MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 151,307,444
<INVESTMENTS-AT-VALUE> 153,047,128
<RECEIVABLES> 2,082,060
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 155,129,168
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,018
<TOTAL-LIABILITIES> 85,018
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 153,389,303
<SHARES-COMMON-STOCK> 15,140,896<F1>
<SHARES-COMMON-PRIOR> 18,328,669<F1>
<ACCUMULATED-NII-CURRENT> 22,437
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 107,254
<ACCUM-APPREC-OR-DEPREC> 1,739,684
<NET-ASSETS> 155,044,170
<DIVIDEND-INCOME> 141,198
<INTEREST-INCOME> 7,644,608
<OTHER-INCOME> 0
<EXPENSES-NET> 1,208,053
<NET-INVESTMENT-INCOME> 6,577,753
<REALIZED-GAINS-CURRENT> 86,964
<APPREC-INCREASE-CURRENT> (795,155)
<NET-CHANGE-FROM-OPS> 5,869,562
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,489,955<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,693,878<F1>
<NUMBER-OF-SHARES-REDEEMED> 5,836,119<F1>
<SHARES-REINVESTED> 4,468<F1>
<NET-CHANGE-IN-ASSETS> 32,321,415
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 178,891
<GROSS-ADVISORY-FEES> 772,339
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,214,452
<AVERAGE-NET-ASSETS> 169,632,465<F1>
<PER-SHARE-NAV-BEGIN> 10.12<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> (.04)<F1>
<PER-SHARE-DIVIDEND> .39<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.00<F1>
<EXPENSE-RATIO> .70<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 101
<NAME> THE KENT MICHIGAN MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 151,307,444
<INVESTMENTS-AT-VALUE> 153,047,128
<RECEIVABLES> 2,082,060
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 155,129,188
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85,018
<TOTAL-LIABILITIES> 85,018
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 153,389,303
<SHARES-COMMON-STOCK> 240,448<F1>
<SHARES-COMMON-PRIOR> 187,833<F1>
<ACCUMULATED-NII-CURRENT> 22,437
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 107,254
<ACCUM-APPREC-OR-DEPREC> 1,739,684
<NET-ASSETS> 155,044,170
<DIVIDEND-INCOME> 141,198
<INTEREST-INCOME> 7,644,608
<OTHER-INCOME> 0
<EXPENSES-NET> 1,208,053
<NET-INVESTMENT-INCOME> 6,577,753
<REALIZED-GAINS-CURRENT> 86,964
<APPREC-INCREASE-CURRENT> (795,155)
<NET-CHANGE-FROM-OPS> 5,869,562
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,688<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 100,489<F1>
<NUMBER-OF-SHARES-REDEEMED> 50,830<F1>
<SHARES-REINVESTED> 2,956<F1>
<NET-CHANGE-IN-ASSETS> 32,321,415
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 178,891
<GROSS-ADVISORY-FEES> 772,339
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,213,682
<AVERAGE-NET-ASSETS> 2,168,706<F1>
<PER-SHARE-NAV-BEGIN> 10.11<F1>
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> (.05)<F1>
<PER-SHARE-DIVIDEND> .37<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.07<F1>
<EXPENSE-RATIO> .85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 11
<NAME> THE KENT LIMITED TERM TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 40,391,435
<INVESTMENTS-AT-VALUE> 40,988,056
<RECEIVABLES> 620,384
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41,608,440
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,121
<TOTAL-LIABILITIES> 31,121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,957,086
<SHARES-COMMON-STOCK> 4,080,067<F1>
<SHARES-COMMON-PRIOR> 5,416,282<F1>
<ACCUMULATED-NII-CURRENT> 7,011
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,601
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 596,621
<NET-ASSETS> 41,577,319
<DIVIDEND-INCOME> 29,364
<INTEREST-INCOME> 2,196,043
<OTHER-INCOME> 2,163
<EXPENSES-NET> 366,024
<NET-INVESTMENT-INCOME> 1,861,546
<REALIZED-GAINS-CURRENT> 82,971
<APPREC-INCREASE-CURRENT> (270,758)
<NET-CHANGE-FROM-OPS> 1,673,759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,906,156<F1>
<DISTRIBUTIONS-OF-GAINS> 45,972<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 849,971<F1>
<NUMBER-OF-SHARES-REDEEMED> 2,187,798<F1>
<SHARES-REINVESTED> 1,612<F1>
<NET-CHANGE-IN-ASSETS> 13,823,871
<ACCUMULATED-NII-PRIOR> 24,691
<ACCUMULATED-GAINS-PRIOR> 9,290
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225,891
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 367,042
<AVERAGE-NET-ASSETS> 48,456,740<F1>
<PER-SHARE-NAV-BEGIN> 10.22<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> (.04)<F1>
<PER-SHARE-DIVIDEND> .40<F1>
<PER-SHARE-DISTRIBUTIONS> .01<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.16<F1>
<EXPENSE-RATIO> .75<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 111
<NAME> THE KENT LIMITED TERM TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 40,391,435
<INVESTMENTS-AT-VALUE> 40,988,056
<RECEIVABLES> 620,384
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 41,608,440
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,121
<TOTAL-LIABILITIES> 31,121
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,957,086
<SHARES-COMMON-STOCK> 10,370<F1>
<SHARES-COMMON-PRIOR> 5,258<F1>
<ACCUMULATED-NII-CURRENT> 7,011
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,601
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 596,621
<NET-ASSETS> 41,577,319
<DIVIDEND-INCOME> 29,364
<INTEREST-INCOME> 2,196,043
<OTHER-INCOME> 2,163
<EXPENSES-NET> 366,024
<NET-INVESTMENT-INCOME> 1,861,546
<REALIZED-GAINS-CURRENT> 82,971
<APPREC-INCREASE-CURRENT> (270,758)
<NET-CHANGE-FROM-OPS> 1,673,759
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,590<F1>
<DISTRIBUTIONS-OF-GAINS> 87<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 5,061<F1>
<NUMBER-OF-SHARES-REDEEMED> 205<F1>
<SHARES-REINVESTED> 256<F1>
<NET-CHANGE-IN-ASSETS> 13,823,871
<ACCUMULATED-NII-PRIOR> 24,691
<ACCUMULATED-GAINS-PRIOR> 9,209
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225,891
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 367,042
<AVERAGE-NET-ASSETS> 65,423<F1>
<PER-SHARE-NAV-BEGIN> 10.24<F1>
<PER-SHARE-NII> .37<F1>
<PER-SHARE-GAIN-APPREC> (.02)<F1>
<PER-SHARE-DIVIDEND> .38<F1>
<PER-SHARE-DISTRIBUTIONS> .01<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.20<F1>
<EXPENSE-RATIO> .87<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 12
<NAME> THE KENT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 236,175,521
<INVESTMENTS-AT-VALUE> 238,295,359
<RECEIVABLES> 4,592,584
<ASSETS-OTHER> 6,024
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 242,893,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112,252
<TOTAL-LIABILITIES> 112,252
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 239,174,252
<SHARES-COMMON-STOCK> 23,623,536<F1>
<SHARES-COMMON-PRIOR> 11,626,340<F1>
<ACCUMULATED-NII-CURRENT> 49,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,437,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,119,838
<NET-ASSETS> 242,781,715
<DIVIDEND-INCOME> 234,655
<INTEREST-INCOME> 14,688,283
<OTHER-INCOME> 0
<EXPENSES-NET> 1,674,892
<NET-INVESTMENT-INCOME> 13,248,046
<REALIZED-GAINS-CURRENT> 2,157,485
<APPREC-INCREASE-CURRENT> (7,015,717)
<NET-CHANGE-FROM-OPS> 8,389,814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,160,805<F1>
<DISTRIBUTIONS-OF-GAINS> 717,482<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 15,175,279<F1>
<NUMBER-OF-SHARES-REDEEMED> 3,437,207<F1>
<SHARES-REINVESTED> 259,124<F1>
<NET-CHANGE-IN-ASSETS> 114,764,307
<ACCUMULATED-NII-PRIOR> 100,052
<ACCUMULATED-GAINS-PRIOR> 2,026,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,209,526
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,680,058
<AVERAGE-NET-ASSETS> 199,408,820<F1>
<PER-SHARE-NAV-BEGIN> 10.84<F1>
<PER-SHARE-NII> .66<F1>
<PER-SHARE-GAIN-APPREC> (.56)<F1>
<PER-SHARE-DIVIDEND> .75<F1>
<PER-SHARE-DISTRIBUTIONS> .03<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.16<F1>
<EXPENSE-RATIO> .83<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 121
<NAME> THE KENT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 236,175,521
<INVESTMENTS-AT-VALUE> 238,295,359
<RECEIVABLES> 4,592,584
<ASSETS-OTHER> 6,024
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 242,893,967
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 112,252
<TOTAL-LIABILITIES> 112,252
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 239,174,252
<SHARES-COMMON-STOCK> 267,927<F1>
<SHARES-COMMON-PRIOR> 181,277<F1>
<ACCUMULATED-NII-CURRENT> 49,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,437,936
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,119,838
<NET-ASSETS> 242,781,715
<DIVIDEND-INCOME> 234,655
<INTEREST-INCOME> 14,688,283
<OTHER-INCOME> 0
<EXPENSES-NET> 1,674,892
<NET-INVESTMENT-INCOME> 13,248,046
<REALIZED-GAINS-CURRENT> 2,157,485
<APPREC-INCREASE-CURRENT> (7,015,717)
<NET-CHANGE-FROM-OPS> 8,389,814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 164,572<F1>
<DISTRIBUTIONS-OF-GAINS> 2,063<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 129,967<F1>
<NUMBER-OF-SHARES-REDEEMED> 57,824<F1>
<SHARES-REINVESTED> 14,507<F1>
<NET-CHANGE-IN-ASSETS> 114,764,307
<ACCUMULATED-NII-PRIOR> 100,052
<ACCUMULATED-GAINS-PRIOR> 2,026,964
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,209,526
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,680,058
<AVERAGE-NET-ASSETS> 2,284,208<F1>
<PER-SHARE-NAV-BEGIN> 10.82<F1>
<PER-SHARE-NII> .66<F1>
<PER-SHARE-GAIN-APPREC> (.56)<F1>
<PER-SHARE-DIVIDEND> .73<F1>
<PER-SHARE-DISTRIBUTIONS> .03<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.16<F1>
<EXPENSE-RATIO> 1.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 13
<NAME> THE KENT TAX-FREE INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 106,335,280
<INVESTMENTS-AT-VALUE> 109,413,825
<RECEIVABLES> 1,515,783
<ASSETS-OTHER> 5,865
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,935,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,727
<TOTAL-LIABILITIES> 51,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,745,686
<SHARES-COMMON-STOCK> 10,708,823<F1>
<SHARES-COMMON-PRIOR> 11,611,059<F1>
<ACCUMULATED-NII-CURRENT> 8,405
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,078,545
<NET-ASSETS> 110,883,746
<DIVIDEND-INCOME> 96,276
<INTEREST-INCOME> 5,530,986
<OTHER-INCOME> 0
<EXPENSES-NET> 890,151
<NET-INVESTMENT-INCOME> 4,737,111
<REALIZED-GAINS-CURRENT> 1,605,269
<APPREC-INCREASE-CURRENT> (1,887,284)
<NET-CHANGE-FROM-OPS> 4,455,096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,725,879<F1>
<DISTRIBUTIONS-OF-GAINS> 1,679,825<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,371,900<F1>
<NUMBER-OF-SHARES-REDEEMED> 4,276,961<F1>
<SHARES-REINVESTED> 2,825<F1>
<NET-CHANGE-IN-ASSETS> 11,500,544
<ACCUMULATED-NII-PRIOR> 29,289
<ACCUMULATED-GAINS-PRIOR> 138,105
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 595,616
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 892,513
<AVERAGE-NET-ASSETS> 107,342,086<F1>
<PER-SHARE-NAV-BEGIN> 10.49<F1>
<PER-SHARE-NII> .46<F1>
<PER-SHARE-GAIN-APPREC> (.06)<F1>
<PER-SHARE-DIVIDEND> .46<F1>
<PER-SHARE-DISTRIBUTIONS> .16<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.27<F1>
<EXPENSE-RATIO> .82<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Institutional Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799700
<NAME> THE KENT FUNDS
<SERIES>
<NUMBER> 131
<NAME> THE KENT TAX-FREE INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 106,335,280
<INVESTMENTS-AT-VALUE> 109,413,825
<RECEIVABLES> 1,515,783
<ASSETS-OTHER> 5,865
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,935,473
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51,727
<TOTAL-LIABILITIES> 51,727
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 107,745,686
<SHARES-COMMON-STOCK> 90,957<F1>
<SHARES-COMMON-PRIOR> 50,253<F1>
<ACCUMULATED-NII-CURRENT> 8,405
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 51,110
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,078,545
<NET-ASSETS> 110,883,746
<DIVIDEND-INCOME> 96,276
<INTEREST-INCOME> 5,530,986
<OTHER-INCOME> 0
<EXPENSES-NET> 890,151
<NET-INVESTMENT-INCOME> 4,737,111
<REALIZED-GAINS-CURRENT> 1,605,269
<APPREC-INCREASE-CURRENT> (1,887,284)
<NET-CHANGE-FROM-OPS> 4,455,096
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32,116<F1>
<DISTRIBUTIONS-OF-GAINS> 12,439<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 51,428<F1>
<NUMBER-OF-SHARES-REDEEMED> 14,550<F1>
<SHARES-REINVESTED> 3,826<F1>
<NET-CHANGE-IN-ASSETS> 11,500,544
<ACCUMULATED-NII-PRIOR> 29,289
<ACCUMULATED-GAINS-PRIOR> 138,105
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 595,616
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 892,513
<AVERAGE-NET-ASSETS> 765,597<F1>
<PER-SHARE-NAV-BEGIN> 10.52<F1>
<PER-SHARE-NII> .41<F1>
<PER-SHARE-GAIN-APPREC> (.05)<F1>
<PER-SHARE-DIVIDEND> .43<F1>
<PER-SHARE-DISTRIBUTIONS> .16<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.29<F1>
<EXPENSE-RATIO> 1.07<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Investment Shares
</FN>
</TABLE>
